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Yellow Hat 9882

イエローハット
Yellow Hat Ltd.
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1-7-4 Iwamotocho, Chiyoda-ku Tokyo, Japan 101-0032
http://www.yellowhat.jp/
03-6866-1680
Summary
Yellow Hat sells car and motorcycle parts and accessories and provides maintenance services. In the Japanese market the leading company by sales is Autobacs Seven (TSE1: 9832), followed by Yellow Hat. The company has two segments: car and motorcycle parts sales and property leasing. In the property business Yellow Hat leases store buildings to its sales subsidiaries, affiliates and group store operators.
Specialty Retail
Key dates
2011-02-07
Coverage initiation
Full Report
2021-10-29
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Key financial data

CumulativeFY03/21FY03/22
(JPYmn)Q1Q1–Q2Q1–Q3Q1–Q4Q1Q1–Q2Q1–Q3Q1–Q4
Sales (JPYmn)31,13367,613115,211146,99433,38366,298
YoY-5.3%-5.5%2.5%4.2%7.2%-1.9%
Auto and Motorcycle Parts Sales29,53664,419110,412140,58731,76563,102
YoY-5.7%-5.8%2.5%4.3%7.5%-2.0%
Wholesale9,47022,12939,36949,17710,382-
YoY-8.8%-11.1%-3.0%0.0%9.6%
General stores2,9286,24110,92614,1493,290-
YoY1.1%3.9%8.9%11.1%12.4%
Group stores6,54215,88828,44235,0277,092-
YoY-12.6%-15.8%-6.9%-3.8%8.4%-
Retail19,19240,44868,29987,75020,407-
YoY-4.5%-3.3%5.5%6.4%6.3%-
Other8731,8422,7443,660976-
YoY4.1%10.2%15.5%16.1%11.8%-
Real Estate Lease1,5973,1944,7986,4071,6173,194
YoY2.0%2.2%2.3%2.4%1.3%0.0%
Gross profit (JPYmn)13,04127,26445,98959,90014,08427,492
YoY-3.1%-3.9%3.8%6.0%8.0%0.8%
Gross profit margin41.9%40.3%39.9%40.7%42.2%41.5%
SG&A expenses (JPYmn)11,24222,68934,86646,92211,57223,173
YoY-0.7%0.1%0.7%1.1%2.9%2.1%
SG&A ratio36.1%33.6%30.3%31.9%34.7%35.0%
Operating profit (JPYmn)1,7984,57411,12312,9782,5124,318
YoY-16.1%-19.8%15.0%28.6%39.7%-5.6%
Operating profit margin5.8%6.8%9.7%8.8%7.5%6.5%
Auto and Motorcycle Parts Sales1,4433,90110,12811,6782,1573,615
YoY-22.0%-23.8%15.1%30.6%49.5%-7.3%
Operating profit margin4.9%6.1%9.2%8.3%6.8%5.7%
Real Estate Lease3546739941,299354703
YoY21.2%15.6%14.1%12.7%0.0%4.5%
Operating profit margin22.2%21.1%20.7%20.3%21.9%22.0%
QuarterlyFY03/21FY03/22
(JPYmn)Q1Q2Q3Q4Q1Q2Q3Q4
Sales (JPYmn)31,13336,48047,59831,78333,38332,915
YoY-5.3%-5.6%16.6%10.9%7.2%-9.8%
Auto and Motorcycle Parts Sales29,53634,88345,99330,17531,76531,337
YoY-5.7%-6.0%17.1%11.3%7.5%-10.2%
Wholesale9,47012,65917,2409,80810,382-
YoY-8.8%-12.7%9.9%14.3%9.6%-
General stores2,9283,3134,6853,2233,290-
YoY1.1%6.6%16.2%19.5%12.4%-
Group stores6,5429,34612,5546,5857,092-
YoY-12.6%-18.0%7.7%11.9%8.4%-
Retail19,19221,25627,85119,45120,407-
YoY-4.5%-2.3%21.8%9.6%6.3%-
Other873969902916976-
YoY4.1%16.3%28.3%17.7%11.8%-
Real Estate Lease1,5971,5971,6041,6091,6171,577
YoY2.0%2.5%2.4%2.8%1.3%-1.3%
Gross profit (JPYmn)13,04114,22318,72513,91114,08413,408
YoY-3.1%-4.6%17.5%13.9%8.0%-5.7%
Gross profit margin41.9%39.0%39.3%43.8%42.2%40.7%
SG&A expenses (JPYmn)11,24211,44712,17712,05611,57211,601
YoY-0.7%0.8%1.7%2.3%2.9%1.3%
SG&A ratio36.1%31.4%25.6%37.9%34.7%35.2%
Operating profit (JPYmn)1,7982,7766,5491,8552,5121,806
YoY-16.1%-22.0%65.1%337.5%39.7%-34.9%
Operating profit margin5.8%7.6%13.8%5.8%7.5%5.5%
Auto and Motorcycle Parts Sales1,4432,4586,2271,5502,1571,458
YoY-22.0%-24.8%69.3%983.9%49.5%-40.7%
Operating profit margin4.9%7.0%13.5%5.1%6.8%4.7%
Real Estate Lease354319321305354349
YoY21.2%10.0%11.1%8.2%0.0%9.4%
Operating profit margin22.2%20.0%20.0%19.0%21.9%22.1%
Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

Recent updates

1H FY03/22 flash update

2021-10-29

Yellow Hat Ltd. announced earnings results for 1H FY03/22; see the results section for details.

Q1 FY03/22 flash update

2021-08-03

Yellow Hat Ltd. announced earnings results for Q1 FY03/22; see the results section for details.

