Company Update / Consumer Discretionary / IJ / Click here for full PDF version
Author(s): Lukito Supriadi ;Andrianto Saputra
- posted 1Q24 net profit of Rp326bn (+222% yoy), coming above our/consensus estimates at 40/41% amidst earlier Lebaran.
- Overall Lebaran festive performance was below expectations at -2.4% SSSG , albeit with healthier inventory levels post Eid (-23% yoy).
- Maintain BUY with lower TP of Rp2,750 as most of the negatives has been priced in with 12M share price drop of -66%.
1Q24 results: beat amidst earlier Lebaran
booked 1Q24 net profit of Rp326bn (+222% yoy) and this came above at 41/40% of our/consensus FY24F estimate (vs. 5yr average of 7%). Gross sales grew by 37% yoy to Rp3.7tr mainly driven by 1Q24 SSSG of 34%. Sales notably picked up toward the end of March post the disbursement of festive allowance (THR). Stripping aside the seasonality shift, Jan-Feb24 SSSG was at 0.7% and the Lebaran festive SSSG was actually -2.4%, below management's expectations.
Inventory clearance led to lower 1Q24 GPM but better during Lebaran
Inventory clearance activities during the beginning of the year led to 1Q24's GPM of 34.9% (-68bps yoy), but this led to an overall healthier GPM of 35.9% during Lebaran (c.20bps yoy). Additionally, inventory levels also ended healthier at -23% lower yoy post Eid festives. Overall opex grew +3.6% yoy, and operating leverage led to EBIT margin expansion to 13% vs. 1Q23's 7%.
Mid-low tier mall traffic and occupancy dampening 's recovery
Management shared that mid-low tier malls foot traffic and occupancy has translated negatively for . Notably, middle/lower tier malls' occupancy rate in Greater Jakarta ranged at c.70/50% in 1Q24 with no indicative signs of improvement, yet. This was a key factor behind 's plan to close 10 stores (8 of which have been confirmed) and 29 stores under watch list.
Execution risk on management's transformative initiatives
's turnaround hinges on management's initiatives to renew focus on private label brands (as key differentiating factor from other retailers); offer store-based consignment merchandise on omni-channel platform, and address the underperforming stores which includes store closure and downsizing. Management clarified store closures shall not lead to inventory write-offs as unsold inventory for closed stores will be transferred to other stores.
Maintain Buy at unchanged TP of Rp2,750
Despite the Lebaran underperformance, we view that 's share price retracement of -66% in 12M has mostly priced in the negatives. We maintain BUY with unchanged TP of Rp2,750 based on 7.8x FY24F PE (-1.s.d from its 5yr avg).
Sumber : IPS