from the preceding year, to breach 1 trillion yen (US$7 billion) for the first time since 2007. That sounds nice but still, you might well be shocked that the chain spent a whole 17 years getting revenues back to where they were in 2007. The lion’s share of operating revenue (83 per cent) and exactly half of the operating profit emanated from domestic stores. Operating profit as a whole rose by 11.2 per cent and net profit to the owners by 7.9 per cent. So far, so good. Within the domestic store segment, there was a divergence in sales performance between the large stores typically located in the major tourist destinations and smaller, regional stores. Specifically, the former experienced sales growth of 12.3 per cent while the latter was flat. Indeed, no less than 80 per cent of sales were attributable to just five stores – Nihonbashi and Shinjuku in Tokyo, Yokohama, Kyoto and Osaka – each of which recorded sales in excess of 100 billion yen (US$700 million). At these big stores,15 per cent of the customer base, on average, were international tourists who spent big on duty-free; that percentage was up to almost 30 per cent in Osaka. The dependence of Takashimaya’s growth in 2024 on those inbound tourists to its major domestic markets is now a bit of a concern in view of geopolitics. A weak Chinese economy, jittery domestic consumer confidence, and a couple of overseas stores that aren’t exactly setting the world on fire. Overseas stores Takashimaya operates four stores overseas, in Singapore, Bangkok, Ho Chi Minh City and Shanghai. Operating revenues were up strongly at its iconic Singapore store on Orchard Road, and also in Ho Chi Minh City (+6.2 per cent and 21.2 per cent, respectively), but were down sharply in Shanghai (-21.3 per cent) and slightly down at the IconSiam store in Bangkok (-1.2 per cent). The latter two stores ran a slight operating loss and underperformed company expectations. Toshin Development Takashimaya’s commercial property arm, Toshin Development, leases space in shopping centres anchored by Takashimaya department stores. Toshin also develops mixed-use and urban development projects, including the Saigon Centre and IconSiam in Bangkok. Overall, Toshin’s operating revenue and profitability stumbled in the last 12 months, which was attributed by the company to a revamp of one of its shopping centres in Japan (Tamagawa in western Tokyo) and an adverse comparison with asset sales in the base year. The overseas results were a bright spot, though, with a 15.7 per cent increase in operating revenue. Still, despite the ordinary results, operating revenue growth is expected to tail off sharply this year, and the profit outlook isn’t spectacular either, which caught the eye of investors in the company’s Q&A session. The company responded that it expects the Tamagawa revamp to continue eating into profits this year, along with outsourcing and other operating costs.  The outlook for stores The company leadership concedes that things are getting a bit wonky in terms of the consumer outlook. Things have not gone so well this year after a promising start in January, when sales at domestic stores rose by 6.3 per cent, year on year: Things soured shortly thereafter, with a 1.0 per cent decline in February and a 2.5 per cent decrease in March, results that have been broadly reflected across the whole of Japan’s department-store sector. The company has already acknowledged that tourism growth will level off, in particular, no increase is expected in Chinese group tours, and the emphasis will have to shift toward getting more out of tourists from outside China and Western countries by putting greater emphasis on services. Nonetheless, Takashimaya is still looking for a 4.3 per cent increase in operating revenue in Japan this year – a little less than half the growth rate of 2024. It anticipates being able to achieve this growth with a number of initiatives, one of which is to broaden its merchandise appeal beyond inbound tourists and high-net-worth customers. Certainly, there is a lot of scope for doing this, considering Takashimaya’s historically high-end, exclusive market positioning, but it is also indicative of a problem inherent in the department store format: A huge swathe of mid-market shoppers have long abandoned department stores, preferring trendier and more value-oriented shopping channels.  Takashimaya also wants to tailor its merchandise better to regional tastes, but this raises the question of why this wasn’t being done better already, in view of the sharp dichotomy in customer base between the major city flagships and the others in the company portfolio. However, irrespective of weak or no sales and traffic growth, Takashimaya is not keen to close weaker stores, given their importance to the local communities. Moreover, as long as operating costs are not rising and the company owns the store buildings and land, even marginal profitability is good enough to keep the lights on. Meanwhile, Takashimaya is looking for an operating revenue increase of 3.8 per cent at its overseas stores (down slightly from 2024). It is looking for a big improvement in its Bangkok store in particular, which co-anchors the IconSiam centre across the river to the west of downtown. It would also like to see its ailing Shanghai store work its way out of the red this year, despite a poor sales outlook (the company is forecasting a 7.3 per cent drop in operating revenue). This store may not even have existed had the company followed through with its pre-Covid plan to shutter it. One wonders if the change of mind in the middle of 2019 to keep the store open was misguided. Further reading: Why tourists and big city flagships are key to Takashimaya’s recovery