Sector Update  /  Consumer Discretionary  /   Click here for full PDF version 
 Author(s):  Lukito Supriadi  ;Andrianto Saputra 

• Accounting for earlier Lebaran seasonality which denotes higher GPM, RALS /MAPI's lower GPM -68/-161bps yoy came below expectations.
• Sustained low mall occupancy rate in mid-low tiered malls led to some stores' underperformance for retailers like LPPF and ACES .
• Retailers' base effect in 2Q23 are deemed to be less favorable compared to staples', in our view. Maintain sector Neutral call.

1Q24 recap: ACES was the outperformer
Although 1Q24 retailers' earnings were optically positive (Fig. 7), we note that the underlying performance of RALS /LPPF/MAPI may miss consensus and our estimates accounting for the earlier Lebaran. LPPF has also shared that its Lebaran festive SSSG of -2.4% is below management's expectations; and that the Lebaran's festive revenue would be somewhat evenly distributed between 1Q24 and 2Q24. On the other hand,despite the earlier Lebaran RALS /MAPI booked -68/-161bps yoy lower GPM in contrast of the typically higher GPM of +64/+44bps qoq for RALS /MAPI during the Lebaran quarters in the past 5yr ex-Covid(Fig 12). ACES was the clear outperformer in 1Q24, driven by their strong sales recovery momentum.
Low occupancy rate in mid-low tiered malls leading to some stores' underperformance for LPPF /ACES
One key factor on mid-lower class retailers' underperformance may be due to delayed recovery in mid-low tier mall's occupancy rate. According to Colliers' data, G. Jakarta mall occupancy levels in mid/low tiered malls stood at only c.70/50% as of 1Q24. Based on our channel checks, this trend may partially be attributed by consumers' rising adoption of e-commerce. This has led to a portion of LPPF 's stores dragging down performance (29 under watchlist and 10 planned for closure - these 39 stores are c.25% of total stores). A similar trend (although far less significant) is being cited by ACES pertaining to their 10 underperforming stores (4.2 % of total stores) - these stores are located in 2ndtier malls in Jakarta/Java. From this standpoint, MAPI may be the most resilient as its stores' locations are focused in 1sttier malls.
Retailers' base effect for 2Q24 is less favourable compared to staples
Looking ahead, we note a general distinction between retailers and staples. While 2Q23 represents a low base effect for staples (report), 2Q23 were far more normalized for ACES /MAPI given their 2Q23 SSSG of 8.9/7.7%.Nonetheless, ACES recently shared that indicative Apr24 SSSG is positive despite Apr23's 15.0% SSSG . On the other hand, we expect AMRT to continue its strong SSSG for Apr24.In sum, we maintain our Neutral call on the sector with pecking order: ACES > MAPI > AMRT > RALS > LPPF .


Sumber : IPS