Improving Gross Margins and Reducing Slow-Moving Inventory Through Merchandising Process Reform

「Meanwhile, following the July clearance event, the company stepped up full-price sales and kept sale sales to an appropriate scale. As a result, full-price sales in July-August reached 108% of the prior-year level, while the gross margin improved by 3.3 percentage points from the previous year.」

「Regarding the gross margin, the company strengthened sale sales to prevent excess inventory caused by sluggish sales, resulting in a decline in the full-price sales ratio and a gross margin below the previous year.」

「Regarding the gross margin, the company secured approximately the planned margin on full-price merchandise. However, the full-price sales ratio declined because it strengthened sale sales to avoid excess inventory caused by weak sales, resulting in a 2.3-point decline in the gross margin from the previous year.」

「The company will work to raise the balance point between product value and price through product innovation and upgrades, improve customer equity by strengthening customer touchpoints, and fundamentally improve customer service through the development of sales personnel, thereby enhancing brand value.」

「During the interim consolidated accounting period, net sales were slightly below the previous year. However, gross profit exceeded the previous year due to improved gross margins resulting from stronger full-price sales and narrower discounts during sales events. Operating profit was below the previous year because SG&A expenses, mainly personnel costs, increased.」

「In the first quarter, net sales fell below the previous fiscal year, mainly due to the impact of a decline in sale sales following the sharp reduction in carried-over inventory, in addition to the backlash from the post-pandemic consumption boom. Full-price sales remained at approximately the previous fiscal year's level, resulting in a full-price sales ratio above plan and contributing to gross margin improvement.」

「For the fiscal year ended February 2024, the company implemented initiatives including SCM optimization through stronger cooperation with major suppliers, limiting excess procurement through procurement-pool operations, QR production for strong-selling products, and shortening the merchandising cycle. The gross margin improved by 0.2 points from the previous fiscal year to 62.2%. For the fiscal year ending February 2025, the company aims to achieve the 63.0% target in its medium-term management plan by continuing to reduce the procurement cost ratio, strengthen inventory control, and improve the full-price sales ratio.」

「While continuing to improve its gross margin and control SG&A expenses, the company also completed the renewal of its e-commerce platform in September and proceeded with new store openings and renovations of existing stores. It is actively promoting measures to expand sales toward achieving its final-year targets. As a result, the Group's net sales for the cumulative third quarter were ¥44.603 billion and operating profit was ¥1.727 billion.」

「The current fiscal year is the second year of the medium-term management plan announced on 14 April 2022. In addition to securing net sales, the company has continued to work on improving its gross margin and controlling SG&A expenses.」

「This is the second year of the mid-term management plan announced on 14 April 2022. In addition to securing revenue, we are continuously working to improve the gross profit margin and control selling, general and administrative expenses in order to build a more stable earnings base. As investment to put the company on a growth trajectory, we are also actively pursuing the renewal of the e-commerce platform, new store openings in areas and facilities where we have not previously operated stores, and renovations of existing stores.」

「The company achieved the planned 62.0% gross margin for the fiscal year ended February 2023, announced on 14 April 2022. For the fiscal year ending February 2024, it is targeting a further 0.5-point improvement to 62.5% through initiatives including SCM optimization by strengthening cooperation with major suppliers, limiting excess procurement through procurement-pool operations, implementing QR production for strong-selling products, and shortening the merchandising cycle.」

「In addition, by continuing to implement measures under the medium-term management plan, including strengthening inventory control, promoting full-price sales, and limiting discounts on sale merchandise, the company exceeded its gross profit target.」

「In addition, by continuing this fiscal year to implement measures under the Medium-Term Management Plan (fiscal years ending February 2023 to February 2025), announced on 14 April of this year, including reducing the procurement cost ratio, strengthening inventory control, promoting full-price sales, and limiting discounts on sale merchandise, the company improved its gross margin beyond plan and exceeded its gross profit target.」

「The company reduced the procurement cost ratio, strengthened inventory control, and focused on full-price sales at both physical stores and through e-commerce, resulting in gross profit exceeding expectations.」

「To improve the full-price sales ratio, the company will target a ratio of at least 70% and implement measures including reducing the number of product codes, consolidating merchandising, adding strong-selling products during the season, limiting the depth of discounts, and shortening sale periods. For inventory control, it will establish a system capable of responding flexibly to sales trends by operating a pool equivalent to 20% of the procurement budget. It also aims to improve inventory turnover by shortening the merchandising cycle and strengthening in-season responsiveness through an in-season additional production system.」

「Meanwhile, structural reform of the business under the Revitalization Plan, which the entire company is undertaking, is progressing smoothly. Through lower procurement costs, stronger inventory management, and maintaining a full-price sales model at both physical stores and through e-commerce, the company maintained its gross margin at the targeted level, reaching 49.6% cumulatively, a 9.2-point improvement from the previous year.」

「Meanwhile, structural reform under the Revitalization Plan, which the entire company is undertaking, is progressing smoothly. Through lower procurement costs, stronger inventory management, and a commitment to full-price sales at both physical stores and through e-commerce, the company maintained its gross margin at the targeted level, reaching 47.0% cumulatively, an 8.5-point improvement from the previous year. Reductions in SG&A expenses have also progressed beyond expectations.」

