Metro Brands expects sales growth to moderate amid third Covid wave

Traffic at its stores impacted due to restrictions in third wave

After reporting a strong increase in sales in the October-December quarter (Q3FY22), footwear major Metro Brands has started to see the impact of the third wave on the number of people stepping in into its stores to buy shoes.

In the quarter gone by, the company saw its revenue at Rs 484 crore, up 59 per cent compared to the year-ago quarter helped by wedding and festive sales.

“We're already seeing it impact traffic in our stores and subsequent consumption,” Nissan Joseph, CEO of Metro Brands told Business Standard. However, Joseph remains hopeful that the situation won’t last for long as other countries which have earlier witnessed a rise in cases and also restricted movement to curb the spread of the virus have come out of it quickly. He added that the restrictions in the on-going wave won’t be as long and protracted as the previous two waves.

The shoe major also expects its profit after tax margins performance to normalise and be in the 12 per cent range which went up to 15 per cent in the first nine months of the FY22. Joseph also expects the gross margins to normalise due to the end of the season sales kicking in and normalising at around 53 - 55 per cent, the company's historical range for gross margins. “We think that 53 to 55 per cent range is about where a good retail operator can operate and still be priced meaningfully for the consumer,” Joseph said.

In any given year, the company only sells 10 per cent of its stock at a discount and will continue to maintain sticking to that number. Joseph said that the company is not sitting on heavy inventory due to which it has to push a higher amount of stocks through discounts.

In the quarter ended December, its gross margins came in at 59.1 per cent.

During the previous quarter, it also opened 39 new stores which is the highest ever number of new stores the company has opened in a particular quarter taking its total store count to 629 across all formats which include Metro, Mochi, Crocs and Walkway.
 

Joseph believes that for any retail business achieving 20 per cent of its overall sales from the e-commerce channel is not an unreasonable number, without commenting on a time frame in which the company will see a fifth of its revenue come from online sales. In the October-December quarter, 9.2 per cent of its sales came from the online channel, which was a tad bit over 2 per cent when Covid hit in 2020.