TOKYO — Mitsukoshi Ltd., the second-largest and one of the most prestigious department store chains in Japan, has revealed plans to close a total of 10 stores and cut 800 jobs by May 2005 to boost profitability.

The stores to be closed include three major units in Osaka, Yokohama and Kurashiki in Okayama Prefecture west of Kobe. Seven smaller outlets also will be shuttered.

The move to close the money-losing stores and “satellite” shops is part of Mitsukoshi’s five-year “selection and concentration” restructuring program, now in its third year; the effort involves a reordering of priorities and resources to discontinue unprofitable projects while expanding and strengthening the chain’s core stores.

It is against this background that Mitsukoshi is opening a 10-story, two-basement store with about 161,000 square feet of floor space adjacent to its main flagship in Nihonbashi, in central Tokyo, on Saturday. The store has been built at a cost of 16.5 billion yen, or $150 million at the current exchange rate.

This will be followed by the reopening of a renovated store in Shinjuku later this month that has been converted into a specialty unit devoted mainly to luxury brand accessories and sundry goods. The company has spent 5 billion yen, or $45.5 million, on the renovation of the 224,000-square-foot store.

Japan’s department store sales have been declining for six consecutive years, which is attributed to a declining birthrate, a growing number of new entrants into the department store business, an increasing diversity of retail outlets and changes in consumers’ purchasing behaviors and lifestyles.

In particular, large-scale shopping centers, which are increasingly making their presence felt in both urban and suburban areas, are giving major competition to department stores.

The large-scale restructuring, involving the closure of three large department stores, is unprecedented in the history of the retail industry here, but Mitsukoshi’s management explained that the total losses of the three stores in Osaka, Yokohama and Kurashiki are running at more than 4 billion yen, or $36.4 million, a year.

With the closures, Mitsukoshi will be left with 15 large stores, with its Nihonbashi flagship accounting for more than 30 percent of the company’s total sales.

This story first appeared in the October 8, 2004 issue of WWD. Subscribe Today.

The company, in revising downward its previous forecasts, said it now expects a net loss of 2.5 billion yen, or $22.7 million, in the current business year to February 2005, against an earlier projection of a net profit of 7.5 billion yen, or $68.2 million. The latest projection for consolidated revenues in the current fiscal year is 908 billion yen, or $8.25 billion, down 1 percent from the previous forecast of 917.5 billion, or $8.34 billion, Mitsukoshi said.

The Osaka store will be sold for 95.3 billion yen, or $866 million. The five-story store has 110,000 square feet of floor space and reported sales of 26.83 billion yen, or $243.9 million, in the last business year. It employs 264 people. The Yokohama store, with 131 people on its payroll, has an annual turnover of 23.9 billion yen, or $217 million, while the Kurashiki facility, with 98 employees, reported sales of 8.6 billion yen, or $78.2 million.