Bata India

Stock Opportunities
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An article on the current management state of mind ( bata,relaxo).

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One of the research reports indicated that 65-70% of their costs are fixed. The management is expected to invoke forced majeure clause to save on rentals. Given that most of their showrooms are air conditioned and premium, their products will be seen as discretionary in nature and it might take longer time before the footfalls reach previous levels. Waiting to hear management updates to exchange on the current situation.

Edit:

  1. As expected, the management is likely to revisit their expansion plans and rationalize physical presence.
  2. Most urban schools are likely to postpone school reopening dates. This is now certainly going to hit Q1 revenues
  3. Staggered re-opening of stores has started, but no data on footfalls yet.

Footwear retailer Bata India Ltd opened 180 of its over 1,400 stores. It has created an instruction manual in 11 regional languages for its 6,000-odd employees, trained store staff, and done away with paper bills. “We are encouraging customers to try shoes themselves, make contact-less payments and insist on an e-invoice. Our contact centre is keeping customers informed about which stores have re-opened," Sandeep Kataria, chief executive officer, Bata India said.

  1. Company plans to launch anti-bacterial shoes and face masks, under the Power brand.

According to Sandeep Kataria, CEO of Bata India, the footwear company plans to introduce masks under its sports brand Power and broaden antibacterial school shoes range to adults.

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How is this going to impact Indian Footwear Companies?

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drop in revenues and profits in qtrly earnings.

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Profit before tax stands at Rs. 573 Million from Rs. 1747 last quarter. Wondering what would be the impact in Q1 FY21

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Going ahead i think the impact will be higher for BATA, coz if one sees, last 1-2 years whatever growth they had was all on account of increasing realisations as well as expansion in margins.

Now since sales will sort of degrow, the negative effect of operating leverage will be very high here and that is what has played out in this quarter’s result as well.

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Can someone explain about the OPM for bata, what has lead to this substantial increase?

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Premiumization has led to increase in operating profit margin for bata.
They had done makeover of their stores and came with concept of red store. They have also signedup kirti sanon and sushant rajput (actors).

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What is Ind-AS116 impact?

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Hi guys,

Wanted to understand if there is a way to find out the asset value of the owned stores of BATA.

P.S. I am a newbie investor, so pardon my doubts, if they seem silly

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Q1FY20 Hidden pointers

The Company has elected to apply the practical expedient of not assessing the rent concessions as a lease modification, as per MCA notification dated 24th July 2020 on INDAS 116 for rent concessions which are granted due to COVID-19 pandemic. As per requirements of MCA notification, out of total rent concessions confirmed till 30th June 2020 of Rs. 501.38 million (including Rs.162.49 million unconditional rent concessions pertaining to subsequent quarters), Rs. 200.96 million has been accounted under rent expenses (to the extent available) and balance of Rs. 300.42 million is reported under Other Income for the quarter ended 30th June 2020.

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would appreciate if you could explain a bit about this . Does this means company is following conservative accounting principle or otherwise? If so, what impact will it have on future profits?

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The MCA(Ministry of Corporate Affairs) has introduced Covid-19 Related Rent Concessions as per their notice dated 24th July 2020. The management has opted in for it, and since that doesn’t get included under their rental expenses it gets added to the other income and for this quarter has helped in reducing their overall loss.

What needs to be noted is that the 200.6 million mentioned doesn’t seem to be there under the rental expense.

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Going forward if they opt out of the concession this can have an impact on the profit margin, if any, in the subsequent quarters.

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Bata
1QFY21 takeaways

 Bata recorded poor revenue in 1QFY21 as stores were entirely shut in April and May and were operational for a limited number of days and working hours in June. Seeing the consumer behavior in the June, Bata believes that signs of improvement are there and the festive season could witness considerable improvement in demand.

 During the quarter, retail and non-retail business in terms of footwear pairs were down by 81% and 82%, respectively YoY. Retail business in terms of revenue was 15% of the revenue recorded in 1QFY20 and non-retail was 17% of 1QFY20 revenue.

 Bata is witnessing a shift in demand towards open footwear (slippers), casual footwear and sportswear. This has caused a decline in average selling price YoY.

