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Business trends

Japan's cafes and bars struggle as sales plunge 40%

Chains cancel earnings guidance as sales sink amid coronavirus restrictions

A Starbucks coffee shop is closed in Tokyo's Ginza district.

TOKYO -- Restaurant chains in Japan are taking earnings guidance off the menu after shutdowns and limited hours caused by the coronavirus pandemic have made near-future projections hard to predict, with sales in March down almost 40% at some companies.

One week after Tokyo's municipal government called for a full or partial shutdown of businesses in the industry, the murky financial outlook is also dealing a serious blow to workers as companies are forced to find creative ways to make payroll.

"We chose to close our stores for the safety [of customers and employees], and we don't know when we can reopen," Masanori Hoshino, Doutor Nichires Holdings president, told an analyst briefing Wednesday. The company, which closed about 590 coffee shops and restaurants, refrained from issuing guidance for the year through February 2021.

Same-store sales plunged 22% on the year in March as consumers increasingly shunned dining out. Now with the store closures, Doutor Nichires is certain to face a further drop for April after posting a 2% increase in net profit to 6 billion yen ($55.1 million) for last fiscal year.

Bars have also seen sales sink during the epidemic, as many prefectures, including the nation's capital, have asked that alcohol stopped being served at 7 p.m. and close doors at 8 p.m. Hub, which operates British-style pubs, suffered a 39% drop in same-store sales in March before shutting all 114 directly-run locations.

SFP Holdings, the parent of more than a dozen restaurants and izakaya pubs, suspended operations at all 228 directly run eateries this month. Both Hub and SFP Holdings skipped issuing earnings guidance for the current fiscal year.

Of 13 eatery companies that released fiscal 2019 results by Friday, all but one -- curry restaurant chain Ichibanya -- chose not to offer a profit outlook for the year to February.

With Japan expanding a state of emergency to all prefectures Thursday, more restaurants are shifting to reduced hours or closing doors altogether.

McDonald's Japan expanded the dining area closure from 8 p.m. to 5 a.m. to 1,410 stores Saturday in line with guidance for reduced hours from three prefectures, including tourist-destination Kyoto.

Zensho Holdings has also started closing the doors at more of its beef-bowl eateries and other restaurants during late-night hours.

Paying workers during the shutdowns poses a tricky question.

Hub is continuing to pay full-time employees their full salaries, applying for the maximum amount of government subsidies for retaining jobs. For part-timers, the Tokyo company in April is providing 60% of their average pay from the past three months.

Noodle restaurant chain Ringer Hut has asked contract employees and part-timers to use paid leave and is considering guaranteeing 80% of their pay after that.

Prolonged shutdowns are feared to hurt both workers and their employers.

If restaurant companies can negotiate rent and use government subsidies, "they could keep overhead expenses down to about 20% of their sales," Seiichiro Samejima of the Ichiyoshi Research Institute said.

But some companies are having trouble negotiating with property owners. "Big real estate companies are giving us a break, but negotiating rent with smaller landlords is not easy," said an executive at a leading restaurant operator.

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