Improving Profitability and Corporate Value through Structural Reform

「We will also implement company-wide organizational and structural reforms centered on the Office for Promoting Operational Efficiency. These will include (1) digital transformation and rationalization of head-office functions; (2) optimization of the logistics supply chain; (3) appropriate allocation of personnel through store consolidation, closure and efficiency improvements; and (4) optimizing and maximizing measures through a digital shift and digital transformation in sales promotion by strengthening digital-member acquisition, thereby improving productivity and operational efficiency across the group.」

「(2) Improving store efficiency and labor-hour productivity by promoting reforms in area-based store development centered on LIFE SELECT」

「In addition to improving store productivity through the consolidation and closure of stores in line with LIFE SELECT openings, we have been able to contain increases in personnel, advertising and other expenses through initiatives to optimize advertising and promotions, including strengthening digital advertising in place of printed flyers.」

「As part of efforts to further improve performance in the third quarter of the current fiscal year, the 2 initiatives we have promoted for some time, namely increasing market share and sales through proactive store development and ensuring appropriate inventory management and gross profit and deal profit based on sell-through management, have steadily produced results. We will continue these reforms aimed at business growth.」

「Gross profit during the cumulative consolidated second quarter was ¥225.570 billion, up 1.4% year on year, due to an increase in gross profit attributable to the market-linked digital transformation strategy aimed at optimizing sales and profit.」

「In the Denki business, factors included (1) the continuing reactionary decline in stay-at-home demand from the previous fiscal year; (2) lost sales opportunities due to reduced working hours resulting from employees contracting COVID-19; (3) a decline in the gross profit margin during the transition toward reforms aimed at optimizing sales and profit through digital transformation linked to the market; and (4) a decline in gross profit due to restrictions on procurement under strategic balance-sheet reform initiatives.」

「Although we worked to improve the gross profit margin under the management reforms to strengthen the corporate constitution that we have pursued for some time,」

「Profit has continued to improve as a result of efforts to raise gross profit margins and reduce selling, general and administrative expenses under the management reforms to strengthen the corporate constitution that we have pursued for some time,」

「Although profit continued to improve as a result of higher gross profit margins and lower selling, general and administrative expenses under the management reforms to strengthen the corporate constitution, lower sales caused operating profit to decline 22.0% year on year to ¥58.0 billion and ordinary profit to decline 18.6% to ¥64.409 billion. Profit attributable to owners of the parent increased 11.2% to ¥47.493 billion, due to the reform results in each business segment and the effects of organizational restructuring in the Denki segment. All business segments achieved profitability.」

「The Denki business was affected by lower sales following the adoption of the Accounting Standard for Revenue Recognition during the period, a reactionary decline from temporary demand in the previous fiscal year related to special fixed cash benefits and stay-at-home demand, and a reduction in selling-floor space caused by the consolidation and closure of urban-format store areas. The segment profit margin increased by 0.45 percentage points through higher profit margins from optimal pricing involving cash discounts and points, the profit contribution from expanding a broad range of SPA products, and sales maximization and cost reductions through management under the divisional-president system.」

「Although temporary effects, including demand for special fixed cash benefits and stay-at-home products, contributed to higher revenue and profit during the period, the greatest results came from higher gross profit and reductions in selling, general and administrative expenses under the "management reforms to strengthen the corporate constitution" that we have pursued for some time. Specifically, the results came from (1) the profit contribution from expanding a broad range of SPA products unavailable from competitors, including consumer electronics, furniture, household goods and housing-related products; (2) maximizing sales, strengthening competitiveness and reducing costs through fine-tuned regional management under the branch-manager system; (3) optimizing sales-floor layouts in line with the markets and trading areas of urban-format stores; and (4) our proprietary e-commerce business, which leverages the strengths of physical stores with nationwide coverage.」

「Although one-off effects, including demand related to special fixed-amount benefits and demand for stay-at-home products, contributed to the increase in revenue and earnings, the greatest results came from the corporate-strengthening management reform we have pursued, which improved gross profit and reduced selling, general and administrative expenses. Specifically, the results came from (1) expanding a broad range of proprietary SPA products, including consumer electronics, furniture, household goods and housing-related products; (2) maximizing sales and strengthening competitiveness while reducing costs through detailed regional management under the branch manager system; (3) optimizing sales-floor layouts at urban stores to match their markets and trading areas; and (4) our proprietary e-commerce business, which leverages the strengths of physical stores.」

