Metro Brands Q2 FY26 earnings call

Where management's figures differ from the filing

• Consolidated revenue growth: said 11% YoY consolidated revenue growth in Q2 FY26; filed ₹6.51 cr (-98.9% YoY). Management only stated YoY growth on the call, not absolute Q2 revenue; no reason for the gap discussed.
• Consolidated EBITDA growth: said 10% YoY consolidated EBITDA growth in Q2 FY26; filed ₹1.71 cr (-98.9% YoY). Management only stated YoY growth on the call, not absolute Q2 EBITDA; no reason for the gap discussed.

What moved the numbers, as management explained it

• Ind AS 116 accounting dampened Q2 PAT by ~1% from 42 new stores and 4 Foot Locker openings; FY25 Ind AS 116 non-cash charge ~₹37 crore; CFO says impact normalises next quarter. (accounting)
• Marketing spend up ~100 bps for a second consecutive quarter; biggest investment lift on Metro Mochi.
• GST price cut passed to consumers reduced top line (no profitability impact); affects ~90% of Walkway and ~40% of Metro Mochi footwear.
• Prolonged monsoons through the quarter and customer hold-back waiting for the new GST regime muted sales growth; partly offset by earlier festive season.
• Rent-to-revenue ratio rose slightly from the 13-15% band as muted H1 top line growth amplified fixed rentals; CFO expects normalisation in Q3-Q4 with festive sales.

The numbers management led with

• Net new store additions: 38 stores in 2QFY26 (42 opened, 4 closed)
• Foot Locker stores opened: 4 high-profile stores in 2QFY26
• Walkway stores opened: 10 stores in 2QFY26 — highest ever for the format
• E-commerce growth: 39% YoY across digital channels; 14% of revenue

Guidance on this call

What changed since the Fri 8 Aug 2025 call

By business

Balance sheet, capex and funding

• H1 FY26 capex ~₹60 crore; Foot Locker capex materially higher per store than Metro Mochi; plus some store renovations.
• Inventory at end-September up ~₹80-85 crore vs September 2024, for festive prep, new stores and new formats (Clarks, Foot Locker).
• Store-level inventory at ~6.5-7 months of sales; no material like-for-like change.
• Pre-Ind AS to post-Ind AS EBITDA gap ~8.5-9% of revenue; pre-Ind AS quarterly run rate not provided.
• FY25 Ind AS 116 non-cash P&L charge ~₹37 crore; cash and treasury returns ~7%.

The industry, as management sees it

Management views demand as finally approaching a clean like-for-like quarter after years of COVID lumpiness, wedding-date shifts, elections and erratic monsoons. GST rate reductions are seen as a structural positive for the organised footwear trade given the 70% unorganised market share, with the company positioned to capture share via Tier 2/3 expansion.

Risks management named

• BIS regulatory issue still impacting Foot Locker and FILA expansion pace; not fully resolved
• Rental escalation running above historic 13-15% of revenue band; H2 normalisation required
• Ind AS 116 rent-free period accounting creating ~1% PAT drag in store-opening quarters
• GST-driven 11% price pass-through in mid-price band will depress top line realisation

Not answered directly

• Crocs granular revenue contribution and store-by-store expansion plan
• Pre-Ind AS depreciation and interest expense quarterly run rate
• Specific store addition guidance for H2 FY26 and FY27

Asked for a number, answered without one

• FILA revenue benchmark vs original ₹300-400 cr aspiration: Said they couldn't have hit the pre-BIS aspiration; brand on track for 12-18 month repositioning; no specific number given.
• Pre-Ind AS quarterly depreciation and interest run rate: CFO: "I don't have that number handy with me"; only gave an 8.5-9% EBITDA gap band.
• H2 / FY27 store addition plan: Said not fixated on a number; will only grow when rental economics make sense across banners.
• Crocs contribution to revenue: Said they don't break out granular numbers; sees no reason to question Crocs growth runway.
• Sales per square foot of the year-old Foot Locker store: Said clocking well and broadly in line with company average; no absolute number given.

Every question, with its answer

1. 1. FILA / Foot Locker BIS status

   Gaurav Jogani, JM Financial

   Question. On FILA and Foot Locker — what is the status of the BIS issue, and where do we benchmark FILA today versus pre-BIS aspirations? When can growth normalise?