Trends and outlook

Quarterly trends and results

CumulativeFY03/21FY03/22FY03/22FY03/22
(JPYmn)Q1Q1–Q2Q1–Q3Q1–Q4Q1Q1–Q2Q1–Q3Q1–Q4% of Est.1H Est.% of Est.FY Est.
Sales31,13367,613115,211146,99433,38366,29897.5%68,00044.2%150,000
YoY-5.3%-5.5%2.5%4.2%7.2%-1.9%0.6%2.0%
Gross profit13,04127,26445,98959,90014,08427,492
YoY-3.1%-3.9%3.8%6.0%8.0%0.8%
Gross profit margin41.9%40.3%39.9%40.7%42.2%41.5%
SG&A expenses11,24222,68934,86646,92211,57223,173
YoY-0.7%0.1%0.7%1.1%2.9%2.1%
SG&A ratio36.1%33.6%30.3%31.9%34.7%35.0%
Operating profit1,7984,57411,12312,9782,5124,31890.0%4,80032.0%13,500
YoY-16.1%-19.8%15.0%28.6%39.7%-5.6%4.9%4.0%
Operating profit margin5.8%6.8%9.7%8.8%7.5%6.5%7.1%9.0%
Recurring profit2,0674,98111,97114,0312,7474,69090.2%5,20032.3%14,500
YoY-14.7%-19.1%14.6%26.5%32.9%-5.8%4.4%3.3%
Recurring profit margin6.6%7.4%10.4%9.5%8.2%7.1%7.6%9.7%
Net income1,3693,3478,1118,5461,8523,19093.8%3,40033.6%9,500
YoY-18.1%-21.0%13.8%16.5%35.3%-4.7%1.6%11.2%
Net margin4.4%5.0%7.0%5.8%5.5%4.8%5.0%6.3%
QuarterlyFY03/21FY03/22
(JPYmn)Q1Q2Q3Q4Q1Q2Q3Q4
Sales31,13336,48047,59831,78333,38332,915
YoY-5.3%-5.6%16.6%10.9%7.2%-9.8%
Gross profit13,04114,22318,72513,91114,08413,408
YoY-3.1%-4.6%17.5%13.9%8.0%-5.7%
Gross profit margin41.9%39.0%39.3%43.8%42.2%40.7%
SG&A expenses11,24211,44712,17712,05611,57211,601
YoY-0.7%0.8%1.7%2.3%2.9%1.3%
SG&A ratio36.1%31.4%25.6%37.9%34.7%35.2%
Operating profit1,7982,7766,5491,8552,5121,806
YoY-16.1%-22.0%65.1%337.5%39.7%-34.9%
Operating profit margin5.8%7.6%13.8%5.8%7.5%5.5%
Recurring profit2,0672,9146,9902,0602,7471,943
YoY-14.7%-22.0%63.0%217.9%32.9%-33.3%
Recurring profit margin6.6%8.0%14.7%6.5%8.2%5.9%
Net income1,3691,9784,7644351,8521,338
YoY-18.1%-22.9%64.6%113.2%35.3%-32.4%
Net margin4.4%5.4%10.0%1.4%5.5%4.1%
Source: Shared Research based on company data
Quarterly performance by segment
CumulativeFY03/21FY03/22
(JPYmn)Q1Q1–Q2Q1–Q3Q1–Q4Q1Q1–Q2Q1–Q3Q1–Q4
Sales (JPYmn)31,13367,613115,211146,99433,38366,298
YoY-5.3%-5.5%2.5%4.2%7.2%-1.9%
Auto and Motorcycle Parts Sales29,53664,419110,412140,58731,76563,102
YoY-5.7%-5.8%2.5%4.3%7.5%-2.0%
Wholesale9,47022,12939,36949,17710,382-
YoY-8.8%-11.1%-3.0%0.0%9.6%
General stores2,9286,24110,92614,1493,290-
YoY1.1%3.9%8.9%11.1%12.4%
Group stores6,54215,88828,44235,0277,092-
YoY-12.6%-15.8%-6.9%-3.8%8.4%-
Retail19,19240,44868,29987,75020,407-
YoY-4.5%-3.3%5.5%6.4%6.3%-
Other8731,8422,7443,660976-
YoY4.1%10.2%15.5%16.1%11.8%-
Real Estate Lease1,5973,1944,7986,4071,6173,194
YoY2.0%2.2%2.3%2.4%1.3%0.0%
Gross profit (JPYmn)13,04127,26445,98959,90014,08427,492
YoY-3.1%-3.9%3.8%6.0%8.0%0.8%
Gross profit margin41.9%40.3%39.9%40.7%42.2%41.5%
SG&A expenses (JPYmn)11,24222,68934,86646,92211,57223,173
YoY-0.7%0.1%0.7%1.1%2.9%2.1%
SG&A ratio36.1%33.6%30.3%31.9%34.7%35.0%
Operating profit (JPYmn)1,7984,57411,12312,9782,5124,318
YoY-16.1%-19.8%15.0%28.6%39.7%-5.6%
Operating profit margin5.8%6.8%9.7%8.8%7.5%6.5%
Auto and Motorcycle Parts Sales1,4433,90110,12811,6782,1573,615
YoY-22.0%-23.8%15.1%30.6%49.5%-7.3%
Operating profit margin4.9%6.1%9.2%8.3%6.8%5.7%
Real Estate Lease3546739941,299354703
YoY21.2%15.6%14.1%12.7%0.0%4.5%
Operating profit margin22.2%21.1%20.7%20.3%21.9%22.0%
QuarterlyFY03/21FY03/22
(JPYmn)Q1Q2Q3Q4Q1Q2Q3Q4
Sales (JPYmn)31,13336,48047,59831,78333,38332,915
YoY-5.3%-5.6%16.6%10.9%7.2%-9.8%
Auto and Motorcycle Parts Sales29,53634,88345,99330,17531,76531,337
YoY-5.7%-6.0%17.1%11.3%7.5%-10.2%
Wholesale9,47012,65917,2409,80810,382-
YoY-8.8%-12.7%9.9%14.3%9.6%-
General stores2,9283,3134,6853,2233,290-
YoY1.1%6.6%16.2%19.5%12.4%-
Group stores6,5429,34612,5546,5857,092-
YoY-12.6%-18.0%7.7%11.9%8.4%-
Retail19,19221,25627,85119,45120,407-
YoY-4.5%-2.3%21.8%9.6%6.3%-
Other873969902916976-
YoY4.1%16.3%28.3%17.7%11.8%-
Real Estate Lease1,5971,5971,6041,6091,6171,577
YoY2.0%2.5%2.4%2.8%1.3%-1.3%
Gross profit (JPYmn)13,04114,22318,72513,91114,08413,408
YoY-3.1%-4.6%17.5%13.9%8.0%-5.7%
Gross profit margin41.9%39.0%39.3%43.8%42.2%40.7%
SG&A expenses (JPYmn)11,24211,44712,17712,05611,57211,601
YoY-0.7%0.8%1.7%2.3%2.9%1.3%
SG&A ratio36.1%31.4%25.6%37.9%34.7%35.2%
Operating profit (JPYmn)1,7982,7766,5491,8552,5121,806
YoY-16.1%-22.0%65.1%337.5%39.7%-34.9%
Operating profit margin5.8%7.6%13.8%5.8%7.5%5.5%
Auto and Motorcycle Parts Sales1,4432,4586,2271,5502,1571,458
YoY-22.0%-24.8%69.3%983.9%49.5%-40.7%
Operating profit margin4.9%7.0%13.5%5.1%6.8%4.7%
Real Estate Lease354319321305354349
YoY21.2%10.0%11.1%8.2%0.0%9.4%
Operating profit margin22.2%20.0%20.0%19.0%21.9%22.1%
Source: Shared Research based on company data
Store count
FY03/21FY03/22
(number of stores)Q1Q2Q3Q4Q1Q2Q3Q4
Total number of stores846849854852854854
Net increase-305322
Yellow Hat (Japan)736736740740740738
Net increase-2-222--2
Openings39131824
Closures511111626
Wholly owned subsidiaries365365366365365-
Net increase-2-2-1-2--
Group company stores371371374375375-
Net increase--34--
2-Rin-Kan565758575758
Net increase-121-1
Bikers' Station SOX515354555758
Net increase-112323
Yellow Hat (overseas)332---
Net increase-1-1-1-3-3-
Source: Shared Research based on company data
Note: Net increase from the end of previous fiscal year
YoY comparison of sales by product category at all Yellow Hat stores
FY03/21FY03/22
Q1Q1-Q2Q1-Q3Q1-Q4Q1Q1-Q2Q1-Q3Q1-Q4
All-store retail sales (JPYmn)27,19455,912100,105128,71628,167
YoY-8.7%-10.5%-0.6%1.2%3.6%
Comparable-store sales YoY-9.2%-10.9%-1.1%0.8%3.0%
Tires-13%-22%-4%-2%2%
Aluminum wheels-15%-31%2%4%-8%
Audio, navigation systems, other-27%-19%-11%-8%18%
Engine oil-6%-4%-1%-1%10%
Batteries11%6%8%7%-7%
Maintenance and car washing8%8%10%9%-7%
Interior accessories-5%1%2%1%-8%
Exterior accessories-5%-6%24%34%-7%
Functional products-1%1%4%4%1%
Services-7%-6%1%2%9%
Inspection-3%-2%4%7%12%
Source: Shared Research based on company data
*Audio, navigation system, other: car navigation systems, drive recorders, audio equipment, electronic toll collection (ETC) devices, and other products
*Services: wages for maintenance work, installation or replacement work, and other services

