TRENT HAS TRANSFORMED ITS BUSINESS MODEL FROM RETAIL FIRST TO BRAND LED

News: Trent has transformed its business model from retail first to brand led, private label consumer business with large focus on offering value to the customer at every price point of the products available in the store. Management aspiration is to grow revenues at CAGR of 25% in the medium term. This will be largely driven by higher store addition with large focus on micro markets, fast churning of products from shelves backed by efficient supply chain and adding one or two more brands, which can scale-up in-line with other life-style brands. High base and muted demand in the branded apparel segment might result in mid-single digit like for like growth in the near term. However, the management is confident on its product portfolio and store fundamentals to drive improved LFL growth in the long run. Trent’s current store count is 1,000+ stores. The company will continue to add large number of stores in the near term as it sees large opportunities in micro market, where aspirational levels are improving. Pre-covid, the company was under-indexed in southern part of India. However, they substantially increase its presence in states such as Bengaluru and Chennai. To efficiently manage its large store addition, the company has upgraded its back-end technology moving from an older version of SAP and technologically integrated every part of the business. Focus is on supply-chain scale-up (store allocation, replenishment, logistics) to support faster churn out at store level. The company is continuously focusing on removing the inefficiencies from the system and optimise store operations. This will lead to better margins and capital efficiency resulting better return profile at store level.

View: Trent's analyst meet provided us glimpse of its customer centric approach to drive growth focusing on presence, availability of product and value proposition to stay ahead of fashion and lifestyle market which is expected to grow by 10-12% over FY25-28. Management had not spoken about any differentiated strategy and focused more on its key pillars of growth. The growth will be largely driven by store addition (200-220 store addition p.a.) while like-for-like growth is expected to remain at mid-single digit in the near term. Improved store fundamentals and efficiencies will drive the profitability and return profile going ahead. We have already factored in it in our estimates and don’t expect any material change in our estimates.

Impact: Positive