   Answer, Nissan Joseph, CEO, Metro Brands. BIS issues aren't fully resolved but considerable headway made; we should be ahead of the curve by early next year. Foot Locker expansion is similarly limited — only 4 stores opened this quarter, and we would have wanted to open many more. FILA is being carried in 100+ Metro/Mochi doors as part of a 12-18 month repositioning. The first new FILA standalone store will open later at the end of this calendar year. While we couldn't get close to pre-BIS aspirations, management remains confident FILA can reposition — customer response to assortments in 100+ doors has been positive.

   Follow-up. If pre-BIS aspiration was ₹300-400 crores, where are we on that journey, and can we be back on growth next year?

   Answer. Pretty pleased with progress given BIS constraints; pre-BIS aspiration clearly not met. The investment in FILA will be a terrific one for the company; repositioning a brand is not for the faint of heart.

   Partly answered.

2. 2. Clarks rollout strategy

   Gaurav Jogani, JM Financial

   Question. On Clarks — what is the full rollout plan including online and distribution, and is there any cannibalisation risk to existing Metro/Mochi assortment?

   Answer, Nissan Joseph, CEO, Metro Brands. Clarks historically had ~50 doors. There's no cannibalisation concern — it is a reintroduction into the Metro/Mochi chain. The plan is to first scale within existing doors and then start standalone Clarks stores from around August next year. Customer appreciation for Clarks remains strong and there is no good substitute in the assortment. Kaushal Parekh added that the Clarks supply chain will fully stabilise over the next 2-3 quarters; currently only the Cloudstepper women's range (35-40% of offer) is in stores.

3. 3. Clarks online and supply chain

   Videesha Sheth, Ambit Capital

   Question. On Clarks — can you talk about the online ramp-up of the portfolio? Pre-acquisition online used to be a sizable chunk. Update on assortment and platforms?

   Answer, Nissan Joseph, CEO, Metro Brands. Pre-acquisition online was sizable but more discount-led. Metro does not want to play the discount game. Clarks site is live, linked to marketplaces and omnichannel in stores. The journey has started — scaling brick-and-mortar standalones, expanding into more Metro/Mochi doors, and investing in performance marketing. Kaushal Parekh added: complete supply chain of Clarks to stabilise over next 2-3 quarters; only the Cloudstepper range (35-40% of offer) currently available; new merchandise to come in over the next 2-3 quarters, after which store ramp-up and full online push will follow.

4. 4. H2 demand outlook

   Videesha Sheth, Ambit Capital

   Question. On consumption and demand outlook for the second half of the year — what are you seeing?

   Answer, Nissan Joseph, CEO, Metro Brands. H2 should be a clean like-for-like quarter after many years. No COVID lumpiness, no wedding-date shifts, no election noise. GST reductions are seen creating and spurring more demand. Management sees no tailwinds, some headwinds, and expects a steady stream of accretive business over coming quarters.

5. 5. Ind AS 116 / Foot Locker depreciation

   Gaurav Jogani, JM Financial

   Question. On Foot Locker depreciation and interest — 4 large stores opened implies a big Ind AS 116 step-up. How should we forecast the depreciation/interest impact going ahead?

   Answer, Kaushal Parekh, CFO, Metro Brands. PAT impact in Q2 was ~1% predominantly from 42 new stores and 4 large Foot Locker stores. Ind AS 116 rent-free period accounting creates a disproportionate charge in opening quarters; will normalise from next quarter. Under a 10-year lease example, notional depreciation and finance expense under Ind AS is much higher than actual rent in years 1-5, then lower in years 6-10. In FY25, the Ind AS 116 non-cash charge aggregated to ~₹37 crores on an annualised basis. Nissan added that EBITDA neutralises this effect and should be the focus metric; sales per sq ft maintained YoY in Q2 even with larger Foot Locker stores.

   Follow-up. Given GST will also reduce realisation on the 40% Metro/Mochi range, will that impact revenue per sq ft even if EBITDA per sq ft is unaffected?

   Answer. Logically, yes — top line comes down to the extent of the discount passed to the customer. Profitability is unaffected. Will share more details on the per-sq-ft number next quarter.

6. 6. Demand recovery levers

   Tejash, Avendus

   Question. On GST-led demand revival — given the earlier policy interventions (monetary easing, income tax cuts) are now in the system, are you seeing recovery across footfalls, conversion and bill size?

