Daily Brief Thematic (Sector/Industry): Japan Department Stores: Sales Recovery but the Real Opportunity Is in Margin Growth and more

In today’s briefing:

Japan Department Stores: Sales Recovery but the Real Opportunity Is in Margin Growth
Google in Japan – Infrastructure Investments Highlight Japan Growth and Forex Shift
US Economy – Key Macro Events This Week

Japan Department Stores: Sales Recovery but the Real Opportunity Is in Margin Growth

Department stores managed a partial rebound in 2021-22 but remain around 19% behind pre-Covid levels overall. As a result, profits remain elusive and the shake up in the industry continues.
On the plus side, luxury sales continue to surge and management is now more engaged than for years.
Although we remain negative on the sector overall, some companies will bounce back strongly as detailed in this in-depth review of the sector.

Google will invest $735mn (¥105bn) through 2023 on Japan infrastructure including its first local data center and additional subsea capacity
The Google CEO met with Prime Minister Kishida and the announcement scores political points but it also makes sense with a material JP business and the weak yen
Google is probably Japan’s largest Internet advertising company with an estimated ¥685bn in FY21 sales

At the September meeting, the FOMC raised their fed funds rate target by 75bps, or 3% in the last 7 months.
Powell has been quite clear that his intention is to put the long-term health of the economy top of his mind in his effort to quash inflation before it gets out of hand; remarking that “I wish there were a painless way to do that. There isn’t. We have to get supply and demand back into alignment. The way we do that is by slowing the economy.”
The last meeting demonstrated a hawkish shift in economic projections.

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