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Metro Brands Ltd Management Discussions

Jul 22, 2024|12:19:55 PM

Metro Brands Ltd Share Price Management Discussions


According to the International Monetary Fund (IMF), the global economy expanded by 3.4% in 2022 and is projected to decline to 3.0% in 2023. The major forces that shaped the world economy in 2022 seem to continue into 2023 but with changed intensities. Accordingly, 2023 will reflect the negative implications of geopolitical tensions in Europe amid the Russia-Ukraine war, supply chain disruptions, stubbornlyhigh inflation, conditions. On a positive note, Asia- Pacific will be the most dynamic leading to of the worlds major regions in 2023, predominantly driven by the buoyant outlook for India and China. Further, global inflation is projected to decline from 8.7% in 2022 to 6.8% in 2023 and 5.2% in 2024 with the central banks efforts tame inflation by substantial tightening of monetary policy.


India emerged as the shining beacon in a grim global scenario and continues to be among the fastest growing economies in the world. Despite strong global headwinds, Indias real GDP grew by 7.2% in FY 2022-23 as against 9.1% in FY 2021-22 and reflects underlying economic resilience, relatively robust domestic consumption and lesser dependence on global demand. Further, the fiscal deficit for FY 2022-23 is in control and narrows to 6.4% of the GDP. India has surpassed the United Kingdom as the fifth largest economy in the world and as per the Reserve Bank of India (RBI), India will become a US$ 3.7 trillion economy in 2023 and will continue to maintain its lead over the United Kingdom in 2023. Following the gradual normalisation of global supply chains, softening of global commodity prices, and successive hikes in the policy repo rate by 250 basis points in FY 2022-23, the RBI has projected the CPI inflation at 5.2% for FY 2023-24 as against 6.75% in FY 2022-23 (April-February).

The IMF projects the Indian economy to advance steadily at 6.1% in FY 2023-24 supported by strong domestic consumption, abating of inflation, a conducive domestic policy environment, technology-enabled development, and revival in credit growth among others. Further, the results of growth-enhancing policies and schemes such as production-linked incentives (PLI) scheme and the governments push toward domestic manufacturing and self-reliance and increased infrastructure spending will lead to a stronger multiplier effecton jobs and income, higher productivity, and more efficiency, economic growth. With its strong fundamentals, massive demographic strengths, and multiple growth levers in place, the Indian economy is expected to sustain the growth momentum in the long term.


Incorporated in 1977, Metro Brands Limited (MBL) is one of the largest footwear and accessories specialty retailers in India. The Company has a pan-India presence through 739 stores located in 174 cities spread across 31 states and union territories as of March 31, 2023. Its wide range of brands and products across multiple categories through own and third-party brands cater to all occasions across age groups.

The Company has continued to achieve strong growth in FY 2022-23, both in terms of volumes and value, across all its formats and tiers, led by higher sales and store count, improved gross margin and cost optimisation. The Company primarily follows the Company Owned and Company Operated (COCO) model of retailing. In FY 2022- 23, the Company expanded its reach and scalability and opened highest ever 144 new stores, closed 29 stores and relocated 13 stores to better locations.

The Company recorded robust growth in FY 2022-23 with a total income of 2,181.51 crores, a growth of 55.6% compared to the previous year. Net profit for the fiscal year stood at 365.39 crores, recording a growth of 70.6% as against 214.20 crores the previous year. Growth has been driven by robust store openings, better assortments, higher pricing, less discounting and greater volumes. The Company saw an improvement in gross margins at 58.1% in FY 2022-23 due to lower contribution of discounted sales, improvement in the overall sales mix and cost optimisation.

On a standalone basis, the Companys digital channels posted high double-digit growth of 48.1% in FY 2022-23.

The contribution of e-commerce sales (including omni-channel) was 7.9% of total revenue from operations in FY 2022-23. Online sales grew at a CAGR of 71% in the last four years.

