Trent Stock Crashes 7.5% After Q2 Results: What's Dragging Tata's Retail Giant Down?

Trent, a prominent retail company under the Tata Group, experienced a significant 7.5% drop in its share price, reaching a low of Rs 4,262.60 after announcing its Q2 results for the current financial year. The company reported a 16% year-on-year (YoY) growth in revenue from operations, with consolidated net profit climbing 11.44% to Rs 373.42 crore. Standalone revenue from the sale of products also saw a 20% rise to Rs 5,061 crore.

However, the performance of specific business segments raised concerns. Trent's food and grocery business, Star, reported flat revenue growth at Rs 869 crore, with its like-for-like growth also remaining stagnant. According to a report by Motilal Oswal Financial Services, Star's revenue declined 2% YoY, with multiple stores undergoing upgrades. Revenue per square foot for Star decreased by 14% YoY to Rs 26,900.

The affordable fashion brand, Zudio, also indicated a flat trend with a consolidation of 10 stores and the opening of 11 new ones, resulting in a stable store count. Trent's overall revenue growth decelerated to 17% YoY in Q2 FY26, as significant area additions were offset by a sharp 17% YoY decline in revenue per square foot, suggesting store-level sales cannibalisation.

Management commented that consumer sentiment in Q2 was muted, further impacted by unseasonal rains and initial customer prioritization of products with greater GST cut benefits. The company expects demand traction to improve over the medium term for discretionary lifestyle categories. Emerging categories like beauty and personal care, innerwear, and footwear contributed 21% of standalone revenue, and online revenue grew 56% YoY, accounting for over 6% of Westside sales.

Motilal Oswal Financial Services highlighted Trent's robust footprint additions and strong growth potential in Star and emerging categories but noted that revenue growth acceleration remains a key trigger.

Impact: This news is likely to impact Trent's stock price negatively in the short term due to the share price drop and concerns over segment-specific performance and revenue deceleration. It may also influence investor sentiment towards the retail sector, emphasizing the need for strong consumer demand and effective store-level performance. Rating: 7/10

Difficult Terms: YoY: Year-on-year, comparing data from one year to the same period in the previous year. Consolidated Net Profit: The total profit of a company and all its subsidiaries after deducting all expenses and taxes. Standalone Revenue: Revenue generated by a company from its own operations, excluding any subsidiaries. Like-for-like growth: A measure of growth that compares revenue from stores that have been open for a full year, excluding new stores or those that have been significantly renovated. Bps: Basis points, a unit of measure used in finance, equal to one-hundredth of a percent (0.01%). Revenue per square feet: A metric measuring sales performance relative to the retail space available. Discretionary lifestyle categories: Products and services that consumers can choose to buy but are not essential, such as fashion, entertainment, and luxury goods. GST rationalisation: Changes or adjustments made to the Goods and Services Tax system. Cannibalisation: When a new product or service offered by a company reduces the sales of its existing products or services.