I have been asked on Padini -
Why am I not doing anything about it, since the price has dropped substantially from the original purchase.
The performance of its stocks and financials have been deteriorating. Why?
Would the weakening of the ringgit be affecting its performance?
Why am I not selling then if I foresee the performance to be weakening in the immediate term.
These are my take.
Retail is definitely being hit especially for the non-essential goods. For Padini, it does come under a combination of both non-essential or to some extent essential. It all depends of the category of its customers. If the customers are working adult, they would definitely be needing new clothes and Padini targets the middle income. Currently, the low and middle income are the hardest hit in terms of inflation that has been affecting due mainly to GST. This will affect Padini and many other clothes retailers.
On top of the lower consumption power recently, I can see that Padini is also hit hard by higher rent and the lesser concentration of malls. If there are too many malls, it may not be a good thing for retailers as they are spread thin. This is possibly happened to Padini. It just expanded too aggressively and have their operations in too many malls. I rather they pick the higher traffic ones. My understanding is that this is due to the attractive part of starting early with a mall, where they get better deals especially store space and rentals.
Despite the lesser than stellar performance, I still think Padini will be a good stock to hold over the long term. Firstly, it is definitely not expensive today. It is a solid dividend stock. The strengthening of dollar is affecting all the other competitors and sooner or later, clothing retailers will increase their prices. They in fact are doing it already.
I still see the strategy and its space that Padini is in, there will be lots of expansion opportunity. It should start looking at expanding its franchise overseas and on the corporate front, perhaps should even consider buying back stocks rather than just dividends.