As of FY 2022-23, 74% of the total stores product sales at MBOs was from in-house brands and 26% from third-party arrangements. Third-party brands also include Crocs, Fitflop and Fila with which the Company has strategic long-term agreements.

One of the key developments for FY23, was acquisition of Cravatex Brands Limited. The Company acquired 100% capital of Cravatex Brands Limited (now known as Metro Athleisure Limited) on December 1, 2022 and it became a wholly-owned subsidiary of the Company. Cravatex Brands Limited holds an exclusive long-term license for the Italian sportswear brand FILA and owns the Indian sportswear brand Proline. This acquisition fits the strategic vision of MBL to expand its presence in the sports and athleisure space in India and serve the growing need of consumers in the sports and athleisure category. The Company looks forward to elevate the sportswear landscape in India and address significant white space in its product portfolio as of date.


The Indian footwear industry is one of the top employment generating industries in the nation. Footwear is also one of the largest retail segments in India. The organised footwear segment is estimated to grow at a CAGR of ~20-22% from FY 2021-22 to FY 2024-25, reaching a market share of 36%- 40% by the end of this period. The unorganised footwear segment is estimated to grow at a CAGR of ~12-14% from FY 2021-22 to FY 2024-25. Sales of the organised footwear segment is estimated to have grown by 34% in FY 2022-23 compared to the previous year.

The organised footwear retail segment is expected to outpace the growth of the unorganised footwear retail for several reasons. First is the growth of retail in India due to overall economic growth, favourable demographics, increasing disposable income, steady urbanisation, growth of rural consumption, the popularity of digital payment and changing consumer preferences. The second major growth driver is the shift in perception of footwear from a utilitarian commodity to a fashion statement, higher aspiration levels, increasing participation of women in the workforce, rising demand for branded footwear, exposure to global fashion brands and digital penetration. Further, the expansion of exclusive brand outlets in Tier II and small towns and increased share of e-retail are also propelling the growth of the organised footwear sector.

India ranks as the second-largest consumer of footwear globally, following China, in terms of the number of pairs purchased. Still, Indias annual per capita consumption of footwear stands at approximately 1.9 pairs, lower than the global average of 3.2 pairs. This indicates significant potential for growth in the future, with expectations of the annual footwear consumption in India reaching 2-2.1 pairs by FY 2024-25.

The sports and athleisure (S&A) segment in the footwear market in India is growing rapidly. The demand for sports and athleisure footwear is expected to increase due to heightened focus on health and fitness globally.

Further, increase in discretionary income and growing infrastructure to support sports and physical activities will encourage participation in sports. As a result, consumers are expected to allocate more spending towards athleisure and sportswear. The sports footwear segment in India is estimated to grow at a CAGR of 25% from FY 2020-21 to FY 2024-25.


The Indian footwear market is poised for robust growth in the coming years, driven by factors such as preference for branded products, digital penetration, the rapid expansion of e-commerce, the influence of social media, and exposure to global fashion trends. Notably, Tier II and Tier III cities are emerging as key growth hubs for the footwear industry.

The various opportunities for growth are discussed below:

Rising Middle-Class Income and Aspirations: The growing disposable income of the Indian middle class has led to changing consumer preferences. Value-oriented and brand-conscious, consumers now seek high-quality footwear that aligns with their aspirations. This shift in behaviour has fuelled demand for branded footwear, with consumers steadily pivoting towards products in the premium range.

Preference of Known Brands in Tier II and Tier III Cities: The Indian footwear market is witnessing strong demand in Tier II and Tier III cities, with a growing preference for branded products. As consumers become more fashion-conscious and globally aware, they seek well-known brands that match their style preferences. This trend is reshaping the retail landscape and offering significant growth opportunities for companies in this segment.

Impact of New Malls in Tier II and Tier III: The emergence of new malls in Tier II and Tier III cities has played a pivotal role in bolstering the physical presence of footwear brands and retailers. With the growing footfalls at these malls, businesses are finding fresh avenues to connect with customers in these regions.

