Despite fears of a downturn following the consumption tax increase in April, sales in many sectors remain strong. Although sales of high end art and jewellery sales were frenzied in March and remain weak as a result, department stores are reporting strong sales in luxury brands even now.
Having jumped 20% year on year in March, department store sales fell by 12% in April following the consumption tax rise. This was lower than the last time the tax was raised in 1997 and all signs suggest consumers are not overly concerned. A number of stores have been reporting not only sales at reasonable levels, but even sales increases. Jewellery, art and precious metals surged in March up 38.9% on last year and have indeed since fallen back, but sales of other luxury brand items have remained strong.
At Matsuya in Ginza, sales of high end apparel and accessory items on the 2nd floor jumped 20% in April-May compared to 2013. Average purchase prices are hovering around ¥80,000-100,000 with brands such as Christian Louboutin doing particularly well. Similarly at Sogo Seibu stores Italian leather goods are also selling well. Bags priced at ¥200,000 or more are popular, with Celine bags in this price range outselling last year for example. At Seibu Ikebukuro, men’s footwear and accessories are both up more than 10% on 2013. A spokesman pointed out that wealthy customers, those buying ¥5 million watches in March, are coming back to buy high end bags and other accessories.
In May Isetan-Mitsukoshi held its annual ordering party for customers wanting to buy high end men’s footwear brand John Lobb. The Isetan Shinjuku store took orders for 72 pairs mostly from customers who’d bought before – a value of ¥18 million, 80% higher than last year. Overall men’s footwear sales were up 18% at Isetan Shinjuku in May alone. Even sales of watches are returning slowly, with the drop in May at Isetan Shinjuku lower than in April.
J Front Retailing and Takashimaya both announced better than expected 1Q2014 results too. Sales in 1Q for J Front were the best since 1Q2007, beating all previous records. Pretax profit jumped 18%, despite a forecast fall of around 2%, although divestment in subsidiaries led to higher costs and a downturn in profits overall. For Takashimaya, 2014 was the third straight year in a row of increased sales in 1Q, with operating profit also up around 13%. Both chains said sales increases were higher than in 1997 and that unprecedented numbers of tourist shoppers had contributed significantly. Senior executives at Takashimaya noted high sales of Louis Vuitton and Cartier products prior to the tax increase.
Fears over a downturn following the rise in consumption tax increasingly appear to have been overstated (see JC1406). Perhaps unfairly some industry insiders are now even decrying the government’s timidity in splitting the rise into two parts, with a second round of worry and uncertainty due next October when the tax is increased again to 10%.
What these much better than expected sales results do suggest, however, is that in some respects government policy seems to be working well, with inflation hitting a 30 year high of 3.5% and with many export companies still enjoying returns from the low value of the Yen.
Some of them are even willing to pass part of the profits back to employees. A Keidanren survey suggested that summer bonuses will rise 7% on average this year compared to 2013, but the reluctance to increase wages remains a worry. High end retailers like department stores and consumer electronics stores were tentatively hoping for a quick recovery, and it increasingly looks like they will have their hopes fulfilled.
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