Isetan not renewing lease of Westgate mall outlet

Isetan's outlet at Westgate mall opened in 2013 as one of the anchor tenants, with a department store and a supermarket (right). It is the firm's first such outlet outside the Orchard Road area.
Isetan's outlet at Westgate mall opened in 2013 as one of the anchor tenants, with a department store and a supermarket (above). It is the firm's first such outlet outside the Orchard Road area.PHOTO: ISETAN

Decision comes after failure to reach deal on renewal terms with landlord, says Japanese firm

Isetan Singapore will not renew the lease for its Westgate store in Jurong East, noting that the outlet is loss-making.

In a regulatory filing to the Singapore Exchange yesterday, the Japanese department store operator said it decided not to renew the lease after failing to come to an agreement with landlord JG Trustee on the renewal terms.

Isetan's decision comes amid stiff competition in the retail scene and falling sales at its flagship store at Shaw Centre off Orchard Road.

Its Westgate store, which opened in 2013 as one of the mall's anchor tenants, has a department store and a supermarket - its first such outlet outside the Orchard Road area.

While Westgate declined to disclose how much space is occupied by Isetan, reports in 2012 said the store was to take up some 60,000 sq ft of the mall's basement two.

Isetan's lease at Westgate will expire on Dec 22 this year.

Westgate centre manager Sabrina Lai said: "We are in advanced negotiations with several prospects and exploring several options for the use of the space."

Brands that have closed their Westgate stores include clothing retailer Cos, H&M's higher-end sister brand.

TALKS IN PROGRESS

We are in advanced negotiations with several prospects and exploring several options for the use of the space.

WESTGATE CENTRE MANAGER SABRINA LAI


HEARTLAND REALITY

Districts play an important role in the branding of a store. It doesn't mean that people can't afford more expensive offerings, but they might rather go to branded districts such as Orchard Road for that experience.

SINGAPORE POLYTECHNIC MARKETING AND RETAIL LECTURER LUCAS TOK, who said Westgate is in the heartland but has more high-end offerings and this may be a reason customers gravitate to nearby malls.

Isetan's retail segment saw a net loss of $21.2 million last year, up from a net loss of $9.4 million in 2017. Its losses last year included an $11.9 million impairment for two underperforming heartland stores, as well as a $2.4 million provision for onerous rental contracts.

It had said in a filing on April 10 that it will put in about $12 million to convert its flagship Isetan Scotts into a lifestyle destination store, with a major renovation set for completion next year.

The store will be reconfigured to emphasise areas such as beauty and athleisure, said Isetan in a separate statement. Its sub-leasing area will be expanded for stable recurring income. It added that since it revamped its Tampines store in 2017, "the improvement in sales and earnings of the renovated portion has been significant".

Isetan is also looking at greater use of digital platforms, with a new mobile app coming out this year with features such as electronic rebates.

As the retail landscape suffers, department stores such as Tangs and Robinsons have made changes to their store offerings and layouts in the past five to six years, said Singapore Polytechnic marketing and retail lecturer Lucas Tok.

These include making store layouts less structured and creating multiple pathways for customers to explore the available brands - something Isetan seems not to have done.

Mr Tok said Westgate is in the heartland but has more high-end offerings and this may be a reason customers gravitate to nearby malls. "Districts play an important role in the branding of a store. It doesn't mean that people can't afford more expensive offerings, but they might rather go to branded districts such as Orchard Road for that experience."

Isetan Singapore has a market capitalisation of about $128 million and sits on bond investments worth around $68.5 million, as well as $50.7 million in cash.

A version of this article appeared in the print edition of The Straits Times on May 07, 2019, with the headline 'Isetan not renewing lease of Westgate mall outlet'. Print Edition | Subscribe