| Tuesday, 28 February 2023 |
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Good morning [%first_name |Dear Reader%],
This week’s edition is about a business that has never lived up to all the initial hype surrounding it. A business that has been kept alive for years despite it having a snowball’s chance in hell of achieving the scale of its competitors.
What makes its plight especially stark is that it’s part of a company that has enjoyed glorious success otherwise.
Tata Group’s Trent Ltd is known for popular apparel retailers like Westside, Zudio, and Zara. But it also runs a supermarket chain—branded Star Market and Star Hyper—that’s a straggler at best. It’s almost impossible to find anyone who has a contrarian take on its prospects.
For good measure, I wrote about the existential crisis it was facing way back in August 2020.
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Two-and-a-half years is too short a period to escape from such dire straits.
But it seems Trent finally has some reason to be hopeful.
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Light at the end of the tunnel
One of the highlights of Trent’s numbers for the quarter ended December 2022 was this: an almost 60% jump in Star’s revenue over the same period in 2021. According to Trent, this was the division’s highest-ever quarterly revenue, though the company did not disclose any further details. (Financials for the two entities that operate the supermarkets are only available on an annual basis.)
A report by brokerage ICICI Direct also notes that “a material improvement” in Star’s bottom line during the period—read reduction in losses—may have contributed to a 5X jump in the profits of Trent’s joint ventures and associates to Rs 77 crore (US$9.3 million).
On a revenue per sq ft basis, too, Star is finally starting to look good in comparison with DMart, India’s most profitable grocer. In the year ended March 2020, Star’s revenue per sq ft stood at Rs 16,000 (US$193), half of DMart’s, according to a recent report by brokerage Kotak Institutional Equities. Two years later, Star had brought this figure up to Rs 18,700 (US$226)—two-thirds of DMart’s.
This is what Trent said when it announced its recent quarterly numbers:
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