The primary business of Visionary Holdings is retail sales of eyeglasses and contact lenses through its Meganesuper chain of retail stores. Using eye care services, to provide solutions to prolong the healthy lifespan of eye health (ie, products, services, advice) to differentiate itself from competitors, Visionary Holdings is the fourth largest company in the domestic eyewear industry in terms of sales (as of FY2020). In FY04/21, 36.1% of sales came from eyeglasses, 40.4% from contact lenses, and 23.4% from hearing aids. The sales weighting of contact lenses is relatively high compared to other major eyewear chains. The average price for eyeglasses was JPY39,419 in Q4 FY04/21 (JPY36,854 in Q4 FY04/20), which is higher than its peers. The average price is increasing because the company charges separately for comprehensive eye exams, high function premium lenses, and eyeglass frames. While 38% of its stores are located in shopping districts, 40% are standalone roadside stores, and 22% are located in shopping malls. The company has an especially large presence in the Kanto and Chubu regions.
In the past, the company tried unsuccessfully to compete against low-price sellers without making any changes to its high-cost structure but found itself slipping into the red in FY04/08. After persistent losses in the following years eroded its capital base, Advantage Partners stepped in to acquire a 74.9% stake in January 2012 (subsequently reduced to 68.4% at the end of FY04/15) and set about restructuring and reviving the business. In FY04/14, Visionary Holdings recorded operating loss of JPY2.1bn and net loss of JPY2.6bn, but after that the company got back on the road to recovery and finally moved out of the red and into the black in FY04/16, reporting operating profit of JPY523mn and net income of JPY261mn.
In June 2014, Visionary Holdings made a decisive switch in its business strategy, forswearing price competition and instead redefining itself as an eyecare provider with a lineup of products and services aimed at helping customers prolong the healthy lifespan of their eyes. Along with this switch, the company also broke from the industry practice of bundling frames and lenses, choosing instead to price all frames, lenses, and eye exams separately. Aided by the expansion of its eye exam services, it also expanded sales of premium lenses (i.e., lenses other than mono-focal) and was able to further differentiate itself from competitors by setting prices commensurate with the quality of products and services offered. As a result of these changes, Visionary Holdings was able to successfully go after the market segment comprised of people aged 45 and above (the age at which people’s vision tends to change) and turn around sales and earnings.
The company’s priority since FY04/17 has been restarting growth and, toward this end, it has been rolling out true eyewear specialty stores (where the emphasis is on eye care). It has focused on improving its operating efficiency, building a foundation that can support sustained growth, and strengthening its business infrastructure. Advantage Partners and related parties reduced their stake in Visionary Holdings by selling shares through a secondary offering in August 2018, and are no longer the leading shareholders. Also, Advantage Partners appointed board members retired in July 2019 so it no longer has representatives on the board, a sign that Visionary Holdings moved out of the business rehabilitation stage from a capital perspective as well.
In December 2019, the company announced that it had formed a capital and business alliance with M3 Inc. (TSE Prime: 2413), which operates a medical information website. In addition to marketing products and services based on M3’s healthcare network and content at Visionary Holdings stores, the company is also strengthening ties with nearby ophthalmologists by leveraging M3’s network of healthcare professionals.
◤ FY04/21 results: For FY04/21, the company reported full-year consolidated sales of JPY26.1bn (-4.7% YoY), operating profit of JPY353mn (versus a loss of JPY212mn in FY04/20), net income attributable to owners of the parent of JPY67mn (versus a loss of JPY1.2bn in FY04/20), and EBITDA* of JPY1.3bn (+46.8% YoY) (*EBITDA = operating profit + amortization of long-term prepaid expenses + amortization of asset retirement obligations + depreciation and goodwill amortization + share-based compensation expenses). The decline in sales was attributable to a combination of (1) temporary store closures, shortened operating hours, and other disruptions that weighed on sales at existing stores in the wake of the pandemic, and (2) a decline in the number of stores in operation following the acceleration of closures, relocations, and consolidations of unprofitable stores. The decline in sales notwithstanding, the company still managed to move into the black, reporting operating profit of JPY353mn versus a year-earlier loss of JPY212mn thanks to concerted cost control at the SG&A expense level, including negotiating with landlords to secure lower rents, curbing non-essential/non-urgent spending, and making sustained reductions in store operating hours so as to reduce employee overtime hours and raise store profitability. At the recurring profit level, the company reported a full-year profit of JPY926mn versus a year-earlier loss of JP332mn, mainly reflecting JPY603mn in employment adjustment subsidies received from the government during the year. Net income attributable to owners of the parent was JPY67mn (versus a loss of JPY1.2bn in FY04/20) as the company booked losses in connection with planned store relocations/closures (in FY04/21 and FY04/22) and upgrades to its core IT systems, including JPY645mn in impairment losses, JPY32mn in losses on store closures, and JPY192mn in inventory valuation losses.
The company maintained its stance that the outlook for FY04/22 was undetermined, because it was still difficult to make reasonable earnings estimates. The company said, however, that it would be quick to make an announcement and provide guidance for FY04/22 as soon as it is in a position to do so.
