This article first appeared in The Edge Financial Daily on November 30, 2018
KUALA LUMPUR: Padini Holdings Bhd failed to find joy in the three-month tax holiday.
The fashion retailer’s net profit declined 42.5% to RM17.96 million for the first quarter ended Sept 30, 2018 (1QFY19) from RM31.2 million a year ago due to margin compression, according to its filing with Bursa Malaysia yesterday.
The quarterly net profit of RM17.96 million is the lowest since 4QFY19 when it achieved RM18.17 million.
Quarterly revenue was, however, up slightly by 4.6% to RM329.8 million against RM315.18 million a year ago, mainly contributed by increase sales in Brands Outlet.
Earnings per share shrank to 2.73 sen in 1QFY19 from 4.75 sen. Despite the earnings contraction, Padini declared a second interim dividend of 2.5 sen per share for the financial year ending June 30, 2019, payable on Dec 28.
Padini pointed out that the lower profit before tax (PBT) was partly due to the drop in gross profit margin from 43% to 40%.
“The higher gross profit margin in the previous quarter was mainly due to the reversal of inventories written off and inventories written down in the previous financial year,” said Padini, adding that the rise in staff cost, rental and some other store operating expenses also caused the fall in PBT.
On prospects, Padini said the group is confident of turning in another profitable period despite the challenging economic environment and rising cost.
“The management will continue to be vigilant to the changes in the external environment and take necessary actions, including reviewing our cost structure in order to maintain long-term sustainable growth,” said Padini.
Some analysts noted that Malaysians were on the shopping trail during the tax holiday between June and August. However, the fashion retailer was not able to boost sales much. That it had to sacrifice profit margin does not paint a rosy picture of its earnings prospects moving forward.
Shares in Padini closed four sen or 0.73% up at RM5.52 yesterday, valuing it at RM3.63 billion.