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Foot Locker - A sneaker opportunity

Metro Brands (METRO) announced an exclusive offline partnership with Foot Locker (FL), which should provide METRO another leg to generate INR10-15b revenue in the next 3-5 years. With internal accruals, METRO has an opportunity to leverage the premium FL brand with ASP of INR5,000+.

Deal contours

METRO is granted exclusive rights to own and operate FL stores in India, while Nykaa will serve as the exclusive e-commerce partner and operate FL's India website along with Nykaa’s existing ecommerce platforms. METRO’s exclusive rights include opening and operating athletic and casual footwear & athletic and casual apparel stores under the brand names ‘Foot Locker’ and ‘Kids Foot Locker’.

Foot Locker, a strong enabler to leverage India athleisure market

FL is a New York-headquartered footwear and apparel retailer operating in 26 countries with 2,600 multi- brand retail stores (MBO) and around 184 franchised stores in the Middle East and Asia. It operates under five brands” 1) Foot Locker (1,588 stores), 2) Kids Foot Locker (410 stores), 3) Champs Sports, 4) WSS, and 5) atmos. FL curates special product assortments and marketing content that support premium position from brands such as Nike, Jordan, Adidas, and Puma, as well as new and emerging brands in the athletic and lifestyle space. Nike contribute around 65% of total sales, while the top 5 brands contribute 86% of supplies.

FL could provide INR10-15b revenue opportunity

FL’s average store size in the US is ~3,200sqft and its international stores have an average size of ~2,000sqft. Kids Foot Locker stores have an average size of ~ 1,900sqft. In India, METRO could test customer response by initially opening stores in urban-centric locations with potential to rollout 300-400 stores. The top sportswear brands in India, like Puma, Adidas, and Sketchers, have 400-500 stores. With a typical revenue per store of INR20-30m (similar to Metro stores), METRO has an opportunity to leverage the FL brand in India to potentially generate sales of INR10-15b in the next 3-5 years. This could be done through internal accruals with typical capex of about INR10m per store vs. METRO’s FCF of INR5.1b in FY24-25E and strong net cash balance sheet. The lack of web presence could be the only hindrance, with differential pricing and product strategy as seen in Crocs.

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