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UPDATE 2-Overseas push drives profit growth at Japan's Uniqlo, 7-Eleven owners
October 12, 2017 / 6:45 AM / 2 months ago

UPDATE 2-Overseas push drives profit growth at Japan's Uniqlo, 7-Eleven owners

* Fast Retailing annual operating profit hits record high

* Uniqlo overseas oper profit up 95.4 pct, domestic down 6.4 pct

* Seven & i posts record high Q2 profit, driven by 7-Eleven U.S. (Recasts with Seven & i results, adds executive comment)

By Sam Nussey and Taiga Uranaka

TOKYO, Oct 12 (Reuters) - An overseas push is paying off for Japan’s top two retailers, with Seven & i Holdings and Fast Retailing Co Ltd both raking in strong profits even as business at home struggles amid a checkered recovery in consumer spending.

Hit hard by an economy mired in deflation for nearly two decades, top Japanese retailers have focused on expanding abroad to boost earnings. While cautious domestic consumers are starting to loosen their pursestrings, analysts believe anaemic wages are still capping spending levels.

At Fast Retailing, operating profit hit a record high of 176.4 billion yen ($1.57 billion) for the year ended August as overseas earnings almost doubled at its Uniqlo division, known for its lightweight down jackets and HeatTech fabric technology. Domestic Uniqlo profits fell 6.4 percent.

Fast Retailing forecast a 13.4 percent rise in operating profit for the current financial year on strong growth in Asia.

At its global brands unit, which does not include Uniqlo, profits rose 48 percent. But its low-priced GU stores saw a drop in profits as they struggled to replicate hits such as 990-yen jeans and gaucho pants that drove expansion in earlier years.

The retailer, founded by Tadashi Yanai - one of Japan’s richest men, is currently working on overhauling its supply chain to reduce inventory losses and boost its e-commerce offering in a bid to attract Japan’s thrifty shoppers.

“Overseas markets are important, but we are a Japanese company and have to profit at home,” Yanai told reporters.

7-ELEVEN SALES GROW

Offshore business underpinned results for Seven & i Holdings too, driving its quarterly operating profit up 10.3 percent to a record high of 110.3 billion yen, above an average estimate of 106.1 billion yen from three analysts polled by Thomson Reuters.

The company’s convenience store business accounted for 85 percent of its first-half operating profit of 194.5 billion yen. It has nearly 20,000 7-Eleven stores in Japan and 8,500 in the United States.

Seven & i has put more focus on 7-Eleven stores in these two locations under the leadership of Ryuichi Isaka, who became chief of the $100 billion retail conglomerate in May last year.

Same-store sales, a key gauge of retailers’ health, at 7-Eleven stores in Japan rose 1 percent year-on-year in the first six months of the financial year. At U.S. outlets, same-store sales climbed 1.5 percent.

The company forecasts a 16 percent rise in full-year operating profit at its North American unit 7-Eleven Inc.

“We are making solid progress in achieving that forecast,” Isaka told reporters at an earnings briefing.

The company, which has said it plans to increase the number of 7-Eleven stores in North America to 10,000 in 2019, agreed in April to acquire 1,110 convenience stores in the United States from Sunoco LP for $3.3 billion. ($1 = 112.2900 yen) (Editing by Edwina Gibbs and Himani Sarkar)

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