Railway firms benefit from retail, but FY2014 sales dip due to rebuilding

Investment in converting stations and surrounding areas into shopping centres and community hubs has paid serious dividends for railway operators. FY2014 saw solid growth on a like for like basis, but closure of properties for rebuilding and refurbishment, combined with some correction following the 2014 tax hike, meant a contraction in revenues for some. This is a temporary blip as stations become an ever more important location for brands, retailers and services.

Most of the leading railway operators posted lower revenue in their retail businesses in FY2014. The biggest, JR East, saw income from commercial space fall 0.9% to ¥412 billion, but this was partly because of the closure of parts of Tokyo Station for refurbishment. Shopping and office space alone saw revenue rise 1.8% to ¥266.5 billion, producing an operating profit of ¥72.3 billion. During the year, JR East opened several new SCs including CIAL Sakuragicho in Kanagawa, Nonowa Musashi Koganei and Midori Nagano.

Going forward, the Shinjuku New South Exit Building is scheduled for completion in Spring 2016 and the Sendai Station East Exit Development will complete in 2016 too. JR East began construction of the Atami Station Building this year, slated to open in 2017, and the JR Chiba Station South Exit Building is expected to open in 2018 with 57,000 sqm of sales space. Phase 1 of the Shibuya Station Area Development Plan, a joint project with Tokyu Corp and Tokyo Metro, will open in 2020 with 70,000 sqm of sales space. The three year plan for the development calls for sales of ¥425 billion through FY2018.

JR West also saw revenue decline, by 8.3% to ¥220 billion, but this was largely due to the conversion of the Isetan-Mitsukoshi store into Lucua 1100, which opened in April, resulting in the closure of the building for seven months – on a like for like basis, revenue was positive. During the year, JR West opened Eki Marche, a 70 tenant SC within Shin-Osaka station, as well as developing parts of Toyama and Kanazawa stations to take advantage of the traffic from the new bullet train from Tokyo to Kanazawa. JR West is playing catch up to JR East in converting stations into appealing shopping centres and is currently rebuilding at Shin-Osaka, Hiroshima and Kanazawa.

JR Tokai in Chubu posted higher revenue, up 5.9% to ¥233.8 billion. Revenue was boosted by the perennial growth at JR Takashimaya Nagoya, which also saw investment in upgraded space. JR Tokai is also creating new SCs, especially along its commuter routes to prosperous commuter towns such as Anjo.

Among the private railway operators, Kintetsu posted revenue of ¥391 billion, up 2.5% and profit up 16% to ¥5.6 billion. Although its newly rebuilt Abeno Harukas Kintetsu department store has been poorly received, the reopening offset the loss of revenue from the closure of Kintetsu Momoyama. Kintetsu also benefited from the conversion of convenience stores to Familymart, and growth at its highway service areas.

Tokyu’s revenue from its lifestyle division fell 0.9% to ¥520 billion, but profit leapt 19% to ¥7 billion. The fall in revenue was caused by the closure of Tokyu Toyoko in Shibuya and the ongoing restructuring of Tokyu Store supermarkets. During the year, Tokyu began rolling out its new specialty chain, Mikke by Tokyu Department Store, which sells fashion accessories, opening two stores but with plans for as many as 20 over the next two years.

Among the smaller firms, Meitetsu posted lower retail revenue of ¥141 billion, down 5.8% and Hiroshima Dentetsu was down 7% to ¥10.7 billion.