Ramayana Lestari Sentosa “THIS TIME IT’S REAL”

Going Down The Memory Lane

In 2002, FORBES once made an article about Ramayana and the owners, Mr. Paulus Tumewu.

http://www.forbes.com/global/2002/0708/05 6.html

Here is the short summary about the article

Mob scene, 1998

Rioters burned down 12 stores of Indonesia’s best retail chain. Ramayana took it in stride. Usually the chant is “Buy, baby, buy.”

“Does this look like a recession to you?” says Paulus Tumewu with a smile as he waves his arm. The head of Indonesia’s best retailer is in its newest store, the 80th in the Ramayana chain, in Salatiga, a dusty town of 250,000 in the highlands of central Java. Tumewu, 50, has just presided over the opening. The aisles are so packed that security guards have to hold back the crowds at the entrance. “It’s like this every time we open a store,” says the founder.

Ramayana isn’t widely known, but it should be. It belies all the stereotypes about Indonesian companies: It is run by an entrepreneur with no connection to crony capitalists; it is well managed and has no debt; it is profitable in the midst of turmoil; and it has healthy prospects for long-term growth.

ts success–as reflected by a spot on FORBES GLOBAL’s Top 200 Small Companies list last fall–shows that Indonesia, despite economic woes, still has a large, underserved consumer market. “If you look below the surface of perceived political risk in Indonesia, a number of companies are doing well despite the problems,” says Ian Hargreaves, a fund manager with Invesco in Hong Kong.

A glance at Ramayana’s financials tells the story. In a decade that was the most turbulent in Indonesia’s postwar history, Ramayana from 1993 to 2001 boosted its sales nearly 11 times, to $332 million, and profits by 35 times, to $37 million; compounded, that’s an annual growth of 34% and 57%). Because of a bottomless supply of low-wage output, net margins averaged 9% and return on assets, 10%–higher than Wal-Mart’s 3% margin and 9% ROA. This year the company expects sales to rise 25% on ten store openings, and profits 20%.

THE FALL

From what I observed after talking to some Ramayana customers, staffs, buyside and sell side analysts, I have some conclusion about why Ramayana performance has stalled in the last 10 years (2005-2015).

1. Indonesia is a growing country and recently broke the USD 3.000 / year GDP per capita. Although most of Ramanyana customers target is low-end people, they still concerned about their lifestlye and class, not to mention after the social media trend begun, people wants to post their pict on social media with a cool fashion product.

2. Selling a cheap fashion product but with a below average quality doesn’t always works.

3. The marketing campaign (ads) often endorsed with outdated artist

4. People expect better shopping and store experience (a cold air conditioner, clean toilet, proper staff, store design, tile, etc)

5. Supermarket business (ROBINSON) is only to attract the department store (fashion) crowds, so a loss in supermarket business is inevitable.

That’s why Ramayana earnings and share price going sideways in the last decade, their market share is also declining……

Ramayana, who once a darling and princess was slept for about 10 years…..

I even read one analyst said in their report in 2013

“At this stage of the cycle, we are getting the vibes that Paulus Tumewu is more ready now than ever before to throw in the towel, particularly given continued tough operating environment facing the company. This could lead to a possible sale of RALS. While nothing is concrete for now, we note that Matahari Department Stores (LPPF) was previously sold to CVC in 2010 at P/Sales of 1.0x, compared to RALS’ current P/Sales of 1.2x (sector: 1.3x). However, given RALS’ current weak operating performance and possible earnings disappointment ahead, we are of the view that it would be difficult for RALS to obtain a higher valuation for its stake sale than current levels.”

Things is so bad and hope is not even there…..

TRANSFORMATION

Until in late 2015, the founder’s daugther arise to take up responsibility to turnaround her father’s company. Jane Tumewu, currently sitting as Head of Merchandising held a press conference on 20 May 2016. She proclaimed 6 TRANSFORMATION PILLARS FOR RAMAYANA.

1. Fashion meets entertainment

Ramayana will collaborate it’s fashion brands with famous artists in Indonesia such as Raffi Ahmad for “RA Jeans”, Zaskia Mecca for “Gaya Hijab Kini”; Aliando Syarief for “Aerosmith” brand; Prilly Latuconsina for “Pink Dept”. Ramayana also promised (and they do it !) to held a routine “Meet and Greet” for artists fans to meet their idol.

