Pan Pacific International Holdings 7532

パン・パシフィック・インターナショナルHD

Recent Updates

2021-11-11

Q1 FY06/22 flash update

2021-11-09

Sales figures for October 2021

2021-09-22

Full-year FY06/21 report update

Get in touch

2-19-10 Aobadai Meguro-ku Tokyo, Japan 153-0042

https://ppih.co.jp/

03-5725-7532

Summary

A general discount retailer offering convenience with its revolutionary product display methods, shockingly low prices, and fun shopping experiences. Core line of business is the Don Quijote discount store chain. Aims to establish a post-general merchandise store (GMS) format with the acquisition of Uny.

Multiline RetailSpecialty RetailFood & Staples Retailing

Key dates

2010-01-06

Coverage initiation

Full Report

2021-11-11

Q1 FY06/22 flash update

2021-11-11

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Executive summary

Pan Pacific International Holdings Corporation (PPIH) is one of Japan’s top retailers whose core business is the Don Quijote discount store chain. The company operated 667 stores in Japan and overseas as of end-June 2021. The company recorded sales of JPY1.7tn in FY06/21. As well as Don Quijote, the company runs MEGA Don Quijote, a family-oriented, discount store brand that features spacious layouts and a wide array of food products. Based on the concept of making customers the utmost priority, PPIH has a unique store concept called CV+D+A, with CV standing for convenience, D for discount, and A for amusement to differentiate itself from peers. Most retail companies pursue convenience for customers so that they can buy what they want, when they want, and offer products at competitive prices. In contrast, the company’s concept is for customers to spend time instore, enjoying an exciting shopping experience. Its stores attract consumers, because they provide a form of amusement not offered by conventional retailers.

The company’s operations prioritize the delegation of authority and store autonomy. The sales floor managers source, display, and price items in a way that helps consumers enjoy shopping, having researched demand and competitor trends in their trade area. Mass displays (displaying a large volume of the same product), point-of-purchase (POP) displays such as handwritten price labels and product copy, and spot products that highlight the low price or rarity value of a product are all techniques to enhance consumers’ shopping experience.

PPIH has an aggressive stance on M&A. To date it has acquired GMS Nagasakiya Co., Ltd., and US supermarket chains. In January 2019, the company made Uny Co., Ltd. (GMS and other businesses) a wholly owned, consolidated subsidiary. Since forming an alliance with Uny in August 2017, the company has run dual-name stores such as MEGA Don Quijote UNY and Don Quijote UNY, which benefit from Uny’s expertise in the business while simultaneously promoting the Don Quijote concept of encouraging customers to spend time instore. This has produced positive effects such as improved sales and customer traffic, and earnings improvement. At the same time, to focus its management resources on specific businesses, it decided to sell DOit, which operates the home center business, and 99 Ichiba, which operates mini-supermarkets. As its name suggests, the company is looking to develop into a leading retailer not only in Japan but throughout the Pan Pacific region. Over the past few years, the company has been expanding its own business in Asia while also increasing the number of overseas stores through the acquisition of businesses in North America. In line with the ongoing expansion in the overseas business, the company in February 2021 announced the acquisition of GRCY Holdings, inc., which operates Gelson’s, a high-end supermarket in California.

Having made Uny a subsidiary, the company’s annual sales reached approximately JPY1.7tn. The company sees earnings improvement of Uny’s retail business as the main profit growth driver. In addition to targeting sales growth in existing formats, particularly at Don Quijote, through higher comparable store sales and accelerated store openings, the company is also focused on ensuring profitability at its Uny stores (mainly dual-name stores).

Trends and outlook

The company recorded FY06/21 sales of JPY1.7tn (+1.6% YoY), operating profit of JPY81.3bn (+7.8% YoY), net income ttributable to owners of the parent of JPY53.9bn (+7.9 YoY), and ROE of 13.6%. The annual dividend was JPY16.0 per share (payout ratio of 18.8%). The company has now shown YoY sales and operating profit growth in each of the 32 consecutive years since it opened its first Don Quijote store.

For FY06/22, the company forecasts sales of JPY1.9tn (+9.4% YoY), operating profit of JPY85.0bn (+4.5% YoY), and net profit attributable to owners of the parent of JPY57.6bn (+7.0% YoY). Expecting the COVID-19 pandemic to drag on, the company’s forecast does not assume a recovery in inbound demand and factors in a cooling in consumer sentiment.

Under the leadership of Naoki Yoshida who took over as president and CEO in September 2019, PPIH in February 2020 unveiled its new medium- to long-term management plan Passion 2030, which targets operating profit of JPY200bn in 2030 (assuming sales of about JPY3tn). The company aims to generate operating profit of about JPY150bn by evolving and expanding current businesses and another JPY50bn through measures such as merchandising reform, cost optimization, and shift to profitability in its finance business. For the time being, it is looking to maximized synergies with Uny, control of procurement costs through economics of scale, and a private brand product strategy to serve as the drivers behind earnings growth.

Strengths and weaknesses

Shared Research believes the company’s strengths are 1) ability to execute management policies in the field in ways that are compatible with the conditions of each region, 2) a powerful brand associated with an enjoyable shopping experience and low prices, and 3) swift decision-making. Weaknesses include 1) decline in store competitiveness for having become a giant corporation, 2) existence of some consumers who lack familiarity with, or acceptance of stores, and 3) heavy dependence on the domestic market (see Strengths and weaknesses section for details).

Key financial data

Income statement		FY06/13	FY06/14	FY06/15	FY06/16	FY06/17	FY06/18	FY06/19	FY06/20	FY06/21	FY06/22
(JPYmn)		Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Est.
Sales		568,377	612,424	683,981	759,592	828,798	941,508	1,328,874	1,681,947	1,708,635	1,870,000
	YoY	5.2%	7.7%	11.7%	11.1%	9.1%	13.6%	41.1%	26.6%	1.6%	9.4%
Gross profit		149,807	161,018	181,741	201,893	218,580	243,991	370,527	481,689	497,325	553,900
	YoY	7.4%	7.5%	12.9%	11.1%	8.3%	11.6%	51.9%	30.0%	3.2%	11.4%
	Gross profit margin	26.4%	26.3%	26.6%	26.6%	26.4%	25.9%	27.9%	28.6%	29.1%	29.6%
SG&A expenses		117,438	126,726	142,638	158,708	172,395	192,423	307,417	405,692	416,018	468,900
	YoY	6.5%	7.9%	12.6%	11.3%	8.6%	11.6%	59.8%	32.0%	2.5%	12.7%
Operating profit		32,369	34,292	39,103	43,185	46,185	51,568	63,110	75,997	81,306	85,000
	YoY	10.4%	5.9%	14.0%	10.4%	6.9%	11.7%	22.4%	20.4%	7.0%	4.5%
	Operating profit margin	5.7%	5.6%	5.7%	5.7%	5.6%	5.5%	4.7%	4.5%	4.8%	4.5%
Recurring profit		33,201	35,487	40,160	43,797	45,523	57,218	68,240	75,173	81,526	83,000
	YoY	13.4%	6.9%	13.2%	9.1%	3.9%	25.7%	19.3%	10.2%	8.5%	1.8%
	Recurring profit margin	5.8%	5.8%	5.9%	5.8%	5.5%	6.1%	5.1%	4.5%	4.8%	4.4%
Net income		21,141	21,471	23,148	24,938	33,082	36,405	48,253	50,303	53,851	57,600
	YoY	6.5%	1.6%	7.8%	7.7%	32.7%	10.0%	32.5%	4.2%	7.1%	7.0%
	Net margin	3.7%	3.5%	3.4%	3.3%	4.0%	3.9%	3.6%	3.0%	3.2%	3.1%
Per-share data (split-adjusted; JPY)
Shares issued (year-end; '000)		622,911	627,152	631,676	632,473	632,715	632,773	633,287	633,929	634,239
EPS (JPY)		34.2	34.4	36.8	39.4	52.3	57.5	72.2	78.8	84.9	90.8
Book value per share (JPY)		267.0	298.8	336.2	366.1	409.4	458.9	520.4	589.3	660.1
Dividend per share (JPY)		4.1	4.5	5.0	5.5	6.5	8.0	10.0	15.0	16.0	16.5
Balance sheet (JPYmn)
	Cash and cash equivalents	31,698	42,690	49,717	42,894	76,430	71,973	172,673	179,785	157,522
	Accounts receivable	5,371	5,730	6,820	7,720	8,966	12,848	18,744	18,378	21,074
	Inventories	85,997	89,105	94,580	117,400	123,969	135,781	188,510	190,397	203,416
Total current assets		143,391	158,834	175,981	195,977	227,585	244,125	496,405	496,760	495,496
Total assets		386,622	432,135	505,666	560,568	642,868	807,057	1,282,100	1,298,948	1,370,252
	Accounts payable	48,036	55,118	60,556	70,194	85,661	93,030	159,064	148,226	149,984
	Total interest-bearing debt	126,506	134,531	167,507	186,499	211,068	332,712	549,902	532,553	533,353
Total liabilities		216,444	238,971	284,299	316,021	362,938	494,562	929,800	908,232	931,487
Shareholders' equity		167,233	187,637	209,682	231,788	258,282	291,337	328,109	373,950	416,527
Cash flow statement (JPYmn)
Cash flows from operating activities		38,270	39,684	42,520	29,110	56,441	46,081	101,978	65,135	79,054
Cash flows from investing activities		-23,293	-36,593	-52,641	-52,197	-40,593	-164,443	-37,113	-33,452	-78,042
Cash flows from financing activities		-9,510	4,440	16,176	17,148	17,644	116,083	43,456	-34,030	-28,954
Financial ratios
ROA (RP-based)		8.6%	8.2%	7.9%	7.8%	7.1%	7.1%	5.3%	5.8%	6.1%
ROE		13.7%	12.1%	11.6%	11.2%	13.5%	13.3%	15.6%	14.3%	13.6%
Equity ratio		43.0%	43.4%	42.0%	41.3%	40.3%	36.0%	25.6%	28.8%	30.6%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: The company executed a 2-for-1 stock split on July 1, 2015 and a 4-for-1 stock split on September 1, 2019.
Note: The company revised its inventory valuation method from the retail method to the moving average method in FY06/21.

