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Torikizoku headed for red ink as price hike deters eaters

'Izakaya' operator abandons plan to have 1,000 locations

Torikizoku raised prices for the first time in 28 years in 2017, but the strategy seems to have backfired. (Photo by Tetsuo Oshiro)

TOKYO -- Torikizoku, an operator of Japanese-style izakaya pubs, said Friday that it expects to book a parent-only net loss of 356 million yen ($3.2 million) for the year ending July, as customers continue to stay away after the chain raised prices on all items in 2017.

The company had originally forecast a net profit of 747 million yen, up from 662 million yen the previous fiscal year. Its sales forecast was apparently downgraded by 2 billion yen to 35.8 billion yen, an increase of 6%.

The results have forced the chain to call off its plan to expand its network to 1,000 locations, and to reformulate its strategy.

Torikizoku will book impairment losses associated with the closure of 21 unprofitable sites this fiscal year. It has struggled since embarking on its first price hike in 28 years in October 2017 -- a 6% increase to 298 yen for all menu items.

Sales at the country's izakayas and pubs have fallen for 10 straight years since 2009, according to the Japan Foodservice Association. Not only are competitors like restaurants eating into their share of the alcoholic beverage market, but they must also contend with the growth of low-cost chains, where customers only spend around 1,000 yen to 1,500 yen.

Torikizoku's rivals are not faring much better. Japan's six izakaya chains with annual revenue topping 10 billion yen each suffered a sales drop for the nine months through December. All but Colowide and Watami logged a decline in operating profit as well.

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