Metro Brands Limited — Q2 FY26 earnings call

Call held 17 Oct 2025

Management summary

Metro Brands reported a solid Q2 FY26 with 11-12% revenue and EBITDA growth, alongside a 40bps gross margin expansion. Store expansion continued with 42 new openings, and e-commerce saw significant 39% growth. However, prolonged monsoons, customer delays due to GST benefits, and the impact of Ind AS 116 on new store openings slightly dampened profitability, with H1 pre-Ind AS EBITDA growth at 3%.

Highlights

  • Standalone business revenue growth of 12% in Q2 FY26.

  • Consolidated business revenue growth of 11% in Q2 FY26.

  • Gross margins expanded by 40 basis points YoY.

  • Standalone EBITDA grew 12% and consolidated EBITDA grew 10% in Q2 FY26.

  • Net addition of 38 stores (42 opened, 4 closed), including 4 Foot Locker and 10 Walkway stores.

  • E-commerce business achieved 39% growth, contributing 14% to total revenue.

Concerns

  • Prolonged monsoons and customers waiting for GST benefits impacted Q2 sales.

  • Ind AS 116 accounting dampened PAT due to the opening of 42 new stores, with an impact of almost 1% in Q2.

  • Pre-Ind AS EBITDA growth for H1 was only 3%, with a 120 basis points contraction in margin to 17.8%.

Key financials

2 periods

Headline

  • Standalone Revenue Growth
    12%
    YoY +12%
  • Consolidated Revenue Growth
    11%
    YoY +11%
  • Gross Margin Expansion
    40 bps
  • Standalone EBITDA Growth
    12%
    YoY +12%
  • Consolidated EBITDA Growth
    10%
    YoY +10%

H1

  • Pre-Ind AS EBITDA Growth
    3%
    YoY +3%
  • Pre-Ind AS EBITDA Margin
    17.8%

What they filed

Q1 FY27: revenue up 14.6%, net profit down 4.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue585 703 643 628 651 +11%811 +15%773 +20%720 +15%
EBITDA155 225 197 194 171 +10%265 +18%238 +21%215 +11%
Net profit72 95 95 99 69 −4%130 +37%118 +24%95 −4%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

medium confidence
  • Capex Capex disclosed
    • New store openings (60 stores in H1, including 4 Foot Locker stores)
    • Store renovations
    Devanshu Bansal: Also, Kaushal, if you could comment on capex because there that normality will not be there, right? So we have opened 60 stores. Typically, capex was between, say, INR50 lakhs, INR60 lakhs formats like Metro Mochi. So here also, it is slightly on the higher side. So if you can throw some light on that as well? Kaushal Parekh: Yes. So there are 2, 3 points here. Capex for Foot Locker stores are significantly higher than what we incur for Metro Mochi, that is one. We have opened 60 stores. We have also renovated a few stores. So it's a combination of all these 3 factors that is leading to that capex cost of around INR60 crores during the year.

Guidance & targets

Profitability

  • ROCE for Foot Locker format Profitability · medium-to long-term time frame · High confidence upward of 20%- 25%
    our endeavor would be to make sure that we can generate ROCE upward of 20%- 25% from this format over a medium-to long-term time frame.

    — Kaushal Parekh

  • ROCE for Walkway format Profitability · medium- to long-term time frame, say, in 3 to 5 years · High confidence 20% to 30%
    our endeavor is that, say, in medium- to long-term time frame, say, in 3 to 5 years, if we can consistently deliver ROCEs somewhere in that range of 20% to 30% from Walkway format, I think that would be a good utilization of our treasury funds, which is touching 7% odd returns.

    — Kaushal Parekh

Store Expansion

  • Network addition for Crocs Store Expansion · next 3 to 5 years · High confidence 10%
    Rajiv, 10% network addition even for Crocs for next 3 to 5 years is easily possible.

    — Kaushal Parekh

E-commerce

  • Contribution to revenue E-commerce · longer term · Medium confidence 15% and 20%
    Overall, if you look at it, I think the e-com business should be somewhere between 15% and 20%.

    — Nissan Joseph

Overall Growth

  • Revenue Growth Rate Overall Growth · future · High confidence 15% plus
    Overall, I think we're safe we continue to feel confident in our guidance that we will grow at a 15% plus rate and also produce a profit after tax of the 15% and an EBITDA in the 30% range.

