Metro Brands' FY25 is a tale of two halves. Can the recovery be sustained?
Metro Brands Ltd's FY25 turned out to be a tale of two halves. The first half was marked by painfully slow year-on-year growth of just 2% in consolidated revenue for the footwear specialty retailer, thanks to fewer wedding dates, the general election, and the heatwave.
While growth picked up in the second half of the year (H2FY25), it led to only 6.4% revenue growth in FY25 to ₹2,507 crore.
In the earnings call, the management reiterated its long-term goal of 15% revenue growth. From a near-term perspective, a softer base of FY25 should support growth numbers, although much depends on whether the recovery seen in H2FY25 sustains.
For now, the sales growth momentum seen from the December quarter (Q3FY25) due to the festival and wedding seasons has continued in Q4. Thus, revenue growth for the past two quarters stood at about 10%. Still, sales per square foot continued to decline year-on-year for the eighth consecutive quarter in Q4, even as the drop was just 1% in the last two quarters.
Consolidated revenue in Q4 was ₹643 crore. Ebitda margin rose 347 basis points year-on-year to 30.7% because of better cost control, reduction in Fila losses and restructuring of Fila's royalty. Fila losses have halved year-on-year in FY25 to ₹30 crore and are expected to drop further. FY26 and FY27 are going to be all about repositioning the Fila brand.
Also Read: Trump's tariffs may knock out $5.67 bn of India's exports; textiles, kitchenware, footwear may gain
In FY25, Metro added an underwhelming 70 net stores, taking the total count to 908 as of March end. The management hasn't provided specific store addition guidance for FY26, but has said that rentals are coming off peak and getting more favourable for new store openings.
Metro said it is on track to open new Fila EBOs (exclusive brand outlets) in H2FY26 and has visibility of adding three Foot Locker stores before the festive season begins in Q3FY26.
Given the strong runway for growth in Metro, Mochi, and Walkway formats, along with significant growth opportunities in Fila and Foot Locker, analysts from Motilal Oswal Financial Services have built in a CAGR of 15% and 18% in revenue and Ebitda over FY25-27E.
But valuations don't offer comfort even after the stock is down 15% from its 52-week high of ₹1,430 apiece seen on 9 August. The stock trades at around 72 times FY26 estimated earnings, as per Bloomberg data. This would limit sharp upsides in the foreseeable future. Kotak Institutional Equities has downgraded its rating on the stock to 'sell', primarily due to expensive valuations.
Also Read: Bata struggles to put its best foot forward amid demand woes
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