Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Event-Driven

After several months of cross-company negotiations around tie-ups, late in August <a href="https://www.smartkarma.com/entities/cocokara-fine-inc" target="_blank" data-smartkarma-citation="entities:15447:1" rel="noopener">Cocokara Fine (3098 JP</a> and <a href="https://www.smartkarma.com/entities/matsumotokiyoshi-holdings-co" target="_blank" data-smartkarma-citation="entities:2259:1" rel="noopener">Matsumotokiyoshi Holdings Co (3088 JP)</a> confirmed they were finally entering discussions to merge operations.These may take a while but, while Cocokara's other suitor, <a href="https://www.smartkarma.com/entities/sugi-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:9255:1" rel="noopener">Sugi Holdings (7649 JP)</a>, looked a better bet culturally, Matsumotokiyoshi and Cocokara have plenty to discuss given the potential areas for synergy and collaboration.Much has already been said about opportunities post-merger, particularly in private brands, but it is how these private brands could power a significant increase in market share at the expense of convenience stores – and even in collaboration with GMS and supermarket retailers – that is perhaps most alluring.In addition, Japan's health services market is in robust health precisely because so many Japanese aren't – because they are ageing. Cocokara has already built a substantial health services business which Matsukiyo could help grow.The drugstore sector is already one of the most active in terms of M&amp;A, but this deal will be the largest so far and will cause a major disruption for competitors and food, cosmetics and toiletries distribution.

After several months of cross-company negotiations around tie-ups, late in August Cocokara Fine (3098 JP and Matsumotokiyoshi Holdings Co (3088 JP) confirmed they were finally entering discussions to merge operations.These may take a while but, while Cocokara's other suitor, Sugi Holdings (7649 JP), looked a better bet culturally, Matsumotokiyoshi and Cocokara have plenty to discuss given the potential areas for synergy and collaboration.Much has already been said about opportunities post-merger, particularly in private brands, but it is how these private brands could power a significant increase in market share at the expense of convenience stores – and even in collaboration with GMS and supermarket retailers – that is perhaps most alluring.In addition, Japan's health services market is in robust health precisely because so many Japanese aren't – because they are ageing. Cocokara has already built a substantial health services business which Matsukiyo could help grow.The drugstore sector is already one of the most active in terms of M&amp;A, but this deal will be the largest so far and will cause a major disruption for competitors and food, cosmetics and toiletries distribution.

Cocokara and Matsukiyo: Potential Competition for Supermarkets and Convenience Stores

Equity Bottom-Up

Seven &amp; I sent in a team of senior executives to sort out Sogo Seibu three years ago resulting in recommendations that included handing off the Kansai stores and converting others to shopping centres.The resulting restructuring is in progress, with more stores closed than any other department store chain.  Next month will also see the formal renaming of Sogo Kobe and Seibu Takatsuki as Hankyu stores. The move gives <a href="https://www.smartkarma.com/entities/h2o-retailing-corp" target="_blank" data-smartkarma-citation="entities:17562:1" rel="noopener">H2O Retailing (8242 JP),</a> which owns the department stores of <a href="https://www.smartkarma.com/entities/hankyu-hanshin-holdings-inc" target="_blank" data-smartkarma-citation="entities:13058:1" rel="noopener">Hankyu Hanshin Holdings (9042 JP)</a> the opportunity to further consolidate its position as the preeminent retailer in the Kansai region.Seven &amp; I meanwhile will now focus on extracting more sales and profit from some of the remaining 15 stores but is likely to want to convert or close more stores in the near future. Already, it has decided to convert its large Seibu Tokorozawa store into a shopping centre later this year. The net result will be a much smaller chain of department stores that Seven &amp; I could well be packaging up to sell to a competitor or offload through an MBO. This could lead to an improvement in OPM.

Seven &amp; I sent in a team of senior executives to sort out Sogo Seibu three years ago resulting in recommendations that included handing off the Kansai stores and converting others to shopping centres.The resulting restructuring is in progress, with more stores closed than any other department store chain.  Next month will also see the formal renaming of Sogo Kobe and Seibu Takatsuki as Hankyu stores. The move gives H2O Retailing (8242 JP), which owns the department stores of Hankyu Hanshin Holdings (9042 JP) the opportunity to further consolidate its position as the preeminent retailer in the Kansai region.Seven &amp; I meanwhile will now focus on extracting more sales and profit from some of the remaining 15 stores but is likely to want to convert or close more stores in the near future. Already, it has decided to convert its large Seibu Tokorozawa store into a shopping centre later this year. The net result will be a much smaller chain of department stores that Seven &amp; I could well be packaging up to sell to a competitor or offload through an MBO. This could lead to an improvement in OPM.

