Page Industries: Losing grip

Jockey and Speedo innerwear maker Page Industries share price has slumped over 8% in the last two trading sessions following the dismal performance during the fiscal third quarter.

It seems the slow volume growth and margin performance are collectively spoiling the show. Net profit dropped by 14.6% to Ra 87 crore during the quarter under review. This is despite, a 7.5% increase in revenue to Rs 794 crore.

The company witnessed a decline in volumes of 2.8% on the year. The demand slowdown is biting hard and offtake from the shelves is low.

Higher costs eroded Ebitda (earnings before interest, tax, depreciation, and amortization) margin, which declined by a whopping 490 basis points to 17.5%. Ebitda has declined by a striking 16% on year to Rs 139 crore.

The net profit for nine months ended 31 December has declined by 2% on the year. The company claims that the dip in profit after tax is temporary and entirely due to enhanced investments in sales and marketing, people and technology, which will drive sustainable growth in the years to come.

Meanwhile, investors continue to be in a generous mood, given a higher discount on the bourses. Page Industries trade at about 49 times estimated earnings for FY21, despite the fact that the shares have shed 12.5% from their 52-week trading high seen on 24 January.

Tepid consumer demand and high competitive intensity impacted the performance of Page Industries. It resulted in lower offtake from distributors and a decline in footfalls in its own exclusive stores (720+). For 9MFY20, revenues grew 7% YoY to Rs 2404 crs with volume growth of a mere 1% YoY to 138 million pieces.

In a bid to beat the blues, the management has undertaken several initiatives such as new product launches, sustained enhancement in distribution reach and higher investments in marketing and human resources.

The company is enhancing its focus on the kidswear segment through its brand Jockey Junior. The management is investing in building a separate team to focus on the kid’s innerwear segment and has added a new team by hiring a new national sales manager for the kid’s innerwear segment.

It opened two exclusive Jockey Junior stores in Q3FY20. It has set up a team of 120 sales personnel to capture the growth opportunity in the segment

Going ahead we expect near term pressure to continue and sustainable improvement in volume trajectory would remain the key monitorable ahead.

Net net we believe that growth may still take some time to come back and we may see another one to two-quarters of slower growth ahead.

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