Shift away from a high-fixed-cost profit-and-loss structure

「For restaurants such as Kin no Kura that primarily serve alcoholic beverages, we completed the transformation of our business structure by undertaking large-scale closures and format conversions, mainly of high-fixed-cost stores located in large premises, upper floors and basements.」

「Because prime locations near stations in the Tokyo metropolitan area, once a strength of the group, had already become a weakness, the company had continued since 2020 to pursue large-scale closures, centered on high-fixed-cost stores such as large stores, stores on upper floors and basement stores. With this business-structure reform reaching completion, selling, general and administrative expenses declined substantially, making a significant contribution to the improvement in operating profit.」

「Because prime locations in front of stations in the Tokyo metropolitan area, once a strength of our group, have now become a weakness, we have pursued large-scale closures of high-fixed-cost stores, primarily large-format, upper-floor and basement locations, since two fiscal years ago. These measures are now largely complete.」

「As cost-cutting measures for stores that will remain in operation, the company will reduce delivery costs by reviewing logistics, negotiate rent reductions and cut utility costs through detailed management based on operating conditions. In addition, to minimize head-office expenses, the company will reduce executive compensation, continuing the reductions made in the previous fiscal year, and cut fees paid, among other measures.」

「The company also implemented measures to review all expenditures, including cuts to sales promotion expenses, recruitment expenses, fees paid, and executive compensation, as well as negotiations to reduce store rents.」

「Prime locations near stations in the Tokyo metropolitan area, previously one of the company's strengths, have now become a weakness. In particular, because customer-attraction power has deteriorated significantly in areas such as Shinjuku and Shibuya, the company will proceed with further store closures.」

「The company decided to close more than 40 stores in the fiscal year ending June 2020, focusing not only on stores expected to become unprofitable but also on stores requiring time to improve their store-level earnings, stores with a high rent-to-sales ratio, and large stores and stores on upper floors.」

「While proceeding with store closures, the company worked to make effective use of available stores by subdividing them to improve seat turnover at existing stores and combining business formats suited to the characteristics of each trading area.」

「As part of the consolidation and reorganization of large stores and stores on upper floors whose operating efficiency had deteriorated, the company subdivided some of these stores and developed and opened brands designed to address customer needs different from those served by its existing brands.」

「At present, seat utilization has declined at many of the izakaya stores located on upper floors. To reduce the operating floor area of these stores, the company reviewed its lease agreements and improved operating efficiency by subdividing and returning part of the leased space.」

「In addition, because the company's stores are primarily located near stations in the Tokyo metropolitan area, it has a high-fixed-cost earnings structure. Accordingly, the company worked to transform this structure by focusing on rent reductions and changing the locations of new stores to areas near the Tokyo metropolitan area where the rent-to-sales ratio is lower.」