Page Industries Limited (PAGEIND.NS) Earnings Call Transcript & Summary

Sir, the first question is on the growth statement which you made like May being stronger than April and then June being stronger than May. Just wanted to understand that like across the quarters also, there are some quarters which are stronger and then there are some quarters which are relatively weaker. So typically, is this a phenomenon you see across the years that month-on-month, as you go from April to June, there's a month-on-month improvement? Or was this the first time you are seeing this trend?

See, there is no specific pattern. Obviously, quarter-on-quarter, the contribution to the overall number vary. But in terms of growth rates, there is no specific pattern. Last year, that's what we experienced. Quarter 1 for us was slower when compared to the subsequent quarters in the year. As the year progressed, our performance both at a retail level as well and also at a primary level improved for us. This year, we don't know. We are -- we have seen that within the quarter till June, it's also largely to do with a very muted April because of the festive impact. We've seen recovery in May and thereafter further recovery in June. So as of now, in the quarter, that's how it's been. And if I take last year as a trend, yes, we've seen improvements quarter-on-quarter for the year as the year progress.

So Karthik, let me put it this way, right? When you -- when we look at the full quarter number, there's a 2% volume growth, right? If you look at April, May and June on a Y-o-Y growth versus last year, right, how different the growth profile would be? I understand April could be maybe meaningfully different because of the early festive. But when you look at May and June, on a Y-o-Y growth basis, was the trend very similar? Or was it different? And similarly, like are you seeing any uptick in July? Or is July also kind of very similar to what you have seen last quarter?

So I cannot comment on July yet. So I'll keep my comment to the quarter. So if you just look at it from a number point of view, last year, we had reported about a 4% revenue growth in quarter 1. By the time we ended the year, it was about 8%, 8.5% for the whole financial year of FY '25. And that's where I said that the performance improved quarter-over-quarter. It's a similar pattern we have experienced in quarter 1 alone. I'm not sure whether that's a reflection of what we will see in quarter 2 and quarter 3. I'll retain my comment for quarter 1, where we've seen a positive trajectory month-over-month.

Well, maybe I will take that offline. The other question -- the second question is in terms of the earlier discussion around margins, right? Now when I look at, one, the EBITDA margin, there's -- you have a positive tailwind on the EBITDA margin, even gross margin side, at least on the efficiency side, when you talk about improving efficiency, it looks like a structural advantage, right, that this benefit should continue. So in that context, when you look at the -- for example, you talked about the correction in price -- product ladder, which had a positive impact, right, 0.3%, 0.4%. As a brand, why not take a price cut or a price correction at the entry-level price point, right, not across the portfolio because at the entry level, if you take some price correction, it basically helps the brand to gain market share because the pricing difference between, say, a lower brand product versus Jockey's entry-level product becomes slightly lower, right? And at least your margins could easily support that. So from a strategy point of view, why is that not a thought process?

No, I think -- yes, go ahead, Deepanjan, please.

See, there are 2 parts to this question. One is definitely the operating margin and whether it is right to reduce the price. Operating margin, while it is -- I mean we are in the range of 19% to 21%, of course, it has been a bit higher in last few quarters. But as we have been telling and we -- and that's what is likely to happen, the subsequent quarters that we see, I mean, as we see the margins will be within this range of [ 19% to 21% ]. This heightened or the increased margin of 21% plus is unlikely to be sustained. So we'll come back within this range more because our marketing spend will be in the range of 4% to 5%. And as we go ahead, our IT spends will be slightly on the higher side. So considering all these factors, it will be coming back within this range of 19% to 21%. Coming to your question of why not price reduction to take advantage of the market. See, we as a brand all along has stood for value of our money, and we are focused always on driving value to the consumer. So the kind of products or features that we provide in our products, our prices are very much in line with those features. So we don't see a requirement that by reducing price simply to capture the market share, our value position will be enhanced or will be affected. So we will maintain our value proposition. And towards the same objective, we don't see any requirement of price increase.

