Store expansion, omnichannel strategy to boost MR DIY’s profitability — analysts

KUALA LUMPUR (August 5): MR DIY Group (M) Bhd (MR DIY)’s steady store expansion and omnichannel strategy will boost its profitability.

Hong Leong Investment Bank said that for fiscal year 2022 (FY22), Mr DIY opened 93 new stores, or 52% of the group’s target of 180 additional stores for the year.

Additionally, the group recently launched its first MR DIY Plus store at Mid Valley Megamall, which received an overwhelming response, and it plans to open 10 MR DIY Plus stores over the next three years, focusing on locations of choice with higher foot traffic.

“We understand that the group implemented price increases across broad categories of its products in April and May, which should help cushion margin contractions due to multiple cost headwinds.

“As directed by management, the full implementation of this price increase will be fully reflected in the next quarter,” it said in a research note on Friday (August 5).

Meanwhile, Kenanga Research said while store expansions have been positive for the group, it remains cautious about the group’s sales outlook for the second half of FY22 (2HFY22) as inflationary pressures begin. to be felt.

“However, historically, the fourth quarter is the best quarter (for the group) due to the end-of-year shopping season and the festivities.

“With pricing adjustments, we expect gross profit margin to remain flat at around 41% for the remainder of the year,” he said in a separate note.

Conversely, Maybank Investment Bank believes that recent MR DIY price increases in the second quarter could further dampen sales volume growth in 2HFY22, given the lack of holiday-driven sales momentum.

“While MR DIY remains a beneficiary sector from consumer downgrades, we understand that average monthly sales weakened after Hari Raya in April-May 2022.

“As more than 70% of its products are sourced from overseas end suppliers, particularly China, any major changes in currencies, taxes, trade policies or tariffs in China may negatively impact profits, and expenses Higher operating expenses due to minimum wage hikes could also impact negative earnings growth,” he said.

Tanya J. Hill