Seven & I's Sogo Seibu Loses Kansai Branches, Converting More Stores to SCs

Thematic (Sector/Industry)

The following provides a snapshot guide to the performance of all the main retail sectors in Japan in 2018-19 sector by sector including winners and losers. <a href="https://www.smartkarma.com/insights/japan-retail-review-and-ranking-2018-19-profit-growth-slowing-as-competition-increases" target="_blank" rel="noopener">In an accompanying Insight, we provide an overview of retail performance for the entire sector in 2018-19 by sales, profits and margins.</a>

The following provides a snapshot guide to the performance of all the main retail sectors in Japan in 2018-19 sector by sector including winners and losers. In an accompanying Insight, we provide an overview of retail performance for the entire sector in 2018-19 by sales, profits and margins.

Japan Retail Highlights 2018-19: Sector by Sector and Winners in Each Sector

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Quantitative Analysis

• RELATIVE PRICE SCORE • <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/226/original/2019-06-13_16-47-07.png?1560412038" class="editor-image img-responsive" data-smartkarma-image-id="90226"></figure><div class="content-caption">Source: Japan Analytics</div>INTRODUCTION - The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are thus on a comparable scale, 'Overbought' and 'Oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. Company outlier thresholds are set at +4 &amp; -2 and equate to the top and bottom first-to-second percentiles of historical observations from which mean reversion takes a matter of months. RPS outliers with a Score of greater than 10.0 are rare outside of the 2000 tech 'bubble'. <a href="https://www.smartkarma.com/entities/goldwin-inc" target="_blank" data-smartkarma-citation="entities:410:1">Goldwin (8111 JP)</a> has the distinction of being one of only two large-cap RPS 'ten-baggers' since that time.This insight updates our list of Overbought and Oversold companies, reviews the best and worst performing companies in terms of RPS over the last three months and adds some specific comments on stocks on each category.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/196/original/2019-06-13_11-15-27.png?1560392157" class="editor-image img-responsive" data-smartkarma-image-id="90196"></figure><div class="content-caption">Source: Japan Analytics</div>STATISTICS - Currently, of the 3,832 listed companies for which daily RPS data is available, 94 companies are 'Overbought', and 131 are 'Oversold' - 2.5% and 3.4%, respectively of the total. For the 758 companies with a market capitalisation of over ¥100b, there are 50 'Overbought' and 18 'Oversold' companies, 6.6% and 5.0%, respectively. As noted the companion Insight, <a href="https://www.smartkarma.com/insights/japan-june-relative-price-scores-market-sectors-peer-groups-more-of-the-same" target="_blank" data-smartkarma-citation="insights:30323">🇯🇵 Japan • June Relative Price Scores: Market, Sectors &amp; Peer Groups - More of The Same</a>, these numbers and percentages are unusual and were last seen in the Japanese market in 2000. <hr>• RELATIVE PRICE SCORE TOPS •<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/202/original/2019-06-13_13-06-49.png?1560398835" class="editor-image img-responsive" data-smartkarma-image-id="90202"></figure><div class="content-caption">Source: Japan Analytics</div>RPS 'TOPS' - In the last two years, 444 companies have achieved an RPS of '4' or more and the average Overbought 'persistence' is 43 days. 1.4% of the total of 1.29 million traded stock days were by companies with an RPS of over 4. For companies with a market capitalisation higher than ¥100b, the numbers are 96 companies and 75 days - demonstrating the superior persistence of large capitalisation companies in this regard. Some examples of RPS mean reversion in the last three months have been <a href="https://www.smartkarma.com/entities/descente-ltd" target="_blank" data-smartkarma-citation="entities:8225:1">Descente (8114 JP)</a>, <a href="https://www.smartkarma.com/entities/alfresa-holdings-corp" target="_blank" data-smartkarma-citation="entities:10610:1">Alfresa (2784 JP)</a>, <a href="https://www.smartkarma.com/entities/320" target="_blank" data-smartkarma-citation="entities:320:1">FamilyMart Uny (8028 JP)</a>, <a href="https://www.smartkarma.com/entities/kikkoman-corp" target="_blank" data-smartkarma-citation="entities:11720:1">Kikkoman (2801 JP)</a>, <a href="https://www.smartkarma.com/entities/kobayashi-pharmaceutical-co" target="_blank" data-smartkarma-citation="entities:14930:1">Kobayashi Pharmaceutical (4967 JP)</a>, and <a href="https://www.smartkarma.com/entities/eiken-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:12675:1">Eiken Chemical (4549 JP)</a>.  <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/201/original/2019-06-13_13-04-38.png?1560398780" class="editor-image img-responsive" data-smartkarma-image-id="90201"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/203/original/2019-06-13_13-08-46.png?1560398945" class="editor-image img-responsive" data-smartkarma-image-id="90203"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/204/original/2019-06-13_13-09-37.png?1560399049" class="editor-image img-responsive" data-smartkarma-image-id="90204"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/205/original/2019-06-13_13-12-01.png?1560399142" class="editor-image img-responsive" data-smartkarma-image-id="90205"></figure><div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/316/original/2019-06-15_19-45-47.png?1560595558" class="editor-image img-responsive" data-smartkarma-image-id="90316"></figure>Source: Japan Analytics
</div>RPS 'BOTTOMS' - 372 companies have seen their RPS fall to '-2' or below in the last two years, and the average Oversold 'persistence' is 61 days. 1.5% of the total of 1.29 million traded stock days were by companies with an RPS of less than -2.  For larger capitalisation companies, the numbers are 85 companies and 89 days. A recent example of positive RPS mean reversion is <a href="https://www.smartkarma.com/entities/k-o-energy-group-inc" target="_blank" data-smartkarma-citation="entities:17701:1">K&amp;O Energy (1663 JP)</a>.<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/207/original/2019-06-13_13-14-03.png?1560399270" class="editor-image img-responsive" data-smartkarma-image-id="90207"></figure>Source: Japan Analytics
</div><div class="content-highlight">In the DETAIL section below, we list the current very overbought (RPS&gt;5), too late to buy (RPS &gt;4&lt;5) and oversold (RPS &lt;-2) stocks as well as the most substantial three-month positive and negative changes in RPS.</div>

