2019 H1 results: big four in Japan

Date : 10 October 2019

Japan's four largest retailers, Seven & i Holdings, AEON, FamilyMart and Lawson, have posted their results for the six months ending 31 August 2019.

Seven & i Holdings: total sales flat up 0.8%

Seven & i recorded a 0.8% increase in total group sales to JPY5997.4bn (US$55.8bn), with operating profit rising 2.8% to JPY205.1bn (US1.9m) year-on-year (yoy).

Revenue from domestic convenience store operations was flat, up 0.4% to JPY488.1bn (US4.5bn) yoy. 7-Eleven Japan's key growth measure, existing store sales, fell 0.6% in H1. This was due to a 3.1% fall in customer numbers, despite a stronger average spending per customer. The retailer added 158 net new stores to its convenience network in Japan during the half, reaching 21,034 outlets.

Total store sales operations at 7-Eleven Inc (U.S and Canada) increased 1.6% to JPY1,948.3bn (US$18.1bn), driven by strong processed food, fast food and non-food sales. Gasoline sales, however, fell 1.2% to JPY996.2bn (US$9.3bn).

The retailer’s main supermarket banner, Ito-Yokado, posted decline in merchandise, lifestyle and foods sales. This had a significant impact on consolidated superstore revenue, which fell 2.7% to JPY922.9bn (US$8.6bn) yoy.

Looking ahead, the retailer said it will close 1,000 unprofitable 7-Eleven stores. To support its franchisees, it will implement new policies, such as reducing monthly fees. The retailer also plans to close five Seibu and Sogo department stores, and is considering shuttering 33 Ito-Yokado outlets.

AEON: revenue up 0.9%

AEON has posted a 0.9% increase in operating revenue to JPY4,304.8bn (US$40.1bn), with operating profit rising 12.3% to JPY100.8bn (US$938.5m) for the first half yoy. Operating revenue at its General Merchandise Store was flat, while Supermarket operations fell 1.5% to JPY1,605.1bn (US$14.9bn) yoy.

Operating revenue from operations in Japan increased 0.8% to JPY3913.9bn (US$29.7bn). Growth was much stronger overseas for the retailer’s ASEAN business, with revenue rising 7.1% to JPY195.1bn (US$1.8bn). Revenue from China increased 0.8% to JPY140.7bn (US$1.3bn), and following several years of losses up until a turnaround this time last year, operating profit increased 542.4% to JPY4.4bn (US$41.1m) yoy.

Performance of AEON's Health & Wellness Business, which operates under Welcia Holdings Co., Ltd., remains strong. Operating revenue increased 10.1% to JPY434.7bn (US$4bn), supported by the addition of 98 net new stores during the half (total network 1,976), as well as 5.3% LFL sales growth in existing stores.

FamilyMart: total store sales remains flat

FamilyMart posted total stores sales of JPY1,521.8bn (US$14.1bn) for H1, down 0.3% yoy. Core operating profit increased 37.2% to JPY41.7bn (US$388.3m) yoy.  The retailer ended the first half with a total network of 24,012 stores, up 116 yoy. Store numbers in Japan continue to consolidate, reaching 16,507. However, this is expected to rise for the first time post the merger by the fiscal year ending 29 February 2020. 

FamilyMart's largest overseas market, Taiwan, posted a mixed set of results. Revenue fell 5.3% to JPY30.8bn (US$286.9m), but core operating profit increased by 8.3% to JPY4.6bn (US$42.8m).

FamilyMart will continue to work towards four strategic pillars:

- Enhancing support for franchised stores

- Strengthening the profitability of its stores

- Moving forward with the shift to digital

- Promoting business collaboration with Pan Pacific International Holdings Corporation (PPIH)

For its strengthening the profitability of its stores strategy, it is expanding its frozen food range for its Mother’s Kitchen brand, plus increasing the number of store shelves for frozen food. The retailer has already completed the installation of 25,000 new-model self-service coffee machines, which it began installing in October 2018.

Lawson: revenue up 4.9%

Lawson has recorded a 6.6% increase in operating profit to JPY36.7bn (US$345.1m) for H1. Operating revenue increased 4.9% to JPY369.1bn (US$3.4bn) and consolidated net sales of convenience stores increased 4.3% to JPY1,276.9bn (US$11.9bn) yoy.

In the first half, existing-store-sales in Japan increased 0.4% yoy. This was mainly driven by its improved evening and late night product ranges. It ended the first half with 14,721 convenience stores in Japan, 381 more outlets yoy.

Lawson continues to expand in China, the retailer’s second largest market. It added a net 316 stores to reach 2,323 during the six months ending 31 August. Lawson became the first Japanese convenience store operator to enter Hunan (Changsha) and Liaoning (Shenyang) provinces, in June and August respectively.

Addressing Japan’s increasing severe labour shortage remains a focus area. In July, Lawson trialled self-checkouts using the self-mode function on its POS cash registers with automatic change-dispensers, which it fully introduced into all stores by the end of FY2018. It plans to start operating these self-checkouts from November this year. Furthermore, in August, it also started experimenting with smart stores to drive in-store efficiencies. The stores are unmanned during early hours, and customers are required to register their purchases themselves using self-checkout.

Looking ahead, Lawson hopes to further progress its labour and personnel-saving measures for store operations, including expansion of self-checkouts. In response to the October 1 increase in Japan’s consumption tax, Lawson hopes to expand sales and increase membership by offering additional points to Lawson Bank’s “Lawson Ponta Plus” credit card holders.