It's the weekend and here's our writeup on the business of #metrobrands. The company's recent investor presentation offered some insights into its business. Show some love by retweeting and following us if you like our work🙂
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#may27capital
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#metrobrands is incorporated in the year 1977. It is one of the largest footwear specialty retailers in India. It is a one-stop shop catering to the footwear needs of men, women, and children covering the entire family.
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#metrobrands sells footwear brands like Mochi, Crocs, and Skechers and it recently entered into an exclusive tie-up with Fitflops. It also sells belts, bags, and wallets.
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Their first store was set up in Mumbai in the year 1955. Today the company has 629 stores across 140 cities in 30 states and UTs in India and is engaged with 250 vendors of which some shared relationships for 20+ years with the company.
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Metro Brands follows the Asset light business model and its products are fully outsourced. The company does not have any manufacturing facility. This can be a drawback as the company won’t have much control over the quality of products.
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The lease rentals of stores are either fixed or on a revenue-sharing basis with the landlords. The compensation for store managers and the employees has variable components and is pegged against the store-level sales. So the higher they are better the employee compensation.
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#metrobrands majorly operates in the mid and premium footwear segment where the average ticket size is ₹1,000+ whereas a company like Relaxo focuses on the mass market with an average ticket size of ₹200-500.
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#metrobrands majorly operates 2 formats of stores. Multi-brand outlets (MBOs) like Metro, Mochi, and Walkway and Exclusive brand outlets (EBOs) like Crocs. It also has shop-in-shop (SIS) outlets in departmental stores.
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▪️Own brands of the company contribute 70% of the total store product sales through the multi-brand outlets (MBOs)
▪️Third-party sales were around 30% on average in the last 3 years.
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▪️Third-party sales were around 30% on average in the last 3 years.
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▪️Own brands: The company has in-house brands like Metro, Mochi, Walkway, DaVinci, and Activ across categories like Casual, formal, sports, and accessories.
▪️Third-party brands: It sells 3rd party brands like Crocs, Fitflop, Clarks, Skechers, Reebok, Adidas, Campus, etc.
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▪️Third-party brands: It sells 3rd party brands like Crocs, Fitflop, Clarks, Skechers, Reebok, Adidas, Campus, etc.
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▪️The company first entered into an agreement with Crocs in 2015. Since then, Crocs exclusive brand outlets (EBOs) increased from 96 in FY19 to 175 in 9M FY22
▪️Each EBO has an 18-yr agreement post the 1st 3 yrs the agreement provides for automatic renewal for 5 periods of 3 yrs
▪️Each EBO has an 18-yr agreement post the 1st 3 yrs the agreement provides for automatic renewal for 5 periods of 3 yrs
#metrobrands entered into a long-term exclusive agreement with UK-based premium flip-flops brand Fitflop in January 2022 for sales and distribution across India.
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Pivoting to Online and Omnichannel presence:
▪️Currently offers its products on 7 E-commerce platforms
▪️The online sales of the company increased from ₹19 Crs in FY19 to ₹85 Crs in 9M FY22.
▪️The % revenue of online sales to total sales has increased from 1.7% to 9.2%.
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▪️Currently offers its products on 7 E-commerce platforms
▪️The online sales of the company increased from ₹19 Crs in FY19 to ₹85 Crs in 9M FY22.
▪️The % revenue of online sales to total sales has increased from 1.7% to 9.2%.
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Loyalty programs:
#metrobrands designed loyalty programs like “Club Metro” and “My Mochi” where 4% of the net bill value will be credited to customers in the form of loyalty points that can be redeemed across any store of the respective brand.
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#metrobrands designed loyalty programs like “Club Metro” and “My Mochi” where 4% of the net bill value will be credited to customers in the form of loyalty points that can be redeemed across any store of the respective brand.
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▪️CRISIL Research has stated Metro brands offer the highest loyalty point credits for customers among the key Indian footwear players.
▪️The company is using these loyalty programs to gain insights into the trends, customer preferences.
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▪️The company is using these loyalty programs to gain insights into the trends, customer preferences.
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▪️Customers signed up for the “Club Metro” program increased from 3.8 Mn in FY19 to 5.3 Mn in 9M FY22. “My Mochi” program saw an increase from 2.4 Mn to 3.7 Mn in the same period.
▪️The loyalty program for Crocs brand increased from 2 lakhs in FY20 to 7 lakhs in 9M FY22.
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▪️The loyalty program for Crocs brand increased from 2 lakhs in FY20 to 7 lakhs in 9M FY22.
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▪️Percentage repeat sales to total products sales through loyalty programs in the last 3 years and 9 months has been at 51% on an average.
▪️ CRISIL Research has stated #metrobrands offer the highest loyalty point credits for customers among the key Indian footwear players.
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▪️ CRISIL Research has stated #metrobrands offer the highest loyalty point credits for customers among the key Indian footwear players.
