Bata Pakistan Limited

Bata is one of the largest manufacturer and retailer of footwear in the world. The shoemaker claims to serves a million customers every day, having presence in six continents. The company, founded in 1894, has 25 production facilities and more than 500 retail outlets across the globe, selling shoes as well as accessories. The shoemaker has a large presence in Pakistan as well, with over six decades of history. The company was incorporated in 1951, and went public as Bata Pakistan Limited in 1979; it is also a constituent of the KSE 100 list.
Bata Pakistan is one of the leading players in local footwear market; it has a strong retail network comprising of more than 400 retail outlets, 467 registered wholesale dealers, 13 wholesale depots, 28 wholesale distributors and 41 DSP wholesale franchises across the country.
Being an international chain, brand diversity is a forte of Bata. The brand portfolio currently consists of Marie Claire, Hush Puppies, Power, Bubble Gummers, North Star, Scholl, Bata Comfort and Weinbrenner.
Bata Pakistan Limited does not have its scope limited to the domestic market, it also exports footwear. The company has around 2,500 permanent employees, but claims to provide direct and indirect employment to 10,000 individuals.
A long history and a strong brand name do not paint the complete picture though. Bata Pakistan has seen competition rise significantly in the past decade, with a host of small players flooding the market, along with long term rivals like Servis.
Recent Financial Performance In CY14, Bata Pakistan reported Rs 13.8 billion in annual sales. Over the past five years, the top line has expanded at a compound annual growth rate of 10.6 percent, which is modest in itself, but doesn't tell the whole story. The worrying element for Bata is the trajectory of its revenue growth, which has diminished from 30 percent in 2010 to less than 8 percent in 2014. In the first nine months of 2015, the company's sales grew 9 percent year-over-year.
To take the point further, Bata Pakistan's growth in same store sales has plunged significantly over the years, from 26 percent in 2010 to just 5 percent as of CY14. While the overall market for footwear has grown rapidly in the past half decade, stiff competition has not allowed Bata to up its market share. In the past five years, the company only added 38 retail outlets to its network.
Also, the company's utilisation of available capacity has transformed over the years, from over-production five years ago to under production today. The installed capacity has been enhanced gradually each year by Bata, to cater for increased production - apart from CY13, when the jump was rather large. From nearly 100 percent capacity utilization in 2010, Bata made use of 80 percent of its capacity in 2014.
With a decline in its top line growth, Bata has also encountered a decline in the growth of its after-tax profits. In CY14, the company managed 8.7 percent rise in PAT to Rs 1.34 billion. The company's margins - both gross and net - have trended upwards since 2011.
In the first three quarter of CY15, the shoemaker registered a 12 percent rise in profits. The gross margin soared 200 basis points YoY as the operating margin grew 100 bps. In the nine month period, per-share earnings came out to be Rs 137.9.
Over the years, Bata's price to earnings multiple has grown steeply. As of 2014-end, the stock traded at a multiple of 19.7 times its income in that period, as compared to 5.73 in 2010. The dividend yield has come down though, from 4.24 percent in 2010 to 2.23 percent in 2014.
Bata shareholders haven't had a good calendar year so far, with the stock sliding from around Rs 3800 at the beginning of the year to around Rs 3200-mark now, amid slowing growth outlook and stiff competition. Over the years though, the stock has yielded great returns, rallying from under Rs 700 in mid-2012, to over Rs 3000 in less than two years.