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)

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

Like most lifestyle segments, the outdoor apparel &amp; equipment market contracted in 2020 but this is a blip in an otherwise sustained multi-year expansion. Long-term growth is being driven by both expanded supply and demand as consumers of all ages embrace the great outdoors for the first time in generations and suppliers rush to equip them.This has benefited retailers such as <a href="https://www.smartkarma.com/entities/workman-co-ltd" target="_blank" data-smartkarma-citation="entities:8467:1" rel="noopener">Workman Co Ltd (7564 JP)</a>, <a href="https://www.smartkarma.com/entities/goldwin-inc" target="_blank" data-smartkarma-citation="entities:410:1" rel="noopener">Goldwin Inc (8111 JP)</a> and <a href="https://www.smartkarma.com/entities/snow-peak-inc" target="_blank" data-smartkarma-citation="entities:7218:1" rel="noopener">Snow Peak Inc (7816 JP)</a> but it also means that a number of other retailers have entered the market, creating new competition, including <a href="https://www.smartkarma.com/entities/bic-camera-inc" target="_blank" data-smartkarma-citation="entities:11328:1" rel="noopener">Bic Camera Inc (3048 JP) </a>and <a href="https://www.smartkarma.com/entities/kohnan-shoji-co-ltd" target="_blank" data-smartkarma-citation="entities:5662:1" rel="noopener">Kohnan Shoji (7516 JP).</a>

Like most lifestyle segments, the outdoor apparel &amp; equipment market contracted in 2020 but this is a blip in an otherwise sustained multi-year expansion. Long-term growth is being driven by both expanded supply and demand as consumers of all ages embrace the great outdoors for the first time in generations and suppliers rush to equip them.This has benefited retailers such as Workman Co Ltd (7564 JP), Goldwin Inc (8111 JP) and Snow Peak Inc (7816 JP) but it also means that a number of other retailers have entered the market, creating new competition, including Bic Camera Inc (3048 JP) and Kohnan Shoji (7516 JP).

Japan's Outdoor Market Expands 3.2% in 2019 but Contraction in 2020

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

This morning's Yomiuri newspaper has an <a href="https://www.yomiuri.co.jp/economy/20201028-OYT1T50030/" target="_blank" rel="noopener">article</a> (paywalled) which says that <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> will, within this week, launch a Tender Offer for <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>, putting itself in competition with <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> which has already launched a Tender Offer at JPY 4200/share, currently set to expire on the 16 November.The possibility of Nitori coming in was  flagged by the Nikkei on the 20th, late, and Shimachu shares jumped more than 10% the next day, and have recently been trading in the JPY 4,700-4,800 area. This development was discussed in <a href="https://www.smartkarma.com/insights/nitori-to-make-a-rival-bid-for-shimachu-more-fun-to-go" target="_blank" data-smartkarma-citation="insights:44353" rel="noopener">Nitori To Make a Rival Bid for Shimachu? More Fun To Go</a> after discussing the original Tender Offer by DCM (which was stated as too light a bid) in <a href="https://www.smartkarma.com/insights/dcm-does-a-full-takeover-of-shimachu-looks-like-a-strong-price-look-again" target="_blank" data-smartkarma-citation="insights:43806" rel="noopener">DCM Does a Full Takeover of Shimachu - Looks Like a Strong Price. Look Again.</a> An official unsolicited TOB by Nitori would be an interesting hostile-but-not-necessarily-so bid for what may be the last good quality Tokyo-based asset of the type available to be scooped up (there are other chains of similar-type stores, but nothing so broad-based, branded, or extensive to my knowledge).Right now, we have a lack of information. We have a newspaper article by a paper which has not yet (to my knowledge) discussed the matter. But the shares are trading now through JPY 4,900/share.And it is worth gaming out the possibilities, preparing for how you will react when there is no additional news or immediate reaction.As a friend often iterates, "Plan the Trade, Trade the Plan."

This morning's Yomiuri newspaper has an article (paywalled) which says that Nitori Holdings (9843 JP) will, within this week, launch a Tender Offer for Shimachu Co Ltd (8184 JP), putting itself in competition with Dcm Holdings (3050 JP) which has already launched a Tender Offer at JPY 4200/share, currently set to expire on the 16 November.The possibility of Nitori coming in was  flagged by the Nikkei on the 20th, late, and Shimachu shares jumped more than 10% the next day, and have recently been trading in the JPY 4,700-4,800 area. This development was discussed in Nitori To Make a Rival Bid for Shimachu? More Fun To Go after discussing the original Tender Offer by DCM (which was stated as too light a bid) in DCM Does a Full Takeover of Shimachu - Looks Like a Strong Price. Look Again. An official unsolicited TOB by Nitori would be an interesting hostile-but-not-necessarily-so bid for what may be the last good quality Tokyo-based asset of the type available to be scooped up (there are other chains of similar-type stores, but nothing so broad-based, branded, or extensive to my knowledge).Right now, we have a lack of information. We have a newspaper article by a paper which has not yet (to my knowledge) discussed the matter. But the shares are trading now through JPY 4,900/share.And it is worth gaming out the possibilities, preparing for how you will react when there is no additional news or immediate reaction.As a friend often iterates, "Plan the Trade, Trade the Plan."

