Hero to open more stores amid competition

The Jakarta Post, Jakarta

Publicly listed retailer PT Hero Supermarket said on Wednesday it planned to budget some Rp 200 billion (US$21 million) this year to open additional hypermarkets and stores in order to compete with other giant retailers.

Hero president Ipung Kurnia said the company would open four new Giant hypermarkets and one Hero supermarket in Greater Jakarta this year, as well as eight Guardian pharmacies and Starmart minimarkets.

"We have decided to allocate about Rp 200 billion in capital expenditure and not to distribute any dividend payment this year in order to help finance our expansion," said Ipung after the company's annual shareholder meeting.

Ipung said the capital expenditure would be drawn partly from the company's internal cash and from a five-year standby loan provided by Standard Chartered Bank.

For the past three years, Hero has been under pressure from several foreign-based hypermarkets and new retail players, which have opened stores near many Hero outlets.

The company has difficulty competing because it cannot match the lower prices offered by the hypermarket giants and the new retailers, analysts have said.

Hero has had to spend more on business repositioning and operational costs as a result of the stiffer competition, thus reducing its profit margins.

The company's net profit plunged by 93 percent last year to Rp 2 billion from Rp 32 billion in 2002. Nevertheless, its sales surged by 24 percent to Rp 3 trillion.

The company currently operates 222 stores and employs approximately 10,000 people.