Sanrio 8136

サンリオ

Recent Updates

2021-11-25

Appellate court's decision on petition to revoke supplementary tax assessment order based on anti-tax haven rules

2021-11-02

Revisions to full-year earnings forecasts

2021-11-02

1H FY03/22 flash update

Get in touch

1-11-1 Osaki Shinagawa-ku Tokyo, Japan 141-8603

https://www.sanrio.co.jp/corporate/

03-3779-8111

Summary

Social communication” underpins Sanrio’s corporate philosophy. According to the company, it operates under the concept of “small gift, big smile.” Sanrio’s businesses include the development of characters who convey the spirit of thoughtfulness, the planning and development of gift merchandise featuring the company’s characters, and the operation of theme parks.

Multiline Retail

Key dates

2012-08-29

Coverage initiation

Full Report

2021-11-25

1H FY03/22 flash update

2021-11-02

Download

Executive summary

Overview

A company with “social communication” as its motto: Social communication underpins Sanrio’s corporate philosophy. According to the company, it operates under the concept of “small gift, big smile.” Sanrio’s businesses include the development of characters who convey the spirit of thoughtfulness, the planning and development of gift merchandise featuring the company’s characters, and the operation of theme parks (including Sanrio Puroland and Harmonyland). In FY03/21, the company reported consolidated sales of JPY41.0bn (-25.7% YoY) and an operating loss of JPY3.2bn (operating profit of JPY2.1bn in FY03/20).

Mainstay characters: Founded in 1960, the company has a long history and over the years has introduced many characters that have gained popularity not just in Japan but around the world, including perennial favorites such as Hello Kitty (introduced in 1974), My Melody (1975), and Little Twin Stars (1975). Still, the company’s sales seem to conform to the Pareto principle, with roughly 80% of sales being generated by the top 20% of characters and Hello Kitty topping the list, generating about 50% of sales.

Reporting segments: For reporting purposes, the company breaks down its businesses geographically into the Domestic segment and the Overseas segment, and further breaks down overseas operations by region, into Europe (the UK and Germany), the Americas (North America and South America), and Asia (Hong Kong, Taiwan, South Korea, and China). In FY03/21, the company reported sales of JPY34.9bn (-26.4% YoY) for the Domestic segment, JPY1.2bn for Europe (-17.4% YoY), JPY2.4bn for the Americas (-21.2% YoY) and JPY6.8bn for Asia (-23.7% YoY). In terms of operating profit/loss after the remittance of master license fees to the parent, it reported an operating loss of JPY2.9bn for the Domestic segment (operating profit of JPY1.7bn in FY03/20), a loss of JPY300mn for Europe (loss of JPY500mn in FY03/20), a loss of JPY1.1bn for the Americas (loss of JPY1.1bn in FY03/20), and profit of JPY1.9bn for Asia (-31.9% YoY).

Domestic segment: The parent company’s main business divisions are Product Sales, Licensing, Entertainment, and Overseas (overseas subsidiaries’ royalty payments and exports). Subsidiaries run the theme park business. In the Product Sales division, the company develops its own character goods, has them produced by contract manufacturers, and sells them through various channels, starting with its nationwide chain of directly managed Sanrio shops and company-run stores inside of department stores and mass retailers. The division also includes wholesale and e-commerce sales. In the Licensing division, Sanrio licenses its characters for use by other companies, collecting licensing fees in return for allowing its characters to be used in merchandising, advertisements, and sales promotions. Merchandising involves the use of Sanrio characters in various third-party products such as toys, foods, and apparel, as well as character-shaped products (such as figurines) and various character goods. In the Entertainment division, the company is diversifying into new areas such as animation and games. Theme parks, including the indoor Sanrio Puroland theme park and open-air Harmonyland theme park, are run by subsidiaries. Traditionally, Sanrio has used the product sales business to nurture characters into future sources of revenue for the high-margin licensing business. For this reason, the domestic product sales business has come to be regarded as something approaching sacred ground, with its low profitability seemingly overlooked. One of the company’s top priorities accordingly is to improve profitability at the domestic product sales business.

Overseas segment: Sanrio’s overseas business is focused primarily on licensing, though the proportion of sales from licensing and product sales varies from region to region. Overseas segment earnings are disclosed on an individual subsidiary basis. Overseas subsidiaries pay master license fees (booked as cost of sales) to the parent company (the copyright holder) proportional to their royalty income. All of the company’s overseas subsidiaries have January–December fiscal years. In keeping with standard accounting practices, the company includes the quarterly results of these subsidiaries in consolidated results with a three-month lag (i.e., Sanrio’s FY03/21 results reflect the results at its overseas subsidiaries in the 2020 calendar year). The US business accounts for the bulk of overseas segment losses, and in turn the product sales business accounts for the bulk of US business losses prior to common costs (JPY600mn loss for product sales and JPY0bn loss for licensing). Thus in order to move the US business into profit, the company must stem losses at the product sales business in the US.

Changes in representative directors: On July 1, 2020, Shintaro Tsuji vacated the office of representative director, president and CEO and assumed the position of representative director, founder and chairman. On the same day, Tomokuni Tsuji, formerly senior managing director, became the company’s representative director, president and CEO. Tomokuni Tsuji is the grandson of Shintaro Tsuji. He became a director in 2016 after joining the company in 2014. With this change, the company’s management will be entrusted to a young executive born in 1988.

Trends and outlook

FY03/21 results: For FY03/21, the company reported full-year consolidated sales of JPY41.0bn (-25.7% YoY), operating loss of JPY3.2bn (versus profit of JPY2.1bn in FY03/20), recurring loss of JPY1.7bn (versus profit of JPY3.2bn in FY03/20), and net loss attributable to owners of the parent of JPY3.9bn (versus profit of JPY191mn in FY03/20). Sales came in more than JPY800mn ahead of the company’s revised estimate thanks in large part to higher-than-expected royalty income received by the parent and higher-than-expected online sales at its US subsidiary. The operating loss was roughly JPY700mn smaller than expected, reflecting the boost from the higher-than-expected sales and additional cuts in SG&A spending at the parent and Sanrio Entertainment Co., Ltd. The loss at the recurring profit level was about JPY1.3bn less than the company’s revised estimate, reflecting the smaller-than-expected operating loss and larger-than-expected gains on investments in partnerships at the US subsidiary (reported under non-operating income). In contrast, net loss attributable to owners of the parent was more than JPY300mn larger than the company’s revised estimate, reflecting a combination of asset impairment charges booked in connection with the US subsidiary and larger-than-expected income tax deferments at the parent. Having booked a net loss for the year, the company decided it would not pay a dividend for FY03/21.

FY03/22 forecast (Revised): On November 2, 2021, the company revised its full-year earnings forecast. The revised FY03/22 forecast is JPY49.3bn sales (vs. JPY49.1bn in the previous forecast), JPY0bn operating profit (vs. JPY0.7bn operating loss in the previous forecast), JPY0.5bn recurring profit (vs. JPY0.4bn recurring loss in the previous forecast), JPY1.5bn net income attributable to owners of the parent (vs. JPY2.1bn in the previous forecast), and JPY18.62 EPS (vs. JPY26.07 in the previous forecast). The dividend forecast is unchanged. As for operating profit and recurring profit, with the exception of the theme park business, where a recovery has been delayed compared to the original forecast due to the declaration of states of emergency in Japan, both overseas and domestic operations are performing well. The company's sales progress rate against the revised full-year FY03/22 forecast was 48.3%. On the other hand, net income is expected to fall short of the original forecast due to an extraordinary loss in 1H FY03/22 associated with business restructuring in China.

Medium-term business plan: On May 25, 2021, the company announced a three-year medium-term business plan ending in FY03/24, with the aim of achieving a turnaround in operating profit to JPY3.0bn in FY03/24. The main pillars of this medium-term business plan are: 1) improving profitability at the domestic product sales business, where margins have narrowed; 2) lifting the US business out of the red and into the black; and 3) planting seeds for regrowth and corporate culture reform. Sanrio aims to post operating profit of JPY3.0bn in FY03/24 (versus an operating loss of JPY3.2bn in FY03/21). To lift operating profit to JPY3.0bn by FY03/24, the company will need to achieve a JPY6.2bn improvement at the operating level relative to FY03/21. The company assumes recovery by FY03/24 from the COVID-19-induced slump in the theme park business (JPY1.6bn operating loss in FY03/21, after three consecutive years of operating profits through FY03/20), and also thinks it necessary to boost profitability at the domestic product sales business (from an operating loss of JPY1.8bn in FY03/21) and achieve a shift to profit at the US business (from an operating loss of JPY1.1bn in FY03/21). Sanrio targets sales of JPY53.0bn in FY03/24 (versus sales of JPY41.0bn in FY03/21). However, the company says the sales target of JPY53.0bn is what is required to achieve operating profit of JPY3.0bn; it is not a firm commitment.