• RELATIVE PRICE SCORE • Source: Japan AnalyticsINTRODUCTION - The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are thus on a comparable scale, 'Overbought' and 'Oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. Company outlier thresholds are set at +4 &amp; -2 and equate to the top and bottom first-to-second percentiles of historical observations from which mean reversion takes a matter of months. RPS outliers with a Score of greater than 10.0 are rare outside of the 2000 tech 'bubble'. Goldwin (8111 JP) has the distinction of being one of only two large-cap RPS 'ten-baggers' since that time.This insight updates our list of Overbought and Oversold companies, reviews the best and worst performing companies in terms of RPS over the last three months and adds some specific comments on stocks on each category.Source: Japan AnalyticsSTATISTICS - Currently, of the 3,832 listed companies for which daily RPS data is available, 94 companies are 'Overbought', and 131 are 'Oversold' - 2.5% and 3.4%, respectively of the total. For the 758 companies with a market capitalisation of over ¥100b, there are 50 'Overbought' and 18 'Oversold' companies, 6.6% and 5.0%, respectively. As noted the companion Insight, 🇯🇵 Japan • June Relative Price Scores: Market, Sectors &amp; Peer Groups - More of The Same, these numbers and percentages are unusual and were last seen in the Japanese market in 2000. • RELATIVE PRICE SCORE TOPS •Source: Japan AnalyticsRPS 'TOPS' - In the last two years, 444 companies have achieved an RPS of '4' or more and the average Overbought 'persistence' is 43 days. 1.4% of the total of 1.29 million traded stock days were by companies with an RPS of over 4. For companies with a market capitalisation higher than ¥100b, the numbers are 96 companies and 75 days - demonstrating the superior persistence of large capitalisation companies in this regard. Some examples of RPS mean reversion in the last three months have been Descente (8114 JP), Alfresa (2784 JP), FamilyMart Uny (8028 JP), Kikkoman (2801 JP), Kobayashi Pharmaceutical (4967 JP), and Eiken Chemical (4549 JP).  
Source: Japan Analytics
RPS 'BOTTOMS' - 372 companies have seen their RPS fall to '-2' or below in the last two years, and the average Oversold 'persistence' is 61 days. 1.5% of the total of 1.29 million traded stock days were by companies with an RPS of less than -2.  For larger capitalisation companies, the numbers are 85 companies and 89 days. A recent example of positive RPS mean reversion is K&amp;O Energy (1663 JP).
Source: Japan Analytics
In the DETAIL section below, we list the current very overbought (RPS&gt;5), too late to buy (RPS &gt;4&lt;5) and oversold (RPS &lt;-2) stocks as well as the most substantial three-month positive and negative changes in RPS.

