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3. PADINI HOLDINGS BERHAD1.0COMPANY PROFILE
1.1 Background
Padini Holdings Berhad (Padini) was incorporated in 1971. Before venturing into trading,
distribution and retailing Padini started its business in manufacturing & wholesaling. Padini
is the largest domestic apparel retailer. Padini is one of Malaysia’s most profitable retail
companies with 7 main brands, catering to virtually all segments of the Malaysian market,
making it a resilient proxy to the retail industry. Mr Yong Pang Chaun, whom is the current
managing director and also a substantial shareholder with a 44.0% stake, is also the founder
of the group. The group has developed their retail business for the low to middle income
level over the years. Started life as a manufacturer and supplier of garments around the early
70’s, the group then made inroads into the retail scene some years later with its diversified
flagship brand. Padini has over 41 years under its belt and is still going strong until now.
1.2 Board of Directors
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ChairmanDatuk Dr. Abdullah Bin Abdul RahmanIndependent Non-Executive Director
DirectorYong Pang Chaun
Group Managing Director
DirectorChan Kwai Heng
Executive Director
DirectorCheong Chung YetExecutive Director
DirectorChong Chin Lin
Executive Director
DirectorYong Lai Wah
Executive Director
DirectorSahid bin Mohamed Yasin
Independent Non Executive Director
1.3 Organisation Chart
1.4 Core business
Padini Holdings Bhd sells apparel and accessories with overwhelming domestic presence
as well as exposure in high end, mid-end and value clothing segments for all age group
1.5 Mission
To exceed customers’ expectations and our brand’s promise.
1.6 Vision
To be the best fashion company ever.
1.7 Authorized Capital
The authorized capital of Padini is RM100, 000, 000.
1.8 Pay up Capital
The pay up capital of Padini is RM65, 791, 000
2.0 GENERAL ENVIRONMENT2.1 Politics
a. Economic Transformation Programme (ETP).
Through ETP projects and initiatives, the Malaysian Government plans to boost
Malaysians’ income level. Padini should be able to realize on the growing of Malaysian
affluent as many can afford to purchase higher priced items besides the value products that
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PADINI HOLDINGS BHD
Padini Corporation Sdn Bhd
Padini International Ltd (HK)
The New World Garment Manufacturers Sdn Bhd
Yee Fung Hong Sdn Bhd
Vincci Ladies Specialties Centre Sdn Bhd
Vincci Holdings Sdn Bhd
Padini Dot Com Sdn Bhd
Mikihouse Children Wear Sdn Bhd
SEED Corporation Sdn Bhd
The founding Yong Family 44%
the group offers. The incremental of wealthy and thriving consumer base has allowed brands
such as Padini, Padini Authentics and Seed to obtain higher revenue. The group can take
this advantage to strengthen its single brand stores into multi- brand concept stores, where
consumers gain access to all of Padini’s in- house brand collections.
b. Third Industrial Master Plan (IMP3).
This plan covers growth areas include industrial and home textiles; functional
fabrics; high- end fabrics and garments; ethnic fabrics; and key support facilities and services
such as design houses and fashion centres, specialized dyeing and finishing facilities, etc. Six
strategic drives have been implemented to expand the industry further include:
i. Magnifying the promotion of investment in higher value added textiles
and apparel as well as key support services.
ii. Maintaining the market share in textiles and apparel and promoting
exports of the growth goals.
iii. Magnifying regional cooperation in the industry.
iv. Amplifying national capabilities and aiding the ICT application and
new technologies.
v. Amplifying the workforce abilities in developing production and
marketing.
vi. Enhancing the institutional support for the further development of the
industry.
c. Investment Act 1986
Under the Investment Act 1986, various textile products and activities have
been gazetted as promoted products and activities to enhance investments in the textiles and
textile products industry. These products and activities could be accounted for tax incentives
in the form of Pioneer Status or Investment Tax Allowance. The products and activities are:
i. Natural or man- made fibres
ii. Yarn of natural or man- made fibres
iii. Woven fabrics
iv. Knitted fabrics
v. Finishing of fabrics such as bleaching, dyeing and printing
vi. Non- woven fabrics
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vii. Specialized apparel
viii. Technical or functional textiles and textile products
d. National Key Economic Areas (NKEA)
For the past 10 years, Malaysia has organized various nationwide sales which
formed yearly sales known as ‘Mega Sale Carnival’, ‘GP Sales’ and ‘Year- End Sales’. The
domestic retail sector has benefited from these activities. These activities have widen and
augmented all economic sectors through a unified sale happening nationwide. The outcome
is the creation of the “1Malaysia Unified Sales” aimed to attract tourists and locals to shop
in Malaysia.
