Metro Brands Limited (MBL) is poised to see a significant uptick in its growth trajectory. Their robust performance in the e-commerce sector is likely to support this growth in the days to come. As the demand for sports footwear increases in India, MBL is well-positioned to benefit, especially through its association with the FILA brand.
The company has laid out plans to expand its operations in the next financial year. But before scaling up, it wishes to solidify its product positioning and distribution strategy. Moreover, clearing out old stocks remains one of its immediate priorities. A rise in repeat purchases, an expanded premium products portfolio, and steady growth in the FILA operations will undoubtedly play a pivotal role in enhancing MBL’s profitability. The firm stands out as one of the quality footwear companies in the region.
MBL has witnessed a steady 15% year-on-year growth in revenue, attributed largely to its new store openings. Their growth even on a high base in the previous year’s June quarter is commendable. While the company has managed to maintain its gross margin annually, a decline of nearly 400 basis points in the EBITDA margin was observed due to losses in the Cravatex business, amounting to roughly 9 crores. A surge in operating expenses resulting from rapid new store inaugurations has led to an 11% drop in the company’s net profit.
Looking ahead, MBL plans to inaugurate 200 new stores in the next two years, supplementing its existing count of 739. These new additions will span various formats including Metro, Mochi, Crocs, Walkway, and even the sub-brand Fitflop. MBL’s expansion strategy is cluster-based, seeking not just to intensify its presence in current locations but also to venture into new cities. The company has set its sights on several Tier 2 and Tier 3 cities, given that it currently operates in 182 cities across the country. Considering the untapped potential in new cities, the company has vast opportunities for business expansion. Impressively, over the past decade, the company has maintained a Compound Annual Growth Rate (CAGR) of 18%, and it aims to accelerate this rate.
Last October, MBL acquired the sales and distribution rights for FILA. The company was laser-focused on liquidating old stocks, a task which is now nearing its final stages. By the third quarter of this financial year, MBL is optimistic about completely clearing out old inventory. Meanwhile, efforts to reposition the FILA brand are already underway. The increasing share of e-commerce sales is aiding the company in extending its reach.
On October 12, MBL shares closed at a strong 1,164 rupees, a 0.30% increase. Currently, the stock is trading at 62 times the company’s estimated earnings for FY25. Given its potential, investors might consider including it in their portfolios, especially during market dips.