Under its medium-term plan (covering FY04/20–FY04/23, announced in June 2019), the company is targeting FY03/23 consolidated sales of JPY37.3bn (representing a CAGR of 8.9%), operating profit of JPY1.7bn (22.9%), and EBITDA of JPY2.9bn (16.3%). Its basic strategy calls for 1) transitioning to its new, next-generation store format; 2) the ongoing rollout of new stores designed to meet the needs of local markets; 3) ongoing hiring and training of new staff to support growth in the business; 4) using its Me no Kenkou (eye health) platform to facilitate additional acquisitions; and 5) moving into new markets by growing its wearable device business.
Strengths: lessons learned from past mistakes, database of over 9mn customers, and the targeting of (and ability to reach) customers aged 45+. Weaknesses: financing constraints that make it difficult to acquire new customers, a limited customer base, and limited store locations. (See the “Strengths and weaknesses” section for details.)
|Gross profit margin||66.5%||64.4%||67.1%||68.2%||65.8%||63.9%||62.9%||62.4%||62.6%|
|Operating profit margin||-10.1%||-14.3%||-5.7%||3.3%||2.4%||3.3%||3.5%||-0.8%||1.4%|
|Non-operating income (expenses)||-48||-326||-177||-102||-86||-129||-79||-121||573|
|Recurring profit margin||-10.4%||-16.4%||-6.9%||2.7%||1.9%||2.7%||3.2%||-1.2%||3.6%|
|Extraordinary gains (losses)||-515||-62||-386||22||-46||-44||-326||-466||-856|
|Implied tax rates||-5.7%||-4.6%||-8.2%||41.1%||61.8%||-33.2%||5.2%||-42.6%||-39.5%|
|Per-share data (JPY)||FY04/13||FY04/14||FY04/15||FY04/16||FY04/17||FY04/18||FY04/19||FY04/20||FY04/21|
|Shares issued (year-end; mn)||1.4||5.5||6.4||8.2||15.9||15.9||22.6||37.2||37.4|
|Book value per share (JPY)||-2,325.4||-323.0||-441.2||-226.1||-111.1||-5.8||15.3||127.6||135.7|
|EPS (fully diluted; JPY)||-||-||-||8.7||1.7||28.8||18.5||-||-|
|Balance sheet (JPYmn)||FY04/13||FY04/14||FY04/15||FY04/16||FY04/17||FY04/18||FY04/19||FY04/20||FY04/21|
|Cash and cash equivalents||492||1,702||1,336||2,791||3,439||2,975||1,261||5,421||6,194|
|Allowance for doubtful accounts||-1||-1||-1||-0||-0||-||-||-||-|
|Tangible fixed assets||2,569||2,853||2,614||2,559||2,686||2,426||2,795||2,960||2,942|
|Investments and other assets||4,823||4,344||3,122||3,108||3,119||3,046||3,496||3,331||3,245|
|Allowance for doubtful accounts||-89||-89||-89||-89||-78||-91||-89||-88||-88|
|Income taxes payable||130||151||144||231||175||54||123||180||177|
|Other current liabilities||388||272||483||1,074||1,337||1,560||1,777||2,158||2,893|
|Valuation and translation differences||6||6||4||1||-262||-178||-168||-51||-123|
|Subscription rights to shares||-||-||16||64||135||250||352||444||475|
|Total liabilities and equity||11,703||12,469||11,036||12,336||13,397||14,054||15,065||19,575||19,874|
|Cash flow statement (JPYmn)||FY04/13||FY04/14||FY04/15||FY04/16||FY04/17||FY04/18||FY04/19||FY04/20||FY04/21|
|Cash flows from operating activities||-2,228||-1,945||-1,147||1,073||976||974||354||1,385||2,726|
|Cash flows from investing activities||167||126||414||-452||-627||36||-1,080||-1,042||-611|
|Cash flows from financing activities||1,288||3,028||364||714||193||-1,303||-929||3,749||-1,342|
Visionary Holdings Co., Ltd. released monthly sales data for April 2022.
|Comparable-store sales YoY||May||Jun||Jul||Aug||Sep||Oct||Nov||Dec||Jan||Feb||Mar||Apr|
|All-store sales YoY||May||Jun||Jul||Aug||Sep||Oct||Nov||Dec||Jan||Feb||Mar||Apr|
On March 17, 2022, Visionary Holdings Co., Ltd. announced a merger between two consolidated subsidiaries as part of its group restructuring efforts.
At a meeting of the company's board of directors on the same day, the board approved plans for an absorption-type merger between two consolidated subsidiaries, with wholly owned VH Retail Service Co., Ltd. being the surviving company after its merger with Megane House Co., Ltd. (a subsidiary of VH Retail Service). With way of explanation, the company said the merger of the two subsidiaries would help strengthen the group's retail sales operations, facilitate faster decision-making, and otherwise help increase management efficiency of the group amid prolonged COVID-19 pandemic.
Because this is a merger of two subsidiaries, it will not have a material impact on consolidated results.
With the merger agreement having been approved on March 17, 2022 by the board of directors of the three companies involved (Visionary Holdings, VH Retail Service, and Megane House) and also by the shareholders of VH Retail Service, the merger is now set to go into effect on May 1, 2022.
On the same day, the company announced that it would be making its consolidated subsidiary Enhanlabo Co., Ltd. a wholly owned subsidiary, and that along with this it would also be spinning off and selling Enhanlabo's wearable device business, and then dissolving and liquidating the rest of Enhanlabo, waiving any of Enhanlabo's debt obligations it held in the process.
