Trent Ltd. registered a 20.4% QoQ growth / 45.8% YoY growth to Rs. 2,628.4 crores in Q1FY24, surpassing market expectations of Rs. 2,374.9 crores. This was driven by healthy LFL growth of 12% across its brands. Along with this, the contribution of business emerging categories which include beauty and personal care, innerwear, and footwear increased to 19% in Q1FY24 compared to 18% in Q1FY23. On the operational front, EBITDA rose to Rs. 367.4 crores (up 80.9% QoQ / up 26.0% YoY) but was unable to beat street estimates of Rs. 380.5 crores in Q1FY24. The EBITDA margins contracted 220 bps YoY to 14.0% owing to a shift in the product mix of the company (increasing focus on Zudio) and subdued demand scenario in the value segment. The PAT expanded 270.8% QoQ / 45.0% YoY to Rs. 166.7 crores in Q1FY24, while the PAT margin increased to 6.3% in Q1FY24 (up 428 bps QoQ / down 3 bps YoY), higher than market estimates of a 5.1% margin. As of 30th June 2023, the total store headcount included 221 Westside stores (7 stores added in Q1FY24), 388 Zudio stores (40 stores added in Q1FY24), and 23 stores across other lifestyle concepts.
Valuation and Outlook
Continuing on its stellar growth trajectory, Trent Ltd. emerged as an exception to the overall softness displayed in demand among other apparel players in the market as evidenced by its positive LFL growth. The rapid scale-up of Zudio in response to the increasing demand of price-conscious customers boded well in maintaining the growth momentum of the business. Along with this, the company’s Star segment recorded a healthy revenue growth of 33% YoY in Q1FY24, with most of its growth driven through strong volume accelerated the business dynamic in the right direction. On the operational front, margins contracted with the increasing prominence of Zudio stores. Going forward, our focus would remain on the emerging categories growth trajectory and demand dynamics of Westside and Zudio stores and management updates on its grocery business
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