Trent

A shop that breeds more shops

The surest kind of compounding a retailer can offer is the simplest: open a store, let it earn, use the earnings to open more, and repeat for years. Trent, the Tata group's retailer, has turned that loop into an art. Its Westside and Zudio formats sell affordable, own-brand fashion that shoppers return for, and the company has been multiplying its stores across the country at a pace few can match — each new shop a small, repeatable engine of profit.

Philip Fisher urged investors to find businesses with a long runway and the skill to keep widening it. Trent fits: sales compounded around fifty per cent a year over five years, profit faster, and the return on capital has climbed near twenty-eight per cent as the model has matured. India's shift from unbranded bazaars to organised retail is a tailwind measured in decades.

A great business at a great-business price

Candour on valuation, as always. At about ninety times earnings — down from the hundred-and-thirty-odd the market paid in recent years, after a near-quarter fall from its high — this is dear by any plain measure, and twenty-two times the value of its assets. The de-rating has made it less extravagant, not cheap. One buys Trent for the decade of store-opening ahead, paying a full price for one of the finest retail growth stories in the land.

What to weigh

Fashion is fickle, and value apparel is a crowded, low-margin trade where today's favourite format can tire. The recent slowing of same-store growth is exactly the kind of wobble a ninety-times stock treats harshly. The Tata parentage and steady promoter holding are real comforts; the price leaves no room for error.

What this asks of you

This is an own-for-ten-years proposition, and the discipline it asks is twofold: the patience to let the store count compound, and the steadiness to hold a dear stock through the drawdowns such valuations inevitably bring. The margin of safety is the growth itself, not the multiple. Buy it as a long compounding of India's retail formalisation — and size it knowing you are paying handsomely for the privilege.