Cooling of Foreign Visitors’ "Spree Buying" in Japan and Pullback in Duty-Free Demand

「At Haneda Airport, the impact of China’s advisories against travel to Japan remained limited. Supported by the weaker yen, securing inventories of popular branded products and operating pop-up stores proved effective, and sales at Haneda duty-free stores reached a quarterly record high.」

「Although demand from Chinese passengers has been trending downward, sales in the fourth quarter (January–March) exceeded the year-earlier period for the second consecutive quarter, supported by the effects of various sales promotion campaigns, the introduction of products popular with inbound travelers, and strong performance by the Hermès and Chanel boutiques renovated and expanded in the first half.」

「Although demand from Chinese passengers has been trending downward, sales in the fourth quarter (January–March) exceeded the year-earlier period for the second consecutive quarter, supported by the effects of various sales promotion campaigns, the introduction of products popular with inbound travelers, and strong performance by the Hermès and Chanel boutiques renovated and expanded in the first half.」

「Although passenger numbers on international routes are increasing steadily, demand for high-priced goods, particularly among Chinese passengers, has shown signs of slowing from the previous year.」

「International terminal store sales significantly exceeded the previous fiscal year due to increases in international passenger numbers at Haneda, Narita and other airports, higher purchase rates and average purchase prices at duty-free stores in the first half, and stronger sales at the Ginza downtown duty-free store.」

「International terminal store sales significantly exceeded the previous year due to an increase in international passenger numbers at Haneda, Narita and other airports, as well as increases in the number of duty-free shoppers and average purchase prices. At Haneda Airport’s duty-free stores, sales increased more than passenger numbers did year on year, partly because of the weaker yen and an increase in Chinese passenger numbers, whose recovery had lagged behind.」

「International terminal store sales exceeded the previous fiscal year due to an increase in international passenger numbers at Haneda, Narita and other airports, as well as higher average duty-free purchase prices, partly reflecting the weaker yen.」

「On international routes, recovery will take time for Chinese tourists, who were the largest source of inbound passengers before the COVID-19 pandemic, because border control measures for arrivals from mainland China have been tightened. However, inbound demand is recovering rapidly, particularly from Asia and the United States.」

「Chinese tourists were the largest source of inbound passengers before the COVID-19 pandemic, but China’s zero-COVID policy remains in place, so it will take time for international passenger numbers to recover to pre-pandemic levels. Going forward, however, a recovery in air travel demand is expected, including inbound passengers from Asian countries other than China and from Europe and the United States.」

「As a result, revenue from the merchandise sales business was ¥14,436 million, down 90.3% year on year. In addition to lower sales, the operating loss was ¥11,322 million, compared with operating profit of ¥10,823 million in the previous year, partly because impairment losses on certain duty-free goods expected to be disposed of in the following fiscal year and thereafter were recognized in the current fiscal year in light of the uncertain outlook for international passenger numbers.」

「International terminal store sales were significantly below the previous year due to the sharp decline in international passenger numbers and the continued closure of many of our directly operated duty-free stores. At Haneda Airport Terminal 3, some brand boutiques, in addition to the general duty-free store, have resumed operations in line with flight schedules, while some stores at Narita Airport are operating on a limited number of days. However, product sales remain weak at all stores, including the downtown duty-free store Japan Duty Free GINZA.」

「Revenue from the merchandise sales business was ¥4,977 million, down 94.0% year on year, and the business posted an operating loss of ¥5,764 million, compared with operating profit of ¥7,430 million in the same period of the previous year.」

「Operating revenue in the retail business was ¥1.499 billion, down 96.4% year on year, while the business reported an operating loss of ¥3.246 billion, compared with operating profit of ¥3.898 billion in the same period of the previous year.」

