Ladies and gentlemen, good day and welcome to the Metro Brands Limited Q1 FY 2024 earnings call hosted by Nuvama Wealth Research. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Kapil Jagasia from Nuvama Wealth Research. Thank you, and over to you, sir. Thank you, Aman. Good afternoon, everyone. On behalf of Nuvama Wealth Research, I welcome you all to Metro Brands Q1 FY 2024 earnings conference call. From the management today, we have with us Mr. Rafique Malik, Chairman; Ms. Farah Malik Bhanji, Managing Director; Mr. Nissan Joseph, Chief Executive Officer; Mr. Kaushal Parekh, Chief Financial Officer; and Ms. Alisha Rafique Malik, President, Sports Division, E-commerce, and CRM. Without taking any further time, I would now like to hand over the call to Mr. Nissan for his opening comments. Thank you, and over to you, sir. Thank you, Kapil, and good afternoon, and thank you for joining our Q1 fiscal year 2024 earnings call. We have finished what I would characterize as a good, but more importantly, a normalizing quarter. I will speak more to the term normalizing in a moment, but as we declared in our filing, we had a year-on-year standalone growth of 12%, which is an 82% growth over the pre-COVID era. To speak a little bit about normalizing, this normalizing applies to many aspects of our business, and I would like to add some granularity to that. For once, this is the first quarter which was not compared to a COVID-impacted quarter from last year. On the contrary, we were up against some record-breaking sales, EBITDA, and PAT numbers. This was driven last year by a few factors which included pent-up buying, wardrobe refreshes, and a healthy number of auspicious wedding dates, and an overall return to the brick-and-mortar stores to a fully open, restriction-free environment. While we were able to capitalize on these market forces last year, I am pleased that we've maintained that same level this year, which is a reflection of the operational rigor and consumer focus that we as a company have. To give some color on the consumer, while demand has normalized, it continues to operate within the vectors that indicate strength for us. Some of these points to note are, firstly, we were able to meet that spike in sales from last year despite not having the same conditions of pent-up buying, wedding dates, et cetera. Secondly, we were able to meet the numbers while keeping our gross margins and PAT on par with last year, and our sales of products over INR 3,000 went to an all-time high of 49%. It was a premium consumer who continued to shop at our stores. The third point to note is that we had a strong growth of 63% in our e-commerce, which did not have any pent-up buying to deal with, and is indicative of the strength of the demand that we cater to. On the expense side of the normalized quarter, we are now back to normal rentals after rent waivers that we had received over the period of COVID. Our operations are also back to normal, with business travel for store visits, headcount replacements, regional meetings, and other normal and customary expenses being in line with pre-COVID activities. I would now like to go over some additional updates for the quarter. We opened 27 new stores and thereby closed the quarter with a net total of 766 stores, not including Fila and Proline. This number puts us well on track with our guidance of new store openings that we shared on our previous call. Our Fila integration is on track, and as I mentioned last quarter, we are focused on liquidating inventory, rationalizing distribution, and leveraging operational synergies between the business units and our ongoing Metro Brands operations. We believe we will be better positioned by the end of the first half of this fiscal year. As you may be aware, the central government has issued quality control orders for footwear to be covered under the BIS norm effective January 1st. While we are yet to receive full clarity on the closure of these norms, we are closely monitoring and complying with the orders to ensure that we are compliant. We do foresee some potential disruptions in the supply chain and have front-loaded inventory to mitigate any potential risk in our supply chain. In closing, I would like to reiterate that we feel strong about our strategic initiatives of focusing our growth to the affordable premium sector of the Indian consumer, and that demand in our space continues to be solid, albeit with some normalization post-COVID. Most importantly, I am pleased that our numbers last quarter were very much in line with our continued guidance of the performance targets for PAT and EBITDA that we have shared with you, and the tailwinds for the Indian economy are very much still in line with expectations. With that, I would like to turn it over to the operator to open up for questions. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Gaurav Jogani from Axis Capital. Please go ahead. Thank you for the opportunity here. Congratulations on the good set of numbers. My first question is with regards to the store openings. If we dissect the store openings, approximately 50% of the store openings incrementally for us is happening in these tier 2 and tier 3 cities. If we see the throughput for these tier 2, tier 3 cities, these are meaningfully lower versus the system average. Yet, we are able to generate the sales growth that we are able to do. Where is this incremental growth coming from? That is the first question. The second question is with regards to the premium segment contribution. If you see our premium segment contribution, that has increased meaningfully from this 33% to close to 49%. Where is this premium segment growth coming from, and is this sustainable? I think if I understood your first question correctly, you're asking about where our incremental growth has come from, right? It primarily has come from new stores last quarter, Gaurav, because we were going up against some very, very big numbers from the last previous year. Some of those conditions have not repeated this year, unfortunately, such as pent-up demand and wardrobe refreshes. As you know, there were fewer wedding dates in this quarter, which is quite significant to our business simply because we also cater to that consumer considerably, right? That, I hope, answers your question on the incremental growth. The premium customer is somebody that we've been attracting, and some of it is caused by just our normal day-to-day or year-on-year price increases that we have as a business. Some of it is also our selection of product