Paris Miki Holdings is a leading eyewear retailer in Japan and ranked third in the eyewear market in terms of sales. The company operates Paris Miki, Megane no Miki, Opt-LABEL, OPTIQUE PARIS MIKI, and Kimpo-Do stores. At end-FY03/21 the company had 662 stores in Japan (701 stores at end-FY03/20). In addition to selling high-quality eyewear made in Japan, the company emphasizes service offerings, such as taking the time to measure customers’ vision, and has a comparatively high price point. In FY03/21, the unit price of Paris Miki’s eyeglasses in Japan was JPY31,182 (JPY31,745 in FY03/20). By contrast, newly emerging eyewear retailers seek to distinguish themselves by selling Chinese-made eyewear efficiently at low prices. Founded in 1930, Paris Miki opened its first overseas store in Paris in 1973, followed by Singapore in 1974 and Hawaii in 1978. It had 116 stores in 13 countries overseas at end-FY03/21.

In Japan, the company is renovating aging stores and stores struggling with declining profitability. Its aim is to create distinctive store designs that draw in higher customer traffic, and then use its newly rolled out high-accuracy vision testing equipment to propose lenses and frames best suited to each customer, boosting customer satisfaction. Meanwhile, the store network is declining on a net basis as the company seeks to boost efficiency by closing stores and consolidating stores with low prospects of a turnaround in profitability. The number of stores in Japan at end-March 2021 was 662, down 287 from 10 years earlier (end-March 2012). Through its Made in Japan Project, the company sells its original brand, high-quality eyewear made in Japan, style J and Paris Miki Authentic Eyewear, at affordable prices for consumers.

The company’s most pressing issue overseas is to reduce losses. In China, South Korea, and Australia, it has closed stores running at a deficit and trimmed losses somewhat. In Vietnam, Paris Miki has successfully tied up and shares premises with an ophthalmology hospital, and the store there is recording a profit. In other ASEAN states, the market for eyewear is projected to grow in line with the population, and the company plans to continue building on the approach it has developed in Vietnam.

Trends and outlook

FY03/21 results: For FY03/21, the company reported full-year consolidated sales of JPY43.9bn (-9.2% YoY), an operating loss of JPY180mn (versus an profit of JPY476mn in FY03/20), and a net loss of JPY39mn (versus loss of JPY730mn in FY03/20). The company booked forex gains of JPY344mn but impairment charges of JPY484mn made FY03/21 the sixth consecutive year the company posted an after-tax loss. In Japan, sales were JPY39.6bn (-7.0% YoY) and operating profit was JPY212mn (-58.4% YoY); sales fell due to a 31.3% YoY decline in existing store sales in Q1 as many stores were forced to close in April and May 2020 due to the government's state-of-emergency declaration. The company attempted to reduce rent and cut costs in other ways, but was unable to avoid an operating loss. Overseas, the company reported sales of JPY4.3bn (-25.7% YoY) and an operating loss of JPY393mn (versus loss of JPY34mn in FY03/20); sales in Europe and the US, where there were tight restrictions on leaving the home due to COVID-19, declined significantly. Thailand, Vietnam, and the Philippines, which had previously contributed to profits, also saw falling sales stemming from a slowdown in footfall, and recorded greater combined losses for the year.

FY03/22 forecast: For FY03/22, the company forecasts full-year consolidated sales of JPY47.0bn (+7.2% YoY), operating profit of JPY371mn (versus a loss of JPY180mn in FY03/21, and a net loss of JPY165mn (versus loss of JPY39mn in FY03/21). Paris Miki plans to open 13 new stores in Japan. With the eyewear business as its mainstay, the company will also work to develop new businesses such as hearing aid specialty stores. It also plans to consolidate unprofitable stores and continue to renovate others. It will close a total of 35 stores, including those being relocated and merged. In addition, the company plans to improve the profit margin by strengthening sales of high-end frames and lenses with superior functionality and design.

Medium-term business plan: Along with the release of Q2 FY03/22 results on November 15, 2021, the company provided a brief outline of its new medium-term business plan. Dubbed simply FY2022-2024 Medium-term Business Plan, the new plan covers the three-year period from FY03/23 through FY03/25---the start of which coincides with the date of the change in its legal Japanese name to Paris Miki Holdings on April 1, 2022. The company promised to provide a more detailed outline of its new medium-term plan at the time of its official announcement of its name change next April. Under the new plan, the company is targeting FY03/25 consolidated sales of JPY51.7bn, operating profit of JPY1.5bn, and net income of at least JPY1.0bn. A key part of its new medium-term plan is business reform. Aimed at creating an earnings structure capable of meeting the company's long-term goals, specific reform measures mentioned by the company include (1) measures aimed at providing customer with new value propositions that engender a sense of both excitement and assurance; (2) joint-ventures with other companies in related medical fields both in Japan and overseas; (3) new Audio Life Care services; (4) the development of a unique and unconventional store network; (5) the accelerated rollout of new concept stores specifically designed for specific regions and/or locations, (6) employee training; and (7) continued promotion of its Visual Life Care services and other services that provide ongoing support for eye health.

Strengths and weaknesses

Shared Research sees the company’s strengths as: 1) a framework for providing high value-added products and services, and 2) diversified risks. We believe the company’s weaknesses include: 1) the fact that it has not clearly communicated how it differs from competitors, and 2) high costs and personnel expenses and low profitability. (See the Strengths and weaknesses section for details).

Key financial data

Income statement		FY03/12	FY03/13	FY03/14	FY03/15	FY03/16	FY03/17	FY03/18	FY03/19	FY03/20	FY03/21	FY03/22
(JPYmn)		Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Est.
Sales		59,547	55,419	56,903	54,342	53,727	49,881	50,406	49,689	48,307	43,873	47,038
	YoY	-1.0%	-6.9%	2.7%	-4.5%	-1.1%	-7.2%	1.1%	-1.4%	-2.8%	-9.2%	7.2%
Gross profit		39,795	37,711	38,488	37,082	36,197	33,683	33,662	33,300	32,742	29,757
	YoY	-4.6%	-5.2%	2.1%	-3.7%	-2.4%	-6.9%	-0.1%	-1.1%	-1.7%	-9.1%
	Gross profit margin	66.8%	68.0%	67.6%	68.2%	67.4%	67.5%	66.8%	67.0%	67.8%	67.8%
Operating profit		-114	427	808	175	269	-400	270	146	476	-180	371
	YoY	-	-	89.2%	-78.3%	53.7%	-	-	-45.9%	226.0%	-	-
	Operating profit margin	-0.2%	0.8%	1.4%	0.3%	0.5%	-0.8%	0.5%	0.3%	1.0%	-0.4%	0.8%
Recurring profit		-25	1,066	1,035	635	174	-616	463	233	446	613	481
	YoY	-	-	-2.9%	-38.6%	-72.6%	-	-	-49.7%	91.4%	37.4%	-21.5%
	Recurring profit margin	-0.0%	1.9%	1.8%	1.2%	0.3%	-1.2%	0.9%	0.5%	0.9%	1.4%	1.0%
Net income		-1,177	103	419	198	-601	-1,721	-1,160	-1,342	-730	-39	-165
	YoY	-	-	306.8%	-52.7%	-	-	-	-	-	-	-
	Net margin	-2.0%	0.2%	0.7%	0.4%	-1.1%	-3.5%	-2.3%	-2.7%	-1.5%	-0.1%	-0.4%
Per-share data (JPY)
Shares issued (year-end; '000)		56,057	56,057	56,057	56,057	56,057	56,057	56,057	56,057	56,057	56,057
EPS (JPY)		-	2.0	8.1	3.9	-11.7	-33.5	-22.7	-26.4	-14.3	-0.8	-3.3
Dividend per share (JPY)		18.0	18.0	18.0	18.0	18.0	18.0	16.0	14.0	10.0	6.0	6.0
Book value per share (JPY)		780.9	768.6	770.9	763.7	728.8	676.0	642.4	599.1	576.7	583.6
Balance sheet
(JPYmn)
	Cash and cash equivalents	19,562	15,214	15,507	16,604	16,507	17,408	17,286	16,032	15,487	15,664
	Inventories	10,244	9,658	10,308	11,034	11,375	11,688	11,304	10,641	10,067	9,216
Total current assets		34,922	29,854	31,569	32,892	32,461	33,269	32,831	30,747	28,940	28,595
	Tangible fixed assets	6,782	6,174	5,646	5,709	5,410	5,308	4,337	3,919	4,298	4,728
	Intangible assets	1,166	1,526	1,690	1,606	1,254	1,028	717	555	342	439
	Investments and other assets	9,982	14,523	14,881	12,978	11,941	8,320	8,090	7,723	7,188	6,166
Fixed assets		17,932	22,224	22,219	20,296	18,606	14,657	13,146	12,198	11,829	11,335
Total assets		52,854	52,079	53,788	53,187	51,067	47,926	45,977	42,945	40,770	39,931
	Accounts payable	1,474	1,570	1,852	1,896	1,803	1,820	1,714	1,495	1,300	1,338
	Short-term debt	5,256	1,382	1,664	5,988	5,751	6,281	5,810	5,703	5,107	5,223
Total current liabilities		11,502	7,417	8,915	12,046	11,425	11,580	11,555	11,069	10,126	9,996
	Long-term debt	-	4,000	4,000	600	1,066	532	500	-	24	-
Total fixed liabilities		923	4,827	4,869	1,467	1,830	1,284	1,343	995	991	941
Total liabilities		12,425	12,244	13,785	13,514	13,256	12,865	12,899	12,065	11,117	10,937
Total net assets		40,428	39,834	40,003	39,673	37,811	35,060	33,078	30,880	29,652	28,993
Cash flow statement
(JPYmn)
Cash flows from operating activities		479	2,428	2,065	175	1,095	-42	1,987	1,315	1,732	1,581
Cash flows from investing activities		-421	-2,207	-137	2,876	-1,360	-290	-759	-830	99	-803
Cash flows from financing activities		-151	-958	-806	-149	-694	-896	-1,621	-1,405	-1,277	-345
Financial ratios
Interest-bearing debt		5,256	5,382	5,664	6,588	6,817	6,813	6,310	5,703	5,131	5,223
Net cash		14,306	14,832	11,843	13,016	11,690	10,595	10,976	10,329	10,356	10,441
ROA (RP-based)		-0.0%	2.0%	2.0%	1.2%	0.3%	-1.2%	1.0%	0.5%	1.1%	1.5%
ROE		-2.9%	0.3%	1.1%	0.5%	-1.6%	-4.8%	-3.4%	-4.2%	-2.4%	-0.1%
Equity ratio		76.1%	76.0%	73.8%	73.9%	73.5%	72.5%	71.2%	71.1%	71.9%	71.6%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

Recent updates

December 2021 sales figures

2022-01-04

Paris Miki Holdings Inc. announced December 2021 sales figures.

