Trent Target Price Tailored Down By 18% — Here's Why Macquarie Is Still Bullish

Macquarie has cut its target price on Trent by a sharp 18% to Rs 4,900, even as it retained an Outperform rating, arguing that the current slowdown in sales is cyclical rather than structural and should ease in the second half of CY26. In a note, the brokerage said it has built in a slower near-term demand recovery, prompting earnings cuts of 6-12% for FY26–FY28 and a higher discount rate in its valuation.

This recalibration, rather than a deterioration in the long-term business outlook, drove the steep target price reduction from Rs 6,000 earlier.

Macquarie flagged that Trent’s growth moderation over the past few quarters stems from a confluence of short-term factors. These include softer discretionary demand across small-ticket categories, store additions closer to existing locations, and intensifying competition from value-focused fashion players. Despite this, the brokerage noted that Trent delivered 17% sales growth over the last two quarters and continues to outperform most peers, reinforcing its view that the slowdown is cyclical.

The brokerage added that the proposed revamp of Zudio stores could further strengthen Trent’s competitive positioning once demand normalises. Investments in technology — particularly RFID and warehouse automation — are expected to support long-term EBIT growth, even though near-term weakness could shave 6-12% off FY26-28 earnings.

While near-term visibility remains muted, Macquarie expects sales growth to recover in the second half of CY26. It cited supportive government measures such as potential GST and personal tax reductions, as well as pay hikes for government employees, as factors that could revive discretionary spending. Trent’s prior experience in recalibrating formats like Westside also gives comfort on management’s ability to execute the Zudio revamp without derailing margins.

On profitability, the brokerage highlighted multiple levers to manage margins, including higher store salience with rentals linked to sales, optimisation of freight costs through greater store density, and the normalisation of depreciation costs after a phase of bunched-up warehousing investments.

The 18% target price cut reflects a more cautious stance on fashion-sector growth and a higher segment discount rate, which Macquarie said has driven its DCF-based valuation lower. Even so, the implied EV/EBITDA multiple remains around 45x, signalling continued confidence in Trent’s long-term growth trajectory.

Catalysts that could trigger a re-rating include a sharper-than-expected recovery in fashion demand and improvements in loss-making segments. Until then, Macquarie believes patience is warranted, reiterating that the current weakness is cyclical — and that the real test for the stock lies in a demand pickup in H2CY26.