Thread by @jshilanjanm

Puma's India sales in FY22 > Adidas + Nike + Reebok + Skechers + Asics combined 👏👏

But, that domination is about to change, courtesy of Metro Brands, which is gearing up to bring in some disruption in the premium athleisure segment with FILA.

Let’s start with the basics 👇

Metro Brands is India’s most profitable (net margin wise) and fastest-growing listed footwear retailer in India.

It operates brands like:
Metro Shoes, Walkway, daVinchi, Cheemo, Fitflop, Mochi & Crocs.

But, hey! That was the list until Oct ’22 when it acquired Cravatex Brands, with which it bagged the sale & distribution rights of FILA across all physical and online channels in India, Pakistan, Sri Lanka, Bangladesh, Nepal & Bhutan.

Italy-based FILA is one of the largest footwear-first athleisure brands globally.

But, here, in India, Fila had been losing badly so far, with mere 25 small stores pan-India. Compare that to competitors:

578: Puma
353: Adidas
300: Skechers
216: Reebok
133: Nike
55: Asics

In fact, Puma’s 578 stores did ~Rs 3k cr of sales in FY22. That’s Rs 5.2cr per store. Compared to that, FILA’s 25 stores did ~Rs 25 cr of sales in FY22. That’s a crore per store.

Puma operates 23x stores and does 86x sales!! 🤯🤯

That’s too bad, given at a global scale, Puma & Fila’s sales are almost similar. Both in $8-10bn annual range!

This is because Cravatex had for long been struggling financially, and FILA suffered. Plus, it had been more focused on expanding its own brand Proline.

But, Metro Brands saw a lot of potential in the brand and thus went in. In fact, rights to FILA is the reason why Metro acquired Cravatex.

So, what made it so interested?

Despite being one of the largest & fastest-growing footwear retailers in India, it didn’t own any sports brand of its own.

Given athleisure is the fastest-growing category within footwear, if Metro could grow so fast without it, imagine how much better it could do with it.

+ Fila has been growing like crazy in China, which has similar population dynamics. It recently displaced Adidas as the 2nd biggest athleisure brand after Nike. It’s now vying for the top spot, and given the rate at which it’s growing (~4x in 5 years), the day is not far.

+ Fila’s operator in China, Anta Sports has been working with fabulous margins. This comes as a big lure for Metro, which is also known to be the have highest net margin among competitors. Thus, a perfect match.

+ The premium athleisure category enjoys high brand loyalty, and that means a lot to a company like Metro with avg selling price in the range of Rs 1.4-1.5k. FILA's avg selling price is >2x of that!

But, okay, wait a sec!

So what if Metro has acquired Fila’s rights in India? How does that assure, that Fila will grow now? Or that its presence will expand?

Firstly, Metro has a record of scaling brand stores in a big way, once the demand is established.

Take Crocs. Metro has more than doubled the CROCS store count from ~80 to 200+ in 5 years! 🚀

+ Metro is a cash flow generation beast, with enough fuel to power FILA’s much-needed store expansion 💰

+ Its revenue & consumer preference insights from 700+ locations is a big asset, which it will surely use when rolling-out new exclusive brand outlets (EBOs) for FILA, just as it did for Crocs

+ The premium sportswear category predominantly operates through EBOs. And Metro is the best in the game with the highest sales yield per square foot among listed competitors!

+ A recent ET report cited unnamed Metro officials stating that they are internally planning to expand FILA’s presence 10x in the next 5 years. That would be 250 stores!

As and when that actually happens, within 5 years, in terms of store count, it will have taken over Asics, Nike & Reebok 🔥

My opinion (not recommendation), in a nutshell:

Prospects are really bright for Metro's long-term investors.

The company now has an all-new potential growth driver in FILA which is a & big powerful brand 💪

Especially so in a country like India, which is much similar to China in terms of demographics, and also has a fast-growing aspirational middle class which sees big brands as a display of an upgrade in lifestyle 😅

For Metro, the upside is also huge because it also marks its entry into the sportswear segment, given FILA doesn’t just sell footwear but also other accessories & apparel in the athleisure segment 👚🎽👕

Thus, this could also pave the way for a larger expansion into sports apparel which is an even bigger market. But, that’s something time will tell.
And that’s big!

🚀🚀

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