Shoe-makers’ profits hammered by Covid

Profits of listed shoe-makers of Bangladesh dropped in 2020 despite the drastic fall in the price of rawhides as the sales of the finished products crashed because of the economic slump caused by the pandemic.

Among the six listed companies in the tannery industry, the dividends of all firms also declined last year compared to 2019.

Bata Shoe, a multinational shoe and leather product manufacturer, incurred losses for the first time in its 59-year history in Bangladesh.

It lost Tk 132 crore last year after logging profits of Tk 49 crore a year earlier. The losing trend continued in the January-March period of 2021 as well.

Apex Tannery also reported a loss while Apex Footwear, Fortune Shoes, Legacy Footwear, and Samata Leather posted lower profits.

Apex Tannery's loss stood at Tk 1.81 crore in 2019-20 against a profit of Tk 2.15 crore a year ago. As a result, its dividend payout fell. The situation has remained unchanged in the current fiscal year.

"People now prefer products made from synthetics, non-leather and artificial leather," said Arfanul Hoque, head of retail at Bata.

"Their taste has changed a lot."

So, shoe-makers use a product mix. For instance, people now wear sneakers where there is no element of leather.

Even in a leather shoe, many parts are not made from leather, and leather accounts for 20 to 25 per cent of the cost.

"So, profits don't depend on the price of rawhide anymore," Hoque said.

"Whatever impact was expected from the low price of rawhides on our profits, it was not seen due to the pandemic."

The earnings took a hit as retail businesses crashed during major festivals such as Eid-ul-Fitr, Eid-ul-Azha, Puja, and Pahela Baishakh in 2020 due to the countrywide lockdown, said Bata Shoe in its financial report.

An estimated 77 per cent of rural business leaders such as dealers and wholesalers were particularly impacted by Covid-19, which inflicted a loss on them, it said.

Eid festivals account for about 35 per cent of the shoe and leather business in Bangladesh.

A top official of Apex Footwear said the sales in the domestic market were depressed because of the economic slowdown.

Profits of Apex Footwear halved to Tk 6 crore in 2019-20 from Tk 12 crore a year earlier. In the first nine months of the just-concluded fiscal year, the profit narrowed to Tk 5 crore from Tk 7 crore in the same period a year ago.

The global crisis also hurt the export market. Receipts from the shipment of leather and leather products plunged 21.79 per cent to $797 million in 2019-20, according to the Export Promotion Bureau.

It, however, recovered in the last fiscal year, growing 18.6 per cent to $941.67 million.

Pahela Baishakh marks the beginning of the most important sales season for fashion retailers in the apparel and footwear sectors in Bangladesh.

"This year, right after that, we also had Ramadan from the end of April to the end of May, which would have accounted for almost 40-50 per cent of our total annual sales," said Apex Footwear in the annual report for 2019-20.

"Instead, due to the general holiday and restrictions on shop opening and physical gatherings, we failed to achieve even 10 per cent of our planned sales."

Riaz Uddin Bhuiya, company secretary of Fortune Shoes, said his company didn't use leather in its shoe products usually.

"So, the lower price of the rawhide has no impact on our profitability."

Shares of Apex Footwear closed 3.32 per cent lower at Tk 227 on the Dhaka Stock Exchange yesterday. Apex Tannery shed 1.64 per cent, Bata Shoe 1.30 per cent, Legacy Footwear 3.14 per cent, and Samata Leather 3.98 per cent.

Shares of Fortune Shoes were up 1.55 per cent.