Monthly trends

Monthly comparable store sales

Comparable stores	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec	Jan	Feb	Mar
FY03/10	-4.4%	-7.2%	-9.3%	-4.8%	-3.3%	-3.7%	-6.3%	-7.8%	1.9%	1.0%	-5.4%	-4.7%
FY03/11	-4.1%	-3.4%	3.4%	3.2%	2.7%	3.1%	6.7%	4.3%	4.2%	0.1%	3.3%	0.7%
FY03/12	3.6%	2.7%	-0.2%	1.2%	-1.6%	-2.7%	-2.7%	-1.3%	-4.1%	-2.7%	-7.7%	7.1%
FY03/13	-5.5%	-6.6%	-4.9%	-12.7%	-13.9%	-5.1%	-7.4%	-10.8%	-10.8%	-11.7%	-1.3%	-4.1%
FY03/14	-4.1%	-2.1%	-0.5%	4.8%	3.7%	-0.9%	-1.0%	5.8%	5.1%	4.0%	-1.6%	19.5%
FY03/15	5.5%	-6.2%	-4.4%	-8.4%	-4.9%	-0.9%	-3.9%	1.9%	-6.3%	-3.8%	4.0%	-18.3%
FY03/16	-8.5%	5.9%	1.7%	1.6%	2.2%	-3.0%	5.1%	-1.6%	1.7%	-0.6%	-2.6%	-8.3%
FY03/17	-6.7%	-8.9%	-7.0%	-2.4%	-5.3%	-8.2%	-4.3%	-6.3%	-4.4%	-3.8%	-6.3%	-2.2%
FY03/18	3.0%	2.9%	3.9%	1.8%	-0.3%	4.8%	-4.9%	0.6%	4.2%	0.0%	-2.1%	5.3%
FY03/19	0.5%	-2.3%	-0.5%	0.7%	6.7%	-0.7%	3.9%	3.5%	0.0%	-0.5%	3.7%	1.2%
FY03/20	-0.8%	0.5%	1.4%	-2.4%	-2.5%	20.4%	-2.9%	-0.6%	1.8%	6.3%	7.4%	-17.4%
FY03/20	-45.2%	-47.1%	-3.2%	5.6%	11.8%	-9.5%	12.5%	9.6%	0.1%	-7.7%	-3.5%	22.2%
FY03/20	75.6%	64.5%	-11.1%	-10.5%	-14.8%	-9.6%	-4.2%	-0.7%	6.4%

Monthly all store sales

All stores	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec	Jan	Feb	Mar
FY03/10	-4.5%	-7.0%	-9.3%	-5.2%	-3.5%	-3.7%	-6.8%	-8.4%	1.9%	1.0%	-6.3%	-6.0%
FY03/11	1.0%	3.3%	10.2%	10.3%	9.9%	10.2%	13.6%	10.6%	9.2%	5.3%	5.2%	-2.2%
FY03/12	2.3%	2.4%	-1.3%	-0.2%	-2.6%	-4.2%	-3.5%	-1.7%	-4.6%	-2.9%	-8.3%	6.4%
FY03/13	-5.7%	-6.7%	-5.3%	-13.2%	-14.2%	-5.7%	-7.6%	-11.1%	-11.6%	-12.8%	-3.6%	-7.0%
FY03/14	-7.5%	-5.3%	-3.8%	1.8%	0.5%	-4.7%	-5.0%	1.9%	1.8%	1.1%	-4.2%	17.9%
FY03/15	4.2%	-7.5%	-5.7%	-9.8%	-6.4%	-2.2%	-4.8%	0.8%	-7.2%	-4.9%	2.6%	-19.4%
FY03/16	-9.1%	5.1%	0.4%	0.6%	1.0%	-4.0%	4.3%	-2.9%	0.5%	-1.8%	-3.5%	-9.2%
FY03/17	-7.2%	-9.4%	-7.2%	-2.5%	-5.4%	-9.0%	-5.6%	-7.1%	-4.7%	-3.7%	-6.3%	-2.2%
FY03/18	3.0%	3.7%	4.0%	1.6%	-1.2%	3.6%	-6.2%	-0.5%	2.7%	-1.6%	-3.4%	2.8%
FY03/19	-1.6%	-4.4%	-2.8%	-0.9%	4.5%	-3.2%	1.7%	0.9%	-2.5%	-2.8%	0.7%	-1.6%
FY03/20	-3.4%	-1.8%	-1.2%	-4.4%	-5.0%	17.6%	-5.8%	-3.5%	-0.7%	4.0%	5.2%	-20.1%
FY03/20	-46.5%	-48.5%	-4.4%	3.2%	9.1%	-11.8%	10.3%	7.6%	-1.0%	-8.9%	-5.6%	19.7%
FY03/20	70.1%	59.2%	-13.0%	-12.6%	-16.6%	-11.8%	-6.3%	-2.5%	4.3%

Source: Shared Research based on company data

Announcement of new medium-term business plan (outline)

2021-11-16

On November 15, 2021, Paris Miki Holdings Inc. announced its new medium-term business plan (outline).

In November 2021, the company provided a brief outline of its new medium-term business plan. Dubbed simply FY2022-2024 Medium-term Business Plan, the new plan covers the three-year period from FY03/23 through FY03/25---the start of which coincides with the date of the change in its legal Japanese name to Paris Miki Holdings on April 1, 2022. The company promised to provide a more detailed outline of its new medium-term plan at the time of its official announcement of its name change next April.

Outline of long-term company vision

The FY2022-2024 Medium-term Business Plan corresponds to Phase I under the company's long-term vision that goes out to 2023, by which time its aim is to make Paris Miki a brand known throughout the world for its devotion to customer service that both sets customers at ease while at the same time getting them excited about the prospect of new eyewear.

Towards this end, plans call for expanding its presence in the growing markets of Southeast Asia to take advantage of the favorable demographics in that region; to accomplish this, the company plans to develop a high-quality eyecare business built around modern ophthalmological clinics featuring the latest in equipment and treatments, and are capable of delivering eyecare on par with that available in Japan. At home in Japan, plans call for creating a network of outlets with spacious and inviting floor layouts that meet the demands of customers for high-quality products and services to match.

Consolidated sales and earnings targets for FY03/25

Sales: JPY51.7bn (versus projected sales of JPY47.0bn in FY03/22)
Operating profit: JPY1.5bn (versus projected profit of JPY371mn in FY03/22)
Net income: JPY1.0mn (versus projected loss of JPY165mn in FY03/22)

Another key part of its new medium-term business plan is business reform. Aimed at creating at earnings structure capable of meeting the company's long-term goals, specific reform measures mentioned by the company include (1) measures aimed at providing customer with new value propositions that engender a sense of both excitement and assurance; (2) joint-ventures with other companies in related medical fields both in Japan and overseas; (3) new Audio Life Care services; (4) the development of a unique and unconventional store network; (5) the accelerated rollout of new concept stores specifically designed for specific regions and/or locations, (6) employee training; and (7) continued promotion of its Visual Life Care services and other services that provide ongoing support for eye health.