At the meeting of its board of directors held on March 17, 2022, the board also approved plans for the disposition of subsidiary Enhanlabo. Under the plan, consolidated subsidiary Enhanlabo is first transformed into a wholly owned subsidiary, then its wearable device business will be spun off and sold. The rest of Enhanlabo will subsequently be dissolved and liquidated, with Visionary Holdings waiving any of Enhanlabo's debt obligations that it holds in the process.
Located in the Nihonbashi district of Tokyo, Enhanlabo Co., Ltd. was until today a majority-owned consolidated subsidiary of Visionary Holdings, with Visionary Holding owning 94.3%; other shareholders include Tokyo Optical Co., Ltd. and Rikei Corporation, each with a 2.8% stake.
Enhanlabo had been aiming to develop and commercialize its "b.g." wearable device business at an early stage, but is now looking at a much longer timeframe before receiving big orders. Faced with this situation, Visionary Holdings, with a view to optimize the use of its management resources, decided to transfer rights and obligations related to the "b.g." wearable devices business to Tokyo Optical Co., Ltd. and then dissolve and liquidate the rest of Enhanlabo while waiving any of Enhanlabo's debt obligations that it held in the process.
With these plans having been approved on March 17, 2022 by the board of directors of Visionary Holdings and Enhanlabo, as well as by the shareholders of Enhanlabo, Visionary Holdings' acquisition of the minority stakes in Enhanlabo was also completed the same day. This paves the way for the absorption-type company split and the transfer of the wearable device business to take place on April 30, followed by the final liquidation of the remainder of Enhanlabo on August 15, 2022.
The disposition of Enhanlabo is not expected to have a material impact on consolidated results for FY04/22.
|(JPYmn)||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||Q1–Q3||Q1–Q4||% of Est.||FY Est.|
|Gross profit margin||62.5%||62.5%||62.6%||62.4%||63.8%||64.3%||64.2%||62.6%||59.6%||60.6%||61.4%|
|Operating profit margin||-1.4%||0.8%||0.9%||-0.8%||2.5%||3.6%||2.9%||1.4%||-||-||-|
|Recurring profit margin||-2.0%||0.4%||0.5%||-1.2%||4.5%||4.9%||4.6%||3.6%||-||-||-|
|Gross profit margin||62.5%||62.6%||62.9%||61.4%||63.8%||64.8%||63.9%||57.8%||59.6%||61.6%||62.9%|
|Operating profit margin||-1.4%||3.0%||1.0%||-6.4%||2.5%||4.6%||1.6%||-3.5%||-||0.5%||1.8%|
|Recurring profit margin||-2.0%||2.8%||0.7%||-7.2%||4.5%||5.3%||4.1%||0.3%||-||2.1%||2.0%|
|Operating profit margin||-1.4%||3.0%||1.0%||-6.4%||2.5%||4.6%||1.6%||-3.5%||-||0.5%||1.8%|
|Operating profit margin||2.9%||5.8%||3.1%||-5.5%||5.9%||8.6%||5.7%||1.2%||0.3%||6.9%||7.1%|
|Operating profit margin||-||-||0.6%||0.7%||0.4%||-||0.7%||-||16.6%||0.4%||0.8%|
|Operating profit margin||0.4%||0.5%||0.7%||0.6%||0.6%||0.7%||0.2%||0.5%||24.6%||1.0%||1.2%|
|Operating profit margin||-||-||-||-||-||-||-||-||-||0.0%||0.0%|
|% of sales||7.1%||7.0%||8.4%||7.8%||7.9%||7.8%||8.5%||10.1%||9.4%||9.6%||8.6%|
|% of sales||25.7%||24.1%||24.3%||28.1%||26.2%||24.4%||25.2%||24.3%||26.7%||22.3%||24.2%|
|% of sales||10.0%||9.4%||10.0%||11.7%||9.9%||9.4%||9.6%||9.3%||9.2%||9.4%||9.4%|
|% of sales||4.5%||3.2%||3.3%||4.9%||3.6%||3.5%||3.6%||3.4%||4.4%||2.9%||3.5%|
|% of sales||16.5%||15.9%||15.9%||15.3%||13.7%||15.1%||15.2%||14.1%||16.4%||16.8%||15.3%|
|Factors affecting OP changes||FY04/20||FY04/21||FY04/22|
|Gross profit margin||-99||-55||75||-71||95||163||67||-232||-270||-224||-65|
|Other admin. expenses||-248||-159||-64||-49||283||141||100||37||-200||-69||-49|
|Comparable-store sales YoY||7.9%||-0.8%||-4.8%||4.4%||0.0%|
|Store count in Japan||373||374||373||369||332||325||324||322||324||323||325|
|Operating profit margin||3.0%||6.2%||3.3%||-5.5%||6.3%||9.1%||6.6%||0.6%||0.3%||7.4%||7.7%|
|Average price of frame and lenses (Comparable-store sales YoY)||FY04/20||FY04/21||FY04/22|
|All existing stores||36,696||37,870||37,047||36,854||37,030||38,961||39,055||39,419||39,507||41,531||44,009|
|Next-generation format stores||41,471||42,198||40,627||40,457||40,220||42,660||42,776||42,816||42,770||44,500||46,381|
|Gross profit margin||47.6%||48.5%||49.0%||43.6%||46.6%||40.9%||40.2%||36.8%||58.8%||31.7%||44.6%|
|Operating profit margin||-||-||16.7%||10.3%||10.3%||-||20.5%||-||16.6%||15.2%||20.5%|
|Gross profit margin||46.9%||44.7%||43.8%||44.5%||45.0%||43.3%||40.3%||45.5%||49.4%||50.6%||56.2%|
|Operating profit margin||18.9%||18.9%||27.7%||20.8%||22.8%||24.5%||6.4%||15.4%||24.6%||31.1%||36.4%|
The company applied the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020), but this had minimal impact on earnings.
