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Over the past six months, Trent’s stock has shed nearly 40% of its value, wiping out approximately INR 47,000 crore in market capitalization. This dramatic correction begs the question: What’s going wrong? Trent’s appeal has always been its consistency in delivering aggressive revenue growth, quarter after quarter. For context, in FY24, the company reported a staggering 54% YoY revenue growth, building on an already strong base. EBITDA margins were also expanding rapidly, compounding at 162% over five years, which gave investors the confidence that Trent was not just growing—it was growing efficiently. But in FY25, the picture began to change. Revenue growth for FY25 came in at 39% YoY—still impressive by industry standards but falling short of investor expectations set by previous years. Quarterly revenue growth slowed to 28% in Q4FY25, compared to 53% growth in the same quarter last year. This deceleration has triggered alarm bells.
Much of Trent’s growth in recent years was powered by Zudio, its value fashion brand. With affordable pricing (most products under INR 500), Zudio rapidly gained traction across Tier 2 and Tier 3 cities. Over 5 years, it achieved a 57% CAGR in-store additions, opening over 765 outlets nationwide. But growth has a cost—and limits. Analysts from Kotak Institutional Equities recently flagged a worrying trend: store cannibalisation. Multiple Zudio stores have opened within the same pin codes, leading to an overlap in customer base and stagnation in per-store revenue. The pace of new store openings has started to decline, with just 18 net new stores added in Q3FY25—and some closures noted.
Interestingly, there has also been a shift in revenue composition. While Zudio contributed 57% to Trent’s revenue in FY24, its share dipped to 49% in FY25, with Westside climbing to 50%. Now, this might seem like good news—Westside has higher margins. But Zudio was the volume driver, and its fast fashion model enabled faster inventory churn and higher store productivity. Its slowdown impacts not just growth, but operating leverage too. Meanwhile, the aggressive expansion of both brands has led to a rise in fixed costs—rent, salaries, supply chain logistics—squeezing EBITDA margins, which came in lower than expected.
The retail landscape isn’t what it was five years ago. It’s far more crowded and aggressive now: Shein, the global fast-fashion juggernaut, re-entered India in partnership with Reliance Retail after a five-year hiatus. It’s brand recognition and digital-native DNA present a credible threat to Zudio’s dominance. Yousta, Reliance’s in-house affordable fashion brand, is also gunning for Zudio’s turf with plans to open 1,000+ stores. While it had just 55 outlets in late 2024, the ambition is clear—and backed by deep pockets. The quick-commerce boom is also encroaching on Star Bazaar, Trent’s grocery business. Players like Blinkit, Zepto, and Swiggy Instamart are rapidly changing how consumers shop for daily essentials, forcing Star Bazaar to rethink its value proposition.
At its peak, Trent was trading at over 130x its estimated FY25 earnings. That’s nosebleed territory, even for high-growth consumer stocks. Such lofty valuations are only justified if the company continues to beat expectations. But when growth moderates—as it has—valuations can compress very quickly. Several brokerages, including Kotak, have downgraded Trent to a ‘Sell’ and slashed target prices. Earnings estimates have been revised down, and the stock has seen institutional selling pressure in recent weeks. The global market environment hasn’t helped either. Uncertainties around the US elections, Trump-era tariff rollbacks, and volatility in global commodity prices have made investors cautious about equities in general—especially high-P/E growth stocks like Trent. Add to that the weak sentiment in domestic midcaps and consumer discretionary segments, and Trent’s fall becomes part of a broader narrative of profit-booking and sector rotation.
References:
- Economic Times – Trent shares nosedive over 19% after analysts cut target price following Q4 miss; sharpest fall since March 2020
- Times Now – 47000 Crore Loss; Trent’s Fall from Grace: Six Key Reasons Behind Nifty’s Former Star Losing Shine — Zudio, Westside Stores Shut
- Share Khan – Trent Limited Staying resilient in a tough time
- CNBC TV18 – Reliance Retail Expands Yousta to Challenge Zudio in India’s Value Retail Market
- Image by Freepik
