Speaking to ET Now, Kaustubh Pawaskar, Lead Analyst, ICICI Direct explained that expectations going into the December quarter were elevated due to seasonal factors.
“So, basically in quarter three there was anticipation that there would be better growth, about 20%, largely driven by higher festive sales,” he said. “I had earlier mentioned that we should expect a normalised growth of around 18% to 20% in Trent from now because the base is normalising for the company.”
According to Pawaskar, optimism was also fuelled by portfolio-level changes and the expected benefit of the GST rate cut, which had raised hopes of a stronger quarter. However, reported growth of 17% proved to be below both analyst and Street estimates.
“For Q3, we were anticipating around 22% growth,” he said, acknowledging the miss. “On a normal quarter, we should expect growth somewhere around 18% to 20%, largely driven by store additions, while like-for-like growth should be in the low- to mid-single digits.”
Competition and Normalising Base Weigh on Performance
When asked where Trent may have faltered, Pawaskar pointed to intensifying competition in the value fashion segment alongside a high base from last year.
“They have done changes in their portfolio, that is for sure. If you go to Westside or Zudio, a lot of portfolio change has been done,” he said. “But competition is building up, especially in the value fashion space. Consumers are also looking to try new brands.” He added that the demand environment has yet to see a meaningful push. With Q3 FY25 having delivered nearly 37% growth, the current slowdown reflects base normalisation rather than a structural issue.
“If we compare it to the 11% to 12% growth of the overall apparel or retail market, 17% is still better,” Pawaskar noted. “On a steady state, we should expect around 18% to 20% growth unless something really drives sales in the quarters ahead.”
Store Additions, Estimates, and Valuation Outlook
While Pawaskar continues to maintain a buy rating on the stock, he acknowledged that earnings estimates could see further downgrades depending on margins and store rollout pace.
“For nine months, they have added around 90 stores including Westside and Zudio,” he said. “Traditionally, Trent has added around 200 stores annually. This year, reaching 200 looks difficult. I think they will be closer to 160–180 stores, which will have an impact on revenue growth for the year.”
On valuation, Trent currently trades at around 90 times earnings, even after correcting 40–45% from its peak. Pawaskar believes the stock may now undergo a period of time correction.
“It will take another two to three quarters for the base to normalise,” he said. “That will be the point when we should assess what kind of earnings growth CAGR Trent can deliver on a normalised basis and what valuation the company would be comfortable with.”
Despite near-term challenges, he reiterated confidence in the company’s long-term prospects.
“The long-term growth prospects of the company are intact. The management has not changed its guidance of 25% CAGR,” Pawaskar said.
Margins Remain a Key Comfort
While top-line growth disappointed, margins are expected to remain resilient. Pawaskar highlighted Trent’s strong operating model, particularly its heavy reliance on private labels.
“Trent has done exceptionally well in terms of margins over the last two quarters despite disappointment on growth,” he said. “I believe margins should remain stable year-on-year.”
He added that the company’s revenue mix plays a crucial role.
“Nearly 95% of revenues come from private labels. That differentiates Trent from other companies.”
For the December quarter, Pawaskar expects margins to remain in line with the first half.
“More or less, it should be in the range of 17% to 17.5%,” he said.
The Road Ahead
As growth moderates and competition intensifies, the Street appears to be reassessing expectations from Trent after years of outsized expansion. While the long-term story remains intact, analysts believe the stock may need time for fundamentals and valuations to realign before confidence fully returns.
