Top Message

青山 理

Issues to be addressed

The Aoyama Group’s operating environment has been undergoing numerous structural changes, as characterized by a decline in the working-age population, a shrinking suit market due to a trend to a more casual office fashion and changing consumer behavior toward customization, showrooming and sharing. These changes have had a significant impact on the business wear business, which is at the core of the Group’s operation.

Working in this harsh operating environment, Aoyama Group believes that reforming the business wear business, its core business, taking new challenges and creating and growing next generation businesses are crucial to sustaining growth as a company trusted by customers and works hard together to achieve the medium-term management plan “CHALLENGEⅡ2020”, which ends in fiscal 2020.

The Aoyama Group formulated its medium-term management plan “CHALLENGE Ⅱ 2020” , which will enable us to build a foundation during this three years, focusing the vision that the Group aims to realize total Group sales of 400 billion and our core business’ account for only 60% of our total operations in transition over 10 years..

However, the expansion of low priced order-made suits and entering of main casual wear company and leading EC shopping mall into suits market bring further changes in business environment. Under such circumstances we will implement the drastic reform with reorganizing measures and restructuring the business model to respond to business environment changes and intensifying competition. We also declared Group mission as《AOYAMA MIND: Engage with working people 》in previous fiscal year and employee’s Principle as (1) Customer’s Point of View(2) Bottom-up Approach(3) Pursuing Quality(4) Sense of Ownership (5) Spirit of Challenge (6) Fare & Square.

Going forward with Aoyama mind as our basic principles, we intend to implement the key strategies of current medium-term management plan 1, Reform the core business and Take on new challenges 2, Create and grow next-generation businesses 3,Develop infrastructure to improve productivity 4, Work on ESG initiatives, and to create a new growth track by taking advantage of the Aoyama Group’s strength in Sales capabilities, Store development capabilities, Merchandise procurement capabilities, Pursuing quality, Customer base. By doing so, we will continue contributing to our customers, shareholders, business counterparties, employees and local communities.

We will appreciate our shareholders’ further understanding and support.

General Outline

The Company’s performs in fiscal 2018

With regard to performance in fiscal 2018, the Group posted net sales of 250,030 million yen, or 98.2% of that of the previous year and operating income of 14,600 million yen, or 71.0% of that of the previous year, as a result net sales and income decreased.
The main reason for decrease in net sales is business wear business’ lower sales, 97.8% of that of the previous year and American Eagle business in casual wear business, 89.8% of that of the previous year.
The main reason for decrease in operating income is weak sales of existing stores and decline of business wear business’s gross margin by1.1%, casual wear business’ decline by 2.3%.
As for business wear business, our core business, sales of men’s item remained sluggish although sales of corporate business increased by expansion of corporate partners and sales of women’s items grew steadily...

(¥ Millions)

 

FY3/2019

Chahge from Forecast

Change

Segment

Net sales

Operating income

Net sales

Operating income

Net sales

Operating income

Business wear businness

184,405

13,515

▲1,995

▲905

▲4,322

▲5,549

Casual wear B\business

13,608

▲1,390

358

60

▲1,536

▲550

Credit card business

5,065

2,088

5

3

160

231

Printing and media business

12,394

133

524

▲2

792

▲148

Sundry sales busineaa

15,816

621

▲4

21

▲123

▲18

Total repair service business

12,849

▲481

▲71

9

323

24

Others

10,351

63

▲299

▲47

378

40

Consolidated adjustments

▲4,191

79

▲921

489

▲218

7

Consolidated total

250,300

14,629

▲2,400

▲371

▲4,545

▲5,962

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)

 

FY2018 result

FY2021 plan

Amount of increase or decrease (3 years)

 