1H FY03/22 results

  • Sales: JPY66.3bn (-1.9% YoY)
  • Operating profit: JPY4.3bn (-5.6% YoY)
  • Recurring profit: JPY4.7bn (-5.8% YoY)
  • Net income attributable to owners of the parent: JPY3.2bn (-4.7% YoY)

Sales were down YoY. Main factors were the decline in demand for travel due to the prolongation of restrictions on going out and stagnant sales of high-ticket items such as tires and car navigation systems.

Gross profit was up 0.8% YoY to JPY27.5bn. While sales declined, growth in wage earnings from high-margin car inspection and maintenance services helped improve GPM.

Profit lines from the operating profit and below decreased on a YoY basis. Impacting was the 2.1% YoY increase in SG&A expenses to JPY23.2bn due mainly to an increase in personnel expenses as store staffing was expanded to provide better in-store customer service.

Note that, with the adoption of the new Accounting Standard for Revenue Recognition, 1H sales decreased by JPY1.1bn and operating profit and recurring profit by JPY260mn each compared with results based on the previous accounting standard.

Status by segment is as follows. 

Automotive and Motorcycle Parts Sales
  • Sales: JPY63.1bn (-2.0% YoY)
  • Operating profit: JPY3.6bn (-7.3% YoY) 

In 1H FY03/22, there were four openings and six closings of Yellow Hat stores in Japan. Outside of Yellow Hat stores, the company opened three 2-Rin-Kan stores and three Bikers Station SOX stores, while closing two 2-Rin-Kan stores. As of end-Q2, the company had a total of 854 stores (Yellow Hat: 738; 2-Rin-Kan: 58; SOX: 58) and seven Yellow Hat automobile inspection centers in Japan.

Real Estate Lease
  • Sales: JPY3.2bn (largely flat YoY)
  • Operating profit: JPY703mn (+4.5% YoY) 

Full-year company forecast

FY03/21FY03/22
(JPYmn)1H Act.2H Act.FY Act.1H Act.2H Est.FY Est.
Sales67,61379,381146,99466,29883,702150,000
YoY-5.5%14.2%4.2%-1.9%5.4%2.0%
Cost of sales40,34946,74587,09438,80649,19488,000
Gross profit27,26432,63659,90027,49234,50862,000
YoY-3.9%16.0%6.0%0.8%5.7%3.5%
Gross profit margin40.3%41.1%40.7%41.5%41.2%41.3%
SG&A expenses22,68924,23346,92223,17325,32748,500
SG&A ratio33.6%30.5%31.9%35.0%30.3%32.3%
Operating profit4,5748,40412,9784,3189,18213,500
YoY-19.8%91.4%28.6%-5.6%9.3%4.0%
Operating profit margin6.8%10.6%8.8%6.5%11.0%9.0%
Recurring profit4,9819,05014,0314,6909,81014,500
YoY-19.1%83.3%26.5%-5.8%8.4%3.3%
Recurring profit margin7.4%11.4%9.5%7.1%11.7%9.7%
Net income3,3475,1998,5463,1906,3109,500
YoY-21.0%67.8%16.5%-4.7%21.4%11.2%
Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods. 
Number of stores and planned store openings/closures
FY03/20FY03/21FY03/22
Act.Act.Est.
Store count849852871
Net increase14319
Yellow Hat (Japan)738740750
Net increase10210
Openings211820
Closures121610
2-Rin-Kan565761
Net increase-14
Bikers' Station SOX525560
Net increase535
Yellow Hat (overseas)3--
Net increase-1-3-
In-store sales
FY03/20FY03/21FY03/22
Act.Act.Est.
All-store retail sales (JPYmn)127,129128,716-
Store sales YoY (all stores)-0.7%1.3%-
Store sales YoY (comp-store)-1.3%0.8%0.0%

The company’s FY03/22 full-year earnings forecast calls for sales of JPY150.0bn (+2.0% YoY), operating profit of JPY13.5bn (+4.0% YoY), recurring profit of JPY14.5bn (+3.3% YoY), and net income attributable to owners of the parent of JPY9.5bn (+11.2% YoY).

Key initiatives in FY03/22

The company plans to strengthen its business foundation and increase profits by implementing the measures outlined below, beginning with the expansion of automotive parts sales, the company’s main source of profits.

 Expand automotive parts sales business: The company plans to open more stores under the Yellow Hat and Kakuyasu Tire Tread brands and strengthen sales of tires and other expendable auto parts by enhancing the range of products and car life services it offers at physical stores.

Expand automobile inspection and service business: The company plans to increase profits and enhance customer loyalty by strengthening its maintenance service business, including vehicle inspection. Toward that end, it will develop qualified mechanics and systematically acquire designated auto inspection shops.

Strengthen motorcycle business: The company plans to open new 2-Rin-Kan and Bikers’ Station SOX stores and expand earnings at existing stores by increasing sales of its own-brand parts and capturing inspection demand.

Strengthen wholesale business: To expand its wholesale business targeting sales to general retailers other than Yellow Hat stores, the company plans to develop products and capture new customers via its manufacturer-vendor subsidiary JOYFULL Co., Ltd.

The company aims to improve brand awareness by continuing to enhance its advertising and promotional initiatives.

