India’s Metro Brands misses profit view as footwear demand slipped ahead of tax cuts

Metro Brands missed its second-quarter profit estimates on Thursday, as footwear demand softened in anticipation of India’s consumption tax cuts.

The firm, which sells Crocs and Fila besides its own brands, posted consolidated quarterly profit of 676.9 million rupees ($7.69 million), missing analysts’ expectation of 822.6 million rupees, according to data compiled by LSEG.

A consumption slowdown in India’s urban centers have dragged earnings for footwear retailers including rivals Bata and Campus Activewear which are yet to report their results.

Metro’s quarterly revenue grew about 11% to 6.51 billion rupees, helped by e-commerce sales that have grown 39% from a year ago.

But analysts expect a demand boost in the second half of the year due to festivals and tax cuts. Shares of the company have risen 7% since the consumption tax cuts were announced.

Demand remains strong for products that cater to upper middle class and richer Indians, despite the dampening effect of the high cost of living on overall urban consumption.

Metro has benefited from such premiumization as 54% of sales in the first half were from footwear retailing for more than 3,000 rupees.