Bata India Ltd's September quarter (Q2FY26) proved forgettable, dragging its shares down 4% on Tuesday as results fell short across key metrics. Growth challenges persisted through the quarter, and with no meaningful relief on costs, the footwear maker missed expectations at several levels.

Revenue at ₹801 crore declined 4% year-on-year, marking the worst performance in the past ten quarters. For perspective, both JM Financial Institutional Securities and Motilal Oswal Financial Services had pegged Bata's revenue at around ₹860 crore.

Bata attributed the shortfall partly to early transmission of goods and services tax (GST) benefits to consumers, well before the official rate cuts were notified, in an effort to clear inventory. However, the Q2 topline was hit by deferred purchases from channel partners and consumers following the announcement of rationalization of GST slabs. A temporary disruption at a key warehouse in July further weighed on business.

Profitability, too, came under pressure in Q2. Gross margin fell for the third consecutive quarter, slipping 122 basis points (bps) year-on-year to 55.4%, as higher markdowns for pre-festive inventory clearance and stepped-up marketing spends bit into earnings. Ebitda margin contracted 277 bps to 18.1%, reversing the 153-bps expansion seen in Q1 to 21%. This was well below Motilal Oswal's and JM Financial's forecasts of 24.2% and 22.9%, respectively.

The Ebitda margin decline was primarily due to a steep 124 bps year-on-year growth in other expenses as a percentage of revenue. Staff costs as a percentage of revenue increased at a relatively slower pace of 30 bps. The upshot: Bata's Q2 Ebitda declined 17% to ₹145 crore versus 7.5% growth seen in Q1 to ₹199 crore.

Finding its footing

There are, however, signs of hope. Bata said that while the GST 2.0 transition muted demand in Q2, sales momentum has picked up since 22 September, when the new GST rates came into effect. Moreover, its premium brands, including Hush Puppies and Power, are seeing robust growth, and its zero-base merchandising initiative—designed to improve efficiency and customer experience—has now expanded to 200 stores.

Investors will be watching whether these efforts can meaningfully revive growth amid rising competition. How the lower-priced products fare is another monitorable. With the company dragging its feet on growth, Bata's stock is down around 20% so far in 2025.