Trent to recover as pandemic impact subsides

As the pandemic impact subsides with the economic activity picking up pace, Trent may find itself better placed compared to peers. Its flagship concept, Westside, which contributes a big share of revenues, is expected to continue to play a key role in boosting earnings.

According to Axis Securities, factors that could drive recovery post FY21 include Westside’s success in retail concept driven by exclusive/trendy offerings at competitive prices, significant growth opportunities in Zudio format driven by aggressive store additions beyond metros and rise in consumer preference towards value fashion owing to the pandemic led financial constraints.

Trent’s prospects appear better from a medium term perspective. The retailer expects a strong recovery, driving a 18 per cent standalone revenue compound annual growth rate over FY20-23, says Jefferies analysts. Though the retailer may have to bear a significant loss in FY21 but its three-year EBITDA, CAGR would be about 20 per cent.

While Trent’s revenues grew by around 30 per cent year-on-year in the first three quarters of FY20, results for the last two quarters have understandably been marred by the pandemic. Revenue growth dropped to 8 per cent in the March quarter. The June quarter saw revenues decline by a whopping 87 per cent. Hereon, a delay in revival in discretionary spending is a chief concern.

Muted near-term earnings outlook may well keep meaningful upsides at bay in the stock, which has recovered smartly from the lows in 2020. Even so, the shares are still nearly 15 per cent away from their pre-covid highs seen in February on NSE.