PADINI HOLDING BERHAD 1.0 COMPANY PROFILE 1.1 Background of the company Padini is a Malaysian-domiciled investment-holding company headquartered in HicomGlenmarie Industrial Park, Shah Alam. Incorporated in 1971 as proprietorship under the trade name Hwayo Garments Manufacturers Company, Padini was initially engaged in the manufacture and wholesale of ladies wear. The company subsequently added men’s and children’s lines to its offerings when it established its first three brands from 1975 – 1987. In 1988, Padini discarded its role as wholesaler to take up the role of consignor. Thereafter, the first single-brand store distributing Seed was opened in 1992 in Sungei Wang Plaza, Kuala Lumpur. The company has nine labels in its family of brands and retail in 330 freestanding stores, franchised outlets and consignment counters in Malaysia and around the world. The company’s subsidiaries include Vincci Ladies’ Specialties Centre Sdn. Bhd., which is engaged in dealing of ladies’ shoes and accessories; Padini Corporation Sdn Bhd., Seed Corporation Sdn. Bhd., Yee Fong Hung (Malaysia) SendirianBerhad (Yee Fong Hung) and Padini International Limited, which is engaged in dealing of garments and ancillary products; Padini Dot Com Sdn. Bhd. (Padini Dot Com), which is engaged in provision of management services, and Mikihouse Children’s Wear Sdn. Bhd. (Mikihouse), which is engaged in dealing of children’s garments, maternity wear and accessories. Tizio was introduced to the public with the opening of its first outlet in Mid Valley Megamall in Nov 2012 and subsequently in Paradigm Mall on 23 May 2013. Like almost all of the Group’s Brands, Tizio was developed in-house by, and is registered to the group. Anticipate more presence from Tizio in the coming years as the brand has been slated to become an addition to the group’s portfolio of core brands. On 5 March 1998, the group was listed on the Second Board of Bursa Malaysia Securities Berhad (Bursa) and thereafter, transferred to the Main Board on 4 August 2004. The Main and Second Boards merged on 3 August 2009. Major shareholders of the group as at 8 July 2013 are Pang Chaun Yong with 44% and Skim Amanah Saham Bumiputera with 5.0%. 1.2 organizational charts HAJI SAHID BIN MOHAMED YASIN (CHAIRMAN) YONG PANG CHAUN (MANAGINGDIRECTOR) YONG LAI FOO KEE FATT YEAP TIEN WAH CHONG CHIN CHAN KWAI CHING CHEONG LIN (DIRECTOR) HENG CHUNG YET (DIRECTOR) (DIRECTOR) (DIRECTOR) (DIRECTOR) (DIRECTOR) (Organisation chart been done by our group) 1.3 company structure 2.0 GENERAL ENVIRONMENT ANALYSIS 2.1 Political factor In order to improve consumers spending in the clothing industry, "Mega Carnival Sale" has been implemented by the Malaysian government is to be held 3 times a year. Its main purpose is to promote Malaysia as a "value for money shopping destination". This aggressive approach attracts the tourist to shop at the local apparel outlets, which in turn would increase foreign tourist spending and increases our country's foreign exchange earnings. This would also encourage the Malaysians to shop locally, which would benefit Padini Holdings Bhd in terms of their sales. This has created an opportunity for the domestic companies. However the side effect of such activities would stimulate the domestic economy and increases the number of competitors in the domestic market. Nevertheless, Padini Holdings would still stand out as market leader. 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 the group offers. The incremental of wealthy and thriving consumer base has allowed brands such as Padini, Padini Authentic 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 2.2 Economic factor Malaysia's economic growth is to be has been unstable fluctuating from -1.5 to -2.6 from 2008 to 2010. The highest growth was during the period of March to September 2009 which increases from –7, 8 to 5.7. The economic growth is expected to be due to the domestic market with growth in the private sector. The private sector makes up the majority of the Malaysian economy, with private consumption accounting for nearly 44% of GDP. "Love Malaysia, Buy Malaysia" campaign was launched to by the government to get Malaysians to support domestic market and take holidays in local tourist sites. The government also subsequently launched a national campaign on wise spending, with the aim to educate consumers on the importance of domestic demand on the GDP growth and economic recovery as a whole. 2.3 Social factor Malaysian is classified as an upper middle-income country, and considered as one of the most developed among the developing countries. Middle income households defined as those earning between RM1, 500 and RM3, 500 per month, and has increased from 32.3% of total household population in 1995 to 37% in 1999. The low-income group, categorized by household income of up to RM1, 500 per month, spends a proportion of this amount on food. Meanwhile, the high and middle income households spend most of their money at hypermarkets. 