Metro Brands Limited ($METROBRAND)

Thank you. Ladies and gentlemen, good day, and welcome to Metro Brands Limited Q4 FY '26 Earnings Conference Call hosted by Emkay Global Financial Services Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference Mr. Devanshu Bansal from Emkay Global Financial Services. Thank you, and over to you, sir.

Thank you, and good afternoon, everyone. I would like to welcome the management team of Metro Brands and thank them for this opportunity. We have with us today Mr. Rafique Malik, Chairman; Ms. Farah Malik Bhanji, Managing Director; Mr. Nissan Joseph, Chief Executive Officer; Mr. Kaushal Parekh, Chief Financial Officer; Mr. Mohit Dhanjal, Chief Operating Officer; and Ms. Alisha Rafique Malik, Resident Sports Division, E-commerce and CRM. I shall now hand over the call to the management for the opening remarks. Over to you, sir.

Thank you, Devanshu. Good afternoon, everyone, and thank you for joining our earnings call. In Q4 FY '26, we posted a 20% growth in our stand-alone business, along with a 21% growth in EBITDA, leading to a PAT of 15%. We continue to see consistent growth from our multiple e-comm channels in our digital commerce business as it grew 53% and hold a 12% share of our total revenues for that quarter. A few noteworthy points on store openings. We crossed the 1,000 zone mark last quarter by opening a net of 42 stores and ended the quarter with a total of 1,034 stores. In those openings, we also had our first 2 [indiscernible] stores that we opened since the acquisition. As we look to the future, we are closely monitoring the Gulf crisis to see the impact that it could potentially have on our raw material and other input costs, though we believe we can mitigate most of it for the near term. We remain aware that there could be disruptions caused by geopolitical issues, and we'll stay agile to make sure that we continue to maximize our sales and profitability in those situations. In March of 2026, we also opened a new DC that increases our storage capacity by 200,000 square feet, ensuring that we have the capacity to cater for our growth. We continue to invest in growing our multiple banners, invest in our talent, our technologies and last but not least, in our marketing initiatives to ensure that we continue to hold a strong position in the market. In closing, despite a slow start to the fiscal year, I'm very pleased to see and proud of the team that have been delivered metrics in our guidance range, which has been patent the mid-teen percentage range. EBITDA in the high 20s to low 30s and of course, a sales growth of 15%. With that, I will now turn it back to the operator for questions.

[Operator Instructions] The first question is from the line of Sameer Gupta from IIFL Capital.

First of all, congratulations on a good set of numbers. First question, sir, most of the input cost basket has gone up and specific to crude you're seeing a very sharper inflation. Now if you can just quantify the kind of input cost inflation that you are facing at this point? And what is the strategy? I know you mentioned you can mitigate most of it in the near term, but still, are you looking at price hikes going forward. And I still understand that you keep -- you have more than 6 months of inventory. But still, the procurement for the next like season would have started and you would be looking it at higher prices. So I just wanted to understand this aspect.

Great. Thank you, Sameer. The 2 ways that we plan on mitigating this. First of all, we are looking at forward buying a lot of the raw materials that we can buy in bulk to make sure that we don't see significant price hikes there. Overall, if it does impact us in those items that it impacts us, I think we've seen overall input cost of 10% maybe. So it's not significant in spike, though there are certain categories that spike a little bit more than the others. And like you rightly said, we do have 6 months worth of inventory, and we also have orders placed for past that period of weeks that would be protected in price. So when you look at the overall picture of things, it's going to be a lot more gradual going that caused that spike in between, we're not going to have to see that spike. And because we are so far planned out, we're able to then figure out how best to mitigate it.

Got it. So basically not looking at any immediate need of reaction in terms of pricing at all in the near term, and that would be a correct summary?

Nothing more than normal inflation, Sameer.

And I may also add, the impact the slightly higher inventory that you see is also one of the reasons behind this is some front loading of inventory that we did in anticipation of this price rise, which may see gradually coming through from now on.

Got it, Kaushal, that's very helpful. Subquestion to this is also there is an impact on the input cost basket, but there is also an impact on the end consumer demand. And usually, inflation tends to have higher impact on discretionary products. So just wanted to understand any experience that you can share how has been in the past. Now FY '23 is a very modeled year or even though it was an inflationary but there were a lot of other things that were happening. So that may not be the right benchmark. But in previous years where there was high inflation, how did demand pan out at that point in time with footwear is still a discretionary purchase, which can be deferred, so that is the source of this question.

