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TAY TWO 7610
テイツー
Recent Updates
2022-04-28
2022-04-15
2022-04-15
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〒700-0974
650-111 Imamura, Kita-ku, Okayama City, Okayama Prefecture
Summary
Tay Two Co., Ltd. was founded in 1989 in Okayama, Okayama Prefecture (western Japan) as a buyer and seller of secondhand books. In the 1990s, the store network expanded eastward into the Kansai and Kanto regions.
Distributors
Key dates
2021-11-15
Coverage initiation
Executive summary
Overview
Tay Two Co., Ltd. was founded in 1989 in Okayama, Okayama Prefecture (western Japan) as a buyer and seller of secondhand books. In the 1990s, the store network expanded eastward into the Kansai and Kanto regions. As of end-February 2022, the company operated 114 stores selling both new and secondhand books, game software, trading cards, DVDs, and other products.
In FY02/21, new products accounted for 51.2% of sales and 21.9% of gross profit, secondhand goods accounted for 46.8% of sales and 73.9% of gross profit, and rental items accounted for 1.4% of sales and 2.8% of gross profit. Secondhand goods have higher gross profit margin (GPM) than new products and account for a larger share of gross profit. The company is focusing on sales not only in brick-and-mortar stores but also online. Shared Research understands that e-commerce sales accounted for about 18% of secondhand sales in FY02/22 (versus about 12% in FY02/21).
Products handled in FY02/21 included games (52.7% of sales, 37.0% of gross profit), trading cards (18.5% of sales, 16.3% of gross profit), books (15.0% of sales, 28.9% of gross profit), and DVDs (2.5% of sales, 4.0% of gross profit).
Sales can be broken down by the number of stores and sales per store. Tay Two had 114 stores as of end-February 2022 (up nine YoY). The store network decreased from 128 at end-FY02/17 to 101 at end-FY02/20 in line with the reorganization of unprofitable stores, but the company has observed net increase since FY02/21. Sales per store amounted to JPY245mn (+1.2% YoY) in FY02/22. Previously, sales per store had been trending downward since FY02/13, but they began to rise in FY02/21 due in part to the acquisition of Yamatoku Co., Ltd. (e-commerce sales, etc.) as a consolidated subsidiary and in part to growth in sales of trading cards.
Tay Two's GPM in FY02/22 was 33.7% (+2.7pp YoY). The company's GPM has been rising since reaching a nadir of 24.0% in FY02/18. Relatively high-margin secondhand goods made up a greater proportion of sales and also carried a higher GPM. Major SG&A expenses include personnel expenses and other store-related expenses, rent, and depreciation, which fluctuate as the number of stores increases or decreases.
As of February 28, 2022, Tay Two was operating seven retail brand formats. Furuhon Ichiba (literally “used book market”) is the flagship brand, chiefly found in suburban roadside locations. In FY02/21, the company had 84 directly managed Furuhon Ichiba stores (same in FY02/21) and two franchise stores (also unchanged). Furuichi is a scaled-down version of Furuhon Ichiba, with 17 stores (six in FY02/21). The Treka Park brand (treka is short for “trading card”), specializing in trading cards, had five stand-alone stores (same in FY02/21), but is often set up inside other stores as a shop dealing in trading cards.
Customers bring secondhand goods such as books and games to Tay Two stores, where staff evaluate the goods, checking for scratches, stains, or any other conditions, and calculate the purchase price. If both parties agree on the price, the goods are bought and sold, and the store pays the agreed price to the consumer. The store adds a margin to the purchased goods, labels them with a selling price, and displays them in-store, where they are bought by general consumers.
When purchasing secondhand goods, the store uses master data on products. The master data shows how much the product was bought and sold for in the past, how much it sells for online, how popular it is (in terms of trading volume and inventory period), appropriate purchase price, and the condition of the product such as scratches and stains. The company has accumulated product data for over 30 years in business. The head office manages the master data, and stores are equipped with a system allowing instant access to the purchase price when a product code is entered.
