Page Industries Ltd

NSE:PAGEIND

Earnings Call Transcript 2024-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the Q1 FY '24 Earnings Conference Call of Page Industries Limited. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. V. S. Ganesh, Managing Director, Page Industries Limited. Thank you, and over to you, sir.

[V. Ganesh, executive]

Thank you. Thank you so much, and good evening, everyone. Thank you all for joining us in our evening -- earnings call today evening. I'm joined by our CFO, Mr. Deepanjan; and our COO, Mr. Gagan Sehgal.I hope you have already seen our press release. [Technical Difficulty] Before we dive into the numbers and specifics, I would like to provide a context and an overview of the quarter that has just concluded. In a time characterized by significant challenges, I am pleased to share that the company has exhibited remarkable tenacity. Q1 witnessed a sequential revenue growth of 28% and a volume growth of 31%. However, as you know, macro headwinds and market conditions did pose some challenges, leading to slight [Technical Difficulty].

[Operator]

We have lost the connection for Mr. Ganesh. Please stay connected. We will reconnect. Ladies and gentlemen, we have the line for Mr. V. S. Ganesh connected. Sir, please go ahead.

[V. Ganesh, executive]

Yes, thank you. And I apologize for that call drop. I hope you can hear me loud and clear. So I was just saying during this quarter, the macro headwinds and market conditions did pose some challenges, leading to a slight year-on-year degrowth reflected in a 7.5% decline in revenue and an 11.5% decline in volume compared to Q1 of the previous year. The prevailing demand remains subdued due to several factors aligning with the anticipated expectations, which contributed to lower sales volumes. It is worth mentioning that our industry has witnessed an accumulation of excess inventory, which has had repercussions on the overall ecosystem, resulting in certain unsustainable business practices, which is happening in the marketplace.Our brand's growth strategy are deliberately designed to ensure sustainable long-term growth while upholding sound financial health and maintaining the integrity of our brand identity. To navigate the temporary phase of market conditions, we have taken enough measures to safeguard and improve our market share. Additionally, diligent control of our expenses has been instituted to protect our margins.Speaking on some of the key updates for the quarter, our EBITDA margins witnessed sequential improvement, which is attributed to lower product costs and better overhead absorptions. While we have taken several measures to control operating expenses, I would like to highlight that the high EBITDA margin in Q1 FY '23 was a result of the higher revenue recorded during that period.Our distribution network expansion remains in line with our plan. As of end of June, we have extended the presence to over 120,000 plus MBOs, 1,330 EBOs and 2,800 plus LFS outlets. We are strategically directing our attention towards metro and Tier 2 and 3 cities, while keenly gauging the potential pin codes for expansion. It's heartening to note that our e-commerce channel witnessed substantial growth of 43%, reflecting evolving consumer purchasing habits and our commitment to bolstering our online presence.I'm sure you must be wanting to know our progress on the ARS implementation. I'm delighted to state that the implementation has been making significant progress and is being strengthened for extensive adoption. While demand continues to be subdued, we remain steadfast in our conviction that this is merely a transient phase. Our proactive approach involves continued investment in shaping the future, thereby ensuring that we capitalize on the promising prospects that lie ahead of us.Our strategic focus continues on multiple trends through intensifying general trade distribution, expanding modern trade and exclusive brand outlets, growing our D2C business, improving our customer experience, strengthening our product portfolio and consumer engagement, which will go very hand-in-hand with building -- brand building and ensuring a very robust supply chain.I will now let our CFO, Mr. Deepanjan, to give you a detailed view on our financial performance, after which we'll be happy to take your questions. Let me thank you once again for joining the call today. Deepanjan, over to you.

[Deepanjan Bandyopadhyay, executive]

Thank you, VS-ji. So, good evening, everyone. I hope all of you are keeping well. So thank you for your participation in this evening. I'm pleased to report that Page Industries has delivered a reasonable performance in Q1 despite the current market challenges. We have successfully improved the margins for enhancing the qualitative aspects of our inventory.Let me begin by breaking down our quarter's performance. Q1 revenue stood at INR 12,400 million, a growth of 28% quarter-on-quarter and a degrowth of 7.5% year-on-year. Volumes were INR 55.8 million, which was a growth of 31% quarter-on-quarter and a degrowth of 11.5% year-on-year.Q1 EBITDA was [ INR 2,418 million ], which was a growth of 80% quarter-on-quarter and a degrowth of 19% year-on-year. Q1 EBITDA margins were at 19.6%, which has grown by 5.6% quarter-on-quarter, largely due to R&D cost softening and operational expenditure optimization. Q1 FY '23 EBITDA margins were higher at 22.2% due to higher sales and better cost absorption.Q1 PAT, we were at INR 1,584 million, a growth of 102% over sequential quarter and a degrowth of 23.5% year-on-year. Q1 PAT margin was around 12.8% as against 15.4% in Q1 FY '23.Inventory was INR 14,321 million as of quarter end as against INR 15,921 million in the end of Q4 FY '23, which was around 105 days at the end of June versus 154 days in quarter 4 FY '23, which is in line with our annual target of optimizing the inventory base.Net working capital was INR 8,470 million as per Q1 FY '24 as compared to INR 7,710 million at the end of Q4 FY '23. Working capital days is at 58, which is around 73 days at the end of Q4 '23.So to summarize our financial performance, despite the challenging demand contraction, Q1 FY '24 focused our ability in mitigating demand challenges and capitalizing on growth opportunities. Our EBITDA performance highlights our commitment to operational efficiency and prudent cost management amidst the demand frustration.With this, we can open the floor to any further questions that you may have.

