Trent's worst over after Rs 1.6 lakh crore shock? Why brokerages aren't convinced yet

Trent Limited, Tata Group’s retail crown jewel, emerged as a standout wealth creator and a clear investor favourite during the bull run that lasted until September 2024. Over the past five years, it has delivered exceptional returns, including gains of 126% in 2023 and a further 133% in 2024.

However, this strong momentum has come to a grinding halt. The stock has corrected more than 50% from its record peak of Rs 8,345, eroding around Rs 1.60 lakh crore in investor wealth as the rally lost steam. The downturn accelerated in 2025, with the stock declining around 40%, and the weakness has continued into 2026 as well, with shares already down about 18% year-to-date.

A key factor behind the slowdown appears to be store network over-densification. Experts highlight that Trent’s aggressive expansion, particularly through Zudio, has led to overlapping store presence within cities. Many existing outlets now face competition from newly opened stores in close proximity, and several of these “densified” locations are reportedly witnessing pressure on sales, including instances of negative growth.


To put things into perspective, Zudio added 107 stores in Q4 FY26, taking its total store count in India to 957, reflecting YoY store growth of 25% in Q4 FY26. Over FY26, Zudio added 194 stores across the country, of which 45 stores were opened in existing PIN codes. Assuming that stores added within existing PIN codes do not contribute meaningfully to incremental system sales in the first year due to cannibalization, the effective contribution from store expansion is likely lower than what headline numbers suggest, Goldman Sachs said.

Will Q4 change the tide?

Goldman Sachs, with a Neutral stance and a target price of Rs 4,080, expects a YoY decline in operating profit in Q4 FY26 for Trent Limited. Over the last four quarters up to 3Q FY26, store additions have grown by approximately 30% YoY, while operating costs have increased by only 9% YoY, aided by automation initiatives implemented since December 2024. These initiatives had delivered meaningful cost benefits, fully realised in Q4 FY25.

As these benefits are now being compared in Q4 FY26, operating costs are expected to rise in line with store expansion, at around 24% YoY. Consequently, EBIT growth is expected to remain weak, with an estimated YoY decline of around 9%.

Looking ahead, margin pressure could persist into 1H FY27 due to input cost inflation. Value apparel retailers are expected to face rising polyester prices, which are closely linked to crude oil. Typically, over 55% of raw materials in value apparel in India are polyester or other crude-linked derivatives, and Zudio’s product mix is also heavily polyester-driven.

Importantly, management is unlikely to take price hikes in the near term. In earlier inflationary cycles, including FY23, the company preferred to absorb raw material inflation. Given Zudio’s sharp pricing strategy—with most products priced below Rs 999—the ability to pass on higher input costs remains limited.

While recent updates and checks indicate that apparel demand remained stable in Q4 FY26, a prolonged rise in crude oil prices could eventually weigh on demand if inflation persists longer than expected.

The brokerage expects Trent to report sales growth of around 18% in Q4 FY26. This improvement is likely to be driven primarily by like-for-like (LFL) growth. It also benefits from a favourable base, as LFL growth in Q4 FY25 had been in the mid-single-digit range, down from high single digits in Q3 FY25. Against this backdrop, LFL growth of around 3–4% YoY is expected in Q4 FY26.

That said, growth from new store additions is expected to moderate compared to Q3. In Q3 FY26, Trent reported 16% YoY sales growth alongside -1% YoY LFL growth, implying that nearly 17% of growth was driven by new store additions. This contribution is expected to be slightly lower in Q4 FY26, as adjusted store growth (combined Westside and Zudio) is about 200 basis points lower than in Q3 FY26.

Citi, which maintains a Sell rating with a target price of Rs 3,800, points out that despite strong store expansion, average revenue per square foot (assuming the same new-store size as TTM) declined 2.8% YoY, after falling 16.1% and 15.5% YoY in Q3 and Q2, respectively. The brokerage also highlights concerns around intensifying competition, potential cannibalization, and continued expansion into tier 2 and tier 3 towns, which could weigh on performance going forward.

In its Q4 business update, the company reported standalone revenue growth of 20% YoY to Rs 4,937 crore, compared to Rs 4,106 crore in the same period last year. For FY26, revenue rose 18% YoY to Rs 19,701 crore from Rs 16,668 crore in FY25.

Despite the 8% on Monday, Trent has witnessed notable weakness in recent months. The stock is down nearly 20% over the last six months. On a year-to-date basis, it has declined around 11%. Despite this correction, the company has delivered strong long-term returns, rising nearly 385% over the past five years. However, it currently trades about 43% below its 52-week high of Rs 6,261.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)