On 15th June 2011, the Honourable Minister of Domestic Trade, Co-
operatives and Consumerism and the Tourism Minister had jointly established 1Malaysia
Unified Sale in Suria KLCC. The sale was done together with the 1Malaysia Mega Sale
Carnival from 15th June 2011 until 4th September 2011
2.2 Economy
a. Inflation
Inflation indicates the economic fluctuations in Malaysia according to the changes
in the Consumer Price Index (CPI) of a country. CPI shows the divergence in prices of
consumer goods in the country’s ‘shopping basket’ over a duration.
Figure 1: Malaysian CPI and Inflation Rate : January 2011- January 2012
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.
Based on Figure 1, the Malaysian inflation rate was recorded between 2.2 percent
and 3.5 percent for year 2011. This shows healthy level of inflation in Malaysia as most
economists believe that healthy inflation rate is between 1.0 percent and 3.0 percent. The
risk of financial markets is reduced with low inflation rates and this ensures flavourable
business environment.
b. Gross Domestic Product
The prime indicator of the wealth of Malaysian economy is measured using
Gross Domestic Product (GDP). A precise GDP figure is calculated by considering and
adjusting the Private and Public sector spending, the production of goods and services
and exports in the country for imports and inflation.
Figure 2: Malaysian GDP Value ($ Billions): 2003- 2012
Based on World Bank’s report, the Malaysian Gross Domestic Product (GDP)
had obtained 278.67 billion US dollars in December 2011. The Malaysian GDP is
estimated to be 0.45 percent of the world economy. From 1960 to 2011, the average of
Malaysian GDP was 59.93 Billion USD. In that duration, the highest GDP recorded was
278.67 Billion USD in December 2011 and the lowest was 2.42 Billion USD in
December 1961.
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Figure 3: Malaysian GDP Growth Rate
The Gross Domestic Product (GDP) growth rate measures an aggregated
difference in value of the goods and services manufactured by an economy. In Asia,
Malaysia is a fast developing economy. Since the 1970s, as an average income country,
Malaysia has changed from a manufacturer of raw materials into a rising multi- sector
economy. To detach from the country’s reliance on exports, the Malaysian government
has worked on raising domestic demand. However, exports especially electronics
continue to drive the economy significantly.
From the beginning of April to the end of June 2012, the Malaysian Gross
Domestic Product (GDP) increased 3.00 percent compared to the previous quarter.
During 2000 until 2012, the average of the Malaysian GDP Growth Rate was 1.22
percent. In that duration, the highest rate was 5.90 percent in September 2009 and the
lowest rate was -7.60 percent in March 2009.
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Agriculture12%
Industry40%
Services48%
Malaysian GDP Composition by Sectors in 2011
Figure 4: Malaysian GDP Composition by Sectors in 2011
Source:https://www.cia.gov/library/publications/the-world-factbook/fields/
2012.html, The Central Intelligence Agency.
Figure 4 shows the major movements in Malaysian economy are Industry and
Service sectors. In service sector, critical forces were finance, real estate and information
and telecommunications services. Besides that, rapid growth in wholesale and retail
service sector is seen in recent years.
c. Unemployment Rate
The unemployment rate represents the percentage of active job seekers that is
jobless, out of the total number of labour force. Roughly 4% -6% in the unemployment
rate is considered healthy. Lower rates are caused by inflation and upward pressure on
wages while higher rates reduce the consumer spending.
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Figure 5: Malaysian Unemployment Rate : October 2010- September 2012
From October 2010 until September 2012, the unemployment rate in Malaysia is
too low around 2.8% to 3.4%. Hence, this inflationary situation has forced employers to
continually increase wages on retaining and attracting valuable employees. Since firms
have to widen resources on retaining and attracting employees, they would put less effort
in performing their duties. As a result, the unutilized of resources would result in less
innovation and slower productivity growth.
2.3 Socio- cultural
a. Demographic Elements
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Population
Yearly growth 1.542% (2011 est.)