Customers sometimes bring a large number of secondhand trading cards to the store at one time. It takes time for staff to check and evaluate each item, and high-value cards are often mixed in. The company developed its own trading card reading and evaluation machine, TAY2 AI Yomitori (reading) System (TAYS), which it uses to automatically evaluate cards brought for sale. The system enables appropriate purchase evaluations even if the staff member lacks specialized trading card knowledge. Tay Two also sells the TAYS system to external companies as part of its B2B strategy.
The GPM for secondhand goods is determined by the selling price, purchase price, turnover (the ratio of goods actually sold), and cost of disposal. If a product on the shelf has a selling price of JPY100, a purchase price of JPY20, a turnover of 50%, and a disposal cost of JPY10, the GPM will be 50%. The selling price and purchase price differ depending on the popularity of the product handled and the degree of competition with other companies. In the case of a popular manga that has just been released, while the differential between the selling price and the purchase price is small, turnover is high and the cost of disposal is small.
Other listed companies in the same industry include GEO Holdings Corporation (TSE Prime: 2681), Book Off Group Holdings Ltd. (TSE Prime: 9278), and Komehyo Holdings Co., Ltd. (TSE Standard: 2780). Tay Two is distinguished by the high proportion of sales from new products, high inventory turnover, and high operating profit margin (OPM), ROE, and ROA, as well as a net cash position. While Book Off operates roughly 50/50 directly managed and franchise stores, Tay Two’s stores are predominately managed directly.
Over the long term, the markets for books and games are shrinking. The 10-year CAGR was -4.2% for paper books and magazines, -6.8% for home video game software, and -3.4% for DVDs. On the other hand, the market for trading cards grew annually by 4.1% over the same period. Shared Research believes consumer behavior is shifting from print books to e-books, from home video games to smartphone apps, and from DVDs to subscription-based video distribution. At the same time, the expansion of the secondhand market in the form of online flea markets and auctions is expected to swell the overall market for secondhand goods by 5.8% annually from 2018 to 2025 (Reuse Business Journal “Secondhand Market Data Book 2020”).
The 10-year CAGR for Tay Two’s sales was -2.9%. The company also generated losses for five of the past 10 years. The company began a series of structural reforms in FY02/18, involving: (1) reorganizing unprofitable stores, (2) withdrawing temporarily from loss-making e-commerce sales, and (3) decentralizing functions from the Tokyo head office. These brought the company back into the black in FY02/19. Tay Two has since remained on this new growth trajectory.
In June 2020, Tay Two acquired and consolidated Yamatoku Co., Ltd., which buys and sells secondhand goods mainly online. Yamatoku sells secondhand goods through its own online channel and through auction sites, and has a track record of exporting products to more than 90 countries. Tay Two will draw on Yamatoku’s e-commerce planning and marketing capabilities to build a group e-commerce site and generate synergies.
Earnings trends
Sales in FY02/22 were JPY26.8bn (+7.6 YoY), operating profit was JPY1.3bn (+40.2% YoY), recurring profit was JPY1.3bn (+40.9% YoY), and net income attributable to owners of the parent was JPY1.5bn (+113.0% YoY). Contributing to gains were the opening of 11 scaled-down Furuichi stores and growth in e-commerce sales. By product, while sales of secondhand books were down 9.5% YoY, sales of secondhand trading cards were up 86.2%YoY and sales of new trading cards were up 34.4%YoY.
The full-year company forecast for FY02/23 call for sales of JPY26.4bn (-1.7% YoY), operating profit of JPY1.1bn (-15.6% YoY), recurring profit of JPY1.1bn (-16.4% YoY), and net income attributable to owners of the parent of JPY700mn (-53.3% YoY). By product, Tay Two expects sales of trading cards to increase, while also projecting declines in sales of books and games. The company plans to launch group e-commerce site Furuichi Online in 2H FY02/23.
