Padini

Industry observers opine the worst could be over as earnings for the company retail group’s fourth quarter ended June 30 2015 came in above market expectations.

Its management has indicatead that it is committed to a minumum 10 sen per share. Padini has a strong cash pile to continue rewarding shareholders. As at June 30 2015, the group was in a net cash position of rm98.13 million equivalent to 15 sen per share.
It is worth nothing that a large chunk of Padini’s shares are held by MD Yong via his private vehicle – the single largest shareholder with 43.7% stakes.

Where business operations are concerned, observers think Padini’s worse days could be over as margins stabilise and consumer sentiment recovers going forward. For FY2015, gross margins fell to 43% while net margins declined to 8.2%. In FY2014, Padini registered gross margins of 46% while net margins stood at 10.4%.

While SSSG expected to decline or even turn negative, observers opine it will be new stores that will generate sales growth.

Padini’s penetration into new markets could help to drive eanrings growth even if margins fail to recover. Besides that the group’s value for money Brands Outlet stores are benefiting from consumer down trading given current economic uncertainties.

It is possible that Brands Outlet will overtake that of Padini Concept Stores. Revenue from Brands Outlet came in on par with its higher end sister Padini Concept Stores while segmental profits overtook the latter in FY2015.

Looking ahead, a reovery in consumer sentiment will be positive for retailers like Padini.