FOCUS: Specialty apparel FY2012-13: gaining further ground

Jan 15

The results for specialty apparel retailing in FY2012 were even better than 2011, reflecting higher spending on premium fashions as well as a general uplift in consumer demand. The top specialty apparel retailers outperformed the market, averaging 9.1% growth and now account for 35% of the entire apparel market – the top 20 alone own 25%. Womenswear retailers grew the fastest, boosted by a cluster of up and coming middle ranking retailers like Trinity Arts and Mash Style Lab that posted sales up more than 50%.



CHART 1: High Growth Specialty Apparel Retailers, FY2012

CHART 2: Leading Apparel Specialty Retailers with Sales over ¥10 billion, FY2012

CHART 3: Womenswear Specialty Retailers over ¥10 bln, FY2012

CHART 4: Menswear Specialty Retailers over ¥10 bln, FY2012

CHART 5: Leading Apparel Retailers by Profit, FY2012

CHART 6: Apparel Retailers by Store Openings and Closures, FY2012


Speciality chains leading and maturing

Specialty apparel retailing may now be a mature format, but its diversity remains its greatest strength and the source of most of the new ideas in fashion retailing. As has been the case now for several years, the middle ranking firms with sales between ¥10 billion and ¥50 billion are providing much of the high growth that is helping the specialty format outpace other channels – with the important exception of e-commerce. Because of the stellar growth of some middle ranking firms, within the top 68 firms with sales of more than ¥10 billion the average growth rate was a very healthy 9.1% in FY2012. This was much higher than the 5.3% for the top 10 and 5.8% for the top 20. For the first time in three years, the rate of growth for the top 10 was less than for all firms with sales of more than ¥1 billion, which stood at 5.5%, itself a strong result.

Key Highlights for FY2012

  • Overall apparel sales grew just 0.4% in FY2012, but the top 100 apparel retailers (in all formats) expanded sales by 5.2%.
  • Sales for specialty apparel retailers with turnover of more than ¥1 billion rose 5.5% to ¥4.79 trillion.
  • 60% of firms managed to increase sales.
  • Combined sales of the top 68 specialty firms with sales over ¥10 billion totalled ¥4.31 trillion.
  • Average growth for the top 68 was 9.1%, up from 5% in FY2011, with the top 20 achieving 5.8%, against 5.3% the year before. This was the highest growth since 2005. In 2010 the growth rate was only 0.5%, and sales actually shrank 5.5% in 2009.
  • The list of retailers with sales of more than ¥10 billion is growing with eight more added last year, and five in 2011 (See Chart 2).
  • 16 retailers managed double-digit growth, the highest number since 2006 and compared to 12 in 2011, and two in 2010.
  • Unlike in 2009 when 43 of the top 55 lost turnover, in 2012 just 18 saw sales fall (compared to 20 in 2011). Even better, not one dropped sales by double digits compared to four in 2011 and 10 in 2010.
  • The market share of the leading ¥10 billion plus firms grew again last year although more slowly thanks to the strong performance of the format overall. Assuming a market value of around ¥4.79 trillion for all specialty retailers with sales of more than ¥1 billion, the top 60 accounted for 90% share, up one point from 2011 and 5 points from 2010. This represents 38% of the total apparel market of ¥12.499 trillion.
  • The top 20 produced sales of ¥3.094 trillion, giving them 65% of the specialty market, and 24.3% of all apparel retail sales. The top 10 – all with sales of more than ¥100 billion – took 49% of the total specialty apparel market, down slightly due to the higher growth of the sector overall.
  • Uniqlo had a 13% share, and Shimamura 10%, in other words, close to a quarter of the specialty apparel market by value is now held by just these two companies.

The Winners: casual & fair trade fashion

Statistics aside, the real story is in who the winners and losers were last year. There were some really strong performances, and often from the same names that have come up in previous annual reviews. Their consistent growth reflects their ability to meet new demand that larger firms have not tapped into, as well as relentless store expansion.

