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. 

Thematic (Sector/Industry)

<ul>
<li>The following is an in-depth review of the Japanese retail sector in 2021-22 and is designed to provide a complete overview for any investor in Japanese retail/consumer markets.</li>
<li>FY2021-22 proved a rebound year for retailers at the sector level. But on a company by company basis, there has been radical divergence between the best and the rest. </li>
<li>We look at the reasons for this divergence and the implications for Japanese retail and consumer firms in the years ahead.</li>
</ul>


The following is an in-depth review of the Japanese retail sector in 2021-22 and is designed to provide a complete overview for any investor in Japanese retail/consumer markets.
FY2021-22 proved a rebound year for retailers at the sector level. But on a company by company basis, there has been radical divergence between the best and the rest. 
We look at the reasons for this divergence and the implications for Japanese retail and consumer firms in the years ahead.


Japanese Retailing 2021-22: What's Really Going on and What's Next?

<ul>
<li>With food inflation exceeding 8% in December, prices have become the focus for all supermarket retailing. </li>
<li>This is good news for those that are set up for price competition but it presents a serious challenge to the majority of chains.</li>
<li>The net result will be a widening gap in performance between the best and rest, with the former delivering both top line growth and rising margins.</li>
</ul>


With food inflation exceeding 8% in December, prices have become the focus for all supermarket retailing. 
This is good news for those that are set up for price competition but it presents a serious challenge to the majority of chains.
The net result will be a widening gap in performance between the best and rest, with the former delivering both top line growth and rising margins.


Japan's Supermarkets: The Coming Disruption

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>On 31 August, <a href="https://www.smartkarma.com/entities/kansai-super-market-ltd" target="_blank" data-smartkarma-citation="entities:15519:1" rel="noopener">Kansai Super Market (9919 JP)</a> and its top shareholder (10.02% of shares out) <a href="https://www.smartkarma.com/entities/h2o-retailing-corp" target="_blank" data-smartkarma-citation="entities:17562:1" rel="noopener">H2 O Retailing (8242 JP)</a> (the parent of Hanshin Department Store and related companies) <a href="https://data.swcms.net/file/h2o-retailing/ja/news/auto_20210830491858/pdfFile.pdf" target="_blank" rel="noopener">announced</a> a business merger whereby the H₂O would inject two supermarket businesses it owns - Izumiya and Hankyu Oasis - into a holding company with Kansai Super, receiving shares in a newly enlarged Kansai Super in exchange. </p><p>H₂O would go from owning 10.66% to owning 58% of Kansai Super, and the 89.34% would own 42% of NEWCO. </p><p>The merger was short-dated/accelerated, with the EGM to vote on this deal set for a Record Date on 15 September, the EGMs of all the related companies where an EGM was necessary (Kansai Super, Hankyu Oasis, and Izumiya (the latter two foregone conclusions because they are 100%-owned by H₂O) on 29 October, and the merger effective December 1st.</p><p>The shares popped a bit, then fell back. </p><p>At first glance, this seemed somewhat opportunistic for H₂O, and it meant that the 89.34% "minority" in Kansai Super would become a real minority without getting paid a premium or provided a chance to exit. Based on the net assets of the companies, it seemed like H₂O was getting a good deal. Based on the OP levels in the past year, it did not seem like H₂O was getting special treatment. </p><p>A couple of days later, on 3 September, privately-held discount ("every day low price") supermarket chain OK Corp (primarily based in the Kanto area, but which had been aimed at expanding into the Kansai area), which was the second-largest single shareholder of Kansai Super (based originally in Osaka/Kansai) at 7.23%, stepped up and offered a <a href="https://ok-corporation.jp/media/001/202109/20210903_%E3%83%97%E3%83%AC%E3%82%B9%E3%83%AA%E3%83%AA%E3%83%BC%E3%82%B9.pdf" target="_blank" rel="noopener">press release</a> which said that it would vote against the merger and if the merger were not approved, it would be willing to launch a Tender Offer to buy the shares of Kansai Super at ¥2,250/share (the highest price since listing and nearly vs ¥1,374/share the day before, and more than double the market price of Kansai Super in June when the proposal was made). On 3 Sep OK complained about their treatment, and noted that from the perspective of shareholder interest, their bid should be considered, but OK also had no intention of launching a hostile bid.</p><p>The shares popped, moving limit up. Then limit up another day, and then the shares traded at JPY 2,200/share in considerable volume before drifting lower.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/229/527/original/Screenshot+2021-09-13+at+8.10.54+PM.png?1631535065" class="editor-image img-responsive" data-smartkarma-image-id="229527"></figure><p></p></section><p>Today the shares fell back 7+% to just below JPY 2,000/share. </p><p>There is some very long history between the founder of OK and Yuji Kitano the founder of Kansai Super, and they once worked together, with OK seconding employees to Kansai Super to learn the business of fresh grocery sales. </p><p>Mr Kitano passed away in 2013, and OK Supermarket started buying shares in 2016, getting to just under 5%, then it peaked its head above and by the end of the fiscal year in February, owned 7.23%. Of course, that year in October (2016), Kansai Super entered into a business and capital alliance with H₂O Retailing, and H₂O bought about 10% of the shares out. </p><p>Fast forward five years and it turns out that OK approached Kansai Super in April 2021, and proposed a capital and business alliance on 9 June, in writing. Kansai Super put this to an Independent Committee which then took its time, setting its first meeting with OK some 11 weeks later on 26 August. The Kansai Super <a href="http://www.kansaisuper.co.jp/upimages/irinfo/irnews_629.pdf" target="_blank" rel="noopener">release</a> (Japanese only) on 31 August suggests there was a "third party tender offer approach" but then doesn't discuss it much while saying that intense discussions and due diligence was afforded to H₂O Retailing in the same timeframe.</p><p>Five days after the first interview with OK, Kansai Super and H₂O announced their deal. </p><p>This is a complicated deal and it begs the question of whether shareholder interests matter and how shareholders decide. </p><p>More discussion below. </p>