Although customer traffic declined in the company's core Retail segment as consumers tended to remain at home during the COVID-19 pandemic, sales were about the same YoY. This growth occurred in part because the company's sales composition changed during the pandemic. The change in sales composition was primarily driven by ongoing measures aimed at strengthening services that generate recurring revenue (contact lens delivery service, etc.).
The company recorded an operating loss in Q3 FY04/22. GPM was down as a result of changes in pricing policy and the sales mix, with gross profit down. Although rent and labor costs were lower, SG&A expenses rose on the back of higher selling expenses.
Gross profit: The company reported gross profit of JPY12.1bn (-3.5% YoY) and GPM of 61.4% (-2.8pp YoY). Main factors were first-time discounts for the contact lens delivery service, as well as a greater sales weighting for relatively low-margin contact lenses and luxury brand frames.
GPM was lower than Q3 FY04/21, but has been improving on a quarterly basis from 57.8% in Q4 FY04/21 to 62.9% in Q3 FY04/22. The company has worked to improve GPM by keeping coupons to a minimum and re-evaluating promotions. With the recovery in eyeglasses, GPM is expected to continue to improve to around 65%.
SG&A expenses: The company reported SG&A expenses of JPY12.4bn (+3.5% YoY) and an SG&A ratio of 62.8% (+1.6pp YoY). Although SG&A expenses were up from Q3 FY04/21, they were kept to a minimum compared to 1H.
Selling expenses were up 14.8% YoY to JPY1.8bn. The company stepped up advertising activity beginning Q1 FY04/22 in anticipation of higher customer volume as COVID-19 subsides, utilizing a broad range of media (including TV commercials in the Greater Tokyo area, direct mail and newspaper inserts, as well as SNS, YouTube and video ads in taxis) to promote greater recognition of high-value added services such as eye care examinations and the warranty system, as well as the contact lens delivery service.
Coupon distribution was curtailed as the number of customers picked up as a result of increased awareness and recovery of foot traffic as things returned to normal.
Personnel expenses were down 2.4% YoY to JPY4.8bn. The decrease reflected contraction of the store network and a reversal of bonus reserves in Q2 FY04/22 and a scaling back of mid-career hiring. Store operations put priority on profitability, as the company continued to shorten business hours, maintained one-shift system, and more strongly encouraged customer reservations, aiming to flexibly and efficiently allocate store personnel.
Rent was down 2.0% YoY to JPY1.9bn. As sales activities returned to normal, store rent linked to sales increased YoY.
Other expenses were up 11.1% YoY to JPY3.2bn. Cost burdens associated with providing the coronavirus vaccine and weekly antigen testing for all employees increased.
A fraudulent outflow of funds based on false instructions provided by a malicious third party occurred at a subsidiary, leading to extraordinary losses of JPY95mn. This is currently being investigated by the authorities.
The company left its forecast for FY04/22 undecided, citing uncertainties in the operating environment, including trends in new COVID-19 infections, which make reasonable calculations difficult.
Sales and profits remained within the range of internal forecasts. In its initial forecast, the company expected that customer footfall would recover in early autumn 2021 as the vaccine rollout wound down and the impact from COVID-19 eased, with operating profits returning for the full year. Based on these assumptions, assuming sluggish sales, the company maintained the employment of full-time employees, continuing operations with an emphasis on store profitability, such as shortening business hours and more strongly encouraging customer reservations to optimize staff deployment. On the other hand, in order to attract customers in 2H FY04/22, the company strengthened advertising activities beginning in Q1 FY04/22 in an aim to raise awareness.
Although the operating environment changed drastically with the COVID-19 outbreak, making certain rational assumptions, the company has made flexible strategic adjustments by making decisions quickly from the top down when deviating from assumptions. Through business revitalization, the company has managed to shorten the process from decision to execution, enabling top management to make quick decisions and execute these in a timely manner. The company has in fact closed unprofitable stores, continued shortened business hours, and reduced labor costs through a one-shift system since the early days of the COVID-19 epidemic.
Q4 FY04/22 includes March and April, when demand is typically high. With COVID-19 infections subsiding, the company will focus on securing profits.
In February 2022, sales decreased by 14.5% due to a temporary rise in COVID-19 cases. As February saw increased infections and sluggish demand, the company thoroughly constrained promotions and instead focused on securing profitability.
In March and April, sales at existing stores are expected to recover as efforts to tame COVID-19 and increase customer numbers prove effective. To meet new lifestyle demand, the company will also strengthen the first month discount campaign for its regular contact lens delivery service.
