– Metro Brands – marketing footwear

Metro Brands Limited Q2 FY25 Earnings Conference Call Summary

Metro Brands reported a 5.1% year-over-year standalone revenue growth for Q2 FY25, with EBITDA and PAT remaining constant compared to the previous year.
The company’s e-commerce business contributed over 10% of total sales, with in-house brands representing over 70% of the total business.
Sales of products priced over ₹3,000 constituted 53% of total sales, signifying continued demand for premium products.
Metro Brands opened 23 new stores and closed 3 stores in Q2, resulting in a net addition of 20 stores.
For the first half of FY25, the company opened 40 new stores and closed 5, leading to a net addition of 35 stores.
The company maintains a stable PAT percentage for the quarter, reflecting operational rigor and financial discipline.
Metro Brands observed a moderate reduction in net working capital days due to the stabilization of BIS-related supply chain disruptions in their core brands.

The company remains confident in achieving its previously provided guidance of 12-15% revenue growth for FY25.
Management expects the business growth trajectory witnessed from Q1 to Q2 to persist, driven by consumer demand and the upcoming wedding season.
Metro Brands anticipates a strong performance in the second half of FY25, particularly in Q3, due to the festival and wedding season.
The company plans to open over 100 new stores (net) in FY25.
While expansion plans for the Walkway segment are currently paused for business model refinement, the company expects growth to accelerate towards the end of FY25 and into FY26.
Expansion plans for the Fila brand, particularly for EBOs, are expected to commence in the second half of FY26, contingent on the resolution of BIS-related challenges.

The gross margin for Q2 FY25 was negatively impacted by approximately 100 basis points due to the liquidation of FILA inventory.
Management anticipates a minor impact on margins in Q3 due to the remaining FILA inventory liquidation, followed by a return to normalized margins.
Higher marketing costs in Q2, primarily due to the new autumn-winter campaign, impacted the EBITDA margin.
For the full fiscal year FY25, Metro Brands targets an EBITDA margin in the 30% range.

Management believes that the normalization of post-COVID market dynamics is largely complete, with consumer behavior becoming more predictable.
The company sees opportunities arising from BIS regulations, particularly as they impact competitors more heavily reliant on imports.
Despite challenges, Metro Brands is confident in the growth potential of the sports and athleisure segment in India.

The most significant risk highlighted during the call is the impact of BIS regulations on the sports and athleisure segment.
The regulations have caused supply chain disruptions, primarily due to the challenges associated with rapidly scaling up domestic production of specific high-tech products.
Uncertainty regarding potential government relaxation of import restrictions adds further complexity.

Metro Brands has implemented several strategies to mitigate the risks posed by BIS regulations, including:
- Shifting sourcing to India for its core brands (Metro, Mochi, and Walkway).
- Forward buying inventory to bridge the gap until domestic substitutes are available.
- Exploring options for domestic manufacturing of raw materials and finished goods for brands like Fila.
The company launched a new FILA footwear collection manufactured predominantly in India.
Metro Brands signed a new agreement with New Era, a leading headwear and accessories brand, anticipating the opening of its first New Era kiosk shortly.
The company successfully launched the first Foot Locker store in India, with plans to open a few more in the coming quarters.
Metro Brands implemented a celebrity-led marketing campaign to expand its reach and cater to diverse consumer segments.
The company is focused on optimizing working capital and reducing inventory levels.

Metro Brands’ cautious approach to expansion in the sports and athleisure segment is driven by a desire to make informed decisions amidst the evolving regulatory landscape. They are not abandoning the category but are carefully monitoring the situation and adjusting their strategies accordingly.
While the BIS regulations present challenges, they also create opportunities for Metro Brands to leverage their existing domestic manufacturing capabilities and potentially gain market share from competitors more reliant on imports.
The company’s strong financial discipline and focus on operational efficiency are evident in their consistent profitability and working capital management.

Taken a help of https://notebooklm.google/ so pardon me if there is any error in this summary.

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