Apr 12, 2018
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Aeon profit climbs 14% to yearly record, invests in US e-tailer Boxed

Apr 12, 2018

Aeon Co Ltd, Japan’s largest retailer by sales, posted a record annual operating profit after a 14 percent jump from the previous year on the back of restructuring efforts, and forecast a further gain this year.

Aeon plans to invest in U.S. online retailer Boxed "to introduce systems that have already been completed in the U.S. and speed up our online business," it added - Reuters

The supermarket and shopping mall company said on Wednesday operating profit for the year that ended in February was 210.3 billion yen ($1.97 billion). That beat the 204.9 billion yen average estimate of eight analysts polled by Thomson Reuters I/B/E/S.

Aeon forecast operating profit for the year through February 2019 would rise to 240 billion yen, well above a consensus estimate of 221 billion yen from eight analysts.

The results, seen as a bellwether for consumer spending, come as Japanese households’ confidence in the economy worsens, with many consumers complaining of higher fuel and fresh food prices, and the mood among companies souring for the first time in two years.

The retailer is focusing restructuring efforts on its struggling general merchandise stores - stores that sell a wide range of products under one roof - in favour of specialised stores in areas such as apparel and beauty.

While its restructuring efforts are yielding fruit, Aeon still faces pressure on multiple fronts. It is unable to raise prices amid sluggish consumer spending and faces criticism that it has been low to adapt to the rise of e-commerce.

It has also lost customers to discount stores and specialist retailers in products such as clothing and electronics.

The retailer has continued to cut prices, most recently on 100 own brand goods in January. Soichi Okazaki, president of Aeon Retail, said the company regarded price cuts as essential to its strategy.

Separately on Wednesday, Aeon announced that it plans to invest in U.S. online retailer Boxed, without providing financial details.

“With this investment we aim to introduce systems that have already been completed in the U.S. and speed up our online business,” Shinya Wako, chief strategy officer at Aeon, admitting that online sales “have not taken off as we hoped”.

Aeon has said it will invest 500 billion yen in technology and logistics over three years as it looks to raise its online sales ratio from less than 1 percent in the year ended February 2017 to 12 percent in the year ending February 2021.

“Investment in firms with technology, joint operations... we want to do more of this,” said Motoya Okada, president of Aeon. “We must rapidly change Aeon’s current situation,” he added.

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