Sales 

The company forecasts sales of JPY150.0bn (+2.0% YoY), of which mainstay Auto and Motorcycle Parts Sales segment accounts for JPY143.6bn (+2.2% YoY). An increased number of stores is a positive factor for sales, but the company expects flat YoY comparable-store sales.

Sales break down into JPY49.8bn for wholesale (+1.2% YoY) and JPY89.9bn for retail (+2.4% YoY).

Stores openings and closures, and net increase

In Japan, the company plans to open 30 new stores and close 11 stores for a net increase of 19 to bring the total store count to 871 at end-FY03/22. The company mainly plans to increase the number of Yellow Hat stores. 

For the Yellow Hat auto parts business, the company plans to open 20 new stores and close 10 stores for a net increase of 10 stores, bringing the total to 750 at end-FY03/22. 

For Yellow Hat (including Yellow Hat Motor Sport), the company plans to open 15 stores and close 10 stores for a net increase of five stores, bringing the total to 697 stores at end-FY03/22.

For Kakuyasu Tire Tread, the company plans to open five stores and close none for a net increase of five stores and total of 53 stores at end-FY03/22.

For 2-Rin-Kan (sales of motorcycle parts), the company plans to open five stores and close one store for a net increase of four stores, bringing the total to 61 stores at end-FY03/22. 

For Bikers’ Station SOX (sales of new and preowned motorcycles), the company plans to open five stores and close none for a net increase of five stores, bringing the total to 60 stores at end-FY03/22. 

Comparable-store sales

Yellow Hat forecasts a 3.0% YoY increase in all-store sales in 1H and 3.0% YoY decline in 2H for flat YoY sales over the full year. The company expects a rebound in sales in 1H FY03/22 after the decline in 1H FY03/21 because of the spread of COVID-19. In 2H FY03/22, the company expects a downturn versus the increase in sales of winter tires and tire chains in 2H FY03/21 due to snowfall. The company forecasts a 4% YoY volume decline of tires (its mainstay product) after the previous year’s increase associated with snowfall.

Operating profit

The company forecasts operating profit of JPY13.5bn (+4.0% YoY) and OPM of 9.0% (+0.2pp YoY). The increase in gross profit due to higher sales and GPM is expected to exceed the rise in SG&A expenses (see below).

Gross profit

The company forecasts gross profit of JPY62.0bn (+3.5% YoY) and a GPM of 41.3% (+0.4pp YoY). Gross profit is expected to increase on a higher GPM from an increased sales share of relatively high-margin retail sales and a smaller sales share of relatively low-margin wholesale sales.

SG&A expenses

The company forecasts SG&A expenses of JPY48.5bn (+3.4% YoY) and an SG&A expense ratio of 32.3% (+0.4pp YoY). The rise in SG&A expenses is associated with an increased retail store count.

Outlook

Yellow Hat published an overview of its medium-term plan (FY03/21–FY03/23) in an annual securities report, calling for FY03/23 sales of JPY150.0bn (+6.4% versus FY03/20), operating profit of JPY11.4bn (+12.9%), and recurring profit of JPY12.5bn (+10.9%).

In regard to capital efficiency, the company aims to maintain both return on equity (ROE) and return on assets (ROA; ratio of recurring profit to total assets) of 8% or higher as it works to maximize enterprise value.

Operating profit, ROE, and ROA surpassed targets of the final year of the medium-term plan (FY03/23) in FY03/21. The company expects to reach the medium-term plan target for sales a year early in FY03/22.

Medium-term plan targets and results
FY03/20FY03/21FY03/22FY03/23
Act.Act.Est.Targets
Sales (JPYmn)141,031146,994150,000150,000
Operating profit (JPYmn)10,09312,97813,50011,400
Operating profit margin7.2%8.8%9.0%7.6%
Recurring profit (JPYmn)11,09514,03114,50012,300
Recurring profit margin7.9%9.5%9.7%8.2%
ROE9.0%9.7%-8.0% or higher
ROA (RP-based)10.3%12.3%-8.0% or higher
Source: Shared Research based on company materials

Taking a medium-term view, the business environment is rapidly evolving as the Japanese auto parts market shrinks and plans have arisen to make use of automatic diagnostic equipment in auto maintenance services due to an increase in vehicles with automatic braking systems and lane keeping assistance functionality. At the same time, because of declines in the numbers of gas stations and body shops offering automotive expendables and maintenance services, there is increasing need for the expendables sales and maintenance services Yellow Hat provides through its nationwide network.

The company plans to improve enterprise value through the following initiatives.

Expansion of automotive parts sales business

Aiming to expand the auto parts sales business, the company plans to open more stores using the Yellow Hat and Kakuyasu Tire Tread brands and enhance the range of products and car life services it offers at physical stores, strengthening sales of expendables with a focus on tires.

Kakuyasu Tire Tread stores are operated by wholly owned subsidiary Yellow Hat Tread and specialize in new, used, and outlet-priced tires and aluminum wheels. The first Kakuyasu Tire Tread opened in April 2012, and there were 50 stores in the chain as of November 2019.

In Japan, since FY03/12, the company has each year been opening about 30 stores and closing about 10, for a net increase of about 20 stores per year. Under the medium-term plan, it plans to continue opening 20–30 stores per year and says it is possible to develop some 1,000 stores in Japan, assuming a potential customer population of about 50,000 people per store.

The company has slowed its pace of store openings in FY03/21 and FY03/22, because the impact on the real estate and construction industries of the Tokyo Olympics and the COVID-19 pandemic remains unclear.

Yellow Hat store openings and closings
Yellow Hat store countFY03/12FY03/13FY03/14FY03/15FY03/16FY03/17FY03/18FY03/19FY03/20FY03/21FY03/22
(year-end)Est.
Openings3439234636263733211820
Japan3438234336263733211820
Overseas-1-3-------
Closures6941465169121910
Japan484105498111610
Overseas21-4117113-
Store count (year-end)545575594626666678708732741740750
Japan530560579612653675703728738740750
Overseas151515141312543--
Source: Shared Research based on company data
Note: Openings, closings, and end-FY store count are totals of directly operated stores, stores operated by subsidiaries, and stores operated by franchisees. 

Since FY03/13, Yellow Hat has increased the store count with a focus on those managed by wholly owned subsidiaries, and it plans to maintain this approach for the medium term.

