METROBRAND

reports weak Q1, eyes expansion

reported weaker-than-expected Q1 FY26 results, leading to a cut in its earnings estimates by analysts. The footwear retailer's consolidated revenue grew by 9% year-on-year to ₹628 crore, missing estimates and falling short of its long-term revenue CAGR goal of 15-18%. Key Performance and Operational Challenges Revenue Impact: The company's revenue was negatively impacted by a 2-3% hit from early Eid in March and unseasonal rains in key markets like Gujarat and Maharashtra. Sales Per Square Foot: Sales per square foot continued its downward trend for the ninth consecutive quarter, declining 3% to ₹4,350. This persistent decline factored into analysts lowering their revenue estimates for FY26 and FY27. Despite a focus on premium products, which contributed 56% of Q1 sales, profitability was impacted by higher marketing expenses. EBITDA margin was down 45 basis points year-on-year to 31%. However, the company maintained its long-term guidance of an operating margin above 30%, supported by cost-control measures. Store Expansion: Metro added a net of 20 stores in Q1, bringing its total to 928, and plans to accelerate store launches in the second half of the year, particularly for brands like Fila, Clarks, and Foot Locker. Brand Strategy: The company is strategically scaling up its newer brands. It plans to launch three Foot Locker outlets ahead of the festive season and Fila exclusive stores in H2, with Fila expected to break even by FY27. Comparative Performance: Despite the challenges, Metro's revenue and profit growth was considered "decent" compared to rivals like Bata India and Relaxo Footwears, which have seen a sharper decline. However, the stock's valuation remains steep, trading at 58x estimated FY27 earnings, which leaves little room for error amid prolonged demand weakness.