To Our Shareholders
In the fiscal year under review, there were signs of recovery in the Japanese economy, including improvement in corporate earnings and the employment environment, but the outlook remained uncertain due to factors such as policy trends in each country related to the protectionist trade measures of the U.S. and geopolitical risks in the Middle East.
In the retail business, the Company continues to face a challenging operating environment amid a number of trends: consumer behavior is changing as customers’ lifestyles diversify; competition is becoming increasingly tougher with companies entering the market from various other business sectors; and consumers are doing more of their spending via retail channels outside physical stores, such as e-commerce and C2C used-goods marketplaces.
Amid these conditions, the Company implemented a range of measures to drive a recovery in sales, which have been weak for some time. First, based on the view that attracting customers to stores is of paramount importance, the Company worked to attract food product supermarket tenants, which have high customer traffic, opened 100-yen shops as distributors for the Daiso brand, and introduced the T-point system to collect customer information and provide loyalty point rewards to customers. Regarding stores, there were no store openings or store closures in the fiscal year under review. With respect to existing stores, the Company renovated nine stores to incorporate Daiso 100-yen shops, renovated two stores to accommodate furniture outlets, and renovated one store to introduce a food product supermarket tenant.
In terms of capital investment and fund procurement, in the fiscal year under review, capital investment totaled ¥3,900 million, mostly in store construction fees related to new store openings, and all provided for with funds on hand.
In addition, the Company recorded extraordinary losses of ¥3,660 million, which mainly comprised asset impairment losses and business structural reform-related expenses.
As a result of the above, operating revenue for the fiscal year under review was ¥146,272 million (down 0.4 % year on year), operating profit was ¥9,888 million (up 0.3% year on year), ordinary profit was ¥10,541 million (down 2.1% year on year) and profit was ¥4,301 million (down 31.5% year on year).
With respect to our outlook and issues to be addressed, the Company expects the domestic economy to continue recovering at a modest pace overall, but business conditions in the retail business are likely to remain challenging due to factors such as intensifying competition for market share amid growth in the e-commerce market, a chronic labor shortage, and rising costs across the entire supply chain. That fast-changing business environment has reduced the customer appeal of the Company’s core retail businesses of furniture / home fashion and home center goods, which has put pressure on profits in recent years, despite the opening of new stores. That reflected insufficient investment in growth, preventing the Company from replacing existing store operations and creating new business formats.
Against that backdrop, the Company established the Medium-Term Management Plan 2021, setting a three-year period through fiscal 2021 (ending August 31, 2021) for putting the Company on track to achieving increased sales and profits and building the foundation needed to reform the corporate structure so that ROE exceeds capital cost. By implementing the following measures, the Company aims to achieve ROE of 5% in the final fiscal year of the plan.
(1) Store development
- Renovate existing stores and proactively increase floor space.
- Reduce the number of old-format stores and proactively open Shop in Shop locations.
(2) Business format development
- Proactive development of sales spaces that propose new lifestyles.
- Improve the ability to attract more customers by bringing in new tenants and franchises.
- Develop an e-commerce system for interior products.
(3) Cost structure reform
- Improve the gross profit margin primarily by implementing predicative ordering and aggregating the frequency of product deliveries.
- Reduce SG&A expenses mainly through revolutionized logistics and labor-saving initiatives.
(4) Management infrastructure development
- Review the personnel systems.
- Upgrade information systems mainly to optimize operations and improve security.
- Creation of marketing that utilizes a T-Point database.
- Reconstruction of brand management.
- Proactive pursuit of M&A.
We appreciate the continued support and encouragement of our shareholders.
President and Representative Director