Retail & Wholesale

April 2008

Retail Sales Up For 8th Straight Month In March
Japanese retail sales rose in March for the eighth straight month, the government said Monday, as consumers bought more new-model cars while their spending on gasoline and other fuels climbed because of their rising costs. Retail sales increased 1.1% last month from a year earlier, data from the Ministry of Economy, Trade and Industry showed. In February they gained a revised 3.2% on year. Continued rises in retail sales, while partly traceable to soaring global energy costs, suggest that consumption has yet to fall apart despite many negatives, such as energy and food inflation and sluggish income growth. Consumption makes up more than half of Japan's gross domestic product. In March, sales of energy - such as gasoline, heating oil and gas oil - gained 4.0%, which accounted for 0.41 percentage points of the headline figure, a trade ministry official said at a press briefing. The second biggest boost came from retail sales of automobiles. They increased 2.4% on demand for the latest models and contributed 0.36 point to the overall retail sales number, the official said. Sales of food and drinks rose 0.6% on year, the data showed. Those of electronics gained 1.7% partly because flat-screen TVs continued to lure buyers, the official said. But merchants saw their sales of clothing and other personal belongings fall 0.3% in March, the data showed. The decline was partly due to colder-than-usual weather in early part of that month, the official said. The trade ministry left its assessment unchanged, saying "there are signs of recovery" in Japanese retail sales, the official added. Monday's data also showed that sales at department stores and supermarkets, which account for around 15% of Japan's total retail sales, rose 0.2% on year after adjustment for the change in the number of stores, the Ministry of Economy, Trade and Industry, said. This marked the second straight month of gains for adjusted large-scale retailers' sales. (Dow Jones, Monday, April 28, 2008)

Tesco Struggling To Get Japan Supermarket Ops On Track
Tesco plc, the U.K.-based grocery and general merchandise retail chain, is facing an uphill battle in the Japanese market. It has already started to reshuffle the management of its local unit to get supermarket operations here up and running. The world's third-largest retailer recently announced a 12% rise in group net profit to a record 2.13 billion pounds, or about 430 billion yen, for the year ended February, but CEO Terry Leahy has conceded that the earnings environment for its Japan operations remains severe. In addition to the Tsurukame-Land discount food supermarkets it acquired in 2003, Tesco Japan Co. has opened seven "Tesco Express" small stores in Tokyo and neighboring prefectures since last year. The pace at which it has opened outlets under its own brand, however, has been much slower than originally planned. For the year through February, Tesco Japan, which runs a total of 125 stores, chalked up 63.9 billion yen in sales, up 1.5% from the previous year. On a same-store basis, however, the Japanese operations suffered a 4% decline. The Japanese unit came in last in sales among the firm's overseas operations, except for the U.S., a new market for Tesco that it entered only last year through convenience store-type outlets. The rate of return for the Japan business has also worsened due to the investment required to build up local operations and the intense price war it has waged with Japanese supermarket chains, presenting a contrast to the strong performance posted overall by Tesco's overseas operations. Cash flow-based return on investment stood at 13.1% last year for all foreign operations, a 1.7-point gain from four years earlier, buoyed largely by the nearly 15% return marked by the group's South Korean business. To jump-start its Japanese operations, Tesco will send Michael Fleming to join the management team of the Tokyo-based unit. Fleming has a solid track record in leading Tesco businesses in emerging Asian economies. Tesco is famous for quickly withdrawing from markets once it judges them to be unprofitable. Industry observers are paying attention to how the U.K. parent will deal with the Japan business at a time when its overseas operations in other regions, including Southeast Asia and Central and Eastern Europe, are performing well. (The Nikkei Marketing Journal, Tuesday, April 22, 2008)