American Companies Are Exposed, TooBy
At least 35 U.S. companies, including memory-chip technology maker Rambus (RMBS), Coach (COH), and Tiffany (TIF), derive 15 percent or more of their revenues from Japan, according to data compiled by Bloomberg, and they risk losing business in the wake of the tragedy there. About 75 percent of Aflac's (AFL) 2010 sales come from Japan, the highest amount among U.S. companies with a market value of $100 million or more.
Some U.S.-owned plants in Japan got hit by the earthquake. Texas Instruments (TXN) said its silicon wafer plant in Miho, Japan, had sustained "substantial" damage. The plant accounts for 10 percent of company revenue. U.S.-based retailers will be vulnerable to shifts in consumer behavior as the nation rebuilds. "Even for Japanese consumers who have the means, they may not be in the mood to open up their wallets," says Lawrence Creatura, fund manager at Federated Investors in Rochester, N.Y. Coach shuttered 20 of its 165 stores in Japan in response to the quake and cut staff and shortened hours at others. Tiffany closed some of its 55 outlets. "The situation is fluid," says Tiffany spokesman Mark Aaron.
In 2010, Japan was the second-largest market for the pricey clubs made by Callaway Golf (ELY), accounting for $164.8 million in sales, or 17 percent of revenue. If you're a Japanese golf player, splurging on clubs may not feel right while the country is digging out. "In a niche that has frozen up, a consumer discretionary product isn't going to do anything," says Casey Alexander, an analyst for Gilford Securities who cut his rating on Callaway to sell from hold on Mar. 15. Tim Buckman, spokesman for Callaway, says of the earthquake and tsunami: "We're still in the process of assessing what kind of impact it will have."
Other companies have a more optimistic outlook. Aflac, the supplemental health-insurance company based in Columbus, Ga., has been in Japan since the 1970s. On Mar. 14 it reaffirmed its forecast for 2011 operating earnings "at the low end" of an 8 percent to 12 percent increase. "We expect Aflac Japan sales will only be minimally impacted by these events," Aflac Chief Executive Dan Amos says.
Dole Food (DOLE), the world's biggest fresh-fruit-and-vegetable producer, won't see a "material effect," Chief Executive Officer David A. DeLorenzo said. Dole had 2009 sales of $794 million in Japan, 12 percent of its total. "As bad as it is, it's just one area in Japan, which is a very big country," DeLorenzo told analysts on a Mar. 14 call.
The bottom line: U.S. companies with substantial sales in Japan may see business suffer, especially if they offer high-end consumer products.