By and  on February 23, 2009

TOKYO — Japanese department store operator Takashimaya Co. Ltd. said Tuesday it will open a flagship in Shanghai in 2012, marking its entry into the Chinese retail market.

The store will cover 430,560 square feet of retail space over eight levels. The Japanese company will work with a Chinese property developer to open the store in a residential area on the western side of the city. The investment will total about 4 billion yen, or $42.73 million at current exchange, Takashimaya said.

The company hopes to expand its presence in China by opening more stores, but no further details are available, said a Takashimaya spokesman.

Takashimaya’s opening follows a similar move by rival Isetan Mitsukoshi Holdings Co. Ltd., which opened its first stores in China in 1993 and experienced mixed results. There are four Isetan stores in the country after the shuttering of one of the Shanghai flagships late last year.

Over the years, Takashimaya has expanded its geographic reach beyond the core Japanese market with stores in New York, Paris, Taipei and Singapore. International expansion — particularly in the fast-growing Chinese market — could help compensate for Japan’s stagnant retail climate.

Jeremy Tonkin, a senior analyst with CLSA in Tokyo, noted Takashimaya is one of the few Japanese retailers to find success in overseas expansion. The company’s Singapore store is very profitable and contributes about 10 percent of Takashimaya’s operating profit.

“[Shanghai] is probably a good move…they are one of the few profitable retailers operating overseas,” he said.

Japanese department stores have faced increasing competition from shopping centers and other retailers. Depressed consumer spending amid the ongoing recession has bit even more into their business.

Japan’s department stores have seen their sales shrink for more than a decade. Last year, total revenues dropped 4.3 percent to 7.38 trillion yen, or $78.84 billion, according to the Japan Department Stores Association.

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