[Operator]

[Operator Instructions] First question is from the line of Avi Mehta from Macquarie.

[Avi Mehta, analyst]

Congratulations on this performance. Sir, I wanted to kind of understand the volume trend. Would you envisage that volume weakness is bottomed up now in this quarter and that we should probably turn maybe positive next quarter? Or how do we kind of see this as we go forward? Any indication or guidance on how should we look at this would be very helpful, sir.

[V. Ganesh, executive]

Yes, Mr. Mehta. Thank you. Yes, as regards volume, we -- if I look at the last few weeks, we are seeing some improvement, but I see it's early days, it's all -- we have to keenly watch how the festive period is. We are very, very optimistic that this festive season will be buoyant. Last year was not all that buoyant. So we are seeing some uptick, but it's too early for us to give you a guidance or tell you very, very clearly that things settle around, though we are seeing some light at the end of the tunnel.

[Avi Mehta, analyst]

And sir, when you say festive demand, that would be more of a third quarter phenomenon? Is that how I should understand it? That is so what we had said look for more in the second half from a demand recovery. Is that what I will -- I should read? Or maybe if you could kind of -- I am not really sure of when you said festive, is it 2Q or 3Q that it plays into?

[V. Ganesh, executive]

Yes. So basically, when we -- festive, of course, we are looking at Diwali, which is the main, main season, and that's what we are looking at. And of course, they're also regional now. In Kerala, now the O&M is going to kick start, and I think this is a time for Kerala. So if you start in a phased manner in all these states, but mainly Diwali, as we said. And so we are seeing already some improvements, but it all depends on how long the trajectory -- the upswing can continue. We need to keep a close watch because the market seems to be very volatile. So I will say the demand continues to be subdued, and we need to keep -- having a close watch.

[Avi Mehta, analyst]

Got it, sir. Got it. Fairly clear. Sir, the second bit on the margin side. I mean, last quarter, you had given an expectation of moving to 20%, 21% in second half. Now post this performance, would you look to upgrade that guidance? And if you could also give us some sense on which line items in the other expenses have you focused on primarily, which have helped drive this margin improvement?

[V. Ganesh, executive]

Yes. So, Mr. Mehta, we have always been comfortable between 19% to 21% EBITDA. And even -- then, we look at all our interventions. We always try and maintain this margin. We are happy with that margin. We don't want to tighten too much on the need to have expenses. We need to also look after the brand and its long-term prospect. So the short-term challenges apart, we need to invest for the future. So we always are comfortable with the 19%, 21% range.Now coming to the areas which we are concentrating on to control, mainly we are looking at how we can bring the inventory down, and there has been tremendous progress in this trend, and we'll continue to work very hard on that front. Our overheads [indiscernible] and our overheads are well under control, and we are looking at every rupee spent, whether it's necessary or not, and that is something we are looking at. We will continue to be people friendly. We will continue to look after our associates. So we will not take those actions, but we will be making sure that the expenses are under control.From a cash flow point of view, again, whatever CapEx that can be postponed, we are postponing it so that we are in a comfortable position because we also are blessed with a very good inventory health now. So there is nothing to panic on that front, and there is no need to have an accelerated expansion plan. So we are working very closely based on the demand, we are synchronizing our capacities.

[Avi Mehta, analyst]

Perfect, sir. Perfect. And with your permission, just a last bit. Any tight indication? Would it be fair to say ARS impact is more or less done now? Or we...

[V. Ganesh, executive]

ARS impact is more or less done because see, the last time when I told you that there is a temporary correction in inventory because inventory was bloated at that time. So we have gone through that phase. So there is absolutely nothing to worry as far as ARS coming in the way of our sales numbers.

[Avi Mehta, analyst]

Okay. So it's just a demand thing now and that you're saying, let's just wait and watch. [Technical Difficulty]

[Operator]

Next question is from the line of Ravi Naredi from Naredi Investments.

[Ravi Naredi, analyst]

V. Ganesh, really in tough situation, you have tried your best to give the results. Sir, June quarter is highest for company, but is down year-to-year 7.5% in top line, profit after tax down 23.6%. So our old stock of raw material and fabric has been wiped out or still we are having? And what you would learn from this lesson where maintaining higher inventory of raw materials and other things?

