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. 

Equity Bottom-Up

<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> is Japan’s largest retail conglomerate by revenues but it struggles to make respectable profits.Now, as with Seven-Eleven at <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>, Aeon may have found the high margin star subsidiary it has been looking for: Welcia Holdings.Welcia is the country’s leading drugstore chain and is growing strongly, exceeding ¥1 trillion in sales for the first time and forecasting an increase to ¥1.8 trillion through 2023.Last year, it made almost as much profit as the whole of Aeon combined but there are plenty of opportunities to extract more profit from this sector.Like most Japanese drugstore stocks, Welcia is currently trading at historically high levels thanks to a surge in sales from March onwards (see below for details)  but with more consolidation coming in the sector led by the leaders, Welcia is a solid buy when dips in the market provide an opportunity.

Aeon Co Ltd (8267 JP) is Japan’s largest retail conglomerate by revenues but it struggles to make respectable profits.Now, as with Seven-Eleven at Seven &amp; I Holdings (3382 JP), Aeon may have found the high margin star subsidiary it has been looking for: Welcia Holdings.Welcia is the country’s leading drugstore chain and is growing strongly, exceeding ¥1 trillion in sales for the first time and forecasting an increase to ¥1.8 trillion through 2023.Last year, it made almost as much profit as the whole of Aeon combined but there are plenty of opportunities to extract more profit from this sector.Like most Japanese drugstore stocks, Welcia is currently trading at historically high levels thanks to a surge in sales from March onwards (see below for details)  but with more consolidation coming in the sector led by the leaders, Welcia is a solid buy when dips in the market provide an opportunity.

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.

Event-Driven

Japan’s convenience stores outperformed the Topix index by over 10 percentage points during the COVID-19 led equity sell off in March 2020. Over the next two and a half months, the Topix index outperformed convenience stores as the overall market recovered from March 2020 low level.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/139/148/original/image_13359878321591778788605.png?1591778788" width="556" height="264" class="editor-image img-responsive" data-smartkarma-image-id="139148"></figure><div class="content-caption">Source: Cap IQ</div>The equity market recovery post March 2020 sell-off was swift. The Topix index is currently just 6.8 percentage points lower than its pre COVID-19 high level.We expect the impact of COVID-19 on businesses to be long lasting, therefore this recovery in equity markets is a bit premature.In that backdrop, we analyse for opportunities in the the Japanese convenience stores, which is considered defensive.

Japan’s convenience stores outperformed the Topix index by over 10 percentage points during the COVID-19 led equity sell off in March 2020. Over the next two and a half months, the Topix index outperformed convenience stores as the overall market recovered from March 2020 low level.Source: Cap IQThe equity market recovery post March 2020 sell-off was swift. The Topix index is currently just 6.8 percentage points lower than its pre COVID-19 high level.We expect the impact of COVID-19 on businesses to be long lasting, therefore this recovery in equity markets is a bit premature.In that backdrop, we analyse for opportunities in the the Japanese convenience stores, which is considered defensive.

Japan Convenience Store Pair Trade: Long Lawson/Short Seven & I

Thematic (Sector/Industry)

No one really knows what will happen after the initial shock of the coronavirus fades away. Many observers in Japan, expert and otherwise, are already predicting a completely new world in one way or another, but the reality is likely more prosaic.What is certain is that the Japanese consumer economy will recover and it is just a question of when.The most likely effect of the crisis is that it will catalyse a period of change already in process and which also happens to be one of the most dramatic and far-reaching seen so far in retail.But there is one trend that may well reverse as more businesses go under or contract, providing relief for many retailers: the labour shortage and rise in wages.The following offers an in-depth review of both the impact of the current crisis and implications as well as the long-term trends in Japanese retailing, providing insight into which sectors, formats and specific companies will win and lose in the next three years.For a short read, we provide the conclusions and winners and losers first.