Store count
Stores (year-end)FY03/12FY03/13FY03/14FY03/15FY03/16FY03/17FY03/18FY03/19FY03/20FY03/21FY03/22
Est.
Total Yellow Hat group stores562625645698750781809835849852871
YoY8.7%11.2%3.2%8.2%7.4%4.1%3.6%3.2%1.7%0.4%2.2%
Total Yellow Hat stores545575594626666687708732741740750
YoY5.4%5.5%3.3%5.4%6.4%3.2%3.1%3.4%1.2%-0.1%1.4%
Japan530560579612653675703728738740750
YoY6.0%5.7%3.4%5.7%6.7%3.4%4.1%3.6%1.4%0.3%1.4%
Yellow Hat Sales Pro (directly managed)26---------
Managed by cons. subsidiaries103148171207253297320346367365
Managed by Yellow Hat group companies401412408405400378383382371375
Overseas151515141312543--
YoY-11.8%0.0%0.0%-6.7%-7.1%-7.7%-58.3%-20.0%-25.0%--
Other group stores in Japan175051728494101103108112121
YoY466.7%194.1%2.0%41.4%16.7%11.8%7.4%2.0%4.8%3.7%8.1%
2-Rin-Kan138404450535556565761
YoY-50.0%-5.3%10.0%13.6%6.0%3.8%1.8%0.0%1.8%7.0%
Bikers' Station SOX---2834414647525560
YoY----21.4%20.6%12.2%2.2%10.6%5.8%9.1%
Montecarlo15121110-------
Source: Shared Research based on company materials

Looking at historical performance, retail sales has been the driver behind the company’s sales growth, and growth in retail sales was achieved through an increase in store count. However, over the long term, sales per store have been in a downward trend. This is primarily because the company has focused its store openings on relatively low-cost vacated premises in regional areas with small commercial zones.

Auto and Motorcycle Parts Sales: retail store count and sales
FY03/12FY03/13FY03/14FY03/15FY03/16FY03/17FY03/18FY03/19FY03/20FY03/21
Store count145198222289337391421449475477
YoY20.8%36.6%12.1%30.2%16.6%16.0%7.7%6.7%5.8%0.4%
Yellow Hat Sales Pro (directly managed)26---------
Stores managed by subsidiaries103148171207253297320346367365
2-Rin-Kan1384044505355565657
Bikers' Station SOX---28344146475255
Montecarlo15121110------
Sales: Retail (JPYmn)31,48348,25951,64456,26462,44370,78377,33480,54582,46887,750
YoY-0.2%53.3%7.0%8.9%11.0%13.4%9.3%4.2%2.4%6.4%
Sales per store (JPYmn)238281246220199194190185179184
YoY-15.2%18.4%-12.6%-10.5%-9.4%-2.5%-2.0%-2.8%-3.6%3.3%
Source: Shared Research based on company materials

Expansion of automobile inspection and maintenance service businesses

In services, Yellow Hat seeks to enhance its automobile inspection and maintenance services by developing human resources such as qualified mechanics and increasing the number of designated auto inspection shops, as it aims to expand the earnings of the services department and win new customers (as of June 2021, 168 stores were designated inspection shops).

The Japanese government considers auto maintenance shops that have equipment and space to overhaul vehicles and a 2nd grade mechanic (under the Japanese National Trade Skill Testing system) to be either certified shops or designated shops. At a certified shop, vehicles can be taken apart for inspection and maintenance, but there is no auto inspection line, so vehicles must be taken to a separate auto inspection facility for testing. Designated shops are a subset of certified shops that have their own testing lines like those found at auto inspection facilities, so there is no need to take vehicles to a Land Transport Bureau branch office when auto inspections are conducted. These designated shops have the advantage of being able to conduct auto inspections on weekends and holidays, and inspections can be done quickly because there is no need to take vehicles to a Land Transport Bureau branch office.

Yellow Hat says that auto inspections themselves do not generate substantial earnings, but even if it sets inspection fees lower than at manufacturer-affiliated dealers, the replacement of expendables when inspections are conducted generates sales and profit from the parts and wages for the replacement work, so there is adequate merit in expanding auto inspection capacity.

The company does not disclose sales data related to auto inspection and services, but its supplementary financial information includes YoY comparisons for the number of vehicles inspected and sales from services. Based on those trends, Shared Research estimates that over the last 10 years the number of vehicles inspected increased by approximately 2.5x, while sales from services approximately doubled.

YoY comparison of number of automobiles inspected and services sales
FY03/12FY03/13FY03/14FY03/15FY03/16FY03/17FY03/18FY03/19FY03/20FY03/21
YoY
No of cars inspected13.0%14.0%10.0%10.0%19.0%14.0%7.0%4.0%-1.0%7.0%
Services sales9.0%8.0%5.0%1.0%13.0%8.0%10.0%5.0%4.0%3.0%
Source: Shared Research based on company data

Enhancement of motorcycle business

In order to enhance the motorcycle business, the company plans to open new 2-Rin-Kan and Bikers’ Station SOX stores and expand earnings at existing stores by increasing sales of its own-brand parts and capturing inspection demand.

The motorcycle business comprises 2-Rin-Kan stores (sales of motorcycle parts) operated by 2-Rin-Kan Yellow Hat Co., Ltd., which became a subsidiary in April 2012, and Bikers’ Station SOX stores (sales of new and preowned motorcycles) operated by YellowHat-Sox Inc., which became a subsidiary in May 2014.

Historically, the company has opened about three 2-Rin-Kan stores per year and about five Bikers’ Station SOX stores per year.

Enhancement of wholesale business

In addition to wholesaling to Yellow Hat stores, the parent and its subsidiary wholesalers sell automotive and motorcycle parts to hardware stores and other general customers. In FY03/21, wholesaling to customers other than Yellow Hat stores generated sales of JPY14.1bn (+11.1% YoY), accounting for 10.1% (+0.7pp YoY) of Auto and Motorcycle Parts Sales business sales.

In the medium term, to enhance wholesaling to customers other than Yellow Hat stores, the company plans to develop products and capture new customers via the manufacturer vendor subsidiary JOYFULL Co., Ltd.

JOYFULL became a subsidiary in August 2010. It develops and manufactures washer fluids, battery fluids, and coolants, and launched the new ENERGY LUBE brand of automotive lubricants in April 2019.

Vigorous company-building

Yellow Hat aims to improve brand awareness by continuing to enhance its advertising and promotional initiatives.

Dividend policy

In terms of its dividend policy, Yellow Hat targets a 30% consolidated payout ratio while taking its consolidated earnings, financial condition, and investment plans into account. 

In FY03/21, the company paid a dividend of JPY54.0 per share (payout ratio of 29.1%). The FY03/22 dividend forecast is JPY58.0 per share (payout ratio of 28.2%).

Business

Yellow Hat sells automotive and motorcycle parts and accessories and provides maintenance services. In the Japanese market the leading company by sales is Autobacs Seven (TSE1: 9832), followed by Yellow Hat. In FY03/21, Yellow Hat had sales of JPY147.0bn versus JPY220.4.4bn for Autobacs Seven.

