Metro Brands Ltd’s shares are around ₹1,275 apiece, similar to the levels seen at the beginning of 2024. During this span, the Nifty 500 index has gained 25%. The footwear retailer is bearing the brunt of muted demand trends. Recall that lower number of auspicious dates for weddings and election-led disruptions had weighed on many retailers in the June quarter. Thus, Metro’s consolidated revenue growth fell 1% year-on-year in Q1FY25.
The company’s growth has also been impacted in recent quarters given its high base. Revenue growth in FY24 was almost 11% compared to about 58% and 68% in FY23 and FY22, respectively. However, the scenario could incrementally improve hereon. “Metro Brands has suffered a performance deterioration over the past six quarters, primarily due to a strong base effect. However, we believe this trend is nearing its end,” said a recent report from Nuvama Institutional Equities.
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Prabhudas Lilladher’s analysts pointed out that the worst seems to be over for Metro. That is because Q2FY25 is showing some green shoots across brands, despite the impact of heavy rains in some regions. Secondly, H2FY25 is expected to show improvement in demand led by the festive and wedding season. Further, the relaunch of Fila & Foot Locker is expected to aid growth.
Metro Brands is projecting FY25 revenue growth at 12-15% as it expects demand to rebound in the second half of the year. Its long-term revenue growth goal is 15-18%. As on June-end, the company had 851 stores and it plans to launch 225 stores, excluding Fila, across brands over the next two years. Tier-1 and tier-2 cities and beyond would be a priority for Metro to meet demand in these emerging markets. “We expect Metro to return to double-digit profit before tax growth in FY25 and 18.6% Cagr over FY25-27,” said the Prabhudas report dated 25 September.
Metro plans to open its first Foot Locker store in Q3FY25. The Fila brand is currently in a reset phase. The company’s focus in FY25 would be to relaunch Fila by leveraging Foot Locker & Metro/Mochi multi-brand outlets’ distribution network. In FY26, Metro will restart opening new Fila-exclusive brand stores.
Meanwhile, the Bureau of Indian Standards (BIS) implementation for footwear may lead to a marginal rise in costs. Overall, Metro’s premiumization trend has continued with 54% of Q1FY25 sales coming from products priced over ₹3,000.
Nonetheless, given that a meaningful pickup in demand is still awaited, Metro’s valuations are far from comforting. The stock trades at 66 times FY26 estimated earnings, showed Bloomberg data. A delay in demand recovery is a key near-term risk.
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