Strengths and weaknesses

Shared Research thinks Sanrio’s strengths are: 1) strong IP with a track record of establishing many well-known and highly popular characters; 2) a relatively stable flow of income in Japan, as a consequence of customer connections constructed thus far; and 3) completion of a domestic business model in which it cultivates the popularity of characters through its product sales and theme park businesses before leveraging them in the licensing business.

We believe the company’s weaknesses are: 1) decline in the market for Hello Kitty products for young children could lead a decrease in future customers, 2) vulnerability of overseas income (mainly derived from licensing) to local market sentiment, and 3) the company has not been able to monetize their characters to their full potential since it mainly focuses on selling physical products.

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		74,954	74,233	77,009	74,562	72,476	62,695	60,220	59,120	55,261	41,053	49,300
	YoY	-2.2%	-1.0%	3.7%	-3.2%	-2.8%	-13.5%	-3.9%	-1.8%	-6.5%	-25.7%	20.1%
Gross profit		48,116	49,454	53,359	50,562	47,306	40,470	38,718	37,871	35,017	25,290
	YoY	4.2%	2.8%	7.9%	-5.2%	-6.4%	-14.5%	-4.3%	-2.2%	-7.5%	-27.8%
	Gross profit margin	64.2%	66.6%	69.3%	67.8%	65.3%	64.6%	64.3%	64.1%	63.4%	61.6%
Operating profit		18,906	20,198	21,019	17,468	12,675	6,904	5,734	4,786	2,106	-3,280	0
	YoY	26.1%	6.8%	4.1%	-16.9%	-27.4%	-45.5%	-16.9%	-16.5%	-56.0%	-	-
	Operating profit margin	25.2%	27.2%	27.3%	23.4%	17.5%	11.0%	9.5%	8.1%	3.8%	-	-
Recurring profit		18,368	19,646	20,180	18,525	13,178	7,255	6,020	5,836	3,274	-1,731	500
	YoY	37.2%	7.0%	2.7%	-8.2%	-28.9%	-44.9%	-17.0%	-3.1%	-43.9%	-	-
	Recurring profit margin	24.5%	26.5%	26.2%	24.8%	18.2%	11.6%	10.0%	9.9%	5.9%	-	1.0%
Net income		14,378	12,536	12,802	12,804	9,609	6,475	4,928	3,880	191	-3,960	1,500
	YoY	53.3%	-12.8%	2.1%	0.0%	-25.0%	-32.6%	-23.9%	-21.3%	-95.1%	-	-
	Net margin	19.2%	16.9%	16.6%	17.2%	13.3%	10.3%	8.2%	6.6%	0.3%	-	3.0%
Per-share data (JPY)
Shares issued (year-end; '000)		89,065	89,065	89,065	89,065	89,065	89,065	89,065	89,065	89,065	89,065
EPS		162.6	142.1	145.2	146.5	112.1	76.3	58.1	45.7	2.3	-47.9	18.6
EPS (fully diluted)		160.6	142.1	145.2	-	-	-	-	-	-	-
Dividend per share		40.0	45.0	80.0	80.0	80.0	80.0	55.0	30.0	35.0	-	16.0
Book value per share		418.1	553.3	699.3	757.1	641.2	622.9	618.7	614.1	548.8	461.3
Balance sheet (JPYmn)
	Cash and cash equivalents	25,893	35,627	52,265	54,816	41,080	41,172	44,290	43,814	40,053	36,876
	Accounts receivable	9,949	10,752	12,770	11,567	9,433	7,698	7,824	6,866	6,211	5,269
	Inventories	3,116	3,110	3,544	3,916	4,300	4,306	4,211	4,423	4,854	4,606
Total current assets		44,009	55,672	72,238	74,311	57,757	56,295	57,871	56,387	53,780	48,937
Tangible fixed assets		18,078	17,648	19,022	18,891	18,744	18,539	16,430	15,912	15,890	16,098
Intangible assets		3,869	4,000	4,865	5,254	5,200	4,715	3,905	3,397	2,474	2,216
Investments and other assets		22,650	19,989	21,359	23,569	24,060	21,711	20,033	19,458	17,339	17,766
Total fixed assets		44,598	41,638	45,248	47,714	48,006	44,967	40,368	38,768	35,704	36,081
Total assets		88,748	97,425	117,585	122,124	105,826	101,312	98,274	95,185	89,515	85,040
	Accounts payable	4,486	4,481	4,658	4,821	5,019	3,911	4,563	4,433	3,964	3,180
	Short-term debt	17,112	11,852	11,777	10,828	7,069	10,591	9,271	8,613	9,775	17,542
Total current liabilities		28,626	24,879	29,288	29,373	23,022	24,824	24,508	22,891	22,595	29,336
	Long-term debt	13,544	14,261	14,059	14,261	12,741	10,255	10,786	11,411	10,395	10,317
Total fixed liabilities		23,043	23,563	26,413	26,481	28,070	23,429	21,033	19,896	20,532	18,417
Total liabilities		51,669	48,443	55,701	55,855	51,092	48,253	45,539	42,788	43,127	47,754
Total net assets		37,078	48,982	61,883	66,269	54,733	53,058	52,734	52,396	46,387	37,285
Total interest-bearing debt		31,153	26,807	26,552	26,035	21,016	22,077	21,388	21,260	22,221	30,962
Cash flow statement (JPYmn)
Cash flows from operating activities		14,820	17,085	17,448	14,438	10,011	7,037	3,936	4,868	834	-2,287
Cash flows from investing activities		2,005	-485	-8,651	-7,818	-6,398	8,736	4,376	-2,576	-3,624	7,007
Cash flows from financing activities		-10,313	-9,651	-5,417	-11,921	-19,582	-6,111	-7,958	-3,053	-4,993	-862
Financial ratios
ROA (RP-based)		21.3%	21.1%	18.8%	15.5%	11.6%	7.0%	6.0%	6.0%	3.5%	-2.0%
ROE		43.5%	29.2%	23.2%	20.1%	16.0%	12.1%	9.4%	7.4%	0.4%	-9.5%
Equity ratio		41.7%	50.1%	52.4%	54.0%	51.4%	52.2%	53.4%	54.7%	51.5%	43.7%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Reversal of allowance for sales returns is subtracted from gross profit.

Recent updates

Appellate court's decision on petition to revoke supplementary tax assessment order based on Japanese Anti-Tax Have Rules

2021-11-24

On November 24, 2021, Sanrio Co., Ltd. released a statement concerning an appellate court's judgment regarding the company’s petition to revoke a supplementary tax assessment order made on the basis of Japanese Anti-Tax Haven Rules.

On December 15, 2017, the company received a supplementary tax assessment order from the Tokyo Regional Taxation Bureau regarding the revision of income tax statements during the period of four years from FY03/13 to FY03/16, during which the company’s subsidiaries in Hong Kong were deemed not to have satisfied the requirements for exemption from Japanese Anti-Tax Haven Rules. The order called for the reassessment of additional taxable income from the company and its consolidated taxable subsidiaries, which came to a total of approximately JPY2.8bn and JPY1.1bn in additional tax payment (including local tax). (The company recorded the expense in its accounts as income taxes for prior periods in FY03/18.)

Not satisfied with the supplementary tax assessment order, the company filed a petition for its revocation at the Tokyo District Court, and on February 26, 2021, received a judgment from that court to the effect that its petition had not been granted. The company filed an appeal to the Tokyo High Court, but on November 24, 2021, received a judgment from that court to the effect that its petition had not been granted. The company said that, upon scrutinizing the judgment, it plans to file an appeal to the Supreme Court (including petition for acceptance of appeal).

Revisions to full-year earnings forecasts

2021-11-02

Sanrio Co., Ltd. announced a revision to its earnings forecasts.

Revisions to full-year earnings forecasts (November 2, 2021)

On November 2, 2021, the company revised its full-year earnings forecast. The revised FY03/22 forecast is JPY49.3bn sales (vs. JPY49.1bn in the previous forecast), JPY0bn operating profit (vs. JPY0.7bn operating loss in the previous forecast), JPY0.5bn recurring profit (vs. JPY0.4bn recurring loss in the previous forecast), JPY1.5bn net income attributable to owners of the parent (vs. JPY2.1bn in the previous forecast), and JPY18.62 EPS (vs. JPY26.07 in the previous forecast). The dividend forecast is unchanged.

As for operating profit and recurring profit, with the exception of the theme park business, where a recovery has been delayed compared to the original forecast due to the declaration of states of emergency in Japan, both overseas and domestic operations are performing well. The company's sales progress rate against the revised full-year FY03/22 forecast was 48.3%. On the other hand, net income is expected to fall short of the original forecast due to an extraordinary loss in 1H FY03/22 associated with business restructuring in China.

