Ladies and gentlemen, good day and welcome to Metro Brands Q3 FY 2025 earnings conference call hosted by Axis Capital Limited. As a reminder, all participant 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 then zero on your touchtone phone. I now hand the conference over to Mr. Anuraag Lodha from Axis Capital Limited. Thank you, and over to you, sir. Yeah. Thank you. Hello, everyone. Welcome to Metro Brands Q3 FY 2025 conference call today. From the management, we have Mr. Rafique Malik, the chairman; Mrs. Farah Malik Bhanji, the managing director; Mr. Nissan Joseph, the chief executive officer; Mr. Kaushal Parekh, the chief financial officer; Mr. Mohit Dhanjal, chief operating officer; and Ms. Alisha Rafique Malik, the president, sports division, e-commerce, and CRM. Thank you everyone for joining into the call and I will now pass over the call to the management. Thanks. Thank you. Good afternoon and thank you for joining and welcome to our Q3 FY 2025 earnings call. As reported in our filings on a standalone and consolidated basis, I am pleased to share that our revenue has now gone back to double-digit growth as we reported a 10% growth over last year Q3. In addition to that, our EBITDA grew 13% to over 32% in the quarter, and our profit before tax grew 18% over the same period last year. We are pleased to see business continue to improve over the previous quarters and that growth is coming across all our banners. We had a good October and November and a decent December despite a lot of our competitors, and I dare say almost all of our competitors, going on end-of-season sale early. Our e-commerce business continues to perform to expectations, and we were able to start testing the quick commerce channel in a few markets with some success. We will continue to monitor this channel to ensure that we capitalize on any meaningful opportunity it may present to us as it continues to evolve. For the quarter, we opened a net of 22 stores, which takes us to 57 net new stores for the year. I would like to reiterate that we do intend to hit our previously stated target of 225 stores for over the two years ending FY 2026. To do that, we plan on opening 140 to 145 stores next year. We successfully launched the first Foot Locker in October and also opened the largest Crocs store in India in the Lulu Mall in Kochi. We've been conservative in our projections of new stores for Foot Locker, given the uncertainties of the BIS regulations. We currently have three more stores signed up, and we are pleased to see that the government is starting to approve factories for our partners in Southeast Asia and other geos. We will have more clarity on the supply in the next four to eight weeks, at which time we will firm up our new store plans for the coming year for Foot Locker. On the Fila front, I'm glad to report that we are done with the liquidation of all goods and we launched the first tranche of goods into our stores in October. We were very pleased with the results, although it was a small test launch, and we will progressively increase the depth of each launch starting in mid-February as we spend this coming year in repositioning the brand. As I mentioned at the previous call, the sales trajectory continues to improve and more importantly, we continue to be in our consistent guidance of margins in the 55% plus range and EBITDA in the 30% range. With that, I would like to turn the call back to the operator and open it up for 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 your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. 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 Aditya Khetan from SMIFS Institutional Equities. Please go ahead. Yeah, thank you, sir, for the opportunity. I have a couple of questions. Sir, first question, is it possible to quantify the Fila inventory liquidation loss during the quarter? Absolute figure, sir. impact on gross margins due to that was close to about 50 basis points. sir, in absolute figures, if you can share any sort of a number. Obviously, since these were discounted sales, the number would be meaningless in terms of the overall quantum. Okay, sir. Sir, my next question is, are you witnessing any sort of a change in consumer sentiment from the high premium categories to mid-range, considering the urban and the rural slowdown? Is there any change which can materially change the trend towards the premiumization journey, what we are talking about? No. What you've seen last quarter is we hit 55% in goods over INR 3,000, that continues to grow for us. We're not seeing any distinct differentiation between the urban and the rural markets when it comes to shopping for premium products at our banners. Okay. Sir, when we look at the ASP for the last six quarters, it has been largely at the same number only, INR 1,500. Sir, I believe even with seasonality, I think it should have changed. When we look at your 2022 numbers, there at least we see some seasonality or change in numbers. Now it seems like more of a bookkeeping entry only. We are keeping that, the same number only for the last six quarters. Any thoughts on this? Why is it at the same level last quarter also and this quarter also? Actually, the ASP that arrived there is based on total sales divided by quantity. Since our accessory sales are increasing, the increase in ASP that we have seen is not getting reflected. Maybe what we'll do next time around is show overall and even show maybe footwear ASPs. That would give a better flavor in terms of the growth that's happening. Okay. Also, as we've seen growth in our Walkway channel, that's going to be offset by growth in our Crocs channel. You have this balancing that happens on ASPs. When you have eight banners of business, all of them coming in at a different average ASP, when one grows, the other one also grows, it can have both a acceleration and a deceleration effect on your ASP. Got it, sir. Sir, till last quarter, we were quite confident of opening around 100 stores for FY 2025. Now I think we have toned down that guidance. Any particular reason, sir? What could be the reason for it? Sure. There's a couple of reasons for it. One of them is there's a lot of malls that are delayed in opening. We don't open a mall unless we see visibility of about 50% occupancy coming online when we open, because we find it to be quite unattractive to open stores in malls that aren't fully occupied. They don't have to be fully occupied to do that. We've had a considerable number of stores get pushed out as late as into Q1 of next fiscal year. That's one thing. I also think there's a lot of demand for retail space. You've seen multiple brands talking about opening up hundreds of stores. There is a big push for retail space. We're seeing that demand slowing down, hence the confidence comes back to us for opening our target stores for next year. Got it. Sir, any particular figure, if we can provide for the new store opening in Foot Locker, in FitFlop, and for the New Era. For FY 2026, how many stores you'll add? Right now, for FY 2026, for Foot Locker, we're taking a cautious stance till we have full visibility of our BIS initiatives and how that's going to play out because supply is critical for the Foot Locker chain. The good news is that