SEVEN & I Holdings Co, Japan's largest retailer, has posted its first profit gain in four quarters as cigarette sales boosted earnings at its 7-Eleven convenience stores.
Net income rose 3 percent to 34.4 billion yen (US$341 million) in the three months ended August from a year earlier, Bloomberg News reported. The result was calculated by subtracting first-quarter earnings from the first-half profit, the Tokyo-based company reported yesterday.
The retailer's 7-Eleven outlets in Japan, which account for more than half of earnings, are benefiting as new restrictions on cigarette-vending machines prompt many of Japan's 26 million smokers to shift their purchases to convenience stores.
Chief Executive Officer Toshifumi Suzuki aims to increase earnings by stocking more of his own grocery label, expanding banking services and adding stores in China as he battles a record low in consumer confidence in his home market.
Seven & I kept its forecast for full-year profit to rise 4.9 percent to 137 billion yen. Operating profit from 7-Eleven stores rose 6.4 percent to 63.6 billion yen in the quarter.
Since July 1, Japan's smokers have needed a smart card to purchase cigarettes through the nation's vending machines, which previously accounted for more than half of tobacco sales.
Many smokers haven't applied for the so-called Taspo card, designed to reduce underage smoking, resulting in a shift of purchases to convenience stores. Cigarettes accounted for about 97 percent of the 3.7 percent gain in same-store 7-Eleven sales during the first half, President Noritoshi Murata told reporters in Tokyo.
Sales at Japan's convenience stores open at least a year gained 5.1 percent in August and 12 percent in July, according to government figures.
Other retail formats, such as department stores and supermarkets, are posting declines amid sluggish consumer demand.
Aeon Co, Japan's largest supermarket operator, on Wednesday posted an 8.6 percent slump in operating profit. The fastest inflation in a decade is forcing consumers to tighten purse strings as costlier food and gasoline leave them less to spend amid sluggish wage growth. Household spending slumped 4 percent in August.
Seven & I's first-half operating profit from department stores, which include Sogo and Seibu, dropped 25 percent to 7.4 billion yen.
The supermarket division posted a 2.5-percent decline. Profit at its financial services division rose 43 percent to 13.7 billion yen in the half.
Seven & I shares closed down 8.4 percent to a six-month low of 2,410 yen in Tokyo yesterday before the earnings statement was released.