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

<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 biggest retail group in Kansai, announced in late August that it would expand its share in <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> to take a majority stake. As is usual, the announcement was made with full understanding and acceptance by Kansai Supermarket’s board and CEO, but things have not gone according to plan. We now face another situation where existing shareholders object to a cosy, pre-agreed takeover. In this case, the company objecting is OK Super, the perennially successful Tokyo-based discount supermarket.OK Super would, in our opinion, offer the best growth longer term given its operational excellence, low price positioning and massive pent-up Japanese consumer demand for lower prices. Last year, OK Super broke ¥508 billion in sales for the first time, making it a top four chain, and achieved operating profits of ¥37.8 billion. In contrast, Kansai Super sales were ¥130.9 billion, with operating profits of ¥2.7 billion.Whereas Kansai Super largely represents past supermarket success, OK is the present and future and the prospect of OK entering the Kansai market would represent a serious threat to existing chains, not least H2O’s own.

H2 O Retailing (8242 JP), the biggest retail group in Kansai, announced in late August that it would expand its share in Kansai Super Market (9919 JP) to take a majority stake. As is usual, the announcement was made with full understanding and acceptance by Kansai Supermarket’s board and CEO, but things have not gone according to plan. We now face another situation where existing shareholders object to a cosy, pre-agreed takeover. In this case, the company objecting is OK Super, the perennially successful Tokyo-based discount supermarket.OK Super would, in our opinion, offer the best growth longer term given its operational excellence, low price positioning and massive pent-up Japanese consumer demand for lower prices. Last year, OK Super broke ¥508 billion in sales for the first time, making it a top four chain, and achieved operating profits of ¥37.8 billion. In contrast, Kansai Super sales were ¥130.9 billion, with operating profits of ¥2.7 billion.Whereas Kansai Super largely represents past supermarket success, OK is the present and future and the prospect of OK entering the Kansai market would represent a serious threat to existing chains, not least H2O’s own.

H2O Retailing and OK Super: Which Is the Better Owner of Kansai Supermarket?

Thematic (Sector/Industry)

The following is an in-depth review of Japanese retail in the last 18 months covering all the main formats and categories, providing a quick way to see an overview of all the key trends and winners and losers in Japanese retailing now and going forward.FY2020 was an anomaly and one that businesses everywhere will want to forget and never repeat. There was more than enough pain among Japan’s top retailers last year, but equally some formats did surprisingly well given the circumstances.For most, work-from-home was the single most important factor in determining a chain’s fortunes. City-centre stores and shopping centres offering mostly discretionary shopping have been hit hard, as have convenience stores.But those chains selling essentials, healthcare, electronics and, most importantly, food, all saw their fortunes improve. The pandemic has also revealed the strong, dynamic players and exposed the weaker ones. Oh, and everyone needs to be online.

The following is an in-depth review of Japanese retail in the last 18 months covering all the main formats and categories, providing a quick way to see an overview of all the key trends and winners and losers in Japanese retailing now and going forward.FY2020 was an anomaly and one that businesses everywhere will want to forget and never repeat. There was more than enough pain among Japan’s top retailers last year, but equally some formats did surprisingly well given the circumstances.For most, work-from-home was the single most important factor in determining a chain’s fortunes. City-centre stores and shopping centres offering mostly discretionary shopping have been hit hard, as have convenience stores.But those chains selling essentials, healthcare, electronics and, most importantly, food, all saw their fortunes improve. The pandemic has also revealed the strong, dynamic players and exposed the weaker ones. Oh, and everyone needs to be online.

The Polarising Pandemic in Japanese Retail

Equity Bottom-Up

<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> had its 34th straight year of record results in FY2020 – and that’s before it has even begun to integrate its recent acquisition of <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>.
Last month, the largest furniture retailer confirmed further expansion into fashion and a new IKEA-like restaurant concept due to roll out in many of its larger stores.
Nitori is making progress online too; in FY2020, online membership grew 73% to 9.03 million users and Nitori expects to see 13 million users by the end of the current year.
It also plans to open more stores overseas after a pause in 2020 where the potential remains untapped.

Nitori Holdings (9843 JP) had its 34th straight year of record results in FY2020 – and that’s before it has even begun to integrate its recent acquisition of Shimachu Co Ltd (8184 JP).
Last month, the largest furniture retailer confirmed further expansion into fashion and a new IKEA-like restaurant concept due to roll out in many of its larger stores.
Nitori is making progress online too; in FY2020, online membership grew 73% to 9.03 million users and Nitori expects to see 13 million users by the end of the current year.
It also plans to open more stores overseas after a pause in 2020 where the potential remains untapped.

More Diversification to Come as Nitori Chases ¥1 Trillion

'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.

• RESULTS - 31st MARCH •<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/198/450/original/image_34417378121617226031453.png?1617226032" class="editor-image img-responsive" data-smartkarma-image-id="198450"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics  </div>RESULTS - Only 5 out of nine of yesterday's results scored positively. The largest cap to report <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> saw the largest negative change.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/198/452/original/image_17536353141617226688099.png?1617226688" class="editor-image img-responsive" data-smartkarma-image-id="198452"></figure>• FORECASTS/REVISIONS - 31st MARCH •  <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/198/451/original/image_60108354431617226572225.png?1617226572" class="editor-image img-responsive" data-smartkarma-image-id="198451"></figure>FORECASTS/REVISIONS - Of the 10 annual forecasts and revisions, only half scored positively. The DETAIL Section below focuses on <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>, <a href="https://www.smartkarma.com/entities/kawasaki-heavy-industries" target="_blank" data-smartkarma-citation="entities:8790:1" rel="noopener">Kawasaki Heavy Industries (7012 JP)</a>, and <a href="https://www.smartkarma.com/entities/hankyu-hanshin-holdings-inc" target="_blank" data-smartkarma-citation="entities:13058:1" rel="noopener">Hankyu Hanshin (9042 JP)</a>.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/198/453/original/image_25686156251617226730677.png?1617226731" class="editor-image img-responsive" data-smartkarma-image-id="198453"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/198/454/original/image_94245619961617226769457.png?1617226770" class="editor-image img-responsive" data-smartkarma-image-id="198454"></figure>