we're not impacted by that in our core businesses. Metro, Mochi, Walkway, and even Crocs is not impacted by it at all. It is really the Foot Locker business that's impacted by it. We will hold on that till we see what's going to happen. However, we have signed up almost three stores to open in the next six to nine months of Foot Locker. It's not like we're hitting pause on it's just that we're being cautious about the growth there. The New Era business is new to us, it's also new in the country. We're going to take that cautiously. We've opened three kiosks so far. We have a few more on the books, we continue to evaluate this. These are moving targets, I don't really want to give a forward-looking statement here at this call that at some point we'll come back and you'll have to hold on to it. Rest assured, though, we feel confident we're on track to open up the 140 to 145 stores next year, which will put us in that range of that 225 stores that we talked about. Sir, just one last question. Sir, what would be the average size of the New Era average size per square foot for this segment, New Era? We don't break those numbers out typically. I'd rather not start that whole process. If you look at our investor presentation, you have a good idea of the range, of price range that we sell and what the square foot of the store itself. Sir, broadly for New Era, the average price point would be somewhere around INR 3,000 to INR 4,000. For kiosks, obviously, the size would be around 150 to 200 square feet max. Okay, sir. Thank you, sir. Thank you. The next question is from the line of Videesha Sheth from Ambit Capital. Please go ahead. Hi, good afternoon. Thank you for the opportunity. Given the lower than anticipated store addition in FY 2025, what exactly gives the confidence in terms of adding 140-150 stores in a single year? It seems to be on the higher side. Given the current subdued consumption landscape, and lack of visibility of revival, if you could just spend a minute on that, please. Videesha, I think we also had covered this in our last earning call. Post FY 2023, after that COVID bump, we saw rentals sort of shooting up. We were not comfortable signing certain leases, and we decided to go slow because these are long-term leases for seven to nine years. It doesn't make sense just to hit a number, sign something which is going to come and bite you later. What we are seeing now is slight tapering off in terms of the rental expectation, and hence it gives us that opportunity to push the pedal. We have always said, when there is too much euphoria in the market, you might see us going slightly slow. When we see the environment coming back, when there is slight pessimism in the market, that's the time when we get best rental deals, and that's what we will try and push. Nissan has alluded to certain malls which are getting pushed into next financial year. We have already signed the LOI, but those are getting pushed in the next financial year. We have some visibility in terms of what would come in H1 of next financial year. Considering that, we feel hitting that 130-140 number should be doable. However, having said that, if we do that, it would be our highest sales growth. We are aspiring to hit that number. Got it. What would be the revised growth guidance? How would you peg the current consumption environment with the 12%-15% revenue growth guidance? We would avoid giving any specific number. If you just see last three quarters, Q1 was muted, 0% sales growth. Q2 was 5%, Q3 was 10%, and Q4, there will be end of season sale as well as we see a strong dispersion of marriage dates in this quarter. That gives us confidence we should follow that trajectory that we have seen over the last three quarters, and Q4 should be reasonably good. Question, not just from the near-term perspective, but even when we talk about the next two to three years, how would you look at growth? If you see from a longer-term horizon, if you see last 10 years for us, our average sales CAGR has been around 14%, right? Which is predominantly achieved through four brands, Metro, Mochi, Walkway, and Crocs. With the newer brands, a few of them are in incubation stage, but they will all start delivering from FY 2026 onwards. That gives us confidence that if you are modeling us for a longer-term horizon, two to five years, we feel achieving a top-line CAGR of 15%-18% should be doable. Got it. Second question was just on the profitability side. Barring the impact from Fila, what would be the reason for gross margin expansion? 130 basis points of gross margin contraction. Contraction, right? Contraction, yes. Fila was one of the reasons. If you see second pointer, our e-commerce contribution has increased slightly from say about 9.5%, 10% to 11%. That also has some impact on the overall gross margins. Fila liquidation, we already discussed. Broadly, if you take these two together, that broadly explains the gross margin impact that you're seeing in last year and for current quarter. I would like to reiterate, though, the 59% margin is what we guide to. We actually guide to north of 55%, Videesha. We've hit 59% last quarter. All right. Just lastly, a follow-up to that is there a specific reason that the OPEX is increasing or is growing just by 3% to 4-odd%? Even I think last quarter, the run rate was on the lower side. Any cost control measures that you'd like to call out? In fact, many cost control measures. We generally do ground-up budgeting. At all times, all the costs are looked very carefully. We try and control costs. There are good costs which you continue to expand, which helps you to improve sales. Then there are certain costs which are discretionary in nature, depending on the sales performance, et cetera. Those are the levers that we sort of try and work on. I think you've also seen an increase in our marketing expense, which we think is critical to continuing to build the brand. Got it. That's all from my side. Thank you. Thanks. The next question is from the line of Sameer Gupta from India Infoline. Please go ahead. Hi. Good afternoon. Thanks for taking my question. Congratulations on a good set of numbers. Most of my questions have actually been answered. Just your thoughts on BIS. During the opening remarks also and in a media interview also, I heard Nissan saying about certification for factories in Southeast Asia. Which are these countries, and does that help Metro specifically? It's a step in the right direction, but specifically for Metro, are these factories which are linked to Metro in any way? And just incrementally, the situation regarding BIS uncertainty, if let's say last quarter to this quarter, would you say you're getting feelers that it is getting better and there is some resolution in sight going forward? I understand that Nike, Adidas supplier Hong Fu has set up some manufacturing in India. Just your thoughts on all these pieces. I think it's been a little bit of a moving target, and these things usually are when they implement it. What happened was in the calendar back half of last year, no factories were being certified, so there was an absolute impossible situation to import shoes in. However, in the last few weeks, we know of multiple factories in multiple countries