On 31 August, Kansai Super Market (9919 JP) and its top shareholder (10.02% of shares out) H2 O Retailing (8242 JP) (the parent of Hanshin Department Store and related companies) announced a business merger whereby the H₂O would inject two supermarket businesses it owns - Izumiya and Hankyu Oasis - into a holding company with Kansai Super, receiving shares in a newly enlarged Kansai Super in exchange. H₂O would go from owning 10.66% to owning 58% of Kansai Super, and the 89.34% would own 42% of NEWCO. The merger was short-dated/accelerated, with the EGM to vote on this deal set for a Record Date on 15 September, the EGMs of all the related companies where an EGM was necessary (Kansai Super, Hankyu Oasis, and Izumiya (the latter two foregone conclusions because they are 100%-owned by H₂O) on 29 October, and the merger effective December 1st.The shares popped a bit, then fell back. At first glance, this seemed somewhat opportunistic for H₂O, and it meant that the 89.34% "minority" in Kansai Super would become a real minority without getting paid a premium or provided a chance to exit. Based on the net assets of the companies, it seemed like H₂O was getting a good deal. Based on the OP levels in the past year, it did not seem like H₂O was getting special treatment. A couple of days later, on 3 September, privately-held discount ("every day low price") supermarket chain OK Corp (primarily based in the Kanto area, but which had been aimed at expanding into the Kansai area), which was the second-largest single shareholder of Kansai Super (based originally in Osaka/Kansai) at 7.23%, stepped up and offered a press release which said that it would vote against the merger and if the merger were not approved, it would be willing to launch a Tender Offer to buy the shares of Kansai Super at ¥2,250/share (the highest price since listing and nearly vs ¥1,374/share the day before, and more than double the market price of Kansai Super in June when the proposal was made). On 3 Sep OK complained about their treatment, and noted that from the perspective of shareholder interest, their bid should be considered, but OK also had no intention of launching a hostile bid.The shares popped, moving limit up. Then limit up another day, and then the shares traded at JPY 2,200/share in considerable volume before drifting lower.Today the shares fell back 7+% to just below JPY 2,000/share. There is some very long history between the founder of OK and Yuji Kitano the founder of Kansai Super, and they once worked together, with OK seconding employees to Kansai Super to learn the business of fresh grocery sales. Mr Kitano passed away in 2013, and OK Supermarket started buying shares in 2016, getting to just under 5%, then it peaked its head above and by the end of the fiscal year in February, owned 7.23%. Of course, that year in October (2016), Kansai Super entered into a business and capital alliance with H₂O Retailing, and H₂O bought about 10% of the shares out. Fast forward five years and it turns out that OK approached Kansai Super in April 2021, and proposed a capital and business alliance on 9 June, in writing. Kansai Super put this to an Independent Committee which then took its time, setting its first meeting with OK some 11 weeks later on 26 August. The Kansai Super release (Japanese only) on 31 August suggests there was a "third party tender offer approach" but then doesn't discuss it much while saying that intense discussions and due diligence was afforded to H₂O Retailing in the same timeframe.Five days after the first interview with OK, Kansai Super and H₂O announced their deal. This is a complicated deal and it begs the question of whether shareholder interests matter and how shareholders decide. More discussion below. 

Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

<div><p><em>Tachiaigai Bunbai</em> Offerings are the most common "Pre-event" indicators for TOPIX Inclusion Events. </p></div><div>
<p>A <em>tachiaigai bunbai</em> Offering is where a company sells newly issued or secondary shares (usually from a controlling shareholder) to the public (Off-market), with a limit placed on the maximum quantity per subscriber, most often with the intention of increasing the number of shareholders, public float percentage, and/or the market capitalization of the public float in order to meet TSE1 Section Transfer requirements. They are announced as taking place in a period a week or two later, then confirmed on the eve of the offer on pricing date - usually at a 2-4% discount - and the offer takes place pre-open the next day.</p>
<p>I have discussed such offerings previously in <a href="https://www.smartkarma.com/insights/topix-inclusion-pre-events-recent-tachiaigai-bunbai-round-up" target="_blank" data-smartkarma-citation="insights:40509" rel="noopener">TOPIX Inclusion Pre-Events: Recent "Tachiaigai Bunbai" Round-Up</a> in June 2020 and in <a href="https://www.smartkarma.com/insights/topix-inclusion-pre-events-recent-tachiaigai-bunbai-round-up-october-2020-two-stocks-to-buy" target="_blank" data-smartkarma-citation="insights:43984" rel="noopener">TOPIX Inclusion Pre-Events: Recent “Tachiaigai Bunbai” Round-Up (October 2020) - Two Stocks To Buy</a> in October 2020.  </p>
<p>Below is a closer look at the recent history of such <em>tachiaigai bunbai</em> offerings and a discussion on the potential of these candidates to get promoted to TSE1 in the near future. </p>
</div>

Tachiaigai Bunbai Offerings are the most common "Pre-event" indicators for TOPIX Inclusion Events. 
A tachiaigai bunbai Offering is where a company sells newly issued or secondary shares (usually from a controlling shareholder) to the public (Off-market), with a limit placed on the maximum quantity per subscriber, most often with the intention of increasing the number of shareholders, public float percentage, and/or the market capitalization of the public float in order to meet TSE1 Section Transfer requirements. They are announced as taking place in a period a week or two later, then confirmed on the eve of the offer on pricing date - usually at a 2-4% discount - and the offer takes place pre-open the next day.
I have discussed such offerings previously in TOPIX Inclusion Pre-Events: Recent "Tachiaigai Bunbai" Round-Up in June 2020 and in TOPIX Inclusion Pre-Events: Recent “Tachiaigai Bunbai” Round-Up (October 2020) - Two Stocks To Buy in October 2020.  
Below is a closer look at the recent history of such tachiaigai bunbai offerings and a discussion on the potential of these candidates to get promoted to TSE1 in the near future. 