No one really knows what will happen after the initial shock of the coronavirus fades away. Many observers in Japan, expert and otherwise, are already predicting a completely new world in one way or another, but the reality is likely more prosaic.What is certain is that the Japanese consumer economy will recover and it is just a question of when.The most likely effect of the crisis is that it will catalyse a period of change already in process and which also happens to be one of the most dramatic and far-reaching seen so far in retail.But there is one trend that may well reverse as more businesses go under or contract, providing relief for many retailers: the labour shortage and rise in wages.The following offers an in-depth review of both the impact of the current crisis and implications as well as the long-term trends in Japanese retailing, providing insight into which sectors, formats and specific companies will win and lose in the next three years.For a short read, we provide the conclusions and winners and losers first.

After Covid: The Future for Japanese Retail: Winners & Losers

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Consumer Staples are a good inflation hedge, but only if they can pass on the increase in raw material costs to end consumers. In a scenario of high unemployment and collapsing demand this may not always be possible.We have taken a look at the change in short interest on Asian consumer staples names across Hong Kong, Korea, Taiwan and Japan to identify stocks that the market is betting on and against.There is a fair bit of variability among the HK and Taiwan stocks, short interest has been broadly lower in Korea and has been plummeting in Japan. Investors can use the data as one of the inputs in identifying stocks that could benefit from an increase in inflation in the near/medium term.

Consumer Staples are a good inflation hedge, but only if they can pass on the increase in raw material costs to end consumers. In a scenario of high unemployment and collapsing demand this may not always be possible.We have taken a look at the change in short interest on Asian consumer staples names across Hong Kong, Korea, Taiwan and Japan to identify stocks that the market is betting on and against.There is a fair bit of variability among the HK and Taiwan stocks, short interest has been broadly lower in Korea and has been plummeting in Japan. Investors can use the data as one of the inputs in identifying stocks that could benefit from an increase in inflation in the near/medium term.

Asian Consumer Staples - Inflation Hedge?

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/413/original/File%202020-04-10%207%2001%2043.jpeg?1586469736" class="editor-image img-responsive" data-smartkarma-image-id="127413"></figure><div class="content-caption">Source • aatishb.com</div>CATCHING UP - As Japan's COVID-19 curve catches up with the global trendline and Tokyo reported a record number of 181 new confirmed cases, the local and national authorities are sparring over the details of the implementation of the requests to cease business operations. There are also variations of policy at the sub-prefectural level as, for example, concerning child-care facilities as Tokyo's wards adopt differing strategies. Such confusion is leading many individuals and some companies to take stricter measures than have so far been requested. Aichi and Kyoto Prefectures, which were omitted from the state of emergency declaration, have decided to implement measures independently. The constitutional arrangements governing relations between the state and prefectures are not working well at present and the frequent and very public communication breakdowns do not inspire confidence. The 'good' news is that COVID-19-attributed deaths in Japan are still below one hundred and only 99 people are deemed to be in critical condition. YOU ARE ON YOUR OWN (FOR ABOUT A WEEK) - Meanwhile, the national government is adamant that no compensation will be offered to businesses that are required to close. Support will be provided instead at an individual level where there is evidence of a loss of income. It does, however, appear that the shutdown will not now be implemented until the end of next week, which would result in only eight lost working days. The bold assumption is that the 80% social distancing measures that are being requested will have resulted in a peaking of the daily case count by months end.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/414/original/2020-04-10_06-57-43.png?1586470869" class="editor-image img-responsive" data-smartkarma-image-id="127414"></figure><div class="content-caption">Source • Social distancing to slow the US COVID-19 epidemic</div>SOCIAL DISTANCING v LOCKDOWNS - In an interesting preprint <a href="https://www.medrxiv.org/content/10.1101/2020.04.03.20052373v1" target="_blank" rel="noopener">paper</a> issued on 8th April - Social distancing to slow the US COVID-19 epidemic - a time-series analysis examined the impact of both social distancing measures and lockdowns in various US states. The evidence suggests that both policies are effective in reducing cases. These conclusions support Japan's current policy of avoiding the economic and social side-effects of universal stay-at-home policies.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/417/original/2020-04-10_07-33-27.png?1586471635" class="editor-image img-responsive" data-smartkarma-image-id="127417"></figure><div class="content-caption">Source • Japan Analytics</div>In the DETAIL below, as the pace of announcements picks up, we shall review the 32 results and 14 annual revisions or initial forecasts made yesterday. The positive/negative balance for results was 17:15, for revisions and forecasts the split was 7:7, with <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> being the primary 'casualty'.

