Shares of Japanese department stores have enjoyed record-breaking rallies in recent weeks, as extreme summer heat drove consumers into air-conditioned stores, boosting sales and fueling investor optimism.
Isetan Mitsukoshi Holdings Ltd, Takashimaya Co, and J. Front Retailing Co shares all climbed more than 10 percent last month, notching their strongest August performances since 2020. J. Front, which runs the popular Daimaru chain, hit an all-time high last week after posting robust August sales growth.
The rally was driven by expectations of higher footfall — and sales — as shoppers sought refuge from Japan’s elevated temperatures. The country saw its hottest summer on record this year, as climate change drives heat waves worldwide.
As temperatures rise, “people are spending more time shopping indoors, where it’s cooler,” said Shoichi Arisawa, an analyst at Iwai Cosmo Securities. That’s translating into higher sales for department stores, lifting sentiment around their stocks, he said.
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J Front, Isetan Mitsukoshi and Takashimaya all saw growth in in-store sales this August compared to last year, with Takashimaya posting a 9.3 percent boost in sales to Japanese customers.
An ongoing increase in domestic wages also means local shoppers are more likely to make purchases, rather than just browse, Arisawa said.
Japan plans to hike its minimum hourly wage by a record 6.3 percent this fiscal year, the labor ministry said last week.
The stocks’ August rebound followed a slowdown in July as spending by tourists slid. Rumors of a large earthquake hitting Japan, which circulated on social media, deterred some visitors from South Korea, Hong Kong SAR, and the Taiwan region, who are among the biggest spenders at Japanese department stores.
The tourism industry is poised to recover through December, however, according to Bloomberg Economics.
This bodes well for department store stocks. “Inbound tourism is set to pick up — I think the upward stock trend will continue,” said Iwai Cosmo’s Arisawa.
However, heat could become a hindrance as autumn rolls around, Arisawa added. Department stores struggled to sell winter clothes last October because of unusually warm weather, he said.