The company intends to invest JPY6.0bn under its medium-term business plan (FY04/20–FY04/23). Specific investment goals are 1) JPY400mn for personnel and system investments, 2) JPY2.0bn for eye exam and other equipment, 3) JPY1.9bn for store remodeling, and 4) JPY1.7bn for new store openings. As of Q3 FY04/22, the company had invested a total of JPY4.0bn (65.8% of the earmarked amount). Since the height of the pandemic, renewals have been curtailed in line with the company's earnings. The company opened new stores as it identified favorable locations, with continued investments in HR and its core systems. It is preparing a store environment which is suitable for selling cutting-edge eyeglasses and hearing aids. A new system is scheduled to be introduced by the end of April 2024, and the company expects this to contribute to improved store productivity and more efficient inventory management.
The Retail segment reported sales of JPY18.4bn (-0.1% YoY) and operating profit of JPY947mn (-28.7% YoY). Customer traffic was down due to the trend of consumers staying at home in response to state of emergency declarations and priority measures implemented to prevent the spread of COVID-19.
The company opened 17 new stores (of which 11 were relocated) and closed 13 (four integrated with nearby stores and nine relocated), bringing the total number of stores at end-Q3 FY04/22 to 325 (+1 YoY). The company prioritized store profitability in operations, such as continuing to shorten opening hours and recommending and strengthening customer reservations to optimize staffing with greater flexibility.
Store openings: Visionary Holdings is opening new stores by means of cross-industry collaboration, hoping to generate mutual demand between customer bases. It joined forces with menswear retailer Aoki Holdings (TSE Prime 8214), reopening two stores as shops inside Aoki outlets. Sales climbed after the move, suggesting the desired synergistic effects, and the company plans to open more such stores going forward. The company has also teamed up with Minamisoma City in Fukushima Prefecture, where it opened a mobile store on the site of a public commercial facility as a special event. Going forward, the company plans to collaborate with more local governments around the country, to provide mobile store services to regions that lack eyeglass and hearing aid retailers. The company also advanced relocation. With COVID-19, there were more opportunities to secure favorable locations under favorable conditions, and the company has been moving to locations closer to stations and larger stores.
Store closings: Shortly after the COVID-19 outbreak, anticipating the pandemic’s prolonged impact, Visionary Holdings decided to shut down unprofitable stores. It closed 35 stores in 1H FY04/20 followed by 49 more stores in 2H. Closures focused on stores that were already struggling and were likely to generate losses under lower customer volumes, as well as stores located in shopping centers and other venues where the company had little say over matters like business hours. This helped the company to minimize outflows leading to deficits. With the likely candidates already dealt with, the company closed 13 more stores in cumulative Q3 FY04/22, with this entailing consolidating four stores into nearby stores and relocating nine, rather than a complete withdrawal from operations.
Next-generation format stores: The company had 157 next-generation stores in Q3 FY04/22 (+40 stores YoY), representing 48.3% of the network. To provide high-value-added Total Eye Exams and make stores more suitable for retailing high-end eyewear, the company is accelerating the remodeling of aging stores and the shift to next-generation stores.
Eyeglasses: Sales were JPY7.4bn (-5.2% YoY).
Overall customer volume: Customer volume for all eyeglass stores
was down by 14.3% YoY in Q1 FY04/22, by 12.2% in Q2 and 11.6% in Q3. Against the backdrop of a prolonged state of emergency and a surge in COVID-19 cases, many consumers tended
to stay home. Decreased customer numbers are expected to bottom out and then recover as things return to normal.
Average customer spend for all stores: Average customer spend for all eyeglass stores was up by 6.4% in Q1 FY04/22, 6.7% in Q2 and 12.6% in Q3. Average unit price of eyeglasses was JPY39,507 (+6.7% YoY) in Q1, JPY41,531 (+6.6% YoY) in Q2 and JPY44,009 (+12.7% YoY) in Q3. Unit price includes the price of frames, lenses, and accessories, as well as eye exam fees. Lower customer footfall has meant more customer service time per customer. Meanwhile, a stronger emphasis on staff training has led to greater customer service and exam capabilities. This has yielded greater customer satisfaction with service and product proposals, and fed into more sales of products with higher unit prices. By conveying to customers its stance of emphasizing eye care and by expanding its network of next-generation and remodeled stores, the company has created an environment in which customers are willing to buy more high-end products.
Total Eye Exams: For a fee, the company conducts a visual acuity exam to help customers select lenses. Customers can choose between a Lite course (23 categories tested, JPY2,000), a Total Eye course (42 categories, JPY3,000), and a Premium course (52 categories, JPY4,000). The company is attracting more customers to the Premium course by teaching the importance of performing a detailed exam to select the optimum frame and lens. In Q3 FY04/22, 75.5% of customers opting for an exam chose the Premium course (versus 26.3% in Q1 and 42.3% in Q2). These efforts are leading to higher average customer spend in the short term. The removal of the light course from the menu table also contributed to an increase in customers selecting the premium course. Over the longer term, Visionary Holdings expects that customers who are satisfied that they bought the optimum frame and lens through a thorough eye exam will be converted to regular customers.
Contact lenses: Sales decreased 2.4% YoY to JPY8.1bn. Although the market for contact lens shrunk some 20% during the COVID-19 outbreak, the company managed to secure regular customers through its contact lens delivery service that provides customers with delivery of contact lens once every three months, with sales increased YoY.
Subscriber volume for the contact lens delivery service rose by 11.4% YoY, with this service accounting for 84.2% of contact lens sales (+5.8 pp YoY). Through
first-time discount campaigns, the company is working to ensure a stable earnings base by encouraging new contact lens customers shopping at brick-and-mortar stores
to subscribe to the delivery service.