is tending to be more along that range. If you also notice that we sell 30% of our products from outside brands such as Crocs and FitFlop and other brands, that also comes with a much higher ASP. Those are some of the drivers to that growth to 49%. sir, my related question to this is the contribution at 49% sustainable going ahead? If that is the case, are the gross margins slated to even increase from the current levels? First of all, we have cyclical quarters in the business of retail. Quarter 2 and Quarter 4 will see diminished ASPs and diminished gross margins simply because, as we all know, those are the quarters that the end-of-season sales in India falls in. We will see some diminishing. Gaurav, we always maintain that our gross margin targets will come between the range of 55%-57%. From quarter to quarter, we might blip up a little, we might blip down a little, but our business is scheduled and designed to run and produce a 57% annualized gross margin. Some quarters are gonna be higher, some quarters are gonna be lower. Sure, sir, I understand that. I mean, the clarification on the first question because my question was more with regards to the addition of the stores in the tier 2 and 3 cities. The throughput in these tier 2 and 3 cities is significantly lower as to what we see in the metro and the tier 1 towns. Incrementally, if we are opening more stores in these cities, is there a possible impact on the revenue per store that we have or rather the revenue per sq ft in that sense? Because if we see for this quarter, it's meaningfully lower at 12%. Though I understand there is a base impact. If you can shed any light on this. Yeah, Gaurav, what's important to us, obviously top-line revenue per sq ft of sales revenue is very important, what's critical to any business sustainability is looking at your gross margins and your profitability contributions on a per store level, right? These stores that you mentioned typically in tier 2 and tier 3 towns, while they may not have the same throughput as a store in a metro city, come with a much lower operating cost structure, right from CapEx to rentals. That offsets it to ensure that when it comes to the PAT and the EBITDA levels, that they're staying consistent with what we guide to. Gaurav, just to add to what Nissan said, you are correct. When we open stores in tier 2, 3 cities, it will have some impact on the revenue per sq ft number that you see. Only that matrix is not the right way to evaluate. As Nissan mentioned, what we track is profitability per store. A tier 3 store may be doing, say, one half of the productivity what your Phoenix set in Mumbai may do. But at times, their profitability is equivalent to what a metro city would deliver. That's how we sort of review our business. We still maintain that we want our cash return cycle within two years. That is the question. In that sense, because we are typically adding 100 stores on a base of, say, 750 or 800 odd stores now, and typically that comes to around 12%-13%, because these stores are now getting added in tier 2, tier 3 cities also, that would not need a commensurate increase in the revenue also. Is that understanding right? Was largely my question. I think you're trying to model out the growth, right? There's a couple of things. One is what you said, obviously, that goes to the south side of the equation, but to the north side of the equation, we are opening up some FitFlop stores. We are opening more Crocs stores. Those stores always come with a higher productivity of sales per sq ft. It's not like we've stopped opening in tier 1 and metro city stores. Our strategy is, we have a threefold retail strategy. One of them is to cluster. For those of you in Mumbai, in Linking Road, we could open up a store two kilometers from our existing store, and it wouldn't cannibalize our existing store any. There's an opportunity to open more stores on Linking Road itself. That's a cluster strategy. There's a backfill strategy where we go in and backfill, where we only have a Metro, or if we have a Metro and a Mochi, we might look at saying, "Can we do a Crocs with it?" That's a backfill strategy. The third part of the strategy is to go to new cities, which then tend to be, of course, tier 2 and tier 3 cities. It's only one part of our three-pronged strategy for growth. It's not like you'll see a distorted amount of openings happening in tier 3 cities. Every new city is going to be a tier 2, tier 3, fundamentally because we've already penetrated all the metro cities and tier 1 cities. Sure, sir. That's all from me. The backfilling, Gaurav, could happen very much in those metro cities and tier 1 cities as well. Okay, sir. Thank you for the answer. Thanks, Gaurav. Thank you. Before we take the next question, I'd like to remind our participants to limit their question to two per participant. If time permits, you may join the queue for any follow-up. The next question is from the line of Nihal Maheshwari from Nuvama Institutional Equities. Please go ahead. Yes, thank you so much, good evening, Nissan. My first question was that you did mention about the base impact last quarter because of the pent-up demand and the various other factors. Just to get a better sense, by any chance, is it possible to get the revenue per square feet number for the first quarter of FY 2020? That would be a more like to like comparable number. Nihal, it's there in our presentation. It was 5,700 in Q1 last year. No, not last year. I was looking for Q1 FY 2020. Q1 FY 2020, I don't have that number ready. Nihal, if I could just give you a comparison of sales, Q1 versus, say, Q1 of FY 2020, our revenue is up by 82%. During that period, if you see our store growth, that is close to about 48%, 49%, 50%. Obviously, the balance growth is the organic growth coming from the stores that were existing at that point in time. Got that. I'm guessing the store and the square footage growth wouldn't be too different, ideally. Yeah. In FY 2020, I have an annual number readily available. It was around 16,800. Okay, sure. Maybe I'll connect offline in case. An annual number for FY 2020. Sure. That's helpful. The second question was on the gross margin bit. While you did mention about the fact that the premium share or INR 3,000 above was at 49% versus 43% last year, we did see that the share of own brands, let's say, a 4%-5% drop. Is it right to say that the impact of the premium segment, irrespective of being an own brand or a third party on gross margin, more or less negated the mix impact because of our own