Infant deaths in 1,000 births are 14.57
Persons below aged 15 is 29.6%
Urban population is 72% of the population (2010)
Urban population growth is 2.4% (2010)
Literacy rate is 88.7%
Major cities- population
Kuala Lumpur (capital) 1.493 million
Klang 1.071 million
Johor Bahru 958,000 (2009)
Ethnic groups
Malay 50.4%
Chinese 23.7%
Indigenous 11%
Indian 7.1%
Others 7.8% (2004 est.)
Languages Bahasa Malaysia, English, Chinese dialects, Tamil,
Telugu, Malayalam, Panjabi, Thai
Note: indigenous languages in East Malaysia
Religions
Muslim 60.4%
Buddhist 19.2%
Christian 9.1%
Hindu 6.3%
Confucians and Taoist 2.6%
Others 1.5%
None 0.8% (2000 census)
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Table 1: Malaysia’s Demographic Elements
Source:http://www.indexmundi.com/malaysia/demographics_profile.html,CIA
World Factbook)
As 60.4% of the population is Muslim in Malaysia, the political, judicial and
religious systems are closely associated and religious leaders take eminent positions in
the country.
b. Structure of Household Expenditure
Household Consumption by Purpose 2000 2009 2000-09
% of total household consumption
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Food and non-alcoholic beverages 24.1 21.8 23.0
Alcoholic, beverages and tobacco 2.2 2.3 2.1
Clothing and footwear 3.5 2.4 2.7
Housing, water, electricity, gas and
fuels
21.7 16.7 18.9
Furnishings, household equipment and
maintenance
5.9 5.2 5.4
Health 2.1 2.1 2.0
Transport 12.6 13.1 13.4
Communication 4.9 7.4 6.3
Recreation and culture 4.3 4.9 4.5
Education 1.5 1.6 1.5
Restaurants and hotels 5.8 9.7 7.5
Miscellaneous goods and services 11.6 12.7 12.8
Table 1: Malaysian Household Consumption by Purpose: 2000- 2009
Source:http://www.bnm.gov.my/files/publication/ar/en/2010/cp01_001_whitebox.pdf, Department of Statistic, Malaysia)
Table 1 shows that the expenditure for clothing and footwear is small,
making up of 2.7% of the total expenditure. According to the Q411 Nielsen Global
Confidence Survey, 58% of 500 Malaysian respondents reduce clothing
expenditure. However, the Malaysia’s index scored 101 which indicates optimism.
2.4 Environmental Elements
Business environment should be conserved by any company as consumers might
not purchase harmful product or product that uses harmful processes.
a. Background of Malaysian Environment
Malaysia makes up of 328,550 square kilometers of land and has 20 million
population ( July 1997 est.). Most of the citizens occupy the western coast. 59% of
the total land is tropical forest. Even after industrialization, a large area of the
country is still forested. Malaysia has the highest industrial carbon dioxide
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emissions among 50 nations in the world. The negligence would cause major
environmental problems.
b. Causes and Adverse Effects of Bad Environment
Industrialization and progress of natural resource basis have created
environmental problems. The adverse effects are deforestation, depletion of
fisheries, air and water pollution and contamination by industrial wastes.
c. Environment Laws
The main structure of environment legislation in Malaysia was the 1974
Environmental Quality Act (EQA). Since then, the regulations are constituted.
Based on EQA 1996, it has been amended many times. Other legislations are
the Fisheries Act 1985, the Pesticides Act 1974 and the Plant Quarantine Act
1976.
d. Types of Legislation
The procedure of legislation in Malaysia is as follows:
1. The Federal Constitution (Perlembagaan Persekutuan).
2. Parliament constituted the Acts.
3. The executive (Ministerial Regulations) enacted rules and other
subordinate legislation.
4. State laws and rules.
e. Results of the Acts
In 1978, industrial and automobile emissions are restricted by clean-air
legislation. In Malaysian seas, vessels are not allowed to emit oil.
2.5 Technological Analysis
Technological advancement helps to improve performance of the companies in
competing for differentiation and providing superior product to its customers.
The Ministry of Science, Technology and Innovation (MOSTI) is responsible for
the research, telecommunication and information technology of Malaysia. The objective
of the ministry is to induce competitiveness in science and technology using the creation
of knowledge and sustainable development.
