Why Does Macquarie Remain Bullish on Trent Despite Near-Term Demand Weakness?
About Trent and the Organized Fashion Retail Landscape
Trent has emerged as one of the most structurally compelling stories within India’s organized retail and fashion ecosystem. Backed by the Tata Group, the company has steadily transformed itself from a multi-format retailer into a focused fashion-led growth engine, with Zudio acting as the primary scale driver and Westside anchoring the premium end.
Over the last several years, Trent has benefited from the shift away from unorganized retail, rising fashion penetration, and disciplined execution across store rollout, sourcing, and inventory management. However, like most discretionary consumption plays, the company has not been immune to near-term demand moderation caused by inflationary pressures and uneven consumption recovery.
Macquarie’s latest note reflects this dual reality. While acknowledging near-term softness in fashion demand, the brokerage remains constructive on Trent’s medium-term trajectory, citing internal levers such as format revamps, technology adoption, and operating efficiency improvements.
Key Takeaways From Macquarie on Trent
🔹 Outperform rating maintained with a target price of ₹4,900
🔹 Near-term sales moderation acknowledged due to demand weakness
🔹 Sales recovery expected in the second half of CY26
🔹 Zudio revamp planned to deepen competitive advantage
🔹 RFID and technology investments expected to support EBIT expansion
🔹 Government policy initiatives seen as supportive for demand recovery
The core of Macquarie’s conviction lies in Trent’s ability to self-correct and self-upgrade even during periods of muted demand. Unlike pure cyclical plays, Trent has multiple internal growth levers that do not rely solely on macro tailwinds.
For investors navigating consumption-driven volatility, such differentiation is critical. Markets often extrapolate near-term demand softness far into the future, creating periods of mispricing. This is similar to how disciplined market participants rely on structured frameworks such as a calibrated Nifty Tip to avoid reacting impulsively to short-term noise.
Trent Business and Growth Drivers Snapshot
| Driver | Current Status | Strategic Impact |
|---|---|---|
| Zudio Format | Scale-led expansion | Mass affordability advantage |
| Store Network | Aggressive rollout | Market share gains |
| Technology (RFID) | Investment phase | Inventory efficiency and EBIT uplift |
| Sourcing Model | Largely in-house | Margin protection |
Zudio remains the centerpiece of Trent’s growth strategy. Its value-fashion positioning, rapid inventory churn, and tightly controlled cost structure have allowed it to scale faster than peers. The proposed revamp is not a cosmetic exercise but a strategic enhancement aimed at improving throughput, customer experience, and SKU productivity.
Strengths and Weaknesses
|
🔹 Strong brand backing and governance 🔹 Scalable Zudio format 🔹 Tight control on sourcing and costs 🔹 Technology-led efficiency initiatives |
🔻 Dependence on discretionary spending 🔻 Near-term demand sensitivity 🔻 High expectations priced into valuations |
RFID adoption is a notable differentiator. While many retailers discuss technology adoption, Trent is actively investing in systems that improve stock visibility, reduce shrinkage, and optimize replenishment. Over time, these efficiencies tend to translate into measurable EBIT expansion, particularly in large-format, high-SKU environments.
Opportunities and Threats Ahead
|
💡 Fashion demand recovery in H2 CY26 💡 Further penetration into Tier 2 and Tier 3 cities 💡 Operating leverage from store scale |
⚠️ Prolonged discretionary slowdown ⚠️ Competitive intensity in value fashion ⚠️ Execution risk in format revamp |
Macquarie also points to supportive policy measures as a secondary tailwind. Government initiatives aimed at boosting disposable incomes and consumption could act as accelerators once macro conditions stabilize. In such a scenario, companies with ready capacity and refined formats stand to benefit disproportionately.
Valuation and Investment View
Macquarie’s ₹4,900 target reflects confidence in Trent’s medium-term earnings compounding rather than near-term quarterly performance. The brokerage believes that once demand normalizes, Trent’s operating leverage, efficiency gains, and format-led scale will drive superior profitability.
For investors, the stock represents a classic execution-led compounder where timing matters. Periods of demand softness often provide consolidation phases rather than structural breaks. Tactical market volatility can be managed through disciplined approaches such as a structured BankNifty Tip strategy, while maintaining long-term exposure to quality consumption plays.
Investor Takeaway
Derivative Pro and Nifty Expert Gulshan Khera, CFP®, believes Trent’s long-term story remains intact despite near-term consumption headwinds. The planned Zudio revamp, RFID-led efficiency gains, and eventual demand recovery are key catalysts for sustained earnings growth. Investors should focus on execution milestones rather than short-term sales volatility, while accessing consistent market perspective at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
Related Queries on Trent and Fashion Retail Stocks
Why is Macquarie positive on Trent stock?
How important is Zudio for Trent’s growth?
What role does RFID play in retail profitability?
When will fashion demand recover in India?
Are organized fashion retailers long-term compounders?
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
