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Public company info - AEON Stores (Hong Kong) Co. Ltd. , 00984.HK
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AEON Stores (Hong Kong) Co. Ltd., 00984.HK - Company Profile
Chairman Yuki HABU
Share Issued (share) 260,000,000
Par Currency
Par Value 0.0
Industry Department Stores & Shopping Malls
Corporate Profile Business Summary: The Group is engaged in the operation of retail stores. Performance for the year: Amid a challenging business environment, the Group’s revenue was stable in the year, reaching HK$9,493,800,000 (2018: HK$9,675,900,000). Gross profit margin only adjusted modestly to 29.9% (2018: 31.0%). Business Review In 2019, the economy of Hong Kong has been affected by the Sino-US trade conflict since the previous year, which led to a decline in both imports and exports. Concurrently, the number of tourists was also cut sharply due to social unrest, which further weakened consumer confidence. As part of the retail industry, in response to the changes in consumer confidence in the first half, the Group took action to stimulate sales amidst a sluggish consumer market, so its performance in the second half improved over the first half. Hong Kong Operations The retail industry in the city in the first half of the year was affected by uncertainties including the Sino-US trade conflict since the previous year and the resulting drop in trade. Stepping into the second half of the year, people refrained from going out for shopping due to the social unrest. Adding to the uncertainties that overshadowed the situation, the sale of large commodities was suppressed, and the overall consumption environment of the retail industry has changed. The Group’s business model focuses on the General Merchandise Store (“GMS”) business, while the food business has steadily developed. But weak consumer confidence had a ripple effect on the performance of other operations including apparel and daily commodities. However, against the backdrop of the downward trend of the local retail market, the Group managed to alleviate the decrease through more effective sales and daily operation. Besides, as it has anticipated weaker consumer confidence, the Group has enhanced its control measures over various operating expenses in the year under review, so its performance in the second half outperformed that in the first half of the year. The Group has steadfastly faced the challenges. In 2020, its strategy will echo the needs of customers, to improve the shopping environment and provide innovative products and malls (was already in place in the second half of the year): 1. To reduce the queuing time of customers, the self-service cashier system has been upgraded and “POS Express” which accepts payment via mobile phone was introduced with loyalty member services being digitalized as well. 2. Direct imports of proprietary brand (TOPVALU) and national brand merchandise from Japan in the year. The Group has purchased a variety of unique and higher margin commodities to enrich its product mix. 3. The Kowloon Bay store completed renovation last September, and introduced AEON Japan’s proprietary brand — a functional casual underwear store “iC innercasual”. AEON’s first overseas “HÓME CÓORDY”, which sells different household products, was opened at the Kornhill store in December 2019. The store has been well-received by customers after opening and recorded a satisfactory sales performance. 4. The Group opened six “Living Plaza” outlets during the year, which mainly sell daily commodities, and is developing into a store that allows consumers to buy daily necessities at one convenient location. 5. To strengthen the operational foundation and improve productivity in 2020 and beyond, the Group has completed the replacement of the new ERP system, and has laid a foundation for digitalization, informatization and better logistic efficiency. As at 31 December 2019, the Group operated 65 stores in Hong Kong. For the year ended 31 December 2019, revenue from Hong Kong operations dropped slightly by 3.2% to HK$4,239,000,000 (2018: HK$4,376,900,000). Mainly under the effects of the new accounting standards, therefore, the Hong Kong segment ultimately recorded a loss of HK$114,800,000 (2018: profit HK$9,100,000). PRC Operations Affected by the Sino-US trade dispute and the reduction of imports and exports, the economic growth of China further decelerated to 6.1% in 2019, but local consumption showed signs of a rebound under the policy support of the government. Regarding its PRC operations, the Group’s Guangdong AEON and AEON South China companies opened two new stores in 2019 in line with the execution of the annual plan, while closing three stores. The two companies leveraged their accumulated knowledge of opening new stores, as demonstrated by the new stores opening in 2019 recording a profit in the first operating year. After closing some stores in the year of 2018–2019, Guangdong AEON and AEON South China further reduced the costs through consolidating duplicate business, while increasing profit and business income through centralized procurement. As at 31 December 2019, the Group operated 33 stores in the PRC. For the year ended 31 December 2019, revenue from the PRC operations dropped slightly year-on-year by 0.8% to HK$5,254,800,000 (2018: HK$5,299,000,000). However, mainly under the effects of new accounting standards, the segment recorded a loss of HK$80,600,000 (2018: loss HK$59,800,000) in the year. Prospects: Hong Kong Operations At the end of 2019, China and US concluded and signed Phase 1 of their trade agreement and