Sat, 21 Feb 2004

Hero's profit drops 93% amid tougher competition

The Jakarta Post Jakarta

Publicly listed retailer PT Hero Supermarket said on Friday that its net profit plunged by 93 percent last year due to the huge costs of business repositioning amid tougher competition in the industry.

In a press statement on Friday, the company said its profit dropped to Rp 2 billion (about US$238,095) last year from Rp 32 billion in 2002.

Nevertheless, its sales surged by 24 percent to Rp 3 trillion, but operating profit declined to Rp 43 billion from Rp 48 billion.

Hero president Ipung Kurnia said the decline was mostly because of the company's move in spending Rp 49 billion mainly for closing down several of its stores. The company also suffered a declining asset value in its bakery business.

Analysts said that for the past three years, Hero was under pressure from French hypermarket Carrefour, which has opened stores near many Hero markets.

Hero has difficulties competing with Carrefour because it cannot match the prices offered by the hypermarket giant.

Analysts also said that Hero had to spend more on operational costs as a result of the stiffer competition in the retail sector, thus reducing its profit margins.

In a bid to compete with Carrefour and Dutch hypermarket Makro, the company made the decision to expand its business by opening four hypermarkets of its own, named Giant, as well as eight Guardian pharmaceutical stores and four Starmart stores.

The company also acquired 22 Tops supermarket outlets last year, which will be rebranded and integrated into the Hero supermarket family, in a bid to accelerate the expansion of its network at a relatively low cost.

"Our key priorities are to reposition our overall business and continue to expand Giant and other successful formats," said Ipung in a statement.

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