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GLOBERIDE, Inc. (JP-7990) Tokyo Stock Exchange First Section ( I )

2019-01-28  提供機構:FISCO  作者:FISCO  點閱次數:5

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◆Summary

GLOBERIDE, Inc. <7990> (hereafter, also “the Company”) became the global leader in fishing product sales (under the DAIWA global brand) in 1976. It has consistently led the industry since then with numerous innovations, rev­olutionary products based on unique technologies, and new proposals for fishing lifestyle. DAIWA is a universally known presence in the fishing world. The Company also sells products for golf, tennis, and cycling sports worldwide.

It generated approximately 70% of sales in Japan and 30% from other countries and has steadily solidified positions in the Americas, Europe, and Asia and Oceania. Growth in sales to Asia has stood out recently. The Company manufactures almost all of its products, except for some luxury items, in China, Vietnam, Thailand, and other overseas sites. Sales ratios by product are fishing, the main business, at 87.4%, golf at 5.0%, racquet sports at 6.7% and others including cycling sports at 0.9% in FY3/19 1H.

The Company renamed itself from Daiwa Seiko Corporation to GLOBERIDE on October 1, 2009. It continues to use the DAIWA brand for fishing products and is steadily growing this business. Because its products are for hobbies, income fluctuates with trends in economic activity. Nevertheless, it possesses a strong brand presence, and a key point is the extent to which it can expand in areas besides fishing products. Going forward, the Company hopes to stimulate the global market by developing innovative new products that create market opportunities.

In the 1H FY3/19 consolidated results announced on November 7, 2018, net sales were ¥45,574mn (up 1.4% year on year (YoY)), operating profit was ¥2,703mn (down 7.8%), ordinary profit was ¥2,575mn (down 13.3%), and profit attributable to owners of parent was ¥2,584mn (up 26.5%). The decline in both operating and ordinary profit was partially the result of the series of large natural disasters that struck the Japanese archipelago during the period. As a result, the Company lowered its forecast for FY3/19 net sales from ¥90,000mn to ¥88,000mn (up 2.6% YoY), and dropped its forecast for operating profit from ¥4,000mn to ¥3,450mn (down 8.5%).

The Company currently undertaking the medium-term business plan lasting through FY3/21. The targets for FY3/21, the plan’s final fiscal year, are net sales of ¥100,000mn and operating profit of ¥5,000mn, while it is aiming for an annual dividend of ¥70.

◆Business details and history

Started as a manufacturer of fishing reels for export, DAIWA brand captured the hearts of fishing fans

The Company was established in 1955. It was initially named Matsui Manufacturing and mainly manufactured fishing reels for export. It established Daiwa Seiko Corporation in Yamatocho, Nakano Ward, Tokyo in 1958, built a plant for reel production at the site of the current headquarters in 1960, and also moved the headquarters two years later. It launched overseas operations with the establishment of Daiwa Corporation in Los Angeles, US in 1966. The Company revised its company name in Japanese (still Daiwa Seiko in English) in 1969 and listed shares on the Second Section of the Tokyo Stock Exchange in 1970. It switched to the First Section in 1976.

The Company began as a specialty manufacturer of fishing products, but started to diversify by starting sales of golf products in Japan in 1972. It moved into tennis products in 1980 and cycling sports products in 1990. The new name GLOBERIDE was adopted in 2009. The Company has a corporate motto of being a “lifetime sports company” that enriches life, and its main fishing business is known throughout the fishing world. The brand is very highly regarded, and as a top brand, based on the principle of changing lives to make them more exciting from experiencing “Feel Alive (the ultimate moment)” through fishing, the Company has evolved the concept of fishing goods and captured the hearts of fishing fans by consistently delivering innovative products to the market. The DAIWA brand mark receives robust consumer support as a symbol of challenge, originality, and innovation. Support for the DAIWA brand is extensive not only in Japan, but also worldwide.

In fishing products, the Company proposed an out-spool mechanism for reels ahead of the industry, and this created the template of the modern spinning reel. The Company focuses on more than just reels, rods, and other core products and offers an extensive line-up of related products including lures, strings, and other small items. It also handles cooler boxes and rain gear and is a comprehensive supplier of fishing-related items. In Japan, the Company covers from large chain stores to local specialty shops and “DAIWA fishing goods” is a familiar sign. Much of product supply goes through direct sales to retailers, and this format keeps the Company in touch with consumer needs. The Company actively pursues a variety of measures to expand the market, including cooperation in the TV production of “The Fishing,” the most popular fishing program, and the well-known “Fishing Fool’s Diary” movie series (seen in reruns on TV).

