Ito-Yokado Co. said Thursday its first-half net profit jumped 40 percent from a year earlier to 32.41 billion yen, powered by the performance of Seven-Eleven Co. and other subsidiaries.
For the six months that ended Aug. 31, revenue at Japan’s second-largest retailer rose 1.4 percent on a year-on-year basis to 1.8 trillion yen.
Seven-Eleven, in which Ito-Yokado has a 50.6 percent stake, continued to post robust growth in earnings and revenue for the first half, buoyed by aggressive store openings.
The convenience store chain’s net profit increased 8 percent on a year-on-year basis to 53.81 billion yen, on revenue of 257.08 billion yen, up 7 percent. It opened a net 261 new outlets during the reporting period, including five in Beijing.
Ito-Yokado was also boosted by improved profitability at its banking subsidiary, IY Bank. The bank operates automated-teller machines installed at the retailer’s group stores.
Yet the strong performance of these subsidiaries only highlighted the supermarket chain’s struggle in its main general merchandise store business.
Same-store sales at Ito-Yokado stores dropped 3 percent from the same period last year. Same-store sales represent a key gauge of retail health.
By category, apparel posted the sharpest drop, falling by 7 percent on a year-on-year basis.
This is particularly disappointing given the dismal sales of seasonal apparel items last year due to an unusually cool summer.
Ito-Yokado’s results underscore the hardships faced by major retailers in their core general merchandise stores, which handle groceries, apparel and household items.
Rival Aeon Co., which reported record half-year results on Tuesday, presented a similar picture. Poor general merchandise store performance was helped by activity at subsidiaries — Aeon’s shopping mall developer and credit card operator.
“Amid fierce competition with specialty stores, supermarkets and among themselves, general merchandise stores have not been able to differentiate themselves” from rivals, said Yasuyuki Sasaki, retail analyst at Credit Suisse First Boston Securities (Japan) Ltd.
“As for apparel, they could not move fast enough to capitalize on this year’s hot summer.”
Ito-Yokado said it plans a drastic review of its apparel category, such as reducing item varieties by some 30 percent in an effort to ditch unattractive products. At its large stores, this would mean that the roughly 48,000 varieties adorning store shelves would be cut to 33,000.
“Currently, there are too many items that look the same to shoppers,” Noritoshi Murata, the company’s chief financial officer, told a news conference.
The company also said it will increase its number of part-time workers to cut store operating costs.
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