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TOKYO (MNI) – Japanese department store sales are expected to show
an improvement in October from a 5.2% drop in September, thanks to falls
in temperatures which buoyed sales of autumn and winter clothing, a
survey by Market News International found.

Japan Department Stores Association will release October sales
figures on Wednesday, Nov. 24.

According to the survey, eight out of the nine surveyed major
department stores reported improvement in their October sales, compared
with September.

That suggests the year-on-year decline in combined nationwide
department store sales in October appear to have shrunk from the 5.2%
fall marked in September. The association’s data are adjusted to
facilitate comparisons on a same-store basis.

Eight of the nine surveyed stores reported year-on-year falls in
sales in September mainly because lingering high temperatures dampened
sales of autumn and winter clothing. Apparel sales accounted for around
35% of overall department store sales in fiscal 2009.

But for October, four of the nine stores reported increases in
sales from year-earlier levels while four others said the declines in
their sales had shrunk. Only one said it had a larger drop.

Looking ahead, November sales are expected to improve further
thanks to solid demand for year-end gifts as well as low temperatures
supporting winter clothing sales.

Six of the nine surveyed stores reported that either the
year-on-year rate of growth in sales accelerated in the first half of
November from all of October or sales posted a year-on-year gain after a
drop last month.

Department store sales recorded year-on-year falls for 31 straight
months through September.

After the collapse of Lehman Brothers in September 2008, the
decline in department store sales hit a trough at -13.1% in March 2009
before showing a gradual recovery to -1.4% in July this year.

However, the pace of decline accelerated to -3.2% in August and
-5.2% in September.

Last month, the association said record heat waves continued to
dampen sales of autumn clothing while consumer sentiment was hurt by the
higher yen and weaker share prices.

Waning effects of fiscal stimulus also made the outlook uncertain,
the industry group said. The government ended its subsidy for buying
fuel-efficient vehicles in September, as planned, although tax breaks
for buying low-emission automobiles remain in place.

But there is a silver lining. Unemployment has been falling in
recent moths and wages are recovering while the yen has stopped rising
sharply against the dollar and Tokyo share prices are on the mend.

Average “base” salaries, or scheduled cash earnings at surveyed
companies that employ five or more people, were unchanged y/y in
September, improving from 24 consecutive months of drops through August.

Some department store spokesmen said stock prices, if staying above
10,000, are expected to boost demand for jewelry and designer bags. The
benchmark Nikkei 225 index rose 2% to close just above 10,000 on
Thursday.

Major department stores are closely watching whether Sino-Japanese
territory disputes will deter Chinese visitors here, who have supported
department store sales and rural area tourism.

A spokesman at Keio said the dispute might have some impact on the
chain’s October sales. The decline in sales widened in October from
September because large scale sales promotions designed to lure Chinese
customers failed to shore up figures.

A spokesman at Matsuya also said Chinese spending by credit cards
rose 24.3% from a year earlier in October, slowing down sharply from a
156.5% gain in September.

According to the association, spending on duty-free items by
overseas travelers including Chinese citizens showed a 18.7% gain on the
year in September, after posting +16.5% in August, +51.9% in July and
+99.1% in June.

Sales to overseas customers account for less than 1% of overall
department store sales now, but major store chains are seeking ways to
attract them.

J. Front Retailing, holding company of Daimaru and Matsuzakaya, is
bringing a major retailer of consumer electronics to its Ginza store
in central Tokyo partly to lure overseas customers.

skodama@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4838 **

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