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

Leading home centre group <a href="https://www.smartkarma.com/entities/dcm-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:13042:1" rel="noopener">Dcm Holdings (3050 JP)</a> announced it will acquire <a href="https://www.smartkarma.com/entities/shimachu-co-ltd" target="_blank" data-smartkarma-citation="entities:5235:1" rel="noopener">Shimachu Co Ltd (8184 JP)</a>, the seventh largest chain, in November. The move will catapult DCM back to the top of the ranking.
The deal could also provide a catalyst for further consolidation in a sector that’s long overdue for more after remaining static for much of the past 15 years. While the drugstore and homecentre sectors are very different, they do share one similarity: the leaders dominate in certain territories but none are true national retailers. In drugstores, national coverage through M&amp;A has been happening in the last two years but in homecentres only two firms are cross-regional.
While the leading 10 chains had a 65.5%, share and the top 30 more than 90% in FY2019, to scale effectively against competition from all sides, true national leaders will have to emerge.
The proposed takeover is also an expression of the current flux in the homecentre market as consumers increase further their consumption of home decoration and home improvement category. Although this is a long-term trend, homecentre retailers were slow to exploit this, leaving the field to <a href="https://www.smartkarma.com/entities/nitori-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20386:1" rel="noopener">Nitori Holdings (9843 JP)</a> and other dedicated home decoration retailers.
There are now more signs of the sector leaders doing more to widen private label merchandise ranges to take a slice of this growing market, and some are even launching dedicated chains (<a href="https://www.smartkarma.com/insights/targeting-nitori-cainz-follows-workman-s-success-into-homeware-retailing-with-style-factory-chain" target="_blank" rel="noopener">see this insight for a detailed look at the new threat to Nitori from Cainz</a>, the unlisted homecentre sector leader – at least until DCM absorbs Shimachu). See this separate insight for more on this. Shimachu will be a key help to DCM in targeting this market given its more consumer-oriented history.
I.e. this is not just another old-style Japan retail case of expansion for the sake of it, but a genuinely interesting and useful strategic deal.

Leading home centre group Dcm Holdings (3050 JP) announced it will acquire Shimachu Co Ltd (8184 JP), the seventh largest chain, in November. The move will catapult DCM back to the top of the ranking.
The deal could also provide a catalyst for further consolidation in a sector that’s long overdue for more after remaining static for much of the past 15 years. While the drugstore and homecentre sectors are very different, they do share one similarity: the leaders dominate in certain territories but none are true national retailers. In drugstores, national coverage through M&amp;A has been happening in the last two years but in homecentres only two firms are cross-regional.
While the leading 10 chains had a 65.5%, share and the top 30 more than 90% in FY2019, to scale effectively against competition from all sides, true national leaders will have to emerge.
The proposed takeover is also an expression of the current flux in the homecentre market as consumers increase further their consumption of home decoration and home improvement category. Although this is a long-term trend, homecentre retailers were slow to exploit this, leaving the field to Nitori Holdings (9843 JP) and other dedicated home decoration retailers.
There are now more signs of the sector leaders doing more to widen private label merchandise ranges to take a slice of this growing market, and some are even launching dedicated chains (see this insight for a detailed look at the new threat to Nitori from Cainz, the unlisted homecentre sector leader – at least until DCM absorbs Shimachu). See this separate insight for more on this. Shimachu will be a key help to DCM in targeting this market given its more consumer-oriented history.
I.e. this is not just another old-style Japan retail case of expansion for the sake of it, but a genuinely interesting and useful strategic deal.

A New Era of Home Centre Consolidation Starts as DCM Buys Shimachu

'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.

