Going ahead, the enhanced focus on economic products and emphasis on distribution, along with strong brand equity, should help Bata fare better in the current situation, say analysts.
According to Kaustubh Pawaskar, analyst at Sharekhan, “Bata’s strategy in terms of new relevant collections (washable footwear, etc) and a strong focus on distribution via the omni-channel approach, WhatsApp and e-commerce, seems to be in the right direction, and should help in faster recovery as the situation normalises.” Bata’s choice to push its economic portfolio is a right step towards recovery, he added.
While emphasis on delivery and e-commerce channels is common across industries, Bata is pushing non-premium (Rs 499 per pair) products. This would be relevant in the Covid-19 context, where most individuals are working from home and schools’ re-opening has been delayed. The larger push to demand, according to Bata’s management, will come from festive season (after September).
Market share gains from local/unbranded players should further aid the recovery process for the company, which has a strong balance sheet. However, these moves may impact profitability/margin gains in the near term, due to a change in the revenue mix towards lower-priced products.
Some margin support, however, is expected from the June quarter as half of Bata’s landlords have agreed to waive off rent during the lockdown
and revisit agreements (indicates likely lower rent) till the business situation normalises, according to the management.
Overall, how fast the company’s strategy delivers will be crucial for the stock, which has already recovered 20 per cent since March 23 closing lows, and currently trades at 43 times FY21 estimated earnings.