TOPIX Inclusion Pre-Events: Recent “Tachiaigai Bunbai” Round-Up (August 2021)

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/158/456/original/2020-09-12_13-08-43.png?1599883751" class="editor-image img-responsive" data-smartkarma-image-id="158456"></figure><div class="content-caption">Source for all Charts: Japan Analytics</div><p><strong>YET TO BOTTOM OUT</strong> - As we finish the first batch of results covering the period from May to July, our scoring of Results, Annual, and Interim Revisions has yet to see a bottoming out in momentum. Nevertheless, the market, aided by ample liquidity, has already discounted the first six months of a potential recovery. The market's optimism is supported by the Cabinet Office Leading Indicator of Business Conditions which, as of July, had seen two months of recovery.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/158/458/original/2020-09-12_13-20-58.png?1599884472" class="editor-image img-responsive" data-smartkarma-image-id="158458"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/158/459/original/2020-09-12_13-31-24.png?1599885118" class="editor-image img-responsive" data-smartkarma-image-id="158459"></figure><p></p><hr><p style="text-align: center;"><strong>• BEST &amp; WORST •</strong></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/158/449/original/2020-09-12_10-38-08.png?1599874697" class="editor-image img-responsive" data-smartkarma-image-id="158449"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/158/451/original/2020-09-12_10-40-00.png?1599874819" class="editor-image img-responsive" data-smartkarma-image-id="158451"></figure><p>Our picks of the 'best' from Friday's announcements are logistics infrastructure company <a href="https://www.smartkarma.com/entities/cre-inc-japan" target="_blank" data-smartkarma-citation="entities:25924:1" rel="noopener">CRE (3458 JP)</a> and personal products provider <a href="https://www.smartkarma.com/entities/ya-man-ltd" target="_blank" data-smartkarma-citation="entities:16129:1" rel="noopener">Ya Man (6630 JP)</a>. The 'worst' results were from Ai gaming company <a href="https://www.smartkarma.com/entities/heroz-inc" target="_blank" data-smartkarma-citation="entities:27106:1" rel="noopener">Heroz (4382 JP)</a> and commercial design and display specialist <a href="https://www.smartkarma.com/entities/tanseisha-co-ltd" target="_blank" data-smartkarma-citation="entities:10898:1" rel="noopener">Tanseisha (9743 JP)</a>, the latter due to a severe downward revision for the full year. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/158/452/original/2020-09-12_10-41-46.png?1599874918" class="editor-image img-responsive" data-smartkarma-image-id="158452"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/158/453/original/2020-09-12_10-43-21.png?1599875013" class="editor-image img-responsive" data-smartkarma-image-id="158453"></figure><p style="text-align: center;"></p><div>
<hr>
<p style="text-align: center;"><strong>DAILY STATS</strong></p>
</div><hr><div><div class="content-highlight"><p style="text-align: left;"><strong>PERCENTAGES</strong> -<strong>50%</strong> of quarterly results, <strong>66%</strong> of annual forecasts/revisions and<strong> 69%</strong> of interim forecasts have negative Scores. <strong>29%</strong> of companies reporting lost money for the quarter.</p></div></div><hr><div><p style="text-align: center;"><strong>48 Quarterly Results</strong></p></div><div><ul style="list-style-type: disc;">
<li>
<strong>Results Score:</strong> 46% Positive / 4% Neutral / 50% Negative</li>
<li>
<strong>Average Results Score Change:</strong> +0.9 points</li>
<li>
<strong>Average % Change in Revenue:</strong> -5.8% Quarter YoY / -3.7% Rolling TTM YoY </li>
<li>Average Operating Profit Margin Change: -4.1ppt</li>
<li>Percentage Making Quarterly Losses: 29%</li>
</ul></div><hr><div><p style="text-align: center;"><strong>29 Annual • 13 Interim Forecasts/Revisions</strong></p></div><div><ul style="list-style-type: disc;">
<li>
<strong>Annual Forecast/Revision Score:</strong> 31% Positive / 3% Neutral / 66% Negative</li>
<li>
<strong>Interim Forecast/Revision Score Change:</strong> 23% Positive / 8% Neutral / 69% Negative</li>
<li>
<strong>Average Forecast/Revision Score Change:</strong> -6.9 points</li>
</ul></div>

Source for all Charts: Japan AnalyticsYET TO BOTTOM OUT - As we finish the first batch of results covering the period from May to July, our scoring of Results, Annual, and Interim Revisions has yet to see a bottoming out in momentum. Nevertheless, the market, aided by ample liquidity, has already discounted the first six months of a potential recovery. The market's optimism is supported by the Cabinet Office Leading Indicator of Business Conditions which, as of July, had seen two months of recovery.• BEST &amp; WORST •Our picks of the 'best' from Friday's announcements are logistics infrastructure company CRE (3458 JP) and personal products provider Ya Man (6630 JP). The 'worst' results were from Ai gaming company Heroz (4382 JP) and commercial design and display specialist Tanseisha (9743 JP), the latter due to a severe downward revision for the full year. 

