Ladies and gentlemen, good day and welcome to Metro Brands Limited Q2 FY 2025 earnings conference call hosted by JM Financial. As a reminder, all participants' lines will be in the 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 the star 10 zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Gaurav Jogani from JM Financial. Thank you. Over to you, sir. Hi, everyone. On behalf of JM Financial, it's my pleasure to welcome you all to Metro Brands Q2 FY 2025 earnings conference call. From the management, we have with us Mr. Rafique Malik, Chairman, Mrs. Farah Malik Bhanji, Managing Director, Mr. Nissan Joseph, Chief Executive Officer, Mr. Kaushal Parekh, Chief Financial Officer, Mr. Naveen Goela, Chief Business Officer, Mr. Mohit Dhanjal, Chief Operating Officer, and Ms. Alisha Rafique Malik, Director & Head, Corporate Division & CSR from MBL. Thank you. I now hand over to the management to give us an opening remarks. Thank you, Gaurav. Good afternoon. Thank you for joining and welcome to our Q2 FY 2025 earnings call. As we shared in our filings on a standalone basis, we were up 5.1% with EBITDA and PAT remaining constant to last year. We are pleased to see business improve over the previous quarter. There were some wins in our portfolio banners last quarter that I do want to call out. Sales of Crocs grew well through what is their most important quarter, which is the monsoon period. We're also pleased to see momentum build in our Walkway segment. While we cleaned up almost all of the FILA inventory, our overall margins still came within our guidance. Our e-com business continues to run north of 10% of our total sales, and our in-house brands continue to represent over 70% of the total business in our MBOs. Sales of products over INR 3,000 represented 53% of our sales as compared to 50% for fiscal year 2024, showing the continued demand for premium products. We opened 23 new stores offset by three closures. For the first half we have opened 40 new stores offset by five closures. We're confident that we are on track to open over 100 stores in this fiscal year. Last, not least, on our Q2 performance, Metro Brands continues to show deep operational rigor and financial discipline as reflected in our stable PAT% for the quarter. Furthermore, with the stabilization of BIS-related supply chain disruption in our core brands, we have seen moderate reductions in net working capital days. In the quarter, we also announced the signing of a new agreement with New Era, a leader in crafting high-quality headwear and accessories with over 500 licenses globally in its portfolio. We anticipate opening our first New Era kiosk in the next few weeks. We also just wrapped up an exciting launch of the first Foot Locker store in India at Select Citywalk in Delhi. We are pleased with the support that we received from all the international brands in curating an elevated assortment in the store. We look to open the next few stores in the coming quarters. On the BIS front, we have been working on aligning with the regulations and changing inspection schedules. I must point out that we have been able to mitigate the risk to our core businesses of Metro Shoes, Mochi, and Walkway by moving sourcing to India or have forward-bought inventories to such time as we can substitute it with BIS-approved India production. We, however, are still facing challenges in the sports and athleisure segment, which is why we consciously slowed the growth of FILA standalone stores that do require a much wider assortment. Though we are opening more stores for Foot Locker in the next 6 to 8 months, we are moving cautiously so we have a more concrete view of the supply chain with BIS influence. We have, however, launched the first of our FILA footwear collection across Metro and Mochi stores and apparel into Foot Locker, and are pleased with the response on the products. Looking to the current quarter, October has some shifts in dates of some key festivals, we are seeing the sales results come in line with expectations. Furthermore, we have a strong lineup of wedding dates in November and December and anticipate sales to come through at that time as well. In closing, it appears that most of the normalization of the COVID events are behind us. The consumer continues to respond to the relevant categories and price points, we are confident that the trajectory of growth we have seen from Q1 to Q2 will continue. With that, I would like to turn it over to the Q&A session. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants must strictly 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 Devisha Seth from Algebris Capital. Please go ahead. Hi. Thank you for the opportunity. I hope I'm audible. Yes, go ahead. Correct. My first question was on growth. How are you looking at growth in FY 2025 versus the previous year in terms of 12%-15%, and especially in the context of urban growth being under stress, we've also seen in the past at FMCG companies? Well, I still think we're going to go with our guidance that we provided earlier in the previous quarterly call of about 14% to 15%. Now, obviously, when you have a slightly muted first quarter and a second quarter that can meet that, it's not going to be the easiest thing in the world. We have all indications, Devisha, that the business is there, and there's no reason we shouldn't come at that guidance range. Is there any particular indications that you'd like to elaborate? Sure. I use Crocs as an example for that, right? This is the season for Crocs, and this is the biggest season for Crocs with Q2, and we saw that the Crocs sales were very much in line with expectations. In fact, I must say it was even better than that, and we were quite pleased with it, showing that the consumer is not fatigued necessarily. As we've come out of the COVID hump, the recovery line it's not been a straight line, it's been more lumpy. That's what we've seen. We also feel that we're able to predict business much better, and that means that we are through that normalization lumps that we've gone through. All indications are that we should be selling our products well because it's stuff that should have sold well over the last two quarters, especially last quarter, has done well. Don't forget, though, Q2 is typically our lowest and probably least exciting quarter in the year. It's occupied by hot season that people don't like to shop. It's occupied by end-of-season sales, which is not our core business, as you know. There are some things that make it uninteresting and unexciting. Despite that, inside that, we have seen some exciting shoots that give us the confidence to say we think business is going to be back on track. Got it. Switching over to Foot Locker. With the first store now being open in the north, any numbers you'd like to