This article first appeared in The Edge Financial Daily on November 17, 2017
KUALA LUMPUR: Padini Holdings Bhd, which reported a 14.6% year-on-year (y-o-y) rise in net profit in the financial year just ended, aims to maintain its growth momentum in the current financial year ending June 30, 2018 (FY18) despite the soft pace of retail sales.
The fashion retailer’s net profit rose to RM157.39 million in FY17 from RM137.39 million in the previous year, while revenue grew 20.7% to RM1.57 billion from RM1.3 billion in FY16.
Padini chief financial officer Sharon Sung said the group, whose brands include Padini, Seed, Padini Authentics, PDI, and P&Co will continue to apply the same strategy as in FY17, which resulted in positive growth from its existing stores. It saw an 8% y-o-y same-stores-sales growth in FY17.
“Hopefully, we can do better [in FY18] and to have that [good results], there is no single factor. It is like a whole package, which is the combination of all our brands,” she told reporters after the group’s annual general meeting yesterday.
“We will put more effort, for example, into our merchandising and marketing activities,” she added.
However, Sung said the group remains cautious about the state of consumer sentiment in Malaysia amid the ever-changing and evolving retail environment.
“I think consumers will remain cautious in their spending and are more price-sensitive in current times,” she noted.
On Padini’s part, the group will continue to deliver value and speed-to-market which is critical for its continued success.
“We won’t be introducing new brands apart from Vincci Mini, but we will continue to improve our merchandising and value chain in terms of giving more value to our customers,” said Sung. Vincci Mini is a footwear and handbag brand that focuses on children aged between two and 10.
Domestic operations continue to be the main driver of the group’s revenue and profit, accounting for 96% of its revenue in FY17, and the remaining 4% from overseas markets.
As of June 30, Padini had 126 retail stores in Malaysia, of which 36 were single-brand stores, 43 were Padini Concept Stores (PCS) and 47 were Brands Outlet Stores (BOS).
The group, who has forayed into overseas markets such as Phnom Penh in Cambodia, said the leniency in running a business there was the main reason why it had penetrated into the market. “First things first, there is no capital control [in Cambodia] and it is much easier to set up a subsidiary with 100% foreign shareholding compared with Thailand and Indonesia,” said Sung.
The group plans to set up its own outlets in Cambodia and will spend RM20 million to open three new stores — two PCS and one BOS — in FY18.
On the local front, Padini plans to open 12 new stores in FY18, of which six will be PCS and the remaining ones BOS.
TA Securities analyst Damia Othman noted that Padini’s FY17 earnings improved, underpinned by the opening of 14 new stores and the closing down of six underperforming stores.
“I expect FY18 earnings growth to be 19% driven by the number of new stores they plan to open and the continued rationalisation of its stores by closing down underperforming stores. For FY19, earnings are expected to grow by 9%,” she told The Edge Financial Daily.
Padini shares closed one sen or 0.2% higher at RM5.10 yesterday, bringing a market capitalisation of RM3.35 billion. The stock hit a record high of RM5.37 on Monday from a low of RM2.23 on Jan 16.
“[Padini’s] current market price is very high as it’s getting positive market sentiment. But I believe it’s running ahead of its fundamentals,” Damia, who has a “sell” rating on the stock and a target price of RM4.67, said.