Recent updates

Sales figures for October 2021

2021-11-09

On November 9, Pan Pacific International Holdings Corporation announced sales figures for October 2021.

Monthly trends

Don Quijote			FY06/10	FY06/11	FY06/12	FY06/13	FY06/14	FY06/15	FY06/16	FY06/17	FY06/18	FY06/19	FY06/20	FY06/21
			FY	FY	FY	FY	FY	FY	FY	FY	FY	FY	FY	FY
All stores	Sales		6.1%	5.9%	6.2%	7.1%	6.6%	12.3%	112.3%	11.8%	12.2%	5.0%	-0.5%	-7.3%
	Store count		162	169	185	200	217	242	243	292	313	322	339	346
Comparable stores	Sales		-1.5%	3.4%	0.5%	-0.1%	0.8%	4.6%	4.6%	2.6%	4.1%	1.2%	-2.9%	-9.7%
	Customer count		3.8%	3.1%	-0.8%	-0.5%	0.1%	1.9%	1.9%	2.2%	2.3%	0.3%	-2.7%	-9.1%
	Customer spend		-5.1%	0.3%	1.3%	0.4%	0.7%	2.7%	2.7%	0.4%	1.8%	0.9%	-0.2%	-0.7%
	Store count		149	158	164	179	194	208	209	258	283	297	315	325
By product	Electric appliances		-3.6%	5.1%	-2.2%	-0.5%	-2.7%	4.8%	4.8%	10.5%	12.4%	2.2%	-1.2%	-6.1%
	Household goods		9.1%	7.9%	6.7%	7.9%	8.8%	14.8%	14.8%	18.2%	20.2%	5.2%	-2.3%	-12.5%
	Foods		14.4%	4.5%	7.3%	8.9%	13.1%	19.0%	19.0%	17.4%	16.2%	9.9%	6.5%	-1.6%
	Watches & fashion merchandise		1.7%	4.3%	11.9%	11.2%	3.4%	8.8%	8.8%	2.7%	1.8%	0.7%	-9.5%	-12.4%
	Sports & leisure goods		5.5%	8.2%	2.0%	8.3%	5.6%	7.1%	7.1%	3.7%	2.4%	0.0%	-1.3%	-2.1%


Domestic retail			FY06/21
Major five companies			Jul	Aug	Sep	Oct	Nov	Dec	Jan	Feb	Mar	Apr	May	Jun
All stores	Sales		0.9%	2.5%	-12.0%	2.5%	-0.8%	-0.1%	3.6%	-2.7%	0.8%	1.8%	-2.1%	-2.5%
	Store count		579	577	578	578	581	582	581	582	582	585	584	582
Comparable stores	Sales		-2.2%	-1.5%	-14.9%	-0.4%	-3.3%	-3.3%	0.1%	-6.1%	-2.4%	-0.9%	-4.6%	-4.4%
	Customer count		-6.6%	-5.2%	-12.4%	-3.9%	-5.0%	-5.0%	-4.6%	-9.5%	-5.7%	0.0%	-2.1%	-1.5%
	Customer spend		4.7%	3.8%	-2.9%	3.6%	1.8%	1.9%	4.9%	3.8%	3.5%	-0.9%	-2.6%	-2.9%
	Store count		521	522	520	518	523	528	528	536	529	536	542	541

Domestic retail			FY06/22
Major four companies			Jul	Aug	Sep	Oct	Nov	Dec	Jan	Feb	Mar	Apr	May	Jun
All stores	Sales		3.8%	-3.5%	1.7%	5.2%
	Store count		585	586	587	588
Comparable stores	Sales		2.4%	-4.3%	0.1%	3.6%
	Customer count		2.9%	-4.1%	-0.5%	2.3%
	Customer spend		-0.6%	-0.2%	0.6%	1.2%
	Store count		545	551	547	549

Discount Store			FY06/22
			Jul	Aug	Sep	Oct	Nov	Dec	Jan	Feb	Mar	Apr	May	Jun
All stores	Sales		7.8%	-0.2%	5.2%	9.7%
	Store count		446	447	449	450
Comparable stores	Sales		3.4%	-4.5%	1.0%	5.3%
	Customer count		3.5%	-4.5%	-0.1%	3.0%
	Customer spend		-0.1%	0.0%	1.1%	2.3%
	Store count		410	417	417	419
By product	Electric appliances		-6.5%	-17.3%	-10.1%	-3.5%
	Household goods		2.7%	-2.6%	4.4%	8.1%
	Foods		6.7%	2.3%	4.2%	7.5%
	Watches & fashion merchandise		-3.5%	-14.3%	-7.7%	-2.4%
	Sports & leisure goods		14.8%	-13.4%	0.1%	8.3%

GMS			FY06/22
			Jul	Aug	Sep	Oct	Nov	Dec	Jan	Feb	Mar	Apr	May	Jun
All stores	Sales		-4.7%	-8.5%	-5.7%	-3.9%
	Store count		139	139	138	138
Comparable stores		Sales	0.1%	-3.8%	-1.9%	-0.2%
		Customer count	1.9%	-3.1%	-1.6%	0.9%
		Customer spend	-1.8%	-0.7%	-0.4%	-1.1%
		Apparel	6.2%	-18.2%	-15.8%	-8.1%
		Household goods	-1.2%	-8.3%	-6.4%	-1.4%
		Foods	-0.6%	-0.4%	1.2%	1.7%
	Store count		135	134	130	130