「The number of foreign visitors to Japan reached a record high of 31.88 million for the full calendar year 2019 through December last year. However, from late January this year, the spread of the novel coronavirus disease led to successive measures including bans on group tours in China and other countries and reductions in flights, causing the number of visitors to Japan to decline sharply, by approximately 60% in February. In March, as the impact of the infectious disease spread worldwide, many countries imposed measures including restrictions on overseas travel and stay-at-home orders, while Japan implemented enhanced quarantine measures and visa invalidations. As a result, the number of visitors to Japan from countries around the world fell below the previous year, declining by approximately 90%.」

「Although the sharp decline in the number of South Korean visitors to Japan has continued since August 2019, the number of visitors from all regions other than South Korea has exceeded the previous year, partly due to events such as the Rugby World Cup 2019 Japan.」

「However, conditions now require attention to the sharp decline in the number of South Korean visitors to Japan since August this year and the uncertainty surrounding the outlook for the Chinese economy. Merchandise sales to South Korean travelers have declined by more than 30% year on year.」

「In general, including at the airport-style downtown duty-free store “Japan Duty Free GINZA,” the decline in Chinese consumer spending since October last year was also one factor behind sales falling below the previous year.」

「However, as demand from Chinese travelers to visit Japan is expected to continue growing, we will implement various measures to increase sales and pursue comprehensive initiatives in cooperation with our e-commerce business. In addition, as the number of Japanese travelers departing the country reached a record high last year and is expected to remain firm, we will develop product strategies that adequately reflect the preferences of Japanese consumers.」

「Since October last year, the growth rate of sales to Chinese travelers at our duty-free stores has slowed due to the tightening of regulations in China on bringing duty-free goods into the country and foreign-exchange movements such as the weaker renminbi. As a result, our duty-free stores, including the airport-style downtown duty-free store “Japan Duty Free GINZA,” have shown a declining trend in the growth of merchandise sales.」

「Meanwhile, the number of foreign visitors to Japan in September turned lower year on year due to the impact of natural disasters, including the northern Osaka earthquake, successive typhoons making landfall and the Hokkaido Eastern Iburi earthquake, raising concerns about the impact on inbound demand.」

「In addition to changes in consumption trends, including the shift by foreign visitors to Japan from the consumption of goods to the consumption of experiences, the environment surrounding retail sales has changed significantly due to the expansion of cross-border e-commerce and the diversification of payment methods,」

「International-flight shop sales at Narita Airport and Kansai Airport declined significantly due to the pullback from “buying binge” demand. Although revenue increased with the opening of new stores, including airport-style downtown duty-free stores, sales were below the previous year. As a result, operating revenue in the retail business was ¥131.911 billion, down 1.9% year on year, while operating profit was ¥7.254 billion, down 23.4% year on year, partly due to higher operating expenses at airport-style downtown duty-free stores.」

「Although retail sales have fallen below the same period of the previous year following the end of the “buying binge,” we will continue to capture opportunities arising from domestic consumption by foreign visitors to Japan, which is expected to increase over the medium to long term, and work to secure revenue. As a result, operating revenue in the retail business was ¥97.629 billion, down 3.3% year on year, while operating profit was ¥5.359 billion, down 33.8% year on year, partly due to higher operating expenses at airport-style downtown duty-free stores.」

「The slowdown in so-called "buying sprees" has continued since the second half of last year, and operating revenue remained substantially below target during the six months ended the second quarter. Nevertheless, we will work to secure revenue by capturing opportunities arising from domestic spending by inbound visitors, which is expected to increase over the medium to long term.」

「International-flight shop sales at Narita Airport and Kansai Airport declined significantly due to the pullback from the previous year's so-called “buying binge” demand. Although revenue increased with the opening of airport-style downtown duty-free stores, sales were below the same period of the previous year. As a result, operating revenue in the retail business was ¥32.245 billion, down 1.5% year on year, while operating profit was ¥1.669 billion, down 38.3% year on year, partly due to higher operating expenses at airport-style downtown duty-free stores.」