Almost all of the 16 retailers that managed double digit growth had sales of less than ¥100 billion (see Chart 1), the exceptions being United Arrows and Aoki Holdings, reflecting the buoyancy of the middle ranking firms. Growth for the better firms came from across all categories: womenswear, casual apparel and select shops. The only anomaly was Palemo, whose growth of 41.7% came entirely from the merger with sister company Suzutan organised by mutual parent, Uny.


GU topped the ranking for fastest growth among the ¥10 billion plus group in FY2012 with sales reaching ¥58 billion, up 80% on the year – FY2013 sales came in at ¥83.7 billion, up another 44%. Although new stores boosted growth, same store sales also jumped, up 35% despite lower prices, helped by a new TV ad campaign. There remains plenty of room for more growth. Launched in 2006 as a Fast Retailing authored solution for Daiei’s floundering apparel floors, GU has emerged as a strong second brand for Fast Retailing, offering fashion basics at prices 30-50% less than Uniqlo. Since 2010, GU has begun to move away from the Uniqlo merchandise model, switching from massive lots of a small number of SKUs to small lots of many SKUs. Prices are also being held down, with an average of ¥1,000 last summer. GU is concentrating on a rapid roll out of stores at home, sometimes replacing Uniqlo locations. 60 stores were opened in the year to August 2013 with another 60-80 expected in the year ahead. Fast Retailing forecasts sales of ¥100 billion by August 2014.

Mash Style Lab

Mash Style Lab was the second fastest growing firm last year, up 72.6%. Sales now exceed ¥20 billion. Although same store sales were flat in FY2012, new stores and strong e-commerce sales helped drive growth. Mash Style Lab is owned by Mash Holdings which owns two of the fastest growing young chains in Japan, Snidel in fashion and Cosme Kitchen in cosmetics. Snidel produces street and feminine fashions for 20s to 30s women with a dressy, sophisticated image dubbed Street Formal. Snidel takes risks where many other mainstream fashion retailers don’t, delivering an original and fresh collection that differentiates it from other SC tenant competitors.

It also has several other chains including Gelato Pique, which sells homeware in appropriately ice creamy colours, Fray I.D, a streetwear brand, and Lily Brown, a vintage inspired chain.

Trinity Arts

Trinity Arts was the third fastest-growing retailer last year, up 57.6% to ¥26.4 billion – the rate of growth was almost exactly the same as 2011. The chain started life as a fashion and station building tenant but has found a role as one of the higher fashion tenants in suburban SCs with plenty of growth potential. It was bought by Point (now re-formed as Adastria Holdings) last year, creating a group of more than 1,170 stores and sales of ¥120 billion.

Trinity Arts’ key chain is Niko and…, which mixes accessories, apparel and lifestyle merchandise, distinguishing it from the mainstream, and appealing to a more eclectic and fashion forward shopping mall visitor. Trinity Arts acquired Studio Clip in 2012. Both chains posted same store sales up in double digits.

H&M Japan

H&M Japan was the fourth fastest growing firm in FY2012 with sales up 53% on a local currency basis. It looks like H&M is set for similar growth in FY2013 ending November too; sales rose 52% on a local currency basis in the first nine months of FY2013. In Swedish Krona, sales rose 23% to SEK 2.079 billion (¥31 billion). H&M continues to add more stores, and was expected to have some 36 stores in Japan as of December 2013.

H&M’s enthusiasm for the Japanese market remains unabated, as does consumer appreciation for the H&M brand, resulting in high sales per store. A rough estimate suggests turnover is close to an average of ¥1.7 billion per store, about double other markets. The Swedish firm also introduced the Monki and Weekday chains, adding new potential sources of growth. At the current rate of investment in new stores, H&M is likely to see Japan sales hit ¥100 billion within about three years. On current turnover of competitors, this will make it the largest overseas fashion retailer and one of the top 11 or 12 specialty apparel retailers in Japan, less than a decade after entering the market.

