1H19 Lower-than-Estimate Performance
The 2Q19 revenues were at IDR3.72 trillion or a 1.7% y-y growth from IDR3.6 trillion in 2Q18. But 1H19 revenues were at IDR3.48 trillion or a 0.20% y-y decline from IDR3.49 trillion in 1H18. The 1H19 revenues were backed by consignment sales of IDR2.8 trillion or a 1.74% y-y decline. In fact, commissions from the consignment sales increase by 7.30% y-y or reaching IDR627 billion from the prior figure of IDR584 billion. We estimate that Eid Mubarak momentum allowed RALS to post solid 1H19 revenues despite our estimate of 1H19 lower performance. RALS’ underperformance was reflected from June’s ~1.7% growth in stores’ average sales, lower than 2Q19 economic growth of 5.05%.

Cost Efficiencies to Maintain Revenues Margins
Stagnant economic growth worsens the retail industry outlook because household consumption grew but ~5%. To counter risk arising from the sluggish backdrop, RALS closure unproductive brick-and-mortar stores. In 2Q19, it terminated two stores (affiliate and private). Besides, it manages its costs efficiently as it reduces supermarket spaces to boost productivity. The 1H19 financial report disclosed the efficiency it carried out, with a 1.18% y-y decline to IDR1.91 trillion in COGS from IDR1.94 trillion in 1H18.


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