naoko-fujimura

Japan’s Biggest Companies Struggle Back to Profit on Cost Cuts, China Boom

by on May 12, 2010

By Naoko Fujimura May 13 (Bloomberg) — Japanese companies including Toyota Motor Corp. and Panasonic Corp. forecast profit will surge this year as exports and cost cuts power a recovery from the worst recession on record. Net income will probably climb a combined 64 percent to 6.44 trillion yen ($69 billion) for the year ending March 31, based on the 107 Nikkei 225 Stock Average companies that have projected earnings. Toyota , which vowed to slash 290 billion yen in costs, predicts profit will gain 48 percent. The optimism tracks the companies’ expansion in China and India, where rising wages and consumer confidence fuel demand for cars, televisions, electric power generation and factory equipment. Panasonic, Toshiba Corp. and Hitachi Ltd. , the nation’s largest private employer, aim to increase sales and production abroad to counter a declining population at home. “The worst of the crisis is behind us,” said Nissan Motor Co. Chief Executive Officer Carlos Ghosn . Japan’s own economy will probably grow 1.8 percent this year, according to the median forecast of Bank of Japan board members, after 2009’s 5.2 percent plummet, the biggest drop since comparable data were made available in 1995. The 2010 target is less than a quarter of the 8 percent expansion forecast for China, set to overtake Japan as the world’s second-biggest economy this year. India is projected to grow 8 percent in the year to March 2011. The outlook for rising profit has helped propel the Nikkei 225 to a 5.2 percent gain in the first three months of the year, the fourth straight quarterly advance. ‘Conservative Estimates’ Companies may even beat their earnings forecasts, many of which are based on worst-case foreign exchange rate estimates, said Edwin Merner , president of Atlantis Investment Research Corp. in Tokyo, which manages about $3 billion. “Most companies have made very conservative estimates for this year and results are likely to be better than expected, unless the world economy weakens,” Merner said. “Many stocks now look very cheap.” Nissan Motor Co. , which yesterday said profit will triple this year, boosted sales in China 68 percent to 243,000 vehicles in the three months ended March. The automaker, Japan’s third- largest, aims to raise output capacity in China by about 70 percent to 900,000 units a year by 2012. The expected rebound in earnings also shows Japan’s biggest companies are reaping benefits after paring costs by closing underused factories and firing workers. Sony Corp. Chief Executive Officer Howard Stringer last year oversaw plans to eliminate 16,000 jobs and shut eight plants. Panasonic in October said it had cut 29,155 jobs since September 2008. The firings provide another reason for companies to look abroad for growth. Japanese employment has declined in 10 of the past 15 months on a seasonally adjusted basis, dropping to the lowest since 1990 in November. Grinding Down Costs Sony on May 10 said cost reductions helped it beat its own forecast by reporting a narrower-than-estimated loss for last fiscal year. The company will announce its forecast for the current year today. Panasonic, which earlier this month said it intends to boost overseas sales to 55 percent of its total, projects net income of 50 billion yen for this year, compared with a 103.5 billion yen loss in the previous year. The company, the world’s biggest maker of plasma televisions, on May 7 said cost cuts will boost operating profit by 490 billion yen this fiscal year. At Honda Motor Co., which expects profit to jump 27 percent to 340 billion yen this year, the outlook hasn’t been enough to ease some cost controls, said Akemi Ando , a Tokyo-based spokeswoman. “Just like last year, we still don’t get overtime hours or take business trips unless there is an urgent need,” she said. Currency Rates Toyota based its full-year forecast on exchange rates of 90 yen to the dollar and 125 yen to the euro, compared with an average 93 yen against the dollar and 131 yen against the euro last fiscal year. The company estimates annual operating profit is reduced by 30 billion yen when the Japanese currency rises 1 yen against the dollar. Japanese exporters’ profit remains vulnerable, Merner said, citing “risks that include an overly strong yen, weak stock markets, continuing financial crisis in Europe, problems in BRICS, loss of investor confidence.” The U.S. currency has averaged 93.35 yen since the April 1 beginning of Japan’s fiscal year. The euro has averaged 123.89 yen since April 1. For Toyota, Japan’s biggest company with almost double the market value of its nearest rival in size, the expected turnaround may mark the end of its worst patch ever. Battered first by the global recession, then by recalls that cost the company at least 170 billion yen, President Akio Toyoda said he can at last see daylight. “We are still in the middle of the storm,” he told reporters May 11. “But I am feeling that we can see clear skies in the distance.” To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net .