In February 2022, Tay Two announced that it had set long-term numerical targets for FY02/27 of sales of JPY35.4bn, operating profit of JPY2.0bn, and net income attributable to owners of the parent of JPY1.2bn. The company said it plans to focus resources on reuse stores, reuse e-commerce, and reuse-related B2B activities, and announced strategies for these various areas. It also said it plans to pay dividends on an ongoing basis.
Strengths and weaknesses
Shared Research sees three strengths for the company: (1) It has developed prowess in evaluating secondhand trading cards and boasts the highest transaction volume in the industry in this area, due in part to its in-store card competition spaces; (2) it has high inventory turnover and total asset turnover due to efforts to enhance product appeal, such as pricing that takes into account how well an item sells and its inventory level, and offering multiple volumes of manga for sale as a set; and (3) it has boosted the appeal of its stores through product lineups and events, efficiently luring customer traffic.
On the other hand, Shared Research sees three weaknesses: (1) Tay Two has been unable to keep up with competitors in expanding into new secondhand product areas; (2) trading card prices fluctuate in line with revisions to card maker’s rules, which is a cause of greater volatility in the company’s performance; and (3) the company is lagging behind competitors in its e-commerce efforts.
(See the Strengths and weaknesses section below.)
Key financial data
Note: Figures may differ from company data due to differences in rounding methods.
Recent updates
Acquisition of treasury shares
Tay Two Co., Ltd. announced a resolution on the purchase of treasury stock.
Details of purchase
Notice of upward revision to FY02/22 earnings forecast
Tay Two Co., Ltd. has announced revisions to its full-year earnings forecast.
Since the upward revisions made to the company's full-year forecast on October 1, 2021, customer utilization of both physical and e-commerce stores has exceeded projections due in part to promotional sales measures. Additionally, following consideration of recoverability, the company has decided to record deferred tax assets, which is expected to result in booking JPY535mn on income taxes-deferred.
As a result, the company has made the following revisions to its full-year FY02/22 forecast.
Revenue: JPY26.8bn (previous forecast of JPY25.5bn)
Operating profit: JPY1.3bn (JPY950mn)
Recurring profit: JPY1.3bn (JPY950mn)
Net income attributable to owners of the parent: JPY1.5bn (JPY650mn)
Trends and outlook
Quarterly trends and results
Note: Figures may differ from company data due to differences in rounding methods.
Full-year FY02/22 results (out April 14, 2022)
Overview
*Net income attributable to owners of the parent.
The achievement rate against the company’s revised full-year FY02/22 forecast (out April 14, 2022) was 100.0% for sales, operating profit, recurring profit, and net income attributable to owners of the parent.
Sales
Sales rose 7.6% YoY. The company resumed full-scale reuse store opening efforts, launching 11 "Furuichi" small package stores, primarily in Aeon mall facilities. Sales of secondhand trading cards rose 86.2% YoY, and sales of games increased 5.3% YoY. In contrast, sales of books declined 9.5% YoY. With regard to new products, sales of trading cards grew 34.4% YoY, while sales of games dropped 13.2% YoY. Performance from trading cards was brisk overall, and the company noted particularly strong results from the Pokémon Trading Card Game.
In the category of reuse e-commerce, both sales and profit increased. E-commerce sales generated through the parent company amounted to JPY480mn (+11.6% YoY). Consolidated subsidiary Yamatoku produced about JPY2.1bn in e-commerce sales. Based on these results, Shared Research concludes that e-commerce sales accounted for about 18% of the company's secondhand sales (compared to about 12% in FY02/21).
Although its contribution to overall sales was small, the company successfully launched a new business in the reuse-related B2B activities category when it began selling the TAYS trading card reading and evaluation machine to external customers. Through the external sale of TAYS, the company will generate one-time earnings through initial installation and recurring monthly sales.
