Mitsukoshi Ltd., Japan's third-largest department store chain, said Friday it returned to profit in the first quarter from the year before, when it posted a loss because of a revaluation of its real estate holdings.
Net profit for the three months to May 31 was 2.4 billion yen from a loss of 11.6 billion yen a year earlier. Revenue dropped 5.3 percent to 185.3 billion yen, the Tokyo-based retailer said in a statement.
Japan's oldest department store chain is struggling to find ways to boost sales and become more competitive in the world's second-biggest retail market, worth 129 trillion yen a year. Mitsukoshi's stores in smaller cities are losing market share to malls and supermarkets, analyst Shinya Torihama said.
"Mitsukoshi is struggling partly because it has too many stores in smaller cities," rather than in Tokyo and Osaka, said Torihama, a retail analyst at Okasan Securities Co. in Tokyo, before the announcement. "It has to do something about those stores. The only way to survive or stay competitive is to bolster business in big cities."
Mitsukoshi kept its full-year profit forecast unchanged at 10.7 billion yen on revenue of 801.3 billion yen.
Mitsukoshi's annual revenue was surpassed by that of Daimaru Inc. in the business year that ended Feb. 28, becoming the second-largest department store chain behind Takashimaya Co.
Three of Japan's top four department store chains, except for Mitsukoshi, said sales rose in May. It was the first time this year that Takashimaya, Daimaru and Isetan Co. recorded simultaneous increases.
Sales fell as floor space at Mitsukoshi's flagship store in Tokyo's Nihonbashi district, the old commercial center, was reduced because of renovation.
Department store sales fell 0.4 percent in May from a year earlier, the third consecutive drop.