So I think there's a couple of ways to look at that. First of all, this footwear is not a constant purchase, right, that you feel an inflation would hit your wallet to a significant nature, neither is it a big ticket item. So those are the 2 things that things like us had going for it. The other thing is, unfortunately, inflation really affects the low to middle class much harder than it seems to affect slightly higher class version. And therefore, we don't see as much fluctuations come when there's inflation of a higher nature. So the demand tends to not be as spiky or lumpy when we see inflation, as you might see with people that have -- see a significant increase in the basic basket of good purchases.

So because of the premium nature of the premium and target consumer, you're saying that the elasticity to inflation is that much lower?

Correct.

Next question is from the line of Rahul Agarwal from Ikigai Asset Management.

I have 2 questions, both on more medium-term trends. One is going to look at the in-store sales, I see single-digit growth over the last 3 years. If you could just comment on how do you see walk-in footfalls in stores and the growth forward? And for fiscal '26 and obviously, including 2025, the same I'm getting is that most of the top line growth is driven by new store additions and lesser from [indiscernible]. So any comments specifically on same-store sales growth across maybe [indiscernible] the core network. If you can just talk about that.

Thank you for your question, Rahul. We are seeing footfall growth in our Metro Mochi stores. Another way to look at that also is the size of basket goods that they buy -- the basket of goods that they do buy, we opened up stores that have different mix of sales per square foot. And you can see that we've maintained our square footage compared to the last quarter at 4,500. That shows that it is not just coming from new store because it was only new stores, you would start seeing that square footage -- sales per square foot go down because new stores typically aren't as productive as the existing stores, right? They get up to that mark, but not right away. We always think that there's room for improvement in SSG, but we're quite pleased with the SSG we are seeing, especially since we're able to decide for how we look compared to the market in previous quarters once we see the numbers. And so that has also been indicated to us that we're gaining market share. But you're right, a portion of our increases do come from new stores. The portion of increases do come from the annualization of stores that we opened in the previous year, but that is not what drives all of it. It is definitely SSG's advancement.

that. And the question on the in-store footfalls, how should I look at that part of the segment?

Yes. No, we're seeing into football is growing. One way to measure that is also the number of bills that we have. So we've seen that. But more importantly, what we're seeing from our databases in the back half of the year. Also the same part that we saw our business start to improve. We started seeing new customers into our stores, customers that we didn't have -- maybe they were not new, but we never had information on them. So one could lead to the conclusions that they were new customers. So we started seeing that increase, too, which is where you start -- if you track this from Q1 through Q4, we've seen steady improvements in our business and is largely driven by our ability to acquire new customers and also go back and win back and/or get customers to repurchase in our stores.

Next question is from the line of Gaurav Jogani from JM Financial.

My first question is with regards to the nature of the growth. One, we are seeing the proportion of men will increase significantly in the oral contribution, whereas the [ UniFi ] has kind of [indiscernible]. So anything to read there given that Walkway and blocks are also adding this kind of comment.

No, Gaurav, I think the best way is to look men's and Unisex together because at times due to some reclassification that happens from a few of the third-party brands. you see slight movement even during this quarter, the increase that you see in men's, there is equivalent decrease that has happened in unisex. So nothing more to read into that.

Okay. And just on data on that we also able to get from the data was at E-sport of India kind of decline, whereas the south part of India is continuing to grow faster [indiscernible]. So anything specific to Eastern part gentle kind of 50% on a Y-o-Y basis? On a first quote basis, that is.

We're just trying to see the number you're seeing, right? It's pretty much in line with our number of stores. so it depends on what happens from a festival standpoint in the other markets as much. But if you look at it over the years, the eastern part of our business has been between the 13% to 15% mark, right? And last quarter, we were 14% for the year, we were 14%. So it's nothing unusual that happened there that I could point to.

And Gaurav, like it's also rounding off that comes here because we're showing -- we are not showing in decimal points. So even 14.5%, I believe will be rounded up to 15%. There is 14.13%, I'm saying, 14.49% would still be rounded down to 14%. So we have not seen any decline as such in the Eastern part of India.

And just last part for me given the medium-term guidance towards that 15% to 18% growth, and now we have multifold brands in your [indiscernible]. How are you looking to segregate this growth between your 4 brands versus the new age brands? What kind of growth are you looking from these 2 cohorts? That will be the final question.

