The Telegraph
Since 1st March, 1999
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After a terrible June quarter, Tata’s retailing venture, Trent, has reported much-improved sales and operating margin for the quarter ended September. Though Trent has been steadily increasing the number of stores, growth in sales has been erratic. Sales have grown at 36 per cent year-on-year and 35 per cent sequentially after having averaged a 56 per cent in the past 10 quarters taken together. Sequentially, sales jumped with the addition of new stores.

The operational costs for the quarter at Rs 23.75 crore (Rs 15.63 crore) were 52 per cent above the year-ago period and 15 per cent above the June quarter cost of Rs 20.68 crore. Finished products purchase was up 99 per cent over the year-ago period (up 28 per cent sequentially) to stock the new stores while the other expenditure which includes the advertising and sales promotion costs was up 38 per cent on a year-on basis to Rs 10.39 crore (Rs 7.53 crore) and 8 per cent sequentially.

Strangely, despite widening business activity, staff cost has remained the same at Rs 1.64 crore (Rs 1.66 crore) which was down by a substantial 26 per cent sequentially.

Operating profit at Rs 2.94 crore (Rs 0.92 crore) were up by a huge 218 per cent over the year-ago period while sequentially it reported a much better performance over the June quarter when it had reported an operating loss of Rs 0.92 crore. OPM at 11 per cent was much above the 5 per cent it earned during the previous corresponding quarter.

The other income has been steadily declining and for the current quarter at Rs 1.14 crore (Rs 2.63 crore), down from the June quarter income of Rs 4.97 crore. Interest costs were negligible.

Despite rising sales and operating profits net profit was down 2 per cent over the previous corresponding quarter. However, this was mainly because last year, net profit was propped up by other income whereas this year’s profit was purely out of operational income.

The stock currently trading at Rs 158 discounts its September quarter annualised EPS of Rs 7.90 by 20 times. The key aspect of Trent’s September quarter profit was the vastly improved quality of earnings higher operating margin and net profits devoid of other income. The question is, is it sustainable' Besides, the next few quarter’s profits are already built into the current price.

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