Department stores in Japan are starting to fully rebound after an extended period of depressed sales during the novel coronavirus pandemic.

But inflation and the return of dining out are taking a bite out of supermarket profits.

Supermarkets suffered from rising commodity prices and soaring energy expenses, according to newly released financial results.

Aeon Co.’s general supermarket operations, the company’s core business arm, posted an operating profit, and the Aeon group posted growth in both earnings and profit on a consolidated basis. However, United Super Markets Holdings Inc., an Aeon subsidiary that operates supermarket chains specializing in food, recorded a drop in profit.

So did Life Corp., another supermarket chain operator.

“Consumers are pulling back from purchases because unit prices have risen,” Life President Takaharu Iwasaki said. “Another factor is that people are returning from the habit of eating at home to eating out as (anti-COVID) restrictions on people’s movements have been lifted.”

But three major department store chain operators posted rosy results for the year ending in February 2023, with their mainstay department stores all posting operating profit for the first time in three years.

They owe their return to the black to a rebound in consumption from people going out again and to a surge in the number of foreign visitors to Japan, which relaxed its anti-COVID-19 border control measures last fall.

J. Front Retailing Co., which runs the Daimaru and Matsuzakaya department store chains, reported gross sales of 998.7 billion yen ($7.44 billion), up 15.3 percent year on year, and a net profit of 14.2 billion yen, up 3.3 times from the previous year.

The company’s department store business arm accounted for 7.5 billion yen in operating profit, or earnings from the core business operations.

Sales of expensive items such as wristwatches performed well throughout the year. And tax-free sales to inbound visitors jumped by five times from the previous year.

Takashimaya Co. also saw a rebound in its number of customers, largely at its outlets in central Tokyo.

“Demand associated with people going out is humming,” said company President Yoshio Murata.

The operator also managed to reduce costs by having its own employees double as cashiers and perform other work that was previously outsourced.

That led its department stores to return to an operating profit of 11 billion yen.

Sogo & Seibu Co. posted an operating profit of 2.5 billion yen. It saw sales rise more than 10 percent year-on-year at many of its outlets, including the Seibu Ikebukuro flagship store in Tokyo.

But the operator of the Sogo and Seibu department store chains posted a 13.1-billion-yen net loss, its fourth consecutive year in the red. The company wrote off extraordinary losses, some of which were associated with the planned closure of the Sogo Hiroshima department store’s “new building.”

J. Front and Takashimaya both predicted revenue growth in their earnings forecasts for the term ending in February 2024. Both companies expect their tax-free sales to rebound to 70 percent of their peak figures from February 2020 as visitors to Japan shop lavishly.

“Economic activities will be normalized further as the legal status of COVID-19 gets downgraded to a Class 5 infectious disease in May,” J. Front President Tatsuya Yoshimoto told a news conference on April 11. “And the trend for wage hikes will certainly make consumer sentiment more positive.”

Elsewhere in retail, convenience stores also posted robust financial results.

Seven & i Holdings Co.’s domestic convenience store operations saw a year-on-year sales growth of 2 percent and operating profit rise 3.9 percent.

As people venture out into the world more and more often, existing outlets operated by Seven-Eleven Japan Co., a Seven & i group company, saw a rise in both the number of customers and amounts spent per customer.

The situation was much the same for FamilyMart Co. and Lawson Inc., operators of rival convenience store chains.

“The trend of people increasingly going out is working to our benefit,” said FamilyMart President Kensuke Hosomi.

 (This article was written by Yoko Masuda, Kazumi Tako and Takeshi Suezaki.)