Bata, the largest footwear retailer in India, on Tuesday said the company is planning to open 50 franchise stores this financial year.
In an interview to CNBC-TV18, Ram Kumar Gupta, director-finance and chief financial officer, said that 75 percent revenue of Bata comes from products below Rs 1,000.
Watch: Bata welcomes GST rate cut on footwear, says move will benefit customers
Gupta said as per the various reports, 40 percent footwear market is under organised and rest 60 percent is under unorganised sector.
Edited excerpts: What portion of your revenue comes from the sub-Rs 500 segment and the Rs 500 to Rs 1,000 segment?
Revenue is around 25 percent up to Rs 500 segment and between Rs 500 and Rs 1,000, it's around 75 percent.
About 75 percent of your portfolio volumes and 50 percent of your revenues will now be taxed at just five percent GST rate. What does this mean in terms of incremental volumes for you and demand going ahead?
One, we welcome this move of GST council to reduce GST rate from 18 percent to five percent in the price range of Rs 500 to Rs 1,000. It's a very positive move, which will definitely benefit to our customers.
What part of the industry is organised and how much is unorganised?
There are no authentic numbers available. However, as per various reports, 40 percent footwear market is under organised sector and rest of 60 percent is under unorganised sector.
What was the same store sales growth during the first quarter, if you can tell us and what is the trend looking like?
First quarter was not very good. It was in a mid-single digit. However, we are expecting a good growth in the coming months and we are expecting a high single digit growth in financial year 2018-19.
Your average selling price – how much did it grow in the first quarter and how much are you expecting to grow it full year FY19?
Average selling price is improved by high single digit and in the financial year 2018-19, we are expecting it to be in double digit.
How much is the revenue that came in from premium products and how much will it be by the end of the year?
From premium products, it's around 30 percent of total revenue, which will definitely increase in the coming months and we are expecting it will go up to 34-35 percent by end of this financial year.
Can we assume that your margins will be above 18 percent. Is that what you are targeting?
I am not saying that, but definitely we are working towards improvement of our margins and we expect it will give a positive result to us in the coming quarters.
Rent as a percentage of sales has come down very sharply over a period of time from 16 percent in Q4 of FY17. It has now come down all the way to 11.5 percent. Can it go lower or is this a number analyst should work with now?
We are taking lot of initiatives and this is the top agenda in our cost savings initiative. We are renegotiating rent with the existing landlords. In addition to that, we are optimising our retail space, wherever we have big space and we feel that we can manage our store in smaller space, we are taking these initiatives.
How much will rent as a percentage of your sales come down by?
When your revenue of all our stores increase, we have long-term agreements with our landlords. So if turnover will go up, then as a percentage, it will come down, rentals will come down.
How many stores did you open in the last quarter and how many do you plan on opening this year. Hundred stores is what you had guided for earlier. So how many franchise stores have you opened so far and what is your plan?
For FY18-19, we have a plan to open around 100 our own retail stores. In addition to that, we have a plan to open around 50 franchise store. In Q1, we opened around 20 retail stores and 10 franchise stores.
What is the opportunity for individual brands? You had launched 'Power' as a standalone store in Gurugram last quarter. What is the plan to expand individual brands like that?
We opened first 'Power' store not in Gurugram but in Noida. The store is doing very well and we are expanding this. We plan to open around five 'Power' stored during financial year 2018-19. Beside this, we will open 'Bubblegummers' stores also for children. We have already opened one store in Bengaluru, which is doing very well and now we will extent this in other cities also.
We have doubled our budget than last year and next year again as we have a plan to increase it 70-80 percent against this year, which means it will be around three percent of our total revenue.
How much more will you spend in terms of advertising now?