Trends and outlook

Quarterly trends and results

Cumulative		FY03/20				FY03/21				FY03/22				FY03/22
(JPYmn)		Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	% of Est.	FY Est.
Sales		12,252	25,988	37,667	48,307	8,076	21,021	33,182	43,873	10,376	21,870	-	-	46.5%	47,038
	YoY	-3.0%	-0.8%	-2.3%	-2.8%	-34.1%	-19.1%	-11.9%	-9.2%	28.5%	4.0%	-	-		7.2%
Gross profit		8,348	17,584	25,523	32,742	5,484	14,344	22,617	29,757	7,156	15,076	-	-	47.2%	31,918
	YoY	-1.5%	0.6%	-0.9%	-1.7%	-34.3%	-18.4%	-11.4%	-9.1%	30.5%	5.1%	-	-		7.3%
	Gross profit margin	68.1%	67.7%	67.8%	67.8%	67.9%	68.2%	68.2%	67.8%	69.0%	68.9%	-	-		67.9%
SG&A expenses		8,069	16,588	24,482	32,266	6,772	14,568	22,458	29,938	7,616	15,355	-	-	48.7%	31,546
	YoY	-1.6%	-0.9%	-2.4%	-2.7%	-16.1%	-12.2%	-8.3%	-7.2%	12.5%	5.4%	-	-		5.4%
	SG&A ratio	65.9%	63.8%	65.0%	66.8%	83.9%	69.3%	67.7%	68.2%	73.4%	70.2%	-	-		67.1%
Operating profit		279	996	1,041	476	-1,288	-223	159	-180	-459	-278	-	-	-	371
	YoY	0.4%	37.6%	57.7%	226.0%	-	-	-84.7%	-	-	-	-	-		-
	Operating profit margin	2.3%	3.8%	2.8%	1.0%	-	-	0.5%	-	-	-	-	-		0.8%
Recurring profit		203	883	1,060	446	-1,214	61	652	613	-402	-175	-	-	-	481
	YoY	-29.8%	11.3%	52.1%	91.4%	-	-93.1%	-38.5%	37.4%	-	-	-	-		-21.6%
	Recurring profit margin	1.7%	3.4%	2.8%	0.9%	-	0.3%	2.0%	1.4%	-	-	-	-		1.0%
Net income		3	415	497	-730	-1,350	-220	257	-39	-513	-361	-	-	-	-165
	YoY	-97.7%	10.4%	212.6%	-	-	-	-48.3%	-	-	-	-	-		-
	Net margin	0.0%	1.6%	1.3%	-	-	-	0.8%	-	-	-	-	-		-
Quarterly		FY03/20				FY03/21				FY03/22
(JPYmn)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Sales		12,252	13,736	11,679	10,640	8,076	12,945	12,161	10,691	10,376	11,494	-	-
	YoY	-3.0%	1.2%	-5.5%	-4.4%	-34.1%	-5.8%	4.1%	0.5%	28.5%	-11.2%	-	-
Gross profit		8,348	9,236	7,939	7,219	5,484	8,860	8,273	7,140	7,156	7,920	-	-
	YoY	-1.5%	2.7%	-4.1%	-4.4%	-34.3%	-4.1%	4.2%	-1.1%	30.5%	-10.6%	-	-
	Gross profit margin	68.1%	67.2%	68.0%	67.8%	67.9%	68.4%	68.0%	66.8%	69.0%	68.9%	-	-
SG&A expenses		8,069	8,519	7,894	7,784	6,772	7,796	7,890	7,480	7,616	7,739	-	-
	YoY	-1.6%	-0.4%	-5.3%	-3.5%	-16.1%	-8.5%	-0.1%	-3.9%	12.5%	-0.7%	-	-
	SG&A ratio	65.9%	62.0%	67.6%	73.2%	83.9%	60.2%	64.9%	70.0%	73.4%	67.3%	-	-
Operating profit		279	717	45	-565	-1,288	1,065	382	-339	-459	181	-	-
	YoY	0.4%	60.8%	-	-	-	48.5%	748.9%	-	-	-83.0%	-	-
	Operating profit margin	2.3%	5.2%	0.4%	-	-	8.2%	3.1%	-	-	1.6%	-	-
Recurring profit		203	680	177	-614	-1,214	1,275	591	-39	-402	227	-	-
	YoY	-29.8%	34.9%	-	-	-	87.5%	233.9%	-	-	-82.2%	-	-
	Recurring profit margin	1.7%	5.0%	1.5%	-	-	9.8%	4.9%	-	-	2.0%	-	-
Net income		3	412	82	-1,227	-1,350	1,130	477	-296	-513	152	-	-
	YoY	-97.7%	66.1%	-	-	-	174.3%	481.7%	-	-	-86.5%	-	-
	Net margin	0.0%	3.0%	0.7%	-	-	8.7%	3.9%	-	-	1.3%	-	-

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

By segment					FY03/20				FY03/21				FY03/22
Quarterly (JPYmn)					Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Sales					12,252	13,736	11,679	10,640	8,076	12,945	12,161	10,691	10,376	11,494	-	-
	YoY				-3.0%	1.2%	-5.5%	-4.4%	-34.1%	-5.8%	4.1%	0.5%	28.5%	-11.2%	-	-
		Japan			10,881	12,305	10,327	9,265	7,262	12,081	10,993	9,408	9,164	10,381	-	-
				YoY	-1.5%	3.0%	-4.7%	-5.0%	-33.3%	-1.8%	6.4%	1.5%	26.2%	-14.1%	-	-
		Overseas			1,457	1,490	1,424	1,443	866	929	1,250	1,360	1,275	1,178	-	-
				YoY	-12.2%	-14.3%	-12.7%	-3.8%	-40.6%	-37.7%	-12.2%	-5.8%	47.2%	26.8%	-	-
		Adjustments			-87	-58	-72	-69	-52	-65	-83	-76	-64	64	-	-
Operating profit					279	717	45	-565	-1,288	1,065	382	-339	-459	181	-	-
	YoY				0.4%	60.8%	-	-	-	48.5%	748.9%	-	-	-83.0%	-	-
	Operating profit margin				2.3%	5.2%	0.4%	-5.3%	-	8.2%	3.1%	-	-	1.6%	-	-
			Japan		244	727	57	-518	-1,072	1,135	354	-205	-488	258	-	-
				YoY	-22.0%	32.7%	-	-	-	56.1%	521.1%	-	-	-77.3%	-	-
				Operating profit margin	2.2%	5.9%	0.6%	-	-14.8%	9.4%	3.2%	-2.2%	-	2.5%	-	-
			Overseas		35	-11	-12	-46	-215	-71	28	-135	29	-77	-	-
				YoY	-	-	-	-	-	-	-	-	-	-	-	-
				Operating profit margin	2.4%	-	-	-	-	-	-	-	2.3%	-	-	-
		Adjustments			-	-	-	-	-	-	-	-	-	-	-	-

Source: Shared Research based on company data

Sales by product					FY03/20				FY03/21				FY03/22
Quarterly (JPYmn)					Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
	Total sales				11,095	12,483	10,711	9,511	7,490	12,448	11,265	9,647	9,466	10,738	-	-
		YoY			-2.1%	2.2%	-3.2%	-4.9%	-32.5%	-0.3%	5.2%	1.4%	26.4%	-13.7%	-	-
			Frames		3,234	3,734	3,244	3,029	2,248	3,813	3,479	3,126	2,900	3,224	-	-
				YoY	-1.8%	2.6%	-4.2%	-6.6%	-30.5%	2.1%	7.2%	3.2%	29.0%	-15.4%	-	-
				% of total sales	29.1%	29.9%	30.3%	31.8%	30.0%	30.6%	30.9%	32.4%	30.6%	30.0%	-	-
			Lenses		4,629	5,348	4,568	4,196	3,263	5,506	4,964	4,206	4,086	4,738	-	-
				YoY	-2.3%	3.9%	-3.0%	-6.5%	-29.5%	3.0%	8.7%	0.2%	25.2%	-13.9%	-	-
				% of total sales	41.7%	42.8%	42.6%	44.1%	43.6%	44.2%	44.1%	43.6%	43.2%	44.1%	-	-
			Sunglasses		855	883	417	393	430	709	298	322	583	658	-	-
				YoY	-1.2%	-8.2%	25.6%	3.1%	-49.7%	-19.7%	-28.5%	-18.1%	35.6%	-7.2%	-	-
				% of total sales	7.7%	7.1%	3.9%	4.1%	5.7%	5.7%	2.6%	3.3%	6.2%	6.1%	-	-
			Contact lenses and accessories		184	220	171	180	145	160	160	148	141	149	-	-
				YoY	-5.6%	11.7%	-11.9%	1.1%	-21.2%	-27.3%	-6.4%	-17.8%	-2.8%	-6.9%	-	-
				% of total sales	1.7%	1.8%	1.6%	1.9%	1.9%	1.3%	1.4%	1.5%	1.5%	1.4%	-	-
			Hearing aids		1,633	1,661	1,684	1,218	947	1,544	1,674	1,193	1,309	1,464	-	-
				YoY	0.6%	10.2%	-3.4%	-4.3%	-42.0%	-7.0%	-0.6%	-2.1%	38.2%	-5.2%	-	-
				% of total sales	14.7%	13.3%	15.7%	12.8%	12.6%	12.4%	14.9%	12.4%	13.8%	13.6%	-	-
			Other		556	638	627	497	455	717	689	651	445	506	-	-
				YoY	-10.2%	-16.7%	-10.6%	14.3%	-18.2%	12.4%	9.9%	31.0%	-2.2%	-29.4%	-	-
				% of total sales	5.0%	5.1%	5.9%	5.2%	6.1%	5.8%	6.1%	6.7%	4.7%	4.7%	-	-

Source: Shared Research based on company data

Sales growth YoY	FY03/20				FY03/21				FY03/22				FY03/22
	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	FY Est.
All stores	-2.1%	2.2%	-3.2%	-4.9%	-32.5%	-0.3%	5.2%	1.4%	26.4%	-13.7%	-	-	6.0%
Comparable stores	0.0%	4.3%	0.6%	-2.6%	-31.3%	1.9%	6.7%	3.1%	29.7%	-11.8%	-	-	7.6%

Source: Shared Research based on company data

Store count in Japan		FY03/20				FY03/21				FY03/22				FY03/22
		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	FY Est.
Store count in Japan		728	718	709	701	696	683	679	662	660	658	-	-	645
	Openings	7	5	1	6	8	3	5	-	6	1	-	-	13
	Closures	-20	-15	-10	-14	-13	-16	-9	-17	-8	-3	-	-	-30
Tenant		285	281	276	271	273	266	268	260	258	257	-	-	-
In building		91	92	93	92	90	89	89	85	86	85	-	-	-
Suburban		352	345	340	338	333	328	322	317	316	316	-	-	-
Paris Miki		707	697	689	681	673	661	657	642	640	638	-	-	-
	Directly managed	601	592	586	580	572	564	560	545	543	542	-	-	-
	Franchisee	106	105	103	101	101	97	97	97	97	96	-	-	-
Kimpo-do		20	20	19	19	22	21	21	20	20	20	-	-	-
Great		1	1	1	1	1	1	1	-	-	-	-	-	-
Mobile stores		4	3	3	3	3	3	3	3	3	3	-	-	-

Source: Shared Research based on company data

Quarterly sales

Source: Shared Research based on company data

Consolidated results for 1H FY03/22

Sales: JPY21.9bn (+4.0% YoY)
Operating loss: JPY278mn (versus loss of JPY223mn in 1H FY03/21)
Recurring loss: JPY175mn (versus profit of JPY61mn in 1H FY03/21)
Net loss*: JPY361mn (versus loss of JPY220mn in 1H FY03/21)
*Net income/loss attributable to owners of the parent

In Q1, the company started applying the new accounting standard for revenue recognition (Accounting Standards Board of Japan Statement No. 29, March 31, 2020). This resulted in 1H sales being reduced by JPY126mn, SG&A expenses by JPY103mn, and operating profit, recurring profit, and pre-tax net income by JPY22mn each.

