There is a lot of movement in the market these days in the shares of Tata Group’s giant company Trent Limited. The shares of this company selling fashion, footwear and lifestyle products were once the first choice of investors and it gave huge returns to the people. But in recent times the stock has fallen more than 40% from its all-time high of ₹5,563.35. However, after a slight recovery at lower levels, the company’s shares are currently trading at around ₹ 3,169.20. Even today a rise of 2% has been seen in this stock. At present the total market cap of the company is ₹ 1,64,986.62 crore. Has the bad times for this stock passed now or is there still a need to be more cautious? Let us understand what are the main reasons behind this big crash.
Earnings increased but pace slowed down
If we look at the financial figures, the annual revenue of Trent Limited has increased from ₹ 8,242 crore in FY 2023 to ₹ 20,074 crore in FY 2026. The figures may look strong, but the real story behind it is hidden in its slowing pace. The company’s sales growth was a record 83.24% in FY 2023, which declined to only 17.16% in FY 2026. According to the report of TradeBrain, this slowness of growth clearly indicates that the company has now entered its mature phase, where maintaining the same pace as before is a big challenge.
Valuation had become very expensive
There is a simple rule of the stock market that when expectations go far ahead of reality, profit realization is certain. Something similar was seen with Trent’s stock also. When this stock was at its peak, its valuation had become very expensive. During the year 2024, the price-to-earnings (P/E) ratio of the company had reached approximately 231.6 times and the price-to-book (P/B) ratio had reached 62.5 times. This valuation was very high compared to other competing companies in the retail sector. Investors’ expectations had increased so much that as soon as there was even a slight slowdown in the pace of growth, large-scale profit-booking started in the market and the shares came down rapidly.
Mutual competition among Judio outlets
Some practical challenges are also emerging at the level of the company’s business model. At present the competition in the Indian fashion market has become very tough. Trent is facing challenges from e-commerce companies and local brands, but a big problem has arisen from within the company itself. The company’s very popular brand Zudio is opening new stores rapidly across the country. According to the report, due to opening of more stores in the same area, they have now started competing among themselves, which is called ‘cannibalization’ in business language. Due to this, direct pressure on the earnings and profits per store is clearly visible.
Impact of slowdown in the market
The current situation of the country’s retail market is also being considered a major reason for this decline. Common consumers are now spending money very thoughtfully on non-essential items related to clothes and lifestyle. Due to this changed habit, the sales growth of the company’s old stores (Same-Store Sales Growth) has been affected. Along with this, Trent is rapidly expanding new outlets in smaller cities. There is a huge investment in setting up these new stores and it takes a long time to get full profits from them. Due to this huge expenditure, there is a direct impact on the company’s earnings and overall growth in the short term.
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Disclaimer: This article is for information only and should not be considered as investment advice in any way. TV9 Bharatvarsha advises its readers and viewers to consult their financial advisors before taking any money-related decisions.
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