Japan Exporter Stocks May Fall on Signs of U.S. Retail Weakness

By Patrick Rial

Sept. 26 (Bloomberg) -- Japanese exporter stocks may drop after the U.S. retail market showed signs of weakening, increasing concern profit at companies including Sony Corp. will be curbed.

U.S. retailer Target Corp. slashed its sales forecast for this month and Lowes Cos. issued a profit warning. Meanwhile, consumer confidence fell more than expected and sales of previously owned homes dropped to the slowest pace in five years.

``We'll see the subprime problem gradually making its way into the real economy of the U.S.,'' said Masayoshi Okamoto, a strategist at Jujiya Securities Co. in Tokyo.

Yamada Denki Co. may lead gains by domestic retailers after the company said it will acquire smaller rival Kimuraya Select Co. and boosted its stake in Best Denki Co., increasing speculation that consolidation in the industry will continue.

Nikkei 225 Stock Average futures expiring in December last traded in Chicago at 16,410, up from the close of 16,350 in Osaka and 16,315 in Singapore yesterday. The Bank of New York Japan ADR Index, which tracks the nation's American depositary receipts, jumped 1.1 percent.

Yesterday, the Nikkei climbed 0.6 percent to 16,401.73 and the Topix index advanced 1 percent to 1,566.83.

Investors will also be focusing on the cabinet appointments by newly elected Prime Minister Yasuo Fukuda. Jujiya's Okamoto said that since most of the ministers are the same as under the previous prime minister, there shouldn't be any market impact.

U.S. Retailers

U.S.-traded receipts of Sony, which generates about 70 percent of its sales outside Japan, slid 1.3 percent from the closing share price in Tokyo yesterday. Those of Toyota Motor Corp., which gets as much as 70 percent of its operating profit, or sales minus the cost of goods sold and administrative expenses, from North America, fell 0.6 percent. Receipts of Kyocera Corp., the world's biggest maker of ceramic packaging for chips, lost 0.5 percent.

Target, the second-largest U.S. discount chain, said yesterday same-store sales will increase 1.5 percent to 2.5 percent for the five weeks through Oct. 6, versus a previous forecast for an increase of up to 6 percent.

Lowe's, the second-biggest home improvement chain, said its profit this year will be at the low end of a previous forecast, sending its shares tumbling 6.1 percent.

Elsewhere, an index of consumer confidence fell more than forecast in September, to 99.8 from 105.6 and sales of previously owned homes dropped 4.3 percent in August to the slowest annual pace since 2002 and a separate index of home values fell the most in at least six years in July.

Domestic Consolidation?

Yamada Denki, the country's largest electronics retail chain, said yesterday it will make Kimuraya Select, a discount electronics chain with stores in the Tokyo region. The acquisition will cost the company as much as 6 billion yen ($52.3 million), the Nikkei newspaper reported.

Yamada also boosted its stake in Best Denki to 7.71 percent from 6.47 percent according to a regulatory filing. Yamada hopes to increase its stake in the company to about 20 percent, the Nikkei reported on Sept. 22. Best Denki plans to resist any takeover attempt, according to the Nikkei.

The move came after Bic Camera Inc. said on Sept. 20 it would pay 5.7 billion yen for new shares in Best Denki, giving it a 9.33 percent stake in the retailer. Yamada Denki has said in the past it is determined to retain the top spot among electronics retailers.

Hino Motors Ltd. may climb. Japan's biggest maker of heavy- duty trucks raised its net income forecast for the six months through September by 16 percent, to 11 billion yen, on higher overseas sales.

Fukuda, who was elected as Japan's prime minister yesterday, re-appointed Fukushiro Nukaga to the finance minister position. New appointments include Shigeru Ishiba, who was named defense minister, while Masahiko Komura was appointed foreign minister.