BATA have redefined stepping into the New Year in style. The company recently reported its half year results and they did not disappoint. With brands such as Power, Weinbrenner and legacy Bata brands recording strong performance in the first half of the year, the company’s only frown was the 2% volume decline on a year on year basis.
A SENS Statement from the company indicated that the company still faces competitive forces from cheap alternative brands (imports from Asia). The company however does benefit from the fact that it controls certain aspects of the value chain and seeks to ensure they cut down cuts in areas such as transportation and raw material processing. A sure way of strengthening the cash flow statement.
In terms of financial performance, the shoe company recorded a 9.5% improvement at half year 2018 compared to 2017. They are so far managing to control costs with a 1% increase in cost of sales however there are signals from value chain suppliers indicating increases in the prices of inputs which could have potential to increase the Cost of Sales in the second half of 2018.
Profitable on the gross end increased by 19.8% with profit before tax coming in 72.3% stronger at half year. The 77% increase in net profit indicates that the company is set to record an earnings per share at year end of around K0.26 (forward EPS).
However, working capital may appear slightly strained as they are recording more inventory albeit their liquid asset position has greatly improved. Furthermore, at half year it is expected that sales may have slowed down owing to the school already being in session and consumers cooling off purchases for footwear.
The shoe maker is intent on bringing quality shoes to market at an affordable price point. They are signaling the use of artificial intelligence (big data) to better serve their customers. A first for a Zambian shoe business. They are also putting faith in the Bata Club which will be a critical platform and priority during the second half of the year. Furthermore, they have intentions of expanding on their brick and mortar platform with 3 additional stores in the pipeline. One wonders however, whether their strategy will include an online offering as that too is whether there are additional competitive forces. Taking a leaf from the likes of Next UK, Ted baker, Boohoo UK, and Walmark, an online strategy could be the next source of value for the Bata as it a growing choice among consumers.