Padini will be opening more retail stores as part of the company’s strategy to expand further in Sarawak and Sabah.
KUCHING: Padini Holdings Bhd (Padini) will be opening more retail stores as part of the company’s strategy to expand further in Sarawak and Sabah.
The company foresees the opening of more outlets especially Brands Outlet (BO), which tailor to the demographic of various cities with a different mix of products and fashion items to boost its revenue and same-store-sales (SSS) growth.
Padini executive director Chan Kwai Heng said the company still foresees higher turnover for financial year 2015 (FY15) with the expansion in size and reach its distribution network.
“We plan to open one BO and one Padini Concept Stores (PCS) each in Vivacity Megamall in Kuching and also in Bintulu.
“For FY15, the group still sees potential for top-line growth considering the expansion in the size and reach our distribution network.
“The increase in our number of stores achieved in FY14 will continue in FY15 and all these new stores should help boost top-line growth.
“Even as competition intensified, the diverse market segments we serve and the geographical spread of our distribution network have helped us tremendously to moderate the competitive pressures faced,” he told The Borneo Post through an e-mail interview recently.
He added that for FY15, Padini will also be opening an additional four BO stores and four PCS in Peninsular Malaysia.
Meanwhile, the research arm of Maybank Investment Bank Bhd (Maybank IB Research) in a November 19 report said Padini targets to open six BO and six PCS outlets in FY15 nationwide against five BO and seven PCS in FY14, of which two PCS outlets will be replacements.
The research firm noted that PCS Komtar in Johor is expected to replace PCS in JB City Square while PCS in Mid Valley Megamall, Kuala Lumpur is poised to replace six single brand shops in the megamall.
Other than that, Maybank IB Research noted Padini aims to launch another two PCS likely to be at Imago Mall in Kota Kinabalu, Sabah by the third quarter financial year 2015 (3QFY15) and Sunway Putra Mall in Kuala Lumpur in February 2015.
Additionally, the research firm pointed out Padini will also open another BO which could be at Imago Mall in Kota Kinabalu by 3QFY15. Maybank IB Research observed in 1QFY15 ended September, Padini has opened one PCS and one BO, both are in Komtar, Johor. It noted that sales are gradually trending up as the stores in Komtar, Johor are in a relatively new mall.
As for the current second quarter financial year (2QFY15), Maybank IB Research said Padini has opened a PCS outlet at IOI City Mall in Putrajaya on November 13 and a BO at the shopping complex on November 20. The research firm added another BO store at AEON Taiping, Perak opened on November 14.
Moving forward, Maybank IB Research said Padini will be looking at BO, a concept store which carries a mixture of in-house and third party consignment brands as one of the major engines of growth.
The research firm noted Padini does not fix the brands which it distributes.
In the meantime, Maybank IB Research noted BO which caters for demographic of various cities has a competitive edge and flexibility as it observed Padini constantly fine-tuning the mix of products and this could potentially lead to better profit margins.
As for the company’s operations in Sarawak, Chan said Padini currently has two PCS, one in Kuching and one in Miri while the company also has two BO, one in Kuching and one in Miri.
For Sabah, Chan observed that Padini has one BO and two PCS in Kota Kinabalu.
He revealed that PCS in Kuching and Miri has occupied a total of 29,339 square feet of retail space while BO in Kuching and Miri has a total retail space of 15,410 square feet.
As for Sabah, he noted the company’s two PCS occupied a total area of 12,300 square feet and the BO has an area of 9,580 square feet.
For FY14, Chan revealed that Padini’s operations in Sarawak and Sabah contributed about seven per cent of the group’s total revenue.
He observed that for all retail stores owned by Padini, the SSS growth for FY14 over FY13 was at 6.2 per cent.
Likewise, Maybank IB Research noted Padini’s BO’s SSS growth was the highest for FY14 at 16 per cent compared with other brands which it distributes.
The research firm pointed out the pretax profit margins for BO are also higher at about 17 per cent against the company’s blended pretax profit margin of 14 per cent in FY14.
It noted despite stiff competition in the retail segment, most of Padini’s brands have registered healthy growth in FY14.
At the same time, Chan said the retail sector in Malaysia has for the last two decades been vibrant and robust.
He observed the variety and range of goods and services offered at retail outlets have expanded and changes as the economy developed.
“At Padini, our pricing, merchandising and retailing policies have always been influenced by our efforts to be relevant to the needs of our customers.
“This policy of being relevant to the people we serve has been central to our efforts to improve our sales,” he noted.
For FY14 ended June 2014, Padini said its revenue increased 9.7 per cent year-on-year (y-o-y) to RM866.26 million compared with RM789.77 million in FY13.
For the same period, the company added its net profit grew 6.5 per cent y-o-y to RM90.91 million against RM85.39 million recorded in FY13.
In its explaination notes accompanying the financial results, Padini said the higher growth in its turnover was attributed to higher contribution from its existing as well as new retail stores opened during FY14.
Padini observed that its earnings for FY14 softened due to operating expenses which rose faster than the increase in revenues as well as promotional clearance sales events.
Looking ahead, with more stores opening in FY15, Maybank IB Research forecast Padini to register revenue growth of 10 per cent in FY15.
Nonetheless, the research firm has projected lower profit margin for Padini in FY15 on expectation that the company may be more aggressive on its stock clearance sales prior to the introduction of the Goods and Services Tax (GST) next year.
Maybank Research also reduced Padini’s FY16 and FY17 sales growth on expectation of softer consumer demand amid inflationary pressure.
Nevertheless, the research firm believed Padini will be able to maintain its stable revenue and earnings growth as well as attractive dividend yields of about 5.7 per cent which will provide support for the company’s share price.