Profit
Gross profit was JPY9.0bn (+16.9% YoY). The GPM was 33.7%, a YoY improvement of 2.7pp.
Operating profit was up 40.2% YoY. Although SG&A expenses rose 13.7% to JPY7.7bn and the SG&A ratio rose 1.5pp to 28.8%, this was offset by improvement in the GPM.
Tay Two posted JPY118mn in impairment loss on unprofitable stores as extraordinary loss. The company determined that it could potentially recover losses carried forward for tax purposes and accordingly decided to record deferred tax assets. As a result, the company accounted for tax impact by adding JPY535mn to its income tax—deferred account.
FY02/23 company forecast
Note: Figures may differ from company data due to differences in rounding methods.
The full-year company forecast for FY02/23 call for sales of JPY26.4bn (-1.7% YoY), operating profit of JPY1.1bn (-15.6% YoY), recurring profit of JPY1.1bn (-16.4% YoY), and net income attributable to owners of the parent of JPY700mn (-53.3% YoY).
The company's forecast is based in part on the assumption that sales of trading cards will increase and the projection that sales of games and books will decrease.
The company plans to open 10 new Furuichi stores in FY02/23 (one is the conversion of an existing store). In addition to the usual stores located mainly in the shopping malls of Aeon, it also plans to open suburban roadside locations.
The company plans to launch group e-commerce site Furuichi Online in 2H FY02/23.
The company plans to focus on expanding sales of external sales of its TAYS trading card reading and evaluation machines. It also plans to install more of its IoT high-performance trading card vending machines, called AIICO.
In April 2022, the company announced a business alliance with Kaitori Okoku Co., Ltd. (TSE Standard: 3181). Kaitori Okoku (48 directly managed stores as of end-FY02/22) operates primarily in the Chubu region, primarily buying and selling used apparel, hobby-related products, tools, and brand-name goods. Tay Two believes that this alliance with Kaitori Okoku will generate synergy by combining the complementary strengths of both parties. The company plans to introduce its TAYS system in stores operated by Kaitori Okoku. In addition, the company plans to deploy its personnel at Kaitori Okoku so they can acquire operational expertise that can later be applied to apparel, brand-name products, and other goods on which the company is focused.
Historical forecast and disparity with results
The company was facing an adverse market environment for many years, including an ongoing decline in sales, but its sales swung upward for the first time in 11 years in FY02/21. From FY02/13 to FY02/17, profits underperformed forecasts. In particular, in FY02/15 and FY02/17, the initial forecast called for profitability, but the company ended both years in the red.
The company released no forecast for FY02/16, citing anticipated short-term changes in the business environments surrounding its consolidated subsidiaries.
Since FY02/18, the company's profits have often exceeded initial projections. In FY02/20 and FY02/22, the company had initially projected declines in profit, but profits ultimately increased in both years.
Notes: Figures may differ from company data due to differences in rounding methods.
The initial forecast for FY02/21 reflects figures announced in Q3 after consolidation of Yamatoku.
For FY02/18, due to liquidation of consolidated subsidiary CardFlex Japan at the beginning of the fiscal year, the forecast is for interim results. The forecast for net income is as announced.
The company did not release a forecast in FY02/16 due to the expected near-term change in the business of a consolidated subsidiary.
Medium- and long-term outlook
In February 2022, Tay Two announced that it had set long-term numerical targets for FY02/27 of sales of JPY35.4bn, operating profit of JPY2.0bn, and net income attributable to owners of the parent of JPY1.2bn. While targeting net income of at least JPY700mn, the company plans to continue paying dividends through FY02/27.
Group vision and management policy
The vision of the Tay Two Group focuses on "connecting communities and the world through reuse." In accordance with this vision, Tay Two has made reuse a pillar of its business. Moving forward, it will aim to procure secondhand goods outside of the areas covered by its brick-and-mortar stores by utilizing e-commerce channels and participating in regional development activities. In addition, it will target overseas expansion through the use of e-commerce. By focusing on reuse, the company aims to contribute to society while maintaining an awareness of the importance of sustainability.
