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Retail

Retail retreat: Japan apparel group Onward to shut 20% of stores

Company sheds brick and mortar to invest more in growing online segment

An Onward store in Tokyo: the retailer has relied heavily on department store and shopping center locations. (Photo courtesy of the company)

TOKYO -- Midsize Japanese clothing retailer Onward Holdings will close around a fifth of its stores worldwide, pivoting toward e-commerce as its mainstay brick-and-mortar locations struggle to attract customers.

The company, which sells mainly at department stores and shopping malls in Japan, will shutter about 600 of its more than 3,000 locations.

Onward -- whose portfolio includes women's apparel line Nijyusanku and men's suit brand Gotairiku -- is responding to a global shift in the apparel industry toward online shopping.

Other retailers have struggled to adapt to the trend, with U.S. fast-fashion chain Forever 21 filing for bankruptcy just this week. The chain will close all of its 14 stores in Japan at the end of October.

Onward, which has a U.S. presence with its J. Press brand of menswear, will soon slash its earnings forecast for the fiscal year ending February 2020 to reflect the cost of the closures.

The company is expected to see a net loss of roughly 30 billion yen ($278 million) , its first drop into the red in 11 years, compared with the current estimate of a 5.5 billion yen profit. It will maintain its current dividend plans.

Onward looks to use the retrenchment to reduce costs and free up resources to invest in sales channels with a better growth outlook. These include Onward Crosset, its main e-commerce outlet, where sales have been rising. Employees affiliated with the shuttered stores will be reassigned to these growth areas.

Onward targets annual online sales of 50 billion yen in the year ending February 2022, double the fiscal 2018 figure. With the cost reductions from its store closures, it aims to reach its operating profit target of 10 billion yen a year ahead of schedule.

The retailer will also consider acquisitions in areas where it can easily leverage its brand power, such as food and lifestyle goods.

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