UPDATE 3-Aeon H1 op profit falls 40 pct, keeps outlook
* H1 op profit drops 39.5 pct, hit by weak sales
* Keeps full-year op profit forecast for 4.5-12.6 pct growth
* Shares end down 2 pct before announcement (Updates with company news conference)
TOKYO, Oct 6 (Reuters) - Japan's second-largest retailer, Aeon Co Ltd (8267.T), reported a 39.5 percent fall in first-half operating profit on Tuesday, hurt by prolonged weak consumer spending, but it reiterated its full-year outlook above the market forecast.
Supermarkets and department stores remain in a slump even as the country's economy crawls out of recession, with record deflation and rising job losses dampening hopes for a speedy recovery.
Aeon President Motoya Okada said the tough times will continue for the retail industry.
"The customers' drive for thrift is expected to accelerate amid the lack of improvement in employment conditions and other factors," he said.
"But we aim to meet the target by cost-cutting efforts and rationalisation of our operations."
Aeon and rivals such as Seven & I Holdings (3382.T) have been hit by sharp falls in sales for months as thrifty consumers cut back spending on clothes and other non-daily items and defect to cheaper specialty stores like Fast Retailing's (9983.T) Uniqlo.
Aeon has been trying to lure back shoppers by expanding offerings of cheap store brand items and sprucing up shops, but its attempts to revamp its larger supermarkets that sell clothes and houseware items in addition to groceries have failed to reverse the trend.
"Many had expected Aeon to cut its outlook. It's very hard for Aeon to meet its full-year forecast," said Shun Tanaka, a retail analyst at SMBC Friend Research Center.
He added that the company's supermarkets, which had enjoyed relatively solid sales, have been suffering lately due to price falls.
The retail conglomerate runs about 1,800 supermarkets and grocery outlets, including Jusco stores, as well as thousands of specialty shops, including U.S. apparel chain Talbots (TLB.N).
OVERSEAS EXPANSION
Okada said the company is shifting its focus to the Asian market outside Japan, where little growth is expected due largely to the country's ageing population. Continued...
