Westside – A cheaper version of Zara

Trent is one of the leading players in the branded retail industry in India. Trent operates 264 stores across 76 cities in India. Trent operates stores across four formats as below:

1. Westside:
Westside offers branded fashion apparel, footwear and accessories for women, men and children. Westside accounts for around 90% of Trent’s revenues. Westside owns a portfolio of exclusive and differentiated fashion brands.

Own brands are the key differentiators of the business. Own brands contribute 97% of total revenues. Globally retailers who control the entire value chain are relatively more successful. Third-party brands were successfully replaced by own brands without impact on customer experience.

Westside added 27 new stores in FY19. Property selection happens through a rigorous set of reviews.

An average size of Westside store is around 18,000 sq. ft. A new store requires total investment of ₹ 6-7 crores across capex, deposits and inventory.

ClubWest membership has more than 50 lakh memberships.

2. Zudio:
Zudio offers fashion at stunning prices for women, men and children. Zudio focuses on 100% own branded offering. It has presence through 40 standalone stores and as well as 16 Star locations. A new store requires total investment of ₹ 3-4 crores across capex, deposits and inventory. Sales per square feet for Zudio stores crossed ₹ 14,000 per sq. ft.

Zudio added 33 standalone stores in FY19. An average Zudio store size is around 6,000-8,000 sq. ft.

3. Star Bazaar:
Star is a fresh food and grocery retail chain, operating 26 supermarkets and 10 hypermarkets. Star is 50:50 JV between Trent and Tesco UK. Star made a loss of ₹ 85 Crores in FY19.

4. Landmark:
Landmark, a family entertainment concept, operates through 5 independent stores and retailed through select Westside stores.

Investments:
Zara is 51:49 JV between Inditex Spain and Trent. Zara operates 22 stores in major cities.

Opportunity:
India is at an inflection point of GDP per capita of USD 2000. Apparel consumption and revenues in various nations grew exponentially as GDP per capita crossed USD 2000.

The number of urban working women is expected to reach 6 Crores by 2025.

69% of India’s population lives in tier 2 and tier 3 cities. Tier 2 and tier 3 cities contribute 54% to the total retail consumption.

By 2020, it is expected that 120 new cities will emerge with the average household income in line with that of major metropolitan cities.

Domestic consumption has increased by 3.5x in last decade and is expected to grow to ₹ 335 lakh Crores by 2028.

Internet penetration grew from 4% to 34% between 2007 and 2017. It stood at 88% and 22% in urban and rural areas, respectively.

Retail market is expected to be around ₹ 60 lakh Crores in 2019. Fashion & lifestyle market is expected to reach around ₹ 21 lakh Crores. Apparel market stands around ₹ 4.5 Crores.

Over 95% of the Food & Retail market is unorganised.

Trent plans to open 40 Westside outlets every year and hundreds of its mass market Zudio stores across India.

Now that we’re built this capability and this model that’s working so well, it’s time to grow faster.

Moat:
Trent is increasing focus on building private labels/in-house brands. Private labels have inherent advantages:
– Lower concept to customer time
– Faster execution
– Better control over quality & pricing
– Improved margins
– Differentiated & exclusive offerings

Westside is building a cheaper version of Zara. Westside continue to be a profitable concept.

Investors:
– Promoter Tata Group hold 32.6% of the company
– MF hold 13.2% of the company
– FII hold 22.2% of the company
– Premji holds 2.8% of the company
– RK Damani holds 2.7% of the company
– Trent has approved issue of ₹ 950 Crores equity shares on a preferential basis to Tata Sons
– Trent is exploring options to raise additional ₹ 600 Crores in FY20

Efficiency:
– Sales per square feet is one of the key measures which assesses retail efficiency in terms of space utilization.

Valuation:
trent-val

Source:
Company Annual Report

Disclosure:
Invested since 2012

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