Retail Sector:Morning Comment Minpaku bill to be submitted ahead of schedule
Morning comment
In this note we will summarize and comment on the implications of newspaperarticles that we view as important for the retail sector.
25 June Nikkei morning edition
Sanyo Shokai (8011: NR, ￥205): On 24 June, the company announced it willsolicit roughly 250 voluntary retirees, corresponding to nearly 20% of its totalworkforce. The is the second time management is resorting to voluntaryretirements, following a similar initiative in 2013. Sanyo Shokai lost salesincome from its former mainstay brand Burberry after its licensing agreementwith the UK luxury fashion house expired last summer, while its other brandshave also registered lackluster apparel sales amid sluggish consumption.
Management plans to implement structural reforms such as suspending orabolishing unprofitable brands as it rushes to turn around earnings. It hasrevised down its consolidated earnings outlook for Jan-Jun 2016. It cut itsoriginal sales projection by ￥3.5bn to ￥33.5bn (-39% YoY). It now looks for anoperating loss of ￥5.5bn (versus ￥7.7bn profit in FY12/15), representing a￥3.3bn wider loss than originally projected. The company is currentlycompiling its full-year FY12/16 forecasts. Factoring in the dropout of Burberrysales, which at one point are estimated to have accounted for nearly half oftotal sales, management originally projected an FY12/16 operating loss of ￥2bnon a 20% drop in sales. However, the dent in sales caused by the absence ofBurberry has been larger than expected, and the Mackintosh London brandpositioned as a successor to Burberry has been unable to offset the negativeimpact. Sales of other brands have also been lackluster, especially atdepartment stores, raising the need for additional restructuring. The companywill start suspending and abolishing unprofitable brands. It is currentlyconsidering scrapping multiple brands including Pringle 1815 (women'sapparel) and Bianca Epoca. It will accept voluntary retirement applicationsduring 11-21 October, and retirements will go into effect from 31 December. Inaddition to the standard retirement allowance, applicants will receive a specialseverance payment. The company will also offer re-employment support tovoluntary retirees.
As One (7476: NR, ￥3,850): In the fall of this year, the company will establishits second Chinese distribution center in Beijing. The new facility will supportshipping of lab equipment as early as one hour after orders have been received.
Management also plans to set up an inland distribution center aroundChongqing in 2017. It aims to tap demand from companies and universitiesand lift annual sales in China from the current roughly ￥1.8bn to ￥5bn by 2020.
The company already operates a distribution center in Shanghai, and shippingto Beijing currently takes 3-4 days.