    — Nissan Joseph

  • Profit After Tax (PAT) Overall Growth · future · High confidence 15%

    — Nissan Joseph

  • EBITDA Margin Overall Growth · future · High confidence 30%

    — Nissan Joseph

  • Volume Growth Overall Growth · future · Medium confidence 10%, 12%
    So basically, a 10%, 12% kind of a volume growth and 3%, 4% kind of a value growth, right? Yes, very true. If we target a 15% overall growth.

    — Kaushal Parekh

  • Value Growth Overall Growth · future · Medium confidence 3%, 4%

    — Kaushal Parekh

SSG Growth

  • Same Store Sales Growth SSG Growth · going forward · Medium confidence mid- to high single digits
    So I think that is a sustainable SSGs that we would target going forward.

    — Kaushal Parekh

What to watch in Q3 FY26

FILA standalone store opening

end of this calendar year
Current No standalone FILA stores currently open
Target First FILA store opened

Why it matters

Marks a key milestone in the repositioning of the FILA brand and its potential for accelerated growth.

Nissan Joseph: We are looking at opening our first FILA store since the closure of all the FILA stores later on at the end of this calendar year.

Risks & concerns

  • BIS (Bureau of Indian Standards) issues

    medium

    BIS issues are not fully resolved, impacting Foot Locker and FILA store expansion, though headway is being made.

    Management acknowledged

  • Impact of Ind AS 116 accounting on PAT

    medium

    Ind AS 116 accounting dampened PAT by almost 1% in Q2 due to new store openings, especially for large Foot Locker stores.

    Management acknowledged

  • Monsoon and GST benefit delays impacting sales

    low

    Prolonged monsoons and customers waiting for GST benefits created headwinds in Q2, but these factors are not expected to persist.

    Management acknowledged

  • Past erratic events (COVID, elections) impacting business

    low

    Past lumpiness from COVID and national elections affected business, but management believes these external factors are not present for the upcoming quarters.

    Management downplayed

Q&A highlights

8 direct
FILA brand repositioning and BIS issues Direct
So we are gaining traction in mitigating that BIS issue. Our Foot Locker business shares the same issue, which is why you've seen us only open 4 stores this quarter. I think had we not had BIS, we definitely have wanted to open many, many more stores for Foot Locker. ... We are looking at opening our first FILA store since the closure of all the FILA stores later on at the end of this calendar year.

Clarifies the ongoing impact of BIS issues on Foot Locker and FILA store expansion, and provides a timeline for FILA's first standalone store.

Asked by Gaurav Jogani

Clarks brand integration and expansion Direct
Clarks footwear into 200 of our Metro and Mochi doors, and it has done extremely well. We plan on expanding this to 300 doors in the next quarter. ... We would probably start our new store growth on Clarks probably in the back half of next year.

Details the current distribution and future expansion plans for Clarks, including standalone stores and online presence.

Asked by Gaurav Jogani

Impact of GST reduction on sales per square foot and profitability Direct
Yes. Logically, yes, Gaurav, to the extent of discount that we have passed on to the customer, our top line to that extent comes down. But as you rightly said, it will not have any impact on profitability. Next quarter, we'll try to give some details on that number too.

Explains that while GST reduction might lower realization (top line), it is not expected to impact profitability, with more details promised next quarter.

Asked by Gaurav Jogani

Pre-Ind AS EBITDA growth and margin contraction in H1 Direct
I find that first half, the pre-Ind AS EBITDA approximate growth is just 3%. I just want to get a sense on why this is the case because this would imply a sharp escalation in rentals. ... And even if I look at the pre-Ind AS EBITDA margin, it's at 17.8% for the first half. That's a 120 basis points contraction.

Highlights a significant contraction in pre-Ind AS EBITDA margin for H1, prompting management to explain the impact of new store openings and higher marketing spend.

Asked by Sameer Gupta

Increase in inventory in H1 Direct
our inventory has increased by about INR150 crores and we have done a capex of about INR60-odd crores. ... If you compare it with September '24, our overall increase, I think, is around INR80 crores, INR85 crores Second point is, obviously, the inventory that we carry is also in line with all the new store additions that we are planning to add over next 2 quarters. And also the new formats that we have started.

