INRODUCTION Company Background
Padini Holdings Berhad began as a backend operation in Malaysia’s apparel i ndustry,
manufacturing, trading and supplying garments to order for retailers and distributors. However, driven by a vision, Padini Holdings Berhad ventured into distribution and retail by creating its own brands catering to specific consumer niches. Today, Padini Holdings Berhad has entered the new millennium as a major force in Malaysia’s multibillion textiles and garment industry, a brand leader i nvolved in the
distribution and retail of its own fashion labels through 330 freestanding stores, franchised outlets and consignment counters in Malaysia and around the world. It labels proudly carried the Made in Malaysia stamp abroad with its products exports to Bahrain, Brunei, Cambodia, Egypt, Indonesia, Kuwait, Morocco, Myanmar, Oman, Pakistan, Philippines, Qatar, Saudi Arabia, Syria, Thailand and United Arab Emirates. The success of the company can be attributed to the foresight of its management and the dedication of its staff. Padini Holdings Berhad address fashion conscious consumers of both genders and all ages through our ten distinct brands: Padini, Padini Authentics, Seed, PDI, P&Co, Vincci, Vincci Accessories, Miki Kids, Tizio and Brands Outlet. Each of these labels represents a particular fashion philosophy and encompasses a comprehensive range of products that fit into our targeted consumer’s universe.
Planning and Strategic Management Basic Strategies used to respond for uncertainty
Padini Holdings Berhad is defined as a prospector. Padini had a strong foothold in the domestic market with a vast retail network of nine labels under its profolio namely Padini, PadiniAuthentics, PDI, P&CO, Seed, Vincci, Vincci+, Vincci Accessories, and Miki Kids. Its major subsidiaries include Vincci Ladies’ Specialties Centre SdnBhd, Padini Corporation Sdn.
Bhd, Seed Corporation Sdn. Bhd, Yee Fong Hung (Malaysia) SendirianBerhad, Mikihouse Children’s Wear Sdn. Bhd, Vincci Holdings Sdn. Bhd, Padini Dot Com SdnBh d, The New
World Garment Manufacturers SdnBhd, and Padini International Limited.In year 2000, Padini Dot Com SdnBhd was established to provide electronic business services and solutions for the group. Padini began operations as Hwayo Garments Manufacturers Company and manufactured ladies garments which were sold to departmental stores wholesale. Then, sole proprietorship expanded into textile trading two years later, and in 1975, the company
entered the retail industry with the flagship brand, Padini. Vincci was launched in 1981, representing a brand for ladies shoes, bags, belts and accessories. The company subsequently launched the Miki brand to distribute childrenwear in 1987. The Seed and Rope labels were then created in 1990.In 1991, Home Stores SdnBhd was established as a holding company for the Group's retail, wholesale and manufacturing businesses. The holding company was then changed to Padini Holdings Sdn Bhd. Soon after, the brand PadiniAuthentics was launched. In 1995, Padini became a public company as we know today - Padini Holdings Berhad. In 1998, Padini Holdings Berhad was listed on the Second Board of the KLSE and in the same year, P&Co was launched. The PDI label followed suit a year later along with the first of the Group's multi-brand concept store - The Padini Shop. The group also ventured into the F&B industry with Seed Cafe.Padini was relaunched as a career wear brand in 2001. In these five years, Padini had also expanded its foreign presence in markets such as the Philippines, Saudi Arabia and Thailand. In 2004, Padini was transferred to the main board.Vincci+, Vincci Accessories and Brands Outlet were launched in 2007. It opened it's first store in Oman and received a valutaion by Interbrand at RM 245million. Subsequently, in 2009 and 2010, Padini launched its first stores in Syria, Qatar and Pakistan.Padini launched more stores in the Middle East, South East Asia and North African countries as well as its first Vincci
store in Myammar.In year 2000, Padini Dot Com SdnBhd was established to provide electronic business services and solutions for the group.Besides that, two cafes are operated under the Padini Holdings Berhad, one at the Mid Valley Megamall and the other at their office in Shah Alam.
