Kansai's post-Expo quarter reaches every landlord, but not every shop floor

Kintetsu Group Holdings and Nankai Electric Railway have put the same phrase into their April–June filings: 大阪・関西万博の反動減, the reaction against last year's Osaka-Kansai Expo. Both name it as a drag on the quarter, according to their own 決算短信. More useful than the phrase is what sits underneath it, because Kansai's three big station landlords went through the same missing crowd and their shops did not come out of it alike.

Kintetsu's retail segment, whose flagship is the Kintetsu Department Store filling Abeno Harukas, took revenue down 0.6% to ¥54.3bn and still lifted segment profit 37.5% to ¥2.3bn. The company puts that down to department-store floor renovations, in-store events and firm duty-free sales, which between them more than covered the Expo reaction. Its hotel and leisure arm had no such cover: revenue fell 0.6% there too, but segment profit dropped 48.4%, which Kintetsu attributes to the same Expo reaction plus restraint among Chinese travellers.

Nankai's shops read differently again. Its retail segment, the Namba centres and the station businesses, grew revenue 5.1% to ¥8.0bn, which the company credits to higher rents as tenant sales rose, while segment profit fell 4.4% to ¥1.2bn on higher running costs. Tenants trading up and the landlord earning less on them is a cost story rather than a demand one, and Nankai keeps the Expo reaction on the railway side of its filing.

JR West is the largest of the three and had the hardest quarter. Its retail segment, which carries LUCUA and the Osaka Station City shops, fell 4.8% to ¥55.1bn with segment profit down 26.4% to ¥3.8bn, and its property segment fell 7.8% with profit down 16.6%. The company guides the full year lower as well, revenue down 0.9% and operating profit down 16.7%. JR West does not name the Expo in its own filing, so that attribution belongs to Kintetsu and Nankai; what JR West adds is scale, the same three months read off Osaka Station.

Tokyo split in the same quarter

If the Expo reaction were the whole story, Tokyo's landlords would have had a clean quarter. They did not. Tobu Railway lifted retail segment profit 24.4%, on Tobu Department Store in Ikebukuro and the Solamachi shops under Skytree, and Odakyu lifted life-service profit 16.9% behind Odakyu Department Store in Shinjuku. Over the same three months Tokyu's life-service segment profit fell 33.9% and Keio's fell 35.3%, the latter carrying Keio Department Store and Keio Mall in Shinjuku. Two Tokyo landlords up by roughly a quarter; two down by roughly a third.

Set the seven side by side and the line does not fall where the Expo did. The strongest retail line of the group belongs to Kintetsu, in the city that lost the crowd, and two of the three weakest belong to landlords in Tokyo, which never had it. In our reading the Expo reaction is a traffic event, and traffic is the one input a station landlord cannot hold steady from one year to the next. What it can move is the floor: which categories sit where, what runs on them in a given month, and whether the duty-free counter is set up for the travellers who did turn up. Kintetsu says it spent the quarter doing exactly that, and it is the operator that turned less revenue into more profit.

Two results in the same window show the same shape. Kintetsu Department Store, listed in its own right, took revenue down 1.2% in March–May and lifted operating profit 79.4% to ¥1.93bn. Matsuya, whose business is effectively Ginza, grew revenue 5.9% to ¥12.1bn with operating profit up 35.9% over its own March–May quarter. In both, the earnings line moved far faster than the sales line, which is the same gap Kintetsu's retail segment opened in April–June. Department-store economics are improving quicker than department-store sales, and that is a change in how the floors are run, not in how many people walk them.

The second half is where this gets tested. Kintetsu's hotel line shows what the Expo reaction costs when there is nothing set against it, and hotels also carry the Chinese travel restraint the company names directly. JR West has already guided its year down. If the split holds into the autumn, the useful question in Kansai will not be when the crowd returns, but which landlords used the quiet quarter to change what their floors sell.