The Company has three sales locations in Japan - Tokyo, Osaka, and Fukuoka. Outside of Japan, it operates Daiwa Corporation in the US and has sales offices in the UK, France, Germany, Italy, Australia, China, Hong Kong, South Korea, Taiwan, Singapore, Malaysia, and Thailand. The Company manufactures most of the products at overseas sites, including Thailand, China, and Vietnam.

Meanwhile, in the golf business, the Company offers two popular brands ONOFF, which proposes products for refined golfing with reliable quality, and FOURTEEN, known for superior club philosophy and excellent performance.

The Company does not blindly pursue sales growth in this business. Instead, it focuses on selling high-end products and services to customers with an emphasis on brands by building membership organizations and offering a fitting service that provides clubs best suited to individual customers. It also has contracts with professionals such as Shingo Katayama, Yosuke Asaji, Ji-hee Lee, Akane Iijima, O. Sattaya, and Satsuki Oshiro. The success of these top professionals attests to reliable club performance and enhances the brand image.

The Company is the distributor for PRINCE (US based tennis warehouse manufacturer) in Japan for tennis and other racquet sports. It proposes a tennis lifestyle for adults that covers activities both on and off the court and has carefully cultivated the brand for racquets as well as tennis wear and other related products. The Company handles a wide range of products beyond tennis, including badminton, which has attracted interest following strong performances by Japanese athletes in the Olympics, and squash.

In cycling sports, the Company promotes the three European brands of CORRATEC, FOCUS, and BOTTECCHIA.

The Company’s apparel business cannot be overlooked. It has recently launched D-VEC, a new apparel brand that combines functionality and fashion, and the Company is making new proposals as a “lifetime sports company.”

The Company mainly supplied fishing apparel up until now, but the D-VEC brand launched in 2017 has been well received as a line that combines the technology and functionality cultivated over many years through DAIWA fishing apparel with the fashion sense brought by a dedicated design team. This line is available not only at the Company’s store, but department stores and boutiques are also now asking to carry the line. D-VEC is widely receiving attention as a highly-fashionable performance line capable of withstanding harsh natural environments.

◆Performance trends

1. FY3/19 1H results (April to September 2018)

In the FY3/19 1H (April to September 2018) results announced on November 7, 2018, net sales were ¥45,574mn (up 1.4%YoY), operating profit was ¥2,703mn (down 7.8%), ordinary profit was ¥2,575mn (down 13.3%), and profit attributable to owners of parent was ¥2,584mn (up 26.5%), for lower operating profit.

Within Japan, there is the sense that the economic indicators are improving, such as the economy performing better compared to recently, but it is not the case that consumer confidence is as high as the indicators. In this situation, it cannot be said that the environment surrounding the Company’s products, which are not daily necessities, is necessarily a good one. However, it is responding through the launches of innovative products that strike a chord with people who enjoy fishing, golf, and racquet sports.

These efforts have yielded results, and in the mainstay fishing business the Company has a history of continually exceeding the actual market value in the domestic market. However, no matter how popular the Company’s products are, profits cannot grow if the market itself shrinks due to inclement weather or other factors. In 1H, a number of large natural disasters occurred one after another, including the torrential rains in western Japan, the earthquake in northern Osaka, typhoons, and the Hokkaido Eastern Iburi Earthquake. These natural disasters had significant negative impacts on the market. Marine fishing parks and a number of other fishing spots, particularly in Kansai, were impacted by the natural disasters, while the severe summertime heat nationwide also had a large impact.

In the domestic fishing market, the overall market declined approximately 3% YoY. In this environment, the Company’s fishing business posted an overall 0.5% YoY decline in sales.

There has been a YoY increase in sales since the beginning of October (the start of 2H), but it has not yet developed into a full-fledged recovery. Western Japan is a particularly large market for the Company, and we expect a quick recovery in consumer sentiment.

Meanwhile, despite solid market conditions in the domestic golf business, sales declined 22% YoY due to the fact that the flagship brand ONOFF had a lull in new product launches. In racket sports, sales fell 12% YoY due to the stagnation of the tennis boom.

