ICICI Direct: Trent Q1 Review - Quality Franchise To Withstand Near Term Headwinds   

ICICI Direct Report

As expected, Trent Ltd. reported a washout Q1 FY21. High store concentration in worst hit Covid-19 states (approximately 17%, 16% of Westside, Zudio stores in Maharashtra) and higher presence in malls (approximately 50% for Westside, 25% for Zudio) further hampered store operations due to stringent measures by local authorities.

Subsequently, the company reported revenue de-growth of 87% YoY to Rs 96.3 crore (April 0%, May 8%, June 32% pre-Covid-19 sales YoY). The company made provisions worth Rs 40 crore towards inventories that led gross margins to contract substantially to 13.3% versus 53% in Q1 FY20.

However, considering encouraging traction post lockdown relaxations, the company may reverse it in ensuing quarters. Due to cost rationalisation measures, other expenses, employee expenses de-grew 57%, 18% YoY, respectively.

Ebitda losses were at Rs 119.1 crore. Other income grew 50% YoY to Rs 52.9 crore of which Rs 36 crore pertains to rent related waivers. Owing to deferred tax asset (Rs 43 crore), Trent reported net loss of Rs 139.5 crore.

Overall 90% of Westside, Zudio stores have now reopened. End of season sale, which began from August 01, saw healthy offtake with approximately 3 times jump in revenues. As per the management, while footfalls are at approximately 35% of pre-Covid-19 levels better conversion ratio, higher average transaction size led to sales at approximately 55% recovery rate.

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