Company Update : Metro Brands Ltd By Motilal Oswal Financial Services Ltd
Revenue/PAT up 11%/22% YoY; in-line numbers
* Consolidated revenue grew 11% YoY to INR7 (in line), led by 8% YoY area addition and 1% YoY increase in revenue per sqft to INR5,150.
* The company added 24 stores (in 5 new cities) and closed 2 stores, taking the total count to 895 stores. Format-wise, it added 6 Metro sores, 4 Mochi stores, 4 Crocs stores, 3 Walkaway stores, 1 Fitflop store, 3 New Era EBOs, and launched its first Foot Locker store.
* Shortfall in annual store adds guidance: Consequently, the net new store openings for FY25 will remain below the guidance of 100 stores (net 56 stores added in 9MFY25). However, the company is committed to achieving its overall target of 225 store openings by FY26.
* Gross profit grew 8% YoY to INR4.1b (in line) and margins contracted by 125bp YoY to 58.6%, which could be due to the liquidation of some old Fila inventory at higher discounts (mostly cleared in 2QFY25).
* EBITDA grew 13% YoY to INR2.3b (in line), as better cost control offset gross margin contraction. Margin grew by 70bp YoY to 32%.
* Depreciation/finance costs rose 12%/15% YoY, while other income grew 45% YoY.
* Resultantly, PAT (adjusting prior period taxes of INR257m primarily related to Fila) grew 22% YoY to INR1.2b (in line).
* 9MFY25 revenue/EBITDA/PAT grew 5%/4%/9% YoY.
Update on new business formats
* Launch of Foot Locker –
* Signed a long-term licensing agreement with Foot Locker, Inc. in 3QFY24 and launched its first Foot Locker store in India at New Delhi's Nexus Select City Walk in Oct’24.
* The store’s performance so far has been largely as per management expectation.
* Due to supply chain-related concerns after BIS implementation, the company is taking a cautious stance on store expansion, and hence, it will be adding only 2-3 Foot Locker stores over the next 6-9 months.
* Fila –
* Liquidation of excess inventory of Fila has been completed in 3QFY25.
* Due to BIS-related concerns, the company has initiated local manufacturing of Fila footwear in India, with a second drop expected to hit stores by mid Feb’25.
* Further, in 2HFY26, after FILA operations stabilize, management will restart opening new FILA EBOs.
* Launch of New Era –
* Entered into a long-term exclusive distribution agreement with New Era Cap, LLC.
* In Oct’24, the company launched its first New Era kiosk in Bengaluru, followed by kiosks in Hyderabad and Mumbai.
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