'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/106/452/original/2019-11-17_11-54-09.png?1573959284" class="editor-image img-responsive" data-smartkarma-image-id="106452"></figure><div class="content-caption">Source: Japan Analytics</div>4TH DOWN AND A FEW MORE TO GO - The latest quarterly results are now, with the exception of three large insurance companies are currently in the market and, to loosely paraphrase the under-rated Jesse Winchester's second album title, this is the fourth straight 'down' quarter with the prospect a few more to come. Operating Income has declined by 7.8% and Net Income by 18.8%, taking margins to 6.9% and 4.6%, respectively - declines of 84bps and 122bps. The market has celebrated these new two-year lows by rising to new two-year highs, leaving some to wonder what they are missing, other than yet more central bank liquidity. The trailing-twelve-month (TTM) price-earnings ratio is now 17 times, the highest since 5th February 2018, ten trading days after the long-term market peak.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/106/458/original/2019-11-17_12-49-55.png?1573962614" class="editor-image img-responsive" data-smartkarma-image-id="106458"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/106/459/original/2019-11-17_13-10-47.png?1573963867" class="editor-image img-responsive" data-smartkarma-image-id="106459"></figure><div class="content-caption">Source: Japan Analytics</div>THE EARNINGS CYCLE HAS YET TO BOTTOM -  Our Results &amp; Forecast/Revision Score data series cover the last sixteen years of quarterly earnings and eleven years of forecasts and revisions and measure both results and forecasts but also their momentum, providing a better correlation with the market direction than past earnings.   The Forecast/Revision Score leads the Results Score by several months, and the market leads or lags depending on monetary and liquidity conditions. Although both Scores recovered in the last five days of results announcements, the Forecast/Revision Score of 0.45 reached on 8th November is the lowest such score in ten years and is suggesting that earnings have yet to bottom.<div class="content-highlight">WISHFUL THINKING? - The 'gap' between market expectations and actual and forecast earnings momentum is now wider than at any time since late 2014, shortly before the market peak of May 2015. Is this foresight or just wishful thinking? We tend to the latter interpretation.</div>In the DETAIL section below, we shall provide a full breakdown of the results and revisions announcements by Sector, Peer Group and company and offer brief comments on several recommended buys and sells.

Source: Japan Analytics4TH DOWN AND A FEW MORE TO GO - The latest quarterly results are now, with the exception of three large insurance companies are currently in the market and, to loosely paraphrase the under-rated Jesse Winchester's second album title, this is the fourth straight 'down' quarter with the prospect a few more to come. Operating Income has declined by 7.8% and Net Income by 18.8%, taking margins to 6.9% and 4.6%, respectively - declines of 84bps and 122bps. The market has celebrated these new two-year lows by rising to new two-year highs, leaving some to wonder what they are missing, other than yet more central bank liquidity. The trailing-twelve-month (TTM) price-earnings ratio is now 17 times, the highest since 5th February 2018, ten trading days after the long-term market peak.Source: Japan AnalyticsTHE EARNINGS CYCLE HAS YET TO BOTTOM -  Our Results &amp; Forecast/Revision Score data series cover the last sixteen years of quarterly earnings and eleven years of forecasts and revisions and measure both results and forecasts but also their momentum, providing a better correlation with the market direction than past earnings.   The Forecast/Revision Score leads the Results Score by several months, and the market leads or lags depending on monetary and liquidity conditions. Although both Scores recovered in the last five days of results announcements, the Forecast/Revision Score of 0.45 reached on 8th November is the lowest such score in ten years and is suggesting that earnings have yet to bottom.WISHFUL THINKING? - The 'gap' between market expectations and actual and forecast earnings momentum is now wider than at any time since late 2014, shortly before the market peak of May 2015. Is this foresight or just wishful thinking? We tend to the latter interpretation.In the DETAIL section below, we shall provide a full breakdown of the results and revisions announcements by Sector, Peer Group and company and offer brief comments on several recommended buys and sells.

🇯🇵 Japan • Results & Revisions Review - Wishful Thinking

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. 