Contact lens available through the contact lens delivery service are cheaper than OTC products, so while an increase in the contact lens sold through the service will lead to a decrease in profit margin, it will also lead to an increase in profits.
Over-the-counter sales were down YoY. Most customers who buy contact lenses in-store have run out of stock and are seeking immediate replacements. Consumers are adjusting their home stock.
Hearing aids: Sales were JPY1.1bn (+7.9% YoY). The increase reflects a stronger focus on training to improve the knowledge and examination skills of sales staff, as well as more proactive advertising activities.
People in need of hearing aids are not likely to notice that their hearing is deteriorating, and hearing aids are often purchased on the recommendation of a friend or relative who finds it difficult to communicate with the individual. Delays in dealing with hearing loss may also be due to the fact that the elderly have less chance to come into contact with friends and relatives during COVID-19 and thus do not notice any deterioration in hearing. The company handles a large number of high-quality products, generally available from JPY100,000 to JPY800,000 for a complete set. They also offer consultations, installments payment plans, loan programs, paid guarantees and have created an environment where it is easy for consumers to purchase the products.
Q1 FY04/22 (May–July 2021): Sales were JPY6.1bn (+2.6% YoY) and operating profit was JPY19mn (-95.1% YoY). Higher sales reflected a rebound from sluggish performance in Q1 FY04/21. Sales of eyeglasses were down YoY due to a drop in customer footfall under the state of emergency as well as contraction in the store network compared with Q1 FY04/21. Sales of contact lenses were up, driven by growth in subscribers to the contact lens delivery service.
Q2 FY04/22 (August–October 2021): Sales were JPY6.1bn (-4.4% YoY) and operating profit was JPY449mn (-22.7% YoY). In August, under a resurgence in COVID-19 cases and the nationwide tendency to stay home, even customer footfall in rural areas, typically a pillar for the company, was sluggish. Comparable store sales were down 13.5% versus August 2020. The segment has seen a recovery since the state of emergency was lifted, with comparable store sales down only 0.2% in September and rising 4.5% in October.
FY04/22 (November 2021–January 2022): Sales were JPY6.3bn
(+3.5% YoY) and operating profit was JPY480mn (+30.0% YoY). After the cancellation of the state of emergency, the company has begun to recover, with comparable store sales up 1.5% in December and 12.0% in January. Sales increased during the year-end and New Year sales season as demand increased, with this contributing significantly to profits.
Appointment reservations: The company has been promoting a reservation system for in-store services for the past three years, which gained significant momentum during the pandemic. In Q3 FY04/22, 21.8% of customers made reservations to visit stores. This compares to 7.1% in Q3 FY04/20, before the onset of COVID-19. Reservations offer customers the advantages of preventing in-store crowding and eliminating waiting times. It also enables the company to better allocate staff based on reservation volumes, boosting store productivity.
On-site sales: The company's on-site service for eyeglasses and hearing aids, where staff visit aged care facilities and private homes to sell products, has proven especially popular with elderly customers who are hesitant to leave their homes. Demand for home and facility visits has remained solid since the outbreak of COVID-19. As Japan’s aging population fuels greater demand, the company is laying the groundwork for more extensive on-site sales.
Thorough eye exams: The company provides a Total Eye Exam, a 40–70 minute comprehensive exam, for a separate fee. The exam is not limited to evaluating visual acuity, but also looks at factors such as the customer’s living environment and the ability of the eye to focus. Visionary Holdings has installed 124 Essilor VISION-R800 phoropters, the world’s most advanced refraction inspection instrument, in 110 stores (53 new units and 49 new stores in FY04/22), to become one of the largest providers of this service in the world. This enables lens power to be measured in 0.01 D increments, 25 times more precise than conventional instruments. Improved training has raised the level of eye exam proficiency and customer service, while the state-of-the-art instruments have boosted customer satisfaction and contributed to higher average customer spend.
Collaboration with ophthalmologists: The company's efforts to foster trust with ophthalmologists practicing near their stores have resulted in rising referrals from ophthalmologists. To increase prospective partners, staff visited a total of 302 nearby ophthalmology clinics to promote their ability to propose optimal lenses via the Total Eye Exam carried out by trained staff and the introduction of VISION-R800, as well as the company’s warranty and aftercare programs. Visionary Holdings is also strengthening collaboration by utilizing online medical information provider M3’s (TSE Prime: 2413) network of healthcare professionals.
Visionary Holdings’ warranty system: In addition to changing prescriptions an unlimited number of times free of charge for the first six months, the company provides numerous original service plans for aftercare support such as the HYPER Guarantee system (free), 3-year comprehensive HYPER Guarantee plan (JPY10,800, excluding taxes), Perfect Fitting (optimal eyeglass adjustment anytime), and the Child Safety Plan offering quick and easy replacement of lenses and frames with no limit on frequency (JPY1,000 per month).
Clinical trial subject recruiting: In August 2021, Visionary Holdings started offering a clinical trial subject recruiting service at some 200 Meganesuper stores, in collaboration with M3 group company Qlife. The company gets customers to register as clinical trial subjects, and is paid a finder's fee if the customers go on to participate in a trial.
The company worked to meet diverse needs of the eyecare and eyewear markets, largely at Visionize, the exclusive distributor in Japan for Marcolin S.p.A., an Italian designer, manufacturer, and distributor of the world’s leading eyewear brands.
