Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- E-commerce momentum continued to grow, contributing positively to both portfolio and profitability.
- Franchise store expansion is robust, with 40 to 50 EBOs being added every quarter, particularly in Tier 3 to Tier 5 cities.
- Power brand showed double-digit momentum and is positioned well in the athleisure space with new product launches.
- Significant investments in technology and store renovations have led to the best inventory levels and capacity utilization in six quarters.
- Premium products, especially in the comfort and Hush Puppies lines, continue to perform well, with sneaker studios expanding to 740 stores.
Negative Points
- Overall sales were down by 1.4%, reflecting a tough quarter with negative momentum in the latter part.
- Same-store sales growth was negative, particularly in the lower single digits, impacting overall revenue.
- Employee costs increased by 15%, and other expenses rose by 18% year-over-year, partly due to one-time tech-related investments.
- The mass price points in the distribution business continue to face stress, affecting overall performance.
- The dress category, both for men and women, showed disproportionate stress, likely due to external factors like elections and wedding season.
Q & A Highlights
Q: Can you please let us know the channel-wise growth between COCOs, distribution, and online in this quarter?
A: Franchise and e-commerce channels grew the fastest, outstripping overall growth. The mass distribution business was the relative laggard. (Gunjan Shah, CEO)
Q: What is the same-store sales growth in your COCO network?
A: Same-store sales growth has been negative, in the lower single digits. Our goal is to achieve mid to high single digits to see significant efficiencies. (Gunjan Shah, CEO)
Q: Can you let us know the impact of high-performance merchandising investments?
A: The impact is measured through gross margin markdown, inventory turns, and availability. Early signs are positive, but consistent performance over the next six months will provide a clearer picture. (Gunjan Shah, CEO)
Q: What is the plan for store expansion, including COCO, POCO, SIS, and MBOs?
A: We plan to add 40-50 stores per quarter, with about 35 POCO and 10 COCO stores. Franchise stores are more accretive from an ROC and EBITDA perspective. (Gunjan Shah, CEO)
Q: How has the value segment performed compared to the premium segment?
A: The premium segment continues to grow faster, contributing about 25% of sales. The value segment has shown some signs of improvement but has not completely turned around yet. (Gunjan Shah, CEO)
Q: What are the broader category trends in the footwear market?
A: The key trends are sneakerization, casualization, and fashion. Categories like dress shoes showed stress last quarter, likely due to specific events. (Gunjan Shah, CEO)
Q: How are we positioned to benefit from trends like sneakerization and casualization?
A: Casual and sneaker categories contribute about 50-55% of our business, expected to grow to 60-65% in the next three years. We are investing in technology and consumer propositions to drive this growth. (Gunjan Shah, CEO)
Q: What is the impact of BIS regulations on Bata and the broader footwear industry?
A: BIS regulations cover about 90% of our products. We have successfully transitioned to comply with these regulations, and we expect minimal disruption. (Gunjan Shah, CEO)
Q: Can you provide details on the Nine West licensing agreement and its strategic importance?
A: The agreement is a royalty-based, long-term contract covering manufacturing to retail. Nine West fits into our strategy of high fashion premium, targeting younger ladies. (Gunjan Shah, CEO)
Q: What are the plans for store openings in Tier 3 and beyond, and how are these stores performing?
A: We plan to add 120-140 stores annually, with 70% in Tier 3 and below. These stores are seeing good traction, often being the first branded retail experience in these markets. (Gunjan Shah, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