brands being lower? Yeah. Our own brands and our outside brands run about the same margins, especially when you come to below the line. Right? On the front side, when we say outside brands, we mean brands also like Crocs and FitFlop, where we enjoy very healthy margins. Nihal, if you see, though the contribution of outside brands increased, it did not have any adverse impact on our gross margins because the lion's share of growth came from brands with whom we have strategic relationship, like Crocs and FitFlop. Sure, that's helpful. My final question for now is that second quarter in a row, the number of Crocs stores have been stable, and other stores are seeing a robust expansion. Any specific comments on that that you may want to highlight? Yeah. We definitely plan on continuing to grow our Crocs stores. There were some malls that we've actually built stores, and they're sitting there in the dark because the mall hasn't opened. When you roll out your plan, you assume you're going to open up some Crocs stores in Q1, and they don't open because the mall doesn't open. We remain committed to growth on Crocs. Having said that, though, I think when you look at our growth rate over the last four years, you'll see that it's distorted to growth in Crocs, right? It's not so much a slowdown in Crocs as much as we're trying to catch up the other banners that we have of Metro, Mochi, and Walkway for their growth as well. There's a certain amount of stores we do want to open and not go much beyond that because we feel we don't want to get the business out of sync in terms of how much focus and bandwidth we can put towards it. It's actually controlled growth, you're right about your observation on Crocs, it is not a reflection of us stopping growth in Crocs. Sure. Thanks, Nissan. Kaushal, I'll just come back for some other question. Thank you. Thanks, Nihal. Thank you. Next question is from the line of Kapil Jagasia from Nuvama Wealth Research. Please go ahead. Thank you. Just going by the realization of your four, five brands, Walkway brand has seen a good increase in realization by around 25% over the last one year. Could you give us some sense on how has the growth panned out in this brand vis-à-vis company average and also on the outlook of store openings here as this brand particularly has added lower number of stores if you compare that to our other in-house brands? I think I've shared in previous calls that we're trying to ensure that we have the right formula for Walkway that matches our expectations, especially from a ROCE standpoint, right? We're trying to get that. We identified the South and the West as growth avenues for us for Walkway. We're confident that the Walkway channel, the Walkway brand, has considerable legs in the Indian economy, and we will continue to grow it as and when we feel we're totally ready and right to grow it. Similarly, on the realization front, Crocs realization had spiked up by 25% in Q3 of last fiscal year. Would we be expecting another hike during this year too, and what would be the countdown? Just a ballpark number would help. Kapil, it's a normal MRP increase that we see in most of the brands, including Crocs. Q3 last year, I'm not very sure if you did see a very significant spike. It would be a normal organic spike that we generally see. Also, the number that you see is inclusive of Jibbitz. Excluding Jibbitz, the ASP has grown for Crocs from around INR 2,900 to around INR 3,000, if you just consider Crocs footwear. Okay, that helps. My second question is on Cravatex. Just looking at the last two quarters run rate for Cravatex, this quarter revenue numbers for Cravatex seems to be a bit lower. Should we interpret that bulk of the inventory liquidation would have happened over the last six months, or is there a season effect linked to it? Just trying to understand the quarterly run rate for this Cravatex. Kapil, we have mentioned this in our presentation. We actually implemented the SAP S/4HANA, the same ERP that we have in Metro Brands, in Cravatex as well. In the initial months, we saw some teething issues there, and that led to some loss of sales, and hence you're seeing slight dip in the sales vis-a-vis what you saw in Q4 of last year. Having said that, on a lower sales base, our loss is restricted to INR 14 crores. This is predominantly on account of improvement in gross margins that we saw in Q1, and also some cost savings and rationalization which is underway. How the month of July panned out, is it in line with the previous quarter or we are seeing some improvement over there? We typically don't give forward-looking statements, Kapil, but I think, what I can speak to is last year, we saw this pent-up demand spike last for about four and a half months. It goes well into this quarter a little bit. Our sales are also appropriately responding because that pent-up demand does peter down as we get closer to Diwali. We're seeing that and we continue to see the demand for our product continue to stay strong. Sure, sir. I'll come back in the question queue for other questions. Thank you so much. Thank you. The next question is from the line of Samyak Jain from Marcellus Investment Managers. Please go ahead. Hey, Nissan. Can you hear me? I can, Samyak. Go ahead. Please go ahead. Yeah. Nissan, just on the larger picture on the whole business. Your voice is not very clear. Sorry to interrupt. Yeah. Can you use the handset mode? Is this better? Yeah. Yeah. Nissan, could you take us through your buying process? What sort of buying systems and processes do you have in place? How do you capture the regionality element? What sort of data do you track when you're buying, and how does that play into the art part of the buying? Yeah. India is a unique geographical conglomeration of different tastes and festivals and so on and so forth. It's quite complex as to how we have to decipher that code. The peak seasons that are driven by festivals vary not only between state to state, but also from year to year, because some of those festivals have a tendency to move in dates. It's not literally looking one date to the previous date, but understanding the season that leads up to that date of festival. That's number one. Number two, we've spent a lot of time understanding the regional tastes of India over the last 50 odd years, so we have a good sense for that. When we look at our business, like most businesses, you start off with your base from last year to say, "Okay, this is my base. What were the drivers to it? What are the misses to it? What were the