Trends and outlook

Quarterly trends and results

Earnings (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	% of Est.	FY Est.
Sales		13,379	27,660	42,151	55,261	7,289	17,070	29,449	41,053	10,802	23,793	48.3%	49,300
	YoY	-3.8%	-2.2%	-3.4%	-6.5%	-45.5%	-38.3%	-30.1%	-25.7%	48.2%	39.4%		20.1%
Adjusted gross profit		8,623	17,877	27,201	35,017	4,520	10,484	18,126	25,290	7,147	15,266	48.6%	31,399
	YoY	-5.3%	-2.5%	-3.4%	-7.5%	-47.6%	-41.4%	-33.4%	-27.8%	58.1%	45.6%		24.2%
	Gross profit margin	64.5%	64.6%	64.5%	63.4%	62.0%	61.4%	61.6%	61.6%	66.2%	64.2%		63.7%
SG&A expenses		7,929	16,502	24,768	32,910	5,698	13,130	20,642	28,570	7,206	14,978	47.7%	31,399
	YoY	2.1%	2.0%	1.7%	-0.5%	-28.1%	-20.4%	-16.7%	-13.2%	26.5%	14.1%		9.9%
	SG&A ratio	59.3%	59.7%	58.8%	59.6%	78.2%	76.9%	70.1%	69.6%	66.7%	63.0%		63.7%
Operating profit		694	1,374	2,433	2,106	-1,177	-2,645	-2,516	-3,280	-59	288	-	0
	YoY	-48.1%	-36.3%	-36.1%	-56.0%	-	-	-	-	-	-		-
	Operating profit margin	5.2%	5.0%	5.8%	3.8%	-	-	-	-	-	1.2%		0.0%
Recurring profit		944	2,039	3,307	3,274	-999	-1,938	-1,766	-1,731	102	636	127.2%	500
	YoY	-44.3%	-25.3%	-27.9%	-43.9%	-	-	-	-	-	-		-
	Recurring profit margin	7.1%	7.4%	7.8%	5.9%	-	-	-	-	0.9%	2.7%		1.0%
Net income		-291	326	1,540	191	-858	-2,847	-2,357	-3,960	2,470	1,949	129.9%	1,500
	YoY	-	-78.5%	-48.9%	-95.1%	-	-	-	-	-	-		-
	Net margin	-	1.2%	3.7%	0.3%	-	-	-	-	22.9%	8.2%		3.0%
Quarterly		FY03/20				FY03/21				FY03/22
(JPYmn)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2
Sales		13,379	14,281	14,491	13,110	7,289	9,781	12,379	11,604	10,802	12,991
	YoY	-3.8%	-0.6%	-5.6%	-15.4%	-45.5%	-31.5%	-14.6%	-11.5%	48.2%	32.8%
Adjusted gross profit		8,623	9,254	9,324	7,816	4,520	5,964	7,642	7,164	7,147	8,119
	YoY	-5.3%	0.2%	-5.1%	-19.5%	-47.6%	-35.6%	-18.0%	-8.3%	58.1%	36.1%
	Gross profit margin	64.5%	64.8%	64.3%	59.6%	62.0%	61.0%	61.7%	61.7%	66.2%	62.5%
SG&A expenses		7,929	8,573	8,266	8,142	5,698	7,432	7,512	7,928	7,206	7,772
	YoY	2.1%	1.9%	1.1%	-6.7%	-28.1%	-13.3%	-9.1%	-2.6%	26.5%	4.6%
	SG&A ratio	59.3%	60.0%	57.0%	62.1%	78.2%	76.0%	60.7%	68.3%	66.7%	59.8%
Operating profit		694	680	1,059	-327	-1,177	-1,468	129	-764	-59	347
	YoY	-48.1%	-17.3%	-35.9%	-	-	-	-87.8%	-	-	-
	Operating profit margin	5.2%	4.8%	7.3%	-	-	-	1.0%	-	-	2.7%
Recurring profit		944	1,095	1,268	-33	-999	-939	172	35	102	534
	YoY	-44.3%	5.8%	-31.7%	-	-	-	-86.4%	-	-	-
	Recurring profit margin	7.1%	7.7%	8.8%	-	-	-	1.4%	0.3%	0.9%	4.1%
Net income		-291	617	1,214	-1,349	-858	-1,989	490	-1,603	2,470	-521
	YoY	-	37.1%	-19.1%	-	-	-	-59.6%	-	-	-
	Net margin	-	4.3%	8.4%	-	-	-	4.0%	-	22.9%	-

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Quarterly (three-month) performance figures calculated based on the difference from the preceding quarter.

Quarterly results by reportable segment

By reportable segment (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	% of Est.	FY Est.
Sales			13,379	27,660	42,151	55,261	7,289	17,070	29,449	41,053	10,802	23,793	48.3%	49,300
	YoY		-3.8%	-2.2%	-3.4%	-6.5%	-45.5%	-38.3%	-30.1%	-25.7%	48.2%	39.4%		20.1%
	Japan		11,625	24,184	37,583	47,447	6,115	14,718	25,369	34,940	9,193	20,113	47.4%	42,429
		YoY	0.0%	-0.5%	-1.3%	-6.5%	-47.4%	-39.1%	-32.5%	-26.4%	50.3%	36.7%		21.4%
	Europe		405	712	1,004	1,484	256	536	885	1,225	371	759	49.0%	1,549
		YoY	-33.9%	-30.7%	-27.8%	-17.4%	-36.8%	-24.7%	-11.9%	-17.5%	44.9%	41.6%		26.4%
	Americas		771	1,382	2,199	3,126	423	811	1,475	2,464	680	1,513	45.3%	3,343
		YoY	-11.3%	-8.2%	-4.6%	-3.3%	-45.1%	-41.3%	-32.9%	-21.2%	60.8%	86.6%		35.7%
	Asia		2,103	4,267	6,202	8,981	1,515	3,217	4,831	6,848	1,960	4,212	54.8%	7,687
		YoY	-15.6%	-10.8%	-14.2%	-12.7%	-28.0%	-24.6%	-22.1%	-23.8%	29.4%	30.9%		12.3%
	Total		14,905	30,547	46,989	61,040	8,311	19,284	32,562	45,479	12,205	26,598	48.4%	55,010
		YoY	-4.5%	-3.4%	-4.1%	-7.6%	-44.2%	-36.9%	-30.7%	-25.5%	46.9%	37.9%		21.0%
	Adjustments		-1,525	-2,886	-4,837	-5,778	-1,022	-2,213	-3,112	-4,426	-1,402	-2,805	-	-5,710
Operating profit			694	1,374	2,433	2,106	-1,177	-2,645	-2,516	-3,280	-59	288	-	0
	YoY		-48.1%	-36.3%	-36.1%	-56.0%	-	-	-	-	-	-		-
	Japan		771	1,184	2,085	1,716	-607	-2,088	-2,527	-2,938	133	-70	-	-643
		YoY	-30.1%	-26.6%	-23.5%	-52.6%	-	-	-	-	-	-		-
	Europe		-104	-276	-444	-553	-220	-386	-102	-305	-69	-122	-	-302
		YoY	-	-	-	-	-	-	-	-	-	-		-
	Americas		-173	-438	-706	-1,107	-351	-711	-861	-1,160	-167	-304	-	-512
		YoY	-	-	-	-	-	-	-	-	-	-		-
	Asia		642	1,329	1,910	2,878	430	946	1,402	1,959	628	1,414	62.1%	2,277
		YoY	-21.0%	-15.6%	-22.8%	-19.0%	-33.0%	-28.8%	-26.6%	-31.9%	46.0%	49.5%		16.2%
	Total		1,135	1,799	2,846	2,933	-748	-2,239	-2,090	-2,445	525	918	112.1%	819
		YoY	-36.1%	-30.5%	-32.8%	-48.6%	-	-	-	-	-	-		-
	Adjustments		-441	-424	-413	-827	-429	-406	-426	-834	-584	-629	-	-819
By reportable segment (quarterly)			FY03/20				FY03/21				FY03/22
(JPYmn)			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2
Sales			13,379	14,281	14,491	13,110	7,289	9,781	12,379	11,604	10,802	12,991
	YoY		-3.8%	-0.6%	-5.6%	-15.4%	-45.5%	-31.5%	-14.6%	-11.5%	48.2%	32.8%
	Japan		11,625	12,559	13,399	9,864	6,115	8,603	10,651	9,571	9,193	10,920
		YoY	0.0%	-1.0%	-2.6%	-22.3%	-47.4%	-31.5%	-20.5%	-3.0%	50.3%	26.9%
	Europe		405	307	292	480	256	280	349	340	371	388
		YoY	-33.9%	-26.0%	-19.3%	17.9%	-36.8%	-8.8%	19.5%	-29.2%	44.9%	38.6%
	Americas		771	611	817	927	423	388	664	989	680	833
		YoY	-11.3%	-4.1%	2.4%	-0.1%	-45.1%	-36.5%	-18.7%	6.7%	60.8%	114.7%
	Asia		2,103	2,164	1,935	2,779	1,515	1,702	1,614	2,017	1,960	2,252
		YoY	-15.6%	-5.6%	-20.9%	-9.0%	-28.0%	-21.3%	-16.6%	-27.4%	29.4%	32.3%
	Total		14,905	15,642	16,442	14,051	8,311	10,973	13,278	12,917	12,205	14,393
		YoY	-4.5%	-2.4%	-5.3%	-17.8%	-44.2%	-29.8%	-19.2%	-8.1%	46.9%	31.2%
	Adjustments		-1,525	-1,361	-1,951	-941	-1,022	-1,191	-899	-1,314	-1,402	-1,403
Operating profit			694	680	1,059	-327	-1,177	-1,468	129	-764	-59	347
	YoY		-48.1%	-17.3%	-35.9%	-	-	-	-87.8%	-	-	-
	Japan		771	413	901	-369	-607	-1,481	-439	-411	133	-203
		YoY	-30.1%	-19.0%	-19.0%	-	-	-	-	-	-	-
	Europe		-104	-172	-168	-109	-220	-166	284	-203	-69	-53
		YoY	-	-	-	-	-	-	-	-	-	-
	Americas		-173	-265	-268	-401	-351	-360	-150	-299	-167	-137
		YoY	-	-	-	-	-	-	-	-	-	-
	Asia		642	687	581	968	430	516	456	557	628	786
		YoY	-21.0%	-9.8%	-35.4%	-10.1%	-33.0%	-24.9%	-21.5%	-42.5%	46.0%	52.3%
	Total		1,135	664	1,047	87	-748	-1,491	149	-355	525	393
		YoY	-36.1%	-18.3%	-36.3%	-94.1%	-	-	-85.8%	-	-	-
	Adjustments		-441	17	11	-414	-429	23	-20	-408	-584	-45

