Metro Brands' Focus On Premium Shoes Pays Off, CEO Nissan Joseph Says

Metro Brands Ltd.'s focus on premium footwear paid off as spending among buyers with purchasing power stays strong despite economy-wide inflation.

The shoe retailer's revenue jumped fourfold in the first quarter, Chief Executive Officer Nissan Joseph told BQ Prime. "We saw a steady increase in sales of footwear that are priced upwards of Rs 3,000, which proves that consumers are willing to spend despite prices going up."

The top segment contributed 40% to sales, followed by Rs 1,501-3,000 footwear at 44% and Rs 501-1,000 at 12%. Products worth less than Rs 500 contributed 4% to sales.

The footwear retailer's experience reflects steady consumption among affluent buyers even as overall sentiment remains gloomy. Inflation and lingering effects of the pandemic-induced disruption have prevented consumer confidence from rising above pre-Covid levels.

But for Metro Brands, demand didn't suffer even after the company hiked prices by 7% during the April-June quarter, said Joseph. "Demand is strong across channels, geographies, and categories."

"Offline shopping has come back with a storm and the exciting part is it hasn't come at the cost of our online business," he said. E-commerce, contributing 10% to sales, grew 106% quarter-on-quarter.

Consumption will continue to remain robust with the onset of the festive period and the upcoming marriage season, the CEO said. Growing work-from-office trend would further improve footfalls, he said.

The company also benefited from increase of GST for items under Rs 1,000 to 12%, Joseph said. The subsequent price increase helped bridge the gap between organised and unorganised retail, he said.

Flags More Price Hikes

If input inflation sustains at the current levels, Joseph said, then the company will hike prices by 7% to 9% in the ongoing quarter.

Barring any unforeseen events, the CEO does not anticipate any significant imbalance on the demand or the supply side due to the high inflation. "Inflation is something we need to live with."

To cushion margin, the company resorted to inventory hedging—stocking excess inventory as a buffer to limit risks associated with future price rise. Besides, lower discounting and better product mix also helped achieve record-high margin during April-June period, Joseph said.

However margins seen at 59% in the first quarter, Joseph said, are not sustainable. "This quarter, we didn't have end-of-season sales which dampens some of the margins," he said. "We stick to our guidance of 55-57% range, which is more normalized number."

"Despite the inflationary pressures, we were able to improve our margins because we're hedging inventories and the price increases weren't as significant as we anticipated," he said.

Best Quarter In History

The footwear retailer's fourfold jump in first quarter revenue was also aided by a low base due to Covid-led disruptions a year earlier. Sequentially, revenue grew 26% to Rs 508 crore.

"Our performance in first quarter was spectacular, no matter with whichever quarter [sequentially or year-on-year] we compare it," Joseph said. "We have reported our best quarter ever with record revenues, Ebitda and PAT, reflecting the robustness of the operational model and steady recovery in consumption."

The company reported a net profit of Rs 105.7 crore from a loss of Rs 12 crore in the first quarter of the previous year. On quarter-on-quarter basis, net profit rose 52%.

Store Opening

The footwear retailer's growth in terms of number of new stores in the last few years was driven by Crocs but that's changing now, Joseph said.

"We have opened 20 new stores,” he said. “That was across each of our concepts including Metro, Mochi, Walkway, etc. "

Over the next three years, the company plans to open 260 stores. "We're on track to achieve the number... a run rate of 80 stores a year gets us to the target," he said.

Metro Brands is also constantly reviewing inorganic opportunities with an eye on premiumisation as it looks to tap the expanding Indian middle class.

"We have a sizeable war chest of funds, and we are looking at suitable opportunities to invest to get the best shareholders ,” the CEO said.

“We understand that there are a lot of consumers in the bottom of the pyramid, but we are very clear about where we want to play and that is the mid-to-premium segment of the market and any acquisition we do has to fit in this space," he said.