January in Tokyo, Tokyu closed its flagship in an upper-crusty part of Shibuya Ward. Both the Takashimaya and Tokyu stores were luxury-focused, and had been a fixture of their neighbourhoods for decades. The other department store to close was Fujimaru in Obihiro, Hokkaido, which had been open for 120 years, initially as a kimono store. Looked at over a longer time horizon the situation is even more bleak: probably about 40 per cent of the industry has gone away just in the last two decades, nibbled and gnawed at by fast fashion, a more budget-conscious Japanese consumer, deregulation of the retail industry, e-commerce, and the redevelopment of many Japanese railway stations that are directly connected to department stores.  Takashimaya won’t go quietly Still, Takashimaya soldiers on and its results in recent months suggest that some green shoots of recovery are taking hold. January sales growth was strong for its stores in Japan and although monthly sales are not reported for its overseas branches, recent trends suggest things are on an upward path. In Japan itself, year-on-year sales growth in January for the 15-store chain was 16.3 per cent, but this number was artificially boosted by the closing-down sale at the Tachikawa unit, which posted an increase of 68.9 per cent over January 2022. Aside from Tachikawa, the Shinjuku store has experienced the strongest growth (+30.4 per cent in January, on top of +16.9 per cent in December), Osaka (+22.5 per cent, after +9.2 per cent in December), Kyoto (+17.2 per cent, +6.2 per cent in December), Yokohama (+15.0 per cent, +1.2 per cent in December) and the Nihombashi flagship store (+12.4 per cent, +5.5 per cent in December). Category sales at the chain are being led by apparel and expensive personal accessories, such as watches and jewelry, which are benefiting from the weak yen, which has been an important factor in the revival of inbound tourism.  On the same theme, the growth at the Shinjuku and Osaka units is in no small part thanks to the return of overseas visitors: these stores derive as much as 20 per cent of their sales from tax-free sales to tourists, so international travel normalisation is key to their fortunes. Normalisation of travel from China, in particular, is a huge boost. Southeast Asia stabilising Takashimaya’s overseas business appears to be back on track. It has four units outside Japan: in Singapore, Ho Chi Minh City, Shanghai and Bangkok – and these generated nearly 20 billion yen (approximately $219 million) in the first nine months of 2022 alone and contributed 4.1 billion yen in operating profit, numbers that should steadily improve further in calendar 2023 as the recovery continues. The weak yen has also been a factor in the improved numbers for the overseas stores; The Japanese yen is currently trading at 13 per cent below its level of a year ago against the Singapore dollar. The Shanghai store has been somewhat of a weak link and was lucky to get a reprieve after the company announced in 2019 that it was shutting up shop and getting out of China. Management is confident now that the Shanghai unit can be profitable over the longer term and the situation is now much improved, with many Chinese now travelling and spending domestically. Indeed, despite the fact that as recently as December the company downgraded its FY22 revenue forecast for Shanghai, the outlook for 2023 is much rosier. In Singapore’s Orchard Road, Takashimaya operates one of the largest department stores in Southeast Asia, with about 20 per cent of its sales derived from tourists. The department store anchors a shopping centre operated by another Takashimaya development arm Toshin Development, which has been able to lease space at higher rents in recent months – or perhaps more accurately, offer fewer reductions – because of improving tenant sales. Takashimaya’s Vietnam store, in the Saigon Centre in Ho Chi Minh City, and its flagship in ICONSIAM in Bangkok, are also on the bounce. The outlook for 2023 Takashimaya sees huge promise in Toshin. Through the subsidiary, the company can not only develop a retail small tenant support structure for the department store itself, but can also develop other uses such as office and residential to build out integrated mixed-use projects. Aside from Singapore, other notable examples of activity by the company in this area are The Saigon Centre in Ho Chi Minh City, ICONSIAM in Bangkok and the Nihombashi flagship. Toshin’s expertise is also behind the development of Kyoto Takashimaya Shopping Center, where the department store will anchor a floor space of nearly 70,000sqm when an expansion is completed later in 2023. The new specialty store space will be leased with the aim of attracting customer segments that don’t currently shop at the department store itself. With the department store business recovering nicely, Takashimaya announced in December revisions to its earnings forecast for its FY23 which ends at the end of February. Its new forecast is for total operating revenue of 872.0 billion Japanese yen (+14.6 per cent year on year), operating profit of 28.5 billion Japanese yen (+593.4 per cent, year on year), recurring profit of 28.0 billion Japanese yen (+305.6 per cent, year on year), and net income attributable to owners of the parent of 26.0 billion Japanese yen (+385.1 per cent, year on year). As usual, it is the regional stores that are lagging while the big city flagships, with their ability to attract affluent urban customers and tourists, are recovering well. This seems to be a pattern worldwide and Japan is no exception. It isn’t clear how the regional stores will go, longer term, and Takashimaya is looking at ways to cut costs, including having fewer store personnel. If the company is to continue offering its world-famous service, it will be doing so with fewer staff.