Metro Brands: Sales Density Continued To Normalize Downward in June Quarter

MBL’s topline grew 9.1% YoY to INR 6.28bn (HSIE estimate was: INR 6.41bn). The growth was impacted by pre-ponement of Eid to March and early onset of monsoon in key markets. Sales density continued to normalize downward in Q1 (at INR17.8k vs INR19k/sq. ft. in Q1FY25). The e-commerce business saw robust growth (up 45% YoY; contributing 13.7% to revenue). Gross Margin contracted by 16bps YoY to 59.3% (HSIE estimate was: 59.8%).

EBITDA Margin contracted 45bps YoY to 30.9% (HSIE estimate was: 32.3%), primarily due to higher marketing spends on brand building. The company has signed an exclusive long-term agreement with Clarks. Losses from Fila continue to narrow, with breakeven expected in FY27. We largely maintain our FY27/28 estimates and our SELL rating holds with a DCF-based TP of INR980/sh, implying 47x Jun-27 P/E.

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Source: HDFC Securities Institutional Equities

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