Table 2: MOSTI’s agencies
Agencies Role
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Malaysian Centre For Remote Sensing (MACRES).
Remote sensing, telemetry, geographic information system (GIS) and research.
National Science Centre.
Promoting awareness, appreciation, interest and understanding of science and technology.
NationalOceanographyDirectorate.
Marine science and oceanography development.
National SpaceAgency.
Research and development of space science.
Department of Chemistry Malaysia
Chemical analysis, investigation/ forensic and consultancy services/
Malaysian Nuclear Agency.
Nuclear technology research and development.
MalaysianMeteorologicalServices.
National meteorological monitoring services and natural disaster warning.
Department of Standards Malaysia
National standards and Accreditation body.
Atomic EnergyLicencing Board.
Control and supervision of radioactive material usage in industries. The board also examines and enforces safety rules.
MOSTI also gives research grants. Through specialized schemes, the funds are available
such as ScienceFund, Techno Fund (Pre- commercialization and IP acquisition fund), InnoFund
(Enterprise innovation and community innovation fund), eHCD (Human capital development
fund), eIRPA and the Brain Gain fund.
3.0 TASK ENVIRONMENT ANALSISAccording to Michael Porter, there are five forces which determine the competition in the
industry as listed in table 1. They are competitive rivalry, threat of substitute, threat of
entry, buyer power and supplier power. The explanation below will describe that how a
dairy industry as being influenced by five forces.
High Medium Low
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Competitive Rivalry •Threat of New Entrants •Threat of Substitutes •Supplier Power •Buyer Power •
3.1 Competitive Rivalry
When the number of competitors increases, the rivalry increases because of more
firms must compete for the same customers and resources. If the competitors have similar
market share, the rivalry will become intensified.
When the firms are of equal size, they will have to compete for the same
resources such as market share, customers' loyalty, brand image and other factor. In the
current market, PADINI face many competitors from local and also oversee brand such
as Levis, ZARA or GUESS. They also face with foreign competitor such as Giordano,
Levis jeans and others.
Besides that, most of the customer will compare the price with the other
competitors. They also compare the styles of the clothing season. This make the Padini
need to compete with Esprit, Giodano and others. They have to make sure that they make
a sale and customers will always keep returning to their shop.
In conclusion, the intensity of rivalry among existing competitors of Padini is
high because the number of competitors in the retail industry and the established brands.
Competition is very fierce and a certain percentage of loyal customers need to be
maintained in order to remain in the competitive industry.
3.2 Threat of New Entrants
The existing companies such as Esprit, Bonia and Elba have already established
themselves with manufacturing. They are already operating at the lowest cost possible because
their selling prices are much cheaper than foreign competitors. Thus, it is difficult for new
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comers to come into the market, because they will face retaliation from the existing companies.
New companies can come into the market; however they cannot operate in a large scale
immediately.
Companies that have already existed in the market for long such as Esprit, Elba, and
Bonia have established themselves with their suppliers, the distribution agents and the customers.
They have already obtained the learning experience of studying the market and knowing what
exactly the customers are looking for. Thus, this would pose a threat for the new entrant, because
when selling clothing, it may not be according to the taste of the Malaysian consumers, they will
have to undergo a test and trial stage, and this would be costly if they are competing with the
large retailers.
The threat of entry for Padini is low, because Padini is a large retailer. They have a huge
amount of outlets and they understand what the customer wants. So they will producing a
product cheaply and sell it in the lower prices
3.3 Threat of substitute
The threat of new entrants to the apparel industry market leaders in the clothing and
apparel industry are relatively low. This is mainly due to the fact that the big player’s superior
financial resources greatly overpower the new entrants. The company has appeared in the market
for about 20 to 30 years, most of the customers know it very much. This makes them have brand
loyalty among customers. So there are difficult for the new entrants.
Furthermore, apparel is no visible substitute, because clothing is a basic need and
necessity. However, there are potential substitutes in reaching to the customers. This is in the
form of a non-retailing store such as direct mail, online shopping, direct mailers, telephone sales,
door-to-door selling. In Malaysia, we have already seen this appearing such as SmartShop,
Cosway, Amway, and others. The threat of new entrants to the apparel industry market leaders in
the clothing and apparel industry are relatively low.
