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Fashion retailers look to slow down expansion

After seeing a difficult year in 2013, fashion retailers have said they will slow down expansion this year in a bid to focus more on business evaluation as well as to facilitate better performance in the market

Anggi M. Lubis (The Jakarta Post)
Jakarta
Mon, April 7, 2014

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Fashion retailers look to slow down expansion

After seeing a difficult year in 2013, fashion retailers have said they will slow down expansion this year in a bid to focus more on business evaluation as well as to facilitate better performance in the market.

Publicly listed Mitra Adiperkasa (MAP), the country'€™s largest upmarket retailer, expects sales growth to slow this year to between 15 and 18 percent, far lower than it posted last year, the company'€™s corporate secretary Fetty
Kwartati said.

The lifestyle retailer has cut down its capital expenditure (capex) to Rp 600 billion (US$53 million) this year, far below last year'€™s Rp 850 billion.

The funds will be used to finance the company'€™s store expansion plan.

MAP plans to open 250 new stores with a total area of 60,000 square meters. The number of new stores is lower than that of the previous year.

In 2013, the company opened 396 new stores nationwide.

By the end of 2013, MAP operated 1,779 stores in 58 cities across the country.

The company'€™s same-store sales growth (SSSG) '€” reflecting growth from chains that existed before the financial report period '€” stood at 10 percent last year.

Fetty told The Jakarta Post over the weekend that the company has yet to calculate this year'€™s SSSG. It might be lower compared to last year.

'€œThis year, we decided to set a more humble target to focus on internal consolidation, after seeing more than 25 percent growth annually in the last three years,'€ she explained.

MAP, which has imported a lot of popular foreign brands, has successful boosted its revenue by about 28 percent to Rp 9.73 trillion last year, compared to the Rp 7.58 trillion it generated in the previous year.

Its revenues grew by about 25 percent and 29 percent year-on-year, respectively, in 2011 and 2012.

While seeing shoppers'€™ stronger consumption in the past few years, however, MAP fell short in generating higher profits growth last year, as its bottom line plummeting by about 24 percent year-on-year (y-o-y) to Rp 327.29 billion.

'€œLast year'€™s rising costs hit us insistently,'€ Fetty explained.

Rising rent prices and other expenses '€” such as labor wages and electricity prices '€” coupled with currency depreciation that resulted in huge losses on foreign exchange, have trimmed the company'€™s net profits last year.

MAP '€” which targets middle- to upper-class consumers with brands such as Zara, Next and Marks & Spencer '€” is not the only retailers setting a modest target after a year of unsatisfying performance.

Ramayana Lestari Sentosa, whose consumers mostly come from the country'€™s middle- to lower-class population '€” is also planning to open about 6 new stores this year '€” down from 8 stores it built along 2013.

Ramayana is set to allocate only about Rp 350 billion of capex this year compared to more than
Rp 400 billion disbursed last year, as the company decides to maintain expansion after suffering a huge dip in profits, the company'€™s spokesman Setyadi Surya said.

While its revenue remained relatively stagnant at Rp 6 trillion, the retailer'€™s net profit was down by nearly 8 percent to Rp 390.53 billion last year, mostly attributed to rising labor wages and inflation, which hit the retailer'€™s consumer segment hard.

Meanwhile, Matahari Department Store (MDS) has a different story. The store, who caters to the middle-class segment, plans a massive expansion by opening 15 new stores this year after see surging profits in 2013.

MDS, recorded nearly 50 percent y-o-y growth in net income to Rp 1.15 trillion compared to Rp 771 billion in 2012. It posted a 20 percent rise in full-year sales, earning Rp 6.75 trillion last year compared to Rp 5.62 trillion the
previous year.

'€œSome 70 percent of our total merchandise is on consignment, with the balance directly purchased. Of this, the vast majority is sourced locally in Indonesia,'€ the company said in a written statement.

MDS operates 125 stores in 61 cities nationwide, having opened 9 new stores last year.

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