Value-for-money fashion drives Trent’s 129% inflation

After outperforming most of the world’s major retail stocks, shares of Trent Ltd. may be poised to rise further with its inclusion in India’s benchmark index.
On a strategy to win in affordable apparel, the Tata Group company’s stock has surged 129% this year, and is ranked No. 3 on the Bloomberg World Retail Index. Gains could extend further on Friday after news that Trent will be included in India’s benchmark NSE Nifty 50 gauge next month.
The stock has gained momentum amid investor enthusiasm over the company’s value-for-money Zudio brand. Trent’s sales rose 56% in the latest quarter, outpacing rivals such as Avenue Supermarts Ltd. and Aditya Birla Fashion & Retail Ltd., even as extreme heat and recent national elections suppressed consumption in India.
“Trent’s operating metrics have been better than peers, especially during recent quarters when market conditions have been weak,” said Shriram Ramdas, vice president, New Delhi-based Green Portfolio Pvt Ltd. “Zudeo has been able to attract customers to its stores.”
According to Abhilash Pagaria, head of alternatives and quantitative research at Nuvama Wealth Management Ltd, its inclusion in the Nifty 50 could lead to $500 million inflows into Trent’s stock, due to buying by passive funds that track the index. Trent’s market value is approaching $30 billion.
The stock’s sharp rise has left some analysts cautious, with at least three brokerages cutting their recommendations after earnings earlier this month. Analyst Himanshu Shah at Dolat Capital Markets Pvt cited “sharp stock price growth” for the downgrade, while he expects increased competition to be a major risk for Trent as rivals try to replicate its successful business model.
Apart from Zudio, the Mumbai-based company’s retail apparel brands include Westside and Utsa. It also has a local joint venture with Zara owner Inditex SA and runs the supermarket chain Star Bazaar in partnership with Tesco PLC.