Don Quijote			FY06/21
			Jul	Aug	Sep	Oct	Nov	Dec	Jan	Feb	Mar	Apr	May	Jun
All stores	Sales		-7.0%	-6.1%	-20.9%	-6.9%	-8.4%	-8.7%	-5.7%	-9.3%	-1.8%	-2.8%	-3.7%	-3.3%
	Store count		342	341	342	342	345	346	345	346	346	349	348	346
Comparable stores	Sales		-9.6%	-9.0%	-23.4%	-9.2%	-10.7%	-11.0%	-7.7%	-11.4%	-4.6%	-5.4%	-6.6%	-5.2%
	Customer count		-11.2%	-9.5%	-18.0%	-8.5%	-8.3%	-9.2%	-8.6%	-13.3%	-9.7%	-5.7%	-3.7%	-1.7%
	Customer spend		1.8%	0.6%	-6.6%	-0.7%	-2.6%	-1.9%	0.9%	2.2%	5.6%	0.3%	-3.0%	-3.7%
	Store count		318	319	317	316	319	320	320	325	319	323	326	325
By product	Electric appliances		3.7%	-1.1%	-17.4%	-6.3%	-3.6%	-4.3%	0.1%	-9.3%	-1.5%	1.5%	-12.7%	-19.9%
	Household goods		-12.0%	-11.1%	-32.7%	-10.9%	-13.9%	-13.6%	-12.1%	-15.1%	-2.3%	-10.8%	-7.8%	-2.5%
	Foods		-3.0%	-0.1%	-12.8%	-1.7%	-2.2%	-2.2%	0.1%	-2.0%	-2.6%	-1.5%	1.4%	6.2%
	Watches & fashion merchandise		-13.9%	-17.3%	-21.8%	-11.6%	-17.1%	-16.0%	-21.2%	-18.3%	-0.7%	17.4%	-1.8%	-12.2%
	Sports & leisure goods		-0.4%	7.1%	-6.2%	-5.5%	2.3%	-6.4%	-3.2%	-3.0%	2.3%	-3.7%	-5.3%	-6.7%

Don Quijote			FY06/22
			Jul	Aug	Sep	Oct	Nov	Dec	Jan	Feb	Mar	Apr	May	Jun
All stores	Sales		3.7%	-4.5%	0.5%	6.1%
	Store count		349	349	349	349
Comparable stores	Sales		2.2%	-5.8%	-0.5%	5.0%
	Customer count		3.1%	-5.3%	-0.8%	3.0%
	Customer spend		-0.9%	-4.5%	0.3%	1.9%
	Store count		325	332	329	330
By product	Electric appliances		-6.9%	-16.5%	-10.7%	-4.2%
	Household goods		3.9%	-1.4%	5.3%	9.3%
	Foods		8.3%	3.2%	3.7%	9.3%
	Watches & fashion merchandise		-4.5%	-13.9%	-8.2%	-2.4%
	Sports & leisure goods		16.0%	-11.6%	1.4%	10.2%

UNY			FY06/21
			Jul	Aug	Sep	Oct	Nov	Dec	Jan	Feb	Mar	Apr	May	Jun
All stores	Sales		-7.6%	-6.0%	-14.0%	-2.5%	-8.5%	-5.5%	-2.4%	-9.7%	-7.3%	-0.6%	-6.6%	-9.1%
	Store count		149	147	147	147	144	143	143	143	143	142	140	139
Comparable stores		Sales	6.9%	7.5%	-1.6%	9.9%	3.4%	4.2%	6.6%	-2.1%	-1.2%	5.3%	-2.0%	-5.2%
		Customer count	-0.7%	0.5%	-3.6%	2.0%	-1.5%	-0.6%	-0.9%	-6.0%	-1.6%	7.1%	0.4%	-2.4%
		Customer spend	7.6%	7.0%	2.1%	7.7%	4.9%	4.8%	7.5%	4.1%	0.4%	-1.7%	-2.4%	-2.8%
		Apparel	-5.6%	-7.9%	-14.6%	13.3%	-9.0%	1.6%	-7.7%	-9.1%	15.8%	75.4%	6.0%	-16.5%
		Household goods	8.9%	8.9%	-16.3%	24.2%	7.5%	6.3%	9.5%	-4.2%	-4.1%	6.7%	-7.5%	-11.1%
		Foods	8.9%	10.1%	5.0%	6.6%	5.2%	4.1%	9.0%	-0.5%	-3.4%	-2.8%	-2.2%	-0.8%
	Store count		145	142	141	138	137	139	139	138	136	138	137	135
UDR	Store count		43	44	44	44	47	48	48	48	48	49	51	52

UNY			FY06/22
			Jul	Aug	Sep	Oct	Nov	Dec	Jan	Feb	Mar	Apr	May	Jun
All stores	Sales		-4.7%	-8.5%	-5.7%	-3.9%
	Store count		139	139	138	138
Comparable stores		Sales	0.1%	-3.8%	-1.9%	-0.2%
		Customer count	1.9%	-3.1%	-1.6%	0.9%
		Customer spend	-1.8%	-0.7%	-0.4%	-1.1%
		Apparel	6.2%	-18.2%	-15.8%	-8.1%
		Household goods	-1.2%	-8.3%	-6.4%	-1.4%
		Foods	-0.6%	-0.4%	1.2%	1.7%
	Store count		135	134	130	130
UDR	Store count		52	53	54	55

Source: Shared Research based on company data

Acquisition of treasury stock through off-auction own share repurchase trading

2021-09-06

Pan Pacific International Holdings Corporation announced the acquisition of treasury stock through off-auction own share repurchase trading (ToSTNeT-3).

Reasons for acquisition of treasury stock

The company has engaged in a business alliance with FamilyMart Co., Ltd. since August 2017, which included the acquisition of an equity stake in PPIH by FamilyMart. As of September 2021, FamilyMart was a major shareholder with 69,438,000 shares (equivalent to 11.0% of outstanding shares).

FamilyMart and PPIH have validated and held discussions on the future of the partnership, leading to the two companies agreeing to continue strengthening their alliance. However, FamilyMart will divest part of its equity stake in PPIH as a relationship of trust has already been established.

In response to the sale of shares by FamilyMart, PPIH decided on a comparable acquisition of treasury stock. The treasury stock will be acquired through off-auction own share repurchase trading (ToSTNeT-3). FamilyMart will sell 38,054,000 shares (equivalent to 6.00% of outstanding shares).

Details of acquisition

Type of shares to be acquired: common stock
Total number of shares to be acquired: 38,054,000 (upper limit, equivalent to 6.00% of outstanding shares)
Total acquisition price: JPY80,941mn (upper limit)
Acquisition date: September 7, 2021

Trends and outlook

Quarterly trends and results

Cumulative		FY06/21				FY06/22				FY06/22
(JPYmn)		Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	% of Est.	FY Est.
Sales		418,474	852,861	1,268,196	1,708,635	445,474	-	-	-	23.8%	1,870,000
	YoY	-2.4%	-0.7%	0.2%	1.6%	6.5%	-	-	-		9.4%
Gross profit		123,455	251,194	369,944	497,325	127,477	-	-	-	23.0%	553,900
	YoY	0.7%	1.4%	1.5%	3.2%	3.3%	-	-	-		11.4%
	Gross profit margin	29.5%	29.5%	29.2%	29.1%	28.6%	-	-	-		29.6%
SG&A expenses		100,251	201,865	303,056	416,018	111,402	-	-	-	23.8%	468,900
	YoY	-1.2%	-0.4%	-0.4%	2.5%	11.1%	-	-	-		12.7%
	SG&A ratio	24.0%	23.7%	23.9%	24.3%	25.0%	-	-	-		25.1%
Operating profit		23,204	49,329	66,888	81,306	16,075	-	-	-	18.9%	85,000
	YoY	9.8%	9.3%	10.7%	7.0%	-30.7%	-	-	-		4.5%
	Operating profit margin	5.5%	5.8%	5.3%	4.8%	3.6%	-	-	-		4.5%
Recurring profit		22,805	48,192	67,547	81,526	16,447	-	-	-	19.8%	83,000
	YoY	11.5%	5.8%	12.7%	8.5%	-27.9%	-	-	-		1.8%
	Recurring profit margin	5.4%	5.7%	5.3%	4.8%	3.7%	-	-	-		4.4%
Net income		16,470	32,638	45,234	53,851	12,420	-	-	-	21.6%	57,600
	YoY	30.7%	13.0%	17.9%	7.1%	-24.6%	-	-	-		7.0%
	Net margin	3.9%	3.8%	3.6%	3.2%	2.8%	-	-	-		3.1%
Quarterly		FY06/21				FY06/21
(JPYmn)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Sales		418,474	434,387	415,335	440,439	445,474	-	-	-
	YoY	-2.4%	1.0%	2.1%	5.8%	6.5%	-	-	-
Gross profit		123,455	127,739	118,750	127,381	127,477	-	-	-
	YoY	0.7%	2.0%	1.6%	8.8%	3.3%	-	-	-
	Gross profit margin	29.5%	29.4%	28.6%	28.9%	28.6%	-	-	-
SG&A expenses		100,251	101,614	101,191	112,962	111,402	-	-	-
	YoY	-1.2%	0.4%	-0.3%	11.3%	11.1%	-	-	-
	SG&A ratio	24.0%	23.4%	24.4%	25.6%	25.0%	-	-	-
Operating profit		23,204	26,125	17,559	14,418	16,075	-	-	-
	YoY	9.8%	8.9%	14.7%	-7.4%	-30.7%	-	-	-
	Operating profit margin	5.5%	6.0%	4.2%	3.3%	3.6%	-	-	-
Recurring profit		22,805	25,387	19,355	13,979	16,447	-	-	-
	YoY	11.5%	1.1%	34.8%	-8.4%	-27.9%	-	-	-
	Recurring profit margin	5.4%	5.8%	4.7%	3.2%	3.7%	-	-	-
Net income		16,470	16,168	12,596	8,617	12,420	-	-	-
	YoY	30.7%	-0.7%	32.9%	-27.8%	-24.6%	-	-	-
	Net margin	3.9%	3.7%	3.0%	2.0%	2.8%	-	-	-

