MARUI GROUP CO., LTD. Financial Results Briefing for Fiscal 2014

Transcription

1 MARUI GROUP CO., LTD. Financial Results Briefing for Fiscal 2014 May 14, 2015

2 Today s Agenda 1. Overview of Performance in Fiscal Progress of Medium-Term Management Plan and Future Initiatives 3. New Management Indicator for New Business Model 4. Performance Targets for Fiscal 2015 and Shareholder Returns 2

3 1 Overview of Performance in Fiscal 2014

4 Summary of Performance in Fiscal th consecutive year of higher gross profit, 6th consecutive year of higher operating income 2. Share buybacks of 15.0 billion and cancellation of 40.0 million shares 3. Strong growth in credit card services, card transactions exceed 1 trillion 4

5 Consolidated Statements of Income: Targets Achieved for Both Revenues and Income Higher operating income for 6th consecutive year despite revenue declines due to impacts of consumption tax hike and transition to SC-style stores ROE improves 0.2 percentage points to 5.2% FY12 FY13 FY14 YOY vs Target Billions of yen Billions of yen Billions of yen % Billions of yen Total operating revenues Gross profit (Gross margin of total operating revenues (%)) (36.4) (37.4) (39.1) (+1.7) (-0.2) SG&A expenses Operating income Ordinary income Net income EPS (yen) ROE (%)

6 Segment Information: Targets Achieved for Retailing and Store Operation Targets achieved in retailing and store operation despite revenue and income declines due to impact of consumption tax hike Double-digit growth for total operating revenues and operating income in credit card services following strong business expansion Total operating revenues Operating income FY12 FY13 FY14 vs FY12 FY13 FY14 YOY Target YOY vs Target Billions of yen Billions of yen Billions of yen % Billions of yen Billions of yen Billions of yen Billions of yen % Billions of yen Retailing and store operation Credit card services Retailingrelated services * * 2% decrease due to impact of transition to SC-style stores 6

7 SG&A Expenses: Increase in Credit Card Services Variable Costs Variable costs up due to higher point-related expenses stemming from increased card transactions Reduction in fixed costs and decrease in measure-associated sales promotion expenses Breakdown of SG&A Expenses FY13 FY14 YOY Billions of yen Billions of yen Billions of yen Sales promotion expenses Point-related expenses Breakdown of YOY Change Variable costs Billions of yen +2.5 Fixed costs, etc. Billions of yen -1.3 Sales administration costs Personnel cost Equipment costs Depreciation and amortization Provision for bad debts Expenses for interest repayment 0.9 ー -0.9 Others Total SG&A expenses

8 Consolidated Balance Sheets: Higher Operating Receivables Higher operating receivables due to expansion of credit card services Revolving repayment receivables totaling 13.5 billion liquefied during 1st half Shareholders equity ratio down due to share buybacks, but up on market value basis Mar. 31, 2014 Mar. 31, 2015 YOY Billions of yen Billions of yen Billions of yen Operating receivables Installment sales accounts receivable (Including factoring accounts receivable) (46.0) (66.5) Operating loans Fixed assets Interest-bearing debt Shareholders equity Shareholders equity ratio 47.5 % 45.4 % -2.1% Shareholders equity ratio on market value basis 36.5 % 53.1 % % Total assets

9 Cash Flows: Operating Cash Flow Allocated to Expenditures and Shareholder Returns Operating cash flow of 28.8 billion (excluding rise of operating receivables) allocated entirely to capital expenditures and shareholder returns Net cash provided by operating activities (excluding rise of operating receivables) FY13 FY14 YOY Billions of yen Billions of yen Billions of yen Increase in operating receivables Net cash provided by (used in) operating activities Capital expenditures (including redemption of guarantees) Decrease (increase) in investment securities for sale Net cash provided by (used in) investing activities Cash dividends paid Purchase of treasury stock Net cash provided by (used in) financing activities Cash and cash equivalents at end of period

10 Card Transactions in Credit Card Services: Rapid Growth in Card Shopping Transactions, Transactions Over 1 Trillion Card Transactions (Billions of yen) Over 1 trillion YOY increase Began issuing EPOS Cards years 10

11 2 Progress of Medium-Term Management Plan and Future Initiatives

12 Framework of Medium-Term Management Plan (Fiscal 2014 Fiscal 2016) 1. Reform retailing and store operation business model 2. Pursue further earnings growth through nationwide expansion centered on growing credit card services and retailing-related services 3. Develop vigorous, highly productive organization geared toward innovation that takes advantage of diversity Achieve more than 36.0 billion for operating income and ROE of 6.0% or higher + 4. Implement financial strategies to improve corporate value (from 2nd half of fiscal 2015) 12

