Japan's department stores post a ninth straight monthly gain as September duty-free sales hit a record
Nationwide department-store sales rose 4.2% in September, a ninth straight monthly gain, and duty-free spending hit a September record with fewer foreign visitors. Strip out rising prices and the weak yen, though, and the growth looks thinner.
Japan's department stores extended their run of year-on-year growth to nine months in September, with nationwide sales up 4.2% to ¥443.4bn on a store-count-adjusted basis, according to the Japan Department Stores Association (JDSA). Stores in the ten largest cities rose 5.3%, while those in the other seven regions edged up 0.2%.
JDSA credited an early turn to autumn weather that got knitwear, jackets and stoles moving, strong sales of high-priced goods to domestic and overseas customers alike, and well-attended events for stores' personal-account clients and regional food fairs. The calendar helped too: the month had one more public holiday than a year earlier, and the association said the long Silver Week weekend lifted domestic demand while holidays across Asia brought more overseas visitors into stores.
A duty-free record from fewer visitors
Tax-free sales to overseas visitors rose 25.3% to ¥49.6bn, 11.2% of the total and a seventh straight monthly gain, and the number of tax-free buyers rose 5.9% to 491,000 after falling in August. JDSA said both were the highest on record for a September, crediting holiday travel from South Korea, Taiwan and Hong Kong and the weak yen. Chinese buyer numbers fell about 15%, but higher spending per buyer lifted sales to Chinese customers by about 7%, the association said.
That record came in a month when fewer foreign visitors came to Japan. Arrivals fell 5.0% to 3.10 million in September, according to the Japan National Tourism Organization (JNTO), which pointed to higher air fares tied to the situation in the Middle East, flight cuts and typhoon cancellations. Arrivals from China fell to 430,800 from 775,657 a year earlier, a drop of more than two-fifths by floortok's calculation, while South Korea and Taiwan set September records. Department stores took more tax-free business from a smaller pool of visitors, led by the markets that are still growing.
Tokyo runs hottest; Yokohama and Nagoya slip
Domestic sales rose 2.1%, a third straight gain. Tokyo, reported separately, rose 9.3% to ¥140.9bn, its ninth straight gain and 3.6 points faster than in August, with clothing up 15.5% and art, jewellery and precious metals up 10.7% for a tenth straight month of double-digit growth. JDSA said closing-down sales at some stores also drew crowds, and that Tokyo sales were running 10.2% ahead of last year in October as of the 18th. Osaka rose 2.7%, while Yokohama (−2.0%) and Nagoya (−0.2%) were the only two of the ten big cities to fall.
All five of JDSA's main product groups grew nationwide: clothing rose 5.7%, led by menswear at 11.2%; personal items such as bags and shoes rose 6.6%, helped by umbrellas and rain boots in what the Japan Meteorological Agency called the wettest September on record for the Pacific side of eastern Japan; household goods rose 7.9%; food rose 2.9%; and sundries rose 2.6%, within which art, jewellery and precious metals gained 6.5% and cosmetics 1.0%. Fresh food fell 0.8%.
% change year on year
How much of the growth is real?
Some of it is prices. Consumer prices have risen every month this year, by between 1.3% and 2.1% year on year, according to the Statistics Bureau of Japan, and stood 2.1% higher in September, exactly the rate at which department stores' domestic sales grew. By that rough measure, shoppers at home bought about as much as they did a year earlier. The government's own department-store figures show the same pattern across the year: in METI's Current Survey of Commerce, sales outgrew consumer prices by less than one percentage point in January, February and March, matched them in August and fell short of them in June, by floortok's calculation. Only April, May and July ran well ahead. The price index tracks a broad household basket rather than what department stores sell, so it is a guide, not an exact measure of how much more was bought.
percentage points (sales growth minus CPI inflation)
The weak yen does more of the work on the tax-free side. A dollar bought ¥156.42 on average in September against ¥147.86 a year earlier, and 100 Korean won bought ¥11.51 against ¥10.62, according to U.S. Federal Reserve exchange-rate data: about 6% and 8% more yen, by floortok's calculation. Visitors from South Korea, one of the markets JDSA singled out, arrived with noticeably more buying power. Gold, which sets the price of much of what sits in the jewellery cases, averaged $4,319 an ounce in September, according to the World Bank, roughly a quarter more than a year earlier once converted into yen at those rates. Higher price tags, not only more pieces sold, can lift the jewellery line.
In our view, that is the caution in a ninth straight gain: rising sales do not always mean a healthier business when part of the lift comes from forces outside the stores. September had several, from a rare five-day Silver Week and an early autumn to prices rising across the economy and a weak yen that stretches visitors' budgets and raises the yen price of goods priced in dollars or gold. None of those means a store is selling to more customers, and each can reverse; a stronger yen would shrink the tax-free line and the yen value of luxury goods at the same time. The durable signal is the tax-free mix itself. Records built on South Korea, Taiwan and Hong Kong, and on Chinese customers spending more per visit rather than coming in greater numbers, show how far stores have adapted to a smaller China market, while leaving that line resting on fewer markets and on the exchange rate.