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Quarterly (three-month) performance figures show the difference between the cumulative quarters and the preceding cumulative quarters.

Having changed its reporting segments at the beginning of FY03/22, the company now has reporting segments based on the structure of sales activities by geographical segment (Japan, Europe, North America and South America, and Asia), with forecasts for the Japan segment further broken down into headquarters, Puroland (SPL), and Harmonyland (HL). Results forecasts for Sanrio headquarters are divided still further by business division, while those for overseas segments are disclosed on an individual subsidiary basis. Previously, Sanrio employed disclosure by segment in financial results summaries and securities reports. In results briefing materials, though, master license fees remitted to the parent company were added back to figures for each regional subsidiary, while the domestic operation was broken down into Product Sales, Licensing, and Other. In principle, Sanrio used the figures reported in results briefing materials as basis for communication with investors. For the purposes of business administration, however, as of FY03/21 the company used individual business divisions to categorize domestic earnings, and individual subsidiaries to do the same for overseas earnings. With the release of its new medium-term business plan Sanrio decided to unify disclosure, employing only the figures used for business administration purposes. Thus under this new method of disclosure, figures may differ even if the name used is the same. This needs to be taken into account when making comparisons with FY03/20 and earlier.

Key changes
Product supply costs (for merchandise production and distribution centers) previously were treated as companywide costs, but they are now allocated to the product sales business as that is where they are mainly incurred (as a consequence, the product sales operating profit margin appears lower than it did previously). Costs for the e-commerce business previously came under the Domestic Other business but now are included in the domestic product sales business. Costs for the entertainment (animation, games, etc.) business previously were allocated to the Domestic Licensing business but now are treated separately. Similarly, costs associated with corporate licensing and deals with convenience stores previously were divided between the Domestic Licensing business and Domestic Other business, but now are allocated solely to the domestic licensing business. As a result of the above, costs falling into the domestic other business category now are limited to animation/movie production and advertising costs and other companywide costs that are not associated directly with any single business division. Master license fees remitted by overseas subsidiaries to the parent company are no longer added back to the earnings of subsidiaries in each region (subsidiaries’ profitability accordingly can be compared directly with that of non-group companies also paying licensing fees).

Performance of Japan segment

Japan segment (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	% of Est.	FY Est.
Sales
	Head office			9,220			38,044	5,682	13,241		30,563	7,971	16,755	48.1%	34,847
		YoY		-3.5%	-	-	-6.8%	-38.4%	-	-	-19.7%	40.3%	26.5%		14.0%
	Sanrio Entertainment (SET)			2,339			9,340	198	1,181		4,014	1,149	3,103	44.6%	6,955
		YoY		15.4%	-	-	-1.9%	-91.5%	-	-	-57.0%	480.3%	162.7%		73.3%
		Sanrio Puroland (SPL)		1,860			7,577	122	875		3,098	900	2,515	44.8%	5,614
			YoY	14.7%	-	-	-1.1%	-93.4%	-	-	-59.1%	637.7%	187.4%		81.2%
		Harmony Land (HL)		479			1,763	75	305		915	248	587	43.8%	1,341
			YoY	18.6%	-	-	-5.3%	-84.3%	-	-	-48.1%	230.7%	92.5%		46.6%
	Other subsidiaries			715			2,772	460	861		1,885	471	1,115	43.8%	2,545
		YoY		21.0%	-	-	-10.7%	-35.7%	-	-	-32.0%	2.4%	29.5%		35.0%
	Total			12,275			50,158	6,341	15,284		36,462	9,592	20,974	47.3%	44,348
		YoY		0.8%	-	-	-6.1%	-48.3%	-	-	-27.3%	51.3%	37.2%		21.6%
	Intra-segment			-649			-2,710	-226	-566		-1,522	-398	-861	-	-1,919
	Total sales			11,625			47,447	6,115	14,718		34,940	9,193	20,113	47.4%	42,429
		YoY		0.0%	-	-	-6.5%	-47.4%	-	-	-26.4%	50.3%	36.7%		21.4%
	Inter-segment			-1,201			-4,362	-764	-1,724		-3,357	-1,162	-2,394	-	-4,718
	External sales			10,423			43,084	5,351	12,994		31,582	8,031	17,718	47.0%	37,710
		YoY		1.8%	-	-	-4.7%	-48.7%	-	-	-26.7%	50.1%	36.4%		19.4%
Operating profit
	Head office			828			1,144	-271	-1,075		-920	605	609	257.0%	237
		YoY		-35.0%	-	-	-64.8%	-	-	-	-	-	-		-
	Sanrio Entertainment (SET)			33			483	-154	-775		-1,636	-324	-569	-	-747
		YoY		-	-	-	63.7%	-	-	-	-	-	-		-
		Sanrio Puroland (SPL)		17			434	-96	-554		-1,215	-194	-357	-	-441
			YoY	-	-	-	63.8%	-	-	-	-	-	-		-
		Harmony Land (HL)		15			49	-58	-220		-421	-129	-211	-	-305
			YoY	-	-	-	63.3%	-	-	-	-	-	-		-
	Other subsidiaries			29			141	-82	-172		-233	-71	-107	-	-57
		YoY		-	-	-	-38.7%	-	-	-	-	-	-		-
	Total			891			1,771	-509	-2,023		-2,791	210	-67	-	-566
		YoY		-27.5%	-	-	-53.1%	-	-	-	-	-	-		-
	Intra-segment			-119			-55	-98	-64		-147	-76	-2	-	-76
	Operating profit			771			1,716	-607	-2,088		-2,938	133	-70	-	-643
		YoY		-30.1%	-	-	-52.6%	-	-	-	-	-	-		-

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Quarterly (three-month) performance figures show the difference between the cumulative quarters and the preceding cumulative quarters.

