MARUI GROUP s Innovation and Corporate Value Improvement Targeting Sustainable Growth. September, 2016

Transcription

1 MARUI GROUP s Innovation and Corporate Value Improvement Targeting Sustainable Growth September, 2016

2 1 A Look at MARUI GROUP

3 Overview of MARUI GROUP Founded: Business activities: Stores: 1931 (Initially sold furniture through monthly installment payments) Retailing, FinTech * Unique business model merging retailing and finance 29 stores primarily in Kanto but also in Tokai, Kansai, and Kyushu Cardholders: 6.1 million (As of March 31, 2016) Employees: 5,899 Market capitalization: (As of March 31, 2016) KPIs (FY2016): ROE: 6.0 % (Up 0.8 pts YoY) ROIC: 3.3 % (Unchanged YoY) EPS: (Up 20.1% YoY) 2

4 Performance Trends: 8th Consecutive Year of Higher Operating Income Anticipated Moved on to stage of sustainable growth and corporate value improvement through co-creation management and business model transformation after overcoming crisis including two losses (Billions of yen) Bubble economy Bubble collapse Money Lending Business Act revision Lehman shock 80.9 (Yen) EPS Operating income FY87 FY91 FY96 FY01 FY08 FY10-50 FY17 (Forecast) 3

5 Co-Creation Management : Open Innovation with Customers Creditability should not be assigned to customers; it should be built together with customers. (Founder: Chuji Aoi) Amalgamation of co-creation efforts Hakata Marui Gold card with no annual fees More than 3 million pairs sold! Rakuchin Kirei Shoes Co-Creation = Open Innovation with Customers EPOS card app Over 750,000 downloads! Advertisement incorporating customer feedback Private insurance brand 4

6 Co-Creation Management: Creation of Corporate Value Together with All Stakeholders 5

7 2 Innovation Targeting Sustainable Growth 1 Customer innovations 2 Retailing innovations 3 Credit card innovations

8 Customer Innovations

9 Customer Innovations: Questionable Sustainability of Youth-Oriented Business in Japan Previously Going forward Youth-oriented Diversity & Inclusion Provide products, services, and stores that bring joy to all customers regardless of age, gender, or physical characteristics 8

10 Increase in Customer Numbers Following Expansion of Target Age Groups Seven consecutive years of increased purchase numbers following expansion of customer age groups after comprehensive revision of products, sales floors, stores, customer service, etc. Number of Purchases 7 consecutive years of increases 92 million 58 million 40 and over 21% 66% 39 and under 79% 34% FY FY08 FY FY FY FY FY13 FY FY FY

11 New Market Created through Inclusive Sizes: Private Brand Shoes Rakuchin Kirei Shoes co-created with customers unprecedented best seller with more than 3 million pairs sold New market created through addressing needs of customers excluded by industry standards Foot Sizes of Adult Japanese Women and Size Range of Women s Shoes MARUI GROUP s shoe size range Standard industry shoe size range cm 10

12 Forward-Looking Initiatives Evolve forward-looking initiatives for bringing joy to all customers leading up to Tokyo 2020 Olympic and Paralympic Games Facilities that can be enjoyed regardless of disability Initiatives for supporting LGBT community 11

13 Retailing Innovations

14 Retailing Innovations: Transition toward Business Model Focused on Shopping Centers Previously Going forward Department Stores Shopping Centers Convert all department stores to real estate-model shopping centers over five years beginning with FY2015 (excluding some exceptions) 13

15 Reason for Transition to Shopping Centers: Shift of Focus from Physical Goods to Fulfilling Lifestyles Shift in focus of Japanese consumption from physical goods to fulfilling lifestyles dating back 30 years Focus on Physical Goods vs. Fulfilling Lifestyles (Source: Public Opinion Survey Concerning People s Lifestyles, Cabinet Office) Change in focus Focus on fulfilling lifestyles Focus on physical goods 14

16 Reason for Transition to Shopping Centers: Long-Term Social Needs for Experience Consumption Increase in consumption of experiences (telecommunications, eating out, leisure, etc.), but sharp decline in consumption of goods (clothing (apparel) consumption plummeted to 60% of 1995 s level) Consumption Expenditures (1995 indexed to 100) 100 Telecommunications services Eating out Leisure Total consumption 90% Food 89% Newspapers and magazines Clothing 263% 109% 106% 71% 61% Experiences Goods * Source: Family Income and Expenditure Survey, Statistics Bureau, Ministry of Internal Affairs and Communications (two-ormore-person households in which head of household works, food excludes eating out, leisure based on Company data) 15

