Paris Miki Holdings 7455
三城ホールディングス
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2021-12-01
2021-11-16
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Shiodome Shiba Rikyu Building 10F 1-2-3 Kaigan, Minato-ku Tokyo, Japan 105-0022
Summary
An eyeglass retailer focusing on depth of product offering and selling across the price spectrum. Largest store network in Japan.
Specialty Retail
Key dates
2022-02-14
Next earnings announcement
2010-04-12
Coverage initiation
Executive summary
Business overview
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 (versus projected sales of JPY47.0bn in FY03/22), operating profit of JPY1.5bn (versus projected profit of JPY371mn in FY03/22), and net income of at least JPY1.0bn (versus projected loss of JPY165mn in FY03/22). A key part of its new medium-term 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.
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
Note: Figures may differ from company materials due to differences in rounding methods.
Recent updates
November 2021 sales figures
Paris Miki Holdings Inc. announced November 2021 sales figures.
Monthly trends
Announcement of new medium-term business plan (outline)
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
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
Note: Figures may differ from company materials due to differences in rounding methods.
Consolidated results for 1H FY03/22 (out November 15, 2021)
*Net income/loss attributable to owners of the parent
For the six-month period through Q2 FY03/22, the company reported higher sales at the consolidated level but operating losses widened. By way of explanation, the company said more time was needed to get eyeglass sales back to pre-pandemic levels because in-person customer interaction was a integral to the eyewear sales process. And it also required more spending on things such as store remodelings, advertising/promotion, and employee training in order to gain the support of customers, which is essential because as an eyewear seller the company is looking to both set customers at ease by providing assurance while at the same time getting them excited about the prospect of new eyewear. Along with this, the company continued the rollout of its Vision Life Care vision testing system and the training store staff to use the new system to help customers find the right lenses and frames to meet the changes in their visual needs and personal lifestyles. As a result, the company said it was able to increase the average size of customer purchases.
Another factor affecting reported sales and earnings was the company's adoption of the new accounting standard for revenue recognition (ASBJ Statement No. 29). With its changeover to the new revenue recognition standards at the beginning of the current fiscal year, the company said reported sales for the six-month period were reduced by JPY126mn and SG&A expenses by JPY103mn, and this reduced reported earnings at the operating, recurring, and pre-tax profit levels by JPY22mn (each) versus the amount that would have been reported under the old revenue recognition standard.
Breakdown of results by segment
Japan segment
For the six-month period through Q2 FY03/22, the Japan segment reported higher sales but operating losses widened.
The company said that customer traffic last been on the mend since the Japanese government lifted its first state of emergency declaration (issued April 2020), for even though it held down sales promotional activity in general it did run promotions in connection with its 90-year anniversary celebration. During the first six month of FY03/22, the company saw sales run basically flat YoY as customer traffic slowed in the wake of subsequent state of emergency declarations (issued in response to a resurgence in coronavirus infections certain areas). Operating losses widened, though, because at the same time expenses went up, propelled by increased spending on TV commercials and other advertising/promotion, and rising expenses at the individual store level (particularly personnel-related expenses and rents), which jumped from depressed levels during the same six-month period last year, when the pandemic had forced it to temporarily close or shorten the operating hours of stores and as a result it was able to receive temporary concessions on rents from many landlords.
With regard to its store scrap-and-build program, the company said store relocations were running in line with plan but that it had reduced the number of unprofitable locations it planned to close by the end of the fiscal year to around 30 stores versus its initial plan calling for 35 store closures. With respect to its Kimpo-do outlets (mainly located inside department stores), the company said customer traffic was bouncing back, sales were up, and operating losses were smaller than the same six-month period the previous year.
Overseas segment
For the six-month period through Q2 FY03/22, the Overseas segment reported double-digit growth sales and sharply reduced operating losses versus the same period the previous year thanks to the improving profitability of its US operations, which went a long ways towards offsetting the weakness at its operations in Southeast Asia.
Overseas, sales continued to rebound from depressed levels during the same six-month period the previous year (when most of its overseas stores were forced to either temporarily close or shorten operating hours in the wake of the pandemic). The strength of the recovery this year varied from country to country, though, depending largely on the prevalence of coronavirus infections and the mitigation measures put in place by local governments. In the case of Southeast Asia, for example, the resurgence of coronavirus infections blocked the comeback in customer traffic, tipping the company's subsidiaries in Malaysia and Thailand into the red versus profits in most past years. In contrast, the company's US operations (in the Seattle area) saw a rebound in customer traffic off depressed levels at this time last year (when business was hurt by especially restrictions on flights and local demonstrations) and was able to report a profit.
Company forecast for FY03/22
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.
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.
Medium-term business plan (FY2022-2024)
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.
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
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.
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.
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.
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.
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.
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.
Contact lenses and accessories (1.5% of Japan retail sales for FY03/21)
The company sells contact lenses as complements to the main product, eyeglasses. GPMs for contact lenses are generally lower than the company average, at 30–40%.
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 three-month validity is recommended 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. The health of customers' vision is important to the company, and it doesn't plan on strengthening its contact lens sales as it doesn't believe the current environment is conducive to wider use of their contact lens products.
Hearing aids (13.1% of Japan retail sales for FY03/21)
The hearing aid business is relatively new for the company and represents an area of potential growth. Hearing aids have been increasing as a proportion of total sales since the company began reporting separate sales in FY03/05. GPMs for hearing aids (at around 50%) are generally lower than the company average. Prices for hearing aids vary widely: from several ten thousand yen to several hundred thousand yen per unit. The company is pursuing measures to capture a wide range of demand, such as by working to market high-quality hearing aids while keeping prices down, expanding the private-brand product lineup, and offering long-term subscription-type rental services for hearing aids at reasonable prices (starting from JPY110 a day).
At salon format stores with a large proportion of customers aged 60 and over, the company is also reinforcing services, such as encouraging hearing comparisons. The company says the core customers for 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, and is focusing on growing this market.