Japanese retail giant AEON has slashed its earnings estimates for the financial year to end-February, citing competitive pressures in the tough Japanese supermarket sector.

The company said that it now expects to book full-year operating profit of JPY170bn (US$1.66bn), down from previous estimates of JPY210bn. Net profit is expected to come in at JPY40bn, compared to earlier forecasts of JPY70bn.

Consumer sentiment remained weak during the year, Aeon said. “Tough competition in the supermarket industry continues,” the group added.

The company tried to stimulate sales at its supermarket arm by increasing the amount of floorspace given to the “prepared foods sector” at more than 300 outlets. Aeon said it benefited from a sales uplift at these sites and intends to roll the move out further.

Looking to the coming year, Aeon expressed some concern about the soon-to-be implemented national sales tax hike. The increase will come into effect in April and is expected to dent already downbeat consumer sentiment in Japan.