Lockdown adds to Padini's woes

KUALA LUMPUR: Padini Holdings Bhd's streak of poor earnings is expected to continue through 2021 as its brick-and-mortar outlets will be severely affected by MCO3.0 while overseas outlets face risk of closures.

Following a briefing yesterday, Kenanga Research said it expects further store closures within the year as it continues to struggle with its performance during MCO3.0.

This is expected to result in revenue compression as outlet sales comprise about 93.2% of the retaiers 9MFY21 total sales.

"We are unexcited over Padini’s underwhelming online presence.

"We feel that its sizeable online ticket size of RM50–80 and its fast fashion offerings make it more suited for omni-channel distribution," said Kenanga, while noting that e-commerce sales in 9MFY21 grew to 1.2% from 0.3% in the same period last year.

Padini's website and mobile app are being developed, the latter of which is scheduled for release this year.

About 80% of its e-commerce sales are through its own distribution channels while the remainder is sold via Shopee and Lazada.

Kenanga expects poor same-store sales growth to continue with 3QFY21 reporting a 25% year-on-year decline, despite a weak base.

"Alongside mobility restrictions and poor sales mix, performance was marred by the group’s overestimation of its CNY sales, being eventually forced to clear out its inventory.

"Padini had similarly overestimated its sales for the Hari Raya promotions this year. This year’s Raya performance was worse than the last due to tighter movement controls," said Kenanga.

The research house maintained its "hold" call on the stock with an unchanged fair value of RM3.18 a share based on a price-earnings ratio of 16x 2022 forecast earnings per share.