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Japan-Update

Japan's Aeon seen ringing up record first-half profit

Price cuts, stores tailored for locals drive traffic

TOKYO -- Aeon's operating profit likely jumped 16% on the year to about 84 billion yen ($750 million) for the six months ended August, its first record high for the period in 11 years, as shoppers flocked to stores customized for their communities.

Operating revenue probably rose 1% to about 4.15 trillion yen at the Japanese retail giant.

The general merchandise store segment saw a marked improvement in the first half. While the business is apparently still losing money, the operating loss likely narrowed by at least 5 billion yen from the year-earlier 18.3 billion yen.

This recovery owes partly to the success of a new store type that debuted fully in 2015. Aeon Style stores, of which Aeon has opened about 50 across Japan, are built to cater to specific subsets of consumers commonly found in the area, such as seniors or families. The Aeon Style Himonya store in Tokyo's Meguro Ward, for example, offers a variety of boxed meals and prepared foods with high-quality ingredients, targeting working women in dual-income households.

The company also brought in more customers with discounts on food and daily essentials. Aeon lowered prices on some 250 items by an average of 10% in April and implemented similar cuts for around 110 private-label products last month. Sales of discounted items jumped roughly 50% after the August markdowns.

The retailer boosted profits in the drugstore segment by adding prescription-dispensing pharmacies to more locations and expanding food selections. Continued solid showings by the financial services and shopping center development segments helped compensate for weakness in a supermarket segment that struggled amid a labor shortage and a lengthy rainy spell in August.

Overseas operations buoyed Aeon's earnings as well. Sales rose in such Asian markets as Vietnam, Malaysia and China as the brand's name recognition grew.

Aeon is expected to maintain its forecast for the full year ending February 2018 when releasing first-half results Oct. 4. It sees operating revenue rising 1% to 8.3 trillion yen and operating profit climbing 6% to 195 billion yen.

(Nikkei)

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