Metro Brands shares may rise 28% on sports and athleisure opportunity: Goldman Sachs

Branded footwear's penetration in India is rising, according to Goldman Sachs, which cited a drop in market share of the unbranded footwear segment to 75% from 85% earlier.

"Global trends suggest that as the footwear market grows, 40% to 60% of the market share gets consolidated with the top 15 brands," Goldman Sachs wrote in its note. Therefore, the brokerage sees organised multi-brand retailers to be the best positioned to capture the rising brand penetration.

Goldman Sachs believes that Metro Brands will start scaling up Fila in the financial year 2025 through its existing Metro and Mochi store network, new Fila exclusive brand outlets and online channels.

The brokerage sees Metro Brands' Sports & Athleisure contributing to nearly 17% of its revenue by financial year 2035.

"We are confident of Fila scale up given Metro Brands' past execution track record with third party premium brand Crocs with store count rising from 12 to 200 in eight years, and expertise in operating in premium segments," the note said.

Metro Brands is better positioned with regards to key structural trends like premiumisation and rising sports & athleisure penetration, according to Goldman Sachs.

Bata's new initiatives towards portfolio premiumisation and increase in marketing spending has not managed to revive growth yet, according to Goldman Sachs. The company's product portfolio is relatively more skewed towards mass and economy segments, which structurally have lower growth potential compared to the overall footwear market.

"We believe Bata has been unable to premiumise its product portfolio as fast as Metro Brands due to weaker merchandising and a perception that the brand is not contemporary and just a maker of school shoes," the brokerage said.

Shares of Metro Brands are trading 5% higher at ₹1,186.9, while those of Bata are trading 1.2% higher at ₹1,396.6.