Trent’s March quarter results are a mix of hits and misses
Premium- Trent management noted that margins have recovered starting March and are in line with the trends seen in Q3
Trent Ltd reported 53% year-on-year (y-o-y) growth in standalone revenue from operations to ₹1185 crore in the March quarter (Q4FY22). This is despite the adverse impact of the third wave in January and February.
Sequentially, though, revenues have dropped by 12%. Further, due to the lower full price participation in the January ‘End Of Season Sale’, gross margin declined by 400 basis points (bps) y-o-y to 49%. One basis point is 0.01%.
While revenue was ahead of ICICI Securities’ analysts’ estimates, Ebitda (earnings before interest, tax, depreciation and amortization) at ₹152 crore, fell short of expectations. This meant Ebitda margin declined by 480bps to 13% as employee expenses rose y-o-y by 48%. Also, there was an impact from lower rental waivers and higher costs due to store additions, said analysts at ICICI Securities in a report on 28 April. The management noted that margins have recovered starting March and are in line with the trends seen in Q3.
Trent added more than 125 stores in FY22 with Westside recently opening its 200th store. In Q4, Westside reported like-for-like growth of 16% and 21% vis-a-vis Q4FY20 and Q4FY21 levels respectively though both these bases were partly impacted by covid waves. According to the management, Westside’s current annual revenue run-rate is more than Rs5000 crore. Westside’s online channel constituted 7% of Westside revenues and grew by 74% y-o-y in FY22. Through the recently launched Tata Neu app, the online presence is likely to increase further.
Despite second and third covid waves impacting operations in FY22, note that the revenue registered CAGR of more than 15% over a three-year period (FY19-FY22). CAGR is compound annual growth rate
“We are adjusting our store addition targets and same-store sales growth for Westside, factoring in which we are raising FY24E Ebitda by 20%. Our estimates for Westside for FY23 are still lower than the current Rs5000 crore run-rate highlighted by management," said analysts at Edelweiss Securities Ltd in a report on 27 April.
Meanwhile, shares of Trent have increased by 15% in the calendar year 2022 so far, while the Nifty 500 index fell by 1% in the same period. Valuations are expensive which may limit meaningful upsides in the near term. As footfalls recover, the outlook for the company is promising. However, weak discretionary demand or further lockdown restrictions pose a threat to recovery.
MINT PREMIUM See All