Top Message

青山 理

"CHALLENGE Ⅱ 2020" starts for 3 years which will be the foundation of the aim after 10 years

We finished the final year of the three-year medium-term management plan“CHALLENGE 2017,” which started in April 2015. Unfortunately, we could not achieve the plan put up initially due mainly to downward trend in the Business wear business and the Casual wear business, which are our core businesses.

With regard to performance in fiscal 2017 as the last year of the “CHALLENGE 2017”, the Group posted net sales of 254,846 million yen, or 100.8% of that of the previous year, and operating income of 20,591 million yen, or 101.9% of that of the previous year. Both sales profit and operating income increased.
The increase in sales profit was mainly attributable to opening of new restaurants by glob Co., Ltd., which is included in “Others” segment, and the increase in sales of existing stores. The reasons for higher operating income include decreased deficit for the Casual wear business, which is attributable to the improvement in gross margin, and the increase in credit card shopping balance in the Credit card business.

With regard to the Aoyama Group’s operating environment, we expect two major changes to further become apparent. The two major changes are: issues related to people, including declining birthrate and aging population, a decline in the working-age population and the growing number of women in the workplace; and changes related to consumer behavior such as a trend to a more casual office fashion triggered by the Cool Biz campaign, etc., expansion of major EC sites, customization, showrooming and sharing.

Under the new medium-term management plan “CHALLENGE II 2020,” we considered what we should do now in response to such changes in the business environment, so that the Aoyama Group will be supported by customers and realize sustainable growth. As a result, we reached a conclusion that we should focus on innovation and challenge in the Business wear business and on creation and growing of next-generation businesses in the other businesses, while we need to invest in human resources, IT systems and logistics to establish a foundation for realization of these targets.

To improve corporate value, live up to stakeholders’ expectations with squarely facing all of them through enhancement of ESG including Global Warming, work style reforms, Women’s Participation and Advancement in the Workplace and Governance enhancement etc.

Facing the harsh environment, namely, the shrinking suit market, all directors and employees of our Group will come together as one and work hard to achieve the new plan and build a foundation for next growth. I would be grateful for your continued understanding and support in our future endeavors.

General Outline

The Company perform in fiscal 2017.

With regard to performance in fiscal 2017, the Group posted net sales of 254,846 million yen, or 100.8% of that of the previous year, and operating income of 20,591 million yen, or 101.9% of that of the previous year. Both sales profit and operating income increased.
The increase in sales profit was mainly attributable to opening of new restaurants by glob Co., Ltd., which is included in “Others” segment, and the increase in sales of existing stores. The reasons for higher operating income include decreased deficit for the Casual wear business, which is attributable to the improvement in gross margin, and the increase in credit card shopping balance in the Credit card business. In our core Business wear business, net sales of existing stores stood at 97.5% of those of the previous year, since sales of menswear items, including suits, were sluggish despite robust sales of women’s wear.
Financial results of “Yofuku-no-Aoyama, ” operated by Aoyama Suits (Shanghai) Co., Ltd., a Chinese subsidiary of the Company, have been included in the consolidated financial results of Business wear business since the current fiscal year.

(Millions of yen)

 

Medium-term management plan for FY2018

FY3/2018

Amount of increase or decrease

Segment

Net sales

Operating income

Net sales

Operating income

Net sales

Operating income

Business wear business

1,905

192

1,887

191

▲18

▲1

 Of which, women’s wear

300

-

299

-

-

-

Casual wear business

160

▲5

151

▲8

▲9

▲3

Credit card business

49

16

49

18

0

2

Printing and media business

112

2

116

3

4

1

Sundry sales business

161

6

159

6

▲2

0

Total repair service business

128

▲3

125

▲5

▲3

▲2

Others

102

2

100

0

▲2

▲2

Consolidated adjustments

▲30

0

▲39

0

▲9

0

Consolidated total

2,587

210

2,548

205

▲39

▲5

Plan by Segments for“CHALLENGE Ⅱ 2020”

When formulating the new medium-term management plan “CHALLENGE II 2020,” we first drew the vision the Group wants to realize ten years from now. Over the next ten years, we aim to achieve total Group sales of 400 billion yen and become less dependent on a single business by raising the ratio of businesses other than the mainstay business to 40% of our total operations. Under such a policy, we position the medium-term management plan “CHALLENGE II 2020” as three years for building a foundation and plan to achieve 300 billion yen in net sales, 25 billion yen in operating income, and a return on equity (ROE) of 6.3%, all on a consolidated basis, by the fiscal year ending March 2021, the final year of the plan.

(Millions of yen)

 

FY2017 result

FY2020 plan

Amount of increase or decrease (3 years)

 

Net sales

Operating income

Net sales

Operating income

Net sales

Operating income

Business wear business

188,700

19,100

202,500

20,200

13,800

1,100

 Of which, women’s wear

29,900

-

35,000

-

5,100

-

 Of which, corporate tie-ups

11,100

-

15,000

-

3,900

-

 Of which, EC digital

1,900

-

3,300

-

1,400

-

Casual wear business

15,100

(800)

17,100

0

2,000

800

Credit card business

4,900

1,800

5,400

1,800

500

0

Printing and media business

11,600

300

11,500

300

(100)

0

Sundry sales business

15,900

600

15,500

500

(400)

(100)

Total repair service business

12,500

(500)

17,400

1,000

4,900

1,500

Others

10,000

0

14,600

700

4,600

700

 Of which, restaurant business

7,900

300

11,400

700

3,500

400

New business

-

-

19,000

500

19,000

500

Adjustments

(3,900)

0

(3,000)

0

900

0

Consolidated total

254,800

20,500

300,000

25,000

45,200

4,500

ROE
(excluding goodwill)

5.0%
(5.5%)

6.3%
(7.0%)

+1.3%
(+1.5%)

Review of Operations

Business Wear Business

Business wear business of Aoyama Trading Co., Ltd., Blue Reverse Co., Ltd., MDS Co., Ltd., Eisho Co., Ltd., FUKURYO Co., Ltd., Aoyama Suits (Shanghai) Co., Ltd.

