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Business trends

Japanese service companies find overseas route to fatter profits

Nikkei data shows retailers and eateries increased foreign sales 60% in 5 years

A Lawson store in the Philippines. The Japanese convenience store operator finds itself relying more on its overseas operations for greater profits.

TOKYO -- Japanese retail and restaurant chains are becoming more reliant on overseas operations for increased profitability. The Lawson convenience chain's Chinese operations are set to turn a profit as soon as 2020, and the Asia business of Saizeriya, a chain of family-style Italian eateries, is set to make up more than half of the company's consolidated operating profit.

Companies are trying to cultivate more customers overseas as Japan's market continues to shrink as the population declines.

The overseas sales of about 2,000 non-manufacturers totaled 28.6 trillion yen ($262.95 billion) in the fiscal year that ended last March, according to data compiled by Nikkei. While that is relatively low compared to manufacturers' 204 trillion yen total, it is more than 60% higher than five years earlier. For manufacturers, that figure grew 28% during the same span.

Overseas sales have grown to make up nearly 10% of non-manufacturers' total sales. For 60 companies that break out figures for overseas profits and losses, profits stood at 310 billion yen, 2.1 times greater than five years earlier.

One reason overseas profits are playing a greater role in supporting the balance sheets of Japanese companies is the swelling number of middle-class consumers in China and Southeast Asia.

Lawson opened shop in Shanghai in 1996. By the end of the year, it is set to have 2,650 stores in China, up 30% from the beginning of the year. The convenience store operator aims to have 3,500 outlets in the country by the end of 2020.

Uniqlo, Muji and other brand retailers from Japan are also planning to open additional stores in China.

For Uniqlo, the chain of casual clothing stores operated by Fast Retailing, its overseas profit for the fiscal year that ended in August surpassed its profit in Japan for the first time. The main driver was its profit for the greater China area -- mainland China, Hong Kong, Taiwan and elsewhere -- which grew 21%.

Saizeriya is also popular with middle-income earners. The operating profit at its Asia operations are nearly two times greater than they were five years ago.

In many of these markets, if companies are able to improve their brand awareness among consumers, they are able to move into existing commercial facilities at advantageous terms, which over time makes profitability easier. And strengthening their brands also helps Japanese companies compete with Western rivals.

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