Watson to open more stores in Indonesia
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Watson Indonesia’s debut on the Indonesian Stock Exchange (IDX) has marked a new chapter in the company’s expansion journey to a wider market base.
Duta Intidaya, the sole franchisee of Hong Kong-based personal care retail chain AS Watsons Group, made the decision to go public to finance its aggressive expansion plans to match Watson’s operations in neighboring countries.
There are more than 100 Watson stores in Singapore and over 400 in the Philippines, but only 47 in
Indonesia, even though the latter is the largest economy in Southeast Asia.
The company plans to open 15 to 20 Watson stores this year, using 65 percent of the proceeds from its initial public offering (IPO), which stood at Rp 86.05 billion (US$6.49 million). The remaining 35 percent of the IPO funds will be used to repay the firm’s debt to lender HSBC.
The new stores will be located in big city malls and at a stand-alone store in Bali. Each store takes roughly Rp 1 billion to set up. Three new outlets have been set up in Jakarta as of now.
They are expected to boost Watson’s presence and help the company compete with other personal care retail chains, like local Pharos Group’s Century Healthcare and Hero Group’s Guardian. Century has over 200 stores right now, while Guardian has more than 100 stores.
“We are still small, so we need more funds to expand and the IPO is the most proper decision at this time. We want to build a stronger brand,” Duta Intidaya director Sukarnen Suwanto said in a press conference.
The company offers various beauty products, personal care and health and general merchandise products, of which less than 10 percent are imported.
“The remaining 35 percent of the IPO funds will be used to repay the firm’s debt to lender HSBC.”
He acknowledged that growth had been slow in the past. It opened its first store in 2006, but only started to expand aggressively in 2013 and 2014 with around 30 stores opening up during the period. At present, it has set up as many as 47 stores in Java.
Duta Intidaya took three years to prepare for the IPO by opening more stores, which eventually increased costs for rent, staff recruitment and store renovations.
The rising costs led the firm to suffer Rp 35 billion in net losses last year, even though its revenues grew 17.7 percent to Rp 192 billion from 2014. The growth rate in revenue was higher than the 18 percent rate the retail industry posted, according to marketing research firm Nielsen.
“We believe we will get payback from the investments. The retail industry is more like a marathon than a sprint. The more stores opened up, the more growth reaped in the long run,” Sukarnen said.
He refused to provide details on its bottom line target, but added that it eyed 20 percent growth in revenues this year.
In the long run, the company hopes to open up 15 to 20 stores every year and launch an online shop in early 2017. Online sales of its products are currently only available through the webmarket Lazada. Developments in the online market are expected to generate at least half of total sales by 2020.
Meanwhile, Duta Intidaya’s shares ended at Rp 189 apiece on Tuesday, 5 percent higher than the IPO price of Rp 180 per share. It reached a peak of Rp 213 per share within the first hour of trading.
Questions & Answers
Q.Why did Duta Intidaya decide to list on the Indonesian Stock Exchange?
Why did Duta Intidaya decide to list on the Indonesian Stock Exchange?
The company went public to secure funding for aggressive expansion plans. This expansion aims to help Watson Indonesia match the operational scale of its counterparts in other Southeast Asian countries, such as Singapore and the Philippines.
Q.How many new stores does Watson Indonesia plan to open this year, and where will they be located?
How many new stores does Watson Indonesia plan to open this year, and where will they be located?
Watson Indonesia plans to open 15 to 20 new stores this year. These new outlets will be situated in large city malls, with one stand-alone store specifically planned for Bali. Three new stores have already opened in Jakarta.
Q.How will Duta Intidaya use the funds raised from its Initial Public Offering?
How will Duta Intidaya use the funds raised from its Initial Public Offering?
Sixty-five percent of the IPO proceeds, which amounted to Rp 86.05 billion (US$6.49 million), will be used to finance the opening of new stores. The remaining 35 percent of the funds is earmarked for repaying the firm's debt to HSBC.
Q.What is the company's long-term strategy for growth beyond physical stores?
What is the company's long-term strategy for growth beyond physical stores?
In the long run, the company hopes to continue opening 15 to 20 stores annually. Additionally, it plans to launch its own online shop in early 2017, expecting online sales to generate at least half of total sales by 2020.
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