Is Trent out of fashion?

In the fickle world of fashion, few brands stay in trend for long. But Trent, the Tata Group's retail showstopper, has managed to effortlessly strut through the last decade. Stores are sprouting. Sales are growing. And investors—until recently—were swooning.

Then came the stumble.

A 28 per cent year-on-year rise in quarterly revenue should have turned some heads. Instead, the market turned its back. The stock dropped 15 per cent in a day. Something is clearly amiss.

Is Trent's growth in all the right places?

On the surface, Trent's figures still dazzle. Zudio—the budget fashion chain that has quietly conquered every mall, high street, and roadside corner alike—continues to drive expansion with Westside humming along. Trent has now crossed the 1,000-store milestone in India.

But if you scratch beneath the surface, the polish starts to fade.

Same-store sales growth (SSSG), the clearest signal of consumer loyalty, has slowed. The post-pandemic spending spree is losing steam. FY24's performance suggests that Trent's recent growth owes more to store openings than customer enthusiasm.

With the number of tiles higher than the footfall, a more fundamental question arises. If store openings are doing the heavy lifting, what happens when expansion slows-or stalls?

Similar store count, wildly different valuations

This is where it gets interesting.

Smaller value retailers like V-Mart , V2 Retail and Baazar Style run a similar number of stores. Their combined market capitalisation is Rs 16,000 crore. Trent, even after its recent correction, still commands Rs 1.6 lakh crore. That's a tenfold premium.

Yes, Trent is no ordinary retailer. Its merchandising is superior. Its branding more polished. And its execution, in many ways, is exceptional. But is it ten times better?

Markets don't just price the present. They price in a vision of the future. This begs the question-just how perfect a tomorrow is Trent expected to deliver?

Trent's challengers are getting louder

It's not like the competition is asleep.

V2 Retail clocked 69 per cent revenue growth in the latest quarter. Baazar Style wasn't far behind at 55 per cent. Same store sales for both were in the 20-24 per cent range—numbers Trent would have been proud of not long ago.

Sure, they operate on thinner margins. And yes, their brand equity doesn't match Trent's. But in retail, scale and operating discipline can quickly level the playing field. Operating leverage is a powerful thing—once fixed costs are covered, the extra rupee starts to matter a lot more.

Besides, the customer doesn't always care about slick branding. In a Tier-2 town, the right price and fresh stock often beat a high-street aesthetic.

Is Trent's story one of hope or caution?

If the valuation gap with peers doesn't cause concern, a broader comparison might.

India's entire listed textile industry—352 companies strong—generated Rs 1.8 lakh crore in revenue in FY24. Their collective market value? Rs 2.4 lakh crore. Trent, with less than a tenth of that revenue, is worth two-thirds as much.

Of course, Trent is a retail business, not a textile exporter. It sells shirts, not cotton yarn. But numbers like this speak less about industry differences and more about market sentiments. It's not the first time, either.

Remember when Wipro and Infosys together were valued at three times the entire cement and metals sectors in 1999? Or when DLF briefly topped the whole pharma sector in 2007? Or more recently, when Hindustan Unilever alone had a market cap higher than the top 10 pharma companies combined? The lesson: narratives can override numerators.

These weren't market tops, they were red flags.

Groceries and growing pains

To justify its lofty valuation, Trent needs more than fashion. Enter Star Baazar—its foray into grocery retail.

Strategically, it makes sense. Groceries drive customer footfall, frequency, and loyalty. They're the holy grail of Indian retail. But there's a problem. DMart already owns this grail. Reliance wants it too. Blinkit, Zepto and Swiggy Instamart are nibbling away at the urban end.

Star Baazar, by contrast, remains loss-making and sub-scale. Worse, it has yet to show that it can earn its cost of capital—something Warren Buffett might call the minimum requirement for any expansion plan.

At some point, opening more stores without earning more on each one becomes a treadmill, not a strategy.

What's the real cost of looking this good?

Trent's appeal isn't in doubt. Its stores are thoughtfully designed. Its private labels are on-trend. And Zudio has pulled off the near-impossible: fast fashion with Indian margins.

But investors are no longer just buying a good business. They're buying the idea that this machine will keep humming flawlessly, margins will hold, new categories will click, and execution will remain world-class.

That's a lot of perfection to pay up for.

Final fitting

So, should investors stay loyal? Or is this just a retail fantasy in need of a reality check?

Perhaps both.

Trent remains one of the best-dressed companies in the market. But when the price assumes a market with no shocks, competition that never catches up, and execution that never falters—you might want to inspect the stitching.

After all, fashion fades. Even for stocks.

Also read: Can ONGC future-proof itself beyond oil?

This article was originally published on April 12, 2025.