Addresses the increase in inventory, attributing it to preparation for the festive season, new store additions, and new formats like Clarks and Foot Locker.

Asked by Devanshu Bansal

Elevated A&P (Advertising & Promotion) spend Direct
We do plan on investing in marketing. Some of that marketing ends up with immediate sales in that same quarter. Some of that marketing flows to another quarter. So you might see the benefit of the following quarter where the relative marketing spend may not be as much. But these are this last quarter and this quarter is the ones that we would spend the most money on our marketing because this is where we do most of our business.

Confirms higher A&P spend (1% extra) focused on Metro Mochi, indicating continued investment in marketing for awareness and intent.

Asked by Ankit Kedia

E-commerce channel growth and strategy Direct
So we've made significant investments into our D2C side. We've made significant investments into the technology that utilizes omnichannel capabilities with the different marketplaces. I think we're also investing more in digital marketing. ... Overall, if you look at it, I think the e-com business should be somewhere between 15% and 20%.

Explains the drivers behind the 39% e-commerce growth, including D2C investments and digital marketing, and sets a long-term target for its contribution.

Asked by Avinash Karumanchi

Walkway brand margins and ROCE Direct
Walkway, we have we clearly mentioned, right, that our incoming gross margins in Walkway would be lower than that of Metro Mochi, the overall gross margins that we sort of report. And obviously, that will flow through EBITDA and PAT. So profit as a percentage in Walkway would be -- would always be lower than Metro Mochi. However, our endeavor is that, say, in medium- to long-term time frame, say, in 3 to 5 years, if we can consistently deliver ROCEs somewhere in that range of 20% to 30% from Walkway format.

Clarifies that Walkway has lower gross margins than Metro Mochi but aims for a healthy 20-30% ROCE in the medium term, indicating strategic investment in the value segment.

Asked by Tejash

2 min read 6 chapters

Detailed narrative

Q2 FY26 Performance Overview

Metro Brands reported a 12% growth in its standalone business and an 11% growth in consolidated numbers for Q2 FY26. Gross margins expanded by 40 basis points year-over-year. EBITDA also saw healthy growth, with standalone EBITDA up 12% and consolidated EBITDA up 10%. The company noted challenges from prolonged monsoons and customers delaying purchases due to anticipated GST benefits, but also benefited from an earlier festive season.

Store Expansion and New Formats

The company added 42 new stores and closed 4, resulting in a net addition of 38 stores during the quarter. This included 4 high-profile Foot Locker stores and a record 10 Walkway stores. Metro Brands continues to invest in its core business, opening a reimagined Mochi store format in Ghatkopar. The impact of Ind AS 116 accounting on these new store openings dampened PAT by almost 1% in Q2.

Brand Integration and Repositioning (FILA, Clarks)

FILA's repositioning is underway, with the brand carried in over 100 Metro Mochi doors. The first standalone FILA store is expected to open by the end of the calendar year, following a 12-18 month repositioning phase. Clarks footwear was launched in 200 Metro and Mochi doors and performed well, with plans to expand to 300 doors next quarter and start new store growth in H2 FY26. Supply chain stabilization for Clarks is expected in the next 2-3 quarters.

E-commerce Growth and Strategy

The e-commerce business demonstrated strong performance, growing 39% across multiple digital channels and now contributing 14% to total revenue. This growth is attributed to significant investments in D2C capabilities, omnichannel technology, and digital marketing. Management aims for e-commerce to contribute 15-20% of revenue in the longer term, focusing on value rather than discounting.

GST Impact and Demand Outlook

GST changes have positively impacted the business, with an 11% reduction for footwear priced between INR 1,000 and INR 2,500, and a 6% reduction for footwear under INR 1,000. While this may lead to lower realization per square foot, it is not expected to impact profitability. Management anticipates a more stable demand environment in the coming quarters, free from the erratic events of previous years like COVID and elections.

Financial Discipline and Future Outlook

Despite challenges, the company maintains operational rigor and financial discipline. Management expressed confidence in achieving a 15%+ revenue growth rate, 15% PAT, and 30% EBITDA margin in the future. They also target ROCE of 20-25% for Foot Locker and 20-30% for Walkway formats in the medium-to-long term, alongside mid-to-high single-digit SSG growth.

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