13 Retailing and Store Operation Business Model Reforms

14 Retailing and Store Operation Business Model Reforms Basic Policy Store development reforms Improve corporate value by shifting to a business model with high capital efficiency Shift from earnings management based on Company real estate costs to earnings management focused on market price-based rent fees (hurdle rate) Transition from department stores to SC-style stores Improve performance of store sections earning less than average market rental fees Sales floor reforms Product reforms Selectively concentrate resources on Company sales floors to transition to specialty store model Selectively concentrate management resources on sales floors capable of achieving profit margins 3% above average market rental fees to transition to specialty store model, even in Marui stores Enhance lineups and expand variations of new PB products for sale outside of Marui stores Develop competitive, high-value-added products centered on women s shoes Approved fall 2015 store opening in LaLaport TACHIKAWA-TACHIHI Growth strategies Develop nationwide operations using 2 store brands Flexibly operate and develop new SC-style Marui stores run by Marui and SC Modi stores run by AIM Create based on site location and scale as a united Marui Group 14

15 Transition to SC-Style Stores: Steady Progress While Overcoming Issues Step 1 Step 2 Step 3 Spring 2014 Fall Benefits Opened Machida Marui, first SC-style Marui store Purchase numbers 2.6 times higher due to contributions from food-selling tenants Double-digit growth in new cardholders Issues Store earnings lower than expected due to lack of basic leasing knowledge Shifted to rental agreements for sections of Marui City Yokohama, Kichijoji Marui, etc. Benefits Approx. 3,500 m 2 of sales floor shifted to rental agreements Profitability improved at almost all sections shifted to rental agreements Future tasks Accelerating transition to SC-style stores Renovating all stores Convert Shibuya stores to SC 15

16 Conversion of Shibuya Stores to SC: Start of New Marui on Proceeding with Further SC Transition Issues regarding 2 Shibuya stores Symbolic of past Marui (youth, fashion) Inability to respond to changing times, particularly low performance Difficulty in clearly differentiating concept of 2 stores nearby each other Successfully convert Shibuya stores to SC, and advance overall transition Start of a new Marui (Retailing and store operation advanced by whole Group) Renovate 2 Shibuya stores based on 2 Group brands Convert Jam Shibuya to Marui-operated Shibuya Marui SC-style store Convert City Shibuya to AIM Create-operated Shibuya Modi SC 16

17 2 Store Categories: Differentiation through 2 Brands Shibuya Marui Shibuya Modi Opened in April 2015 Opening in fall 2015 Floor Product category Floor Product category 9F Rooftop restaurants 8F Animation products / Video games 8F Amusement area Marui Co., Ltd. 7F 6F 5F 4F 3F 2F 1F Miscellaneous goods Cosmetics Women s apparel Restaurants Men s apparel Fashion accessories Fashion accessories AIM Create Co., Ltd. 7F 6F 5F 4F 3F 2F 1F B1F HMV&BOOKS Fashion accessories Miscellaneous food items Cosmetics TOKYO Select new business models Restaurants Services Food events Shop united under single concept Introduce various restaurants and miscellaneous goods to complement already popular apparel Reinvent store concept to create commercial facility in consideration of the future of Shibuya 17

18 Performance Forecasts Total Operating Revenues and Operating Income Forecasts Jam Shibuya Shibuya Marui City Shibuya Shibuya Modi Total operating revenues Total operating revenues Operating income Operating income Current performance (Apr. 24 May 10, 2015) Net sales: +29% YOY Customer numbers: +56% YOY Card transactions: +23% Expand lifestyle category floor space to realize 30% increase in purchase numbers 18

19 SC Transition Road Map: Phased Income Improvements to Appear in 3 5 Years Anticipated Income Improvements New stores Hakata SC-style Marui Machida Marui Shibuya Marui Income improvement Modi Shibuya Modi Approx billion Rental contract section Yokohama, Kichijoji, etc. All stores FY19 ー Progress of transition to SC-style stores Within 3 years 70% Within 5 years 100% Renewal of tenant rental contracts * Progress of transition to SC-style stores = fixed-term rental contracted floor space total floor space capable of being fixed-term rental contracted * Total for Marui and Modi 19

20 New Store Opening: Hakata Marui to be Opened in Front of Hakata Station in Spring 2016 Preparations for opening this new SC-style Marui store progressing steadily Here * Hakata Marui to be opened as part of Hakata-Chuo SW Project (Tentative Name) conducted by Japan Post Co., Ltd. Above artist rendition provided by Japan Post Co., Ltd. 11F ~ 8F 7F 1F B1F Open: Spring 2016 Marui-operated floors: B1F 7F Planned sales floor space: Approx. 15,000 m 2 Investment amount: 5.0 billion 20

