Morgan Stanley has reiterated its ‘overweight’ rating on Tata Group’s retail subsidiary Torrent, following its entry into the mass-priced beauty space with the launch of Zudio Beauty. The move positions Torrent to compete with well-established companies in the beauty and personal care (BPC) industry such as Hindustan Unilever’s Elle 18, Sugar Cosmetics, Health & Glow and Colorbar.
Zudio Beauty’s competitiveness
The launch of Zudio Beauty is significant as it marks Trent’s foray into the affordable beauty space. Unlike competitors such as Reliance, Nikaa and Shoppers Stop, which focus on the premium and high-end segment, Torrent aims to reach a different demographic by offering affordable beauty products.
Morgan Stanley noted that Zudio’s beauty and personal care (BPC) business is already well established within its Westside and Zudio stores. The contribution from BPC sales has increased significantly, with the division now accounting for approximately 20% of total revenue, compared to just 10% previously. This highlights the growing importance of beauty products in driving overall torrent growth.
Main highlights:
BPC Sales Growth: Beauty and personal care products have become an important part of Zudio and Westside stores, reflecting changing customer behavior toward more luxurious and impulsive purchases. Revenue Contribution: Emerging categories, including beauty, have doubled their share of total revenue, now contributing 20% compared to 10% previously.
Morgan Stanley Investment Outlook
Morgan Stanley has set a price target for Trent at 8,032 rupees per share, implying an 8% upside from the previous closing price. The brokerage remains optimistic about Torrent’s expansion strategy, especially the launch of Zudio Beauty, which is expected to add value to the company’s revenue stream.
Trent’s beauty history
This is Trent’s first foray into mass-market beauty, but the company is no stranger to the industry. In the past, Trent ventured into luxury cosmetics by launching Tata Click Palette Store. Additionally, the Tata Group previously founded India’s first beauty brand, Lakme, which was later sold to Hindustan Unilever.
Zudio Beauty Store Expansion
Trent has already opened its first independent Zudio Beauty store in Bangalore and plans to expand to other major cities such as Gurugram, Pune and Hyderabad. This expansion further strengthens Torrent’s position in the growing affordable beauty market.
Zudio’s growth story
Zudio initially started in 2017 as part of Star stores and has grown to become one of India’s largest apparel brands. Its unique design portfolio and low gross margins have driven the store’s high productivity and success. Zudio’s rapid growth played a key role in Trent’s overall expansion. In FY24, Zudio surpassed Westside in terms of revenue and now accounts for more than a third of Torrent’s total revenue, up sharply from just 8% a few years ago.
Current number of stores:
Zudio: 559 stores Westside: 228 stores (as of June 2024)
conclusion
Morgan Stanley’s bullish stance on Torrent is supported by the company’s strategic expansion into beauty retail, with a particular focus on mass-priced beauty products through Zudio Beauty. With the increasing importance of beauty and personal care sales in the sales mix, Torrent is well-positioned to continue its upward trajectory with its successful brand portfolio and aggressive store expansion plans.
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