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A cut above the rest

Trent(TRENT IN), a subsidiary of the Tata Group, is a leading player in India's retail industry and manages well-known brands, Zudio and Westside. Zudio is set to grow ahead of peers (though at a modest pace) despite intensifying competition, led by many moats: a) a successful private label strategy, b) robust traction led by differentiated fashion, and c) prudent focus on product quality at reasonable price points and organic growth. Zudio shall continue to be the market leader in the fast fashion segment by a wide margin due to its edge. Also, expect Westside to continue to deliver steady show – Initiate with Buy.

Zudio – Dominating the fast fashion space and all set for expansion: Expect Zudio to continue to be the largest player in fast fashion and grow ahead of the industry. Led by a 31% CAGR through FY27E, the share of fast fashion in the apparel industry is set to touch 14% by FY27E from 10% as of FY24. This may be led by healthy store penetration opportunity (Exhibit 12) and robust same store sales growth (SSSG). The distribution of India’s youth cohort (15-30 years; ~60% of population) should remain stable till 2031, aiding visibility for fast-fashion brands such as Zudio. So, Zudio’s growth journey should be stellar given its: a) astute fashion sense, b) higher non-apparel offering and c) appealing fit for Gen-Z and millennials. Higher footfall despite private-label focus has proven the model’s strength. Quality apparel at affordable price yet differentiated positioning appeal for the Gen Z is a key pull for the brand

TRENT leads peers with differentiated play; outperformance to continue: As TRENT gears up for expansion, we expect it to maintain industry-leading metrics due to differentiated product offerings, strong grip over processes and full reliance on private labels. TRENT’s fashion portfolio has consistently outperformed peers on key parameters – Store size, revenue per sqft/per store and EBITDA margin – by a wide margin (30-40% versus the industry) along with leading headline growth. Expect this to sustain, led by firm focus on fundamentals such as: a) product market fit, b) promising quality at reasonable price points and c) faster design-to-shelf cycle.

Brand incubation to continue: Expect TRENT to evolve as a key consumer brand by leveraging key prior learnings and Zudio’s brand equity. Its emerging brands are Misbu, Samoh and Utsa, with recent entry into beauty (Zudio Beauty) and lab-grown diamonds (Pome). While leading brands are resolving internal issues – Aditya Birla Fashion & Retail (ABFRL – serial acquisitions) and VMart (awaiting turnaround) – TRENT is focused on organic growth via building own brands. TRENT with prudent capital allocation is set to expand its brand portfolio.

Initiate with Buy and SoTP-TP of INR 8,500: Expect TRENT (consolidated) to post revenue/EBITDA/adjusted PAT CAGRs of 27%/29%/38% in FY24-28E (surpassing 16% growth for the apparel space). This is likely to be led by Zudio’s 37% sales CAGR. Organic focus with premium growth offers robust performance amongst peers. Quick Commerce plays should not pose a threat given the constraint of store size. We initiate with Buy and SoTP-TP of INR 8,500 – We value the standalone business at 57x EV/EBITDA (Sep ’27E), Star Baazar at 4x EV/sales and Zara+ Massimo Dutti at 30x EV/EBITDA. Slower-than-expected store addition, price war among value players and failure to gauge fashion dynamics are risks to our call.

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