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ublicly listed retailer PT Sumber Alfaria Trijaya (Alfamart) will open fewer stores this year due to a decline in the purchasing power of the lower-income population, which makes up the majority of its customers.

Last year, Alfamart set a target to open 1,111 new outlets across Indonesia, but it would only be able to open 800 in 2018, Alfamart finance director Tomin Widian said on Monday.

The company will use a major portion of its Rp 2.3 trillion (US$167.9 million) in capital expenditure to finance the 800 new outlets and extend store leases.

The new outlets, comprising 150 franchise stores and 650 regular ones, will be opened in Java and the eastern part of the country.

As of December 2017, Alfamart has 13,477 outlets with more than 400 suppliers for various products.

“We will be more selective in expanding stores as we are really considering the profitability aspect,” said president director Hans Prawira after an event on Monday.

Alfamart executives acknowledged that, alongside weak industry growth, the company’s financial performance was hurting last year due to declining purchasing power in the lower-income segment and intense competition.

Hans cited data from research firm Nielsen Indonesia that showed the country’s retail industry saw negative growth in the first two months of 2018.

The ongoing weak demand has forced the company to juggle between maintaining its day-to-day operations and paying fixed costs, such as labor and rent fees. Labor costs, Hans said, remained the biggest component, yet it could not be dealt with easily as the minimum wage rose every year.

“We didn’t meet our sales expectations last year; this caused our profitability to drop significantly,” he said.

The convenience store retailer booked 9.4 percent growth in net sales to Rp 61.4 trillion in 2017 from a year earlier. The growth was a far cry from the 16.2 percent seen in the year-on-year (yoy) net sales of 2016.

The increase in expenses and slowdown in sales forced the company’s net profit to nosedive by 50 percent yoy to Rp 300 billion in 2017 from Rp 601 billion.

To improve its performance, Alfamart is in the process of adjusting its selling strategy to better suit customer needs.

For example, Hans said, outlets located in residential areas would sell products in larger packages, while smaller, more practical products would be sold in transit locations.

At least 400 outlets in Bogor, West Java, have been involved in pilot projects to implement the customized approach.

The company’s executives, hopeful that sales this year will be boosted by the Ramadhan and Idul Fitri festivities in May and June, forecast sales growth of 15 percent during the events.

Moreover, the upcoming Asian Games in August and September, simultaneous regional elections in June and Christmas and New Year festivities are also expected to boost profits.

In an effort to strengthen its relationship with suppliers, Alfamart announced Monday its collaboration with Standard Chartered Bank Indonesia. The bank, claiming that it offered attractive interest rates, will provide financing worth Rp 350 billion to support Alfamart suppliers.

Alfamart shares, traded at the Indonesia Stock Exchange under the code AMRT, closed at Rp 585 apiece on Monday, a 4.10 percent decrease from the previous trading day.