A supermarket operator that rode Japan’s bubble tea boom to a record high before losing a quarter of its market value in one month might be poised for another leg up.
Kobe Bussan Co and other retailers that cater to cost-conscious consumers could wind up big winners after Japan raises its sales tax to 10 percent from 8 percent on Tuesday.
As Japan’s love affair with Taiwan’s famed tapioca tea took off this year, Kobe Bussan drew attention with products that allow consumers to enjoy the drink at home.
Shares of the company, which also runs the Gyomu Super discount grocery store franchise, more than doubled between October last year and last month to a record high.
The stock has since tumbled, hurt most recently by its decision not to raise its outlook along with its Sept. 12 earnings report, CLSA Ltd analyst Nigel Muston said.
The company reported after the close on Thursday that its sales last month rose 12.3 percent compared with a year ago, slowing from 15.8 percent growth in July, but slightly above the average this year.
In addition to monthly revenue reports, Daiwa Securities Co says the next potential catalysts for Kobe Bussan shares include improving margins on its private brand products and a new medium-term business plan.
“Recently, a boom in the popularity of tapioca in Japan is showing signs of waning,” analyst Jiro Kojima wrote in a Sept. 13 note.
Nonetheless, sales for the discount grocer “look likely to remain robust due partly to boosts from a two-month customer appreciation sale event launched in September,” he said.
The sales tax hike might provide an additional tailwind for Kobe Bussan and other retailers that compete on price, such as Pan Pacific International Holdings Corp, which operates the Don Quijote chain, CLSA said in a report dated Wednesday.
“We see more and more Japanese consumers gravitating toward discount supermarket chains like Gyomu Super given there are just not as many options outside of standard food supermarkets,” Muston wrote.
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