Brands Outlet the growth engine for Padini

SHAH ALAM: Apparel manufacturer Padini Holdings Bhd expects its Brands Outlet concept store to continue to be its growth driver given the lesser competition in the segment.
"Brands Outlet will have better growth prospects, that space is not so crowded," its executive director Chan Kwai Heng (pix) said in a recent interview with SunBiz.
He explained that with lesser competition in the local market, Brands Outlet is expected to register better growth in the future. Its direct competitors are Factory Outlet Store and The Reject Shop.
"If you look at Brands Outlet, it just looks like a pasar malam (night market)…I put in all merchandises whatever I want, the model is very flexible," he said, adding that the Brands Outlet is a reflection of how the company responds to the markets' needs.
However, Chan said the growth momentum for Padini Concept Store will not be as strong as Brands Outlet as it faces stiffer competition and is no longer "new" to customers.
"The Padini Concept Store has been here quite a long time, you can only drive the organic growth," he said.
Chan noted that the retail segment is fast changing, thus the group has to stay "relevant" in terms of pricing.
"The market doesn't stand and wait for you, you've got to move together with the market."

The reduction in pricing, he said, is a necessary move – even though it will bring down profit margins – as it will at least help to cover the fixed cost.
At pre-tax level, the company's profit margin is at the mid-teen level, ranging from 13% to 15%. Specifically, for Brands Outlet, its margin has been higher around 17% to 20% over the years.
Despite rising cost of living, Chan believes the way people spend money will not change easily, thus still foresees an optimistic outlook for the industry.
"Lifestyle is very hard to change…Maybe you spend less frequently and try to economize in other ways," he said.
Chan added the retail sector has always been very vibrant and dynamic, evidenced from new shopping malls built everywhere.
For the financial year ended June 30, Padini posted a net profit of RM90.91 million, an increase of 6.46% versus RM85.39 million in the previous corresponding period.
Currently Padini has 29 Padini Concept Stores and 27 Brands Outlets.
Brand Outlet, Chan said, contributes 30% to the group's domestic sales, while the balance is from Padini Concept Store.
For FY15, Chan said the group is looking to open four outlets each for Padini Concept Store and Brands Outlet, with some of them located in Putrajaya, Taiping, Kota Kinabalu and Bintulu.
According to him, Padini is not considering having an online platform as yet as he believes that Malaysians still prefer to shop at shopping malls and that online shopping is still not well-received.
"Not for Malaysia yet, even if we finally have (an online platform), it will be more to sell stuff overseas, because in Malaysia, we've found that there is not a great deal of online activities,"
Chan added that necessary infrastructure and resources have to be put in if the group wants to kick start its online platform.
"If that business is not big, it is not viable to have an online platform, that's why we don't have it yet," he said.
Chan believes it is yet to be a "good time" for Padini to further expand its business abroad as its main focus will still be on the local market.
On dividend payout, he said the group is committed to delivering at least 5% dividend yield for FY15. It paid 11.5 sen in dividends for FY14.