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Japan: Retail Slump Dents Seven & I's Q1 Profit

Source: Reuters
02/07/2009

Tokyo, July 2 - Japan's largest retailer Seven & I Holdings reported a decline in first-quarter profit on Thursday, hurt by weak consumer spending amid a recession, and kept its full-year outlook.

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The firm and rival upscale stores and supermarket chains are suffering from a retail slump as consumers defer buying clothing and non-essential items during the recession or defect to cheaper specialty stores such as apparel chain Uniqlo.

Seven & I, which operates more than 12,000 Seven-Eleven stores in Japan and 6,300 in the United States, said sales continue to grow at its convenience store business, though not enough to make up for falls in other units.

Seven & I said its operating profit fell 17.5 percent from a year earlier to 58.6 billion yen ($606 million) for March-May.

The company's supermarket chain Ito-Yokado and rival Aeon Co Ltd (8267.T) have been slashing prices and expanding offerings of cheaper store-brand items to lure back shoppers but they have failed to stem the sales decline.

The tough spending environment has also prompted the retailers to take a more drastic approach to overhauling their operations, converting unprofitable supermarkets into discount stores.

Seven-Eleven stores in Japan posted same-store sales growth during the first quarter, helped by higher tobacco sales after the introduction of ID-requiring cigarette vending machines. Many smokers have opted to buy tobacco at convenience stores rather than go to the trouble of registering for the special ID cards.

But the company has forecast almost flat same-store sales growth for the full year after a 5.2 percent increase the previous year, as the effect of the tobacco-sales boost will disappear in year-on-year comparisons later this year.

For the full year ending in February, the company kept its forecast for 1.1 percent growth in operating profit to 285 billion yen, slightly above an average forecast of 282.8 billion yen in a poll of 18 analysts by Thomson Reuters.

Seven & I shares have shed about 25 percent so far this year, underperforming a 7 percent fall in the Tokyo stock exchange's retail sub-index.



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