In May 2018, the company entered the wholesale business through the establishment of subsidiary Vision Wedge. The following August, it went on to acquire Visionize, the exclusive Japan distributor for Marcolin, an Italian manufacturer of such world-famous luxury eyewear brands as Tom Ford Eyewear, Dior, and Celine. Visionize is a wholesaler of luxury brand frames to major eyeglass chains as well as individually owned eyeglass stores in Japan.
Although the Wholesale segment only accounted for 3.8% of sales in cumulative Q3 FY04/22, it occupies a key role in Visionary Holdings' strategy. First, since the Wholesale and Retail segments have different demand periods (demand typically rises in wholesale before retail demand), the company can mitigate seasonal fluctuations in performance. Secondly, the segment gives the company a window into the purchasing behavior of the competition, and allows it to use demand patterns, trends, popular products, and other industry data to inform its own strategy. Third, it offers the company's Retail segment a lower purchasing price for luxury brand products compared to competitors. Finally, in line with its policy of acquiring eyeglass retail stores, the Wholesale segment brings Visionary Holdings into contact with retail stores which it can scope out as potential acquisitions.
Q1 FY04/22 (May–July 2021): Sales were JPY306mn (+39.5% YoY) and operating profit was JPY50mn (+126.0% YoY). Higher sales were driven by brisk performance of new products, as customers adjusted inventories after holding off from purchasing during the pandemic. Gross profit rose temporarily as the company amended the terms of contracts with some client stores, and also received a rebate from Marcolin.
Q2 FY04/22 (August–October 2021): Sales were JPY183mn (-12.9% YoY) while operating profit was JPY28mn (versus a JPY26mn loss in Q2 FY04/21). The drop off in purchasing among customers following the rush to replenish inventories in Q1 put downward pressure on sales and profits.
Q3 FY04/22: Sales were JPY256mn (+21.0% YoY), while operating profit was JPY52mn (+20.9% YoY). Retail store purchases, which were expected to increase demand in Q4, increased. In particular, sales of new brand-name products were strong, helping to revitalize stores.
Along with this, the company also reported total contribution to sales from its e-commerce operations of JPY742mn (+15.3% YoY), reflecting e-commerce sales plus contributions to brick-and-mortar store sales stemming from customers coming as a result of the company’s online presence under its omnichannel marketing strategy. The company's efforts to provide high-quality services that offer convenience are bearing fruit in terms of higher sales and profit, with the breadth of sales also on the rise.
In addition to the group’s own e-commerce website, the segment includes sales generated from online shopping malls operated by third-parties such as Amazon, Rakuten, Yahoo, and Lohaco, primarily of contact lenses, personal care products and eyeglasses accessories. The company has worked to lay the groundwork for its omnichannel market strategy aimed at making the best use of both its physical stores and digital channels that encompass its stores and e-commerce sites.
The company was ahead of peers in completing construction of its own database five years ago. Customers can view their purchase history at brick-and-mortar stores via the company's official e-commerce website, as well as confirming results from eye exams, enabling them to purchase suitable eyewear online. While the company has the infrastructure in place to sell eyewear online, e-commerce sales of eyewear remain lackluster, as the habit of buying eyewear online is not entrenched among consumers. In particular, the company also sells high-priced products and special lenses, so even in the low-priced range, there is limited room for growth in e-commer sales compared to eyeglass chains.
Group reorganization: The company has decided on an absorption-type merger between two consolidated subsidiaries, with wholly owned VH Retail Service Co., Ltd. being the surviving company after its merger with Megane House Co., Ltd. (a subsidiary of VH Retail Service). Given the seemingly never-ending COVID-19 outbreak, the company's policy is to promote agile decision-making, strengthen its sales system, and streamline company management throughout the Group's retail business. In addition, the company plans to make Enhanlabo Co., Ltd., a consolidated subsidiary, into a wholly-owned subsidiary, and to transfer Enhanlabo's wearable device business through a company split. The company's goal is to develop and quickly commercialize its eyeglasses-type optical device (“b.g.”) in the wearable area, but commercialization is expected to take time.
Renewed management philosophy: The accompanying vision declares that the company's raison-d’être in society is grounded in its contribution to the health of the five senses in an era of 100-year lifespans. By extending the health of the five senses over a long lifespan through the products and services it provides, the company aims to contribute to society and realize its own sustainable growth.
After a long phase of business revitalization, the company has positioned the period after FY04/17 as a time for "restarting growth." The philosophy makes explicit what the company had been discussing, namely, its intent to target further growth and strive to become a company that can go the long haul. In terms of the five senses, the company's mainstay business is eyeglass stores (seeing) and it will further boost sales of hearing aids (hearing). Store development will focus on the health of the five senses over a long lifespan, including providing relaxing spaces by diffusing aromas (smelling) and providing a relaxation service (touching) before eye exams.
|Gross profit margin||62.5%||62.2%||62.4%||64.3%||28.9%||62.6%||-|
|Operating profit margin||0.8%||-2.6%||-0.8%||3.6%||-0.9%||1.4%||-|
|Recurring profit margin||0.4%||-3.0%||-1.2%||4.9%||2.2%||3.6%||-|
|Operating profit margin||4.7%||1.5%||3.2%||7.1%||2.6%||4.9%||-|
The company did not offer any guidance with respect to its outlook for FY04/22. By way of explanation, the company said it was still too early to put together reliable estimates as to when the COVID-19 pandemic might come to an end and how much sales and earnings might be affected, noting that even as vaccinations in Japan were just starting to be phased in there were still concerns about the possibility of another round of infections. The company said, however, that it would be quick to make an announcement and provide guidance for FY04/22 as soon as it is in a position to do so.
