Brand fatigue is a looming risk for Page Industries
Shares of Page Industries Ltd slumped to a 52-week low on the National Stock Exchange last month, as investors were disappointed yet again with the company’s March quarter (Q4FY23) earnings. In this calendar year so far, the stock has declined nearly 9%. Not just near-term returns, the stock’s long-term performance also seems to be peppered with more misses than hits.
As per an ICICI Securities Ltd analysis, the innerwear industry has been struggling over the last five years due to business weakness, which has been particularly pronounced in the case of Page Industries.
“PAGE’s rate of revenue growth has declined by 10% over FY18-23 (to 14% CAGR versus 24% CAGR during FY13-18). This is the steepest decline compared to 2% decline (to 11% CAGR) for overall innerwear industry PAGE’s rate of revenue growth has declined by 10% over FY18-23 (to 14% CAGR versus 24% CAGR during FY13-18),” said the ICICI report dated 12 June. This is steep compared to the 2% decline (to 11% CAGR) for the overall innerwear industry, it added. CAGR is short for compound annual growth rate.
Despite attempts at expanding distribution and breaking into new categories like kids wear and women wear, Page Industries has been unable to halt its decline. Growing competition in the innerwear market due to new entrants such as Van Heusen, US Polo, and various D2C brands like Zivame and Clovia has also had an impact.
“As per our survey, we note Jockey has positioned itself strongly in the value segment (average retail price at Rs339) at ~20-25% cheaper than US Polo and Van Heusen. However, given the rapid rise in competitive intensity and likely brand fatigue (Jockey is now ~28-year-old brand in India), we believe it would be relatively challenging for PAGE to enjoy similar growth rate in menswear (as it enjoyed in the past) and enjoy similar success (as in menswear) in extended categories like athleisure, women innerwear, apparels etc,” added the ICICI report.
The stock is currently trading at a FY25 price-to-earnings multiple of around 50x, which does not bode well for its valuation, providing little comfort to investors in the current market scenario.
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Updated: 14 Jun 2023, 12:02 PM IST