[V. Ganesh, executive]

Mr. Naredi, thanks. Very good question. Actually, Q1, when you look at it compared to last quarter, last quarter Q1 was our historically high quarter. Never in our history we had that kind of a quarter. I can say it was partly abnormal because of the supply chain disruptions which we had and there was a tender demand, there was revenge stocking happening. So you can't compare that quarter with this quarter from a baseline point of view. So that's apart, the inventory is high. High side, we can say the inventory is very high. But if you see last year -- previous year Q4 and Q1, Q2 of last year, we did exceedingly well and none of this we're able to predict how long this [Technical Difficulty] continue. These were very, very buoyant.And I can say compared to overall what is happening in the industry, we have done much better. We have less than 100 days inventory. As Deepanjan showed, our inventory levels are well under control now. And I can see many of our peer companies have even 8 to 12 months of inventory, and that's why we are seeing a lot of interventions happening in the market by way of discountings and schemes and other things. Luckily, we had already set that prudence and much better control of our supply chain, so we didn't get pushed to that extent.

[Ravi Naredi, analyst]

Right. Right. And sir, my one more observation. As we regain all Jockey products since last so many years, we find that cost of products are very much expensive now. So we face intense competition. Is it so?

[V. Ganesh, executive]

Our commitment to being a value-for-money brand remains unwavering, and this is deeply ingrained in our core pricing strategy. What we are doing this year, we are elevating the quality and features of our product and thereby we are offering enhanced value for the price side. So we always look at how we can strike at the right balance between quality and affordability.So if you see our products, you will see we have upgraded our products. We may not have reduced price. But from a value for money proposition, there are -- we have really enhanced our products, and that's what you will see in the market.

[Ravi Naredi, analyst]

Yes, V. Ganesh. Really fantastic. And when all expansion of company will complete, including Odisha?

[V. Ganesh, executive]

Odisha project, we'll hand over to operations by Q4 of this year. And then we will be starting off the trial production and then going for commercial production.

[Ravi Naredi, analyst]

And the rest of the production, which you are -- the rest of the expansion which you are doing in Karnataka and Tamil Nadu?

[V. Ganesh, executive]

There is no much work in progress as far as expansions are concerned. The Karnataka plants are already in operations, which we said last year -- last quarter, if you remember, we said it's starting operations. So our elastic unit is now operational and our women's innerwear enhancement is also fully operational now.

[Operator]

[Operator Instructions] Next question is from the line of Tejash Shah from Spark Capital.

[Tejash Shah, analyst]

Congrats on a good set of numbers in difficult environment. Sir, first question is with the distribution reforms behind us, what are the key growth drivers leadership team is focusing on in near and medium term to revive growth and then gain market share?

[V. Ganesh, executive]

Okay. So Tejash, as far as distribution is concerned, it is a work in progress. We -- our distributors are getting the auto replenishment in a phased manner. So -- but it is progressing very well. And as I told you before, there is no impact to sales now. We have crossed that bridge. Coming to our strategy long-term growth, first and foremost is intensifying general trade distribution. We are committed to amplifying our reach within the distribution channel, ensuring that our products are readily accessible to a wider consumer base. So risk is the most important thing. And we continue to expand modern trade and exclusive brand outlets.We have made significant strides in modern trade expansion with a particular emphasis on rapidly growing our network in exclusive brand outlets. This approach aligns with our mission to provide premium shopping experience to our customers and to do [indiscernible] to our entire product range. One other area where we are giving disproportionate attention is in growing the D2C business. We all know this is the most important space which is having the highest growth traction and we have dedicated to nurturing our D2C business segment.The next area which we are seeing is on improving customer experience. We have made tremendous progress in the last few months, few quarters and we will continue to concentrate there, central to our strategies enhancing the overall customer experience. And then we have been strengthening our product portfolio and our endeavor geared further enhancing our product portfolio, getting to a diverse range of consumer preference and needs across the price points and leaving no white space. And so, of course, brand building initiative to grow the awareness, interest and desire for the brand in their respective categories is something which we are now looking at and we are no longer [indiscernible] which we did during the pandemic.So this is where, as I told you before, we don't want to cut cost where it matters. We definitely want to spend where it's required so that the long term of the business is in good hands. And our long-term outlook is so positive that we -- it is very important that we are very aggressive in the marketplace. Of course, there is a lot of work happening. And in further strengthening our supply chain, this has always been our strength. But there's no end to continuous improvement, and we are taking a lot of action in further improving our supply chain and make it much more robust.

[Tejash Shah, analyst]

Sure. Very clear, sir. And sir, second and last question. Among the 4 categories, men's, women, athleisure and kids, which categories -- or if you can give us some qualitative ranking on which categories are growing above company's average growth rate and which are kind of relatively struggling to grow or take the averages up?

[V. Ganesh, executive]

Yes. So that is where -- what we can see is the men's premium category having a good growth comparative to all other properties that's going much higher growth traction. And the area which is going through a flux across industry is athleisure side. Again, this is a temporary phase, and we discussed about it in the last quarter also. And -- but if you look at overall, the evolving lifestyle needs of the consumer and the market has shifted more towards athleisure and every day wear, especially post COVID.Our confidence is deeply rooted in growing this category. So this is a short-term thing, what we've seen athleisure side. But men's premium is, to answer your question, is the one which is growing better -- faster than all other categories.

[Operator]

Next question is from Nihal Mahesh Jham from Nuvama.