in Southeast Asia that have started getting approved, and consequently, those products are going to start shipping and coming through soon. I do want to reiterate, though, that for the Metro Shoes and the Mochi Shoes banner, we have zero exposure because of BIS. Okay? Because we have mitigated and moved all the production we need to India, consequently, there's not an impact to our core existing business. As you know, the Foot Locker business is extremely small, and we're being cautious about it. Even Fila, we've been able to move production to India, that's not going to hold up there either. Our exposure to BIS in total is significantly very small. Having said that, we also know that a lot of the brands, beginning with Crocs and some of the brands that you mentioned, have started production in India for Indian markets and also for global markets. That's another way that we feel it'll mitigate. Overall, I think the BIS issue should resolve itself, maybe not fully, but enough for us to get a clear roadmap of what the future looks like. Just a follow-up here. Can you name some countries where the BIS certification has happened, like is it Thailand, Indonesia? Which are these countries? The two countries that I've heard of, and I want to make sure you understand that this is not absolutely validated, but I have no reason to not believe it, is that it was Vietnam and Indonesia. Great. Thank you, sir. Thank you for this. Secondly, sir, on Walkway, I just wanted to understand what's happening on this piece. I understand you don't give store-wise or format-wise guidance, but not a lot of stores have been added over the years. This is an economy segment. This is a bigger market. Just wondering if you have your strategy in place in Walkway, or you're still calibrating how you're going to address this market. Is it related to franchising versus COCO stores? Something on that regard. Sameer, we know that there is a strategy in place for Walkway. Executing a strategy takes time. It doesn't happen overnight, and you got to validate it through various tests that you run in the market, various programs you put in different stores. You have control group of stores, you have test group of stores to validate it. These are not overnight things that happen in our business. I must say that the one big value retailer that everybody admires today, without naming names, it took them quite a few years to get that model right. It's not an overnight success as we'd all like to believe and see it is. It took years to get that model right. I believe there's immense opportunity for the Walkway brand, but at the same time, like everything we do, we make sure we know what we're doing before we double down on it. That's why you've seen us be a little muted in our growth there, as we just try to focus that market. In a previous call, I had mentioned that we were going to focus first and foremost on the South and the West, and that continues to be the plan. The reason we choose that is because it doesn't have as much of a seasonality impact, so we can get one season down, and then we'll start moving into Northern climes. There is a strategy in place. Just because you're not seeing motion on the new store growth doesn't mean we're not testing out and executing against how we go from step 1 to step 5 of that strategy. Again, a follow-up here. You said it takes time to get the model right. At this point, do you believe the model is right? I think we're seeing green shoots that give us some optimism on it. Got it. That answers my question. Thanks a lot for taking all my questions. I'll come back in the queue for any follow-ups. Thank you, Sameer. The next question is from the line of Saurabh Kundu from Goldman Sachs. Please go ahead. Yeah. Thank you very much. My question, Nissan and Kaushal, is if you could please break down the sales growth that you were seeing in each of the three months this quarter, that will help us understand how you kind of progressed through the quarter, and if you could give some color also on why you saw those growths. Saurabh, just to understand your question better, breakdown, in what sense? We generally do not disclose the SSSG that we have seen. No, just your sales growth number, what were you seeing in October, November, and December, if you could break down for each of these months? Sure. Saurabh, just so we're all transparent about it, Diwali was 2 weeks earlier into October. We did see a considerable lift of sales in October. We were anticipating a little bit of a downer in November as we went against the Diwali numbers from last year, that didn't happen. We held our own, so we felt good about that. Towards the back half, it slowed down a little bit. Also because I think a lot of retailers, as we've come up on the back end of what's perceived to be a slow sales, less than anticipated sales season, I think a lot of retailers were trying to get out of inventory, we saw a lot of retailers go early with the end of season sales. Could that have muted it? That probably had an effect to us, too, because we did not feel we needed to put our products on sale any sooner. There's a number of factors, in a sense, I would say October was an A plus, November was a good B, December was a C. Right. That helps. Thank you very much. Nissan, these other retailers going on their EOSS early seems to be becoming somewhat a trend, them doing it in mid-December instead of ideally perhaps late December or early January. This obviously happens to be a quarter which is seasonally the strongest for you. It could become like a problem almost every year now it seems. Any thoughts on how to counter this, whether to start participating a little bit in these discounts or any thoughts around it will really help. Sequentially, I know that you've jumped, sales growth is impressive, but since you were coming off a low base, it could have been even better had you. Yeah, any thoughts on this? How do you counter this if it keeps happening every year? Yeah, I think it's a little bit cyclical too, right? Don't forget we've come off 2 quarters that were relatively soft for consumer goods, right? I don't speak just to ourselves, I speak to the entire space of consumer goods. It was considerably softer than anybody anticipated. We knew that with the offset of wedding dates, it was going to be challenging on the front half, right? When people are optimistic and euphoric about retail, they tend to buy heavy. If this continues, of course, will it be a challenge to us? It will be a challenge. People aren't buying products just because they're on sale. People are buying products because it's a compelling product and it's value for money. That's number one. Number two, we do have a huge customer base that waits for our EOSS sale. As late as we go in sale, you would think that everybody would have spent their money. We find that not to be true, that consumers do have a lot of. They're holding off for Metro to go on sale and Mochi to go on sale. I think it's a matter of how strong your brand is, Saurabh, that you will be able to do this. We see this in the athletic footwear industry, where we don't have a play in it today, but different brands have different inventory problems every year. They do different things