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Promoters: Mr. Rafique Malik is a Harvard graduate who took Metro Brands from a single store in Mumbai in 1955 to one of the largest networks of fashion footwear and accessories stores across India. He has led the company for the past 45 years. He is currently the Chairman.
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Farah Malik Bhanji is the managing director of the company with over 20 years of experience in the footwear industry. She started off with marketing and oversaw the revamp of the technology roadmap and supply chain of Metro brands.
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She was instrumental in developing relationships with foreign brands such as Clarks, Crocs, and Skechers and expanding the store network.
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Nissan Joseph is the CEO and joined #metrobrands on 1st July 2021. He has over 22 years of brand management expertise across 20 countries. He has led various retail brands across the globe including Foot Action, Payless Shoes, Crocs, nd Planet Sports
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A snapshot of the Board of directors at #metrobrands:
Sales of Metro Brands grew from ₹900 crores in FY17 to Rs ₹1,300 crores in FY20. It has one of the highest gross margins among its peers, according to CRISIL Research.
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The gross margins for 9M FY22 stood at 58.1% compared to 55.1% last year. EBIDTA margins increased from 17.9% to 29.8% in the same period. There are 2 reasons for the improvement in gross margins
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▪️The quantum of discount sales to total sales is lower in this 9M compared to the earlier period. It decreased from 9% in FY21 to sub 5% now.
▪️Improvement in overall sales mix with the contribution of in-house sales increasing from 69.5% to 72%.
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▪️Improvement in overall sales mix with the contribution of in-house sales increasing from 69.5% to 72%.
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The outbreak of Covid has hit the business leading to a 40% drop in sales in the first 2 quarters of FY22. But Q3 FY22 was the first quarter post-Mar ’20 without any major Covid related restrictions.
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Q3 FY22 results:
▪️The consolidated revenue increased 59% year-on-year from ₹304 Crs in Q3 FY21 to ₹484 Crs in Q3 FY22.
▪️EBIDTA increased by 69.8% year-on-year from ₹99 Crs to ₹169 Crs in the same period.
▪️PAT increased by 53.3% year-on-year from ₹66 Crs to ₹102 Crs.
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▪️The consolidated revenue increased 59% year-on-year from ₹304 Crs in Q3 FY21 to ₹484 Crs in Q3 FY22.
▪️EBIDTA increased by 69.8% year-on-year from ₹99 Crs to ₹169 Crs in the same period.
▪️PAT increased by 53.3% year-on-year from ₹66 Crs to ₹102 Crs.
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▪️The E-commerce sales of the company registered 69% growth in Q3 FY22 compared to Q3 FY21. The YoY growth stands at 114%
▪️The % contribution of online sales to total sales has increased from 7.5% in FY21 to 9.2% in 9M FY22. The percentage contribution in FY20 was just 2.5%
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▪️The % contribution of online sales to total sales has increased from 7.5% in FY21 to 9.2% in 9M FY22. The percentage contribution in FY20 was just 2.5%
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▪️#metrobrands has opened 39 new stores in Q3, its highest ever per quarter.
▪️The company expects the gross margins to normalize around 55-56% which is the average in the last few years.
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▪️The company expects the gross margins to normalize around 55-56% which is the average in the last few years.
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Challenges:
▪️ It expects inflationary trends in raw material costs in the range of 5%.
▪️Under most agreements for third-party brands, the company is required to pay for products only once they are sold.
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▪️ It expects inflationary trends in raw material costs in the range of 5%.
▪️Under most agreements for third-party brands, the company is required to pay for products only once they are sold.
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▪️The GST rates have been revised from 5% to 12%. Less than 15% of the company’s product range has a ticket size of less than ₹1,000.
▪️ No control over the quality as the manufacturing is fully outsourced.
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▪️ No control over the quality as the manufacturing is fully outsourced.
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Q3 Concall highlights:
#metrobrands registered the highest ever quarterly revenue and profit after tax due to post-pandemic recovery making it the best quarter in the history of the company.
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#metrobrands registered the highest ever quarterly revenue and profit after tax due to post-pandemic recovery making it the best quarter in the history of the company.
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▪️ It has added 39 stores in the quarter, it is also focusing on increasing engagement in E-commerce.
▪️They do not see price hikes in the near future and will happen only if there is a change in pricing of the raw materials which currently have an inflationary trend of around 5%
▪️They do not see price hikes in the near future and will happen only if there is a change in pricing of the raw materials which currently have an inflationary trend of around 5%
▪️The current EBIDTA Margins are due to the sudden pent-up demand and it will take some more time for the company to witness the actual growth.
▪️In the long term, the company is considering sub-merging brands like Mochi and Metro under Crocs.
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▪️In the long term, the company is considering sub-merging brands like Mochi and Metro under Crocs.
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This write-up is for educational purposes and not investment advice. Do your own research. Please consider subscribing to our Substack newsletters and follow us if you liked the write-up. Link to the top of this thread. Thank you and Happy Investing
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