'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.

• BEST &amp; WORST •The best and worst pair from yesterday's announcements is home centre <a href="https://www.smartkarma.com/entities/kohnan-shoji-co-ltd" target="_blank" data-smartkarma-citation="entities:5662:1" rel="noopener">Kohnan Shoji (7516 JP)</a> and image sensor testing equipment maker and erstwhile gaijin favourite <a href="https://www.smartkarma.com/entities/inter-action-corp" target="_blank" data-smartkarma-citation="entities:7578:1" rel="noopener">Inter Action (7725 JP)</a>.  <section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/164/830/original/2020-10-13_06-15-09.png?1602537360" class="editor-image img-responsive" data-smartkarma-image-id="164830"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/164/831/original/2020-10-13_06-17-29.png?1602537468" class="editor-image img-responsive" data-smartkarma-image-id="164831"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div></section><div>
<hr>
DAILY STATS 
Results continue to improve, but Revisions are net negative.
</div><hr><div>35 Quarterly Results</div><div><ul style="list-style-type: disc;">
<li>Results Score: 51% Positive / 17% Neutral / 31% Negative</li>
<li>Average Results Score Change: +1.6 points</li>
<li>Average % Change in Revenue: -3.8% Quarter YoY / -2.2% Rolling TTM YoY </li>
<li>Average Operating Profit Margin Change: -2.2ppt</li>
<li>Percentage Making Quarterly Losses: 20%</li>
</ul></div><hr><div>20 Annual • 12 Interim Forecasts/Revisions</div><div><ul style="list-style-type: disc;">
<li>Annual Forecast/Revision Score: 30% Positive / 5% Neutral / 65% Negative</li>
<li>Interim Forecast/Revision Score Change: 33% Positive / 17% Neutral / 50% Negative</li>
<li>Average Forecast/Revision Score Change: -6.3 point</li>
</ul></div>

• BEST &amp; WORST •The best and worst pair from yesterday's announcements is home centre Kohnan Shoji (7516 JP) and image sensor testing equipment maker and erstwhile gaijin favourite Inter Action (7725 JP).  Source for all charts &amp; tables: Japan Analytics

DAILY STATS 
Results continue to improve, but Revisions are net negative.
35 Quarterly Results
Results Score: 51% Positive / 17% Neutral / 31% Negative
Average Results Score Change: +1.6 points
Average % Change in Revenue: -3.8% Quarter YoY / -2.2% Rolling TTM YoY 
Average Operating Profit Margin Change: -2.2ppt
Percentage Making Quarterly Losses: 20%
20 Annual • 12 Interim Forecasts/Revisions
Annual Forecast/Revision Score: 30% Positive / 5% Neutral / 65% Negative
Interim Forecast/Revision Score Change: 33% Positive / 17% Neutral / 50% Negative
Average Forecast/Revision Score Change: -6.3 point


🇯🇵 JAPAN • Results & Revisions 10/​​​​​​​​​​​12 - Cosmos, Kohnan Shoji, Hogy Medical, Inter Action

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

Japan

KOHNAN SHOJI CO., LTD. operates a home improvement center chain, located in Osaka, Hyogo, and Kyoto.  The Company sells mainly home improvement products such as lumber, hardware, paint and also household utensils.  Kohnan Shoji also sells auto and leisure products.

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Kohnan Shoji (7516 JP)

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

Japan's Outdoor Market Expands 3.2% in 2019 but Contraction in 2020

Japan's outdoor market is one of few segments to see solid growth in recent years and while the market will dip in 2020, will grow well in the next...

Michael Causton

Gaming Out a Nitori Bid for Shimachu

The Yomiuri says Nitori will launch a TOB as soon as this week. This means Shimachu is quite likely in play, imminently. There are multiple...

Travis Lundy

🇯🇵 JAPAN • Results & Revisions 10/12 - Cosmos, Kohnan Shoji, Hogy Medical, Inter Action

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Campbell Gunn

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

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

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

Japan's Outdoor Market Expands 3.2% in 2019 but Contraction in 2020

Japan's outdoor market is one of few segments to see solid growth in recent years and while the market will dip in 2020, will grow well in the next...

Michael Causton

Gaming Out a Nitori Bid for Shimachu

The Yomiuri says Nitori will launch a TOB as soon as this week. This means Shimachu is quite likely in play, imminently. There are multiple...

Travis Lundy

🇯🇵 JAPAN • Results & Revisions 10/​​​​​​​​​​​12 - Cosmos, Kohnan Shoji, Hogy Medical, Inter Action

----------------------------------------------------------------------------------------------------------------------------------------------

Campbell Gunn

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 10/12 - Cosmos, Kohnan Shoji, Hogy Medical, Inter Action