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/161/859/original/2020-09-27_06-54-19.png?1601157286" class="editor-image img-responsive" data-smartkarma-image-id="161859"></figure><div class="content-caption">Source for all charts &amp; Tables: Japan Analytics</div>BOTTOMING OUT? - The Japanese markets were only open for three days this week, however, of the manufacturing companies that reported several, such as <a href="https://www.smartkarma.com/entities/hirose-electric-co-ltd" target="_blank" data-smartkarma-citation="entities:13513:1" rel="noopener">Hirose Electric (6806 JP)</a> and <a href="https://www.smartkarma.com/entities/ngk-insulators-ltd" target="_blank" data-smartkarma-citation="entities:12580:1" rel="noopener">NGK Insulators (5333 JP)</a> showed signs of a bottoming out in earnings momentum. While some domestic consumer-facing companies are seeing 'boomtown' conditions (see <a href="https://www.smartkarma.com/entities/nitori-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20386:1" rel="noopener">Nitori (9843 JP)</a> below) a broader recovery is dependent on the manufacturing sectors of the economy. Although it is early in the reporting cycle, our three metrics that track results and revisions have improved in the last seven days. As the retail-dominated Febru0ry/May/August/November year-end cohort report over the next two week, we shall see further upticks.     • BEST &amp; WORST •Our best and worst pair from Friday's announcements is home furnishing retailer <a href="https://www.smartkarma.com/entities/nitori-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20386:1" rel="noopener">Nitori (9843 JP)</a> and the leisure and travel company <a href="https://www.smartkarma.com/entities/h-i-s-co-ltd" target="_blank" data-smartkarma-citation="entities:19311:1" rel="noopener">H.I.S. (9603 JP)</a> with a maximum-negative-scoring full-year forecast operating loss of ¥37 billion.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/161/862/original/2020-09-27_07-19-01.png?1601158772" class="editor-image img-responsive" data-smartkarma-image-id="161862"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/161/863/original/2020-09-27_07-20-58.png?1601158948" class="editor-image img-responsive" data-smartkarma-image-id="161863"></figure><hr>DAILY STATS<hr><div>9 Quarterly Results</div><div><ul style="list-style-type: disc;">
<li>
Results Score: 33% Positive / 0% Neutral / 67% Negative</li>
<li>
Average Results Score Change: -3.4 points</li>
<li>
Average % Change in Revenue: -24.6% Quarter YoY / -12.6% Rolling TTM YoY </li>
<li>
Average Operating Profit Margin Change: -5.0ppt</li>
<li>
Percentage Making Quarterly Losses: 67%</li>
</ul></div><hr><div>17 Annual • 7 Interim Forecasts/Revisions</div><div><ul style="list-style-type: disc;">
<li>
Annual Forecast/Revision Score: 55% Positive / 0% Neutral / 45% Negative</li>
<li>
Interim Forecast/Revision Score Change: 53% Positive / 12% Neutral / 35% Negative</li>
<li>
Average Forecast/Revision Score Change: +0.5 points</li>
</ul></div>

Source for all charts &amp; Tables: Japan AnalyticsBOTTOMING OUT? - The Japanese markets were only open for three days this week, however, of the manufacturing companies that reported several, such as Hirose Electric (6806 JP) and NGK Insulators (5333 JP) showed signs of a bottoming out in earnings momentum. While some domestic consumer-facing companies are seeing 'boomtown' conditions (see Nitori (9843 JP) below) a broader recovery is dependent on the manufacturing sectors of the economy. Although it is early in the reporting cycle, our three metrics that track results and revisions have improved in the last seven days. As the retail-dominated Febru0ry/May/August/November year-end cohort report over the next two week, we shall see further upticks.     • BEST &amp; WORST •Our best and worst pair from Friday's announcements is home furnishing retailer Nitori (9843 JP) and the leisure and travel company H.I.S. (9603 JP) with a maximum-negative-scoring full-year forecast operating loss of ¥37 billion.DAILY STATS9 Quarterly Results

Results Score: 33% Positive / 0% Neutral / 67% Negative

Average Results Score Change: -3.4 points

Average % Change in Revenue: -24.6% Quarter YoY / -12.6% Rolling TTM YoY 

Average Operating Profit Margin Change: -5.0ppt

Percentage Making Quarterly Losses: 67%
17 Annual • 7 Interim Forecasts/Revisions

Annual Forecast/Revision Score: 55% Positive / 0% Neutral / 45% Negative

Interim Forecast/Revision Score Change: 53% Positive / 12% Neutral / 35% Negative

Average Forecast/Revision Score Change: +0.5 points


🇯🇵 JAPAN • Results & Revisions 09/25 - HIS, Mimasu (& SUMCO), Nitori, SG, & Alps Alpine Revises▲!

At least until the Covid-19 crisis hit Japan in January, the majority of retailers were gearing up to announce yet another really good year of financial results for FY2019-20.
Even with the crisis, results were generally better than for FY2018 – although there are big variations by sector.
Those differences are more or less what we’ve come to expect, with traditional formats like department stores continuing to struggle, while those formats that have adopted modern management are doing well.
The following is an in-depth review of Japan's retail sector, providing:
<ul>
<li>An overview of consumer demand and retail performance</li>
<li>Format by format reviews showing growth and profit performance across all the main formats: convenience stores, supermarkets, GMS, consumer electronics, drugstores, homecentres, department stores, apparel, home and other specialty  formats.</li>
<li>Rankings:
<ul>
<li>Market share and size by sector/format</li>
<li>By sales for all retailers with sales over ¥250 billion</li>
<li>By gross and operating margins, split by format and category.</li>
</ul>
</li>
</ul>
As this is an in-depth insight, the review is split into two parts to make it easier to read.  This is Part II which provides snapshot reviews of each format/sector. <a href="https://www.smartkarma.com/insights/the-japan-retail-review-winners-and-losers-in-japanese-retailing-part-i" target="_blank" rel="noopener">Part I, which provides a quick overview of all retailing, can be read here</a>.

