JAKARTA -- Matahari Department Store, part of the Lippo Group and Indonesia's largest department store chain, will change its name to Matahari and buy back shares as it grapples with the rapid growth of e-commerce.
The company said in a statement released on Wednesday that it will shorten its name to Matahari "to better reflect the company's positioning as a multifaceted retail platform." It also announced a share buyback of up to 1.25 trillion rupiah ($85.1 million) at a maximum price of 13,330 rupiah per share. This could translate into up to 7% of the company's shares. Matahari will hold an extraordinary shareholders meeting in October to gain approval.
Matahari, partly owned by the Chinese-Indonesian conglomerate Lippo Group, has grown into a dominant department store operator in the country by targeting the rising middle class. But slowing consumer spending and the rising popularity of e-commerce has dogged performance of the operator's physical stores.
The company's same-store sales dropped 1.2% in 2017 and have failed to pick up so far this year. In the first half of 2018, same-store sales increased 4.6% from the year-earlier period, but the figure pales to the 8% year-on-year growth for the first half of 2017.
The company is trying to diversify its sales channels to cater to consumer needs, partly by investing in Matahari Mall, an online marketplace owned by a different Lippo unit. The acquisition cost 770 billion rupiah, which was paid over the two years to 2017.
The move has not been popular with shareholders, and the company's share price has fallen more than 30% since the start of last year.
"As the leading retail platform in Indonesia, we believe that we have considerable room to further grow our large format stores, which will enable us to better serve our target middle income segment in the years to come," said Richard Gibson, Matahari CEO. "In addition we will also make further investments in our logistics capabilities, which not only reduce operational costs in our core business, but also support our fast growing e-commerce business.
"Given the above, in our opinion the Company's current share price significantly undervalues the company, and thus presents a compelling opportunity to increase returns for our shareholders."
Shares in the company rose as much as 13.4% on the buyback news.