Shares of Trent Ltd slipped nearly 5% on Tuesday, January 6, trading at around ₹4,119.30, after brokerage firm Citi reiterated its ‘Sell’ rating on the stock, citing persistent concerns over declining store productivity and revenue density, despite marginally better-than-expected revenue growth in the December quarter.
Citi maintained its target price of Rs 4,350 per share, noting that Trent’s standalone revenue grew 16.9% year-on-year, slightly ahead of its estimate of 15.3%. However, the brokerage highlighted that this growth marked a moderation from earlier quarters, with revenue growth standing at 19.8% in Q1 and 17.1% in Q2, indicating a gradual slowdown in momentum.
According to Citi, the topline outperformance in Q3 was driven largely by aggressive store additions rather than improvements in like-for-like sales performance. During the quarter, Westside added a net 17 stores, while Zudio expanded by 48 stores, compared with Citi’s estimates of 18 and 40 stores, respectively. On a year-to-date basis, Westside and Zudio have added 30 and 89 stores, highlighting an accelerated expansion strategy versus FY25.
However, the brokerage flagged continued pressure on average revenue per square foot, which declined 15.7% year-on-year, broadly in line with its expectations. Citi pointed out that productivity metrics have been under strain for several quarters, with revenue density falling 13.9% in Q1 and 15.5% in Q2. In Q3, revenue per square foot was further impacted by an early festive season, which shifted demand timing, even though the comparison base was relatively weak.
Citi cautioned that while rapid store expansion is supporting headline revenue growth, declining revenue density raises concerns over the sustainability of returns, particularly as newer stores typically take time to mature. Given the ongoing pressure on productivity and limited visibility on earnings improvement, the brokerage reiterated its cautious stance on the stock and retained its Sell rating.