BESHOM: First Quarter Earnings Miss Estimates Amid Margin Pressure, Outlook Challenging

A recent investment bank report highlights that the company’s core net profit for the first quarter of fiscal year 2026 (IQFY26) reached RM1.6 million, significantly underperforming expectations by accounting for just 10% of both the investment bank’s and consensus full-year estimates. This notable shortfall was primarily attributed to weaker-than-expected EBIT margins across its multi-level marketing (MLM) and retail segments.

Performance Review

Despite a 6.2% year-on-year (YoY) increase in revenue to RM35.5 million, IQFY26 core earnings plunged by 39.6% YoY. This decline was driven by a combination of factors, including a lower gross profit (GP) margin of 38.1% (a 3.5 percentage point decrease) due to an unfavourable sales mix, coupled with higher product and packaging costs. Additionally, weaker performances within the MLM and retail divisions further weighed on profitability, only partially offset by stronger contributions from the wholesale segment.

The MLM division experienced a substantial downturn, with its IQFY26 EBIT plummeting 72.6% YoY to RM0.4 million, on the back of a 14.3% YoY revenue decline to RM11.0 million. This weaker outcome was largely due to reduced consumer discretionary spending, slower member recruitment and renewal rates, intense market competition, and subdued purchasing power.

Similarly, the retail division reported a wider operating loss of RM0.9 million in IQFY26, compared to an operating loss of RM0.3 million in IQFY25. This was fueled by an 11.5% YoY revenue decline to RM6.7 million, primarily due to softer demand for in-house high-margin products, a lacklustre response to promotional campaigns, and elevated product and packaging costs.

Conversely, the wholesale division provided a partial cushion to the overall negative impact. In IQFY26, the wholesale division’s EBIT and revenue surged 91.8% and 42.2% YoY to RM0.7 million and RM16.2 million, respectively. This positive performance was supported by improved demand for wellness products and higher-margin vintage tea sales. No dividend was declared for the quarter under review.

Future Outlook and Recommendation

Looking ahead, the second quarter (2Q) is anticipated to remain challenging, primarily due to the absence of festive-driven demand and continued cautious consumer sentiment impacting discretionary spending. In response, the group intends to review and refine its incentive plans to motivate its sales force and enhance productivity, strategies aimed at ultimately supporting sales growth in the MLM division.

In light of the challenging operating conditions and the unfavorable risk-reward profile, TA Securities has revised its target price downwards to RM0.58 per share (previously RM0.64 per share) and has consequently downgraded the stock from Hold to SELL. The investment bank noted that recent share price strength, in their view, limits further upside potential.