Trent’s speedy expansion may be taking a toll on its fashion biz

ET Intelligence Group: Trent’s revenue growth in the March quarter at 19.2% was better than the 15-16% growth in the previous two quarters, driven by relatively stable consumer sentiment. However, the company’s expansion into Tier-II and Tier-III cities has been putting pressure on its largest business segment, fashion portfolio, which contributes four rupees to every five rupees of revenue. The segment’s like-for-like sales growth reduced for the quarter and for the full fiscal year as well. Though Trent believes underlying demand and market opportunities to be strong, its strategy to win market share through rapid scaling up may restrict the growth momentum in the short term. In addition, the conflict in West Asia may push up input costs though Trent is mitigating the risk through largely India-focused sourcing.

For the fashion portfolio, the same-store-sales-growth (SSSG), which consists of stores operational for over 18 months, slipped to low single digits in the March 2026 quarter and in FY26 from mid-single digit growth in the March 2025 quarter and a double-digit increase in FY25. This could be attributed to most of the stores being opened in Tier II and III cities. It further plans to raise ₹2,500 crore through a rights issue to fund the expansion strategy. It means the growth trend is likely to persist in the medium term as the company has indicated that it takes two-to-three years for newer markets to become more relevant.

Apart from the physical channels, Trent’s online channels – Westside.com and Tata Neu – also showed moderation in sales growth. After rising to 56% in the September 2025 quarter from 35% in the June 2025 quarter, it gradually reduced to 25% in the March 2026 quarter. The share of online channels to Westside revenues remained stable at 6% year-on-year.

On the positive side, Trent’s operating margin (EBIT margin) has gradually increased to 11.5% in the March 2026 quarter from 2.9% in the March 2023 quarter, aided by disciplined pricing, better inventory control, and the benefits of scale in sourcing and supply chain operations.

Trent’s stock has gained nearly 25% since April 06 when it issued an encouraging business update for the March quarter, implying a sustained top line growth. This has taken its one-month gain to 32%, also buoyed by an anticipation of a bonus issue of shares. While the announcement of the bonus issue will support the stock in the near term, its performance over the medium term will depend upon how effectively the company executes its expansion strategy.