17 Reason for Transition to Shopping Centers: Ability to Respond to Diverse Needs Difficult environment for department stores and chain stores focused on goods, but strong growth of shopping centers capable of providing both goods and experiences Sales Amounts by Store Type (1995 indexed to 100) Shopping centers 136% Chain stores Department stores 82% 72% * Source: Japan Council of Shopping Centers, Japan Chain Stores Association, and Japan Department Stores Association 16

18 Plan and Progress in Transition to Shopping Centers and Fixed-Term Rental: 0.9 Billion Income Improvement in FY2016 Complete transition to shopping centers and fixed-term rental by FY2019, target income improvement of 7.0 through business model transformation Income Improvements through Transition to Shopping Centers and Fixed-Term Rental Income improvement 7.0 Increase value through contract renewals Income improvement Ratio of fixed-term rental contracts (Year-end) FY15 FY16 FY17 FY18 FY19 FY20 FY21 7% 20% 60% 90% 100% - - * Ratio of fixed-term rental contracts = Fixed-term rental contracted floor space Total floor space capable of being contracted as fixed-term rental * Sections not applicable for fixed-term rental contracts: Sections not applicable for fixed-term rental contracts based on contracts with building owners, directly managed sales floors, event spaces, food sales floors, etc. 17

19 Co-Creation Store Development: Hakata Marui First next-generation shopping center Marui store (opened in April 2016), departure from traditional concept of Marui through co-creation store development with customers Co-Creation Store Development with Customers Focus on Restaurants and Sundries Aggregate total of 15,000 local customers participating through planning meetings and community site Increased lineup of restaurants from initial planning phase, lifestyle category accounting for 70% of sales floor 18

20 Successes from Co-Creation: Hakata Marui Massive support from customers of all ages due to co-creation store development, record-breaking customer and card application numbers for new store opening Performance in 1st Month after Opening Customers: Purchases: Card Applications: 1.1 times higher 2.2 times higher 2.3 times higher * vs. 1st month performance at Yurakucho Marui Investment and Anticipated Benefits Investment amount: 5.7 ROI: 12% NOI yield: More than 4% 19

21 Credit Card Innovations

22 Credit Card Innovations: Change from Past Role of Supporting Retailing Previously Going Forward In-house card Multipurpose card Support for retailing Stores positioned as venues for issuing cards Cash advances Card shopping Cardholders: 6.1 million; Card transactions: 1.4 trillion (FY2016) 21

23 Business Structure Transformation: Card Innovation Going Back to Starting Point of Merging Retailing and Finance Five consecutive years of increased operating receivables after overcoming crushing blow dealt by Money Lending Business Act revision through card innovation Operating Receivables Consumer loans outstanding March 2016 Launch of EPOS card Prior peak Setting of new records Installment sales accounts receivable FY FY FY FY FY FY FY FY FY FY FY

24 Industry-Leading Level of Operating Income per Active Card High-value-added business model [Cardholders] [Card Transactions] [Operating Income] 25.6 million 25.9 million 4, , million 1, EPOS Card Company A Revenue Expenses 19,600 13,900 Company B EPOS Card Company A [Operating Income per Active Card] 13,700 13,300 Company B EPOS Card Company A 10,100 7,800 Income 5, ,300 EPOS Card Company A Company B Company B * Figures from FY2016, segment based * Total for card shopping and cash advance transactions 23

25 Sustainability of Credit Card Business: Comparison of Payment Methods by Country Predominately cash used for payment in Japan, significant room for growth of credit card payments Distribution of Payment Methods by Country Cash 52% 17% Checks 15% Cash Debit cards Bank transfers Prepaid cards, e- money Credit cards 16% 24% 28% 70% Credit cards Japan 日本アメリカ United South 韓国 States Korea * Calculated by MARUI GROUP based on data from the Ministry of Economy, Trade and Industry; Mitsubishi Research Institute, Inc.; and the Japan Consumer Credit Association 24

26 Medium-to-Long-Term Consumption Outlook: Trend toward Cashless Purchasing Annual average growth of 7% in card shopping transactions despite unchanged figures for household spending, expected to increase further due to government drive to install infrastructure leading up to 2020 Card Shopping Transactions Household spending Annual average growth rate: 7% 50 trillion 28 trillion * Source: Consumer Credit Statistics from Japan, Japan Consumer Credit Association 25