ones that we missed, both we didn't have enough, and what were the ones that we had too much?" They're both misses in our minds, right? The question is, how does that translate to the next season coming up? That's where you need a team of buyers that are constantly out in markets, both domestic but also international markets, looking at fashion views and trends that come through as to how we can go through that whole process, right? The key thing is to keep constant freshness in our inventory and assortment, and sometimes it's just a matter of refreshing core items, but often it's also a matter of bringing in styles that we think will resonate with the customer, right? Another key opportunity for us is to work with our vendors directly, because they also, in their particular segment of specialization, have a deeper understanding of the Indian market maybe than we do, right? Because that's all they dabble in, is that one little category that they make for us. We have a very open line of communication with them. We share our data openly with them so they can also guide us. Then, we also ensure that when all the buy is placed, that we're focused on making sure what we call the head items or the NOOS, which means never out of stock items, are focused in on. As you rightly said, Samyak, it is an art, and for an art to work, you need multiple points of view that you look at. I wish I could give you an even shorter answer, and I don't think I've answered it in full, because it is quite a lengthy and detailed process on how we go about selecting our product to ensure that we're relevant to the consumer that comes into our stores. Nissan, how much of your inventory today would you call core inventory, which will have slight changes, maybe a shade darker, a shade lighter, versus fashion inventory, which you are experimenting with? Secondly, how much of your inventory is in-house designed where your buying team is bringing in the designs and asking the manufacturers to do it, versus how much is purchased from outside manufacturers, their designs, which largely won't be exclusive to you? First of all, it's all 70% of our stuff is either core or core refresh, as we call it, Samyak. Most of our inventory is core business, number one, right? The second thing is, all our designs are either our own or they're collaborations with our vendors, right? They also study the trends. It's a collaborative effort when it comes to that. If we do get a style, we insist that it comes only to Metro, because we don't want those styles anywhere else. There might be tweaks to it or there might be material downgrades from it that you might find at a cheaper price somewhere else. Fundamentally, you're not going to find the same shoe somewhere else, which is branded Metro or branded Mochi. All right. Got it. My second question was on the e-commerce piece, right? The last four years, we've seen phenomenal growth in e-commerce. Of course, some of it was tailwind. Just trying to understand what were the inputs that were done or undertaken in the company, which you think have led to a decent chunk of growth being contributed from that. If you can quantify how much, in your assessment, is a tailwind growth in the last four years, versus how much is something which you all have brought in organically. That's a pretty detailed question. Let me give you some broad strokes to what you're asking. We're seeing a lot of growth come from our omni-channel initiative, first and foremost, right? Right. That initiative is about us linking up more and more stores onto the marketplaces so inventory is more readily available. The more your inventory is readily available, the higher it shows up on a search when you're on a marketplace. That, we feel, has been instrumental in helping drive our growth. We also have a select line of SMU products, special make-up products, just for e-commerce. We do that because we want to be able, for people in ZIP codes where we do not exist, to be able to have access to our brands, right? When we're only in 184 cities out of the hundreds of cities in India, it is critical that we let people have access to our products through an e-commerce site. Those are the two biggest avenues of growth. We continue to attack the issue of our own.com site. As you know, attracting people to the.com site is rather an expensive proposition. Not an impossible proposition, but definitely an expensive proposition. Being that we like profitability, we take it a little bit slower on that. We also know that there is some regional sensitivities in this country that we can cater to with e-commerce. E-commerce is a younger consumer overall, right? We're able to curate ranges for them in the SMU that we may not be able to definitely make sense sitting in a store across the 400 Metro stores. All right. You're saying that 25%-30% contribution, which is from your omni-channel, is largely something which is just a opportunity cost, which was captured through availability, and the rest, some organic efforts like coming up with an exclusive line, which has led to more visibility on these marketplaces. Correct. Final question from my end is on the Fila part, right? From a customer propositioning point of view, how are you planning to position Fila? Like, you're planning EBOs, but what is your target customer or what sort of a customer, like not the age group, but the characteristic of that customer is where you want to position Fila. If you look at Fila, it really has the ability to play to a premium level, right, first and foremost. That doesn't mean we will only play to a premium level, but it does have the ability to play to a premium level. That's one vector to consider. Samyak Jain, the other vector to consider is, one thing we like about Fila specifically is that it plays very well to both function and fashion. The fashion side of it goes over multiple genres of music, of sport, of extreme sport. Fila has this broad positioning that is valid in all those positions. We think we can unlock the potential of Fila by obviously providing a premium assortment in our EBOs that will be a significant channel of growth for us as we go forward. Of course, we can have the takedowns from that or the other translations of that product that work well in our Metro Mochi segment that we could also use to continue to grow that. We will be very selective about our distribution. We're working really hard to rationalize our distribution right now, but we would be very selective in our distribution on where we take that out to. We don't want