SET: Sanrio Entertainment Co. Ltd.
SPL: Sanrio Puroland
HL: Harmonyland

Japan HQ : Quarterly performance by business

By head office division (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	% of Est.	FY Est.
Sales				9,220			38,044	5,682	13,241		30,563	7,971	16,755	48.1%	34,847
	YoY			-3.5%	-	-	-6.8%	-38.4%	-	-	-19.7%	40.3%	26.5%		14.0%
	Product sales			4,787			20,391	2,358	6,275		15,360	3,783	7,823	46.3%	16,912
		YoY		4.7%	-	-	0.3%	-50.7%	-	-	-24.7%	60.4%	24.7%		10.1%
	Licensing			2,456			9,966	1,910	3,828		8,816	2,215	4,770	47.3%	10,094
		YoY		-12.5%	-	-	-13.2%	-22.2%	-	-	-11.5%	16.0%	24.6%		14.5%
	Entertainment			600			2,538	593	1,218		2,552	699	1,445	51.0%	2,835
		YoY		5.1%	-	-	-1.7%	-1.2%	-	-	0.6%	17.9%	18.6%		11.1%
	Overseas			1,372			5,124	815	1,909		3,810	1,266	2,688	56.1%	4,793
		YoY		-14.5%	-	-	-19.5%	-40.6%	-	-	-25.6%	55.3%	40.8%		25.8%
		Royalty income from subsidiaries		1,113			4,058	692	1,545		2,996	1,039	2,156	55.9%	3,858
			YoY	-13.0%	-	-	-21.5%	-37.8%	-	-	-26.2%	50.1%	39.5%		28.8%
		Product sales (exports)		259			1,065	122	364		813	226	532	56.9%	935
			YoY	-20.1%	-	-	-10.9%	-52.9%	-	-	-23.7%	85.2%	46.2%		15.0%
	Other			3			23	3	9		23	7	27	12.9%	210
		YoY		200.0%	-	-	-43.9%	0.0%	-	-	-1.5%	133.3%	200.0%		813.0%
Operating profit				828			330	-271	-1,479		-920	605	609	-	237
	YoY			-35.0%	-	-	-85.9%	-	-	-	-	-	-		-
	Product sales			-120			-889	-522	-1,289		-1,834	-177	-566	-	-1,514
		YoY		-	-	-	-	-	-	-	-	-	-		-
	Licensing			1,214			4,946	906	1,788		4,272	1,142	2,214	45.1%	4,914
		YoY		-9.8%	-	-	-6.0%	-25.4%	-	-	-13.6%	26.0%	23.8%		15.0%
	Entertainment			356			1,406	342	641		1,351	417	804	52.8%	1,522
		YoY		0.8%	-	-	-6.5%	-3.9%	-	-	-3.9%	21.9%	25.4%		12.7%
	Overseas			982			3,469	615	1,383		2,679	992	2,059	56.7%	3,630
		YoY		-16.1%	-	-	-24.8%	-37.4%	-	-	-22.8%	61.3%	48.9%		35.5%
		Royalty income from subsidiaries		997			3,569	637	1,421		2,744	988	2,036	56.3%	3,615
			YoY	-12.6%	-	-	-22.2%	-36.1%	-	-	-23.1%	55.1%	43.3%		31.7%
		Product sales (exports)		-15			-100	-22	-38		-65	4	22	157.1%	14
			YoY	-	-	-	-	-	-	-	-	-	-		-
	Other			-77			-309	-195	-324		-722	-130	-257	-	-428
		YoY		-	-	-	-	-	-	-	-	-	-		-
	Cost center			-1,985			-8,292	-1,840	-3,650		-7,505	-2,244	-4,310	-	-8,723
	Operating profit (parent)			370				-693	-1,479		-1,757	-0	-55	-	-598
	Transfer to unallocated expenses			458				421	403		837	606	665	79.5%	837

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

Note 1: The portion of the cost center that has been reclassified to unclassifiable expenses. Unclassifiable expenses are mainly general and administrative expenses related to the entire consolidation that do not belong to any region.

Quarterly trends in Head Office SG&A costs

SG&A by head office division (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	% of Est.	FY Est.
Personnel							1,914		3,728		1,753	-	3,755
	YoY	-	-	-	-	-	-	-	-	-	-8.4%		0.7%
Selling expenses							77		205		196	-	319
	YoY	-	-	-	-	-	-	-	-	-	154.5%		55.6%
Advertising							298		624		457	-	951
	YoY	-	-	-	-	-	-	-	-	-	53.4%		52.4%
Distribution							9		18		8	-	17
	YoY	-	-	-	-	-	-	-	-	-	-11.1%		-5.6%
Right-of-use assets							320		625		430	-	793
	YoY	-	-	-	-	-	-	-	-	-	34.4%		26.9%
Other							1,030		2,303		1,464	-	2,885
	YoY	-	-	-	-	-	-	-	-	-	42.1%		25.3%
Total							3,650		7,505		4,310	-	8,723
	YoY	-	-	-	-	-	-	-	-	-	18.1%		16.2%

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

Overseas segment: Performance by subsidiary

By overseas segment (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	% of Est.	FY Est.
Sales
	Europe			405			1,484	256	536		1,225	371	759	49.0%	1,549
		YoY		-33.9%	-	-	-17.4%	-36.8%	-	-	-17.5%	44.9%	41.6%		26.4%
		Germany		327			1,078	166	395		876	234	471	46.3%	1,018
			YoY	-33.4%	-	-	-21.8%	-49.2%	-	-	-18.7%	41.0%	19.2%		16.2%
		UK (SGL) *excl. SG&A		78			406	90	141		349	136	288	54.2%	531
			YoY	-36.1%	-	-	-2.9%	15.4%	-	-	-14.0%	51.1%	104.3%		52.1%
	North America			566			2,617	318	658		2,153	600	1,342	44.2%	3,037
		YoY		-17.6%	-	-	-2.0%	-43.8%	-	-	-17.7%	88.7%	104.0%		41.1%
	South America			205			509	104	152		311	79	171	56.1%	305
		YoY		13.3%	-	-	-9.4%	-49.3%	-	-	-38.9%	-24.0%	12.5%		-1.9%
	Asia			2,103			8,981	1,515	3,217		6,848	1,960	4,212	54.8%	7,687
		YoY		-23.7%	-	-	-12.7%	-28.0%	-	-	-23.8%	29.4%	30.9%		12.3%
		Hong Kong		498			2,470	432	827		1,778	346	726	60.0%	1,209
			YoY	-23.5%	-	-	-16.4%	-13.3%	-	-	-28.0%	-19.9%	-12.2%		-32.0%
		Taiwan		366			1,187	281	572		1,073	276	497	54.7%	909
			YoY	-24.7%	-	-	0.0%	-23.2%	-	-	-9.6%	-1.8%	-13.1%		-15.3%
		China		1,037			4,608	666	1,560		3,444	1,192	2,673	54.5%	4,909
			YoY	-6.2%	-	-	-6.2%	-35.8%	-	-	-25.3%	79.0%	71.3%		42.5%
		Other		219			782	148	276		584	151	328	47.8%	686
			YoY	-16.7%	-	-	-24.0%	-32.4%	-	-	-25.3%	2.0%	18.8%		17.5%
		Intra-segment		-17			-66	-13	-19		-31	-5	-14	-	-28
	Total			3,280			13,592	2,196	4,565		10,539	3,011	6,485	51.6%	12,580
		YoY		-22.6%	-	-	-11.3%	-33.0%	-	-	-22.5%	37.1%	42.1%		19.4%
	Inter-segment sales			-324			-1,415	-257	-489		-1,068	-240	-410	-	-953
	External sales			2,955			12,177	1,938	4,076		9,470	2,771	6,075	52.3%	11,626
		YoY		-24.8%	-	-	-12.6%	-34.4%	-	-	-22.2%	43.0%	49.0%		22.8%
Operating profit				363			1,217	-140	-151		493	391	988	67.5%	1,463
	YoY			-46.1%	-	-	-41.7%	-	-	-	-59.5%	-	-		196.8%
	Europe			-104			-553	-220	-386		-305	-69	-122	-	-302
		YoY		-	-	-	-	-	-	-	-	-	-		-
		Germany		-68			-439	-169	-266		-174	-97	-204	-	-377
			YoY	-	-	-	-	-	-	-	-	-	-		-
		UK*excl. SG&A		-36			-113	-50	-119		-130	27	82	109.3%	75
			YoY	-	-	-	-	-	-	-	-	-	-		-
	North America			-213			-1,126	-355	-705		-1,167	-175	-323	-	-524
		YoY		-	-	-	-	-	-	-	-	-	-		-
	South America			39			19	4	-6		7	7	19	-	12
		YoY		44.4%	-	-	18.8%	-89.7%	-	-	-63.2%	75.0%	-		71.4%
	Asia			642			2,878	430	946		1,959	628	1,414	62.1%	2,277
		YoY		-21.0%	-	-	-19.0%	-33.0%	-	-	-31.9%	46.0%	49.5%		16.2%
		Hong Kong		159			776	134	211		441	99	213	78.0%	273
			YoY	-21.7%	-	-	-26.9%	-15.7%	-	-	-43.2%	-26.1%	0.9%		-38.1%
		Taiwan		125			371	87	172		306	75	129	58.6%	220
			YoY	-15.5%	-	-	-16.4%	-30.4%	-	-	-17.5%	-13.8%	-25.0%		-28.1%
		China		320			1,560	194	524		1,162	429	1,003	60.1%	1,670
			YoY	-18.4%	-	-	-11.6%	-39.4%	-	-	-25.5%	121.1%	91.4%		43.7%
		Other		37			169	14	38		49	23	68	59.1%	115
			YoY	-46.4%	-	-	-39.4%	-62.2%	-	-	-71.0%	64.3%	78.9%		134.7%
		Intra-segment		-			-	-	-		-	-	-	-	-2

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

1H FY03/22 results

1H FY03/22 results: The company reported consolidated sales of JPY23.7bn (+39.4% YoY), a gross profit of JPY15.2bn (+45.6% YoY), an operating profit of JPY200mn (versus loss of JPY2.6bn in 1H FY03/21), a recurring profit of JPY600mn (versus loss of JPY1.9bn), and net income of JPY1.9bn (versus loss of JPY2.8bn).
Sales, operating profit, and recurring profit came in above the initial forecast. Net income was almost in line with the original forecast, reflecting the extraordinary loss (approximately JPY1.0bn) as described below.

