Investing in Japan: Sugi Holdings expands sales with its incredibly high profitability even in a coronavirus ordeal.
The third wave of the new coronavirus hit Japan with daily new cases exceeding 3,000.
Since November, Japan is struggling to contain the third wave of the new coronavirus infection with daily new cases exceeding 3,000 confirmed a day and the number of deaths continuing to break record highs. The cumulative number of infected people has doubled in less than two months since it reached 100,000 on October 29.
The spread of coronavirus infection changed people's consumption behavior. After the pandemic, tourism industry cannot make both ends meet even with government support programs and food industry lost customers who used to often visit restaurants for expensive dinner.
On the other hand, reservations for Christmas cakes have increased 1.3 times compared to last year with high-priced cakes of around 10,000 yen being sold well. People who are forced to refrain from eating out and traveling spend more money on expenses at home such as takeout meal, deliveries and online shopping. In the logistics industry, strong sales from online shopping caused growing deliveries. Sales of household sewing machines are also increasing. It seems that people who sew small items such as accessories themselves are increasing after they start making face masks at home when masks were in a severe shortage.
Drugstores’ sales have grown steadily after the
spread of the infection. With the convenience of being able to purchase
everything from medicines to daily necessities in one stop, drugstores have
increased sales because people who want to avoid going out for shopping to
prevent infection visit drugstores more often than before.
Sugi Holdings pursues growth strategy to further expand its business.
One of the leading Japanese drugstores is Sugi Holdings Co., Ltd. which is headquartered in Aichi Prefecture and operates Sugi Pharmacy nationwide. Sugi Holdings kept expanding its sales with its incredibly high profitability and actively increasing the number of stores even amid coronavirus outbreak. The company plans to open 120 new stores every year by 2022.
Furthermore, the company pursues growth strategy to further expand its business. Sugi Holdings announced it will form a business alliance with a major drugstore chain in Taiwan to supply private brand products of Sugi Pharmacy and promote personnel exchanges. Sugi Holdings' products were popular among foreign visitors from Asian countries before the spread of the new coronavirus infection because of its high quality and their affordable prices.
In addition, it works with nursing care providers to
deliver medicines, hygiene products, and food products to residents of nursing
care facilities. Joint development of a drug management system will also be
promoted with Kanazawa University to share dosing times and amount of
administrations of medicines with doctors, nursing staff and pharmacists.
Inbound demand plummets causing anguish for drugstore chains.
On the other hand, after the spread of coronavirus infection, the number of foreign visitors to Japan has decreased sharply and drugstores in shopping districts of local large cities such as Sapporo, Fukuoka, and Nagoya have been closed one after another. Until last year, large Japanese drugstore chains have been expanding their stores in those areas in order to take advantage of growing demand from foreign visitors to Japan, but the sharp decrease in foreign visitors has forced them to revise their strategies.
Even in such a somber situation, Sugi Holdings, which has a high profit margin through efficient management, maintains stable business performance. Sugi Holdings’ efficient operation enable the company to fend off stagnation in sales caused by COVID 19. The fact that Sugi Holdings keeps ROE more than 10 % shows its incredible profitability considering the average ROE of Japanese large companies listed on Tokyo stock exchange’s first section is around 6.7% in FY 2019.
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