21 Nationwide Expansion Centered on Credit Card Services

22 Unique Characteristics of Marui s Credit Card Services: Rapid Growth through Fusion of Retailing and Cards Foundations Strengths Performance Integrated management of retailing and cards since founding Legacy as issuer of Japan s first credit card Corporate culture of building credit with customers Personnel exchanges within Group Proactive IT investments Business model fusing retailing with cards Human resources knowledgeable in both retailing and cards Low-cost cardholder acquisition through card issuance in Company stores On-the-spot issuance system using IT Gold Card proposed based on usage records Successful transition from cash advance to shopping credit Transformation of earnings structure to overcome profit decline following Money Lending Business Act revision Cardholder growth Transactions growth Marui Competitors +9% +1% +20% +13% Ratio of active users 63% 56% Credit default ratio 1.7% 1.9% Operating income margin 28% 17% Operating income margin improvement +24% +3% * Averages for competitors calculated by the Company based on disclosure materials Medium- to long-term value improvement: Double fiscal 2014 s segment operating income in fiscal

23 Credit Card Services Growth Strategy: Expansion of Cardholders and Increased Ratio of Active Users Credit card services growth Expansion of cardholders Increased ratio of active users Expand collaboration cardholders by utilizing retailing employees cultivated during transition to SC-style stores Leverage retailing experience to aid businesses of collaboration partners Company collaboration cards, commercial facility collaboration cards, fan club cards Leverage know-how merging retailing and cards to evolve measures and operations Promote card usage during customer service at stores Provide on-the-spot issuance of cards in stores using tablet PCs Introduce nationwide Propose and issue Gold Cards at stores 23

24 Nationwide Expansion: Room to Grow in Previously Unaddressed Areas EPOS Cardholder Numbers Tokyo area Kansai area 4,500, ,000 Other 680,000 76% of total 13% of total 11% of total Share 13% Share 4% Share 1% Strategic region Marui store EPOS office AIM Create branch 24

25 Expansion in Kyushu: Smooth Progress in Collaboration Card Initiatives Cardholder numbers in Kyushu 80,000 in fiscal 2014, target 130,000 by spring 2016 opening of Hakata Marui * Number of cardholders in Kyoto reached approx. 90,000 in 3-year period after Kyoto Marui opening New Hakata Marui Sasebo 5bangai (Dec. 2014) AMU PLAZA OITA (Apr. 2015) HUIS TEN BOSCH (Jul. 2014) Club Hawks EPOS Card (Feb. 2015) Kyudenko (Nov. 2014) 25

26 Service Area Expansion: Accelerate Nationwide Development Establishment of EPOS Card Tohoku Office Established office in Sendai to join ranks of Kansai and Kyushu offices (Apr. 1, 2015) Strengthen efforts to build relationships with collaboration partners and benefit providers in Tohoku Expansion of commercial facility collaboration cards Leverage expertise and human resources to issue commercial facility collaboration cards for unexplored areas of Tokyo and facilities in prefectural cities MONA Shin-Urayasu (Aug. 2014) MALera GIFU (Scheduled for Jul. 2015) Strengthening of Internet application services Expand cardholder numbers by launching smartphone app for applications and starting in-store pickup services Fiscal 2014 Internet applications: 33,000 (up 94% YOY) 26

27 Future Outlook: Target Card Transactions of 2 Trillion in Fiscal 2019 Forecasts for Credit Card Services Card Transactions, Receivables, and Operating Income 2 trillion Card transactions Annual increase of billion Interest-bearing receivables Annual increase of billion * Transactions for revolving and installment payments + cash advance transactions Operating income Annual increase of billion 1 trillion billion 20.1 billion years 5 years 27

28 Financial Strategies to Improve Corporate Value

29 Financial Strategies: Share Buybacks Totaling 20.0 Billion in Fiscal 2015 Allocate all operating cash flows from period of medium-term management plan to growth investments and shareholder returns Share buybacks totaling 15.0 billion conducted in fiscal 2014, conduct additional 20.0 billion in fiscal 2015 Cash Flows from Fiscal 2014 Fiscal 2016 (3 years) Procurement Fund procurement Through incurring interest-bearing debt and liquefaction of receivables billion Operation cash flows Excluding rise of operating Receivables billion Allocation Increase in working capital for credit card services billion Growth investments Shareholder returns billion Capital expenditures billion Dividends billion Capacity for additional Shareholder returns billion FY16 Planned share buybacks of approx billion 15.0 billion completed in FY14 (40.0 million shares cancelled) 20.0 billion scheduled for FY15 (May 15 Aug. 31, 2015) 29

30 Medium-Term Management Plan: Proceeding on Schedule Realize quick ROE improvement through income growth and financial strategies Operating Income (Consolidated) Quick ROE improvement Medium-term management plan (FY14 16) Operating income: More than 36.0 billion ROE: More than 6.0% ROE 8.0% ROE 10.0% 28.0 billion FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY 年 年 年 年 年 年 年 年 年 年 2 2 FY 年 年 年 30

