Release Date: February 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Page Industries Ltd (BOM:532827, Financial) recorded a robust profit after tax growth of 23.1% in Q3 FY24.
- The company achieved a 4.6% increase in sales volume year-on-year, reaching 55.2 million pieces.
- E-commerce channel witnessed substantial growth of 28% year-to-date December and 39% in Q3.
- Improved inventory health within the distribution network, with inventory days reduced from 122 to 95 days.
- Investments in digital transformation and marketing initiatives have been balanced with favorable fabric costs and operational expenses optimization.
Negative Points
- Subdued demand in the innerwear and athleisure industry led to a decline in sales volume.
- Year-to-date December figures indicate a decrease in revenue and volume by 4.6% and 5.8%, respectively.
- Accumulation of excess inventory in the sector, particularly in athleisure, remains a challenge.
- Operating margins were slightly below the desired 19% to 21% range due to subdued demand and less-than-expected top line.
- The market continues to be lukewarm, with apparel growth in low single digits and overall consumer expenditure shifting towards travel and leisure.
Q & A Highlights
Q: Sir, I had a few questions, especially on inventory, on demand, and on margins, if I may. So first, on inventory, I would love to know how the inventory levels at distributor and retailers are and how far off are they from normalized levels. Also, on your point about bottoming out seen in December, is that because the discounting pressures have peaked out? Or are you seeing Jan being better? And lastly, on margin profile, I would love to hear your thoughts on how should we look at this given this quarter is closer to the bottom end of our 19% to 21% range. And how should we look at it going forward? These are the three questions, sir. If you could please help, thank you.
A: Thank you so much, Mr. Avi Mehta. As regards to inventory is concerned, there has been an improvement in the distributor inventory levels, thanks to the successful implementation of the ARS. However, I must say these early days and it has not come to the levels which we desire as these changes take time and it's an ongoing process. But there is a healthy trend which we are seeing and it's on track as far as ARS implementation is concerned. So that is one good news. And I should thank the team for working hard and engaging with our partners in making this project a success and making this the most important project for us to transform the sales function in the organization. As regards the margins are concerned, yeah, we have taken a lot of measures to protect the margins. And as I keep telling, we are very comfortable at 19% to 21% zone, and we are just shy of that. There are two major factors. One is subdued demand and leading to less-than-expected top line, and that has put some pressure on the margins. And we hope this current retail environment will improve in the coming days and we are all geared up to seize opportunities as things improve. But we were able to control and protect margins with a lot of measures which we have taken as regards the control and operating expenses are concerned, and also managing our inventories very, very prudently. So that is regarding the demand part of it. And I'm sorry, what was the third one, Mr. Mehta?
Q: Sorry, you said towards bottoming out seen in December on demand side. So is it in terms of discounting pressures having peaked out? Or is that Jan has seen an improvement? What was that comment supposed to mean? I was not sure, sir.
A: Early days, Mr. Mehta, because the market continues to be lukewarm even though we could see some modest growth. If you see across sectors, it continues to be lukewarm. In fact, apparel seem to be most hit. In fact, what I can see, apparel, the growth has been a very low single digit overall across categories, and while jewelry has recorded 12%. So it continues to be in that state. So we expect Q4 maybe on those lines, though it is early days for us to talk about Q4. But see, from our point of view, we would like to brace ourselves for the worst and control the expenses, work very diligently to protect our margins. And once the market recovers, we want to be out there and seize the opportunity. But the current outlook is not so buoyant, and we are very, very cautious.
Q: And sir, the distributor, would you be able to give any number over there versus 100 that you wanted? It's 110, 120. Where is it in terms of the inventory levels?
A: Karthik, you want to elaborate on that?
A: Yes. Thank you. Mr. Mehta, this inventory levels at the distributors varies across categories. What I can share is that from where we started in the beginning of the financial year, there has been an improvement of about three days in inventory holding. This is in spite of a marginal decrease in year-to-date revenue, which means the impact on decrease in inventory has been much higher, which of course varies between categories, between innerwear and outerwear, between men and women. Overall, what the auto-replenishment system has helped us to is: a, bring down the overall inventory level; but more importantly, improve the inventory health of the distributors. So the mix of the inventory that distributors are today holding is much better when compared to where we were in the beginning of the financial year. This in a way helps in better terms in two ways: both in terms of increasing opportunities for secondary sales as well as because of the inventory normals are coming down, the inventory turns improves and helps in better ROI for the distributor.
Q: Sure, sir. The second question was that you have been highlighting about the e-commerce as a channel and specifically your own website. Are you looking at significantly upping the spends and maybe taking a larger share on your own website versus, say, marketplaces? And if I can just slip in my third question and close is that the reason for the lower realization on a YoY level?
A: Karthik, you want to take that?
A: Sure, sir. Our investments as far as marketing is concerned between, let's say, online channels and off-line channels has remained consistent over the last three years. Today, anywhere between 13% to 15% of our overall marketing investments is a portion to the e-commerce business. And as you may know, this is broken into performance marketing as well as brand-building initiatives. Performance marketing is what directly results in revenues in the online channel, and this contributes to about 75% of our overall spend in the online channel. So the strategy towards investments in online remains consistent. We haven't changed it in the bygone year. We don't foresee a change in this either.
Q: Sure. And sir, just on the realization?
A: The realization will obviously be a function of the mix within the e-commerce business. As far as the overall realization to the organization, we don't see there being a major shift because of our spends towards e-commerce.
Q: I was actually referring to looking at the ASP, which is down 4% YoY. That is what I was looking into.
A: No. ASP is a function of the category mix. While there has been impact on the overall brand revenues across categories, we've seen it being a bit more pronounced in the athleisure segment. We've also been quite aggressive in our expansion when it comes to the access of this business. So the mix in the category is what has led to erosion in ASP to the tune of 4%.
Q: Got that. Thank you so much.
Q: Sir, we have observed in many retail companies now that expanded their network very aggressively during COVID or immediately post-COVID. Those are the one experiencing
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
