Supermarket sales slump as convenience stores boom

While slackened private consumption continues to hurt supermarket chains, convenience stores are enjoying robust sales, according to business reports announced Thursday by major retailers.

Ito-Yokado Co., Ltd. reported 1.51 trillion yen in unconsolidated sales in the business year that ended Feb. 29, marking the first drop since the major supermarket chain went public in 1972.

The operating profit of the Tokyo-based retailer plunged 42.7 percent from the previous year to 30.5 billion yen, and the pretax profit dropped 28.3 percent to 51.1 billion yen.

“With demand shooting up and then suddenly falling, we were left with a heap of stocks and we had to sell them at big discounts,” said Akira Miyauchi, chief financial officer of Ito-Yokado.

This is the first time for the company to suffer year-on-year drops both in sales and profits, Miyauchi said.

By item, sales of clothes dropped 5.2 percent to 425.3 billion yen and that of other household goods fell 4.5 percent to 249.7 billion yen. The declines came despite an increase in the number of its outlets during the past business year; nine new stores were opened and two closed.

Jusco Co., another supermarket chain operator, saw its unconsolidated sales for the past business year grow 8.2 percent to 1.42 trillion yen. The increase, however, was attributed to the opening of 27 stores. The major supermarket chain closed 12 stores in the same period.

With the newly opened stores excluded, sales declined 5.8 percent from the previous year, according to Jusco President Motoya Okada.

Jusco’s operating profit for the year declined 15.1 percent to 20.6 billion yen and pretax profit slipped 3.8 percent to 23.8 billion yen.

“We could not increase sales as we had hoped,” he said. “At the same time, we could not reduce our sales cost to the extent of making up for the sales drop.”

Okada maintained that private consumption is now finally bottoming out, but he is still cautious about business prospects.

In contrast, Seven-Eleven Japan Co., a leading convenience store chain, reported 1.96 trillion yen in sales, including those at its franchises, up 6.3 percent from the previous year.

Its operating profit grew 19.7 percent to 137.5 billion yen, while it posted 140.2 billion yen in pretax profit, up 19.5 percent, and 68.2 billion yen in net profit, up 10.8 percent.

“We could achieve our targets in sales, profits and (the number of) new shops. “This business year, we are reaching to exceed 2 trillion yen in sales,” an official of Seven-Eleven Japan said.