PETALING JAYA: Eco-Shop Marketing Bhd
shares suffered the steepest single-day decline on record after disappointing first-quarter earnings sparked a sharp selloff, wiping out RM800mil in market capitalisation.
The stock fell 15 sen yesterday or 10.5% to close at RM1.28, a four-month low.
Analysts highlighted that Eco-Shop, which reported first-quarter ended Sept 30, 2026 (1Q27) results that were below expectations on Oct 27, is likely to adjust prices higher due to a hike in the minimum wage to RM2,000 from RM1,700.
The company pointed to the yuan appreciation against the ringgit, typhoon-related disruptions at Chinese ports, which delayed shipments of higher-margin imported house brand products, resulting in inventory shortages and an unfavourable sales mix as reasons for the 1Q27 financial performance.
Eco-Shop sells household goods for RM2.60 in Peninsular Malaysia and RM2.80 in Sabah and Sarawak.
Analysts said 1Q27 results were lower than expected on margin pressure and that rising costs, especially from the minimum wage, would likely mean another round of price hikes. They have also lowered their earnings forecasts.
CIMB Research said the company is entering into an increasingly challenging operating environment, as rising cost pressures coincide with cautious household spending. It has lowered the earnings forecasts by 6.2% to 7.1% for the financial year ended May 31, 2027 (FY27) to FY29 to reflect weaker gross profit margins.
The research house has maintained a “hold” call on the stock and lowered the target price (TP) to RM1.40 from RM1.50 as it believes cost pressures would increasingly weigh on profitability in FY27 despite the company expecting supply chain normalisation and product refreshes supporting margins.
It believes the company would revise its RM2.60 fixed price point higher within the next 12 months to defend margins, following the company’s acknowledgement that further price adjustments may be unavoidable.
“While this could support margins over the longer term, we see near-term earnings risks given Eco-Shop’s predominantly price-sensitive B40 customer base.
“Historical rounds of price hikes were followed by prolonged same-store sales growth (SSSG) weakness and declining basket sizes as consumers adjusted their spending,” it said.
UOB Kay Hian Research has downgraded the stock to a “hold” and lowered the TP to RM1.50 from RM1.60 after trimming FY27 to FY29 earnings forecasts by 9%, 5% and 6% respectively to account for lower SSSG for FY27 and gross margin assumptions for all forecasted years.
“While Eco-Shop offers an attractive three-year profit compounded average growth rate (CAGR) of 14.3% driven by its store expansion-led growth, it appears to be priced in by valuations at this juncture.
Furthermore, Eco-Shop has historically displayed a mixed track record with a minimum wage hike cost pass-through,” it said.
While SSSG turned positive in 1Q27 compared to a contraction of 2.3% in 4Q26, it estimates that an increased store participation in the MyKasih programme would only have an incremental uplift to SSSG.
The brokerage has factored in a 20 sen price hike to offset the minimum wage impact, although the quantum and timing remain undecided pending supplier discussions.
“However, higher prices could temporarily weigh on SSSG, given its price sensitive customer base and prolonged sales weakness following the 2025 price adjustment,” it added.
RHB Research, while noting that 1Q27 earnings were below expectations, has kept a “buy” call but lowered the TP to RM1.62 from RM1.82.
It continues to be positive on the company’s business, expecting the dollar store industry to continue rapid growth by capitalising on consumer downtrading trends.
“With that, we project a robust three-year earnings CAGR of 14% – supported by continuous outlet expansion to deepen market penetration and strengthen its brand equity,” it said, adding that the company continues to explore options that include product mix refreshes to alleviate gross profit margin pressures.
It said with the supply chain disruptions normalising in October, sales of products with higher margins should increase and sustain the positive SSSG trend.
“Meanwhile, new store openings in 1Q27 was slower than the usual run rates but management is confident of playing catch-up to meet the target of 100 new openings,” it said.
