We continue to expect modest earnings delivery for the Indonesia retailers we cover in 3Q25F, as consumer confidence remains subdued, particularly among upper-middle-class consumers. While overall retailers may see a slight sales recovery in 3Q25F following a weak 2Q25, we think that same-store sales growth (SSSG) on a y-y basis is likely to remain sluggish, ranging from low-single-digit negative to low-single-digit positive growth. We believe this trend has largely been priced in as 3Q has historically been the weakest quarter for retailers. Spending typically peaks during the Lebaran holidays (late 1Q) and the year-end holiday season (late 4Q). Further, subdued confidence levels have led to slower foot traffic, even at high-end malls (Fig. 2).

Staples over discretionary will likely continue to play out, in our view

Given the persistently low consumer confidence, we expect discretionary spending to remain subdued, with consumers prioritizing staples over non-essential items. The government has responded to the slower spending by accelerating fiscal spending, which had previously been sluggish (Fig. 3), and we do not rule out the possibility of additional stimulus measures, as the government sits on a IDR450tn (USD27bn) cash balance as of Aug-25. The Ministry of Finance is currently monitoring spending progress through end-October 2025 and may reallocate funds from underspent budget items. We believe this would indirectly benefit staples-focused FMCG players, particularly Alfamart (AMRT IJ, Buy) and Alfamidi (MIDI IJ, Buy), heading into 4Q25F. The impact on discretionary spending, however, might materialize later, as stimulus efforts tend to target lower-income consumers.

Stick with mini-market as top picks; we see limited catalysts for discretionary

MIDI and AMRT remain our top picks in the sector, followed by Erajaya Swasembada (ERAA IJ, Buy), Map Aktif Adiperkasa (MAPA IJ, Buy), Mitra Adiperkasa (MAPI IJ, Buy), and Aspirasi Hidup Indonesia (ACES IJ, Buy). We expect MIDI and AMRT to post low-single-digit SSSG in 3Q25F, with MIDI potentially delivering the strongest EPS growth among the stocks under our coverage, supported by the divestment of Lawson (unlisted) (link), which removes the burden of Lawson’s operational losses. MIDI’s low foreign ownership also provides cushion in the event of a foreign investment outflow. AMRT should also report solid results, as its strategy of targeted and selective promotions continues to boost gross margins, offsetting higher opex-to-sales and the 6.5% minimum wage increase for 2025 (link).

Conversely, we see limited near-term catalysts for discretionary retailers. Nonetheless, ERAA will likely benefit from higher sales and margins driven by iPhone 17 demand, potentially supporting strong earnings growth in 4Q25F. Meanwhile, MAPA’s gross margin will likely bottom out following inventory clearance in 3Q25F, suggesting that 3Q25F could mark the trough in earnings for the company this year.

Company highlights

Aspirasi Hidup Indonesia (ACES IJ, Buy) – We expect 3Q25F to remain a challenging quarter for Azko. While some improvement was observed in early-August, the large-scale protests in late August weighed heavily on overall foot traffic, leading to five consecutive months of negative SSSG. We believe it is still too early to conclude whether the company’s rebranding strategy is the primary driver behind the decline, as the slowdown in discretionary spending has been evident across the broader retail industry (Fig. 4). Based on our surveyamong mall operators, the only notable exceptions have been one-dollar stores, beauty, and entertainment-focused retailers (arcades, games, and attractions). While we remain positive on the company’s initiative to accelerate its ex-Java expansion, we think this growth story is unlikely to materialize in the near-term.

Sumber Alfaria Trijaya (AMRT IJ, Buy) – Our industry survey suggests that minimarkets’ SSSG continued to recover month-by-month up to 3Q25F, following the sharp decline back in April due to the Lebaran timing shift. However, given the broad-based consumer demand weakness, overall y-y growth is likely to remain modest, which we estimate will hover in the low single-digit positive range. Notably, the company’s strategy of reducing promotional activity—similar to other minimarket peers (Fig. 6)—has supported a strong gross margin since 1Q25. We believe this should help offset the higher opex-to-sales ratio stemming from the higher minimum wage increase and expenses related to new distribution center (DC) openings. We expect a potential gross margin upside in 4Q25F, supported by promotional support that was not really present last year.

