Bata India continues to drag its feet on growth; trail remains rough

livemint.com:

₹945 crore. June quarter marks the fifth consecutive quarter of subdued revenue performance with growth being flattish in FY24 after two years of strong show. In the March quarter earnings call, Bata’s management had said it was seeing initial signs of demand recovery.

While that did continue for some time in Q1, the latter part of the quarter was adversely impacted by factors such as heatwave and election. Gross margin was up 11 basis points to 54.9%, although Ebitda margin contracted sharply, mainly due to one-time expenditure towards technology investments and higher marketing cost. Encouragingly, some brands are doing relatively better for Bata.

For instance, Floatz contributed about 5% to retail sales last quarter. Bata has 16 Floatz kiosks and plans to reach 30 by December. Further, the Power brand is seeing double-digit growth momentum and the company intends to launch two big products this quarter.

In Q1, Bata launched its second Power EBO (exclusive brand outlet) in the North and aims to add 15 EBOs by December. In Power Apparel, the company is seeing quarter-on-quarter sales improvement and intends to touch 100 stores by December from 70 now. These efforts should push growth.

“A steady network rollout and a product revamp (including apparel and sneakers) could support growth going ahead," said a report by Motilal Oswal Financial Services. It also points out that persistent softness, particularly in the mass segment (below ₹1,000 average selling price), remains a drag. Overall, Bata added 33 franchise stores in Q1 (taking the total count to 566), primarily in tier 3, 4 and 5 towns to cater to branded products' demand and achieve better returns on capital.