TOKYO -- Muji operator Ryohin Keikaku expects operating profit to approach a record this fiscal year thanks to a successful rollout of food items that complement its distinctive lifestyle goods.
The black ink is projected to rise 6% to 45 billion yen ($396 million) in the year ending August 2022, the company said Thursday. This would close in on the all-time high of 45.2 billion yen earned in fiscal 2017.
The Japanese retailer has devoted more sales space to an expanded lineup of snacks and packaged food, which has led to an uptick in customer traffic at outlets in Japan. Kitchen utensils, towels and other daily items are selling strongly as well.
"Support is growing for the expansion of products that sustain the basics of life," said Nobuo Domae, who became the new president of Ryohin Keikaku last month.
Operating revenue is forecast to climb 6% to 480 billion yen this fiscal year, underpinned by the 8% growth for the domestic business to 322 billion yen.
Food sales jumped 60% in fiscal 2021. Muji will widen the lineup of frozen food developed in-house as well as fresh vegetables.
"We'll proceed with product lineups and store operations that will encourage weekly shopping visits at the least," Domae said.
Operating revenue for the East Asia business, which is mainly focused on China, is expected to edge higher to 126 billion yen in the current fiscal year. This would be a significant slowdown from the 17% growth in fiscal 2021.
China was home to 299 outlets at the end of August, or 30% of the global total. But the market faces concerns about worsening business confidence.
"Movement restrictions and other impacts from the coronavirus has persisted sporadically, so we're taking a conservative view," Domae said.
Latent demand in China is still strong. Muji will continue to roll out kitchen items and other lifestyle products in a bid to draw new customers.
While apparel accounts for about 37% of overall sales, everyday items, sundries, food and other daily living essentials form a greater part of sales. It is believed that the latter is less exposed to weak consumption compared with apparel.
Ryohin Keikaku still faces the challenge of rebuilding operations in Europe and the Americas. The segment logged a 2.1 billion yen operating loss in fiscal 2021, with a 600 million yen loss projected for this fiscal year.
Considering the small scale of many European Muji stores, enough revenue is not generated to absorb import costs. Ryohin Keikaku will be tasked with closing unprofitable outlets, among other reforms.
"We can't afford to continue running losses," said Domae.
Net profit this fiscal year is projected to shrink 6% to 32 billion yen due to the effects of one-time windfalls realized in the previous year. Ryohin Keikaku logged a record net profit of 33.9 billion yen in fiscal 2021 thanks partly to substantial foreign exchange gain due to the weak yen. The company also booked a 3.1 billion yen extraordinary gain stemming from forgiveness of lease obligations in the U.S.
There are signs that last year's stay-at-home demand is on the retreat. September's same-store sales, which include online purchases, fell 5.2% from a year earlier. The rush of purchases of curry packets and similar food, along with sundries, appear to be fading as well.
Ryohin Keikaku's high-margin private brand covers over 90% of the products on the shelves. Store operating costs will be cut in part by reining in discounted sales. Weekly inventory control processes will help the company respond to quickly changing business environments.