March 11, 2014 3:55 am JST

Luxury goods helped push Takashimaya's profit higher in fiscal 2013

TOKYO -- Japanese department store operator Takashimaya Co. likely generated a group operating profit of about 29 billion yen ($278 million) for the year ended in February, up 14% and largely in line with plans, helped by high-end items like jewelry and foreign brands.

     Operating revenue, the equivalent of sales, is seen up 3% at slightly above 900 billion yen, also in line with projections. Consumers spent briskly throughout the year, spurred by brighter economic sentiment and the wealth effect from rising stock prices. Sales of luxury goods were strong, especially at flagship stores in Yokohama and Tokyo's Nihonbashi.

     From the start of 2014, demand has swelled ahead of the consumption tax hike planned for April. Although heavy snows in February temporarily cut into customer traffic, the negative impact was more than offset. Department store sales for the month grew 4% from a year earlier.

     In shopping center operations, income from tenants' lease fees rose. Meanwhile, interior design and construction unit Takashimaya Space Create logged growth in orders from foreign-owned hotels and tenants of commercial facilities.

     However, profit apparently declined at a department store in Shanghai.  In addition to the Chinese economic slowdown, President Xi Jinping's crackdown on excessive spending by public officials likely weighed on results.

     Demand is expected to drop after the 5% sales tax in Japan jumps to 8% next month. Yet Takashimaya aims to increase operating profit in fiscal 2014 by stepping up marketing efforts and cutting costs.

     Customers who make purchases of 5,000 yen or more from March 12 to March 25 will get coupons redeemable in April. And the firm expects to save 4 billion yen a year on rent by buying the property that hosts a major department store in central Tokyo. Combined annual cost savings, including labor, are targeted at 10 billion yen.

     On average, analysts see Takashimaya generating an operating profit of 32 billion yen in fiscal 2014.