TO entrench its presence in the consumer home improvement industry even further, MR DIY Group (M) Bhd is trialling a different store strategy on top of its existing one in the hopes of capturing more sales to meet its targets.
The group’s chief executive officer Adrian Ong (pic) tells StarBizWeek that its expansion strategy to grow is still on track despite the pandemic and it recently began with a different store concept in certain locations, starting off first in the rural areas.
“We have decided to trial a new store front format and have decided to call it MR DIY Express. To summarise it, this is a mini version of our flagship brand MR DIY, ” Ong (pic below) says.
“This type of store would be a different format and size than the usual. Historically, we usually add very large types of stores of 9, 000-10, 000 square feet (sq ft) in size. Usually, we are the junior anchor (tenant) in many malls due to the size, ” he adds.
Ong explains that this newest strategy to secure its growth path makes business sense because product demand differs in different locations.
“For MR DIY Express, we are going to build 2, 000-sq-ft stores. To date, we have four of such stores: one in Kelantan, one in Negri Sembilan, one in Malacca and another in Johor, ” Ong says.
“This allows us to open in rural areas. The smaller store will allow us to offer about 30% of the products that we have in our typical store. The offering will be suited to the community living there. This lets us bring modern retail to rural communities, providing service to these consumers which may be less well-serviced, ” he adds.
He notes that the results of the smaller store opening have been very good thus far and the group will like to add more of such stores in the future.
“I think this (concept) will continue to add weight as we go along. With these smaller stores, our sales targets are lower, as in the revenue per sq ft will be higher while cost structures will be in our favour, ” Ong says.
“This will mean lower rentals, lower utility bills and a smaller staff strength to manage the store. This also lets us open in a shorter space of time which will add to our overall efficiency as a group. This lets us also employ a lower risk to return strategy for growth, ” he adds.
Other than reaching out to the rural community, the strategy also allows MR DIY to reach out to the urban zones where it is unable to find larger floor space to house its stores.
“Or sometimes it can be expensive to do so and it just does not make economic sense (to open a bigger store). So in this situation, we can opt for a smaller store of 2, 000 sq ft with a higher rent per sq ft, but keeping in mind to maintain a better per sq ft rental in the overall mix, ” Ong says. “While it is still small (proportion) now, we may take this further from here even for the urban areas, ” he adds.
The group continues to maintain its target to add 175 stores to its overall group network by the end of financial year 2021 ending Dec 31 (FY21) despite the continued economic impact of the Covid-19 pandemic.
“We were ahead of our target in the first quarter of this year. And this places us in a very good position as we added 54 stores which puts us ahead of our first-quarter target. This gives us a bit of leeway should things slow down. Nobody can predict where things will go but we hope things will improve quickly following vaccinations, ” Ong says.
In its recent report following MR DIY’s first-quarter results, Hong Leong Investment Bank Research (HLIB Research) notes most of its store openings were stand-alone stores.
“We are encouraged by this strategy in light of the change in consumer behaviour in avoiding crowded shopping spaces in favour of the easily accessible stand-alone stores closer to home. Despite Covid-19 headwinds, we are impressed by the group’s resilience in maintaining the growth trajectory with a steady pace of store additions, ” HLIB Research says.
It notes that its first-quarter results with a core net profit of RM125mil had matched its expectations and accounts for 26.8% of its forecast. HLIB Research has maintained its “buy” call on MR DIY with a higher target price of RM4.79. Its shares closed at RM3.66 yesterday. This is based on higher price to earnings multiples of 50 times from 40 times that is pegged to the FY22 earnings per share.
The company continues to be closely followed by the investment community and its recent addition to the constituent of the benchmark FBM KLCI also further widens its appeal internationally. Tapping further growth also looks likely to be key in sustaining this interest.