Bata India

Bata India reported a second consecutive quarter of accelerating growth in Q4 FY26, driven by volume expansion across all channels and categories. This robust performance translated into a significant 18% growth in cash flow from operations, indicating improved operational efficiency. The company emphasized that growth was broad-based, covering both channels and product categories.

While the reported PBT showed a substantial decline of 94% in Q4 FY26, this was primarily due to four exceptional items^📎. These included costs related to the closure of a manufacturing facility, an INR220 million FX impact^🌐 from a licensing agreement, lower gains from lease closures, and a one-off^📎 exceptional reversal in the prior year. Excluding these items^📎, the like-to-like PBT growth stood at a healthy 11%, reflecting underlying business strength.

The company successfully continued its inventory reduction strategy, achieving a 28% decrease over two years and 13% year-on-year. This was coupled with a 30% reduction in complexity, leading to a significant improvement in product availability by 1,000 basis points. Management expects these efforts to result in better inventory turns and fresher stock, contributing to future gross margin improvements.

Bata is actively expanding its strategic channels, with the franchise network now exceeding 700 stores and a target to reach 1,000 stores within the next 12 months. E-commerce remains the fastest-growing channel, with bata.com itself growing 81% YoY and contributing 14% to the overall D2C business. The company leverages its 2,000-store omnichannel network, with 1,000 stores fulfilling online orders, to ensure faster delivery and customer gratification.

A significant product upliftment initiative is underway, with a massive amount of new products expected to manifest over the next 12 months, focusing on technology, comfort, and style. Currently, only 10% of the investment in product innovation has reached consumers. The company is also developing a 'sneakers proposition' to enhance brand relevance among younger consumers and address the perception of Bata as a legacy brand.

Gross margins are experiencing optical dilution due to a shift in channel mix, particularly the expansion of the franchise channel, which operates at a lower gross margin percentage but is accretive to the overall bottom line. Management noted a 5-6% raw material inflation but expects a neutral impact for now, managed through judicious price elasticity. Minimum wage hikes are considered structural but partially insulated by existing wage structures.

The Zero-Based Merchandising (ZBM) initiative has been successfully rolled out to 700 stores by May 2026. These ZBM stores, particularly the 550 stores implemented earlier, contribute over 70% of the total COCO network turnover, despite representing less than 50% of the COCO store count. This highlights the higher productivity and strategic importance of these larger, optimized stores.

Trade receivables saw a 65% year-on-year surge, primarily driven by the expansion of multi-brand outlet (MBO), wholesale, and B2B e-commerce channels. Management assured that this increase is a natural outcome of channel growth and does not pose a risk to the financials. They confirmed that there is no deterioration in the number of days outstanding and no significant movement in provisions for doubtful debtors.