At least until the Covid-19 crisis hit Japan in January, the majority of retailers were gearing up to announce yet another really good year of financial results for FY2019-20.
Even with the crisis, results were generally better than for FY2018 – although there are big variations by sector.
Those differences are more or less what we’ve come to expect, with traditional formats like department stores continuing to struggle, while those formats that have adopted modern management are doing well.
The following is an in-depth review of Japan's retail sector, providing:

An overview of consumer demand and retail performance
Format by format reviews showing growth and profit performance across all the main formats: convenience stores, supermarkets, GMS, consumer electronics, drugstores, homecentres, department stores, apparel, home and other specialty  formats.
Rankings:

Market share and size by sector/format
By sales for all retailers with sales over ¥250 billion
By gross and operating margins, split by format and category.



As this is an in-depth insight, the review is split into two parts to make it easier to read.  This is Part II which provides snapshot reviews of each format/sector. Part I, which provides a quick overview of all retailing, can be read here.

Japan Retail Review 2019-20 Part II: A Sector by Sector Review of Winners and Losers

Equity Bottom-Up

IKEA’s first permanent small-format store opened in Harajuku in early June and has been an immediate hit. Offering a wide array of small, take-home items, as well as a home-delivery ordering service, the store also introduces a ‘conbini’ and a new cafe. The small footprint is ideal for roll out across Japan and the second store is already preparing to open in just a few months time in Shibuya. Watch out <a href="https://www.smartkarma.com/entities/nitori-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20386:1" rel="noopener">Nitori Holdings (9843 JP)</a>.

IKEA’s first permanent small-format store opened in Harajuku in early June and has been an immediate hit. Offering a wide array of small, take-home items, as well as a home-delivery ordering service, the store also introduces a ‘conbini’ and a new cafe. The small footprint is ideal for roll out across Japan and the second store is already preparing to open in just a few months time in Shibuya. Watch out Nitori Holdings (9843 JP).

IKEA Harajuku: Made for Japan and for Targeting Nitori

Retail sales slumped again in May, but only because people are not buying clothes, visiting department stores and shopping centres, or buying their lunches at convenience stores.Although this led to another major drop in total sales, several sectors did very well and in June there was a surge in spending at some speciality chains and a return to some semblance of normality for many.

Retail sales slumped again in May, but only because people are not buying clothes, visiting department stores and shopping centres, or buying their lunches at convenience stores.Although this led to another major drop in total sales, several sectors did very well and in June there was a surge in spending at some speciality chains and a return to some semblance of normality for many.

Japan Retail: Essentials Strong in May but in June Even Discretionary Bounces Back

Japan

Nitori Holdings Co., Ltd., is based in Hokkaido and operates a furniture retail chain.  The Company sells living room furniture, storage furniture, dining furniture, office furniture, beds, and interior goods.  Nitori Holdings also sells original brand merchandise and imported merchandise.

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Nitori Holdings (9843 JP)

A New Era of Home Centre Consolidation Starts as DCM Buys Shimachu

Leading home centre group DCM announced it will acquire Shimachu, the seventh largest chain, in November. The move will catapult DCM back to the...

Michael Causton

🇯🇵 JAPAN • Results & Revisions 09/25 - HIS, Mimasu (& SUMCO), Nitori, SG, & Alps Alpine Revises▲!

• BEST WORST •

Campbell Gunn

Japan Retail Review 2019-20 Part II: A Sector by Sector Review of Winners and Losers

At least until the Covid-19 crisis hit Japan in January, the majority of retailers were gearing up to announce yet another really good year of...

Michael Causton

IKEA Harajuku: Made for Japan and for Targeting Nitori

IKEA’s first permanent small-format store opened in Harajuku in early June and has been an immediate hit. Offering a wide array of small, take-home...

Michael Causton

Japan Retail: Essentials Strong in May but in June Even Discretionary Bounces Back

Retail sales slumped again in May, but only because people are not buying clothes, visiting department stores and shopping centres, or buying their...

Michael Causton

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