Footwear majors Bata, Liberty, others conserving cash to bounce back after coronavirus lockdown

Key Highlights

• From renegotiating rental deals to closing down non-performing stores, cash conservation is top priority for footwear retailers
• Middle and senior management of Liberty Shoes take pay cuts up to 50 per cent
• Bata to postpone increments
• Bata is donating washable footwear to hospitals, also manufacturing masks

Footwear retailers Bata and Liberty are having mixed feelings. On one hand, is the deep concern of their business coming to a complete standstill because of the coronavirus lockdown, but on the other hand they do have a glimmer of hope. In the new normal post the lockdown it is the value brands that are expected to do better considering the pay cuts and job loses that are in the offing, and it's not just Bata and Liberty, but also the likes of Lakhani and Relaxo (all of them are value brands) that are likely to have a clear advantage.

"Value footwear brands such as ours should definitely be successful, but at the same time we can't put the cart before the horse, as the current situation is unprecedented and one really can't predict anything," says Anupam Bansal, Executive Director (Retail), Liberty Shoes.

"There will be a host of customer behaviour changes. While increased e-commerce shopping could be the new norm, high street stores could do better than malls. However, at this point one can't really predict," adds Bata India CEO, Sandeep Kataria. For the time being, footwear retailers are looking at every possible way of conserving cash, so that they can stay afloat in the new normal. From renegotiating rental deals to closing down the non-performing stores, cash conservation is their top priority.

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Bansal of Liberty says while the company's shop floor employees are protected from pay cuts and job loses, the employees in the middle management and senior management are taking pay cuts up to 50 per cent. "I am not going to take a salary home for the next few months and I have told my employees just as I am renegotiating rentals with various landlords, they also need to renegotiate rentals with their respective landlords. Cash has to be conserved."

Similarly, Bata, says Kataria, is not considering pay-cuts, but it has put increments in abeyance. "The retail and footwear sectors are one of the largest employment generators and if you look at leather and footwear sector, it alone employs about 45 lakh people directly, consisting of weaker sections of the society, with women consisting 30 per cent of the workforce. Therefore, we do need government support to make sure that we are able to keep up the business and people do not lose jobs. We have already requested for help in terms of moratorium for rentals from mall owners and high street landlords. We also seek the government's support in providing subsidy for minimum wages with which our teams can be supported, also relaxation in some of the statutory payments and requirements that helps the cash flow," says Kataria.

On the other hand, Bata is also doing its bit to support the COVID-19 infrastructure. The footwear major, in the past 10 days has manufactured around 5,000 masks using the fabric that goes into making its shoe linings, at its Batanagar plant near Kolkata. These masks have been donated to the Kolkata Police. Kataria says that it is waiting for the lockdown to be lifted so that fresh stock can come in and the company is able to manufacture masks on a large-scale. "We can make both basic and medical masks once we get fresh stocks," he says. Will Bata look at masks or protective gears as a new business? "We won't look at it as long-term business but we will certainly manufacture in large-scale in the short-term to help the government fight COVID-19. This initiative will not give us revenue or profits," says Kataria.

The company has also been donating its washable footwear to hospitals across the country, the sales of which Kataria expects to grow in the long-run.

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