How Trent is fashioning its success story

The Indian apparel industry has been on a roll, especially post-COVID. While various companies have benefited from the boom in this sector, one apparel maker that stands head and shoulders above its peers is Trent .

This stock has given a monstrous 63 per cent return annually in the last three years. That means its market cap has more than quadrupled during the said period!

It recently crossed Rs 1 lakh crore market cap and is poised to be a part of the Nifty 50.

So, what is the secret behind Trent's success? Let's explore that.

Riding the post-COVID wave

Trent, like every other player in the industry, benefitted from the pent-up demand in this sector after COVID. Almost all players witnessed strong growth in topline and bottomline numbers. Take its direct competitor, Aditya Birla Fashion. Between FY20-23, its revenue grew 12 per cent annually. The same goes for many other players in the industry.

But what makes Trent stand apart is that despite its rivals experiencing a slowdown once the post-COVID boom settled, its growth rate remained unscathed. While others reported lower growth in FY23, Trent's run continued in FY23. In fact, its margins expanded on the back of falling raw material prices.

Making massy, classy

In a landscape where many companies are fixated on premium offerings, targeting affluent customers to bolster profits, Trent has charted a different course. They've not only shown that economies of scale can be a path to profitability but also displayed their prowess in doing so.

Trent's Zudio brand, focusing on products below Rs 1,000, has grown substantially in the last few years, especially by tapping the tier-2 and tier-3 cities. Its operating profit has grown 136 per cent per annum over the previous four years and currently contributes to 38 per cent of overall operating profit.

This remarkable growth is supported by the strong expansion of Zudio stores, which contrasts with their premium brand, Westside.

Although some of its competitors, like Raymond , have pointed out the unprofitable nature of exclusive brand stores (EBOs) if they fail to sustain footfall, Zudio aims to crack this space by focusing on the location and aesthetics of the store.

The road ahead

The company has maintained its store profits, with around 99 per cent of its overall stores being profitable as per the latest AGM. Unsurprisingly, it is looking forward to expanding the business by keeping a targeted capex of around Rs 800 crore this year.

The company aims to capitalise on the consumers' move towards organised apparel retail. While other players are moving towards premium products, Trent has proven otherwise by displaying success in the mid to low segment too.

But it's not all roses. The company trades at a very rich P/E multiple of 167 times, which in itself advises caution. Besides, the company operates in a highly competitive industry, directly pitting its wits against organised, unorganised and various online retailers.

Last but not least, while Trent's focus on the mass market segment is working for them right now, it can be exposed during a demand slowdown - a reason why other brands are focusing on premiumisation.

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