Sales results coming out of Japan in the past few weeks indicate that a high base-year comparison and a narrowing of the tourism effect are starting to have an adverse impact on growth. The evidence is showing up most clearly in the reports coming out of the big department store chains, where the strength is increasingly concentrated in a few flagship stores rather than being distributed across their entire store fleets. First, though, the government’s Ministry of Economy, Trade and Industry (METI), which measures monthly retail trade at large chains in multiple categories, reported that sales for July rose by 2.6 per cent compared with the same month a year ago. As expected, a deceleration in growth across the board is beginning to show up, with sales increases set to fall into the low-single digits throughout the second half of the year as the base year numbers remain high. Indeed, the July result came on top of growth in July 2023 of 7.0 per cent so the two-year stack is still a strong nothing-to-sneeze-at 9.6 per cent.The bigger picture is that after sales growth in all of 2023 of 4.6 per cent for the big chains, this year they are on track for growth of something less than 3 per cent. Consumer confidence still weakThe tourism effect that has buoyed growth throughout the year shows signs of being less broad-based, and spending by domestic consumers isn’t taking up much of the slack. That’s because consumer confidence is marooned well underneath the 51/100 level needed to support spending on bigger-ticket items. On the last day of August, the government reported its latest confidence index reading, which was 36.7 on as scale of 0-100, same as in July. Not something to inspire much joy in the retailer community when you’re shooting for 51 or better.Growth is uneven across categories. Illness has been something of a saving grace with sales growth in the drugstore category extremely robust throughout the first seven months of the year. In July, sales were up 4.5 per cent, after exceeding 6 per cent in each of the first six months. Supermarkets are struggling for sales growth, with METI reporting a 0.1 per cent decline in July. Convenience stores aren’t doing much better, clawing out a 0.7 per cent year-on-year increase. For the first seven months of the year convenience stores have managed little more than 1.5 per cent growth. For large-scale home goods retailers sales growth was 1.6 per cent in July, and the related home improvement category experienced a decline of 1.5 per cent. With consumer confidence like it is, the numbers in both of these latter two categories should come as no surprise.Department stores see amber lightsDepartment stores continue on their roll but there are some worrying signs. Sales for them grew by 5.1 per cent in July, easing up after a breathtaking May and June when sales rose by more than 13 per cent in both months. These results are even better than they look because there are four fewer department stores in the METI database than last year. The amber lights: department stores are benefiting less broadly now from the recovery in inbound tourism, which was putting a rocket under sales in the first half of the year. Spending is still there, but it is becoming more concentrated in a few flagship stores at the big international gateways that do a lot of duty-free business.Takashimaya illustrates this well. The company’s 14 luxury department stores in Japan reported out 4.5 per cent sales growth in August, representing another steep sequential deceleration from 8.9 per cent growth in July 17.2 per cent in June and north of 20 per cent in May. Fully half of its portfolio reported year-on-year sales declines in August. The growth that occurred was heavily concentrated in the two Tokyo flagships in Nihombashi and Shinjuku, two stores in Kyoto, and e-commerce. At the other end of scale, Takashimaya’s two regional stores at Okayama and Takasaki saw sales slide by 13 per cent and 15 per cent respectively.Company executives appear, shrewdly, to have anticipated the slowdown because at an investor Q&A in late June they didn’t upgrade their revenue projections for the second half of the year. For Isetan Mitsukoshi, the story is similar, with its two Tokyo stores in Ginza and Shinjuku doing almost all of the heavy lifting to deliver 11.0 per cent sales growth for the 15-store portfolio. Like Takashimaya, half of Isetan-Mitsukoshi’s store fleet delivered year-on-year sales declines in July and August. A number of the regional stores are going backward in a hurry: specifically, the 10 stores outside Tokyo saw a collective gain of only 1.5 per cent while the five in Tokyo were up 16.7 per cent.J. Front Retailing, which owns and operates 15 Daimaru and Matsuzakaya department stores and 17 Parco shopping malls, is also experiencing a slowdown. It delivered 6.8 per cent growth in August in its department store business, down from 9.5 per cent in July and 15.6 per cent in the first half of the year. The tenants that rent space in its malls are, collectively, doing better, but here too there are signs of slowing after some eye-popping numbers north of 20 per cent in the first half.Uniqlo’s summer ranges get a tickWhile some doubts surround the prospects of the large general merchandise chains, things seem to be improving for some of Japan’s specialty store operators. On September 3, Uniqlo’s parent Fast Retailing reported a bumper August result with its same-stores sales (including e-commerce) in Japan growing by a shade over 25 per cent. Momentum at Uniqlo has been growing for months, thanks to a good reception among consumers to the company’s summer ranges. According to customer traffic and transaction data reported by the company, more customers than last year are beating a path to Uniqlo’s doors and they are spending more when they get there. Uniqlo’s strength lies in the affordability of clothing that is well-designed clothing, incorporates advanced fabric technology and doesn’t attempt to be overly trendy. These qualities are resonating well with Japanese consumers at a time when they are more focussed than ever on value.