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July 28, 2008

Indonesia Retail Market:
Matahari, Hero buoyant despite high inflation

Two of Indonesia's top retailers may have recorded strong sales performances in the first half of the year in spite of high inflation and a weakened public spending power, local daily Jakarta Post quoted their executives as saying.

While their first semester financial reports are yet to be completed, PT Matahari Putra Prima and PT Hero Supermarket - the nation's largest and third largest retailers -- are eyeing growth in sales, the Post said.

Matahari Putra Prima on Friday announced sales in the January to June period this year may have risen 15 percent compared to in the same period last year.

"We haven't completed our financial report for this first semester, but I can say that our sales will still increase -- mainly driven by higher demand; not higher selling prices," communications director Danny Kojongian said.

Many producers increased their selling prices by 5 to 6 percent after the government upped subsidized fuel prices in May.

The country's year-on-year inflation rate increased 11.03 percent in June.

In the first six months of 2007, the company booked 4.15 trillion rupiah (1 US dollar=9,114.24 rupiah)  in revenue, a 19.5 percent increase from 3.48 trillion rupiah in 2006. Full-year sales reached 9.8 trillion rupiah.

PT Hero Supermarket reported a 10.9 percent rise in non-audited sales in the year's first semester to 2.73 trillion rupiah from 2.46 trillion rupiah in the same period last year.

Corporate secretary Vivien Goh said the increase was mainly driven by the company's business expansions and re-branding program.

Hero's operational income rose to 55.6 billion rupiah in the period due to higher margin costs, she said. However, the company chose not to reveal its net profit.

In the first six months of last year, Hero booked 25.1 billion rupiah in net profit, higher than 11.2 billion rupiah a year earlier. For the whole year of 2007, Hero recorded 5.14 trillion rupiah in sales.

However, both companies were cautious in estimating their second semester economic performances.

"The impacts of the raised fuel prices will definitely continue to hit us in the second semester but we have prepared some anticipatory measures, including some saving measures for our expansion plans," Danny said.

Matahari plans to open six department stores and seven hypermarts this year with an allocation of 1.1 trillion rupiah. It is also targeting a 15 percent growth in business this year.

Matahari has 80 outlets throughout the country; Hero has 391. Last year, total sales in the industry reached more than 50 trillion rupiah.

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