Investor Relations

To Our Shareholders

I would like to provide you with a summary of operating results as well as financial results for the 58th fiscal year (from September 1, 2016 to August 31, 2017) of SHIMACHU CO., LTD. (the “Company”).

During the fiscal year under review, gradual recovery was seen in the Japanese economy backed by a trend of improvement in employment and the income environment. However, the outlook remained unclear, due to uncertainty in the overseas economy, including the issue of the U.K.’s withdrawal from the EU, trends in the economic policy of the new U.S. administration, and concern over the future of China and emerging economies.

In the retail business, while there was definite improvement in the employment environment and income environment, we did not observe strong business confidence. The trends of both frugality and selective consumption among consumers are growing stronger, and the business environment surrounding the Company has remained severe.

Amid these conditions, the Company has established this basic policy: “Become Japan’s best service provider through a spirit of gratitude and dedication.” We have carried out business activities centered on “store-specific responses” that provide, on a store-by-store basis, both merchandize assortment and services matching the characteristics of our customers in local regions.

In our furniture and home fashion products business, due mainly to struggling sales in living room furniture and dining room furniture, net sales totaled \40,450 million (down 10.0% year on year), and gross profit totaled \17,459 million (down 9.9% year on year). In our home center products business, due mainly to struggling sales of DIY products and household furnishings, net sales totaled \100,716 million (down 4.1% year on year), and gross profit totaled \29,276 million (down 3.4% year on year).

Regarding stores, in December 2016, we opened HOME’S Tokorozawa (Tokorozawa, Saitama Prefecture), a store combining a home center and furniture store. Regarding capital investment and financing, in the fiscal year under review, capital investment totaled \2,300 million, mostly in store construction fees related to new store openings, and all provided for with funds on hand.

As a result of the above, net sales for the fiscal year under review were ¥141,167 million (down 5.9% year on year), operating profit was ¥7,595 million (down 25.9% year on year), ordinary profit was ¥10,766 million (down 15.3 % year on year) and profit was ¥6,277 million (down 29.7% year on year).

Regarding our outlook and issues to be addressed, we expect the gradual recovery in the Japanese economy to continue backed by the government’s economic policies. However, we also expect the strong consumer trend of cost-consciousness and frugality to continue, meaning that there will continue to be difficult circumstances in the business environment surrounding the Company.

Amid these conditions, the Company is working to address the following challenges.

Firstly, we aim to integrate our furniture store and home center businesses by around next March. Thus far, the Company has operated the furniture store business and home center business as independent businesses. By integrating the two businesses, we aim to improve the efficiency of store operations through synergistic effects and to strengthen our sales department system.

Secondly, through the introduction of the T-POINT system, we will reward our customers with points and conduct marketing analysis. Currently, various business sectors provide reward point services to customers based on the amount of their purchases, but the Company has not yet adopted this type of service on either a full-year basis or for its entire products. Through the introduction of the T-POINT system, customers will be able to “save” and “use” through Japan’s largest shared reward point system, and the Company will be able to conduct marketing analysis based on the buying practices of a wide range of customers. With customer needs diversifying across a wide range of buyers, we will use this analysis to propose new sales promotion plans, and as a tool to provide merchandize assortment and service that meet regional needs.

Thirdly, we are planning to renovate 12 stores in the 59th fiscal year. We will conduct store renovations in a planned manner that includes not only our business integration, but also the opening of stores that are suitable tenants for their regions. We are also building new store models not bound by our existing concept of stores combining furniture stores and home centers. We will work to expand new customer segments among customers who have not yet visited our stores, while increasing the number of store visits among existing customers. As a retailer focused on the lifestyles of our customers, we will work to further expand our scope of operations and to boost our business results.

We appreciate the continued support and encouragement of our shareholders.

November 2017
President and Representative Director
Takaaki Okano