Digital Impact andSocialMediaInfluence: With the rapid penetration of digital technology, consumers are gaining access to a plethora of information on footwear trends, styles and brands. Social media platforms are also engaging consumers and informing their purchase decisions. Both these factors combined are reshaping consumers footwear preferences.

Growing Adoption of Digital Payments: With the rising adoption of digital payment methods, especially in Tier II and III markets, e-commerce platforms have witnessed a surge in sales of footwear products. The convenience and security offered by digital payment options is also contributing to the growing popularity of online footwear shopping.

Opportunity in Sportswear and Athleisure: The rising focus on healthy lifestyles, especially after the pandemic, has driven significant athleisure footwear. Consumers now seek comfort and functionality, creating a lucrative opportunity for retailers to cater to the increasing demand for fitness-oriented and casual footwear.

With a portfolio of aspirational brands, a robust network expansion strategy focused on penetrating smaller towns and cities, a fast-growing online business, and strategic tie-ups with international retailers, MBL is well-positioned to capitalise on the abundant opportunities in the Indian footwear retail segment. Moreover, the recent acquisition of Cravatex Brands Limited, adding sportswear brands like Fila and Proline to its portfolio, positions the Company to tap into Indias growing sportswear and athleisure market more effectively.

Key Strengths:

1. Strong brand value with wide reach: MBL is one of Indias established and largest footwear specialty retailers with a Pan-India presence and catering to customers of different ethnicities and markets.

2. Multi-channel retail platform: The Company is focused to leverage its omni-channel presence across its Exclusive Brand Outlets (EBOs), Multi Brand Outlets (MBOs), and e-commerce platforms.

3. Asset-light business model: It has adopted an asset-light business structure with an efficient operating model for sustained profitable growth.

4. Vast product portfolio: It is one-stop-shop family retailer with an extensive range of brands and products at varied price points, catering to all occasions across age groups and market segments resulting in strong customer loyalty.

5. Product premiumisation: The Company is registering a rising percentage of revenue contribution from products priced above 3,000, demonstrating its success in offering premium products to the market. This growth in premium product sales is expected to lead to higher gross margins and enhanced profitability.

6. Vendor engagement and robust supplier network:

The Company follows an efficient operating model through deep vendor engagements with 250+ vendors and Theory of Constraints (TOC) based supply chain which enable it to leverage better margins with the vendors.

7. Preferred partner for third-party brands: MBL is the platform of choice for third-party brands looking to expand in India. The healthy mix of own and third-party brands allows it to improve variety in the product segment.

8. Experienced promoters and management: The Company continues to derive strength from strong leadership and the vast experience of its promoters and management team with a proven track record of remarkable growth, profitabilityandfinancialdiscipline its sales channels and markets


The Company is exposed to certain risks and challenges. However, it has robust mitigation strategies to overcome adverse situations which may arise on account of foreseeable risks. The key risks and their corresponding mitigation measures are depicted below:

Implementation of BIS: The Department for Promotion of Industry and Internal Trade (DPIIT) issued BIS Quality Control Order (QCO) for footwear, which was mandatory from July 2023. The implementation date is now deferred to 1st January 2024 for most categories of footwear.

Though implementation of BIS is beneficial for the entire industry from long term point of view, we expect this to cause supply chain disruptions in the short-term. Hence, MBL has proactively front-loaded inventory buying to navigate any potential supply chain disruptions. The Company also remains committed to collaborating with its vendors, providing guidance and support throughout the process of testing products to ensure full compliance with the BIS guidelines.

Vendor concentration risk: The Companys reliance on vendors centralised in certain areas for product sourcing may impact the business. However, the Company has longstanding relationships with its vendors and engaged with over 250 vendors across India to reduce the concentration risk. Continual engagements with different sets of vendors have led to product efficiency and seamless supply.