call out in terms of sales or in expectation building? I think in the immediate future, we want to get them up to about three to four stores, just so we can get a read. As you know, when we start opening stores, we try to get into certain markets to get a sense for where do we see the upside. Once we get that model down, then we're able to accelerate it. Having said that, we are concerned about the BIS affecting especially the athlete equipment in India, sports and athletes here because the amount of imports, while all the brands produce a lot of product in India, the vast majority of the products that go to the premium consumer, unfortunately even today, are being imported. Until that sorts itself out, every brand is going to figure out a strategy around it and how to come in line with the regulation. Until that happens, we just want to grow Foot Locker sensibly, so we're confident it'll all work out, and Foot Locker will continue to have significant legs in India. Got it. My last question, Gaurav, FILA. If sales of FILA and Van Heusen were to be included in Q2, how would the gross margin performance look like? What is the cost structure actually that you're still sitting on in terms of cost and any impact on margin that you're seeing in Q2? Over to Mohit. Broadly, the impact would have been around 100 basis points. As we said, most of the liquidation is done. We will see a small portion of it going through in Q3. We might see a small impact in Q3. Post that, I think it should be normalized margin. Got it. Thank you, team. Thanks, Devisha. Thank you. The next question is from the line of Aditi Seth from Systematix Institutional Equities. Please go ahead. Yeah, thank you so much for the opportunity. My first question is impact of FILA dips which you have mentioned, this is on gross or in EBITDA? It is the gross margin. Gross. Also possibly quantify the absolute value of loss. Sorry, come again. If you can repeat your question, please. If you can quantify the absolute value which has been impacted during the quarter. Somewhere close to INR 5.5 crore. Okay. Sir, going by the store addition in H1. We have achieved a 45 store addition, and we have guided for 100 store additions for fiscal. That would like in the next two quarters, this quarter we would be adding around 65 stores. Is this understanding correct? The math would lend itself towards that. I do want to give some color as to why we're at 45 stores for the first half. It's primarily because last year we saw a lot of retailers open a lot of stores, and I think we saw rentals going up a little bit more than we'd like to have seen them go up. These are long-term deals that we sign. These are nine, 10-year leases that we sign. We felt it was a good time for us to just maybe slow that down till things started rationalizing a little bit, and we are seeing that. As you've probably read in the news, some of the national retailers have a negative store growth in the previous quarter, indicating that they probably should not have signed some leases. We decided not to because we're not about getting to a number necessarily. We want to get to that number, but we want to get to it in the right way. Okay. This number is achievable. 45 stores for the next fiscal. These stores have a gestation period, right? It's not that we sign something today and something opens tomorrow. We have to have an order book of leases where we have visibility of LOIs, agreements, and what have you. We're constantly listening. It could be a little bit of left or right of 100, but we're going to be within that same zip code. Okay. Sir, on Walkway, sir, we have not added any store like for the last six months. What is our plan? I believe last quarter also you had stated that Walkway you are looking into the towards the north and the subsequent only. Looking at the demand and all, why are we not adding any store yet in this segment? Yeah. We speak to the same point. We had said the South and the West, not the North and the West, the North and East. The South and the West, and that's number 1. Number 2, we have been putting a lot of effort into the Walkway chain to figure out the right business model. When you do the testing, these testings take anywhere from 3 to 8 months to finish a complete test cycle, and then you have to test it a few times to ensure that you're getting the formulation right. While we do that, we're not in any hurry to open stores on our Walkway chain. I think we are confident that they will be part of the growth story for Metro Brands. That's not an issue. It's just a question of how and when. We see the green shoots that we see from Walkway on its business are very encouraging. Okay. You mean to say that for the next 6 to 8 months, we would- I'm sorry, can you repeat that question? There was some distortion. Yes, sir. My question was for the target store addition, if you have anything on Walkway for FY 2026 and 2027. Absolutely. They will be part of it. Obviously, since they had a slow start, they want to have their fair share, so to speak. It will show its growth from here on out towards the end of the year, and probably starting off in Q1 of FY 2026, we should start seeing some acceleration there. Don't forget, the rentals went up. That's not the chain you want to grow when rentals are hitting a little bit of a peak point. We definitely haven't taken our eye off the opportunity at Walkway. That's awesome. Thank you very much, sir. Enjoying the rest of the day. Thank you. Ladies and gentlemen, in order to ensure that the management is able to answer questions from all participants in the conference, please limit your questions to one participant. The next question is from the line of Sameer Gupta from India Infoline. Please go ahead. Hi, sir. Good afternoon, and thanks for taking my question. Firstly, on the BIS part, you mentioned that FILA additions and intros, you would start from the second half of FY 2026, and that has been delayed due to the BIS. Just want to understand what are the assumptions here. Are you assuming that by when you would start assembling products in India if these BIS regulations don't get sorted out? Or you are assuming that this current situation regarding imports will be resolved at some point of time? By when do you expect this resolution before it starts to affect these plans again? Yeah. Well, I think there's two forms of resolutions that can happen, right? Form number 1 is if the government decides they want to look at it slightly differently after recognizing the challenges of production in India overnight. That's one way that could happen. The other resolution that could definitely happen and will happen is production actually moving to India. That's not out of the question. That's definitely in the cards for all of the brands that we