Trent Stock Drops 4% Despite Strong Q4 Earnings, Raises Concerns from Brokerages Over Fund-Raising and Demand Prospects

Trent Ltd Stock Falls Despite Strong Q4 Results

Trent Ltd, a Tata Group retailer, saw its stock plummet as much as 4 percent on Thursday, despite reporting robust Q4 FY26 financial results. The company's plan to raise up to Rs 2,500 crore through equity or other modes weighed on investor sentiment, with brokerages flagging concerns around demand outlook.

The Tata Group retailer reported a significant improvement in its Q4 FY26 performance, with earnings before interest, taxes, depreciation, and amortization (EBITDA) rising 42.3 percent year-on-year to Rs 927.8 crore, exceeding the CNBC-TV18 poll estimate of Rs 848 crore. EBITDA margin expanded sharply to 18.5 percent from 15.5 percent a year ago, also above expectations of 16.8 percent. Net profit increased 32.5 percent to Rs 413 crore, beating estimates, while revenue rose 19.2 percent to Rs 5,028 crore, slightly below projections.

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The company's operational growth was driven by continued store expansion and operating leverage. Trent added 109 Zudio stores and 22 Westside stores during the quarter, taking its total network to 1,286 outlets as of March-end, including 963 Zudio stores and 300 Westside outlets.

However, investor focus shifted to capital allocation after the company approved an enabling resolution to raise up to Rs 2,500 crore through equity or other modes. The board also announced a 1:2 bonus issue. While the capital raise is aimed at supporting expansion, the lack of clarity on deployment appears to have tempered near-term sentiment.

Brokerages largely acknowledged the strong earnings delivery but flagged concerns around the fund raise and near-term demand outlook. Bernstein maintained an 'Outperform' rating on Trent stock with a target price of Rs 5,000 per share, highlighting that the company is "back on track" with strong growth and margin beat. However, it added that the rights issue does not excite investors.

HSBC retained a 'Buy' rating with a target price of Rs 4,830, highlighting that the EBITDA beat was driven by higher gross margins. However, it pointed to low single-digit like-for-like growth in the fashion segment and warned of potential pressure on store productivity amid rising competition.

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Jefferies has a 'Hold' rating with a target price of Rs 4,675, stating that strong growth was driven by store expansion and improving like-for-like trends. Operating leverage supported the earnings beat. The brokerage also flagged management's cautious stance on near-term demand due to geopolitical risks.

In contrast, Citi maintained a 'Sell' rating, though it raised its target price to Rs 4,100. The brokerage said that margins were supported by factors such as gross margin expansion and cost control, including lower employee and rental costs per square foot. However, it cautioned that some benefits may be non-recurring, including inventory provision reversals.

Trent stock has declined about 20 percent over the past one year, compared with a marginal 0.2 percent decline in the Nifty 50. The company has a market capitalisation of over Rs 1.52 lakh crore, per the latest available data.