27 3 Medium-Term Management Plan (FY2017 FY2021)

28 Medium-Term Management Plan (FY2017 FY2021) 1.Redefinition and reorganization of businesses Stores Retailing FinTech Omni-channel retailing Facility management and distribution Credit cards Financial services IT 2.Co-creation of corporate value with shareholders and other investors Realization of optimal capital structure 27

29 Retailing: Balance Sheet and ROIC Forecasts Advance transition to shopping centers and fixed-term rental and conduct omni-channel retailing to achieve ROIC of more than 5.3% Balance Sheet Forecasts Operating Income and ROIC Forecasts More than 5.3% Liabilities 60.0 Liabilities % Total assets Shareholders equity Equity ratio 81% Total assets Shareholders equity Equity ratio Approx. 70% 10.6 More than FY16 FY FY16 FY

30 FinTech: Balance Sheet and ROIC Forecasts Increase operating receivables to 260.0, procure funds through liabilities to maintain equity ratio of 10%, and strengthen insurance and other financial services to achieve ROIC of more than 4.1% Balance Sheet Forecasts Total assets Operating Income and ROIC Forecasts 3.9% More than 4.1% Total assets Operating receivables Liabilities of which interestbearing debt Equity ratio 10% Operating receivables Liabilities of which interestbearing debt Equity ratio Approx. 10% FY FY FY More than 40.0 FY

31 Realization of Optimal Capital Structure: ROIC and WACC Forecasts Procure funds through low-cost liabilities in FinTech and utilize shareholders equity in Retailing Raise overall ROIC and lower capital costs ROIC and WACC Forecasts ROIC 4% WACC > 2~3% ROIC 3.3% FinTech ROIC 3.9% WACC 3.3~3.7% Liability costs 0.3% Interestbearing debt FinTech ROIC 4.1% Liability costs 0.3~1% Approx. same level Retailing ROIC 3.5% Increase Shareholders equity costs 7~8% Shareholders equity Retailing ROIC 5.3% Shareholders equity costs 7~8% FY2016 FY

32 Realization of Optimal Capital Structure: Targeted Balance Sheet Set amount of operating receivables as upper limit for interest-bearing debt and expand balance of debt to represent 90% of this amount Target equity ratio of approx. 30% over medium-to-long term Balance Sheet Forecasts Total assets 1,000.0 Operating Income and ROIC Forecasts More than 4.0% Operating receivables Total assets Liabilities of which interestbearing debt Shareholders equity Equity ratio 39% Operating receivables Liabilities of which interestbearing debt Shareholders equity Equity ratio Approx. 30% 3.3% 29.6 More than 50.0 FY16 FY21 FY FY

33 Realization of Optimal Capital Structure: Cash Flow Forecasts Forecast for 5-year aggregate core operating cash flow over period of medium-term management plan Allocate cash to growth investments and shareholder returns to realize ongoing growth and improved capital efficiency Cash Flows from FY2017 FY2021 (5 years) <Procurement><Allocation> Fund procurement through incurring interest-bearing debt and liquidation of receivables Increase in operating receivables in FinTech Growth investments 90.0 Existing businesses Investments in new business fields 30.0 Core operating cash flow Growth investments & Shareholder returns Shareholder returns Stable, long-term dividend increases Share buybacks 32

34 EPS and Dividend Forecasts: High Growth Coupled with High Returns Target record-high EPS of 130 through business growth and capital measures (realize 10-year average EPS growth rate of more than 20%) Institute stable, long-term dividend increases in conjunction with income growth More than 130 EPS and Dividends Cash dividend s per share EPS Consolidated payout ratio Share buybacks FY12 FY13 FY14 FY15 FY FY17 (forecast) FY18 (forecast) FY19 (forecast) 30% or more 40% or more (1st half) Undecided FY20 (forecast) FY21 (forecast) 33

35 KPI Targets of Medium-Term Management Plan FY2016 FY2021 ROE 6% More than 10% ROIC 3.3% More than 4% EPS 71 More than 130 Operating income 29.6 More than

36 Forward-looking statements contained in this presentation are based on information available at the time of preparation and on assumptions that have been deemed to be rational. Actual performance may differ greatly due to a variety of factors. Any inquiries may be directed toward the Investor Relations Department (TEL: ).