Risk of Recovering Upfront Investment in Establishing New FCs and Enhancing Their Functions

「For FCs where cash flows from operating activities remain negative, the Company reduces the carrying amount of the assets to their recoverable amount and records the reduction as an impairment loss within extraordinary losses.」

「The Company reviewed the floor space of its FCs and closed 3 FC sites. In connection with the site closures, it sought to reduce rent expense, the largest component of fixed costs, and will focus on concentrating management resources at its other FCs.」

「To resolve these matters, the Company pursued substantial fixed-cost reductions through measures including optimizing FC floor space and headcount, as well as reviewing operating expenses. As a result, it recorded operating income of ¥15.933 million, ordinary income of ¥14.012 million and interim net income of ¥83.662 million for the interim accounting period.」

「The Company recorded an impairment loss of ¥960.569 million, arising mainly from impairment of fixed assets relating to fulfillment centers for which management had decided to proceed with closure and impairment of goodwill at 株式会社アビスジャパン after material accounting adjustments were found to be necessary in the opening balances that had been provisionally accounted for when the company became a consolidated subsidiary from the third consolidated quarter, because future excess earning power could no longer be expected. The Company also recorded ¥362.277 million as an addition to the provision for losses on the closure of business sites in preparation for losses arising from FC closures, as an extraordinary loss.」

「Because the Group recorded operating losses for 2 consecutive fiscal years through the previous fiscal year and has also recorded an operating loss for the cumulative third quarter of the current consolidated fiscal year, it recognizes that events or circumstances exist that raise significant doubt about the going-concern assumption.」

「In terms of profit, the Company had secured resources including FC operating staff on the assumption that its sales plan would be achieved. However, because revenue fell below plan, it was unable to absorb personnel expenses and increases in utility costs and other expenses, resulting in an operating loss of ¥82.314 million (an operating loss of ¥63.799 million in the same quarter of the previous year), an ordinary loss of ¥75.748 million (an ordinary loss of ¥57.611 million in the same quarter of the previous year), and a quarterly net loss of ¥117.656 million (a quarterly net loss of ¥142.015 million in the same quarter of the previous year).」

「Special gains and losses for the fiscal year were a loss of ¥100.964 million. This was mainly due to the recognition of an impairment loss of ¥102.263 million on fixed assets.」

「In terms of profit, although the company worked to secure earnings through expense controls, it was unable to absorb the costs of opening the new Saitama-Soka fulfillment center and higher rent, as well as increases in labor costs and temporary staffing expenses associated with preparations for launching new customers. As a result, the company posted an operating loss of ¥63.799 million (operating profit of ¥193.767 million in the same quarter of the previous year), an ordinary loss of ¥57.611 million (ordinary profit of ¥209.035 million), and a quarterly net loss of ¥142.015 million (quarterly net profit of ¥129.062 million).」

「Because revenue fell below the initial assumption, the Company was unable to absorb the costs of opening the Saitama Soka FC, higher rent expense and the related increase in personnel expenses and other costs, resulting in an operating loss of ¥100.253 million, an ordinary loss of ¥94.983 million and a quarterly net loss of ¥168.516 million.」

「When a new FC is opened, it takes a certain period for the utilization rate to rise to a level commensurate with the new investment. In addition, upfront investments are incurred, including higher rent expense due to increased leased floor space and higher labor costs to increase staffing when launching the new FC. As a result, opening a new FC tends to temporarily reduce operating income.」