3.4 Buyer power
In the clothing and apparel industry, the bargaining power of buyers is relatively large
because the cost of switching companies is non-existent and as simple as walking from one store
to another. If APP or a competitor raises prices, customers will go find a more affordable option.
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In addition, consumers do not see high-end clothing products as an essential commodity so, its
price elastic.
Padinishares the same customers such as Esprit, Levis, Lee Cooper, and Bonia. Thus,
switching cost is low and if customers are not satisfied with the quality, and service offered, they
will switch to other products and purchase from them. From here, the fashion is the important
things to the Padini. Customers will see how fashionable of Padini provide and the price of a
clothes. So, the bargaining power of buyers here is moderate, and they can influence fashion, and
the products carried by Padini.
3.5 Supplier power
For the clothing and apparel industry in general, the power of suppliers is low merely
because there are many different suppliers who are readily available to offer up their services. If
a supplier raised its costs, a firm could move on elsewhere. The number of raw materials
available is numerous, especially from foreign countries which would definitely be cheaper.
Padini manufacture their own clothing so the power of suppliers will arise in the purchase
of raw materials. In the Padini, the bargaining power of suppliers is weak because if the suppliers
raise the prices or reduce the quality, then there are other suppliers available especially from the
third world countries such as China, Vietnam and India. Furthermore, the switching cost of the
supplier is low, because the basic materials needed to manufacture clothing is the same, such as
thread, material, and other necessities.
4.0 SWOT ANALYSIS
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Strength(S)
1. Strong brand presence.2. Diversified segmentation.3. Exposure in major retail centres.4. Strong brand image and brand
reputation.5. Cash pile available for distribution
or store expansion.
Weaknesses(W)
1. Presently lacks international presence in most major markets outside Asia and Arabian countries.
2. Shortage of retail labour.3. Poor advertising strategic.4. Face difficultly in forecasting
fashion trend.
Opportunities(O)
1. Increasing income level in Malaysia.
2. Mega carnival sales implemented by government.
3. Great inflow of tourist from foreign country.
4. ETP projects to further fuel growth of retail and tourism sector.
5. Implementation campaign on “buy Malaysian products”.
Threats (S)
1. Seasonally driven by sales promotions and festivities.
2. Changes in cotton prices and increase minimum wage in China.
3. Potentially aggressive competition from new brand labels penetrating the domestic market.
4. Exposed to raw materials prices and material.
5. Insufficient R&D development.
1) Strengths
Padini has a strong brand presence in domestic market and exposure in major retail centre.
Padini has a total of 80 freestanding stores and 140 consignment counters scattered around
Malaysia. It has outlet in most major shopping centres nationwide, including Gurney Plaza
Penang, 1 Utama shopping complex, and AEON Bukit Tinggi shopping centre. There are
variety Padini product to be choose in the market which diversified segments represented in
different brand cater to almost all ages as well as income group. Padini has a clean balance
sheet which is with a net cash position where RM135 million cash pile available for
distribution or store expansions.
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2) Weaknesses
Although Padini is well-known in domestic market and certain foreign market, it is still
presently lacks international presence in most major markets outside Asia and Arabian
countries. There is inherent risk in forecasting the right trends. In accurate forecasts
would result in poorer sales from unattractive fashions, as well as more inventory write-
downs. Padini’s pace of store expansion is contingent upon ability to procure front-end
retail staff. Padini were once upon a time popular, however this popularity cannot be the
same if no advertising is done. There is no advertising during periods of sales or
launching of new products.
3) Opportunities
Economic Transformation Programme(ETP) boost the growth of retail and tourism
sector. Padini should able to capitalize on Malaysia’s growing affluence as people are
able to afford higher priced items, on top of the value products the group offers. Malaysia
government had implemented the Mega carnival sales which are held 3 times a year. This
is to increase the sale and consumer spending because after the 97’crisis, consumers had
been reluctant to spend. Besides that, there is a great inflow of tourist from Singapore and
other foreign countries, especially during period of sales. The government has
implemented a campaign on “buy Malaysian product”. This is to increase sales of the
domestic market and to help them survive the stiff competition. Increasing income level
within Malaysian makes them more affordable to buy extra stuffing accessories.
