Bata India first quarter disappoints, stocks continue to wander below pre-covid highs

The results for the first quarter of fiscal 22 show the negative impact of the restrictions of the second wave of covid. Revenue was down 55% from the March quarter to ??267 crores. “(That’s) even though Bata didn’t really see a good recovery in Q4 (versus other discretionary categories as well). The product mix would have continued to be unfavorable for the quarter given the decline in the demand for formal establishments (schools were largely closed and offices were subject to strict operating restrictions), “analysts at ICICI Securities Ltd said in a report released Aug. 12.

While revenues have almost doubled year over year, helped by a favorable base, sales are still 70% lower than in Q1FY20. In the first quarter of FY22, retail outlet sales were mostly subdued, thanks to the second wave of covid-19 infections and the lockdowns that followed. In contrast, sales through e-commerce platforms were robust and edged up despite the restrictions. Online sales now represent 15% of total sales in Q1FY22.

Overall, the company swung to operating losses after profiting in the March quarter. Bata’s loss in earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to ??31.5 crore in the first quarter compared to a profit of ??112 crore in Q4FY21.

Dolat Capital Market Pvt. Ltd has revised its estimates for fiscal year 22E downwards to ??11.3 (vs. 19.3 previously) to take into account the loss of revenue during the first quarter of fiscal 21 and resulting in lower operating leverage. “However, we have generally maintained our estimates of EPS FY23E to take into account the planned reopening of shopping malls, schools, offices in FY23E, a favorable base, new advertising campaigns and an increased contribution to e-commerce”, point out the analysts in a report on August 11. EPS is earnings per share.

Gunjan Shah, CEO of Bata India, said: “Since the ease of the lockdown, footfall to our retail outlets has started to increase, signaling strong signs of recovery. “

Analysts say Bata India stock valuations are expensive. Therefore, unless the pace of growth picks up, it would be difficult for valuations to maintain such high levels.