January 10, 2018 / 7:57 AM / 2 years ago

UPDATE 2-Japan's Aeon sees profit boost from price cuts, restructuring

* Boost from restructuring at general merchandising stores

* Own brand products grow in double digits after price cuts

* Aeon reiterates profit forecast for year to February (Recasts with details of pricing strategy)

By Sam Nussey

TOKYO, Jan 10 (Reuters) - Aeon Co Ltd, Japan’s largest retailer by sales, notched up its highest third-quarter profit in four years as price cuts brought in more customers, while restructuring efforts at its struggling general merchandising stores also bore fruit.

Aeon has continued to cut prices as Japan’s supermarkets, convenience stores and drug stores battle it out to attract shoppers in a market where demand is weak. Some other firms have moved to raise prices to cope with cost pressures, including a tight labour market.

“With consumers’ thrifty habits continuing, goods that have had price reductions are performing well,” said Kaori Miyake, Aeon’s head of communication.

Aeon’s operating profit for the three months ended November was 17.8 billion yen ($159.86 million), versus 13 billion a year ago, calculations based on nine-month results show.

It beat an average estimate of 13.8 billion yen from 2 analysts polled by Thomson Reuters.

Earnings were supported by sales of Aeon’s own brand Topvalu products, which grew in double digits following widespread price cuts last year, the company said.

Soichi Okazaki, president of Aeon Retail, said there were signs that Japan’s economy was improving, pointing to strong year-end sales and tourist demand at department stores. But he also said: “We are competing on price.”

While Japanese corporate profits are near an all-time high, consumption has remained weak with households sitting on cash amid uncertainty over the economic outlook.

Aeon is taking measures such as redesigning and rebranding to boost traffic at its general merchandising stores which have lost customers to discount stores and specialists in products such as clothing and electronics.

The retailer maintained its forecast for a record high operating profit of 200 billion yen for the year to February. It is targeting 340 billion yen in operating profit for the year ending February 2021. ($1 = 111.3500 yen) (Reporting by Sam Nussey; Editing by Himani Sarkar and Jane Merriman)

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