MUJI Muji Three Quarter China Continued To Pressure Sales Recorded A 4.1% Decline

The influence of consumer psychology on product sales is exposed in the performance of the Japanese clothing and grocery brand MUJI Muji China market. Consumer confidence is strong, expensive and inexpensive, and consumption is weak and cheap.

Despite 9 price cuts, Chinese consumers still think Muji is selling more and more expensive in China. What is the specific reason? The economy and salaries and the growth of housing prices make consumers confident that consumers do not see Muji as a higher price than the average fast fashion brand, but their brand labels and personalities are more important. On the contrary, when economic growth is at risk, the growth of household assets is stagnant, and even shrinking due to the real estate and stock market, even if the price of Muji is approaching fast fashion brands, consumers still feel that their prices are more expensive, and choose to ignore their brand labels and personalities.

In the three quarter of 8-11, the Muji China market recorded a 4.1% decline in sales compared with sales, which is nearly double the decline in the two quarter, and is also basically consistent with the overall performance of China's retail market since the three quarter. On the basis of a net increase of 17 stores to 246, the brand revenue in the three quarter increased by 10.8%, which is basically the same as that in the two quarter.

The latest quarterly results show that in 2018 3-11, the Muji China market recorded a 1.5% decline over sales, but the overall revenue grew by 14.7% to 53 billion 635 million yen, or about 3 billion 183 million yuan.

MUJI's parent company Ryohin Keikaku Co.Ltd. (7453.T) Co., Ltd. on Wednesday, its stock price opened 1.87% higher in Asia Pacific stock market as early as 26690 yen, then plunged to a lower level, but it was 26850 yen in the whole day, which recorded an increase of 0.60%. However, it lost substantially in January 9th, and the 225 index of Nikkei rose by 225 index 1.10%.

However, due to the announcement of the results, the share price did not reflect the response to earnings.

As early as the two quarter results were released, a number of investment banks in Japan had already seen the prospect of MUJI products in China. They believed that the brand faced many challenges in the Chinese market. Morgan Stanley MUFG Securities analyst Maki Shinozaki believes that the Muji market is difficult to achieve sales growth in the same store; UBS Securities Japan analyst Nozomi Moriya said that Muji only maintains brand power while maintaining the best price to compete in the Chinese market again.

Japanese companies have already said they will consolidate the 50 key categories of global pricing in 2020 and expand to 100 in 2030.

In addition to the macro environment and its own positioning, Muji has also faced huge intellectual property problems in the Chinese market. The company is in a lawsuit against Beijing cotton field Textile Co., Ltd. for a long time against the "Muji" trademark. At the same time, a large number of Chinese brands and Japanese technology giant have launched the P2C business competition.

At the end of September 2018, MINISO, a cheap living home brand, announced that it had won 1 billion yuan investment from Tencent (0700.HK) and private equity giant Hillhouse Capital Group high allocating capital. Many famous people in China think it is the product of imitation Muji and Uniqlo UNIQLO, the latter is the brand of Fast Retailing Co.Ltd. (9983.T) of Asia's largest apparel group.

In addition, Alibaba (NYSE:BABA) and NetEase (NASDAQ:NTES) respectively launched two Internet products, Taobao's core selection and NetEase's strict selection, and its manufacturers' slow-moving mode, known as Chinese suppliers with Muji and other brands, was sold directly to consumers at a lower price.

MUJI China's revenue in the 2018 fiscal year was 67 billion 174 million yen, or about 4 billion yuan, accounting for 109 billion 803 million yen income in the East Asian market and 61.2% in the total income of 378 billion 801 million yen, but the increase in 22.2% was better than that in the group's 2018 fiscal year.

For Japanese brands, under the overall pressure of the domestic market, the overseas market is almost all its growth space, and the neighboring East Asian market is lifeline, especially in the Chinese market.

In the case of a continuous decline in the same store sales in the Chinese market, the only good news for Muji is that sales of new stores can still maintain sales growth, and its profit growth is much better than sales growth. If there is still a lot of operational space to be obtained by sacrificing profits, it remains to be evaluated by the company.

As of the end of March, in the 2018 fiscal year, the operating profit of the good plan business recorded an increase of 18.3%, and the operating profit margin also improved by 40 basis points. In the first three quarters of this year, the operating profit of the group's East Asian market rose 36.6%, 23.8% and 23.3% respectively, and the overall operating profit in the first nine months increased 27.6% to 13 billion 336 million yen, accounting for 38.3%.

However, in the 2019 fiscal year, the space for profit plan and profit adjustment is getting smaller and smaller. Despite the strong earnings in the East Asian market, the overall operating profit in the first three quarters of the domestic market dropped to 9.7% yen to 21 billion 573 million yen, while the growth rate of revenue and sales increased by 4.1% and 5.3% over the same period.

Despite continued price cuts in China, Muji can hardly achieve the same low price as its competitor, UNIQLO. In addition to the huge scale of the purchase, the two brand models are quite different.

The chief executive of the good plan said earlier that "Muji", which has no brand and only high quality products, is the third way out of the Japanese brand in its prime stage, which is to build a brand around simple design and high quality products.

The brand model of MUJI products has worked very well for a long time before 2012, but with the widening gap between the rich and the poor, the survival space of the middle priced brands in retail brands has been shrinking. The US brand J.Crew and the British brand TOPSHOP are facing unprecedented difficulties. The former was once the first choice brand in the US, and the latter was the king of high street in England.

After struggling in the Chinese market, Muji started to expand other lifestyle brands, including restaurants, bookstores and cafes. At the beginning of this year, two hotels were opened in Beijing and Shenzhen. However, with its reputation, its hotels received a lot of bad reviews, which is similar to the central parity of the brand.

On Thursday, Muji's parent company Ryohin Keikaku Co.Ltd. (7453.T) had no unexpected setbacks in its share price plan. 9 days after its low opening 7.12%, it fell to a low level, with a minimum of 24120 yen and a sharp fall of 10.17%, followed by about 10% decline. In the past 12 months, the stock had already fallen 30%, far behind the Nikkei 225 225.