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| Tata Group’s Trent Ltd. reports a 39% increase in Q2 revenue but falls short of profit expectations, causing a dip in the share price. |
Tata Group’s Trent Ltd., recently listed on the Nifty 50 index, announced its Q2 results for the September quarter on Thursday. While the company delivered strong growth, the numbers slightly missed analyst expectations, causing a dip in the stock price.
Revenue Grows by 39%, but Misses Estimates
Trent’s revenue for Q2 surged 39% year-on-year, reaching ₹4,157 crore, up from ₹2,982 crore in the same period last year. However, this was slightly below the ₹4,295 crore revenue estimate from a CNBC-TV18 poll.
Net Profit Below Expectations Despite Solid Year-on-Year Growth
The company's net profit stood at ₹335 crore, falling short of the forecasted ₹428 crore. That said, Trent’s bottomline showed a strong 47% year-on-year growth. The profit miss was largely due to a decline in other income, which dropped to ₹48 crore from ₹80 crore last year. Additionally, higher depreciation costs and a fall in joint venture profits also impacted the bottomline.
Increased Costs Weigh on Profitability
- Depreciation for the quarter rose to ₹197 crore from ₹152 crore.
- The share of Joint Venture profit fell to ₹5.7 crore from ₹25 crore.
- Taxes increased significantly to ₹132 crore from ₹86 crore last year.
These factors contributed to a decrease in overall profitability for the quarter, despite strong revenue growth.
EBITDA and Margins In-Line with Expectations
Trent’s EBITDA stood at ₹643 crore, largely in line with analysts’ estimates of ₹675 crore. EBITDA margins came in at 15.5%, marginally below the expected 15.7% but an improvement from 15.3% during the same period last year.
Retail and Fashion Segments Continue Strong Growth
Trent’s fashion concepts posted double-digit Like-For-Like growth, with Beauty & Personal Care, Innerwear, and Footwear now contributing over 20% to the company’s total revenue.
Additionally, Trent opened 43 new stores in the quarter, including 7 Westside stores and 34 Zudio outlets, further strengthening its retail footprint.
Strong Performance in Star Hypermarket Business
The Star Hypermarket business also performed well, registering a 27% increase in quarterly revenue. Its Like-For-Like growth stood at 14%, driven by an overall improvement in operating performance.
Stock Price Slips 8% Post Earnings Announcement
Following the earnings release, Trent’s shares dropped by 8%, hitting ₹6,398. The stock is now down 25% from its peak of ₹8,345 earlier this year. Despite the recent decline, Trent shares have still gained 120% year-to-date in 2024.
Market Expert’s View: Strong Long-Term Growth Despite Short-Term Miss
Market expert Prakash Diwan pointed out that while Trent’s results were slightly weaker than expected, the company has shown impressive growth despite a challenging retail environment. He stressed that Trent’s expansion plans and growth in sales per store remain on track, but noted that the stock's high valuation means expectations are always elevated.
Conclusion: Trent Positioned for Long-Term Success
Despite a minor miss in Q2 results, Trent Ltd. continues to demonstrate strong growth and resilience in a difficult retail market. The company’s continued store expansion and growth in key segments like fashion and hypermarkets put it in a strong position for future success, though its share price may need time to adjust following the earnings report.