Metro Brands stock up 7%, nears 52-week high on biz pact with New Era

Shares of Metro Brands rallied 7 per cent to Rs 1,430.10 on the BSE in Friday’s intra-day trade after New Era Cap, the New York-based brand revolutionizing headwear in sports fashion, signed a long-term licensing agreement with the company.  In the past two trading days, the stock has gained 9.4 per cent.

Metro Brands is one of India’s largest footwear and accessories specialty. The stock was trading close to its 52-week high of Rs 1,440.45 touched on November 30, 2023. It has bounced back 44 per cent from its 52-week low of Rs 992.65 touched on June 4, 2024.

In an exchange filing, Metro Brands said this partnership will expand the retail presence of New Era in India and deepen the company’s retail expansion in the athleisure market.

 

Under the terms of the agreement, Metro Brands is granted exclusive rights for the distribution and sale of New Era products including headwear, apparel and accessories through retail stores and shopping kiosks. They will hold rights to channel online sales through their own websites, New Era sites and online marketplaces. New Era will also be present in the coming Foot Locker stores in India.

The Indian headwear market has thrived through e-commerce. Recognizing the potential for retail expansion, Metro Brands plans to strategically penetrate the market by integrating sports culture into the cap industry with New Era.

Metro Brands, with over 800 stores across India, is gearing up to open the first Foot Locker store in the country. Within the Metro Brands family, an array of brands, including iconic Indian labels like Metro Shoes, Mochi and popular international choices like Crocs, FitFlop and Fila, have prospered.

Meanwhile, the board of directors of Metro Brands are scheduled to meet on today, August 9, 2024 to consider and approve the unaudited financial results for the quarter ended June 30, 2024 (Q1FY25).

Motilal Oswal Financial Services (MOFSL) in the March quarter (Q4FY24) result update said that in the near term, the brokerage firm believes that the risk of soft demand, delayed BIS implementation was affecting FILA’s repositioning, and a moderation in margins could weigh on growth. But, in the long term, healthy store economics, steady store adds and growth opportunity in Fila/Foot Locker should drive growth.

A combination of superior store economics and a strong runway of growth should allow Metro to garner rich valuations going ahead. The brokerage firm said that they have not factored in Fila and Foot Locker earnings, but believe it has revenue potential of Rs 1,500-Rs 2,000 crore over the next 3-5 years (i.e. 30-40 per cent share of Metro). However, currently the stock is trading above MOFSL’s target price of Rs 1,350 per share.