this to be a lather it everywhere and hope it sells brand. We want to be very curated and purposeful in how we launch this brand because we think it has an opportunity to play to a slightly more premium segment. On the functional piece of the thing, right, do we have in-house talent who can cater to these extreme sports, or is the technological transfer going to come in from the parent company of Fila? Yeah. One of the advantages of taking a license is you're able to piggyback on the technology and the expertise of their global providers, right? We have access to all the technologies and designs that Fila produces globally, and we also have the ability to make it domestically if we so choose to. That's the flexibility that we love about Fila, and we fully plan on capitalizing that. Where we feel there's a gap. We do have design houses that work with us here, both here and actually in the Orient, to help us pass that gap. All right. Got it. Great. Thank you. That's all from my end. Thanks, Samyak. Thank you. The next question is from the line of Manish Poddar from Motilal Oswal AMC. Please go ahead. Yeah. Hi, sir. I have three questions. Pardon me if I ask two. First one is, on the Fila side of business. Assuming, let's say you didn't purchase any fresh inventory after the acquisition, and the inventory amount was about roughly INR 50 crores to my knowledge. Shouldn't this inventory get liquidated by Q2 or let's say Q3 max, and you should be on redesigning the mode by Diwali? Shouldn't that be the case? We do have more orders that were placed for Fila prior to our acquisition. The shoe business works anywhere from three to nine months out. It's not like when we acquired it, there were no orders in-house. We already had orders in-house that we have to honor. There is a small amount of shipments that have come in subsequent to our merger with Cravatex. The other point is, yes, by Q3, we should be all wrapped up with the existing inventory, and we should be able to start our march towards the new position of Fila. Okay. Second one is, let's say in terms of organic pricing, have you taken organic pricing any bit on any product, or is it largely led by mix- Yeah Let's say, basket sales and stuff like that? It's an iterative process. It's not like we sit and say, "Okay, we're going to have a 5% increase across the board." Right? What we do is we look and see what is the price that we're going to have it delivered, landed into our DC. Right? That price moves a bit every now and then. We know the kind of margins we need to make, Manish, we mark it to that price. Typically what we do is if there's a price decrease, we're passing on those savings to the consumer. Remember, our goal is to be affordable premium, not just charge what you can premium, right? If there is a price decrease in anything, we will pass it on to the consumer. Equally, if there's a price increase when that shipment comes in, that product will have a new price. Unfortunately, we're not an FMCG business where you see this repeat item coming over and over again. It's not like four biscuits cost INR 20 last season, now it's going to cost INR 22. A shoe does iterate and change, and similar to that, in sync with that, our prices also iterate and change. Got it. The last bit is on this online business. Any sense, would you have got, let's say, 100 is the incremental sales. Would you have got new customers or it is existing customers? Because you know we're getting basic data of customers, right, in terms of name and number. Actually, we don't get basic data of customers because most of the incremental sales came through Omni, where the marketplace would have that customer information. We don't know that. The second part is that it came through our SMUs, that we give it to them, and they sell it. Special make-ups that we give to them, that they sell. We really don't have visibility. It's something that we would track in our own stores. In our own stores, 30% of our business comes from new customers, where 70% comes from repeat. We got to assume that e-com is along those same lines as well. Sir, how do you get sense on demand, is what I'm trying to understand. Looking at what is happening on Omni or online, that number seems to be really doing well. Whereas if I look at SSG in some form, and that's down. I understand there's obviously base was stiff. I'm just trying to understand, leave aside the numbers also, how is the broader demand environment in your view? No, I think e-commerce is just one small data point of understanding demand. Don't forget, I have 766 stores that I can look at and figure out demand very quickly. Right? We can always figure out what it is that's selling and what it is not selling very quickly, and why. Is it a demand issue or is it a product issue, right? We've not seen anything there. We do get information from marketplaces on our ranking. It's quite collaborative. They're able to also tell us, is the demand specific to Metro or is the demand overall growth in the market? The outcome you're saying is perfectly fresh of both the interventions in terms of, let's say, your ranking versus the peers online and your tracking the offline indicators. Correct. We make our conclusions based on the data we have, Manish, typically we have enough data to at least point directionally. Earlier in my comment, I said we were quite pleased with the demand metrics that we are seeing. When I'm able to wash away any effect of the lack of wedding days or the lack of pent-up buying, I think it shows demand is strong. All right. Perfect. Thanks. Thank you so much. Thanks, Manish. Thank you. The next question is from the line of Jay Gandhi from HDFC Securities. Participants are requested to please limit your question to two per participant. If time permits, you may join the queue for any follow-ups. Thank you for the opportunity. Am I audible? Yes, you're audible. Yeah. This might be a little complicated way of trying to where I'm trying to get at. Is seasonality the reason for the INR 3,000 plus sales being higher? In other words, I presume Crocs sells more in the first quarter, is it? Gross margins are broadly similar. The INR 3,000 plus sales has meaningfully jumped. Is it just the seasonality part? Yeah. To a certain extent, yes. For Crocs, first quarter is like Diwali for all other brands. Obviously, this did contribute to higher ASPs. As we clarified earlier, there's some part of seasonality, because in Q1, you generally see only full price sales. We don't have our EOSS running, which typically starts in Q2 