Sales

Sales increased YoY, thanks to a rebound from the year-ago profit decline owing to shortened business hours and temporary closures amid the COVID-19 pandemic. The company managed to lift the average unit price for its eyeglasses by making product proposals catering to the changes in customer lifestyles, and using its consulting-oriented Visual Life Care vision testing system to give customers advice on improving daily eyewear experience. Still, since eyewear sales involve face-to-face interaction, which some customers were reluctant to engage in during the pandemic, 1H sales did not recover to the pre-pandemic level.

Operating profit

Operating losses increased YoY, with higher SG&A expenses absorbing the YoY increase in gross profit from sales growth.

Gross profit

Gross profit for 1H was JPY15.1bn (+5.1% YoY), and GPM was 68.9% (68.2% YoY). Gross profit margin was at a comparatively high level. In the Japan segment, eyeglasses (frames and lenses) with high GPM took on a greater share of the overall sales mix, thanks to the drop in share of low-GPM items like sunglasses and watches and robust sales of high-performance lenses. The GPM of these various products was at the same level as 1H FY03/21.

The company has been promoting the Made in Japan Project, selling private-brand products developed in-house and manufactured domestically that offer superior functionality and design at affordable prices. In addition to raising customer awareness of the fine quality of Japan-made products, the Project also seeks to work closely with local communities where the products are made and give back to those communities. Note that since these private-brand products are sold at affordable prices based on the company's customer-first policy, they do not yield high GPM.

SG&A expenses

SG&A expenses for 1H were JPY 15.4bn (+5.4% YoY), and the SG&A expense ratio was 70.2% (69.3% YoY). The YoY increase was in reaction to the year-ago result that benefited from lower personnel expenses due to shortened business hours and temporary store closures, along with rent reductions and exemptions due to the pandemic.

Personnel expenses: JPY7.9bn (+4.9% YoY)

Personnel expenses were up from 1H FY03/21, when the shortened business hours and temporary store closures reduced overtime for regular employees and work hours for contract employees.

Rent: JPY3.8bn (+7.3% YoY)

1H rent rose YoY, rebounding from a decline in 1H FY03/21 when rent charges tied to sales decreased accompanying lower sales at shopping mall stores, and some rent became subject to reduction or exemption because of the pandemic.

Advertising expenses: JPY712mn (+30.9% YoY)

Advertising expenses rose YoY due to the reshoot of a TV commercial in Q1. In the current fiscal year, the company is strategically bolstering advertising spending, which it reined in during the pandemic in FY03/21. The new commercial began airing on TV and online video media in June 2021. Since TV ads are expensive, the company selectively uses the media while keeping a close eye on the budget and timing of release.

Progress versus full-year company forecast

Versus the company forecast for full-year FY03/22, 1H sales were 46.5%, gross profit 47.2%, and SG&A expenses 48.7%. Operating profit and recurring profit were in the red in 1H, although the company anticipates a surplus in both of these profit items for the full year.

1H progress in sales and gross profit undershot the company's projections, mainly because the spread of COVID-19 slowed down domestic sales in June and July when demand is normally the highest.

1H GPM was 68.9%, but the company expects this to fall to 67.9% for the full year. The GPM decline factors in a sale that the company plans in 2H to secure its top-line target, and an outlook for higher sales mix of the overseas segment where GPM is low.

Japan segment

During 1H, results in the Japan segment were as anticipated in the April–May period but did not match expectations in June through August due to the spread of COVID-19. Sluggish sales in Q2 (July-September) when the company typically sees its highest earnings will have a significant impact on the full-year performance. Should there be a resurgence of the pandemic in 2H, we understand full-year results could fall short of the company forecast.

To achieve its full-year targets, the company plans to secure earnings during the shopping season around the year-end bonus payment in December, when demand is the second highest after the summer months. With the pandemic winding down, comparable store sales have been showing signs of recovery in November. The company intends to actively capture demand in December by conducting a sale that offers a greater discount than in usual years. Provided sales progress in line with the company plan, operating profit will likely reach the full-year target.

Overseas segment

The company anticipates YoY sales growth in Europe, the US, and China where vaccination is progressing widely. Meanwhile, performance has been sluggish in Southeast Asia, including Malaysia and Thailand, due to the resurgence of COVID-19. As such, the company expects the overseas segment to finish the fiscal year in the red.

Breakdown of results by segment

Japan segment

Sales: JPY19.5bn (+1.0% YoY)
Operating loss: JPY230mn (versus loss of JPY63mn in 1H FY03/21)
Store count: 658 (six openings, eight closings)
Comparable store sales: +3.7% YoY

In 1H FY03/22, the Japan segment reported higher sales, but operating losses widened.

Q1 sales rebounded from the downswing a year earlier due to the spread of COVID-19, but Q2 sales lagged as customer traffic slowed in the wake of subsequent state of emergency declarations; consequently, sales for the six months stood largely flat YoY. On the profit front, the segment logged an operating loss for 1H on higher advertising expenses, personnel expenses, and rent within the SG&A expenses.

Store openings and closures

In 1H, the company opened seven stores and closed 11. It has been working to consolidate small stores that are located nearby and to renovate the surviving stores into larger outlets. The plan is to bolster in-store products lineup in pursuit of sales increase, while curbing SG&A expenses to achieve operational efficiency.

Openings: In light of rising construction material prices, the company intends to rein in opening costs by cutting back on high-cost lodge-format stores and launching more general tenant stores.

Closures: The company mainly closed unprofitable stores in 1H. It plans to close 30 stores for the full year, which is five stores fewer than the initial plan. The rent of some stores the company had originally planned to close was reduced, so the decision on whether to close these stores was postponed to FY03/23 or later.

Renovations: Renovations have progressed largely in line with plan. Given the price hike in wood building materials, the company anticipates potential cost increases for remodeling to the wood-consuming lodge-format stores.

Sales trends by product

Sales of eyeglasses (frames and lenses) were largely flat YoY, while sales of hearing aids showed signs of recovery.

Frames and lenses

1H sales of frames and lenses came in largely flat YoY, with frame sales up 1.0% YoY to JPY6.1bn and those of lenses up 0.6% YoY to JPY8.8bn. High-value-added and high-unit-price lenses such as bifocals performed favorably. However, as customer traffic fell YoY, sales did not recover to the pre-pandemic level (JPY7.0bn for frames and JPY10.0bn for lenses in 1H FY03/20).

Sales of eyeglasses decreased by 7.9% YoY, on the back of a 7.7% YoY decline in customer traffic caused by the resurgence of the pandemic during Q2, when demand is typically the highest. The unit price for eyeglasses was JPY33,108 (+12.3% YoY). Excluding the impact of strategic price cuts in 1H FY03/21 to commemorate the company's 90th anniversary, the unit price of eyeglasses has been on an upward trend. The company's accurate vision testing with its Visual Life Care system allows them to offer the most suitable frames and lenses for a customer’s lifestyle, and eyeglasses that fit the situations and lifestyles where they'll be used. As a result, sales of high-unit-price products such as comfortable frames and performance bifocal lenses have led to a rise in the unit price per pair.

Sunglasses

The sales of sunglasses were JPY1.2bn (+9.0% YoY), surpassing the year-ago result that suffered a hit from the spread of COVID-19, but falling short or the pre-pandemic level (sales of JPY1.7bn in 1H FY03/20). Demand for sunglasses usually reaches its peak in July and August, but sales have been stagnant in the current fiscal year due to factors like people going out less due to the government's state of emergency declaration, unseasonable summer weather, and reduced demand from international tourists.

Contact lenses and accessories

Sales of contact lenses and accessories were JPY290mn (-4.9% YoY). Demand was sluggish as people refraining from going out resulted in fewer opportunities to wear contact lenses. However, there was little impact on results as contact lenses and accessories accounted for only 1.4% of overall sales.

Many major eyewear chains are boosting their contact lens revenue through the sale and service of disposable lenses, but Paris Miki is reluctant to do this. Typically, a prescription from an ophthalmologist with a two-week to six-month validity is recommended by the Ministry of Health, Labour and Welfare when purchasing contact lenses, as non-prescription lenses can cause issues with the eyes. Nonetheless, many companies sell contact lenses without a prescription. Customers also tend to prefer purchasing non-prescription lenses to avoid the hassle and expense of obtaining a prescription.

As a firm that aims to maintain the health of customers' vision, the company believes the current environment is not conducive to promoting wider use of contact lenses. In addition, since its main customers are older and do not fall under the primary customer base for contact lenses, and given the severely competitive market, the company does not plan on strengthening its contact lens sales.

Hearing aids

Hearing aid sales were JPY2.8bn (+11.3% YoY). Sales started showing signs of recovery following a lull during the pandemic when seniors—the company's core customers for its hearing aids—refrained from going out.

The company thinks the market for hearing aids will expand in tandem with further aging of society and the cultivation of latent demand. According to the company, the core customers for its hearing aids are people over 75, and many baby boomers now in their 60s are hesitant to use hearing aids because of the stigma. The plan is to sell devices to these baby boomers by communicating the enjoyment of sound that hearing aids deliver and encouraging customers to take hearing tests when they appear to be experiencing difficulty hearing during eyesight checks.

