UNY Co (TSE:8270)

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Fedguy121

UNY Co., Ltd. primarily engages in the retail business in Japan and Hong Kong. The company was founded in 1950 and is headquartered in Inazawa City, Japan. As a consumer retail business, the company's growth prospects have been dampened by the earthquake, but early signs of recovery are promising.

Company Overview

According to the UNY’s corporate website, the company’s name derives from 5 words: “UNIQUE,” “UNITED,” “UNITY,” “UNIVERSAL,” and “UNIFIED.”^[1] For the year ended February 20, 2011, the company reported revenue of 1.11 trillion yen and net income of 6.05 billion yen.^[2] As of February 20, 2011, the Company had 32 subsidiaries and 13 associated companies.^[3]

The company operates in three segments:

• Retail operates convenience stores and specialty shops that sell clothes, food, other miscellaneous merchandise.
• Financial include the credit and insurance agency businesses.
• Other activities primarily include the leasing of real estate and the manufacture of prepared food.

Trends and Forces

Expectation of Future Tax Hikes and Higher Electricity Bills Drags Spending

The Japanese government is considering a few tax measures as means of financing post-quake reconstruction. These measures include (i) a 10% increase in income tax for 3-5 years (yielding an ¥1.3 trillion annually), (ii) a modest increase in consumption tax (a 2-3% increase from FY2012 onward for two-three years only; each 1% increase would raise around ¥2.5 trillion), and (iii) a possible increase in electricity charges related to the nuclear power plant problems and a higher burden for the public. On the other hand, recovery may continue as aggregate retail same-store sales in Japan recovered to 1.4% year-over-year growth in April from a 3.5% decline in March following the earthquake.^[4]

Japanese Slowdown from Earthquake

Consumers may continue to rein in spending if the Japanese economy remains lackluster for the time being. Consumer spending could remain weak for a longer period in light of deteriorating employment and income coupled with rapid cooling of consumer sentiment. Sales of discretionary goods will likely be sluggish as this trend continues. Some analysts see consumer sentiment as unlikely to recover until 2012, given the nuclear power plant issue and political uncertainty.^[5]

Competition

Aeon competes in the Japanese consumer goods retail space in Japan, as well as several other countries. Selected competitors include:

• Daiei Inc (TYO:8263) owns 2000 stores including department stores, supermarkets, discount stores, restaurants, and hotels.
• Seven & I Holdings (BER:S6M) engages in the retail business in Japan and North America, operating convenience stores, supermarkets, restaurants, and financial services.
• Aeon operates supermarkets, malls, discount stores, and convenience stores in Japan and other parts of Asia.
• Izumi Co. operates large malls and supermarkets in Japan, including the “You Me” branded supermalls.

References

1. ↑ UNY HK “About Us”
2. ↑ Capital IQ “UNY”
3. ↑ Reuters UNY stock profile
4. ↑ JP Morgan analyst report, 27 May 2011
5. ↑ Daiwa Capital Markets, “Future slowdown in personal consumption a concern”