• PADINI reported a 4QFY26 core net loss of RM6.4m (versus a core net profit of RM13.6m in 4QFY25), bringing FY26 core net profit (CNP) to RM127.7m (-24.3% YoY). The results missed expectations, accounting for only 89% of our full-year forecast and 86% of consensus.
• The Group declared a first interim dividend of 1.8sen for FY27 (ex-date: 14 September 2026) (4QFY25: 1.8sen), bringing total DPS declared for FY26 to 9.2sen (FY25: 9.6sen).
• We cut our FY27F core net profit forecast by 11.3% to RM120.7m and introduce FY28F and FY29F core net profit forecasts of RM123.5m and RM128.1m respectively, as elevated depreciation and rental-related costs following the SST scope expansion appear more structural than transitory.
• Maintain HOLD with a lower TP of RM1.29 (from RM1.45), based on an unchanged 10.5x P/E applied to our lower FY27F EPS of 12.2 sen (from 13.8 sen previously).
Below Expectations. Excluding net forex gain (-RM1.1m) and inventory losses/write-offs (+RM4.4m), PADINI reported a 4QFY26 core net loss of RM6.4m, bringing FY26 CNP to RM127.7m. The results missed expectations, accounting for only 89% of our full-year forecast and 86% of consensus, as steep revenue normalisation post-festive quarter met persistently elevated operating costs.
QoQ. 4QFY26 revenue fell 41.4% QoQ to RM365.9m, resulting in a swing to a core net loss of RM6.4m (3QFY26: CNP RM64.8m), as festive-driven demand from the Chinese New Year and Hari Raya period in 3QFY26 normalised. Gross profit margin also compressed to 36% (3QFY26: 40%) amid softer sales momentum and higher promotional activities, alongside continued elevated depreciation and rental-related costs that weighed further on operating leverage.
YoY. 4QFY26 swung into a core net loss of RM6.4m from a core net profit of RM13.6m in 4QFY25, mainly due to a 6.7% YoY decline in revenue amid softer consumer demand. In addition, operating expenses (administrative and selling & distribution costs) rose 3.7% YoY, driven by higher depreciation charges (+22.6% YoY) and the continued impact of service tax on rental expenses following the July 2025 SST scope expansion, resulting in weaker operating leverage and a swing into loss during the quarter.
YTD. FY26 revenue fell 3.2% YoY to RM1,875.5m, while core net profit declined 24.3% YoY to RM127.7m, as softer consumer demand and rising operating costs (higher depreciation, fullyear SST impact on rental expenses) weighed on operating leverage. Gross profit margin held broadly stable at 39% (FY25: 39%), supported by resilient in-house brand and sportswear contribution.
Dividend. The Group declared a first interim dividend of 1.8sen (ex-date: 14 September 2026) (4QFY25: 1.8sen), bringing total DPS declared for 12MFY26 to 9.2sen (12MFY25: 9.6sen).
Outlook. We expect FY27 to remain challenging, as the 4QFY26 swing into a core net loss underscores that cost pressures, particularly elevated depreciation and the now full-year impact of the SST scope expansion on rental expenses, have proven more structural than transitory. Management continues to guide for a challenging retail environment amid weakening consumer purchasing power, ongoing trade tensions and an elevated inflation and interest rate environment, though it remains optimistic on delivering a satisfactory FY27 performance through continued cost control, working capital optimisation and operational streamlining. On a more positive note, the MACC investigation overhang has been substantially resolved following the unfreezing of the Group's bank accounts in July 2026, with management confirming no director, officer or employee has been charged or subject to forfeiture proceedings, which should remove a key source of sentiment overhang on the stock. That said, with revenue growth likely to stay muted and operating deleverage persisting into 1QFY27, we see limited near-term earnings recovery catalysts and expect consensus estimates to trend lower following this set of results.
Earnings Revision. Following the FY26 miss, we cut our FY27F core net profit forecast by 11.3% to RM120.7m (from RM136.1m previously), and introduce FY28F and FY29F core net profit forecasts of RM123.5m and RM128.1m respectively. The revision is consistent with our economist's view that Malaysian retail spending remains stable but not particularly strong, even as wholesale activity has softened. This is reflected in 4QFY26 EBIT margin, which collapsed to near-breakeven at 0.1% (4QFY25: 5.0%) as revenue normalisation met persistently elevated depreciation and rental costs.
Valuation & Recommendation. We retain our HOLD call on PADINI with a lower TP of RM1.29 (from RM1.45), based on an unchanged P/E multiple of 10.5x applied to our lower FY27F EPS of 12.2 sen (from 13.8 sen previously). We believe the retail sector continues to face limited near-term re-rating catalysts amid a still-soft discretionary spending backdrop, though this is partly offset by the resolution of the MACC investigation overhang, which should remove a key source of sentiment drag on the stock going forward.
Risk. Weaker-than-expected same-store sales, continued cost inflation from depreciation and rental expenses, and forex volatility raising material sourcing and freight costs remain the key risks to our forecasts.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.029059 | 4.061288 |
| EUR | 4.678261 | 4.683031 |
| CNY | 0.601267 | 0.601882 |
| HKD | 0.513945 | 0.517555 |
| SGD | 3.163772 | 3.186125 |