Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

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.

Equity Bottom-Up

Japan’s largest apparel retailer, <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a> has significantly expanded its presence outside of Japan over the years. It now generates over 45% of its revenues from the Uniqlo International segment compared to 38% in the Uniqlo Japan segment.In one of our previous notes, we mentioned the following;<blockquote>The success or failure of Uniqlo’s mission lies in the hands of its international business as Uniqlo Japan has already matured and has limited growth potential. The International business has plenty of room to grow within the existing geographies such as China, Singapore, Thailand, the Philippines and Indonesia. Furthermore, Uniqlo’s entry into countries like India should allow the company to eventually sustain growth momentum even in the event of a slowdown in the domestic market or other key countries such as China.</blockquote>However, we never expected COVID-19 back then.

Japan’s largest apparel retailer, Fast Retailing (9983 JP) has significantly expanded its presence outside of Japan over the years. It now generates over 45% of its revenues from the Uniqlo International segment compared to 38% in the Uniqlo Japan segment.In one of our previous notes, we mentioned the following;The success or failure of Uniqlo’s mission lies in the hands of its international business as Uniqlo Japan has already matured and has limited growth potential. The International business has plenty of room to grow within the existing geographies such as China, Singapore, Thailand, the Philippines and Indonesia. Furthermore, Uniqlo’s entry into countries like India should allow the company to eventually sustain growth momentum even in the event of a slowdown in the domestic market or other key countries such as China.However, we never expected COVID-19 back then.

2Q20 Earnings Preview: Data Analytics Point to a 28% Decline in China Revenues Due to COVID-19

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/126/826/original/File%202020-04-06%2014%2031%2044.jpeg?1586211571" class="editor-image img-responsive" data-smartkarma-image-id="126826"></figure><div class="content-caption">Source • Financial Times</div>ABE ROLLS THE DICE - Japan's solution to the recent alarming rise in COVID-19 infections is to adopt a middle way between those adopted by Sweden and the lockdown countries. The full details will emerge later today but will include constraints on social gatherings in certain major cities as well as a stimulus package equivalent to 20% of GDP. In a tacit acknowledgement that Japanese non-consumer facing businesses cannot function from home, companies will be requested to comply with the principle of 'stay-at-home' as much as possible; however, public transportation systems will operate as usual with no reduction in capacity. The measures will be in place until the end of the extended Golden Week holiday period that ends on 6th March. In effect, Japan will be in semi-social-distancing mode for the next three weeks. After that, should the R0 be below 1, Japan reverts to business-as-usual.BIFURCATION - The implications of these policies for the market should be considered positive and when combined with the stimulus package reduced the risk of a two-stage decline as noted in our market update <a href="https://www.smartkarma.com/insights/japan-market-update-5th-april-2020-overshoot" target="_blank" data-smartkarma-citation="insights:38114" rel="noopener"> Overshoot</a>. Domestically-orientated non-consumer facing businesses are relatively well-placed in this post-COVID world. Globally-exposed businesses will still suffer, and some will be dependent on government support to survive. We would look to add to oversold stocks in the former group while waiting for selling or shorting opportunities as sentiment towards the latter recovers before the inevitable comprise in earnings. Accordingly, this Insight is BULLISH.In the DETAIL below, we shall review the Revision and Results announced yesterday. The following quotation is a good summation of the philosophy behind "The Japan Experiment':-<blockquote>"The Japanese system is a set of equations optimizing for minimal pressure for institutional change by maximising leadership wiggle room, subject to the constraint of providing the entire populace a minimally acceptable quality of life for a rich nation." - Richard Hostetter </blockquote>

Source • Financial TimesABE ROLLS THE DICE - Japan's solution to the recent alarming rise in COVID-19 infections is to adopt a middle way between those adopted by Sweden and the lockdown countries. The full details will emerge later today but will include constraints on social gatherings in certain major cities as well as a stimulus package equivalent to 20% of GDP. In a tacit acknowledgement that Japanese non-consumer facing businesses cannot function from home, companies will be requested to comply with the principle of 'stay-at-home' as much as possible; however, public transportation systems will operate as usual with no reduction in capacity. The measures will be in place until the end of the extended Golden Week holiday period that ends on 6th March. In effect, Japan will be in semi-social-distancing mode for the next three weeks. After that, should the R0 be below 1, Japan reverts to business-as-usual.BIFURCATION - The implications of these policies for the market should be considered positive and when combined with the stimulus package reduced the risk of a two-stage decline as noted in our market update  Overshoot. Domestically-orientated non-consumer facing businesses are relatively well-placed in this post-COVID world. Globally-exposed businesses will still suffer, and some will be dependent on government support to survive. We would look to add to oversold stocks in the former group while waiting for selling or shorting opportunities as sentiment towards the latter recovers before the inevitable comprise in earnings. Accordingly, this Insight is BULLISH.In the DETAIL below, we shall review the Revision and Results announced yesterday. The following quotation is a good summation of the philosophy behind "The Japan Experiment':-"The Japanese system is a set of equations optimizing for minimal pressure for institutional change by maximising leadership wiggle room, subject to the constraint of providing the entire populace a minimally acceptable quality of life for a rich nation." - Richard Hostetter 

🇯🇵 JAPAN • Revisions & Results Update 6th April - The Japanese Experiment

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. 

Nitori may have achieved 33 years of consecutive growth but the interiors retailer is worried about saturation in the home market and its attempts to make a big push overseas have stalled. To keep the engine running, Nitori has begun diversifying into consumer electronics, cosmetics and apparel.

