TOKYO -- Duty-free retailer Laox's operating profit likely plunged about 90% on the year to 500 million yen ($4.69 million) in the January-September period, as the strong yen and higher import taxes imposed by Beijing hurt spending by Chinese tourists visiting Japan.
The Japanese company's sales apparently fell 40% to around 45 billion yen. Typical tourist purchases have shifted from higher-end products such as watches and rice cookers to lower-cost items including beauty appliances, cosmetics and pharmaceuticals, cutting spending per customer 30-40%. Competition intensified as drugstores also began duty-free sales.
Rising labor costs and rent from increased store numbers also exacted a toll on profit. By the end of September, the retailer had added 12 stores on the year to operate 42 shops. Though unprofitable outlets outside major urban areas were closed, the impact of streamlining measures was limited.
January-September results are due out Monday. The decline in spending per customer is expected to continue through the final quarter, increasing the likelihood of the company missing its full-year guidance. Laox projects operating profit to drop 85% to 1.2 billion yen for the year ending in December.