Muji, with its parent company Ryohin Keikaku, is still lagging behinds its peers Uniqlo and Nitori, but that might make the stock more interesting to value-investors.
Really love Muji for my entire life, but I’m dismayed to find it’s repeated failure in entering the US market (and Europe broadly). Western customers rave about the stationery, but not the furniture or the apparel (which do very well in China). That is something worth thinking about.
I think the leadership at Muji thought they could dip their toes into western markets by opening up small shops that sell stationaries, and then expand in the most successful markets. Sadly, all I think it's doing is making people misunderstand the brand...
I would love to see a fully-fledged expansion plan in Europe and the US in the way Muji has expanded in China or South Korea, with massive stores selling its entire product-line (including Muji's food offering and restaurant). Perhaps then western consumers would appreciate Muji for what it is: A furniture brand with incredibly innovative and clean products that really encapsulates the essence of Japanese craftmanship.
Thanks for this one. I’ve been in Ryohin Keikaku for the last few months now. I really like the risk/reward here, but I’ll admit i didn’t expect the yen to slide quite this hard. That has to be creating some extra challenges for them.
I’ve also been enjoying your last few posts as well. I especially liked the shimano one as it is just not one that gets much attention. Keep it up!
One thing I'd point out is that it's not a good idea to look at debt/net assets as a gauge of creditworthiness, etc. The denominator is an accounting fiction and not helpful in determining whether creditors will be repaid.
Professional credit investors pay much more attention to measures such as debt/EBITDA, debt/(EBITDA-capex), EBITDA/interest, etc, etc. Of course, care has to be taken to use an accurate earnings number free of embellishments (as private equity firms often do when they present these kinds of metrics for their buyouts).
Just high level, looking at what Bloomberg tells me, Muji has very little debt relative to EBITDA, especially if you take into account its cash balance. Seems like this would be an investment grade company if it were rated.
Thank you so much for the feedback! Yeah, this is true and for my future analyses I will actually use debt/ebitda. I think there's an argument to be had that it can be misleading as companies' ebitda usually go down when they need their debt the most, in recessions, which can create a false sense of security in bull markets. However, for stable value companies, the ones which I am trying to cover, it's usually a great measure.
For sure, this is all more art than science. Each metric has pros and cons.
I will say, though, that outside of financial institutions (banks, insurance companies, etc), the use of book equity for anything is of very limited value when things are stressed. As anybody who has worked in stressed and distressed credit investing will attest, the book net asset value is close to being an irrelevant measure when things are really bad a company is about to file for bankruptcy administration or similar reorganization.
Really love Muji for my entire life, but I’m dismayed to find it’s repeated failure in entering the US market (and Europe broadly). Western customers rave about the stationery, but not the furniture or the apparel (which do very well in China). That is something worth thinking about.
I think the leadership at Muji thought they could dip their toes into western markets by opening up small shops that sell stationaries, and then expand in the most successful markets. Sadly, all I think it's doing is making people misunderstand the brand...
I would love to see a fully-fledged expansion plan in Europe and the US in the way Muji has expanded in China or South Korea, with massive stores selling its entire product-line (including Muji's food offering and restaurant). Perhaps then western consumers would appreciate Muji for what it is: A furniture brand with incredibly innovative and clean products that really encapsulates the essence of Japanese craftmanship.
Thanks for this one. I’ve been in Ryohin Keikaku for the last few months now. I really like the risk/reward here, but I’ll admit i didn’t expect the yen to slide quite this hard. That has to be creating some extra challenges for them.
I’ve also been enjoying your last few posts as well. I especially liked the shimano one as it is just not one that gets much attention. Keep it up!
I know I'm late here, and interesting write-up.
One thing I'd point out is that it's not a good idea to look at debt/net assets as a gauge of creditworthiness, etc. The denominator is an accounting fiction and not helpful in determining whether creditors will be repaid.
Professional credit investors pay much more attention to measures such as debt/EBITDA, debt/(EBITDA-capex), EBITDA/interest, etc, etc. Of course, care has to be taken to use an accurate earnings number free of embellishments (as private equity firms often do when they present these kinds of metrics for their buyouts).
Just high level, looking at what Bloomberg tells me, Muji has very little debt relative to EBITDA, especially if you take into account its cash balance. Seems like this would be an investment grade company if it were rated.
Thank you so much for the feedback! Yeah, this is true and for my future analyses I will actually use debt/ebitda. I think there's an argument to be had that it can be misleading as companies' ebitda usually go down when they need their debt the most, in recessions, which can create a false sense of security in bull markets. However, for stable value companies, the ones which I am trying to cover, it's usually a great measure.
For sure, this is all more art than science. Each metric has pros and cons.
I will say, though, that outside of financial institutions (banks, insurance companies, etc), the use of book equity for anything is of very limited value when things are stressed. As anybody who has worked in stressed and distressed credit investing will attest, the book net asset value is close to being an irrelevant measure when things are really bad a company is about to file for bankruptcy administration or similar reorganization.