Overseas, sales were solid, making up for the decline in domestic sales, with a steady expansion of sales in the fishing business. Although the fishing market in the United States and Europe are not particularly strong, the initiatives made over the past few years to strengthen the overseas business have started to yield results. The overseas business grew at a double-digit clip, even excluding foreign exchange gains due to the depreciation of the yen and other factors.

Looking by region, in the Americas, while the overall market was on par with the same period of the previous fiscal year, the Company still recorded growth of 25% in the United States on a local currency basis. In Europe, the market grew 1% even though the market contracted due to the severe cold wave in 1Q. In Asia and Oceania, the Company recorded a 12% increase in sales. In Asia, there was a large effect from the launching of new products meeting the needs of each region.

The conditions in the golf market are severe to the extent it can be described as a global slump, including that even in the main market of the United States, a leading sports equipment manufacturer has withdrawn from golf equipment. The background to this is that currently there are no star players, like Tiger Woods.

In profits, there was an increase in costs, such as personnel costs and logistics costs. There was an increase in upfront investment related to e-commerce as well as an increase in apparel-related costs. The cost of sales increased slightly from ¥28,548mn in the previous fiscal year to ¥28,918mn, but the cost of sales ratio fell slightly from 63.51% to 63.45%.

In non-operating profit and expenditure, the non-recurrence of the ¥270mn posted in the year-earlier period from the settlement on patent litigation resulted in ordinary profit declining more than operating profit.

On the financial side, the Company has been selling investment securities and using proceeds from sales to repay borrowings. As of September 30, 2018, short-term borrowings were ¥15,598mn (down from ¥17,210mn as of March 31, 2018), while long-term borrowings were ¥8,288mn (down from ¥10,324mn as of March 31, 2018). The equity ratio improved to 32.0%, compared to 30.8% as of March 31, 2018.

2. Outlook for FY3/19

For FY3/19, at the beginning of current fiscal year, the Company forecasts higher net sales and profits to continue, with ¥90,000mn in net sales (up 4.6% YoY), ¥4,000mn in operating profit (up 6.1%), ¥3,700mn in ordinary profit (up 2.8%), and ¥2,600mn in profit attributable to owners of parent (up 4.1%).

However, due to the difficult 1H, the Company lowered its forecast FY3/19 net sales forecast to ¥88,000mn (up 2.6% YoY), its operating profit forecast to ¥3,450mn (down 8.5%), and its ordinary profit forecast to ¥2,900mn (down 19.4%), while leaving its outlook for profit attributable to owners of parent unchanged. Although the net sales forecast was lowered, the Company appears set to post record high net sales again in FY3/19, after setting a record in FY3/18 for the first time in 25 years going back to FY3/93.

The Company intends to pursue sales growth in the mainstay fishing goods business at a faster pace than the market in Japan by continuing to release innovative products. Its plan focuses on drawing customers to retail stores by aggressively stimulating the market through events, sales promotions, and other efforts.

In the overseas fishing business, the Company is focusing efforts in the United States, particularly in the popular bass fishing market. The Company has launched new reels for bass fishing, which the Company has been developing based on upfront investment, and the results of this investment have begun to contribute to earnings. In Europe, although the market lacks vigor, there is room for the Company to cultivate more business, as its market share is not as high as in Japan.

Meanwhile, in Asia, the Company will continue to make proposals for lure fishing and otherwise work to expand the market.

In the golf business, the Company focuses on steady sales growth with provision of high-end products and services to “fan” customers while carefully preserving its brands. Specifically, it utilizes test hitting opportunities and other events as member perks for ONOFF, FOURTEEN, and other fan clubs to improve brand value and also highlight product features.

In 1H FY3/19, the Company was in a defensive mode as it was a lean period for new product releases, but the Company will launch new ladies products in 2H FY3/19. With respect to the FOURTEEN brand, the Company plans to return to its roots as a top wedge brand and thereby engineer a rally in the golf business overall.

Meanwhile, the situation in racquet sports remains challenging. There is a movement symbolizing young people moving away from tennis, and for the foreseeable future the Company will be taking a defensive posture in racquet sports. However, there are a few positive developments as well, such as the arrival of new stars like Naomi Osaka. In fact, October sales recovered on a YoY basis, possibly reflecting Naomi Osaka’s success.

 

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