Akio Nitori, Chairman of Nitori HD, talks about “The dollar will eventually reach 110 yen – how will we work then?

Making up for a three-year delay

Records will be broken someday. Although he knew this, it was still a shock when it became a reality.

In the fiscal year ended March 2012, Nitori HD, a major furniture manufacturer and sales company, broke its record of 33 consecutive terms of sales and profit growth since its listing on the Tokyo Stock Exchange.

In addition to the irregular 13-month and 11-day accounting period of the previous fiscal year, the biggest reason was the depreciation of the yen. Looking from March 2008, the yen has depreciated by 50 yen from 111 yen to 161 yen per dollar. Our company is affected by the exchange rate by 2 billion yen per year at 1 yen, so if the 50 yen difference continues for a year, we will have a 100 billion yen loss. There is nothing we can do about this. Even so, we managed to keep the decrease in ordinary income to 11.7 billion yen. The employees did a great job. Moreover, during this period, the company was able to be reborn as a muscular company. Just like people, a company needs to be trained. I am also doing muscle training now, and at most, I gained more than 1 kg of muscle mass in a month. If you put in the effort, the results will come back to you.

The yen has weakened sharply and the Nikkei Stock Average has fluctuated wildly. In these uncertain times, what strategies is Nitori, led by its charismatic founder and chairman Akio Nitori (80), planning to pursue? We asked him about the outlook for the Japanese economy as well as the company’s top management.

We asked him, “In order to cope with the severe changes in the external environment, we will continue to provide products that satisfy our customers, without fail making efforts to reduce costs, such as by reviewing where in the world we procure the raw materials for our products. Nothing will change that, even if the increase in sales and profits is interrupted. In Japan, the number of places where we can open large stores has become quite limited, but overseas is unlimited, so our business will be centered overseas from now on. While the number of new store openings in Japan is approximately 50 per year, the number of new store openings overseas is 100, and in the future we aim to open more than 200 stores overseas each year. Our medium- to long-term management strategy was originally to “accelerate the expansion of our global chain,” and we need to make up for the three years we have been unable to do so with Corona. Eventually, we would like to increase the ratio of domestic and overseas sales to 50% each.

As of March 2012, Nitori had 179 overseas stores, and the company plans to increase this number to 270 by the end of this fiscal year. The company has already opened stores in 11 countries, mainly in Asia. The company is focusing on Taiwan and mainland China.

The 19th century was the era of the Industrial Revolution in England, the 20th century was the era of war and America, and I believe that the 21st century will be the era of Asia. I believe that the 21st century will be the era of Asia. Asia will probably account for more than half of the world’s GDP. Where we should aim to open new stores is where development is taking place.

The Chinese economy is said to be in the midst of a bubble burst, and the conflict with the U.S. is expected to intensify. When I asked him whether it would be risky to rush into China in such a situation, he gave a strong answer.

There is no doubt that the Chinese economy is in decline. Japanese companies that have entered the Chinese market are also in trouble. To be honest, we are also struggling. But that’s OK. Some say we should wait a little longer, but that is too late. Now that the economy is in a slump, rents are cheaper and we can open new stores under better conditions. Some of them have opened new stores, but the numbers are worse than expected. But then you can just pull out. Through scrap and build, the good stores will remain. In other words, we can make even a pinch into an opportunity. Thus, by the time the economy improves, the number of stores in China will be 300 to 400, and the time will come when we will be glad we opened those stores. We will wait and see. I think that’s what overseas business is all about.