Nitori: 15 years of record profits, sales up 11% to ¥386 billion

Nitori appears to go from strength to strength. Despite having a business based on direct imports from China, last year it overcame higher costs due to the weakened Yen, and with particularly high demand in the final quarter, reported another record performance. The company is introducing higher quality lines and opening more stores, both at home and overseas. It sees demand rising again after a six month post tax lull, and expects more low cost homeware chains to emerge in the next few years.

Nitori, the leading furniture retailer, had another record year despite the weak Yen. Although competing chains like Otsuka Kagu were forced to increase prices several times in the past 12 months in order to offset narrowing margins on imported lines, Nitori managed to improve supply efficiency enough to cover the exchange rate shift.

The company announced net profit to February up 7% on FY2012 to ¥38.4 billion, the fifteenth record year in a row. Sales also rose 11% to ¥386.7 billion, with pretax profits up 2% at ¥63.4 billion. Nitori has enjoyed huge pre-tax hike demand over the past three months, double the levels it expected. It says that despite pressure on profits due to the exchange rate, improved quality and design, as well as the consistency of its low price message, all helped increase both footfall and sales per customer.

The company is reasonably confident for the coming financial year too. Although large sales increases in January to March will inevitably give way to a decline in sales growth over the next few months, Nitori expects the lull to last no more than half the year.

Company CEO Akio Nitori says he fully expects the increased price consciousness among consumers to force some retailers into or close to bankruptcy. The furniture market is already dominated by just three chains, but more fragmented markets like food and household products are likely to see significant consolidation. Nitori also said he expected more discount orientated chains to emerge throughout the retail industry, catering to the growing number of lower income households, particularly those whose main form of work is non-permanent, casual or seasonal jobs.

For Nitori itself, price leadership will remain its main marketing goal, but it is also working on higher quality, higher margin lines and expanding overseas. The first three Nitori stores opened in California last year, and it has another in Taiwan, with plans for up to three in China in the current financial year. By 2022, Nitori hopes to take more than a third of sales from overseas markets. It also plans to add 50 new stores at home in 2014, up from 10 last year, with a target of 1,000 stores in total by 2022 of which 300 will be overseas.

Given that Akio Nitori turned 70 in March, he will step down as president of the parent company this year, staying on as chairman to oversee strategy. The company is forecasting another great year, with target sales of ¥413 billion, up 7%, and pretax profits up 4% to ¥66 billion.