4) Threats
Padini’s sales generally fluctuate with seasonal festivities and other nationwide sales
programmes. However, during quiter periods with no festivities (typically every Apr-
Jun), the group sees comparatively lower sales figure. Padini’s materials are in the form
of finished goods, but increased in cotton prices, are appreciation of the Chinese RMB,
and minimum wage hikes in china would translate into higher garment prices. The China
Daily reported that the country’s minimum wage will rise by an average rate of 13% over
the next five years. Malaysia has seen a number of foreign brands (Uniqlo, Charles and
Keith, Cotton-On) enter the country trying to tap on increasing domestic affluence, and
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that has resulted in mounting competition in the retail industry. Insufficient of R&D
department cause the company unable to monitor the fashion of clothing in Malaysia and
in other leading country.
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5.0 TOWS MATRIX
Strengths (S)1. Strong brand presence.2. Diversified
segmentation’3. Exposure in major
retail centres.4. Strong brand image
and brand reputation.5. Cash pile available for
distribution or store expansion.
Weaknesses (W)1. Presently lacks
international presence in most major markets outside Asia and Arabian countries.
2. Shortage of retail labor.3. Poor advertising
strategic.4. Face difficultly in
forecasting fashion trend.
Opportunities (O)1. Increasing income level
in Malaysia.2. Mega carnival sales
implemented by government.
3. Great inflow of tourist from foreign country.
4. ETP projects to further fuel growth of retail and tourism sector.
5. Implementation campaign on “Buy Malaysian Products”.
SO Strategies1. Build on brand
loyalty. (S1,S3,O3)2. Increase the store
outlet. (S5O1)3. Provide variety of
products. (S2O5)
WO Strategies1. Increasing awareness of
customers about sales through media. (W3O2)
2. Improve distribution channel through agency service. (W1O4)
Threats (T)1. Seasonally driven by
sales promotion and festivities.
2. Changes in cotton prices and increase minimum wage in China.
3. Potentially aggressive competition from new brand labels penetrating the domestic market.
4. Exposed to raw materials prices and material.
5. Insufficient R&D development.
ST Strategies1. Gains competitive
advantage among competitors. (S1S2S4T3)
2. Increase social responsibility by doing charity. (S4T1)
3. Manage the profit effectively. (S5T5)
WT Strategies1. Doing marketing
research. (W4T5)2. Aggressive advertising.
(W3T3)
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EXTERNAL FACTORS (EFAS)
INTERNAL FACTORS (IFAS)
i. Strengths and Opportunities Strategies
Padini has the strengths of strong brand presence, strong brand image and brand reputation
among the consumers. In addition, they also has the great inflow of tourist from foreign country
such as Singapore, Indonesia, and Arabian countries. This can be a good strategies for them to
build brand loyalty on consumers form local and foreign countries. Padini has good position on
their financial which there are cash pile available for them to distribution or store expansion. So,
to fulfill the opportunities that currently consumers have increased income level, Padini can
increase the store outlet in the market so consumers can easily shop for the products. One of the
strengths of Padini is their product was market in diversified segmentation which is from
children to adult. In addition, government also provide the opportunities for the industry with
implement campaign on “Buy Malaysian Products”. Padini should take this chances to produce
more variety products for the consumers to choose.
ii. Weaknesses and Opportunities Strategies
Padini has the weakness in advertise their product. There are less effective advertising implement
by the marketing department. In order to bear with this weakness, they need to implement a
strategy by increase awareness of customers about their product through media. One of the way
is participate in Mega Carnival sales that implement by government. Although Padini is a well-
known in Asia and Arabian countries, it still facing the weakness of lacks international presence
in most major markets outside those countries. So, they can take the opportunities from ETP
projects to further fuel growth of retail and tourism sector by implement the strategy of getting
service from agency centre in foreign countries.
iii. Strengths and Threats Strategies
Padini always face greater competitive in the industry. There is always a lot potential aggressive
competitor from new brand labels penetrating the domestic market. However, Padini have the
strengths of strong brand presence, strong brand image and brand reputation among the
consumer, and also they have variable consumers in diversified segmentation. So, this can be the
strategy for the company to gain competitive advantage among competitors. Another threats of
Padini is they have to face the problem of seasonal driven by sales promotion and festivities.