「However, by reducing procurement costs, strengthening inventory management and focusing exclusively on full-price sales in both physical stores and e-commerce, the gross margin was 50.1%, above expectations. Selling, general and administrative expense reductions also progressed more than expected, reducing the operating loss.」

「Product inventory at the end of the fiscal year ended February 2021 was reduced by ¥4.1 billion from the beginning of the fiscal year to ¥9.0 billion on a non-consolidated basis. The company plans to reduce product inventory to ¥6.0 billion by the end of the fiscal year ending February 2022 through measures including shortening the merchandising cycle and improving inventory turnover by establishing a QR system for short-cycle production and in-season additional planning and production.」

「Meanwhile, regarding SG&A expenses, the company worked to reduce total expenses through measures including restraining personnel costs and negotiating reductions in real estate rents, achieving reductions beyond the initial plan. However, these reductions were insufficient to offset the decline in net sales and gross profit caused by the COVID-19 pandemic, and the operating loss widened.」

「Meanwhile, regarding SG&A expenses, the company worked to reduce total expenses through measures including restraining personnel costs and negotiating reductions in real estate rents, but the operating loss widened.」

「In formulating its Revitalization Plan, the company decided to shift from its previous product and sales policies, which prioritized advance sales and net sales, to policies prioritizing profit and profit margin. By shifting to a more selective procurement policy aligned with demand, it began moving away from discount sales and securing an appropriate gross profit, while centralizing authority over product purchasing to reduce purchase amounts and inventory and improve operating cash flow. In response to the increase in carried-over inventory caused by the spread of COVID-19, it will respond flexibly, with inventory reduction as its highest-priority initiative.」

「The gross margin deteriorated due to the expansion of discount sales to reduce carried-over inventory and inventory valuation losses. Regarding SG&A expenses, the company worked to reduce total expenses by restraining personnel costs and cutting travel and transportation expenses, but was unable to prevent the operating loss from widening.」

「In terms of profit, the gross margin deteriorated due in part to the expansion of discount sales as the purchase ratio of the company's point-card members increased. In terms of SG&A expenses, although the company worked to reduce total expenses by restraining personnel costs while continuing marketing investment to support active sales, the operating loss widened.」

「During the nine months ended 30 November, sales increased slightly year on year and operating income and ordinary income also improved, driven by enhanced sales measures during the summer clearance sale, stronger full-price promotions from September, and front-loaded demand ahead of the consumption tax increase.」

「In addition, the gross margin declined due to the expansion of discount sales resulting from the implementation of aggressive promotional measures as the purchase ratio of the company's point-card members increased, as well as differences in the timing of inventory valuation associated with the change in the fiscal year-end. Meanwhile, although the company worked to reduce total SG&A expenses by restraining personnel costs while continuing marketing investment to support active sales, it was unable to offset the decline in gross profit, and the operating loss widened.」

「In addition, while investing in marketing initiatives, the company reduced SG&A expenses and achieved a return to operating and ordinary profitability. As a result, the Group's net sales for the cumulative first quarter were ¥16.114 billion, up 2.9% year on year; operating profit was ¥245 million, compared with an operating loss of ¥35 million in the same period of the previous year; and ordinary profit was ¥198 million, compared with an ordinary loss of ¥120 million in the same period of the previous year.」

「Although net sales declined, the decline in profit was contained by a 1.8-point improvement in the profit margin, with the figure decreasing by ¥566 million from the previous fiscal year to ¥28.583 billion.」

「For the cumulative third quarter of the current consolidated fiscal year, net sales declined due to the extremely hot summer and weather-related factors from September onward. However, as a result of improving gross profit and reducing SG&A expenses, each profit measure improved.」

「As a result of improving the gross margin and reducing SG&A expenses, operating results improved from the previous year. For the cumulative second quarter of the current consolidated fiscal year, the Group reported net sales of ¥29,266 million, down 8.2% year on year, and an operating loss of ¥807 million, compared with an operating loss of ¥1,626 million in the same period of the previous year.」

「Operating results improved substantially through improvements in the gross margin and control of SG&A expenses.」

「The Company will standardize and enhance the merchandising process, review the duties of merchandising and production personnel, and strengthen coordination with the production division to establish a system for efficiently pursuing the creation of attractive products. It will also promote the disposal of stagnant inventory and improve efficiency. In addition, it will expand direct sourcing and establish a quick-response system to further accelerate supply-chain optimization.」

「For the cumulative third quarter of the current consolidated fiscal year, net sales declined due to the discontinuation of brands and closure of unprofitable stores in connection with the business-structure reforms. However, as a result of improving gross profit and reducing SG&A expenses, the Company substantially improved each profit measure from the previous year.」

「During the second quarter of the current consolidated cumulative period, net sales declined because brands were discontinued as part of the business structure reform, but profitability improved as a result of efforts to improve the gross profit margin and reduce selling, general and administrative expenses.」

「Going forward, the Company will pursue further efficiency improvements across the organization, implement merchandising reforms and promote measures to increase gross profit and the gross margin.」

「The Company will standardize and enhance the merchandising process, review the duties of merchandising and production personnel, and strengthen coordination with the production division to establish a structure for efficiently pursuing the creation of attractive products. Through these measures, it aims to improve the gross margin and reduce stagnant inventory.」