This One Beat EBITDA Estimates, And The Stock Is Still Down From Its Peak

Zudio at 982 stores and accelerating into smaller cities, margins expanding 208 basis points, private labels at 73% of Star Bazaar revenue 

Sometimes the most interesting moment to look at a quality retail business is not when everything is going right, but when the operating delivery is strong and the stock has corrected anyway. Trent’s Q1FY27 is that moment. EBITDA beat Axis Securities’ estimates by 17.3%. PAT beat by 25.3%.

Margins expanded 208 basis points year-on-year to 19.6%. Revenue grew 18.5%. And yet the stock sits at Rs 3,110 — meaningfully below its 52-week high of Rs 3,782. Axis Securities maintains BUY with a revised target of Rs 3,640, calling the correction an entry point rather than a warning sign. “The recent correction in the stock price enhances the risk-reward profile, offering an attractive entry point for long-term investors,” the report states.

The Quarter 

Revenue of Rs 5,666 crore — up 18.5% year-on-year — marginally missed the estimate of Rs 5,690 crore. But everything below revenue came in well ahead. EBITDA of Rs 1,111 crore beat the estimate of Rs 947 crore by 17.3%. EBITDA margin of 19.6% beat the estimate of 16.6% by 296 basis points. PAT of Rs 532 crore beat the estimate of Rs 424 crore by 25.3%.

Gross margins expanded 149 basis points year-on-year to 46.6%. The operational quality of the quarter — despite a subdued discretionary demand environment and ongoing geopolitical uncertainty — speaks to a business with genuine cost discipline and a product mix that is moving in the right direction.

Like-for-like growth for the fashion portfolio came in at low single digits — not a standout number, but understandable in a quarter where consumer sentiment remained healthy but tilted toward value rather than discretionary spending. What more than compensated was the emerging categories contribution: beauty and personal care, innerwear and footwear collectively contributed over 21% of revenue — a meaningful and growing layer of the mix that is higher frequency and more resilient than discretionary fashion.

Zudio — 982 Stores

The Zudio network is the long-term compounding engine of Trent’s story, and Q1FY27 added 19 net stores to reach 982 — including seven in the UAE. The more strategically important number is the geographic composition of new additions: over 80% of new Zudio stores opened in Tier II and Tier III cities. This is deliberate, not opportunistic.

Smaller cities offer lower competition, lower real estate costs and a consumer base that is increasingly aspirational but deeply price-sensitive — precisely where Zudio’s value-led private-label proposition has the most structural advantage.

The total retail footprint now exceeds 18 million square feet across 301 Westside stores, 982 Zudio stores and 29 other lifestyle stores. The pace of expansion — and the concentration in underpenetrated markets — is the mechanism through which Trent captures the organised retail opportunity in India’s next phase of consumption growth.

Star Bazaar 

At Star Bazaar — Trent’s grocery and hypermarket format — private labels contributed over 73% of revenue in Q1FY27. For context, this is exceptional by any retail standard globally. Private label dominance at this level means the format controls its own pricing, margin and product differentiation in a way that branded grocery retailers cannot match.

“Private labels contributed over 73% of revenue, supporting improved store-level profitability,” Axis Securities notes — and the successful transfer of Trent’s private-label playbook from apparel to grocery reinforces the multi-format earnings visibility that underpins the SOTP valuation.

The New Vectors 

The growth optionality above the base case is building steadily. The UAE expansion — seven Zudio stores operational — is the brand’s first international test, and early traction is encouraging. Zudio Beauty — the extension of the brand into personal care — adds a high-frequency, high-margin product category within the existing store network without requiring new real estate.

And entry into lab-grown diamond jewellery opens a premium, high-engagement category that is growing rapidly among young urban consumers and sits naturally alongside Trent’s fashion positioning.

None of these are material in today’s P&L. Each could become meaningful in three to five years. “New growth avenues, including UAE expansion, Zudio Beauty, and entry into the LGD jewellery segment, are expected to further strengthen the growth trajectory,” the report states — optionality that is not currently priced in at the revised target of Rs 3,640.

GST 

One element that will flow through in subsequent quarters rather than Q1 is the GST reduction on apparel and lifestyle products — a policy change that Axis Securities specifically flags as “a welcome step that is likely to augur well over time.” For a value-led retailer like Trent, GST rationalisation is a structural positive — it either improves margins directly or allows price reductions that drive volume acceleration in price-sensitive segments. The benefit was not fully visible in Q1FY27 numbers, which makes it an incremental catalyst for the quarters ahead.

Trent has built three distinct and complementary retail formats — Westside for premium fashion, Zudio for value fashion at scale, and Star Bazaar for grocery — all anchored by private-label discipline that drives both margin and differentiation. The Q1FY27 numbers show a business executing well operationally even in a challenging demand environment. The stock’s correction from its highs has created a gap between the quality of the underlying business and the current price — and that gap is what Axis Securities is pointing investors toward.