Padini: Another mistake

I make many mistakes in investment and the sale of Padini is another mistake. I sold it for Airasia, which obviously was not a mistake but it was from a wrong stock sale to a right stock purchase. Padini achieves an amazing result, one that will be comparable against Airasia for this year.

I did not do enough checking. I did not go to the store anymore to look. In fact, when I saw the concept store in Mid Valley several months ago, I knew I already made a mistake. The store was full of people who shops, made payments not 1 piece of clothing but several. They collected several hundreds of Ringgit from each and every customer. The queue for payment was long.

Why then did I sell it? I thought due to the economic slowdown and GST, it will impact all retailers. Yes, it does impact AEON, Tesco, Bonia, many brands in malls but not Padini.

How did it progress so much. It went for volume as opposed to margins. The display and design was made simpler. Prices was at RM19, RM29, RM39, RM49 - hence its product went lower end. I guess due to the economic reason and its mid-range branding, this strategy works. For how long more? This is a big question. Its business went for the FOS market in fact and it beat them hands down.

If it can continue with this momentum, I would have no doubt buy again even at the price of RM2.75 (now).

When I bought Padini, I have mentioned I like its business of moving from stores to its own stores. It has managed to do well collecting all its brands under one big store. Another thing that could potentially be of advantage to Padini is that perhaps rental has stopped increasing last year due to oversupply and more purchases are made through e-commerce.

It also has very strong cashflow as can be seen from results from several years.

Well, for those who still have the stock do check them out at the physical store. Do not just look at the numbers, announcements and dividends. It is a strong company - just that whether it can keep to the momentum!