Intensively "Online", Using Influence, Bata Closes Factory in Purwakarta

"The company can no longer continue production at the Purwakarta factory due to declining customer demand for the type of product produced at the Purwakarta factory. The factory's production capacity significantly exceeds the sustainable supply from suppliers in Indonesia," said the Secretary of PT Sepatu Bata Tbk, Hatta Tutuko, in the information disclosure document.

He further explains that such policy must be taken after they have struggled to face losses and industry challenges due to the Covid-19 pandemic and rapid shifts in consumer behavior. They have been experiencing this problem for the past four years.

In its 2023 financial report, the company announced a 5 percent decrease in sales value to Rp 609.6 billion from the 2022 sales value of Rp 643.4 billion. This decrease is in line with the 2023 production quantity, which is only 1.15 million pairs of shoes and sandals, down from 1.8 million pairs of footwear in the previous year.

At the same time, the company recorded an increase in comprehensive losses of Rp 188.4 billion from Rp 107.2 billion in 2022. The current year loss also increased from Rp 106.1 billion to Rp 190.5 billion last year. The losses suffered in 2023 were mainly due to damage to fixed assets and aging inventory.

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This financial performance was obtained even though the company made various efforts to improve sales. The outline of their innovations in the last year includes optimizing marketing by involving influencers in the hope of increasing store visitors on the company's online platform.

In the information disclosure report, it was also stated that the company always presents product innovations with designs and technology that prioritize comfort with today's style (comfort with style).

This company also still has 458 stores spread throughout Indonesia.

The company is also rearranging the goods it will sell to stores to produce more optimal sales. They also held a loyalty program and exclusive offers as rewards for Bata Club Member customers. Lastly, provide ongoing training for employees through various training programs, both online and offline.

Amidst these efforts, Bata has to offset losses by selling assets in the form of land and the Graha Bata building in the Cilandak area of South Jakarta, valued at Rp 64 billion. The asset, which spans 1,993 square meters, will be bought by PT Simatupang Jaya Realty. This was announced on the BEI website on March 8, 2024.

Until the end of 2023, Bata will employ 366 employees, which is a decrease from the 380 employees in the previous year. The company also still has 458 stores scattered throughout Indonesia.

Industry is sluggish

The problems experienced by Bata cannot be separated from the general performance of the footwear industry in the country. The Indonesian Footwear Association (Aprisindo) stated that the domestic footwear industry has not yet recovered to normal since the Covid-19 pandemic. Recent global economic dynamics have also influenced this.

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Executive Director of Aprisindo, Firman Bakri, when contacted separately, expressed that this sluggishness was even felt during this year's Ramadhan and Idul Fitri momentum. This is marked by the inability of many retail sellers to fulfill their Eid stock, as well as a decline in sales for some local brands in the middle and lower class market segments, compared to Eid in 2023.

"2024 will also be full of challenges, starting from food inflation and others. "Several brands during last Eid for the middle and lower middle segments experienced a decline compared to the same period in 2023. What is certain is that this also affects footwear manufacturers," he said.

Regarding the closure of the Bata factory, according to him, it cannot be separated from losses due to declining orders with costs that are not balanced with revenue, such as high employee wages and unbalanced selling prices.

Even though he is still waiting for further explanation from the company, Firman sees that Bata's business in Indonesia will still continue, especially in the retail sector. "Apart from production in Purwakarta, Bata also still has a business scheme in the form of maklun orders (ordering shoes from other factories) for their brand," he said.

Stocks plummeted

The significant decrease in BATA's stock prices has occurred since mid-2023. The company's stock prices have fallen below Rp 100 since mid-January 2024. As of Friday (3/5/2024), BATA's stock was only worth Rp 95 per share.

Citing RTI Business, the majority of BATA shares, which is 82.01 percent, are owned by the foreign company Bafin Nederland BV. Meanwhile, the rest is owned by the public. Until the fourth quarter of 2023, Bata's share capital has declined to IDR 183 billion, compared to IDR 676 billion in the same period in 2022.

Market observer William Hartanto, when contacted, assessed that the company's policy of stopping factory activities will have a negative sentiment for BATA's shares.

"The factory is the issuer's asset for generating profits. I noticed that BATA was also late in releasing financial reports and within a year, stock prices had dropped from Rp 600 to Rp 90 per share. This is not a good indication," said William.

He appealed to shareholder investors to wait-and-see until there is an explanation from the issuer regarding the case and the reasons for the delay in releasing the financial report. "Only from there can we monitor again whether BATA shares are worth recommending or not," he said.