To realize this group vision, the company has established a three-point management policy that aims to expand reuse, intensify the company's focus on e-commerce, and strengthen management infrastructure.
Strategies by business domain
In line with its management policy, the company has identified three business domains (reuse stores, reuse e-commerce, and reuse-related B2B activities) and established the following strategies for each of them.
Reuse stores
In FY02/27, the company aims to generate sales of JPY23.0bn and operating profit of JPY460mn through the reuse stores domain. These targets are roughly on par with projections for FY02/23 but do not account for impact stemming from e-commerce sales of merchandise procured through brick-and-mortar stores. To achieve sales growth in the reuse e-commerce domain, the company must take advantage of its ability to procure merchandise through its brick-and-mortar stores. Consequently, the company projects that the actual figures generated through the reuse stores domain will remain flat. However, the company will be developing this business domain in tandem with the reuse e-commerce domain and forecasts that the combined performance of these two domains will effectively improve.
Store opening plan
In FY02/23, Tay Two plans to open 10 new scaled-down Furuichi stores. The company primarily plans to open Furuichi stores in Aeon mall facilities, but it also intends to open stores in suburban roadside format. It has not revealed its long-term store-opening plan for FY02/23 and subsequent accounting periods but maintains that it will base its decisions regarding the opening and closing of reuse stores on its surrounding business environment and cost-effectiveness.
Product lineup
In addition to its mainstay books, games, and trading cards, the company also handles merchandise such as mobile devices, apparel, brand-name goods, and household goods. During April 2022, the company formed a business alliance with Kaitori Okoku Co., Ltd., which operates primarily in the Chubu region of Japan and mainly procures and sells secondhand apparel, hobby-related products, tools, and brand-name goods. Tay Two plans to deploy its personnel at Kaitori Okoku so they can acquire operational expertise that can later be applied to apparel, brand-name products, and other goods on which the company is focused. The company aims to diversify its product lineup through a variety of collaborative efforts such as this one.
Core systems
The is currently engaged in ongoing efforts aimed at revamping its core systems and expects these efforts to reach their completion by October 2022. However, in line with its business development plans, the company will subsequently make additional investments in this system.
Reuse e-commerce
In FY02/27, Tay Two aims to generate sales of JPY12.0bn and operating profit of JPY1.4bn through the reuse e-commerce domain. The company anticipates that this domain will be its main source of operating profit in FY02/27. Tay Two has not disclosed its overseas sales targets but has indicated that it intends to expand overseas sales through e-commerce channels.
Group e-commerce site Furuichi Online
Tay Two plans to launch its Furuichi Online website during 2H FY02/23. The design concept and management policy associated with Furuichi Online comprehensively reflect the expertise of subsidiary Yamatoku, and the company plans to conduct integrated management of its brick-and-mortar stores and e-commerce site moving forward. In FY02/27, Tay Two aims to achieve sales of JPY10.0bn (most of the JPY12.0bn it is targeting through the reuse e-commerce domain) through Furuichi Online.
Investment in business locations and personnel
Consolidated subsidiary Yamatoku plans to expand its operations by investing in additional business locations, increasing the number of its staff, shortening the time required to complete assessments, responding to increases in material volumes, and expanding its capacity to introduce new commercial products.
Reuse-related B2B activities
In FY02/27, the company aims to generate sales of JPY400mn and operating profit of JPY120mn through reuse-related B2B activities.
Trading card reading and evaluation machine TAYS
The company plans to expand sales generated through TAYS, a trading card reading and evaluation system that it began selling externally in FY02/22. Through its external sale of TAYS, the company produces earnings through initial installation and subsequently receives recurring monthly sales.
