「CHALLENGE Ⅱ 2020」(2018-2020)Medium-Term Management Plan

Aoyama Trading Co., Ltd. announced today that it has formulated its medium-term management plan, “CHALLENGE II 2020”, which runs for three years from FY 2018 through FY 2020.

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 triggered by the Cool Biz campaign, etc., 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 operations. Working in this harsh operating environment, the Aoyama Group believes that reforming the business wear business, its core business, and creating next-generation businesses are crucial to sustaining growth as a company trusted by customers.
Against this backdrop, the Group formulated its medium-term management plan, “CHALLENGE II 2020”, focusing on the vision the Group wants to realize 10 years from now. Over the next ten years, we aim to achieve total Group sales of 400 billion yen and have our core business account for only 60% of our total operations in a transition that will make us less dependent on a single business. Our latest medium-term management plan, “CHALLENGE II 2020”, will enable us to build a foundation over the next three years as we work toward these goals. We plan to achieve 300 billion yen in net sales, 25 billion yen in operating income, and a return on equity (ROE) of 6.3% (excluding goodwill is 7%), all on a consolidated basis, by FY 2020, the final year of the plan.
During the period of the medium-term management plan, we will pay dividends to shareholders and buy back our shares with the aim of achieving a consolidated total payout ratio of 100%.
We have also drafted a mission statement for Aoyama and employee conduct rules, which we call Aoyama Mind: Engage with working people. Working with the Aoyama Mind at the heart of everything we do, we will focus on: (1) reforming the core business and taking on new challenges; (2) creating and growing next-generation businesses; (3) developing infrastructure to improve productivity; and, (4) working on ESG initiatives. These are our key strategies during the upcoming three-year period, which will enable us to attain sustainable growth.

1. Key Strategies under the “CHALLENGE II 2020” Medium-term Business Plan

  1. (1) Reform the core business and take on new challenges
    1. ① Expand corporate sales and develop an organizational structure: shift from internal to external
    2. ② Accelerate efforts to digitize EC, sales promotions, store operations, etc.
    3. ③ Make a full-scale entry into the uniform market
    4. ④ Implement measures targeting people in their 20s and 30s, as well as stores in rural areas, and enhance merchandising
  2. (2) Create and grow next-generation businesses
    1. ① Expand the total repair service business (new store launches and M&As)
    2. ② Effectively use store assets across Japan
    3. ③ Create new businesses (leverage customer bases to create synergies, work on out-of-the-box initiatives)
  3. (3) Develop infrastructure to improve productivity
    1. ① Maintain the new personnel system: improve motivation
    2. ② Aggressively invest in IT innovations
  4. (4) Work on ESG initiatives
    1. ① Environmental initiatives
    2. ② Personnel and social initiatives
    3. ③ Governance enhancement

2. Medium-term Business Targets (Fiscal Year Ending March 2021)

  2017 estimate 2020 target Difference
Consolidated net sales 258.7 billion yen 300 billion yen +41.3 billion yen
Consolidated operating income 21 billion yen 25 billion yen +4 billion yen
ROE 4.6% 6.3% +1.7p
(excluding goodwill) (5.3%) (7.0%) (+1.7p)

3. Dividend Policy

During the “CHALLENGE II 2020” period (FY 2018 - FY 2020), we will pay dividends to shareholders and buy back our shares with the aim of achieving a consolidated total payout ratio of 100%.
Dividends will be paid at a payout ratio of 70% of consolidated net income. More specifically, we will maintain a steady dividend payout of 100 yen. If the dividend amount calculated at the payout ratio of 70% is greater than 100 yen, the difference will be paid at the end of the fiscal year as a special performance-linked dividend.
We will buy back our shares valued at an amount equal to consolidated net income minus the total amount of dividends described above.

For more information about the “CHALLENGE II 2020”
medium-term management plan, please see the attached presentation document.

Presentation document (PDF / 1.5MB)