Trent Q4 Results Review - Another Quarter Of Blockbuster Growth; Margins Remain Under Pressure: Systematix

Systematix Research Report

Trent Ltd. delivered a strong beat on the top line front, growing 75% YoY to Rs 20.8 billion, which is a sharp pick-up in three-year revenue compound annual growth rate to 42%. Growth came from a combination of strong like-for-like growth in Westside, aggressive store expansion in Zudio and strong traction in emerging categories like beauty and personal care, innerwear and footwear.

However, margins corrected sharply on account of faster growth in the low-margin Zudio business and higher growth-oriented investments. Westside recorded 23% same-store-sales growth over Q4FY22. Star Bazaar continued to see increased traction and growing sales density post footprint tightening coupled with focus on fresh foods and own brands. Star Bazaar revenue grew 46% YoY.

Trent’s margins were below estimates with a sharp gross margin contraction of 833 bps YoY to 40.8% and Ebitda margin contracting 260 bps to 10.2% led by lower other expenses, with operating profit at Rs 2.12 billion versus 1.52 billion in Q4 FY22.

Online channel continues to account for ~6% of Westside’s revenue. As of March 2023, the company had 214 Westside, 352 Zudio and 24 stores of Utsa and Landmark, with store openings falling marginally short of expectations.

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