Excerpt from:
Japan’s Biggest Companies Struggle Back to Profit on Cost Cuts, China Boom

Tagged as: , , , , , , , , ,

{ 0 comments }

Kirin Scraps Suntory Takeover, Balking at Brewery’s $10 Billion Price Tag

by on February 7, 2010

By Naoko Fujimura Feb. 8 (Bloomberg) — Kirin Holdings Co. , Japan’s largest beverage company, ended talks to buy Suntory Holdings Ltd. that would have created the world’s fifth-biggest foodmaker after balking at a $10 billion asking price. Suntory President Nobutada Saji and other members of the founding family had been seeking a stake of at least 33.4 percent in the merged company, which would have given them veto power over major decisions, including takeovers. The companies started talks in July as a declining population and stagnant economy sapped demand for their products at home. “Kirin has been negotiating on the premise that the new entity would be managed as a listed company in order to ensure appropriate management independence,” the Tokyo-based brewer said in a statement today. Kirin shares extended their decline after the announcement, falling as much as 6.9 percent. The stock traded 4.9 percent lower at 1,372 yen as of 12:44 p.m. in Tokyo. Suntory wanted about 0.9 percent of a share for each Kirin share in a new holding company, a Suntory executive, who declined to provide his name, told reporters in Tokyo today. That would have valued closely held Suntory at 892 billion yen ($10 billion) based on Kirin’s last closing price. “It would have been difficult to create a new company as there were differences in opinions, including the merger ratio,” Suntory said in a faxed statement. Uniting the century-old beverage makers would have created a company with sales of $42.7 billion, surpassing Coca-Cola Co. ’s $31.9 billion and placing it behind Nestle SA , Unilever PLC, Kraft Foods Inc. and PepsiCo Inc. Japanese food and beverage makers have been expanding overseas to reduce their reliance on a population that’s forecast to shrink 10 percent by 2030. Overseas Expansion Kirin last year agreed to pay A$3.5 billion ($3 billion) to take full ownership of Lion Nathan Ltd., Australia’s second- largest brewer. It also bought almost half of San Miguel Brewery Inc. , partly funded by the sale of its holding in the Philippine brewer’s parent San Miguel Corp. Suntory purchased European drinkmaker Orangina Schweppes from Blackstone Group LP and Lion Capital LLP in November for an undisclosed sum, and Groupe Danone SA’s Australia and New Zealand drinks business Frucor for more than 600 million euros ($819 million) in 2008. Kirin ’s domestic beer sales dropped 0.9 percent by volume last year and Japan soft-drink sales plunged 7 percent. The brewer of Ichiban Shibori and Kirin Lager overtook Asahi Breweries Ltd. last year in Japanese beer sales for the first time in nine years. Suntory sells Brand’s health food and is the Japanese partner of Haagen-Dazs ice cream. Suntory is 89 percent owned by members of the founding family. Saji’s grandfather, Shinjiro Torii , started the company in 1899 and began building Japan’s first whiskey distillery in Osaka prefecture in 1923. To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net

See the original post here:
Kirin Scraps Suntory Takeover, Balking at Brewery’s $10 Billion Price Tag

