TOKYO (REUTERS) - An overseas push is paying off for Japan's top two retailers, with Seven & i Holdings and Fast Retailing both raking in strong profits even as business at home struggles amid a checkered recovery in consumer spending.
Hit hard by an economy mired in deflation for nearly two decades, top Japanese retailers have focused on expanding abroad to boost earnings. While cautious domestic consumers are starting to loosen their pursestrings, analysts believe anaemic wages are still capping spending levels.
At Fast Retailing, operating profit hit a record high of 176.4 billion yen (S$2.12 billion) for the year ended August as overseas earnings almost doubled at its Uniqlo division, known for its lightweight down jackets and HeatTech fabric technology. Domestic Uniqlo profits fell 6.4 per cent.
Fast Retailing forecast a 13.4 per cent rise in operating profit for the current financial year on strong growth in Asia.
At its global brands unit, which does not include Uniqlo, profits rose 48 per cent. But its low-priced GU stores saw a drop in profits as they struggled to replicate hits such as 990-yen jeans and gaucho pants that drove expansion in earlier years.
The retailer, founded by Tadashi Yanai - one of Japan's richest men, is currently working on overhauling its supply chain to reduce inventory losses and boost its e-commerce offering in a bid to attract Japan's thrifty shoppers.
"Overseas markets are important, but we are a Japanese company and have to profit at home," Yanai told reporters.
Offshore business underpinned results for Seven & i Holdings too, driving its quarterly operating profit up 10.3 per cent to a record high of 110.3 billion yen, above an average estimate of 106.1 billion yen from three analysts polled by Thomson Reuters.
The company's convenience store business accounted for 85 per cent of its first-half operating profit of 194.5 billion yen. It has nearly 20,000 7-Eleven stores in Japan and 8,500 in the United States.
Seven & i has put more focus on 7-Eleven stores in these two locations under the leadership of Ryuichi Isaka, who became chief of the US$100 billion retail conglomerate in May last year.
Same-store sales, a key gauge of retailers' health, at 7-Eleven stores in Japan rose 1 per cent year-on-year in the first six months of the financial year. At US outlets, same-store sales climbed 1.5 per cent. The company forecasts a 16 per cent rise in full-year operating profit at its North American unit 7-Eleven.
"We are making solid progress in achieving that forecast," Mr Isaka told reporters at an earnings briefing.
The company, which has said it plans to increase the number of 7-Eleven stores in North America to 10,000 in 2019, agreed in April to acquire 1,110 convenience stores in the United States from Sunoco for US$3.3 billion (S$4.47 billion).