Vincci is the most prominent brand of the Padini family . It is a footwear brand that focuses on chic and affordability. Most of its shoes are made from syntheticmaterials. It also sells watches, sunglasses, PVC handbags and bead accessories. Miki has two brands under it, which are Miki Kids and Miki Maternity. The Miki Kids is designed for toddlers, while the Miki Maternity is designed for fashionable mums-to-be. The clothes of these two brands are mostly made up of polyester spandex, poly rayon spandex, cotton poplin and cotton nylon. Seed focuses on the urban office-wear for the masses. It’s business is affordable and forwardlooking. The clothes under this line are usually jackets, shirts, and a variety of denims, khakis, and knitwear.
Moreover, one of its bright spots is the group’s export markets. Padini has 65 franchises
located mostly in the Middle East and 16 dealer stores in Thailand. Combined, the export market accounted for 8.3% of total revenue in FY12. Revenue from this segment has grown from RM38.7m in FY08 to RM60.0m in FY12 at a 4-year CAGR of 11.6%. Furthermore, Padini had recently signed an exclusive 10-year deal with Singapore’s leading fashion retailer FJ Benjamin Holdings Ltd to distribute Vincci shoes and accessories under the brand name “VNC” in Indonesia. The collaboration entails a master franchise agreement where a total of
25 stores will be opened within the next five years, the first of which is expected to open as soon as December this year.
MISSION To Exceed Customers’ Expectations and Our Brands’ Promise
Padini Holdings Berhad started from humble beginnings in the apparel industry. Their roots are in the manufacturing, trading and supplying of garments to retailers and distributors. However, driven by a vision, they ventured into distribution and retail by creating our own brands catering to specific consumer niches. They are very committed in achieving their own goal through hard work, discipline and creative endeavour. Currently, Padini Holdings is consolidating its operations in order to be even more streamlined. In the long terms, they will continue to maintain their high standard of design and manufacturing quality as well as affordability. They are also working towards expanding the business on a regional basis. At present, They have a growing presence in their neighbouring countries, and they believe that there is great scope for growth.
VISION To Be The Best Fashion Company Ever
The vision of the Padini Holdings Berhad is to be the best fashion company ever. They aspire to be a global leader in the fashion and retail industry with the highest standards in design, manufacturing, quality, customer service, branding and innovation. As a creatively driven and design oriented group, they want to create fashion consciousness that is stylish yet affordable within their brand niches.
SWOT ANALYSIS
Strengths Padini Holdings Berhad has its own nine core brands which are Padini Authenthics, PDI, SEED, Tizio, MIKI, Vincci, P&Co, Brands Outlet and Padini. These nine core brands have strong presences which provides for higher sales of products that are associated with the brands, better acceptance of new products, higher ability to increase market share through advertising, and stronger resistance to price erosions in the market . Besides,
given its longer-than-competition track record in Malaysia of 21 years since the opening of its first Seed store, the Group has a more extensive distribution network . Furthermore, we believe that competition is unlikely to mimic the Group’s distribution network or any
expansions in its distribution network given that the target markets of the most formidable of competition are confined to the mid-upper income earning urban population. The Group on the other hand, offers value as well as basic merchandise targeting also the mid-lower income population. It’sdiversified offerings also manage to prevent its demand from fluctuating,
instead tapping into almost every age and income segment of the market. Next, the Group also caters to only one geographical market according it with a single focus on catering to the preferences of Malaysians. Large international brands, on the other hand, are unlikely to incur additional localization costs given that Malaysia is a relatively small market in their global portfolio.
Weaknesses From what we can observe, the Group is unable to secure the best suppliers in the global market given its relatively small scale compared to global giants like Zara, H&M and
Uniqlo. So, it is possible to decline in quality to remain competitive with fast fashion rivals, hence may lose some existing customers. Frequent and prolonged sales periods may adversely affect the Group as it provides incentive to consumers to withhold their purchases until discounts are offered. Thus, may result in the Group indirectly positioning itself in the same market already being served by the Group value-themed concept store Brands Outlet.