At the company's stores, only staff who have taken a class on the knowledge and skills associated with hearing aids (offered by the Association for Technical Aids) and received practical training are authorized to sell hearing aids. This is due to the company's thinking that even though hearing aids fall under the category of controlled medical device, they should not be sold by staff without expertise regardless of the actual legal requirement. In fact, the company sets itself apart from rivals by having sales staff with expertise conduct an accurate hearing test, suggest the most appropriate hearing aid for the customer based on the test results, and make necessary adjustments before handing over the product to the customer.

The company markets hearing aids for the enjoyment of sound (music) rather than merely functional hearing. In April 2021, the company opened DIGNA HOUSE Audio studio (Aoyama, Tokyo), a store specializing in Audio Life Care counseling-based hearing testing. It will be the company’s flagship store for hearing aids, aiming to unearth latent demand for hearing aids and grow sales.

Overseas segment

Sales: JPY2.5bn (+36.7% YoY)
Operating loss: JPY48mn (versus loss of JPY286mn in 1H FY03/21)
Store count: 115 (three openings, five closures)

In 1H FY03/22, the Overseas segment reported double-digit growth in sales and sharply reduced operating losses versus the same period the previous year thanks to improved profitability of its US operations, which went a long ways towards offsetting the weakness at its operations in Southeast Asia.

The prevalence of coronavirus infections and the mitigation measures put in place by local governments varied from country to country and region to region. However, sales overseas showed signs of recovery compared to the depressed levels in 1H FY03/21, when the company's overseas stores in many countries and regions were forced to either temporarily close or shorten operating hours in the wake of the pandemic.

Europe and the US

Stores in these regions suffered a prolonged drop in sales during 1H FY03/21 due to strict government restrictions on outings in the respective countries. In 1H FY03/22, due in part to progress on vaccination programs, sales gradually recovered.

France had higher sales and profits, as well as an operating loss. Paris Miki opened its first overseas store on Avenue de l'Opéra in central Paris in 1973. The store had just completed a major renovation in March 2020. However, customer footfall remains low with local customers not returning because of strict government restrictions under the pandemic, and with the number of tourists plummeting as well. The company stepped up efforts to narrow the loss by cutting back employee work hours to reduce personnel expenses, but thinks it will be difficult for profitability to recover until customers return.

German operations posted higher sales, which narrowed the loss.

In the UK, sales grew, narrowing the loss.

The US operation (Seattle) returned to profitability with higher sales and profits. Customer footfall, which fell in 1H FY03/21 due to travel restrictions and local demonstrations, recovered and contributed to earnings.

Asia and Oceania

The spread of COVID-19 has picked up again in Southeast Asia, and operating loss widened as a result.

In China, customer traffic has been recovering, thanks to progress made in the vaccination program. Sales increased by roughly 50% YoY, and operating loss was halved versus 1H FY03/21. In China, leveraging its far higher proportion of qualified personnel than competitors, the company is seeking to differentiate itself through vision testing and medical examinations and shift to the high value-added market.

Singapore returned to profitability with increased sales and profits. Despite strict government restrictions, sales have been on track to recovery, and the company expects to remain in the black for the full year.

In Malaysia, operating loss widened. Before the COVID-19 pandemic, the Malaysian operation was a driver of the company's overseas business, but infections have been on the rise in comparison with other Asian countries, and performance has been lower than expected. Another factor that contributed to the sluggishness was the fact that many of the company's stores in Malaysia were department store tenants, which do not have control over their own business hours. As for the store in the airport shopping mall, the company is contemplating withdrawal since customer traffic has remained low from the drop in the number of tourists.

Thailand fell into the red due to resurgence of the pandemic. The company operates eyewear stores in partnership with ophthalmologists there, which the company considers a successful model. As such, it expects performance to bounce back once the pandemic subsides.

South Korea posted an operating loss. The company closed a large number of loss-making locations to improve its earnings structure. So long as the pandemic winds down and stores return to normal operations, the company may be able to turn a profit for the full year.

In Vietnam, sales growth has been slowing down. At the eye hospital run by the company, the numbers of patients and surgeries have decreased due to the COVID-19 pandemic. However, since the company has been working to operate a hospital that is firmly rooted in the local community, it expects performance to bounce back once the pandemic subsides.

Q2 (July–September) results

In Q2 (July–September 2021), sales were JPY11.5bn (-11.2% YoY). Q1 (April–June 2021) saw a rebound from the lull during the same period a year earlier, and comparable store sales in Japan increased 29.7% YoY backed by the winding down of COVID-19. However, Q2 comparable store sales fell 11.8% YoY (down 10.5% YoY in July, 14.8% in August, and 9.6% in September), as the company failed to leverage the shopping season around the summer bonus payment and missed the demand for sunglasses due to resurgence of the pandemic and unseasonable summer weather.

Q2 operating profit stood at JPY181mn (-83.0% YoY; operating loss of JPY459mn in Q1 FY03/22), and OPM was 1.6% (8.2% in Q2 FY03/21; an operating loss in Q1 FY03/22). With the decline in sales, the company had to shoulder a greater burden of fixed costs.

Company forecast for FY03/22

		FY03/20			FY03/21			FY03/22
(JPYmn)		1H Act.	2H Act.	FY Act.	1H Act.	2H Act.	FY Act.	1H Act.	2H Est.	FY Est.
Sales		25,988	22,319	48,307	21,021	22,852	43,873	21,870	25,168	47,038
	YoY	-0.8%	-5.0%	-2.8%	-19.1%	2.4%	-9.2%	4.0%	10.1%	7.2%
Cost of sales		8,403	7,161	15,564	6,676	7,439	14,115	6,793	8,326	15,119
Gross profit		17,584	15,158	32,742	14,344	15,413	29,757	15,076	16,842	31,918
	YoY	0.6%	-4.2%	-1.7%	-18.4%	1.7%	-9.1%	5.1%	9.3%	7.3%
	Gross profit margin	67.7%	67.9%	67.8%	68.2%	67.4%	67.8%	68.9%	66.9%	67.9%
SG&A expenses		16,588	15,678	32,266	14,568	15,370	29,938	15,355	16,191	31,546
	YoY	-0.9%	-4.4%	-2.7%	-12.2%	-2.0%	-7.2%	5.4%	5.3%	5.4%
	SG&A ratio	63.8%	70.2%	66.8%	69.3%	67.3%	68.2%	70.2%	64.3%	67.1%
Operating profit		996	-520	476	-223	43	-180	-278	649	371
	YoY	37.6%	-	226.0%	-	-	-	-	-	-
	Operating profit margin	3.8%	-2.3%	1.0%	-1.1%	0.2%	-0.4%	-1.3%	2.6%	0.8%
Recurring profit		883	-437	446	61	552	613	-175	656	481
	YoY	11.3%	-	91.4%	-93.1%	-	37.4%	-	18.8%	-21.5%
	Recurring profit margin	3.4%	-2.0%	0.9%	0.3%	2.4%	1.4%	-0.8%	2.6%	1.0%
Net income		415	-1,145	-730	-220	181	-39	-361	196	-165
	YoY	10.4%	-	-	-	-	-	-	8.3%	-
	Net margin	1.6%	-5.1%	-1.5%	-1.0%	0.8%	-0.1%	-1.7%	0.8%	-0.4%

Source: Shared Research based on company data

For FY03/22, the company is forecasting full-year consolidated sales of JPY47.0bn (+7.2% YoY), operating profit of JPY371mn (versus a loss of JPY180mn in FY03/21), and a net loss of JPY165mn (versus a loss of JPY39mn in FY03/21).

Total sales for stores in Japan are expected to increase 6.0% YoY, with comparable store sales expected to increase 7.6% YoY. Some stores were forced to suspend operations or curtail business hours in FY03/21, but the company is factoring in a surge in delayed customer traffic in FY03/22. It assumes that the unit price of eyeglasses will remain on a par YoY.

The company projects largely unchanged GPM at 67.9% (+0.1pp YoY). It expects the SG&A ratio to improve to 67.1% (-1.1% YoY), as increased advertising and personnel expenses are offset by an upturn in sales. On the whole, the company expects to record an operating profit, with strength in the Japan segment offsetting overseas losses. In light of the fact that some of its properties face possible impairment, the company included a JPY200mn impairment loss in the forecast. The company anticipates a pre-tax profit but a loss after tax.

Going forward, the company will work to boost profitability by closing unprofitable stores, while driving recovery in performance through new store openings and renovations. At the same time, it will expand its line of private-brand eyeglass frames and develop high-performance lenses and new products to enhance the product appeal of its eyewear. The company has also set a policy of increasing points of contact with customers and expanding its sales channels by stepping up digital marketing efforts, an area where it lags behind. As a future driver of growth, the company will reinforce sales of hearing aids, a market expected to grow in line with Japan’s aging population, and take measures to turn performance around in the Overseas segment.

Store network strategy

The company expects to have 640 stores in Japan at end-March 2022 (a net decrease of 22 stores YoY). It plans to open 13 new stores during the year, both in shopping malls and on the site of former convenience stores and standalone suburban stores. With a view to store profitability, the company will also take measures to consolidate unprofitable stores and renovate stores to fit the demographics of regions where it is expanding—30 stores are slated for closure, including consolidations.

The company forecasts capital investment of JPY2.5bn in FY03/22 (+JPY282mn YoY). The major thrust will be investment in renovations, targeting 55 stores. It expects to channel the bulk of renovation investment into the new lodge format suburban flagship stores, whose spacious interiors allow shoppers to avoid crowding. The number of renovation projects is expected to be roughly the same YoY, but rising building material prices and construction costs will likely mean higher investment cost per project.

When opening new stores or relocating or renovating stores, the company’s focus is on families and elderly customers. The Visual Life Care (VLC) testing system enables the company to propose functional lenses that match the different life situations of customers, e.g., daily life, computer work, driving, outdoor sports, etc. The company has about 700 senior vision testing technicians, the most in the industry—it encourages employees to seek qualification. The company thinks that experienced technicians, using the VLC system, can propose eyewear optimally suited to individual customers and improve customer satisfaction, which can feed into recommendations for higher value-added products and multiple eyewear purchases.

Merchandising strategy

The company’s merchandising strategy will continue to center on the Made in Japan Project, which started in June 2018. A key goal of the Made in Japan Project is to sell private-brand products, developed in-house and made in Japan, that offer excellent functionality and design at affordable prices. While appealing to customers with the fine quality of Japan-made products, the Project also seeks to work closely with local communities where the products are made and give back to those communities (the company has its own factory in Sabae, Fukui Prefecture, the eyewear capital of Japan). In terms of unit volume, eyeglass frames made in Japan account for as much as 40–50% of all the frames Paris Miki sells. Competitors often use frames made in China to offer lower prices, but the company wants to get the message across that it insists on the high quality that frames made in Japan can offer.

In 1905, people in Sabae in Fukui Prefecture invited eyeglass craftsmen from Osaka to teach their techniques. In this way, eyewear manufacturing began there as a side industry to farming. The company’s subsidiary, Create Three (formerly Fukui Kouki), is the second oldest eyewear maker in Sabae and the first in the world to introduce titanium frame eyeglasses. Even in Sabae, only a few companies other than Create Three can handle the entire manufacturing process from creating the metal molds through to the final product. Paris Miki plans to leverage this technological advantage to aggressively bring to market reasonable, appropriately priced products, mainly original brands. With the help of not not only Create Three but other eyewear manufacturers in Sabae, the company has brought several brands to market to date, including style J, PARIS MIKI Authentic Eyewear, DIGNA Classic, and Sabae Kouki.

style J is a brand Paris Miki launched in 2015 before starting the Made in Japan Project. With the influx of foreign-made products and the shrinking market share of eyewear made in Japan, the company, animated by the concept of bringing authentic eyeglasses to customers, positioned the style J brand as a line of products that fully demonstrate the appeal of Japanese eyewear. In 2017, the branding was changed to All Japan Made, to indicate that all steps in manufacturing, from design and the making of parts to processing and finishing, are carried out in Japan. All Japan Made is one of the core brands in the Made in Japan Project. Retail prices average around JPY30,000 including lens.

PARIS MIKI Authentic Eyewear was launched in July 2018. A Made in Japan brand, it differs from its predecessor style J in that it bears the company’s name. In that sense, it has helped to strengthen the company’s branding. In addition to being made in Japan, the eyewear features simple and neutral designs that emphasize comfort of wearing. Prices start from JPY19,800 including lens.

In June 2019, the company formed subsidiary Opt Make Fukui, an eyeglass frame repair operation based in Sabae, Fukui Prefecture. As the number of eyeglass repair shops in Japan shrinks, there is growing demand from customers who want to keep on using quality eyewear for many years. To meet this need, the company through Opt Make Fukui incorporated after-sales service capabilities into the group, giving the Made in Japan Project a comprehensive framework for eyewear, from production to after-sales service.

New products

The company is seeking to expand sales of 24G, a bifocals series that offers next-day delivery. In June 2019, the company announced a business tie-up with Israel-based Shamir Optical Industry Ltd., which designs high-performance eyeglass lenses. In January 2020, the company announced the start of a new 24G service to provide customers with bifocals within 24 hours. It normally takes more than a week to deliver high-performance or specialized lenses such as bifocals or polarized lenses for fishing or driving or other outdoor activities. Paris Miki was able to achieve the rapid delivery time through an exclusive agreement with Shamir that allows the company to source from the lens lab Shamir set up in Japan. The company is targeting customers who want to obtain high-quality products made in Japan quickly. The service began on a nationwide basis in February 2021. Prices start at JPY30,000 for single-focus lenses and JPY40,000 for bifocals.

Digital marketing

The company is making inroads into digital marketing, an area where it has lagged behind. The company says it has been unable to link customer data gathered in stores with customer data obtained online. Its aim for digital marketing is to build a foundation that will support higher sales, by increasing points of contact with customers, providing after-sales service information, and building motivation to visit its stores by providing new product information .

The company renewed its website in September 2020, and also changed the name of the online store to PARIS MIKI ONLINE SHOP, drawing on its brand recognition. Going forward, it will seek to connect in-store and online customer data, such as by drawing on in-store purchase histories to complete online purchase transactions. The company wants to promote customer ownership of different kinds of eyewear according to how products are used, e.g., work, daily life, etc. It believes this will feed into higher sales.

One new planned initiative is the introduction of a virtual reality function on the website. The company is developing a system that allows users to experience a virtual shopping trip to its stores without the use of special goggles, and then to actually buy products by linking with the online store. The company predicts that brick-and-mortar retail and e-commerce functionalities will build off one another.

Hearing aids

The company’s focus is on unearthing latent demand for hearing aids for the senior citizen market. Paris Miki is working to enhance its product appeal, expanding its private-brand line and taking other steps to bring lower-priced products to market. It has also made inroads with customers through its long-term hearing aid rental service (starting from JPY110 a day), resembling a subscription service, which allows customers to try out a product fully before purchase. The demographics for the company’s eyewear include a relatively high percentage of senior citizens, corresponding to the potential user base for hearing aids. The company plans to further boost hearing aids sales while eliciting input from customers. The normalization of mask wearing and the proliferation of acrylic partitions to avoid COVID-19 droplet transmission has made many elderly people more aware of their hearing difficulties. The company expects demand in this area to grow down the road.

Paris Miki says the core customers for its hearing aids are people over 75. Many baby boomers now in their 60s are hesitant to use hearing aids because of the stigma. To target baby boomers, the company will begin marketing hearing aids for the enjoyment of music rather than merely functional hearing. In April 2021, the company opened DIGNA HOUSE Audio studio (Aoyama, Tokyo), a store specializing in Audio Life Care counseling-based hearing testing. The new store aims to unearth latent demand for hearing aids and grow sales.

Overseas segment

The Overseas segment has been in the red for several years, and eliminating the deficit is a pressing issue. The company expects lingering fallout from COVID-19 in FY03/22, which will make a turnaround in earnings difficult, but forecasts a return to profitability within two to three years. In the US and South Korea, the company will move forward with store consolidation to boost profitability. The company is positioning Vietnam, where it has established an eye hospital, and Thailand and the Philippines, where its eyewear stores operate in partnership with eye clinics, as successful models for the rest of the group. In Southeast Asia, where the eyewear market is projected to expand in line with the population, the company wants to tie-up with ophthalmology businesses to bring about longer-term growth. In China, leveraging its far higher proportion of qualified personnel than competitors, the company is seeking to differentiate itself through vision testing and medical examinations and shift to the high value-added market.

Japan International Eye Hospital: With a staff of local doctors under the direction of Dr. Tadashi Hattori, who has been practicing and teaching at the Vietnam National Institute of Ophthalmology since 2002, the hospital is responsible for treating patients. It is a patient-friendly hospital equipped with Lasik surgery capabilities and other state-of-the-art facilities, and inpatient rooms offer a panoramic view of Hanoi’s large West Lake. Paris Miki operates a store covering roughly 33sqm (about 10 tsubo) on the first floor, but says that the facility is primarily a hospital.

Medium-term business plan (FY2022-2024)

Financial targets of the medium-term business plan

			FY03/21	FY03/22	FY03/23	FY03/24	FY03/25	FY03/31
(JPYmn)			Act.	Est.	Est.	Est.	Est.	Est.
Sales			43,873	47,038	47,500	49,650	51,655	65,000
	YoY		-9.2%	7.2%	1.0%	4.5%	4.0%	-
	Japan		39,393	41,614	42,000	44,000	45,775	56,500
		YoY	-6.9%	5.6%	0.9%	4.8%	4.0%	-
	Overseas		4,264	5,087	5,100	5,150	5,200	6,000
		YoY	-25.7%	19.3%	0.3%	1.0%	1.0%	-
	New businesses		216	337	400	500	680	2,500
		YoY	-14.3%	56.0%	18.7%	25.0%	36.0%	-
Gross profit			29,758	31,917	32,300	33,762	35,125	44,200
	YoY		-9.1%	7.3%	1.2%	4.5%	4.0%	-
	Gross profit margin		67.8%	67.9%	68.0%	68.0%	68.0%	68.0%
SG&A expenses			29,938	31,546	31,560	32,737	33,607	37,650
	YoY		-7.2%	5.4%	0.0%	3.7%	2.7%	-
	SG&A ratio		68.2%	67.1%	66.4%	65.9%	65.1%	57.9%
Operating profit			-180	371	740	1,025	1,518	6,550
	YoY		-	-	99.5%	38.5%	48.1%	-
	Operating profit margin		-	0.8%	1.6%	2.1%	2.9%	10.1%
Net income			-39	-165	380	610	1,000	4,389
	YoY		-	-	-	60.5%	63.9%	-
	Net margin		-	-	0.8%	1.2%	1.9%	6.8%
EPS			-	-	7.5	12.0	19.7	86.4
ROE			-	-	1.4%	2.2%	3.5%	11.0%

Source: Shared Research based on company data

Along with the release of Q2 FY03/22 results on November 15, 2021, the company provided a brief outline of its new medium-term business plan. Dubbed simply FY2022-2024 Medium-term Business Plan, the new plan covers the three-year period from FY03/23 through FY03/25---the start of which coincides with the date of the change in its legal Japanese name to Paris Miki Holdings on April 1, 2022. The company promised to provide a more detailed outline of its new medium-term plan at the time of its official announcement of its name change next April.

