As Japan's department stores continue their decade(s) long downward spiral, J. Front Retailing is making a strategic move that could put it well ahead of its competition.
With the acquisition of Parco complete this past August, J. Front Retailing is ready to take advantage of the lack of big department store players in small size-markets spread throughout Japan and abroad.
Parco shopping centers have had an advantage over the years of attracting strong and diverse tenants, the holy grail of consumers; young people in their 20`s and 30`s, have lower operating costs and make a profit.
Although Parco has not opened a new shopping center in over 2 and half years, J. Front Retailing is ready to not just open one Parco shopping centers, but many.
J. Front Retailing' strategy with Parco is to open new shopping centers of up to 10,000 square meters in small markets of only 200,000 to 300,000 people in Japan and China where there may not be a substantial department store or retail presence. To date this strategy has worked for Parco and no others are effectively and efficiently implementing their success.
J. Front Retailing predicts an expanded Parco shopping center business can reach 13 billion yen in operating profit by the end of fiscal year 2016 which would help J. Front Retailing reach their forecast of 30 billion yen in operating profit from department store operations by fiscal year 2016.
Will the success of J. Front Retailing's Parco expansion plan drive additional M&A business of smaller-size department stores by their larger counterparts?
If so, this could be the biggest thing to hit department stores since Matsuzakaya first let customers enter the store in their street shoes - way back in 1924.
Information J. Front Retailing & Nikkei