October 5, 2016 / 7:16 AM / a year ago

UPDATE 1-Japan's Aeon Q2 profit edges up as discount store income counters weak consumer spending

* Second-quarter operating profit gains 5.6 percent

* Company says consumer sentiment has stalled (Adds company comment, second-quarter result)

TOKYO, Oct 5 (Reuters) - Aeon Co Ltd on Wednesday said second-quarter operating profit edged up as Japan's biggest retailer by sales bolstered income from discount shops, supermarkets and drug stores to compensate for losses at its general merchandise outlets amid weak consumer spending.

Operating profit for the three months ended Aug. 31 rose 5.6 percent to 39.5 billion yen ($384.02 million) compared with 37.4 billion yen a year earlier. Thomson Reuters calculated the result by subtracting first-quarter numbers.

First-half operating profit rose 0.1 percent to 72.4 billion yen compared with a profit of 72.3 billion yen a year earlier.

Japan's retailers are coming under pressure as efforts by the government and the Bank of Japan to spur consumer spending and counter deflation falter.

"Consumer sentiment has stalled and the future of our business environment is unclear," Aeon said in its earnings release.

Partly as a result of a stronger yen that has made imports cheaper, Japan's core consumer price index, which excludes fresh food prices, fell 0.5 percent in July, the biggest margin on over three years.

A separate indicator compiled by the Bank of Japan that strips away the effect of both energy and fresh food costs showed consumer prices rose 0.5 percent in the year to July, slower than a 0.7 percent annual increase in the previous month.

Aeon maintained its operating profit forecast for the full year ending Feb. 28 at 190 billion yen. Eleven analysts surveyed by Thomson Reuters forecast an average operating profit of 188 billion yen for the twelve months. ($1 = 102.8600 yen) (Reporting by Tim Kelly; Editing by Sunil Nair and Christopher Cushing)

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