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Hero shuts down 74 stores as purchasing power weakens
Getting bigger: Customers shop at an IKEA store in Alam Sutera, Tangerang, Banten, on Sunday
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Getting bigger: Customers shop at an IKEA store in Alam Sutera, Tangerang, Banten, on Sunday. With 4,000 to 5,000 customer visits to the store every weekend, PT Hero Supermarket is considering opening a second store on a 5-hectare plot of land in Jakarta to boost the companyâs business performance. Hero recorded negative growth during this yearâs first half.(JP/Ricky Yudhistira) (JP/Ricky Yudhistira)
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span class="inline inline-center">Getting bigger: Customers shop at an IKEA store in Alam Sutera, Tangerang, Banten, on Sunday. With 4,000 to 5,000 customer visits to the store every weekend, PT Hero Supermarket is considering opening a second store on a 5-hectare plot of land in Jakarta to boost the company's business performance. Hero recorded negative growth during this year's first half.(JP/Ricky Yudhistira)
Publicly listed retail company PT Hero Supermarket (Hero) has closed the doors of dozens of its stores during the first half of this year to cut costs amid the domestic economic slowdown that has weakened purchasing power.
The company said on Friday that it had closed down 74 of its 715 stores in operation.
'We closed down stores to optimize our portfolio,' the company's finance director, Xafier Thiry, said during a press briefing in Central Jakarta on Friday.
Sixty-one of the closed stores were small-format stores, while the remaining 13 were large format. The small-format stores comprised 39 Starmarts and 22 Guardians, while the large formats involved 10 Ekspress or Hero and three Ekstras, according to Thiry.
According to Thiry, in addition to weakening purchasing power, the shutdowns were caused by one-off factors such as the recent government ban on the sale of alcoholic drinks at minimarkets such as Starmarts. The regulation was enforced in April.
'Performance in the second half was negatively affected by one-off factors,' he said, citing the
company's failure to renegotiate the extension of leases with landlords as another example of the one-off factors.
The company's director, Arief Istanto, explained that often times the company stopped the operation of a store because the landlord had not extended the lease. 'The contract was not extended because it depended on the landlord [whether to continue or stop],' Arief told reporters.
When asked whether store closures would continue in the second semester, Thiry said that closures were normal and that the company might close more stores in the second half to maintain its portfolio. However, he expected closures in the second half to not be as intense as in the first half.
'It [closures] is part of our daily life. We are closing stores every year and every semester. We believe that we need that to change our portfolio,' he said.
Although Hero ran less stores in the first half, it saw a 15 percent sales increase to Rp 7.48 trillion (US$519 million) from Rp 6.5 trillion in the same period last year. The majority of the sales came from the company's large-format stores such as Hero, Giant and Ikea at Rp 6.87 trillion.
'As much as 80 percent of our revenue comes from large-format stores,' the company's president director, Stephane Deutsch, said.
But the rise in sales was not enough to boost profits as the company suffered Rp 32 billion in losses because it had to pay a deficit in stocks from previous years, according to Arief.
One of the company's stores that showed positive performance during the first half was household appliance store Ikea, which the company rolled out in 2012. Arief said that the first Ikea store performed well in the first half and was preparing to install another store sometime next year.
'We are seeking 5 hectares to build the second Ikea. We want it to be either in South or East Jakarta. We will build it in Sentul, Bogor, West Java,' he said, adding that the existing Ikea store was drawing around 4,000 to 5,000 people each week. (saf)
