Thursday, September 26, 2013
Daiei Sees Y14.5bn Net Loss For March-August Half
TOKYO (Nikkei)--Daiei Inc. (8263) expects to suffer a 14.5 billion yen group net loss for the six months ended Aug. 31, the retailer said Wednesday.
Sluggish apparel sales and extraordinary charges for stores are expected to hurt earnings. Daiei, which suffered a 2.7 billion yen net loss for the same period a year earlier, must now focus on rebuilding its operations after becoming an Aeon Co. (8267) subsidiary at the end of August.
Operating revenue, the equivalent of sales, likely declined 3% on the year to 409 billion yen, falling short of earlier guidance by 2 billion yen. Daiei aggressively slashed prices of food and daily-use products to attract consumers. Visitor traffic was mostly unchanged on the year, but sales per customer dropped.
Daiei now expects a 4.1 billion yen operating loss for the interim period, growing from 1.5 billion yen in red ink a year earlier.
Sales of high-margin apparel slumped owing to the effects of torrential rains nationwide and intensified competition from apparel specialty stores.
Daiei will book nearly 9.3 billion yen in extraordinary charges, contributing to the net loss. It will incur 7.4 billion yen in depreciation charges associated with aging stores. Because it plans to rebuild around 10 stores starting in fiscal 2014 and after, Daiei is setting aside 1.8 billion yen in reserves for covering charges related to site closures.
For the full year ending February 2014, Daiei is keeping guidance for a 1 billion yen operating profit.
But rebuilding Daiei, which incurred a net loss for a fifth straight year through fiscal 2012, may prove difficult. It remains saddled with hefty fixed costs. The Industrial Revitalization Corp. of Japan, which provided Daiei with financial assistance in 2004, shuttered more than 50 unprofitable stores. But a number of stores that would prove too costly to close remain in operation, according to company sources.
Daiei will work with Aeon to unify purchasing, jointly use distribution facilities and adopt e-money in a bid to recover a net profit in fiscal 2014.
(The Nikkei, Sept. 26 morning edition)