every year. This will continue. It's not that everybody's going to go sooner and sooner. I do think, though, when you go 2 weeks into December into sale, it's just a sign of no retailer wants to do that. They have to do it because they've got so much inventory. Typically, that's what that means. Sorry, that's helpful. One last question. I thought the year-over-year growth or slight de-growth in sales per square feet that you reported is only at -1% now. Which is a reasonably good number, looking at the fact that you've added stores, you've added 8% stores year-over-year. You plan to add a very high percentage of stores in the next year. Assuming that you actually achieve that number, it also has an impact on the sales per square feet, right? You'll have a higher percentage of young stores in the mix. Any sort of ideas you can give to us on this sales per square feet number? Saurabh, the way we look at this is. Let me give an example. When we evaluate new stores, we hardly see what kind of sales per square foot it's going to generate. What's important for us is whether we will be able to generate and maintain or improve our margins from the new store that is coming in. A small store in a tier 3 town that's generating, say, INR 20 lakhs, I'm just giving an example here, but if it is giving me 15% PAT, I'm more than happy. In those towns, maybe you get slightly bigger space at very reasonable rentals. We are not too perturbed about how that number moves. Most important thing for us, and that's how maybe a good thing would be to evaluate a retailer is, both in conjunction, in terms of how the sales per square foot is moving and how the profitability is moving from quarter to quarter and year to year. Fair enough. Understood. Maybe EBITDA per square feet or some number like that is probably more relevant in that case. One last question, and thanks for taking all these questions. One last from my side. It was helpful that you mentioned those monthly trends. Are those trends any different in metros versus tier 2, tier 3? For example, is there more competition in metros, less in tier 2, tier 3? Any color which you could give us? No, I think the only differentiation we saw there, Saurabh, was where Diwali is important and where Diwali is not important. Where Diwali is not important, there was probably more of an evenness between October and November. Where Diwali is super important, there was more of a distortion to October's numbers than it was to November's numbers. It's really more about the locale rather than the tiering of city. Great. Thanks, Nissan. Thanks. Thank you. Saurabh. The next question is on the line of Devanshu Bansal from Emkay Global. Please go ahead. Hi, thanks for taking my question, congratulations on your return to double-digit growth. Sir, first question is towards Fila India sourcing, right? We have made a comment, as we have been able to sort of source it domestically. The question was, is it the entire design range for Fila? Have we been able to source that, or is it only a part of offering that we have been successful for Fila? I think we are growing, we're repositioning Fila this year, right, Devanshu? What that means is we're launching capsule collections to start with, then we'll increase the frequency and the width of the collection. It's an evolution as we reposition the brand, right? It's not like there's a full range that we even expected to launch back in October, November of this year. We expected to launch a very tight range because we want to reposition, and at the same time, we want to make sure we're learning as we go because we are trying to attract a different customer than where Fila used to play, right? For that reason, we haven't faced any challenges. As we evolve the range and it grows and grows, we will expand the manufacturing capabilities to appropriately fill that need. Understood. Also there is some change in royalty arrangement with Fila. Any sort of clarity as in what was it before and how does the revised arrangement sort of benefit us? Devanshu, it's obviously slightly sensitive information, we have not given the overall royalty, et cetera, percentage, absolute amount out. Just to clarify, what we have done is try to realign our royalty expense to the kind of sales ramp-up that we expect to see over the next two to three to four years. That's how the royalty would sort of hit the books of accounts, more in line with how the sales growth would happen. Just to better understand, Kaushal, is it like currently if the base of sales is low, then you may be paying a lower percentage of sales, when this base grows, that royalty percentage may increase. Is this the right way to understand it? It's not a percentage. Yeah, broadly, if you plot the sales number and the royalty number over the next three to four years, it would be more aligned to the sales growth that we expect to see. Okay, understood. A few questions on the matrices side. I'm noticing that among regions, south is seeing sort of relatively higher expansion, from a contribution perspective, that is sort of reducing from the revenue perspective. What is the reason for the slower growth in the southern region, are we sort of expecting to grow faster in that geography? Nothing much to read about, Devanshu, there. Temporary blips, a few percentage points here or there. East remains our area of focus because that's where we want to increase our presence. You will see a consistent growth across all the geographies. Nothing much to read into that. Understood. Likewise, tier 2 towns among all these tier of cities that we mentioned. There, the growth is sort of significantly lower versus the other tier of towns. Is it like there is some noticeable trend there, or we should not read much about it there as well? Again, the percentage of business, the tier 2 number has stayed pretty consistent over the last couple of quarters and years. I don't know what you're seeing on tier 2 that would lead you to think there's not that growth happening. As far as the percentage of business, like Kaushal said, it's not significant of a blip to say it's gone from 24 to 23, but it used to be 22 a few years ago. These are ranges that really happen in business as opposed to trends. Obviously, Devanshu, over a period of time for a few of our slightly matured brands, you will see expansion more in tier 3 and 4 cities. Obviously, when that happens, when you see the percentage in terms of number of stores, you will see that, say, Metro and tier 1 would keep going down slightly. However, we expect sales distribution to be more in line, so it should fall in place. Got it. Thanks for taking my questions. That's it from my end. Thank you. The next question is from the line of Gaurav Jogani from JM Financial. Please go ahead. Hi, Nissan and team. Thank you for taking my question. My first question was with regards to the tier 2 segment only. Actually, we were seeing that of total stores added, approximately 40% of the stores were added in the tier 2, tier 3 towns over the last one year. Could that be a reason why our sales per square feet has not increased because these stores are in these tier 2, tier 3 towns, though profitability has seen a better improvement versus the sales per square feet