Synopsis : Trent faces back-to-back downgrades as HSBC cuts its target price citing high capex, weak near-term growth, and lowered EPS estimates. With Nuvama’s earlier downgrade, investors now eye how Trent will navigate subdued demand and rising competition in India’s retail sector.
Trent, the Tata Group’s retail powerhouse behind Westside and Zudio, is under investor scanner after HSBC slashed its target price to Rs 6,600 from Rs 6,700 while maintaining its ‘Buy’ stance. This marks the second downgrade in a week, following Nuvama’s move to downgrade the stock to ‘Hold’ amid disappointing near-term growth prospects.
High Capex Pressure:
HSBC highlighted that Trent’s ambitious plan to add 250 stores annually across all formats, including Westside, Zudio, Star, Utsa, and Samoh, will sustain a high annual capital expenditure of Rs 1,000–1,500 crore for the foreseeable future. While these aggressive expansions are strategic for future growth, they impact near-term cash flows and necessitated a trim in EPS estimates by 1–2% for FY27 and FY28, though revenue and EBITDA projections remain unchanged.
Weak Near-Term Growth:
In Q1FY26, Trent’s revenue grew just over 20% year-on-year, falling short of HSBC’s 34% growth estimate due to a soft demand environment and sourcing disruptions from Bangladesh. Despite its rapid product refreshes to counter ‘fashion fatigue’, subdued consumer sentiment and intensifying competition in the value-fashion segment could affect growth and margins, prompting HSBC to flag a muted short-term outlook.
Lowered EPS and Valuation Risks:
Higher capex and slower-than-expected growth have led HSBC to lower Trent’s trailing twelve months (TTM) June 2027 EPS used for valuation from Rs 85.1 to Rs 84.1, directly impacting the valuation under the P/E multiple framework. This cautious stance aligns with Nuvama’s recent downgrade, which pointed to Trent’s growth slowdown in its core fashion business and flagged its high valuations amid declining growth visibility.
Stock Performance:
Trent’s stock has seen a 9.4% slide in the past five trading sessions, a 7% decline over the past month, and is down 20% in the last six months. Over the last year, it has eroded 1.7% of investors’ wealth, raising concerns for shareholders assessing the timing of their next move as Trent balances aggressive expansion with profitability under challenging market conditions.
Disclaimer : This article is for informational purposes only and does not constitute financial advice. Please consult your financial advisor before making investment decisions.
