MOSL: TRENT (Buy) - ANNUAL REPORT UPDATE-Setting store by consistency; investing aggressively
TRENT - Annual Report Update: Setting store by consistency; investing aggressively
(TRENT IN, Mkt Cap USD2.3b, CMP INR461, TP INR515, 12% Upside, Buy)
We pored over TRENT’s annual report to capture key details of the company’s performance over the past year. Key takeaways:
Another year of consistent growth
Standalone revenue increased 23% to INR25.3b in FY19, primarily led by Westside (+18%) and Zudio (newly started fast fashion value format; +42% to INR2b). However, the EBITDA margin contracted 40bp to 9.3%, which, in our view, can be attributed to losses at Zudio.
Healthy operating metrics at Westside/Zudio; extensive capex planned
Westside continued delivering steady revenue/sq. ft. growth of 2.5% to INR10.2k in FY19. Separately, Zudio’s revenue/sq. ft. stood at INR14,000 for independent stores on a like-to-like basis, which is significantly higher than the industry average of INR8-10k. Against this backdrop, management in its AGM revealed its plan to add 35-40 Westside stores and 100 Zudio stores. TRENT intends to raise INR15b to fund its growth plans, of which INR9.5b is already raised from Tata Sons.
Trent Limited is engaged in the retail sale of readymade garments. The Company's segments include Retailing and Others. It primarily operates stores across three formats: Westside, Star and Landmark. Westside offers apparel, footwear and accessories for men, women and children, along with furnishings, decor and a range of home accessories. It offers products in approximately 60 cities across over 90 stores. Star hypermarket and convenience store chain offers a range of products, including staple foods, beverages, health and beauty products, apparel, home furnishings, vegetables, fruits, dairy and non-vegetarian products. The Star brand operates through approximately 30 stores under Star Daily, Star Market & Star Hyper banners. Landmark is a family entertainment format that offers a range of toys, front-list books and sports merchandize. Westside offers in-house fashion brands, such as Wunderlove, Sassy Soda, StudioWest, Zuba, Bombay Paisley, Denim Shop and Gourmet West, among others.
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