Trent share price falls 8% despite 47% rise in Q2 net profit. Here's why

Trent share price: By 1:33 pm, the stock was down 7.49%, trading at Rs 6,432.55 on the Bombay Stock Exchange (BSE).

In Short

• Trent shares drop 8% after Q2 results
• Revenue rises 39%, but Trent's profit growth missed expectations
• Weak consumer sentiment and seasonality hurt Trent’s retail business

Shares of Trent Ltd. saw a sharp decline of 8% in Thursday’s trading session despite reporting a profit for the second quarter of the financial year. By 1:33 pm, the stock was down 7.49%, trading at Rs 6,432.55 on the Bombay Stock Exchange (BSE).

The company’s shares have fallen more than 13% in the past month and nearly 9% over the last five trading sessions. However, on a year-to-date basis, Trent shares are still up by 114%, and they have delivered an impressive 165% return over the past year.

The Tata Group's Trent, which recently joined the Nifty 50 index, announced its Q2 results on Thursday. While revenue rose 39% year-on-year to Rs 4,157 crore from Rs 2,982 crore in the same quarter last year, the results fell slightly short of market expectations. The company reported a net profit of Rs 335 crore, reflecting a 47% increase from the previous year.

However, the company’s profitability was affected by several factors, including a decline in other income, which dropped to Rs 48 crore from Rs 80 crore in the same period last year. Depreciation costs increased to Rs 197 crore from Rs 152 crore, while the share of joint venture profits fell sharply to Rs 5.7 crore from Rs 25 crore.

Higher taxes, which rose to Rs 132 crore from Rs 86 crore in the prior year, also weighed on the company’s bottom line.

Trent’s Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) stood at Rs 643 crore, which was broadly in line with market estimates of Rs 675 crore. Margins, too, were close to expectations, with a slight increase to 15.5% from 15.3% last year.

In its investor presentation, Trent management pointed to challenges in the retail business due to weak consumer sentiment and seasonality factors.

Despite this, the company saw strong double-digit like-for-like growth in its fashion segments. Beauty & Personal Care, Innerwear, and Footwear now collectively contribute over 20% to Trent’s revenue.

The company also expanded its footprint during the quarter, opening 43 new stores, including 7 Westside stores and 34 Zudio stores. It also consolidated nine Westside and 16 Zudio stores. Additionally, Trent’s Star Hypermarket business reported a 27% increase in revenue, with a 14% like-for-like growth, signaling a strong improvement in operating performance.