METROBRAND - Metro Brands Limited Share Price

In the earnings call for the second quarter of FY26 held on October 17, 2025, Metro Brands Limited's management presented a positive outlook characterized by a 12% growth in standalone business and an 11% growth in consolidated figures. Noteworthy points shared by management included:

1. Sales Growth: The company managed to increase gross margins by 40 basis points year-on-year. For the quarter, EBITDA grew by 12% for standalone and 10% for consolidated.

2. Store Expansion: During this period, Metro Brands added a net total of 38 new stores, with 42 openings and 4 closures. This included 4 Foot Locker stores and a record 10 new Walkway stores, marking the highest addition for Walkway in any quarter.

3. Marketing Investment: Management emphasized a strategy that involved increased marketing spending, nearly 100 basis points more compared to previous years, focusing on brand awareness and consumer intent.

4. E-commerce Growth: The e-commerce segment expanded by 39% across various digital platforms, now contributing approximately 14% to total revenue.

5. GST Impact: Recent GST adjustments positively influenced prices, resulting in an 11% reduction for footwear priced between INR1,000 and INR2,500 and a 6% reduction for footwear under INR1,000, benefiting nearly 90% of their footwear assortment.

6. Future Expansion Plans: Management expressed confidence in continuing to grow through challenges and emphasized a structured expansion plan, anticipating higher growth from new store formats.

7. Long-term Growth Guidance: The company reiterated its guidance for achieving sustained growth rates above 15% in sales and a similar profit growth trajectory over the coming years, supported by the opening of new stores and improved operational efficiency.

The management's outlook underscores a commitment to capitalizing on growth opportunities through strategic investments in marketing, expansion, and e-commerce enhancement while navigating industry challenges.

Major Questions and Answers from the Q&A Section

1. Question: "With respect to FILA and Foot Locker, at what stages are you right now? What benchmark have you reached with FILA since its launch?"
   Answer: "The BIS issues aren't fully resolved, but we've made significant progress. I expect to be ahead of the curve early next year. Currently, we've repositioned FILA in over 100 Metro Mochi doors, and we're launching our first FILA store by year-end. It's a 12-18 month process for repositioning. We're confident in FILA's future growth despite the temporary setbacks."

2. Question: "What is your plan moving forward with Clarks footwear?"
   Answer: "We plan to open our new Clarks stores in the back half of next year after stabilizing product supply. We aim to leverage Clarks' previous popularity at around 50 doors while ensuring it's well reintroduced into our Metro and Mochi chains without significant cannibalization."

3. Question: "Can you share the consumption and demand outlook for the second half of the year?"
   Answer: "We foresee a steady demand environment, aided by recent GST reductions that should spur sales. This quarter lacks the prior year's COVID disruptions and shifting wedding dates, making it favorable for consistent sales growth."

4. Question: "How does the opening of Foot Locker stores impact depreciation and interest?"
   Answer: "The introduction of new stores, including Foot Locker, will lead to a higher depreciation charge in the near term due to Ind AS 116. However, from next quarter, we expect the impact to normalize. We anticipate EBITDA to provide a better picture despite these accounting effects."

5. Question: "What are your expectations for FILA sales growth moving forward?"
   Answer: "We've encountered some challenges, but we believe FILA can reposition successfully. The early response has been encouraging, and we remain confident that the investments will yield positive returns. We're cautious, aiming for long-term sustainable growth rather than quick wins."

6. Question: "Could you provide an outlook on the increase in inventory level as the festive season approaches?"
   Answer: "Our inventory typically rises in preparation for the festive season, with an increase of INR150 crores this year. This encompasses inventory for new store formats and seasonal stock, aligning with our overall business expansion strategy."

7. Question: "How will the marketing spend affect your designs and rollouts?"
   Answer: "We are increasing our marketing investments across all chains to enhance brand visibility and consumer relevance. This elevated spend is primarily targeted towards our Metro Mochi lines and is designed to bolster sales in the upcoming festive season."

8. Question: "What can we expect regarding your e-commerce growth and strategy?"
   Answer: "We're investing significantly in our online presence and digital marketing, achieving a 39% growth in our e-commerce revenue, which now represents 14% of total sales. Our focus is on maintaining premium positioning while optimizing channel strategies."

9. Question: "What's the anticipated performance of Walkway regarding sales per square foot?"
   Answer: "While Walkway's throughput is inherently lower than Metro and Mochi, we're confident in our ability to optimize efficiency. Our strategy involves carefully scaling the Walkway brand to achieve a reasonable return on capital."

10. Question: "Can we anticipate significant EBITDA growth despite recent rental pressures?"
    Answer: "Yes, while rental costs are rising, we're committed to maintaining an EBITDA growth trajectory by enhancing revenue through strategic store openings and marketing initiatives. We expect EBITDA margins to recover as revenue increases."