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Consumers only will buy the products in certain period. So, inventory turnover for certain period
will be low. The strategy for settle this is by increase social responsibility by doing charity such
as donates some products for association they need it since they has the strengths of strong brand
image and brand reputation. Padini face another threats of insufficient R&D development in the
industry. With the strengths of cash pile available, they can implement the strategy by manage
the profit effectively so the R&D department can be develop to gain more latest technology and
information.
iv. Weaknesses and Threats Strategies
To solve the weakness of facing difficulty in forecasting fashion trend and also the threat of
insufficient R&D development, Padini can implement the strategy gain and do marketing
research by expert. They can build a marketing research department so that the problems can be
solving effectively. Other than that, poor advertising and aggressive a competition from new
brand labels penetrating the domestic market might give them the risk that consumers will
choose for substitute products. in order to bear with the risk, Padini need to implement a strategy
of aggressively advertise their product in market such as expose more on media by organize and
sponsor activities.
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6.0 FINANCIAL RATIO
PADINI HOLDINGS BERHADRatio FY 31 Dec
2011 2010 VariancesPROFITABILITY RATIO
Net profit margin 13.32 11.75
Increase
Gross Profit Margin 51.16 49.98
Increase
Return on investment 17.04 17.10
Decrease
Return on equity 115.05
92.68
Increase
Earning per shares 0.12 0.46 DecreaseLIQUIDITY
Current ratio 2.54 2.37 IncreaseQuick ratio 1.30 1.69 DecreaseInventory to net working 0.81 0.50 Increase
ACTIVITY RATIOInventory turnover 0.63 0.64 DecreaseDays' sales in inventory 116.1
555.7
2Increase
Total assets turnover 1.28 1.46 DecreaseFixed assets turnover 1.86 2.09 DecreaseAverage collection period 25.32 22.9
1Increase
LEVERAGE RATIOSDebt to equity ratio 0.72 0.46 IncreaseLong term debt to capital structure 0.21 0.01 Increase
The table above is the ratio analysis of PadiniBerhad in two years performance from year 2010 to 2011.
A. PROFITABILITY RATIO
It relates the profit to sales and investments. Profitability ratio is to indicate the firm’s overall
effectiveness of operations and give us an idea on how well the firm utilized its resources in
order to generate profit and increase the shareholder value.
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a. Net Profit Margin
This ratio is to indicate how much of revenues a company can generate for every RM 1 in sales.
In Padini, the net profit margin has significant increase from 11.75% in year 2010 to 13.32% in
year 2011. The arising percentage of 1.57% shows thatPadini has well performed in year 2011
compare with the performance in year 2010 where thePadini has more generates RM 0.0156 of
every RM 1 in sales.
b. Gross Profit Margin
Gross profit margin is to show how much the gross profit of every RM 1 in cost of goods sold. In
Padini, the gross profit margin has increase from 49.98% in year 2010 to 51.16% in year 2011.
The arising percentage of 1.818% shows that the management ofPadini has a well control system
in its expenses in order to generate more profit to its company.
c. Return on Investments (ROI)
This ratio shows how well the firm management puts the company assets to work in order to
generate income. Lower ratio shows lower company performance.ROI ratio in Padini shows
decline of 0.06% which decrease from 17.10% to 17.04% in these two years. It shows that the
Padini has reduced in using assets to generate the firm sales.
d. Return on Equity (ROE)
This ratio is to measure how the stockholders fared during the year. It is a true bottom-line
measure of performance. ROE ratio has increase 22.37%, from 92.68% in 2010 to 115.05% in
2011. That is Padini’s superior return on equity maybe due to its efficient use of asset to generate
sales and the fact that Padini benefitted from its use of more debt financing or financial leverage.
e. Earnings per Share
Earnings per share represent the portion of a company's earnings, net of taxes and preferred stock
dividends, which are allocated to each share of common stock. EPS ratio has slightly decrease
RM0.34, from RM0.46 in 2010 to RM0.12 in 2011. This means that it is not a good signal for the
company financial position because the lowerer the earnings per share, the lower each share
worth.
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B. LIQUIDTY
a. Current Ratio
It is a measure of general liquidity and is most widely used to make the analysis for short term
financial position or liquidity of a firm. This ratio increase 0.17 times, from 2.37 times in 2010 to
2.54 times in 2011. Even the current ratio is increase a bit; the current assets of the firm are still
more than twice the current liabilities. It shows that the company is generally considered to have
good short term financial strength.
b. Quick Ratio
Quick ratio is a measure of how well a company can meet its short term financial liabilities. The
ratio decrease 0.30 times, from 1.69 times in2010 to 1.30 times in 2011. The lower the ratio the
less financially secure a company is in the short term. The company with a quick ratio of lower
than 1.0 is not sufficiently able to meet their short term liabilities.