Japan segment: Many of the company's directly-managed stores continued to face tough trading conditions due to the expansion of areas under states of emergency and areas where measures to prevent the spread of infections were in place. However, the wholesale and e-commerce businesses were able to increase sales, which supported the business overall. Hygiene products and stay-at-home related goods which performed well as a result of impact of the COVID-19 pandemic, and a high-profile lottery tickets that captured consumer demand, accounted for larger portion of the sales mix. The number of Sanrio+ members, an app for Sanrio Fan Club members launched in July 2020, exceeded 1 million in October 2021. The theme park business was impacted by a decline in visitor numbers due to the pandemic.

Overseas segment: In Europe, apparel licensees grew and a major toy licensee resumed operations, while in North America, sales initiatives with toy manufacturers made solid progress. In China, a collaboration with a large sporting goods manufacturer contributed to growth, while demand for masks and other hygiene products grew in Asia overall.

Extraordinary loss: The company recorded an extraordinary loss of approximately JPY1.0bn related to business restructuring expenses aimed at expanding merchandise and e-commerce sales in mainland China. These expenses related to non-consolidated subsidiary Sanrio Brand Development Shanghai Co. Ltd.

FY03/22 forecast: On November 2, 2021, the company revised its full-year earnings forecast. The revised FY03/22 forecast is JPY49.3bn sales (vs. JPY49.1bn in the previous forecast), 0 operating profit (vs. JPY0.7bn operating loss in the previous forecast), JPY0.5bn recurring profit (vs. JPY0.4bn recurring loss in the previous forecast), JPY1.5bn net income attributable to owners of the parent (vs. JPY2.1bn in the previous forecast), and JPY18.62 EPS (vs. JPY26.07 in the previous forecast). The dividend forecast is unchanged. With the exception of the theme park business, where a recovery in operating profit and recurring profit has been delayed compared to the original forecast due to the declaration of states of emergency in Japan, both overseas and domestic operations are performing well. The company's sales progress rate against the revised full-year FY03/22 forecast was 48.3%. On the other hand, net income is expected to fall short of the original forecast due to an extraordinary loss in 1H FY03/22 associated with business restructuring in China. For more details see "Company forecast for FY03/22" below.

Progress of medium-term business plan: The company plans to release a document on its website in mid-November 2021.

Application for Prime Market: On October 15, 2021, the company decided to apply to the Tokyo Stock Exchange for a listing on the Prime Market. On July 9, 2021, the company received the result of its initial assessment of compliance with listing criteria for the new market category from the TSE, and has confirmed that it meets the criteria for maintaining a listing on the Prime Market.

Japan segment

In 1H FY03/22, the Japan segment reported sales of JPY20bn (+36.7% YoY) and operating breakeven (0) (loss of JPY2.0bn in 1H FY03/21). In the Product Sales Division at the head office and SET (Sanrio Entertainment), SG&A costs of JPY0 (JPY300mn in Q1 FY03/21) and JPY100mn (JPY900mn in Q1 FY03/21) were transferred to extraordinary losses respectively, as losses related to temporary park closures, etc.

HQ business

For 1H FY03/22, the Japan HQ business reported sales of JPY16.7bn (+26.5% YoY) and an operating profit of JPY600mn (versus loss of JPY1.0bn in 1H FY03/21). Sales under HQ business by division were as follows: Product sales JPY7.8bn (+24.7% YoY); Licensing JPY4.7bn (+24.6% YoY); Entertainment JPY1.4bn (+18.6% YoY); and Overseas JPY2.6bn (+40.8% YoY). Operating profit (loss) under HQ business by division were as follows: Product sales, a loss of JPY500mn (versus loss of JPY1.2bn); Licensing JPY2.2bn (+23.8% YoY); Entertainment JPY800mn (+25.4%YoY); Overseas JPY2.0bn (+48.9% YoY); and Cost center, a loss of JPY4.3bn (versus a loss of JPY3.6bn).

In Product sales, the retail division continued to struggle to the ongoing spread of COVID-19 with missed opportunities for consumers to visit stores and a decline in motivation to purchase. Comparable store sales in Q2 were +2.7% YoY in July, -5.6% YoY in August, and -16.8% YoY in September. Meanwhile, e-commerce sales (including wholesale sales) were +10.4% YoY in July, +34.4% YoY in August, and -0.2% YoY in September. The number of online members increased 47.7% YoY. The wholesale division also continued to perform well.

In Licensing, in the area of corporate licensing, new contracts for real estate-related products, lunch boxes, and meal delivery services contributed to results. In the licensing of merchandising rights, large-scale projects for global cosmetic brands boosted overall sales, and products related to home consumption were strong.

In Entertainment, the animation as well as toys and hobby businesses grew in Q2.

Sanrio Entertainment (SET)

Sales were JPY3.1bn (+162.7% YoY) and the operating loss was JPY500mn (JPY700mn in the same period last year).

In SPL, the company reported a total of 227,000 visitors during Q2 FY03/22. In the same period of the previous year, the number of visitors was 102,000 when Puroland reopened since July 13. Due to the declaration of a state of emergency and pandemic-related restrictions, the capacity of the park was limited to 50%, and the company was not able to carry out any promotions to boost visitor numbers.

In HL, the company reported a total of 73,000 visitors during Q2 FY03/22. In the same period of the previous year, the number of visitors was 47,000. Although the number of visitors in July picked up, visitor numbers from neighboring prefectures were sluggish due to the declaration of a state of emergency and pandemic-related restrictions in the Kyushu region in the first half of August.

Overseas segment

The fiscal year end of all overseas consolidated subsidiaries is January-December, and the company's consolidated results for FY03/22 will reflect the January-December period of 2021.

Europe

In European operations, the company posted 1H sales of JPY700mn (+41.6% YoY) and an operating loss of JPY100mn (versus a loss of JPY300mn in 1H FY03/21).

Sales from character licensing deals were up YoY, the bulk of the gains here coming from licensing deals with major corporations for use of Sanrio characters on apparel and the start of initiatives with major toy licensees.

With respect to its popular Mister Men/Little Miss characters, the company said it saw a continued strong licensing deal flow in the key area of publishing. In addition, sales were significantly higher compared to the previous year, due in part to a promotion by a major French publisher at a mass book retailer.

Americas

The Americas reported total 1H sales of JPY1.5bn (+86.6% YoY) and an operating loss of JPY300mn (versus a loss of JPY700mn in 1H FY03/21).

In North America, the company’s licensing business reported a steady flow of licensing deals with toy manufacturers (mainly for use of Sanrio characters in stuffed toys) and an increase in the number of retail stores handling these products, helped by an initiative with a major toy licensee. In the merchandise sales business, online sales were strong compared to the same period last year. Sales through brick-and-mortar store operations also grew significantly due to spring break and the lifting of restrictions.

In South America, sales increased significantly, driven by collaborations with online games, a new initiative in Brazil. Cllaborations with sandal producers continued to perform well in existing contracts. On the other hand, in Mexico, sales declined YoY, partly due to delays in the launch of new products by a manufacturer of sanitary products who is a major client of the company.

Asia

Operations in Asia reported total 1H sales of JPY4.2bn (+30.9% YoY) and an operating profit of JPY1.4bn (+49.5% YoY).

In Hong Kong and Macau, campaigns at convenience store chains and initiatives with manufacturers of non-woven masks and other hygiene products performed well.

In Taiwan, due to the impact of the pandemic, campaigns in convenience stores and other distribution/retail and food service industries have been sluggish. On the other hand, in the health & beauty category, new contracts with manufacturers mainly in hygience products such as masks have grown.

In South Korea, the digital category continues to perform well. In addition, sales in the footwear category have increased significantly as existing clients start sales on major e-commerce sites. On the other hand, manufacturers fousing mainly on hygiene products have reduced shipment volumes due to the impact of soaring raw material prices in China. This resulted in sluggish sales growth.

