Nissan Joseph, chief executive officer of Metro Brands Ltd. on the strategies and core principles that have helped the footwear player transition from a family-run business to a professional entity boasting a Rs 2000 crore revenue
New Delhi: Metro Brands Ltd. (MBL) has been a company with sound financials. Its net profit in fiscal year (FY) 2019 stood at Rs152.7 crore, in FY 2020 stood at Rs160.6 crore and in FY 2021 it stood at Rs 64.6 crore as reported by leading business media.
In FY 2022 after it went public, its profit after tax (PAT) was Rs 214 crore with 231% year-over-year (y-o-y) growth. Its PAT in FY 2023 was Rs 365 crore with 71% y-o-y growth. MBL ended the June 2023 quarter on a high note with PAT of Rs 93.50 crore.
Chief Executive Officer of the company Nissan Joseph attributes this to financial prudence, which has been the DNA of the family-owned business that was started in 1955 by Abdul Malik Tejani who bought the store he was working at in Colaba, Mumbai. His son Rafique A. Malik nurtured the business with passion and hard work making it a national brand.
“The promoters have done an outstanding job of getting all the right disciplines, the right metrics and rigours in place,” said Joseph.
Over the years, MBL mushroomed into a national footwear chain with its own as well as third-party brands like Crocs under its hood, selling footwear, footcare products and accessories such as belts, bags, socks and wallets.
MBL managed to transition smoothly from being a family-owned, family-run business into a professionally-run entity, and with Joseph stepping in armed with an MBA degree in International Business from Western Sydney University and two decades of global experience, it was ready for its next phase of growth.
Speaking of growth
In the last two years, MBL has grown on many fronts. Its store count grew by 115 from FY 2022 to FY 2023. Its revenue grew from Rs 1,343 crore in FY2022 to R2,127 crore in FY2023. In FY 2023, its e-commerce revenue grew by 48% y-o-y. Its presence grew from 142 cities to 174 cities. In the first quarter of FY 2024, the company opened 27 new stores, taking its tally to 756 stores. It added 8 new cities since 31 March 2023 to be present in 182 cities.
In addition, MBL added a couple of brands to its existing portfolio of own brands comprising Metro Shoes, Mochi, Walkway and third-party brands including Crocs that it had partnered with in 2015 to run exclusive stores. The new additions include British footwear brand Fitflop, which it brought to India in April 2022, and Fila and Proline from Cravatex Brands, which MBL acquired in October 2022.
Cravatex was engaged in retail, brand licensing, distribution and sourcing of footwear. It held an exclusive long-term license for the Italian sportswear brand Fila and owned the sportswear brand Proline. It also represented other international brands.
“Since COVID-19, consumers wanted to get more casual and invested in their wellness, which led them to buy more sports and sports-related goods. We saw that as a huge white space in our portfolio of brands,” said Joseph about the acquisition. He explained that while MBL sold Skechers, Adidas and Puma, it wanted to have its brand on the shelves to ensure that MBL could meet the needs of every kind of sportswear consumer.
When evaluating new brands to onboard or introduce, MBL applies a simple filter: Customer relevance. “While our strategy is to make sure that we’re owning a much larger part of the customer’s footwear wardrobe,” said the CEO. “We will only add brands if they are meaningful to our customers, and hence be meaningful to our business,” he said.
Geography matters
Metro Brands has set its sights on opening about 200 stores in two years i.e. by 2025. While metros and tier 1 still present opportunities to open more stores, tier 2 and 3 cities offer good future potential for the company.
Currently, the company’s deepest penetrated markets for its offline stores are South and West India, with East being the least penetrated due to serviceability issues.
When evaluating places to open new stores, MBL uses its e-commerce business to point the way. “We see certain trends that come from our e-commerce business… some zip codes come to light where we don’t have a store nearby or we think we’re underserving. We use the e-commerce data to also point the way to us as to where we should be going and also affirm where we are already,” said Joseph, emphasising that it is just one of the data points that MBL uses to figure out its growth strategy.
The balancing act
While expansion is part of the plan, MBL takes a balanced approach to growth, ensuring it doesn’t come at the cost of profitability. “Finding that perfect equilibrium between sales, revenue, profitability, market penetration, and segmentation is the key to sustainable growth,” Joseph said, adding that they don’t believe in opening 100 stores and only to later close 60.
This approach also means that Metro Brands doesn’t open stores purely because everyone else is doing it.
“We don’t make any decisions because of ego,” he said citing the example of its store in Delhi’s famous Connaught Place that it shut due to lack of feasibility. While it continued to be a sought-after locality for businesses and a status symbol, Metro refrained until June this year to open a store there again. “We have that kind of financial discipline that says we’re not going to open a store if it doesn’t do well,” the CEO explained.
He explained that as a business MBL prioritises sustainable growth and therefore is not looking at aggressive numbers despite having the capital.
“We have a sizable war chest, which we can deploy should the right opportunity come by. We are constantly measuring our capital allocation against returns for the shareholder, measuring how we’re investing our time, our talent and our capital,” he said.
Metro’s store opening strategy
MBL’s real estate growth strategy can be broken into three distinct buckets:
- Clustering: Opening stores in catchments that the company understands and serves well.
- Backfill strategy: Opening stores of other brands from the company’s stable in a locality where its first store is doing well. For instance, if the Metro Shoes store in a town is doing well, the company evaluates the demographics of the sales and considers opening stores of Mochi, Crocs or Walkway.
- New store growth: This is a foray into a new market, including entering new localities in an existing market. For instance, opening a store in a new neighbourhood in a place like Navi Mumbai where Metro is already present.
“When opening new stores MBL strikes a balance between all the above three buckets to make sure you’re capturing the opportunities while mitigating risk,” Joseph said.
Success secrets
Over the last six decades, the company has grown slowly, steadily and most importantly profitably, as its financials reveal. It has managed to evolve and change with the times and consumers and is a respectable name in the industry. One of the pillars of success is an asset-light model.
“We adopt an asset-light approach, partnering with trusted third-party vendors for all our footwear and product sourcing. Rather than pursuing costly backward integration into manufacturing, we prioritise offering a diverse range of products in various designs, colours and sizes across different footwear categories,” the company said in its annual report for FY 2022-2023.
Additionally, its scale of operations and strong supplier network enable it to leverage better margins with vendors and enter into arrangements with third-party brands on favourable terms. As of March 2023, the company had 250 vendors in its network.
According to Joseph, MBL’s success formula is no secret. “What we do is not amazing. It’s not like Coca-Cola’s formula that we keep under lock and key. We do the basics of retail but, we do it every single day,” said the CEO who said the team is constantly looking for an opportunity to improve operations.
The team also looks for operational red flags—the proverbial faulty O-ring that caused the Columbia Space Shuttle to blow up.
“We’re all looking for the O-ring together, if there’s one to be found. But if we do find it, we will quickly recover,” said Joseph speaking about the company’s ability to respond quickly to challenges.
Every Monday at 10 am team leaders huddle to discuss issues they’re facing—the O-rings they found that need to be addressed,” explained Joseph whose purpose for the company and all its 5200 employees is to ‘Get Everyone on their Feet’.
