Trent shares slip 3% as Kotak Equities cuts target price to Rs 5,150 on growth concerns

Tata Group’s retail arm, Trent Ltd, fell by as much as 2.6% on Monday to Rs 4,868.25 on the BSE after brokerage Kotak Institutional Equities cut the stock's target price to Rs 5,150 from Rs 5,550. The downgrade was driven by concerns over the company's store expansion strategy and revenue throughput.

Kotak Institutional Equities highlighted that Trent's aggressive store expansion, particularly for Westside and Zudio, could pressure its revenue growth. The brokerage noted that Trent's densely located newer stores might cannibalize sales, leading to lower-than-expected revenue throughput. Consequently, it revised its earnings estimates for FY2026-27 down by 1-5% and retained a «reduce» rating on the stock.

The stock was volatile last week after reports suggested an inflated store count of 269 on Trent's website, which was later corrected to 240. This reflects a net addition of eight stores year-to-date. The brokerage now projects a period-end store count of 243 for FY2025, down from previous net additions of 26, 14, and 18 stores in FY2022, FY2023, and FY2024, respectively.

Kotak Equities noted that Trent is shifting towards larger-format stores with an expanded merchandise offering, which has resulted in store closures in FY2025. The brokerage expects store expansion to normalize, projecting 18 and 22 new store openings in FY2026 and FY2027, respectively.

Larger Westside stores typically take longer to mature and report lower revenue throughput than smaller stores. Trent has closed 21 Westside stores in the first