F.O. International

Excluding Palemo’s exceptional increase due to merger, the fifth fastest-growing childrenswear retailer was F.O. International. Started in 1998 as a wholesaler of childrenswear, F.O. developed a nationwide network of 1,200 retail clients before creating its own stores in 2003. It has rapidly expanded key chains like F.O. Kids, Breeze and Apres Les Cours since. Although net store numbers were static at 175 stores, it opened more larger stores in SCs and closed low traffic locations, helping push sales up by 30%.

What makes F.O. chains different is their bright, colorful and fun designs that stand apart from the basic ranges of other mass market retailers. Although prices are higher, the level of design and originality appeals to the growing number of parents wanting more fashionable attire for their children. It has managed to quadruple sales from ¥5 billion five years ago to ¥20 billion last year.

M’s Co Ltd

Sixth fastest growing chain, M’s is the smallest of the fast growth firms. The Fukushima based fashion retailer focuses on fast fashions for the teen and 20s womenswear market with chains like Retro Girl, Ems Excite and Casita. Launched in 1992 as a wholesaler and retailer, M’s has since expanded to 111 stores as well as a popular e-commerce operation called Girly Select ( M’s has remained independent although it did take on Point as a shareholder and joint venture partner in 2006. This partnership was dissolved in 2009 due to management differences.


Also worth a mention is Titicaca. Although too small to get into the ranking table, the Tokyo-based firm saw sales jump 46% to ¥5.8 billion in FY2012. What is unusual about Titicaca is its focus on fair trade fashions and homeware and the fact that it started pioneering fair trade in Japan back in 1977. From the mid-2000s it began to emerge as an SPA retailer, creating more demand driven production but still keeping to its fair trade principles, providing well-paid work to communities in central and southern American countries, and more recently in Asia. A big boost came when it was taken over by variety store retailer Village Vanguard in 2007. Since then it has expanded rapidly into SCs. Its colourful, original stores mixing fashions and interiors, combined with its strong fair trade and environmental credentials, appeal to a growing number of ethical fashion consumers in Japan.

The losers: same AGAIN

Fewer companies lost sales last year and of those that did the percentage decline in sales was less. Outdated womenswear and casual apparel chains fared the worst.

The worst performing chain was Suzuya which has seen store numbers fall from more than 300 to just 59, with 29 closing in FY2012 alone. Summit Colmo, owned by Sumitomo’s supermarket chain Summit, has also seen apparel sales fall over the last decade. Familiar is a 60 year old retailer and wholesaler concentrating on the baby and toddler market with its own brands, as well as through licensed characters like Snoopy and Madeline. Positioned at the premium end of the market with a traditional feel and conservative management, sales have fallen about 25% since 2007.

Jeansmate continues to suffer because so much of its sales come from mass-market denim. Value retailers have taken away its customer base and its loss of sales has become arterial. It has made half-hearted efforts to develop new concepts such as in lifestyle accessories, and even opening stores 24-hours a day in some locations, but it is unable to compete on price with value retailers.

Womenswear up 13%, top 5 own 70% of market

Womenswear massively outperformed menswear in 2012. Of those retailers with women’s apparel sales of more than ¥10 billion, sales growth averaged 12.9% compared to 5.4% for menswear retailers. All the fastest growth, with the exception of Cross Company, was among retailers with sales of less than ¥50 billion. Senken’s survey-based estimate of the value of the specialty womenswear market for firms with sales of more than ¥1 billion (around 120 companies) was ¥1.19 trillion last year, although this excludes key players deemed as ‘wholesalers’ such as World. This gives the top 28 with sales of more than ¥10 billion (listed in Chart 3) a huge 96% of the market, and the top 10 retailers alone 71%. The top four owned 47% but add in an estimate for World’s womenswear only retail sales (not included) of ¥250 billion and the top five would own close to 70% of specialty womenswear retailing. The key reasons for the rapid growth in womenswear were expansion of existing chains and the creation of new store concepts, particularly by up-and-coming retailers.

Apart from these chains, the biggest growth in womenswear came from the select shop retailers, which continued to develop more women’s merchandise in core brands as well as more dedicated womenswear chains. Urban Research led this growth, up 29%, followed by United Arrows’ up 12.3%.

