A Worrying Time for Fashion Retailers

With March numbers already in, department stores and fashion retailers are already feeling the economic effects from the earthquake and tsunami.
With customers not consuming anything beyond essentials and companies cutting retail operating hours, companies like Fast Retailing’s Uniqlo dropped 10.5% while department store Isetan Mitsukoshi reported March a drop in March sales of 28.4% at Isetan stores and 22.8% at Mitsukoshi stores, and fearing the worst they believe some of their Tokyo department store locations may have fallen over 30%. J. Front Retailing, operator of 21 Daimaru and Matsuzakaya department stores also reported a drop in March sales of 9.6%, with Matsuzakaya department stores reporting sales throughout Tokyo dropping up to 29.6%. Luxury retailers in Tokyo are also reporting decreasing boutique sales albeit not as high as department stores, with most retailers reporting a drop of between 10-15%.

While these sales numbers are worrisome many in the industry believe sales may worsen especially if the department stores, fashion retailers and luxury boutiques are restricted on their use of air-conditioning, an idea being floated around by the Tokyo Government.

This news comes at a time when Japan’s luxury industry was beginning to recover from the burst of the luxury bubble in late 2007, companies reallocating resources to a more consumption-driven China and a decline in demand domestically.

Do you think the drop in sales numbers is temporary or long-term?

Information Japan Department Stores Association, WWD and various confidential sources