Productivity Improvement Through Business Model Reform

「Cost-base reform is progressing faster than the full-year initial plan of a ¥3.3 billion reduction, reaching approximately 36% progress in the first quarter.」

「During the consolidated fiscal year, we steadily shifted our business model from the traditional department-store-centered “building business” to a “customer business” that connects directly with each customer, deepening relationships with customers identified at department stores and creating new revenue opportunities through “federation” activities that make maximum use of the Group’s diverse content.」

「As a result, break-even sales for the department store business as a whole declined, establishing a structure in which revenue growth directly leads to profit growth, and we achieved the revitalization of the department stores targeted in Phase 1.」

「In addition, steady progress in the income and expense structure reforms resulted in higher revenue, based on total sales, and higher profit for the regional department stores as a whole.」

「Meanwhile, on the expense side, rigorous implementation of the Science of Department Stores (income and expense structure reforms) at stores nationwide has advanced expense control, including reductions in fixed costs and restraint of expenses linked to sales. As a result, the earnings of the domestic department store business have improved substantially, including continued profitability for the regional department stores as a whole.」

「We are also accelerating nationwide efforts to rigorously control expenses through the Science of Department Stores (income and expense structure reforms), and the earnings performance of the domestic department store business has improved substantially, including a return to profitability for the regional department stores as a whole.」

「Our other affiliated companies also recorded substantial year-on-year increases in revenue and profit, reflecting progress in the income and expense structure reforms and the recovery in demand for service consumption following the reclassification of COVID-19 as a Class 5 infectious disease.」

「In addition, we worked to analyze the business structure of the Group's department stores scientifically and systematize guidelines for reforming the income and expense structure, store structure, organization and staffing, and operations based on quantitative indicators.」

「Under the income and expense structure reforms, in the domestic department store business we have been transforming our earnings structure into one that can generate profits more readily even in a highly uncertain business environment by lowering break-even sales through fixed-cost reductions. Going forward, we will aim to further increase operating profit through a recovery in net sales and continued control of break-even sales.」

「Under the income and expense structure reforms, we have expanded the scope of these initiatives to domestic Group companies and are advancing highly agile profit control by strengthening earnings progress management and response measures so that we can respond flexibly to fluctuations in sales.」

「Under the income and expense structure reforms, we worked from the perspective of the Science of Department Stores to establish standards and disciplines for controlling expenses and staffing. With respect to expenses, in addition to the decline in variable costs accompanying lower sales, we have lowered break-even sales through fixed-cost reductions. With respect to staffing, we optimized staff allocation by reviewing operational processes across the Group and brought operations in-house by having employees perform multiple tasks.」

「Under the income and expense structure reforms that support our strategy, we reviewed outsourced operations across the Group and reduced costs by bringing sales operations and online work in-house. We also controlled costs by reviewing advertising media and reducing advertising expenses through the shift to online media.」

「Cash flow from operating activities was an inflow of ¥4,881 million, an increase of ¥21,600 million from the cumulative second quarter of the previous consolidated fiscal year. This was mainly attributable to the reduction in the quarterly net loss before income taxes, primarily as a result of higher net sales and lower selling, general and administrative expenses due to the progress of reforms to the income and expense structure.」

「In addition, we will advance reforms to our income and expense structure, transforming the quality of our revenue through diversified monetization methods and implementing cost reductions and reallocations.」

「Going forward, we will continue to develop new approaches to communication, accelerate the digital shift, build the operating base for a business model transformation based on these initiatives, and pursue fundamental cost structure reforms by making our income and expense structure more transparent.」

「While proceeding with business model reform in the retail, or department store, business as planned, we will further accelerate our digital shift and work on three priority areas in response to changes in customer behavior, new lifestyles and changes in consumption patterns in preparation for the with-COVID and post-COVID periods.」

「While proceeding with business model reform in the retail, or department store, business as planned, we will further accelerate our digital shift and work on three priority areas in response to changes in customer behavior, new lifestyles and changes in consumption patterns in preparation for the with-COVID and post-COVID periods.」

「By reviewing without exception all of the assumptions, expertise, systems and operations that we have previously taken for granted and advancing fundamental cost structure reforms linked to business model reform, we are pursuing substantial reductions in selling, general and administrative expenses, including advertising expenses, land and building rents, and personnel expenses.」

「In this challenging environment, our Group is pursuing change and transformation to help customers in various aspects of their lives, with the aim of realizing the Mitsukoshi Isetan Group, which connects people and the times, and is working to create new value. To this end, we continue to make forward-looking investments and are advancing business model reform by incorporating new capabilities, including digital technologies, in addition to the expertise and resources we have developed over many years through our people and stores. At the same time, in this environment, we have begun fundamental structural reforms linked to business model reform, reviewing without exception all of the assumptions, expertise, systems and operations that we have previously taken for granted.」

「Against this backdrop, we are working to establish a new business model so that the department store business can generate stable earnings on a sustainable basis as a core source of revenue. In addition to upgrading our stores, we are also developing the infrastructure needed to create a seamless experience in which customers can enjoy the same experience in stores and online.」

「In the department store business, we are pursuing a restructuring of our business model so that it can generate stable earnings as a core source of revenue. As digitalization advances rapidly, we are promoting the seamless integration of online and offline channels so that customers can enjoy the same experience both in stores and through e-commerce.」

「Consolidated selling, general and administrative expenses were ¥319,052 million, down 6.9% year on year. As a result of cost structure reforms at each company, we substantially reduced selling, general and administrative expenses.」

「In the department store business, we are pursuing a fundamental rebuilding of our business model.」

「In the department store business, we are rebuilding our business model.」

「In FY2017, as a run-up to the plan, we focused on “structural reform” and “strengthening the profit structure,” and began reforming unprofitable businesses and the cost structure, reviewing staffing policies, and addressing inventory risks ahead of schedule.」

「We shifted from conventional flyer-based sales promotion to measures using social media and initiatives tailored to customer trends at each store. Together with more efficient management of selling, general and administrative expenses, including advertising costs, and the strengthening of high-margin products, including private-label products, this reduced the deficit.」

「We shifted the focus of our core sales promotion policy from conventional flyer-based promotions to “koto” initiatives centered on events unique to each store. This also advanced control of selling, general and administrative expenses, including advertising costs, and led to improved earnings.」

「[Strategy 3] Building a foundation to strengthen PDCA We will seek to create greater spillover effects by expanding and leveraging across the group the business platform developed primarily through the department store business. To strengthen management PDCA, we are developing infrastructure to pursue profits and improve visibility, in addition to sales and merchandise margin rates.」

「In the department store business, as part of procurement structural reform, we launched “ISETAN MITSUKOSHI THE FOOD,” the first proprietary brand in the food division.」

「As a further step in the structural reform of procurement being pursued by the group as a whole, we are expanding the rollout of “NUMBER TWENTY-ONE,” our original women’s footwear brand, both within and outside the group.」

「We will seek to improve productivity by building new systems and reforming our business model.」