Nitori seen turning in 29th year of record profits

TOKYO——Nitori Holdings likely logged record profits for a 29th straight year in the 12 months ended February by expanding its urban footprint and using currency forward contracts to minimize the impact of a soft yen.

Group operating profit is seen roughly in line with the forecast, rising 7% to just over 71 billion yen ($624 million). Sales apparently jumped 9% to about 455 billion yen, beating the projection by 10 billion yen.

The furniture retailer opened a total of 50 locations in Japan and abroad, including one in central Tokyo's Printemps Ginza department store. It has attracted a wider range of customers, such as younger women and seniors, by focusing more heavily on the Tokyo region.

This boosted customers at existing stores by 2% last fiscal year -- the first increase since the year ended February 2012. Per-customer sales climbed more than 1%, while existing-store sales jumped by just over 3%.

Nitori made its name with low prices in a deflationary landscape but has expanded its lineup of slightly higher-end items, such as couches priced at 50,000 yen to 100,000 yen, in the last three to four years. It had lifted existing-store sales by pushing customers to spend more. But last fiscal year, it bolstered earnings by wooing a more diverse demographic.

The company rolled out a number of hit products as well, such as cast-iron skillets that proved popular among homemakers for their excellent heat retention.

Nitori manufactures its own products. About 90% are made in Vietnam, China and elsewhere abroad, so a weak yen boosts its import costs. But the company mitigated foreign exchange losses by taking advantage of forward contracts.

The yen traded at about 120 to the dollar on average in the fiscal year ended February, compared with just under 99 the year before that. Each 1 yen weakening by the Japanese currency shaves 1.6 billion yen off operating profit, meaning that Nitori could have taken a hit of tens of billions of yen. But the actual blow apparently came to only about 7 billion yen, thanks to the signing of exchange rate forward contracts for about 103 yen to the dollar early on.

Nitori has already finished settling forward contracts for about 108 yen to the dollar for the year ending February 2017. The exchange rate is seen having only a limited effect on earnings, putting the company on track to a 30th straight year of record operating profits this fiscal year.

Source from: Nikkei