[Nihal Jham, analyst]

Sir, 2 questions. First is, if you could just give a ballpark inventory number. I know you mentioned 100 days, but the absolute inventory number at the end of Q1?

[Deepanjan Bandyopadhyay, executive]

So actual inventory number was INR 14,321 million at the Q1.

[Nihal Jham, analyst]

That is helpful. And then when you mentioned about these unsustainable business practices, is it more in terms of incentives or aggressive discounting on the pricing by the competitors? Just if you could give a little more color, that would be helpful.

[V. Ganesh, executive]

It's actually both. If you go to the market, you will see, except us -- a few of us, almost all the brands are having offers, promotions buy one, get one free or more. And when I look at retailers, there are a lot of schemes which are happening, which are -- if you look at it from a bottom line point of view, these are not sustainable, and it's not EBITDA bottom line friendly. In a way, I can say this is a way of liquidating the stock and bringing the inventory down. So that is what is happening in the marketplace. So that is what we meant by unsustainable business parties.And of course, we, as a brand, we work in a very hygienic focus, sustainable growth initiatives is what we take. So while we are making sure our partners are happy and this is where ARS is really helping our distributors because they're -- the inventory turns are improving, and this is much better than any schemes or incentives which we can give. Our retailers are getting better products. Our consumers are able to discover more product ranges of ours. So we will continue to focus on these aspects, which will bring in sustainable growth.

[Nihal Jham, analyst]

Sure. I just have one question, if I may. But when I say look at how your reviews are shaping up, is there a thought for Jockey as a brand to go beyond athleisure and become a full fledge apparel brand? We had a certain jeans SKUs also that we have discussed about, if you could just comment on that.

[V. Ganesh, executive]

Nihal, I didn't get that last part of the question. If you can repeat it once again, please?

[Nihal Jham, analyst]

Yes. Mr. Ganesh, I was asking that while Jockey has expanded very well into the athleisure space, is there a thought to make it into a full-fledged apparel brand just based on observations of some of our EBOs and also some SKU launches of jeans and some other product categories which are beyond athleisure by definition.

[V. Ganesh, executive]

Okay. So Nihal, 2 parts to this question. One, if you see, our EBOs, it's not with athleisure, it is house of Jockey. We have preference across the range, men's innerwear, women's innerwear, women's outerwear, men's outerwear and juniors. So this is the entire product that we have to offer today. And when it comes to adjacencies, we only look at adjacencies which are relevant to the brand signature, which is relevant to Jockey and how we are positioned. So we don't see ourselves coming with something like denim or something because that will confuse the amount of the consumers.And today, there is good clarity among our consumers as to what Jockey stands for and our adjacencies or the expansions would be in line with the brand signature.

[Operator]

Next question is from the line of Sheela Rathi from Morgan Stanley.

[Sheela Rathi, analyst]

Sir, just to repeat to one of the earlier questions in terms of the category trends where you talked about men's premium growing faster, whereas athleisure, there are certain issues. Now talking about the festive season, how do you plan to have the inventory in place in anticipation of the demand, which we expect to be strong in the third quarter onwards?

[V. Ganesh, executive]

Well, our distributor inventory health is very, very healthy. And we -- with this good adoption of ARS, they also have a wide representation of our product needs. We also are back with good inventories in our warehouses. So if there is an uptick in demand, we are well positioned to cater to those requirements. And we have also taken enough and more initiatives in the back end as far as agility is concerned. So today, we have made tremendous progress in turning around order to shipment as well as back end is concerned. So with all this in place, we will be the first to make use of the opportunity when the market bounces back.

[Sheela Rathi, analyst]

And we are, on a sequential basis, also seeing that changing, right? That is demand is improving for us in general?

[V. Ganesh, executive]

Absolutely. Yes.

[Sheela Rathi, analyst]

Sir, my second question was on the gross margins. Why is there a dip in the gross margins this quarter?

[V. Ganesh, executive]

Deepanjan, do you want to take that?

[Deepanjan Bandyopadhyay, executive]

Yes. So the dip in the gross margin, as we compare with Q1 '23, so there have been several factors. Firstly, the prevailing demand has been subdued. And as VS-ji explained, we had the highest sales in a quarter in the previous year. So it was the highest level of sales. So naturally, with the high sales, our overheads optimization were much better last year. I mean, last year -- yes, with that, the margins that we reported last year were quite high. At this same time, we -- I hope I'm audible.

[Operator]

Yes. Yes, you are, sir.

[Deepanjan Bandyopadhyay, executive]

Okay. At the same time, as we explained, there are situation in the market where the inventory will exit, and there are several promotional activities given by other competitors, which has impacted our sales turnovers. And we continue to focus on the long-term sustainable growth. So to navigate this temporary phase of marketing conditions, we have taken measures to safeguard and improve our market share. Additionally, we have taken steps for controlling our expenses and optimizing them.So this is broadly the reason that when we look at Q1 FY '23, the sales are significantly higher and that helps in optimizing the costs. Current quarter, when we look at it and actually seeing the sales were much higher in that quarter, we had less investment in advertisement and less investment in other sales initiatives. This year, we have resumed the advertisement, and that has impacted our margin percent. But yes, I mean, if you look at the sequential margin, yes, we have improved significantly. So we have increased it almost 5.6% as compared to our Q4 FY '23.

