Matahari sees strong sales as it expands hypermarket stores

Leony Aurora, The Jakarta Post, Jakarta

Publicly listed PT Matahari Putra Prima, the biggest retailer in Indonesia, expects sales growth to shoot up by more than 30 percent next year spurred by robust economic growth and aggressive expansion of its hypermarkets.

Speaking at a forum on Friday, Matahari's director of investor and public relations Danny Kojongian said that next year the retailer planned to open 13 new hypermarkets -- 10 to be constructed from scratch and three converted from existing supermarkets -- under the brand Hypermart.

The Hypermarts will be built in Medan, Pekanbaru, Batam, Jakarta (two outlets), Greater Jakarta (two outlets), Bandung, Malang and Surabaya in East Java, Pontianak, and Makasar (two outlets).

Matahari did not intend to open new supermarkets. "We will focus on building hypermarkets," said Danny. Hypermarkets were larger-scale stores that sold more goods at cheaper prices, while supermarkets focussed more on convenience shopping, he said.

Capital expenditure for store expansions, which also include 11 department stores and 10 Time Zone outlets, is estimated at between Rp 400 billion (about US$43 million) and Rp 500 billion.

"We will use proceeds from our bonds issues this year. If more is needed, we will turn to our internal finances," he said.

Matahari has three core businesses; the department stores, multi-format supermarkets -- including Matahari supermarket, its hypermarket Hypermart, and Boston Pharmacy -- and entertainment center Time Zone.

Director of finance Hendra Sidin said that as of September, total sales reached Rp 3.7 trillion (about US$399 million), up 11.6 percent from the same nine-month period the previous year.

"We expect to get sales up to Rp 5.6 trillion by the end of this year, about 11 percent higher than 2003," Hendra said.

With economic growth estimated to accelerate next year at 5.5 percent, Hendra was confident that sales growth would be even higher.

"Our target is more than 30 percent," he said. This sales growth projection had factored in the possibility of an increase in fuel prices by 10 percent, he said.

Matahari inaugurated its first Hypermart in Serpong, Tangerang, in April this year. Since then, three more Hypermarts have entered the already fierce competition between the industry's major players such as French giant Carrefour, Dutch- based Makro, and Giant.

Modern markets are often viewed as threatening the existence of traditional ones. To address this problem, several regulations have been drafted and passed.

For example, Bylaw No. 2/2002 on private markets in Jakarta stipulates that a private market occupying more than 4,000 square meters (sq m) of land must be built at least 2.5 kilometers away from a traditional or community market.

A presidential decree on modern markets is currently being drafted, which will regulate that hypermarkets can only be constructed in a provincial capital.

Hendra said that the draft decree did not have clear definitions about what a hypermarket was. "It seems that the draft regulates stores (hypermarkets) with saleable area of between 5,000 and 10,000 sq m," he said.

"As our (Hypermart) outlets have under 5,000 sq m of saleable area, we are quite optimistic that the decree won't affect us significantly," he said.

As a group, Matahari is the biggest retailer in Indonesia with between 20 and 25 percent of market share. However, in the hypermarket industry, Hypermart is placed five notches below Carrefour, the top hypermarket in the country.

"We wish to attain second place within five to eight years," said Danny.