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MarketScreener Homepage  >  Equities  >  Tokyo  >  Kirin Holdings Co Ltd    2503   JP3258000003

KIRIN HOLDINGS CO LTD

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Japanese seek bargains as economy limps, Abenomics loses shine

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08/24/2016 | 10:59pm EDT
People are reflected in mirrors at an entrance to a department store in Tokyo

TOKYO (Reuters) - Three years of so-called "Abenomics", Japanese Prime Minister Shinzo Abe's bold stimulus programme, has failed to dislodge a deflationary mindset among businesses and consumers.

As the world's third-largest economy falters again - with a stronger yen gnawing at overseas profits and domestic consumption sapping companies' confidence to invest or sufficiently raise wages - firms that increased their prices in the hope of a sustained recovery are rethinking their strategy.

Many consumers, with little extra to go around, are opting for cheaper products - welcome news for the discount retailers who flourished during two decades of economic stagnation.

Housewife Yuko Narita, 48, says she is tightening the family purse strings and scouting around for sales on daily goods and clothing. "There's a sense the economy is stalling and companies' earnings are bad this year, so I'm holding off from spending on big items," she said.

Nobuko Jin, a 75-year-old part-time worker who receives some pension, says she is cutting back and just buying necessities. "I get the feeling prices are creeping up. I wonder where the benefits of Abenomics are going. I'm trying to spend less," she said.

Discount store operator Don Quijote Holdings (>> Don Quijote Holdings Co Ltd), which sells everything from cosmetics and clothing to toilet paper, has seen business revive as the economy loses momentum. It expects operating profit to rise more than 4 percent in the year to next June. "Household spending won't be strong. That's when consumption centres on discount stores, so it's a tailwind for us," said Mitsuo Takahashi, the firm's chief financial officer.

Restaurant chain operator Skylark Group (>> Skylark Co Ltd) has cut prices on some items and is offering more cheap lunch menus to lure family diners. And Fast Retailing Co (>> Fast Retailing Co Ltd), owner of the Uniqlo casual wear brand, reversed course this year after two years of price hikes hurt its clothing sales. Its latest quarterly operating profit rose 18.6 percent.

"We'll continue with our (new) strategy and bring down prices this autumn and winter," said Ken Okazaki, the company's chief finance officer.

At discount furniture and home accessories retailer Nitori Holdings (>> Nitori Holdings Co Ltd), chairman Akio Nitori said his company won't raise prices. "Once you lose consumers to your competitors with price hikes, it's hard to lure them back," he said.

"RENEWED FEARS OF DEFLATION"

Japan's growth stalled in April-June, exports fell last month at the fastest pace since the global financial crisis, and the mood among businesses has deteriorated to pre-Abenomics levels.

This all makes it tougher for policymakers, already struggling to fend off external risks, to shift Japan's deflationary mindset.

The gloom is broadening beyond exporters hit directly by the renewed strength of the yen <JPY=>, which drove down the U.S. dollar to around 100 yen - some 25 percent below levels a year ago.

"We're seeing renewed fears of deflation as the environment surrounding consumption is worsening," said Akihiro Ito, senior executive officer at beverage maker Kirin Holdings (>> Kirin Holdings Co Ltd).

Isetan Mitsukoshi (>> Isetan Mitsukoshi Holdings Ltd.), Japan's biggest department store chain by sales, has seen demand for high-end goods, which surged in the early days of Abenomics, slow this year. "Some expensive goods still sell well so it's not like we're back to the old days," said CEO Hiroshi Ohnishi. "But the deflationary mindset appears to be returning."

Abe's administration insists the economy has emerged strongly from stagnation thanks to its mix of fiscal, monetary stimulus steps and structural reforms.

Indeed, the economy grew 2 percent in fiscal 2013 as hopes for Abenomics bolstered Tokyo stocks <.N225> and pulled the yen off record highs. But it has barely recovered from the hit to consumption from a sales tax hike in April 2014, contracting 0.9 percent in fiscal 2014 and growing just 0.8 percent in the year to end-March.

Analysts predict, at best, feeble growth in the current quarter as both exports and consumption limp along.

"I haven't felt like I got the benefits of Abenomics strongly," said Makoto Etani, a 45-year-old office worker in Tokyo. "I do feel there are specific kinds of people who benefited, but it's not spread evenly throughout society."

Abe has this month announced a plan for a 13.5 trillion yen ($135 billion) fiscal stimulus package that includes payouts to low-income households in a renewed effort to spur growth. The Bank of Japan also eased policy last month, and may take further steps next month as it reviews its policies.

But companies polled by Reuters overwhelmingly say the fiscal package, focussed on public works spending, will do little to boost growth.

($1 = 100.3000 yen)

(Additional reporting by Ritsuko Shimizu, Kaori Kaneko, Kento Sahara and Minami Funakoshi; Editing by Ian Geoghegan)

By Leika Kihara

Stocks mentioned in the article
ChangeLast1st jan.
FAST RETAILING CO LTD 0.80% 65740 End-of-day quote.21.52%
ISETAN MITSUKOSHI HOLDINGS LTD. 0.58% 865 End-of-day quote.-27.92%
KIRIN HOLDINGS CO LTD -1.34% 2250.5 End-of-day quote.-0.13%
NITORI HOLDINGS CO LTD 0.88% 16075 End-of-day quote.19.16%
PAN PACIFIC INTERNATIONAL HOLDINGS CORP. 0.86% 1768 End-of-day quote.-73.49%
SKYLARK HOLDINGS CO LTD 1.20% 1938 End-of-day quote.13.33%
US DOLLAR / JAPANESE YEN (USD/JPY) 0.13% 107.692 Delayed Quote.-1.80%
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Financials (JPY)
Sales 2019 1 963 B
EBIT 2019 108 B
Net income 2019 69 386 M
Debt 2019 354 B
Yield 2019 2,82%
P/E ratio 2019 30,6x
P/E ratio 2020 14,0x
EV / Sales2019 1,19x
EV / Sales2020 1,17x
Capitalization 1 976 B
Technical analysis trends KIRIN HOLDINGS CO LTD
Short TermMid-TermLong Term
TrendsNeutralBearishBearish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 15
Average target price 2 595,33  JPY
Last Close Price 2 250,50  JPY
Spread / Highest target 46,6%
Spread / Average Target 15,3%
Spread / Lowest Target -0,02%
EPS Revisions
Managers
NameTitle
Yoshinori Isozaki President & Representative Director
Akihiro Ito Auditor
Noriaki Kobayashi Executive Officer, Head-Group R&D
Hiroshi Ogawa Executive Vice President
Keisuke Nishimura Representative Director & Vice President
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