Menswear Retail Business / Sales percentage

The Business Wear Business, centered on Yofuku-no-Aoyama, is our Group’s core business, boasting the record of being No. 1 in sales in the menswear specialty store industry.
Net sales of the business were 188,728 million yen (100.2 % of that of the previous year) and segment income (operating income) was 19,064 million yen (97.9 % of that of the previous year).
Regarding the Business wear business of Aoyama Trading Co., Ltd., which is our core business, we opened 16 stores of “Yofuku-no-Aoyama” (including 5 relocated stores), 10 stores of “The Suit Company” (including 7 rebranded stores, of which 1 store was “Yofuku-no-Aoyama,” 5 stores were “Next Blue,” and 1 store was “Universal Language”), and 2 stores of “White The Suit Company,” a specialty store for womenswear, as we engaged in a steady store opening activities. On the marketing front, we asked Mr. Troy James, a Canadian performer, to appear in our new TV commercial for “Yofuku-no-Aoyama,” in which he emphasized the stretchability of the suit through surprising moves to stress the suit’s functionality. Furthermore, we also opened an official account on Line and Instagram and launched a sales campaign on the web through YouTube, etc. to increase new customers. In the product area, we enhanced our lineup of highly functional products such as leather shoes that are easy to run in, which feature tire technology of Bridgestone, and light walking shoes that adopt an insole developed by an educational-industrial complex to lead to correct walking.
For womenswear, we enhanced the product lineup by increasing the variation of clothes to suit each occasion and age, such as formal wear for married women. As a result, sales in this category performed favorably.
However, due to a decline in the number of customers, sales from existing stores were 97.5% of the previous year.
From the current fiscal year, Aoyama Suits (Shanghai) Co., Ltd. and Shanghai Fukuryo Industry and Trade Co., Ltd., a subsidiary of Fukuryo Co., Ltd., have been included in the Business wear business. The number of “Yofuku-no-Aoyama” stores operated by Aoyama Suits (Shanghai) Co., Ltd. in China stood at 24 at the end of December 2018.

Casual Wear Business

Casual wear business of Aoyama Trading Co., Ltd., Eagle Retailing Corporation

Casual wear business / Sales percentage

The casual wear business of Aoyama Trading Co., Ltd. operates CALAJA and LEVI’S STORE, and Eagle Retailing Corporation operates franchises of American Eagle Outfitters (U.S.).
In the Casual wear business, due mainly to the sluggish market of American-style casual wear, net sales were15,145 million yen (90.8% of that of the previous year) and segment loss (operating loss) was 840 million yen (in the previous year, segment loss (operating loss) was 1,556 million yen).

Credit Card Business

Aoyama Capital Co., Ltd.

Creadit Card Business / Sales percentage

Issues and manages credit cards such as AOYAMA Card and acquires new card members for the purpose of supporting sales promotions in the business wear business
In the Credit card business, due to an increase in shopping transaction volume, net sales were 4,905 million yen (107.7 % of the previous year) and segment income (operating income) was 1,857 million yen (139.7 % of the previous year). Funds were acquired through loans from the parent company, Aoyama Trading Co., Ltd., and through the issuance of corporate bonds.

Printing and Media Business

ASCON Co., Ltd.

Commerical Printing Business / Sales percentage

Provides a wide range of sales promotion services such as distributing flyers and direct mail as a sales promotion support company
In the Printing and media business, net sales totaled 11,602 million yen (101.5% of the previous year) and segment income (operating income) was 281 million yen (100.7% of the previous year).

Sundry Sales Business

Seigo Co., Ltd.

Sundry Sales Business / Sales percentage

Operates Daiso & Aoyama 100 Yen Plaza stores as franchises of DAISO INDUSTRIES CO., LTD.
In the Sundry sales business, net sales were 15,939 million yen (100.7% of the previous year) and segment income (operating income) was 639 million yen (106.1% of the previous year) due to an increase in the line of products priced at 150-500 yen.
Regarding stores, the number of stores at the end of February 2018 was 118 (117 stores at the end of the previous year).

Total Repair Service Business

Minit Asia Pacific Co., Ltd.

Total Repair Service Business / Sales percentage

Operates and develops “Mister Minit” stores in the Asia Pacific region and provides consumers with comprehensive repair services including repair of shoes and key duplication
In the total repair service business, net sales were 12,525 million yen (106.0% of the previous year) due to store opening, etc., but segment loss (operating loss) came in at 506 million yen (segment income (operating income) of 163 million yen was posted in the previous fiscal year) mainly due to prior investment for business expansion through diversification of service, accelerated store opening, etc.

Others

Reuse business of Aoyama Trading Co., Ltd., glob Co., Ltd., WTW Corporation

Others / Sales percentage

The Reuse business of Aoyama Trading Co., Ltd. operates franchise stores of 2nd STREET and JUMBLE STORE run by GEO CORPORATION, glob Co., Ltd. operates franchises such as Yakiniku King restaurants run by The Monogatari Corporation, and WTW Corporation operates WT W and WTW SURF CLUB that handle sundry and interior goods.
In Other business, mainly due to opening of 1 new store of “2nd STREET”, 4 new stores of “Yakiniku king”, 2 new stores of “Yuzu An” and 1 new store of “WTW”, net sales were 9,972 million yen (128.6% of that of the previous year) and segment income (operating income) was 22 million yen (in the previous year, it was 79 million yen as segment loss (operating loss)).

March 31, 2018

President

青山 理