Erajaya Swasembada (ERAA IJ, Buy) – ERAA showed signs of improvement in 3Q25F, as reflected by its 8M25 YTD SSSG of -1.5% y-y, with an improvement from -3.1% y-y in 1H25. On the opex side, we do not expect a material change from the previous quarters, as overall traffic remains subdued and the company continues to expand, particularly in its non-digital business segments. The third quarter is typically a quieter period for ERAA, with stronger momentum anticipated in 4Q25F, driven by the iPhone 17 launch — a product cycle that historically delivers higher sales turnover and margins than other handsets. We do not expect any delay in iPhone 17 sales, as the model is scheduled to be available by 17 Oct 2025. Our industry survey also indicates that Apple has secured import licenses for the new iPhone series through next year. We, therefore, expect ERAA to record the strongest earnings growth among discretionary retailers we cover in 4Q25F.

Map Aktif Adiperkasa (MAPA IJ, Buy) – While we expect q-q sales to rebound in 3Q25F, we also anticipate a gross margin y-y correction following the elevated inventory levels observed in 1H25 — with inventory days at 193 and aging inventory (>6 months) at 29.5%, vs. 185 days in FY24 and a target of 180 days. We believe this will lead to optically weaker y-y earnings growth, given that 3Q24’s gross margin benefited from a high base, as the company completed its additional inventory clearance from its overseas operations in 2Q24. We believe inventory clearance remains an inevitable and natural part of the retail business, particularly amid weaker-than-expected demand. We see limited downside risk to earnings following the 3Q25F results, although we acknowledge the sector’s current lack of catalysts.

Mitra Adiperkasa (MAPI IJ, Buy) – With MAPA remaining the company’s main growth driver, we expect moderate showing in MAPI’s upcoming results, especially as its ex-MAPA businesses have continued to record slower growth. The Starbucks F&B segment also remains challenging, having recorded three consecutive years of negative SSSG, while our industry survey indicates that other coffee chains have achieved SSSG in the 20–30% range this year. We continue to prefer MAPA over MAPI, as MAPI’s P/E ratio currently trades at a premium (at 8.2x FY26F) vs. MAPA at 7.6x despite its slower top line and EPS growth, and lower ROE.

Midi Utama Indonesia (MIDI IJ, Buy) – Alfamidi’s performance should not differ significantly from Alfamart’s, as we also expect the company to record low single-digit SSSG growth. However, reported y-y sales growth will likely appear optically lower following the Lawson divestment in May-25, given the higher sales base from last year when Lawson’s revenue was still consolidated. That said, on the earnings front, we believe Alfamidi is poised to deliver the strongest growth among retailers we cover in Q3, as the Lawson divestment removes a key drag on margins that has persisted over the past three years (Fig. 5).

Fig. 2: Indonesia 1Q23-3Q25F mid-upper-end mall traffic y-y growth – Expecting slower growth in 3Q25F

Fig. 3: Government expenditure seasonality – slower expense rollout in 1H25, with acceleration starting to be seen in 3Q25F

Fig. 4: Discretionary retail 1H25 y-y SSSG – broad-based weakness

Fig. 5: MIDI ex Lawson and Alfamidi only NPM – Lawson has been the main drag

Fig. 6: Minimarket and total market price off promotion – Peaked in early 2025 and has started to come down

INVESTMENT RATINGS
A rating of ‘Buy’, indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of ‘Neutral’, indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of ‘Reduce’, indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of ‘Suspended’, indicates that the rating, target price, and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies that are labelled as ‘Not Rated’ or ‘No Rating’ are not in regular research coverage. Benchmark is Indonesia Composite Index (‘IDX Composite’). A ‘Target Price’, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part of the analyst’s estimates for the company’s earnings, and may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market in general. 

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Jody Wijaya (jody.wijaya@verdhana.id)

Sandy Ham (sandy.ham@verdhana.id)

Samuel Christian (samuel.christian@verdhana.id