Trent shares slide as June-quarter revenue growth misses Citi estimate

Shares of Trent fell more than 11% on Tuesday after the Indian fashion retailer reported June-quarter revenue growth that trailed Citi’s expectation. The Tata Group company said standalone revenue rose 19% from a year earlier to 56.66 billion rupees, equal to about $595 million.

The move put pressure on one of India’s larger listed retail names, whose Westside and Zudio formats have been central to its growth in apparel and fast fashion. Trent said in a Monday release that it operated 1,312 stores at the end of June.

Citi said in a Monday report that it had expected Trent to deliver 23% revenue growth for the quarter. The bank said it remained cautious on the company, citing weaker revenue per square foot, rising competition, cannibalization and the effect of store openings in smaller cities.

Revenue per square foot measures how much sales a retailer generates from its store area. Analysts use the metric to assess store productivity, particularly when a company is expanding its footprint quickly. A lower trend can indicate that new or existing stores are producing less sales density, although the reasons can vary by format, city and maturity of the store base.

Citi also pointed to cannibalization, a retail term used when new stores draw sales away from a company’s existing outlets rather than adding wholly incremental demand. That issue can become more relevant as chains increase density in established markets or expand formats aimed at overlapping customer groups.

Trent’s main retail brands include Westside and Zudio, both focused on the Indian market. Zudio has become a prominent value-fashion format, while Westside operates in apparel and lifestyle retail. The company’s expansion has been closely watched by investors because store additions can lift headline revenue, while also raising scrutiny of unit economics and productivity.

Despite Tuesday’s decline, CNBC reported that Trent’s shares were still up 4.3% since the beginning of the year. India’s benchmark Sensex index was down nearly 8% over the same period, according to CNBC.

The quarter’s reported growth underscores the distinction between absolute expansion and market expectations. Trent continued to grow revenue at a double-digit annual rate, according to its release, but the pace came in below Citi’s estimate, prompting concern over the quality and durability of sales growth as the company adds stores.

This story draws on original reporting from CNBC.