IoT-based trading card vending machine AIICO
Together with a manufacturer, the company has developed its AIICO vending machine, which is equipped with an advanced digital signage advertising system and sells trading cards. These systems also sport a variety of other features, including QR code-based payment. The company began installing these machines in its directly managed stores during FY02/22. Additionally, the company plans to install these machines at non-store locations and at stores operated by other companies. If the company successfully installs a predetermined number of AIICO machines, it will be able to launch a business that generates digital signage advertising sales.
Previous medium-term business plan
The company announced a medium-term business plan in October 2017, covering the period from FY02/18–FY02/21. The essential focus was on: (1) streamlining the store network and (2) regaining profitability by reinforcing the tie-up with A-Too Co., Ltd. Specifically, the company suspended the planned opening of numerous Treka Park stores, focusing instead on Furuhon Ichiba stores; temporarily withdrew from the e-commerce business; and lowered fixed costs by relocating the Tokyo head office. As a result, although the company posted a loss in FY02/18 due to one-off expenses, profitability subsequently turned upward.
The company announced a new medium-term business plan in February 2020, covering the period from FY02/21–FY02/23, targeting operating profit of JPY500mn in FY02/23. However, the company acquired Yamatoku in June 2020, changing its business portfolio. So, the company in March 2021 announced a new group growth strategy for FY02/22. Given the difficulties involved in predicting future performance, the company opted not to set numerical targets but rather present specific initiatives it will take.
Business
Business description
The company opened the first Furuhon Ichiba store in 1989 for the purpose of buying and selling secondhand books, and in 1990, established Tay Two Co., Ltd. It mainly deals in either new or secondhand books, games, trading cards, and DVDs, either for sale or as rental items. In FY02/21, new products accounted for 51.2% of sales, secondhand goods accounted for 46.8%, and rental items accounted for 1.4%. In terms of gross profit*, however, new products accounted for 21.9%, secondhand goods accounted for 73.9%, and rental items accounted for 2.8%. Secondhand goods carry high GPMs overall, thus accounting for a greater share of total profit. The company operates seven retail brand formats, with 105 stores in the network as of end-February 2021. In June 2020, Tay Two acquired and consolidated Yamatoku, aiming to bolster its e-commerce business and expand the portfolio of products handled. Shared Research found that e-commerce accounted for 11.8% of secondhand sales in FY02/21.
*For convenience, Shared Research calculates and analyzes gross profit as the difference between announced sales and cost of purchased goods figures.
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Figures may differ from company materials due to differences in rounding methods.
Store formats
The company operates seven retail brand formats. Products handled and location strategies differ depending on the format.
*secondhand Other includes mobile devices , clothing , name-brand goods , liquor , cash vouchers
Note: Number of stand-alone Treka Park stores, excluding shops located in Furuhon Ichiba stores.
Furuhon Ichiba
Furuhon Ichiba (literally “used book market”) is the company’s flagship store format. These stores deal in almost all products except rental items. Most stores cover about 500m2 and are in suburban roadside locations. The company closed several unprofitable stores, bringing the number of stores from 100 in FY02/12 to 84 in FY02/22. In addition to the directly managed stores, there are two franchise stores. In many cases, a Treka Park shop is set up inside Furuhon Ichiba stores as a space for dealing in trading cards.
Furuichi
A format launched in FY02/19, Furuichi is a scaled-down version of Furuhon Ichiba, with a standard store covering about 115m2. Furuichi stores deal in mainly new and secondhand games, trading cards, and hobby goods. In many cases, stores are located in shopping malls, particularly Aeon malls. As of April 2022, the company was focusing most strongly on the Furuichi format. Since startup costs can be held to roughly a tenth of the costs for Furuhon Ichiba stores, it is possible to turn a monthly profit as early as the second month after opening. The company opened 11 new Furuichi stores in FY02/22 and plans to open 10 in FY02/23. Although the majority of these stores will be opened within Aeon mall facilities, the company also plans to open its first store in suburban roadside format.