「The most significant improvement in earnings during the current fiscal year came from the improvement in gross profit and the reduction in selling, general and administrative expenses under the corporate-strengthening management reform we have pursued. Specifically, the results came from (1) expanding a broad range of proprietary SPA products, including consumer electronics, furniture, household goods and housing-related products; (2) faster management and detailed regional management under the branch manager system; (3) strengthening the mix of new products at existing stores as outlet store sales performed well; (4) achieving optimal pricing and improving labor productivity through the electronic shelf-label strategy; (5) optimizing urban stores; and (6) our proprietary e-commerce business, which leverages the strengths of physical stores. Together with these management reforms, reductions in selling, general and administrative expenses through shorter operating hours and lower advertising costs resulted in operating income increasing 86.1% year on year to ¥46.010 billion.」

「With the safety, security and health of customers and employees as our top priority, we have implemented measures to prevent the spread of COVID-19. At the same time, despite being forced to limit business activities through shortened hours and temporary closures during the pandemic, we have undertaken reforms to strengthen our business base for the post-pandemic era without being constrained by conventional thinking, including analyzing what customers expect from retailers, selecting product ranges suited to each region, reducing expenses through rigorous cost control, improving operational efficiency and reviewing how employees work.」

「Against this backdrop in the consumer electronics market, we moved quickly to reform the earnings model for the consumer electronics business in response to anticipated consumption tax increases and a sharp slowdown in personal consumption after the 2020 Tokyo Olympics, and the results of these reforms continued to emerge during the third quarter. Gross profit increased 6.4% year on year and operating income increased 67.7%.」

「Against this backdrop in the consumer electronics market, we moved quickly to reform the earnings model for the consumer electronics business in response to anticipated increases in consumption tax rates and a sharp slowdown in personal consumption after the 2020 Tokyo Olympics, and the results of these reforms have continued to emerge since the previous fiscal year.」

「The benefits of the reforms toward a new earnings model undertaken in the previous fiscal year continued to emerge. Gross profit improved sharply during the first-quarter cumulative period, and the ordinary profit margin improved from 1.4% in the previous-year period to 2.0%, an increase of 0.6 percentage points.」

「In addition, during the first half of the fiscal year, we pursued reforms toward a new earnings model to strengthen the consumer electronics business, including (1) reform of sell-out operations aimed at improving the cross ratio by integrating virtual and physical channels and (2) repeated remodeling of existing Kaden Sumaイル-kan stores into a new format optimized and maximized based on various effectiveness analyses. The results of these reforms became evident, and performance during the third and fourth consolidated accounting periods, from 1 October 2018 to 31 March 2019, recovered as planned under the revised plan. Gross profit improved sharply, while the ordinary profit margin improved substantially from 1.3% in the first-half cumulative period to 3.3%.」

「The results of these reforms became evident, and performance during the third-quarter consolidated accounting period, from 1 October 2018 to 31 December 2018, recovered as planned under the revised plan. Gross profit improved sharply, while the ordinary profit margin improved substantially from 1.3% in the first-half cumulative period to 4.3%.」

「By adding these initiatives to the conversion of stores into the Kaden Sumaイル-kan format, repeatedly testing and optimizing them, we aim to expand standardized store development to 100 stores during the current fiscal year and establish a foundation for securing profits.」

「We will improve the efficiency of management resources by optimizing and maximizing personnel, products, funds, services, logistics and information systems across group companies, thereby improving profit margins, reducing costs, improving inventory efficiency and generating cash flow.」

「As one of Japan's largest network and service IoT companies, we will continue to develop new business areas centered on consumer electronics sales and advance structural reforms, strengthening proposals that combine products and services, from cradle to grave, to support every aspect of customers' lives.」

「The benefits of structural reform continued to emerge during the first nine months of the fiscal year.」

「During the first half of the fiscal year, we continued to pursue new business areas centered on consumer electronics sales and structural reforms, including reform of the personnel system, improvements in store efficiency, reductions in selling, general and administrative expenses, lifestyle support services, smart home services, remodeling services, Yamada Net Mall services, environmental businesses, finance card services, proprietary product development services and the rollout of digital support stations, thereby improving profit margins and reducing selling, general and administrative expenses.」

「In addition to carrying out various structural reforms undertaken over several years, including reform of the personnel system, improvements in store efficiency and reductions in selling, general and administrative expenses, we have pursued initiatives including lifestyle support services, smart home services, remodeling services, Yamada Net Mall services, environmental businesses, finance card services and proprietary product development services.」

「We will continue to implement structural reforms and other initiatives from a medium- to long-term perspective, working to improve profitability and corporate value through measures such as improving the gross profit margin and reducing selling, general and administrative expenses.」