🇯🇵 Japan • Relative Price Scores - Overbought & Oversold Companies - June 2019

Following <a href="https://www.smartkarma.com/insights/japan-department-stores-2018-some-growth-again-and-even-real-profits-part-i" target="_blank">Part I</a> of our review of Japanese department stores, which provided an overview of the sector by region, product category, the top 30 firms and the top 50 stores, we conclude with a review of key trends in the sector and the outlook for the next five years. We expect:
<ul class="">
<li>Further contraction of the sector overall as more stores are closed or converted to shopping buildings (vertical shopping centres).</li>
<li>Such contraction will benefit the remaining stores because the upscale positioning will be underpinned by more investment in fewer stores, and the closed stores are mostly drab and more like GMS stores than upscale emporiums.</li>
<li>A few leading firms will diversify successfully away from a dependence on just department stores.</li>
<li>Continued growth in tourism and the continued growth in the number of wealthy Japanese will underpin stability for the better chains and stores.</li>
<li>A new emphasis on being retailers, rather than just property managers as they were in the past, will lead to higher growth, particularly in terms of profits. These profits will come from higher sales densities and the addition of more high margin merchandise and services.</li>
<li>The likely winners will be <a href="https://www.smartkarma.com/entities/8947" target="_blank" data-smartkarma-citation="entities:8947:1">J Front Retailing (3086 JP)</a>, <a href="https://www.smartkarma.com/entities/370" target="_blank" data-smartkarma-citation="entities:370:1">Takashimaya (8233 JP)</a> and <a href="https://www.smartkarma.com/entities/13058" target="_blank" data-smartkarma-citation="entities:13058:1">Hankyu Hanshin (9042 JP)</a> which is part of <a href="https://www.smartkarma.com/entities/17562" target="_blank" data-smartkarma-citation="entities:17562:1">H2O Retailing (8242 JP)</a>. <a href="https://www.smartkarma.com/entities/18871" target="_blank" data-smartkarma-citation="entities:18871:1">Isetan Mitsukoshi's (3099 JP)</a> more conservative new management, and ongoing closures, and Seven &amp; I's concerted paring down of the Sogo Seibu chain suggest these two firms will underperform.</li>
</ul>

Following Part I of our review of Japanese department stores, which provided an overview of the sector by region, product category, the top 30 firms and the top 50 stores, we conclude with a review of key trends in the sector and the outlook for the next five years. We expect:

Further contraction of the sector overall as more stores are closed or converted to shopping buildings (vertical shopping centres).
Such contraction will benefit the remaining stores because the upscale positioning will be underpinned by more investment in fewer stores, and the closed stores are mostly drab and more like GMS stores than upscale emporiums.
A few leading firms will diversify successfully away from a dependence on just department stores.
Continued growth in tourism and the continued growth in the number of wealthy Japanese will underpin stability for the better chains and stores.
A new emphasis on being retailers, rather than just property managers as they were in the past, will lead to higher growth, particularly in terms of profits. These profits will come from higher sales densities and the addition of more high margin merchandise and services.
The likely winners will be J Front Retailing (3086 JP), Takashimaya (8233 JP) and Hankyu Hanshin (9042 JP) which is part of H2O Retailing (8242 JP). Isetan Mitsukoshi's (3099 JP) more conservative new management, and ongoing closures, and Seven &amp; I's concerted paring down of the Sogo Seibu chain suggest these two firms will underperform.


Japan Department Stores 2018: Some Growth Again and Even Real Profits – Part II

Japan

H2O RETAILING CORPORATION founded in Osaka in 1929, operates railway terminal department stores.  The Company's main store is located at Hankyu terminal in Umeda (Osaka) and sells clothing, foods, sundry goods, furniture, and household utensils.  H2O Retailing also operates restaurants and coffee shops.

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H2O Retailing (8242 JP)

Cocokara and Matsukiyo: Potential Competition for Supermarkets and Convenience Stores

After several months of cross-company negotiations around tie-ups, late in August Cocokara Fine (3098 JP and Matsumotokiyoshi Holdings Co (3088 JP)...

Michael Causton

Seven & I's Sogo Seibu Loses Kansai Branches, Converting More Stores to SCs

Seven & I sent in a team of senior executives to sort out Sogo Seibu three years ago resulting in recommendations that included handing off the...

Michael Causton

Japan Retail Highlights 2018-19: Sector by Sector and Winners in Each Sector

The following provides a snapshot guide to the performance of all the main retail sectors in Japan in 2018-19 sector by sector including winners...

Michael Causton

🇯🇵 Japan • Relative Price Scores - Overbought & Oversold Companies - June 2019

• RELATIVE PRICE SCORE • INTRODUCTION - The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by...

Campbell Gunn

Japan Department Stores 2018: Some Growth Again and Even Real Profits – Part II

Following Part I of our review of Japanese department stores, which provided an overview of the sector by region, product category, the top 30...

Michael Causton

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