PETALING JAYA: Padini Holdings Bhd
’s focus on the mass market positions it to benefit from consumers shifting toward more affordable options amid economic pressures.
Analysts at CIMB Research, following the group’s first-quarter (1Q) briefing for financial year ending June 2026 (FY26) maintained a positive outlook on the retailer, noting that Padini’s margins remain resilient, supported by a stronger ringgit and continued consumer downtrading.
“Padini is broadening its product range, adding more stock keeping units in higher-margin, high-demand categories such as innerwear and selected apparel, supported by activewear extensions and intellectual property or IP-brand collaborations to lift store productivity,” the research house said.
It said that during the analysts’ briefing, Padini reported that its FY26’s 1Q revenue rose 2% year-on-year, driven by five net new store openings, which had offset a 1% decline in same-store sales growth.
“Gross profit margin grew 4.3 percentage points to 39.9%, supported by a more profitable sales mix, lower discounting, and currency tailwinds from the ringgit’s appreciation against China’s yuan.
Padini sources a majority of its products from China.
However, core net profit was flattish at RM20.7mil, owing to a sharp increase in the effective tax rate to 34.6% arising from the reversal of deferred tax assets related to prior-period foreign exchange gains.
The research house said Padini also incurred an additional RM2mil in rental expenses in 1Q following the implementation of the 8% sales and service tax on leasing effective July 2025.
The impact will vary quarter-on-quarter as leasing charges are partly tied to sales performance, it added.
“The group also noted softer consumer spending in early 2Q of its FY26, which we attribute to inflation-driven caution among households.
“Nevertheless, we expect demand for Padini’s products to remain resilient given its mass-market positioning.”
CIMB Research said the stock’s valuations remain attractive, backed by solid dividend yields.
It noted that Padini is trading at an attractive valuation, with a one-year forward price-to-earnings of 10.8 times, which is 18.7% below its five-year average and 32.2% below its 10-year average.
The company’s strong net cash of RM748mil, which was 42% of the stock’s market value, supports its dividend yields of 4.5 to 4.8% for FY26 to FY28.
“We make no changes to our FY26 to FY28 earnings per share estimates and maintain our ‘buy’ call with a target price (TP) of RM2.40.”
At the time of writing, shares of Padini were trading at RM1.83, down 17% year-to-date.
Meanwhile, BIMB Research said Malaysia remains the sole earnings engine for Padini, with overseas operations still loss-making.
Touching on FY26 plans, this includes 11 store refurbishments and five to six new store openings, with capital expenditure of RM50 to RM70mil.
However, the research house said Padini’s management highlighted that consumer sentiment remains weak and cautious, with little evidence of improvement despite government measures such as fuel subsidy rationalisation and the Sumbangan Asas Rahmah RM100 aid.
Looking at 1Q of FY26 earnings, BIMB Research said it “underscored Padini’s operational discipline and ability to read weak consumer sentiment and price accordingly, delivering a 40% gross margin, which was the top end of its 36% to 40% target range.
“We maintain ‘buy’ with a TP of RM2.40.”