In China, sales were strong in almost all categories, including a major collaboration with a major sporting goods manufacturer and growth in the health & beauty category. In addition to Hello Kitty, other characters also contributed to sales growth. Minimum guarantee payments, which had been delayed due to the impact of the pandemic, were received, resulting in a significant increase in sales YoY. As for Mr. Men Little Miss, its recognition in China and other Asian countries has been increasing, leading to sales growth.

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		27,660	27,601	55,261	17,070	23,983	41,053	23,793	25,507	49,300
	YoY	-2.2%	-10.5%	-6.5%	-38.3%	-13.1%	-25.7%	39.4%	6.4%	20.1%
Adjusted gross profit		17,877	17,140	35,017	10,484	14,806	25,290	15,266	16,134	31,400
	YoY	-2.5%	-12.2%	-7.5%	-41.4%	-13.6%	-27.8%	45.6%	9.0%	24.2%
	Gross profit margin	64.6%	62.1%	63.4%	61.4%	61.7%	61.6%	64.2%	63.3%	63.7%
SG&A expenses		16,502	16,408	32,910	13,130	15,440	28,570	14,978	16,422	31,400
	SG&A ratio	59.7%	59.4%	59.6%	76.9%	64.4%	69.6%	63.0%	64.4%	63.7%
Operating profit		1,374	732	2,106	-2,645	-635	-3,280	288	-288	0
	YoY	-36.3%	-72.1%	-56.0%	-	-	-	-	-	-
	Operating profit margin	5.0%	2.7%	3.8%	-	-2.6%	-8.0%	-	-1.1%	0.0%
Recurring profit		2,039	1,235	3,274	-1,938	207	-1,731	636	-136	500
	YoY	-25.3%	-60.2%	-43.9%	-	-83.2%	-	-	-	-
	Recurring profit margin	7.4%	4.5%	5.9%	-	0.9%	-4.2%	-	-0.5%	1.0%
Net income		326	-135	191	-2,847	-1,113	-3,960	1,949	-449	1,500
	YoY	-78.5%	-	-95.1%	-	-	-	-	-	-

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

Revision of full-year earnings forecasts (November 2, 2021)

On November 2, 2021, the company revised its full-year earnings forecast. The revised FY03/22 forecast is JPY49.3bn sales (vs. JPY49.1bn in the previous forecast), 0 operating profit (vs. JPY0.7bn operating loss in the previous forecast), JPY0.5bn recurring profit (vs. JPY0.4bn recurring loss in the previous forecast), JPY1.5bn net income attributable to owners of the parent (vs. JPY2.1bn in the previous forecast), and JPY18.62 EPS (vs. JPY26.07 in the previous forecast). The dividend forecast is unchanged.

Supplement as of Q1 earnings report announcement (August 4, 2021)

The company stated that it maintained its initial forecast, taking into account the impact of the spread of COVID-19 and the future progress of its medium-term business plan.

The spread of COVID-19 in Japan has worsened compared to March 2021, when the company formulated its initial plan. As of August 2021, the start of Q2, emergency declarations were still in effect in Tokyo and other major urban areas. In particular, there has been a significant increase in the number of new infections since late July 2021. As a result, some Sanrio stores and theme parks are experiencing restrictions such as shortened hours and limited number of customers. These conditions will be a factor in the deteriorating 1H results of the Japan segment, which includes the Product Sales Division at the head office and SPL/HL (theme park) operated by Sanrio Entertainment (SET).

As various related costs will be incurred in promoting the medium-term business plan, there is a possibility that additional costs beyond the initial plan will be incurred from Q2 onward. The company plans to explain the progress of its medium-term business plan at its Q2 FY03/22 financial results briefing.

Initial forecast (May 14, 2021)

For FY03/22 the company projects full-year consolidated sales of JPY49.1bn (+19.6% YoY), operating loss of JPY700mn (versus loss of JPY3.2bn in FY03/21), recurring loss of JPY400mn (versus loss of JPY1.7bn in FY03/21), net income attributable to owners of the parent of JPY2.1bn (versus loss of JPY3.9bn in FY03/21), and EPS of JPY26.07. For 1H FY03/22, the company projects consolidated sales of JPY23.0bn (+34.7% YoY), operating loss of JPY1.1bn (versus loss of JPY2.6bn in 1H FY03/21), recurring loss of JPY1.0bn (versus loss of JPY1.9bn in 1H FY03/21), net income attributable to owners of the parent of JPY1.9bn (versus loss of JPY2.8bn in 1H FY03/21), and EPS of JPY23.59. With regard to its dividend payment plans, the company said now that it is taking the necessary steps to turn sales and earnings around, it is looking to pay a dividend of JPY16.0 per share for the year. Current plans call for paying an interim dividend of JPY8.0 per share and a fiscal year-end dividend of JPY8.0 per share, but the company said it will be working hard to make further improvements in profitability during the year with the hope of paying an even larger dividend at the fiscal year-end.

Sanrio’s initial forecast for FY03/22 was formulated on the basis of the operating environment as of March 2021. In April 2021, however, a third state of emergency was imposed in some areas of Japan, and during the Golden Week holiday period in late April and early May the company was forced to close its Puroland theme park temporarily. In the product sales business, some stores (those in department stores, for example) also had to close temporarily or shorten their opening hours. This has resulted in circumstances that differed somewhat from those envisioned when initial guidance was generated. The company noted that the financial results report by overseas subsidiaries that are included in consolidated results in FY03/22 (April 2021–March 2022) will all be based on the January–December 2021 calendar year.

Since the start of FY03/22, Sanrio has sold some land and buildings that it had been using as offices and for other purposes as part of an overall effort to better utilize its resources and improve its financial position. With the sales contract having been signed on March 26 and the actual transfer having taken place on April 20, 2021, the company expects to book extraordinary gains on the sale of these fixed assets of some JPY3.8bn in Q1 FY03/22. The company also noted that the transaction took the form of a sales-leaseback agreement, under which it plans to remain in place and continue using the property for another three years.

Revisions to breakdown for company earnings forecasts

As of FY03/22, Sanrio made changes to the breakdown of company earnings forecasts. The company now has reportable segments based on the structure of sales activities by geographical segment (Japan, Europe, North America and South America, and Asia), with forecasts for the Japan segment further broken down into headquarters, Puroland (SPL), and Harmonyland (HL). Earnings forecasts for Sanrio headquarters are divided still further by business division, while those for overseas segments are disclosed on an individual subsidiary basis. The company will also use this method for future quarterly earnings disclosures.

Previously, Sanrio employed disclosure by reportable segment in financial results summaries and securities reports. In results briefing materials, though, master license fees remitted to the parent company were added back to figures for each regional subsidiary, while the domestic operation was broken down into Product Sales, Licensing, and Other. In principle, Sanrio used the figures reported in results briefing materials as basis for communication with investors. For the purposes of business administration, however, as of FY03/21 the company used individual business divisions to categorize domestic earnings, and individual subsidiaries to do the same for overseas earnings. With the release of its new medium-term business plan Sanrio decided to unify disclosure, employing only the figures used for business administration purposes. Thus under this new method of disclosure, figures may differ even if the name used is the same. This needs to be taken into account when making comparisons with FY03/20 and earlier.

Key changes

Product supply costs (for merchandise production and distribution centers) previously were treated as companywide costs, but they are now allocated to the product sales business as that is where they are mainly incurred (as a consequence, the product sales operating profit margin appears lower than it did previously). Costs for the e-commerce business previously came under the Domestic Other business but now are included in the domestic product sales business.

Costs for the entertainment (animation, games, etc.) business previously were allocated to the Domestic Licensing business but now are treated separately. Similarly, costs associated with corporate licensing and deals with convenience stores previously were divided between the Domestic Licensing business and Domestic Other business, but now are allocated solely to the domestic licensing business.

As a result of the above, costs falling into the domestic other business category now are limited to animation/movie production and advertising costs and other companywide costs that are not associated directly with any single business division.

Master license fees remitted by overseas subsidiaries to the parent company are no longer added back to the earnings of subsidiaries in each region (subsidiaries’ profitability accordingly can be compared directly with that of non-group companies also paying licensing fees).

