ICICI Direct: Trent Q1 Review - Quality Franchise To Withstand Near Term Headwinds   
A customer browses clothing displayed in the womenswear department of a Westside store operated by Trent Ltd., the retail unit of Tata Group, in Mumbai. (Photographer Kanishka Sonthalia/Bloomberg)

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

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BQ Blue’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages. These reports offer BloombergQuint’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.

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.

Click on the attachment to read the full report:

ICICI Direct Trent Q1FY21 Result Update.pdf

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