KUALA LUMPUR (Nov 26): Padini Holdings Bhd's net profit fell 30.62% to RM19.24 million in the first quarter ended Sept 30, 2014 (1QFY15) from RM27.74 million a year ago, on declining sales from its consignment, wholesale and single-brand stores coupled with rising operating costs.

Nevertheless, the retailer has declared a second interim dividend of 2.5 sen per share, to be paid on Dec 29.

There was a slight improvement in revenue for 1QFY15, which was 4.39% higher at RM226.75 million from RM217.22 million in the previous corresponding quarter, its filing with Bursa Malaysia this evening showed.

But even though revenue had risen, gross margins actually fell by about 2% due to more aggressive sales campaigns held during the quarter, said Padini. That, coupled with rising operating costs, had resulted in its profit before tax falling to RM26.7 million, which is 31.4% lower than the same quarter a year ago.

"Although operating costs have been rising steadily over the years, the impact from such increases had generally been mitigated by a relatively faster rate of growth in revenues.

"For the quarter under review however, the increase in revenues from our Padini Concept Stores and Brands Outlet stores had been diluted by declining sales from the consignment, wholesale and single-brand stores side of the business. This had been largely responsible for the substantial reduction in profit before tax," said Padini.

"Overall, the Padini Concept Stores (including the promotional sales fairs conducted) and the Brands Outlet stores had generated an increase of RM17.6million in revenues but declines in the other distribution channels had reduced the total quantum of the revenue gains," it noted.

According to Padini, pressures on margins brought about by an increasingly price-sensitive population of consumers, and by rising operating costs, will continue to bear on the profitability of the Group's business operations.

"We are nevertheless confident that the strategies that we have adopted in relation to pricing, merchandising, and network expansion will surely put the business on a more robust position in the time ahead," it said.

It added that the coming final quarter of its 2015 financial year will see the imposition of the Goods and Services Tax (GST) and it is expected that consumers will react negatively to it regardless of whether prices rise.

"As the position now stands, as we cross over to the GST regime, all prices displayed must be inclusive of GST.

"As such, prices of all merchandise already in the shops on the last day of March 2015 are deemed to be GST inclusive and so long as these prices are not changed, the trader will receive less money for their wares and hence will experience a contraction in margins," Padini added.

Padini closed 1 sen or 0.56% lower at RM1.77 today, bringing it to a market capitalisation of RM1.16 billion.