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Revenue from Operations: INR 918.5 crores, representing a 1.7% value growth.
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Gross Margin: INR 515.6 crores, improved by 17 basis points over the last year.
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EBITDA Margin: 22.7%, expanded by 141 basis points.
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Reported PAT: Approximately INR 582 million, flat year-over-year.
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Exceptional Item: INR 11 crores related to VRS for a section of workers at a South factory.
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Store Expansion: Over 600 franchise stores, up from less than 100 three years ago.
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Inventory Management: Lowest inventory in eight quarters with high availability.
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Same-Store Sales: Sales per square foot increased, with a 38% reduction in inventory lines.
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Product Line Performance: Floatz contributing 8-10% of turnover, Power brand close to double-digit volume growth.
Release Date: February 10, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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Bata India Ltd (BOM:500043) reported a 1.7% growth in revenue from operations, indicating a positive trend in sales.
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The company achieved a gross margin improvement of 17 basis points year-over-year, reflecting better cost management and efficiency.
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EBITDA margin expanded by 141 basis points, showcasing improved operational efficiency.
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The company has successfully reduced inventory levels to the lowest in eight quarters, enhancing cash flow and reducing holding costs.
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Bata India Ltd (BOM:500043) has expanded its franchise network to over 600 stores, significantly increasing its market presence and reach.
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The company is behind its target for implementing zero-based merchandising, with only 17 stores updated against a target of 100 by December.
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Despite revenue growth, the reported PAT remained flat, indicating challenges in translating sales growth into profit.
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There was a one-time exceptional item related to VRS, impacting the financial results for the quarter.
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Store additions were flat, with no net increase in the number of stores, potentially limiting future growth opportunities.
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The company faces challenges in maintaining gross margins as the proportion of franchise stores increases, which typically have lower margins.
Q: Sir, my first question is on zero-based merchandising. Last quarter, we had given a target of 100 stores by December and 250 stores by March '25. We are still at around 17 stores in the presentation for December. So, we are behind that target. So any challenges in executing zero-based merchandising? A: Gunjan Shah, CEO: Yes, you are right. We realized that zero-based merchandising requires more than just merchandising changes; it involves physical changes and training. We are confident we will get back on track, albeit with a delay of a quarter or a few months.
Q: So in the overall, say, by end of FY26, we'll be able to implement zero-based merchandising across the COCO stores first? A: Gunjan Shah, CEO: It will be focused on COCO stores primarily. The objective is to cover Pareto turnover contribution stores within such a long time period, focusing on the top 50% turnover stores first.
Q: The second question is on the whole value proposition. At least in the example you have shared, we have exited the 499, 599, 699, the entry-level price points. Is that the right way to look at it? A: Gunjan Shah, CEO: The example was to highlight price point reduction. The price points will depend on the consumer cohort. In premium malls, we curate price points accordingly, while in other areas, the critical price point might be different.
Q: Just one question from my side is you have not added any stores this quarter. So anything that you would like to call out over here on the store addition momentum going forward? A: Gunjan Shah, CEO: The net additions have been flattish due to closing unprofitable stores. We expect this to continue for another quarter, after which net additions should pick up.
Q: Thank you for taking my question, sir. And also congratulations on finally, the cost leverage is starting to work out and good work on that. So my question is, again, with regards to the gross margins here. What really has helped the margin expansion on a YoY basis? A: Amit Gupta, Global Head - Distribution: The overall gross margin has expanded by 17 bps due to more efficient sourcing and in-house manufacturing, along with a lower sale of discounted products.
Q: Has Power, as a part of Bata portfolio, been a very successful brand in any of the other countries? A: Gunjan Shah, CEO: I cannot comment on other countries, but India is one of the largest markets for Power.
Q: Lastly, see, in the last three years of your tenure, you have addressed multiple gaps in products, service, supply chain, but the brand gap remains. Do you think there is enough brand gap that you have bridged in what urban consumer, premium urban consumer wants? A: Gunjan Shah, CEO: We focus on our core consumers and different brands play different roles. We aim to stay focused on core consumers and the core brand, while also seeding and supporting brands like Power and Floatz to target different consumer sets.
Q: When I look at our current performance and compare it with the pre-COVID, on an absolute basis, we have seen 11% kind of revenue growth. Can we reach that pre-COVID PBT margin, given whatever business structure we have changed? A: Gunjan Shah, CEO: We are confident that with the current cost structure, once we achieve like-for-like growth and overall top-line leverage, we should see significant leverage in PBT margins.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
