Drug-store stock jumps on record profit


Tsuruha is part of Aeon's Welcia group of drug stores, which is expanding as Japan's population ages

TOKYO, Japan (CNN) -- Stock in drug-store chain Tsuruha Co. is soaring on Thursday, up 6.92 percent to 2395 yen by late morning.

The company posted record profit figures after the close of Tokyo trade on Wednesday. It is ramping up its number of stores amid strong demand for drugs in Japan.

The chain notched a 31.1 percent jump in earnings for its business year, ended in May. Total group net profit hit 2.7 billion yen ($22.6 million).

Tsuruha is part of the Welcia group of 11 drugstore operators set up by retailer Aeon Co. Tsuruha opened 47 new stores last fiscal year, part of a broad Welcia expansion.

Same store sales up slightly

Total sales jumped 21.8 percent as a result, hitting 101.1 billion yen ($841.5 million). Its same-store sales increased 2 percent.

Because Tsuruha gets its sales within Japan, it will not be severely affected by the fluctuating yen. The yen's run of strength will in fact make imported drugs cheaper (Toyota worried by yen).

Tsuruha predicts an 11.3 percent increase in profit, to 3.0 billion yen, for the business year now running. It forecasts sales will rise 12.5 percent to 5.6 billion yen.

Its strong sales result comes as Japan suffers through one of its worst recessions since World War II (full story).

Drug demand is relatively constant in a downturn. Drug-store sales are rising in Japan and other developed nations, such as the United States.

The population in Japan is increasingly aged. The large generation of Baby Boomers in Japan are supporting themselves and sometimes older parents.

Facing tough competition

Aeon believes the 1,000-store Welcia group is one of its four core businesses. It plans to open as many as 300 new stores in the near future to take on rival Matsumotokiyoshi Co.

Aeon is Japan's second-largest retailer. It said Wednesday it has closed a deal to sell Korean-made liquid-display television screens in Japan (full story).

The LG Electronics sets will cost 20 percent less than competing Japanese brands. One Aeon executive said younger Japanese are not so concerned about buying only Japanese electronics.

The group also sells clothing and has a credit-card operation. Its superstores face competition from Wal-Mart. The U.S. budget retailer is entering the market in Japan through an alliance with supermarket chain Seiyu.

Aeon stock is down 1.77 percent at 3330 yen on Thursday, on a day the Topix index is off 0.57 percent at 1038.22.