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Japan Retailers Report Mixed May Sales

But a new study suggests the luxury market will recover later this year.

TOKYO—Japanese retailers reported mixed sales figures for May but a new study indicates that the country’s luxury goods market will recover quickly after the devastating March 11 earthquake and tsunami.
 
Fast Retailing said Thursday that May comps at Uniqlo stores in Japan were down 1.6 percent compared with the same month last year. A Fast Retailing spokesman said he doesn’t believe the quake is affecting sales. Instead, he blamed unseasonably cold weather and a typhoon in the middle of the month for slow sales of summer items.
 
“Our business condition is good,” the spokesman said. “Even though it was very cold between May 20 and 27, our overall sales didn’t change much from last year.”

Meanwhile, department store operator Isetan Mitsukoshi Holdings said that sales at nine of its main stores in Japan were up 0.6 percent compared with May of last year.

Isetan rival Takashimaya said sales at its 18 stores in Japan were down 2.7 percent in May compared to the previous year but have recovered to pre-quake levels. Takashimaya also cited the typhoon as a reason for the drop, as well as the fact that this May had one fewer Saturday than last May.
 
H2O Retailing, which operates the Hankyu and Hanshin department store chains, reported that May same-store sales were down 3.7 percent. However, when taking into account recently opened stores, overall sales were up 8.3 percent year-on-year, it said.
 
McKinsey & Company said this week that it expects the Japanese market for luxury goods to recover relatively quickly. Consumers’ “voluntary restraint” immediately following the quake appears to be a short-lived phenomenon and the situation is “not nearly as bleak as many had predicted” according to the consultancy.

“Dealt an earthquake and a nuclear crisis, Japan’s luxury consumers still could not be stopped for long. With travel during the May break known as Golden Week down 30 percent, shoppers took to the streets closer to home and once again opened their wallets at crowded luxury boutiques,” wrote Brian Salsberg, a partner in the Tokyo office, and Naomi Yamakawa, a marketing consultant. “They did so with caution, however: continuing a two-year trend, consumers are increasingly looking for a deal or other specific ‘reason’ to purchase, and planned buys are far outweighing impulse buys. With a continued focus on quality, service, and marketing, Japan’s luxury market should recover to pre-March 11 levels.”

In particular, McKinsey noted that sales of watches and jewelry have been particularly resilient.

“In the aftermath of the earthquake and continuing aftershocks, consumers are afraid to be alone, leading to a flurry of engagements and weddings, and jewelry and watches are among the few items of value that are easy to bring along in case of evacuation,” according to the report, which was based on a survey of senior executives from more than two dozen luxury companies.

Although McKinsey was careful to state that Japan will remain a very competitive market for luxury goods, it voiced an optimistic view for the coming months. The consultancy said that 60 percent of the executives surveyed predict flat or higher 2011 sales in Japan compared to the previous year despite the quake. The remaining 40 percent foresee a drop.

“The picture that emerges, while not definitive, is that the desire to own luxury goods has not waned in the wake of what has been called the nation’s worst crisis since World War II,” the report said.

Japan’s post-quake evolution could also instigate significant political changes. Just Thursday, Prime Minister Naoto Kan survived a no-confidence vote in the lower house of parliament, amid growing criticism of his handling of the economy and his response to the quake and ensuing nuclear crisis.  But earlier in the day, he had offered to step down once steps to ensure post-quake reconstruction and resolution of the nuclear problems are in place. Kan’s statement was a vague one as he did not give a timeframe for when he plans to step down.

The Nikkei 225 slid 1.69 percent to end the day at 9,555, closing before the no-confidence vote took place.