C. ACTIVITY RATIO
a. Inventory Turnover
Inventory turnover ratio indicates the number of time the stock has been turned over during the
period and evaluates the efficiency with which a firm is able to manage its inventory.The ration
decrease 0.01times, from 0.64 times in 2010 to 0.63 times in 2011. This shows that the demand
of the Padini’s product is decrease or not enough. It is also mean that’s the products are sitting in
the warehouse unsold for too long, which is costly for business.
b. Total Assets Turnover
The total asset turnover ratio measures the ability of a company to use its assets to efficiently
generate sales. The ratio decrease 0.18 times, from 1.46 times in 2010 to 1.28 times in year 2011.
The ratio is merely decreased shows that there are little sluggish in the firm’s sales.
c. Fixed Assets Turnover
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The fixed asset turnover ratio measures the company's effectiveness in generating sales from its
investments in plant, property, and equipment. The ratio has been decrease 0.28 times, from 2.09
times in 2010 to 1.86 times in 2011. An decreasing fixed assets turnover means that the company
has been less effective using company’s investments in net property, plant, and equipment.
d. Average Collection Period
The average collection period is the number of days, on average, that it takes a company to
collect its credit accounts or its accounts receivables. The ratios significantly increase 2.41 days,
from 22.91 days in 2010 to 25.32 days in 2011. By comparing with last year, a increasing of
average collection period means Padini’s customers are not paying their credit accounts on time.
D. LEVERAGE RATIOS
a. Debt Equity Ratio
Debt equity ratio is a measurement of how much suppliers, lenders, creditors and obligors have
committed to the company versus what the shareholders have committed.The ratio increase 0.26
times, from 0.46 times in 2010 to 0.72 times in 2011. The increasing in this ratio might show that
the company is being financed by creditors rather than from its own financial sources which may
be a dangerous trend. The company with high debt-to-equity ratio may not be able to attract
additional lending capital.
b. Long Term Debt to Capital Structure
It is used in determine what portion of the total capitalization, or full debt and equity of the
company, is made for the long term debt to finance operation. The ratio for long term debt
capital structure shows increasing 0.2 times, from 0.01 times in year 2010 to 0.21 times in year
2011. Increasing of this ratio means that the company is facing mature financial difficulty.
7.0 STRATEGY DIRECTIONPADINI began as a back end operations in Malaysia’s apparel industry, manufacturing,
trading and supplying garments to order for retailers and distributors. Today, Padini has become
one of the most well-known brands in Malaysia's multibillion garment industries. A brand leader
in the distribution and retailing of its own fashion labels through more than 230 freestanding
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stores, franchises and consignment counters. Padini has also proudly carried the Made-in-
Malaysia stamp abroad, with its products exports to Thailand, Brunei, Saudi Arabia, Philippines,
Cambodia, India, Egypt, Oman, UAE, Indonesia and Syria
Padini also has a small export business that contributed 9% of FY10 group revenue. The
group’s export sales consist primarily of women’s footwear to the Middle East, Thailand,
Singapore, Philippines, Indonesia, Brunei and Australia. Padini’s export business was unsolicited
and originated from foreign parties approaching Management upon discovering Vincci’s
products. The group’s export business is organised along the franchise model which minimizes
Padini’s risk exposure as the cost of setting up stores and operating expense are borne by the
franchisees. Padini earns a one-off licensing fee and royalties in addition to merchandise sales to
franchisees.
Padini Holdings Bhd's line of women's shoes and accessories under its Vincci label
would be distributed in Indonesia under a 10-year deal. Its unit Vincci Ladies' Specialties Centre
Sdn Bhd had on August 7, 2012 signed a master franchise agreement with FJ Benjamin
(Singapore) Pte Ltd and PT Gilang Agung Persada of Jakarta. Under the agreement, FJ
Benjamin, through its associate PT Gilang Agung Persada, open 25 stores within five years in
Indonesia. The franchise would see FJ Benjamin distributing trendy and affordable VNC
women's shoes and accessories in Indonesia. VNC products are sold under the Vincci label in
Malaysia and are produced by the Padini Group.
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