Written by Melody Song
Sunday, 16 May 2010 23:28
SHAH ALAM: Fashion retailer PADINI HOLDINGS BHD [] plans to spend about RM7.55 million on existing and new stores by year-end, according to executive director Cheong Chung Yet.
Cheong, who is also Padini's creative director, told The Edge Financial Daily the average capital expenditure (capex) per square foot for its outlets was around RM200, while capex for its Brands Outlet store was around RM100.
"This year our major projects include a flagship Vincci store in Fahrenheit 88 Kuala Lumpur where customers will be able to get bags, shoes and accessories in-store, and a new 15,880-sq ft Brands Outlet store in Sunway Pyramid," he said, adding the company was also undertaking renovations in its Bandar Utama 2 and Pavilion Padini Concept Store (PCS) outlets.
At present, the company has 20 PCS outlets and is also eyeing East Malaysia and regional markets for expansion opportunities, said Cheong.
He also said sales from PCS outlets contributed about 40% of total group turnover in 2009, adding that some 150 new designs were introduced every month across its brands.
Padini has a total of seven primary brands, 197 outlets and consignment counters, and 72 franchise and dealer stores overseas.
"The next level for us would be to bring the company regional and to have more market recognition there," he said, noting that Padini already had some exposure in Asean countries including Thailand, the Philippines and Brunei, with 23 outlets in Saudi Arabia and nine in the United Arab Emirates (UAE).
According to the company's financial statements, its export market contributed about 10% of total revenue, which was RM128.4 million in the second quarter ended Feb 25, 2010.
Cheong said most of Padini's expansion plans were funded by internally generated funds.
He said Padini was cautiously optimistic on the outlook for the rest of the year, although the board of directors had not set a sales target.
"We have been maintaining earnings growth of around 18% year-on-year, which is impressive because sustaining this growth is challenging," he said.
On other challenges that lay ahead, Cheong said rising costs of raw material especially cotton yarns and labour costs in China where a large portion of garments and items were sourced from were areas the company was keeping an eye on.
"It is becoming difficult to sustain our retail prices, but we don't really revise our prices upwards," he said, explaining the company preferred to compromise with its suppliers on costs.
Padini was among OSK Research's top 50 Malaysian small-cap companies, which the research house said it liked for its robust return on equity (ROE) which it anticipates would hover above industry average at around 20% for the next two years, consistent earnings growth and strong balance sheet with net cash of RM25 million.
OSK has a neutral call on the stock with a target price of RM4.25. Padini closed five sen lower last Friday at RM3.75 with 6,400 shares done.
http://www.theedgemalaysia.com/business-news/166134-padini-plans-to-spend-rm755m-on-stores-this-year.html
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