improvement? Yes, Gaurav. That is obviously one of the reasons why you see that movement in the sales per square feet. Yeah. It is not really an indicator of SSG, basically, the lowest sales per square feet. Would that be a right way to understand it? It's a combination, Gaurav, because SSGs and the expansion in tier 3, 4 regions both have impact on that number. It's not a reflection of SSG in this particular case. Sure. Okay. Sir, the next question is again with regards to the store OP. The clarification with regards to that is, the store openings that you're guiding for 125 odd stores for the next year probably, or the total 225 stores by FY 2026, would that be a gross guidance or a net guidance? Net guidance, Gaurav. This would not include the Fila or the Foot Locker stores, right? It would not include Fila, but it includes Foot Locker. Okay. Gaurav, I just want to point out, I think a lot of people missed it. When you see our store closures and you see our store openings in the previous quarters, it used to include relocations. If we show up as a closed store on a closed store list and we show up as a new store on a new store list, the net would be zero, of course, zero store growth. Now, I don't know if you picked it up, but we started reporting it fully as a clean number. If we relocated, we just considered it as a existing store. Got it. There was actually difference in the Q1, Q2 numbers because of that. Yes, we did notice that. Okay. Nissan, last and final question from my end is, in terms of the margins, we see that the margins are already at a healthy level, though we have seen some gross margin contraction during this quarter, A, because of the Fila 50 base law that we see One of the other reasons that Kaushal mentioned. How should one think about the margin here on a medium-term basis, say, the next 4 quarters? Can we expect steady EBITDA margin expansion and not the gross margin expansion from the current levels, given that the Fila losses will now come out and probably that would turn to the path of profitability, which it's not contributing right now? You should expect that. I must caution you that from quarter to quarter, they have different margins because in Q4 we go into End of Season Sales, the growth margins will be slightly dampened compared to Q3. That's number 1, right? You are absolutely right that now that Fila is behind us, overall that's accretive to our margin structure. That's probably a true statement on your part. Gaurav, just wanted to remind that we do have good amount of our costs which are already variable in nature. Beyond a point, we don't expect significant synergies to sort of come in. Having said that, if our overall top-line growth is upward of 15%, obviously you will see benefits flowing through in EBITDA. Sure. Thank you. Thank you for taking my question. That's all. The next question is from the line of Vicky Punjabi from UTI Mutual Fund. Please go ahead. Hi. Thanks for taking the question. Just quickly, again, on the revenue per square feet decline of 1%, I mean, see the context of this environment was it's coming on the back of a 10% decline last year. We had much better number of wedding days and the expansion at 8%-9%, whatever, 9% or 10% kind of odd retail space expansion doesn't seem to be saying that we should have seen a decline at least on a revenue per square feet basis. I mean, I'm just thinking, how do I read into this in terms of performance? Vicky, even last year, we didn't see a decline. We saw 6%, 7% growth. We also just discussed addition of stores in tier 3, 4 towns. No, Kaushal. Sorry, Kaushal. I meant revenue per square feet, which was down 10% last year, not the total revenue. Q3. Okay. Sorry, Vicky, revenue per square feet. Are you referring to any particular slide of the presentation or? Last year, as per at least what data I have, last year it was at INR 5,200, this year it's INR 5,150. Correct? Yeah. I think the last year, INR 5,200 itself was almost a double-digit decline, it came off a base of INR 5,750. You're comparing with FY 2023 and obviously FY 2023- Yes All of us know, right? It was a bumper year with all sorts of revenge buying, wardrobe refresh, whatever you call, across all categories. We clearly saw that COVID bump and pent-up demand coming in there. Frankly, that was not a terrible number. If you see our sales per square foot, pre-COVID, it used to be around INR 17,500, INR 17,000 thereabout, which is currently around INR 19,000-INR 20,000. We have seen a healthy growth, if you just put those numbers and see growth over last three, four years. Also prior to that, we had a lot more as a percentage of our business, Vicky, we had a lot more Crocs stores than we do today. I think you all question why we hadn't grown Metro and Mochi as aggressively as we grew Crocs previously. We started growing Metro and Mochi, and of course one of the effects of growing Metro and Mochi versus Crocs is that it is going to be slightly dilutive to our sales per square foot because the sales per square foot for Crocs are extremely high. As you know, they're 500-600 square foot stores with high productivity. That's just the nature of the beast. Okay. This is more of a mix effect is what's playing out on a year-over-year basis. Correct. Okay. Crocs, it seems like the unisex performance was very subdued this quarter. Was there anything which is one-off in this? We don't see the subdued in the unisex business like you do. Don't forget the unisex business is more than just Crocs. It's also slides. That might shift from one brand to another. It's not necessarily specific to Crocs. Okay. Sure. Thanks. That's it from my side. Thank you. The next question is from the line of Umang Mehta from Kotak Securities. Please go ahead. Hi. Thanks, Nissan and Kaushal for the opportunity. My question was on the store addition you are planning to do next year, 140 odd. Last year you added 10 cities. Any rough sense of how many cities these stores will add on your overall kind of city count? Broadly, you should see us adding, say around 25 to 40 new cities. We try to sort of expand in a way that it's predominantly not contributed by new cities. Maybe 60 odd% coming in from the existing cities where we are already present and 30, 40% coming in from the new store and new city that we open. Broadly, you can assume that we would penetrate to further 25 to 40 new cities in next year. Understood. That helps. The second question was on Fila. From whatever you said, it appeared like you have a fixed royalty agreement with them. Typically, in other retail businesses, we feel that generally the number is variable. My question is this fixed number throughout the life of the deal, or is it fixed in the initial few years, then scales as you're ramping up to a certain level? Well, I'm not going to speak specifically to the Fila deal, because we do like to have some confidential competitive information. However, most deals, you'll find, Umang, have a combination of either a minimum or a percentage variable, whichever is higher. It has multiple ways you slice and dice between those two numbers. Got it. Understood. Just one last one. I know it's still early days, but what percentage of your network is already selling Fila merchandise, the