Trent stock tanked 12% on Friday amid concerns about a slowdown in its revenue growth, as revealed during its recent Annual General Meeting (AGM).
At the time of publication, Tata Group backed-Trent stock was trading at Rs 5,451.00, 11.95% down from its previous close.
This slower growth outlook disappointed investors and analysts, leading to a wave of downgrades from brokerages.
Trent stock: What triggered the sharp selloff
The stock price tumbled after the Annual General Meeting (AGM) of the company during which the management indicated that they are expecting a slowdown in revenue.
The comments of its management hinted that as new stores open up, its growth rate in the traditional fashion business is mellowing, and the newer categories such as Zudio Beauty and Star require time to normalize before they can become growth drivers.
The company’s subdued financial performance in the recent quarter also caused worry on Dalal Street.
Despite its earlier success, with a five-year CAGR of 35%, the company’s current growth rate has slowed to 20% year-on-year, falling short of its own stated target of 25% growth in the coming years.
This deceleration raises concerns about Trent’s ability to sustain its past momentum or generate better returns.
The downward revision in growth forecasts fell short of analyst expectations, prompting several brokerages to downgrade the stock. Coupled with its high valuation, this triggered a sharp sell-off, with Trent shares plunging 11–14% intraday.
The hard task of maintaining high growth rates in a competitive retail environment particularly following a strong outperformance period, is prompting an investor reaction.
What analysts say
The analysts seem bearish on Trent stock after the recent sell-off with many brokerages downgrading its rating.
Nuvama lowered its rating of Trent to “Hold” from “Buy”, cut its price target, and slashed its revenue as well as EBITDA projections for the next two years.
“Pickup in Zudio Beauty and the Star business can become the next big growth levers, but we believe these businesses need to stabilize before scaling up. The slowdown in growth forces our hand to downgrade Trent to ‘hold’ with a revised target of Rs 5,884,” the wealth management company said in a statement.
HDFC Securities estimates a 23% CAGR growth in revenue and profit before tax (PBT) of Trent over the fiscal year 25-27 which is 8-10% lower than the street estimate.
When the brokerage issued its report, a little over a week ago, it left the SELL rating on Trent stock unchanged and placed a sum-of-the-parts (SOTP)-based target price of 4,300 per share.
The sharp selloff seems reaction to the evolved conditions as investors are responding to the pressure of maintaining high growth rates in a competitive retail environment, particularly, following a spell of solid outperformance.
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