Brokerage firm Prabhudas Lilladher has maintained a 'Hold' rating on Metro Brands while reducing its price target to ₹924. The revision follows concerns over slow store sales growth, supply chain delays, and the financial impact of heavy spending on new brand rollouts. Despite these short-term pressures, the brokerage continues to see value in the company’s long-term expansion and omni-channel strategy.
Prabhudas Lilladher has maintained its 'Hold' rating on Metro Brands but lowered the price target to ₹924, reflecting a cautious outlook on the company's near-term performance. The move follows a period where the retail footwear chain faced operational challenges, including limited store sales growth and a shifting festive calendar that impacted quarterly results.
One of the key metrics highlighted by the brokerage is the 1.4% year-on-year growth in sales per store. This figure suggests that demand momentum at the store level has been slowing, at least in the short term. The company is also dealing with logistical hurdles that have delayed the rollout of new store formats, further complicating the execution of its planned expansion.
Operational costs remain a central point of concern. Metro Brands is currently in a phase of significant capital spending as it introduces new brands and expands its footprint. While these investments are meant to drive future growth, they place immediate pressure on profit margins. The brokerage noted that the company has limited room for margin expansion until these new operational cycles begin to deliver returns and the high spending phase tapers off.
Despite these headwinds, the company's long-term growth strategy remains a focal point for analysts. Management continues to invest in its omni-channel presence, which has shown steady performance. Digital channels now account for approximately 14% of the company's total sales and recorded 12% growth year-on-year in the second quarter. The company is also actively pursuing growth in Tier-2 cities through its 'Walkway' store format, which aims to capture a wider, value-conscious demographic.
Looking ahead, the long-term outlook is supported by a portfolio of brands, including MetroActiv, Clarks, FILA, and Foot Locker. The success of this strategy will depend heavily on the company's ability to balance its aggressive expansion with operational efficiency. For investors, the key monitorable remains whether the company can improve its store-level productivity and successfully execute the rollout of these new brand outlets without adding further stress to its balance sheet. The brokerage has projected an earnings per share compound annual growth rate of 13% through fiscal year 2029, assuming the company effectively manages its capital allocation.