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T Ramayana Lestari Sentosa (RALS) said that the minimum-wage increments, although a burden on operating costs, would ultimately benefit the retailer as their target market, the middle and lower income segment, would have a higher disposable income.

Several administrations in Indonesia, especially those that are home to large industrial complexes, have increased their regional minimum wages. The Jakarta administration recently fixed the 2013 minimum wage at Rp 2.2 million (US$228), 44 percent higher than that of 2012.

RALS finance director, Suryanto, said that the minimum-wage increments would, at the very least, trigger a 21 percent increase in payroll expenses. “However, this situation also presents an opportunity. Our target customers will have more disposable income thanks to their wage increases. This is as long as inflation remains at low levels,” he said.

Customers’ improved purchasing power would translate into stronger sales that would offset higher operational costs, Suryanto said.

The retailer reported that their operational costs had hit Rp 1.1 billion in the first nine months of the year, or 10.1 percent higher than the Rp 1 billion during the same period last year, due to rising rents and utility bills, as well as wages.

However, Suryanto pointed out that the retailer expected sales to grow by 24 percent to Rp 9.3 trillion in 2013 thanks to this improved purchasing power.

This year alone, the retailer aims to book Rp 7.5 trillion in sales. Within the first nine months of 2012, it met 79 percent of its annual sales target, recording a sales figure of Rp 5.9 trillion. In addition, sales in September were 12.9 percent higher than the Rp 5.2 trillion earned during the same period last year.

In the first nine months of 2012, gross profits reached Rp 1.5 billion, with a gross profit margin of 26.8 percent. Thus, the retailer has seen a 10.6 percent increase in gross profit margins as of September 2012, compared to the Rp 1.4 billion booked during the same period last year.

Operating profits in the first nine months of 2012 reached Rp 420 billion, with an operating profit margin of 7.1 percent. The operating profit as of September 2012 was 12 percent higher than the Rp 375 billion booked during the same period last year.

Suryanto added that in order to meet their 2012 targets, they would open three more stores by December, bringing the number of new stores opened this year to seven, and the overall number of stores to 114.

However, he added that the business growth of stores outside Java was “less than brilliant” given that weakening commodity exports, due to the sluggish European economy, had pinched the incomes of local farmers.

So far, business growth for stores in West Java, East Java and Central Java was at 11.5 percent, while the growth for stores located in the greater Jakarta area was at 9 percent. Stores outside Java island, however, grew by only 7.5 percent.

“In 2013, we are targeting a growth of 14.5 percent for West, East and Central Java, a growth of 13 percent for the greater Jakarta area and 12.5 percent for areas outside the island of Java,” he said.

“We aim to open at least six, or perhaps eight, more stores next year,” he added.