Trent stock surges 12% in two days following launch of lab-grown diamond brand Pome

Shares of Trent surged by 12 per cent over the past two days, reaching a new all-time high of ₹8,318.25 on the BSE on Wednesday. This rally follows the pilot launch of its new lab-grown diamond (LGD) brand, ‘Pome,’ in Westside stores.

Pome has recently been launched in select Westside stores in Mumbai, Bengaluru, Hyderabad, and Gurgaon. This pilot initiative by Trent aims to assess the market with SKUs presented in a kiosk format. The company plans to develop an LGD jewelry brand, introduce exclusive brand outlets (EBOs), and accelerate its growth.

Kotak Equities, a domestic brokerage firm, refers to Pome as the Zudio of the jewellery segment, highlighting how the brand has strategically positioned itself with a pricing strategy centered on the concept of "diamonds for all."

About Pome - lab grown diamond

Pome has set the prices for LGD jewelry to align with Trent’s typical competitive pricing. A 1-carat solitaire engagement ring is listed at ₹24,000-29,000. A quick estimate indicates that the implied cost of a lab-grown diamond solitaire in Pome LGD jewelry is approximately ₹13,000-17,000 per carat.

“As per this pricing framework, on an average, Pome’s pricing could be at (1) 30% discount to ₹15-20k SKUs of natural diamond studded jewelry and (2) 80-85% discount to high value ₹500k+ natural diamond studded jewelry,” the brokerage firm said.

Calculations indicate that with current end-product prices and raw material costs, Pome achieves gross margins of approximately 45-50%. Broadly speaking, Pome's retail economics (for exclusive brand outlets) may be somewhat comparable to Caratlane, provided higher foot traffic and sales volumes offset the lower pricing.

“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 had built scale over time, as customers have become more indulgent and impulsive. Emerging categories' salience has increased to 20 per cent of standalone revenue, versus 10 per cent earlier,” the brokerage firm said in its note.

Trent's shares have become multibaggers, delivering returns of 111.7 per cent over the past six months, 297 per cent over the last year, and 175 per cent so far this year.