Despite profit growth, Trent Limited stock drops on underlying sales weakness

Trent Ltd., the fashion and lifestyle retailer from the Tata Group, saw its stock price drop over 6 percent on Monday—hitting a 16-month low—as analysts reacted to underlying softness in key sales metrics for the second quarter of fiscal year 2026.

Despite reporting a strong 11.3 percent rise in consolidated net profit to 376.86 crore on a 15.9 percent revenue increase to 4,817.68 crore, brokerages flagged that the company's growth pace has decelerated sharply. Analysts at Nuvama Research told Mint that the moderation was heavily influenced by a significant 17 percent decline in revenue per sq.ft., which offset the 43 percent year-over-year growth in new area addition. Analysts noted this decline indicated a struggle with store-level cannibalization and was further compounded by the expanding mix of Tier-II and new stores, which typically have a higher gestation period.

Noel N Tata, chairman, Trent Limited, commented on the quarter's performance, stating, “We remain focused on portfolio growth, elevating our products and enhancing store experience for our customers. Reduction in GST rates is a welcome step and over time is likely to augur well for our product categories. The business registered steady performance during the quarter.”

Along with the second quarter results, Trent also informed the stock exchange of a significant corporate development: a buyback offer received from Inditex to acquire a portion of Trent's minority holding in Inditex Trent Retail India (ITRIPL). Inditex, which holds the majority 65.06 percent stake in the Zara operating joint venture, offered buyback of 94,900 equity shares of face value of 1000 rupees each held by Trent (which currently owns 34.94 percent).

Operationally, the quarter was marked by aggressive physical expansion, bringing the total portfolio to over 1,000 large-box fashion stores across 251 cities, with the opening of 19 Westside and 44 Zudio stores. The company also launched its new youth-focused fashion brand, “Burnt Toast,” during the quarter, aimed at dynamic self-expression.

While analysts lowered the company's earnings outlook due to the sales productivity pressure, they acknowledged that profit before interest, depreciation and tax (PBDIT) rose 21.1 percent to 843.53 crore due to "significant cost optimisation" and exceptional operational discipline.