The next question comes from the line of Sameer Gupta with India Infoline.

I mean, I know it's been asked by many participants. But just on this volume growth number, so 2% versus 8.5% last quarter, I understand that you mentioned the reasons as subdued consumer sentiment and festive timing mismatch. But frankly, we haven't seen such a slowdown for any other retail company so far, which have reported. Plus you mentioned innerwear has seen a slightly more subdued, and this is a more stable category. So just wanted to understand a little more in granular detail, any study or handle you have as to track brand relevance, whether those aspects are healthy channel-wise, if there is a problem with EBO growing much faster than the GT channel? Any color that you could give additionally to what you have already given?

Sure, Sameer. Thanks for the question. I think it's probably the first thing on our minds as well, right? So in terms of brand health and relevance for men's innerwear as well as women's innerwear as a category, brand score seems to be still at an all-time high. Just to get you in on the details, right, our top-of-mind awareness for the brand for men stand at about 55% and for women at about 36%, 37%, which has been the highest that it's ever been. More importantly, we track a metric called MPD, which is most preferred brand. It's a general brand management metric, where for men Jockey is at about 55% and for women, it's about 45%. Again, all-time high that it's ever been since the time we've been tracking it. So we don't have indications of the brand losing relevance amongst what we define as our target audience. In fact, the brand scores seem to be on a high. This is through syndicated research. Also from anecdotal research that we collect when we speak to retailers on the ground, this is multi-brand retailers as well as the information that we have on system, on record as far as our [indiscernible] stores are concerned, there is a marked drop in consumers at a store level. That's what we've seen, both in a multi-brand scenario as well as an exclusive brand scenario. And that's the reason we kind of push to attribute this more to the consumer level. And of course, the growth that are seen today is being aided by expansion. But at a consumer level, there seems to be stress at this point in time.

Got it. And any difference in the MBO versus EBO growth rate?

No. At a like-to-like level, there is no difference. Of course, when you add in expansion, we've been adding about anywhere between 130 to 160 [ EBS ] year after year. And hence, we've seen better growth rates overall as a channel. But if that were to be discounted and looked at a like-to-like store level performance, MBOs and EBOs seem to be performing in a similar manner, but there's a definite difference in performance between offline and online. Online seem to be growing a lot more robust and healthy when compared to offline.

Got it. Second question is on the JKY Groove, the new launch product. Now just wanted to understand the thought process here. Is it coming after a feedback from the trade channels because see, Jockey, as we know, is known for comfort and fit. Fashion is a different ball game. It increases the risk of provisioning on inventory, debt stock, et cetera. And the competition here is much more intense versus your normal Jockey products, which stand for, as I said, comfort and fit. Also, last year, we had experimented with jeans. That has seen a limited success. So what exactly is the thought process behind launching this product?

Great question, Sameer. Thanks for the question. This is not a feedback from GT, not a feedback from retailers for the need for this. This is more to look at spaces for extending the product portfolio within the brand ambit. That's where this is coming from. As you know, you've been following the brand. Over the years, we moved from innerwear to sleepwear, sleepwear to lounge wear, loungewear to athleisure athleisure to one mile wear. We've also entered the performance activewear. And we've seen large portions of success in all of these areas that we've gotten into. This is another space within apparel as a category. And the apprehensions that you have are the apprehensions we have as well. And that is the reason we've not gone out for a full-fledged launch from the get-go. What we did this quarter was more of a pilot just to understand how this space operates and whether there are going to be risks like you had mentioned. So this particular launch was contained to just about 50 EBOs in the country and jockey.in and one other platform on e-commerce, just to assess what the response is going to be and also track business metrics in terms of turns, in terms of inventory, in terms of redundancy, et cetera. And this was launched about mid-May. So as I'm speaking to you, we have about 75 days of [ tertiary ] data compared to the primary that we made or the products that we made and hence sell-through information. So far, the performance has been really, really good and promising. That being said, I don't think tomorrow, this will become the mainstay of Jockey or the face of Jockey or we'll expand straight away to 50,000, 60,000 outlets. That's not the intent. We will tread this area cautiously, look to expand in a methodical manner season after season until we get a hang of this, get a clear understanding of what it means to business and how it affects our metrics. But it is an opportunity for us to talk to the younger audience. It's an opportunity for us to extend ourselves into a new space. That's how we are looking at it.

