UPDATE 1-Rakuten profit up as shoppers go online in recession

(Adds company comment)

By Sachi Izumi

TOKYO, Feb 13 (Reuters) - Rakuten Inc (4755.Q), Japan's biggest Internet shopping mall operator, posted a record quarterly profit on Friday as financial worries prompted more consumers to go online for bargain deals. Fears about job losses and falling incomes in a deepening recession have pushed Japanese consumers' confidence to record lows, hammering sales at department stores and other retailers that offer up-market clothing and discretionary items. Instead, shoppers have been turning to discount and online stores as they seek lower prices for food, apparel goods and travel packages, and companies such as casual wear chain Fast Retailing (9983.T) and McDonald's Japan (2702.Q) have also booked solid earnings.

Rakuten shares gained 20 percent in the past year, outperforming a 33 percent plunge in the index for the Jasdaq market , Japan's biggest market for startups, on which they are listed.

"In these economic conditions there is nothing like direct transactions that skip the middle," Rakuten chief executive Hiroshi Mikitani told a briefing. "Considering that shipping fees have fallen dramatically ... most items are cheaper online."

Mikitani said sales are showing a big jump especially on Sundays, reflecting a trend among consumers to who choose to stay home instead of going out on their days off.

Rakuten's operating profit totalled 16.3 billion yen ($179 million) in October-December, against a loss of 19.6 billion yen a year earlier, boosted also by a lack of hefty reserves that its financial unit set aside in 2007 to repay interest charges deemed illegally high.

Without the reserves, its quarterly profit more than tripled from a year earlier.

The company does not disclose its earnings outlook, but analysts on average see an operating profit of 54.9 billion yen and a net profit of 32.8 billion yen in 2009, according to a poll of 12 and 11 brokerages, respectively, by Reuters Estimates.

The profit jump at Rakuten, which offers goods ranging from electronics and household items to automobiles through a network of more than 26,000 online sellers, is a rare bright spot in Japan's otherwise gloomy corporate earnings season, illustrated by loss warnings from giants such as Toyota Motor Corp (7203.T) and Sony Corp (6758.T).

The Internet firm also benefited from travellers flocking for online tickets and packages for better deals as it runs a travel website backed by more than 41,000 firms, offsetting slowing demand for business trips.

Japan's export-driven economy has been battered by the spreading global recession and the stronger yen, and figures due out on Monday are expected to show that it shrank 3.1 percent in the last three months of 2008. That would be its worst performance since the first quarter of 1974. [ID:nT171712]

Manufacturers, traditionally reluctant to cut staff, have been shedding jobs, pushing up the jobless rate to a three-year high in December and weighing on personal consumption, which accounts for more than half of the economy.

Rakuten's net loss jumped 10-fold to 68.4 billion yen in October-December due to special losses on its stake in Tokyo Broadcasting System Inc (9401.T), payments to Tokyo Tomin Bank (8339.T) for dissolving their partnership, and other charges.

Rakuten had spent about 117 billion yen to acquire a nearly 20 percent stake in TBS with the intention of taking over the TV network but was thwarted when TBS shareholders voted to convert the broadcaster into a holding company.

A law that took effect in April allows a broadcaster to operate under a holding company and put local TV stations under its umbrella. The law prohibits a shareholder from owning more than 33 percent of voting rights in the holding company.

Before the results, Rakuten shares closed up 6.6 percent at 50,300 yen, against a 2.4 percent rise in the Jasdaq index. ($1=91.12 yen) (Editing by Michael Watson)