TOKYO -- Discount furniture retailer Nitori Holdings beat market expectations for the first time in six quarters in the March-May period, a feat for a company whose profit appears to only keep increasing.
Analysts tend to set the bar high for the extremely profitable Nitori, resulting in actual results undershooting their projections. Nitori differentiates itself from others by focusing on private-label products, so it "doesn't face intense competition with Amazon and other online retailers," says an analyst at a brokerage.
Nitori said Thursday that March-May operating profit jumped 18% on the year to 30.4 billion yen ($275 million), marking the first increase for the period in two years and surpassing the 30 billion yen average of analyst expectations.
Existing-store sales grew 2.7%, with Nitori's furniture and household items capturing demand from college graduates and others moving to start work.
"The March-May earnings were generally as planned, as cost-reduction efforts bore fruit," CEO Toshiyuki Shirai told reporters in Tokyo. Nitori handles everything from production and distribution to retailing, and profitability improved thanks to greater standardization of materials and more compact packaging.
Nitori's operating profit increased for a 31st straight year in fiscal 2017,which ended this past February, marking the longest streak achieved by a publicly traded Japanese company.
The stock draws investors seeking long-term investment opportunities, and the share price has grown more than sixfold over the past decade.
Yet the company's stock has sunk the day after quarterly earnings releases for five straight periods dating to December-February 2016, as hopes propelled by market projections propped up the shares beforehand.
Some market players take advantage of such correction cycles.
"An algorithm that automatically trades stocks based on the gap of projected and actual earnings is at work," said Nobuyuki Fujimoto, director of market analysis at financial technology company Zaisan Net.
But surpassing the market's expectations may help Nitori's stock break the pattern this time.
For the full year ending in February 2019, the company projects a 6% rise in operating profit to 99 billion yen on a 7% increase in sales to 614 billion yen.