R

etailer Hero Supermarket has set its sights on opening new flagship Hero Supermarket outlets next year after five years of not opening any new stores due to tight competition and a sluggish economy.

“We are still reviewing our expansion plan, but we are planning to open Giant and Hero supermarkets in several places, such as Manado in North Sulawesi,” Hero president director Stephane Deutsch said on Thursday.

This will be the first time a Hero Supermarket has opened since 2012. For years, the company has focused on generating money through Giant hypermarkets, which aim to serve the mass market.

The company faced massive store closures in recent years as competition ate up its convenience store business Starmart, as well as Hero supermarkets, Guardian pharmacies, Giant Ekspres and Giant Ekstra stores. The company shut down more than 100 stores last year, operating a total of 610 stores as of December 2015.

Following the store closures, sales declined by 1 percent year-on-year to Rp 7.1 trillion (US$539.6 million) in the first half of this year while gross profit rose 7 percent to Rp 1.74 trillion.

Hero is optimistic that there is growth potential in the retail sector next year after the retail chain managed to grow profits despite a decrease in sales in the first half of this year, company executives said.

The company’s food and grocery business unit, namely Giant Ekstra and Ekspres as well as Hero supermarkets, is the company’s biggest revenue contributor despite decline in its profitability due to lower sales and higher costs, Stephane explained.

Based on the company’s review, Indonesia’s modern retail market, which contributes 20 percent to nationwide retail trade, will expand in the future as consumers start to shift their shopping patterns from buying food supplies at traditional markets to grocery stores.

“Traditional markets dominate the market with an 80 percent share, but consumers are going modern. So, there is still room for growth in the modern retail market,” Stephane said.

Hero Supermarket independent director Arief Istanto said the company expected to open four to five Giant outlets in East Java, Central Java and Manado.

The company’s management declined to mention the total capital expenditure (capex) prepared for the expansion plan next year as the review was still ongoing, but Arief said the amount would likely be higher than what was allocated in 2016.

The group spent Rp 212 billion in capex during the first half of this year, lower by 21 percent as compared to the same period of 2015. About 53 percent of the capex spent in the first half of this year was used for expansion of new stores, including new Giant outlets in Palembang, South Sumatra and Lombok, West Nusa Tenggara.

As of June, the group operated 476 stores comprising 55 Giant Ekstra, 150 Giant Ekspres and Hero Supermarkets, 270 health and beauty Guardian shops and one IKEA franchise.

Arief revealed that the company was debating adding a new IKEA store next year following its success in attracting 5 million visitors since the launch of its first IKEA store in Alam Sutera, Tangerang, Banten two years ago.

“I cannot comment any further on IKEA because we are still in discussion with the brand’s head office in Sweden,” he said.