As shown in Part I of our review, the apparel and fashion market contracted slightly last year and no single format was immune to the tougher trading environment – even the online channel.
However, retailers with fresh ideas and strong marketing to back them up continue to outperform, a reminder that the Japanese fashion market is perennially dynamic and adapts to new market realities. The winners include <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/ryohin-keikaku-co-ltd" target="_blank" data-smartkarma-citation="entities:2765:1" rel="noopener">Ryohin Keikaku (7453 JP)</a> and Baycrews.
This is Part II of a 2-part review of Japan's apparel and fashion markets. <a href="https://www.smartkarma.com/insights/japan-fashion-market-review-2019-part-i-a-stable-market-but-tougher-trading-all-round" target="_blank" rel="noopener">Part I of our review is here</a> and has a macro review of retailers by format in 2018-19 as well as sales rankings of the top 100 apparel retailers, market share trends by format and profitability rankings.

As shown in Part I of our review, the apparel and fashion market contracted slightly last year and no single format was immune to the tougher trading environment – even the online channel.
However, retailers with fresh ideas and strong marketing to back them up continue to outperform, a reminder that the Japanese fashion market is perennially dynamic and adapts to new market realities. The winners include Workman Co Ltd (7564 JP),Ryohin Keikaku (7453 JP) and Baycrews.
This is Part II of a 2-part review of Japan's apparel and fashion markets. Part I of our review is here and has a macro review of retailers by format in 2018-19 as well as sales rankings of the top 100 apparel retailers, market share trends by format and profitability rankings.

Japan Fashion Market Review 2019 Part II: Winners & Losers and Key Business Trends

The apparel and fashion market contracted slightly last year and no single format was immune to the tougher trading environment – even the online channel.
The large store formats suffered the worst but a number of major specialty chains also posted lower sales. In e-commerce, even <a href="https://www.smartkarma.com/entities/zozo-inc" target="_blank" data-smartkarma-citation="entities:18379:1" rel="noopener">ZOZO Inc (3092 JP)</a> suffered its lowest sales growth in several years.
The reasons are clear: consumption of apparel fell again last year while other categories like home interiors, food and communications rose.
At the same time, the leading specialty retailers face saturation in some product categories and territories. As a result, e-commerce share continues to grow as does that of the biggest firms – the top 10 apparel retailers saw their share increase 3 points in a year to 30%.
This is Part I of a 2-part review of Japan's apparel and fashion markets. <a href="https://www.smartkarma.com/insights/winners-losers-and-key-business-trends-in-japanese-fashion-retailing-2018-19" target="_blank" rel="noopener">Part II of our review is here</a> and has profiles of the winners in 2018-19 and key trends impacting performance now and going forward.

The apparel and fashion market contracted slightly last year and no single format was immune to the tougher trading environment – even the online channel.
The large store formats suffered the worst but a number of major specialty chains also posted lower sales. In e-commerce, even ZOZO Inc (3092 JP) suffered its lowest sales growth in several years.
The reasons are clear: consumption of apparel fell again last year while other categories like home interiors, food and communications rose.
At the same time, the leading specialty retailers face saturation in some product categories and territories. As a result, e-commerce share continues to grow as does that of the biggest firms – the top 10 apparel retailers saw their share increase 3 points in a year to 30%.
This is Part I of a 2-part review of Japan's apparel and fashion markets. Part II of our review is here and has profiles of the winners in 2018-19 and key trends impacting performance now and going forward.

Japan Fashion Market Review 2019 Part I: A Stable Market but Tougher Trading All Round

The following is an in-depth review of the retail sector results for 2018-19 giving investors a quick overview of the strengths and weaknesses in the sector as well as highlighting key winners and losers by sales growth and profit. <a href="https://www.smartkarma.com/insights/japan-retail-highlights-2018-19-sector-by-sector-and-winners-in-each-sector" target="_blank" rel="noopener">In an accompanying Insight, we provide snapshot reviews of each sector to give investors quick guides to seach retail sector's strengths and weaknesses.</a>
Leading retailers grew sales and share last year and made more money too. Although savings rates rose to their highest level ever in 2018, this also meant that a lot of households had money stored up, providing better retailers and brands with an opportunity to convince them to spend some of it.
Many formats and sectors had a good year including convenience stores, discount chains, drugstores, speciality chains such as in fashion and even consumer electronics (at least for now), but some also contracted, notably GMS chains and department stores.
Retailing also became more profitable last year, up 6% on average for the top 250 retailers, and is expected to grow profits further on the back of new technologies wrought by the pressures of the labour shortage. However, profit growth is slowing as competition increases across different formats.

