Yoshinoya HD / 9861
COVERAGE INITIATED ON: 2018.11.14 LAST UPDATE: 2021.08.12
Shared Research Inc. has produced this report by request from the company discussed in the report. The aim is to provide an “owner’s manual” to investors. We at Shared Research Inc. make every effort to provide an accurate, objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data and findings. We will always present opinions from company management as such. Our views are ours where stated. We do not try to convince or influence, only inform. We appreciate your suggestions and feedback. Write to us at [email protected] or find us on Bloomberg.
Research Coverage Report by Shared Research Inc.
Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
INDEX
How to read a Shared Research report: This report begins with the trends and outlook section, which discusses the company’s most recent earnings. First-time readers should start at the business section later in the report.
Executive summary ------3 Key financial data ------5 Recent updates ------7 Highlights ------7 Trends and outlook ------8 Quarterly trends and results ------8 Past initial forecasts versus results ------17 Business ------22 Business description ------22 Group strategy ------35 Group structure ------37 Profitability snapshot ------38 Strengths and weaknesses ------41 Market and value chain------43 Restaurant market trends ------43 Competition ------44 Historical performance and financial statements ------47 Income statement ------47 Balance sheet ------48 Cash flow statement ------50 Historical performance ------51 Other information ------65 History ------65 News and topics ------66 Corporate governance and top management ------69 Dividend policy ------70 Major shareholders ------70 Employees ------70 By the way ------71 Profile ------72
02/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Executive summary
Business overview
◤ Yoshinoya HD operates major restaurant chains in Japan and overseas. Its core business is Yoshinoya, which invented gyudon (beef bowl) and marked its 120th anniversary in 2019. In FY02/20, the company posted consolidated sales of JPY216.2bn, placing it fifth among 95 listed restaurant companies in Japan (FY02/21 sales: on pace for JPY170.3bn). Later, in FY02/21, the company reported consolidated sales of JPY170.3bn and an operating loss of JPY5.3bn. The company began actively acquiring restaurant operators around 1995, and has grown to operate a diverse portfolio of restaurants. Main brands include Yoshinoya (gyudon) and Hanamaru Udon (udon noodles). As of end-FY02/21, it had a total of 3,168 restaurants, 2,203 in Japan and 965 overseas. The majority of its restaurants in Japan are directly operated, whereas overseas (mainly Yoshinoya and Hanamaru restaurants) most are operated by franchisees. (The company sold off its Arcmeal business in February 2020 and completed the sale of its stake in Kyotaru in April 2021.)
◤ At the Yoshinoya segment, which accounts for 50–60% of total sales and at least 70% of operating profit, the company operated 1,189 restaurants in Japan (as of end-February 2021), ranking the chain second among the three companies that dominate the beef bowl market in Japan. Annual sales per restaurant were JPY88mn. Over the past 10 years, the company has maintained around 1,200 Yoshinoya restaurants as it continued to scrap and build its domestic suburban stores. Yoshinoya is a strong brand, but beef prices are currently high, and the company’s profit margins tend to fluctuate along with these prices due in part to the high sales weighting of gyudon. Consequently, companywide OPM over the past five years only averaged 1.4% (excluding impact from the operating loss in FY02/21), placing Yoshinoya HD near the bottom of the food-service sector, although profit levels have recovered somewhat from the slump that occurred in the wake of the outbreak of BSE that occurred at the beginning of the year 2000.
◤ Growth drivers are the Hanamaru segment (11.8% of total sales in FY02/21) and the Overseas segment (11.5%). The Hanamaru business comprised 490 restaurants around the country (mostly directly operated), making it the second-largest udon chain in Japan. Annual sales per restaurant were JPY40mn. The company targets a total of 800 locations. The Overseas segment mostly involves Yoshinoya (947 locations) and Hanamaru (18) restaurants in the US, China, and the ASEAN region (as of end-FY02/21). The company is also focusing on opening directly operated restaurants abroad and expects the number of overseas restaurants to exceed that of Yoshinoya restaurants in Japan by 2025.
Trends and outlook
◤ FY02/21 results: In FY02/21, the company reported full-year consolidated sales of JPY170.3bn (-21.2% YoY), operating loss of JPY5.3bn (versus profit of JPY3.9bn in FY02/20), recurring loss of JPY2.0bn (versus profit of JPY3.4bn), and net loss attributable to owners of the parent of JPY7.5bn (versus profit of JPY713mn in FY02/20). On top of the sale of its Arcmeal business, which put a JPY19.8bn dent in consolidated sales versus FY02/20, the shortened business hours and temporary shutdowns of restaurants operated by group companies in the wake of pandemic also weighed heavily on sales. On the earnings front, the company moved back into the black in 2H thanks to ongoing cost-cutting measures (including negotiating lower rents) and the implementation of structural reforms across the group. Notwithstanding, the sharp drop in sales still left the group with operating loss for the full year. Further, the company booked net loss attributable to owners of the parent of JPY7.5bn, this figure including extraordinary losses of JPY5.8bn booked in connection with the pandemic and impairment losses on store closures and declines in the profitability of store assets.
