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The Honolulu Advertiser
Posted on: Thursday, December 13, 2001

Japan's retailers face a blue Christmas

By Miki Anzai
Bloomberg News Service

Tokyo's famed Ginza shopping street, decked out with holiday decorations, is crowded with shoppers and potential shoppers — but shrinking worker salaries and skimpy bonuses this year have retailers expecting a bleak sales season.

Associated Press

TOKYO — Housewife Yoko Morioka is cutting back on her holiday spending this year because her husband's winter bonus was cut by 15 percent.

"I came here just to buy Christmas cards," the 41-year-old Morioka said after shopping at Isetan Co.'s flagship department store in Tokyo's Shinjuku entertainment district. "I need to tighten my purse strings more than I had expected."

That's not the sentiment retailers want to hear during their peak selling period, Japan's traditional year-end gift-giving season.

Department stores typically generate about one-third of their revenue in December. This year, with unemployment at a record-high 5.4 percent, wages falling and the economy in its third recession in decade, retailers are bracing for disappointing holiday sales.

"Revenue declines are unavoidable," said Masashi Murata, an economist at Sanwa Research Institute & Consulting Corp.

Part of the problem is that winter bonuses, which can amount to several months salary for Japanese workers, will fall 2 percent from a year earlier, to an average of 462,400 yen ($3,670), Murata said. About 1.6 million people, or 2.7 percent of all employees eligible for bonuses, may "get nothing" this year, he said.

To attract more customers and encourage holiday spending, Isetan, Japan's fifth-largest department store operator, and five rivals last month offered discounts on early purchases of year-end gifts, boosting sales. The chains may see sales sputter this month as a result, analysts said.

Isetan and Matsuzakaya Co., Japan's sixth-largest department store chain, both posted 10 percent sales declines last weekend from a year earlier.

"Shrinking salaries and bonuses definitely made shoppers more bargain-conscious and selective," said Tamami Matsuoka, a Tsubasa Securities Co. analyst.

The outlook for general merchandise stores is even bleaker. Such stores compete on price more fiercely than do department stores because their target customers are lower-income individuals, Matsuoka said.

Ito-Yokado Co., Japan's largest retailer, cut the price of men's suits made in China 18 percent from last year, and sold 90,000 between Dec. 4 and Dec. 9.

"We sold all the ... suits in just six days, but these have a small profit margin, so we can't do this too often," said company spokesman Yasuo Takaha.

Retailers suffer either way, "as lowering prices to bolster unit sales will end up hurting their gross margin," or sales minus cost of goods sold, Sanwa Research's Murata said.

December sales at Joshin Denki Co.'s 192 outlets will slip from a year earlier, the home-electronics retailer said.

Sales have been more than 4.8 percent behind last year's pace each month since April.

"We want to sell televisions and personal computers during the holidays, but many shoppers now think twice about buying," Joshin spokesman Hisao Saito said.

Joshin expects a current loss, or pretax loss from operations, of 3.5 billion yen for its fiscal year ending March 31, a turnaround from its initial forecast of a 2.3 billion yen profit.

Even Yamada Denki Co., the only major Japanese consumer electronics retailer to post a profit in its fiscal first half, lowered its full-year current profit forecast, citing slumping sales and falling prices of personal computers.

There are a few bright spots.

Luxury goods and products featuring popular movie and cartoon characters are selling well, retailers said. Isetan reaped $1 million from a six-day sale last month of items such as brooms, hats and costumes tied to the movie "Harry Potter and the Sorcerer's Stone," which earlier this month broke the Japanese box-office record for an opening weekend.

Beginning Dec. 13, Isetan will promote products featuring the "Peanuts" character Snoopy in a weeklong sale at its seven stores. Isetan expects to take in $1 million from sales of Snoopy items, such as mugs and shopping bags, said chief sales promotion manager Toru Hayakawa.

European designer goods are selling well, too, as consumers spend money earmarked for trips they canceled after Sept. 11's terrorist attacks in the United States, said Kazuhiro Ozono, a spokesman at Takashimaya Co., Japan's largest department store operator. Takashimaya's sales rose 4 percent last month from a year earlier.

About 218,000 fewer Japanese are expected to go overseas this year than last year during the Dec. 23-Jan. 3 period, according to a Japan Travel Bureau survey.

"I canceled my trip to New York, so I could buy a Dunhill notebook and Gucci ties," said Shinji Murakami, a 67-year-old retired businessman who lives on a monthly pension of 400,000 yen (a little less than $3,200).

Circumstances are tougher this year for college students such as 20-year-old Akimitsu Miyazaki. He canceled a winter trip to the U.S. West Coast to save money because he's worried about finding a job after graduation. Japan's unemployment rate for males between 15 and 24 rose to a record 10.7 percent in October.