METROBRAND - Metro Brands Limited Share Price

Metro Brands Limited provided a positive outlook during the earnings call for Q3 FY26. The management reported a 15% growth in both standalone and consolidated business, with consolidated sales exceeding INR 800 crores for the first time. They highlighted a steady consumer traffic across online and offline channels, demonstrating resilience despite slight shifts in seasonal patterns.

Key forward-looking points included:

1. Store Openings: The company opened 35 new stores this quarter, bringing the total for the fiscal year to over 100. They announced plans to continue strategic openings tailored to market needs, emphasizing profitability rather than a fixed number of new stores.

2. Product Line Expansion: The introduction of new store concepts like MetroActiv, targeting athletic performance seekers with brands like Nike and ASICS, was highlighted as a growth opportunity. They also aim to launch Clarks stores in Q3 of the upcoming fiscal year.

3. Digital Growth: Management reported a 24% growth in digital commerce, contributing to 12% of total revenues, indicating a positive trajectory in e-commerce initiatives.

4. Financial Metrics: EBITDA grew by 33%, with 16% growth in PAT, showcasing strong operational efficiency. Despite challenges from IndAS accounting and labor code accruals, PAT performance remained robust.

5. Margin Guidance: The management reaffirmed its guidance for maintaining a margin of 30% EBITDA and 15% PAT with expectations for the Foot Locker and MetroActiv stores to improve margins over time as they stabilize.

6. Marketplace Trends: The management acknowledged the potential impacts from the GST benefits, citing a 3% higher growth had GST reductions not occurred, while discussing competitive pressures in the athletic footwear segment.

Overall, the company is focused on sustained growth and market positioning, balancing new initiatives with their existing operational frameworks to foster long-term business health.

Here are the major questions and answers from the Q&A section of the earnings transcript:

1. Question from Gaurav Jogani: "What has really helped you in this [growth], and how confident are you of sustaining these trends going forward?"

   Answer by Nissan Joseph: "Our third quarter's double-digit growth is a result of various initiatives implemented across our banners. The business trajectory is improving, and we are optimistic about sustaining this trend. We continuously monitor market conditions but see no immediate factors that would dampen our growth."

2. Question from Gaurav Jogani: "Any guidance on store openings, can this be the new normal in terms of store openings?"

   Answer by Nissan Joseph: "We opened 6 Foot Locker and 3 MetroActiv stores recently, affirming our commitment to invest in new stores. We aren't constrained by capital and plan to open stores that are profitable, focusing on opportunities rather than a fixed number of openings."

3. Question from Gaurav Jogani: "Can you explain the trend regarding other income and finance costs this quarter?"

   Answer by Kaushal Parekh: "The decline in other income is due to a payout of a special dividend last year affecting our treasury. Despite a lower investable surplus, total treasury income remains above last year. The finance cost is generally stable, with a shift in store openings affecting quarterly impacts."

4. Question from Devanshu Bansal: "What has driven the growth improvement from 11% in Q2 to 15% in Q3?"

   Answer by Nissan Joseph: "The growth reflects improved comp-store sales despite no uptick in revenue per square foot, as new stores have not yet matched the sales of mature stores. Our existing stores performed well, compensating for any expected impacts."

5. Question from Devanshu Bansal: "How are we improving our portfolio's salience in the sports and athleisure space?"

   Answer by Nissan Joseph: "We continue to see growth in both performance and fashion markets, and our new retail concepts like Foot Locker and MetroActiv cater to this demand. We've invested in design and marketing to strengthen our retail presence."

6. Question from Devanshu Bansal: "Are the recent higher store closures indicative of strategic corrections?"

   Answer by Kaushal Parekh: "The closures are standard cleanup and not unusual, as we typically close 2-3% of stores annually. Our overall store base remains stable, and we don't expect significant changes in the future."

7. Question from Rahul Agarwal: "What are the trends in inventory health and its expected movement?"

   Answer by Kaushal Parekh: "As of December, inventory is slightly up due to seasonal factors, but nothing abnormal. We maintain a healthy inventory level that aligns with historical trends."

8. Question from Sameer Gupta: "What would gross sales growth be if you include GST adjustments?"

   Answer by Kaushal Parekh: "Considering GST benefits, gross sales would be about 3% higher. However, net sales remain unchanged since discounting was offered in line with the lower GST rates."

9. Question from Ankit Kedia: "How do you account for the Shoe Depot format, and is it just for leftover inventory?"

   Answer by Nissan Joseph: "Shoe Depot is a retail outlet concept that allows us to clear stock year-round. It does not rely solely on leftover inventory but offers flexibility across our brands to liquidate products efficiently."

10. Question from Akhil Parekh: "Why are BIS constraints significant for Foot Locker and FILA but not for other brands?"

    Answer by Nissan Joseph: "BIS impacts our high-end products, which are largely imported. Other brands primarily source locally, thus avoiding this issue. While BIS affects product availability, we're committed to our growth despite these challenges."