Tagged as: , , , , , , , , , , , , ,

{ 0 comments }

No Fit for Luxury Lifestyle for Tokyo Women Costs Versace, Gucci Customers

November 6, 2009

By Naoko Fujimura Nov. 6 (Bloomberg) — Akiko Sayama re-examined her spending habits when the Tokyo staffing agency where she works cut its overtime budget. She lost more than $13,000 in annual pay, so one of the first things she did was curb her tastes for Louis Vuitton and PPR SA’s Gucci. “I need to cut back where I can,” said Sayama, 41, who lives in Saitama prefecture outside of Tokyo. “It’s not like I lost my interest in luxury brands. I can’t afford them.” Sayama is embracing a frugality that, along with a shrinking population and falling wages, is causing Japan’s economy to contract by 5.7 percent this year, according to the median estimate of 17 economists compiled by Bloomberg. Luxury spending in the country could fall 14 percent to 19 billion euros ($28.1 billion) this year from a peak of 22 billion euros in 2005 and 2006, Boston-based consultant Bain & Co . said. The worldwide luxury market is expected to shrink 8 percent to 153 billion euros this year, including a 16 percent decline in the Americas and an 8 percent drop in Europe. Yet spending in China, the world’s most populous country, may grow 12 percent to 6.6 billion euros this year, compared with 5.9 billion euros last year, Bain said Oct. 19. “Given the pace of economic growth, luxury-goods makers are starting to give up on Tokyo, as they shift their focus to other Asian markets like China and Singapore,” said Naoki Iizuka , a senior economist at Mizuho Securities Co. in Tokyo. “The situation will remain severe here because more people are losing their interests in brands with the advent of cheaper, fast fashions.” Giving Up on Tokyo Tokyo housewife Masako Shikano, 46, said she stopped buying clothes by Michel Klein, a Paris-based designer, in favor of Uniqlo. Michel Klein offers a fake leather jacket for 19,950 yen ($220), while Uniqlo’s synthetic leather jacket sells for about 5,990 yen. “Uniqlo has a good design,” Shikano said. “It looks good on me, even though it’s cheap.” LVMH Moet Hennessy Louis Vuitton SA , the largest luxury- goods maker, last year scrapped its plan for a Vuitton flagship store in Ginza, one of Tokyo’s busiest shopping districts. Gap Inc., the largest U.S. clothing retailer, took over the space. Gianni Versace SpA said in October it will withdraw from Japan and review its entire business strategy. Versace Japan had sales of 1.6 billion yen in 2008 compared with 4.1 billion yen four years ago, according to Teikoku Data Bank Ltd., a Tokyo- based credit researcher. “The Versace boutiques in Japan no longer represented the brand image and it was felt to be more advantageous for the company to close them and start with a clean slate,” Milan- based Versace said Oct. 7. ‘Very Tough’ The Japanese market will stay “very tough,” Hermes International SCA Chief Executive Officer Patrick Thomas said Oct. 7. Sales elsewhere in Asia are “booming,” he said. Gucci sales in Japan dropped 20 percent in the third quarter of the year, according to Jean-Francois Palus , PPR’s chief financial officer. Bain estimated that 15 percent of the 300 luxury stores expected to open this year will be in mainland China, with another 25 percent opening elsewhere in Asia. Bulgari SpA Chief Executive Officer Francesco Trapani said Oct. 9 that sales at the world’s third-largest jeweler improved in the second half, particularly in China. Asia is its biggest market. Japan has the highest proportion of people over 65 and the lowest of those under 15. Wages fell for the 16th straight month in September, the government said Nov. 2. Uniqlo, H&M Winter bonuses among Japan’s largest companies will fall 15.9 percent to 747,282 yen in 2009, the biggest drop since the survey began in 1959, the Japan Business Federation said Oct. 29. Companies typically pay the bonus in December. Casual-clothing chains including Uniqlo and H&M are increasing their presence. Fast Retailing Co. , operator of Uniqlo, opened its biggest store in Nagoya City in October. The company has about 780 domestic outlets. Hennes & Mauritz AB , operator of H&M shops, opened three stores in September around Tokyo. Its sixth outlet opens in Tokyo this month. Los Angeles-based Forever 21 Inc., which sells casual dresses, opened its first shop in Tokyo in April. Abercrombie & Fitch Co., the U.S. retailer specializing in clothes for teens, opens its first Asia store in Tokyo in December. Casual and Thrifty J. Front Retailing Co. , Japan’s second-largest department store operator, wants to reduce reliance on luxury goods at its Daimaru and Matsuzakaya department stores after profits dropped 31 percent in the first half of this year from a year earlier. The company must expand its low- and mid-priced merchandise to attract younger consumers, Chief Executive Officer Tsutomu Okuda said Oct. 13. “The number of rational and smart consumers is increasing rapidly, and they’re becoming more casual and thrifty, eager to find value for what they spend,” he said. The Esperanza casual shoe brand is opening an outlet next month inside Daimaru’s Osaka Shinsaibashi store, selling short boots and pumps for about $50. Not everyone is shopping downmarket to save money. The economy is signaling a recovery from its deepest post-war recession, with industrial production rising for a seventh month and the jobless rate falling for a second month in September. “I would buy Louis Vuitton if I find something I really like, and it doesn’t matter how much it costs,” said Kyoko Hoshi, 55, a housewife. Vuitton’s Strategy Louis Vuitton is trying something new in the Ikebukuro train station near ticket gates for East Japan Railway Co. , Japan’s biggest railway operator, and Tokyo Metro Co., a subway operator. The underground store will remain until late 2010, then move to the Seibu Department Store, a unit of Seven & I Holdings Co. , in the same complex. Unlike other Louis Vuitton stores, it resembles a construction site with signs written in yellow letters on a cement-like floor and Monogram and Graffiti bags displayed on wooden crates. “Foreign luxury goods companies need to think about what innovations are needed to really suit the Japanese market, instead of simply flogging what they already have,” said Yuwa Hedrick-Wong, a Singapore-based economic adviser at MasterCard Worldwide. Sayama said she last bought a Louis Vuitton wallet in January because her old one was falling apart. Now she shops for less expensive items. “I don’t have much money to spare anymore,” she said over an 800-yen ($9) plate of pasta at an Italian restaurant in Tokyo. “After all, luxury products are something I can live without.” To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net .