   Answer, Nissan Joseph, CEO, Metro Brands. It's a multitude of factors, not singular. Government actions on tax code, GST normalisation and getting away from COVID lumpiness are all helping. H1 FY20 to H1 FY26 sales are up 116% (14% CAGR), so growth has been robust pre-COVID. Last few years have been muted due to one-off events — national elections, monsoons, GST deferral — that don't exist in the coming quarters. Should be steady-streaming and accretive.

7. 7. Walkway strategy and customer

   Tejash, Avendus

   Question. On Walkway — how are you ensuring merchandise supply chain alignment given it's a cost-sensitive value segment? What is the new value proposition and core customer profile?

   Answer, Nissan Joseph, CEO, Metro Brands. Target customer is Tier 2 towns (and some Tier 1), tapping into the unorganised market (which is 70% of the industry) and aspirational consumers. Walkway growth was deliberately cut to near-zero in the last 2 years to fix the model — different cadence, cost and throughput focused. Now confident the model is right and can be scaled relatively quickly without rushing.

8. 8. Foot Locker throughput

   Sameer Gupta, IIFL Capital

   Question. On Foot Locker — one store has been operational for almost a year. Any colour on throughput, sales per sq ft vs company average?

   Answer, Nissan Joseph, CEO, Metro Brands. Productivity is very much in line — not dilutive on sales per sq ft despite much larger stores. Foot Locker sells primarily external brands, so margin flow-throughs will be lower than the rest of the chain. Two strategic priorities: be sensitive to margins while growing, and serve a majority of the Indian consumer's footwear wardrobe across price points.

   Follow-up. So throughput is in line but margins are lower — can you clarify?

   Answer. Foot Locker stores are ~3x Metro/Mochi store size with similar ASPs. Throughputs broadly in line with expectations despite supply chain disruptions and merchandise not being up to the mark yet. Since we deal with third-party brands, incoming gross margins are lower than company-level, but scale efficiencies below gross margin should help. Profit % will be lower than Metro/Mochi but ROCE target is 20-25% over medium-to-long term.

9. 9. Pre-Ind AS EBITDA / rental pressure

   Sameer Gupta, IIFL Capital

   Question. On EBITDA growth — H1 pre-Ind AS EBITDA grew only ~3% with margins contracting 120 bps. Does this imply pressure on SSG or escalation in rentals, especially for Foot Locker?

   Answer, Kaushal Parekh, CFO, Metro Brands. If top line growth is strong, rental escalation doesn't hurt; if muted, it reflects in the numbers. Reported EBITDA is broadly in line with top line growth in Q2 and H1. Two big levers: 1% higher marketing spend YoY and Ind AS accounting impact of ~0.6% on PAT at H1 level. H1 is 46% of annual revenue, so Q3-Q4 will see significant normalisation of rent-to-revenue ratio as fixed costs amortise over higher revenue. The rental range has generally been 13-15% and has moved up slightly.

   Follow-up. Even adjusting for marketing and Ind AS, the residual is fixed rentals, and those seem to be growing faster than top line. Is that a function of lower sales growth that will self-correct with GST?

   Answer. Yes. With higher top line in H2 and rentals remaining fixed, rent-to-revenue ratio improves and overall margins normalise.

   Partly answered.

10. 10. Inventory build-up

    Devanshu Bansal, Emkay Global

    Question. Inventory has increased by ~₹150 crores in H1 with ~₹60 crores capex and ~60 new stores. Can you break up the inventory increase between existing stores and new format stocking?

    Answer, Kaushal Parekh. Inventory uptick in September is normal — preparation for Q3-Q4 season. Versus September '24, the increase is ~₹80-85 crores, which is a combination of (a) inventory for new stores planned over next 2 quarters, (b) new formats (Clarks, 4 Foot Locker stores), and (c) stores that have been filled but haven't started selling. Note: respondent is Kaushal Parekh (CFO).

    Follow-up. On capex — Foot Locker capex is significantly higher than Metro/Mochi. Is there any capex per store increase for the other formats?

    Answer. Capex of ~₹60 crores in H1 is a combination of 60 new store openings, Foot Locker's higher capex intensity, and renovations. No material increase in capex per store for Metro/Mochi or other formats.

11. 11. Store-level inventory

    Devanshu Bansal, Emkay Global

    Question. Like-for-like inventory at the store level — what is the increase vs September last year?

    Answer, Kaushal Parekh, CFO, Metro Brands. On a like-to-like store basis, no significant change. Inventory in any particular store runs in the 6.5-7 months range.

