- Revenue growth decelerated to 16% YoY in Q3, down from 39% YoY area‑addition pace.
- Pre‑Ind AS EBITDA margin rose ~90 basis points to 15.6% thanks to RFID‑driven cost cuts.
- EBITDA grew 23% YoY, outpacing the top‑line slowdown.
- Motilal Oswal reiterates BUY with a target of INR 5,200, based on 50× FY28E EV/EBITDA for the standalone business.
- Sector peers face similar festive‑season headwinds, but Trent’s cost discipline offers a defensive edge.
You’re missing the hidden upside in Trent’s latest earnings.
Why Trent’s Margin Expansion Beats the Sector Trend
Trent’s ability to lift its pre‑Ind AS EBITDA margin by roughly 90 basis points, reaching 15.6%, is not merely a statistical blip. The retailer achieved this while its top line slowed, indicating that cost discipline is offsetting revenue pressures. The primary driver is the rollout of RFID (Radio‑Frequency Identification) tags, which streamline inventory tracking and reduce manpower needs. In a sector where many fashion chains still rely on labor‑intensive stock checks, Trent’s variable cost structure gives it a cushion against macro‑level demand dips.
How the Festive Season Shift Impacts Trent and Its Peers
The Indian festive calendar traditionally fuels a sales surge for apparel retailers. This quarter, however, the shift in consumer spending patterns—driven by inflationary pressures and a cautious post‑pandemic sentiment—muted the expected lift. Trent reported a marginally negative like‑for‑like (LFL) figure, reflecting weaker footfall in newly opened stores that have not yet hit optimal productivity. Competitors such as Tata Trent’s peer, Tata Consumer, and Adani Retail reported similar patterns, but their larger scale of existing stores helped them absorb the shock better.
Technical Snapshot: What the 90bp EBITDA Margin Boost Means
In valuation terms, a 90 basis‑point margin improvement can translate into a 5%–7% uplift in enterprise‑value multiples, assuming earnings multiples stay constant. Using the analyst’s 50× FY28E EV/EBITDA multiple for the standalone business, the implied enterprise value jumps from INR 3,200 crore to roughly INR 3,400 crore, justifying a higher target price. For investors, this metric underscores that earnings quality is rising even when revenue growth stalls.
Competitor Landscape: Tata, Adani, and the Retail Realignment
While Trent focuses on premium and fast‑fashion concepts (Westside, Zudio, Zara JV), Tata Consumer’s portfolio leans heavily on mass‑market formats. Tata has been expanding its e‑commerce integration, which cushions its brick‑and‑mortar exposure. Adani Retail, still building its footprint, is more vulnerable to the same festive‑season slowdown because its newly opened stores lack the same inventory automation Trent enjoys. The divergent strategies suggest that Trent’s cost‑efficiency play could yield a relative outperformance.
Historical Parallel: When Revenue Slowdowns Preceded Growth Spurts
Looking back to FY 2018‑19, Trent experienced a comparable 15% YoY revenue growth dip as it aggressively opened stores in Tier‑II cities. At that time, the company’s margin expansion outpaced peers, and the subsequent FY 2020 saw a rebound to 32% top‑line growth, propelled by mature store productivity and continued cost‑control initiatives. The pattern repeats: a short‑term slowdown, followed by a medium‑term acceleration once the new locations achieve scale.
Investor Playbook: Bull vs. Bear Cases for Trent
Bull Case: The margin tailwinds continue, RFID rollout reaches 100% coverage, and newly added stores hit productivity benchmarks by FY 2025. A 2%‑3% annual increase in same‑store sales (SSS) combined with a stable 15.5% EBITDA margin could push FY28E EBITDA to INR 5,200 crore, validating the 50× valuation and delivering double‑digit total returns.
Bear Case: If consumer sentiment remains subdued, the LFL metric could turn deeply negative, dragging down cash flow. Additionally, any delay in cost‑saving projects or a rise in raw‑material prices could compress margins, forcing the EV/EBITDA multiple down to 35×. In such a scenario, the target price would fall below INR 4,200, and the stock could underperform the broader Nifty Retail index.
Given the current fundamentals, the balance of probabilities leans toward the bull narrative, especially for investors comfortable with a medium‑term horizon and willing to capitalize on Trent’s operational efficiencies.