TRENT - Annual Report Summary
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Business Overview
Trent Ltd was originally incorporated as Lakme Limited and was in the business of manufacturing, selling and exporting cosmetics, toiletries and perfumery products. In 1998, the company chose to divest from cosmetics and pursue apparel retailing given the absence of established brands in most categories. Towards the end of March 1998, Lakme acquired multiple brands and departmental stores across the country. Lakme Exports Limited, a subsidiary of Lakme, was amalgamated with Littlewoods International Limited and was renamed “Trent”.
Trent is engaged in retailing of apparel, toys, games, food etc. They own over 400 stores under various retail concepts (brands). Trent is a part of the Tata Group which is valued at over $100 Billion and has operations in more than 100 countries. The company operates through four major retail formats which are discussed below.
Westside offers branded fashion apparel, footwear and accessories for women, men and children, along with a wide range of home furnishings and décor. It includes brands like Nuon, Studiofit, Luna Blu, Lov, Zuba, Wes etc. It accounts for nearly 70% of the company’s revenue in FY21.
Zudio is the company’s value fashion concept and offers products at competitive prices for men, women and children. The majority of Zudio Stores are present in the states of Gujarat, Karnataka and Maharashtra. It has 133 operating stores across the country.
Star Market is a supermarket chain that offers groceries, beverages, health and beauty products. The stores are primarily operated by Trent Hypermarket Pvt Ltd which is in a 50:50 JV with Tesco Plc UK. It has around 60 working stores across the country.
ZARA and Massima Dutti: The company has two separate associations with Inditex Group ESP wherein it holds a 49% stake. There are 21 ZARA stores and 3 Massima Dutti stores in the country. The combined revenue of these entities is over 1200 Cr in FY21.
Other Concepts: Booker Wholesale, Value Mandi, Landmark and Utsa.
Industry Analysis
Demographic advantage: India’s population is still young and the population growth rate of the country is higher than that of western countries and China, making the country a rising market for apparel, lifestyle and technology products.
Rising Income and Urbanization: The rising incomes and rise in the number of higher-income households keep consumption on an upward trajectory while global economies are on the brink of recession. By 2030, 40% of the population is expected to live in and around cities and rapid development of tier 2, tier 3 and tier 4 cities are also expected. India is eventually expected to become the third-largest consumer economy in terms of consumption by 2025.
Retail markets: The retail segment of India is recovering after covid and is emerging as one of the largest sectors in the country. It contributes over 10% to the country’s GDP and 8% to employment. The retail market segment in India is expected to reach $1.1-1.3 trillion by 2025 with a CAGR of 9% - 11%, according to research by BCG in association with the Retailers Association of India. Developed countries like US and UK are expecting only around 3.6% - 4.5% respectively.
Major innovations in Supply chain models and investments in supermarkets and increasing corporate participation can be witnessed. Furthermore, a significant online selling impact is yet to be experienced in groceries and related products which is expected to change in the coming years.
Fashion and Related market: India’s fashion and apparel industry is estimated around $59.3 Billion in 2021. It is the sixth-largest market in the world. Private labels and in-house products are in trend where customers receive quality and satisfaction against higher margins. The industry is expected to grow to $106 Billion by 2025/26. Marketing and Sustainable production alongside brand building will drive growth and revenue in the coming years.
Food and Grocery: The food and grocery segment still remain vastly unorganized in the country. However, 85% of traditional retailers are expected to drop to 65% - 70% in the coming years with the majority of the share taken by E-Commerce and Modern Retailers.
Online Retail: The online retail market is expected to grow by 32% over the next five years to reach $225 Billion. The direct-to-consumer model is expected to be the catalyst bringing in a CAGR of over 40% - 45% levels.
Continuous investment into marketing and technology is benefiting brands and MNCs. The strong growth in revenue is seen in Fashion - 90% and in healthcare around 85% in the country. The rising income levels and brand loyalty amongst consumers are posing to be strong building blocks over the next few years.
Policy Support: 100% FDI is allowed in textiles. Huge technology development funds and integrated textile funds are released by the government which encourages private equity and employment.
Business Analysis
WESTSIDE
Westside is a flagship concept of the Company and contributes significantly to its revenues. It is a destination brand that caters to a discerning and diverse audience of fashion across men, women, kids, innerwear, beauty, footwear and home. The business has progressively evolved into a unique model with aspirational & exclusive retail brands coupled with offerings that are customer-pull-led.
Key focus areas during FY2022:
Managing Covid supply backdrop
Emphasis on new fashion trends
Scaling up the annual subscription-based model of customer engagement – WestStyleClub
Increasing store presence and foot traffic.
Leveraging social media to grow and build reach across the younger spending sections of the country.
Integrated Value chain: Speed and seamlessness is the key to the efficient operations carried out in Westside. The best technology is integrated into the inventory management system and the operating efficiency of individual stores and warehouses is closely monitored. Sync is also aimed to achieve between online and offline stores to enhance overall customer satisfaction.
ZUDIO
Zudio focuses entirely on exclusive branded offerings, curated in-house and in line with the latest fashion trends at sharp prices. This brand targets the younger generation and aims to achieve an efficient lead time and constantly stay updated with trends. Merchandise is almost entirely sourced from India to maintain the competitive pricing strategy.
Zudio added over 100 new stores, now 233 in total over the year. The stores cover around 6000-8000 sq. feet and the capital employed is around 3 to 4 crore.
STAR Market
Star stores operated in JV with Trent and Tesco UK comprises hypermarket and supermarket stores. The company opened 12 new stores over the year. The supermarkets span over 7000-8000 sq. feet offers food and groceries, home care products, apparel, home décor and beauty products.
Exclusive retail brand offerings include:
Klia: Cleaning-aids & home care products
Fabsta: Packaged food and beverages
Skye: Personal care products
Other Subsidiaries
ZARA & Massimo Dutti
During the year under review, the Zara entity recorded revenues of Rs. 1,815 crores. The incremental store openings for Zara continue to be calibrated with a focus on presence only in very high-quality retail spaces. The entity for Massimo Dutti operates 3 stores and recorded revenues of Rs 59 crore in FY22.