3.4% of their income is spent on clothing and foot wear. Malaysia's consumers' lifestyle has been changing for the better due to the rise in education levels. High profile retailers as well as global mass media have shaped consumers’ buying behaviour, resulting in the Malaysians being more westernized. The Malaysian's life leisure life revolves around trendy shopping malls. Therefore Padini Holdings Bhd has to be more update with the latest trends. They have to advertise and keep the consumers informed and reminded that they still exist and provide the customers with quality and trendy clothes. 2.4 Technological factor With the Internet and e-commerce, retailers can now sell their products online and deliver it to customers on their door-step efficiently within a timely manner. It can make customers' life more convenient as they do not need to get their house to go purchase a product in the hypermarket and making the purchase at the comfort of their own home. Furthermore, retailers can also sell their products to the overseas market without the need to open a physical store in the foreign country. This helps Padini Holdings to earn more profit using online intermediaries and cut costs by not establishing new stores in certain areas. 2.5 Environment factor Environmental changes have a major impact on virtually all products, services, markets, and customers. In Padini, environmental factors affect a lot in trends, which customer nowadays up to date with fashions. In addition, new trends are creating a different type of consumer and, consequently, need for a different products, services and strategies. So, Padini is in line because they provide variety of products to satisfy the need of customer. Environment factor such as weather also affected the Padini’s sales where generally fluctuate with seasonal festivities such as Hari Raya, Christmas and the Chinese Lunar New Year. Nationwide sales programs such as the Malaysian Mega-Sale and Merdeka Sale are also potent revenue drivers. But, during quiter periods with no festivities (typically every 4Q of Padini’s FY or Apr-Jun quarter), the group sees comparatively lower sales figures. However, this is a known characteristic of the retail industry and is not expected to have substantial impact on Padini’s overall financial performance. 2.6 Legal factor Padini has a large product offering for its customers. It offers luxury and high fashion items that cater to upmarket consumers (Seed, Padini, Vincci+),affordable, core value garments for the lower to middle income earners (Brands Outlets, Vincci, Padini Authentics),and its own children’s and maternity wear (Miki). It recently started to offer children’s wear under Seed and Padini. Therefore, these brands has been credited by the Association of Accredited Advertising Agencies of Malaysia (4 A’s) incollaboration with Interbrand – the world’s leading brand consultant to be the Malaysia’s 30 most valuable brands. 3.0 TASK ENVIRONMENT ANALYSIS 3.1 Porter 5 Forces Analysis 1. Threat of new entrants – high.Malaysia is becoming an important expansion base for Western retailers. Even as big retail brands and labels focus their attentions on the emerging markets of China, India or even our ASEAN neighbours, they too have seen it fit to establish a presence in Malaysia as well. Increasingly, Malaysia will see more international retailers venturing into the market directly as opposed to via the traditional gateways of Hong Kong and Singapore. In the past year itself, there has been an influx of international brands, which compete on the same playing field as Padini, the most recent being Japanese behemoth Uniqlo and Swedish fashion retailer H&M, which have opened their flagship stores in the Golden Triangle. We believe that given the growing size of the pot, the main barrier to entry would be with regards to the prime retail space which is getting scarce. 2. Bargaining power of buyers – high. The rising income levels, better education and greater access to a variety of brands and labels have resulted in a class of consumers more sophisticated in their needs and preferences. Where customer loyalty is of the utmost importance, retailers have strived to attain superior customer responsiveness by employing various methods of advertisements and promotions, loyalty programmes, as well as to increase customer’s perceived value of a brand. Brands catering to this expanding group of consumers have become numerous but more often than not, these brands pay more attention to the pricing strategies than to the perceived quality of the products under their brands.