Metro Brands is losing its mojo, but its stock remains richly valued

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₹576 crore, which was below estimates. Rapid store expansion caused standalone revenue per square foot to drop 10% to ₹4,500. Also read: Cement prices are at a multi-year low, and there’s more earnings pain ahead A silver lining is the shift towards premium products, with 54% of sales now from products priced above ₹3,000, against 50% in the March quarter.

Losses from both Fila and Proline have narrowed, and Metro is on track to complete the liquidation of excess Fila inventory by the end of September. Post-liquidation, Fila will be relaunched under the umbrella of the Metro and Mochi distribution network. While this has bolstered the gross margin, the overall picture is cloudy.

Consolidated Ebitda fell about 3% year-on-year to ₹180 crore and margin contracted by 70 basis points due to higher manpower costs and operational inefficiencies. Metro’s ambitious expansion plans, which includes the acquisition of New Era and a target of 225 new stores in the next two years, signal a desire to dominate the market. However, the current performance raises questions about the sustainability of this approach.

The company's valuation, at a lofty 87 times FY25 earnings, shows investors have high expectations, but these are in stark contrast to the current reality. Also read: IRCTC’s journey can be pleasant if non-convenience fee surprises “With management’s continued focus on product penetration, we reckon top line growth will be 14% CAGR (compound annual growth rate) over FY24-FY26E, which will be driven by 9% CAGR growth in volumes supported by continued store expansion and 4% CAGR growth in value over similar period," said Yes Securities. The broker expects Ebitda to grow at a CAGR of 15% over FY24-FY26 as operating margins should