Brokerages tracking Westside's parent Trent Ltd broadly agreed on one thing after its Q3 results — margins surprised positively, but the long-awaited growth revival remains uneven. The Tata Group retailer reported consolidated revenue and EBITDA growth of around 15% and 28% year-on-year, respectively, with EBITDA margins expanding sharply to about 20.4%.
Gross margins improved to roughly 45%, marking a strong recovery after several quarters of pressure. However, like-for-like (LFL) growth stayed negative in the fashion business, keeping analysts divided on how durable the earnings momentum really is.
Margin Upside Driven by Efficiency
The margin beat was largely attributed to operating efficiencies, better sourcing, and productivity gains, particularly at Zudio. Several brokerages flagged that the improvement was structural rather than a one-off, aided by automation, tighter cost controls and stabilising employee expenses. Employee costs as a share of revenue continued to trend lower sequentially, while rental costs declined to around 9-9.5% of revenue, helped by depreciation benefits on newer stores.
That said, some analysts cautioned that part of the PAT beat was supported by higher "other income," including dividend income, implying that earnings quality warrants close monitoring if growth does not accelerate meaningfully.
Cautious Brokerage Calls
Brokerage views remain mixed. Citi maintained a Sell rating with a target price of around Rs 4,350, flagging concerns around margin sustainability as expansion-related costs catch up. Jefferies stayed on the sidelines with a Hold rating, pegging a base-case valuation of roughly Rs 4,575, while outlining an upside scenario of Rs 6,500 if growth accelerates materially, and a downside case of Rs 3,500 if competitive pressures intensify.
In contrast, Bernstein reiterated an Outperform rating with a Rs 5,000 target, arguing that margin stabilisation at Zudio and steady network expansion offer medium-term upside. Morgan Stanley remained Equal-weight, acknowledging the margin beat but flagging that visibility on sustained LFL growth remains limited.
Growth Challenges Persist
While store additions remained healthy, revenue productivity lagged expectations. LFL growth in the fashion segment stayed negative due to muted discretionary demand and an unfavourable festive calendar. Analysts noted that Trent's newer stores-especially in Tier 2 and Tier 3 cities-are taking longer to mature, delaying operating leverage benefits.
Zudio continued to outperform on margins, but brokerages highlighted that sustaining high growth rates will depend on deeper penetration in urban markets and a recovery in discretionary spending. The Star Bazaar format remained a concern, with multiple analysts questioning the long-term viability of the business model amid intense competition in food and grocery.
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