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Jockey - All or Nothing

Jockey - All or Nothing

Page Industries saw a surge in its stock price after the company announced its results for the previous quarter. And considering they posted their highest ever quarterly profit, there’s good reason for us to revisit the stock. So in today’s Finshots Markets, we talk about Page, Jockey and the not so glamorous business of selling underwear.


Jockey

The Story

Jockey International, Inc. is a manufacturer, distributor and retailer of underwear, sleepwear and sportswear for men, women, and children. However, the foreign company does not sell its products in India. Instead, Page Industries — a little known entity (outside of stock market circles) holds the exclusive rights to manufacture and distribute Jockey branded products in the country. Page also happens to be the single largest licensee for Jockey International and one of their most successful brand partners.

Now the business arrangement between the two entities isn’t all that complicated. Page pays Jockey International a 5% royalty on sales every year and they continue to hold exclusive rights to market the brand in India. But what’s remarkable about the arrangement is that they’ve been together for well over two decades now. That’s a long long time.

And to understand why, you have to look at how Page has built the Jockey Brand in India

Understanding Underwear

Let’s face it. Page makes quality underwear. The smooth flow, the soft fabric, the elastic straps that don’t leave nasty stretch marks, the strategically placed vents that allow your vitals to breathe — the products ooze quality through and through. For the most part, the underwear lasts a good year without much maintenance and there is very little incentive to switch.

Apart from the obvious merits of quality, Jockey’s pricing and positioning aims to reduce cognitive dissonance. Cognitive dissonance occurs when your ideas, beliefs or behaviours contradict each other. This simple theory follows that if you have doubts about your purchase and its ability to provide maximum value for the best price, there is a high chance that you will avoid making a similar purchase again.

Imagine buying a VIP Frenchie and then finding out you could have had a Jockey by paying a premium of ₹50 — or sporting a Calvin Klein for ₹999 and then seeing a Jockey sell for as little as ₹200. It’s this feeling of possible regret that the human brain tries to avoid whilst making a purchase. And Jockey’s brand image is tailor-made to reduce the internal conflict within you. A VIP Frenchie is affordable, a Calvin Klein — Premium.

Jockey, for the lack of a better term, is both.

And cultivating this brand was no easy task. Page had the gargantuan task of organizing a market that was heavily unorganized. There was a time when underwear was sold as if it were contraband. The stigma associated with the product was quite incredible. Page flipped the script entirely. They were the pioneers of advertising underwear. They used fancy boxes for packaging. Everything about the brand felt premium. And for a young millennial population coming of age, Jockey was the only alternative.

In 2010, they went one step further. They ventured into the athleisure segment offering track pants, joggers, pyjamas, jackets, sweatshirts, leggings and much more. The company also started betting big on swimwear. They currently sell Speedo branded products in India. And through it all, Page has emerged as a trendsetter in the industry.

In the last 10 years, revenues have grown by 9 times from ₹339 crores in FY10 to ₹2945 crore in FY20. Net profit has kept pace — from ₹40 crores in FY10 to ₹343 crores in FY20. They have the highest margins in the industry. They push their inventory faster than anybody else. They are market leaders. They have a presence in 2800 cities. They work with 4000 distributors, 66,000 retailers, 750+ Exclusive Brand Outlets, and 180+ Outlets in Malls.

These are truly staggering numbers. For any apparel brand for that matter.

But that doesn’t mean things have been smooth sailing. Other brands are catching up. Take, for instance, Van Heusen by Aditya Birla Fashion. They are one of Page’s biggest competitors. In 2017, they made revenues totalling 200 crores from innerwear alone. For context, it took Page 14 years to hit that number. Granted, the market was very nascent back then. But it still gives you a rough idea of how the competition is nipping at the company’s heels.

Also, the economic slowdown in 2019 wasn’t kind to Page. Yes, people will always buy underwear. But their propensity to spend large sums of money isn’t as high when the economy is in the doldrums. As a result, revenues only grew 3% in FY20 —the slowest growth Page has witnessed in more than a decade. Also, retailers have been in a spot of bother these past few years. Demonetisation and GST had hit some of these people real bad. And when cash isn’t easy to come by, you either shut shop or switch to a more profitable endeavour.

The pandemic that ensued soon after only made things worse. With a lockdown in place, sales fell 35% between April and September last year. And profits tanked 70%. But bear in mind, that’s only because the company kept paying its employees in full. There weren’t many layoffs at Page and so, you’ve got to admire the company for doing something so gutsy during such a tumultuous time. And perhaps good karma does pay off. Because after September, there was a boom. With people working from home, the athleisure segment saw the highest growth within the portfolio of products. Add it to the festive season and some pent up demand, Page managed to post a top-line growth of 17% and paired it with the highest ever quarterly net profit of ₹153 crores. And sure, Page is a ridiculously expensive stock even now.

But if there is one company that has continued to outperform consistently for the past decade, it’s Page Industries. So yeah, what do you think of Page’s prospects? Do you think they’ll manage to lead the pack? Or do you think the stock is grossly overvalued? Let us know your thoughts on Twitter.

Until then…

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