BATAINDIA - Bata India Limited Share Price

In the earnings call held on June 2, 2025, management provided an outlook emphasizing the focus on growth through strategic initiatives. Gunjan Shah, the Managing Director and CEO, highlighted three key levers: driving same-store growth, evolution of the product portfolio, and enhancing inventory agility.

The management reported significant progress in their Zero Base Merchandising (ZBM) initiative, expanding from 40 to 146 stores. This transformation has resulted in a 40% reduction in the number of lines in stores, a 25% decrease in inventory, and a remarkable improvement in customer retrieval time from over 1.5 minutes to 45 seconds.

For the financial performance, overall revenue from operations was reported at INR 788 crores, a decline of 1.2% year-over-year, with gross margins at INR 455 crores, reflecting a decrease of 230 basis points compared to the same quarter last year. The management also indicated that the long-term strategy includes a shift toward a volume-driven growth model.

Regarding forward-looking points:

1. Store expansion is expected to increase in the next fiscal year compared to the previous year's addition of approximately 100 stores.
2. The introduction of value propositions across their product lines is anticipated to drive volume growth, particularly in the ladies' core essentials and the Power Move+ collection.
3. Franchise stores have expanded to 625, with efforts to enhance the low-cost segment under INR 1,000.
4. The ongoing focus on inventory reduction, projected to continue improving inventory turnover and efficiency.

Overall, management aims for consistent volume-driven revenue growth and enhanced profitability through operational improvements and strategic initiatives, with goals set for expanding the store footprint and optimizing the product portfolio.

Question and Answer Summary from Q&A Section of the Earnings Call Transcript

Question 1: "Firstly, on the gross margin contraction this quarter, now I understand that increased franchising operations will also lead to some gross margin dilution. So, if you can maybe quantify the impact of that and the rest, if there is any gross margin contraction, the reasons for that?"

Answer 1: "Several factors contributed to the gross margin contraction, including the mix of sales from franchises and e-commerce, which impacts our profitability. Additionally, we've been focusing on providing value to consumers while adjusting our cost structure for key products, and we expect this to normalize in future quarters."

Question 2: "You ended the year with over 100 stores being added. How should we think about store addition momentum going forward?"

Answer 2: "We anticipate store additions to be slightly higher than last year's figures. We're maintaining an 80-20 ratio between franchise and direct stores, and we have clear plans to sustain this momentum in the coming years."

Question 3: "Can you help with the revenue mix from COCO, franchisee, multi-brand distribution, and e-commerce channels for this year?"

Answer 3: "For this year, approximately 70% of our revenue comes from COCO, 7.5% from franchises, around 10% from e-commerce, and the remaining 12-13% from multi-brand distribution."

Question 4: "You highlighted that you experienced revenue growth in the stores with Zero-Based Merchandising. What about those outside the pilot program?"

Answer 4: "Demand conditions are indeed tight across the board. However, we're focused on presenting a strong portfolio and enhancing consumer experience in all stores. We're working hard to yield better outcomes, driven by our initiatives."

Question 5: "Regarding the lower other expenses this quarter, could you elaborate on the adjustments made in licensed rights?"

Answer 5: "We restructured a licensed brand agreement, which allowed us to create an intangible asset on our balance sheet. This change shifts royalty payments to depreciation and finance costs, impacting comparability with previous years, but will be a recurring feature."

Question 6: "What is the impact of the focused product scheme announced in the budget on your brand's global presence and exports?"

Answer 6: "While we await finer details on the scheme, it represents an opportunity for us as a local manufacturer. We're aligning our structure to cater to Bata globally, and we'll keep stakeholders updated as we progress."

Question 7: "How does Bata envision itself in 3-5 years from now, particularly regarding growth, margins, and inventory management?"

Answer 7: "We aim for volume-driven growth rooted in relevance to our consumer base. Our focus on efficacy in inventory management and profitability allows us to expect healthier margins and improved balance sheet metrics in the years to come."

Question 8: "In a lean demand environment, do you foresee higher discounting practices affecting margins?"

Answer 8: "Yes, there is a possibility of increased discounting, but our sharpened inventory strategy allows us to react efficiently to demand fluctuations without excessive markdowns, positive for maintaining margins long-term."

These are the major questions asked and responses from the earnings call conducted on June 2, 2025, providing stakeholders with insights into the company's performance and roadmap.