Historical performance and turning point

Company falls into earnings slump in FY03/08

In FY03/06, the company posted sales of JPY188.1bn (+0.6% YoY) and operating profit of JPY2.3bn (+188.7%, OPM of 1.9%). However, consumer sentiment subsequently deteriorated along with the economy, and the company lost its ability to coordinate its subsidiaries following consolidation among them in an attempt to boost efficiency under the Y-DNA* program formulated in FY03/05. This led to a slump in sales and an increased SG&A expense burden. In FY03/07 operating profit fell 79.0% YoY to JPY478mn (OPM of 0.4%) and in FY03/08 Yellow Hat posted an operating loss of JPY507mn.

*Under the Yellowhat Drastic New stage Action program (Y-DNA), a plan to innovate while retaining the Yellow Hat DNA, the company sought to merge and unify subsidiary sales companies to reduce costs and enhance head office functions.

Earnings growth achieved from FY03/09 onward under system established by current president, Yasuo Horie

Under Yasuo Horie, who became president in October 2008, the company concentrated its resources on the core automotive parts business, conducted strict cost reductions and expense controls, and employed a basic policy of having regional sales subsidiaries manage stores.

In addition, the company reduced the sales ratio of audio and visual products and other car electronics, which have relatively low margins in the face of fierce competition, and raised the ratio of relatively high-margin tires and expendables (including batteries and oil), for which demand is proportional to the number of vehicles owned and distance traveled. In this way, it improved its overall GPM.

It also promoted other measures to improve margins, such as actively opening stores at low cost, primarily in vacated premises, thereby reducing procurement costs by leveraging procurement scale based on a higher store count.

In FY03/09, sales fell to JPY89.8bn (-15.8% YoY), but the company returned to the black with operating profit of JPY279mn (OPM of 0.3%). The recovery in sales and profits continued from FY03/10 onward, with FY03/21 sales amounting to JPY147.0bn (+4.2% YoY) and operating profit to JPY13.0bn (+28.6% YoY, OPM of 8.8%).

Trends in sales and operating profit
Source: Shared Research based on company data

Business segments

The company has two segments: Auto and Motorcycle Parts Sales (95.6% of sales in FY03/21) and Real Estate Lease (4.4%). In the latter business, Yellow Hat leases store buildings to its sales subsidiaries, affiliates, and group store operators.

Performance by segment
FY03/12FY03/13FY03/14FY03/15FY03/16FY03/17FY03/18FY03/19FY03/20FY03/21
(JPYmn)Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.
Sales103,110117,482120,671121,788125,961129,817137,865139,200141,031146,994
YoY8.3%13.9%2.7%0.9%3.4%3.1%6.2%1.0%1.3%4.2%
Auto and Motorcycle Parts Sales96,248110,531113,829115,081119,411123,370131,418132,812134,775140,587
YoY8.9%14.8%3.0%1.1%3.8%3.3%6.5%1.1%1.5%4.3%
% of total93.3%94.1%94.3%94.5%94.8%95.0%95.3%95.4%95.6%95.6%
Real Estate Lease6,8626,9506,8426,7066,5496,4476,4466,3886,2566,407
YoY0.7%1.3%-1.6%-2.0%-2.3%-1.6%0.0%-0.9%-2.1%2.4%
% of total6.7%5.9%5.7%5.5%5.2%5.0%4.7%4.6%4.4%4.4%
Operating profit6,2387,0768,8317,4847,2036,9399,5619,58310,09312,978
YoY32.7%13.4%24.8%-15.3%-3.8%-3.7%37.8%0.2%5.3%28.6%
Operating profit margin6.0%6.0%7.3%6.1%5.7%5.3%6.9%6.9%7.2%8.8%
Auto and Motorcycle Parts Sales5,4246,1827,9146,4486,2115,9368,5948,4828,94011,678
YoY38.6%14.0%28.0%-18.5%-3.7%-4.4%44.8%-1.3%5.4%30.6%
Operating profit margin5.6%5.6%7.0%5.6%5.2%4.8%6.5%6.4%6.6%8.3%
% of total87.0%87.4%89.6%86.2%86.2%85.5%89.9%88.5%88.6%90.0%
Real Estate Lease8148939171,0369921,0029671,1011,1531,299
YoY3.4%9.7%2.7%13.0%-4.2%1.0%-3.5%13.9%4.7%12.7%
Operating profit margin11.9%12.8%13.4%15.4%15.1%15.5%15.0%17.2%18.4%20.3%
% of total13.0%12.6%10.4%13.8%13.8%14.4%10.1%11.5%11.4%10.0%
Source: Shared Research based on company materials

Auto and Motorcycle Parts Sales (95.6% of sales and 90.0% of operating profit in FY03/21)

Its main format is the Yellow Hat auto accessories chain. The company also has a chain of 2-Rin-Kan stores, which sell motorcycle parts, and the Bikers’ Station SOX chain, which sells motorcycles. There are three sales formats in use: retail sales by consolidated subsidiaries, wholesale sales to group affiliates (voluntary chain members), and wholesale sales to hardware stores and other general customers.

In FY03/21, sales by product were: tires and wheels, 27.9% (29.5% in FY03/20); audio and visual products, 8.7% (9.9%); car wash, car washing, oil, and other chemicals, 10.1% (9.7%); functional products, 11.5% (11.3%); interior and exterior products, 5.3% (4.8%); motorcycle products, 10.5% (9.6%); and other, 26.1% (25.3%).

Gross profit margins are relatively low for car electronics such as audio and visual products due to falling prices amid stiff competition. Conversely, gross profit margins are relatively high for tires and consumables (including batteries and oil) because of steady growth in replacement demand proportionate to car ownership and distances traveled.

Segment sales and operating profit (FY03/21)
Sales by product: Auto and Motorcycle Parts Sales (FY03/21) 
Source: Shared Research based on company data 

Overview of business model

In the core Auto and Motorcycle Parts Sales business, there are three selling formats: retail by consolidated subsidiaries, wholesale sales to group companies (voluntary chain stores*), and wholesale sales to general-purpose stores such as hardware stores.

Three selling formats for Yellow Hat
Source: Shared Research based on company data

*A voluntary chain is a business format where retailers or wholesalers form an organization with the aim of joint procurement of merchandise. Under a franchise chain, the head company (franchisor) contracts with franchisees and supplies them with trademarks, products/services, and management expertise to help them carry out their selling activities.

In FY03/21, sales by format in this segment were as follows: retail, 62.4% (61.2% in FY03/20); wholesale, 35.0% (36.5%), with 24.9% (27.0%) to Yellow Hat group companies (voluntary chains) and 10.1% (9.4%) to general stores.

Until FY03/15, wholesale sales comprised a larger share of the total than retail, but in FY03/16, retail sales overtook wholesale. The rise in the ratio of retail sales to total sales was driven by two factors: an increased retail store presence due to acquisition of companies such as Monte-carlo Co., Ltd. (now Hiroshima Yellow Hat), Driver Stand Co., Ltd. (now 2-Rin-Kan Yellow Hat), and Will Co., Ltd. (now YellowHat-Sox); and cases whereby some group companies found it impossible to continue operating as associate stores in the voluntary chain due to the lack of successors, so they were consolidated as subsidiaries.

Auto and Motorcycle Parts Sales business: sales by selling format
FY03/12FY03/13FY03/14FY03/15FY03/16FY03/17FY03/18FY03/19FY03/20FY03/21
(JPYmn)Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.
Sales96,248110,531113,829115,081119,411123,370131,418132,812134,775140,587
YoY8.9%14.8%3.0%1.1%3.8%3.3%6.5%1.1%1.5%4.3%
Retail31,48348,25951,64456,26462,44370,78377,33480,54582,46887,750
YoY-0.2%53.3%7.0%8.9%11.0%13.4%9.3%4.2%2.4%6.4%
% of total32.7%43.7%45.4%48.9%52.3%57.4%58.8%60.6%61.2%62.4%
Wholesale64,18661,63561,47057,34754,96150,37651,69849,55349,15349,177
YoY13.6%-4.0%-0.3%-6.7%-4.2%-8.3%2.6%-4.1%-0.8%0.0%
% of total66.7%55.8%54.0%49.8%46.0%40.8%39.3%37.3%36.5%35.0%
Group stores59,61753,91453,47447,50944,05539,41039,59237,36136,42035,027
YoY12.7%-9.6%-0.8%-11.2%-7.3%-10.5%0.5%-5.6%-2.5%-3.8%
% of total61.9%48.8%47.0%41.3%36.9%31.9%30.1%28.1%27.0%24.9%
General stores4,5687,7207,9969,83710,90510,96612,10612,19112,73214,149
YoY28.3%69.0%3.6%23.0%10.9%0.6%10.4%0.7%4.4%11.1%
% of total4.7%7.0%7.0%8.5%9.1%8.9%9.2%9.2%9.4%10.1%
Other5796377151,4702,0062,2102,3862,7133,1533,660
YoY68.8%10.0%12.2%105.6%36.5%10.2%8.0%13.7%16.2%16.1%
% of total0.6%0.6%0.6%1.3%1.7%1.8%1.8%2.0%2.3%2.6%
Operating profit5,4246,1827,9146,4486,2115,9368,5948,4828,94011,678
YoY38.6%14.0%28.0%-18.5%-3.7%-4.4%44.8%-1.3%5.4%30.6%
Operating profit margin5.6%5.6%7.0%5.6%5.2%4.8%6.5%6.4%6.6%8.3%
Source: Shared Research based on company materials

Retail

In FY03/21, retail accounted for 62.4% of sales in the Auto and Motorcycle Parts Sales business (up from 61.2% in FY03/19).

In retail, 35 consolidated subsidiaries manage the retail stores and maintenance services of Yellow Hat, 2-Rin-Kan, and Bikers’ Station SOX stores by region (as of July 2021). Collaboration between headquarters and the regional subsidiaries that operate stores is swift, so headquarters’ intentions are amply reflected in operations. The company has also adopted an area specialization strategy which enables efficient management and store operation that reflects needs of the local community.

Retail: store count and sales
FY03/12FY03/13FY03/14FY03/15FY03/16FY03/17FY03/18FY03/19FY03/20FY03/21
Store count145198222289337391421449475477
YoY20.8%36.6%12.1%30.2%16.6%16.0%7.7%6.7%5.8%0.4%
Yellow Hat Sales Pro (directly managed)26---------
Stores managed by subsidiaries103148171207253297320346367365
2-Rin-Kan1384044505355565657
Bikers' Station SOX---28344146475255
Montecarlo15121110------
Sales: Retail (JPYmn)31,48348,25951,64456,26462,44370,78377,33480,54582,46887,750
YoY-0.2%53.3%7.0%8.9%11.0%13.4%9.3%4.2%2.4%6.4%
Sales per store (JPYmn)238281246220199194190185179184
YoY-15.2%18.4%-12.6%-10.5%-9.4%-2.5%-2.0%-2.8%-3.6%3.3%
Source: Shared Research based on company materials

Retail sales are proportional to store count and sales per store. The company is increasing the store count mainly through acquisition and via consolidated subsidiaries. However, sales per store are trending downward in the long term largely due to the company’s focus on store openings in relatively low-cost vacated premises in regional areas with small commercial zones.

Since gross profit for retail includes profit at the store level, it has a higher GPM than wholesale, and there is greater profit volatility in relation to increases or decreases in sales. On the other hand, its SG&A expense ratio is also relatively high due to the fixed cost burden of personnel expenses, rents, and depreciation associated with store operation.

Wholesale

In FY03/21, wholesale accounted for 35.0% of sales in the Auto and Motorcycle Parts Sales business (down from 36.5% in FY03/20). In wholesale, the company wholesales to group stores (voluntary chain members; 24.9% of segment sales) and to general external parties such as hardware stores (10.1% of segment sales).

GPM in wholesale is lower than in retail. Although the company group bears no risk from holding inventories, it also receives no profit at the store level.

Wholesale: store count and sales
FY03/12FY03/13FY03/14FY03/15FY03/16FY03/17FY03/18FY03/19FY03/20FY03/21
Yellow Hat group store count401412408405400378383382371375
YoY5.0%2.7%-1.0%-0.7%-1.2%-5.5%1.3%-0.3%-2.9%1.1%
Sales: Wholesale (JPYmn)64,18661,63561,47057,34754,96150,37651,69849,55349,15349,177
YoY13.6%-4.0%-0.3%-6.7%-4.2%-8.3%2.6%-4.1%-0.8%0.0%
Group stores59,61753,91453,47447,50944,05539,41039,59237,36136,42035,027
YoY12.7%-9.6%-0.8%-11.2%-7.3%-10.5%0.5%-5.6%-2.5%-3.8%
Sales per store (JPYmn)152133130117109101104989794
YoY9.8%-12.9%-1.7%-10.4%-6.3%-7.4%2.7%-6.1%-1.0%-2.9%
General stores4,5687,7207,9969,83710,90510,96612,10612,19112,73214,149
YoY28.3%69.0%3.6%23.0%10.9%0.6%10.4%0.7%4.4%11.1%
Source: Shared Research based on company materials

Wholesale sales to group affiliates (voluntary chain members)

In FY03/21, wholesale sales to group stores accounted for 24.9% of sales in the Auto and Motorcycle Parts Sales business (27.0% in FY03/20). The company generates revenue through wholesale sales of merchandise to group affiliates that operate voluntary chain stores under affiliation agreements.

Yellow Hat executes agreements between group affiliates and affiliated stores (voluntary chain members). This gives affiliates the right to use Yellow Hat’s trademarks and management expertise with the appearance of being part of a single company. Management services include store operations (including face-to-face sales and maintenance work), merchandise management (ordering and sales floor construction) and store management (including achieving sales targets, cost reductions, and staff training). Group affiliates procure merchandise from Yellow Hat and receive sales support from the company as it leverages its buying power in volume purchases and conducts advertising campaigns.