    Follow-up. Pre-Ind AS depreciation and interest expense quarterly run rate — for modelling purposes?

    Answer. Number not handy. Pre-Ind AS vs post-Ind AS EBITDA difference is somewhere in the range of 8.5-9%.

    Not answered directly.

12. 12. A&P spend allocation

    Ankit Kedia, PhillipCapital

    Question. On A&P spend — 100 bps extra on the new Crossover collection. Which brand is this for, what's the potential, and how will you roll it out?

    Answer, Nissan Joseph, CEO, Metro Brands. Committed to driving awareness and relevance of brands with core target consumers. All chains will be investing in marketing — Metro, Mochi and Walkway have different cadences. Biggest investment lift is in Metro/Mochi. Subsequent campaigns planned for both Metro and Mochi.

    Follow-up. Can we expect A&P to remain elevated at these levels, or was this a one-off?

    Answer. Some marketing flows to the following quarter so relative spend may not be as much in those quarters. Q2 and Q3 are when the business peaks and when the most money will be spent.

13. 13. GST pass-through and pricing

    Ankit Kedia, PhillipCapital

    Question. On the GST cut — SKU-led discount to consumer. With new inventory, will MRP be reduced or partially raised with discounts?

    Answer, Nissan Joseph, CEO, Metro Brands. New products will not continue discounting — new GST will be factored into the price tag. Existing inventory will continue to be discounted until sell-through. New products are priced with fresh eyes based on value and margin. No price increase on existing products beyond normal annual inflation in manufacturing/procurement.

14. 14. FILA response and ON / Skechers positioning

    Ankit Kedia, PhillipCapital

    Question. On FILA — you alluded first store by end of CY2025. How has the FILA response been in Metro/Mochi stores? Also, you've onboarded ON for Foot Locker — how does this fit with Skechers on one end and FILA on the other?

    Answer, Nissan Joseph, CEO, Metro Brands. ON was brought in primarily for Foot Locker; some selected styles tested across other banners. The company has sold men's dress shoes in the ₹25,000-40,000 range before, so the price point is not new. Always testing consumer demand across price points. On FILA new range, response follows the normal 3-4-3 pattern (3 underperform, 4 in line, 3 pleasantly surprise) in 100+ Metro/Mochi doors.

15. 15. E-commerce mix trajectory

    Avinash Karumanchi, MOSL

    Question. On online channel mix — historically 10-11%, suddenly 13-14% last two quarters. Is there a change in online strategy, and what is the long-term contribution you see?

    Answer, Nissan Joseph, CEO, Metro Brands. Significant D2C investments, technology for omnichannel, digital marketing spend increasing with better productivity via technology and talent. Long-term e-com mix should be 15-20% for a brand like Metro — not over-indexing. Will not rush into discounting. Growth currently driven primarily by Metro and Mochi brand investments, with handbags disproportionately selling online. Walkway sells online only through marketplaces.

    Follow-up. Is the sudden mix jump coming from new brands (FILA, Clarks) or is it broad-based?

    Answer. Primarily from own Metro and Mochi brand investments, though Clarks is helping. Handbags also disproportionately sell online.

16. 16. Walkway productivity and margin dilution

    Tejash, Avendus

    Question. On Walkway — Kaushal said Walkway revenue per sq ft won't be dilutive at company level. Did I hear that right, and what is the throughput in new Walkway stores?

    Answer, Kaushal Parekh, CFO, Metro Brands. You got it slightly wrong. If Walkway expands aggressively, adverse effect on overall sales per sq ft because throughput in Walkway stores is lower than Metro/Mochi. All other additions (Foot Locker etc.) should help improve sales per sq ft. On margins, Walkway incoming gross margins will be lower than Metro/Mochi, flowing through to EBITDA and PAT. Profit % will be lower in Walkway. Endeavor is to deliver ROCE of 20-30% over 3-5 years, which is a good use of treasury funds currently yielding ~7%.

17. 17. Store addition mix going forward

    Rahul Agarwal, Ikigai Asset

    Question. On store additions — assuming 80-110 stores a year. Will the mix between Metro/Mochi/Crocs and newer brands be materially different from the last 3 years?

    Answer, Kaushal Parekh, CFO, Metro Brands. Expect robust store addition across all formats. Walkway added 11 stores and closed 1 last quarter — highest for Walkway. All formats (Metro, Mochi, Crocs, Walkway) will grow.