◤ FY02/22 forecast: For FY02/22, the company forecasts full-year consolidated sales of JPY155.1bn (-9.0% YoY), operating profit of JPY2.7bn (versus loss of JPY5.3bn in FY02/21), recurring profit of JPY5.2bn (versus loss of JPY2.0bn), and net income attributable to owners of the parent of JPY2.0bn (versus loss of JPY7.5bn in FY02/21). Having sold off both its Arcmeal and Kyotaru businesses, the company sees consolidated sales in FY02/22 coming in roughly 8% below where they were in FY02/20. Since the second state of emergency declaration was lifted in March 2021, the company reports that sales are slowly coming back but are unlikely to return to the pre-pandemic levels of FY02/20. In Japan, the company is assuming sales at Yoshinoya restaurants will recover to 90% of where they were pre-pandemic (FY02/20) but is not as hopeful for its Hanamaru and ramen restaurants, the bulk of which are located in shopping centers and in urban areas. Overseas, the company’s
03/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
outlook for sales varies greatly by region which in turn depends heavily on trends in the number of COVID-19 cases; accordingly, the company is assuming nearly a full recovery in sales in the US and China to the FY02/20 levels but sees hard times continuing in Indonesia, home to most of its restaurants that are in ASEAN countries. On the earnings front, during the past year the company made progress toward reducing costs to where it could generate roughly 90% of the profit it generated in FY02/20 on lower sales, as it assumes consolidated sales will come in roughly 8% below where they were in FY02/20. In this relation, the company noted that it can already see that operating profit in FY02/22 is unlikely to get back to where it was in FY02/20 owing in part to the restrictions placed on restaurant operating hours by local governments in Q1 (March–May 2021) as part of ongoing efforts to prevent novel coronavirus infections.
◤ Yoshinoya HD positioned the three years ending in FY02/19—the first stage of its long-term vision NEW BEGINNINGS 2025—as a period for sowing the seeds of growth, and pressed on with initiatives to restructure its stores. FY02/20 marks the start of the second stage of growth, during which the company will seek to “redefine the restaurant business” by finding new, unprecedented ways to create value. To this end, it plans to develop new markets and new customers both in Japan and overseas, and introduce measures aimed at countering the impact of Japan’s declining population and aging society on its businesses. The company has temporarily withdrawn numerical targets until it can assess the impact of the COVID-19 pandemic, but intends to maintain its strategic direction.
Strengths and weaknesses
◤ Yoshinoya HD’s strengths are its brand power, wealth of knowledge and experience in overseas restaurant operation, and enterprising culture that drives new initiatives.
◤ The company’s weaknesses are selling points of mainstay products also causing constraints, structural risk in procuring main ingredient beef, and a saturated market and insufficient synergies among brands.
04/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Key financial data