2. Fashion transformation

Ramayana goes with #KERENHAKSEGALABANGSA,
has refreshed its collections so that they are more cool and fashionable. Ramayana also implemented internal efficiencies so they can offer a much affordable price to the customers for some brands.

3.Store Rejuvenation

Ramayana new face is born !, Ramayana rejuvenate the look of its stores as they want their customers to enjoy better shopping and store experience.

4. Social media presence

Ramayana actively building a presence on, Instagram, YouTube to reach their customer basis. Their social media gaining huge followers and their Youtube video got a million views. Beside social media, Ramayana also actively doing a promotion on TV and radio.

TALK IS CHEAP, BUT ACTION ARE PRICELESS

It’s good to see that Mrs. Jane commited to wake “Princess Ramayana” from her long sleep, but some market players still not convinced about it, because they think “yeah talk is cheap, they always failed to deliver promises, etc.” I understand that.

That’s why, it’s time for me to tell you about my “on the ground a.k.a channel checking” to find out whether Mrs. Jane strategy has worked to solve Ramayana problem. Of course we at Sucorinvest Asset Management Team already heard Mrs. Jane strategy, plans at each meeting that we attended. We believe her and can feel her confidence but we believe it’s still better to check it on the ground. (Blusukan ala President Jokowi)

So, I decided to visited 10 Ramayana / SPAR / Robinson stores and interviewed some Ramayana customers, also Ramayana staff. I am asking them a lot of questions with main focus on things that made investors still skeptical and doubt. I did it all alone, so don’t be surprised to see a lot of selfie photos……

The first people I met was RA (Raffi Ahmad) product staff (right picture) at Ramayana ITC BSD.

He said to me that since Mrs. Jane leadership era, he could see A LOT of improvements in all aspects. This including better marketing strategy, traffic / visitor jump, and he also proud to said that Ramayana sales in Lebaran 2016 is the highest ever in Ramayana history.

He noticed that now, many young people come to Ramayana not only to “just buy a merchandise” but also they know that they can be cool by wearing a merchandise / fashion products at Ramayana. He achieved and even exceeded RA product sales target in June-July (IDR 100-120 Million per month on June-July), making him got incentive from Ramayana.

He also stated that outright product is now the best selling product on the outlet. The outright product already achieved target even in August (as you know, low monthly sales on seasonality), and outright sales person now helping consignment sales person so they can achieve their target too. (Fyi, Ramayana BSD target was IDR 4 Billion in August 2016)

When I asked what Ramayana still lacked about ?

I amazed that he didn’t mentioned about income, he even said now it’s up to all sales force if they want better / higher comission. The only thing he concerned is a supply issue, because not all of artists product are available at the store where he worked and also he wants faster delivery for products that already sold out.

His last statement is an IMPORTANT POINT !

FRESH MEAT BUSINESS IMPROVING A LOT !!

The guy beside me (left picture) is a fresh meat staff at SP AR supermarket at Ramayana Cengkareng.

When I asked a lot of things, he looked at me with an awkward expression, maybe because he was surprised there’s a people (me) who asked him about fresh meat business.

From him, I learned that food waste from fresh meat department is now shrinking sharply compared to a few months ago. He said to me that all fresh meat was displayed about 3 days, and if not sold yet, the meat would “go” to fast food department. Then, fast food department will use the meat to produce fast food product and would be displayed for 24 hours.

He also said to me that he noticed a rising visitors on SP AR supermarket in the last few months (He can noticed it since fresh meat display was located not far from entry gate).

I emphasized to him that what I want to know is not the “amount of visitors on June-July where I know there would be a huge rise in visitors traffic because of fasting and lebaran period, what I want to know is visitors traffic in August vs another low season month such April, May, and yet he still said to me that he noticed a rising visitors traffic in August 2016 compared to April, May 2016.”

Again, this man repeated a same comment like a RA staff above, the only concern at fresh meat department is they wants faster delivery for products they requested.