What's Behind Matahari Department Store's Falling Shares?
Indonesia's largest department store chain Matahari Department Store has seen its shares plunge 32.2 percent to IDR 10,775 a share since its recent peak of IDR 15,900 a piece on 22 May 2017. Although its shares rebounded 2.13 percent on Wednesday (23/08) they remain around the lowest level since early 2014. What is behind this decline?
Key reason for the decline is slowing growth of Matahari Department Store's sales. Although the company posted a 10.8 percent year-on-year (y/y) rise in net sales to IDR 5.74 trillion (approx. USD $432 million) in the first half of 2017, it was a major slowdown from the 32.12 percent (y/y) growth pace that was recorded in H1-2016.
Meanwhile, Matahari Department Store's net profit rose 15 percent (y/y) to IDR 1.34 trillion in the fist half of 2017. This also constitutes a significant slowdown from a 78.61 percent (y/y) growth pace recorded in the same period one year earlier.
Sharply slowing net profit and sales growth is an indicator that the company's business has met some obstacles, particularly bleak consumers' bleak appetite for spending. For example, same store sales growth in H1-2017 only grew at a pace of 8.0 percent (y/y), while one year earlier growth was recorded at 27.1 percent (y/y). Moreover, this 8.0 percent growth pace in H1-2017 already included the momentum originating from the Ramadan month and Idul Fitri celebrations (a period that usually gives rise to a peak in retail sales). These festivities fell earlier in 2017. Last year the positive impact of rising retail sales during the Ramadan and Idul Fitri period were felt in the third quarter.
The management of Matahari Department Store stated that they see few room for same store sales growth in the remainder of 2017. In fact, it may contract amid Indonesia's stagnant economic growth and people's bleak consumption.
In an effort to boost sales Matahari Department Store engaged in more aggressive marketing and promotions in Q2-2017, both online and offline. Therefore, the company's marketing costs rose 203 percent on a quarterly basis.
Stock Quote Matahari Department Store - LPPF: