MUJI Muji Sales Experience 9 Price Cuts, China'S First Decline

After nearly two years of low single digit growth, even after 9 price cuts, the Japanese apparel and grocery brand MUJI/ Muji China market is still the first time in the past two quarters that the brand has entered China for the first time.

In the 6-8 quarter of 2019 fiscal year two, the Muji China market recorded a 2.2% decline over sales, a 400 basis point decrease compared with the 1.8% increase in the first quarter, while dragging down the comparable decline of 0.2% in the first half of the Chinese brand market.

Once again affected by the sluggish Chinese market, the Ryohin Keikaku Co. Ltd. program of Muji's parent company continued to lose its share price after two quarterly reports.

On Thursday, the stock price fell sharply by 4.17% or 1400 yen, closing at 32150 yen.

MUJI sales fell for the first time in China, just as the Sino US trade war intensified. Chinese consumers, especially middle class consumers, began to become more sensitive to prices. The same products were followed by a search for brands that had a certain weakness in brand awareness and design but had more advantages in terms of price.

This week, it has been accused of "Shanzhai", a cheap living home brand named MINISO from Muji and Uniqlo UNIQLO, announced its investment of 1 billion yuan from Tencent and high leverage capital.

In the past two years, Tencent has been looking for investment in retail business, whether it is a famous brand or a lot of products, as well as the city beauty (China) Holdings Limited and Hai Lan's home.

As one of the largest technology companies in China, Tencent's investment logic also shows that the "middle price" brand represented by Muji is under global disfavor, and the plight of British brand Topshop and J.Crew is more obvious.

Despite the decline in comparable sales, but benefiting from a net increase of 25 stores, the two quarter of Muji sales in China still recorded an increase of 10.4% in Renminbi, which only slowed sharply compared with the first quarter of 14.8%.

By the end of August, there were 235 stores in China, compared with 210 in the same period last year. In the first half of this year, the brand added 6 stores in China, including 8 new outlets and 2 outlets.

At the end of the fiscal year, there were 264 stores in China, and 35 new outlets opened in the second half.

In the first half of the year, the Chinese market was sold at 36 billion 168 million yen, and the annual revenue of the 2018 fiscal year increased by 30 billion 807 million yen by 17.4%, with an increase of 12.6% in RMB.

In the two quarter, sales in the East Asian market composed of the group of mainland China, Hongkong, Taiwan and South Korea increased by 15.9% to 29 billion 417 million yen, accounting for 31%. In the first half of this year, the total income of the East Asian market was 58 billion 573 million yen, an increase of 15.8% over the year, accounting for 29.1%.

Despite the decline in China's market revenue, the eastern Asian market operating profit rose by 23.8% to 4 billion 792 million yen in the two quarter, accounting for 46.8% of the total operating profit of the group. In the first half of this year, the operating profit of the East Asian market rose 29.6% to 9 billion 191 million yen, or 39%, while the Japanese local market recorded a 3.6% decline to 3-8 yen in 3-8 months.

In the first half of this year, business profits in East Asia rose by 170 basis points to 15.7%.

At the end of August, Muji announced ninth price cuts in the Chinese market in the past 4 years. Since October 2014, the "new pricing" strategy has been launched in China. Muji will be lowered at the beginning of the year, at the end of the year or at the end of the year. From the current frequency, Muji has basically reached two times a year.

Continuous price cuts failed to ease the hardship of Muji in China, especially after the 200 milestone numbers reached in the mainland market.

After entering 2017, the performance curve of Muji in China is downward.

On the contrary, its competitor, UNIQLO, accelerated its growth in China through continuous expansion after correcting the price increase.

Local retail observation and no fashion Chinese network data show that in 3-5 months, the sales volume of the same store in UNIQLO's big China market rose sharply.

Takeshi Okazak Okazak, chief financial officer of Fast Retailing Co. Ltd. fast marketing group of UNIQLO parent company, said at the earnings conference that UNIQLO's performance did not represent the overall market, but the brand continued to gain growth in the Chinese market with the concept of LifeWea, while the gross profit margin was improving step by step, and the same store sales growth accelerated in the three quarter.

At the beginning of the July earnings conference, Satoru Matsuzaki, the president of Muji company, said he worried that the Chinese stock market might affect consumer demand of the brand target middle class customers, but he said he could see the future demand of the Chinese market.

As the two most important brands in the Chinese market, Muji and UNIQLO's performance are also reflected in the stock price of the two parent brands.

As of Thursday, the share price of fast selling has risen by 24.49% this year, while the share price of the good plan has fallen by 9.56% so far this year, while the Nikkei 225 index has increased by 1.10%. In the past 12 months, the fast selling share price has soared 71.05%, and the good plan has a 1.53% decrease, which is far away from the 16.23% increase of the Nikkei 225 index.