Upgrade: Strengthening narrative; top retail pick

研报英文原文证据摘录

Upgrade: Strengthening narrative; top retail pick

Macquarie Equity Research Isetan Mitsukoshi

Entering a new growth phase for luxury brands

Luxury brands have experienced two major waves of creative director reshuffling in the past,

both of which had positive implications for Japanese department store performance.

A clear precedent is the first “creative revolution” in 1995-97, when a new generation of

designers, such as Tom Ford, Alexander McQueen, and Marc Jacobs, were appointed as

creative directors of major luxury houses. These revitalised brands became key growth

drivers for Japanese department stores.

In the 2000s, the focus shifted toward commercialisation by established creative leaders,

leading to the expansion of accessories, fragrances, and entry-level products, which

broadened the customer base.

Can brands restore desirability through product strength, rather than price increases?

The 2024-25 period has marked an unprecedented wave of creative director turnover, with

nine out of the top 15 luxury brands changing their creative leadership. This shift is driven

by structural challenges, including weaker demand in China and declining profitability due to

erosion of perceived premium value. As a result, brands are urgently seeking to restore both

revenue growth and brand desirability.

In recent years, price increases have been a key driver of both sales and earnings growth

across the sector. However, this strategy has also contributed to growing disengagement

among younger consumers. Against this backdrop, the central question of the current

creative reset is whether brands can rebuild desirability through stronger product innovation,

rather than continued price hikes.

Implications for Japanese department stores: early signs of positive spillover