Biting slowdown is squeezing Page Industries' profit margin on Jockey and Speedo

• Jockey and Speedo seller Page Industries has seen a 13.8% fall in profits while gross margin is down to 40%.
  
  
• Rising competition and rising costs are making the slowdown worse.
  
  
• The $1.9 billion Sunder Genomal family that had a dream run with Jockey for years is facing headwinds now.
  
  
• Mirae Asset Blue Chip Fund and Kotak Emerging Equity Scheme were among shareholders at the end of December 2019.
  

The 1% decline in the share price of Page Industries, or the nearly 14% fall in quarterly profit, is not the entire story.

2019-20 is turning out to be more difficult than ever before due to three reasons— rising competition, rising input costs, and slowing demand. Profit margin is constantly shrinking— gross margin is down from over 63% at the end of March 2019 to 40% in December— for the company, which is sole licence holder for Jockey and Speedo brands, in India, Sri Lanka, Bangladesh, Nepal and the UAE.



The latest third quarter saw 13.8% fall in profit to ₹87 crore and a 16% rise in expenses due to finance and employee benefits expenses. On the other hand, revenue grew at a relatively slower rate of 6.6% to ₹797 crore ($11 million). Mirae Asset Blue Chip Fund and Kotak Emerging Equity Scheme were among shareholders at the end of December 2019.

More brands of innerwear have entered India, and some more have grown here

The branded innerwear segment in India has been growing, with the entry of new players like Zivame, Clovia, Pretty Secrets which sell under their own brand online. Added to that, the variety of options having considerably grown with e-commerce giants like Amazon, Flipkart and Myntra, Snapdeal have increased considerably.

To keep up with rising competition, the company has had to invest more. “A temporary dip in PAT (profit after tax) is entirely due to enhanced investments in sales and marketing, people and technology, which will drive sustainable growth in the years to come,” said the company’s official statement. As on September 30t, 2018, the Bengaluru-based company had over 20,000 employees, spread over 15 manufacturing units in Bengaluru, Hassan, Mysore, Gowribidanur, Tiptur and Tirupur.

Headwinds for underwear

The Sunder Genomal family's— worth $1.9 billion according to Forbes— 26-year long dream run with Jockey is finally slowing down, along with the Indian economy.

The share price has multiplied over nearly 90 times since the listing in 2007. Even in the last three years, since demonetisation, when the economy started to slow down the stock has gone 63.7%.

However, you can neither write-off the promoters nor the brands they sell. Page Industries currenly sells to 130 million Indians but there is still a huge chunk of untapped market for branded players

There is a big enough market for a lot of players but the sellers have to wait for the slowdown to end for the profit squeeze to ease.


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