Trent stock looks trendy again as sales rebound

Trent Ltd is enjoying the optimism surrounding the rebound in demand as the economy opens up. The retailer's shares are just about 7% lower from the 52-week high of Rs. 1346.85 apiece seen on 7 April. Store additions, recovering footfall and pent-up demand are likely to support Trent's operations.

Westside recently opened its 200th store and Zudio's store count currently stands over 200. These two store formats have seen a better recovery and achieved budgeted sales with strong growth in the last two months vis-a-vis pre-covid levels, note analysts at Motilal Oswal based on their channel checks. This could be due to the high fashion quotient in Westside and Zudio, which supports demand amid a high inflationary environment.

Trent is expected to announce the March quarter (Q4FY22) results next week. Analysts at ICICI Securities expect revenue and Ebitda (earnings before interest, tax, depreciation and amortization) to grow by 48% and 26% year-on-year respectively.

However, on a sequential basis, revenue and Ebitda are estimated to decline by 15% and 41% respectively owing to the impact of Omicron at the beginning of the quarter.

To be sure, the resurgence in covid cases could pose a risk to the recovery. Also, the increase in input costs could push apparel retailers to resort to price hikes which would weigh on demand.

Further, Motilal Oswal analysts note that potential GST (goods and service tax) rate hike on apparels to 12% from 5% can impact demand, particularly in the price-sensitive value retail segment.