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Business

Sanrio wants Hello Kitty to grow up

Flagging earnings force company to send iconic brand into adult market

This Sanrio pop-up shop in a Tokyo branch of Keio Department Store targets seniors.

TOKYO -- Hello Kitty is not just kids' stuff anymore. Creator Sanrio is trying to leverage the character's appeal by expanding into the adult and senior markets with luxury wallets and handbags branded with the iconic feline.

The company kicked off its adult venture with a pop-up shop that sells canes and stuffed toys sporting Hello Kitty and other characters. The shop, located inside a Keio Department Store branch in Tokyo, will remain open through December.

Sanrio plans to open a total of three stores inside retail chains by the end of fiscal 2018.

The company recently approached stores with the idea of opening premium "adult-oriented Hello Kitty" shops.

The shops will sell only Hello Kitty goods, including handbags and wallets made from ostrich leather and other luxury fabrics. A genuine leather tote bag priced at 80,000 yen ($708) and wallet at 20,000 yen are among the 27 items available. Some products will also be sold at existing Sanrio shops.

Sanrio shops have mostly handled relatively cheap goods in the past. But that is changing. "There is a huge need for expensive, high-quality Hello Kitty items," explained a company official.

Owing to the brand's popularity among foreign visitors, the company concluded that shops showcasing expensive items would go down well.

Sanrio's consolidated sales for the year through March declined 13.5% on the year to 62.6 billion yen while operating profits were down 45.5% to 6.9 billion yen.

With the exception of its theme park, all Sanrio divisions, including flagship product sales and licensing, are weighing on profits. Due in part to foreign visitors spending less in Japan these days, sales at the company's domestic product sales operations slumped 8.5% to 20.4 billion yen.

The company lowered its net profit forecast to 4.8 billion yen, representing a 26% decrease from fiscal 2016. Sanrio had projected a 20% rise to 7.8 billion yen. Sales are now expected to dip 4% to 60.3 billion yen, a downgrade from the previously forecast 5% rise.

Sanrio also cut its fiscal 2017 dividend projection to 55 yen per share, down 25 yen from fiscal 2016.

Although Sanrio also operates an online shop, its unique brick-and-mortar stores offer Hello Kitty fans a more satisfying shopping experience, the official said. Domestic e-tail accounts for a mere 2% or so of total sales.

The company wants to ramp up sales by increasing the number of stores and products that appeal to seniors.

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