Opportunities Given the rural area like Sabah and Sarawak it may be a growth area since penetration there is currently low. With that, the Group can target places like rural areas to build an outlet there to gain more customers and expand the business. In addition, the relatively limited connectively between cities and town will make each area within Sabah and Sarawak a
captive market. This may provide for the offloading of older designs, while providing the Group with stable income streams. Furthermore, the expansion of the Group’s lar ge-format
value-themed stores, Brands Outlet, is another likely growth area given the flexibility of the store’s “value” concept which allows the Group to tailor products mixes according to the
locality of the store, and the strong revenue growth from the operation of the Brands Outlet which registered a 15.2% same store sales growth (SSSG) in FY12 which is similar to the Padini Concept Store’s SSSG of 15.8% and higher than the aggregate SSSG from single brand stores of 6.6%.
Threats The threats that this company is facing is the entry of reputable foreign brands which has made competition stiffer and more competitive which may decelerate the growth in sales and begin the thinning of margins. We saw this most evidently in the Group’s 2QFY13 numbers
following the opening of H&M in Malaysia on 22 Sept 2012 during which growth in revenue decelerated to a low 2.6%yoy while a negative net profit growth was recorded. Net profit margin also declined to 9% from 14% a year ago. Next, Padini Holdings Berhad suffers from very challenging business environment. Padini faces strong competition both directly and
indirectly. Many competing fashion retailers operate at the same level playing field as Padini while at the same times, general retailers though not necessarily targeting the same segment, do pose an indirect threat to Padini as spending habits may change in tandem with economic cycles. There is also a growing trend of deep-pocket international retailers entering the market, and together with the local brands, they compete on location and retail space, frontline retail staff , product quality and pricing and last but not least, the consumer trends and preferences. Prime retail locations have become scarce though with 8.0m sq ft of new retail floor space coming on-stream in the Klang Valley over the next four years, opportunities do exist for Padini to sustain its new store growth trajectory. However, of central importance are the timing and location risks associated with the new mall openings. With the completion of
new malls, there exists a multitude of question marks in relation to demography, visitor traffic, and catchment areas and even whether or not the new malls would be disruptive of visitor traffic to existing malls.
Grand Strategy of Padini Holdings Berhad
Padini Holdings Berhad uses the growth strategy in expansion, sales growth, increase in employees and diversified products. Its growth strategy has not changed very much in recent years. The quantum leap in domestic retail store expansion has also had seen the group's retail floor space almost tripled from 245,700 sqft in FY07 to 699,136 sqft in FY12 as the group took advantage of the rapid growth in retail floor space capacity via mall extensions as well as the launch of new malls across the country. In fact, Padini had a bumper year in FY12, adding 129,600 sqft, which comprised of 3 Brands Outlets, 6 Padini Concept stores and 1 free-standing store. With an additional Brands Outlet store having opened at Fahrenheit 88 in the first quarter of FY13, its store count currently stands at 48 single-brand stores, 26 Padini Concept stores and 20 Brands Outlet stores. Beyond that, five more stores are scheduled to be opened in early FY14, which include a Brands Outlet store in Seremban and another Brands Outlet and Padini Concept store in Miri. However, management has commented that the right locations with the right kind of environment that Padini’s brands have been thriving on have
become few and far between.