[Sheela Rathi, analyst]

Yes. So sir, if I could follow up here. Why is there a sequential dip in the gross margins? We -- our gross margins in March quarter was 56.6%, and now we are at 52.9%.

[Deepanjan Bandyopadhyay, executive]

When we are looking at -- when just commenting on gross margin, which is the overall operating margin. So at operating margin, I think, Q4, we were at 13% and now we're at 19%. So that's the improvement around 5% and all. If you look at gross margin perspective, I think between the 2 quarters, considering -- we look at gross margin based on our product cost plus conversion charges. So concerning that, we are nevertheless at the same level as Q4.

[Sheela Rathi, analyst]

And what is that number, the gross margin number as per your calculation?

[Deepanjan Bandyopadhyay, executive]

As per our calculations, we are at the gross margin level of -- yes, we are at around 53%.

[Sheela Rathi, analyst]

And that is a comparable number for the last quarter also?

[Deepanjan Bandyopadhyay, executive]

Yes.

[Sheela Rathi, analyst]

Understood. And my final question, sir, was respect to the distributor count. For last couple of quarters, what we have observed is that the number has been coming lower versus 4,800 earlier, now we are at 4,000. Is there any particular reason why this has been lower?

[V. Ganesh, executive]

Well, Gagan will be able to answer this. But just to tell you, some of this is also some consolidation happening, especially on the accessory distributor -- distribution there is realignment happening. So these are all designed. Actually, there is no distributor attrition per se. In fact, it has only strengthened. And I see this will further improve. With ARS coming in, I can already see excitement in our distributors, the way that is shaping up. So we don't have any such worry, but I think Gagan can add more value to do this comment. Gagan?

[Gagan Sehgal, executive]

Thank you, Mr. VS-ji. I think you have answered it. We don't really see a decrease as such in the distributor count because when you look at the unique distributors, currently -- we used to have around 13, 15 distributors a couple of years back. And currently, we have 1,736 unique channel partners. Yes, there is a bit of consolidation wherein, if any channel partner for any reason, they would have exited at any point of time, which is a normal attrition, right, which is not more than what we expect, the first right of refusal is given to existing distributors. So we are consolidating and making sure that our existing distributors, they continue to grow.And at the same time, as we have created another vertical for accessories, as Mr. Ganesh has rightly mentioned, we want the right kind of channel partners who should invest in us because we see a lot of potential in accessories. So that's the consolidation that has been done from our side by design. So that you should have bigger channel partners who can give you the adequate investment and manpower so that we can create accessories as another vertical and continue to grow because we see huge opportunity there.So there is no cause of concern in terms of any attrition. It's all in control. And we are keeping a very close eye because our channel partners are our primary customers, and we will continue to engage with them very, very closely.

[Operator]

Next question is from the line of Rishi Modi from Marcellus Investment Managers Private Limited.

[Rishi Modi, analyst]

So my first question is to Mr. VS-ji. So we have seen -- could you just quantify the impact of ARS in this quarter? How much of secondary sales which is not being recorded in our primary sales or just the volume which has actually happened at end-consumer level versus what is being recorded in our books?

[V. Ganesh, executive]

Mr. Modi, as I told you some time back as well, we don't have any impacts on primaries or secondaries because of ARS. That was an issue which we had in Q4 because of the bloated inventory the distribution had. So now our secondaries and primaries are in line.

[Rishi Modi, analyst]

So our secondary sales has declined by 9%, 8% is what you suggest, am I right? You're not -- you aren't taking any price hikes. We haven't done anything different this year or this quarter around and hence, the actual numbers started reflecting.

[V. Ganesh, executive]

Yes. Our secondaries are in line with our primaries. And therefore, if you look at it from a growth point of view, what you said is right. And that is understandable because the market is not buoyant, it's sluggish. And it should also compare against a high base of last year Q1, which was abnormally high if you look at it from a base in point of view.

[Rishi Modi, analyst]

Right. Right. I understand. And my second question was on the absolute decrease in employee cost. I think you were saying something, but I just couldn't wrap my head around it. If you could explain how has this decreased in an absolute term amount?

[V. Ganesh, executive]

We have inventory. We have been allowing normal attrition. As a company even during pandemic and even today, we never have post attrition. That's a principle with which we work, and we are a very people-centric company. But last few quarters, since the inventory has been high, and there is a need to manage inventory, we have been allowing normal attrition and better helped us to bring the cost down.

[Rishi Modi, analyst]

And like -- so basically, you're saying that we are underinvesting in our people, we are not replacing people who have left. So which -- like wouldn't this threaten our long-term business capabilities, business strength?