deal with, including FILA. It's just a matter of we need timing to build up the ecosystem of manufacturing in India, and that takes a little time. We don't see that as being a long-term problem. We just got to figure out the next few steps, immediate few steps. Meanwhile, obviously, we have also started evaluating getting all the raw materials and getting the production done in India. However, it will not solve problems with respect to high price, high input article. That is also something that obviously we're working on. Yeah. The line that we just launched was predominantly made in India. Some of it we got in right before the BIS regulation process, but the line that we launched is predominantly made in India. There are ways to step up to this. Of course, we're working on all the different opportunities to do that. Just to follow up on there. My understanding is that you can still, based on the current regulations, import the, let's say, sub-part, like a sole and an upper, and it'll be assembled in India. Is that understanding correct? In a simplistic way, you're correct, Sameer. I'll just leave it at that. There's a lot of regulations to it. In a simplistic way, you are. I think the true solution is not about how you can do things in short-term. It's about how do we fix the long-term part of being in line with the regulations long-term. Got it, sir. Last question from me. The store addition guidance of 100 stores for this year, I'm assuming it's on a net basis after accounting for closures. Just to follow from this, let's say there is an inherent recovery that is expected in second half. Let's say for whatever reasons, it's delayed or it runs below expectations, we still go ahead and do our 100 stores, or we also take a little more cautious view and delay it a little bit. How is that going to happen? Okay. To answer your first part of your question, it is net that we're talking about. If there's a We don't see a rebound like everyone's anticipating. We are committed to some of these leases, right? It's not like you can walk away from them. What it may do is impact the ones that come in the first half of the following fiscal year. For this year, pretty much what you have is locked and loaded. I mean, short of having an event like COVID or something, there's no reason that we would want to hold back our current growth plans. Sameer, if you see pessimism in the market and if you see rentals opening further from here on, we will beIt existed also. In opening. Yeah, in opening of new stores. Got it, sir. Thanks and all the best. Wish you all a happy Diwali. Thank you, Sameer. Thank you. The next question is from the line of Navin Niredi from Niredi Investments. Please go ahead. Hello. Hi, good afternoon. Thanks for the opportunity. I've got two questions. My first question is, in this year, we are able to see sequential decrease in revenue per square feet. Can you give some color on whether we will be able to get better square foot compared to last year, given that the range of premium customer has increased on year-on-year basis? My second question is, sir, also you mentioned that there is supply chain disruption in Sports and Athleisure Footwear segment on account of BIS certification. How much percentage effect will be seen on the revenue and margin side as well? On the square foot part, there's a couple of drivers to the square foot of our base number that you're comparing us to, right? In the base number, Crocs represented a higher percentage of stores than in the current number, right? Because within the last few years, we've really focused on opening Metro, Mochi, and Walkway stores. That comes at a different metric totally. While it may look like it's absolute, it really isn't. It's just a matter of the mix of growth that we're having. That's one thing that affects sales per square foot. The other thing is, I don't know if you picked up on it, but our tier 3 penetrations went up from 15% to 16%, it now represents 10% of our business. The tier 2s, the tier 3 cities don't come on as strong immediately. It takes them a little while to mature and get to the same rate of sales as a square foot of our normal business. Having said that, Navin, we expect our sales per square foot for H2 to be in line with what we saw last year. I'm not saying for the full year, but individually, if you see it for H2, we are expecting our sales per square foot to be better. To answer your question on the supply chain disruption. The kind of business we're talking is under 15% of our total business. Even in that 15%, we would have the ability to produce a lot of that domestically as well, right? We also think that there's going to be a little bit of cost impact on BIS, to be BIS compliant. We're not as efficient in operating manufacturing here in India yet. Importing raw materials because we don't have the ecosystem here in India. There's going to be raw material that you need to import, so there's multiple nodes or touch points on a production chain, and all these add cost. If we don't see anything significant necessarily, these are just things we have to consider and work through. The good news is for our core brands of Metro, Mochi, Walkway, the BIS effect is minimal. It would only be for our expansion brands, which aren't baked into our numbers anyway. It's not. All right. Thank you and wish you a very happy Diwali ahead one. Thanks, Navin. Thank you. The next question is from the line of Umang Mehta from Kotak Securities. Please go ahead. Yeah. Hi. Thanks. Just continuing this question on BIS impact on S&A where, given that this would have impacted other brands as well, and this would have a lot of purchasing brand, do you see them prioritizing their own sales? Are you facing any supply shortages as of now? Yeah. When we talk about the impact on the S&A, let's be honest, we're going to see minimal impact right now in the market because people have forward bought stock, right? When we go forward, the kind of product we're talking about is a high-end product. We're talking about 15% of the product that's not capable of being produced in India by the third-party brands we carry. The percentage is even a fraction of that. It's not a significant impact. Don't forget, if you can't get it anywhere in the market, then we're not disadvantaged by it. Will they prioritize their own stores over it? I can't speak for what they will or won't do, but all points of sale are important, typically to a brand, and Metro caters to a very unique set of customers, which is why we can coexist in the malls. Same thing works for Crocs. We coexist with Crocs in a Metro store and a Crocs store, and that goes for the other brands that we carry as well. Understood. That makes sense. Just one clarification. Since you maintained your guidance for 15% for