and Q4 of every financial year. For the full year as a whole, last year, if you see upward of INR 1,500, it was around 86%. We would hover around that% even for this financial year. Right. With ± point upward bound. Okay. I'm just looking at the productivity of two major cohorts. One is the Metro plus Mochi and the other is Crocs. Crocs you've not added much this time, which means the productivity, sales density of each store has meaningfully jumped. The balance, which is Metro plus Mochi, if I look at it, your area addition is about 20% plus year-over-year. If I x out the online sales and the Crocs sales, my growth in Metro plus Mochi is probably low single digits. Sorry, at least mid-single digits. Is my understanding correct? Am I broadly directionally right? You're on the right pin code. I'm sorry? You're on the right pin code. Okay, fair enough. Just one thing, has your share of discounted sales, is it still significantly low versus pre-pandemic times? I remember it was eight, nine%, which came down to five. Yeah. In quarter one it was sub five. We'll actually come to know only once Q2 happens, we'll have the initial trends, Q4, we don't expect it to go beyond that historical run rate that we've seen for so many years. For the last two years, it was sub five for the full year as a whole. As we normalize, it should be around that percentage. Thank you. The next question is from the line of Varun Singh from ICICI Securities. Please go ahead. Thank you, sir. What is the reason for underperformance in men's footwear and also at the value price point, which is between INR 1,500-INR 3,000 price point? That's my first question. To answer your first question on men's, we do sell a lot of Crocs in Q1, which typically goes under unisex for us. It's predominantly men-driven, and as Kaushal just mentioned, Q1 is pretty much Diwali for Crocs because of the monsoons. That's the biggest driver for it. Nothing significant otherwise. If you see that unisex percentage in FY 2020 it was 7% and now it has moved to 12%, and you see a similar equivalent drop in men's. It is slight reclassification of product under that category, and hence you see that movement in percentage. Okay, understood. I ask this question because assuming that it would be Diwali when last year and assuming not much retail expansion in Crocs, and so the year-on-year growth rate, just wanted to understand your view on that. As you mentioned that it was a reclassification, so I'm assuming that it's more to do with reclassification than to do with seasonality, given we are doing YoY comparison. Yes. That's correct. It's predominantly on account of further reclassification. Got it. Sir, my second question is, our overall retail expansion, in terms of million sq ft, is very aggressive at 27%. Looking at all other retail companies which have reported their numbers so far, this is quite a great execution. Just wanted to have your view and understanding that how should we be looking at store addition and hence retail expansion going forward? Well, thank you for that comment, Varun, but we believe that the opportunity for growth exists in India. We guided that last quarter that we would open 200 stores in the coming two years, and we feel very good about meeting that number. Rentals continue to increase in India, it's not like we want to blow up expansion. We are very cautious and financially disciplined as we expand. We feel confident we can hit the 200-store number over the next two years. Thank you. The next question is from the line of Bhargav Bhutade from Kotak Mutual Fund. Please go ahead. Yeah, good evening and congratulations on a good performance. My first question is it fair to say that the revenue growth in this quarter was primarily realization-driven, which could also be a factor of portfolio premiumization? As we said, our non-in-house brands grew to 30%. That was predominantly driven by Crocs and FitFlop. That comes at a premium. You're right, some of it was to do with the mix of goods as much as it was to do with the overall sales. However, that mix of goods sales lends itself to where we want to play, Bhargav, which is what's exciting for us, that it is along the lines of affordable premium that we want to play in. That's why we feel reassured about the demand in that space. Just wanted to know if there is any volume growth in the below INR 3,000 MRP category. We try not to give too much granularity on certain things. We're not seeing a lack of growth in any category per se. When you have growth in one category, it's going to come at the cost of another category from a% of business standpoint, right? We're not seeing anything significant. Long time ago, we had that under INR 1,000 category, because that kind of started to get diminished because of the GST increases. That's been over a year and a half ago, Bhargav. We're not seeing anything significant in our business in any particular price point per se. The last question is: What's the price point at which Fila is selling now, and what is the expected range, which you plan to do once the old inventory gets liquidated? Fila is on sale right now, if I were you, I would use this time to go grab you some Fila. We got some Fila at some very good prices out there, at prices you may never see again, right? The idea is, we think the sweet spot for an Indian premium brand is between INR 4,000 and INR 6,000. That's the sweet spot for the brand. We're not going to play too far away from that plus or minus, because we believe that that's where the sweet spot is. We're not trying to be outliers by any means, Bhargav, but at the same time, we want to capitalize on the premium position of Fila. Fair to say it would be 2X of what the current price point is, in terms of range? Well, of the sale price, categorically, yes. Okay. Of the range, to be more fair, I know what you're trying to ask me. I don't know if 2X is the answer, because there was a different mix of product at different mixes time in the Cravatex timeline of operations. It's hard for me to gauge what you're using as a base to say 1X or 2X or 3X. I think what we really need to know is that our EBOs will be positioned more premium. Our multi-brand stores of Metro and Mochi will be positioned more to cater to other consumers that shop there at an affordable premium range. I think it's important to point out, as I mentioned, we think the sweet spot is somewhere between INR 4,000 and INR 6,000. We are going to play in and around that space as far as where the sweet spot is, but we will have items above