Consumer Staples Author: Contributor, Yoshitsu Jan 19, 2022 12:40 AM (GMT+8)
TKLF IPO

[New York - January 19, 2022 - Yoshitsu] Yoshitsu Co., Ltd is a Japanese beauty and health product retailer as well as a maker of other products, and a wholesaler. It raised USD 25 million and debuted on Nasdaq under the ticker symbol 'TKLF' on Tuesday, January 18th. The company has booked USD 221.51 million in revenue and made a profit of USD 5.52 milllion for the 12 months ended March 31st, 2021, despite the adverse impact caused by the COVID-19 pandemic on the retail industry.  

The company issued 6,250,000 American Depositary Shares ('ADSs') at a price to the public of USD 4.00 per ADS, which included 250,000 ADSs issued pursuant to the partial exercise of the underwriters' over-allotment option. Each ADS represents one ordinary share of the company. The IPO enabled Yoshitsu to receive aggregate gross proceeds of USD 25 million, before deducting underwriting discounts and other related expenses. Univest Securities, LLC acted as the sole book runner and Valuable Capital Ltd. acted as a co-manager to the offering.

Headquartered in Tokyo, Yoshitsu offers approximately 12,400 stock keeping units ('SKUs[sl1] ') of beauty products, including cosmetics, skin care, fragrance, and body care, among others, 3,600 SKUs of health products, including over-the-counter ('OTC') drugs, nutritional supplements, and medical supplies and devices, and 7,900 SKUs of other products, including home goods, food, and alcoholic beverages.

The company sells its products through directly operated physical stores, online stores, and franchise stores to retail and wholesale customers in Japan, China, the US, Canada, and the UK. Even though China market has contributed to more than half of its revenue for the past two years, Yoshitsu attaches importance to balance in different markets. The Director of Yoshitsu, Mr. Sen Uehara, said that "China is one of the indispensable markets, but we aim to diversify our development in different markets. In the future, we plan to expand the sales markets in Canada, the United States, Europe, and East Asia."

Due to the pandemic, the global supply chains issue has become one of the biggest challenges in 2021, spawning shortages, price hikes, and maritime traffic jams that could be seen from space. However, the sourcing issue does not trouble Yoshitsu that much. The company has established long-term relationships with over 90 suppliers, consisting primarily of cosmetics and pharmaceutical companies and distributors, including many well-known Japanese brands, such as Shiseido, Sato, Kao, and Kosé. The extensive network of suppliers ensures the global supply chains issue does not materially affect Yoshitsu's business or the results of the operations.

Nevertheless, the shipping fee has inevitably increased. "With the sales raising from 10.7 billion yen in 2019 to 23.4 billion yen in 2021, we've witnessed the shipping fee went up from 890 million yen to 1.9 billion yen," Uehara said, adding, "The sales packing fare rate was up from 1.72% to 4.26%, about 2.5 times up. We've already reduced distribution costs by shipping all at once instead of shipping multiple times where the basic charge of the delivery company has increased by 3 or 4 times."

Due to the growing popularity of online shopping, e-commerce has been growing rapidly in recent years. As a result, the company has steady growth, despite the spreading pandemic. The total revenue increased by USD 81.94 million or 58.7%, from USD 139.57 million for the fiscal year ended March 31, 2020 to USD 221.51 million for the fiscal year ended March 31, 2021. The gross profit increased by USD 12.47 million, or 45.4%, from USD 27.49 million to USD 39.95 million; the company also reported a net income of USD 5.52 million and USD 4.89 million for the fiscal year ended March 31, 2021 and 2020, respectively.

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According to its SEC filings, net proceeds from the IPO will be used for opening new directly operated physical stores and adding franchise stores, brand marketing, improving distribution centers and logistics systems, and talent acquisition and retention.

IPO