Trent's Q2 Profit Misses Estimates Amidst Slowest Revenue Growth in 16 Quarters; Exits Zara JV

Trent's financial results for the second quarter of FY26 showed a consolidated net profit of ₹377 crore, an 11.3% increase year-on-year. However, this figure fell short of Street estimates of ₹446 crore. Revenue from operations stood at ₹4,818 crore, up 16% year-on-year, but this was also below expectations of ₹4,998 crore and represented the slowest growth rate for the company in at least 16 quarters, failing to meet its own target of around 25% growth. Management cited muted consumer sentiment and GST transitional issues as contributing factors.

Total expenses increased by 18% to ₹4,267.39 crore, largely due to higher staff costs and overheads associated with its aggressive store expansion. Despite these challenges, Earnings Before Interest, Tax, Depreciation, and Amortisation (Ebitda) grew 26.5% to ₹817 crore, and Ebitda margins improved by 150 basis points to 17.5%, which were in line with estimates.

The company continued its store expansion, reaching 1,101 stores across 251 cities. Significantly, Trent's board approved divesting its entire stake of 94,900 equity shares in Inditex Trent Retail India (ITRIPL), the joint venture operating Zara stores in India, through its share buyback program. Trent has been gradually reducing its stake in this 51:49 JV over the past two years.

Impact: The miss on profit and revenue estimates, coupled with the slowest growth in revenue in over three years, may put pressure on Trent's stock in the short term. However, strong Ebitda growth, improved margins, and continued aggressive store expansion, particularly in tier 2 and 3 cities, provide a positive outlook. The exit from the Zara JV indicates a strategic shift, potentially allowing Trent to focus more on its own brands. Rating: 6/10

Difficult Terms: Ebitda: Earnings Before Interest, Tax, Depreciation, and Amortisation. It's a measure of a company's operating performance. Basis points: A unit of measure used in finance equal to one-hundredth of a percent (0.01%). 150 basis points equals 1.5%. Consolidated net profit: The total profit of a company and its subsidiaries after all expenses and taxes. Consolidated revenue from operations: The total income generated from the primary business activities of a company and its subsidiaries. JV (Joint Venture): A business arrangement where two or more parties agree to pool their resources for the purpose of accomplishing a specific task. Stake: The amount of ownership a company has in another entity, usually expressed as a percentage.