April 13 (Bloomberg) -- Japanese stocks dropped, headed for a third consecutive day of losses. Takashimaya Co. paced retailers lower after the company said full-year profit missed its forecast and predicted that sales will drop this year.

``The large retailers need to create ways to attract consumers and they're still finding the challenge very difficult,'' said Masaki Iso, who oversees $6.1 billion as head of Japanese equities at Yasuda Asset Management Co. in Tokyo.

Stocks also declined after a government report showed that producer prices rose for a 13th month in March, eroding profits at companies that can't pass costs on to customers after almost seven years of deflation.

The Topix fell 6.74, or 0.6 percent to 1172.54 as of 1:45 p.m. in Tokyo. The Nikkei 225 Stock Average dropped 67.36, or 0.6 percent, to 11,602.94. Nikkei 225 futures fell 0.3 percent to 11,630 in Osaka and slipped 0.4 percent to 11,625 in Singapore.

Losses in the Nikkei widened in the afternoon session after sell orders for two lots of 500 Nikkei 225 futures contracts at 11,640 and two at 11,630 were executed between 1:21 p.m. and 1:22 p.m. on the Osaka Securities Exchange.

Retailers declined on concern their sales may not rebound this year as consumers shift their spending from goods to services, according to Yasuda Asset's Iso.

``It's too early to invest in these companies and turning around their businesses will still take time,'' he said.

Takashimaya, Japan's biggest department store operator, dropped 45 yen, or 4.3 percent, to 1,010.

Retailers Drop

The company said yesterday that net income totaled 13.9 billion yen ($129.4 million), less than the 14.6 billion yen profit it had forecast on Oct. 12. For the current year, Takashimaya is predicting a 1.4 percent decline in sales after they fell 7.9 percent for the fiscal year ended in March.

Other retailers also dropped. Ito-Yokado Co., Japan's second- largest, fell 40 yen, or 1 percent, to 4,130.

Isetan Co., the nation's fourth-largest department store operator, lost 14 yen, or 1 percent, to 1,341. The company, which cut its full year profit by 31 percent last month, said sales fell for a second month in March, on a year-on-year basis.

Elsewhere, Livedoor Co., the Internet portal battling for control of the country's largest media group, jumped on speculation the company may force its main adversary, Fuji Television Network Inc., into an alliance.

Livedoor surged 29 yen, or 9.9 percent, to 322.

Bandai Co., Japan's second-largest toymaker by value, climbed 90 yen, or 4.1 percent, to 2,300. Jay Defibaugh, an analyst at Credit Suisse First Boston, raised his rating on the company's shares to ``outperform'' from ``neutral.''

Kanebo

Kanebo Ltd., a food and drugs maker undergoing rehabilitation by the Industrial Revitalization Corp. of Japan, plunged 200 yen, or 13.4 percent, to 1,291. The company said it had negative net worth in the four years ended March 2003 as former management overstated sales and understated expenses and losses.

The former management inflated earnings by about 200 billion yen from fiscal 1999 to 2003 and excluded losses from money- losing units such as Koyo Senshoku, the Nihon Keizai newspaper earlier reported without citing anyone.

To contact the reporter for this story: Michael Tsang in Tokyo at mtsang1@bloomberg.net.

Last Updated: April 13, 2005 01:07 EDT