Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Yesterday after the close, 500+ store home centre operator <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> announced full-year earnings (revs -0.2%, OP -16.6%, NP -16.4%yoy) and a buyback. </li>
<li>The buyback is for up to 1.2mm shares and up to ¥4bn to spend from here to end Sep 2022.</li>
<li>The shareholder register is interesting, diverse, and makes one wonder whether the buyback is to soften the blow of lower income, defence against an activist, or something else.</li>
</ul>


Yesterday after the close, 500+ store home centre operator Kohnan Shoji (7516 JP) announced full-year earnings (revs -0.2%, OP -16.6%, NP -16.4%yoy) and a buyback. 
The buyback is for up to 1.2mm shares and up to ¥4bn to spend from here to end Sep 2022.
The shareholder register is interesting, diverse, and makes one wonder whether the buyback is to soften the blow of lower income, defence against an activist, or something else.


Kohnan Shoji (7516) Buyback - Shareholder Return? Activist Defense? Future MBO? All of the Above?

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

Nitori+ isn’t on the radar of most apparel retail competitors because they think a furniture retailer can’t sell apparel. But, as Nitori’s 18th N+ store attests, the home furnishings retailer may have struck gold with its chain for women over 40 thanks to a mix of disciplined supply chains, simple designs and low prices – and the fact that this age group is one of the few to grow in the next decade. We expect to see around 150 stores open within the next two years.

Nitori+ isn’t on the radar of most apparel retail competitors because they think a furniture retailer can’t sell apparel. But, as Nitori’s 18th N+ store attests, the home furnishings retailer may have struck gold with its chain for women over 40 thanks to a mix of disciplined supply chains, simple designs and low prices – and the fact that this age group is one of the few to grow in the next decade. We expect to see around 150 stores open within the next two years.

N+ Nitori: Fashion the New Frontier for the Japanese Giant

<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?

<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

<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)

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