Great. This is really, really helpful, really detailed answer. One more question, if I may squeeze in. This is specifically on the international business. Now we have had these territories, Middle East and Bangladesh, Nepal, Sri Lanka, et cetera, for many years now. But we haven't seen anything meaningful happening on the international front. It is still sub 5% as a percentage of sales. What is the thought process here? I mean are you limited in terms of bandwidth to explore waters outside India? Or I mean how do you look at it?

Honestly, I think for many years now, the focus has been India. India has been riding the growth story for Page, not just for Page for any category you look at across brands. And I think it continues to do so. The promise that India gives is there. It is intact, and we are very, very committed to building the business here. But about 1 year, 1.5 years ago is where we've actually consciously invested in infrastructure as well as resources to dedicatedly handle our international geographies. Now some of these geographies are strategically not being entered into for reasons. But the areas that we have entered into, largely, if you look at Middle East or Nepal, these are areas where infrastructure efforts and investments have been made in the last couple of years. We have invested now a lot into research and market understanding so that we can, in a way, get back into these territories with a new niche to speak, right, and look at it with all intent now that we've invested in that geography. So yes, at this point in time, it is a very small contributor to the overall revenues of the brand. But we are seeing opportunities in each of these geographies to grow and contribute in a meaningful manner to the overall revenues of Page. So we will see change in this area this year and the next year onwards. Also, the entry into these areas has a long gestation period for us to actually launch or relaunch the brand to make it a success and have meaning in that business. And that's why you're seeing that lag. But yes, when we do choose to move in there and build the brand meaningfully, that time we will start seeing results.

Any target you have internally or whatever you can share as to what kind of contribution it should have, let's say, in 5 years from now?

No, I don't think we are targeting from a contribution point of view. Internally, there are independent business plans at a country level. That's the way we are looking at it based on the potential that the country throws at out rather than looking at it as a contribution metric for the overall business.

The next question comes from the line of Ankit Kedia with PhillipCapital.

Sir, my first question is on the manufacturing cost. If you look, the volumes have been low in the quarter. So did we get some benefit out of that given that the manpower cost would have been low apart from the efficiency gains you are talking of? And by the end of the quarter, if the volume increases, say, by end of the year, will we get leverage on that front or it will be in line to the sales or volume growth?

No, definitely, I think there will be a benefit coming from manufacturing efficiency. There are 2 parts to it. If the volume increases substantially, and that's what we are hopeful that volume will increase in the coming quarters. So with increase in sales volume, there will be a requirement of increasing the production and maybe the requirement of recruiting more people will also come in, though efficiency is increasing. So if there is more recruitment of workforce, then the benefit of higher manufacturing efficiency will be to some extent diluted. But if we continue to leverage the existing workforce and produce more, then the benefit of further manufacturing efficiency or overabsorption of overheads will flow into the manufacturing cost.

Sure. And sir, from the Odisha plant, we had some benefits from the state government. While it pilot today, did we see some benefit of that also flowing because on the manpower front, we are sub 1,000 manpower out there. So I don't think we are running at even at half the capacity today. So how do we see that ramp-up coming in? And do we need if the volume growth is, say, mid- to a little bit high single digit, when do you think the full capacity utilization of Odisha can happen? Given that we have set ourselves a INR 8,000 crore target, and this is a new plant and another plant is expected to come in a year's time, so can both the plants be absorbed for the INR 8,000 crore of target you have set yourself? Or is these 2 plants are very long term in nature?

