MUJI’s Global Success: What’s the Secret Behind Their Business?

Exploring a Company That Continues to Grow Through Simple Philosophy

Most of you have probably shopped at MUJI at least once. Today, we’ll objectively analyze Ryohin Keikaku, the company behind those simple and functional products, from an investment perspective. We’ll explain the company’s performance and business operations in an easy-to-understand way, avoiding complex technical terms wherever possible.

Outstanding Recent Performance

Ryohin Keikaku’s recent performance has been truly impressive. For 17 consecutive months through June 2025, existing store sales have exceeded the previous year’s figures – a remarkable record that demonstrates continued growth even after overcoming the COVID-19 pandemic.

In the interim results for fiscal year ending August 2025, operating revenue reached 382 billion yen, an increase of 62.1 billion yen from the previous year. Operating profit also grew to 36.1 billion yen, up 12 billion yen from the previous year. Management has also revised its full-year profit forecast upward from 64 billion yen to 67 billion yen, reflecting their confidence in the business.

Monthly sales data shows strong performance across all categories, with functional innerwear, summer clothing, and household goods all performing well, with every division clearing previous year’s results. This consistent performance is truly remarkable.

Sound Financial Management

Looking at Ryohin Keikaku’s financial condition reveals very healthy management practices. An ROE (Return on Equity) of approximately 15% indicates that the company is “efficiently generating profits using shareholders’ invested capital.” This is an excellent figure for the retail industry.

The equity ratio of 57.5% is also reassuring. This means the company “operates solidly with its own capital rather than relying too heavily on debt,” indicating a structure that can withstand economic downturns.

Dividends are also planned to increase from the previous year’s annual 40 yen to 44 yen, showing the company’s commitment to shareholder returns.

Strong Business Model

What sets MUJI apart from other retailers is that it handles everything from product planning to manufacturing and sales in-house (called the SPA model). Typically, planning companies, manufacturing companies, and retail companies are separate entities, each adding their own margins. However, by handling everything internally, MUJI eliminates these inefficiencies.

This approach enables them to achieve their quality at competitive prices while quickly incorporating customer feedback into products. This represents a significant competitive advantage.

MUJI’s philosophy of “simple,” “functional,” and “universal” isn’t just a marketing strategy – it’s a corporate culture that permeates everything from product development to store operations. This is why they maintain strong customer trust and brand power.

Competitive Analysis

MUJI is often compared to Nitori. While both handle furniture and interior goods, their strategies are completely different. Nitori promotes cost-performance with their catchphrase “Beyond Your Expectations, Nitori,” while MUJI provides “essential value for long-term use.”

Despite competing in the same market, they target different customers. Nitori targets people who want “affordable and functional items,” while MUJI targets those who want “simple, quality items for long-term use.” This is why both companies can succeed.

However, Ryohin Keikaku does have weaknesses. Compared to Nitori, inventory turnover is slower, meaning products tend to remain unsold longer. This is due to the high proportion of clothing items and represents a challenge in responding to fashion changes.

Impressive International Expansion

What’s remarkable about Ryohin Keikaku is their success overseas. Few Japanese retail companies have succeeded in international expansion, but Ryohin Keikaku generates over one-third of its sales overseas – a truly impressive achievement.

Their presence in Asian markets is particularly strong, and continued growth in this region is expected. With growing populations and rising incomes in these areas, demand for “slightly better quality” products like MUJI should continue to increase.

Venturing into New Businesses

Recently, Ryohin Keikaku has begun initiatives beyond traditional retail. They’ve established “MUJI ENERGY,” a renewable energy business company with JERA, and expanded into accommodation businesses with MUJI HOTEL and MUJI BASE.

While these new ventures won’t immediately generate significant revenue, they’re noteworthy as efforts to expand the possibilities of the “MUJI” brand.

Investment Risks to Consider

Of course, it’s not all positive. There are risks to consider from an investment perspective.

First, the stock price has risen considerably. A PER (Price-to-Earnings Ratio) of approximately 38 times means “the stock is trading at 38 years’ worth of current profits, expecting future growth.” If growth doesn’t meet expectations, the stock price could decline.

Other considerations include the inventory management challenges mentioned earlier, foreign exchange impacts (since overseas sales are significant, yen appreciation reduces profits), and intensifying competition with rivals.

ESG Initiatives Also Notable

In modern investing, environmental and social considerations (ESG) have become important criteria. Ryohin Keikaku is active in this area, entering renewable energy business, simplifying packaging, and working on community issues – all part of sustainable management practices.

The new management structure (centered around new President Shimizu) also aims for highly transparent governance, which should contribute to long-term corporate value enhancement.

Overall Investment Perspective

When viewing Ryohin Keikaku as an investment target, several characteristics emerge. Performance is strong, they have a solid business model, and international expansion is progressing smoothly. Brand strength is evident, and they’re actively pursuing new businesses.

However, the stock price reflects growth expectations, with a PER of approximately 38 times assuming continued growth. For investment consideration, it’s important to evaluate the company’s growth potential from a medium to long-term perspective.

Analyst target prices are around 6,300-6,700 yen, indicating the market gives the company a certain level of recognition.

Conclusion

We’ve analyzed Ryohin Keikaku, the company behind the familiar MUJI brand, from an investment perspective. It’s clear this is a company that continues steady growth while maintaining its philosophy of simplicity.

Investment decisions vary depending on individual investors’ risk tolerance, investment timeline, and portfolio considerations. We hope this analysis serves as a reference for understanding Ryohin Keikaku as a company.

For actual investment consideration, we recommend checking the latest financial statements and securities reports, and conducting thorough research and consideration on your own. Corporate analysis is just one factor in investment decisions, and it’s important to remember that investing involves risks.