the full year, which implies a second half growth rate, which is fairly high. Kaushal said that you will maintain the same store, 75% run rate of year-over-year business. Actually, I think there's a disconnect, right? You need to grow the same store significantly to achieve your guidance, right? Am I missing something? Umang, what I mentioned was, if you see H2 on a standalone basis, H2 versus H2 of last year, then our expectation is that our sales per sq ft would be around similar lines as we saw last time in the last H2. As Nissan mentioned, for the year, we are still maintaining our guidance. We said 12%-15%. We are hopeful that it should be in that range of if not 12%-15%, at least 10%-15% should be the range. Understood. Actually, because your growth in one month is 6%, the R rate is fairly high, right? We know the store growth that you are doing. I understood your point. Thank you. Thanks, Umang. Thank you. Next question is from the line of Gaurav Jogani from JM Financial. Please go ahead. Thank you. I just want to talk to you with regards to the margins a bit. If you look at the margins, Q2 was slightly impacted on account of the liquidation of the quarter and also kind of how it would have impacted the margins. Given that we are expecting different revenue acceleration in this Q4, what kind of margins can we expect as a whole? Yes, Gaurav, you're right. Q2 had marketing costs were higher as compared to last year on account of a new auto campaign that we just launched. You are correct on that front and the impact you see in other expense, which is slightly higher as compared to Q1 of this financial year. For the year as a whole, for H1, our EBITDA margin has been around 29%. H2 generally contributes around 53% of the overall annual business. Q3 is the biggest and it's a quarter where we generally don't see any end of season sale. We are still gunning for EBITDA margin in that 30% range. Sure. For the year next. For the year, yes. Yeah. Okay. A question on the regional impacts, if you see anything. Because, given the split that you shared in terms of the stores, North, East. Roughly, in the last couple of years we know that South revenue for Metro has been consistently declining and we are seeing good acceleration in the East of these stores. Any regional theme or demand patterns you would like to call out? Gaurav, if you see, frankly, there's no trend here. Our expansion in East in just in terms of overall number of stores, was slightly slower in last six months or so. Whereas our expansion in West and South has been good in terms of just the absolute number of new stores that we've opened. That's what is leading to the percentage variance that you're seeing. Having said that, obviously East, since it's least penetrated, just in terms of revenue to store percentage, it is one of our best regions and that is something that we will be focusing on to increase our penetration from here on. If you look at the share of business, it's marginally different. I think it's more of a rounding. Gaurav said it is really a shrinking business. It's 100 basis points movement, it's really a rounding. A related question to this was, even if you look at the year-wise data also. I think that Tier 3 growth actually has been far better versus the year one, year two. Is that a similar thing you are expecting in Q3 also? What we're seeing in Q3, we have Diwali and Durga Puja and Dussehra. Durga Puja and Dussehra come together, Diwali, as you know, follows. Both those festival seasons are coming two weeks earlier, right? Of course, we would see the East react very positively to a number like that. When we get to an early Diwali, the North and the Middle of the country would react very well to that. What I meant earlier on when I said that we're starting to be able to predict the business much more accurately, indicating that there is a normalization of business. That's what I meant. We're able to predict these things much more effectively. Whereas in a lumpy business, it's very hard to predict, right? I'm not saying that I'm a expert at it, but we can tell when we get better at it, that's what we're talking about. Okay. Thank you. The next question is from the line of Shirish Pardeshi from Centrum Broking. Please go ahead. Hi. Good afternoon. Thanks for the opportunity. To start with, Sanjeev, do you think I may follow up on the 7.4% revenue growth, what is the volume growth? And maybe if you can give us, is there any regional variation within Metro stores? On an overall basis, Shirish, we've seen our ASP rise by around 1% in H1. Obviously, that is good news for volume growth, which I think you can see from the number. Sorry, I missed your second question, Shirish. I'm saying, is this volume disruption is higher South and West versus North? Broadly, in terms of regions, we are not seeing any specific trends wherein certain regions are consistently outperforming the other or things like that. As Nissan mentioned, there are regional sensitivities. Obviously when Durga Puja comes, East performs the best. Those are the type of trends that we've seen. Nothing suggesting any permanent trend with respect to any specific regions as such. The reason why I'm asking, we started in the beginning of the year anticipating BIS will create some disruption in the street and the inventory, we loaded the inventory. I was just more curious Safety, Diwali and Dussehra and festive season has come up about two weeks early. Is the channel inventory under control or will have some impact because we have taken much more time than anticipated to liquidate the line inventory. Sir, this question is aimed at not for FILA. I was going to say that's two different buckets that we need to be talking about. Let's talk about the Metro Mochi Walkway core business that generates most of our revenue and profits. We've actually seen inventory decline quarter-on-quarter, nothing significant because we had to still forward buy. We don't have any concerns about inventory levels for Q3 and Q4 of this year at all. The reason why I'm asking, Nissan, while visiting Delhi and around Karol Bagh, the Chinese suppliers are still dominating there. Even if we keep very composite is saying that because of the BIS norm, the imports will come down, there is enough inventory which is happening. It should not happen that when the market is really picking up, we either have excess inventory or we will not have the inventory. I understand you would have some kind of conscious view on building the inventory. Well, in all honesty, Shirish, we, less than 15% of our production comes from outside the country in our normal times. Out of that, it's shared between China and Brazil. I'm surprised about your comment that you saw a huge penetration of Chinese goods unless you were referring to