While there is no dearth of new malls being opened,
management has found many of them to be unsuitable for its brands. The new store openings allowed Padini to boost its year-on-year sales growth, but with fewer floor space expansion plans on the horizon, we believe Padini’s revenue growth
trajectory will be one that is less sanguine than in previous years. Padini’s same-store sales growth has been increasing at a 4-year CAGR of 9.8%, very much below the corresponding 20.5% growth rate of both new and existing stores. Going forward, we expect Padini’s top
line growth to be driven by the gradual maturing of the new stores it opened in recent years, which is expected to see higher per square foot sales generated. Management has guided that they would be achieve this by attracting customer spend by tweaking its store merchandise mix and perceived value and quality of Padini’s offerings, improving design to delivery of its products to keep up with the ever-changing consumer trends and preferences, as well as continually refurbish existing stores to attract customers. Padini Holdings Berhad also focus the main thrust of theircorporate social responsibility activities on the area of education and practical training for pressing issue of unemployable graduates,
providing practical pre-job training, and building up a labour
resource from which they may select suitable candidates to fill executive-level vacancies
available in Padini. There are two programme are ste up, which are Retail Trainee Programme and Graduate Retail Internship Programme. Retail Trainee Programme is introduced to replace the Management Trainee learning Programme which is introduced in year 2011. This new month-long programme is opened to fresh graduates interested in pursuing a career in retail, and it covers both classroom and on- the-job training. While the classroom training imparts skills required to manage a retail shop, and informs about the prospects and rewards of such a career, the on-the-job training exposes the participants to the rigours and demands of the job.While, Graduate Retail Internship Programme is introduced to an earlier internship programme.new programme focuses exclusively on the practical aspects of the retail trade. Participants who are existing undergraduate students spend the entire duration of the programme in the retail shops operated by the Padini Group. This programme which runs over a 3 to 6 month duration depending on the policies of the universities from which the participants were selected, rotates each participant among the various brands that the Padini Group owns. The intention here is to let each participant experience how each of the Group’s brands is being positioned and how the different brand identities will impact
upon how retail is conducted. Padini Holdings Berhad has a vast retail network of nine labels under its profolio namely Padini, PadiniAuthentics, PDI, P&CO, Seed, Vincci, Vincci+, Vincci Accessories, and MIKI Kids.Padini's apparels consists of the chic, simple, formal and smart casual wear for young executives.SEED apparels focuses on contemporary, trendy and creative designs for both casual and work apparels, which targets the fashion conscious. SEED offers runwayinspired collections which is in line with its aspirations to bring runway fashions onto its racks, for men, women and children.PadiniAuthentics offers a casual line that embodies individuality and confidence, for men, women and children.P&Co's clothing line targets the eclectic, edgy and individualistic fashion-minded consumer.PDI offers smart and simple basic-wear for both men and women, including denims, jeans, T-shirts, jackets, shirts, poloTs and accessories.MIKI's line of clothing consists of MIKI Kids and MIKI baby which are wearing for kids and babies.
Competitive Strategy used by Padini Holdings Berhad
Among
the
Porter’s
Competitive
strategies,
cost
leadership
strategy
and
differentiation strategy are the two strategies that used by Padini Holdings Berhad. Cost leadership strategy is keeping the costs and prices low for a wide market, while differentiation strategy is offering unique and superior value. Padini Holdings Berhad’s operating expenses as a percentage of revenue have also
been on a declining trend over the past four years as the group benefited from the economies of scale. Additionally, the revenue per square foot for Padini’s single brand stores, Brands
Outlet stores and Padini Concept stores have also been increasing, reflecting management’s
efficient use of floor space and good P&L control. One such initiative was the allocation of larger floor space for the higher-margin Vincci accessories in its stores. Generally, the major cost components for garment manufacturers are cotton price and labour costs. There exists the risk that manufacturers would not be able to pass on the rising costs to fashion retailers. Thus far, Padini’s costs of good sold have been relatively steady despite the rising input and
Chinese manufacturing labour costs due to the low bargaining power of manufacturers. Padini also designs most of its own products, which affords the company a better control of input costs while retaining the flexibility of varying its merchandise mix via its Brands Outlet stores. Since the cost of producing is low, the price of products is cheaper. A multi-brand retail store, Brands Outlet, which is one of Padini’s subsidies offers a variety of lesser known house brands at a reasonable and affordable price . The outlets use all year round promotions, value buys and value-for-money merchandise as a marketing strategy. Padini provides different products for different costomers . Padini's apparels consist of the chic, simple, formal and smart casual wear for young executives. SEED apparels focuses on contemporary, trendy and creative designs for both casual and work apparels, which targets the fashion conscious. Padini Authentics offers a casual line that embodies individuality and confidence, for men, women and children. P&Co's clothing line targets the eclectic, edgy and individualistic fashion-minded consumer. PDI offers smart and simple basic-wear for both men and women, including denims, jeans, T-shirts, jackets, shirts, poloTs and accessories. MIKI's line of clothing consists of MIKI Kids and MIKI baby. Vincci offers shoes, in-trend bags and accessories. Brands Outlet comprises of various styles of clothing and accessories for men, women and children.
