Matahari to open eight hypermarkets<\/p>\n
Bloomberg, Jakarta<\/p>\n
PT Matahari Putra Prima, Indonesia's biggest retailer by
\nsales, plans to open eight hypermarkets this year, stepping up
\ncompetition for retail sales with Carrefour SA and Dairy Farm
\nInternational Holdings Ltd.<\/p>\n
Matahari expects hypermarkets -- a combination of department
\nstores and supermarkets -- will account for as much as half of
\nIndonesian retail sales within five years, Noel Trinder, who runs
\nMatahari's supermarket business, said last night. He said they
\naccount for about 30 percent at present.<\/p>\n
Consumer spending is driving an economy that grew about 4
\npercent last year and will expand as much as 5 percent in 2004.
\nStill, competition is fierce, and about 11 foreign retailers have
\nset up operations in Indonesia in the past five years to take
\nadvantage of rising domestic consumption in the world's fourth
\nmost populous nation.<\/p>\n
"I'm not convinced," said Alvin Pattisahusiwa, who helps
\noversee the equivalent of $2 billion of Indonesian assets,
\nincluding stocks, for MeesPierson Finas Investment Management in
\nJakarta.<\/p>\n
"The concern with Matahari has always been its management's
\nlack of transparency and its lack of focus."<\/p>\n
He doesn't own Matahari stock, which has fallen 14 percent
\nthis year.<\/p>\n
Matahari, which will convert three of its existing
\nsupermarkets into hypermarkets, will compete with ventures run by
\nCarrefour, Europe's largest retailer, PT Hero Supermarket and the
\nHong Kong-based Dairy Farm.<\/p>\n
The company operates 82 supermarkets and department stores
\nwith a total area of 752,000 square meters. According to a report
\nlast year by Indonesia's Investment and Banking Research Agency,
\ntotal retail outlets almost doubled from 780 outlets in 1998 to
\naround 1,400 outlets in 2002.<\/p>\n
Matahari, which earns two-thirds of sales from department
\nstore operations, will spend between Rp 70 billion (US$8.3
\nmillion) and Rp 200 billion for expansion this year, Trinder
\nsaid.<\/p>\n
"The company's aggressive plan to move to the hypermarket
\nbusiness is going to push up costs and hurt profit," said Rani
\nSofjan, an analyst at Mandiri Securities in Jakarta. She has a
\n"sell" recommendation on the stock.<\/p>\n
Still, Matahari said profit margins will increase two
\npercentage points this year as it benefits from higher sales
\nvolumes and last year's closure of 15 less-profitable outlets.<\/p>\n
Matahari is "inefficient" because its operating margin is
\nlower than the 10 percentage point margin for PT Ramayana Lestari
\nSentosa, the country's second-biggest retailer, said Laksono
\nWidodo, an analyst at ING Financial Markets in Jakarta, who has a
\n"sell" on the stock.<\/p>\n
"It remains to be seen whether the company can improve
\nmargins at all with the new strategy," he said.<\/p>\n
Matahari's profit rose 4 percent to Rp 105.3 billion in
\n2002. Profit probably rose 10 percent last year, Matahari
\nPresident Benjamin Mailool said last night. "Much of it was
\ngenerated in the fourth quarter," as Indonesians spent more on
\nclothes, communal feasts and for charity during the Muslim's holy
\nmonth of Ramadan, which fell in November.<\/p>\n
In the nine months to September, profit rose to Rp 52 billion
\nfrom Rp 51 billion in the previous year.<\/p>",
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