Nitori may have achieved 33 years of consecutive growth but the interiors retailer is worried about saturation in the home market and its attempts to make a big push overseas have stalled. To keep the engine running, Nitori has begun diversifying into consumer electronics, cosmetics and apparel.

Nitori: Expanding Through Diversification into New Categories

Event-Driven

<a href="https://www.smartkarma.com/entities/yamada-denki-co-ltd" target="_blank" data-smartkarma-citation="entities:641:1" rel="noopener">Yamada Denki (9831 JP)</a>  is the largest consumer electronics retailer, not the best sector to be in right now, while <a href="https://www.smartkarma.com/entities/otsuka-kagu-ltd" target="_blank" data-smartkarma-citation="entities:5139:1" rel="noopener">Otsuka Kagu Ltd (8186 JP)</a> increasing looks like a has-been furniture chain.Yamada has now acquired a major stake in Otsuka. While it claims it plans to protect Otsuka’s premium positioning for the time being, the move is really about aiding further diversification, in particular, development of Yamada’s new lifestyle formats like Smile Kan which is attempting to compete with Nitori in furniture and household goods.

Yamada Denki (9831 JP)  is the largest consumer electronics retailer, not the best sector to be in right now, while Otsuka Kagu Ltd (8186 JP) increasing looks like a has-been furniture chain.Yamada has now acquired a major stake in Otsuka. While it claims it plans to protect Otsuka’s premium positioning for the time being, the move is really about aiding further diversification, in particular, development of Yamada’s new lifestyle formats like Smile Kan which is attempting to compete with Nitori in furniture and household goods.

Yamada Denki's Acquisition of Otsuka Kagu Won't Save Otsuka but Will Help Yamada Go After Nitori

Akio Nitori, the founder and chairman of the hit interiors chain of the same name, has been talking about diversifying into the fashion business for about five years but no one really believed him.With so much competition at the value end of the market, few considered there was an opportunity for <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> to apply its undoubted skills in supply chains, merchandising and marketing to a market that has only grown in two of the last five years, but they will likely be proved wrong.Earlier in the year, Nitori launched an entirely new apparel chain that targets women in their 40s to 60s and last month, launched a dedicated online store and opened more retail stores. Aiming at this market sounds like a dead end but, in fact, this population segment is the fastest growing under the age of 65 over the next 20 years.The new chain is a kind of Uniqlo (<a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP))</a> for older women and not only serves this expanding market but also enters a section of the retail market that is almost competition-free.The new chain isn't a sign of madness but another example of Nitori's retail excellence.The new chain will cause major worries for GMS retailers like <a href="https://www.smartkarma.com/entities/aeon-co-ltd" target="_blank" data-smartkarma-citation="entities:3:1" rel="noopener">Aeon Co Ltd (8267 JP)</a> and Ito-Yokado (<a href="https://www.smartkarma.com/entities/seven-i-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:1041:1" rel="noopener">Seven &amp; I Holdings (3382 JP))</a> and for apparel retailer, <a href="https://www.smartkarma.com/entities/shimamura-co-ltd" target="_blank" data-smartkarma-citation="entities:15213:1" rel="noopener">Shimamura (8227 JP).</a>

Akio Nitori, the founder and chairman of the hit interiors chain of the same name, has been talking about diversifying into the fashion business for about five years but no one really believed him.With so much competition at the value end of the market, few considered there was an opportunity for Nitori (9843 JP) to apply its undoubted skills in supply chains, merchandising and marketing to a market that has only grown in two of the last five years, but they will likely be proved wrong.Earlier in the year, Nitori launched an entirely new apparel chain that targets women in their 40s to 60s and last month, launched a dedicated online store and opened more retail stores. Aiming at this market sounds like a dead end but, in fact, this population segment is the fastest growing under the age of 65 over the next 20 years.The new chain is a kind of Uniqlo (Fast Retailing (9983 JP)) for older women and not only serves this expanding market but also enters a section of the retail market that is almost competition-free.The new chain isn't a sign of madness but another example of Nitori's retail excellence.The new chain will cause major worries for GMS retailers like Aeon Co Ltd (8267 JP) and Ito-Yokado (Seven &amp; I Holdings (3382 JP)) and for apparel retailer, Shimamura (8227 JP).

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)

2Q20 Earnings Preview: Data Analytics Point to a 28% Decline in China Revenues Due to COVID-19

Japan’s largest apparel retailer, Fast Retailing (9983 JP) has significantly expanded its presence outside of Japan over the years. It now...

Oshadhi Kumarasiri

🇯🇵 JAPAN • Revisions & Results Update 6th April - The Japanese Experiment

ABE ROLLS THE DICE - Japan's solution to the recent alarming rise in COVID-19 infections is to adopt a middle way between those adopted by Sweden...

Campbell Gunn

Nitori: Expanding Through Diversification into New Categories

Nitori may have achieved 33 years of consecutive growth but the interiors retailer is worried about saturation in the home market and its attempts...

Michael Causton

Yamada Denki's Acquisition of Otsuka Kagu Won't Save Otsuka but Will Help Yamada Go After Nitori

Yamada Denki (9831 JP) is the largest consumer electronics retailer, not the best sector to be in right now, while Otsuka Kagu Ltd (8186...

Michael Causton

Nitori the Fashion Chain

Akio Nitori, the founder and chairman of the hit interiors chain of the same name, has been talking about diversifying into the fashion business...

Michael Causton

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