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: The company revised its inventory valuation method from the retail method to the moving average method in FY06/21.
Note: The company is applying the Accounting Standard for Revenue Recognition and other standards from FY06/22.　　　　　　　　　　　

By segment			FY06/21				FY06/21
(JPYmn)			Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4
Sales			418,474	852,861	1,268,196	1,708,635	445,474	-	-	-
	YoY		-2.4%	-0.7%	0.2%	1.6%	6.5%	-	-	-
	Discount Store		286,195	579,345	868,670	1,183,526	322,065	-	-	-
		YoY	1.6%	3.3%	4.4%	5.9%	12.5%	-	-	-
	GMS		112,372	234,539	342,393	449,989	105,297	-	-	-
		YoY	-12.3%	-10.0%	-9.5%	-8.5%	-6.3%	-	-	-
	Rent		16,413	31,834	46,483	60,927	14,570	-	-	-
		YoY	8.2%	7.2%	4.4%	4.6%	-11.2%	-	-	-
	Other		3,494	7,142	10,649	14,193	3,541	-	-	-
		YoY	-8.3%	-5.6%	-5.6%	-2.7%	1.3%	-	-	-
Operating profit			23,204	49,329	66,888	80,843	16,075	-	-	-
	YoY		9.8%	9.3%	10.7%	6.4%	-30.7%	-	-	-
	Profit margin		5.5%	5.8%	5.3%	4.7%	3.6%	-	-	-
	Discount Store		16,065	32,254	45,238	55,335	15,345	-	-	-
		YoY	7.4%	14.7%	22.6%	17.0%	-4.5%	-	-	-
		Profit margin	5.6%	5.6%	5.2%	4.7%	4.8%	-	-	-
	GMS		3,657	11,317	14,015	16,599	368	-	-	-
		YoY	27.7%	13.1%	6.8%	-2.3%	-89.9%	-	-	-
		Profit margin	3.3%	4.8%	4.1%	3.7%	0.3%	-	-	-
	Rent		3,957	7,489	10,498	13,362	2,061	-	-	-
		YoY	25.3%	11.1%	-0.1%	-1.6%	-47.9%	-	-	-
		Profit margin	24.1%	23.5%	22.6%	21.9%	14.1%	-	-	-
	Other		-955	-1,875	-3,138	-4,453	-1,730	-	-	-
		YoY	-	-	-	-	-	-	-	-
		Profit margin	-	-	-	-	-	-	-	-
	Adjustments		480	144	275		30	-	-	-
By segment			FY06/21				FY06/21
(JPYmn)			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Sales			418,474	434,387	415,335	440,439	445,474	-	-	-
	YoY		-2.4%	1.0%	2.1%	5.8%	6.5%	-	-	-
	Discount Store		286,195	293,150	289,325	314,856	322,065	-	-	-
		YoY	1.6%	4.9%	6.9%	10.2%	12.5%	-	-	-
	GMS		112,372	122,167	107,854	107,596	105,297	-	-	-
		YoY	-12.3%	-7.7%	-8.4%	-5.1%	-6.3%	-	-	-
	Rent		16,413	15,421	14,649	14,444	14,570	-	-	-
		YoY	8.2%	6.1%	-1.2%	5.4%	-11.2%	-	-	-
	Other		3,494	3,648	3,507	3,544	3,541	-	-	-
		YoY	-8.3%	-2.8%	-5.5%	7.0%	1.3%	-	-	-
Operating profit			23,204	26,125	17,559	13,955	16,075	-	-	-
	YoY		9.8%	8.9%	14.7%	-10.4%	-30.7%	-	-	-
	Profit margin		5.5%	6.0%	4.2%	3.2%	3.6%	-	-	-
	Discount Store		16,065	16,189	12,984	10,097	15,345	-	-	-
		YoY	7.4%	23.1%	47.9%	-3.1%	-4.5%	-	-	-
		Profit margin	5.6%	5.5%	4.5%	3.2%	4.8%	-	-	-
	GMS		3,657	7,660	2,698	2,584	368	-	-	-
		YoY	27.7%	7.3%	-13.5%	-33.2%	-89.9%	-	-	-
		Profit margin	3.3%	6.3%	2.5%	2.4%	0.3%	-	-	-
	Rent		3,957	3,532	3,009	2,864	2,061	-	-	-
		YoY	25.3%	-1.4%	-20.1%	-6.8%	-47.9%	-	-	-
		Profit margin	24.1%	22.9%	20.5%	19.8%	14.1%	-	-	-
	Other		-955	-920	-1,263	-1,315	-1,730	-	-	-
		YoY	-	-	-	-	-	-	-	-
		Profit margin	-27.3%	-25.2%	-36.0%	-37.1%	-	-	-	-
	Adjustments		480	-336	131	-275	30	-	-	-

Source: Shared Research based on company data
Note: The company revised its inventory valuation method from the retail method to the moving average method in FY06/21.
Note: The company is applying the Accounting Standard for Revenue Recognition and other standards from FY06/22.

By product category				FY06/21				FY06/21
Quarterly (JPYmn)				Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Sales				418,474	434,387	415,335	440,439	445,474
	YoY			-2.4%	1.0%	2.1%	5.8%	6.5%
	Discount Store			286,195	293,150	289,325	314,856	322,065
		YoY		1.6%	4.9%	6.9%	10.2%	12.5%
		Electric appliances		22,136	23,169	22,601	19,975	21,000
			YoY	2.0%	5.7%	9.7%	-8.8%	-5.1%
			% of total	7.7%	7.9%	7.8%	6.3%	6.5%
		Household goods		56,625	55,406	56,076	57,341	64,100
			YoY	-13.1%	-5.6%	-3.6%	-4.2%	13.2%
			% of total	19.8%	18.9%	19.4%	18.2%	19.9%
		Foods		110,045	116,198	117,807	120,860	119,800
			YoY	11.4%	12.3%	11.3%	6.8%	8.9%
			% of total	38.5%	39.6%	40.7%	38.4%	37.2%
		Watches & fashion merchandise		38,173	38,710	33,099	34,747	34,300
			YoY	-11.1%	-8.5%	-6.2%	2.6%	-10.1%
			% of total	13.3%	13.2%	11.4%	11.0%	10.7%
		Sports & leisure goods		17,687	15,826	13,227	15,025	18,200
			YoY	9.2%	4.9%	6.1%	-4.0%	2.9%
			% of total	6.2%	5.4%	4.6%	4.8%	5.7%
		Overseas		34,672	36,675	38,981	59,842	60,300
			YoY	34.8%	40.7%	31.4%	81.0%	73.9%
			% of total	12.1%	12.5%	13.5%	19.0%	18.7%
		Other		6,857	7,165	7,536	7,064	4,500
			YoY	-3.5%	-12.3%	-3.3%	-15.7%	-34.4%
			% of total	2.4%	2.4%	2.6%	2.2%	1.4%
	GMS			112,372	122,167	107,854	107,596	105,297
		YoY		-12.3%	-7.7%	-8.4%	-5.1%	-6.3%
		Apparel		13,057	15,955	11,574	14,124	10,900
			YoY	-22.5%	-12.0%	-15.4%	7.8%	-16.5%
			% of total	11.6%	13.1%	10.7%	13.1%	10.4%
		Household goods		16,896	20,658	17,013	13,817	15,400
			YoY	-14.5%	-2.6%	0.1%	-22.1%	-8.9%
			% of total	15.0%	16.9%	15.8%	12.8%	14.6%
		Foods		82,059	83,685	77,927	77,843	78,500
			YoY	-5.4%	-5.2%	-6.1%	-5.7%	-4.3%
			% of total	73.0%	68.5%	72.3%	72.3%	74.6%
		Other		360	1,868	1,341	1,811	500
			YoY	-92.4%	-60.9%	-67.1%	-	38.9%
			% of total	0.3%	1.5%	1.2%	1.7%	0.5%