Yes. I think from a quantum of growth in each one, there's significant opportunity for each of those banners to grow, right? And there's very big base of what growth looks like to the locker can grow to a certain number, definitely not as big as the number of Metro Mochi stores out there, right? Same with trucks. But each of them for the next few years, from a quantum standpoint, have the same quantum potential for growth. And as you know, we're well capitalized and we find the right opportunities for whatever brand that might be we're happy to open those stores. But the opportunity exists, Gaurav, the willingness on our part exists. The tools exist, of course, the capital exists. So that's not a restraint in any way. It's just got to be the right locations in the right markets for the right manner.

[indiscernible] us different. I mean I do understand the there. Just given where the base for the core brand is now higher. And the dural brands are starting at a lower. So can there be the quantum of growth percentage could be different in each of these. And it is what kind of growth can we expect from sort of the [indiscernible] versus the older [indiscernible]?

Correct. Gaurav, I think I understood your question. I met at quantum, maybe I didn't clarify, quantum in terms of numbers, not in terms of percentage, right? So in terms of numbers, for the next foreseeable couple of years, all of them have a significant opportunity to grow almost to the same level. It might vary a little bit less than right. But from a percentage standpoint, as you rightly pointed out, would be significantly different. We have no [ Clark ] stores today. So their growth will be in tens to speak on a mass basis. And where Metro Mochi has a lot of sorts, so the growth may seem small on a percentage basis. But when you look at a numerical quantum, I think the opportunity for each of those banners to grow at equal paces almost despite good.

Next question is from the line of Umang Mehta from Kotak Securities.

Congrats on a good year. My first question was on demand. So currently, what kind of momentum are you seeing? So we see quarters of stable revenue per [indiscernible]? Are you confident that with the current pace of expansion, that number will remain stable or grow from where we are. And other question was you mentioned about testers in demand to be good [indiscernible]. So was there anything like lower -- higher vesting of wedding days in this current quarter versus this quarter, so kind of driving this improvement on a sequential basis?

Okay. Just to take it down, be couple of your questions. I'll take the last part first. There's nothing significant driving it. But like I said, I think some of the marketing initiatives that we're putting in place is driving new footfall to our stores, and that's where you're seeing that growth come from. When we look to the future on markets, we are pretty confident that on a long-term basis, we can continue to grow our business in that 15-plus percent range. year-over-year as we've done and shown over periods of time. Will there be hiccups in between? Absolutely. Will there be things that come in? Absolutely. Will there be normal things that come in that create prices such as lower wedding dates 1 season or 1 quarter versus another quarter? Those things will always happen. So for me to commit and say every single quarter will at 15% is a little bit erratic on my part. However, what I'm confident about my poise, we can keep the sustained growth going for quite a bit of time.

Got it. And the second question was on the network expansion. Specifically, if you can call out on your current pipeline for Fila, Footlocker, Clarks and Metro Active how many stores could be possibly add in '27?

All of them combined?

Yes.

So let me break it down this way. I think the opportunity to be open. I'm just going to say an aggregated number in those brands that you mentioned, on open-store exist. When we get the right locations, will we get the right rentals will we get the right timing of all of those will we make sure that BI mitigated, especially for the foot lock and the metro active brands, which are typically dependent on important products. Those are questions that remain unanswered until we have clarity of all of those things. We try not to just open stores rapidly. So the opportunity exist easily this year. Now how much of this opportunity we realized due to other economic conditions that we may or may not control.

Sure. And BIS issue is very large?

Well, BIS issues to varying degrees happen with most of our brands with trucks, it's not significant because they have more production in there. So to varying degrees, it has it. But don't forget is that -- let's assume it's 15% of an entire brand portfolio, right? You know that 15% is what super accretive to your profit line. That's what's doing a lot of flow through down to your profit line of that manner, right? So if you miss that last 15% of your sales, the impact to your profit could always be all of that amount. So that's why we're very, very careful when we make these decisions.

Sure. Makes sense. And then one last one for my question. Possible to highlight the [indiscernible] and PAT for the full year?

So [indiscernible] EBITDA amount would be around 21-odd percent. And I think we've already given [indiscernible] full year, with 14.5%.

Next question is from Shraddha Kapadia from SMIFS Limited.

Congratulations on the good set of numbers. Also, if we take a look then e-commerce and omnichannel sales have increased significantly for the Q4. So how should we quote for the upcoming years?