that, obviously, to create the halo effect for the brand. Because Nike has had a tough time in that range. Essentially, that was where I was coming from. Hello? I heard you. I didn't hear a question, however. I'm saying Nike has had a tough time selling at that price point, so that is where I was coming from. Which price point? You mean the INR 4,000-INR 6,000? Yes. That's the sweet spot. Okay. It's actually higher than that, to be honest with you. Okay. Great, sir. Thank you very much for your thoughts and all the very best. Thanks, Bhargav. Thank you. The next question is from the line of Ali Azhar Shakir from Motilal Oswal. Please go ahead. Yeah, thanks for the opportunity, sir. A few questions. First is on Fila. You did give a lot of detail in terms of where we are in terms of the inventory cleanup. In terms of store additions, if you could share some light, you did provide about 200 store addition. I think that is excluding Fila. Fila, of course, we have a very low base of store additions. Now that we may have kind of reached some situation of cleanup of inventory and rejigging of operations, from when do we expect the acceleration of store addition happening here in Fila? If you could share some guidance on that. In terms of store additions. I think our previous comment on this hasn't changed. When we look at that landscape of brands similar to Fila, we see between 300 EBOs-500 EBOs of brands that have been matured in the country, right? At that same space with that same level of consumer that they cater to. We don't see any reason why Fila should not be looking at those as a direction on where we'd like to get to. That hasn't changed at all. Then, we also know that we have the potential to sell Fila in our Metro and Mochi stores. Today they number close to 300 Metro stores and 200 Mochi stores. That's already 500 stores, and that number will continue to grow. When you look at it, and you add select distribution on top of that's the kind of store presence that Fila could have, once we get the ball rolling. Got it, sir. This is very helpful. Would you be able to share, from when do we expect acceleration of that store addition to start? Will it be from FY 2025 onwards? Do you think we have reached closer to that end of cleanup and we should start? It's interesting, and I guess I can anecdotally go back to how we grew Crocs, right? When we took on Crocs for the first year, we actually shut most of the stores and took it down to three. For the first nine to 15 months, we were in the process of just repositioning the brand. Subsequent to that, we've opened up 200 stores in the last four, five years, right? I think Fila has the same, if not greater legs. Somewhere between the end of 2024 fiscal and the start of 2025, I think you'll definitely see us get into that same mode of expansion like we did with Crocs. Got it. This 100 store addition run rate of yearly doesn't include that, right? The Yeah, it doesn't include that. Yeah, it doesn't include that. Got it. Second question, I'll just club them both from a revenue and margin point of view. You mentioned that actually the impact in this quarter has mainly been because of the wardrobe refresh and high base of last year. Does that imply that we are not seeing any impact because of any weak outlook? Because when we talk to other retailers and our channel checks also indicate that overall in the premium category as well, volumes have been pretty soft. That's point one, A part of the question. Second is also discounting, as we have seen in this year going up, and you mentioned that rebase will happen. From a full year point of view, we should see some rebase of that gross margin, EBITDA margin as well from your current, rather 2023 numbers of 58%+ to your guidance of 55%-57%? First of all, Ali, I see premium actually doing quite well in India, right? Not to pick on scotch and luxury watches, but both of those categories are having very good growth rates. When you say we're not seeing premium grow in India, that's not the data that I'm seeing, number one, right? We're not seeing that in our own business, right? Crocs has had some significant price increases, and I would position it closer to a premium product for its category, and we're not seeing any slowdown there. I don't see that from where we sit in our business than from the products that we sell and the consumers that we cater to. We cater to that same consumer even in a tier 2 town, right? Mind you, it's not like we go to tier 2 town and that consumer doesn't exist. We are catering to them there. As far as the discounting goes, yes, we do go into a discount mode, in Q2 and Q4. That's why we continue to guide that our gross margins will come in between 55%-57%, despite the fact that we were at 60% last quarter, because it will normalize down a little bit. Sometimes we are going to above that number, sometimes we are going to be in that number. That's where I would leave it at the discounting part. Understood. This is very helpful. Thank you so much, sir. Thank you. Thank you. The next question is from the line of Gaurav Shivani from Axis Capital. Please go ahead. Thank you for the opportunity again, sir. My question again is with regards to the Fila thing. Fila, as you know, today in the media interaction morning, you said that you will largely see it getting breakeven by Q4. What kind of profitability can we expect once the rationalization of the distribution channel also happens and you in the time for this. Will it be line with your existing company products or will it be higher than that even? Yeah. Adding to the long list of things I love about Fila and the whole acquisition of the Fila brand, apart from it being a brand that parlays into fashion and function, apart from it parlaying from the fact that we can take global styles and produce them locally, both in footwear and apparel. One of the things we absolutely love about Fila is that we know it'll be margin accretive to our existing business and potentially even all the other aspects of our business. Mind you, it's a low base to start with for the first few years, so it's not like it's gonna significantly move our numbers. As and when we feel the time is right for it to move our numbers, which as I mentioned before, it will be accretive to us, we will be sure to share that with you. Okay. Sir, just one bookkeeping question. If you can highlight how much was the price increase on a YOY basis on an overall basis for us? Gaurav, as you see, e-com contribution has gone up, and that's why if you see our ASPs on an