Yoshitsu Co., Ltd Establishes Franchise Network for Southeast Asia Expansion

Rhea-AI Summary

Yoshitsu Co., (Nasdaq: TKLF), a retailer and wholesaler of Japanese products, has announced a significant expansion into Southeast Asia. Through its Hong Kong subsidiary, Tokyo Lifestyle , the company has entered into agreements with Grun Group Thailand Co. to develop a franchise network under the 'Tokyo Lifestyle' brand. The expansion plan includes:

- Establishing 18 franchise stores in Thailand by 2026
- Opening 15 franchise stores in Malaysia by 2026
- Targeting downtown areas and fast-growing middle-class consumer groups

This strategic move aims to capture the potential of the Southeast Asian market, build brand awareness, and drive long-term growth for Yoshitsu.

Positive

• Expansion into the promising Southeast Asian market
• Plan to establish 33 franchise stores across Thailand and Malaysia by 2026
• Strategic partnership with Grun Group Thailand for market entry
• Targeting fast-growing middle-class consumer groups in prime locations

Negative

• Potential challenges and fierce competition in the new market
• Risks associated with rapid expansion and franchise model

Insights

Market Research Analyst

This expansion into Southeast Asia represents a strategic move for Yoshitsu, targeting a high-potential market. The plan to establish 33 franchise stores across Thailand and Malaysia by 2026 is ambitious but calculated. The focus on middle-class consumers in urban areas aligns with the region's economic growth trends. However, success hinges on several factors:

• Adapting to local consumer preferences
• Navigating regulatory landscapes
• Managing competition from established local and international brands

While the expansion could drive long-term growth, investors should monitor initial store performance and brand reception in these new markets. The franchise model may limit capital expenditure but could pose challenges in maintaining consistent quality and brand image across locations.

Financial Analyst

Yoshitsu's Southeast Asian expansion strategy presents a mixed financial outlook. The franchise model allows for rapid expansion with reduced capital investment, potentially improving ROI. However, the lack of specific financial projections is concerning. Key financial considerations include:

• Initial franchise fees and ongoing royalties
• Inventory management costs
• Marketing expenses for brand establishment

The phased approach to store openings (3 in 2024, 8 in 2025, 18 by 2026 in Thailand; 2 in 2024, 5 in 2025, 15 by 2026 in Malaysia) allows for adjustment based on performance. Investors should watch for updates on store profitability, same-store sales growth and the impact on Yoshitsu's overall financial health as the expansion progresses.

Retail Industry Expert

Yoshitsu's entry into Southeast Asia through a franchise network is a calculated risk with potential for significant rewards. The strategy leverages several key retail trends:

• Growing demand for Japanese beauty and lifestyle products in Southeast Asia
• Rising middle-class consumer base in urban areas
• Increasing mall culture in Thailand and Malaysia

The varied store formats (standard and lifestyle) show adaptability to different locations and consumer needs. However, success will depend on:

• Effective localization of product offerings
• Strong supply chain management
• Consistent brand experience across franchise locations

The partnership with Grun Thailand, a local brand marketing agency, could provide valuable insights into consumer behavior and preferences, potentially accelerating market penetration. Investors should monitor customer acquisition costs, brand loyalty metrics and inventory turnover rates as indicators of the expansion's success.

TOKYO, Aug. 12, 2024 (GLOBE NEWSWIRE) -- Yoshitsu Co., Ltd ("Yoshitsu" or the "Company") (Nasdaq: TKLF), a retailer and wholesaler of Japanese beauty and health products, sundry products, luxury products, electronic products, as well as other products in Hong Kong, Japan, North America, and the United Kingdom, today announced that, on August 1, 2024, the Company, through its Hong Kong subsidiary, Tokyo Lifestyle Limited (“TLS”), entered into the following agreements with Grun Group Thailand Co. Ltd. (“Grun Thailand”), a professional brand marketing agency, to develop a network of franchise stores for beauty products in the Southeast Asia market under the “Tokyo Lifestyle” brand: (i) a trademark license agreement with Tokyo Lifestyle Thailand Co., Ltd., a company incorporated in Thailand, the controlling shareholder of which is Grun Thailand, and (ii) a purchase and sales contract (collectively, the “Agreements”). The Company sees these Agreements as representing a significant milestone in the Company’s ambitious regional expansion strategy.