There were few poor performances last year other than Suzuya. Cox continues to restructure its business, closing down more stores in the recently merged Blue Grass chain, resulting in a 8.1% drop in womenswear sales. Palemo jumped 55% but only through merger, with core sales down. Chiyoda is also working through Mac House’s ageing store portfolio, closing six stores last year.

Menswear growth averages 5.4%

In menswear, FY2012 was better than 2011 with average growth for the top 16 retailers with sales of more than ¥10 billion of 5.4%, up 2.3 points. The top 10 performed better, with growth of 5.9% (Chart 4).

Aoki contributed significant growth, up more than 10%, partly thanks to the success of its Orihica chain, but also due to new stores – it added 35 stores last year (see Chart 6).

The top chains continued to maintain a high share of the total market of specialty retailers with turnover of over ¥1 billion (60 firms). Menswear specialty retail sales were valued at an estimated ¥1.436 trillion, up 5.8%, slightly outperforming the top 16 which rose an average of 5.4%. Market share for the ¥10 billion plus group has fallen in recent years, dropping to 64% last year. The top four accounted for 43% of the market.

Profits continue to rise

In FY2012, profits continued to improve across the board. Operating profits grew around 5% for the specialty format overall, but average growth among the ¥10 billion plus group was 21.5%. Gross margins rose fractionally, by 0.3 points to 48.1%.

As Chart 5 shows, Uniqlo remains the most profitable apparel retailer by far, both by value and by margin, recording a 16.8% pretax margin last year. Among the top 20 most profitable firms it was only beaten by uniform and working gear retailer Workman, which boasted a pretax margin of 18.7%. By gross margins, Samantha Thavasa leads with 65.5%, followed by Miki House (64%), Aoki Holdings (61.5%), Taka Q (61%), Familiar (60%) and Aoyama Shoji (59.9%).

Many leading firms increased profits last year. Aoyama Shoji, Nishimatsuya Chain, United Arrows, and Aoki were all helped by growing sales of private brands, including higher priced lines for Aoyama and Aoki. United Arrows remains the most efficient retailer, topping the sales densities ranking with average sales of just under ¥200,000 per sqm per month. Among the firms in our ranking, it is followed by Ships at ¥125,000, Japan Imagination at ¥123,000, and Miki House with ¥107,000.

Growth, stable prices, and solid demand

FY2012 was another strong year for specialty apparel retailers. The format outperformed the apparel market overall by a significant margin, and the top 60 specialty retailers outperformed other apparel retailers even more. Much of the vitality came from an important group of retailers with sales from ¥10 billion to ¥50 billion which are producing both high and consistent growth. These firms were all retail led, with a relentless focus on efficient supply chains, and strong merchandising and marketing skills. They are quick to spot new trends and execute their answers to new demand effectively.

Prices held up well, and demand for higher priced items was also clear. The growth in premium SCs is helping lift the sales of the better fashion merchants, and the shift to more lifestyle merchandising that encourages browsing, is helping to keep customers coming into stores rather than simply clicking to buy.

Japanese consumers’ growing enthusiasm for shopping online is not stopping investment in new SCs because shopping remains the key form of leisure for many – and retail stores will become showrooms for the latest and most innovative products long before any existential threat. Glitzy new SCs with lots of entertainment, like Aeon Makuhari Shintoshin (see Page 4), will have a long and popular life. For now specialty chains continue to invest heavily in store expansion, with an average of 14 new stores per retailer among the top 68 firms, and 54 among the top 10 fastest growing retailers by store numbers. Even if sales switch to online channels, brand exposure remains an important incentive to drive sales both online and off.

This willingness to invest is matched by Japan’s capacity to absorb new chains precisely because under-performing businesses are at last being allowed to fail. As banks and Sogo Shosha pull back support, and both SC developers and department stores focus more on performance at the expense of loyalty to old friends, the market is opening up, providing significant new opportunities in an apparel market that is also actually growing consistently, at least for now, for the first time in more than 15 years.