Retail fashion is a disorderly industry, with a raft of new brands entering the market every year. A few years ago, Forever21 dominated retailers that target the youth, but has since filed for bankruptcy. Where does that leave brands like Westside that offers a mix of products for customers ranging from children to women?
Westside is a retail subsidiary of Trent, part of the Tata group. Trent also has a 49 percent stake in the Indian units of international brands Zara and Massimo Dutti. Zudio, which was acquired by Trent from its JV, Trent Hypermarket Private Ltd in FY18, has launched an aggressive expansion plan.
More than the product mix, what has worked for Trent is its offering of 10 different private labels.
Trent’s gross sales in the last decade to March 31, 2019 rose 237 percent. Net profit jumped to Rs 106 crore from Rs 22 lakh in the same period. Retail fashion brands with private labels have typically seen higher footfalls, helping them beat the long lull seen in the early 2000s.
The good show has reflected on the share price. The Trent stock has shot up 516 percent at Rs 545 in the past decade. Trent shares have rallied steadily this year despite the crushing slowdown and liquidity crisis as well as the cutthroat competition from ecommerce players. This year alone, it delivered 50 percent returns to its shareholders.
Westside, the retail subsidiary of Trent, recorded nearly 85 percent growth in revenue with a higher contribution from substantial sales growth from stores at existing locations. Private brands have contributed nearly 97 percent returns to the revenue, which has resulted in 180 percent growth in cash balance in the last 10 years.
Westside, in particular, recorded a nearly 85 percent growth in revenue. Much of that growth came from stores at existing locations. But the salient reason for the stellar growth has been the contribution of private labels.
Private brands contributed nearly 97 percent of revenue, triggering a 180 percent growth in cash balance in the past decade.
The downside for an investor is the expensive valuation of the stock at 194x price-to-earnings. The debt-to-equity ratio at 0.30x and return-on-equity (RoE) at 6.57 percent as on March 31, 2019 are also unfavourable to investors.