Financially beleaguered department store Sogo Co. said Wednesday its capital deficit increased to approximately 580 billion yen at the end of the 1999 business year.
Sogo had put the deficit at 530 billion yen when it announced a restructuring plan April 6, only to revise it upward after confirming that groupwide losses in its 1999 business year, which ended in February, were around 40 billion yen.
A capital deficit occurs when a company’s prospective losses eclipse the combined amount of its shareholders’ equity and other capital items.
Announcing its results for the 1999 business year, Sogo said Wednesday it incurred a net loss of 137.61 billion yen on a consolidated basis and 137.62 billion yen on an unconsolidated basis, sharply up from respective losses of 25.60 billion yen and 25.68 billion yen the previous year.
The company fell deeper into the red as a result of registering an extraordinary loss of 144.99 billion yen, including 140.60 billion yen put into loan-loss reserves and 2.56 billion yen set aside for an early retirement program.
Consolidated pretax profit in the 1999 business year dropped 23.4 percent to 518 million yen on group sales of 155.12 billion yen, down 6.6 percent, due largely to the continuation of stagnant personal consumption and weak demand from corporate customers.
Parent-company pretax profit declined 75.7 percent to 116 million yen on a 6.3 percent fall in sales to 142.89 billion yen.
The Osaka-based company will continue to forgo dividend payments.
Sogo’s new restructuring plan, which takes effect in the 2000 business year, features requests for 73 major creditor banks to forgive claims on a total of 639 billion yen in loans.
The requested debt waiver is the largest of its kind in Japanese corporate history. For the 2000 business year, when changes to accounting rules require Sogo to expand the coverage of group results, the company expects a consolidated net profit of 35 billion yen, including profits from the waiver of obligations, and a pretax loss of 7 billion yen on group sales of 1 trillion yen.
Meanwhile, Hiroo Mizushima, the 88-year-old chairman of Sogo, resigned from his post Wednesday to take responsibility for the company’s financial troubles.
Kyoichi Yamada, president of Sogo, and all other top management will also step down when the company’s rehabilitation gets fully on track.