Trent gets a downgrade call from this global brokerage, cuts target price

Shares of Trent received a downgrade call from global brokerage Goldman Sachs, which also gave a 'neutral' rating against a 'buy' call earlier. The brokerage firm also trimmed the price target by 21%, setting it at ₹5,500 per share, down from ₹6,970. This adjustment indicates a mere potential upside of 2.4% from the previous day's closing price. The downgrade is primarily attributed to higher-than-expected cannibalisation impacts, affecting the company's financial year 2026 sales and earnings per share estimates, which have been cut by 5% to 9% and 8% to 13%, respectively.

Goldman Sachs pointed out that the cannibalisation, a reduction in sales due to the introduction of similar products, has influenced Trent's performance expectations. Initially, the firm anticipated that Trent's Zudio would capture a 5% market share in India's apparel sector by 2035. However, the market share at the end of the last financial year was only 1.5%. Despite Zudio's growth rate outpacing the overall apparel market, its market share gains have been slower than anticipated. The projected sales growth for Zudio in FY25 stands at 60%, yet Goldman Sachs believes shares "could continue to trade in a range around the current price levels, until there is a sign of inflection."

The implications of this downgrade are notable for Trent, as it may affect investor sentiment and market positioning. While Zudio's expansion continues, the slower-than-expected market share increase presents challenges. Trent's competitors in the apparel industry, such as Reliance Retail and Aditya Birla Fashion & Retail, are also vying for market share in this competitive landscape.

Analysts will watch out for any strategic moves by Trent to counteract these challenges and any subsequent market reactions. Until an inflection point is reached, the company's stock may experience limited movement around its current valuation.