「CHALLENGE 2017」(2015-2017)Medium-Term Management Plan

AOYAMA TRADING Co., Ltd. formulated a three-year medium-term management plan with fiscal 2017 as the final year.


The environment surrounding the Group is very harsh because of factors such as the shrinking suits market reflecting a low birth rate and an aging population.In this severe business climate, the Group, upon celebrating the 50th anniversary of its founding in May 2014, formulated the medium-term management plan “CHALLENGE 2017” as a first step toward further growth for the next 50 years.
Up to now, our corporate philosophy centered on “offering better products at lower prices and contributing to society through the selling of clothing” and menswear retail. In the future, however, we will focus on “aiming to further contribute to society through retail and services to consumers based on sustainable growth” as a new corporate philosophy with an eye to expanding our business domains.
Under this newly formulated medium-term management plan “CHALLENGE 2017,” based on this philosophy, we will strive to realize stable growth of our core business of business wear through the expansion of womenswear sales reflecting an increase in the number of female workers, and proactively expand business domains, such as the restaurant business, overseas business and new businesses by leveraging the strengths (sales capabilities, store development capabilities, merchandise procurement capabilities, adherence to quality, and customer base) the Group has cultivated over the past 50 years. By doing so, we will build a stable business portfolio and aim to become a company that is able to contribute to society through sustainable growth.
By implementing these initiatives, we plan to achieve net sales of ¥280,000 million and operating income at a record high of ¥27,000 million in fiscal 2017, the final year of the plan.
Also, in returning profits to shareholders, we will conduct dividend payments and acquisition of our own shares targeting a consolidated total return ratio of 130% during the period of the medium-term management plan.
As a result of these measures, we plan to raise ROE from 5.1% expected for the current fiscal year to 7% by fiscal 2017.


<Overview>

  1. 1. New corporate philosophy
    “Aiming to further contribute to society through retail and services to consumers based on sustainable growth”

  2. 2. New management vision
    • ・Expansion of "strengths" in the core business: - No.1 approval rate among business persons
    • ・Proactive expansion of business domains: - Building a "stable business portfolio"
    • ・Management that engages stakeholders: - Implementation of "improvements for sustainable growth"

  3. 3. Priority measures of the medium-term management plan "CHALLENGE 2017"
    • (1) Expansion of "strengths" in the core business - No.1 approval rate among business persons
          Business wear business
      • ・Strengthen womenswear (expand sales floor area for womenswear, increase sales of ladies formalwear, etc.)
      • ・Expand share of business apparel and accessories, etc. (develop new businesses, develop functional products, reinforce sales promotion, etc.)
      • ・Expand e-commerce (EC) and promote omni-channel strategy (promote omni-channel strategy with brick-and-mortar stores, etc.)
    • (2) Proactive expansion of business domains — Building a "stable business portfolio"
       (i) Casual wear business
      • ・Growth strategy of "American Eagle Outfitters" (accelerate store openings at local shopping centers, expand EC sales, etc.)
      • ・Second pillar of casual wear business (consider M&As)
       (ii) Restaurant business
      • ・Expand sales of franchise (FC) restaurant business centered on Yakiniku King, etc.
       (iii) Overseas business
      • ・Steadily expand store openings in China starting from the Shanghai area
      • ・Open stores in the ASEAN area
       (iv) New businesses
      • ・Launch new businesses that utilize the Company’s strengths such as store development capabilities and customer data
    • (3) Management that engages stakeholders - Implementation of "improvements for sustainable growth"
      • ・Appropriately pursue cooperation with stakeholders while squarely facing all of them in order to improve corporate value through enhancement of the governance structure, appropriate disclosure of information, personnel strategy and expansion of CSR activities, among other things.
  4. 4. Performance targets
      Fiscal 2014 forecast Fiscal 2017 plan
    Consolidated net sales ¥222,200 million ¥280,000 million
    Consolidated operating income ¥18,600 million ¥27,000 million (record high)
    ROE 5.1% 7.0%
  5. 5. Enhancing return of profits to shareholders
    • ・We will conduct dividend payments and acquisitions of our own shares targeting a consolidated total return ratio of 130% during the period of the medium-term management plan (from fiscal 2015 to fiscal 2017).
      Regarding dividend, we will target a payout ratio of 70% against consolidated net income. Specifically, a steady ordinary dividend of ¥100 per share will be paid, and if the dividend calculated based on the targeted payout ratio of 70% exceeds ¥100, the excess amount will be treated as performance-linked dividend and will be paid out as special dividend at the end of the fiscal year.
      As for the acquisition of our own shares, we will acquire an amount derived by subtracting the total dividend amount above from 130% of consolidated net income.
      For details, please refer to the Company’s news release, "Information in regard to the policy of return of profits to shareholders(PDF / 89KB)" officially announced January 28, 2015.

For details of the medium-term management plan "CHALLENGE 2017," please refer to the separate presentation material.

Presentation material (PDF / 2305KB)

<Progress>

Regarding the progress of the mediumterm management plan, net sales exceeded the plan by ¥2,700 million because of the positive impact of making the abovementioned two companies wholly-owned subsidiaries, although the business wear business and the casual wear business recorded sales lower than the plan. However, operating income fell short of the plan by ¥2,300 million on a consolidated basis as the business wear business was ¥1,100 million short and the casual wear business was ¥2,400 million short.
For fiscal 2017, the final year of the mediumterm management plan, the Group had to revise the targets for net sales and operating income from the initial plan because performance of the business wear business is expected to be lower than the initial plan, as the number of store openings will be lower than the initial plan, and in view of the current status of American Eagle Outfitters, which has yet to establish an earnings structure. In these circumstances, we are resolved to do our utmost to increase sales from existing stores of the business wear business and restore the casual wear business to profitability at an early stage in order to achieve the revised plan for the final year of the medium-term management plan.
For fiscal 2017, we forecast net sales of ¥260,700 million, or 103.1% of that of the previous year, and operating income of ¥22,500 million, or 111.3% of that of the previous year.