Trent continued to report stellar growth in its topline numbers with the revenue up by 17.96% QoQ and 53.65% YoY in Q3 FY23. Here's what worked for the company:
Trent Q3 Earnings Review: Zudio, emerging products and store expansion drive the retail firm's highest-ever revenue
- Trent registered the highest-ever quarterly revenues exceeding ₹2,100 crore in Q3 and ₹6,000 crore for the 9-month period till December 2023.
1) Westside saw a handsome growth in LFL (like-for-like) by 17% YoY on the back of increased footfalls along with strong growth across emerging categories (beauty, innerwear, footwear and personal care products).
2) Zudio is a game changer for Trent in the value fashion category having shown exponential growth both in terms of store expansion (93 stores added in 9M FY23) and revenue contribution (40%+ of sales).
3) Encouraging growth is seen in store expansion with total of 211 stores of Westside and 326 stores of Zudio.
4) Emerging category sales mix improved sequentially.
5) 50/50 JV with MAS Group to design, develop and manufacture lingerie, active wear, etc.
6) Robust growth in Star Bazaar business at 58% YoY on account of small-footprint store fronts and focus on fresh food and owned brands.
Trent registered the highest-ever quarterly revenues exceeding ₹2,100 crore in Q3 and ₹6,000 crore for the 9-month period till December 2023.
The change in the revenue profile across formats is aligned with its expansion strategy. Operating EBIT margin for each of Q3 FY23 and 9M FY23 was 9.8% (9.1% for 9M FY22 and 8.6% for 9M FY20).
Trent opened 11 and 93 Westside and Zudio stores, respectively, in 9MFY23, taking the total store count to 211 and 326, respectively.
Online revenue through Westside.com and other Tata group platforms contributed over 6% of total Westside revenue. It will continue to invest significantly in resetting the technology stack across the entire value chain in line with the growing scale.
Growth in new product categories
Emerging categories (beauty and personal care, innerwear and footwear contributed to over 18% of standalone revenues.
JV for lingerie and active wear
During 3QFY23, Trent entered a 50:50 JV with MAS Group of Sri Lanka for designing, development and manufacture of lingerie, activewear and related apparel products.
In Q3 FY23, emerging markets including innerwear, footwear, and personal care products contributed 18%+ of total revenue. This JV will further give an uplift to the category mix sales and improve growth.
With tight footprint stores and a focus on fresh foods & own brands, the business witnessed improved customer traction with growing sales densities. Given the improving store economics and the differentiated & scalable model, Trent sees the business as a key growth engine.
While the discretionary category is seeing a challenging demand environment, Trent has continued to grow at a healthy pace with steady SSSG (same store sales growth). Further, despite the aggressive store addition, it has seen limited balance sheet risk or weakness in operations.
Zudio proves to be a game changer
Zudio, which is a value fashion brand, has seen exponential growth in terms of revenue contribution (40%+) and store expansion (Zudio stores have multiplied ~8x in the last three years with a total of 326 outlets), and is set to become the next leg of growth for Trent.
However, the aggressive expansion has costed Trent slight contraction in margins.
Robust growth in store expansion
Trent currently has 211 Westside and 326 Zudio stores. It also has 21 Utsa and Landmark stores. The management also stated that the performance was in-line with expectations. It expects total store addition for Westside and Zudio to reach 216 and 356 stores, respectively, by the year end.
Shuchi Nahar is a Certified Research Analyst. She can be found on Twitter at @shuchi_nahar
Note: This article is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment related investment-related decision.
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