mitsukoshi fukuoka

Mitsukoshi (2779) and Isetan (8238), the fourth- and fifth-largest department stores in Japan, are reportedly in talks for a capital tie-up and an integration of their operations. Together the two firms generated 1.6 trillion yen in sales for the February 2007 year. Thus the combined company would be the largest department-store operation in Japan, exceeding Daimaru-Matsuzakaya whose merger into the new firm J. Front Retailing is expected to be completed in September.

A Mitsukoshi-Isetan combination would be something like a merger of Saks and Macy's. Mistsukoshi, whose history extends back to the 17th century, caters to a rich, upscale clientele, while Isetan has a strong following among younger people for its fashion sense. Although some observers suggest that matching the old and rich with the young and hip makes a nice fit, it would also seem the new company would have to move carefully to avoid alienating either group of core customers.

Geographically, though, the two firms are a good match. Mitsukoshi's historic base in Tokyo is Nihonbashi and it has stores in Sapporo and Nagoya; in total, Mitsukoshi has 20 units. Isetan's Tokyo home is Shinjuku, with six other stores in the Tokyo area, including Kichijoji, Tachikawa, and Urawa (Saitama); it also has four regional stores and eight shops in Asia. Mitsukoshi's units are located throughout Japan and Isetan's are mostly in the Tokyo area, so except in Fukuoka, there isn't much overlap between them. There's also geographic diversity overseas, because Mitsukoshi has more shops in Europe than in Asia.

Mitsukoshi has been having financial difficulties for a long time. The chain depends heavily on seasonal gift-giving by corporate customers, and sales for this group fell 15.5% last year. Japanese department stores suffered heavily during the long business drought of the 1990s, and they have been stung by competition from supermarkets, specialty stores, convenience stores, and other retail formats. Lately things have picked up a bit: Department-store sales rose 5.5% in June, the fastest pace in nine years, although much of that may have had to do with starting summer discounts earlier to take advantage of an extra Saturday in June.

Analysts expect that a Mitsukoshi-Isetan would soon achieve benefits through integration of purchasing, logistics, etc., led by the well-respected Isetan team. Isetan has already made substantial headway in streamlining its operations, while Mitsukoshi still has a way to go in improving its stores outside major metropolitan areas.