Bata India posts third straight drop in profit on tepid demand, one-time charge

Bata India posted its third straight decline in quarterly profit on Monday, hurt by customers postponing purchases in anticipation of the government’s tax cuts and a one-time expense related to a voluntary retirement scheme at one of its factories.

The footwear retailer reported a 73.3% drop in second-quarter profit, but said it is expecting signs of recovery during the festive season.

Bata’s consolidated profit came in at 139 million rupees ($1.58 million) for the July-to-September period, compared to 519.8 million rupees ($5.91 million) a year ago.

The Indian government’s sweeping goods and services tax (GST) cuts went into effect on September 22.

The company also reported an additional expense of 82.7 million rupees due to a voluntary retirement scheme at a manufacturing unit. It added, without disclosing details, that disruption in one of the firm’s largest warehouses in July had a temporary business impact.

Bata, which sells brands such as ‘Hush Puppies’ and ‘North Star’ in India posted a consolidated revenue from operations of 8.01 billion rupees, 4.3% lower from a year ago.

KEY CONTEXT

A slowdown in discretionary spending across India’s urban centers, due to the high cost of living and sluggish wage growth, has weighed on earnings of footwear retailers, including rivals Metro Brands and Campus Activewear. Campus is yet to post its quarterly results.

Bata India has been focusing on casual and athleisure lines to attract younger consumers amid a broader retail slowdown. However, analysts expect demand to rebound in the ongoing festive quarter, supported by recent tax cuts and improving consumer sentiment that could boost the sector.

“While overall the (second-quarter) did have muted demand adversely impacted by the GST 2.0 transition, we are seeing positive signs of recovery this festive season post September 22,” Bata India CEO Gunjan Shah said in a statement.