Trent’s Q4, FY25 net profit declines on rising discounts, expansion of Zudio stores

The ongoing expansion of its Zudio stores and slower same-store sales growth (SSSG) led to Trent’s net profit declining to its steepest during Q4, FY25.

During the quarter, the company’s profit margins contracted due to rising discounts and the growing contribution of the lower-margin Zudio business to overall revenue. Despite this, it continued to add stores at a robust pace. The concentration of Zudio store openings towards the end of the fiscal year is expected to fuel revenue growth in the upcoming quarters.

In future, Trent plans to focus on new product lines, including lab-grown diamonds and beauty products, which could boost the top line. Analysts forecast an annual growth of 25–26 per cent in the company’s revenue and net profit from FY25 through FY27.

Trent's revenue increased by 29 per cent Y-o-Y but declined by 10 per cent in Q4, FY25 compared to the previous quarter, indicating a slowdown after the holiday season. The company’s net profit declined by 47 per cent Y-o-Y in Q4, FY25 and by 26 per cent from the previous quarter as the company continued its aggressive store expansion.

During the quarter, the company launched 13 Westside and 40 Zudio stores. Effective cost management helped reduce rent expenses by 20 per cent Y-o-Y. Analysts noted, despite some pressure on gross margins due to Zudio's lower price points, the company’s operating margin before depreciation and amortization (EBITDA margin) is expected to stay stable at 16–17 per cent, supported by cost controls.

For FY25, Trent’s revenue and net profit rose by 40 per cent and 10 per cent Y-o-Y to Rs 16,668 crore and Rs 1,584.8 crore, respectively. The lower profit growth was due to a higher baseline last year, which included a one-time gain of Rs 576 crore from reassessing lease estimates.

Trent's expansion strategy focused on targeting Tier II and III cities. It established a presence in 64 new cities and towns, as per a report by Elara Securities. The brokerage firm anticipates Zudio’s store count to grow at a rate of 17 per cent annually while the store count for Westside is projected to grow by 8 per cent between FY25 and FY28. The combined retail footprint for Zudio and Westside stores grew by 40 per cent to 9.5 million sq ft in FY25. Online sales contributed 6 per cent to the company's revenue.

Trent's SSSG has gradually softened over the past two quarters, reflecting weaker demand. As per a report by the Motilal Oswal Financial Services, Trent's SSSG declined to a mid-single digit during the quarter from a high-single digit in the December 2024 quarter and double-digit growth in the September 2024 quarter.

In FY26, Trent’s growth is likely to be boosted by Zudio's store openings that were concentrated towards the end of the fiscal year.