Bata plans to turn around next year

Shoemaker Bata India Ltd, after nearly three years in the red, expects to turn profitable again next financial year. In an attempt to give its brand an image makeover, Bata is planning to increase its retail presence and launch more youth-oriented and contemporary products.

The company estimated that it would end the current financial year (it follows a January-December calendar) with a turnover of Rs 750 crore and with accumulated losses of nearly Rs 40 crore.

Next fiscal Bata is aiming for a 12 per cent increase in sales to reach Rs 840 crore. "Our cost of production in India over the years has been very high. We will improve our cost efficiencies considerably with the ongoing voluntary retirement scheme," said Constantin Salameh, chief financial officer, Bata International and board member, Bata India.

In the three rounds of VRS offered this year, Bata reduced its employee count by 1,600 and it expects another 700-80 to avail the offer next year. Currently, the company has 10,000 employees.

According to Salameh, reducing labour costs was one of Bata India's biggest challenges because of the highly unionised nature of its workforce. "With such a high cost structure we would increasingly look at outsourcing our production," added Salameh.

Of the 60 million pairs of footwear it sells in India, Bata manufactures nearly 40 million pairs and outsources the rest.

Bata said that its Power brand of sports shoes will be the key growth driver as it looks to target the youth segment. "Power already sells 1.2 million pairs a year and next year sales will grow by 200 per cent. Power will stand for quality and affordability," said Stephen Davies, managing director Bata India.

In the last five years, Bata had lost considerable ground to sportswear manufacturers like Reebok, Adidas and Nike.to take on the competition it has positioned the Power brand as a technology driven, yet low cost product. The core range of Power shoes would be priced below Rs 1,000.

According to Davies, Bata had also revamped its marketing operations and segmented its retail operations in the form of flagship stores, city, family and bazaar outlets.

In the organised footwear sector Bata remains the largest manufacturer and retailer with a almost a quarter of the market share.

"Our flagship stores are located at some of the best shopping districts in all the metros. We have witnessed a 15-20 per cent increase in footfalls just by renovating those stores," Davies added.

The publicly listed Bata India is 51 per cent owned by the Switzerland-based Bata family and has 1,600 retail outlets in the country with 1,100 company owned-stores contributing to 60 per cent of its sales.