METROBRAND - Metro Brands Limited Share Price

In the earnings conference call for the quarter and financial year ended March 31, 2025, Metro Brands Limited's management provided an optimistic outlook for the future. Mr. Nissan Joseph, CEO, noted a revenue growth of over 10% on a consolidated basis and over 9% for the standalone business for the quarter. EBITDA increased by 18%, hitting 31%, and PBT grew by 13%. Gross margins remained healthy at over 55%.

For the year, revenues grew by 6%, with EBITDA and PBT also outpacing revenue growth at 8% and 7%, respectively. The management emphasized improvement in the second half of the year, overcoming prior challenges from fewer wedding dates and a national election impacting consumer footfall.

Looking ahead, the management expects to achieve a Compound Annual Growth Rate (CAGR) of 15% starting from FY '26, indicating confidence in reverting to historical growth rates. This projection assumes gradual recovery, avoiding a rapid jump but aiming for consistent performance.

Store expansion continues to be a focus, with 70 net new stores opened in FY '25, and plans to open multiple stores in H2 of FY '26, particularly in the Fila and Foot Locker formats. Management is not fixated on a specific number of openings, prioritizing meaningful and profitable locations. Additionally, e-commerce is highlighted as a strong growth driver, expanding by 45% in Q4 and 20% year-on-year.

In terms of sustainability achievements, they surpassed their goal of recycling one pair for every pair sold. The management remains committed to financial discipline and operational rigor, targeting gross margins between 55% and 57%, while maintaining EBITDA around 30% and PAT around 15%.

Q1: On the Fila part. Had we breakeven in Fila this year in FY '25?
A1: Thank you, Gaurav. The first two years of the Fila acquisition focused on cleanup, which took longer than expected. This year, we aim for repositioning the brand. While Fila's performance won't dramatically impact the overall business, it won't be dilutive either.

Q2: What is the status of the 5 to 6 Fila stores planned by August?
A2: We are on track to open more Fila stores in H2 of this fiscal year. We are clear on the repositioning strategy, which takes time and requires trial and error to establish brand presence effectively.

Q3: Can we expect to revert back to our historical revenue CAGR of 15% to 18% from FY '26?
A3: After two quarters of double-digit growth, we're confident in returning to our growth trajectory. While historical CAGR is our goal, it's about maintaining operational rigor and profitability over time rather than a specific number of store openings.

Q4: What growth do you anticipate for the Crocs brand moving forward?
A4: Crocs presents significant growth potential, especially as India's economy matures. While we aren't planning for it to grow faster than our overall expansion, we recognize its aspirational value within the footwear market.

Q5: What are the expectations for ASP growth in FY '26 across new formats?
A5: Historically, we see ASP growth around 3% to 5%. With new formats like Fila and Foot Locker coming into play, we expect to maintain this range barring significant changes in overall market trends or customer preferences.

Q6: What factors drove the 45% growth in e-commerce this quarter?
A6: Our e-commerce growth stems from various channels, with a strong focus on omnichannel sales and full-price items. We aim to expand customer acquisition without relying on discounts, positioning ourselves strategically across product categories.

Q7: How will footwear ASPs evolve with the addition of new brands?
A7: While we foresee ASPs remaining stable initially, as we ramp up the Walkway segment, the introduction of additional brands may create shifts in the average ASP over time as we increase market presence.

Q8: Will the current working capital efficiencies remain?
A8: We aim for a working capital range of 70 to 75 days. Although we are tapering off excesses from previous BIS-related inventory buildups, we want to strike a balance without compromising on sales potential.

Q9: Can you clarify the increase in other financial assets to INR179 crores?
A9: The increase in other financial assets primarily reflects our investment in fixed deposits. This reallocation is purely an accounting classification tied to the tenure of those deposits, not indicative of any performance issue.

Q10: Have you seen a weak performance in the South, particularly in Andhra Pradesh and Telangana?
A10: Yes, we have noticed slight softness in that region. The reasons could range from IT sector slowdown to ongoing public works. Historical trends suggest this should rebound over time, and we don't consider it a significant concern.