Detailed forecasts by segment

Company forecast by reportable segment

By reportable segment		FY03/21			FY03/22			YoY
(JPYmn)		1H Act.	2H Act.	FY Act.	1H Est.	2H Est.	FY Est.	1H	2H	FY
Sales		17,070	23,983	41,053	23,000	26,100	49,100	34.7%	8.8%	19.6%
	Japan	14,718	20,222	34,940	20,297	23,177	43,474	37.9%	14.6%	24.4%
	Europe	536	689	1,225	629	735	1,364	17.4%	6.7%	11.3%
	Americas	811	1,653	2,464	1,001	1,625	2,626	23.4%	-1.7%	6.6%
	Asia	3,217	3,631	6,848	3,512	3,308	6,820	9.2%	-8.9%	-0.4%
	Total	19,284	26,195	45,479	25,442	28,843	54,285	31.9%	10.1%	19.4%
	Adjustments	-2,213	-2,213	-4,426	-2,442	-2,743	-5,185	-	-	-
Operating profit		-2,645	-635	-3,280	-1,100	400	-700	-	-	-
	Japan	-2,088	-850	-2,938	-942	406	-536	-	-	-
	Europe	-386	81	-305	-241	-112	-353	-	-	-
	Americas	-711	-449	-1,160	-515	-227	-742	-	-	-
	Asia	946	1,013	1,959	983	774	1,757	3.9%	-23.6%	-10.3%
	Total	-2,239	-206	-2,445	-716	840	124	-	-	-
	Adjustments	-406	-428	-834	-383	-441	-824	-	-	-

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

Japan segment

Forecast for Japan segment

Japan segment		FY03/21			FY03/22			YoY
(JPYmn)		1H Act.	2H Act.	FY Act.	1H Est.	2H Est.	FY Est.	1H	2H	FY
Sales
	Head office	13,241	17,322	30,563	15,743	18,520	34,263	18.9%	6.9%	12.1%
	Sanrio Puroland (SPL)	875	2,223	3,098	3,236	3,404	6,640	269.8%	53.1%	114.3%
	Harmony Land (HL)	305	610	915	1,121	878	1,999	267.5%	43.9%	118.5%
	Other subsidiaries	861	1,024	1,885	1,088	1,430	2,518	26.4%	39.6%	33.6%
	Total	15,284	21,178	36,462	21,189	24,233	45,422	38.6%	14.4%	24.6%
	Intra-segment	-566	-956	-1,522	-891	-1,056	-1,947	-	-	-
	Total sales	14,718	20,222	34,940	20,297	23,177	43,474	37.9%	14.6%	24.4%
	Inter-segment	-1,724	-1,633	-3,357	-1,771	-1,919	-3,690	-	-	-
	External sales	12,994	18,588	31,582	18,526	21,257	39,783	42.6%	14.4%	26.0%
Operating profit
	Head office	-1,075	155	-920	-920	404	-516	-	160.6%	-
	Sanrio Puroland (SPL)	-554	-661	-1,215	-27	52	25	-	-	-
	Harmony Land (HL)	-220	-201	-421	74	-53	21	-	-	-
	Other subsidiaries	-172	-61	-233	-60	50	-10	-	-	-
	Total	-2,023	-768	-2,791	-934	454	-480	-	-	-
	Intra-segment	-64	-83	-147	-7	-49	-56	-	-	-
	Operating profit	-2,088	-850	-2,938	-942	406	-536	-	-	-
	Company-wide expenses	-403	-434	-837	-403	-434	-837	-	-	-

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

Head office business divisions

The company does not expect inbound demand to recover in FY03/22. It anticipates sales growth in the Product Sales division, which particularly suffered in FY03/21. Meanwhile, it forecasts weaker sales growth in the Licensing and Entertainment divisions, where sales decline was rather small in FY03/21. As mentioned, some stores (those in department stores, for example) had to close temporarily or shorten their opening hours under the state of emergency declaration in April 2021, which was not anticipated at the time the company released its initial forecast.

SPL and HL (theme parks)

As indicated earlier, the re-imposition of a state of emergency meant that Puroland (SPL) was forced to close temporarily over the Golden Week holiday period in late April and early May, which is traditionally the busiest time for theme park operators. This closure was not anticipated at the time the company released its initial forecast.

Parent company: breakdown of sales and operating profit forecast by segment

By head office division			FY03/21			FY03/22			YoY
(JPYmn)			1H Act.	2H Act.	FY Act.	1H Est.	2H Est.	FY Est.	1H	2H	FY
Sales			13,241	17,322	30,563	15,743	18,520	34,263	18.9%	6.9%	12.1%
	Product sales		6,275	9,085	15,360	7,846	9,686	17,532	25.0%	6.6%	14.1%
	Licensing		3,827	4,989	8,816	4,441	5,104	9,545	16.0%	2.3%	8.3%
	Entertainment		1,219	1,333	2,552	1,331	1,391	2,722	9.2%	4.4%	6.7%
	Overseas		1,909	1,901	3,810	2,113	2,331	4,444	10.7%	22.6%	16.6%
		Royalty income from subsidiaries	1,545	1,451	2,996	1,651	1,859	3,510	6.9%	28.1%	17.2%
		Product sales (exports)	364	449	813	462	471	933	26.9%	4.9%	14.8%
Operating profit			-1,435	-322	-1,757	-1,324	-29	-1,353	-	-	-
	Product sales		-1,289	-545	-1,834	-958	-311	-1,269	-	-	-
	Licensing		1,788	2,484	4,272	2,200	2,670	4,870	23.0%	7.5%	14.0%
	Entertainment		641	710	1,351	707	718	1,425	10.3%	1.1%	5.5%
	Overseas		1,427	1,252	2,679	1,532	1,740	3,272	7.4%	39.0%	22.1%
		Royalty income from subsidiaries	1,465	1,279	2,744	1,528	1,726	3,254	4.3%	34.9%	18.6%
		Product sales (exports)	-38	-27	-65	4	13	17	-	-	-
	SUM		2,215	3,532	5,747	3,123	4,366	7,489	41.0%	23.6%	30.3%
	Cost center		-3,650	-3,855	-7,505	-4,447	-4,395	-8,842	-	-	-

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

Forecast for company-wide SG&A expenses

SG&A by head office division	FY03/21			FY03/22			YoY
(JPYmn)	1H Act.	2H Act.	FY Act.	1H Est.	2H Est.	FY Est.	1H	2H	FY
Personnel	1,914	1,814	3,728	1,809	2,041	3,850	-5.5%	12.5%	3.3%
Selling expenses	77	128	205	278	238	516	261.0%	85.9%	151.7%
Advertising	298	326	624	550	450	1,000	84.6%	38.0%	60.3%
Distribution	9	8	17	9	9	18	0.0%	12.5%	5.9%
Right-of-use assets	320	305	625	396	356	752	23.8%	16.7%	20.3%
Other	1,030	1,273	2,303	1,402	1,302	2,704	36.1%	2.3%	17.4%
Total	3,650	3,855	7,505	4,447	4,395	8,842	21.8%	14.0%	17.8%

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

Company-wide expenses

The comparison with FY03/21 is premised on the booking of JPY2.2bn in head office-related marketing costs, an increase of JPY0.7bn YoY in reflection of the resumption of normal sales activities. Of this, the company expects to book marketing costs of JPY1.2bn in 1H, up JPY400mn YoY.

Overseas segment

Overseas subsidiaries: breakdown of sales and operating profit forecast by segment

By overseas segment			FY03/21			FY03/22			YoY
(JPYmn)			1H Act.	2H Act.	FY Act.	1H Est.	2H Est.	FY Est.	1H	2H	FY
Sales
	Europe		536	689	1,225	629	735	1,364	17.4%	6.7%	11.3%
		Germany	395	481	876	457	472	929	15.7%	-1.9%	6.1%
		UK (ex. SGA)	141	208	349	171	263	434	21.3%	26.4%	24.4%
	North America		658	1,495	2,153	862	1,501	2,363	31.0%	0.4%	9.8%
	South America		152	159	311	139	124	263	-8.6%	-22.0%	-15.4%
	Asia		3,217	3,631	6,848	3,512	3,308	6,820	9.2%	-8.9%	-0.4%
		Hong Kong	827	951	1,778	645	461	1,106	-22.0%	-51.5%	-37.8%
		Taiwan	572	501	1,073	579	460	1,039	1.2%	-8.2%	-3.2%
		China	1,560	1,884	3,444	2,053	2,120	4,173	31.6%	12.5%	21.2%
		Other	276	308	584	254	289	543	-8.0%	-6.2%	-7.0%
		Intra-segment	-19	-12	-31	-19	-24	-43	-	-	-
	Total		4,565	5,974	10,539	5,144	5,666	10,810	12.7%	-5.2%	2.6%
	Inter-segment sales		-489	-579	-1,068	-655	-792	-1,447	-	-	-
	External sales		4,076	5,394	9,470	4,488	4,875	9,363	10.1%	-9.6%	-1.1%
Operating profit			-151	644	493	226	435	661	-	-32.5%	34.1%
	Europe		-386	81	-305	-241	-112	-353	-	-	-
		Germany	-266	92	-174	-198