Strengthen profitability

「Gross profit increased 2.7% year on year, but the gross margin declined by 0.1 percentage points. SG&A expenses increased 7.0% year on year due to goodwill and other items arising from M&A and the effects of new consolidations, as well as higher outsourced logistics fees, freight and storage costs, and part-time labor costs resulting from higher minimum wages. The SG&A ratio rose by 0.2 percentage points year on year.」

「Gross profit increased to 101.2% of the prior-year period, but the gross margin decreased by 0.07 percentage points year on year. The main factors were changes in the distribution industry environment and higher center fees and other costs resulting from rising prices. Selling, general and administrative expenses increased due to delays in cost controls to address inflation, higher labor and logistics costs amid labor shortages, and additional increases in rent and other expenses arising from temporary factors.」

「Gross profit increased to 101.6% of the year-earlier level, but the gross profit margin declined 0.08 percentage points year on year, mainly due to higher center fees and other costs resulting from inflation. SG&A expenses increased to 103.9% of the year-earlier level due to higher logistics and personnel expenses, as well as increased rent and expenses arising from temporary factors, including higher employee salaries and part-time personnel expenses. The SG&A ratio increased 0.12 percentage points year on year.」

「As a result, net sales for the fiscal year ending March 2025 were 104.5% of the previous fiscal year's level, reaching a record high for the 10th consecutive period, and each level of profit also reached a record high. Gross profit increased steadily to 104.1% of the previous fiscal year's level, despite a temporary negative factor, supported by strong sales of cosmetics, particularly makeup and skincare products, and higher product unit prices. SG&A expenses increased due to higher personnel expenses associated with an increase in employee numbers under the future staffing plan and improvements in the treatment of full-time and part-time employees, reflecting investment in human capital. SG&A expenses also increased to 104.3% of the previous fiscal year's level due to logistics costs exceeding expectations because of the 2024 logistics issue and higher expenses from temporary factors. However, the increase in net sales absorbed the increase in SG&A expenses, improving the SG&A ratio by 0.01 percentage points.」

「Going forward, the Group will expand the composition ratio of priority categories, namely Health & Beauty and pet products, expand transactions with new retailers, and expand exclusive and priority-distribution products to increase net sales and gross profit under the medium-term management plan. At the same time, to address logistics costs, it will work to improve load factors and promote delivery-efficiency initiatives across the supply chain to reduce logistics costs. It will also maintain and implement IT medium-term plan initiatives and improve warehouse productivity using AI to restrain personnel expenses and the personnel expense ratio, working toward achieving its full-year targets for the fiscal year ending March 2025.」

「As a result, net sales reached a record high for the ninth consecutive period, and ordinary income also reached a record high. Gross profit margin improved 0.05 percentage points from the previous fiscal year, supported by broad-based price increases and strong performance by exclusive and priority-distribution products. Although freight costs increased due to the impact of the 2024 logistics issue and SG&A expenses rose due to upfront investment in a growth strategy for the future, improvements in warehouse and operating productivity from implementing IT medium-term plan initiatives contributed to earnings by improving the SG&A ratio by 0.05 percentage points from the previous fiscal year.」

「Through cumulative strategic sales activities, the Group expanded in-store share and strengthened product procurement, planning and development functions, expanding its handling of distinctive products and developing products selected by consumers. As a result of these sales activities, net sales increased 5.9% year on year, marking the eighth consecutive increase for a third quarter.」

「Through the expansion of in-store share driven by the accumulation of strategic sales activities, and by further strengthening its product sourcing, planning and development functions, the Company expanded its handling of distinctive products and developed products selected by consumers.」

「Regarding selling, general and administrative expenses, the company improved productivity and contained expenses through a reduction in headcount resulting from business improvements and a review of staffing at logistics centers, as well as through greater logistics efficiency.」

「To fulfill its mission of ensuring a stable supply of essential goods to everyone, the Company identified changes in consumers' lifestyles and purchasing attitudes through its sales and procurement divisions and converted them into sales. At its logistics centers, it prioritized employee safety and health, implemented measures to prevent the spread of infection and continued operations. It also introduced staggered working hours and teleworking at each location to prevent infection and maintain business continuity during the COVID-19 pandemic, and worked to improve productivity, including by restraining logistics costs. As a result, during the nine months ended 31 December, net sales were ¥652,880 million, operating income was ¥10,654 million, ordinary income was ¥11,338 million, and profit attributable to owners of the parent was ¥7,620 million.」

