Hero's profit drops 93% amid tougher competition

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.