KUALA LUMPUR (Feb 27): Shares of Padini Holdings Bhd (KL:PADINI) fell on Friday to their lowest in six weeks following the fashion retailer’s underwhelming earnings report.
Despite the festive season and school holidays, net profit for the first half of its fiscal year accounted for less than 40% of the full-year consensus estimates, prompting cuts to earnings forecasts and target prices. At least one research house downgraded the stock, though a large majority remained bullish.
Chinese New Year and Hari Raya Aidilfitri spending is expected to “drive sales momentum upwards” before normalising by June, Maybank Investment Bank said and kept its 'buy' call on the stock.
Padini fell as much as 8%, or 16 sen, to RM1.84. It later trimmed losses to close at RM1.86 on Friday. It was still Padini's biggest one-day drop in six months. At the last price, Padini was valued at RM1.84 billion.
Before Friday’s fall, shares of Padini have been rising as investors have been betting on appreciating ringgit to cushion margins under pressure from rising operating costs. A stronger ringgit versus the renminbi may help to reduce Padini’s costs as more than half of its products are sourced from China.
Still, seven out of nine research houses recommend 'buy' on Padini. The remaining two are on 'hold' calls and there are no 'sell' ratings post-results. The average target price is now RM2.22, according to Bloomberg, a potential upside of 21% from current prices.
Following the latest revisions, the consensus is now looking at Padini making a net profit of RM159 million for the financial year ending June 30, 2026 (FY2026).
While sales could improve in the months ahead, Apex Securities is cautious on earnings outlook for FY2026 and downgraded its call to 'hold' from 'buy' after cutting target price by 33 sen to RM1.80.
Discretionary spending remains “uneven despite stable macro conditions, with consumers staying price-sensitive amid lingering cost pressures, which may cap demand momentum outside festive seasons,” the house added.
Net profit shrank year-on-year in the recently-ended quarter, dragged by weaker sales and higher operating costs, lowering the first half net income by 19% to RM61.7 million.
The company blamed higher operational costs, including increased depreciation and the imposition of service tax on rental which took effect from July 1, 2025. On its part, Padini said it would take cost-control measures and working capital optimisation to counter the tough business conditions.