new one, which you've already introduced? Close to about 90 MBOs-100 MBOs of Metro Mochi. It is getting sold in Foot Locker and obviously in the two Fila EBOs as well. Got it. Thanks a lot. All the best. Thanks. The next question is from the line of Saurav Mondal from RK Advisory. Please go ahead. Hello. Thank you for the opportunity. My first question is what is your view on real estate cost going forward? Do you feel it will come down significantly or at a reasonable level? Because we are planning to add a significant number of stores going ahead. Yeah. I don't see real estate in India coming down in any of the spaces, regardless of whether it's business or commercial or personal, right? In an economy that's growing like ours, you're going to see that continue to hold its value at the very least. I think you've seen that there are other retailers that posted a net negative store growth, indicating that those rents were probably unbearable that they signed on to. Right now, whether they did it in the last year, or they did it in the last three years, whatever the number might be. We're not anticipating, nor are we factoring in a reduction in rentals. We just think there's a tapering off of rental costs coming in. If we exactly go with our guidance that we will anyhow add the remaining stores of our previous guidance. It will actually increase our rent and increase our costs. If the revenue growth is like this, then there will be a big problem, big pressure on the bottom line. You know what? We will not open stores to open stores. We will only open stores if they meet our revenue and profit targets, right? It's not a square foot game. It is not a store number game. To your point, are you asking me, is there a risk if we open 140? We feel there's enough real estate growth opportunities for us without putting our growth numbers at risk, without putting our profit at risk. Great. Can you share what% of stores are in fixed rent basis? We'd rather not divulge that number. It's a moving number, right? I can assure you that a lot of our stores do have an option of variable rent. Oh, okay. My next question is, what is the contribution of New Era you are expecting in revenue, say, after two, three years? What is the estimated addressable market size for New Era? We're still testing the market. As you know, the headwear industry in India is not as evolved as in other countries. I think it's an up-and-coming fashion statement. Again, we hesitate to give that kind of guidance numbers because we're not here to hit a target number. We're here to capitalize on the opportunities in a profitable way, right? You've seen us open three kiosks. We're selling New Era in Foot Locker. We're selling it online. As we see that, we also see the sports ecosystem growing, and this falls right into that fan base of the sport ecosystem. There's a lot of levers or tailwinds that come to this category. It's not going to be a significant portion of our business down the road, but it augments what we're doing in the sports space very well. Okay. Considering the macroeconomic situation and sentiment of the people in the retail sector and all of this, where do you see the growth coming from? This New Era, the price category is very, very high, and the Foot Locker is also a high price category. Where do you see the growth coming from? From footwear. We are a footwear retailer first and foremost, we'll continue to be a footwear retailer. We see a lot of demand for the products when the season is right. We see a lot of demand for Foot Locker products. In fact, we were quite disappointed that some of our shipments had to be canceled because of BIS. It's not a lack of demand. I think when we talk about consumer spending being muted, it's really not muted. If you look at the international flights are up. 70% of vacations today are international, versus three years ago, when it was exactly the other way around, where only 30% was international and 70% was domestic. Consumers are spending money. It's just a cyclical thing that happens. We don't believe that we see any reason to be concerned about a slowdown of demand in the Indian economy for footwear, which is where we focus on. Okay. Thank you, guys. Thanks. The next question is from the line of Kinjal Motha from VanEck Advisors. Please go ahead. Hi. Thank you for the opportunity. I just have a follow-up to one of the questions that was already asked. It's related to ASP of 1,500. As you mentioned that it is coming down because of accessories mix. If I try to understand, accessories account for what? Around 10%, 11%, which would be around less than INR 500. Still around 88% of sales come from price point, which is more than 1,500. I'm just trying to understand that how does this math work overall? In terms of quantities, the numbers are really high. Take for example, Crocs Jibbitz. These are like 250, INR 300 Jibbitz, which are counted as one unit. Because of that reason, the ASP looks muted. As I mentioned, we would add from next quarter onwards, overall ASPs. Broadly, we have seen increase in our ASPs and we see it for footwear. Kinjal, I think we're minimizing the impact of low price items, right? If you think about it, if a Crocs shoe, and I'm just going to give you an example, if a Crocs shoe sells for INR 5,000 and they buy five Jibbitz with it or six Jibbitz with it, which is not unusual, right? Now, all of a sudden you have about an 1,800, 6,800 pair transaction, 6,800 and the ASP is now shooting down, right? Six things bring that ASP down against that one shoe. It is significant whereas the sales did not increase that much. It's not like even a 1% or 2% delta in increase in accessories can create quite a lowering of the ASPs for overall ASPs. Having said that, I think we will probably want to start giving guidance in the future on footwear ASPs, we will consider that. Yes, that would be very helpful. Thank you. Thank you. The next question is from the line of Ankit Kedia from PhillipCapital. Please go ahead. A couple of questions from my side. First is on Fila. We had a first drop in October, November. How is the response of that in the two EBOs and 9,200 Metro, Mochi stores first? We're quite optimistic about that drop. When you think about the fact that the brand has been absent in the market for quite a while, to get that kind of response was good. I must reiterate, it was a small drop, Ankit. That's how we do things, right? We test it, we iterate, we test, we reiterate, and so on and so forth. Before the expansion in second half of FY 2026, how many drops are expected? With domestic manufacturing coming in, what is the sweet ASP spot you are considering now, given that in Foot Locker also we would have put some Fila products. What's the learning for Fila coming from Foot Locker as well for us, going forward to manufacture what kind of products? Where do you think Fila will fit in now? Yeah. What we're learning as we go, first of all, to answer your first question, we're probably going to have 2-3 drops a season as we go forward. That's the first thing. As we drop every season, every drop we expand how many stores it goes to as well. It's a double expansion. There's a few more drops coming and they'll go to a few more stores in our