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Market Rally Lifts Trent Shares
Trent's stock jumped nearly 5% to an intraday high of ₹3,532 and traded around ₹3,525 on March 25, 2026. This surge significantly outpaced the benchmark NSE Nifty50's 2.13% gain. The rally was largely driven by a broad market uplift, fueled by falling crude oil prices and hopes for de-escalation in West Asia. This eased geopolitical tension acted as a catalyst, improving investor sentiment. Trent's market capitalization reached approximately ₹1.25 trillion.
Premium Valuation Poses Questions
While external factors provided a short-term boost, the stock's current valuation and underlying business performance need a closer look. Motilal Oswal Financial Services kept a 'Buy' rating but lowered its target price to ₹4,350 from ₹5,200. Their valuation is based on a 40x multiple for future earnings of its standalone businesses, a premium compared to many peers. Trent's Price-to-Earnings (P/E) ratio stood between 65x and 90x over the past twelve months, higher than the specialty retail industry average of 61.6x. Competitors like Avenue Supermarts (DMart) traded at a P/E of about 100.49, while Reliance Retail's was around 22.93. This premium suggests investors expect significant future growth, which faces challenges.
Growth Hurdles Remain
The Indian fashion retail sector is expected to see strong, margin-led growth in 2026, driven by shifts to smaller cities and a focus on value and operational efficiency. However, Trent's recent performance indicators show a more complex picture. Motilal Oswal noted a slowdown in like-for-like growth recently. This deceleration is due to subdued demand and, importantly, self-cannibalization as Trent expands stores in the same areas. Technology efficiencies, particularly in employee expenses, are supporting operating profit growth. Analysts believe store productivity may not fully recover to FY23-25 levels. With benefits from technologies like RFID already factored in, a recovery in like-for-like sales growth is seen as the main driver for future margin expansion. Motilal Oswal projects stable operating profit margins around 13.2% from FY26-28, but warns of potential risks if like-for-like growth remains weak.
Bearish View: Valuation and Growth Risks
Despite a 'Strong Buy' consensus from some analysts with an average price target around ₹4,770, the bear case focuses on Trent's premium valuation and the risk that its growth may not meet expectations. Motilal Oswal's report prefers other large retail companies like Lenskart, VMM, and DMart over Trent, suggesting capital might be better invested elsewhere in the sector. Ongoing self-cannibalization poses a structural risk, potentially limiting the success of new store openings. Unlike highly efficient value retailers, Trent's multiple formats (Westside, Zudio, Star Bazaar) require advanced inventory and supply chain management, which can be strained during slow demand periods. The projected retail footprint expansion of about 20% annually from FY26-28, while boosting revenue, needs to translate into profitable sales growth to justify current valuation levels. If like-for-like growth doesn't rebound strongly, the company risks margin pressure despite expanding its physical presence.
What's Next for Trent
Analysts expect compound annual revenue and operating profit growth of 19% from FY26-28, largely driven by aggressive retail footprint expansion. However, the key factor for a significant stock price adjustment remains the acceleration in overall revenue growth, not just adding more stores. While stable geopolitics and controlled commodity prices are supportive, Trent's ability to overcome its internal growth challenges will determine its long-term performance. The market is watching closely for signs that store productivity can improve and that the expanded network leads to strong top-line growth.