Bata India slides 7% as net profit tanks 78% YoY in December quarter

Bata India should be able to revive its revenue growth trajectory as and when the impact of the Covid-19 is phased out, say analysts

Shares of Bata India skid 7 per cent to Rs 1,462 in the intra-day trade on the BSE on Thuraday on weak earnings show in the December quarter. With today's fall, the stock is trading 21 per cent lower from its 52-week high level of Rs 1,839 touched on February 12, 2020.

On the operational front, the company reported a revenue de-growth of 26 per cent year on year (YoY) to Rs 614.70 crore for the quarter under review. Earnings before interest, taxes, depreciation, and amortization (EBITDA), on the other hand, declined 55 per cent YoY to Rs 117 crore while margins declined 1,260 basis points (YoY) to 19 per cent mainly owing to unfavourable product mix.

The profit after tax declined 77.7 per cent to Rs 26.4 crore from Rs 118.3 crore in the corresponding quarter of previous fiscal. The company had posted a net loss of Rs 44.3 crore in September quarter. However, on sequential basis, the performance was better backed by improved sales during festive season.

Aligning with the current demand scenario, Bata has tweaked its product portfolio from formals & Fashion categories to Casuals, Fitness, & Essential categories covering comfortable sneakers, open & sandals styles. This has led to faster pick up in volumes that reached 88 per cent of pre-Covid levels.

"Owing to decline in Covid cases and vaccine rollout, the overall market sentiment is improving significantly. Backed by good festive sales and our targeted consumer outreach, our sales have recovered to 74 per cent of pre-Covid levels,” the management said.

The management further said it continued to double-down on its focus on cost-savings measures by working closely with landlords for store rentals optimization, controlling discretionary spends and looking for productivity-enhancing measures. The company opened a total of 45 new franchise stores in the quarter, taking its total to 221 Franchise stores.

"Bata continues to penetrate in newer towns through franchise operated stores. Formal and fashion footwear demand is likely to remain muted in the near term due to fewer social gatherings. Unfavourable product mix (shift towards casual category) may lead to deterioration in gross margins in the near term. However, cost rationalisation initiatives will benefit the company over the longer term," ICICI Securities said in a note.

The brokerage firm believes that with its strong brand patronage and pan-India retail reach, Bata India should be able to revive its revenue growth trajectory as and when the impact of the Covid-19 is phased out.

At 10:28 am, Bata India was trading 4 per cent lower at Rs 1,509 on the BSE, as compared to a 0.28 per cent rise in the S&P BSE Sensex. Trading volumes on the counter jumped an over four-fold with a combined 2.6 million equity shares changing hands on the NSE and BSE till the time of writing of this report.