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

(Organisation chart been done by our group)

1.3 company structure

HAJI SAHID BIN MOHAMED

YASIN

(CHAIRMAN)

YONG PANG CHAUN

(MANAGINGDIRECTOR)

FOO KEE FATT

(DIRECTOR) CHEONG

CHUNG YET

(DIRECTOR)

CHAN KWAI

HENG

(DIRECTOR)

CHONG CHIN

LIN

(DIRECTOR)

YONG LAI

WAH

(DIRECTOR)

YEAP TIEN

CHING

(DIRECTOR)

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. As a result, many brands fail rather than thrive.

3. Bargaining power of suppliers – low. As with the trend in the fashion retail industry,

Padini designs its garments while outsourcing the manufacturing operations to OEM

manufacturers. Knitwear and graphic Ts are manufactured locally while the more

complex woven items are sourced from China and Sri Lanka. With the advent of the

global slowdown, the garment manufacturing industry in China has become saturated

and oversupply issues have more than mitigated the effects of minimum wage

rebasing. Thus far, bargaining power of suppliers has remained low, and as a result,

large scale Chinese manufacturers who had previously shunned the small to mid-sized

fashion retailers have reopened their doors to Padini.

4. Threat of substitute products – medium. Padini’s products cater to a wide range of

audiences, the more pronounced differences being the styles and pricing of the brands

they carry. The SEED and Padini brands are trendier while the PDI and Vincci brands

are more neutral. The brands outlet’s products, on the other hand, houses lesser-known

value-for-money labels, which include off-season and surplus branded items. We

believe that Padini’s differentiated products as well as its flexibility of varying its

merchandise mix provides the group with some degree of immunity, though it is note-

worthy that the Vincci accessories are not generally designed in-house, which means

these products no longer retain their unique qualities. In this situation, these ranges of

products runs the risk of attracting the interest of supplies eager to broaden their

distribution as well as competitive retailers anxious to boost their own sales.

5. Competitive rivalry within the industry – high. The garment retail industry is by

nature, one of the most competitive areas of commerce. Competition is particularly

apparent where there are numerous other brands, which operate at the same locations

as Padini. These brands compete not only for market share and floor space, but also

for front line retail staff, which is becoming increasingly scarce. The increased

demand for staff required to run retail operations extends beyond fashion retailing, and

the current rapid growth in retail outlets of all kinds has caused high turnover rates for

front line staff, which has in turn made recruitment costly, time-consuming and often

unproductive. Management has envisaged that the coming years will see the situation

deteriorate further if nothing is done to radically after the conditions of demand and

supply of labour in this industry.

4.0 SWOT

SWOT TABLE: PADINI HOLDINGS BERHAD

Internal: Strengths Internal: Weaknesses

S1

S2

S3

S4

S5

Leading brand in Malaysia

Many retail outlets

Market leadership

Promising quality

Product for all ages

W1

W2

Unstable profits

No online shopping

External: Opportunities External: Threats

O1

O2

O3

O4

Expands their business

Prioritize local companies

Open more branches

Earn more profit

T1

T2

T3

New to market

Increase competition

No celebrity endorsement

4.1.1 Strengths

1. Leading brand in Malaysia

PADINI is a leading brand in Malaysia. There are wide range in style and pricing of

the brands that PADINI carry. For examples, PADINI carries SEED, Vincci,

Mikihouse and etc. the products not only trendy but also neutral which is suitable for

all type of consumers.

2. Many retail outlets

There are in total of 330 retail outlets in Malaysia and around the world for Padini

Holding Berhad. With many retail outlets, PADINI is making sure that they are

unbeatable for their competitors.

3. Market leadership

PADINI is among the well-known brand established since 1971 in Malaysia. It

strategically located factories and warehouses ensure wide market coverage in

Malaysia.

4. Promising quality

PADINI ensure the quality of their product is in higher aspect for their brand and in-

house brands under them.

5. Products for all ages

With in-house brands under PADINI, they ensure that their product is suitable for all

ages of consumers.

4.1.2 Weaknesses

1. Unstable profits

In retailer business, the profit is unstable. The consumers are depending on the season.

In Malaysia, the profit will be at the highest peak when there is festiveseason. For

example: Chinese New Year.

2. No online shopping

Another weakness for PADINI is no online shopping. For customer, they can only buy

Padini’s product in stores which is not a very convenience for the customer. It is

because, not the entire customer is in the city and near to shopping complex.

3. Public perception (low quality)

In retailer business, the perception of public in term of fabric is in a low quality.

5.0 TOWS

TOWS TABLE: PADINI HOLDINGS BERHAD

INTERNAL FACTORS Strengths – S Weaknesses – W

EXTERNAL FACTORS

S1

S2

S3

S4

S5

Leading brand in

Malaysia

Many retail outlets

Market leadership

Promising quality

Product for all ages

W1

W2

Unstable profits

No online shopping

Opportunities – O SO Strategy WO Strategy

O1

O2

O3

O4

Expands their business

Prioritize local companies

Open more branches

Earn more profit

(s3 + o1)

Using the power as market

leadership to expand their

business (horizontal)

(w2 + o3)

Placing more branches to

cover loss of potential online

customer (market dev)

Threats – T ST Strategy WT Strategy

T1

T2

T3

New to market

Increase competition

No celebrity endorsement

(s1 + t3)

(w1 + t2)

STRATEGIC DIRECTION

5.1.1 SO Strategy: Using the power as market leadership to expand their business.

As a market leader in the retail business, PADINI has a huge power and

opportunity to expand their business to the next level. With this, PADINI has the

power to control over

5.1.2 WO Strategy: Placing more branches to cover loss of potential online customer.

PADINI is a well-known brand in retail business which is clothing, accessories,

shoes, children’s clothing and etc. within this areas of business, potential

customers is more interested in window shopping rather than online shopping. It is

a good strategy for PADINI to open more branches in order to attract potential

customer on self-satisfaction.

5.1.3 ST Strategy: