Bata India posts first profit drop in two years on sluggish demand

Bata India reported its first drop in profit in eight quarters on Wednesday, as soft demand dragged its revenue growth to a nine-quarter low. The company's consolidated profit fell 10.5 per cent to 1.07 billion Indian rupees ($12.92 million) in the April-June quarter, while revenue from operations increased just 1.6 per cent to 9.58 billion rupees. That was the slowest revenue growth since the March quarter of 2021 as the company, which is better known for its formal shoes, grapples with a growing consumer preference for casual wear.

Bata has lagged behind its peers due to a slow pace of innovation and ebbing brand pull, while its lower-price products have grown at a slower pace, brokerage Ambit Capital said in a note in May.

As a result, say, analysts, it has struggled with high inventory, which forced it into an early end-of-season sale.

Compounding its problems, Bata's expenses increased 4.5 per cent in the quarter, while inventory costs spiked to 3.83 billion rupees.

Relaxo Footwears, which owns the Sparx sports shoe brand, had hiked prices to counter the increased costs, which helped it post an increase in profit last quarter. Bata's peers Khadim India and Campus Activewear will announce their results later this month.

Shares of Bata, a unit of its Netherlands-based namesake parent, closed 3.2 per cent lower ahead of the results.

That cut its gains for the year to 3.1 per cent, which is still more than its peers. Relaxo's shares have inched up 1.6 per cent, while Khadim has dipped 0.5 per cent and Campus Activewear has slumped about 30 per cent.