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Business News/ Markets / Mark To Market/  Bata stock gains as company steadily walks towards pre-Covid earnings mark

Bata stock gains as company steadily walks towards pre-Covid earnings mark

  • According to Bata management, the easing of the lockdowns and aggressive vaccination drives across the country have translated into higher footfalls in its retail outlets

Bata will continue its expansion in tier 3-5 towns with focus on new emerging digital channels.

Footwear maker Bata India Ltd reported stellar earnings performance in the September quarter. Tight cost control and a favourable base helped the company post better-than-expected operating performance. Even though its 2QFY22 revenue is still lower than 2QFY20 level, possibly because of weaker demand for premium office and casual wear, analysts expect it's financials to improve to pre-Covid levels in the second half of this financial year.

Reacting to earnings, shares of the company rose nearly 4.5% on the NSE in Monday's opening trade. The Street's optimism stems from the company management's upbeat commentary on future growth.

According to the management, the easing of the lockdowns and aggressive vaccination drives across the country have translated into higher footfalls in its retail outlets. This signals healthy and consistent signs of recovery, the management said. Further, Bata launched a major campaign, ‘Step Ahead’, which according to the management is seeing good traction among its customers.

The company will continue its expansion in tier 3-5 towns with focus on new emerging digital channels. Investors would reckon that the company was going to launch a collection of training & fitness apparel under the ‘Power’ brand, which got delayed due to the pandemic. The management said that it will be now be launched at an appropriate time.

In simple terms, the company is steadily heading towards its achieving its pre-covid performance.

"3QFY22 should see Bata India hitting pre-pandemic levels of sales, with 4QFY22 exceeding 4QFY20 levels, especially as the latter was hit by Covid-19. While no explicit number of functional COCO retail outlets has been shared, based on the total store number indicated, we believe they have risen to ~1,375 level from ~1,300 level at the end of 1QFY22 (and from a peak of ~1,450 pre-pandemic), " analysts at Nirmal Bang Securities Ltd said in a report.

"We believe that BIL has likely reopened stores that it had shut down during the course of the pandemic, either in the same or different locations and probably right sized them too," added the report.

The domestic brokerage house has revised numbers its earnings estimates for FY22 higher, but has kept them constant for FY23/FY24. "Our estimates are higher than consensus and we expect the street to get into an upward earnings per share revision cycle," said the Nirmal Bang report.

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