By  on March 25, 2010

TOKYO—Japan’s Takashimaya Co. said Thursday it has scrapped its plans to merge with H2O Retailing Corp., the parent company of Hankyu and Hanshin department stores.

In 2008, the two retailers announced plans to integrate their operations within three years. The combined group would have rivaled Japan’s largest department store retailer Isetan Mitsukoshi Holdings. It also would have become the latest example of consolidation in Japan’s retail industry, which is struggling with sluggish consumer demand.

Takashimaya said that it and H2O have decided that a full-fledged merger would require too many resources. Instead, they have both chosen to formulate new independent business plans and collaborate with one another on areas like materials purchasing and shop development.

Under increasing pressure from declining sales, Japan’s department store operators have been pooling their resources by merging with one another and cutting costs by closing under performing locations.

In 2007, Isetan and Mitsukoshi joined forces. That same year, Daimaru and Matsuzakaya Holdings combined to form J. Front Retailing Co. Ltd. and Hankyu and Hanshin merged to form H2O.

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