SG&A expenses, store count, and comparable store sales

SG&A expenses			FY06/21				FY06/21
Quarterly (JPYmn)			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
SG&A expenses			100,251	101,614	101,191	112,962	111,402	-	-	-
	YoY		-1.2%	0.4%	-0.3%	11.3%	11.1%	-	-	-
	Salaries and allowances		37,546	37,790	38,394	43,642	43,100	-	-	-
		YoY	5.8%	4.2%	5.5%	19.1%	14.8%	-	-	-
	Rents		12,988	13,301	13,314	13,538	13,500	-	-	-
		YoY	-3.2%	-1.8%	-1.7%	1.1%	3.9%	-	-	-
	Commission fees		14,467	14,737	13,628	16,012	14,400	-	-	-
		YoY	-3.7%	-7.0%	-8.8%	3.7%	-0.5%	-	-	-
	Depreciation		6,219	6,470	6,315	7,468	7,200	-	-	-
		YoY	6.7%	5.5%	6.6%	11.4%	15.8%	-	-	-
	Other		29,031	29,316	29,540	32,302	33,100	-	-	-
		YoY	-8.5%	-0.3%	-3.9%	10.2%	14.0%	-	-	-

Store count by company	FY06/21				FY06/21
	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Don Quijote	342	346	346	346	350	-	-	-
Nagasakiya	44	44	44	44	45	-	-	-
UD Retail	44	48	48	52	54	-	-	-
UNY	147	143	143	139	138	-	-	-
Daishin	2	2	2	2	1	-	-	-
Sum: Japan	579	583	583	583	588	-	-	-
Don Quijote (USA)	4	4	4	4	4	-	-	-
Marukai	10	10	10	10	10	-	-	-
QSI	24	24	24	24	24	-	-	-
Gelson's Markets	-	-	-	27	27	-	-	-
PPRM (Singapore)	7	7	8	8	10	-	-	-
PPRM (Hong Kong)	2	3	6	7	7	-	-	-
DONKI Thinglor (Thailand)	2	2	2	2	2	-	-	-
PPRM (Malaysia)	-	-	-	1	1	-	-	-
PPRM (Taiwan)	-	-	-	1	1	-	-	-
Sum: Overseas	49	50	54	84	86	-	-	-
Total	628	633	637	667	674	-	-	-

Don Quijote comparable stores	FY06/21				FY06/21
	Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4
Sales increase	-14.1%	-11.7%	-10.9%	-6.6%	-0.2%	-	-	-
Customer count	-12.9%	-10.6%	-10.8%	-7.4%	-	-	-	-
Customer spend	-1.4%	-1.2%	-0.2%	0.9%	-	-	-	-

Comparable stores	FY06/21				FY06/21
	Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4
Sales increase	4.3%	5.2%	3.8%	2.6%	-1.9%	-	-	-
Customer count	-1.2%	-0.7%	-1.3%	-0.6%	-	-	-	-
Customer spend	5.6%	5.9%	5.1%	3.3%	-	-	-	-

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

Q1 FY06/22 results (out November 10, 2021)

Results summary

Sales: JPY445.5bn (+6.5% YoY)
Operating profit: JPY16.1bn (-30.7% YoY)
Recurring profit: JPY16.4bn (-27.9% YoY)
Net income*: JPY12.4bn (-24.6% YoY)
*Net income attributable to owners of the parent

The company is applying the Accounting Standard for Revenue Recognition and other standards from FY06/22. In accordance with the transitional treatment, the cumulative effect of retroactive application of the new accounting standard prior to the beginning of Q1 is added to or deducted from retained earnings at the beginning of Q1.

Sales increased. Comparable store sales in the Discount Store and GMS businesses were down YoY, which was a factor in the decline in sales. However, the April 2021 acquisition of Gelson's, which operates a high-end supermarket chain in California, had the effect of increasing sales by approximately JPY20.0bn. In the Retail business in Japan and overseas, the opening of new stores opened and the conversion of stores to new formats contributed to the results.

Operating profit declined. The COVID-19 pandemic and unseasonable weather combined to impede sales growth, and expenses for new store openings and renovations increased.

The total number of stores as of the end of June 2021 was 674 (667 as of end-June 2021), consisting of 588 domestic stores and 86 overseas stores. It opened six stores in Japan, including four Don Quijote, one Nagasakiya, and one UD Retail, and two stores overseas in Singapore. Meanwhile, the company closed the Don Quijote Kamikumamoto store.

Discount Store business

Sales: JPY322.1bn (+12.5% YoY)
Operating profit: JPY15.3bn (-4.5% YoY)

Due to more severe restrictions on the flow of people than in Q1 FY06/21, nighttime sales were sluggish. Moreover, unseasonable weather suppressed sales of seasonal products, resulting in a 0.2% YoY decline in comparable store sales. The acquisition of Gelson's, however, led to an increase in sales.

GMS business

Sales: JPY105.3bn (-6.3% YoY)
Operating profit: JPY368mn (-89.9% YoY)

Sales declined due to a decrease in the number of stores as a result of UNY stores shifting to the discount store business. Comparable store sales were down 1.9% YoY as unseasonable weather led to a decline in the number of customers, and weak sales of apparel as the cold summer made it difficult to dispose of summer and other clothing. However, comparable store sales have recovered to pre-COVID levels.

Rent business

Sales: JPY14.6bn (-11.2% YoY)
Operating profit: JPY2.1bn (-47.9% YoY)

Due to the prolonged and widespread impact of COVID-19 and a higher infection prevalence than in FY06/21, vacant lots were created due to tenant closures, resulting in decreased sales and profits.

Overseas business

In Asia, sales increased due to the strong performance of stores opened in Singapore, although sales were sluggish at stores in Hong Kong as they competed with each other. However, profits declined as head office expenses increased and store opening costs were incurred.

In North America, sales remained essentially unchanged from Q1 FY06/21, although the pandemic-inspired special demand has run its course. However, soaring costs suppressed GPM, resulting in lower profits.

Initiatives for this period

Strengthen financial business

To strengthen the financial business, the company established Pan Pacific International Financial Services Corporation, a financial business holding company, in September 2021. The company will build a structure to promote the financial business linked to majica, its original e-money service, collaborate with partner companies, and formulate a strategy for the credit business linked to app, making the financial business a new pillar of the group.

Capital policy

The company executed a share buyback in September 2021. Increased capital efficiency led to improvements in EPS and ROE.

