Shares of Trent faced a sharp decline, dropping 8% following the announcement of their September quarter results. The stock, which recently became part of the Nifty 50 index, has corrected nearly 20% from its record high of ₹8,345. Despite showcasing robust growth in revenue and profit, Trent results fell short of market expectations, impacting the Trent share price.
Strong Revenue and Profit Growth Miss High Expectations
For the September quarter, Trent reported a 39% surge in revenue, reaching ₹4,157 crore compared to ₹2,982 crore in the same quarter last year. However, this figure fell short of the ₹4,295 crore anticipated by a CNBC-TV18 poll, influencing the Trent share price negatively.
Net profit also witnessed a substantial 47% year-on-year increase, reaching ₹335 crore. However, it missed the market’s estimated ₹428 crore, further pressuring the Trent share price and dampening investor sentiment.
Key Factors Affecting Profitability
Trent’s bottom line was impacted by a decrease in other income, which dropped to ₹48 crore from ₹80 crore during the same quarter last year. This decline raised concerns about Trent’s financial health and affected the Trent share price. Additionally, depreciation expenses rose to ₹197 crore from ₹152 crore, and profit from joint ventures fell significantly to ₹5.7 crore from ₹25 crore in the previous year.
Higher taxes were another factor, with the tax expense increasing to ₹132 crore compared to ₹86 crore last year. These combined elements contributed to the underperformance relative to the elevated market expectations.
EBITDA and Margins Analysis
Trent’s Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) stood at ₹643 crore, closely matching estimates of ₹675 crore. The EBITDA margin was 15.5%, aligning with expectations of 15.7% and slightly higher than last year’s 15.3%. Despite this, the Trent share price continued to face downward pressure due to the overall results not exceeding expectations.
Challenges in Retail Business Performance
The company’s management highlighted challenges in the retail business, attributing them to muted consumer sentiment and seasonal factors. Nonetheless, Trent recorded double-digit Like-For-Like growth in its fashion concepts, including beauty and personal care, innerwear, and footwear. These segments now contribute over 20% of the company’s revenue, yet this positive trend did not fully support the Trent share price.
Expansion Initiatives
During the quarter, Trent opened 43 new stores—7 Westside and 34 Zudio stores—and consolidated nine Westside and 16 Zudio locations. This expansion is part of Trent’s broader growth strategy, but it has not been enough to counter the shortfall in profitability that influenced the Trent share price.
The Star Hypermarket segment also saw a 27% increase in revenue compared to last year, with Like-For-Like growth at 14%. Despite these improvements, the Trent share price remains volatile.
Expert Take on Trent’s Performance
Market expert Prakash Diwan commented, “The numbers are far better than expected considering the weak consumer sentiment and how other retailers have struggled with margins and revenue growth. Trent results show that the company’s expansion and single-store contributions are on track. However, the high valuation means expectations are always elevated. In comparison, it may look weaker, but the YoY improvement is remarkable.” This context helps explain why the Trent share price has faced a decline despite positive year-on-year metrics.
Stock Performance Post-Results
Post-earnings, Trent’s share price fell to its lowest point of the day, trading 8% lower at ₹6,398. This marks a 25% decrease from its peak of ₹8,345. Still, the stock is up 120% for 2024, indicating strong growth earlier in the year. The decline highlights how sensitive the Trent share price is to market expectations and quarterly performance.
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Conclusion
While Trent results showcased significant year-on-year growth in both revenue and profit, they fell short of market estimates, leading to a decline in the Trent share price. Factors such as reduced other income, higher depreciation, and increased tax expenses contributed to this outcome. Despite these challenges, Trent’s continued store expansion and solid Like-For-Like growth suggest the company is on a promising path, even if the immediate stock performance reflects caution.
Investors may need to recalibrate their expectations, considering the high valuation and Trent’s long-term growth strategy.