No both. I think even from the plan of -- or even from our plans of expansion in the next few years, both these manufacturing facilities will be fully up and running. And also for a significantly longer term, where there is more production requirements and more sales requirement, this will be a good addition to our total capacity. At the same time, the Orissa facility as well as the new upcoming K.R. Pet facility, they are much more modern, much more, I would say, technically and even from a sustainability perspective, these are much more modern manufacturing facilities. So that also helps. From the Orissa subsidy part of it, it's a bit early now because that's what the plan is. While we have just started operations, the subsidies typically starts flowing in only from beginning of next financial year. Nothing will flow in this year. So it's a bit early now.

Sure. And my last question is for Karthik. Karthik, you said you did an external study where the footfalls were lower at the MBO and EBO level. In the study, did you see that a player like a retailer like Zudio is gaining share in the innerwear category or the study was only for innerwear where you would have seen that overall growth is not there and probably some of the innerwear brands exiting the market in the MBO channels, but value fashion retailer gaining significant market share in a category which is not your competitor overall?

Yes. Thanks, Ankit. No, it did not come out clearly in the study, to be honest. And also from a price point at which the brand that you mentioned operates in, it would -- I would imagine, come directly and compete with some of the economy brands that operate in that price point. Both in terms of product quality, the spec as well as price points, I don't believe that would directly compete with or will be comparable with Jockey as a brand that we operate in. Of course, channel also is a play because for us, largely, in the general trade and exclusive brand stores in the offline space where we operate, whereas that would operate like any other private label, so to speak. So yes, I mean, I don't have a clear answer to say yes or no. There is a possibility, but I'm not sure whether that's what's happened over here.

Are you seeing -- when you say the innerwear got impacted, how was the growth in the modern classic category of men's innerwear because that pricing would be similar to the retailer whom we are discussing. So is modern Classic growth more muted compared to P1, P2 category for us?

No. So interestingly, across price points, we've seen consistent performance in the bygone quarter. And specifically to the comparison, even modern classic will be priced premium when compared to the player in question here.

The next question comes from Prerna Jhunjhunwala with Elara Securities.

First, I would like to understand the growth in the various channels. As you mentioned that the MBO and EBO channel growth was similar and D2C continued to grow. What I was trying to understand is what restricts the physical distribution channel on growth apart from retail environment not being that great, as mentioned earlier. Is there any challenge on footfalls or in terms of attracting customers to the stores? I mean just trying to understand what is restricting the distribution channel growth, whether it is EBO or MBO.

Yes. So like I said, whatever growth we have posted this year is on the back of expansion in a way. So where the growth is being muted is at a consumer level like-to-like. So that's where it's being attributed to walk-ins or consumption being subdued this bygone quarter. But otherwise, expansion in terms of number of doors in terms of presence has definitely gone up when compared to last year same quarter and also gone up within the quarter from March closing to June. So that in terms of efforts or inputs is on. We continue to expand. But where we've seen a stress is largely at a like-to-like growth level.

And what are we doing to attract more -- I understand that you're doing a lot of product innovation. But apart from that, any customer engagement activities that you have ramped up, could you give some instances over that, that could help us understand that, okay, the future growth rate should be much higher than what we've seen in this quarter?

We have a very robust marketing plan in place like we do every year in terms of strengthening brand with clear actionable call-outs to make sure that we are able to drive consumption. That's how we are approaching this year as well. And over the years, over the last 3 years, our investment in marketing has gone up year after year. And today, we operate anywhere between 4.5% to 5% in terms of investment in marketing. And that's the kind of investment that's going in as well this year. It's just that in quarter 1, largely owing to timing and how the sporting calendar pans out, we're seeing a muted investment in quarter 1. That's because last year, we participated in the World Cup campaign, which happened to be in the month of June. And hence, we are seeing a difference over there as far as this year is concerned. But otherwise, when you look at it in totality, full year to full year, we have a solid marketing plan in place backed with adequate investments for us to activate consumer.

Okay. And my second question is on Gen Z younger audience product category that you have launched in JKY Groove. What is the current distribution reach that you have reached in that and where would you want to reach by the end of this year?