other retailers. This is common in Karol Bagh. I think that's the other thing too, how does this affect the other retailers that would have a positive impact on Metro because we're able to source products domestically. The exposure is minimal, in the sense that we've forward bought enough and in any case have already swapped the production in India and/or we're going to get certified in certain factories to make products internationally. It's not like it's completely void. There's a lot of moving parts to this. What I want you to rest assured is that we are on top of it and sure that when business comes like it is, we will have what the customer wants in our stores. Sure. That's really helpful. My second and last question on New Era part of the business. I was more curious. Assume that we have about 800-odd stores and after that, even if I see that it is starting into the Metro. I would assume that 200 stores you will put the product for New Era. More curious, what kind of range, what kind of SKUs, and is it that Metro focus you will do in next two quarters? The reason we got New Era is we think it fits very well with the supply chain, number one. Number two, we think it's a market that's huge globally. It's a very well-known brand globally. Therefore bringing it to India is a great idea. We are more optimistic about the channels of e-com and Foot Locker and our own kiosks. As of now, we don't have any intention of making Metro Mochi stores a big part of that at all. If I pick up your stores, largely it will be e-commerce led experiment. Well, I think it's a matter of when you say it, but initially it's going to be e-commerce and Foot Locker and a couple of kiosks. Then, as you know, everything Metro does, we look at what's happening, we measure well what makes the most sense, and then we push the program, whatever makes the most sense. We're confident that the brand will resonate in India. We've already seen some good results out of our first week of the Foot Locker store on New Era. Sure. Thank you, and all the best. Thanks, Shirish. The next question is from the line of Devanshu Patel from MP Global. Please go ahead. Hi. Thanks for taking my question. Sir, I wanted to understand your thought process behind Metro going for a celebrity-led marketing campaign, which I guess you have not done before. Could you share some thoughts on this please? Sure. We have done celebrity-led advertising and marketing in the past. The last few years, we've gone more of an influencer route of marketing, which is also another very good form of marketing. I think what's important is that you keep having campaigns that appeal to different segments, yet in the same class of customer you want. We all consume information differently. Some consume it better with a celebrity giving it. Some consume it better if it's an opinion leader. Some consume it better on print. Some consume it better on digital. As a marketing thing, you don't want to be all things to all people. You can't afford it. You have to pick and choose which one you're going to pick for this season, which one you're going to pick for the following season. I think we've picked four outstanding celebrities for Metro. I understand. Second question, wanted to understand the inventory sort of situation as of now. Over last 12 months, we have added around 75 to 80 odd stores. Working capital intelligently has actually reduced by about 60 odd stores between September 2024. I guess Metro expansion should have actually led to an increase in inventory by about 60 odd stores. Overall it's INR 100 crore kind of an optimization that is happening in the business. First I wanted to understand what has driven this kind of a working capital optimization and second, further to previous audit execution, are we still comfortable with this current level of inventory or do we plan to sort of achieve this year? Devanshu, in fact we had guided that our inventory would go down from here on, and as Nissan touched upon the point that Of BIS implementation, we had front-loaded our inventory fine. We were high on inventory vis-à-vis our normal levels. That is what is becoming visible now. We have improved our working capital cycle over last one year, and we further expect to optimize it by a bit by end of March this year instead of adding new stores. This is just a factor of inventory front-loaded on account of BIS implementation, which is now getting liquidated and we will move back to our normal working capital cycle. To answer the second question, I think Nissan answered it with respect to the earlier question. We feel extremely confident with the level of inventories that we have, and we don't anticipate a scenario of either a stock out or stock excess on an overall basis. We should be just fine with our overall inventory level being aligned with the kind of sales traction that we see. I guess so. Lastly, wanted to check on this observation that I had basically, it may be a mistake, but you have had period end accounting which seemed to be higher this time around in Q2 versus prior periods. Wanted to check if this is a correct observation from your side. I think the observation is correct if you look at the market, but it's not correct for us. We did not have as much inventory that were aged and we thought was distressed to put on sale. Overall, in all three brands of Metro, Mochi, and Walkway, and even Reebok, we had considerably less end-of-season products to take care of. Having said that, though, we had enough to meet the quotas that we had to. It wasn't like, "Oh, we missed those sales on end-of-season sale." There were some challenges for us because we did not have as much all-season stock. I think you would have seen that reflect in our gross margin if we had spent some of our monies getting rid of dealer inventory that we needed to discard or sell through. In fact, Devanshu, just to share a number, our overall end-of-season sale contribution was sub 9% and in line with what the number was in last year. I guess this question is very clear. Thank you for answering the question. Thanks, Devanshu. The next question is from the line of Tejasva from Avantis Market Research and Equities. Please go ahead. Hi, team. Thanks for the opportunity. My first question pertains to BIS legislation that we spoke about. Now, in the past, we've observed in various industries that tendency is often takes longer to adapt to such changes compared to other companies. Over here, do we see an opportunity for us to gain a competitive advantage during this period? What is getting initiated or not applicable to our industry? Yeah. I would say it's not as applicable. To say that there are no opportunities would not be a true statement, but it's not as applicable because it's not like the multinationals were not producing