「To fulfill its mission of ensuring a stable supply of essential goods to everyone, the Company identified changes in consumers' lifestyles and purchasing attitudes through its sales and procurement divisions and converted them into sales. At its logistics centers, it prioritized employee safety and health, implemented measures to prevent the spread of infection and continued operations. It also introduced staggered working hours and teleworking at each location to prevent infection and maintain business continuity during the COVID-19 pandemic, and worked to improve productivity, including by restraining logistics costs. As a result, during the six months ended 30 September, net sales were ¥429,493 million, operating income was ¥7,101 million, ordinary income was ¥7,564 million, and profit attributable to owners of the parent was ¥5,214 million.」

「To fulfill its mission of ensuring a stable supply of essential goods to everyone, the Company quickly identified changes in consumers' lifestyles and purchasing attitudes through its sales and procurement divisions, secured products and converted them into sales. At its logistics centers, it treated employee safety and health as the highest priorities, implemented measures to prevent the spread of infection and continued operations. It also introduced staggered working hours and teleworking at each location to prevent infection and maintain business continuity during the COVID-19 pandemic, while working to improve productivity. SG&A expenses improved as the Company restrained logistics costs and promoted operational activities adapted to new lifestyles to improve productivity. As a result, during the three months ended 30 June, net sales were ¥213,840 million, operating income was ¥3,556 million, ordinary income was ¥3,808 million, and profit attributable to owners of the parent was ¥2,649 million.」

「The Company improved productivity by reducing travel, entertainment and meeting expenses and promoting business activities adapted to new lifestyles. As a result, SG&A expenses increased 2.5% year on year while net sales increased 6.6%, holding the increase 4.1 percentage points below the growth in net sales. For the nine months ended 31 December, net sales were ¥641,796 million, up 6.6% year on year, operating income was ¥10,086 million, up 39.0%, ordinary income was ¥10,491 million, up 32.1%, and profit attributable to owners of the parent was ¥7,153 million, up 22.8%.」

「The Company restrained the increase in freight costs by improving delivery efficiency and improved productivity by reducing travel, entertainment and meeting expenses and promoting business activities adapted to new lifestyles. As a result, SG&A expenses increased 1.6% year on year while net sales increased 4.5%, holding the increase 2.9 percentage points below the growth in net sales.」

「The company sought to improve productivity by reducing travel expenses, entertainment expenses, meeting expenses and other costs and promoting business activities adapted to the new lifestyle. As a result, while sales increased 8.5% year on year, selling, general and administrative expenses increased 3.0% year on year, limiting the increase by 5.5 percentage points.」

「To address the decline in consumption caused by population decline and the consumption tax increase, the Company proposed products selected by consumers and store displays designed to sell, expanded sales of highly profitable products and implemented measures to improve productivity. As a result, it achieved the targets for the final year of the medium-term management plan: budgeted net sales of ¥771,000 million, ordinary income of ¥10,000 million and profit attributable to owners of the parent of ¥6,500 million.」

「While logistics-related expenses, including freight costs, increased due to higher net sales, the Group restrained the increase in indirect operating expenses through operational consolidation and other measures, reducing the SG&A ratio by 0.02 percentage points year on year to 9.06%. As a result, operating income for the nine months ended 31 December was ¥7,254 million, up 4.7% year on year, and the operating margin increased 0.01 percentage points to 1.21%.」

「While logistics-related costs such as freight increased as net sales expanded, the Company restrained growth in indirect operating expenses through the consolidation of operations. As a result, the SG&A ratio improved by 0.15 percentage points from the previous year to 8.96%, and operating income for the six months ended 30 September was ¥5,036 million, up 12.5% year on year. The operating margin increased 0.06 percentage points to 1.24%.」

「In terms of profitability, the gross margin improved to 10.39%, up 0.03 percentage points from the previous year, through stronger sales of highly profitable categories. However, higher logistics costs and maintenance and repair expenses for buildings and other assets increased the SG&A ratio by 0.06 percentage points to 9.11%, resulting in only a marginal year-on-year increase in operating income for the three months ended 30 June and an operating margin of 1.28%.」

