Japan's J. Front posts 14 pct fall in H1, cuts outlook

TOKYO, Oct 14 (Reuters) - Japan's second-largest department storeoperator, J. Front Retailing Co Ltd (3086.T), on Tuesday posted a 14 percent fall in first-half operating profit and cut its full-year outlook, suffering a similar fate to its rivals amid sluggish consumer spending and economic turmoil.

Department store and supermarket operators have posted dismal first-half results due to a slide in sales of clothing and big ticket items, which combined with a bleak outlook as Japan's population ages has forced some to close stores or seek merger partners.

Convenience stores, on the other hand, have enjoyed strong earnings growth on a jump in tobacco sales after the introduction of ID-requiring vending machines. Second-largest convenience store chain Lawson Inc (2651.T) reported a 14 percent rise in operating profit for the six months ended in August.

"For the first half, the economic situation was very tough and food item costs rose sharply, so those that have been able to pass on cost rises enjoyed a solid performance, including convenience stores," said Nomura analyst Masafumi Shoda.

"I expect another round of restructuring in the second half among those that suffered poor earnings."

J. Front, created by the merger of Daimaru and Matsuzakaya chains last year, said its operating profit came to 14.65 billion yen ($142 million) for the first half, down from 17 billion yen a year ago. It said it expected its full-year operating profit to come to 32 billion yen, down from 40 billion yen in its previous forecast.

Department stores have been hurt by weak sales of clothing -- their main profit driver -- in recent years, but their earnings were hit further this year as the global market turmoil and growing fear of a recession hurt sales of expensive items such as jewellery and fine art.

Third-largest department store chain Takashimaya Co (8233.T) last week reported a 14.7 percent fall in its first-half operating profit and said it plans to merge with smaller rival H2O Retailing (8242.T) in three years to survive increasingly fierce competition.

Last month, industry leader Isetan Mitsukoshi Holdings (3099.T) said it would close six stores in its first major restructuring since the firm was formed through the merger of two rival retailers.

Japan's second-largest retailer, Aeon Co Ltd (8267.T), reported a 13.4 percent fall in first-half operating profit last week and announced additional store closings as part of efforts to revamp its struggling general merchandising stores.

TOBACCO BOON

Lawson said its first-half operating profit rose to 29.1 billion yen, up from 25.5 billion yen a year earlier. The firm said its same-store sales during the period rose 5.4 percent, of which about 4 points were by tobacco sales.

The company said its earnings were also lifted as customers crimped on car trips to supermarkets and bought only what they deemed absolutely necessary at nearby convenience stores.

Strong convenience store sales also helped Japan's largest retailer Seven & I Holdings Co Ltd (3382.T) eke out a 3 percent rise in first-half profit despite a sharp fall in its department store business. (Reporting by Taiga Uranaka; Editing by Hugh Lawson)