cked the habit of shopping there. In this regard, they have had willing co-conspirators in the form of shopping center operators the world over who for decades refused to be persuaded, even in the face of overwhelming evidence, that their once prize anchor tenants were getting to be duds. Eventually, reality will have its way. Takashimaya, one of the world’s most storied upscale department store companies, has called time on its store in Gifu, in northern metro Nagoya, which will bid adieu at the end of July partly because the landlord, Heiwa Building Corporation, has seen enough and won’t come to terms to upgrade the building. Other stores in Takashimaya’s portfolio, and the portfolios of its Japanese peers, ought to be staring down the barrel too, although Takashimaya itself is keen to keep as many of them open as possible because they are so tightly woven into the local communities they serve. Besides, falling sales do not necessarily render a store unprofitable and where there’s life there’s hope, particularly in those instances where the department store building and the land it sits on are owned and not leased. Gifu: a microcosm of the industry’s underbelly So what happened with the Gifu store, whose closing will reduce Takashimaya’s domestic portfolio to 13? The store is in its dotage: it’s been around since 1977 and had a major renovation in 2005. Like other Japanese department stores, the Gifu store is strongly integrated into the local community and something of an icon. But it wasn’t enough. In announcing its closure, the company conceded that thebuilding badly needed an upgrade of electrical, plumbing and HVAC (heating, ventilation and air- conditioning) systems. Things had gotten bad: “Due to the advancing deterioration of various facilities, there is also the possibility of not being able to guarantee a safe environment for our customers.” However, the building was leased from the aforementioned Heiwa Building Corporation, which owns about 50 commercial buildings around Japan including the buildings that house the Tokyo and Nagoya Stock Exchanges. Takashimaya and Heiwa couldn’t see eye to eye on the upgrade. However, problems flushing the toilets and keeping the lifts moving up and down weren’t the only challenges. Even Takashimaya admitted that “amid an operating environment of low birth rates and population aging, conditions influencing the Gifu Store have become increasingly difficult each year and profits are on a downward trend.” It’s only one sentence but it speaks volumes because the same thing applies to some of the company’s other stores. Good company results but not well spread To be sure, Takashimaya as a company had a very decent year in 2023, at least on paper. In December, combined sales at its 14 domestic stores increased by 7.5 per cent over December 2022, following up on a 9.2 per cent increase in November. Duty-free sales of luxury branded items are doing the heavy lifting, driving growth at the tourism strongholds in Tokyo, Osaka and Kyoto. However, domestic customers have also contributed to increased footfall and sales, particularly for fashion items. In the third quarter that ended November 30, sales from domestic customers rose by 4.4 per cent year-on-year, with fashion spending increasing in the double digits. Things have also been going better at the company’s overseas stores too, in Singapore, Ho Chi Minh City and Bangkok. Even the beleaguered Shanghai unit — the company announced its closure in mid-2019 only to reverse itself shortly afterward and decide to keep it open — has experienced some sales uplift. Takashimaya also has a commercial property arm, Toshin Development, that, among other things, leases space in shopping centers anchored by Takashimaya department stores. Toshin’s rental structure is heavily weighted toward fixed, as opposed to variable rent dependent on tenant sales, and has enjoyed improving conditions in the rental market. Toshin is also involved in complex mixed-use and urban development projects that incorporate office and residential space, including the Saigon Centre in Ho Chi Minh City, Iconsiam in Bangkok, and the Starlake and Indochina Plaza projects in Hanoi. Takashimaya upgrades guidance Things have been going well enough overall that Takashimaya upgraded its revenue and earnings guidance for the fiscal year, which ends February 29. The company estimates that full-year sales from inbound travellers to Japan alone will reach 63 billion yen (US$434 million). The market has shown that it approves of the direction the company is heading: Takashimaya’s stock price has risen almost 20 per cent in the past year, although the stocks of its major competitors (for example, Isetan-Mitsukoshi and J. Front Retailing) have appreciated by a similar amount. Does concentration matter? That’s all sounds good, so what is the problem? Five of the 14 domestic stores — Nihombashi and Shinjuku in Tokyo, Osaka, Kyoto/Rakusai and Yokohama — account for about three-quarters of domestic store sales. And that gets us back to the situation at the Gifu store, which contributes less than 2 per cent of the company’s domestic department store sales and has had a wretched run in 2023, even with the low bar set by Covid. But it isn’t the only one: the stores in Sakai, Omiya and Senboku, among others, are also struggling with structural issues and are enduring a string of ordinary sales outcomes. Long-term sustainability (and we don’t mean that word in any environmental sense) is a real issue for stores that are not in trophy locations, even when they are tied to public transport hubs. This is not a problem unique to Takashimaya: its peers have the same vulnerabilities. At least for the time being though, there are enough encouraging signs to keep the markets, and the department stores open, excepting, of course, poor Gifu.