Struggling retailer Daiei Inc. said Friday its group net profit plunged 98.4 percent to 2.3 billion yen in the business first half due to the absence of a hefty one-time gain booked a year ago.
Revenue fell 14.8 percent to 992.08 billion yen, falling short of the firm’s own target by 2.9 billion yen.
Even excluding extraordinary items, Daiei’s struggle was apparent during the March-August period.
Unconsolidated operating profit, which better reflects the supermarket chain’s performance in its core business, dropped 66.6 percent to 3.6 billion yen.
“We failed to effectively deal with the very severe situation,” said Daiei President Kunio Takagi in announcing the earnings figures.
Having received debt waivers from lenders and capital injections from the government-affiliated Development Bank of Japan, the retailer has been held up by many as a symbol of Japan’s so-called zombie companies.
During the six-month period, sales at supermarkets that have been open at least a year dropped 3 percent from a year ago; the firm had targeted a 1 percent decline.
The chain attributed part of the decline to its decision to pull pricey consumer electronics from store shelves amid fierce competition from large electronics retail chains.
Profits were also hit by a decrease in the gross margin of otherwise profitable clothing items, shedding 1.2 percentage points to 32.9 percent.
The gross margin — sales minus the cost of goods sold — shrank as the cold summer forced the chain to mark down seasonable clothes in order to clear its inventory and introduce fall wares earlier.
During the period, the chain worked to revamp its food section, enlisting the help of regional affiliate Maruetsu Inc. and converting small general merchandising stores into food stores.
But these efforts failed to stem a decline in the section’s same-store sales.
Meanwhile, the retailer said it reduced its group interest-bearing debts by 12.4 billion yen to 1.19 trillion yen during the six-month period.
It is also shrinking its bloated business portfolio, selling restaurants and hotels.
One of the retailer’s few bright spots is the Fukuoka Daiei Hawks baseball team, which won the Pacific League pennant.
During a pennant sales campaign, held in the first week of October, the supermarket chain rang up 40 billion yen in sales, twice that of the previous year.
The chain has even extended the campaign, which has been renamed the “Hawks, go for the Japan Series” campaign.
The series begins Saturday, with the Hawks locking horns with the Hanshin Tigers, which won the Central League pennant.
But the team has been plagued by speculation over a possible sale as part of Daiei’s efforts to cut its debts.
During a news conference Friday, Takagi said the company will retain the team, though it is likely to conclude the sale of the Fukuoka Dome stadium and its adjacent Sea Hawk Hotel in November.
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