Bata India (500043) Q4 02/03 earnings summary

Executive summary

• FY2003 turnover rose to Rs.7,114.0m from Rs.6,941.9m; the net loss widened to Rs.260.5m from Rs.74.1m, with no dividend recommended.

• Consumer resistance to price increases, stock-clearance discounts and underused production capacity weighed on results; retail grew while wholesale sales declined.

• Restructuring focused on lowering fixed costs, repositioning retail and improving product and distribution execution; management expected significant turnaround in 2005.

Financial highlights

• Standalone net sales were Rs.6,741.0m, up from Rs.6,497.3m; total sales and other income reached Rs.7,167.0m versus Rs.7,047.9m.

• Loss before tax widened to Rs.213.3m from Rs.112.0m; loss after tax was Rs.260.5m versus Rs.74.1m.

• Basic and diluted EPS was negative Rs.5.07, compared with negative Rs.1.44 in 2002.

• Consolidated loss after tax was Rs.256.5m versus Rs.71.7m; consolidated net sales were Rs.6,741.0m versus Rs.6,497.3m.

Outlook and guidance

• 2004 was designated the “Year of the Product,” with new footwear lines, concept-based marketing and customer-profile-led retail restructuring planned.

• Retail vision targeted 100m pairs sold from 60m; plans called for ~40 Flagship, 120 City and 800 Family stores over two years, through openings and closures.

• Management expected 2004 restructuring to weigh on the short term but reduce costs over time, with results in 2005 expected to show a significant turnaround.