Trent - Store Addition Trajectory For Zudio To Be Two Times In FY24E: ICICI Direct

ICICI Direct Report

Key Annual General Meeting Highlights:

Trent Ltd.'s consolidated revenues (including joint venture-Star and Zudio) surpass Rs 10000 plus crore sales mark in FY23. Zudio has demonstrated strong ability to gain market share in value fashion segment with focus on improving profitability.

Zudio now contributes 40% to standalone revenues (from merely 16% in FY20), with gross revenues surpassing Rs 3200 plus crore in FY23. Ebit margins improved 100 basis points YoY to 7.0%. Trent will continue accelerated store additions for Zudio with opening of 200 plus stores in FY24 to 550 plus stores (added 117 stores in FY23).

Westside reported gross revenue worth Rs 4655 crore with record high Ebitda and Ebit margins of 13% and 11%, respectively, in FY23. Same-store sales growth was at healthy 49% YoY (partly aided by favorable base). With Westside firing on all cylinders, we expect the format to have registered 25% plus return on invested capital during FY23. Trent expects to add 30 Westside outlets in FY24.

Trent’s grocery format Star Bazar continued its calibrated store expansion strategy (added two stores in FY23) with higher emphasis on profitability. Despite muted store addition, revenue grew 35% YoY in FY23E implying healthy SSSG. Enhanced store operational performance led to profit before tax losses narrowing down to Rs 104 crore in FY23 (FY22: loss of Rs 138 crore).

Key triggers for future price performance:

• We pencil in 295 store additions between Westside and Zudio for FY24-25E.

• Liquidity position remains robust with cash and investments worth Rs 600 plus crore that will enable it to tide over the current situation better than peers.

• Zudio continues to be the growth engine for Trent. We expect its revenues to grow at a compound annual growth rate of 31% in FY23-25E.

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