Release Date: February 12, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bata India Ltd (BOM:500043, Financial) reported a 1.7% growth in revenue from operations, indicating a positive trend in sales.
- The company achieved a gross margin improvement of 17 basis points year-over-year, reflecting better cost management and efficiency.
- EBITDA margin expanded by 141 basis points, showcasing enhanced operational efficiency.
- The Floatz brand continues to perform exceptionally well, contributing significantly to turnover and margins.
- Bata India Ltd (BOM:500043) has successfully reduced inventory levels to the lowest in eight quarters, while maintaining high availability, indicating effective inventory management.
Negative Points
- The company is behind its target for implementing zero-based merchandising, with only 17 stores completed against a target of 100 by December.
- There was a one-time exceptional item related to VRS at a South factory, impacting the reported PAT.
- Store additions have been flat, with no net increase in the number of stores this quarter.
- The transition to a higher proportion of franchise stores could potentially impact gross margins negatively.
- Revenue growth was modest at 1.7%, which may not be sufficient to leverage cost structures and improve profitability significantly.
Q & A Highlights
Q: Why is Bata India behind on its zero-based merchandising target, and what are the plans to catch up?
A: Gunjan Shah, CEO, explained that the delay was due to the complexity of implementing changes beyond just merchandising, such as physical store changes and training. The company plans to ramp up efforts and aims to cover the top 50% of turnover-contributing stores by the end of FY26.
Q: How is Bata India addressing the exit from entry-level price points in women's footwear?
A: Gunjan Shah clarified that the price point strategy will vary based on consumer cohorts. While some stores may exit lower price points, others will maintain them depending on the location and consumer profile.
Q: What factors contributed to the positive volume growth in the recent quarter?
A: The CEO attributed the growth to better execution of the End of Season Sale (EOSS), improved value propositions, and volume growth across various channels, including franchise and multi-brand outlets (MBOs).
Q: Why were there no net store additions this quarter, and what is the future outlook for store expansion?
A: Gunjan Shah noted that while there were gross additions, unprofitable stores were closed to improve overall profitability. The company expects net additions to resume, aiming for 30-40 stores per quarter in the future.
Q: How has Bata India managed to expand gross margins despite higher sales from discounted products?
A: Amit Gupta, Global Head - Distribution, explained that improved sourcing efficiency and in-house manufacturing contributed to margin expansion. Additionally, the fixed costs from previous factory closures have started to show benefits.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