[V. Ganesh, executive]

It will not because we -- see, since we have very healthy inventory, when we see uptick happening and when we see the trajectory, we can always get time to do the course correction. We can build that capacity. And Odisha is a virgin place. It's a greenfield. So for us, we -- it's question of timing as to when we had to start recruitments there. That has nothing to do with our current operating plans.And thirdly, we have enough muscle in outsourcing now. If you want to double the capacity there, we can do it. That's the kind of relationship which we have built with outsourcing and the partners. So we don't have any worries as far as seizing the opportunity is concerned when the demand bounces back.

[Rishi Modi, analyst]

So this attrition has largely come on the labor front, not the corporate front. Is that correct way to understand?

[V. Ganesh, executive]

Sorry, I didn't get to you.

[Rishi Modi, analyst]

This is on the factory side that the attrition has come in and you haven't replaced, while the corporate employee count is not -- it's being replaced adequately. Is that a correct read on this?

[V. Ganesh, executive]

It is more still on the operating side because that is where there is no pressure, there is -- we need to manage the capacity. In fact, when it comes to sales, feet on the ground, based on our distribution expansion, we have been adding people. So as I told you some time back, our approach on cost control is matured. Wherever it is required for the growth of the business, we are not holding back. We are making the right investment. And wherever we can tighten out that, we are tightening it.

[Operator]

Next question is from the line of Devanshu Bansal from Emkay Global.

[Devanshu Bansal, analyst]

Congrats on good margin performance in Q1. Sir, if I understood it correctly, you said you did better than peers in Q1 despite them giving higher incentives and discounts to the trade channel. So I wanted to check, is this comment at the volume growth level or at the EBITDA level that you are mentioning?

[V. Ganesh, executive]

Mr. Bansal, what I said was we did better than the peers as far as inventory management is concerned. We are 105 days of inventory compared to 9 to 12 months of inventory which the competition or the peers [brands ]. That is what is actually pushed those brands to take certain actions on the marketplace, which may not be sustainable. So luckily, we, as a brand, are not pushed to that wall. That's what I meant.

[Devanshu Bansal, analyst]

Got it. And sir, a quick follow-up to this. Do you expect this to continue for another 2 quarters since they are having like 10, 12 months of inventory, so that sort of incentives or higher margins will continue for another couple of quarters from the competition perspective?

[V. Ganesh, executive]

It can, but if you see the sequential growth despite all that what is happening in the marketplace, if you see our performance compared to last quarter to this quarter, there is tremendous growth. And end of the day, this is determined by the end consumer. If he is loyal to your brand, he will continue to buy your product as long as we are value for money. And the last quarter growth clearly shows we are not outpriced ourselves. And therefore, we are worried about it. And we have -- the last quarter to this quarter sequential growth is a good indicator of how things are heading.

[Devanshu Bansal, analyst]

Got it, sir. And typically, often Q1 has always been a strong quarter for us, and then we see a sequential decline for all the 3 quarters. So that trend should continue this year? Or you expect demand sort of picking up and that trend can reverse this time around?

[V. Ganesh, executive]

See, it depends fully on the market. Generally, the market needs to pick up. It's anybody's guess. So we hope this can't last for so long and things should bounce back, and that's where we see the uptick because this has been 2, 3 quarters of sluggishness and how long can it last.

[Devanshu Bansal, analyst]

Right. Last question from my end. If you could call out the advertisement expenses that we did in Q4 FY '23 and Q1 FY '24 as a percentage of sales?

[V. Ganesh, executive]

Didn't get you, Mr. Bansal.

[Devanshu Bansal, analyst]

I'm asking if you can call out the advertisement marketing spend that we did in Q4 FY '23 and Q1 FY '24 as a percentage of sales?

[Deepanjan Bandyopadhyay, executive]

So -- yes, so advertisement was around 1.9% -- around 2% in Q4 FY '23 and in FY -- for Q1 FY '24, it's around 2.5%.

[Devanshu Bansal, analyst]

So this has increased, right? So sir, just -- this is a 600 bps sort of gain that we have done in the operating cost since you mentioned that gross margins are largely stable. So can you help us sort of better understand this, such a strong improvement in -- is it largely because of this attrition thing or we have taken some more initiative?

[V. Ganesh, executive]

Sorry, can you repeat the question?

[Devanshu Bansal, analyst]

I'm saying advertisement expenses have increased on a sequential basis. So the improvement in other operating expenses is almost like 600 basis points. You mentioned that we have done some -- we are not doing replacements. So is it the only reason or we have got some other expenses as well?

[Deepanjan Bandyopadhyay, executive]

Yes, it's a combination of several things. First of all, our softening of the RM prices that has been started gradually flowing in [indiscernible]. It has already started flowing from March in Q4, and it has continued. So that is one of the reasons why our margins have started improving. At the same time...

[Devanshu Bansal, analyst]

Gross level margins are stable, right, on a sequential basis?

[Deepanjan Bandyopadhyay, executive]

Yes. So gross level margins are stable. If you look at the employee expenses, that has also, in absolute cost terms, it has reduced. As a percentage basis spend, there is a slight increase. The savings that we have received in terms of other expenses, which is more things like our logistics charges, our travel costs, those kind of things, even the market -- some other selling expenses, what we give typically the incentives to our trade partners. So savings are going to do very well.

