Cool-feel beds help Nitori reap record profits

Sep 19, 2018 | News On Japan

Sep 19, 2018 (Nikkei) - Nitori Holdings is expected to report a record interim profit thanks to brisk sales of household items and furniture, including cool-feel bedding that proved popular during a sweltering summer in Japan.

The Japanese furniture purveyor likely generated a little over 54 billion yen ($480 million) in operating profit for the March-August half, surpassing its projection by more than 1 billion yen. Cost cuts also improved profitability.

Still, Nitori's stock price has been weighed down by uncertainty over its overseas operations, especially in China. The stock has declined 10% since the end of May, compared with a 5% gain for the benchmark Nikkei Stock Average.

Sales for the six months look to have grown 6% to just over 300 billion yen, buoyed by aggressive store openings by the mainstay Nitori chain and the Deco Home chain of smaller stores.

The unusually hot summer in Japan spurred sales of cool-feel bedding. Available in various price points based on functionality, the N Cool bedding line appealed to a broad demographic.

Underpinned by strong consumer spending in Japan, Nitori's existing-store sales grew 1.9%. Customer traffic increased 0.6% and sales-per customer rose 1.3%. Online sales climbed 30% to roughly 20 billion yen.

Nitori's earnings are susceptible to currency fluctuations because the company procures the bulk of its merchandise from other parts of Asia. Even though the weak yen in the March-August period is estimated to have pushed profit down by almost 3 billion yen, Nitori absorbed the impact through cost cuts.

But Nitori's overseas operations, seen as a key to growth in view of limited expansion opportunities in Japan, remain a point of concern for investors. As of Aug. 20, just over 10% of Nitori's 545 stores were abroad, with 30 in Taiwan, 28 in China and five in the U.S. Nitori does not break down overseas earnings in detail.

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