J. Front Retailing's shopping center business accounts for 14.8% of sales but has an operating margin of 20.7%, well above the department store business's 11.2%. The share price has fallen approximately 10% in one month.
Department stores account for most of the group's sales, while the shopping center business's operating margin has steadily improved over the past several years, reaching 20.7% in the fiscal year ending February 2026. The department store business's operating margin was 11.2%, indicating a significant difference in profitability between the two businesses. Shopping center sales were ¥66.0 billion, accounting for only approximately 14.8% of total sales, but the shopping center business is driving earnings.
By segment, operating profit was ¥29.8 billion for department stores, ¥13.6 billion for shopping centers and ¥7.0 billion for the developer business. The shopping center business generates a higher share of profit relative to its share of sales. Despite its low sales mix, the shopping center business has maintained a high operating margin over the long term, remaining in the 20% range for the past 5 fiscal years. The payments and financial services business has a high operating margin of 21.5%, but its scale is small, limiting its contribution to the overall profit mix.
The share price peaked in mid-August and has since been trending lower. The closing price on 11 September was ¥2,607, down approximately 10% in one month. The PER was 22.24x, the PBR was 1.55x and ROE was 6.9%, below the median for the retail sector. The earnings outlook indicates that operating profit is expected to decline in the fiscal year ending February 2027, which may have been perceived as one factor behind the share price decline.
The shopping center business originated with the PARCO business. PARCO Digital Marketing and PARCO (SINGAPORE) PTE LTD are currently classified as consolidated subsidiaries. While department stores primarily purchase and sell merchandise, the shopping center business has a tenant-rental revenue model. The earnings disclosures show that the quality of profitability differs even within the same group.