Source • aatishb.comCATCHING UP - As Japan's COVID-19 curve catches up with the global trendline and Tokyo reported a record number of 181 new confirmed cases, the local and national authorities are sparring over the details of the implementation of the requests to cease business operations. There are also variations of policy at the sub-prefectural level as, for example, concerning child-care facilities as Tokyo's wards adopt differing strategies. Such confusion is leading many individuals and some companies to take stricter measures than have so far been requested. Aichi and Kyoto Prefectures, which were omitted from the state of emergency declaration, have decided to implement measures independently. The constitutional arrangements governing relations between the state and prefectures are not working well at present and the frequent and very public communication breakdowns do not inspire confidence. The 'good' news is that COVID-19-attributed deaths in Japan are still below one hundred and only 99 people are deemed to be in critical condition. YOU ARE ON YOUR OWN (FOR ABOUT A WEEK) - Meanwhile, the national government is adamant that no compensation will be offered to businesses that are required to close. Support will be provided instead at an individual level where there is evidence of a loss of income. It does, however, appear that the shutdown will not now be implemented until the end of next week, which would result in only eight lost working days. The bold assumption is that the 80% social distancing measures that are being requested will have resulted in a peaking of the daily case count by months end.Source • Social distancing to slow the US COVID-19 epidemicSOCIAL DISTANCING v LOCKDOWNS - In an interesting preprint paper issued on 8th April - Social distancing to slow the US COVID-19 epidemic - a time-series analysis examined the impact of both social distancing measures and lockdowns in various US states. The evidence suggests that both policies are effective in reducing cases. These conclusions support Japan's current policy of avoiding the economic and social side-effects of universal stay-at-home policies.Source • Japan AnalyticsIn the DETAIL below, as the pace of announcements picks up, we shall review the 32 results and 14 annual revisions or initial forecasts made yesterday. The positive/negative balance for results was 17:15, for revisions and forecasts the split was 7:7, with Fast Retailing (9983 JP) being the primary 'casualty'.

🇯🇵 JAPAN • Revisions & Results 9th April - Communication Breakdown

Japan

Seven & i Holdings Co., Ltd. is a holding company which was established through the merger of Ito-Yokado Co., Seven Eleven Japan Co., and Denny's Japan. The Company plans, manages, and operates mainly convenience stores, supermarkets, and department stores.

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Seven & I Holdings (3382 JP)

Welcia: Aeon’s Profit Machine

Aeon Co Ltd (8267 JP) is Japan’s largest retail conglomerate by revenues but it struggles to make respectable profits.Now, as with Seven-Eleven at...

Michael Causton

Japan Convenience Store Pair Trade: Long Lawson/Short Seven & I

Japan’s convenience stores outperformed the Topix index by over 10 percentage points during the COVID-19 led equity sell off in March 2020. Over...

Oshadhi Kumarasiri

After Covid: The Future for Japanese Retail: Winners & Losers

No one really knows what will happen after the initial shock of the coronavirus fades away. Many observers in Japan, expert and otherwise, are...

Michael Causton

Asian Consumer Staples - Inflation Hedge?

Consumer Staples are a good inflation hedge, but only if they can pass on the increase in raw material costs to end consumers. In a scenario of...

Brian Freitas

🇯🇵 JAPAN • Revisions & Results 9th April - Communication Breakdown

CATCHING UP - As Japan's COVID-19 curve catches up with the global trendline and Tokyo reported a record number of 181 new confirmed cases, the...

Campbell Gunn

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