• RESULTS - 31st MARCH •Source for all charts &amp; tables: Japan Analytics  RESULTS - Only 5 out of nine of yesterday's results scored positively. The largest cap to report Nitori (9843 JP) saw the largest negative change.• FORECASTS/REVISIONS - 31st MARCH •  FORECASTS/REVISIONS - Of the 10 annual forecasts and revisions, only half scored positively. The DETAIL Section below focuses on Nitori (9843 JP), Kawasaki Heavy Industries (7012 JP), and Hankyu Hanshin (9042 JP).

🇯🇵 JAPAN • Results & Revisions 03/​​​​​​​​​​31 - Nitori, KHI & Hankyu Hanshin

<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>, one of Japan’s best performing retailers, plans to increase the pace of growth, with up to 200 new stores in the next three years.The furniture chain will also invest around ¥200 billion in logistics to support the expansion, as well as rapidly grow its fashion chain, N+. The latter has been dismissed as a gimmick by some analysts but we think the project has serious potential. Nitori is clearly a world class retailer. While Nitori achieved gross margins of 56% last year and operating margins of 16.7%, Fast Retailing had a gross margin (based on 2019 numbers i.e. a more normal year) of 48.9% and operating margin of 11%. Inditex (for the year ending January 2019) had a gross margin of 56.7% and operating margins equal to Nitori.Nitori has also just concluded its takeover of <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> with lots of promise for synergies.With people forced to stay at home in 2020, the nesting instinct took hold and Nitori had a particularly good year. If all goes well, FY2020 will not only be its 34th consecutive year of record results, but also see the fastest profit growth so far.

Nitori Holdings (9843 JP), one of Japan’s best performing retailers, plans to increase the pace of growth, with up to 200 new stores in the next three years.The furniture chain will also invest around ¥200 billion in logistics to support the expansion, as well as rapidly grow its fashion chain, N+. The latter has been dismissed as a gimmick by some analysts but we think the project has serious potential. Nitori is clearly a world class retailer. While Nitori achieved gross margins of 56% last year and operating margins of 16.7%, Fast Retailing had a gross margin (based on 2019 numbers i.e. a more normal year) of 48.9% and operating margin of 11%. Inditex (for the year ending January 2019) had a gross margin of 56.7% and operating margins equal to Nitori.Nitori has also just concluded its takeover of Shimachu Co Ltd (8184 JP) with lots of promise for synergies.With people forced to stay at home in 2020, the nesting instinct took hold and Nitori had a particularly good year. If all goes well, FY2020 will not only be its 34th consecutive year of record results, but also see the fastest profit growth so far.

Nitori: A New Pace of Expansion in Home and Now Apparel

Japan

SHIMACHU CO., LTD. operates a furniture store chain and a home center chain based in Saitama Prefecture and the Tokyo metropolitan area.  The Company sells assembly required or Do-It-Yourself goods, household utensils, gardening tools, sporting goods, and leisure items.

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Shimachu Co Ltd (8184 JP)

H2O Retailing and OK Super: Which Is the Better Owner of Kansai Supermarket?

Kansai Super is the prize in a bidding war between H2O Retailing and OK Super. While the former would use Kansai to consolidate market share, a...

Michael Causton

The Polarising Pandemic in Japanese Retail

A complete review of the Japanese retail sector in the last 18 months, format by format, category by category, providing key trends and winners &...

Michael Causton

More Diversification to Come as Nitori Chases ¥1 Trillion

Nitori looks saturated to some but we believe there are lots of potential areas where the interiors retailer can expand, including its nascent...

Michael Causton

🇯🇵 JAPAN • Results & Revisions 03/31 - Nitori, KHI & Hankyu Hanshin

RESULTS - Only 5 out of nine of yesterday's results scored positively. The largest cap to report Nitori (9843 JP) saw the largest negative change.

Campbell Gunn

Nitori: A New Pace of Expansion in Home and Now Apparel

Nitori is about to accelerate expansion in its core market while absorbing Shimachu and likely expanding that. It is also about to build out its...

Michael Causton

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52-week Range

Market Cap (USDm)

P/E

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H2O Retailing and OK Super: Which Is the Better Owner of Kansai Supermarket?

Kansai Super is the prize in a bidding war between H2O Retailing and OK Super. While the former would use Kansai to consolidate market share, a...

Michael Causton

The Polarising Pandemic in Japanese Retail

A complete review of the Japanese retail sector in the last 18 months, format by format, category by category, providing key trends and winners &...

Michael Causton

More Diversification to Come as Nitori Chases ¥1 Trillion

Nitori looks saturated to some but we believe there are lots of potential areas where the interiors retailer can expand, including its nascent...

Michael Causton

🇯🇵 JAPAN • Results & Revisions 03/​​​​​​​​​​31 - Nitori, KHI & Hankyu Hanshin

RESULTS - Only 5 out of nine of yesterday's results scored positively. The largest cap to report Nitori (9843 JP) saw the largest negative change.

Campbell Gunn

Nitori: A New Pace of Expansion in Home and Now Apparel

Nitori is about to accelerate expansion in its core market while absorbing Shimachu and likely expanding that. It is also about to build out its...

Michael Causton

🇯🇵 JAPAN • Results & Revisions 03/31 - Nitori, KHI & Hankyu Hanshin