Metro Brands Grew 14.2%, But ROCE Fell: Is Expansion Starting to Come at a Cost?
Metro Brands expanded significantly in FY26, surpassing 1,000 stores and achieving 14.2% revenue growth to ₹2,864 crore. While EBITDA and PAT rose by 14.5% and 17.3%, respectively, ROCE decreased from 21.3% to 19.6%, and revenue per square foot also declined. This prompts an important question: can Metro sustain its expansion without compromising returns?
Metro Brands was recently trading around ₹886 per share , with a market capitalization of roughly ₹24,143 crore and a trailing P/E of around 59x . The stock's 52-week range was approximately ₹858–₹1,309 .
Revenue Is Growing, But Capital Efficiency Has Weakened
Metro Brands delivered 14.2% consolidated revenue growth to ₹2,864 crore in FY26 . EBITDA increased 14.5% to ₹869 crore , while PAT grew 17.3% to ₹416 crore . EBITDA margin remained strong at 30.3% despite continued spending on stores, marketing, technology and newer formats.
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However, ROCE declined from 21.3% to 19.6% during the year. This does not mean that the underlying business has stopped generating attractive returns, but it does indicate that capital efficiency needs to be watched as the company becomes larger and continues investing in its physical network.
The issue becomes more relevant because the company is adding stores at a meaningful pace. The next phase of growth will therefore depend not only on increasing revenue but also on how efficiently the additional capital is deployed.
The Store Network Has Crossed 1,000 Locations
Store expansion remains central to Metro Brands' strategy. During FY26, the company opened 147 stores and closed 23 , resulting in 124 net additions and taking the year-end network to 1,032 stores . By June 2026, the network had increased further to 1,041 stores .
The expansion has been across metros, Tier-1 and Tier-2 cities as well as emerging markets. Management has said that each new store is evaluated based on financial viability, with expansion depending on the availability of suitable locations and the company's expected return thresholds. That approach is important because simply increasing store count does not guarantee proportionate growth in earnings.
Revenue Per Square Foot Has Declined
One of the most important numbers raised at the AGM was revenue per square foot , which declined from ₹18,200 in FY25 to ₹17,300 in FY26 . A shareholder specifically questioned whether the increase in store count was coming at the cost of productivity of the overall retail footprint.
The company did not indicate that the decline was forcing a major change in its expansion strategy. Instead, management pointed out that the majority of mature stores are profitable, store closures have historically remained around 2–3% of the network , and the payback period for new stores is around two years . This makes store-level productivity one of the most useful metrics to track alongside total revenue.
New-Store Economics Will Determine the Quality of Expansion
Metro Brands is still expanding, but management says it is doing so selectively. The company is looking across different city tiers and formats, while evaluating individual locations on their financial viability.
The two-year payback period provides one benchmark for judging whether new stores are generating returns in line with management's expectations. At the same time, the company says mature stores are generally profitable and monitors store performance continuously, taking corrective action where required.
The challenge is that as the network gets larger, maintaining the same economics across every new location can become more difficult. This is particularly relevant as the company expands into emerging markets where customer demand and store productivity may differ from established locations.
Strong Margins Are Offsetting Some of the Pressure
Despite the decline in ROCE, Metro Brands continues to maintain a healthy margin profile.Consolidated EBITDA grew 14.5% to ₹869 crore , while EBITDA margin stood at 30.3% . PAT increased 17.3% to ₹416 crore , meaning profit grew faster than revenue during FY26. This suggests that the company is currently able to protect profitability even while investing in expansion.
The management commentary also shows that it is spending on distribution infrastructure, supply chain capacity, marketing, talent and technology. These investments are intended to improve product availability, replenishment and the company's ability to manage a larger network.The key question is whether these investments eventually improve productivity enough to lift returns back towards previous levels.
E-Commerce Is Growing Faster Than the Physical Network
One way Metro Brands can reduce its dependence on physical-store expansion is through digital channels. E-commerce revenue increased 39% during FY26 and contributed 12.9% of consolidated revenue .
The company is also investing in AI and data capabilities for areas such as inventory management, store expansion and customer engagement. Management wants its physical and digital channels to operate as a connected ecosystem rather than treating them as separate businesses. The faster growth of e-commerce provides another route to increase revenue without adding physical space at the same pace.
New Brands and Formats Could Broaden Growth
Metro Brands is also adding newer concepts and partnerships to its portfolio. During FY26, management highlighted MetroActiv, Foot Locker, FILA, New Era and Clarks , covering areas such as comfort footwear, sneakers, sports performance, and athleisure.
These formats can potentially help the company address different consumer segments rather than relying entirely on the traditional Metro and Mochi store formats.
That diversification may also help improve the productivity of the overall retail platform if newer concepts perform well in markets where the company's existing formats have less penetration.
What Investors Need to Watch
The main issue is not whether Metro Brands can continue opening stores. It has already demonstrated that it can. The more important question is whether store productivity, capital efficiency and returns remain healthy as the network gets larger . Revenue per square foot has already declined, while ROCE has moved from 21.3% to 19.6%. At the same time, consolidated EBITDA margin remains above 30%, and e-commerce is growing much faster than the overall business.
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Management plans to continue expanding during FY27, but the final number of new stores will depend on location availability, brand potential and expected returns.
Future Perspective
Metro Brands is now operating at a much larger scale than it was a few years ago. 1,032 stores at FY26-end, ₹2,864 crore of consolidated revenue, ₹869 crore of EBITDA and ₹416 crore of PAT show that the company can grow while maintaining strong profitability.
But the decline in ROCE to 19.6% and revenue per square foot to ₹17,300 show why the next phase needs to be judged on quality of growth, not just the number of stores added.
The company's growing e-commerce business, newer brands, technology investments and disciplined approach to store selection could help balance that pressure. The numbers to track going forward are therefore same-store productivity, revenue per square foot, new-store payback, ROCE, e-commerce growth and EBITDA margin .