The following is an in-depth review of the retail sector results for 2018-19 giving investors a quick overview of the strengths and weaknesses in the sector as well as highlighting key winners and losers by sales growth and profit. In an accompanying Insight, we provide snapshot reviews of each sector to give investors quick guides to seach retail sector's strengths and weaknesses.
Leading retailers grew sales and share last year and made more money too. Although savings rates rose to their highest level ever in 2018, this also meant that a lot of households had money stored up, providing better retailers and brands with an opportunity to convince them to spend some of it.
Many formats and sectors had a good year including convenience stores, discount chains, drugstores, speciality chains such as in fashion and even consumer electronics (at least for now), but some also contracted, notably GMS chains and department stores.
Retailing also became more profitable last year, up 6% on average for the top 250 retailers, and is expected to grow profits further on the back of new technologies wrought by the pressures of the labour shortage. However, profit growth is slowing as competition increases across different formats.

Japan Retail Review and Ranking 2018-19: Profit Growth Slowing as Competition Increases

Japanese wages and salaries finally began to rise in 2017, and consumption expenditure picked up in 2018 but, at the same time, consumer confidence began to dip as households became increasingly wary about the appearance of long threatened price inflation.When prices did begin to rise in mid- to late-2018, and with a second consumption tax hike due in later 2019, households at all income levels began to put their newly increased incomes into savings rather than into retailer’s cash registers.As a result, Japanese households have plenty of money to spend when the enticement is right, especially when retailers offer originality, variety and value, providing plenty of support for the best of the consumer sector going forward. Luxury brands in Japan are having some of their best years ever and retailers offering real value – at all price points – are also being rewarded.

Japanese wages and salaries finally began to rise in 2017, and consumption expenditure picked up in 2018 but, at the same time, consumer confidence began to dip as households became increasingly wary about the appearance of long threatened price inflation.When prices did begin to rise in mid- to late-2018, and with a second consumption tax hike due in later 2019, households at all income levels began to put their newly increased incomes into savings rather than into retailer’s cash registers.As a result, Japanese households have plenty of money to spend when the enticement is right, especially when retailers offer originality, variety and value, providing plenty of support for the best of the consumer sector going forward. Luxury brands in Japan are having some of their best years ever and retailers offering real value – at all price points – are also being rewarded.

Japan Consumption Trends: Lots of Savings for Good Brands and Retailers to Tap Into

Japan

WORKMAN CO., LTD. designs, produces, and retails work uniforms and related goods including work gloves and safety shoes.  The Company operates its own stores and franchise stores located throughout eastern Japan.

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Workman Co Ltd (7564 JP)

🇯🇵 Japan • Results & Revisions Review - Wishful Thinking

4TH DOWN AND A FEW MORE TO GO - The latest quarterly results are now, with the exception of three large insurance companies are currently in the...

Campbell Gunn

Japan Fashion Market Review 2019 Part II: Winners & Losers and Key Business Trends

As shown in Part I of our review, the apparel and fashion market contracted slightly last year and no single format was immune to the tougher...

Michael Causton

Japan Fashion Market Review 2019 Part I: A Stable Market but Tougher Trading All Round

The apparel and fashion market contracted slightly last year and no single format was immune to the tougher trading environment – even the online...

Michael Causton

Japan Retail Review and Ranking 2018-19: Profit Growth Slowing as Competition Increases

The following is an in-depth review of the retail sector results for 2018-19 giving investors a quick overview of the strengths and weaknesses in...

Michael Causton

Japan Consumption Trends: Lots of Savings for Good Brands and Retailers to Tap Into

Japanese wages and salaries finally began to rise in 2017, and consumption expenditure picked up in 2018 but, at the same time, consumer confidence...

Michael Causton

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