Full-year FY06/22 company forecast

		FY06/20			FY06/21			FY06/22 Initial Est.
(JPYmn)		1H	2H	FY	1H	2H	FY	1H Est.	2H Est.	FY Est.
Sales		858,789	823,158	1,681,947	852,861	855,774	1,708,635	929,000	941,000	1,870,000
	YoY	67.3%	0.9%	26.6%	-0.7%	4.0%	1.6%	8.9%	10.0%	9.4%
Gross profit		247,793	233,896	481,689	251,194	246,131	497,325	275,800	278,100	553,900
	YoY	82.7%	-0.4%	30.0%	1.4%	5.2%	3.2%	9.8%	13.0%	11.4%
	Gross profit margin	28.9%	28.4%	28.6%	29.5%	28.8%	29.1%	29.7%	29.6%	29.6%
SG&A expenses		202,680	203,012	405,692	201,865	214,153	416,018	231,300	237,600	468,900
	SG&A ratio	23.6%	24.7%	24.1%	23.7%	25.0%	24.3%	24.9%	25.2%	25.1%
Operating profit		45,113	30,884	75,997	49,329	31,977	81,306	44,500	40,500	85,000
	YoY	50.3%	-6.7%	20.4%	9.3%	3.5%	7.0%	-9.8%	26.7%	4.5%
	Operating profit margin	5.3%	3.8%	4.5%	5.8%	3.7%	4.8%	4.8%	4.3%	4.5%
Recurring profit		45,555	29,618	75,173	48,192	33,334	81,526	43,700	39,300	83,000
	YoY	28.9%	-10.0%	10.2%	5.8%	12.5%	8.5%	-9.3%	17.9%	1.8%
	Recurring profit margin	5.3%	3.6%	4.5%	5.7%	3.9%	4.8%	4.7%	4.2%	4.4%
Net income		28,890	21,413	50,303	32,638	21,213	53,851	30,300	27,300	57,600
	YoY	22.3%	-13.1%	4.2%	13.0%	-0.9%	7.1%	-7.2%	28.7%	7.0%

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

PPIH forecasts FY06/22 sales of JPY1.9tn (+9.4% YoY), operating profit of JPY85.0bn (+4.5% YoY), net income of JPY57.6bn (+7.0% YoY). Of this total, sales in the domestic business (domestic discount store and GMS businesses) is targeted at JPY1.6tn (+4.6% YoY), and operating profit at JPY54.4bn (+6.5% YoY). Sales from overseas businesses (Asia and North America) is projected at JPY267.0bn (+57.1% YoY), and operating profit at JPY12.5bn (+8.3% YoY).

Performance forecast and assumptions

The company has considered the following factors: the COVID-19 pandemic is expected to drag on and recovery of inbound demand is not expected; intermittent state-of-emergency declarations will lower consumer sentiment; and a drop in food sales is expected in FY06/22 due to absence of demand for alternatives to eating out which was seen in FY06/21.

Domestic discount store business

Comparable store sales (excluding duty-free sales) are expected to increase by 3.1% YoY. The company expects to open at least 25 new stores (including five Don Quijote stores, eight UD Retail stores, two Nagasakiya stores, and 10 MEGA stores) and renovate at least 30 stores. It is also planning on capital investments of JPY18.0bn. Comparable store sales (excluding duty-free sales) are expected to recover to pre-COVID-19 levels. UD Retail plans to transfer seven stores from Uny due to the change in business format, and will focus on renovating the stores with Don Quijote as a tenant.

GMS business

Comparable store sales are expected to increase by 2.1% YoY. The company expects to renovate at least 11 stores into new GMS and plans to spend JPY14.0bn in capex (JPY8.4bn in FY06/21). While sales of food products are expected to be sluggish due to a reactive decline against FY06/21, the company anticipates a recovery in clothing and home-oriented goods.

Asia business

Comparable store sales are forecast to decrease by 1.8% YoY. The company expects to open more than 12 new stores—including in Macau—renovate at least three stores, and make capital investments of JPY11.0bn. Comparable store sales were set to be negative, factoring in a decline due to the absence of special demand related to COVID-19, as well as that associated with the opening of new stores seen in FY06/21.

North America business

Comparable store sales are expected to increase by 3.6% YoY. The company plans to renovate at least 10 stores, and make capital investments of JPY10.0bn. Gelson’s is expected to contribute for the entire year.

Other

The company will make capital investments of JPY22.0bn for promotion of digital transformation (DX) and other measures.

Capital expenditures are expected to total JPY75.0bn (actual result for FY06/21 was JPY46.0bn vs. JPY50.0bn planned). In addition to implementing plans accumulated in FY06/21, such as store renovations and strengthening private brand products, the company will step up its promotion of DX.

As a result of the above, operating profit is expected to be JPY85.0bn (+4.5% YoY), recovering to a level comparable to FY06/20, before the outbreak of COVID-19. SG&A expenses are expected to increase in reaction to the decrease in FY06/21 due to shorter operating hours and cost reductions.

Details of main initiatives

However, the company even in this environment aims to increase support from customers by operating its stores based on the idea of store autonomy, responding quickly to shifts in customer preferences, and strengthening sales promotion activities using the group’s proprietary majica e-money service. Management also looks to improve customer satisfaction by increasing store count through the conversion of UNY stores and the New GMS strategy in the UNY business, while also advancing digital strategies and bolstering sales and product development in the private brand lineup of Jonetsu Kakaku products. The company plans to accelerate investment in future growth and establish a structure so that when the COVID-19 pandemic subsides, it will be able to capitalize on domestic and international demand and get back on a growth track.

Domestic discount store business

The company indicated its belief that it had fallen short in responding to changes in consumer behavior following the spread of COVID-19. In particular, management noted that despite the expansion of the e-commerce market due to consumers spending more time at home, online sales were slow to adapt, resulting in lost opportunities.

In FY06/22, the company will strengthen its price competition in brick-and-mortar stores. To achieve this, it will lower the prices of some national brand products and increase the ratio of sales of private brand products to appeal to customers with lower prices. In addition, to maintain and improve the attractiveness of the shelves even as the handling of national brand products declines, the company will strengthen development to increase the attractiveness of private brand products, while also deepening the assortment of product categories where the company can demonstrate its strengths.

Strengthen price competitiveness against rival companies

Price competition is intensifying not only with brick-and-mortar stores in other business formats, but also with the e-commerce market. The company plans to introduce a system that provides recommended prices based on the prices offered by rivals in the vicinity of the store, and as a discount business, strengthen its price competitiveness.

Promote differentiation by introducing and strengthening development of private brand products

The company aims for private brand products to account for 17.5% of sales (approximately 12.5% at end-June 2021). Since the complete renewal of the company's private brand product, Jonetsu Kakaku, in February 2021, the ratio of sales of private brand products has been on an upward trend. The company has been successful in renewing its brand image and strengthening its product development process to incorporate customer feedback and enhance the appeal of its products. A higher percentage of sales from private brand products will allow the company to appeal to customers with lower prices, and is also expected to increase the company's GPM. In FY06/22, the company will implement in-store sales promotions to strengthen sales of existing private brand products, and also fortify new product development.

Deepen and strengthen categories in which the company can become the leader

The company plans to narrow down the number of items of national brand products in order to make room for private brand products. It offers a wide variety of products at low prices, and considers the discovery of favorite products to be one of the most enjoyable aspects of shopping, as it motivates customers to visit stores and make purchases. To continue to provide this kind of enjoyment even as private brand products take up a larger percentage of the shelves, the company will maintain the appeal of its product lineup by digging deep into categories where it can demonstrate its strengths. For example, the company is testing a "Meat Donki" that specializes in meat products. In addition to Meat Donki, the company has repeatedly conducted hypothesis testing on multiple products and categories to determine the balance between necessary products and those that entertain customers.

GMS business

The change in business format to a discount store business format has shown some results. Going forward, the company will accelerate the renovation of stores into new GMSs and aims to achieve a combined operating profit increase of JPY20.0bn (compared to FY6/2020) for Uny and UD Retail.

Accelerate renovation into new GMSs

The number of stores to be converted into UD Retail stores will be limited to seven—five of which will be tenanted by Don Quijote at APITA—compared to 11 stores in FY06/21. Eleven stores are scheduled to be renovated into new GMSs, the same as in FY06/21. The company expects the number of stores to be converted by end-FY6/2024 to decrease from about 80 to about 60. The company plans to close two stores in connection with the conversion to UD Retail, bringing the total number of stores in the GMS business to 137.

Individual store management

The company's corporate philosophy, Genryu (The Source), has spread to Uny employees, boosting their morale and making it possible for the company to introduce its strength in individual store management to Uny. The company will move away from conventional GMS and supermarkets, where store management is led by headquarters. Instead, it will incorporate elements of individual store management, such as product purchasing, pricing, display, and sales, based on decisions made on the spot and taking advantage of local characteristics and locations. In FY06/21, the cash register and core systems of Uny stores were replaced, enabling sales price changes at the discretion of the frontline employees.

Overseas business

In the overseas business, the company aims to expand the number of companies participating in and the number of products handled by the Pan Pacific International Club, which was established to advance exports of Japanese agricultural, livestock, and marine products. It will also pursue the development of stores, mainly in North America and Southeast Asia and follow a policy based on providing Japanese agricultural, livestock, and marine products at affordable prices. It will support future business expansion and profitability improvement, and boost the growth of the company’s Asian and North American businesses.

