Padini’s earnings momentum to continue on resilient sales
KUCHING: Padini Holdings Bhd’s ( Padini) prospects are viewed positively by analysts as sales are expected to remain resilient, supported by the affordable pricing of its products.
The research arm of AmInvestment Bank Bhd (AmInvestment Bank) said, “We believe that Padini’s earnings momentum would continue into the financial year 2017 ( FY17) underpinned by the opening of six new stores in the first half of the financial year.”
It noted that the six stores are expected to consist of three concept stores and three brand outlets and these stores include those that would be located in Sunway Velocity Mall, Design Village in Penang and AEON Melawati.
“We have assumed a sales growth per store of 12.9 per cent in FY17 compared with 15.3 per cent in FY16.
“Same store sales growth was 18 per cent year- on-year (y- o-y) at the concept stores and nine per cent y- o-y at the brands outlets in the first nine months of FY16 (9MFY16).
“We expect Padini’s pre-tax profit margins to improve in FY17 supported by the appreciation of the ringgit against the renminbi.
“As such, we have raised our assumption of Padini’s earnings before interest and tax margins from 14.5 per cent previously to 15.5 per cent each in FY16 and FY17,” it projected, noting that about 90 per cent of Padini’s inventories are sourced from suppliers in China and since the beginning of the year, the ringgit has appreciated by 9.7 per cent against the renminbi.
Meanwhile, AmInvestment Bank believed that online stores would have minimal impact on Padini’s sales.
It said, “We believe that there is minimal threat from online boutiques as the selling prices of Padini’s apparel at the physical stores are still attractive.
“Presently, Padini’s online shop, which commenced operations in November 2015, generates less than RM100,000 of revenue.”
All in, it maintained a ‘buy’ call on the stock.
“We like Padini for its strong brand recognition, sterling earnings track record, wide distribution network, and dominant position in the retail and apparels industry.”