Food Business Lesruptions Affect Hero Decrease in Sales

INDUSTRY.co.id - Jakarta, PT Hero Supermarket Tbk (HERO) in the first nine months of 2017 suffered a negative impact from the decline in sales in the food business that continued in the third quarter after the Eid al-Fitr.

It also made HERO sales in the first nine months of 2017 5 percent lower to Rp9.96 trillion from Rp10.47 trillion in the same period the previous year.

"This is a result of the declining sales of the food business," said Stephane Deutsch as the President Director of HERO in his official statement in Jakarta on Tuesday (31/10/2017).

In the meantime, when seen better operating profit supported by the profitability of Guardian and IKEA higher than the previous year.

The Company recorded a net profit of Rp70 billion for the first nine months of 2017, up from Rp45 billion in the same period in 2016.

Sales in the food business fell 8 percent to Rp8,342 billion as a result of negative sales of like-for-like and store closures with weak performance in the supermarket and hypermarket segments.

Sales in the Guardian and IKEA grew 13 percent to Rp1, 61 trillion compared to Rp1, 43 trillion in the previous year, mainly driven by strong performance like-for-like. As of September 2017, the Company has net cash of Rp 60 billion.

"In the food business, competition is getting tighter because the minimarket operators continue to invest heavily in the development of their business networks," he said.

According to him, we are currently undertaking initiatives to improve ongoing food business performance including reviewing pricing and promotion strategies, improving supplier service levels, and improving supply chain distribution to improve store stock availability.

"A broader strategic review is underway to strengthen future growth plans in the food business," he explained.

In Giant, the second Extra Giant store in Malang has been opened. At Hero Supermarket, planning is underway to revitalize the store in response to satisfactory results from the renovation of the pilot store that opened earlier this year.

The Guardian benefits sustainably from a weak-performing store rationalization program by 2016. A greater focus on the beauty segment has been in synergy with customers, this category has driven most of this year's growth.

"Efforts to strengthen the scope more broadly continue as a response from businesses that are increasingly responsive to customer needs," Stephane said

Meanwhile, in IKEA, sales performance increased significantly compared to the previous year. The new IKEA catalog, focusing on the concept of living room, was launched in September and was well received by customers.

On the other hand, IKEA online trading activities continue to grow along with IKEA E-commerce Distribution Point which opened in Surabaya to support the growth of online sales in the future.

As of September 30, 2017, the Company operates 450 stores, slightly changed from the end of the previous year; consists of 57 Extra Giant, 108 Giant Express, 32 Hero Supermarket, 2 Giant Mart, and 250 Guardian stores, as well as one IKEA shop.

Current trading conditions are expected to remain the same until the end of this year. Considering the still challenging trading conditions in the food business, the Company is conducting a strategic review to support long-term profitability for the company.