Eco-Shop May Increase Prices By 20 Sen Due To Minimum Wage Hike, Say Analysts
Eco-Shop customers in Peninsular Malaysia could see prices rise to RM2.80 next year following the minimum wage hike.
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Popular dollar store Eco-Shop is likely to raise prices by 20 sen from RM2.60 at its Peninsular Malaysia outlets next year amid an impending minimum wage hike
According to The Edge, CIMB Securities made the prediction in a research note yesterday, 28 October, stating that Eco-Shop is expected to incur an additional RM2.8 million in monthly staff costs due to the minimum wage hike announced in the government's 2027 Budget.
The analysis comes after Eco-Shop's share price fell 4.9%, or seven sen, to RM1.36, despite its net profit rising 16.6% year-on-year to RM61.9 million in the first quarter of its 2027 financial year (1QFY2027), which ended on 31 August.
However, its profit growth fell short of analysts' consensus expectations of 19.9% year-on-year growth.
The weaker-than-expected performance was attributed to lower gross profit margins following typhoon-related disruptions at Chinese ports, which affected supply chains, as well as the appreciation of the Chinese renminbi against the ringgit.
"Against this backdrop, we see an increasing likelihood of Eco-Shop revising its RM2.60 fixed price point within the next 12 months to defend margins, in line with Eco-Shop's acknowledgement that further price adjustments may be unavoidable," said the research house.
Eco-Shop currently sells household goods at RM2.60 in Peninsular Malaysia and RM2.80 in Sabah and Sarawak.
However, CIMB Securities warned that while higher prices could support margins over time, they could pose near-term earnings risks as Eco-Shop's predominantly B40 customer base is sensitive to price changes, reported The Star.
The company previously sold its products at RM2.10 and RM2.40 before raising prices due to economic factors.
Image via Direct LandingUOB Kay Hian Research similarly said Eco-Shop has had mixed results passing higher minimum wage costs on to customers
According to the brokerage, previous price increases were followed by prolonged weakness in same-store sales growth and smaller shopping baskets as customers adjusted their spending.
Echoing CIMB Securities' concerns, UOB Kay Hian Research warned that further price increases could lead customers to spend less across Eco-Shop's 477 outlets, given its B40 customer base's sensitivity to price changes.
The brokerage has also factored in a 20 sen price increase to offset the impact of higher minimum wage costs, although the amount and timing remain undecided pending discussions with suppliers.
