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Japan-Update

Hello Kitty maker says goodbye to profit growth for fiscal 2017

Japan's Sanrio cuts forecast as online retail erodes store traffic

Sales tied to Sanrio characters have slowed at stores inside and outside Japan.

TOKYO -- Sanrio, the company behind Hello Kitty, now sees group net profit falling during the fiscal year ending in March for a third straight annual decline amid a drop in sales at bricks-and-mortar stores as more consumers opt to shop online.

The Japanese company lowered its net profit forecast Tuesday to 4.8 billion yen ($42.6 million), representing a 26% decrease from fiscal 2016. Sanrio had projected a 20% rise to 7.8 billion yen. Sales now are expected to dip 4% to 60.3 billion yen, a downgrade from the previously forecast 5% rise.

Sanrio also cut its fiscal 2017 dividend projection to 55 yen per share, down 25 yen from fiscal 2016.

The company faces a slump domestically at its stores outside major urban centers, as well as sluggish demand from big-box retailers carrying its goods. U.S. operations have seen fewer orders from licensees, hurt by a business climate that has forced Toys R Us to file Chapter 11 bankruptcy protection and depressed sales at Wal-Mart Stores.

Though Sanrio operates its own online store, domestic e-retail accounts for a mere 2% or so of total sales. Drastic measures to bolster digital operations will be needed to get the company back on track toward growth. Investors will watch for such steps in the new medium-term business plan due out next spring.

(Nikkei)

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