Management targets for FY03/31

Sales: JPY65.0bn (CAGR of 4.0% from FY03/21)
Breaking down to,
Japan: JPY56.5bn (3.7%)
Overseas: JPY6.0bn (3.5%)
New business domains: JPY2.5bn (27.7%)
Operating profit: JPY6.6bn (OPM of 10.1%)
Net income attributable to owners of the parent: JPY4.4bn
EPS: JPY86.4
ROE: 11.0%

The company plans to raise sales by a CAGR of 4% from FY03/21 to FY03/31. In Japan, it projects the markets for eyewear and hearing aids to expand, and intends to achieve sales growth by improving employees' service levels and proposal capabilities through training, and by bolstering sales of high-value-added products through store reforms. Overseas, the company will cut back on store openings, and seek sales growth by stepping up collaboration with local eye hospitals. The overall plan also calls for the cultivation of new business domains by reimporting this collaboration model (tie-up with eye hospitals) to the Japanese market and promoting the Audio Life Care (counseling-based hearing test) services.

The company says it will work to improve OPM every fiscal year with a view to achieving 10.1% in FY03/31. While GPM is projected to remain around 68.0%, the company expects the SG&A ratio to drop with the closure of unprofitable stores and as the growth in sales eases the burden of fixed costs.

Phase 1 (FY03/23–FY03/25)

The company intends to conduct management reforms and press on with measures to build a profit-generating business structure. On top of closures and consolidation of unprofitable stores in Japan, a renovation project of 20 to 25 locations per year (primarily aging stores like suburban salon-format stores) is in the plans. To attract younger customers, the company will also be rolling out new stores offering products at lower price ranges compared to mainstay Paris Miki and Megane no Miki brands.

Phase 2 (FY03/26–FY03/28)

Phase 2 focuses on aggressive efforts to stabilize profits and make headway in the new business domains. In Japan, the company plans to bolster store openings, promote collaboration with eye hospitals, and work to create a new Audio Life Care market.

Phase 3 (FY03/29–FY03/31)

In Phase 3, the company expects to see sales growth in addition to profit contribution from the new business initiatives in Phase 2. It will also consider shareholder returns commensurate with the profit increase.

Outline of long-term company vision

The company's long-term vision goes out to 2030, by which time its aim is to make Paris Miki a brand known throughout the world for its devotion to customer service that both sets customers at ease while at the same time getting them excited about the prospect of new eyewear.

In Southeast Asia, the company plans to develop a business built around modern ophthalmological services featuring the latest in equipment and treatments, and are capable of delivering eye care on par with that available in Japan, in addition to selling high-quality eyeglasses. At home in Japan, the company will leverage its advanced vision testing technology to create stores that can offer optimal eyeglasses in an inviting setting to meet the demands of customers who wish to cherish and use quality items.

Overseas segment

In Southeast Asia, plans call for a total investment of JPY3.0bn in the medical field by FY03/31, as the company steps up efforts to collaborate and integrate its services with healthcare (eye care). The medical and eyeglasses markets have been expanding in this region on the back of economic growth in line with the population increase, mounting number of people with myopia, and the rising risk of eye diseases. At the same time, higher income levels have spurred interest in healthy living among consumers and maintenance of eye health has become important. The company intends to address the rising demand by providing cutting-edge eye care and selling quality eyeglasses.

The company established the Japan International Eye Hospital in Hanoi in 2014. The background of this move was to support the activities of Dr. Tadashi Hattori, who has been volunteering to provide free cataract surgery to the poor in Vietnam, and also to help develop ophthalmology in the country. Since the hospital is equipped with state-of-the-art medical devices and employs skilled physicians, patients from neighboring countries check in to receive advanced medical care. Meanwhile, the hospital is also frequented by local residents. As it aims to be firmly rooted in the local community, the hospital employs many local physicians and nurses for the purpose of fostering human resources and spreading advanced medical technology in Southeast Asia.

The company has been expanding its initiatives in Vietnam horizontally to other Southeast Asian countries. In Cambodia, it made use of its hospital operation expertise in Vietnam to open a one-stop shop in 2021, combining an eye clinic and an eyewear store. In China, the company operates an Eye Care Center where ophthalmologists provide diagnosis using the latest testing devices. Stores in Thailand and the Philippines offer eye screening tests performed by ophthalmologists and other specialists. The company's strategy is to support maintenance of eye health in the region by strengthening the operation of eyewear stores that have tie-ups with eye care services. 　

Japan segment

The company expects the domestic eyeglasses market to expand from JPY403.0bn in 2020 to JPY450.4bn in 2030, assuming an increase in demand for reading glasses among the second-wave baby boomers in Japan among other factors. It says eyewear demand is diversifying, driven by heightened interest in heath and medical care in line with longevity and aging population, health issues arising from the increase in time spent on digital devices, and growing number of children with myopia.

The company's strengths are its staff with specialized knowledge and skills, stores rooted in local communities, high-quality eyeglasses, and thorough guarantee and maintenance services. The company plans to expand its business in Japan by proposing optimal eyewear for each customer and creating stores that are inviting, so that it can meet the demand of those who wish to cherish and use quality items.

New domains

The company plans to reimport the eye care collaboration model that has been successful in Vietnam. The business will be primarily handled by consolidated subsidiary Medi-shared Inc., which supports hospital management and provides consulting services.

Another initiative is the creation of a new Audio Life Care (counseling-based hearing test) market. The company expects the domestic hearing aid market to expand from JPY35.5bn in 2020 to JPY40.0bn in 2030, as the second-wave baby boomers hit the age group of primary hearing aid users. It plans to pave the way to business launch by providing Audio Life Care services to capture demand centered on the enjoyment of sound.

Management targets for FY03/25

Sales: JPY51.7bn (CAGR of 4.2% from FY03/21)
Breaking down to,
Japan: JPY45.8bn (3.8%)
Overseas: JPY5.2bn (5.1%)
New business domains: JPY680mn (33.2%)
Operating profit: JPY1.5bn (OPM of 2.9%)
Net income attributable to owners of the parent: JPY1.0bn
EPS: JPY19.7
ROE:3.5%

The company positions the current medium-term business plan as Phase 1 of its long-term management vision. To become a globally known service brand by FY03/31, it plans to establish a profit-generating business structure through reforms. OPM is expected to rise from 0.8% in FY03/22 (estimate) to 2.9% in FY03/25. The plan assumes GPM of around 68.0%, with the SG&A ratio declining in tandem with the closure of unprofitable stores, and sales growth reducing the burden of fixed expenses.

The company's initiatives toward realization of the long-term management vision are outlined below.

1) New value propositions that engender a sense of both excitement and assurance

The company seeks to offer both excitement and assurance to customers by stepping up its testing and fitting capabilities, creating attractive stores, and fostering human resources. Leveraging its eyewear manufacturing technology and forte in in-store proposals, the company will provide optimal and comfortable eyeglasses that match the lifestyles of individual customers.

2) Collaboration with other parties in related medical fields both in Japan and overseas

The business model featuring integrated management of an eye hospital and an eyewear store has found success in Vietnam. As such, the company plans to reimport this model to Japan. It will work with consolidated subsidiary Med-shared Inc., mutually sharing domestic and overseas expertise to further develop the business model.

3) New initiatives in Audio Life Care services

Estimates show that over 14.3 million people in Japan have trouble hearing but only 13.5% of this total use hearing aids. The company plans to raise this usage ratio by educating people that hearing aids can facilitate communication and enrich daily living. It also intends to capture demand from the baby boomers who will be hitting the age group of people requiring hearing aids.

High price setting is one of the reasons behind low usage of hearing aids. In FY03/14, the company began offering rental hearing aids for a fixed price as low as JPY3,000 per month, and over 23,500 customers have since used the service. The company plans to enhance these types of new initiatives.

Historically, hearing aids have been perceived as assistive devices, but the company with shore up efforts to sell them as tools to enjoy sound (music). It plans to roll out DIGNA HOUSE Audio studios in major cities across the country to promote the concept of its Audio Life Care services. These stores will staff certified hearing aid technicians to provide consulting services and offer fashionable hearing aids that engender enjoyment of sound.

4) Development of unique and unconventional store network

Since becoming president of the company in 2017, Mr. Sawada has been promoting store reforms. Many of the rival national chain stores seek efficiency by developing uniform store designs, products, and services, but the company opts to create stores that match customer and regional attributes, being mindful of store locations and formats. It seeks to generate demand by developing stores with varying concepts and catering to different customer needs.

For instance, at large city locations where younger customers are expected, the company tends to roll out the entertainment-format stores with a rich lineup of sunglasses, whereas in the suburbs, it prefers the wooden lodge-format stores with an in-store coffee shop, where customers can spend their time in comfort. Plans also call for the launch of a new store format with bright interiors and easy-to-understand price displays so that younger customers can feel at ease entering the stores.

Roughly 50% of the stores have been renovated based on the new concepts; the company intends to raise this ratio to about 70% in the three years covered by the current medium-term business plan.

5) Accelerated rollout of new concept stores designed for specific regions and/or locations

The company plans to invest JPY5.0bn in store development during the three years of the current medium-term business plan. For the short term, it will consolidate and/or close unprofitable stores that have been in operation based on the company's dominant expansion strategy. The expected positive impact of the consolidation/closures comes to roughly JPY200mn. For the medium term, initiatives include the expansion of lodge-format and maison-format stores from the current 23 locations to 64 locations by FY03/25.

6) Employee training to foster staff who can ensure peace of mind

Starting April 2022, eyeglass technician will become a national qualification. Eye problems have diversified and become more complex; there are a range of issues including the decline in eyesight associated with aging and the decline in children's eyesight due to the spread of smartphones and other digital devices. Under these circumstances, the company cites the importance of having store staff with specialist skills conduct testing and propose the most appropriate eyeglasses for each customer.