31 3 New Management Indicator for New Business Model

32 Total Operating Revenues Forecast: Recent Back-and- Forth, Future Decline due to Transition to SC Transition to SC-style stores (Shift from product sales to rent revenues) billion billion

33 Gross Profit Forecast: 4 Consecutive Years of Increases, Strong Growth Going Forward billion billion

34 Operating Income Forecast: 6 Consecutive Years of Increases, Continuing Growth Trends in Future 28.0 billion 18.2 billion

35 Disparity Between Revenue and Income Trends Drop in total operating revenues due to transition to SC-style stores Gross profit Total operating revenues Gross profit increase causes disparity between revenue and income trends Operating income Adoption of new management indicator FY14 35

36 Total Group Transactions: Total Transactions for All Group Businesses to Continue Growing 1,464.4 billion billion

37 New Indicator: Accurately Reflecting Group Growth Potential and Management Conditions Total Group transactions 1 Topline indicator linked with income growth Total Group transactions Gross profit 2 Accounting procedures for more accurately reflecting management conditions Operating income Change in sales display method FY14 37

38 1 Total Group Transactions: Key Management Indicator Displaying Growth Potential Total of sales from retailing and store operation, credit card transactions, and external sales Retailing and store operation Credit card services Retailing-related services Product sales, rent revenues from fixed-term rental contract tenants Card shopping transaction volumes at external affiliates, cash advance transactions, etc. External sales Total Group Transactions Forecast FY14 FY15 YOY Billions of yen Billions of yen % Total Group transactions 1, , Retailing and store operation Credit card services 1, , Retailing-related services

39 2 Change in Sales Display Method: Accounting Procedure for Accurately Reflecting Management Conditions Display method for consignment buying sales from retailing and store operations changed from total value to net value (the global standard) Total operating revenues changed to revenues FY14 (Pre-change) FY14 (Post-change) Consignment sales Rent revenues and others Sales from Companyoperated sales floors Gross profit Impact of change billion 39.7 Decline in revenue Retailing and store operation total operating revenues billion Revenue billion Retailing and store operation gross profit 83.1 billion 83.1 billion Gross profit unaffected 39

40 4 Performance Targets for Fiscal 2015 and Shareholder Returns

41 Performance Targets for Fiscal 2015: Target Increased Revenue and Income Target 1,710.0 billion for total Group transactions (up 17%) and 7th consecutive year of higher operating income Forecasts of 5.8% for ROE and 69.4 for EPS (up 18%) FY14 (Post-change) FY15 YOY Billions of yen Billions of yen % Change Total Group revenues 1, , Revenue* Gross profit (Gross margin of total operating revenues (%)) (63.3) (64.5) ( ー ) (+1.2) SG&A expenses Operating income (Operating income margin (%)) (11.2) (12.0) ( ー ) (+0.8) Net income EPS (yen) ROE (%) ー +0.6 * Fiscal 2015 target for total operating revenues (pre-change): billion (unchanged YOY) 41

42 Segment Income Performance Targets for Fiscal 2015: Higher Income in All 3 Businesses Progress in transition to SC-style stores in retailing and store operation, record-breaking income in credit card services FY14 FY15 YOY Change Billions of yen Billions of yen % Retailing and store operation Credit card services Retailing-related services * Fiscal 2014 credit card service segment income increased 3.7 billion when the impact of liquidity measures ( 1.8 billion) are excluded. 42

43 Shareholder Returns: Share Buybacks and 4th Consecutive Year of Higher Dividends Share buybacks Share buybacks totaling 20.0 billion in fiscal 2015 Dividend policy and forecast Stable and continuous dividend increases targeting a consolidated payout of 30% or higher Year-end dividend of 10 per share (up 1) in fiscal 2014 Full-year dividend of 22 per share (up 3) in fiscal 2015, 4th consecutive year of higher dividends FY11 FY12 FY13 FY14 FY15 Full-year dividends Consolidated payout Total return ratio % 31% 32% 32% 32% 73% 31% 32% 125% 146% 43

44

45 Reference

46 Assumptions for Full-Year Forecasts Billions of yen, % Revenue FY14 FY15 YOY Transactions FY14 FY15 YOY Retailing and store operation Card shopping transactions , Product sales Consignment sales Rent revenue and others Credit card services Financial charges earned on revolving and installment sales Affiliated merchants Cash advances Cash advance transactions Balance of operating receivables Revolving repayment, payment by installments * Card shopping transactions represent credit card shopping transactions at external affiliates. FY14 FY15 YOY Cash advances Retailing-related services

47 Forward-looking statements contained in this presentation are based on information available at the time of preparation and based on assumptions that have been deemed to be rational. Actual performance could differ greatly due to a number of factors.