Net sales

Operating income

Net sales

Operating income

Net sales

Operating income

Business wear business

188,728

19,064

202,500

20,200

+13,772

+1,136

 Of which,women's wear

29,983

-

35,000

-

+5,017

-

 Of which,cororate tie-ups

11,103

-

15,000

-

+3,897

-

 Of which,EC digital

1,988

-

3,300

-

+1,312

-

Casual wear business

15,145

▲840

17,100

0

+1,955

840

Credit card business

4,905

1,857

5,400

1,800

+495

▲57

Printing and media business

11,602

281

11,500

300

▲102

+19

Sundry sales business

15,939

639

15,500

500

▲439

▲139

Total repair service business

12,525

▲506

17,400

1,000

+4,875

+1,506

Others

9,972

22

14,600

700

+4,628

+678

 Of which,restaurant business

7,996

379

11,400

700

+3,404

+321

New business

-

-

19,000

500

+19,000

+500

Adjustments

▲3,973

72

▲3,000

0

+973

▲72

Consolidated total

254,846

20,591

300,000

25,000

45,154

4,409

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

Net sales of the business were 184,405 million yen (97.7% of that of the previous year) and segment income (operating income) was 13,515 million yen (70.9% of that of the previous year). In Aoyama Trading’s Business wear business, which is the segment’s core operations, we opened 14 Yofuku-no-Aoyama stores (including 6 relocated stores and 1 renovated store) along with 5 The Suit Company stores (including 1 relocated store) and closed 16 underperforming stores (10 Yofuku-no-Aoyama stores, 2 The Suit Company stores, 3 Universal Language stores, and 1 UL OUTLET store).
On the product front, we launched a business wear (suits and coats) line, marketed as “Biz Suit With Sport Function,” under the Descente label (sports brand) via a joint development project with Descente Japan Ltd, as well as the new line of suits, Urban Setter, designed for young businessmen in their 20s and 30s looking for more comfortable and functional suits, all with an eye to enhancing our lines of high-performance products. Working to expand our morning coat and tuxedo rental services, we started renting party wear and formal suits for women. We became the first men’s wear retailer to provide rental services for women’s formal suits, which are perfect for a child’s school admission interview, graduation, or entrance ceremony.
However, the number of customers has continued to decline due to various factors, including Change of market environment by accelerating trend toward casual attire in the office etc., and severe weather conditions and disasters such as torrential rains in western Japan. As a result, sales at existing stores were 97.8% of what they were the previous year. The number of men’s suits sold, our mainstay, was 2,048 thousand suits or 96.3% of that of the previous year, and the average sales unit price was 27,187 yen or 99.6% of that of the previous year.

Casual Wear Business

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

Casual wear business / Sales percentage

In the Casual wear business, inclement weather largely put a damper on customer numbers, resulting in net sales of 13,608 million yen (89.9% of the previous year’s figure) and a segment loss (operating loss) of 1,390 million yen (in the previous year, the segment loss, or operating loss, was 840 million yen).
Stores opened and closed as described below.

Credit Card Business

Aoyama Capital Co., Ltd.

Creadit Card Business / Sales percentage

In the Credit card business, due to an increase in shopping revenue, net sales were 5,065 million yen (103.3% of the previous year) and segment income (operating income) was 2,088 million yen (112.5% 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

In the Printing and media business, net sales totaled 12,394 million yen (106.8% of the previous year) due primarily to an increase in orders for electronic promotions and promotional materials. Segment income (operating income), on the other hand, was 133 million yen (47.2% of the previous year) due mainly to a decline in the gross profit margin.

Sundry Sales Business

Seigo Co., Ltd.

Sundry Sales Business / Sales percentage

In the Sundry sales business, net sales were 15,816 million yen (99.2% of the previous year) and segment income (operating income) was 621 million yen (97.2% of the previous year).
Regarding stores, the number of stores at the end of February 2019 was 114 (118 stores at the end of the previous year).

Total Repair Service Business

Minit Asia Pacific Co., Ltd.

Total Repair Service Business / Sales percentage

In the total repair service business, net sales were 12,849 million yen (102.6% of the previous year) due to store opening, etc., but segment loss (operating loss) came in at 481 million yen (segment loss (operating loss) of 506 million yen was posted in the previous fiscal year).

Others

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

Others / Sales percentage

In Other business, due to opening stores of "Yakiniku-king" restaurants net sales were 10,351 million yen (103.8% of that of the previous year) and segment income (operating income) was 63 million yen (275.4% of that of the previous year).
WTW Corporation posted an impairment loss of 1,051 million yen as an extraordinary loss, which includes remaining goodwill totaling 894 million yen.
Stores opened and closed are as described below.

March 31, 2019

President

青山 理