China'S Middle Class Can'T Afford To Consume Muji.

Japan's clothing and grocery brand MUJI Muji, China's mainland market continued to decline, as of the four quarter of February 28th, a decline of 3.9% compared with sales, slightly lower than the 4.1% decline in the three quarter, and dragged down in the 2019 fiscal year, the Chinese market could decline 2.1% than sales.

Net profit growth was stimulated by 27 stores. In the 2019 fiscal year, the growth rate of fixed exchange rate in the Muji China mainland market was 11.1%, increasing by 11.8% to 75 billion 92 million yen or 4 billion 490 million yuan in yen, of which only 9.1% in the four quarter.

As of the end of February, there were 256 stores operating in the mainland market.

The downturn in the mainland market has been a drag on the Ryohin Keikaku Co. Ltd. (7453.T) Co., Ltd., the most important East Asian market. The fourth quarter sales decreased by 3.2%, the fixed exchange rate increased by 8.8%, and the real income increased by 6% to 35 billion 447 million yen.

The East Asian market recorded a comparable sales decline of 1.4% over the whole year, with fixed exchange rate growth of 11.2%.

In the case of comparable sales decline, the eastern Asian market's operating profit increased by only 1.1% to 6 billion 477 million yen in the fourth quarter, up 36.6%, 23.8% and 23.3% in the three quarters.

During the reporting period, the fourth quarter east Asian market operating margin also dropped 90 basis points to 18.2%, only the annual operating profit increased 17.5% to 19 billion 814 million yen, and the operating profit margin improved 80 basis points to 16.2%

The continued deterioration of the Chinese market and the collapse of operating profit in the largest domestic market in Japan are expected to reverse the profit in the current fiscal year, down 6% to 31 billion 800 million yen, of which profits in the first half of the fiscal year are expected to plunge 13.8% to 15 billion 600 million yen.

After the release of the earnings report, in April 11th, Ryohin Keikaku Co. Ltd. (7453.T) Co., Ltd.'s share price plan plunged 11.67% to 23150 yen, the most in the intraday 16.44%.

As China's economic downside risks and consumer demand for clothing have weakened substantially, imprint has lagged far behind rival Uniqlo uniqo in the past two years in the Chinese market, and the latter's interim results on Thursday showed that the Greater China market recorded double digit revenue in the last half of February, of which China's mainland market revenues and profits were recorded by about 20%.

In addition to the Fast Retailing Co. Ltd. (9983.T) fast retailing group's UNIQLO brand, Muji will also need to face the cheap living home brand MINISO, the best quality product and the online and offline competitors of Taobao technology and NYSE:BABA, such as Alibaba, NYSE:BABA and NetEase (NASDAQ:NTES).

Before 2017, Muji was thriving in the Chinese market, and the rapid growth of the economy gave birth to the growing middle class. The group once came to the unique design and brand value of Muji.

Since the beginning of 2017, the performance of the brand in mainland China has gone from bad to worse, and the rate of household leverage and household debt has increased rapidly, as well as more emphasis on experiential consumption. The superiority of Muji has quickly become a disadvantage, and it has been defeated by more cost-effective brands such as UNIQLO.

Despite more than 10 price cuts and the replacement of Naoyuki Yamamoto Yamamoto Naomiyuki, chief executive officer of the Chinese market at the end of last year, Muji's performance in the Chinese market is still hard to change and even deteriorates at a profit level.

As of Thursday's closing, Ryohin Keikaku Co. Ltd. (7453.T) Co., Ltd.'s share price has recorded a 12.80% decline so far this year, while Fast Retailing Co. Ltd. (9983.T) XXX group shares fell 2.18%.

In fiscal year 2019, the total revenue of the good plan was 409 billion 697 million yen, up 7.9% year on year. The company expects revenue growth of 12.8% to 462 billion yen this year. In the performance guidelines, the company expects to add 31 stores to the mainland market, but has not anticipated the performance of the mainland market. It is only expected that the East Asian market will increase by 4.9% a year, which must depend on the re growth of the mainland market.

The annual operating profit is expected to increase by 8.4% to 48 billion 500 million yen, of which the East Asian market is 4.5% to 20 billion 700 million yen, while the East Asian market operating profit margin is expected to drop 110 basis points to 15.1%.

Author: Chen Yifei