Matahari Department Store is bullish that consumer spending will continue to propel Indonesia’s economy, giving the company a solid base to accelerate its store expansion to take advantage of the trend, its chief executive says.
“Indonesia is a consumer-driven economy and relies less on exports than other Asian nations,” Matahari CEO Michael Remsen said in an e-mail on Friday. “As a result, the economy has weathered downturns in the world economy quite well.”
Indonesia’s average per capita income climbed to $3,500 in 2011 from $3,000 in 2010, pushing up the number of middle-income households with extra spending power. Combine that with the fact that the country has a demographically young population, and consumer spending has been growing in the past few years, a trend Remsen expects to see continue.
Indonesian consumers increased their prosperity, “as evidenced by the increase in the average income,” he said. “Consumers have more money to spend after covering basic necessities. And Matahari has accelerated its new store expansion program to service this increased demand from customers.”
Though Remsen did not give details, local media have reported that the company plans to open up to 15 new stores by the end of this year as it seeks to increase its share of the retail market.
Since January, Matahari has opened four new stores — in Depok, a city on the outskirts of Jakarta; Gorontalo in Sulawesi; Palembang in South Sumatra; and Ambon in Maluku.
Matahari, which has 104 stores throughout Indonesia, sells more than 28 different fashion brands and has a 30 percent share of the nation’s department store market that targets the middle-income segment, according to Euromonitor International, a market researcher.
The retailing business in Southeast Asia’s largest economy has continued to show strong growth, driven by higher personal consumption of goods such as refrigerators, microwave ovens and TVs.
Net income at Matahari rose almost ninefold to Rp 157.46 billion ($17 million) in the first half of 2012, from Rp 18.21 billion in the same period in 2011. Sales rose 21 percent to Rp 1.24 trillion, while costs of goods sold climbed 18 percent to Rp 757.17 billion, the company said in a brief prospectus in Investor Daily last Monday.
Performance at other retailers has also picked up. Ramayana Lestari Sentosa, a small fashion retailer, said its first-half net income rose 39 percent to Rp 102.61 billion. Sales increased 15 percent to Rp 2.39 trillion.
The optimism of Indonesian consumers was also recorded by Bank Indonesia, the central bank. After a measure on consumer confidence dropped to 102.5 points in April from 119.2 in January due to the potential reduction of premium fuel subsidies, the July report showed that consumer confidence had picked up, with the index rising to 114.4 points.
Low borrowing costs have also helped encourage consumers to take out loans. The central bank meets on monetary policy this week, and it has kept its key interest rate at a record low 5.75 percent in the past few months.
Department store operator Matahari plans to add more stores this year to cash in on rising prosperity in the country. JG Photo/Safir Makki