Third-party manufacturing risk: The Company sources all its products through outsourcing arrangements with third parties. Any disruptions at such third-party manufacturing facilities or failure of such third parties to adhere to the relevant quality standards may negatively affect the reputation, business and financial condition of the Company. However, the Company has made its outsourcing arrangementsefficientover the years and all in-house products are received at two warehouses in Bhiwandi for quality inspection to ensure superior quality. Moreover, its asset-light business model has led to sustained profitable growth.

Competition risk: Footwear retailing is a highly competitive and fragmented space with a large number of unorganised retailers leading to pressure on margins. The situation is further aggravated by the competition from national and international organised retailers. However, the Companys value proposition which lies in it being a family store and its wide product portfolio give it a competitive advantage.

. its Further, it has diversified products on various leading B2C and B2B marketplaces, its websites and dedicated pages in major Indian e-commerce platforms. Moreover, the Company enjoys a strong loyal customer base and its high repeat customers ensure a steady stream of business in the future.

Margin risk in online sales: The Company may face margin pressure due to promotions and discount competition on online platforms to increase sales. However, the Company considers its online retail business as an additional avenue to the offline mode of sale and not as cannibalistic to brick-and-mortar business. As a mitigation measure, the Company may offer discounts online, while keeping discounts to a minimum to protect margin.

Fast-changing trends: The Company is sensitive to fast-changing consumer trends and the inability to respond to customer expectations can adversely impact the business. However, as a one-stop shop, the Company is prepared to take on this challenge and consistently updates its product portfolio to remain abreast with emerging trends. Its wide range of brands and robust product portfolio in both mid and premium segments cater to all occasions across age groups, gender and market segments. Moreover, the Company is focused on digital campaigns for brand building and growing customer interest in the brand and its products. With the growing adoption of digital platforms, the Company has been increasingly leveraging e-commerce channels to cater to evolving customer preferences.

Future third-party brand acquisitions: Inability to successfully develop and integrate any future brand acquisitions with the Company is a risk. Currently, 74% of the Companys products are sold under in-house brands– Metro, Mochi and Walkway. The Company brings in new brands only when they complete the customer journey and provide them with a better experience in their stores.


Growth of the Indian economy along with growth across key employment-generating sectors is expected to have a cascading effect on overall per capita income levels and consumer sentiment. This will drive consumption expenditure and boost the growth and expansion of the footwear industry.

MBL is poised to deliver strong growth in the years ahead on the back of economic development and the growth of the retail and footwear industry in India. It is strategically positioned to capitalise on the expanding middle class, surging aspirations and spending, shifting consumer preference towards fashionable and premium products and rising demand for higher ASP (average selling price) segments in the footwear industry. The Company is focusing on premiumisation and digitisation to maximise revenue potential through all channels and strengthen its position in the market. Its expertise in brick and mortar and e-commerce retail, combination of superior store economics and strong runway of growth will allow it to garner rich valuations.

Key Business Strategies:

The Company follows the following key organic and inorganic strategies:

Store expansion plans: The Company intends to expand its footprint and is targeting to open 200 stores, net of closed stores, under various formats over the next 2 years.

Leverage omni-channel platforms: The Company is focused to maximise revenue potential through all channels. It intends to build on the successful expansion of Crocs/FitFlop/Fila and leverage the platform to evaluate similar opportunities.

E-Commerce expansion: The Company aims to leverage existing capabilities to increase e-commerce operations with an increasing focus on omni-channel segment, expand revenue, generate channels, and become a digitally relevant brand.

Expansion of accessories portfolio and growth in allied business: The Company is eyeing growth in allied businesses like accessories, shoe care and foot care to augment its portfolio.

Inorganic opportunities: The Company will evaluate targets for inorganic growth within the footwear and accessories space based on strategic fit, returns, operational scale and diversification criteria.


The Management Discussion and Analysis may contain some statements describing the Companys objectives, plans, projections, estimates, and expectations which may be ‘forward-looking statements within the meaning of applicable laws and regulations and are based on informed judgments and estimates. Actual results may differ materially from those expressed or implied.

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