Release Date: February 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bata India Ltd (BOM:500043, Financial) saw a 120 basis point expansion in gross margins, reaching 56% from 54.8% last year.
- The company continued its premiumization journey, with premium categories like Hush Puppies and Bata Comfort outgrowing the overall portfolio.
- Digital commerce showed strong double-digit growth, contributing significantly to overall business performance.
- Bata India Ltd (BOM:500043) successfully expanded its franchise network, crossing 500 stores, which is a more capital-efficient channel.
- The company made significant investments in marketing, resulting in improved brand health metrics and higher consumer awareness.
Negative Points
- Revenue growth was muted at 0.4%, with total revenue reaching INR904 crores compared to INR900 crores last year.
- The mass market segment continued to see sluggishness, impacting overall growth.
- Despite significant marketing investments, consumer response was muted, affecting sales throughput.
- The company faced a mid-single-digit decline in volume growth, attributed to lower price point segments.
- Increased expenses in technology and marketing led to a 10% decline in EBITDA, with EBITDA margin falling to 21.3%.
Q & A Highlights
Q: Hi. Thank you for the opportunity. My first question was on the freshness that you mentioned on slide 4. You said that fashion is at highest levels of 34%. I wanted to know how you define the new product that's coming under the definition of yours into the product launch 30, 60, 90 days back. And how is this number a year back and what is the aspiration for this number for the coming two to three odd year? That is being my first question.
A: Okay, that's good actually. So it's been a journey, Videesha, on this front. Let's say, give you a little perspective, we were let's say going back about six quarters, we were in the range of about mid 20s or so in terms of freshness. The baby design freshness is -- defined freshness is anything that is new to store and therefore that consumer cohort that the store the services in the season. So it's a season-to-season measure and therefore gets reset every season, which is Jan to June as well as July to December. And therefore, percent means out of a total offering that we have in our store, how much of it is fresh. Now there is further rigorously applied to this, and we will want to make sure that this becomes the key proposition because that's what we are trying to promise to consumers in terms of trendy and fashion and we will want to dove tail this similar measure at the store and category level, but that [mid 20s] was still about a couple of seasons back at about 30% and has now moved to 34%. So that's the journey. I hope that answers your question.
Q: And what would be the aspiration for this number for the coming two to three odd year?
A: I think we will want to now take this even further into category cluster kind of freshness. So the overall 34%, I think we will not want to go beyond 40% for a season freshness. But within that, are we making sure that the entire 2,000 EBO network, are we replicating this entire 34% out of 40% is going to be the prime driver going forward. So it will go up but the big driver we will be making sure is demographically spread all across. The minimum threshold that we want to make sure is that it's not only at a certain cluster of stores in a certain category, but all categories and all cluster of stores is where the endeavor would be on this stride.
Q: Got it. And second question was on HBM. How are you tracking the benefits from the implementation of the software. One is, of course, the lower contribution from the counted sales. But just trying to understand when can the benefit from the software -- when are they likely to peak in terms of better store throughput?
A: So I cannot share the business case, Videesha. But we do have business case, it is a financial business case, and we are beholden and obviously want to make sure that we -- the team is tracked against it. There are three or four levers where the benefits are anticipated to come through. First is obviously a better inventory management, right? So a far more linked data and therefore much better visibility of information when making decisions, making decisions much faster on inventory management and therefore placing the orders in the right articles in the right locations is going to be one big lever. The second one is much better -- availability against what we promise to a store. Therefore, adherence to basically what they require while maintaining better inventory management. The third piece, and that should result into better conversions and therefore sales. The third piece is in terms of better financial planning and better control from a merchandising perspective in terms of the right mix of articles and the margin blended profile that the person is wanting to deliver on. The last one is control on obsolescence and therefore, making sure that we are agile in terms of moving the stocks to the right places where we can push it out before it results into inventory hit on us. So these are the four levers that should -- in terms of timing of impact they will pan out. But the sense is that within about 12 months, we should have them into a steady-state run rate of impacts that have been built into the business case.
Q: Got it. Thank you. Just one more question before I go back into the queue. What is the mix of sub 1,000 key product that you are in current quarter. I recall that during 4Q FY23, it was between [30% to 40%]. So just wanted to know the mix for the current quarter and also if (inaudible) assumption want to pick up and [consumer going to debate], would we look to monetize that trend by refocusing on the mass end of our portfolio for the retail operation?
A: Okay. That's a long question, but a quick data point, now less than thousand is been basically for the last quarter was at about 30%, right? Cumulative for the year, it was at 34%. So it is lower, but however, the pace of reduction has come down. So I am assuming that if things stay right, we will want to see this fire. As I said, that goes in conjunction with the mass market business channel, which is MBOs. We continue to invest in it. We are hoping that that's where we will get this entire thing [Repco] back. So while we want to focus on premiumization with the right brands as well as the right offerings, we will not want to lose sight. And in fact, where required, we will take aggressive steps to capture this revival in demand as we see it and introduction of articles.
Q: Yeah. Thanks for the opportunity. Gunjan, in the flat revenue growth picture that we have for the quarter, what is the volume and ASP expansion that you see?
A: Both is mid-single digits, both ways, Girish. So yeah, that's how it is. While this is what I would say -- in addition is that, we have -- as I mentioned now for almost six quarters, we have stopped price increases. So it's largely the premiumization that is driving is mid single-digit kind of a premium or ASP increase. And we are hoping that the stability on pricing, et cetera, will, as I commented just in the previous question, will eventually help us turnaround a mass market demand perspective from consumers, but mid single-digit on the pricing and therefore mid-single digit on volume degrowth.
Q: Okay. The other expense part has jumped up on a YoY basis by almost like 410 basis points. Can you provide a bridge to the that? I mean, what are the elements? What are the account heads which have expanded on a YoY basis?
A: I will request the CFO to answer on this.
A: So as Gunjan talked about it during his
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
