KUALA LUMPUR (Aug 25): Padini Holdings Bhd, which posted a 26% year-on-year decline in net profit for the fourth quarter ended June 30, 2023 (4QFY2023), expects retail business to remain challenging as inflation takes a toll on consumers’ spending power.

“Retail business in general remains challenging due to the deterioration in purchasing power arising potentially from rising cost, trade tensions and rising inflation and interest rates,” said Padini in its quarterly result report to Bursa Malaysia.

The fashion retailer added, however, that supply chain issues, material costs and freight charges seem to have stabilised, although there may still be some further increases in the short term.

In view of these challenges, Padini’s management said it will implement measures to control costs, optimise working capital, preserve cash and streamline operations to minimise any adverse impact.

The group’s net profit dropped 26.02% to RM57.31 million in 4QFY2023, from RM77.46 million a year earlier, due to higher expenses as a result of rising salary and incidental expenses, as well as higher finance costs.

Earnings per share fell to 8.71 sen from 11.77 sen.

Selling and distribution costs were 24.5% higher at RM98.04 million, compared with RM78.76 million in 4QFY2022, while finance costs increased 59.1% to RM8.31 million from RM5.22 million, and administrative expenses grew 6.8% to RM16.27 million from RM15.23 million.  

Revenue for the quarter inched down 1.01% to RM476.33 million, from RM481.2 million previously due to lower sales in existing stores.

The group declared a first interim dividend of 2.5 sen per share, payable on Sept 29.  

For the full year, net profit jumped 44.51% to RM222.69 million, from RM154.1 million in FY2022, as revenue grew 38.13% to RM1.82 billion from RM1.32 billion.

The better full-year performance was due to a low base effect due to the movement control order implemented nationwide last year, which saw most of Padini's outlets  closed from June 1, 2021 to Aug 18, 2021.

Padini shares closed unchanged at RM3.95 on Friday (Aug 25), giving the group a market capitalisation of RM2.60 billion. Year to date, the stock has risen 18%.