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Many stores in Tokyo are ready to reopen today after a three-day weekend as the city begins the long road back to some sense of normalcy — but Tiffany & Co. on Monday gave the first indication of the financial hit fashion companies are likely to take as a result of the disaster.
This story first appeared in the March 22, 2011 issue of WWD. Subscribe Today.
The jeweler on Monday projected that first-quarter sales at its 56 stores in Japan would be down by 15 percent because of the earthquake and tsunami. The statement offered the first firm financial data on the earthquake’s impact on retailing, and more companies are likely to reveal similar if not steeper declines in coming weeks. Aftershocks and power outages continue to buffet the Japanese capital even as residents who fled Tokyo began to return.
Tiffany, which has been in the spotlight for having a significant presence in Japan, said the projected decline in sales there would drag its profit projection for the period down 5 cents to 57 cents a diluted share. Jefferies & Co. analyst Randal Konik estimated the firm’s comparable-store sales in Japan will fall 20 percent this year. “The current situation in Japan poses a significant risk to [Tiffany’s] overall sales and profit outlook,” he said. “We remain cautious on shares until we have further clarity.”
Still, investors gave Tiffany a vote of confidence, pushing shares of the company ahead 5.1 percent to $60.22 amid a broad rally of stock markets worldwide. The S&P Retail Index rose 1.2 percent, or 6.15 points, to 501.25, as the Dow Jones Industrial Average advanced 1.5 percent, or 178.01 points, to 12,036.53, closing above 12,000 for the first time in more than a week. The CAC 40 gained 2.5 percent in Paris and the FTSE 100 increased 1.2 percent in London.
While there was no trading in Tokyo because of a holiday to mark the spring equinox, the city started its return to business, with crowds on bullet trains from Osaka, where some fled last week. Offices and stores are expected to reopen today. Retailers such as Louis Vuitton, Gucci, Chanel and Gap were closed for the three-day weekend while department stores were open for business. Gucci, Marc Jacobs and Bulgari also said they would resume operations, except in Sendai, a focal point of the disaster.
Foot traffic in Tokyo was lighter than normal on Saturday and Sunday, but there were plenty of people out and about braving the occasional aftershocks. Monday’s rainy weather didn’t encourage shoppers.
Life in Osaka, some 250 miles west of Tokyo, was bustling with activity as consumers made their way down major shopping strips like Shinsaibashi.
“We are still in disruption mode in Japan — a bit too early for consumer demand to move back to normal,” said Luca Solca, senior analyst at Bernstein Research in Zurich.
“Knowing the Japanese culture, it won’t be long before the retail situation stabilizes,” said Cristina Morenete, marketing director of Lupo, a Barcelona-based handbag manufacturer with five points of sale in Japan.
The firm opened a test corner in Takashimaya in Yokohama last week and sold six bags. “There are still customers willing to buy,” Morenete said.
Fashion houses and companies are contending with rolling blackouts, which are concentrated in the outer regions of Tokyo but have disrupted train lines for commuters.
The Japanese economy is expected to slow for a quarter or two before rebuilding sparks activity in construction and other sectors. The World Bank has estimated it will take five years to rebuild the damage at a cost of $245 billion, spending that could spur economic growth.
The Cavalli Group said it might delay the opening of the Roberto Cavalli store in Tokyo, scheduled for May. “Building works may be slowed down as a result of what has been happening there,” the firm said.
Although the catastrophe’s death toll continued to climb — at last count those dead or missing topped 20,000 — television channels stopped broadcasting 24-hour disaster coverage. Many foreign firms have moved their employees out of the Tokyo area by temporarily relocating them to Osaka or sending them out of Japan altogether. Most recently, Hermès confirmed that it has flown seven expatriate members of its Japanese division back to their home countries. Gucci’s headquarters in Tokyo are scheduled to reopen Tuesday, but the brand is setting up some “core functions” in its Osaka office as a backup, a spokeswoman said.
PPR chief executive officer François-Henri Pinault, speaking at a press conference to announce a new sustainability initiative for the group, said his thoughts were with the company’s 2,000 employees in Japan.
“They are facing a very difficult situation which could become even more complex in the hours and days that come, so let’s have a thought for them,” Pinault said. “We have established a crisis unit in Paris, which is open 24 hours a day to try and bring them as much help as possible.”
The fashion industry continued its charitable efforts. Macy’s Inc. said it would contribute $100,000 to the American Red Cross for relief efforts and would carry the Ralph Lauren mesh Japan Relief polo shirt, the proceeds from which will be donated to Central Community Chest of Japan. Inditex plans to contribute 1 million euros, or $1.42 million at current exchange, to the International Red Cross.