Asia business

The company expects to expand its business by opening new stores, and forecasts sales increase by JPY35.0bn and profit increase by JPY500-600mn YoY. Using PPIC as a business foundation, the company will launch initiatives to promote Japanese food locally, with the aim of increasing sales and improving profitability. In the medium term, the company aims to achieve an OPM of 8% (6.8% in FY06/21).

North America business

Sales are expected to increase by JPY62.0bn YoY.

In its existing businesses, the company will renovate existing stores and shore up the business especially in the side dish category. In addition to procuring Japanese agricultural and livestock products through PPIC, the company will also strengthen its handling of private brand products.

Gelsonʼs is forecasting sales of JPY80.0bn (JPY90.2bn in FY06/21) and operating profit before amortization of goodwill of JPY3.4bn (JPY7.1bn in FY06/21 with amortization of goodwill of JPY2.7bn). The company expects sales to decline due to a decrease in alternative demand for dining out as economic activity resumes, but it aims to increase sales above pre-COVID-19 levels by securing customers acquired during the pandemic. The company has refurbished two stores in FY06/22 and plans to open two more stores in FY6/23.

Digital data strategy

The company will accelerate its digital data strategy by establishing and restructuring specialized organizations and organizing focus areas. It will also work to improve touchpoints by expanding channels with customers to obtain customer information. The company will further build an infrastructure to centrally manage the information obtained, and analyze the data to improve its understanding of customers and provide best experience for each and every one of them.

Release of new majica app

By end-2021, the company will release a new version of its majica app with enhanced functionality. In addition to searching for and purchasing products, it will add functions for sales promotion, providing product information, communication, and payment to make shopping more convenient. The company will then build an infrastructure for centralized management of application information and databases by May 2022. The company plans to link physical stores and online channels to expand channels with customers and improve the value provided in the form of convenience.

Use of social media

The company will increase information delivery on social media platforms. Opportunity losses are occurring due to insufficient use of social media. The company will create incentives to visit physical stores by linking products featured on social media with the company's social media channels and by posting product reviews.

Historical forecast accuracy

Results vs. Initial Est.		FY06/13	FY06/14	FY06/15	FY06/16	FY06/17	FY06/18	FY06/19	FY06/20	FY06/21
(JPYmn)		Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.
Sales	Initial Est.	560,000	596,300	634,000	730,000	820,000	880,000	1,000,000	1,650,000	1,700,000
	Act.	568,377	612,424	683,981	759,592	828,798	941,508	1,328,874	1,681,947	1,708,635
	Results vs. Initial Est.	1.5%	2.7%	7.9%	4.1%	1.1%	7.0%	32.9%	1.9%	0.5%
Operating profit	Initial Est.	30,500	33,500	34,800	39,800	45,000	48,000	53,000	66,000	77,000
	Act.	32,369	34,292	39,103	43,185	46,185	51,568	63,110	75,997	81,306
	Results vs. Initial Est.	6.1%	2.4%	12.4%	8.5%	2.6%	7.4%	19.1%	15.1%	5.6%
Recurring profit	Initial Est.	30,300	34,000	35,600	40,800	45,500	48,000	58,000	66,000	76,000
	Act.	33,201	35,487	40,160	43,797	45,523	57,218	68,240	75,173	81,526
	Results vs. Initial Est.	9.6%	4.4%	12.8%	7.3%	0.1%	19.2%	17.7%	13.9%	7.3%
Net income	Initial Est.	20,000	21,500	21,500	23,300	26,800	28,000	37,000	45,000	51,000
	Act.	21,141	21,471	23,148	24,938	33,082	36,405	48,253	50,303	53,851
	Results vs. Initial Est.	5.7%	-0.1%	7.7%	7.0%	23.4%	30.0%	30.4%	11.8%	5.6%

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

Performance by segment

			FY06/12	FY06/13	FY06/14	FY06/15	FY06/16	FY06/17	FY06/18	FY06/19	FY06/20	FY06/21
(JPYmn)			Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.
Sales			540,255	568,377	612,424	683,981	759,592	828,798	941,508	1,328,874	1,681,947	1,708,635
	YoY		6.4%	5.2%	7.7%	11.7%	11.1%	9.1%	13.6%	41.1%	26.6%	1.6%
	Retail		519,891	546,930	590,076	659,931	733,334	801,802	913,497	-	-	-
		YoY	6.6%	5.2%	7.9%	11.8%	11.1%	9.3%	13.9%	-	-	-
		% of total sales	96.2%	96.2%	96.4%	96.5%	96.5%	96.7%	97.0%	-	-	-
	Discount Store		-	-	-	-	-	-	923,042	1,015,924	1,117,507	1,183,526
		YoY	-	-	-	-	-	-	-	10.1%	10.0%	5.9%
		% of total sales	-	-	-	-	-	-	98.0%	76.4%	66.4%	69.3%
	GMS		-	-	-	-	-	-	-	266,058	491,621	449,989
		YoY	-	-	-	-	-	-	-	-	84.8%	-8.5%
		% of total sales	-	-	-	-	-	-	-	20.0%	29.2%	26.3%
	Rent		15,453	16,370	17,092	18,200	19,781	20,559	21,295	39,132	58,229	60,927
		YoY	-1.4%	5.9%	4.4%	6.5%	8.7%	3.9%	3.6%	83.8%	48.8%	4.6%
		% of total sales	2.9%	2.9%	2.8%	2.7%	2.6%	2.5%	2.3%	2.9%	3.5%	3.6%
	Other		4,911	5,078	5,256	5,850	6,478	6,437	6,716	7,760	14,590	14,193
		YoY	19.3%	3.4%	3.5%	11.3%	10.7%	-0.6%	4.3%	15.5%	88.0%	-2.7%
		% of total sales	0.9%	0.9%	0.9%	0.9%	0.9%	0.8%	0.7%	0.6%	0.9%	0.8%
Operating profit			29,320	32,369	34,292	39,103	43,185	46,185	51,568	63,110	75,997	80,843
	YoY		15.7%	10.4%	5.9%	14.0%	10.4%	6.9%	11.7%	22.4%	20.4%	6.4%
	Operating profit margin		5.4%	5.7%	5.6%	5.7%	5.7%	5.6%	5.5%	4.7%	4.5%	4.7%
	Retail		22,008	25,327	24,381	21,417	22,746	23,693	27,760	-	-	-
		YoY	11.0%	15.1%	-3.7%	-12.2%	6.2%	4.2%	17.2%	-	-	-
		Operating profit margin	4.2%	4.6%	4.1%	3.2%	3.1%	3.0%	3.0%	-	-	-
	Discount Store		-	-	-	-	-	-	51,508	49,589	47,311	55,335
		YoY	-	-	-	-	-	-	-	-3.7%	-4.6%	17.0%
		Operating profit margin	-	-	-	-	-	-	5.6%	4.9%	4.2%	4.7%
	GMS		-	-	-	-	-	-	-	7,039	16,992	16,599
		YoY	-	-	-	-	-	-	-	-	141.4%	-2.3%
		Operating profit margin	-	-	-	-	-	-	-	2.6%	3.5%	3.7%
	Rent		5,710	4,952	6,505	12,714	14,159	16,123	17,237	7,795	13,579	13,362
		YoY	27.3%	-13.3%	31.4%	95.4%	11.4%	13.9%	6.9%	-54.8%	74.2%	-1.6%
		Operating profit margin	37.0%	30.3%	38.1%	69.9%	71.6%	78.4%	80.9%	19.9%	23.3%	21.9%
	Other		1,843	2,025	3,540	5,372	6,733	6,395	6,329	-1,240	-2,373	-4,453
		YoY	57.0%	9.9%	74.8%	51.8%	25.3%	-5.0%	-1.0%	-	-	-
		Operating profit margin	37.5%	39.9%	67.4%	91.8%	103.9%	99.3%	94.2%	-	-	-
	Adjustments		-241	65	-134	-400	-453	-26	242	-73	488	464