    Follow-up. Tier 2 share of stores has increased over 5 years. With newer brands (FILA, Clarks, Foot Locker, New Era) skewed to metro/Tier 1, will that mix change over next 3 years?

    Answer. New formats will go to metros and Tier 1 first, then Tier 2. Even mature formats (Metro, Mochi, Crocs) have potential in metros and Tier 1. Mix shouldn't change significantly over 3-5 years.

18. 18. Long-term growth inflection

    Rahul Agarwal, Ikigai Asset

    Question. Last 3 years EBITDA and net profit have been mid-single-digit CAGR. With store additions, Walkway, FILA all sorted, plus macro tailwinds — is this an inflection point?

    Answer, Nissan Joseph, CEO, Metro Brands. Perspective: H1 FY20 to H1 FY26 sales are up 116% — a 14% CAGR through the COVID-disrupted period. Last few years muted due to lumpiness. No one-off events foreseen in coming quarters. Macros are helping. Continue to feel confident in guidance of 15%+ revenue growth, ~30% EBITDA margin, 15%+ PAT growth.

19. 19. Crocs expansion plan

    Rajiv Bharati, Nuvama

    Question. On Crocs — extended weather affected Q2. What's the current contribution and expansion plan? Can we get back to 20-25 store additions a year?

    Answer, Nissan Joseph, CEO, Metro Brands. Don't break out Crocs contribution. Not opening stores in middle of Diwali — most Crocs openings done before that. Brand is performing well. Kaushal added: 10% network addition for Crocs over next 3-5 years is easily possible.

    Not answered directly.

20. 20. Market share and SSG sustainability

    Akhil Parekh, B&K Securities

    Question. On growth — 14% CAGR over 5-6 years, but last 2.5 years growth has been subdued at 11%, 6%, 10%. Is there market share loss to D2C / online-only players?

    Answer, Kaushal Parekh, CFO, Metro Brands. FY23 was a bumper year (post-COVID pent-up demand), so comparison looks soft. That's why it's better to take a longer period with COVID out. Healthy growth runway visible. On SSG, mid- to high single digits has been delivered across formats over 6-10 years and is sustainable; Metro's strategy of going to new towns and then topping up with Mochi creates self-cannibalisation in Metro SSG, but overall catchment revenue can nearly double. Nissan added that clustering/backfilling markets and Crocs opening next to existing Metro/Mochi stores does hurt SSG but is healthy because it takes oxygen from competitors.

    Follow-up. On Walkway — value formats are usually most profitable with own manufacturing. Is the outsourced model a challenge for Walkway?

    Answer. Not a challenge. Confident margins can be extracted and ROCE of 20-30% delivered over 3-5 years. Operational rigour keeps costs down; not seeing own manufacturing as a distinct advantage in value retail.

21. 21. GST input credit / working capital

    Ankit Kedia, PhillipCapital

    Question. On Crocs buy-and-sell model and GST cut — with higher GST paid earlier and lower GST now, will there be a working capital increase due to input credit mismatch?

    Answer, Kaushal Parekh, CFO, Metro Brands. No inverted duty issue. Closing input GST balance is only for goods purchased in the last month and gets utilised when GST payment is made on the 20th of the next month. With the GST reduction, input GST itself will also come down. No working capital strain expected.

22. 22. E-com split and store addition plan

    Shraddha Kapadia, SMIFS Limited

    Question. On e-commerce — can you break down growth between own website and marketplaces? Also, store addition plan for H2 and FY27?

    Answer, Kaushal Parekh, CFO, Metro Brands. Both own website and marketplaces have shown similar growth in H1. Mix is 80% marketplaces / 20% own website. Nissan added that the company doesn't fixate on a number — focus is on opening as many profitable stores as possible across banners. Will only grow when it makes sense.

    Not answered directly.

23. 23. Online EBITDA margin and volume/value mix

    Resha Mehta, GreenEdge Wealth

    Question. On online channel — is EBITDA margin similar to offline? And on volume vs value growth, what is the split you target?

    Answer, Kaushal Parekh, CFO, Metro Brands. Online EBITDA margin currently slightly below offline, but the business is profitable — Metro is among the handful that treats it as a profitable business. On volume vs value, historical mix has been ~12% volume growth and 3-4% value (ASP) growth, balancing to ~15% overall. That's the target going forward.

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