overall basis, it doesn't show a significant increase. However, if you were to see it at store level, including all accessories, the growth is around 3%. If you were to see only footwear, growth is around 6%-7% in ASPs. Okay, Gotcha. Thanks. That's all from me. Thank you. The next question is from the line of Prerna Tamhankar from Schoom Partnership. Please go ahead. Yeah. Hi, good evening, Mr. Joseph. It's a pleasure to connect to you. My questions are almost covered. I just want to understand, we've been telling that there's been pent-up demand and going forward, the growth will be normalized. I understand that. Having said that, could you please throw some light or some range as to what would be the growth or the guidance you could give for FY 2024? When we look at our CAGR for the last 10 years, Prerna, we've run about an 18% growth CAGR. We see no reason to deviate from that as a business. However, we will now have more of an accelerated growth, compared to the last 10 years, as a percentage of our business. You could expect that number to probably shift a little bit more positive, right? This quarter is not gonna be the quarter you're gonna see that because like I mentioned, we still are comping some big numbers from last quarter. I think it's great that we're comping big numbers and we're getting within the same zip code as those big numbers because it shows that the demand has significantly increased. When you look at travel today, when you look at restaurants today, I don't need to remind you last year, we were all wearing masks on planes. We were wearing masks when we went to restaurants. This year we're not. People are traveling quite almost free as a bird, so to speak. That has taken up some of the discretionary income that people have, right? Despite all that For us to be performing to this level is a testament of both the demand that exists out there and also the ability of Metro to capitalize on that demand. Okay, Mr. Joseph, thank you very much, and all the best for the future quarters. Thank you. Thank you. The next question is from the line of Jasmine Surana from VT Capital. Please go ahead. Hi. With the e-commerce growth of 62%, 63% overall, I wanted to understand if it is brand-oriented. I mean, are there any particular brands that are leading the e-commerce growth? It is both the Metro and Mochi brands driving it. Also we've seen some good success with Walkway, albeit it's a much smaller part of the business. It's predominantly both those brands that are driving the business. We also have FitFlop online. We've also gone live with Fila online. It's a multitude, but fundamentally, it's all our own brands. All right. Another question was on the ad spend. If we could get a range or a ballpark on what the ad spends are as a percentage to the revenue. Broadly, we expect them to be in a range of around 3%-4%, which is our historical average over the last many years. All right. Thank you so much. Thank you. The next question is from the line of Subhashish Mukherjee from Bajaj Finserv AMC. Please go ahead. Yeah. Hi. Thanks for the opportunity. Two questions from my side. Sir, can you even speak up loud? Not audible here. Am I audible now? Yes. Yeah. A couple of questions from my side. First of all, if I look at the contribution from premium SKUs, that is more than INR 3,000, it has gone up to 49% from 43% in the base quarter, that is Q1 on FY 2023. Despite that, the ASP increase is very low, 3% inclusive of accessories that you mentioned. What could be the reason behind this? Yeah. Predominantly, as I said, in Crocs, Jibbitz contribution has now increased significantly. These are priced around INR 50-INR 300 per piece. As I said, there are two reasons for that. One, our e-commerce contribution has increased from around 8% to 11% in this quarter. Our average MRPs are lower in e-commerce because at times we're not very actively selling Da Vinchi and a few others on e-commerce due to returns issue. That is one. Second, you've seen accessories' overall contribution increase from 11% to 12%, which includes Jibbitz, which are huge in quantity. Hence, on an overall basis, if you see ASP growth looks 1%. If you see it at our store levels, it is around 3%. If I see it only for footwear, which would predominantly include that greater than INR 3,000 MRP, then the ASP growth is around 7%. What is the typical price range on e-com of these shoes? It would be somewhere close to INR 1,000. Okay. My next question is on the standalone piece of the business. If I look at the revenue growth, it is 12% year-over-year. If I look at revenue per sq ft, that is down almost 12%, and EBITDA per sq ft is down almost 16% year-over-year. Is this because of the maturity profile of the stores, or is there something else to read into? No. There are two questions, right? First was with respect to sales, which Nissan explained as to we are comping against last Q1, which had that significant pent-up and higher sales on account of a higher number of marriage dates. Okay? Obviously that explains the reduction in sales per sq ft that you see, plus a healthy addition of stores. What we are doing is for the 27 stores that have opened in the current year, that is all forming part of denominator. Numerator, you don't have sales for the entire year. That is also a reason why it sort of looks lower as compared to last year. With respect to EBITDA, if you see last year, there were still COVID restrictions. There was hardly any travel. Our sales team were not traveling, there were various expenses which were controlled significantly, predominantly driven by COVID-related restrictions. Now we are obviously traveling more, which is essential to ensure that we get the pulse of the market, a pulse of the business that is happening. That has resulted in a slight reduction in the EBITDA that you see by about 1%, 1.5%. Otherwise, the numbers. Hence, Q1 of last year is not strictly comparable with the ongoing quarters. Got it. That's all from my side. Thank you. Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference back to Mr. Nissan Joseph for closing comments. Thank you, and over to you. Thanks everyone for joining us. Once again, as we look forward to this quarter, the Metro Brands performance continues to always come within the guidance that we've offered when it comes to PAT, EBITDA, and gross margin. Thank you again for your interest and thank you for your support. Thank you very much. Ladies and gentlemen, on behalf of Nuvama Wealth Research, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.