> [from Merrill Lynch]
>
> Japan Macro Memo
> The Case For Japan
>
> Japan stands at a major inflection point. After more than a decade of
> stagnation, a new structural up-cycle is starting to emerge. Merrill
> Lynch forecast that Yen asset markets - equities and real estate -
> are poised to be both an important leading indicator and virtuous
> stabilizer in the coming Japan structural up-cycle. This time, the
> cycle is for real because:
===============================
Ito-Yokado profit plunges 71.2% Supermarket operator blames results on cool summer
The Japan Times: Oct. 10, 2003 By TAIGA URANAKA Staff writer
Ito-Yokado Co., Japan's largest retailer, on Thursday became the latest chain to report dismal first-half results due to the cool summer.
The group's supermarkets, including subsidiary stores, saw operating profit drop 71.2 percent to 4.8 billion yen and revenue decline 2.1 percent to 826.5 billion yen for the six-month period ending Aug. 31.
"These were the worst results for a first half," Ito-Yokado President Sakae Isaka said.
On a consolidated basis, the company logged a hefty three-fold growth in net profit to 23.24 billion yen on revenue of 1.77 trillion yen, which rose 1.4 percent from a year earlier.
That jump was largely due to a one-time loss booked a year ago. The increase in sales was thanks to group firms Seven-Eleven Japan Co. and IY Bank.
The company blamed quirky weather since the beginning of the fiscal year, which played havoc with its seasonal merchandising strategies.
After seeing poor sales in spring and early summer items due to the colder March and April, the chain held discount sales in June and early July to clear inventory for midsummer wares for the expected hot season. But the warmer temperatures never materialized.
As a result, sales at Ito-Yokado stores open at least a year dropped 2 percent year-on-year, with sales of high-margin clothing at these outlets down 5 percent.
The company said the challenge ahead is how to introduce items better tuned to the needs of consumers.
"General merchandise stores are said to be in oversupply, but it's not true," Isaka said. "The point is how to develop items that consumers want. The failure to do so was the biggest reason for the disappointing figures."
He added the chain will enlist more housewives as part-time sales floor attendants in a bid to differentiate it from competitors, as they are more knowledgeable about household matters than hires fresh out of school.
For the year through February, the company expects 48 billion yen in group net profit on 3.59 trillion yen in revenue.
7-11 still on hot streak
Seven-Eleven Japan Co., the nation's No. 1 convenience store chain, renewed profit and sales records in the first half of the business year despite the harsh retail environment.
The chain, whose outlets topped the 10,000 mark during the reporting period, said Thursday that aggressive store openings and expansion of original items helped extend its record-setting streak to 24 years.
The company is 50.6 percent owned by Ito-Yokado Co.
In its interim earnings report, the chain said group net profit rose 12.4 percent to 49.99 billion yen, and revenues likewise grew 12.4 percent to 239.38 billion yen.
Sales at all Seven-Eleven outlets -- an aggregate turnover of directly operated and franchise stores -- increased 5 percent year-on-year to 1.19 trillion yen.
The company attributed the results to the success of original items, which account for more than half of its sales. The chain has been expanding its variety of proprietary merchandise developed jointly with makers of national brands.
The chain also started a practice not before seen in convenience stores: distributing samples of food and drinks and making aggressive sales pitches.
It opened a net 312 outlets around the country during the six-month period, with 54 in Aichi Prefecture alone. There were no Seven-Eleven stores in Aichi until last year.
Company officials said they will continue the aggressive expansion policy.
For the full year through February, the company forecasts 90.8 billion yen in profit on 478 billion yen in revenue.