I think you should look at it as a percentage of business, right, because the business is growing and so is e-com. It's not necessarily what is e-com going to grow it. We look at it as what percentage of the business should it represents, and it's going to represent somewhere between 12% to 15% of our business. In the near term. And then that might grow that might not grow, but so where we sit in the near term, that would be how we've stated. So you can do the backward calculation to figure out if the rest of the company is growing at on growth. And as you know with e-com, we do have some lumpy quarters depending on what the festive season is depending on when the winds to a lot of sales online and all of those things. There is some lumpiness in the e-commerce growth. But overall, we think it will be somewhere between the 12% to 15% range.

Sure, sure. That was quite helpful. Sir, I wanted to understand that if we take a look then the Footlocker expansion remains cautious due to the BIS related issues. So when do we expect the supply change in us to normalize. And also the Fila positioning is underway with the local manufacturing. [indiscernible] you expect the brand to meaningfully contribute to the overall growth in profitability?

Okay. So the Footlocker growth, it's not like we've stopped opening stores. I think the aspiration was to open a lot more stores by now if we have the comfort of BIS. We still don't have it. And unfortunately, this is not something that I can predict is out of our hands to predict. All I can tell you, as of today, we still don't have 100% comfort that BIS Challenges for whatever reason have been mitigated. And different brands are in different spaces with it. And that ebbs and flows, by the way. sometimes plans don't get licenses renewed. Sometimes they get it renewed. So it's a little erratic from where we sit to predict how that is going to look. So that's foundational on that. Your second question, [indiscernible]. So as you know, we've opened up first stores and FILA. And we spent a lot of time and money cleaning up the old inventory. And as we reposition it, because we're trying to build for the future and not try to get a quick sale, we want to build it the right way, and that takes a little bit of time. Not believe that in the next 18 months, it becomes meaningful to our numbers.

Next question is from the line of Tejash Shah from Avendus Spark.

Congrats on a good set of numbers. My first question pertains to your read on the consumer sentiment. So if our performance has been very good, but would you attribute largely to our own efforts on expansion or branding or servicing or is it that you are actually picking up a real uptick in sentiment at the consumer level as well?

I think it's a combination, and it depends which banner you're talking about, some banners had outstanding product launches that helps some branders are now taking share away from unorganized markets that has helped. What I -- where we feel a little bit more insulated is twofold. One is our customer for the most of our business tends to be a premium customer, right? And as we know, inflation does a bit the heart right away. It has a delayed effect on them. And because we're not a frequent purchase, or a high ticket purchase. They're not going to do the calculation, oh my god, I can put this, I'm not going to buy it and I'm going to go down and great. That's not who they are, right? So that's how the premium customer acts. When it comes to the value customer for our Walkway business, we are so underpenetrated with Walkway relative to the market, which is dominated in specific -- so the overall footwear market has 70% in unorganized footwear. But in the premium space, in the value space is much higher than is in the unorganized market. So Walkway has huge opportunity to continue its growth given its market share today in that space and the shift from unorganized to organized and the aspiration of customers to have better shopping environments, not enough people pay more. So we see it not being insulated, but I think we see us having a few moats around us that would tie it to any significant swings of inflation.

Then just focusing on your customer side, based on what are media headlines and other numbers that we are picking up, the wide college job seems to be understressed or that part of the market, which is essentially our customer. So I was just trying to understand that is it that our customer base is part of subset of this, which is insulated from the macro news that we are picking up or we -- or they were, as you said, that we had also product launches and we had also made a lot of intervention for growth revival. So I'm just trying to understand the momentum that you have said this quarter. Will it -- is it sustainable for next year, at least in the near future?

So Tejash, I think there's a couple of -- there's a lot of things that go into having good retail quarters. At the foundation in it, if the consumer sentiment isn't right, you can't get it. it doesn't matter what you do. But on the other hand, there's also -- we're comparing ourselves against the previous year, right? What were the inefficiencies we did last year? What were the misses we had last year? What are we better at this year versus last year. A lot of that comes into play. In all honesty, there's so much more we can do to keep improving. So my confidence saying that we can mitigate it or at least we will be that leave the way out of it is not coming from the fact of one single line that my consumer won't be affected by it. There are many things we can do to also inflate ourselves from it. I mean, some of these numbers you're seeing does come from consumer sentiment, it also comes from some of the product launches we've done some of our marketing initiatives that we've invested in, some of the check we've invested in a there's a lot of initiatives going on that we feel is driving it.

And the last question, some time back, we were kind of highlighting that the rentals or the competition for the interspace was not sustainable for us to make a very profitable construct of the business there. And looking at the store expansion this year, should one assume that we are out of that very hypercompetitive market cycle? And from here on, based on this how should we think about store expansion and rate going forward, looking at the space availability and competition both?

