Research firms: Store expansion, omni-channel strategy to boost Mr DIY’s profitability

Friday, 05 Aug 2022 1:25 PM MYT

KUALA LUMPUR, Aug 5 ― MR D.I.Y Group (M) Bhd’s (Mr DIY) steady store expansions and its omni-channel strategy will boost its profitability.

Hong Leong Investment Bank (HLIB) said for financial year 2022 (FY22), Mr DIY has opened 93 new stores ― 52 per cent of the group’s target of 180 additional stores for the year.

Additionally, the group had recently launched its maiden Mr DIY Plus store in Mid Valley Megamall which received an overwhelming response, and plans to open 10 Mr DIY Plus stores in the next three years, focusing on prime locations with higher foot traffic.

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

“As per management guidance, the full implementation of this price increase will be reflected fully in the coming quarter,” it said in a research note today.

Meanwhile, Kenanga Research said although the store expansions were positive for the group, it remained cautious on the group’s sales prospects for the second half of FY22 (2H22) as inflationary pressures start to creep in.

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

“With the adjustments in prices, we expect gross profit margin to remain stable at circa 41 per cent for the rest of the year,” it said in a separate note.

Conversely, Maybank Investment Bank believes Mr DIY’s recent price hikes in the second quarter could further dampen sales volume growth in 2H22, given the absence of festive-driven sales momentum.

“Although Mr DIY remains a sector beneficiary for consumer down-trading, we understand that average monthly sales have softened post-Hari Raya in April-May 2022.

“As more than 70 per cent of its products are sourced from foreign end suppliers, particularly China, any major changes in currency, tax, trade policies or tariffs in China may adversely impact earnings, and higher operating expenses through minimum wage hikes could also impact earnings growth negatively,” it said. ― Bernama