Shares of footwear major Bata India touched a lifetime high on Friday of Rs 1,013.70 per share on the BSE, up 0.57% from its previous close. In the last six sessions, the share price has risen by over 7%. Investors appear to be convinced that the strategy shift initiated by the company, which aims to focus both on volumes and recalibrate its balance between premium and mass segment products, will pay off.
Since January, the stock has put on more than 36%, outperforming the Sensex. The premium products from the company will contribute 35% to the revenue by FY19-end, Ram Kumar Gupta, director-finance and CFO, Bata, said on Friday in an interview to a TV channel. “We are planning to increase premium products,” Gupta said.
Bata is a premium brand for the masses as well, and the company is focusing to steer shoppers from smaller cities in India to the Bata stores by expanding its footprint. The company plans to add around 100 new retail stores, 50 new franchisee stores and expand its distribution in the current year across India. Uday Khanna, chairman, Bata India, said, at the company’s annual general meeting, “The focus will be on building the Bata brand and attracting more footfalls through impactful store décor, in-store activities, aggressive launch of new products and increasing our advertising spends, also focusing on reducing rentals and saving other costs.”
The company plans to take the franchisee count to 500 over the next few years. Analysts said Bata continues to make right moves by focusing on expansion through franchisee, closing down unprofitable stores and renovating the old ones, launching new collections, increasing focus on sub-brands, improving brand perception by use of digital platforms, higher advertising spend and association with celebrities for brand endorsements and enhancing in-store experience to appeal to the more fashion-conscious younger consumers.
Strong execution over the past three quarters and an over 30% year-on-year Ebitda growth gives us more confidence on Bata’s ability to benefit from improving macro environment, analysts at Axis Capital observed. The footwear major reported a good June quarter with revenues up 8.3% y-o-y to Rs 797.3 crore. Ebitda was up 38% y-o-y to Rs 131.8 crore. The profitability improved and the Ebitda margin expanded by 355 bps y-o-y to 16.53%.
The company said the revenue growth was helped by the high-decibel ‘Come & Be Surprised’ campaign to mark the launch of its New Red Label collection. Further, the launch of the internationally developed Red Concept stores in India also aided the performance. The Ebitda margin expansion was on the back of strong cost controls. As guided by the management, store resizing is aiding the profit growth for the company. “In our current range, the women category provides 28-30% revenue,” Gupta said.
The company is constantly taking cost-saving initiatives to grow margin, he added. Bata is also renegotiating the rentals with existing landlords and optimising retail space. “Some of our retail stores which are in big format and as per our requirement if we need lesser space, we surrender surplus space to the landlords and we get substantial savings in this cost,” Gupta added.
The company retails in over 1,400 Bata stores and in thousands of multi-brand footwear dealer stores pan-India. E-commerce, currently accounts for 4-4.5% of the company’s revenue. The figure will move into double digits in the near future, the company said.