MAP, Ramayana See Profits Suffer on Higher Costs

People gather at a Starbucks in the Grand Indonesia mall in Jakarta. (Reuters Photo/Beawiharta)

By : Francezka Nangoy | on 9:40 PM March 28, 2014
Category : Business, Corporate News

Jakarta. Mitra Adiperkasa, an Indonesian lifestyle retailer and Ramayana Lestari Sentosa, a department store operator, both posted lower profit last year on high labor costs.

Mitra Adiperkasa (MAP), which holds the franchising rights for Debenhams, Starbucks and Zara, saw profit decline by 24 percent to Rp 328 billion ($28.87 million) from a year earlier, though revenue grew 28 percent to Rp 9.73 trillion from the year before.

“Our overall performance was impacted by escalating wages and rentals, as well as higher interest and foreign exchange rates due to the sluggish rupiah,” MAP corporate secretary Fetty Kwartati said in a statement on Friday.

Expenses on salaries and allowances at MAP rose by 37 percent to Rp 347.16 billion, and made up more than half of its general and administrative spending last year.

The minimum wage for employees across the country was raised by more than 30 percent last year, with Jakarta receiving the largest hike of 44 percent, according to data from the government.

The rupiah, which depreciated by 26 percent last year, also had an impact on the high-end distributor. The company posted Rp 59.93 billion in foreign exchange losses, more than double 2012’s figure of Rp 25.61 billion.

MAP opened 396 new stores in 2013, increasing its rental expenses by 64 percent. The popular retailer currently operates 1,779 stores in 58 cities in the country, with franchise rights for top fashion brands, including like Marks & Spencer and Topshop and department stores such as Sogo and Seibu.

Last year, it opened Indonesia’s first Galeries Lafayette, a French luxury department store, in Pacific Place mall, Jakarta.

Ramayana Lestari Sentosa, a nation-wide department store operator, suffered the same fate as it saw its net income fall by 7.8 percent to Rp 390.54 billion last year.

The company’s income grew to Rp 6 trillion from Rp 5.70 trillion, which fell well below their revenue target of Rp 8 trillion for 2013.

As the case with MAP, Ramayana’s net earnings were hit hard by higher costs, especially with regard to labor.

The department store chain saw its expenses on salaries and allowances grow by 24 percent to Rp 681.08 billion.

While MAP caters to mid-to higher-income spenders, Ramayana targets mid- to lower-income consumers.

Shares of Mitra Adiperkasa fell 4.9 percent to Rp 6,250, while those of Ramayana lost 1.1 percent to Rp 1,390 on the Indonesia Stock Exchange (IDX) on Friday. That compared with the 0.96 percent gain the main stock gauge in the local bourse.

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