in India. They were producing a significant portion of their business in India, right? Don't forget, if I was to compete with them, to pick up on an opportunity, you would have to deal with India productions. All of a sudden, we're on a level playing field again, right? I don't have an advantage because I have production they don't. Where the delta comes, where the difficulty comes, is in higher tech product. Of course, Metro sells some of those higher tech products, but I don't think it creates an opportunity because if they're struggling to bring in technology-driven products into the country because of BIS, we'll be just as challenged to do that, right? There's not a distinct advantage. Having said that, I think our dependence on that product is significantly lower than that of those multinational brands, right? Our exposure is significantly less. We didn't feel we had to mitigate that risk because it's not as much of a risk for us that we couldn't mitigate. That's it in a nutshell basis. Got it. The second part of the question is that we have seen it in many other industries post-COVID. To give an example, luggage, where four years back, we could not have envisaged India actually becoming a producer there. Somehow, at scale, producers here are now showing that economies still are coming through. Do you see any quality that you spoke about initially and on in terms of pricing Indian players or brands who have some manufacturing facilities which can be used now, do you think that we can actually tap those capacities to meet both ends on quality and on cost? First of all, I do want to say that the quality of Indian manufacturing is not substandard necessarily. What it is they produce a different type of product. That obviously is not as highly technical, that's not as highly complex to produce, and hence comes at a lower price point. Price point to price point, India can produce those goods just equally as well. It's not like there's an opportunity that's vacant, saying that. The challenge is to build for high-tech manufacturing. Metro has two challenges. One is obviously capital, because molds and dyes require a lot of money to be tested. That's number 1. Number 2 is the technical know-how. If you've never done it, you need to import the technical know-how for the first so many months, so many seasons. You get people trained in India or you go send your people abroad to get trained. One of those two things has to happen. That takes time. That's where the challenge is based. Got it. Last question, San, you mentioned that October is progressing as expected and with the rest of the second half relying on strong wedding calendar. Last year also, the consumer sector, not only our industry, the consumer sector at large was similarly optimistic about this wedding season, but somehow it did not come through and it fell short. Just wanted to know what indicators you are monitoring so that we don't fall under the same trap that you actually fell last year. Yeah. What we're looking at is the run-up to Diwali and Durga Puja, right? Very well, number one. Number two, you're right. I think we were quite hopeful, but the year before that, there was a lot of catch-up weddings that happened as well. The quantum of weddings that got squeezed into those dates, the previous Q3 was significant. When you look at the growth over a period of time, that quarter actually was right in line with the normal expectations. Like I said at the opening remarks, recovery tends to be lumpy. I'm not talking recovery from something bad, but really, we're recovering from the COVID drop-off. That's going to be a little lumpy. I think you've heard the other retailers say, "We had a good September, but July was tough." These are lumpy behaviors of a consumer market that really are driven by comparables rather than demand. We're seeing a little bit more evening out of that, and that's what I referred to. Thanks for answering all of this, and Happy Diwali in advance to the team. Thanks, Tejas. Thank you. Next question is from the line of Mansi Desai from Bank of Baroda. Please go ahead. Hello, sir. My first question would be, what are your expectations in terms of the store throughput that we would expect from Croma as we open the first store? Are there any internal targets that we have that a store should be doing this much revenue, et cetera? I don't think we want to share that on a public forum, to be quite honest, Mansi. These are all competitive advantages and secrets that we keep in our trade. What we do want to assure you, though, is that the targets we set ensure two things. One is that the store is profitable in operation, and number two, that number is consequently exciting enough for us to scale the retail app. Those are the kind of metrics we use. If we meet these two numbers, these two initiatives or desires, then we'll start scaling forward. You can rest assured, given the financial discipline that Metro Brands has, that's going to be the driving force for it. Okay. Just here, you were talking about four to five stores of Croma. When we meet our targets that we have, how many stores would we see Croma in the next year? I think Croma hit the expectations that we have as it was going to be in every big metro city in India, right? To start with. Don't forget, by the time we get that done, India will be at a different place because it'll be a few years from now. It's really a question of a rolling incremental number as opposed to a static number, and once you hit that number, that's when it's going to stop. It's going to be an evolutionary number as India evolves, as we evolve our penetration in India as well. Okay. Sir, the second question would be, our contribution from more than INR 3,000 price point has gone up significantly versus last year. Is it because we've opened lesser stores on Walkway, or is it that even in the current Metro Multi store, lower than INR 8,000 or INR 1,500 products are somewhere that we're not picking up? No, that's a good call-out, right? Part of it is that, don't forget, it's offset by the fact that we didn't open as many Crocs store, who does a significant amount of business over the INR 3,000 range. When I say didn't open as many, not as many as we opened in the past. We still opened up a share of Crocs stores. That Walkway effect is offset by the Crocs effect. The reality of it is our ASPs in our Metro Multi business are growing in the sense that consumer is preferring premium product. We find that when we have product in the pickup range, it sells very well, which is an INR 8,000 slipper or a chappal, as we might say. We are seeing the consumer gravitate to the right product at price point. As I mentioned before, we had a terrific monsoon season with Crocs, that's a high ASP item, too. These are all