Page Industries Ltd, the exclusive licensee for leading brands such as Jockey and Speedo in India, continues to struggle as its revenue declined for the third consecutive quarter. The company reported an 8.4% year-on-year drop in revenue to 1,125 crore during the September quarter (Q2FY24), primarily due to falling volumes and excess inventory resulting from muted demand.
Analysts had high expectations for Page Industries’ Q2 revenue, but the company failed to meet them. The concerning aspect is the uncertain demand environment, particularly in the urban and mid-premium segments. Although consumers haven’t downgraded their preferences, purchasing quantities have been reduced. The company hopes for a sales boost during the festival season in Q3. However, industry experts suggest it is unclear how significant this occasion will be for the innerwear category.
Despite the challenging market conditions, Page Industries managed to improve its EBITDA margin, thanks to stable raw material costs and reduced employee expenses and advertisement costs. The company aims to maintain its EBITDA margin in the 19-21% range as it continues to invest in digital initiatives, albeit acknowledging a potential impact on margins.
The delayed revival in volumes has led to a reduction in earnings estimates for Page Industries, further fueling concerns. Notably, the company faced a setback as its chief operating officer resigned, causing uncertainty regarding future leadership and the potential for a turnaround.
Page Industries’ stock has witnessed a 21% decline in the last year, mainly attributed to disappointing earnings results. Despite “fair” valuations based on return ratios, the stock’s performance hinges on the company’s ability to achieve consistent revenue growth.
In conclusion, Page Industries faces a challenging road ahead, with muted demand and a lacklustre earnings performance. The company’s ability to adapt to evolving market conditions while maintaining margin levels will be crucial for its future success.
