Eco-Shop shares drop to four-month low after earnings miss
CIMB Securities cut its target price to RM1.40 and flagged the possibility of a change to the retailer’s RM2.60 fixed price within the next 12 months.
Eco-Shop Marketing Bhd shares dropped 4.9%, or seven sen, to RM1.36 on Oct 28 after its first-quarter performance missed analysts’ forecasts. The decline left the retailer with a market capitalisation of RM7.83 billion and its shares at their lowest since July 1.
For 1Q2027 ended Aug 31, core net profit reached RM61.9 million, rising 16.6% year-on-year. CIMB Securities said the increase was below the 19.9% consensus expectation.
CIMB Securities attributed the shortfall to pressure on gross profit margins. Typhoons disrupted Chinese port operations and strained supply chains, while China’s currency strengthened against the ringgit. The research house trimmed its forecasts for the 2027 financial year by 6.2%, retained a “hold” recommendation and lowered its target price to RM1.40.
Labour expenses are another concern. CIMB Securities said the minimum wage increase under the government’s 2027 budget is expected to raise monthly staff costs by RM2.8 million. Import costs and supplier pricing also remain uncertain.
The research house sees a greater likelihood that Eco-Shop will adjust its RM2.60 fixed price within the next 12 months to protect margins. It noted the retailer had acknowledged that further adjustments might be unavoidable. Although higher prices could help margins over the longer term, CIMB Securities warned they could also alienate B40 customers.
