Bata India , a leading footwear manufacturer and retailer, has responded positively to Prime Minister Narendra Modi's announcement of potential GST reforms that could benefit the footwear industry. The proposed changes, revealed during the Prime Minister's Independence Day speech, include a reduction in the GST rate from 12% to 5% for footwear priced below Rs 1,000.

Industry Impact and Bata's Perspective

Gunjan Shah, CEO of Bata India, welcomed the announcement, highlighting its potential to stimulate consumption and aid recovery in the sub-Rs 1,000 segment. This price range is particularly significant as it represents 80-85% of the footwear industry in India.

Shah emphasized the importance of these reforms, especially for middle-class and mass-market consumers who have faced economic pressure in the post-Covid era. He stated, "The reforms are needed for middle-class and mass-market consumers facing pressure post-Covid."

Historical Context

The footwear industry experienced a significant setback when the GST rate for sub-Rs 1,000 footwear was increased from 5% to 12%. This change had a notable impact on industry volumes, including Bata's sales:

• Bata's sub-Rs 1,000 category contribution dropped from 47% to 37% of sales following the GST rate increase.

Proposed GST Reforms

The announced GST reforms aim to simplify the current five-slab structure, proposing a new system with three slabs:

1. 5%
2. 18%
3. 40%

These changes are expected to provide relief to both consumers and the footwear industry, particularly in the mass-market segment.

Bata India's Current Performance

While welcoming the potential GST reforms, Bata India continues to adapt to the evolving retail landscape:

• The company reported double-digit contribution from online sales through its omnichannel strategy.
• Bata India shares traded 1.06% lower at Rs 1,129.70 on the NSE at the time of reporting.

As the industry awaits the implementation of these proposed GST reforms, companies like Bata India are optimistic about the potential boost to the footwear market, particularly in the crucial sub-Rs 1,000 segment that caters to a large portion of Indian consumers.

Bata India Limited , a leading footwear retailer, reported flat revenue growth for the first quarter, with margins facing pressure amid challenging market conditions. The company's performance reflects ongoing efforts to navigate a complex retail landscape while implementing strategic initiatives to drive future growth.

Financial Performance

Bata India reported revenue of Rs 942.00 crores for Q1, representing a marginal decline of 0.30% compared to the same period last year. The company faced margin pressure, with gross margins declining by 133 basis points. EBITDA margins stood at 22.90%, while PAT margin was 5.50%, down 112 basis points year-on-year.

Strategic Initiatives

Despite the challenging quarter, Bata India continued to push forward with several strategic initiatives:

1. Zero Base Merchandising (ZBM): The company expanded its ZBM initiative to 200 stores, an increase of 50 stores during the quarter. These stores have seen a 33% reduction in product lines and a 22% decrease in inventory, leading to improved customer experience and operational efficiency.

2. Value Proposition: Bata introduced new price points across various product categories to address the stress in the mass segment. For example, new price points of Rs 399.00 and Rs 499.00 in the Bata Ladies category saw checkout rates increase from 3.50% to 8.00%.

3. Portfolio Evolution: The company continued to focus on casualization with its Floatz brand, which maintained a 30% growth momentum. The Power brand expanded in the athleisure segment, while Hush Puppies grew in the premium category, reaching 150 exclusive brand outlets.

4. Franchise Expansion: Bata added 20 franchise stores during the quarter, bringing the total to 644 franchise outlets.

Inventory Management

Total inventory decreased by 16% year-on-year, despite a sequential build-up for the upcoming season. The company implemented a Customer First project to improve end-to-end inventory agility and forecasting.

Market Challenges

Management cited stress in the mass segment and sluggishness in multi-brand outlets as key challenges. The company also noted two exceptional items that impacted results: VRS costs for factory workers and a base year land realization of Rs 134.00 crores.

Outlook

During the earnings call, Bata India's management expressed cautious optimism about future growth. Gunjan Shah, Managing Director and CEO, stated, "We are hopeful that the initiatives that I have talked about will only gather momentum as we go forward. So, the lower price points less than Rs. 1,000 is where the stress is, and that is where we want to basically keep accelerating ourselves, while we push the premium part separately."

The company remains focused on driving same-store sales growth, expanding its franchise network, and improving operational efficiency to navigate the current market challenges and position itself for future growth.

As Bata India continues to adapt to changing consumer preferences and market dynamics, investors and industry observers will be closely watching the company's performance in the coming quarters for signs of a sustained turnaround in revenue growth and profitability.