By entering into the Agreements, the Company plans to establish a distribution network consisting of 18 franchise stores in Thailand and 15 franchise stores in Malaysia by the end of 2026. In Thailand, the Company expects to open three standard stores (with a floor plan of 100 to 150 square meters each) in downtown Bangkok in 2024 and eight lifestyle stores (with a floor plan of 80 to 120 square meters each) nationwide in 2025, and reach 18 stores nationwide by 2026, with the expectation of building a strong brand presence in the country. In Malaysia, the Company anticipates opening two standard stores in Klang Valley in 2024 and five lifestyle stores nationwide in 2025, and reaching 15 stores nationwide by 2026.

Mr. Qiang (Johnny) Liao, Chief Executive Officer of Grun Thailand, remarked, “We consider Southeast Asia as one of the most promising emerging markets in the world. By introducing the brand ‘Tokyo Lifestyle,’ which originated in Japan, we believe Yoshitsu can capture local consumers’ interests, unlocking new opportunities for significant and lasting growth. Moreover, we expect our thoughtful site selection and network expansion plan to be highly compatible with the structure and characteristics of the local markets, both from the perspective of a cost-efficient top-down distribution network and a point-to-area popularization model. We believe this cooperation will accelerate mutual growth, promoting more opportunities and development for both companies.”

Mr. Mei Kanayama, Principal Executive Officer of Yoshitsu, commented, “We are thrilled that our strategic expansion initiatives into the Southeast Asia market have made solid progress. We believe Southeast Asia is a fast-developing and promising region that could offer vast growth potential and present unique challenges and fierce competition. After careful consideration, we decided to partner with Grun Thailand and adopt a franchise network expansion plan to establish our brand and presence in the region. With intense coordination, we carefully chose the downtown areas in Thailand and Malaysia as our expansion outposts, targeting the representative and fast-growing middle-class consumer groups, expecting to build our brand awareness quickly and thoroughly. We are committed to delivering our high-quality fashion products to the market, enhancing customer experiences, and fostering improvements in life quality, cultural diversity, and the regional economy. I believe this strategic step could open up access to this emerging market, driving our long-term growth and ultimately creating more value for our shareholders.”

About Yoshitsu Co., Ltd

Headquartered in Tokyo, Japan, Yoshitsu Co., Ltd is a retailer and wholesaler of Japanese beauty and health products, sundry products, luxury products, electronic products, and other products in Hong Kong, Japan, North America, and the United Kingdom. The Company offers various beauty products (including cosmetics, skincare, fragrance, and body care products), health products (including over-the-counter drugs, nutritional supplements, and medical supplies and devices), sundry products (including home goods), and other products (including food and alcoholic beverages). The Company currently sells its products through directly-operated physical stores, through online stores, and to franchise stores and wholesale customers. For more information, please visit the Company's website at https://www.ystbek.co.jp/irlibrary/.

Forward-Looking Statements

Certain statements in this press release are forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations and projections about future events and financial trends that the Company believes may affect its financial condition, results of operations, business strategy, and financial needs. Investors can identify these forward-looking statements by words or phrases such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to," or other similar expressions. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results in the Company's registration statement and in its other filings with the U.S. Securities and Exchange Commission.

For more information, please contact:

Yoshitsu Co., Ltd
Investor Relations Department
Email: ir@ystbek.co.jp

Ascent Investor Relations LLC
Tina Xiao
President
Phone: +1-646-932-7242
Email: investors@ascent-ir.com

FAQ

What is Yoshitsu's (TKLF) expansion plan for Southeast Asia?

Yoshitsu (TKLF) plans to establish 18 franchise stores in Thailand and 15 in Malaysia by the end of 2026 under the 'Tokyo Lifestyle' brand.

When will Yoshitsu (TKLF) open its first franchise stores in Thailand and Malaysia?

Yoshitsu (TKLF) expects to open three standard stores in downtown Bangkok and two standard stores in Klang Valley, Malaysia, in 2024.

Who is Yoshitsu (TKLF) partnering with for its Southeast Asian expansion?

Yoshitsu (TKLF) is partnering with Grun Group Thailand Co. , a professional brand marketing agency, for its Southeast Asian expansion.

What products will Yoshitsu (TKLF) offer in its Southeast Asian franchise stores?

Yoshitsu (TKLF) will offer Japanese beauty and health products, sundry products, luxury products, and electronic products in its Southeast Asian franchise stores.