portfolio, right? That's number 1. Number 2, what we're really finding is that the consumer appreciates good sports-inspired fashion. We learned that from our Foot Locker stores, and we also learned that from our Metro, Mochi stores that carry the product. Just a carry forward question. Over next one year, how many Metro, Mochi stores have a potential to keep the new pricing Fila footwear? We believe that number is at least around the 300 number over the next few seasons, as we start to expand it. Sure. Given that you have guided for 140 stores ex of Fila, and from second half of FY 2026, Fila EBOs will also start. Can we assume an incremental high single digit to near double digit Fila EBOs on addition to your 140-store guidance? Yeah. I think, listen, we look at Fila with a long runway, as opposed to want to do it fast and furious and then make mistakes and regret it later. We believe that in August of this year, we should be looking at about five to six stores at least, and then we would then iterate from there and then close out the year with a number greater than that. Sure. My last question is on Foot Locker. Given that we have had two months, three months of Foot Locker now, where do you think is the demand supply gap in Foot Locker today? What kind of inventory you are not getting to expand? Is it consumers wanting a particular brand, which is there, a particular type of product which is missing from the portfolio? We're fortunate that every brand in India that is meaningful to the athletic lifestyle consumer has supported us by providing us footwear. What has not happened is getting that heat product, which is what drives differentiation for a Foot Locker. That's where we've not had the luck because of BIS. That's a big difference between what we see. It's not limited to a single brand, it's all brands. On an average, if you could just share what could be the bill value for Foot Locker today. I'm not asking for the ASP. If you can share an ASP, good for us, what will be the typical bill value compared into a Metro Mochi to a Foot Locker, just to help us in comparison the difference. Yeah. Just so you know, when we look at the Foot Locker banner, the price ranges between INR 6,000 and INR 19,000, right? Whereas when you look at Metro and Mochi, it goes from INR 1,000 to INR 10,000 and so on and so forth. That automatically tell you that the Foot Locker average ticket size will be significantly bigger than that of anything else we have in our chain. Yeah, the range you are telling us is very high, right? From two months experience, if you can give us a smaller range. We'd like to keep the information a little bit closer to the vest, if you don't mind. Rest assured that we are quite pleased with the ASPs and the average transaction value coming out of these stores. Just as a data point, I can tell you, for example, even New Era sells extremely well in a Foot Locker store. Somebody, I think, mentioned that these are high-priced products earlier on in the call. That gives you an idea of the kind of transactional value you can have in a Foot Locker. Thank you, all the best, Nissan. Thanks, Ankit. The next question is from the line of Pralin Nandu from Edelweiss Public Alternatives. Please go ahead. Yeah. Hi, Nissan. Thank you for giving me this opportunity. A few questions, partially you answered these questions, but let me just try it in a different manner. The first question is on this reduction in rental or some muted growth there. Is this a reflection of overall slowdown in retail, right? Is this more specific to the footwear as a category that you are witnessing, and how should one think whether this is just a start and maybe this could go on for longer, given that some of your competitors are seeing the net closures of stores? How should one think about these muted growth in rental with the competitive intensity? I want to make sure I clarify. We're not seeing rentals coming down. We're seeing them flattening out, right? That's a good thing because you don't want to keep signing on and signing on as rentals are climbing and climbing. You want to make sure that it's at least normalized a little bit. We don't see rentals coming down for a bit, but we do see the fact that we're able to negotiate a little bit better because it's not like you're going to have 10 people looking for the same spot all of a sudden because the other nine people have realized that these aren't as easy things to do. Unfortunately, after COVID, we had quite a few people think that retail was quite easy to do and started opening up stores like crazy, and that put a lot of pressure. Not only do they open a lot of stores, Pralin, take a lot of the inventory out there, they also didn't realize what good rentals should be in markets, right? Some of them were overpaying. We know they were overpaying for that market, but it could have been their lack of expertise in that market. India is a very tricky market to get data information. Anyhow, that has happened. We don't see it coming down necessarily, but we at least see it flattening off. In some cases, it's really we're able to negotiate a little bit better rentals than we would have in the past, where we wouldn't even had a chance to negotiate because before you blink, it's gone. Thank you for that. The second question, Nissan, would be on gross margins, right? While you said that you have guided for 55%, you did 58%. My question is more in terms of medium-term outlook, let's say on a three-year basis, right? Because you mentioned that before COVID you were doing 14% growth. It should be higher now that you have brands and some of these brands are premium. Also, there should be a lot of localization benefit, not just for your core brands of Metro and Mochi, but also for some of these other brands who are starting manufacturing in India. Could you just help us understand from a medium-term perspective, are there more tailwinds to the gross margins, or do you see any headwinds coming on the gross margin side? Yeah. We don't see any headwinds on the gross margin side. I do want to make it clear that when you look at just that one number, there can be multiple factors that drive it up or down, right? One factor that drives it up is if we sell more of our private label products, our own branded products. A factor that could drive it down is we sold a lot of outside brands. For example, Foot Locker is almost 100% outside brands, so the gross margins there would be diluted to the rest of our margins. However, when you look at the profitability, there are other costs we don't pay for. A good example is while my margins are good in Metro products that we make ourselves, we also have incredible investments into design and development and sourcing costs, which I have none when I go with an outside brand. You don't want to get fixated on that number to say that is the end all and be all. What we really want to look through is how does that flow through to the profit line, right? Last quarter, I know people are quite all over about our sales number and so on and so forth, but I think we missed the fact that on a PBT level, we had a 23% profit, which is, I would say, is industry leading. These are numbers that we're very proud of, number one. At the same