Shares of Tata Group company Trent rallied 7.3% to its new all-time high of Rs 7,998 on the BSE today after launching its new lab-grown diamond (LGD) brand ‘Pome’ in Westside stores.
Currently, the brand has been launched in select Westside stores in Mumbai, Bengaluru, Hyderabad and Gurgaon). This seems like a pilot launch by Trent aimed to test the waters with SKUs in a Kiosk format.
Trent is expected to carve out an LGD jewelry brand, roll out EBOs and accelerate scale-up.
Calling Pome as the Zudio of jewellery segment, domestic brokerage firm Kotak Equities states how the brand has positioned itself in terms of pricing focusing on ‘diamonds for all’.
Pome has priced LGD jewelry in line with Trent’s characteristic sharp pricing. A 1-carat solitaire engagement ring is priced at Rs 24,000-29,000. A back-of-the-envelope calculation suggests that the implied pricing of a lab-grown diamond solitaire in Pome LGD jewelry is about Rs 13,000-17,000/carat.
“As per this pricing framework, on an average, Pome’s pricing could be at (1) 30% discount to Rs15-20k SKUs of natural diamond studded jewelry and (2) 80-85% discount to high value Rs500k+ natural diamond studded jewelry,” said the domestic brokerage firm.
Calculations also suggest that at current end product pricing and RM costs, Pome makes about 45-50% gross margins. At a broad-level, Pome’s retail economics (for EBOs) could be somewhat comparable to that of Caratlane, assuming higher footfalls/volumes make up for lower pricing.
The Indian market may also see a broad-based penetration of LGDs, given that the B2B LGD price is down to Rs 6k-Rs 8k for a 1-carat solitaire (97% discount to natural diamond) and retail prices could settle at Rs 15-20k/carat. Further, several retailers/jewelers are foraying into LGD retailing (Trent, Goldiam, Senco) with affordable price points and their access can accelerate LGD penetration.
Post the update, global brokerage firm Morgan Stanley gave a target price of Rs 8,032 for the stock while maintaining its overweight rating.
“The company’s foray into the mass-priced beauty segment with Zudio Beauty has given conviction. The BPC sales contribution was already quite material in Westside and Zudio stores. BPC business has built scale over time, as customers have become more indulgent and impulsive. Emerging categories’ salience has increased to 20% of standalone revenue, versus 10% earlier,” said a note by the foreign brokerage firm.
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