Yes. So I think we'll have to take it 1 month at a time, 1 quarter at a time as far as this collection is concerned because, like I said, it's a test at this point in time. We need to see how it performs. The pilot itself was launched in 50 exclusive brand stores, 52 exclusive brand stores to be precise, as well as jockey.in. That's the level of presence that it had. It was not extended to the general trade market in the first season. We wanted to keep it really tight where we have very clear understanding of the sell-throughs as well as who's buying it and it was a line of about 14 different products plus colors and sizes to also get a sense of what's appealing to this audience when it comes from a brand like Jockey. So at this moment, it's a very, very contained distribution. But as we go forward, as we learn more about this space, we will gradually increase its presence in the country, both across exclusive brand stores as well as multi-brand retail.

Sir, my last question is on women and athleisure categories. Your annual report talks about these categories being your growth focus going forward. Could you just help us understand what will be the key initiatives that you plan to take this year to improve the growth rate in this category?

I think largely, it's going to be product in terms of what we will see in terms of introduction in the portfolio in these 2 areas. We're going to have a completely new range of elevated premium products coming in as far as the women's innerwear space is concerned. It's just in a way going in now just in time for the festive season, and that's going to be one of the key pillars for us. Also, in the athleisure side, we've done a lot of work in upgrading and elevating our existing products in terms of features, in terms of fits to make it a lot more modern than what it is today to suit the younger consumer at the same time, not alienate our existing loyal consumer set. So that's been a massive exercise that the product team has undergone with every product that is currently in the portfolio. And then, of course, Groove is going to be a pillar when it comes in season 2. And then there are a few initiatives, which I cannot give away too much at this point in time for all of our benefit. But that's something that is planned sometime in quarter 3 this year. So a large portion of focus, which is disproportionate in this area when compared to the other categories is going to be on product enhancement.

Understood, sir. And last question will be on inventory.

Sorry to interrupt there. Ms. Jununwala, can you come back in the question queue for any follow-up questions.

Can I go ahead?

Please go ahead.

What is the status of inventory levels for athleisure as it started declining as mentioned in Q4 call, there was a difference of around 7 days, as you mentioned, between the inventory...

At the partner level is what you're checking, right.

Yes, yes.

So we are seeing a decrease month after month as far as inventory days are concerned at a partner level. I think I had mentioned the last time as well. As far as innerwear as a portfolio is concerned, we are already where we want to be, which is our optimum inventory level. Outerwear still has -- like I think I had mentioned this last time, we'll be taking the whole of this year, at least the first 3 quarters for us to reach an optimum level. But I don't believe that is holding back -- holding us back in a big way in terms of performing both in terms of primary and secondary. Of course, freeing up that level of capital at the partner level will help us introduce more products, more relevant products for those markets, which should again help us in better secondary sell-throughs. But yes, it's a phase that we will need to live through. And I'm hoping that in the next couple of quarters, we should be able to reach optimum levels with outerwear as well.

[Operator Instructions] The next question comes from the line of Tejash Shah with Avendus Spark.

I joined a bit late, so sorry if this question has been asked in any form before. Sir, we are now at a scale where macro trends dominate performance. And we are seeing this in many other category leaders also across consumption space. Now one possible solution that we have seen of late is that to create a portfolio organically or inorganically within the larger portfolio of low index categories or brands. Now since the brand vector is not with us, brand extension is the only lever that we have. So I just wanted to know -- and we have done many launches also in the past with perhaps not with this mindset alone, but we have seen in many category extensions. So are there any bright spots in the portfolio clearly outperforming the average? And when you do the sum total, you can say that 20%, 25% of our overall portfolio is growing way above what the company is today delivering number?

