TOKYO, March 14 Japanese retail giant Aeon Co
sliced close to a fifth off profit estimates for its
latest business year, saying efforts to cut costs at its core
general goods stores fell short of target and tough competition
bit into its supermarket sales.
Aeon warned in a statement on Friday it now estimates it
will book an operating profit of 170 billion yen ($1.66 billion)
for the fiscal year that ended Feb. 28, down from a previous
outlook of as much as 210 billion yen. The new estimate is well
below the average 198 billion yen expected in a poll of 14
analysts by Thomson Reuters I/B/E/S.
Plans to improve its cost structure in the general goods
trade in the traditionally profitable fourth quarter were
undermined by weak sales of winter clothes, Aeon said. Efforts
to shore up supermarket sales were also not enough to offset
fierce competition, it said.
The profit warning is an extra headache for Aeon: A national
sales tax hike being introduced in April is expected to dampen
consumer demand. At 170 billion, operating profit would come in
11 percent lower than a year earlier, rather than rising by as
much as 10 percent in its previous guidance.
Aeon, which operates businesses from malls to drugstores and
banks in Japan, now estimates a net profit of 40 billion yen for
the year ended February instead of 75 billion yen.
The revision came as chief executive Motoya Okada prepared
to unveil a new three-year growth plan through February 2017
later on Friday. Okada is scheduled to hold a news conference
from 5 p.m. (0800 GMT) in Tokyo.
Along with rival retailers like Tesco PLC, Aeon is
looking to push further into China and other Asian markets where
a burgeoning middle class is expected to fuel demand. It's also
counting on accelerated expansion in Asia to offset the
long-standing problem of lacklustre demand in Japan, where the
population is ageing and dwindling.
Shares in Aeon ended down 3.4 percent on Friday ahead of the
forecast revision, in line with the benchmark Nikkei average
($1 = 102.1300 Japanese Yen)
(Reporting by Chang-Ran Kim; Editing by Kenneth Maxwell)