COMPLEMENTING its leather goods knowledge, MESB Bhd’s latest venture into the retail fashion industry will open up new horizons with the possibility of a bespoke wardrobe for the company.
MESB recently announced that it is expanding further into the fashion world with its proposed acquisition of Active Fit Sdn Bhd for RM19mil. Active Fit develops and distributes men’s casual apparel such as shirts, trousers, jackets and basic accessories under the “Jeep” brand in Malaysia.
The leather goods company is hardly covered by analysts. Nonetheless, analysts say the company is not an entirely newcomer in the highly competitive and fragmented industry. It has been around for some time and it has the experience in retail business.
In addition, analysts say the apparel industry is subjected to rapidly evolving fashion trends and shifting consumer demand.
“The fashion industry is very competitive. On top of the competition from local brands, there are also pressures from international chains like H&M and Uniqlo,” an analyst says.
Another analyst opined that the poor consumer sentiment appears to be causing pressure on the local retail-related sector and that most retailers on Bursa Malaysia appear to be going through tough times.
“I believe the sector will be affected by the current conditions in the global economy as fashion is not a staple. People will hold back during uncertain times,” an analyst cautions.
Acknowledging that the industry is highly competitive, MESB says competition comes from the existing competitors, including domestic and foreign players, as well as new entrants. In addition, online shopping is gradually creeping into the conventional retail market for apparel via outlets and consignment counters.
“Nevertheless, the management of MESB believes that Active Fit would be able to stay competitive with its established licensed brand name, experienced management and designing team, wide product range and designs, in-house merchandising and designing facilities, established distribution network and competitive pricing policy,” MESB says in a filing with Bursa Malaysia.
According to MESB, the proposed acquisition of Active Fit will enable the group to expand into the retailing of casual apparel and accessories, being a segment within the retail fashion industry for which the group has experience and expertise.
“The proposed acquisition is expected to broaden MESB’s earnings base and enhance its positioning in the retail fashion industry to capitalise on the future growth of the local retail industry.”
To further grow the new business, MESB is committing RM3mil over three years mainly for brand promotion activities and opening of consignment counters. The company is also looking at enhancing the brand promotion activities of Active Fit by, among others, improving visual merchandising display at its consignment counters as well as increasing product promotional activities and brand publicity.
Furthermore, MESB intends to optimise the merchandise category mix of Active Fit by focusing on higher margin as well as expand Active Fit’s products. Interestingly, Siow Sea Nen and Chen Mui Yong, collectively being two of the vendors of Active Fit, have provided profit guarantee to MESB.
Active Fit, which registered a pre-tax profit of RM3.8mil on a turnover of RM33.6mil for the financial year ended June 30, 2014, operates about 100 consignment counters nationwide for the “Jeep” brand of apparel and accessories.
For the full year ended March 31, 2015, MESB posted a net profit of RM1.25mil on revenue of RM86.6mil.
Despite the news on its expansion, MESB’s share had fallen some 3.5% since the announcement of its proposed acquisition. The counter fell 1 sen to 82 sen yesterday. Year-to-date, the counter has fallen 9.7% and has a market capitalisation of RM34.9mil.
MESB is involved in the trading of quality leatherware products – the range of products covering ladies handbags, ladies small leather goods, gents bags, mens small leather goods and gents accessories – through its subsidiary Miroza Leather (M) Sdn Bhd.
Miroza owns the exclusive license to design, source and market international brands such as Alain Delon, Pierre Cardin and Pierre Balmain. It also holds the Alain Delon distribution rights in Indonesia. In addition, Miroza has established its in-house brands – Giossardi and Giamax.
Miroza operates a few boutiques and over 270 consignment retail counters throughout premier departmental store in Malaysia
MESB ventured into the fashion world in 2004 following its RM36mil purchase of Miroza in a bid to improve its financial position. In addition, it is also involved in the development, rental and legalisation of telecommunication base transceiver stations in Penang through its 40% equity interest in PDC Telecommunication Services Sdn Bhd.
However, MESB is in the process of disposing of its interest in PDC Telecommunication, an exercise to be completed by the fourth quarter of 2015.