For Bata India, chasing growth continues after a lacklustre FY24
₹798 crore. Last quarter, it added three company owned, company operated (COCO) stores taking the total count to 1,329. It also closed some unprofitable or non-brand value-adding COCO outlets.
Bata added 24 franchise stores, primarily in tier-three to tier-five towns, to cater to branded product demand and achieve better returns on capital, taking the overall count to 533. The franchise store addition was lower than the management’s expectations as they would like to maintain a run rate of almost 40 stores each quarter, akin to that seen in the previous two to three quarters. In Q4, Bata launched the Nine West brand, while the Power brand apparel regained its momentum.
Despite efforts to propel sales, a subdued demand environment is hurting growth, especially impacting mass market products that have comparatively lower average selling prices. In the earnings call, the management said it is seeing initial signs of recovery in demand, but there isn’t complete clarity on how the underlying conditions have changed. Q4’s Ebitda (earnings before interest, tax, depreciation and amortization) growth was flat at ₹182 crore with higher spend on advertising eating into profit margin.
The upshot: Ebitda margin contracted by about 50 basis points (bps) even though gross margin expanded. Overall, after two years of solid growth, Bata’s FY24’s year-on-year revenue growth is far from impressive at just 0.8%. As such, the premium segments are performing well, led by strong growth in Red Label, Comfit and Power.
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