2020 H1 results: big four in Japan

Charles Chan
Senior Retail Analyst

Date : 14 October 2020

Japan's four largest retailers, Seven & i Holdings, Aeon, FamilyMart and Lawson, have posted their H1 results for the six months from March 1 to August 31, 2020.

Summary and our view

The big four’s H1 results continue to show the negative impact of COVID-19 has had on convenience retailing in Japan. Average spending per customer at convenience stores has increased, but this has not been enough to offset a significant reduction in customer footfall, resulting in a decline in overall sales. Q2 sales recovered slightly compared to Q1 (when national state of emergency was declared during April and May), but overall H1 performance is still significantly lower than prior year.  

Seven & i Holdings: total group sales -9.6%

  • Total group sales down -9.6% to JPY5,421.1bn (US$51.6bn) YoY
  • Revenue down -15.8% to JPY2,788.4bn (US$26.4bn) YoY 
  • Operating income down -12.4% to JPY179.7bn (US$1.7bn) YoY
  • 7-Eleven Japan sales down -3.4% to JPY2,445.4bn (US$23.3bn) YoY 
  • 7-Eleven Japan existing store sales down -3% and number of customers down -10.7%, but average spend per customer up 8.6% YoY
  • 7-Eleven Japan ended H1 with 20,930 stores, 35 fewer than prior year
  • The retailer forecasts 7-Eleven Japan sales at the end of the fiscal year (February 2021) will recover to JPY4,942bn (US$47bn), down -1.4% from prior year
    • Having previously expanded sales space for frozen products, 7-Eleven Japan is now expanding sales space for liquor. New layouts will be introduced at 8,000 stores by February 2021. 7&i plans to expand the coverage further, introducing the new layout to all stores in H1 FY2022
    • Approx. 300 stores testing Net Convenience Store service in Tokyo (online delivery from convenience stores)
  • Revenue from 7&i’s main supermarket banner, Ito-Yokado, fell -11.2% to JPY526.5bn (US$5bn) YoY (but food sales was up 2.9%)
    • Store policy: continue to review profitability of all stores
    • Focusing on food: Common concept: strengthen in-home meal solutions, review product lineup and price range according to store format
    • Provide “handmade,” “fresh,” and “convenient” products
    • Create sales floors with a lively aspect (to stimulate purchasing sentiment)
  • Total store sales for the six months ended June 30 at 7-Eleven Inc (U.S and Canada) down -15.6% to JPY1,645.1bn (US$15.6bn) YoY.
    • Gasoline sales fell -30.2% to JPY695.6bn (US$6.6bn) YoY
    • 7-Eleven ended the half with 36m registered 7REWARDS members, more than 1,100 stores offering 7NOW delivery (volume up 400% since February)
    • It plans to accelerate Evolution Store pipeline and successful innovations will get standardised into core stores
    • Plans to integrate Speedway acquisition are underway

Aeon: revenue -0.5% and profit -60.7%

  • Group operating revenue down -0.5% to JPY4,270.5bn (US$40.6bn) YoY
  • Group operating profit down -60.7% to JPY33.9bn (US$322.5m) YoY
    • General Merchandise Store posted -JPY35.4bn (-US$336.9m)
    • Shopping Center Development Services & Specialty Store Businesss also posted big decreases
    • Supermarket profit was up significantly, at JPY32bn (US$304.5m). For the corresponding period last year, it posted JPY2.8bn (US$26.6m)
  • Operating revenue from General Merchandise Store Business down -3.3% to JPY1,479.1bn (US$14bn) YoY. At the end of H1, the business traded 1,987 stores, up 77 from the previous quarter
  • Operating revenue from Supermarket Business up 6.7% to JPY1,712.8bn (US$16.3bn) YoY. Revenue from Ministop fell -7.8% but Maxvalu businesses posted strong increases. At the end of H1, Supermarket Business traded 8,863 stores, up 9 from the previous quarter
  • Operating revenue from Health & Wellness Business up 11.2%% to JPY481bn (US$4.6bn) YoY. At the end of H1, the business traded 2,656 stores, up 141 from the previous quarter
  • Operating revenue from Services & Specialty Store Business down -20.1% to JPY304.4bn (US$2.9bn) YoY
  • Operating revenue from International Business down-2.1% to JPY218.4bn (US$2bn) YoY

FamilyMart: total store sales -10.5%

  • Total stores sales down -10.5% to JPY1,362.2bn (US$11.7bn) YoY
  • Core operating profit down -30.5% to JPY32.1bn (US$305.2m) YoY
  • Average daily sales at total stores down -9.6% to JPY488,000 YoY
  • Average daily sales at existing store down -9.8% YoY
  • Number of customers down -14.6%, but average spend per customer up 6.7% YoY
  • Non food and services accounted for 43% of total sales
  • FamilyMart Japan ended H1 with 16,634 stores, 127 more than prior year
  • Gross operating revenue at FamilyMart Taiwan was up 8.9% to JPY33.5bn (US$318.4m) YoY
  • FamilyMart expects average daily sales at total stores will recover to -5.3% (JPY500,000 / US$4,659) at the end of this fiscal year (February 2021) on prior year

During the half, FamilyMart strengthened the dessert category, adding a range of private label products overseen by famous brands such as “Afternoon Tea,” “patisserie KIHACHI,” and “Kanbayashi Shunsho Honten.”

FamilyMart continues to promote the use of FamiPay, an app that offers a barcode payment feature. As of the end of H1, the app reached approx. 6m downloads. As a result, the ration of cashless payments is increasing.

On August 24, 2020, FamilyMart became a wholly owned subsidiary of ITOCHU Corporation. While in September, the business established a new digital advertising company with ITOCHU Corporation, NTT DOCOMO, INC., and CyberAgent, Inc., which would utilise retailers purchasing data.

Lawson: net sales of convenience stores -8.1%

  • Consolidated net sales of convenience stores down -8.1% to JPY1,173.2bn (US$10.1bn) YoY
  • Operating revenue down -12.5% to JPY322.8bn (US$3bn) YoY
  • Operating profit down -54.6% to JPY16.7bn (US$158.8m) YoY
  • Existing-store-sales in Japan (excluding ticket and gift-card sales etc.) down -9% and number of customers down -15.5%, but average spend per customer up 7.7% YoY
  • Lawson expects existing-store-sales in Japan will recover to -5.5% at the end of this fiscal year (February 2021) on prior year

During the half, Lawson expanded its range of frozen foods as well as started to sell single vegetables on its Fresh Vegetable Market displays in all Lawson stores nationwide.

In August 2019, Lawson started introducing food delivery services (Uber Eats) in Tokyo. To meet new stay-at-home food demand, it has since further expanded this service to over 1,000 stores in 12 metropolitan and urban areas by the end of August 2020.

Lawson ended the half with 14,500 convenience stores in Japan, 56 more than it traded at the end of 29 February 2020. Overseas, it recorded 3,130 stores (2,854 in China), 583 stores more YoY.

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