How Yoshitsu Co (NASDAQ: TKLF) Drove Growth Amid A Turbulent Beauty Market – 2022 In Review

It has been a year of milestones for the Japanese beauty company Yoshitsu Co Ltd TKLF. Yoshitsu is a retailer and wholesaler of beauty and health products that saw a year of growth despite difficulties in the market.

The beauty industry is growing, worth over $90 billion in China and $131 billion in Europe. Meanwhile, North America continues as its largest market at $364.8 billion. Traditional stores, especially pharmacies, still represent the largest segment of beauty and health product sales, though there is an increasing shift towards e-commerce that was partially motivated by the lockdowns of the past few years. Companies in the beauty and health space have looked to seek new solutions in 2022 to meet the changing market needs.

One company that struggled was New York personal care icon Revlon REVRQ. The company had a tough year, first filing for bankruptcy before being suspended and delisted by the New York Stock Exchange in October, 2022. 

Parisian personal care company L’Oreal SA LRLCY started a research and development (R&D) collaboration with Alphabet Inc. GOOGL subsidiary Verily to better understand skin health and aging processes. 

American company Ulta Beauty Inc. ULTA saw a net increase of income of 17% in the first half of 2022, and also launched its Beauty& campaign to revolutionize the beauty industry and change perspectives on how to understand beauty and health wellbeing.

Tokyo-based Yoshitsu Co. saw its product portfolio of cosmetics, skincare, fragrances, and cosmetic applicators expand to sauces, condiments, and various food products. Despite market challenges resulting from strict Japanese and Chinese lockdowns, Yoshitsu expanded in the past year, opened more physical locations, and saw record company growth. 

A Series of Successes? 

Opened Brick-and-mortar Locations. While some companies permanently closed their brick-and-mortar stores, Yoshitsu has been expanding. In November 2022 it opened a warehouse in London, UK, to respond to strong European demand for its products. It also added an additional store in Hong Kong, with significant interest coming from China, which reportedly made up 75% of Yoshitsu's revenue in 2021.

Tourist Locations. COVID was tough for companies as Japan was closed to tourists for two years following the pandemic. But when Japan opened up its borders, Yoshitsu was there. It opened various pickup locations, offering duty-free cosmetics to entice tourists, with sites at its Urawa and KoshigayaRyutsudanchi stores in Saitama, as well as in Nagano.

Wholesale Success. The company has also handled market challenges by capitalizing on its robust network of 200+ wholesale partners. 95% of its revenue came from online stores, franchised stores and wholesale operations in 2021. 

Credit Agreement. In November the company entered into a revolving credit facility agreement with a syndicate of national banks. The agreement - for JPY 8.15 billion (about $55.82 million) - expands the opportunity to reinvest in the company and to fulfill a balanced capital allocation. 

Food Products. Successes made possible by steps like the credit agreement include Yoshitsu’s addition of sauces, dressings, and condiments products to its portfolio, entering a market worth over $21 billion. It diversified this plan by later adding a host of food products, including frozen and refrigerated items, processed food, and confectionery.

Record Growth. Perhaps unsurprisingly after a strong year, Yoshitsu saw record revenue growth. Reflecting on the successes, Principal Executive Officer of Yoshitsu Mei Kanayama said: “Although the global economy has been filled with uncertainties, we are satisfied with the accomplishments achieved in our key strategic initiatives, including the completion of our initial public offering in January 2022 and the expansion of our market coverage with new stores and wholesale customers.”

To learn more about Yoshitsu, visit its website. 

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