April 13, 2017 7:25 am JST

Most of Japan's big retailers eyeing higher profits this fiscal year

More shoppers on the lookout for value, not just price

A customer checks out the goods at a Seven-Eleven convenience store in Amagasaki, Japan.

TOKYO -- Net profit is on a growth track at 43 of 57 major Japanese retailers this fiscal year as stores lure choosy shoppers by supplementing bargains with products that cost more but offer added value, such as health benefits and increased safety.

Overall net profit declined 3% at the 57 retailers that had reported by Wednesday their results for the year ended February. But their projections for the current year show a solid 26% increase. A third of the major retailers expect record profits.

Retail giant Aeon sees operating revenue gaining 1% to 8.3 trillion yen ($76 billion). Net profit is projected at 15 billion yen, up 33%.

"Customers are now focusing on value, not just price," said Soichi Okazaki, president of general-merchandise unit Aeon Retail.

In response, Aeon aims to convert former Daiei discount supermarkets into Aeon Style and other stores, stocking them with wine and deli offerings to attract customers willing to pay a bit extra for better products. In addition to low-priced generic items, Aeon's private-label offerings also include such popular value-added products as fish certified for safety and organic meat.

The share of income spent on food rose to 25.8% last year for households of two or more people, a level not seen in 29 years, according to a government survey. This reading for the so-called Engel coefficient indicates thriftiness on clothing and other items as well as the higher demand for ready-to-eat and frozen food that accompanied the rise in dual-income households.

Supermarkets and convenience stores are busy capturing this demand. Seven & i Holdings, enjoying brisk sales of frozen and ready-to-eat food at convenience stores, expects to hit a record net profit for the first time in four years this fiscal year.

At competitor Lawson, customers have flocked to low-carb baked goods and green smoothies rich in vegetables. While mounting investment in store equipment is projected to drag down profit, sales will likely climb 7%.

But the outlook is not so rosy at department store operators. Takashimaya and J. Front Retailing see apparel sales shrinking about 5%.

While many of the major retailers are apparently benefiting from the rise of value-focused shoppers, plenty of others are still growing earnings by appealing to the bargain-minded. Clothier Shimamura, which is also heading toward a record profit, is expanding its lineup of functional products while maintaining its commitment to low prices. It boosted customer traffic last fiscal year through discounts on hot-selling items.

"We will continue to offer low-priced products," Shimamura President Masato Nonaka said.

Businesses serving consumers, including restaurants, hold a rather tough outlook. Among 50 retailers and restaurant operators surveyed by The Nikkei, only five respondents lean bullish on personal consumption trends, while 70% see consumption remaining flat.

(Nikkei)

AEON Co., Ltd.

Japan

Market(Ticker): TKS(8267)
Sector:
Industry:
Retail Trade
Food Retail
Market cap(USD): 12,971.4M
Shares: 871.92M

Seven & I Holdings Co., Ltd.

Japan

Market(Ticker): TKS(3382)
Sector:
Industry:
Retail Trade
Food Retail
Market cap(USD): 37,944.2M
Shares: 886.44M

Lawson, Inc.

Japan

Market(Ticker): TKS(2651)
Sector:
Industry:
Retail Trade
Food Retail
Market cap(USD): 6,771.35M
Shares: 100.3M

J. FRONT RETAILING Co., Ltd.

Japan

Market(Ticker): TKS(3086)
Sector:
Industry:
Retail Trade
Department Stores
Market cap(USD): 3,799.03M
Shares: 268.11M

Takashimaya Co., Ltd.

Japan

Market(Ticker): TKS(8233)
Sector:
Industry:
Retail Trade
Department Stores
Market cap(USD): 3,342.25M
Shares: 355.51M

SHIMAMURA Co., Ltd.

Japan

Market(Ticker): TKS(8227)
Sector:
Industry:
Retail Trade
Apparel/Footwear Retail
Market cap(USD): 4,747.87M
Shares: 36.91M

Get Insights on Asia In Your Inbox

To read the full story, Subscribe or Log in

Get your first month for $0.99

Redeemable only through the Subscribe button below

Once subscribed, you can…

  • Read all stories with unlimited access (5 articles per month without subscription)
  • Use our smartphone and tablet apps

To read the full story, Subscribe or Log in

3 months for $9
SUBSCRIBE TODAY

Take advantage of this limited offer.
Subscribe now to get unlimited access to all articles.

To read the full story, Update your account

We could not renew your subscription.
You need to update your payment information.

To read the full story, Subscribe or Log in

Once subscribed, you can…

  • Read all stories with unlimited access (5 articles per month without subscription)
  • Use our smartphone and tablet apps

To read the full story, Subscribe or Log in

3 months for $9
SUBSCRIBE TODAY

Take advantage of this limited offer.
Subscribe now to get unlimited access to all articles.

To read the full story, Update your account

We could not renew your subscription.
You need to update your payment information.