TOKYO -- Shimamura's group operating profit likely fell 10% on the year to about 44 billion yen ($415 million) for the year ended February to miss its standing projection of 5% growth to 51.2 billion yen.
This would mark the first decline since the year through February 2015. Sales are seen roughly flat on the year at around 567 billion yen, undershooting the forecast as of December by roughly 27 billion yen.
Existing-store sales dropped 3% at the Fashion Center Shimamura chain, which generates 80% of revenue. Shimamura's overall domestic sales declined for the first time in nine years as a result.
Low-priced underwear was in demand, but the company could not restock fast enough to fully capitalize on it.
Shimamura narrowed its range of perennial products, such as T-shirts and other cut-and-sew garments, by 10% in an effort to lower inventories. This ended up driving bargain hunters away.
Increased discount sales to shore up the falling revenue drew in shoppers, with traffic rising 1%. Sales per customer sank more than that, however, depressing margins further.
Some original products, including pants with a warm inner lining, sold well. But the company could not follow up with more hits.
The operating margin fell around 0.8 percentage point to 7.8% as higher advertising and labor costs exerted downward pressure.
In the current year ending February 2019, Shimamura apparently aims to grow sales and profit by accelerating store openings inside and outside Japan to 100 or so from last year's 87. It plans to limit discount sales by introducing a more precise inventory management system.
Results for the just-ended fiscal year come out April 2.