Japan Markets ViewTOMY Shares Trading at High Prices; Investors Expect Strategy for Expanding Target Customer Segment

 

 

[Nikkei QUICK News] Shares of TOMY Company (7867) are performing strongly. On July 22, the company’s shares were up 39 yen (2.7%) to 1,493 yen on the Tokyo stock market, the highest in two years and seven months since December 2019. The increase rate from the end of last year is more than 30%. The company’s strategy of introducing high-priced products targeted at the elderly in Japan, where the birthrate is declining, and strengthening sales of popular products for each region in overseas markets, where growth is expected, is yielding positive results.

 

■ New Fans
In August 2021, TOMY launched a highly functional talking doll, “My baby Ami-chan.” Equipped with an AI-powered facial recognition function, Ami-chan can also call out its owner by name. The doll can combine approximately 1,600 words into about 2.5 billion different conversations. The unit price is 27,500 yen (including tax), which is higher for a toy. This product is not for children. It is designed to meet the needs of the increasing number of elderly people, especially those living alone, who want to communicate with others. TOMY has strong established brands such as “Tomica” miniature cars and “Licca-chan” dress-up dolls. Even with these brands, the company is working hard to capture adult demand. In 2015, the company launched “tomica PREMIUM unlimited,” a series of “TOMICA” for adults, by reproducing cars that appear in popular animation series and films such as “Case Closed (Detective Conan).” In September, the company will launch a new product in collaboration with a popular video game, hoping to attract new Tomica fans. TOMY intends to further beef up the Licca-chan brand by leveraging social networking service (SNS). In July 2021, the company lauched its official Licca-chan channel on YouTube, a video-sharing website. For Instagram, an image-sharing application, the company opened its official account in 2015 and now has a total of 92,000 followers. On Instagram, in addition to the company’s official account, many adults who enjoy dressing up Licca-chan are posting their own pictures. The company provides contents that a wide range of people, from children to adults, can enjoy. Meanwhile, for the overseas markets, TOMY’s overseas sales ratio has been around 50% for the past several years. In the fiscal year ended March 31, 2022 (previous year), Tomica and BEYBLADE BURST, a spinning-top toy, performed well in Asia, the company’s main overseas market. In North America, the company is beginning to see synergistic effects with Fat Brain Toys, a U.S. toy manufacturer that became a subsidiary in October 2020. TOMY aims to expand sales by developing marketing tailored to each region, such as Tomica and game arcade equipment in Asia, and baby products and farm vehicle toys in North America.

 

■ Solid Sales Expected
Mitsuhiro Osawa, senior analyst at Ichiyoshi Research Institute (IRI), attributes the TOMY’s solid stock price performance to “investors’ high expectations for the company’s strategy to expand its target customer segments.” The company’s stock price was on an upward trend even when the overall market was weakening due to concerns about high prices and the U.S. economic outlook. Ikuo Mitsui, fund manager at Aizawa Securities commented, “Many adults are willing to spend on hobbies, tastes, and child-related consumption despite the strong sense of uncertainty. The stock may have been purchased backed by the expectation of solid sales.” TOMY expects sales for the fiscal year ending March 31, 2023 (this fiscal year) to increase 3% year-on-year to JPY170 bn. In the April-June 2022 financial results to be announced on August 9, to what extent will a weakening yen trend benefit the company? Some market participants are saying that “solid sales are expected, especially for standard products, and there are high expectations for continued earnings growth” (according to a securities company in Japan). The strategy to capture adults and the world market is likely to be a focus of attention.
(Reported on July 22)

 

 

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