Japan retail sector: Points to watch in Mar–May results and investment perspectives

研报英文原文证据摘录

Japan retail sector: Points to watch in Mar–May results and investment perspectives

for electricity, for instance, had been

a concern for companies involved in daily necessities because of soaring crude oil prices.

Although the external environment still remains uncertain, we think concerns about cost

increases could ease as a result of the recent drop in crude oil prices. We are also

focusing on the possibility of an improvement in consumer sentiment if the consumption

tax rate is cut for food. Even if implemented, a reduction in the consumption tax is,

however, still a way off, so we think it is important to be mindful that consumers could

remain budget conscious in the near term, with food prices continuing to rise. That said,

we think it is fair to say that the earnings outlook is starting to look brighter for companies

involved in daily necessities. Among companies that sell daily necessities, our focus is on

solid sales and margin improvements at drugstore operators. In particular, we recommend

MatsukiyoCocokara & Co [3088] (Buy), as we expect its gross margin to continue to

improve, and Cosmos Pharmaceutical [3349] (Buy), as we see good prospects for

earnings growth driven by same-store sales growth and store openings.

Over the past few months, share price performance has been relatively good for formats

currently experiencing solid business conditions. Examples include department stores,

where sales in Japan and tax-free sales have both been strong, and big-box electronics

retailers, where sales of air conditioners have been strong. Considering the uncertainty

about the external environment in light of the evolving situation in the Middle East, we

think it is understandable that the stock market would be focused on areas that are faring

well at present.