Source: Shared Research based on company data

Sales breakdown

			FY06/12	FY06/13	FY06/14	FY06/15	FY06/16	FY06/17	FY06/18	FY06/19	FY06/20	FY06/21
(JPYmn)			Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.
Retail			519,891	546,930	590,076	659,931	733,334	801,802	913,497	-	-	-
	YoY		6.6%	5.2%	7.9%	11.8%	11.1%	9.3%	13.9%	-	-	-
Discount Store			-	-	-	-	-	-	923,042	1,015,924	1,117,507	1,183,526
	YoY		-	-	-	-	-	-	-	10.1%	10.0%	5.9%
	Electric appliances		56,049	55,773	54,469	56,842	60,978	68,912	76,698	80,125	86,114	87,881
		YoY	-0.3%	-0.5%	-2.3%	4.5%	7.3%	13.0%	11.3%	4.5%	7.5%	2.1%
		% of total sales	10.4%	9.8%	8.9%	8.3%	8.0%	8.3%	8.1%	6.0%	5.1%	5.1%
	Household goods		117,420	125,549	136,203	137,260	157,288	183,505	217,257	231,835	241,846	225,448
		YoY	8.0%	6.9%	8.5%	13.0%	14.6%	16.7%	18.4%	6.7%	4.3%	-6.8%
		% of total sales	21.7%	22.1%	22.2%	20.1%	20.7%	22.1%	23.1%	17.4%	14.4%	13.2%
	Foods		154,385	161,871	180,619	208,541	242,215	274,553	311,565	350,897	421,152	464,910
		YoY	7.5%	4.8%	11.6%	15.5%	16.1%	13.4%	13.5%	12.6%	20.0%	10.4%
		% of total sales	28.6%	28.5%	29.5%	30.5%	31.9%	33.1%	33.1%	26.4%	25.0%	27.2%
	Watches & fashion merchandise		119,246	130,476	132,395	147,462	154,183	158,451	159,904	162,397	154,419	144,729
		YoY	10.6%	9.4%	1.5%	7.0%	4.6%	2.8%	0.9%	1.6%	-4.9%	-6.3%
		% of total sales	22.1%	23.0%	21.6%	21.6%	20.3%	19.1%	17.0%	12.2%	9.2%	8.5%
	Sports & leisure goods		30,728	33,022	34,588	47,310	51,722	53,596	54,946	55,889	59,404	61,765
		YoY	3.9%	7.5%	4.7%	6.4%	9.3%	3.6%	2.5%	1.7%	6.3%	4.0%
		% of total sales	5.7%	5.8%	5.6%	6.9%	6.8%	6.5%	5.8%	4.2%	3.5%	3.6%
	DIY goods		17,798	17,193	17,794	16,535	15,493	15,814	16,216	15,448	8,611	-
		YoY	6.8%	-3.4%	3.5%	-7.1%	-6.3%	2.1%	2.5%	-4.7%	-44.3%	-
		% of total sales	3.3%	3.0%	2.9%	2.4%	2.0%	1.9%	1.7%	1.2%	0.5%	-
	Overseas		12,940	13,731	24,645	35,591	39,842	35,925	65,480	96,996	114,514	170,170
		YoY	-15.0%	6.1%	79.5%	44.4%	11.9%	-9.8%	82.3%	48.1%	18.1%	48.6%
		% of total sales	2.4%	2.4%	4.0%	5.2%	5.2%	4.3%	7.0%	7.3%	6.8%	10.0%
	Other		11,327	9,314	9,364	10,390	11,612	11,046	11,431	22,337	31,447	28,622
		YoY	12.0%	-17.8%	0.5%	6.4%	11.8%	-4.9%	3.5%	95.4%	40.8%	-9.0%
		% of total sales	2.1%	1.6%	1.5%	1.5%	1.5%	1.3%	1.2%	1.7%	1.9%	1.7%
GMS			-	-	-	-	-	-	-	266,058	491,621	449,989
	YoY		-	-	-	-	-	-	-	-	84.8%	-8.5%
	Apparel		-	-	-	-	-	-	-	35,719	61,863	54,710
		YoY	-	-	-	-	-	-	-	-	73.2%	-11.6%
		% of total sales	-	-	-	-	-	-	-	2.7%	3.7%	3.2%
	Household goods		-	-	-	-	-	-	-	32,378	75,698	68,384
		YoY	-	-	-	-	-	-	-	-	133.8%	-9.7%
		% of total sales	-	-	-	-	-	-	-	2.4%	4.5%	4.0%
	Foods		-	-	-	-	-	-	-	185,532	340,595	321,514
		YoY	-	-	-	-	-	-	-	-	83.6%	-5.6%
		% of total sales	-	-	-	-	-	-	-	14.0%	20.3%	18.8%
	Other		-	-	-	-	-	-	-	12,429	13,465	5,380
		YoY	-	-	-	-	-	-	-	-	8.3%	-60.0%
		% of total sales	-	-	-	-	-	-	-	0.9%	0.8%	0.3%

Source: Shared Research based on company data

Capital expenditures and depreciation

		FY06/12	FY06/13	FY06/14	FY06/15	FY06/16	FY06/17	FY06/18	FY06/19	FY06/20	FY06/21
(JPYmn)		Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.
Capital expenditures		23,563	29,914	35,563	52,727	51,570	45,357	56,061	49,908	38,455	45,976
	Cash flow basis	28,641	29,859	30,944	34,646	36,881	46,661	48,603	74,951	77,819	89,512
	Difference	5,078	-55	-4,619	-18,081	-14,689	1,304	-7,458	25,043	39,364	43,536
Depreciation and amortization		10,474	11,051	11,408	13,003	15,092	15,952	17,378	23,722	29,391	31,545
	Depreciation	9,566	10,026	10,402	11,672	13,301	14,075	14,815	20,012	24,595	26,472
	Difference	908	1,025	1,006	1,331	1,791	1,877	2,563	3,710	4,796	5,073
EBITDA		39,794	43,420	45,700	52,106	58,277	62,137	68,946	86,832	105,388	112,851
	YoY	12.9%	9.1%	5.3%	14.0%	11.8%	6.6%	11.0%	25.9%	21.4%	7.1%
	EBITDA margin	7.4%	7.6%	7.5%	7.6%	7.7%	7.5%	7.3%	6.5%	6.3%	6.6%

Source: Shared Research based on company data

Medium- to long-term management plan Passion 2030

Passion 2030

In February 2020, PPIH announced its new medium- to long-term management strategy, which it calls Passion 2030. For the last few years, the company has been working to achieve the targets of its Vision 2020 medium-term plan (announced in 2015 and covering FY06/16–FY06/20), and ultimately achieved those targets (sales of JPY1tn, 500 stores, and ROE of 15%) a year early in FY06/19 (sales of JPY1.33tn, 693 stores, and ROE of 15.2%). Naoki Yoshida became the company’s third president in September 2019, which impacted the direction of the new management strategy. Uny becoming a wholly owned subsidiary also caused significant change in PPIH’s business portfolio, and the company needed a new management strategy in response to narrower leeway for opening stores using the Don Quijote format. While noting the drastic change in the external environment due to the COVID-19 pandemic, the company has made no change to either the numerical targets or the strategic goals within its medium-term plan, expecting to make up for the FY06/21setbacks in FY06/22 and thereafter.

Numerical targets

PPIH targets operating profit of JPY200bn in FY06/30, aiming to generate operating profit of about JPY150bn by evolving and expanding current businesses and another JPY50bn through measures such as merchandising reform (SPA strategy for foods [see explanation of SPA later], enhanced lineup of private brand products), cost optimization, and shift to profitability in its finance business. The company believes it will need to generate operating profit of about JPY200bn to become a global retailer with a solid pan-Pacific base, a goal it aims to achieve by FY06/30.

In order to achieve the operating profit target of JPY200bn, PPIH estimates it will need to have sales of about JPY3tn. It aims for domestic sales of at least JPY2tn (FY06/19 domestic sales were JPY1.23tn). It looks to form a foundation to achieve overseas sales of about JPY1tn (FY06/19 overseas sales were JPY97bn).

As a medium-term objective, President Yoshida hopes to achieve operating profit of JPY100bn during his tenure. Founder and director Takao Yasuda commented at the time President Yoshida assumed the office that he wanted to institute a term limit of four years for the position of president. Based on this comment, it seems President Yoshida was thinking of achieving the JPY100bn target by FY06/23 when he made