this presented a silver lining for Hong Kong’s economic recovery. However, the novel coronavirus (COVID-19) outbreak after the Lunar New Year in 2020 brought new uncertainties to the business environment. Further measures are needed to cope with the changes in the consumption behaviour of customers. Starting from the end of January with the COVID-19 outbreak, the consumption behaviour of Hong Kong customers has changed. People are going out less frequently, electing to stay at home. In particular, they are purchasing large amounts of food reserves, hygiene, cleaning and antibacterial items. As a retail industry player, the Group has embraced the mission of supporting the community. Hence, the Group, through the worldwide procurement channels of AEON Japan Group, has sourced the merchandise, from Japan, China and South East Asia which are needed by Hong Kong residents, and has strived to assure the offering of hygiene products required by the stores. 1. The Group will implement extensive renovation in its Tuen Mun store, one of its core retail outlets. Facing the changes in the market, in order to increase the sales proportion of local customers, the Group will enhance differentiation of the food division, strengthen the variety of fresh food such as fish, meat and vegetables, and enrich the portfolio of processed food, which is primarily made in Japan, with the aim of becoming the leading store in the district. The Group will reorganize its apparel and household merchandise categories, which are family-oriented, along with the store layout. It will also actively introduce brands under AEON Japan Group. Moreover, it will carry out small-scale renovations in three stores elsewhere in Hong Kong. 2. The Group has changed to direct procurement model since 2019. It purchases its merchandise mix formulated by AEON Group in Japan directly from Japanese manufacturers, with special focus on four house brands namely “iC innercasual”, “HÓME CÓORDY”, “Kids Republic” and “Glam Beautique”. As for food, the Group is building a system which speeds up the introduction of new Japanese merchandise. It hopes to further increase the sales proportion of its own branded products and hence improve its overall gross profit margin by no longer relying on third party suppliers. 3. In the process of addressing different issues in the retail industry, the Group believes that enhancing efficiency in daily operations can help to boost profit. Therefore, it is essential to minimize inventory in the warehouses of stores as well as shorten the turnover days of inventory. Thus the Group plans to change its logistics warehouses and strengthen its cooperation with logistics service providers in 2020, hoping to increase inventory turnover and hence working capital. 4. To facilitate business growth of Living Plaza and increase its revenue, the planned number of new stores opened by the Group in 2020 exceeds that in 2019. The Group is reviewing and optimizing its store opening, construction and operation systems. 5. The Group expects the strategy to digitalize its daily operations, back-end support, etc. to bear fruit this year. It has added self-service cashier systems and the “POS Express” mobile payment system in daily operation in order to accelerate payment and reduce labour. It has also developed online shopping platforms such as an e-commerce platform to provide convenience to customers. These efforts have allowed the Group to conduct real-time inventory control at stores and shorten delivery time. In 2020, the Group will continue efforts to push up revenue and control costs in order to achieve net profit growth. PRC Operations The market looked forward to economic recovery following the signing of the Phase One trade deal between the PRC and the US at the end of last year. However, the nationwide outbreak of COVID-19 in the PRC after Chinese New Year has added uncertainties to the operating environment. Guangdong AEON and South China AEON have obtained the government’s approval to continue to operate food business. The Group targets to procure daily necessities, in particular food products, and support the basic needs of the community. It also supplies merchandise to support the operation of stores and implements strict hygiene management to ensure the safety of staff. In addition, to address the needs of customers who are unable to go out, the Group has enhanced the services of its online supermarket. Under the current uncertain operating environment, the Group has actively responded to changes in customers’ needs and ensured the continuous operation of its stores. In 2020 1. As part of its strategy to boost growth, the Group will increase the number of new stores (7 expected) which will mainly be GMS. Its key challenge for the year is to implement the key strategy of opening small supermarkets in Guangzhou. 2. In terms of merchandise improvement, the Group will step up the development and sales volume of the TOPVALU brand in the PRC, aiming to differentiate the brand and improve its profit. It also plans to introduce “iC innercasual” and “HÓME CÓORDY” stores to the PRC market. These two brands have achieved good progress in Hong Kong. The Group will also expand beauty-related counters in the PRC. 3. Regarding the promotion of digitalized operations, the Group will 1) expand O2O sales of online supermarkets; 2) upgrade its CRM strategy and expand its stable customer base by strengthening customer loyalty and 3) further promote centralized operation of Guangdong AEON and South China AEON stores to rationalize resources.

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