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Investing.com - Goldman Sachs downgraded Trent Ltd (NSE:TREN) (NS:TRENT) from Buy to Neutral and slashed its price target to INR5,500.00 from INR6,970.00, citing concerns about sales cannibalization among the retailer’s Zudio stores.
The investment bank noted that while Zudio store additions remain robust, sales throughput has been moderating and has missed expectations for two consecutive quarters. Goldman Sachs believes higher-than-expected sales cannibalization is the likely culprit as Zudio adds significant retail area in towns that already have numerous stores.
Goldman Sachs cut its FY26-28 sales estimates by 5-9% and earnings per share forecasts by 8-13%, reflecting the slower pace of market share gains than previously anticipated. Despite these concerns, Zudio continues to grow faster than the broader apparel market, with FY25 sales growth estimated at approximately 60%.
Trent’s market share is expected to increase from approximately 1.1% in FY24 to 1.5% in FY25, according to the research firm’s analysis. The company remains the fastest-growing business in Goldman Sachs’ consumer discretionary coverage, with FY25-28 sales and EBITDA compound annual growth rates of approximately 24% and 25%, respectively.
Goldman Sachs indicated that the stock could trade within a range until there are signs of improvement in the cannibalization impact, though the firm’s long-term outlook suggests Trent’s strategy will likely help it capture more market share in larger towns over the medium to long term.
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