indications of a consumer that likes premium products and not a offset of something else. Okay, sir. Thank you very much. Happy Diwali. Thanks, Mansi. The next question is from the line of Saurabh Patwa from Goldman Sachs. Please go ahead. Hi. Thank you. My question is again on BIS. You were having discussions with You or certain bodies must have been in discussion with the regulator or the government on this. Clearly a disruptive situation for all of you. As you said that production in India will eventually happen for these sports brands, but it's going to take time. What possibility do you see there could be some relaxation from the government, and even if temporary, to allow imports in case brands have plans to sort of start producing in India? I really can't comment. I have no knowledge of it. What I can tell you is that these brands produce significant numbers of pairs in India for export, not just for Indian consumption, but for export. I think if anybody has a chance of getting some kind of acknowledgement of that, it would be them, because they are huge exporters of footwear. It's not like we've been importing all our life, we want to continue importing a little bit more. They've been importing and exporting, and most of these brands export far more than they import, right? What the Centre sees value in that or doesn't see, I can't speak for that, but I'm just giving you the framework that exists. If you want to put some odds on it and put a betting team on it, you can do so. My next question is on your recently launched new FILA range, which you've got manufactured in India. Did I get that right? Most of it. Some of it was pre the closure of Okay. A couple of questions on that. What's the price range for the footwear that you've launched, this new range? Secondly, where is it manufactured? A majority was manufactured in India. That's number one. We did that right here in India. Rather than say, what is the price range, because that's going to be indicative of what the true selling prices are, I would say our best are coming around the INR 8,000 range. That's where we are with it. It ranges from INR 5,000 to INR 12,000. Right. One last question. You stripped off the FILA sales from the second quarter reported consolidated sales number and from the base also. What is the sales growth that you have? Typically, what's the sales growth in your core business, excluding FILA? It wasn't zero. Well, I don't have that number handy, sorry, we can get it to you at some point. The reality is it didn't add much because it didn't throw much down to the bottom line either, right? It would not be significant erosion when it comes to the top line on sales. Right. Thank you. That's all from my end. Thanks, Gaurav. The next question is from the line of Saurabh Munjal from RK Advisory. Please go ahead. Hello, my first question is the purchase of goods being trade, which is, if I look at the percentage of sales, it is 50%. In the previous quarter, it was 35%, and previous year same quarter it was 37%. What is the reason for that? Saurabh, it's a function of, you've seen the decline because obviously we had front-loaded the inventories. Obviously, new purchase in the current quarter is lower than sales that we have registered. If you take two lines, purchase of goods being trade and changes in inventories, it is a right way to see both together will give you an understanding of the total cost of sales and the result in gross margins. Okay. That answers the question. My second question is, with the new BIS norms increasing cost in the market, while the ticket items may not be significantly impacted, the bulk of industry volume comes from INR 499-INR 999 range, if you include the unorganized market as well. What is your perspective on the effect of the BIS regulation on its small manufacturers and how do you see this impacting Walkway given that it also operates in this price category? Saurabh, there's no impact on that price point. The impact that you have is when you're moving production of a significant nature that you cannot replicate in India from an outside India entity. That's when the costs come in, right? Because if you want to do it differently, if you need to set up factories and lines that are specialized for it, all that product you're talking about, that's between 499 and 999 is easily available and manufactured in India today. It wasn't the case when people started sourcing it, which is why they just stuck to their legacy sourcing methods. That exists in India today. That's not where you're planning to go. Saurabh, many vendors are exempted from BIS. Some components like soles, et cetera, would have to pass the BIS test, and there you might see slight increase in the cost. The overall ecosystem, since many vendors are out of BIS review, it shouldn't have significant impact. Okay. I have another question on BIS. I don't know is it right or wrong, that the size of the foot, we used to manufacture U.S. and U.K. size. Now they have something, I don't know the name, it's three letters, something new for only India. Is it right that, if that is implemented, I think everybody has to change. Yeah. First of all, to answer your question on that's been under discussion. We don't have any clarity on what's happening with that. India has some very strict regulations when it comes to labeling anyway, and we've all managed with, right? Once we get a clear picture of what that regulation is, we will put it. This has some unique regulations in India on what needs to go on the label, and we're able to do that on all our footwear. It's not an issue. Even if it were to come, it's not a challenge. My third question is, Foot Locker carries popular brands such as Puma, Nike, Adidas, and New Balance. Does Foot Locker hold exclusive distribution rights for these brands in certain regions, or do they offer a unique product range and style that is available exclusively through Foot Locker? Sure. To answer your first question, Foot Locker does not have any exclusive distribution agreement in any region that I'm aware of, but I'm not a Foot Locker spokesperson, so I can't help you out with that, number one. Number two, somewhere between 10%-20% of the Foot Locker range can be exclusive with Foot Locker. They do have some styles. What's really unique about Foot Locker is not about basically the exclusives, but having a store with the entire elevated, curated range so the consumer has a unique shopping experience. Also the experience with the Stripers, which is what we call our employees of the Foot Locker store. That experience is totally unique. It is the CX of the store also, not just exclusive product that makes Foot Locker uniquely different. Okay. I want to ask another question. Could you please hold the line for a few for further