Japan's second-largest retailer, Aeon, likely to record first net loss in seven years

Japan's second-largest retailer, Aeon Co,. is expected to post its first full-year consolidated net loss of about ¥3 billion for 2008-09 in seven years, on account for weak consumer spending on clothing and housing-related products and the impact on Aeon's lower revenues earnings at US firm The Talbots, Inc.

In January the supermarket chain had revised its October 2008 earnings and projected it would fall somewhere between a profit of ¥2.5 billion or a loss of ¥2.5 billion for the year ended in February 2009 in view of the global crisis affecting the group and other factors.

Aeon revised its earnings forecasts downward to account for weak consumer spending on clothing, drop in sale of its housing-related products as a result of the slump in the property market following the global financial turmoil and credit crunch and the impact on its consolidated results of lower revenues and earnings at US firm The Talbots, Inc.

Aeon in its forecast recorded an additional 25.1 billion yen in extraordinary losses for three months ended November 20, 2008 on account of store closing expenses and losses arising out of disposal of property, buildings and equipment associated with store closures.

It also includes an impairment charge of 19.5 billion yen recorded by Talbots, in accord with its decision to sell the J. Jill business to refocus resources to its core business.

In an effort to increase sales, AEON tied up with Japanese telecom major NTT DOCOMO last month to form a new company AEON Marketing Co., Ltd. to conduct one-to-one marketing using mobile phones from May 2009, to improve promotion efficiency, stronger attraction of customers and higher purchase ratios at stores.

The company also plans to increase both sales and profit for the next financial year by promoting the sales of its private-brand products, which have become popular items at supermarkets amid the recession and are usually cheaper than regular products.

At the Davos met in January 2009, Aeon was listed in the Global 100 Most Sustainable Corporations in the World by Corporate Knights Inc. and Innovest Strategic Value Advisors, a leading research firm specialising in analysing ''non traditional'' drivers of shareholder value including companies' performance on social, environmental and strategic governance issues.

In the Global Credit Research Credit Opinion, Moody's gave it a rating outlook of negative for its senior unsecured notes.

The global financial sparked by the US sub prime meltdown that hit last year, marked by downward spiralling of share prices and sharp currency fluctuations as well as faltering corporate earnings have led to employment woes and weak consumer spending heavily impacting the real economy in Japan and around the world. This has affected the company's performance and is expected to record loss for the financial year 2008-09.

AEON CO is mainly engaged in the general retail sale business. It is Japan's largest supermarket chain, with 1,000-plus stores under the MaxValu and other banners, and more than 3,000 ministop convenience stores.