「Against this backdrop, the Group continued to pursue proactive sales activities and worked to expand sales toward achieving the medium-term management plan. During the nine months ended 31 December, it worked to improve performance from the first and second quarters, which had been affected by weak sales of seasonal products, including insecticides, due to unfavorable weather, and implemented measures to expand sales of high-margin products and improve productivity toward achieving its annual sales plan. As a result, net sales increased 3.2% year on year from the cumulative second quarter period, while the increase in SG&A expenses was held to 2.9%, improving the SG&A ratio to 9.08%. The Group also worked to improve the gross profit margin by expanding sales in highly profitable categories, but operating income increased only slightly year on year due to higher freight costs, resulting in an operating margin of 1.20%.」

「The company will achieve its annual earnings forecast and the medium-term management plan for the fiscal year ending March 2020 by thoroughly implementing sales activities based on activity-based costing, improving product unit prices, reducing returns, and improving the productivity of indirect operations, all of which are current growth drivers.」

「Transactions based on activity-based costing by manufacturer and retailer increased gross profit and the gross profit margin. In addition, sales of products offering value-added benefits that satisfy consumers, in cooperation with manufacturers and retailers, led to higher unit prices. As a result, net sales for the fiscal year were ¥732,914 million, up 4.0% year on year; operating income was ¥8,857 million, up 19.9%; ordinary income was ¥9,439 million, up 20.4%; and profit attributable to owners of the parent was ¥6,361 million, up 30.8%. The Group achieved record highs in net sales, ordinary income, profit attributable to owners of the parent and other profit measures.」

「The basic policies of the medium-term management plan are 1. Continue developing growth strategies, 2. Lay the groundwork for the future, and 3. Further strengthen the management foundation. The Group has formulated strategies and begun acting proactively to invest in sales, logistics, systems and globalization, among other areas, and to establish an organizational structure capable of responding to environmental changes, with a view to its ideal state 10 and 20 years from now. As a result, during the three months ended 30 June, net sales were ¥183,701 million, up 3.5% year on year; operating income was ¥2,457 million, up 20.4%; ordinary income was ¥2,701 million, up 23.1%; and profit attributable to owners of the parent was ¥1,795 million, up 36.4%.」

「Specifically, the Group sought to improve earnings power by expanding sales and improving the gross profit margin across the Arata Group, increasing logistics center productivity, and reducing the expense ratio by streamlining indirect operations to improve efficiency. As a result, it exceeded the numerical targets of the medium-term management plan.」

「Specifically, the Group sought to improve earnings power by expanding sales and improving the gross profit margin across the Arata Group, increasing logistics center productivity, and reducing the expense ratio by streamlining indirect operations to improve efficiency. As a result, during the nine months ended 31 December, net sales were ¥539,598 million, up 4.3% year on year; operating income was ¥6,016 million, up 28.1%; ordinary income was ¥6,393 million, up 34.0%; and profit attributable to owners of the parent was ¥3,881 million, up 38.0%.」

「Specifically, the Group sought to improve earnings power by expanding sales and improving the gross profit margin across the Arata Group, increasing logistics center productivity, and reducing the expense ratio by streamlining indirect operations to improve efficiency. As a result, during the nine months ended 30 September, net sales were ¥355,644 million, up 4.7% year on year; operating income was ¥3,703 million, up 39.0%; ordinary income was ¥3,910 million, up 43.7%; and profit attributable to owners of the parent was ¥2,433 million, up 55.4%.」

「Specifically, we sought to improve earnings power by expanding sales and improving the gross profit margin across the ARATA Group, increasing distribution-center productivity, and reducing the expense ratio by streamlining indirect operations to improve efficiency. As a result, for the first quarter of the current fiscal year, net sales were ¥177,504 million, up 5.0% year on year, operating profit was ¥2,042 million, up 33.7%, ordinary profit was ¥2,193 million, up 38.6%, and profit attributable to owners of the parent was ¥1,315 million, up 42.9%.」

「(1) Strengthening profitability ① Improve earnings power by reviewing transaction systems and product mix ② Strengthen product development by leveraging the ARATA Group’s sales capabilities and network ③ Strengthen earnings power by specializing sales, sales promotion and in-store management functions ④ Actively invest management resources in overseas businesses and strengthen the earnings management framework ⑤ Develop product proposals and establish a logistics framework for internet businesses」