 Bata’s End of Season Sale is live since 2.5 weeks and should continue for a week or two. The time frame for the sale would largely be the same as last year but the company will try to align it with the market. The percentage of discount being offered is also in line with the discount offered in FY20. End of season sale revenue contributes approximately 8%-10% to the total turnover for a year.

 Bata had hired manpower for its distribution business in February and March of this year and has indicated that it has put hiring on hold for the time being. The company will resume hiring only if necessary.

 At present, 85%-90% of the company’s stores are open, except in states like West Bengal and Telangana, where the stores are operational for a limited number of days and for a limited period of time per day. However, footfall is not in line with that of last year.

 While the e-commerce business is growing, the contribution from online business is only 5%-6%. It had significantly expanded the range of footwear being sold through the online route.

 Bata has adequate inventory at present and does not foresee any shortage of inventory going forward. Bata is trying to maintain its inventory at the same level as last year to avoid shortage or excess inventory. The company is buying input material strictly on need basis.

 Bata is expecting schools to reopen in October and is hoping that its inventory of school shoes will clear once the schools open. Bata is selling school shoes both through its physical stores and online channels.

 Bata has received complete rent waivers for the lockdown period for most of its properties and has agreed to a revenue sharing model with some landlords for the remaining part of FY21.

 Bata has kept advertisement spend on hold and will decide on the same on the basis of the market condition going forward.

 Curtailment of Chinese imports would not have a material impact on Bata, as it is not dependent on them. Bata’s imports account for only 4%-5% of total cost for design purposes. In terms of raw
material, Bata sources 95% of its raw material from within India.

 On the wholesale side, Bata is entering into partnerships with new distributors and wholesalers and is hopeful of an improvement in business.

 Bata has planned to open over 500 franchisee stores in the next 3-4 years. At present, Bata has ~150 franchisee stores. Business in Tier 2/3/4 cities is improving at a faster pace as compared to metro cities. Bata indicated that it derives ~50% of its revenue from Top 10 cities.

 The management stated that ~40% of revenue comes from the sale of leather shoes. This is followed by sale of school shoes, ladies footwear, etc. The margins and ASP for leather shoes is higher than that of casual slippers.

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news share : Bata India announced Scheme of Amalgamation BPL and CCEL

https://www.thehansindia.com/business/bata-india-announced-scheme-of-amalgamation-bpl-and-ccel-646084
disc: invested

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Q2FY21 Results have been announced today : https://www.bseindia.com/xml-data/corpfiling/AttachLive/d5b6e064-8081-4eb7-bec8-11bf66f538c7.pdf

Bata posted a net loss of 44 crores compared to a net loss of 100 crores in the last quarter.

Consolidated Revenue declined 49% YoY to 367.8 Crores compared to 722 crores in September 2019.

Disclosure : Invested

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Q3FY21 Update:

After last two painful quarters with losses, Bata India has returned to profit. Decent recovery in sales. But a long road to recovery lies ahead.

(Numbers in crores)

Q3FY21 Q3FY20 %Change (YoY) Q2FY21 %Change (QoQ)
Revenue 628.8 847.8 :arrow_down: -26% 382.3 :arrow_up: 64%
Net Profit 26.4 118.3 :arrow_down: -78% -44.3 :arrow_up: 159%

Notes from results:

  1. Sales have recovered to 74% of pre-Covid levels

  2. Sales through digitally enabled platforms like Bata website, online marketplaces, Bata ChatShop, Bata Home Delivery and Bata Store on Wheels contributed over 15% of total revenues

  3. In Institutional & Distribution business, as the economy started opening up, Bata won orders to supply safety & industrial shoes to companies in cement, steel & railways sectors.

  4. Manufacturing: From Jan 2021 onwards, as demand picked up, production inched back to pre-Covid levels

  5. Continued to strengthen its brick and mortar presence in tier 3 & 4 cities by opening new franchise stores across the country, with 221 Franchise stores at the end Dec 2020.

  6. Opened a total of 45 new franchise stores in the quarter, taking its total to 221 Franchise stores. Some of the new towns include Itanagar, Varkala, Sivakasi, Pali, Ratnagiri - all having population between 50K to 3 lakh.

  7. Continued focus on cost-savings measures by working closely with landlords for store rentals optimization, controlling discretionary spends and looking for productivity-enhancing measures

Source:

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