Recommendation Utilizing the identified strengths and opportunities
Strengths With the strong presences Padini Holding Berhad can have a better sale as more customers will know about them. They may also increase their amount of sales by selling more product as they have such amount of shops. On the other hand, with the extensive distribution network their name will be more worldwide known. On the internet, they may distribute their product in detail so that the customers may know more about their product. By having diversified offering more customers would like to spend their money to buy their product as it is cheaper. They may also have a greater increase in their income as more customers are willing to spend their money on their product. Opportunities With the rural area such as Sabah and Sarawak which has less competitive it would be a chance for them to make a larger market. By this they would have an opportunity to increases their amount of customers. Due to the relatively limited connectively between cities and town old fashion design are also available which will increase their income. As old fashion can be use, their customers would have a variety of choice to purchase. Overcome the identified weaknesses and threat
Weakness To overcome the problem of unable to secure the best suppliers, Padini Holding Berhad must do their best to maintain the quality of their stocks so that their quality may not lose to their rivals. To maintain their quantity they would need to examine all their supply before using it so that they would not use the wrong or poor material in their product. On the other hand, a frequent and prolonged sale periods may be overcomes by having more stocks for sales. By having more stocks they may able to face the problem as they could use a lesser price and earn more by selling out more. Threats To overcome the problem of entry of reputable foreign brands, Padini Holding Berhad could try to invent more new brand of stock. Basically, we humans are more attracted by the new
brand. Padini Holding Berhad may also maintain their quality so that their stock would not easily thorn or destroyed. This would also attract more customers as who does not want a bag or cloth that would not easily thorn or destroyed? Padini Holding Berhad could try to design a more different style of design than the other company to overcome the problem of business environment. By having a different style of design they could attract more customers and they may have a great increase on their amount of customers.
Conclusion Padini is mainly an integrated operation that controls its products - fashion wear and accessories - from concept stage to manufacturing, merchandising and image marketing. Each brand represents a fashion philosophy; each philosophy covers a comprehensive range of products aimed at a targeted consumer. Brand image is strongly backed up by real value: quality, functionality and price. Every company has to face a lot of uncertainty to succeed in their business world. Padini organize their company very well, their objectives is to be the market leader in the retail industry and to be the best fashion company ever. To achieve this goal, Padini work hard, discipline and creative endeavour. Besides, Padini try to provide the high quality of the products and the price can afford by everyone so that the customers will loyal and satisfy with the products. Padini is also working towards expanding the business on a regional basis. At present, they have a growing presence in neighbouring countries, and they believe that there is great scope for growth. As at 30th June 2006, the Padini Group has 149 stores and consignment counters in Malaysia. Padini is also the only consumer goods retail brand in Malaysia to make it into Forbes Asia’s “200 Best under a Billion” list of compani es of 2006.
Futhermore, Retail Outlook 2007 classifies Padini as a “Grade A” brand, characterised by high market share and rapid growth rates. Its financial performance in 2006 includes an 18% sales increase with stronger operating profit margins at 14% of revenues while market capitalisation was up by 81% at RM 309 million.
References http://announcements.bursamalaysia.com/EDMS/subweb.nsf/7f04516f8098680348256c6f00 17a6bf/9df142a6dad6ea0848257ac200235360/$FILE/PADINIAnnualReport2012%20(587KB).pdf http://cdn1.i3investor.com/my/files/dfgs88n/2013/01/29/1478219426--281781513.pdf http://en.wikipedia.org/wiki/Padini#Background http://klse.i3investor.com/files/my/ptres/res16933.pdf http://www.padini.com http://www.thestar.com.my/story.aspx?file=%2f2009%2f9%2f14%2fbusiness%2f4684806&s ec=business
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