TOKYO, Nov 13, 2008 (AFP) - Japan's biggest department store operator, Isetan Mitsukoshi Holdings Ltd., said Thursday the financial crisis was cutting into its profits as consumers splurge less on luxury goods.

The company reduced its net profit forecast for the year to March to 27 billion yen (281 million dollars), against 33 billion yen previously projected.

It lowered its sales outlook to 1.480 trillion yen from 1.540 trillion yen.

"An extremely bitter wind is blowing through the department store industry," said company President Kunio Ishizuka.

Isetan Mitsukoshi said sales at its domestic stores tumbled about 8-10 percent in October.

Japan's department stores were struggling even before the financial crisis erupted, due to a shrinking population.

Japanese consumer confidence hit a record low as Asia's largest economy showed fresh signs of stalling, a government survey showed Wednesday.

Mitsukoshi, which is sometimes known as the "Harrods of Tokyo," has been trying to turn its business around through restructuring, closing its Osaka site and several other locations in 2005.

It tied up with rival Isetan earlier this year, creating the country's largest department store operator by sales.

Despite their famous basement foodhalls, dozens of make-up girls and floor after floor of designer label clothing along with traditional kimonos, Japan's department stores have seen their combined sales fall for the past decade.

- Dow Jones Newswires contributed to this story.