[Operator]

[Operator Instructions] Next question is from the line of Amarnath Bhakat from Ministry of Finance of Oman.

[Amarnath Bhakat, analyst]

Yes. Am I audible?

[V. Ganesh, executive]

Yes, yes.

[Amarnath Bhakat, analyst]

Yes. Sir, just trying to understand the way Jockey has performed in the main section so far, of course, this is a market leading. What is holding us back to replicate the same type of performance in the women section and as well as in the kid section, sir? We have tried a little bit in the early stage to do something in the section, but it seems that, that section is not really picking up. So can you give us some color that what the management is thinking about this women and the kid section and some light on the Speedo side as well.

[V. Ganesh, executive]

Okay. Excellent. Thanks, Mr. Amarnath for asking that. So in the business category, the organized market exhibits notably very low penetration, the premium side of the business where we operate. Our current focus is not [Technical Difficulty] the market share, we want to actually gain market share. [Technical Difficulty] So we are allocating to both grew above the line and below the line in few goods, we found the awareness in the category that is one of the 4 more things which we need to focus on, and that's what we are doing.This concerted effort serves the dual purpose of bolstering leadership and calculating consumer understanding regarding the women's innerwear business. We observed that there is a lot of awareness that we need to create in this category, especially on the women's, especially on the broad side of it, wherein we are actually converting all our associates over on the retail space to be a consultant, a fit consultant and a product consultant who can prescribe the right product based on the need of the consumers.We also formed a dedicated team for women's innerwear and juniors. And I can already see this has favorable outcomes in our go-to-market strategy. So this approach has facilitated the establishment of a distinct and dedicated distribution network and it's extending to the very last mile as far as women's innerwear and juniors are concerned. So all these moves, which we are taking will help us to harness evolving premium attrition trend and the transition from unorganized market to the organized player, all this will help us.And if you see our product range, we have a very rich product range, and we are blessed with a very strong research and development team. We have the luxury of having some world-class international talent heading the research and development team who are able to come with exciting products, very, very functional, understanding the consumers' requirement and also rightly priced. So we are nicely positioned where it is aspirational and affordable for our consumers. So we are poised to take off here. I think we have done all the groundwork which is necessary for us to take the business forward. So what you said is very right. There should be nothing that should be stopping us. And we are firing on all cylinders as far as women and juniors are concerned.Coming to Speedo, Speedo has done exceedingly well in the last year. And we are, therefore, refocusing on it. In fact, we are working on a long-term business plan for Speedo with the current improvements which we are seeing. And we will be focusing on further growing this category because Speedo as a market, in India, this is evolving. And there is much more awareness today and there is going to be significant lifestyle improvement, and we are expecting this category to grow. So we stay invested as far as Speedo is concerned.

[Amarnath Bhakat, analyst]

Sir, a follow-up relating to that. If I read you correctly, that means our endeavor is to increase the percentage of this women and kids on revenue. Just in this regard, this product of women, kids, are they at the similar margin level of the men's product or it's substantially different? And just to add to this, sir, what is our effort to extend our -- beyond the India? That means are we doing something to extend to international business as well? And that's my last question.

[V. Ganesh, executive]

Okay. So margins is similar. And as a brand, we always work that way, and it has worked very well. And what is more important is how we manage the inventories at distribution, how we can make sure he has a relevant stock at the right time and to make sure they're in the right place. He gets much inventory turns and thereby becoming more profitability rather than having more percentage points as far as margin is concerned. And this is where our focus on ARS is very, very important. And as far as the international is concerned, we have 13 overseas EBOs, 10 in UAE, in 1 in -- 1 EBO in Sri Lanka and 1 in Qatar and 1 in Oman.

[Operator]

Next question is from the line of Gaurav Jogani from Axis Capital.

[Gaurav Jogani, analyst]

Sir, my first question is with regards to the ad spend. You mentioned that the ad spend was around 2.4-odd percent or for the Q1. However, in the past, in the pre-COVID times, if you see, the ad spend generally has been in the range of around 3.5% to 4%. So while I understand that there would be a phasing issue on quarter-on-quarter basis, but what kind of targets are we seeing on expense on a yearly basis?

[V. Ganesh, executive]

So our ad spend is in the range of 4% to 4.5%, that is what we have been doing. Of course, it came down during the pandemic, it was -- we were media dark. But generally, it's around 4% to 4.5%, and now we are focusing on creating those awareness, both in the brand as well as all the product ranges which we have. So we are getting back to that normal trajectory as far as our expenses are concerned.

[Gaurav Jogani, analyst]

So sir, would it be prudent to assume that the ad spend or the spends would it pick up in the latter half of the year?

[V. Ganesh, executive]

It is bound to pick up in the latter part of the year. But it's all part of our budget. So when I say we have taken enough measures to protect our margins, all these are considered. We have already baked these in our budgets. And we also taken enough initiatives to control costs on other sides of the business so that with the 4%, 4.5% marketing spend, we still can maintain and protect our margins.

[Gaurav Jogani, analyst]

Sure. And sir, the margin guidance you gave, that's the 19% to 21%. That includes the other income with as well, if I'm right?

