The Outperformers 2019

The Outperformers (71-80)

These companies have been ranked based on their stock's excess return over the Sensex for a five-year period

|
Published a year ago on Sep 03, 2019 14 minutes Read

In Outlook Business’ third edition of The Outperformers, these are the companies that have managed to beat the market over a five-year period, creating significant value for their shareholders.

Trent

For most retailers, quick geographical expansion would be an important barometer for success. But not for Noel Tata, chairman, Trent, which operates departmental store Westside. Under his leadership, Tata’s retail arm added just about three to four stores per annum. The idea was to perfect the store format, get the right product mix and achieve store-level profitability before opening more stores. Not only did he expand slowly, but also focused on developing private labels across various product categories – apparel, cosmetics, bags and lingerie. 

This two-pronged strategy, of slow expansion and focus on private labels, has allowed Trent to clock impressive growth numbers consistently. The company has consistently garnered gross margin of around 60% over the past five years, while its profit margin rose from 3.16% to 8.66%. The company’s strong performance reflected in its stock market run as well. Over FY14-FY19, the stock grew at a CAGR of 28.75%. 

Having perfected the Westside format, Trent has now switched to a more aggressive expansion model over the past few years. Analysts expect that the healthy store addition coupled with steady same store sales growth (in high single digit) will drive Trent’s revenue. 

While Westside contributes a lion’s share to Trent’s business (about 92%), the other verticals are also fast scaling up. Their JV with Spanish retail firm Inditex to run Zara and Massimo Dutti stores in the country allows Trent to also cater to the premium audience. They have hit a sweet spot with Star Market, a refreshed avatar of their struggling hypermarket format Star Bazaar. By rightsizing their stores and launching more private labels, the company has been able to trim losses under this format. It has also entered the fast fashion market with Zudio, which offers value with the same private label focus. While Zudio is a lower gross margin business than Westside, it offers higher volume. Analysts expect consolidated revenue to grow at a CAGR of 20% in FY19-2

unsub

You don’t want to be left behind. Do you?

Our work is exclusively for discerning readers. To read our edgy stories and access our archives, you’ve to subscribe