DAILY STATS
PERCENTAGES -50% of quarterly results, 66% of annual forecasts/revisions and 69% of interim forecasts have negative Scores. 29% of companies reporting lost money for the quarter.48 Quarterly Results

Results Score: 46% Positive / 4% Neutral / 50% Negative

Average Results Score Change: +0.9 points

Average % Change in Revenue: -5.8% Quarter YoY / -3.7% Rolling TTM YoY 
Average Operating Profit Margin Change: -4.1ppt
Percentage Making Quarterly Losses: 29%
29 Annual • 13 Interim Forecasts/Revisions

Annual Forecast/Revision Score: 31% Positive / 3% Neutral / 66% Negative

Interim Forecast/Revision Score Change: 23% Positive / 8% Neutral / 69% Negative

Average Forecast/Revision Score Change: -6.9 points


🇯🇵 JAPAN • Results & Revisions 09/​​​​​11 - CRE, Ya-Man, JM, Halows, Tanseisha

Japan

HALOWS CO., LTD. operates food supermarket chain stores in Hiroshima and Okayama Prefectures.  Most of the stores are open 24 hours a day.

Price Gauge
52-week Range	0.00 - 0.00
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Halows Co Ltd (2742 JP)

Japanese Retailing 2021-22: What's Really Going on and What's Next?

There is increasing divergence between the winners and losers in Japanese retailing and the following in-depth review looks at performance in the...

Michael Causton

Japan's Supermarkets: The Coming Disruption

With Trial's IPO looming and inflation at record highs, Japan's supermarket sector is a sector ripe for disruption as pricing pressures widen the...

Michael Causton

The Kansai Super (9919) Conundrum

Kansai Super has Two Suitors - H2O Retailing and Kansai Super have ironed out a deal, and OK Corp objects. This creates a conundrum. But solving it...

Travis Lundy

TOPIX Inclusion Pre-Events: Recent “Tachiaigai Bunbai” Round-Up (August 2021)

Tachiaigai Bunbai Offerings are the most common "Pre-event" indicators for TOPIX Inclusion Events. In this insight, I have handpicked a few...

Janaghan Jeyakumar, CFA

🇯🇵 JAPAN • Results & Revisions 09/11 - CRE, Ya-Man, JM, Halows, Tanseisha

• BEST & WORST • DAILY STATS PERCENTAGES -53% of quarterly results, 53% of annual forecasts/revisions and only 29% of interim forecasts...

Campbell Gunn

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Japanese Retailing 2021-22: What's Really Going on and What's Next?

There is increasing divergence between the winners and losers in Japanese retailing and the following in-depth review looks at performance in the...

Michael Causton

Japan's Supermarkets: The Coming Disruption

With Trial's IPO looming and inflation at record highs, Japan's supermarket sector is a sector ripe for disruption as pricing pressures widen the...

Michael Causton

The Kansai Super (9919) Conundrum

Kansai Super has Two Suitors - H2O Retailing and Kansai Super have ironed out a deal, and OK Corp objects. This creates a conundrum. But solving it...

Travis Lundy

TOPIX Inclusion Pre-Events: Recent “Tachiaigai Bunbai” Round-Up (August 2021)

Tachiaigai Bunbai Offerings are the most common "Pre-event" indicators for TOPIX Inclusion Events. In this insight, I have handpicked a few...

Janaghan Jeyakumar, CFA

🇯🇵 JAPAN • Results & Revisions 09/​​​​​11 - CRE, Ya-Man, JM, Halows, Tanseisha

• BEST & WORST • DAILY STATS PERCENTAGES -53% of quarterly results, 53% of annual forecasts/revisions and only 29% of interim forecasts...

Campbell Gunn

🇯🇵 JAPAN • Results & Revisions 09/11 - CRE, Ya-Man, JM, Halows, Tanseisha