[Deepanjan Bandyopadhyay, executive]

Yes, it does. I mean, yes, it does.

[Gaurav Jogani, analyst]

Sure. And sir, one -- just one last question from my end is, sir, on the trends, while we understand that during the COVID times, there was a lot of volatility in terms of demand conditions and because of which you saw last Q1 being with a very high base. But would it be prudent to assume at least that the demand conditions have now normalized? And probably going ahead, we could see the normalized trends and therefore, these trends may follow now going ahead as well?

[V. Ganesh, executive]

Definitely. But when we talked about volatility, it's not only the pandemic. If you see the last 4, 5 years, there were enough and more things happening in the marketplace, which brought in lot of volatility. GST was one. Then we had the pandemic. Then there was also -- last year, we also said like the above 1,000 and below 1,000 GST correction, then it was reversed back. So all this is something which has -- we went through. So I won't say it was a pandemic -- and today, what we are seeing is the overall bloating of inventory in the industry, which is affecting all of us. So going forward, I hope things will be normal and [indiscernible].

[Gaurav Jogani, analyst]

So, sir, if I may just slip in one last question.

[Deepanjan Bandyopadhyay, executive]

Just to add, I mean in your earlier clarification, the EBITDA -- the margin of 19.5% doesn't include other income.

[Gaurav Jogani, analyst]

Okay. Excluding other income. Okay.

[Deepanjan Bandyopadhyay, executive]

Yes. It excludes other income.

[Gaurav Jogani, analyst]

Okay. And sir, my last question, if I could slip in one more. I saw the pricing bid, this quarter around if you see the top line growth was -- decline was around 8-odd percent. However, the volume decline was higher at around 11.5%, giving you a 2% kind of difference. So I am assuming that we haven't taken any price increase as such for now. So what really explains...

[Deepanjan Bandyopadhyay, executive]

So we had taken a price increase in August 2022. So that impact is definitely there. On top of that, there's a seasonization impact. So that's what is the gap between 11.5% degrowth and the 7.5% growth.

[Gaurav Jogani, analyst]

Sure. So sir, just given the fact that you...

[Gagan Sehgal, executive]

Just to further clarify, we don't see any need for any immediate intervention. We are very comfortable. There will be a need for intervention only if there is some abnormal input cost increase like what we saw 2 years back. If such things happen only, we may have to look at it, and that is something for the industry per se to look at it. But I think now there is no need for us to relooking that and have a price influence.

[Gaurav Jogani, analyst]

Yes. Actually, that was I was meant to ask.

[Operator]

Next question is from the line of Ankit Kedia from PhillipCapital.

[Ankit Kedia, analyst]

Sir, 2 questions from my side. Sir, when you say industry participants are pulled with inventory, once the inventory extinguishes in the system, they could take price cuts because of the lower raw materials. And you have a policy of not taking price cuts. Don't you think that post the price cuts, they will again be competitive and your products are still going to be expensive for a normal consumer?

[V. Ganesh, executive]

Mr. Ankit, if I look at MRP to MRP, we are still very, very comfortable. In fact, most of our peer brands are priced much higher than us. Of course, they have taken certain promotional activities because of the inventory. Yes, that does play in the market. But if you look at MRP to MRP, we are much more competitive than most of our peers brands.

[Ankit Kedia, analyst]

Sure. Sir, my second question is you just entered into the institutional business last month where you're making all the EBO franchisee partners. There are distributors for the institutional. There you are actually told the partners that the Jockey logo will not be there and they pushed out for B2B business. How big is the opportunity for Jockey here? And will you need to pay royalty on these products, given that the Jockey logo or the Jockey brand will not be there on these outerwear products?

[V. Ganesh, executive]

Just want to clarify on this Ankit. The Jockey logo, this will be dependent on the institution which is going to look at our products. Mostly, it will be co-branded. In fact, what we see is most of the institutional buyers are so proud of the Jockey brand that they always prefer co-branding, yes? So that is what it is. So we are seeing a great opportunity. This is -- in the sense, this is one area where we have not explored. Even though we were present, we have not actually pushed this. We see good potential here.In fact, we also see this more not only from a top line point of view or the business position, this also may help us to recruit new consumers. For them, it will be a discovery for the brand. And so we are looking at it that way as well.

[Ankit Kedia, analyst]

So sir, from a 3-year perspective, how big could this business be from your perspective?

[V. Ganesh, executive]

Early days, Mr. Ankit. We are also trying to understand because, as I told you, we want to -- sometimes we can have a very high number at the cost of margin. So we want to strike a good balance between it. So for us, we are still exploring the opportunities with institutional business presence. So you may have to give us the luxury of some more time to give a concrete answer on this.

[Operator]

Ladies and gentlemen, due to time constraint, this was the last question for the day. I now hand the conference over to Mr. Deepanjan B. for the closing comments.

[Deepanjan Bandyopadhyay, executive]

So thanks again, everybody, for participating in the earnings call. [indiscernible] interesting discussion. So thanks again.

[Operator]

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

[V. Ganesh, executive]

Thank you. Thank you.