Insight
Growing up in the late 90’s one would have actually thought Bata Zambia with its prominent “Bata School Shoe” was a wholly owned Zambian company but in actual sense it is not. Bata International is a Canadian owned multinational footwear and fashion accessory manufacturer and retailer based in Lausanne, Switzerland. A family-owned business, the company is organized into three business units which include Bata, Bata Industrials and AW Lab. The company has a retail presence of over 5,300 shops in more than 70 countries and production facilities in 18 countries. In Zambia, Bata have 35 outlets which are franchises and are wholly owned and managed by Zambian’s.
Over the past two rain seasons it has been evident that we have experienced a drought in most parts of the country which has negatively affected the Bata stores in the rural. However, the urban stores have performed well and managed to cover those stores in other districts whose performance was below their targets. Generally, business for Bata was better in the first half of the year as compared to the second half which consists of the January and May back to school period when business is normally good. The second half indicated slow sales in August and September but started to improve from October right through to December 2018. This was primarily due to the introduction of a new show collection for the festive season and the early rains which was a relief to the drought that was experienced earlier.
Financial Performance
According to the abridged financials for 2018 the turnover for the year was K153,803,812 which is an increase of 9% against K141,249,414 which was achieved the previous years. Profit before tax achieved was K25, 022,888, which is an increase of 49% against K16, 738,834 achieved in 2017. In light of the company performance in 2018 and despite opening 3 new stores and renovating 10 stores which required financing, the Board of Directors recommended a dividend payment of K0.10/share compared to K0.07/share in 2017. This represents an increase of 43% over last year, which for the first time, has now reached double digits. The gross profit margin for 2018 stood at 51.04% compared to 45.86% represented in 2017. This ratio gave a clue to the financial structure of Bata Zambia and its exposure to business risk. For Instance, the increase in the margin was minor and strong at the gross profit level but much narrower operating margin as we move down the income statement.
Diagnosis
Internally, the merchandising department has continuously made exciting changes to the shoe line range so as to ensure that they cater to the various tastes in all their branches. Bata is a family shoe chain of stores and their product range has been completely overhauled to keep up with international trends with a local touch. Therefore, Bata Zambia will continue to upgrade their shoe range with new exciting trendy styles especially for the young cautions customers. In addition, great rewards have been offered to the Bata loyalty customers in the form of generous discounts hence enhancing their over brand “BATA BY CHOICE” and market share.
In 2019 Bata Zambia is hopeful that macroeconomic stability will be sustained, aided by continued implementation of reforms towards the country’s economic growth. Mainly, downside risks are always pertinent and these include but not limited to raising oil prices and the recent trends in the kwacha devaluation. It is important to note that Bata Zambia is conscious of the effects of the 2019 proposed sales tax but it is too soon to determine the impact. However their focus will remain to provide quality footwear to their customers at an affordable price despite the status of the Marco environment. Looking forward, Bata Zambia is optimistic that the mining and agricultural sectors will perform well in 2019 in order to generate positive spin offs in the retail and wholesale sectors.
Stock Performance
The Bata security maintained a steady share price for the most part of 2018. The share price sharply dipped by 47.66% towards the end of 2018 despite out performing the All Share Index for the most of the year. The share price has rebounded in 2019 ending February 2019 on par with the Index.