Ramayana Considers Overseas Partner
Ramayana Lestari Sentosa, Indonesia’s second-most profitable retailer, is in talks to partner with an overseas company for the supermarket business as it expects to miss its 2011 sales forecast amid a competitive landscape.
Ramayana faces rising competition from hypermarkets and minimarkets in Jakarta, said Setyadi Surya, the company’s director. Outside of Jakarta, supermarket sales are flat while the retailer lacks distribution channels in areas other than Java, he said.
The talks for a partnership are at an early stage and Ramayana doesn’t rule out the possibility of divesting its supermarkets, Surya said. He declined to identify potential partners.
“There’s interest to buy a stake but we haven’t responded yet,” he said in an interview in Jakarta on Wednesday. “We’re still looking for the right form of cooperation that fits our management style.”
Ramayana’s controlling shareholders aren’t interested in selling a stake in the company now, he said.
Growth in Indonesia, Southeast Asia’s biggest economy, which regained an investment-grade credit rating after 14 years, is helping attract overseas investors to Ramayana.
The Jakarta-based retailer, which seeks to arrest a drop in its shares amid stagnant sales at its supermarkets and delays in store openings, will miss its 2011 sales target of Rp 6.85 trillion ($750 million), Surya said.
“Ramayana is a strong brand, but its supermarket operation isn’t doing well,” said Paul Raymond Widjaja, an analyst at Trimegah Asset Management that manages about $400 million in assets in Jakarta. “A partner may help address Ramayana’s distribution and expansion problems.”
Ramayana’s main customers are from the low- and middle-income groups and it doesn’t have any direct competitors in this segment, Surya said.
The company runs its supermarkets inside its department stores and Ramayana is looking for a partner that can fit in with this concept, he said.
Ramayana, which opened its first department store in Jakarta in 1978, operates 97 supermarkets that accounted for about 35 percent of total sales as of September, according to company data.
Supermarket sales from January through November rose 6.8 percent from a year earlier compared with a 7.4 percent gain for the whole of last year, Surya said.
Competition is tough as shoppers go to Ramayana mainly because of its department store and not its supermarket, Trimegah’s Widjaja said.
Shares of Ramayana fell 4.1 percent to Rp 700 on the Indonesia Stock Exchange on Friday. They are down 17.65 percent for the year. The Jakarta Composite Index has gained 2.5 percent.