Shimamura sales on the rise again

Shimamura had a tough time in the first half of FY2014, partly due to the waning enthusiasm for its young women’s fashions. It is now doing much better, as a result of further expansion of private brands, particularly for its core target of housewives. More work needs to be done to raise its game, in particular store design, but the discount apparel market remains strong, suggesting plenty of scope for further growth.

Discount apparel retail giant Shimamura has returned to intermittent growth in same store sales since September, after a troubled 1H FY2014 when overall sales from its 1,700 stores rose just 1% and same store sales were negative. In contrast, same store sales jumped 10.4% in September, 1.5% in October and 5.5% in December, with a slight dip in November in line with most other apparel retailers.

Key to the uplift was the launch of a new private brand, Closshi. This is Shimamura’s first real experiment with a full line private brand, backed up not only with dedicated corners in its stores but also high budget TV spots, emphasising fabric function and quality, and reminiscent of Uniqlo’s focus on seasonal hero products. Closshi went on sale in the Spring but with a full launch in September. It consists of a tight collection of womenswear focused on casual basics but with a much higher level of fabric quality and design than Shimamura is known for, such as ‘Platinum Cotton’ tops (soft, fine cotton) and light, comfortable denims, as well as shirts made with hemp fabric from France. It has also applied the same marketing message to underwear such as comfortable, well fitted bras.

Shimamura has faced tough competition in the last couple of years, and Abenomics has hit its core customer base of low income families harder than any other segment. Although it was for a decade and more one of the most solid growth stories in apparel retailing, as reported previously it has taken its time adjusting to changing trends, in particular the rise of low price value retailers offering a higher level of design and quality in bright entertaining stores.

This competition comes from both domestic rivals like GU and also the international chains. It had attempted to take these retailers on with higher ticket fashion ranges for young women, but while this started well, the poor design and visual merchandising of its stores, and predominantly roadside and supermarket locations, hindered sales to young women. In addition, adding a niche line of young fashions, consisting of around 1,000 SKUs in stores, was not enough to fix the lessening appeal of the store to the core family market.

Another issue was its choice of merchandise partners for the young collections. Retailers such as Olives de Olives, Spiral Girl, and Nice Claup were precisely the kind of Shibuya 109 brands that have seen sales implode in the last two years, along with Shibuya 109 itself, as the original customer base grows up, and a new generation look elsewhere.

These issues aside, Shimamura remains a popular source of basic apparel for families, and this looks set to continue with this new approach. It has already raised the ratio of provate brands (PBs) to more than 40% of sales and is working hard to grow it further, although it may need to move even faster – it still has more than 500 suppliers and 23 departments to deal with them. Shimamura itself admits that it focused too much on improving supply chain efficiency in the last few years, and forgot to look at what was going on in its own and its rivals stores. It now says it has fixed this, while also using its growing PB base to speed up time to market for new lines.

Closshi is the result and the first of a number of PBs planned that will raise quality and design as well as store image. Closshi is not targeting young girls with a niche collection but is an attempt to lift the design and quality credentials of Shimamura among the core customer: housewives and young mothers. This is surely the right approach and also means it can charge slightly higher prices, with denims at ¥2,300 rather than the usual ¥1,900 and tops at around ¥200 to ¥500 more than average.

The women’s denim line alone sold 400,000 pairs in S/S. This may pale compared to Uniqlo but Shimamura has always been a small lot retailer for a very good reason: it often only stocks one SKU per store for visible apparel like outerwear because it knows its customers do not want to see their neighbour wearing the same jacket. Let no one say Shimamura does not understand its core customer, even if it does mean its nine DCs work overtime to restock stores – now shipping 100,000 units per DC per day.

Shimamura is not completely out of the woods yet and needs to up its game further in product, store design and marketing, as well as invest in more city centre locations.

Sales for the first nine months of FY2014 rose 2% to ¥384 billion but operating profit fell 9.2%. For the full year, Shimamura now forecasts sales up 5.2% to ¥528 billion, and operating profit up 9.2% to ¥46 billion.