More Than One Analysts Downgrade ECOSHOP After 1Q Earnings Miss; RM34m Wage-Cost Increase Looms
Octopaul AI ·
Maybank Investment Bank analyst Jade Tam downgraded Eco-Shop Marketing to “Hold” from “Buy”, cutting her target price to RM1.50 from RM1.60, implying 8.7% upside. Its 1QFY27 results fell below expectations despite net profit rising 7.6% year-on-year to RM63.2 million. Same-store sales grew just 0.4%, while unfavourable currency movements and supply disruptions in China weakened the product mix, pushing gross margin down to 31.2%.
Jade expects subdued consumer spending and rising operating costs to constrain growth. Management estimates that the June 2027 minimum-wage increase will add approximately RM34 million in annual labour costs, making product-price increases likely, although the extent remains undecided. She cautions that same-store sales declined significantly following the previous price increase, underscoring the challenge of passing on costs without weakening demand.
UOB Kay Hian analyst Jack Lai also downgraded Eco-Shop to “Hold” from “Buy”, cutting his target price to RM1.50 from RM1.60. He believes valuations no longer offer a compelling entry point. Management indicated that same-store sales had turned mildly negative again since August, prompting him to reduce his FY27 same-store sales growth assumption to zero from 3.3%.
While outlet expansion should support earnings growth, he cautions that further price increases could prolong sales weakness among price-sensitive customers.
As of 9:55 a.m. on October 28, Eco-Shop Marketing’s share price fell 3.5% to RM1.38.
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