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Analysis: Retail sector shows strong results in Q1, LPPF below expectations
Four major listed retailers, namely Matahari Department Store (LPPF), Ace Hardware Indonesia (ACES), Mitra Adiperkasa (MAPI) and Ramayana Lestari Sentosa (RALS), have released their earnings results of the first quarter of 2018
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Four major listed retailers, namely Matahari Department Store (LPPF), Ace Hardware Indonesia (ACES), Mitra Adiperkasa (MAPI) and Ramayana Lestari Sentosa (RALS), have released their earnings results of the first quarter of 2018. The latter three recorded higher-than-expected earnings in that period, but LPPF was way below our and consensus expectations.
ACES booked the fastest year-on-year (yoy) growth at a rate of 21.5 percent, mainly driven by lifestyle products. This has resulted in an increase in ACES’ same-store sales growth (SSSG) by 13.8 percent yoy in the
first quarter of 2018. The company continues to enjoy a high market share following the government’s import clampdown against black-market players.
The first runner-up is MAPI with net revenue growth of 19.3 percent yoy, mainly supported by specialty stores as well as the food and beverage segment. Its SSSG has significantly improved to 8 percent yoy, while numerous stores were renovated throughout 2017.
The fashion segment of RALS experienced a 10.1 percent yoy increase, with the consignment sales growing by 14.3 percent yoy. Its SSSG during the first quarter of 2018 was flat at 0.3 percent yoy, as 16 supermarkets were closured in 2017.
As for LPPF, it recorded revenue growth of 4.8 percent yoy, low compared to its fashion industry peers.
Among the retail companies, we continue to like RALS as one of the main beneficiaries of purchasing power recovery in the medium-lower income segment throughout this year. Furthermore, RALS’s operational turnover could lead to continued strong earnings growth in 2018.
Retail sales in Sumatra and Kalimantan, which are areas with heavy exposure to commodities, have started to improve since the end of the third quarter last year. Based on our channel checks, LPPF’s poor merchandising strategy has caused a relatively poor sales performance.
Risks to our call: Unstable politics that may cause a prolonged period of low consumer confidence toward spending and lower-than-expected subsidy disbursements that could cause weaker purchasing power.
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The writer is a research analyst at PT Bahana Sekuritas.
