Seiyu Ltd. said Tuesday its first-half group operating loss narrowed to 1.36 billion yen from 2.48 billion yen for the same period last year, thanks to higher sales of household goods.

Seiyu, 53 percent owned by U.S. retail giant Wal-Mart Stores Inc., posted a net loss of 54 billion yen in the January-June period on sales of 467.9 billion yen, down 2.9 percent. Its pretax loss shrank from 6.92 billion yen to 4.28 billion yen.

The net loss was due to a one-time writeoff of assets, the retailer said.

But the figures for the first half were far worse than Seiyu’s initial forecast in February. The retailer had predicted a pretax loss of 1.7 billion yen on sales of 471 billion yen in the first half of 2006.

“Unfortunately, our sales . . . and profit levels did not meet our expectations,” said Seiyu CEO Ed Kolodzieski. “But I am very proud of the accomplishments of our team.”

Seiyu’s same-store sales for the first half rose 1.4 percent, up for the first time in 14 years. Same-store sales compare year-on-year sales figures for individual stores, adjusting for the effect of store openings and closures.

Sales increased in all three of the chain’s main products, clothing, household goods and food.

“We are seeing an increase in both traffic and spending by our customers,” Kolodzieski said.

Kolodzieski said customers are finding more of what they want in stock. Longer store hours also contributed to better same-store sales figures.

As of the end of June, 227 stores, or 60 percent of the total, were operating 24 hours a day.

Seiyu said it expects the company to return to profitability by the end of 2007.

Tokyo-based Seiyu has 392 stores in Japan and is working to restructure its business using capital from Wal-Mart.

Bentonville, Ark.-based Wal-Mart, the world’s biggest retailer, entered the Japanese market in 2002. Last December, it increased its stake in Seiyu from 42 percent to 53 percent.

Wal-Mart has made significant investments in Japan, the world’s second-largest retail market, setting up a distribution facility, updating Seiyu’s computer systems, remodeling stores and opening large-scale supermarkets, which were previously rare in Japan.

Wal-Mart operates more than 6,600 stores in 16 countries, including China and Mexico.

It announced in May it was selling its 16 stores in South Korea to that country’s top discount chain, Shinsegae Co., and in July the firm said it was ending its losing business in Germany, selling its 85 stores there to rival Metro AG.

Information from AP added

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