time, we will always continue to look for ways to improve that number. There's also balance. We want to give our customers affordable value, affordable premium products, right? One of the things you're technically doing is you keep increasing your gross margins. Of course, you're lowering your input cost, but you're also charging more than you probably should. We feel that's a sweet spot for our consumers to continue to see value in shopping our products. That's great. Thank you so much. Last question would be on the Walkway, or the value format. You talked about one of the very famous value retailer, and it took them many years. We are, in a way, trying to fine-tune that model. What is it that is most difficult for you to make a transition from a very successful Metro and Mochi retailer to a value retailer? What is it that is taking a lot of time? Is it this whole value quotient, or can you just help us understand? Where are we now? If you were to rate it out of 10, we have crossed six there. Where are we now, and how big can that be an opportunity? Could it be as big as Mochi and Metro combined? Some color on the value format. That's my question. Yeah. There are many moving parts to getting retail right, okay? It is about how fast you can refresh products to keep excitement in there. It's how can you source while getting efficiencies of scale in sourcing, because that leads to lower costs, that leads to lower retail prices, which is what you're trying to accomplish. How do you get throughput from a store when you're selling low-value items and you need high throughput? How do you get throughput out of 1,100 square foot stores? Again, I'm giving you all the questions that we have to get answered well before we say we have this model right. I think to answer your question, on a scale of one to 10, I would say three years ago we were at a zero because we didn't even know if we should do this business. Today, I'd say we're at a six. That's great, Nissan. Thanks a lot and all the very best. Thanks, Pralin. The next question is from the line of Rahul Agarwal from Ikigai Asset Management. Please go ahead. Hi, good evening. Thank you for the opportunity. Just two questions. One on the balance sheet, one on cash flow. On inventory, I think we had some higher than normal stocking to take care of BIS. If you guys can help me, where are we now on inventory levels? Second, on the operating cash flow generation for nine months, what's the gross cash balance as of December 2024, and thoughts on utilizing the extra cash which you have. Thank you. Broadly, we have seen improvement in our working capital levels from around 82 days to around 76 days as of December. There is an improvement there. We have seen our inventory levels sort of rationalize. In terms of overall cash balance, we have a treasury which is somewhere close around INR 900 crores to INR 1,000 crores. In terms of utilization, your last question, we keep evaluating various opportunities. As a policy, you would have seen since many, many years, we have distributed 25% of the PAT that we earn in the year as dividends. There are many avenues that we are evaluating, but you can be rest assured we'll evaluate everything with that ROI lens in mind, just to make sure that it doesn't impact the overall ROCEs of the company. Thank you so much, Kaushal. All the best. Thank you. Thank you. The next question is from the line of Saurabh Kundu from Goldman Sachs. Please go ahead. Yeah. Thank you for the opportunity again. Still early days, but my question is on North and East Crocs business. Any changes you're seeing there in the sense that, is there high competition from the other operator? I know it's early days, but generally, anything you can share on the North and East Crocs business? Yeah. Saurabh, to your point, it is early days because we were quite well penetrated there in the North and the East and the malls that were meaningful. Now it'll be a new mall play. It'll be maybe a tier 2 outlet play for Crocs to start with. But as that grows, it'll continue to be there, be stronger than before. However, don't forget two things. One is I do get to keep and run and continue to operate all the Crocs stores that we do have in the North and the East, number 1. Number 2, we have Metro and Mochis in those markets, where we would probably now also be selling Crocs a little differently if we don't have a Crocs store. When we have a Crocs store open up on top of a Metro or a Mochi, for example, we downplay the Crocs in a Metro or Mochi because we know it's not going to have the same rate of sales as it used to. We try to get another brand in there. We get some more of a different product in there, like a flip-flop or what have you. Now there would be no reason for me to downplay it. I would continue to be just as business as usual and see what we can get through our store, our staff service that we offer, our brand reputation of serving customers for many, many decades. I think it's a play that I don't think will have a significant impact to us in any period of time, though it'll have a growing impact, but it won't be significant. Got it. Fair enough. I think earlier, I know you will not like to break down the 140, 145 stores that you want to add in FY 2026. Is it fair to assume that on a% growth basis, if I look at the different banners that you have, obviously I'm talking about% growth here. Obviously, the Crocs growth will be lower, right? Or if you could just let us know a ballpark number of Crocs that you can now add, now that you have only South and West, or you aspire to add over the next three, four years. We've been adding about 20 to 30 Crocs stores a year for the last few years. Obviously, if you go back before that, we opened quite a few. You'd know that, Saurabh. I don't see any reason for that number to be significantly different just because we're limited to the South and the West. Don't forget, we chose the South and the West when this whole thing happened because we saw lots of operational gaps, lots of white space opportunity gaps that we could go after in the South and the West. I believe that while we won't have 50 stores open, because we haven't had 50 Crocs stores open in a long time, I don't think 20 is going to be an unreasonable number. 20 for a year. Right. Thanks for that. Very helpful. Last question from my end. I wanted to understand the Foot Locker agreement a little better. It'll really help if you could share if you have any benefits from the online sales part of the business as well. Is there any economic benefit, any profit that you get from the sales that happen on the Nykaa platform? Yes. Just so you know, we actually supply the products to the Nykaa platform. All those products ship out of our DC. Of course, in all fairness, we get paid for our input costs and all the other- Broadly, the warehousing margin. Margin would be applicable. There is a small margin in there. It's not that we benefit vastly from it. We obviously benefit vastly from the store sales. Sure. Any costs, you get the warehousing margins. Okay, that makes sense. Great. Thanks a lot. Thank you. Ladies and gentlemen, that was the last question for today's conference call. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.