Tata-owned Trent is sharpening its focus on store portfolio growth and optimization as India's largest fashion retailer by market value positions itself for gradual consumer sentiment recovery. CEO P Venkatesalu has outlined a strategic approach emphasizing selective density increases across key markets while maintaining the company's aggressive expansion momentum.

Strategic Market Approach

The company plans to continue adding new outlets in areas where it already maintains presence in major cities, while simultaneously expanding into smaller markets. This dual approach reflects Trent's confidence in both mature and emerging market opportunities.

"Consumer sentiment today is neither euphoric nor despondent. It is gradually improving. Outlook over the medium term is positive," Venkatesalu explained. The strategy focuses on pursuing growing reach and share of revenues through selective density increases across key markets with improving customer propositions.

Expansion Track Record

Trent has executed one of the fastest expansion drives by any retailer in India, with impressive results across its portfolio:

The company's approach mirrors successful international retailers including Spain's Inditex (Zara owner) and British chain Primark, which prioritize dense store networks in high-footfall catchments to leverage scale for enhanced bargaining power with vendors and real estate developers.

Stock Performance and Market Position

Despite operational expansion success, Trent's stock has experienced significant volatility:

Competitive Landscape Challenges

The value retailing segment where Zudio operates faces intensifying competition from major players including Reliance, Shoppers Stop, and Aditya Birla Fashion & Retail. Additionally, Chinese fast fashion brand Shein's re-entry into India through Reliance Retail after a five-year ban has created additional competitive pressure.

The clothing and lifestyle products sector has experienced demand slowdown persisting for two years, creating operational challenges for retailers operating on tight margins.

Organizational Philosophy

Venkatesalu emphasized the company's cultural focus on building a nimble, agile organization capable of quick adaptation and grassroots signal recognition. "We have a mix of home-grown and expatriate talent, but culturally, we remain focused on building a nimble, agile organisation—one that can adapt quickly, listen closely to grassroots signals and take calculated risks," he stated.

The CEO acknowledged that scale brings both complexities and advantages as the organization grows, with store density reducing last-mile costs and enabling faster stocking and response to local fashion trends—critical factors as growth moderates.

"Progress is rarely linear. We need to keep changing," Venkatesalu concluded, emphasizing that growth opportunities in the consumer space remain exciting despite challenges.

Macquarie has reduced its target price on Trent by a substantial 18% to ₹4,900 while maintaining its Outperform rating, citing cyclical rather than structural challenges facing the fashion retailer. The brokerage expects the current slowdown to ease in the second half of CY26, driven by supportive government measures and demand normalization.

Target Price Revision Details

The sharp target price cut from ₹6,000 to ₹4,900 reflects Macquarie's more cautious near-term outlook and revised valuation methodology. The brokerage has incorporated slower demand recovery expectations, resulting in earnings cuts across multiple fiscal years.

Cyclical Slowdown Factors

Macquarie identified several short-term factors contributing to Trent's growth moderation over recent quarters. These include softer discretionary demand across small-ticket categories, store additions in proximity to existing locations, and intensifying competition from value-focused fashion players. Despite these headwinds, the company delivered 17% sales growth over the last two quarters, continuing to outperform most industry peers.

The brokerage emphasized that the proposed Zudio store revamp could strengthen Trent's competitive positioning once demand conditions normalize. Additionally, investments in technology infrastructure, particularly RFID systems and warehouse automation, are expected to support long-term EBIT growth despite potential near-term earnings impact.

Recovery Timeline and Catalysts

Macquarie projects sales growth recovery in the second half of CY26, supported by several potential government initiatives:

• Potential GST reductions
• Personal tax cuts
• Government employee pay hikes

The brokerage draws confidence from Trent's historical success in recalibrating retail formats like Westside, suggesting management's capability to execute the Zudio revamp without significantly impacting margins.

Margin Management Strategies

Several operational levers are available to manage profitability during the transition period:

• Higher store salience with rentals linked to sales performance
• Freight cost optimization through increased store density
• Normalization of depreciation costs following warehousing investment phase

Valuation Methodology

The 18% target price reduction stems from a higher segment discount rate and more conservative fashion-sector growth assumptions in Macquarie's DCF-based valuation model. Despite the reduction, the implied EV/EBITDA multiple remains around 45x, indicating sustained confidence in Trent's long-term growth trajectory.

Potential re-rating catalysts include sharper-than-expected fashion demand recovery and improvements in loss-making business segments. Macquarie maintains that patience is warranted as the current weakness represents cyclical challenges rather than fundamental business deterioration, with the critical test being demand recovery in H2 CY26.