Japan retailer Seven & I Q3 profit rises, Aeon falls

Fri Jan 6, 2012 5:18am EST
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By James Topham

TOKYO (Reuters) - Japan's Seven & I Holdings posted a rise in third-quarter profit on Friday as convenience store sales stayed strong, but rival Aeon Co's earnings undershot strong year-earlier results, as retailers worry that profit growth could stall.

Many Japanese retailers are poised to earn record profits in the current financial year after demand for food and consumer goods, especially higher-margin prepared meals and private-label products, rose following the earthquake and tsunami last March.

But with falling wages, high unemployment and concerns about the health of the Japanese and world economies weighing on domestic consumption, market watchers expect retailers to face challenges to profit growth in the near term.

Top Japanese retailer Seven & I's operating profit jumped 17 percent to 66.0 billion yen ($854.7 million) for the September-November quarter in part as visits by older and female customers stayed high after rising in the aftermath of the March 11 disasters in its main convenience store segment.

But Aeon, Japan's second-biggest retailer, posted a year-on-year drop of 19 percent in operating profit over the same period to 25.4 billion yen, despite market watchers expecting it eke out a quarterly gain.

Aeon faced a high hurdle to meet comparisons, having posted a 52 percent surge in operating profit in the third quarter of the 2010/11 business year, when sales jumped due to an unseasonably hot September and ahead of the end of subsidies for green consumer electronics.

"Their earnings seem very steady and strong. Even if Aeon came in a little under analysts' estimates, there is a sense of direction for these companies and investors can be sure of their strength," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Fund.

"Right now, there is so much uncertainty that investors are shifting to stable stocks with strong earnings that are not easily swayed by outside factors like Europe ... In this risk-off environment, stocks of companies like Seven & I and Aeon will remain attractive."   Continued...