Yes. I think -- I don't think we're out of it. It's not like it's gone back to the good old times per se. But I think what we're not seeing is it's acceleration that we saw, right? So we think that stabilized a little bit. And then I think we've also got a great BD team that's working very hard to find at the right sedation in the right spot that makes sense for us. So there's a lot of things there, too.

Any guidance on store expansion?

As many good ones as we can find in stages.

[Operator Instructions] Next question is from the line of Devanshu Bansal from Emkay Global.

So we have been investing in building up a strong leadership team, including operations and technology for the last couple of years. checking, if you could talk about some of the large changes that have happened over last year or so. This will help us better appreciate the improvement in growth profile and also sort of give us confidence for a sustained growth going ahead.

So I think let's start with the technology piece in it, right? So we have now got to an evaluation of our store for systems. And we're moving to a much more robust system that suit us. We created the last one we had, and we like the last one. So when we look to where we want to go, there's other part systems out there. So we have started that checkup the new part system that will start in June. And by the end of the year, we hope to have that rolled out. We've also started developing AI agents in-house. So we've managed logistic workflows inside the organization using AI at despite level of efficiency. We want to see that come to solution. We also continuously investing in all kinds of technology, including giving our people access to AI sites for different regions. You don't -- not everybody wants the same AI sites. They all have different functionalities. So from a tech standpoint, we've definitely done our due diligence, and I'm working for it, not the least of it, where we will be doing an SAP upgrade as well later on this year. So all of that's in fact, right? From a people standpoint, we continue to invest in people. We've had 3 significant hires in the last 12 months. Some of them are faces and some of them are new, but we had a Chief Technology Officer, we've added new Chief Marketing Officer; and most recently, we also added a Chief Product Officer to the team. All of these people from pet domain experience, and they've also come with scale experience. We also complexity experience, which is all of the things we will for to run our business. So we've been strengthening the management team, the senior leadership team, I feel very confident about the capabilities of the team. And it's now a question of how we can leverage that to take us to the next timing.

All right. And sir, this leadership investment is largely done with? Or we expect a few more gaps to fill up in the due course?

So I think as we grow, right, there's always going to be gaps. There's always going to be gaps caused by our growth. It's going to be gaps caused by attrition, right? So there's always going to be gaps that come up. But I think for the most part, for where we are today, I think we've got a terrific team in place.

Understood. And all these leadership as a new roles that have been created, right, like Chief [indiscernible] and Chief Technology Officer or -- these were earlier also there and the new midship that is going as we closed [indiscernible]?

Some of them are new, the Chief Product Officer role and his current [indiscernible] is a new role. The Chief Marketing Officer role is new. We haven't had that position for a couple of years. The Chief Technology Replacement Product is a slightly differentiated. But we also, by the way, a few -- I think it was in the previous fiscal year, we hired us Chief Digital Insights Officer, to join the team, which is why we've been able to take advantage of some of the AI initiatives that are coming through. So we're investing on in the product side of it or the marketing side of it, but also the technology side of it.

Fair enough. Fair enough. Nissan, second, I wanted to understand Box format, the expansion is definitely better than [ FY '26 ]. Any initial read through on how the format is ramping up? Have we now closed the pilot phase and now the expansion should be achieved? In one of the comments, you mentioned that the format has lease penetration potential. So if you could throw some light here would be helpful.

Yes. So I think from a market base standpoint, it has potential for 2 reasons. There are more Tier 3 and Tier 4 towns in these countries in the rest of Tier 1 town, right? So that's why [indiscernible] will be playing. So that's number one. And in that -- in those cheering an organized sector leads the way. So I would guess then this is not a study. But if the average is 70% in those sectors, it's almost 85% of the business is done in an organized sector, right? So the ability to serve that consumer the market is big, the number of stores are big. So that's why we feel that the opportunity to growth exists. What we have to still keep cracking and getting it right is how does walkway play in a Tier 2 town street, how does it pan a Tier 4 street stores. These all come with different mechanics. It's not a cookie-cutter approach. Until we figure out the entire formula, I would never feel that the pilot is done, which I go nationally over few of my work is done on any store concept. But I think there's a lot more pieces to the puzzle to make walkway successful across from Tier 2 to Tier 3 or 4 to small shopping centers through high streets to high-density markets. But overall, though, we are pleased to see with the profitability and the model of Walkway starting to make a lot more sense, especially to our role.

[Operator Instructions] As there are no further questions, we take that as the last question and we conclude today's conference call. On behalf of Emkay Global Financial Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.