In many countries and regions overseas, eyesight checks can only be performed by qualified professionals. While checks in Japan are not bound by similar regulations at present, the company—being long aware of the issue—has lobbied the industry and helped make eyeglass technician a national qualification. There will be no change going forward to the fact that those other than eyeglass technicians are permitted to conduct eyesight checks and sell eyeglasses. Still, the company has hopes that having a national qualification program in place will help create an industry-wide environment that encourages proper proposal of optimal eyewear.

The goal for the company is to have 1,200 staff qualified as eyeglass technicians by 2024. It will seek to ensure peace of mind to the customers by performing high-accuracy vision testing and providing eyeglasses that match customers' lifestyles.

For hearing aids as well, the company plans to increase the number of specialist employees who have taken a class on the knowledge and skills associated with hearing aids (offered by the Association for Technical Aids) and received practical training. The company intends to set itself apart from rivals by having sales staff with expertise conduct an accurate hearing test, suggest the most appropriate hearing aid for the customer based on test results, and make necessary adjustments before handing over the product to the customer.

7) Promotion of Visual Life Care services that provide ongoing support for eye health

The company offers a free vision test whose checklist includes up to 62 items. By doing so, it provides eyeglasses that match customers' lifestyles. Working together with the World Optical College, a school for eye care and eyewear professionals, the company has been fostering eyewear specialists who have received training on optical studies and eyewear design, as well as customer services. Further, it currently offers the Visual Life Care testing system (service to ensure a comfortable eyewear experience) at all of its stores, and plans to dispatch qualified eyeglass technicians going forward. The company's strategy of proposing optimal eyewear by having customers receive vision testing with peace of mind will remain unchanged.

Business

Business description

Paris Miki is the third largest eyewear retailer in Japan by sales. With the influx into the market of competitors offering low-priced products, the company is gradually losing market share. Its store network is on a net declining trend as the company takes steps to boost efficiency by closing and consolidating stores with poor prospects for turning around profitability. The network at end-FY03/21 included 662 stores, down by 287 stores from 10 years ago (end-FY03/12).

The company also has a long track record abroad. It established a local subsidiary in France in 1973 and opened a store in Paris, followed by stores in Singapore in 1974, Hawaii in 1978, and Hong Kong in 1979. As of end-FY03/21, Paris Miki operated 116 stores in 13 countries overseas. Overseas operations have been in the red for several years, and improving profitability is a pressing issue.

Store count

			FY03/12	FY03/13	FY03/14	FY03/15	FY03/16	FY03/17	FY03/18	FY03/19	FY03/20	FY03/21
			FY	FY	FY	FY	FY	FY	FY	FY	FY	FY
Store count in Japan			949	887	867	846	822	806	767	741	701	662
Store count: Overseas			210	197	191	185	167	158	152	138	124	116
	Europe		4	3	3	3	3	3	3	3	3	3
	Asia		188	179	174	168	151	144	138	124	110	103
		Chugoku	119	108	100	87	73	66	59	49	41	35
		South Korea	41	46	49	53	51	49	50	46	39	42
		Other Asia	28	25	25	28	27	29	33	29	30	26
	Oceania		12	9	8	8	7	5	5	5	5	5
	US		6	6	6	6	6	6	6	6	6	5

Source: Shared Research based on company data

Typical store description

The types of domestic stores can be divided into three main categories: Paris Miki and Megane no Miki brands (core store format), Kimpo-do (mainly selling inside department stores), and Opt-LABEL/OPTIQUE PARIS MIKI (low-price format). The Paris Miki and Megane no Miki stores are the same format; Paris Miki is mostly used in the Tokyo/Kanto region, whereas Megane no Miki is typically found in Kansai. The company typically rents its stores—only a few store locations are owned.

Store layouts use nearly all available space for displaying inventory for sale. Average store size is approximately 100sqm, staffed by two to four employees. By location, as of end-March 2021, there were 317 suburban stores, 260 shopping mall stores, and 85 general tenant stores. Of the 642 Paris Miki and Megane no Miki stores, 545 were directly managed and 97 were franchise stores. Franchise stores are mainly located in rural suburban areas.

New concept store development

Under the direction of the current president, the company has classified all stores by region and demographics, and opened stores incorporating new concepts or formats. Currently, of the 642 stores operated by Paris Miki, about 250 have already been newly refurbished or renovated according to the new classification, and the company intends to continue investing in such efforts. In addition to existing standard store formats, the main store formats are as follows.

Entertainment format: Mainly general tenant stores in cities with populations of more than 1mn. With a music and fashion theme (i.e., displaying guitars or drum sets), the stores at first glance do not have the appearance of an eyewear store. The target is customers in their 20s to late 30s. The stores also play a role in driving traffic to the online site and setting new trends.

Belle Époque format: Located mainly inside shopping centers. The format evokes the golden age of Paris in the late 1800s and early 1900s. The target is families and parents in their 30s.

Salon, Maison format: Mainly standalone suburban stores. The stores are furbished with European-style furniture, and offer a café corner and waiting area where visitors can relax. The stores are closely connected with the local community and provide a space where customers can take their time in discussing problems related to vision and hearing. The target customer base can range widely, from new families to baby boomers, depending on store location.

Lodge format: Standalone suburban stores. With the appearance of a log house and having the smell of lumber, the stores’ spacious interiors allow customers to take their time shopping. Lodge format stores are mainly created by renovating and expanding existing standard format regional flagship stores. The target customer base can range widely, from existing customers to new families.

Entertainment format	Belle Époque format
Maison format	lodge format

Source: Shared Research based on company data

Business model

Sales by product for FY03/21 were JPY12.7bn for frames (31.0% of domestic retail sales), JPY17.9bn for lenses (43.9%), and JPY1.8bn for sunglasses (4.3%), JPY613mn (1.5%) for contact lenses and equipment, JPY5.4bn (13.1%) for hearing aids, and JPY2.5bn for other products (6.2%).

Eyeglasses (frames and lenses) (74.9% of Japan retail sales for FY03/21)

Eyeglasses are the core product that the company sells. The company uses two pricing methods: lenses and frames priced separately, or a fixed price for a complete set of glasses (described as the lens-inclusive pricing by Paris Miki). The majority of frames sold by the company, slightly above 60% (retail sales basis), are private brands designed internally (examples include Style J, PARIS MIKI Authentic Eyewear). Both set and separate pricing is used in Paris Miki / Megane no Miki stores, while at the former Opt-LABEL/OPTIQUE PARIS MIKI stores, prices include those of frames and lenses.

Trends in key store metrics

Unit price, other			FY03/12	FY03/13	FY03/14	FY03/15	FY03/16	FY03/17	FY03/18	FY03/19	FY03/20	FY03/21
(JPY)
All stores
	Unit price		27,535	29,407	32,410	32,493	32,304	30,307	30,548	31,367	31,745	31,182
		YoY	-7.8%	6.8%	10.2%	0.3%	-0.6%	-6.2%	0.8%	2.7%	1.2%	-1.8%
	No. of units sold		7.2%	-18.4%	-11.6%	-6.2%	-3.6%	-0.3%	-0.8%	-3.1%	-3.4%	-0.8%
	Customer count		-0.5%	-8.4%	-9.2%	-6.9%	-1.1%	-1.5%	-1.5%	-5.7%	-5.0%	-3.9%
Paris Miki Inc.
	Unit price						28,465	28,027	28,224	29,080	29,520	29,534
		YoY						-1.5%	0.7%	3.0%	1.5%	0.0%
	No. of units sold							-0.2%	-0.7%	-2.9%	-6.2%	-0.1%
	Customer count							-1.2%	-2.0%	-5.2%	-4.5%	-2.2%
Kimpo-do Co., Ltd.
	Unit price						97,155	95,226	98,951	104,106	109,093	109,271
		YoY						-2.0%	3.9%	5.2%	4.8%	0.2%
	No. of units sold							-5.0%	-3.9%	-10.1%	-11.5%	-26.7%
	Customer count							-5.2%	-3.7%	-6.9%	-10.9%	-33.2%
Sales growth YoY
	All stores		-1.5%	-8.8%	-0.4%	-5.6%	-1.6%	-5.9%	0.8%	-1.1%	-1.8%	-6.7%
	Comparable stores		-0.7%	-8.1%	2.7%	-4.5%	-0.6%	-5.7%	1.5%	1.1%	0.5%	-5.1%

Source: Shared Research based on company data

Inventory and GPM

The level of inventory turnover varies between stores located in high-traffic shopping malls and stores located in suburban areas. Stores inventory is managed by a POS system. The company has a distribution center in Himeji that holds approximately 350,000 units of frames inventory; individual stores hold approximately 1,200 frames each. The inventory mix at each store is determined by the Merchandising Department of the head office based on the demographics and local characteristics of each store, and is reviewed in a timely manner based on product turnover and other data. GPMs for frames and lenses are generally better than the company average; lenses tend to carry margins higher than frames.

Domestic frame sales

Source: Shared Research based on company data

Domestic lens sales

Source: Shared Research based on company data

Sunglasses (4.3% of Japan retail sales for FY03/21)

Sunglasses sold in stores can be considered as complementing the core eyeglass product. In urban stores, sunglasses account for a relatively high proportion of sales—before COVID-19, sales at some stores (including those to inbound tourists) were making a contribution to earnings. Confident that the Japanese sunglasses market still has room for growth once the pandemic subsides, the company says it plans to open stores on the ground floors of department stores to ramp up sales, and expects sunglasses to be one driver of future growth.

Sunglasses sold in stores are popular “national” brands (e.g., Ray-Ban, Police) with prices typically ranging from JPY5,000–20,000. GPMs for sunglasses are generally lower than the company average.

Domestic sunglasses sales