Tejas, thanks for the question, right? But this is a function of the life cycle in which that particular space within the portfolio is at. So definitely, there are going to be areas within the portfolio, which is outdoing the average. It's got to do with what stage of the life cycle is that portfolio at, and it's also got to do with how we cut the portfolio. So I can straight away say, for example, accessories as a portfolio where we sell socks, towels, caps, hand kerchiefs as a portfolio is outdoing the brand average by a big margin. That's also because it's in a nascent stage. It's not completely fully distributed to the extent that we would like it to be. And hence, there is a lot of inorganic opportunity for growth, which is sitting over there. Further, if we had to dissect each of our portfolios further, right, let's say, within men's innerwear, if you have to break it down further or within women's innerwear, if you have to break it down further, either in the form of product types, either in the form of collections, either in the form of material groups, you will find parts of the portfolio that is outdoing the average, all of which are, in a way, opportunities for organic growth. That's also because unlike FMCG, here, the number of SKUs that we deal with, which are truly differentiated from each other, either in the form of fit or product type or material or price point, there is opportunity for us to grow. So yes, there are many parts within the portfolio today, which is far outdoing the portfolio average and leading that inorganic agenda for us.

Yes. And sir, JKY Groove, it's actually kind of extension of what we just spoke about. But launching it just in 50 EBOs and only in our portal, what markers will actually give you confidence from such limited launch will -- actually will give you confidence to roll it further? And just wanted to know that is it like targeting a certain category of audience at a price point because I was just looking at the site, it's largely priced below INR 1,000 and with some fashion risk element also in the product line. So broadly, just wanted to understand your view on here.

Yes. So I think I responded to a similar question just before. The markers that we are looking for is, firstly, consumer acceptance because it's new for Jockey as a brand. Secondly, we are having a look out for who's actually shopping this. Is it an existing Jockey consumer who's shopping this? Or are we attracting new consumers into the brand by making this available. The third is to see inventory turns itself and sell-throughs, right? We had a certain plan, obviously, because of the number of stores that we had planned for, we had planned limited quantities, but keeping in mind the number of stores. And hence, store level performance of sell-throughs is a very good indication of how the -- we're also keeping an eye because this is a relatively high fashion when compared to what Jockey otherwise operates in. What's the kind of redundancy that is going to be left with at the end of the season? Are there anything that is going to be left at all? These are something that we're really looking out for so that we can build clear business metrics in this space before we can expand. And that's the reason it has been limited to the distribution that we've kept in mind. We believe it is sufficient width for us to get a clear reading of this part of the business. And then once we justify this to ourselves in terms of performance, seeing it would be relatively easier.

The next question comes from the line of Rajiv Bharti with Nuvama.

Sir, this is regarding JKY Groove. So this looks exciting. So the question is the product market fit, which you talked about, the way you offer this in trade channel, is that a marker to suggest that you have established a product market fit? And the [indiscernible] of that is the success of various launches extension, which we have seen over the years has gone down, how does trade actually accept this such kind of launches?

So see, there is already some level of inherent demand in trade for JKY Groove. We've been receiving a lot of requests from our partners in the general trade channel to extend the portfolio into their stores as well. Again, I'm guessing this is because of the experience with which these retailers come. They deal with consumers on a daily basis. They have a fair sense of what will work with their consumers, what will not work with their consumers. Having considered all of that, if there is some level of latent demand for this, I'm assuming that there is a market for this in general trade as well. Whether we'll consider it successful the minute it goes into general trade, I don't know. We've always taken a phased approach. We are taking the similar approach now. Even within our organized retail space itself, out of close to 1,500 stores that we have, it was today introduced only in about 50. So there is a long way of expansion opportunity available here itself. And then, of course, general trade is a massive opportunity, which is also there. Once we are able to establish relevance of this product at this price point from this brand for consumers in that channel, then we will go after expansion to make it available in as many touch points as possible so that more consumers can come and experience this particular brand, which will flow into business as well.

As there are no further questions from the participants, I now hand the conference over to the management for closing remarks.

So thanks again. It was really wonderful discussing the Q1 results with all of you. I think with this, we can close the earnings call.

Thank you. On behalf of Page Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.