KOCHI: Lulu Group has quietly shut down its hypermarket operations in Malaysia, and is in the process of exiting Indonesia, marking a significant pullback from Southeast Asia, according to reports.

The retreat comes even as the retailer’s margins remain under pressure in its core market of the UAE and in India, prompting a rethink of its capital-intensive expansion model in the GCC, its flagship market.

Earlier this month, The Edge Malaysia confirmed that Lulu had shut down all six of its hypermarket operations in Malaysia, including the flagship CapSquare outlet in Kuala Lumpur, with effect from June 9, 2025.

Citing underperformance and poor footfall, the company reportedly continues only its wholesale operations in Malaysia. Reports from Inside Retail Asia and FocusM further corroborated that store clearances and subdued customer response preceded the exit.

In neighbouring Indonesia, signs of retreat are also becoming evident. Industry commentary, including updates on LinkedIn and The Leap Indonesia, suggest that Lulu is clearing shelves and closing stores, with its BSD City location already shut by end-April 2025.

While Lulu has not issued an official statement regarding its Southeast Asia exit, businessbenchmark.news sought comment from the company four days ago – but has received no response till the time of publishing.

Even beyond Southeast Asia, Lulu seems to be recalibrating its strategy amid tightening margins and changing retail dynamics.

In an earlier exclusive to businessbenchmark.news, a senior Lulu executive had revealed that the recently listed Lulu Retail may pivot away from its traditional ‘mall-based expansion’ strategy, choosing instead to adopt an asset-light model for future growth.

However, the Lulu executive confirmed that the mall-model will likely continue in its fast expanding India market.

The move comes at a time when the company’s own financials trigger discussions among analysts.

Despite the UAE accounting for 85 per cent of Lulu Retail’s net worth, the region generated only 35 per cent of its revenue during the first quarter of 2025.

In contrast, newer GCC markets with a lighter asset footprint delivered nearly two-thirds of the revenue while holding just 40 per cent of net assets – a stark signal that asset-heavy formats may no longer be economically viable, especially in price-sensitive markets.

Profit margin raises questions

Lulu Retail reported a net profit of $69.70 million on revenues of $2.08 billion for Q1 2025, translating to a net profit margin of 3.35 per cent.

In comparison, UAE-based grocer Spinneys posted a net margin of 9.38 per cent, nearly three times higher, for the same geography – an indicator that Lulu’s operational leverage and pricing strategy might need a rethink.

However, analysts cautioned that comparison between Lulu and Spinneys models may not make much sense as both models are way different functionally.

The Lulu Retail shares, listed on Abu Dhbai Securities Market (ADX) on November 14, 2024, has been trading at one-third discounr to its issue price of AED2.04 for some time now.

India operations

Meanwhile, back in India, Lulu’s mall and hypermarket operations too are facing teething troubles. Its Lucknow mall, operating under Lulu India Shopping Malls Pvt Ltd (LISMPL), carries large debt.

With long-term borrowings of Rs945 crore, the company reported a net loss of Rs100.7 crore in FY24, despite a rise in revenue to Rs547.8 crore from Rs350 crore in the previous year.

However, the loss has come down substantially from Rs147.7 crore a year ago. The financials for the year 2024-25 (FY25) are not available yet.

Another Lulu entity managing other malls and hypermarkets in India – Lulu International Shopping Malls Pvt Ltd – posted a widened net loss of Rs99.23 crore in FY24 despite increased revenues compared with the previous year.

The ICRA ratings for these entities have flagged concerns about debt servicing, modest debt service coverage ratio (DSCRs), and sustained delays in retail ramp-up.

“Taken together, these developments – from store exits in South East Asia, low profit margins, and a strategic rethink of its expansion model in GCC, Lulu group, a household name across much of the Gulf and South India, must be having serious rethinking on its way forward,” said an analyst from Dubai.