Tokyo, July 8 - Top Japanese retailers Seven & I Holdings Co and Aeon Co reported sluggish quarterly profits on Tuesday as consumers cut back spending amid rising prices of gasoline and food, but they stuck with their full-year growth targets.
Weak consumer sentiment is especially hurting general merchandising and department stores, which have a higher proportion of non-grocery items.
"Except for grocery stores (which sell daily necessities), the entire retail sector is having a very difficult time," said Masatsugu Okeya, a market analyst at Chibagin Asset Management.
"Apparel sales are weighing down general merchandisers like Aeon, and regional shopping centres are seeing dull same-store sales because of high gasoline prices."
Seven & I said profit falls at its general merchandising stores and department stores offset a relatively solid performance at its Seven-Eleven convenience stores in Japan and financial service business.
Its flagship Ito-Yokado superstores posted a 3 percent decline in its same-store sales during the March-May quarter, dragged down by poor clothing sales.
The firm's U.S. convenience store unit, 7-Eleven Inc, also booked a profit fall, hurt by surging gas prices.
The company, with a market value of about $28 billion, said its operating profit was flat at 71.1 billion yen ($664 million) in the three months ended May and it kept its full-year forecast of a 294 billion yen profit, up 4.6 percent from a year earlier.
The outlook was lower than a mean operating profit forecast of 296.3 billion yen from 15 analysts polled by Reuters Estimates.
Analysts expect Seven-Eleven and rival convenience stores to get a boost from increased cigarette sales from the second quarter. Seven & I generated over 70 percent of its operating profit from its convenience stores last business year.
Tobacco vending machines in Japan will require the use of smart ID cards starting in July, prompting smokers to switch to buying their cigarettes in stores.
AEON SUFFERS
The picture was more bleak for No.2 retailer Aeon, which posted a 20 percent decline in first-quarter profit, hurt by a dismal performance by its main general merchandising stores and U.S. clothing chain Talbots Inc.
Despite the steep profit decline, the firm kept its full-year profit outlook, with operating profit forecast to grow at least 5.7 percent, saying it would rein in spending.
The operator of Jusco stores said its operating profit fell to 22.65 billion yen for the three months ended in May.
The firm said it saw solid sales of food items, buoyed by strong growth of its store brand goods, which attracted shoppers as a cheaper alternative when many national brands raised prices.
"But we were not up to speed in apparel and home fashion, which are divisions with relatively high profit margins," Masaaki Toyoshima, Aeon executive vice president, told a media briefing.
While Talbots continued to hurt Aeon for the first quarter, Toyoshima said turnaround efforts by the struggling U.S. chain selling female apparel were on track and some of the results would start to show this summer.
"We are looking forward to August, when Talbots will be reborn with new merchandise," he said. "Talbots is becoming a little more sophisticated from its uncool image of the past."
Before the earnings announcement, shares of Seven & I ended up 0.3 percent at 3,140 yen, outperforming a 2.5 percent decline in the benchmark Nikkei average.
Aeon closed down 5.4 percent at 1,234 yen a few minutes after its results. Its shares plunged more than 7 percent earlier in the day. ($1=107.06 Yen)