Read the full article →

Parisians Waiting in Rain for Uniqlo Sweaters to Spur `Astounding’ Growth

October 7, 2009

By Naoko Fujimura and Ladka Bauerova Oct. 7 (Bloomberg) — While celebrities watched models strut down catwalks during fashion week in Paris, dozens of people queued in the rain to buy 40-euro cashmere sweaters at the newly opened Uniqlo store in the city’s Opera district. Two days earlier, it was “impossible to get inside” the store, which is across the road from the Galeries Lafayette department store, Guillaume Terne, 24, said. “There has been so much talk about the brand that I simply couldn’t miss it.” While the global recession has hurt luxury brands, Uniqlo’s owner, Yamaguchi, Japan-based Fast Retailing Co. ’s profit for the fiscal year ending August may jump 23 percent to a record on increased demand for the chain’s $45 jeans and $17 camisoles with fitted bra cups. The debut of +J, a brand overseen by German designer Jil Sander , may help sustain sales that jumped 32 percent last month. “No one else can win like Fast Retailing in the retail industry,” said Ichiro Takamatsu , chief executive officer at Japanese hedge-fund advisory Alphex Investments Co. in Tokyo. “The company stimulates demand with its ability to introduce new items.” Chief Executive Officer Tadashi Yanai has increased his focus on product development and design, collaborating with Walt Disney Co. to make T-shirts. Products including HeatTech thermal wear and Bra Tops camisoles have helped boost sales at stores open at least a year in Japan by 11 percent last fiscal year. Tokyo’s Ginza In Tokyo, hundreds of people waited for hours for the Oct. 2 opening of the expanded Uniqlo store in the Ginza district, where brands including Gucci, Chanel, H&M and Zara compete for shoppers. Fast Retailing has reported year-on-year sales growth for every month except two since September 2008, when Lehman Brothers Holdings Inc. filed for bankruptcy, plunging markets worldwide into crisis. Domestic sales at Uniqlo stores open at least a year surged 32 percent last month, while those at Isetan Mitsukoshi Holdings Ltd. and other department stores slipped at least 5 percent. That growth “is astounding in such economic conditions,” Shigeo Kikuchi , an equity manager at Takagi Securities Co., said in a phone interview. Fast Retailing rose 1.2 percent to close at 13,230 yen in Tokyo. The stock has risen 1.9 percent this year, lagging behind the 11 percent gain of the Nikkei 225 Stock Average. The retailer was the second-biggest gainer on the benchmark last year, when it doubled in market value. Record Profit Net income at Fast Retailing probably rose to a record 53.6 billion yen in the 12 months ended August from 43.5 billion yen a year earlier, according to the average estimate of 18 analysts compiled by Bloomberg. Profit may further rise to 64.6 billion yen in fiscal year ending August 2010, according to the analysts’ estimates. The company, which competes with Hennes & Mauritz AB and Inditex SA’s Zara brand, is scheduled to report its full-year earnings tomorrow at about 3 p.m. in Tokyo. In Paris on Oct. 5, four days after the Uniqlo outlet opened, Fréderique Marchand, 29 and Lucie Bloch, 27 waited in the rain for the discounts offered during the store’s first month of operation. “You can get the basics in a hundred different colors, and the prices aren’t bad,” Marchand said. “The quality for the price is very good, even excellent,” said Willy Riche, 31, who first encountered the brand in China. “But the check-out line is huge, so I might just leave the stuff here and come back.” Sales may increase 16 percent to 679.2 billion yen this fiscal year, the analysts forecast. Operating profit, or sales minus the cost of goods sold and selling, general and administrative expenses, may reach 109 billion yen, they said. Luxury Brands Gianni Versace SpA yesterday said it will close its Japanese stores and review its entire business strategy. LVMH Moet Hennessy Louis Vuitton SA said in December that it scrapped plans to open a 12-story store in Ginza, one of Tokyo’s busiest shopping districts. PPR SA , the French owner of Gucci, reported first-half profit dropped 76 percent to 189 million euros and Hermes International SCA , maker of Birkin handbags, posted a 7 percent drop in net income in the same period. “ Fast Retailing is one of the stars in the retail industry,” said Koichi Ogawa , who helps oversee $28 billion at Daiwa SB Investments Ltd. in Tokyo. “It’s faring well with its low-price strategy when the whole industry is slumping.” Fast Retailing Stores The clothier is expanding even as job losses and wage cuts chill household spending in Japan, where retail sales fell 1.8 percent in August from a year earlier, the 12th straight monthly decline. The company also plans to open more stores in China and other overseas markets. Fast Retailing had 1,958 stores last year, of which 813 were Uniqlo outlets. There were 54 Uniqlo stores outside Japan last year. The Uniqlo store in Ginza was expanded 50 percent by taking over three floors in an adjoining building that were abandoned by Brooks Brothers, which relocated to the Marunouchi business district. Giuliano Bettolini, an Italian teacher who has lived in Japan for 20 years, bought a winter overcoat for 14,900 yen from the Ginza outlet. “I have seen lots of things going up and down,” said Bettolini. “Uniqlo has got the right formula for the present situation.” To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net .

Read the full article →