Muji gaining from weak Yen

Nov 15

Muji, perhaps Japan’s most prominent retail brand globally, is reporting a major boost from overseas income. Like so many of its counterparts, Muji is a brand that relies on offshore production for much of its merchandise range, and the weakened Yen has hit its domestic profitability. Overall, however, consolidated operating profit for 2Q2014 was up 26% on last year, entirely down to ever improving, and expanding, performance overseas.

Muji, or Mujirushi Ryohin here at home, is one of Japan’s most iconic modern brands. By February this year it operated in 24 countries outside Japan, adding Kuwait, UAE and Australia last year, with a total of 255 stores overseas, up from just 163 in 2012. Overseas stores account for about 40% of the total. This year it plans just 21 new stores at home, closing a further 15 and taking the domestic total to just above 400, but will open 57 overseas bringing the total to 313. It is this expansion overseas that is currently contributing most to Muji’s success, although the brand is not doing badly at home either.

Muji has had an excellent year so far, and its global performance has helped push its share price to an all time high, with 47.9% of shares now held by overseas investors, another record. Despite pressure on profits in the domestic market due to higher import costs caused by a weak Yen, overseas income has more than made up for the shortfall, with consolidated operating profit up 19.7% overall in 2Q2014, with an end of year target increase of 21.9%. Muji has also maintained its volume. It suffered small year on year falls in like for like sales at directly operated stores in both April and August, but overall sales for these stores have been increasing, up 9.7% in March-August overall. Footfall, up 1.8%, and sales per customer, up 3.4%, have also been consistently strong.

Similarly, by category Muji continues to improve. Apparel sales increased 21.9% in 1H, with its wide range of household and miscellaneous goods also up 17.7%. The proportion of sales from apparel is also creeping upwards, hitting 35.4% of the total, well on the way to its target of 40%.

But what these consolidated figures mask is the way that overseas operations have contributed to company growth. Total consolidated sales came in at ¥99.3 billion for the half, up 17.6% on last year, but within this hides ¥12.1 billion of exports of Japanese products to Muji subsidiaries overseas, an increase of 218.7% on last year – the second year running that the figure has tripled.

This export business is the main reason for Muji’s current financial stability and popularity on the stock exchange. In addition to new stores and new territories, Muji is now looking to boost its international logistics capability, allowing for faster supply and more automatic reordering, no matter where the supplier is based in the world.