2019 Q3 results: big four in Japan

Date : 10 January 2020

Japan's four largest retailers, Seven & i Holdings, AEON, FamilyMart and Lawson, have posted their results for the nine months ending 30 November 2019.

Seven & i Holdings: total sales flat at 0.1%

Seven & i recorded a 0.1% increase in total group sales to JPY9,019.3bn (US$82.4bn), with operating profit rising 4.9% to JPY319bn (US2.9m) year-on-year (yoy).

Revenue from domestic convenience store operations increased 1.2% to JPY733.7bn (US6.7bn) yoy. 7-Eleven Japan's key growth measure, existing store sales, recovered slightly (compared to H1), but fell 0.1% yoy. The number of customers fell 2.5%, but average spending per customer increased by 2.5%. Compared to previous years, 7-Eleven Japan’s store network growth has slowed significantly. At the end of Q3, it operated 21,002 stores, adding 126 net new outlets yoy. As part of Head Office Cost Structure Reforms, the retailer is accelerating closure of unprofitable stores and adopting stricter standards for store openings.

Total store sales operations at 7-Eleven Inc (U.S and Canada) fell 0.8% to JPY2,977.5bn (US$27.2bn). There was strong growth in processed food, fast food and non-food sales, but overall performance was impacted by gasoline sales falling 3.9% to JPY1,510.5bn (US$13.8n).

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 2.8% to JPY1,366.2bn (US$12.4bn) yoy.

AEON: revenue up 1%

AEON has posted a 1% increase in operating revenue to JPY6,401.6bn (US$58.4bn), with operating profit rising 7.9% to JPY117.6bn (US$1.1bn) for Q3 yoy. Operating revenue at its General Merchandise Store was flat, while Supermarket operations fell 1.1% to JPY2,403.5bn (US$21.9bn) yoy.

Operating revenue from operations in Japan increased 1% to JPY5,823.9bn (US$53.1bn). Growth was stronger overseas for the retailer’s ASEAN business, with revenue rising 5.4% to JPY288.8bn (US$2.76bn). Revenue from China fell 0.8% to JPY207.6bn (US$1.9bn), but operating profit for Q3 increased yoy for the time after several consecutive years making a loss.

Performance of AEON's Health & Wellness Business, which operates under Welcia Holdings Co., Ltd., remains strong. Operating revenue increased 10.5% to JPY652.1bn (US$5.9bn), supported by the addition of 198 net new stores yoy, as well as 6.8% and 5.7% LFL sales growth in existing stores for the three months and nine months respectively.

There will be a leadership change at AEON. Executive Vice President Akio Yoshida will become president, effective 1 March, the first change in the company's top post in 23 years. Current President, Motoya Okada, who will step down to become chairman.

FamilyMart: total store sales down 0.4%, but LFL positive

FamilyMart posted total stores sales of JPY2,249.1bn (US$20.5bn) for Q3, down 0.4% yoy. Core operating profit increased 32.2% to JPY63.7bn (US$580m) yoy. LFL average daily sales at existing stores remained positive, growing 0.5% yoy. (Q2 2019: 0.9%, Q1 2019: 1.7% and Q4 2018: 1.7%)

The retailer ended Q3 with a total network of 24,252 stores, up 449 yoy. Like the last few quarters, store network in Japan has remained relatively stable (16,532 stores). Preparations for the Olympic Games are underway. The retailer has started labelling its products such as rice balls and snacks both in Japanese and English.

FamilyMart's largest overseas market, Taiwan, posted a mixed set of results. Revenue fell 4.2% to JPY47.1bn (US$430m), but core operating profit increased by 8.9% to JPY6.8bn (US$62m). Outside the reported period, (13 December 2019) Taiwan FamilyMart is establishing a new company related to member services that aims to enhance customer loyalty. The name of the business has yet to be determined.

FamilyMart Japan will continue to work towards four strategic pillars:

- Enhancing support for franchised stores: labour-saving initiatives, free health check-up support services and more flexible operating hours from March 2020

- Strengthening the profitability of its stores: continues to upgrade its prepared dishes and frozen food range offered in the Mother’s Kitchen brand. Since fiscal year 2019, FamilyMart has been increasing the number of store shelves for frozen food. Furthermore, it has completed the installation of 25,000 new-model self-service coffee machines, which it began installing in October 2018. Sales of coffee products, centred on Café Latte, have been robust, growing approximately 10% yoy

- Moving forward with the shift to digital: since launching FamiPay on July 2019, the app has reached a total 4.4m downloads as of end of December. In November, the retailer launched a multiple-loyalty-point compatibility service that allows customers to make use of d POINT, Rakuten Super Point, and T-POINT. Starting fiscal year 2020, it plans to make it possible for users to link their bank accounts with FamiPay to increase convenience and offer other financial services

- Promoting business collaboration with Pan Pacific International Holdings Corporation (PPIH): in August 2019, it announced plans to increase its stake in PPI to strengthen relationship on joint product and service development and business collaboration

Lawson: LFL sales up 0.2%

Lawson has recorded a 9% increase in operating income to JPY52.1bn (US$480m) yoy. Gross operating revenue increased 4.4% to JPY550.9bn (US$5bn) and consolidated net sales of convenience stores increased 3.6% to JPY1,899.5bn (US$17.3bn) yoy.

Existing store sales in Japan grew 0.2% yoy. The retailer ended Q3 with 14,644 convenience stores in Japan, 120 more outlets yoy, but 15 fewer than at 28 February 2019.

Lawson continues to expand in China, its second largest market. It added a net 502 stores to reach 2,509 at the end of Q3 yoy. Lawson (in H1) became the first Japanese convenience store operator to enter Hunan (Changsha) and Liaoning (Shenyang) provinces, in June and August respectively.

Lawson will continue to look for ways to increase customer convenience and store productivity. It started introducing self-service fried food counters, etc. in all new stores since September 2019. The retailer has been reviewing the feasibility of self-checkouts at its stores and is committed to the expansion of self-checkout services where appropriate.


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