Bata India

Bata India reported a revenue from operations of ₹800 crores for Q2 FY26, marking a 4% decline year-over-year. Gross margin decreased by 150 basis points compared to the previous year but showed a sequential improvement of 190 basis points from Q1. EBITDA also saw a decline of 220 basis points, primarily influenced by the gross margin erosion and a significant increase in Advertising & Promotion (A&P) investments, which nearly doubled to 3.5% of revenue from 1.5% in the prior period.

The company's Q2 performance was significantly impacted by two key events: the GST rate rationalization and a disruption at its largest distribution center (RDC) in Jamalpur. The GST transition led to consumer buying deferral and required additional incentives for channel partners, contributing to the 4% revenue decline and 150 bps gross margin erosion. Management stated that without these disruptions, revenue would have been flat. The RDC issue, affecting 40% of inventory, caused an unplanned abrupt transition, though it has since stabilized.

Bata India continued its focus on inventory decluttering and improving freshness, with inventory turns reaching 2.2 and an ideal target of 2.5. The number of assortments in stores has significantly reduced, improving product availability by 14%. The company is also revamping its customer store experience through 'zero-based merchandising' (ZBM), which has been implemented in Gurgaon and Mumbai, with approximately 90% of Mumbai stores now on ZBM. This initiative is expected to contribute almost 50% of store turnover by the next quarter end.

The company invested heavily in marketing campaigns, with A&P spend now at 3.5% of revenue, aiming to sustain 3-4% going forward^⏳. Key campaigns focused on 'Victoria Ballerina' for ladies, 'Stamina' and 'Easy Slide' for power footwear, and 'Hush Puppies' office sneakers and iconic collection. Easy Slide sales reached 4,000 pairs per week, with a target to hit 10,000 pairs per week. The product portfolio is structured with 40% below INR 1000, 40% between INR 1000-2500, and 20% above INR 2500, with premium sales (above INR 2000) accounting for 30%.

Bata India is pushing for expansion, particularly through its franchise model, which has grown from less than 100 to nearly 700 stores over four years. The company aims to accelerate this growth, targeting multiple store partners within clusters. Additionally, the Shop-in-Shop (SIS) commerce stores are expected to see significant expansion after a business model transformation. Management expressed confidence that ongoing investments in marketing, channel expansion, and product funnel reimagination will cumulatively create a positive impact, with expectations for lower markdown impact and better overall margins in the next quarter.