The Rise of Matahari Department Store in Indonesia's Retail Sector
Within a timespan of a few years only, Matahari Department Store has shown impressive growth. Its market capitalization increased from IDR 146 billion (US $15 million) in late 2008 to a current IDR 31.95 trillion (US $3.28 billion). The company, which sells fashion apparel, accessories and beauty products, is now the largest company in Indonesia's retail sector, outperforming other giant retailers, such as Alfa Supermarket or Hero Supermarket.
Similar to national airline Garuda Indonesia, once an ailing airline but turned around into a success story, Matahari Department Store (MDS) has walked a similar path. The company reported net losses of IDR 3.7 billion (US $0.38 million) in 2008 and IDR 18.0 billion (US $1.85 million) in 2009, but resurrected by restructuring its operations. This restructuring included the transformation of corporate management in order to increase transparency and internal monitoring. It also included the merger with Meadow Indonesia in 2011, enabling MDS to streamline its corporate structure. This corporate transformation has been one of the key elements in the change into a profitable company. Last year, MDS reported a 65.6 percent increase in net income to IDR 770.88 billion (US $79.08 million).
Matahari Department Store Financial Highlight:
| 2011 | 2012 | YoY Growth |
|
| Net Income |
0.47 | 0.77 | 65.6% |
| Revenue |
4.70 | 5.62 | 19.5% |
| Cost of Revenue |
1.59 | 1.91 | 19.8% |
| Operating Income |
1.24 | 1.58 | 27.6% |
in trillion IDR rupiah
Global investors have shown interest in MDS. On 25 March 2013, 222 investors bought 1.16 billion (40 percent) MDS shares from CVC Capital Partners and Multipolar through private placement. This transaction was done at the price of IDR 10,850 (US $1.11) per share, and involved some large international companies such as Schroders, Blackrock Inc., Capital Group, and Fidelity, therefore marking international confidence in MDS. Allegedly, CVC Capital Partners, a Luxembourg-based private equity firm, wanted to reduce its stake in MDS as other (foreign) companies (such as Japan's Fast Retailing Co., Ltd.) are eager to enter Indonesia's retail market, and thus might weaken MDS's market share. Through the current share sales, CVC and Multipolar raised about US $1.3 billion, thus underlining the potential in Indonesia's retail sector.
Current Share Holders of MDS:
| Company | Ownership |
| CVC Capital Partners Ltd |
37.7% |
| Multipolar |
20.2% |
| Public/New Share Holders |
41.8% |
MDS is Indonesia's largest and most well-known retailer which introduced the modern department store concept to Indonesia in the 1970s. The company targets Indonesia's growing middle income segment. According to research conducted by McKinsey & Co, Indonesia will add 90 million people to its consuming class by 2030, with GDP per capita rising accordingly.
In 2012, MDS set aside IDR 400 billion (US $41.03 million) for capital expenditure, three quarters of which was used to open new stores (particularly in eastern Indonesia). MDS currently operates 116 stores throughout the country. This year, it intends to open 15 new stores and expects net income to increase by 10-15 percent.
Due to the aforementioned private placement, shares of MDS have surged over 307 percent this year.
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