Motilal Oswal has reiterated its positive stance on Trent Ltd, with a target price of Rs 3,500, citing recovery in sales and strong expansion plans. As the retailer aims for aggressive store growth in smaller markets, investors are watching whether these new outlets can match the productivity levels of established stores.
What Happened
Motilal Oswal has reaffirmed its positive outlook on Trent Ltd, maintaining a target price of Rs 3,500. The brokerage’s latest report highlights that the company, which recently concluded its 74th Annual General Meeting, is entering a new phase of growth. After a period of cooling momentum, the retailer saw a recovery in sales during the fourth quarter of the fiscal year ended March 2026. The brokerage believes Trent’s focus on footprint expansion and efficient cost management positions it well for future growth.
Growth Strategy and Ambitions
Trent has laid out an ambitious roadmap to significantly expand its brand portfolio beyond its flagship chains, Westside and Zudio. The company aims for a multi-fold increase in revenue over the coming years. Central to this strategy is the rapid expansion of Zudio stores, with long-term plans to scale the network to 5,000 outlets, alongside doubling the number of Westside stores. The company recently reported a consolidated revenue of Rs 20,074 crore and a net profit of Rs 1,721 crore for FY26, providing a solid foundation for these expansion goals.
The Tier 2 Expansion Risk
While the expansion plans are bold, they come with operational challenges. Analysts note that store productivity may remain under pressure in the short term, specifically in fiscal year 2027. This is because stores opened in Tier 2 and Tier 3 markets often have lower initial productivity compared to those in metropolitan areas. These outlets require a longer "gestation period"—the time it takes for a new store to reach full operational efficiency and profitability—before they start contributing effectively to the bottom line. The company's ability to maintain high store-level economics while scaling rapidly across these new geographies will be a crucial test for management.
Financial Projections
The brokerage forecasts a compound annual growth rate (CAGR) of 21% in revenue, 19% in pre-IND AS EBITDA (operating profit), and 17% in adjusted profit after tax between FY26 and FY28. However, the report cautions that future margin expansion will depend heavily on the recovery of "like-for-like" sales—a measure that tracks sales growth from existing, established stores rather than new ones. Essentially, investors are looking for proof that the core business can continue to grow organically alongside the massive new store additions.
What Investors Should Track
Beyond the store count, several factors are now on the monitorable list. Investors will be watching the pace of store maturity in newer cities and whether the company can sustain its margins during this high-growth phase. Additionally, following the recent AGM, the market will track the upcoming leadership transition, as Chairman Noel Tata is set to step down later this year in line with the group's governance policies. The success of the company’s Rs 2,500 crore fundraise, intended for warehousing and supply-chain automation, will also be key to supporting these long-term targets.