MPPA Indonesia says its first half loss doesn’t reflect the true picture of the business.
While the company reported a net loss of Rp169.8 billion (US$12.7 million), performance improvements were evident in the second quarter in both sales and profit when compared to the first three months.
Sales slipped 3 per cent to Rp6.7 trillion, (US$502.6 million), primarily driven by a two-week shift in seasonal sales.
The company says its gross profit margin improved by 173 basis point in the second quarter, compared with the first and cost efficiency measures put in place earlier were starting to show results.
“The business restructuring over the last 18 months is starting to pay off as MPPA sales have been consistently tracking better than its major competitors within the hypermarket and supermarket segment in modern retail,” the company said in a statement.
“Fresh foods and grocery have posted positive growth of 2.5 per cent and 0.7 per cent respectively for the first half.”
Overall sales growth has been largely impacted by weaker sales of electronics and household categories. “Despite the relatively flat sales environment, gross profit margin and operating costs are expected to improve as a direct result of these restructuring efforts.”
MPPA’s first half gross profit margin contracted by 100 base points to 14.9 per cent, primarily due to investment in the company’s recent pricing strategy in lowering over 5000 items to regain a competitive position with particular emphasis on a selected basket of fast moving consumer items of significance to the mini-markets.
“Early indications of the pricing strategy are encouraging. One of the major strategic changes in the restructuring process was the “shift to cost” allowing MPPA to better align its business model by leveraging its data at a SKU level.”
The company’s omnichannel business has started to gain traction as modern Indonesian consumers continue to embrace the digital lifestyle and smartphone technology for their daily shopping and social activities.
MPPA has a growing network of over 300 distribution points across 73 cities consisting of 117 hypermarkets, 26 supermarkets, 30 convenience stores, 112 health and beauty centres.
Given the ongoing soft retail sales environment, MPPA recently announced a rationalisation of senior executives. This is expected to result in an improvement in head office cost efficiency of up to 20 per cent by December 2017.
