West Japan Railway Co. and Isetan Mitsukoshi Holdings Ltd. plan to sharply scale down their struggling department store, JR Osaka Mitsukoshi Isetan, and manage it together with JR’s adjacent specialty shop mall as part of a restructuring plan.

Competition has been heating up among retailers around JR Osaka Station in the past few years with the openings of Hankyu Department Store’s refurbished Umeda flagship and the Grand Front Osaka large commercial complex.

Isetan Mitsukoshi is planning to reduce its retail space by around 60 percent and accommodate specialty shops in the vacated floors, and run it with the adjacent Lucua shopping complex operated by JR West.

The operators are projecting around ¥80 billion in combined sales, including those at Lucua, in the year through March 2016, a challenging target as Isetan Mitsukoshi’s Osaka Station store is forecasting ¥32 billion and Lucua ¥35.7 billion in the year through March.

JR West Vice President Shizuka Yabuki told a news conference that the new department store will “coexist with specialty stores.” The department store operators will reduce or eliminate sections for kimono, art and home interiors while keeping high-margin clothing and general goods sections.