Home Product listing Subway Brands Stock Price: Subway Brands See Significant Growth in Higher Priced Products: CEO

Subway Brands Stock Price: Subway Brands See Significant Growth in Higher Priced Products: CEO

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“We are seeing traction in the four tier cities where we operate as number one. We are seeing traction in the growth of our four concepts, namely Metro, Mochi, Walkway and Crocs, and we are seeing continued double-digit growth in our e-com business,” says Nissan-Joseph, CEO, Metro brands.

Strong pent-up demand emerged in the third quarter. Is this a one-time event or is this the trajectory you expect for the future as well?
This is our first results release after listing and the numbers were quite sensational. We increased our revenues by 59%. We increased EBITDA by 69%. What also pleases us is that we are seeing traction in the four tier cities where we operate as number one. We are seeing traction in the growth of our four concepts, namely Metro, Mochi, Walkway and Crocs, and we are seeing continued double-digit growth in our e-com business.

So to answer your question in a nutshell, we see growth coming from all markets, all levels, all channels, or all shoe categories. Yes, there is pent-up demand, mostly related to wedding season, but we’re also seeing consistent high growth in our occasional business, which isn’t necessarily pent-up demand that’s been going on for a while. We’re also surprisingly seeing that paperwork is in demand, indicating that there’s a bit of desk movement coming back.

The trajectory we’ve been on over the past 10 years has been 16% growth in our sales base and 18% growth in our earnings base. There are other issues like Omicron and we have exercised strong discipline and financial austerity in those times. We are confident that we should be able to continue to maintain the performance we have maintained over the past 10 years.

I’m just wondering if it was this discipline that led to the expansion of margins to 35%? Is it that or were you able to raise prices in some or all areas?
It’s not so much the price hike as the preference for our most expensive products. We have seen significant growth in the over Rs 3,000 category. We are also fortunate to not have a lot of business under Rs 1,000 which will be affected by GST. What we’re seeing on the fringes is just continued discipline and our own house brands continuing to grow. They increased by 300 basis points as a share of activity, from 70% to 73% in the last quarter.

There has been inflation in raw material prices and many manufacturers are facing this across the country. What has been the impact on your business, on your revenue and what is your ability to pass this on to consumers?
We maintain close relationships with our supplier base. Some of them go back three generations; so it’s number one. We are working closely with them to monitor the situation and provide them with enough data so that they can make forward-looking assumptions and start making raw material purchases and production schedules accordingly.

That said, our inventory is now stocked as we anticipated some of these supply chain disruptions and protected against them by ensuring both we had the inventory and were also able to purchase it from a time when commodity prices weren’t going through the roof. At some point, there will be a translation of this into the consumer price, but at the same time, we would not be the only ones doing this. We will probably be a little slow in increasing prices simply because we have been buying futures on both the commodity side and the inventory side. So we see that headwind coming. We are well planned for this. We also have deep supply chain capabilities that we rely on.

When do you see it starting – maybe a few more quarters? I’m trying to understand the product line you were referring to as the higher end products got a bigger share. Is this likely to continue in the short or medium term as well?
I think it’s because of our product offering in this segment. Metro believes in delivering affordable and aspirational yet high-end products, so we want to make sure we hit all three of these – it’s premium, it’s affordable, and it’s aspirational. If you look at the growth of our business, you can see that we are focused on products that bring that value to customers. It will likely lean toward the higher end of the price range.

In terms of the amount of inventory you had, when do you expect to go for price increases?
At present, we had to take a small price hike for GST adjustments for shoes under Rs 1000 and it is very small, less than 13% of our business. Of course, we keep watching it constantly to make sure we don’t miss anything. We are not seeing a general rise in prices over the next few months unless things get worse.

You had a significant addition to physical stores. What is the trajectory for the current quarter and for the current year? Where do you also see the share of online sales?
We opened 31 net stores in the fourth quarter out of a total of 65 stores that we opened this year in the first three quarters. We see this trajectory continuing to grow and that is our intention. We see many opportunities to grow our channels across the different levels and we also continue to view e-commerce as a complementary channel rather than a cannibalistic part of the business. This is not a discount for us. More than 25% of our sales come from omnichannel sales. Due to intense investment and allocation of resources towards the e-commerce channel, it has grown from less than 1% before Covid to double digits now and it continues to grow.