The company targets sales above FY04/21 levels. Management assumes customers will be more comfortable visiting the store this winter as the vaccine rollout gains traction, but anticipates negative effects from COVID-19 will persist in 1H, with some fallout remaining in 2H depending on progress with vaccinations. This makes it difficult to reliably forecast comparable store sales. That said, comparable store sales had been steadily rising, increasing 13.7% YoY in FY04/18, up 15.7% in FY04/19, and up 3.7% in FY04/20, although sales declined YoY 0.5% in FY04/21. The transition to next-generation stores and strengthened training for store staff will likely positive while an increased sales weighting of premium lenses and higher utilization rates of Total Eye Exams could boost average customer spend and lead to an increase in comparable store sales.
As for store openings and closures, the company is aiming for 12 new stores and six relocations over the 322 stores as of end-FY04/21. Management aims for a flexible strategy on new store openings and relocations based on comparable store sales trends and overall profits. The rising number of retail and other store closures could present opportunities to find good locations near stations that can be rented cheaply, which is why management plans on a flexible policy for new store openings. Visionary Holdings accelerated store closures in FY04/21, to the tune of 64 (including eight relocations), but as of June 2021, the company reports that there are almost no stores left that need to be shuttered.
The company forecasts GPM will be roughly flat YoY. It may fluctuate due to changes in the product mix, but the company does not anticipate changes in GPM for individual products. GPM was trending down from 63.9% in FY04/18 to 62.4% in FY04/20, but then rose in FY04/21 to 62.6%.
While weighing cost effectiveness, the company will distribute TV commercials and flyers, as well as pursue more efficient social media-based marketing. Anticipating a rise in customer volume as COVID-19 subsides, it will step up advertising activities, utilizing a broad range of media including TV commercials in the Greater Tokyo area, direct mail and newspaper inserts, and SNS and video ads. The aim is to raise awareness of its high value-added services such as eye care examinations and the warranty system, as well as the contact lens delivery service. Management already aggressively cut SG&A expenses in FY04/21 and does not anticipate further reductions.
|Results vs. Initial Est.||FY04/12||FY04/13||FY04/14||FY04/15||FY04/16||FY04/17||FY04/18||FY04/19||FY04/20||FY04/21||FY04/22|
|Results vs. Initial Est.||-14.1%||-23.2%||-17.2%||-20.2%||-5.4%||-0.6%||5.6%||4.7%||-6.7%||-7.7%|
|Operating profit||Initial Est.||72||121||900||300||760||800||700||1,130||610||20|
|Results vs. Initial Est.||-||-||-||-||-31.2%||-47.2%||2.3%||-17.5%||-||1,666.6%|
|Recurring profit||Initial Est.||-61||97||900||80||630||700||600||1,030||490||-65|
|Results vs. Initial Est.||-||-||-||-||-33.1%||-51.9%||-2.0%||-17.2%||-||-|
|Net income||Initial Est.||-247||-158||700||-350||440||400||230||640||50||-342|
|Results vs. Initial Est.||-||-||-||-||-40.7%||-72.3%||215.6%||-21.9%||-||-|
|Medium-term plan (JPYmn)||FY04/18||FY04/19||FY04/20||FY04/23||4-year|
|Out June 18, 2019||Act.||Act.||Target||Target||CAGR|
|Operating profit margin||3.3%||3.5%||#DIV/0!||4.6%|
|Out June 19, 2018||Act.||Target||Target||CAGR|
|Operating profit margin||3.3%||4.5%||7.8%|
In order to be able to respond flexibly in the face of change, Visionary Holdings usually creates a new business plan every year that will cover the next four years, but did not release a revised plan for FY04/22. The current medium-term plan was formulated prior to the COVID-19 pandemic and management looks to release a revised medium-term plan when it announces FY04/22 earnings forecasts since the business climate has changed so dramatically. While numerical targets may be revised at that time, the overall company strategy will likely remain unchanged.
The company’s current medium-term plan covers the period from FY04/20 through FY04/23. Under the new plan, the company is targeting FY04/23 consolidated sales of JPY37.3bn (representing a CAGR of 8.9%), EBITDA of JPY2.9bn (15.8%), and operating profit of JPY1.7bn (16.7%). Compared with the previous medium-term plan (announced June 2018), the current plan has 1) raised the forecast for sales to reflect the acquisition of Visionize, 2) raised the forecast for depreciation and amortization to reflect goodwill amortization related to the acquisition of Visionize as well as an increase in capital spending, and 3) increased the budget for expenses (other than depreciation) to support medium- to long-term growth.
Since finishing up a long period of restructuring in FY04/16, the company has been focusing its efforts since FY04/17 on restarting growth. Under the new medium-term plan, the company is looking to lay the groundwork that will make it possible to pay a stable and sustainable dividend, and resume dividend payments by the end of the period covered by new medium-term plan (i.e., FY04/23). As part of its effort to create conditions amenable to the resumption of dividend payments, the company conducted a buyback of outstanding preferred shares and a 1-for-10 reverse stock split in November 2019.