In a typical case, franchisees have to pay royalties as set forth in franchise agreements, but because Yellow Hat has adopted a voluntary chain format, it does not collect royalties from affiliates. In contrast to stores operated by consolidated subsidiaries, affiliates may reflect the direction set by headquarters, but are not compelled to do so. As a result, stores operated by group affiliates are allowed a certain degree of latitude with regard to format which goes outside standard formats such as selling cars for example.

Sales in wholesale (to Yellow Hat group companies) are proportional to the store count and sales per store. The wholesale business sells to about 380 stores, and sales are about JPY100mn per store.

Wholesale sales to hardware stores and other general customers

In FY03/21, general wholesale sales accounted for 10.1% of sales in the Auto and Motorcycle Parts Sales business (9.4% in FY03/20). Yellow Hat generates revenue through wholesale sales of merchandise from its subsidiary companies to hardware stores and the like. Sales were JPY14.1bn (+11.1% YoY) in FY03/21, continuing the trend of YoY growth every year since FY03/11. While GPM for general wholesale sales is lower than retail, the fixed cost ratio is also lower, so the impact of declining sales on profits is relatively small.

Yellow Hat got its start as a wholesaler and had transactions with the majority of key hardware stores. As the number of Yellow Hat stores grew, the company focused management resources on the retail side and withdrew temporarily from low-margin wholesale sales to hardware stores. However, the company is once again working to grow its wholesale business. It thinks that bolstering this low-fixed-cost segment will strengthen its business platform and underpin profit growth. To this end it has been utilizing its consolidated subsidiary JOYFULL Co., Ltd. (became a subsidiary in August 2010; manufactures and sells chemical products and has wholesale capabilities) as well as its existing infrastructure of six offices and three logistics centers.

Keys to analyzing Yellow Hat

There are two key areas to focus on when analyzing Yellow Hat: store development (sales growth through new store openings) and improving store profitability.

Store development (sales growth through new store openings)

Per the company, its share of the Japanese car parts market is just 10–20% (details discussed later). Due to companies closing down or withdrawing from the business of car dealerships, service stations and garages, the market is becoming increasingly concentrated and the market share of major players (companies selling car parts) such as Yellow Hat and Autobacs Seven is rising.

Meanwhile, the market for car parts in Japan is forecast to continue shrinking. Yellow Hat’s strategy envisages YoY comparable store sales to be flat YoY in the medium term and aims to grow profits by new store openings. The aggressive store rollout program includes opening 30–40 stores in its key Yellow Hat format per annum combined with new stores for motorcycle accessories merchandiser 2-Rin-Kan and motorcycle seller Bikers’ Station SOX.

Yellow Hat: Auto and Motorcycle Parts Sales and group store count
FY03/12FY03/13FY03/14FY03/15FY03/16FY03/17FY03/18FY03/19FY03/20FY03/21
Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.
Sales (JPYmn)96,248110,531113,829115,081119,411123,370131,418132,812134,775140,587
YoY8.9%14.8%3.0%1.1%3.8%3.3%6.5%1.1%1.5%4.3%
Operating profit (JPYmn)5,4246,1827,9146,4486,2115,9368,5948,4828,94011,678
YoY38.6%14.0%28.0%-18.5%-3.7%-4.4%44.8%-1.3%5.4%30.6%
Operating profit margin5.6%5.6%7.0%5.6%5.2%4.8%6.5%6.4%6.6%8.3%
No. of group stores562625645708750781809835849852
YoY8.7%11.2%3.2%9.8%5.9%4.1%3.6%3.2%1.7%0.4%
Sales per store (JPYmn)171177176163159158162159159165
YoY0.2%3.3%-0.2%-7.9%-2.0%-0.8%2.8%-2.1%-0.2%3.9%
Source: Shared Research based on company materials

Distinguishing feature: opening stores in vacated retail premises

One of the distinguishing characteristics of Yellow Hat is its expertise in low-cost store openings. The company often opens fully fitted out stores using the buildings and fixtures in premises vacated by businesses from other industries. According to the company, its margins in newly opened stores are higher than others in the industry. For example, Autobacs Seven often opens large urban stores in prime locations such as roadsides. In contrast, Yellow Hat has tended to open stores in vacated premises in regional areas with small commercial zones that are relatively low cost. According to the company, although store opening costs vary according to the property, its initial investment expenses are relatively low, enabling a quick turn to profits. The company used to have store opening criteria of selling space of 150 tsubo (496sqm) and site area of 1,000 tsubo (3,306sqm), but it relaxes these when it enters vacated premises to at least 80 tsubo (264sqm) for selling space and 500 tsubo (1,653sqm) for site area. Yellow Hat says that it has already worked to lower costs, including those of fixtures, so there is limited scope for major cuts to store opening costs.

Since around 2012, Autobacs Seven has also adopted an aggressive store opening strategy in small commercial zones, but Yellow Hat thinks its target of 30–40 store openings per year is readily achievable in the medium and long term. The company also argues that it has the advantage of accumulated expertise built up over its long history of opening stores in small catchment areas.

Further, Yellow Hat has a high ratio of retail sales to total sales. They accounted for 62.4% of sales in FY03/21, compared with 38.5% (36.7%) at Autobacs Seven. This is because under its current president, Yasuo Horie, Yellow Hat has shifted store management to regional sales subsidiaries, and in the 2010s focused on these subsidiaries to increase its store count.

Stores

As of end-FY03/20 the company had 738 Yellow Hat stores in Japan (728 at end-FY03/19) and three overseas (four at end-FY03/19). Of the stores in Japan, 367 (346 at end-FY03/19) were operated by wholly owned subsidiaries and 371 (382 at end-FY03/19) by group affiliates (voluntary chain companies, details in table below).

In addition, for motorcycle parts it had 57 2-Rin-Kan stores (56 at end-FY03/20) and for motorcycles and motorcycle parts it had 55 Bikers’ Station SOX stores (52 at end-FY03/20).

Types of Yellow Hat group stores
Store typeBusinessNo. of facilities
Yellow Hat, JapanAutomotive parts sales, automobile inspections, maintenance services740
Subsidiary-operated Yellow HatYellow Hat stores operated by wholly owned subsidiaries365
Managed by Yellow Hat group companiesYellow Hat stores operated by equity method affiliate Hotman and other group affiliates375
Yellow Hat, OverseasYellow Hat stores operated by wholly owned subsidiary Taiwan Yellowhat Co., Ltd.0
2-Rin-KanMotorcycle parts sales business operated by wholly owned subsidiary 2-Rin-Kan Yellow Hat Co., Ltd.57
Bikers' Station SOXMotorcycle and motorcycle parts sales business operated by wholly owned subsidiary YellowHat-Sox Inc.55
Yellow Hat store