Aeon lifts profit forecast on revamp boost

TOKYO: Aeon Co Ltd, Japan’s largest retailer by sales, upgraded its full-year earnings forecast by 2.6%, helped by restructuring at its struggling general merchandising stores (GMS).

The supermarket and shopping mall operator said it expected operating profit to hit 200 billion yen (US$1.78bil) in the year through February. It made no change to its sales forecast.

For the six months through August, Aeon said improved performance at its GMS division helped lift profit 17.5% to 85 billion yen.

Aeon has been battling to turn around its general merchandise stores, which once flourished selling goods as varied as fresh foods and white goods, but have increasingly struggled as discount stores and specialists in products such as clothing and electronics draw customers away.

With supermarkets, convenience stores and drug stores fighting to attract Japan’s thrifty consumers, Aeon has continued to cut prices, most recently in August with reductions on more than 100 own-brand grocery items across 2,800 stores.

While retailers continue to cut prices, there are signs firms in worker-intensive service sectors are struggling to absorb rising wage bills during Japan’s tightest labour market in decades.

Examples include companies famous for low prices such as grilled chicken restaurant chain Torikizoku Co Ltd, which this month raised prices for the first time in 28 years.

Yesterday, Asahi Group Holdings Ltd also said it would raise prices for the first time in 10 years, with its hike focused on products such as bottled and barrelled beer.

The brewer is being squeezed by falling beer consumption and rising delivery costs, and analysts have pointed to price hikes feeding through to higher retail prices.