World Business

Wine, wallpaper may turn around Sanrio's fortunes

By Naoko Fujimura and Chiara Remondini (China Daily)
Updated: 2010-05-15 10:49

Wine, wallpaper may turn around Sanrio's fortunes

Bottles of Hello Kitty Sweet Pink demi-sec bubbly wine.[ENOTRIA VIA BLOOMBERG]

TOKYO - Sanrio Co, the Japanese owner of the Hello Kitty character brand, may boost profit after arresting a 10-year slide in sales by slapping its logo on wine, wallpaper and minicars.

The popularity of Hello Kitty, a white cat with a red bow and no mouth, with celebrities including Lady Gaga and Paris Hilton, has led the company to focus on licensing and to pare its retail and restaurant businesses.

Sanrio almost doubled overseas licenses last year and counts clothing chains Hennes & Mauritz AB and Inditex SA as customers. President Shintaro Tsuji, 82, plans to set up an office in Dubai this month to grow in the Middle East.

"Sanrio can spur profits, as it has a successful strategy for boosting Hello Kitty's exposure in Europe and other overseas markets," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments Ltd in Tokyo, which oversees about $39 billion in assets. "Sanrio is one of the beneficiaries of a Japanese pop culture boom."

License holders outside Japan, China and Southeast Asia jumped to 250 last year from 150 in the previous year, Hideo Yamaguchi, general manager for investor relations, said.

Yamaguchi said the company intends to export the Hello Kitty musical performed at its Puroland theme park in Japan to help boost its brand abroad. The company also markets permission to use characters including Cinnamoroll, Deery-Lou and Chococat.

"Other Sanrio characters also have potential to be popular abroad," said Takashi Oka, an analyst at Toward the Infinite World Inc. "The licensing business is a jewel for Sanrio, as it has no risk of piling up inventory and offers higher profit margin."

An appearance by Hilton, a reality TV player, at Sanrio's 35th birthday party for Hello Kitty, and by Gaga, a pop singer, on Japanese television holding a stuffed toy, helped the company boost fiscal 2009 sales 0.8 percent from the previous year, the first annual gain since 1999.

"Hello Kitty's Zen-like calmness and faceless expression are the major reasons for its appeal across age groups and markets," said Martin Roll, chief executive officer of Singapore-based consulting firm VentureRepublic.

Sanrio shares have jumped 33 percent this year, compared with a 0.7 percent gain for the benchmark Nikkei 225 Stock Average.

Operating profit may rise to a 10-year high of 10.6 billion yen ($114 million) for the year ending March 2011, 15 percent more than the 9.2 billion yen the company reported on a preliminary basis for last year, Masaaki Kitami, an analyst at Bank of America Corp's Merrill Lynch unit, said in a report on April 30. Sales may total 76.4 billion yen this fiscal year, up 3.5 percent from 73.8 billion yen a year earlier.

Sanrio will probably maintain "double-digit" growth in operating profit from next fiscal year because of overseas expansion and restructuring of domestic businesses, Kitami said. He estimates Sanrio's operating profit will rise to 12.5 billion yen for the year ending March 2012 on sales of 79.8 billion yen.

Bloomberg News