What: Takashimaya is doing well in Japan, but is closing unprofitable stores.

Why it is important: Is the future of department stores to be focused on a small selection of store units, instead of covering a whole country?

The article discusses the challenges faced by department stores, exemplified by Takashimaya's decision to close its Gifu store. Department stores, often seen as romantic but outdated, face difficulties due to high capital intensity and changing consumer habits. Despite these challenges, operators like Takashimaya have continued to invest in these stores due to their integral role in local communities.

Takashimaya's Gifu store, operational since 1977, is closing due to its inability to agree with the landlord, Heiwa Building Corporation, on necessary upgrades. This store, despite its iconic status, faced issues like deteriorating facilities and changing market conditions, such as low birth rates and an ageing population, impacting its profitability.

Despite the closure in Gifu, Takashimaya as a whole experienced a strong year in 2023. Sales in December increased by 7.5% year-over-year, driven by duty-free luxury sales and domestic fashion spending. Its overseas stores in Singapore, Ho Chi Minh City, Bangkok, and even the initially struggling Shanghai store, showed positive trends. Takashimaya's real estate arm, Toshin Development, also reported favourable conditions in the rental market and involvement in various mixed-use development projects.

The company raised its revenue and earnings guidance for the fiscal year ending February 29, with sales from inbound travellers to Japan estimated at 63 billion yen. This positive performance is reflected in Takashimaya’s stock price increase of nearly 20% over the past year. However, the article points out a significant concentration of sales in just five of its 14 domestic stores, which account for about three-quarters of domestic sales. Other stores, like those in Sakai, Omiya, and Senboku, face structural issues and mediocre sales, highlighting the challenge of long-term sustainability for department stores not located in prime areas. Despite these challenges, there are enough positive indicators to maintain market confidence and keep most stores operational, excluding the Gifu store.

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