PETALING JAYA: Padini Holdings Bhd
’s current valuation has largely priced in near-term earnings weakness amid a soft retail backdrop, with CIMB Research maintaining a positive view on the apparel retailer’s medium-term prospects despite cautious consumer spending conditions.
The research house said Padini’s resilient mass-market positioning, improving margins and strong balance sheet continue to underpin its investment case, even as sales growth remains subdued.
Padini’s revenue for the nine months ended March 31, 2026, slipped 2.3% year-on-year (y-o-y) to RM1.5bil, weighed by weaker overseas operations and softer domestic demand.
Overseas sales, which accounted for about 2% of revenue, fell 29% y-o-y amid geopolitical disruptions in Cambodia, Thailand and the Middle East, while domestic sales declined 1.4% as consumers stayed prudent.
Despite the weaker top line, gross profit margin improved by 0.7 percentage points to 39.9%, supported by lower discounting activity and a stronger ringgit against the yuan.
CIMB Research expects Padini’s fourth-quarter (4Q26) performance to remain challenging as festive spending associated with Hari Raya was largely pulled forward into the 3Q26.
Rising freight, carriage and personnel costs, exacerbated by elevated fuel prices stemming from the ongoing Middle East conflict, are also expected to weigh on earnings in the near term, it noted.
Padini is managing these pressures through tighter cost controls and operational efficiency measures, including expanding its warehouse automation initiatives.
“Padini’s mass-market positioning should continue to capture downtrading demand and attract value-driven consumers.
“Margins should be further supported by a firmer ringgit against the yuan and a gradual sales mix shift towards higher-margin categories, with Padini guiding for gross profit margins to remain around the 4Q26 level through to FY27 (financial year 2027), slightly above CIMB Research’s forecast range of 39% to 39.5%,” it said.
Padini plans to renovate about 10 stores in FY27, equivalent to roughly 6% of its existing store network.
CIMB Research maintained its “buy” recommendation on Padini with an unchanged target price of RM1.80 per share.
It noted that the stock is trading at 9.7 times calendar year 2027 forecast earnings, about 1.5 standard deviations below its five-year average valuation of 13.2 times.