questions? Thank you. Thank you. The next question is from the line of Percy Panthaki from Vallabhi Capital. Please go ahead. Yeah. Hi, my question is on the sports and leisure category, which you have mentioned. Particularly, you have mentioned that that category has seen a supply chain disruption because of the BIS regulations, and we have taken a cautious approach on that. If you can elaborate more, what exactly going to be cause? It is a category. It was growing in double digits, and had seen a trend shift after COVID. What exactly problem on the demand side as well as on the supply side for this category? I can't speak to the demand side on this category. Demand will remain consistent is my best guess. When you look at the supply side, first of all, they haven't already been disrupted. They could be a disruption if they don't solve for the problem, Percy. That's number one. Every brand has different levels of manufacturing in India relative to their needs. There are brands that are fulfilling 60%-70% of their needs from India, and there are brands that are fulfilling 10% of their needs. If you're a brand getting 10% of your product in India, this is going to be a big challenge for you to accelerate the opening of factories in India. If you're a brand that's already at 60%-70%, moving to 90% is not going to be much of an issue. It just depends from brand to brand. I really can't speak with a blanket statement. Our cautious approach is because we are not 100%, not even close, 60%-70% in terms of manufacturing locally, and it is what basic strategy of cautious approach is that, right? Is that understanding correct? Are you talking about our cautious approach as Foot Locker? No, I'm talking on the sports and leisure category, where we have mentioned that we have taken a cautious call. Right. Well, cautious is not stopping. Cautious is being alert and aware of what's going on and monitoring it closely. We're not walking away from the category by any means. We don't feel that there's no way we can even survive in that category. Of course, we are going to play in that category. We're just keeping a very alert eye on it to see how we move that forward. Listen, when there's disruption in any industry, you got to be cautious about how you make decisions as opposed to if you don't predict disruption. No, similar if you knew there's a war coming, you'd think differently than if there was no war coming, right? Not that this is a war, but this is disruptive like a war can be. You just got to be cautious with the decisions you make. You can't live on the same assumptions that you lived on that got to this point. That's all we're saying. Got it. Just clarification, how much would be our local manufacturing? If you can share it on an overall level or maybe for sports and leisure category, that would be helpful. Thank you. It depends. What I can tell you is that less than 15% of the product that we sell in the Mochi are sourced internationally. I can assure you that we've mitigated that risk. Thank you. The next question is from the line of Jignesh Desai from SMIFS Institutional Equities. Please go ahead. Thank you, sir, for the follow-up. My question was on to the Foot Locker. How is your store format as very large or midsize stores? Also possible to quantify what would be the average price per sq ft for these stores? The stores range, Jignesh, from 3,000, 4,000 sq ft to 7,000 sq ft, typically. As you know, prime real estate in India can be quite challenging to get to. Sometimes it is not a matter of what we want. It is a matter of what's available at the right location. Real estate is all about location, location. Sometimes you're willing to give up size to get the right location. Sometimes you think your size gives you a better location. It's an art. It's not a science that I can just tell you. The range of ideal Foot Locker stores should be somewhere between 4,000 and 7,000 sq ft. My second question was on to the demand, which we are witnessing pre-festive season. Just a week left for Diwali. How is the footfall across the stores, and how much conversion ratio are we achieving as of now? Those are in line with our expectations of this. The problem you have is when you compare to the Diwali period last year, it was in the middle of November, which means it had also the tailwind or the effect of the full-blown wedding season going on in November. When you pull back those numbers, you have to be able to delineate between what was Diwali for Diwali last year and what was wedding for wedding last year. You pull the Diwali numbers and layer it onto your numbers this year. Retail is a very tricky business. That's why I said, being predictive on it is not always easy. We feel that where Diwali is headed right now is right on track. Okay. Sir, one last question. Sir, just to check, any volumetric guidance you can give for FY 2025? For FY 2024, we have 15 million share. Similar, how much growth are we expecting for 2025? Aditi, if you see, historically, we have achieved ASP growth of around 3% plus or minus 1% or 2%, whatever. Right? I'm just saying hypothetically, if we achieve sales growth of 12%, then volume, if you want to arrive, if we do an ASP of 3%, then volume growth would be around 9%. Simplistically, that is how it would sort of work. Thank you. Thanks, Aditya. I think we have time for one more question. The next question is from the line of Bhumika Jain. Hello, am I on? Yes. Yeah, it is. Sir, your total sales in the quarter March 2024 was INR 515 and in this quarter your sales is INR 567 crores. There is a decline in the total sales. What is the reason behind the decline in sales from the March 2024 quarter? Can we know the reason for the decline or how is the company looking this forward? Sorry, Bhumika, not sure if I got your question right. Generally, if you see in our industry, Q2 is the smallest quarter. Q1 generally contributes around 24%-25%. Q2 is around 22%-23%. Q3 is around 27%-28%. Q4 is around 35%-36%. Right? Logical way to compare sales is not with immediate last quarter, but with last year's same quarter. That's how ideally you would see, and if you see Q2 over last year, we have grown by around 5 odd%. Okay. Sir, I have a colleague who also wants to ask a question. I'm sorry, was there a question there? Yeah. Hi, everyone. This is from Thanks. I think we've come to the end. Thank you. That was the last question for today's conference call. I would now like to hand the conference over to the management for their closing comments. I just want to thank you all for being on the call with us. We all feel the growth that we had Q2 over Q1 will continue in Q3 over Q2 as well. Thank you all. On behalf of JM Financial, we conclude this conference. Thank you for joining us, and you may now disconnect your lines.