Realizing synergies through a capital and business alliance with DD Holdings

「The knowledge and expertise possessed by DD Group and its group companies in store operations, purchasing, recruitment and other areas also contribute to establishing the company's business base.」

「The Company uses the expertise and know-how in store operations, procurement, recruitment and other areas possessed by the DD Group and its group companies to establish its business foundation.」

「Cost savings have materialized from integrating the merchandising and logistics functions into the procurement and logistics system of the parent company, 株式会社ＤＤホールディングス, and from recruitment conducted across the group.」

「In addition to improved revenue from food-service operations and synergies from integration with the procurement and logistics system of DD Holdings, the Company’s parent company, continued reductions in head-office expenses resulting from efforts since prior years to improve head-office and sales administration functions resulted in operating profit of ¥17 million, ordinary profit of ¥24 million and quarterly net profit of ¥16 million.」

「Although cost savings have emerged from integrating commercial distribution functions into the procurement and logistics system of DD Holdings, the parent company, and from group-wide recruitment initiatives, the Company recorded an operating loss of ¥10 million, an ordinary loss of ¥22 million and a quarterly net loss of ¥24 million, due to initial investment costs associated with the conversion to the new business formats described above and the recognition of fees related to the issuance of new shares through a third-party allotment conducted in May 2019, including a debt-equity swap, and the issuance of the fifth series of stock acquisition rights.」

「Product sales cooperation payments and other amounts received from suppliers were previously treated as sponsorship income under non-operating income. Following the Company’s becoming an equity-method affiliate of DD Holdings on 20 December 2017, it adopted the same accounting policies as DD Holdings. From the current fiscal year, these amounts have been included in cost of sales as deductions from purchases, with the aim of standardizing profit management and budget management across the group.」

「Product sales cooperation payments and other amounts received from suppliers were previously treated as sponsorship income under non-operating income. Following the Company’s becoming an equity-method affiliate of DD Holdings on 20 December 2017, it adopted the same accounting policies as DD Holdings. From the first quarter of the fiscal year, these amounts have been included in cost of sales as deductions from purchases, with the aim of standardizing profit management and budget management across the group.」

「As part of efforts to realize synergies with DDホールディングス, with which the company entered into a capital and business alliance in November 2017, the company began partial implementation of the DD POINT member service, a points program provided by DDホールディングス, from 20 September 2018. Going forward, the company expects higher sales as customers using the service are directed to its stores.」

「This change was made to present profit and loss categories more appropriately, following the Company’s adoption of the same presentation method as DD Holdings after becoming its equity-method affiliate on 20 December 2017, the disclosure of standardized management indicators across the group, and the expansion of revenue from the Company’s content planning services, which has changed the scope of its services.」

「The Company decided to enter into this capital and business alliance agreement because it considered that establishing a strong partnership between the two companies by making the Company an equity-method affiliate of DD Holdings would be desirable in addressing the management issues recognized by both companies, and that sharing their respective unique strengths would contribute to expanding their corporate value.」

「Through this tender offer, DD Holdings acquired 576,000 shares on 20 December 2017 (5,760 voting rights; 44.07% of the total voting rights held by all shareholders as of 30 September 2017, which amounted to 13,069 voting rights). The Company and DD Holdings formed a project team to generate synergies, are examining specific synergies in logistics, procurement, sales promotion, recruitment and store development, among other areas, and are working toward achieving them at an early stage.」