Challenges in advancing structural reforms and insufficient contribution from head office expenses

「Although selling expenses increased due to expanded promotional measures linked to the CRM strategy, SG&A expenses declined as the Company reduced personnel expenses and continued reviewing logistics and outsourcing costs.」

「Although selling, general and administrative expenses increased slightly, by 0.9% year on year, due to higher store rents, cost efficiency relative to sales improved as a result of optimizing staffing and reviewing some outsourcing and promotional expenses.」

「On the cost side, personnel expenses increased substantially as the company strengthened measures to recruit and retain personnel. In addition, expanded outsourcing costs associated with promoting DX and store maintenance expenses resulted in SG&A increasing by ¥290 million, or 5.5%, from the previous fiscal year.」

「Personnel expenses increased substantially as the Company strengthened measures to recruit and retain employees. In addition, continued spending on outsourcing and promotion costs associated with digital transformation resulted in SG&A expenses increasing by ¥156 million, or 4.0%, year on year.」

「Personnel expenses increased substantially as the Company strengthened measures to recruit and retain employees. In addition, continued spending on outsourcing and promotion costs associated with digital transformation resulted in SG&A expenses increasing by ¥106 million, or 8.3%, year on year.」

「SG&A increased by ¥121 million, or 2.4%, from the previous fiscal year due to expanded upfront investments, including branding investments and higher outsourcing costs associated with promoting DX.」

「On the cost side, in addition to higher variable rent associated with increased department-store sales, the company expanded upfront investments, including branding investments and higher outsourcing costs related to promoting DX. As a result, SG&A increased by ¥129 million, or 3.4%, from the same quarter a year earlier.」

「On the cost side, in addition to higher variable rent associated with increased department-store sales, the company expanded upfront investments, including branding investments and higher outsourcing costs related to promoting DX. As a result, SG&A increased by ¥66 million, or 2.5%, from the same quarter a year earlier.」

「Specifically, to reduce fixed costs by improving operating efficiency, the Company considered reviewing its business portfolio with an emphasis on profitability and growth, in addition to withdrawing from unprofitable stores, and relocated and downsized its head office alongside promoting remote work.」

「Since the state of emergency was declared in April 2020, business structure reforms aimed at moving away from a high-fixed-cost business model have strengthened the earnings base and advanced a shift toward growth areas. Even during the sales decline caused by the COVID-19 pandemic, the Company maintained profit levels broadly in line with plan while continuing growth investment centered on digital transformation.」

「The Company’s business structure reforms aimed at moving away from a high-fixed-cost business model have improved its earnings structure by lowering the break-even ratio, enabling the Company to remain profitable at every level of profit even during the sales decline caused by the COVID-19 pandemic.」

「Meanwhile, the Company will continue to focus on improving operating efficiency by reducing fixed costs and will carry out structural reforms, including reviewing businesses with an emphasis on profitability and future potential, optimizing head-office staffing, and relocating and downsizing the head office alongside promoting remote work, in addition to withdrawing from unprofitable stores.」

「In addition to lower store rents resulting from the continued withdrawal from unprofitable stores and reviews of contractual terms with developers, store-related costs declined substantially as depreciation decreased following impairment losses recognized for certain stores in the fiscal year ended August 2020.」

「The Company continued to withdraw from unprofitable stores and review contractual terms with each developer, reducing store rents. In addition, depreciation declined following impairment losses recognized for certain stores in the fiscal year ended August 2020, substantially reducing store-related costs.」

「By strategically centralizing previously dispersed logistics and repair functions, the Company reduced outsourcing and delivery costs while maintaining service levels.」

「The Company also began reforming its head office and, alongside promoting telework, advanced initiatives to systematize and standardize operations, with the aim of further improving productivity in each area of the business.」

「Although costs related to expanded new store openings and store renovations, as well as costs incurred in transferring logistics functions to an external provider, increased expenses, SG&A declined by ¥25 million, or 0.4%, from the previous fiscal year to ¥6,073 million as part of structural reforms, including streamlining headquarters and rationalizing promotional initiatives.」

「As part of its structural reform initiatives, the Company streamlined head-office operations and rationalized promotional measures. Consequently, SG&A expenses decreased by ¥120 million, or 2.5%, year on year, to ¥4,603 million.」

「As part of its structural reform initiatives, the Company streamlined head-office operations and rationalized promotional measures. Consequently, SG&A expenses decreased by ¥104 million, or 3.2%, year on year, to ¥3,175 million.」

「The Company renewed its core system and attempted structural reform to address the diversification and expansion of its business areas driven by technological advances and the growth strategy. However, a combination of factors, including a lack of company-wide IT literacy, forced a significant postponement of the full-scale launch. Even after the system went live in June, the Company struggled to operate it stably, and progress remained limited.」

「On the profit side, SG&A expenses increased substantially, rising 7.8% year on year, due to higher web-focused promotion costs, additional investment in system development following the postponement of the new core system, higher external support costs to enable an early full-scale launch, and higher personnel and other maintenance costs associated mainly with opening and expanding stores including Festaria Bijoux Sophia Ginza. Meanwhile, gross profit rose only 2.8% year on year, resulting in a substantial consolidated operating loss.」

「In addition to increased headquarters expenses caused by additional investment in building the system following the postponement of operation of the new core system and lower operating efficiency associated with recovery measures, increases in capital investment, fixed rent and other costs related to the opening of “festaria bijou sophia Ginza” also contributed to a substantial 9.8% year-on-year increase in selling, general and administrative expenses.」

「In addition to the costs of capital investment and fixed rent associated with the opening of the street-level store Festaria Bijoux Sophia Ginza on Ginza Chuo-dori in March 2017, depreciation increased following the introduction of a new core system. However, the system’s full-scale launch was postponed, and administrative expenses rose substantially because paid service fees exceeded expectations as additional costs were incurred to build the system. As a result, selling, general and administrative expenses increased 18.9% year on year, and the operating loss worsened significantly from the previous year.」

「However, as a result, the Company remained focused on addressing existing operations, and no specific initiatives for head-office reform were implemented, leaving many issues unresolved.」

「In particular, during the third quarter, spending on various promotions, including the opening event and train advertising for Festaria Bijoux Sophia Ginza, as well as higher depreciation from capital investment and higher fixed rent, placed pressure on results. Selling, general and administrative expenses rose 1.4% year on year. As a result, consolidated operating income fell 55.0% year on year.」

「In terms of costs, the company made capital investments in various infrastructure improvements in addition to expenses related to strengthening its workforce, including head office personnel. However, the contribution to overall sales, as analysed from the head office expense-to-sales ratio, was limited, leaving challenges in the progress of structural reform.」