We aspire to become the largest specialty footwear, accessories retailer in India: Rafique Malik of Metro Brands

Footwear retailer Metro Brands has aggressive expansion plans and is all set to push the pedal on growth after its initial public offering (IPO). According to the company’s management, it plans to open 260 more stores in the next few years, partner with more international brands such as Crocs and Fitflop, expand its presence in tier I, II cities and even tier III towns and beyond, and strengthen omnichannel play while also eying inorganic opportunities for growth. Metro Brands has set out this roadmap to become the largest footwear and accessory retailer in India.

“We aspire to become the largest specialty footwear and accessory retailer in India offering a wide range of relevant local and international brands in various price segments,” said Rafique Malik, Chairman, Metro Brands while addressing a press conference on December 7.

Metro Brands, which sells footwear and accessories under in-house brands such as Metro Shoes, Mochi, Walkway and partner brands such as Crocs, is launching its IPO on December 10 and has fixed a price band of Rs 485-500 per equity share. The public issue comprises fresh issuance of equity worth Rs 295 crore and an offer of sale of Rs 1,072.5 crore. The company plans to raise Rs 1,368 crore through the issue.

Best foot forward

Metro Brands, which competes with Bata India, Relaxo, Khadim and Liberty, currently operates about 598 exclusive and multi-brand outlets across 136 cities in the country. The company is known for its multi-brand outlets (MBOs) such as Metro Shoes, Mochi, and Walkway, which are positioned in different price segments and cater to different sets of consumers. Metro Shoes caters to the family segment and the products are priced in the range of Rs 1,000-10,000, while Mochi targets youth and offers products in Rs 1,000-10,000. The company addresses the value segment (Rs 350-3,500) through its MBO Walkway launched in 2009. Overall, the company operates 220 stores under Metro Shoes, 147 under Mochi and 72 Walkway stores. The company also operates international brands such as Crocs (159 stores) in India and recently entered into a partnership with UK-based footwear brand Fitflop for distribution and retailing in India.

The company now plans to open 260 more stores in the years ahead under its various brands while also scouting for inorganic growth opportunities. “We will look for inorganic opportunities that can scale and leverage our penetration and operational capabilities," said Nissan Joseph, the recently appointed CEO of the company.

Metro Brands will be expanding its presence in existing locations as well as more tier III towns too through all its brands. “We have seen from our learnings in the e-commerce space that there are many aspirational customers in the tier III cities who want great products at affordable prices. So, we see a great opportunity to expand in tier III while continuing to open stores in tier II and I,” added Joseph.

The footwear company is also eying a greater share of sales from e-commerce and is taking initiatives to become an omnichannel player. According to the company, e-commerce currently contributes 11.9 percent to its topline revenue as compared to 1.7 percent in FY19.

According to the company’s Draft Red Herring Prospectus, Metro Brands’ revenue from operations stood at Rs 800 crore in FY21, while it posted a net profit of Rs 64.19 crore during the period.

Operating model

Metro Brands has an asset-light model and it opens stores on a revenue-sharing basis. The company also does not own any manufacturing facilities but has tied up with 250 vendors for the production of inventory. “Retail as a business does not have a long gestation period. Either you have to get it right, or it will never work. We have therefore adopted an asset-light model, ensuring that we never compromise our bottom line in the quest for the top line,” said Malik.

The company claims this model gives it an edge over its competitors. According to Metro Brands, its three-year operating revenue CAGR (FY17-FY20) of 12.4 percent is higher than that of Bata India at 7.2 percent, Khadim at 8.1 percent and Liberty at 10.5 percent. “Our net profit margin (at 8.1 percent) despite the impact of Covid-19 is higher than our peers,” said the company’s management.

The Covid-19 pandemic has hurt the Rs 85,000 crore footwear industry, about half of which is unorganised. ICRA had estimated that the revenue of the entire segment de-grew by 10-15 percent in FY21 due to the pandemic.