Income statement FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 FY02/21 FY02/22 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Est. Sales 165,883 164,599 173,418 180,032 185,738 188,623 198,503 202,385 216,201 170,348 155,100 YoY -3.2%-0.8%5.4%3.8%3.2%1.6%5.2%2.0%6.8%-21.2%-9.0% Gross profit 109,358 105,613 108,758 112,491 114,830 120,237 128,912 129,581 139,949 107,061 - YoY -1.6%-3.4%3.0%3.4%2.1%4.7%7.2%0.5%8.0%-23.5%- Gross profit margin 65.9% 64.2% 62.7% 62.5% 61.8% 63.7% 64.9% 64.0% 64.7% 62.8% - Operating profit 4,801 1,877 2,179 3,515 1,613 1,865 4,019 104 3,926 -5,335 2,700 YoY -6.2% -60.9% 16.1% 61.3% -54.1% 15.6% 115.5% -97.4% 3675.0% - - Operating profit margin 2.9%1.1%1.3%2.0%0.9%1.0%2.0%0.1%1.8%- 1.7% Recurring profit 5,311 2,460 3,270 3,993 2,345 2,750 4,604 349 3,369 -1,964 5,200 YoY -3.6% -53.7% 32.9% 22.1% -41.3% 17.3% 67.4% -92.4% 865.3% - - Recurring profit margin 3.2% 1.5% 1.9% 2.2% 1.3% 1.5% 2.3% 0.2% 1.6% - 3.4% Net income 1,310 -364 698 941 837 1,248 1,491 -6,000 713 -7,503 2,000 YoY 242.9% -127.8% -291.8% 34.8% -11.1% 49.1% 19.5% - - - - Net margin 0.8%-0.4%0.5%0.5%0.7%0.8%-0.3%- 1.3% Per-share data (JPY) Shares issued (year-end; '000) 662 662 66,241 63,941 65,130 65,130 65,130 65,130 65,130 65,130 - EPS 25.8 -7.1 13.6 16.2 13.1 19.4 23.1 -92.9 11.0 -116.1 30.9 EPS (fully diluted) ------Dividend per share 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 - TBD Book value per share 858.4 831.1 831.8 921.0 891.0 879.5 887.1 765.7 739.8 612.5 - Balance sheet (JPYmn) Cash and cash equivalents 17,299 14,244 18,174 27,087 21,287 25,474 21,913 16,971 22,604 37,900 - Total current assets 26,805 24,242 30,079 39,503 36,984 38,600 37,124 33,424 41,303 57,145 - Tangible fixed assets 38,851 38,737 38,236 39,857 44,521 45,178 46,611 46,234 51,595 42,396 - Investments and other assets 25,693 24,282 23,710 26,200 26,717 27,292 27,775 28,870 28,034 27,849 - Intangible assets 3,020 4,076 3,497 3,096 3,067 3,875 4,102 4,155 5,233 4,528 - Total assets 94,371 91,338 95,524 108,658 111,292 114,947 115,613 112,685 126,167 131,921 - Accounts payable 3,865 4,116 4,776 6,753 5,741 5,053 5,985 5,607 6,313 4,140 - Short-term debt 20,158 17,665 22,918 10,416 13,752 14,493 13,307 12,470 14,691 27,738 - Total current liabilities 34,032 31,115 38,673 31,533 31,563 32,530 33,681 31,255 37,963 46,688 - Long-term debt 9,036 11,375 8,571 13,824 17,577 20,807 19,754 27,057 35,373 40,603 - Total fixed liabilities 14,754 16,832 13,438 18,186 21,994 25,207 24,124 31,404 39,818 45,089 - Total liabilities 48,787 47,948 52,112 49,719 53,558 57,737 57,805 62,659 77,782 91,778 - Shareholders' equity 44,420 44,091 59,203 59,161 56,744 57,263 49,445 47,796 39,592 Total net assets 43,390 43,412 58,938 57,733 57,209 57,807 50,025 48,38540,142 Total liabilities and net assets 94,371 91,338 95,524 108,658 111,292 114,947 115,613 112,685 126,167 131,921 - Total interest-bearing debt 29,194 29,040 31,489 24,240 31,329 35,300 33,061 39,527 50,064 68,341 - Cash flow statement (JPYmn) Cash flows from operating activities 8,109 6,212 7,570 11,833 433 10,104 9,374 2,830 14,038 2,722 - Cash flows from investing activities -3,218 -6,937 -4,258 -9,201 -12,365 -6,526 -8,379 -9,034 -8,453 -5,168 - Cash flows from financing activities -3,199 -2,473 481 5,595 3,843 1,085 -4,200 2,461 288 17,810 - Financial ratios ROA (RP-based) 5.5% 2.6% 3.5% 3.9% 2.1% 2.4% 4.0% 0.3% 2.8% -1.5% - ROE 3.0% -0.8% 1.6% 1.9% 1.4% 2.2% 2.6% -11.2% 1.5% -17.2% - Equity ratio 46.7% 46.8% 44.8% 53.7% 51.7% 49.4% 49.5% 43.9% 37.9% 30.0% - Source: Shared Research based on company data. Per-share data adjusted for stock split. Note: Figures may differ from company materials due to differences in rounding methods.
05/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Breakdown of store data by segment Comparable-store sales YoY FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 FY02/21 Yoshinoya -4.9% -2.3% 7.3% 1.2% 0.8% 0.1% 1.4% 0.8% 6.7% -8.5% Hanamaru -7.3% -0.7% 0.2% 0.0% 1.5% -1.3% 2.9% -1.8% 1.5% -35.5% Arcmeal -6.7% 1.2% 6.0% 6.7% 1.8% -6.1% -1.2% -8.7% 3.9% - Kyotaru -4.3% 1.3% -0.7% 1.3% 0.8% 0.1% -0.4% 0.3% 0.5% -28.3% Store count FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 FY02/21 Yoshinoya 1,189 1,193 1,191 1,190 1,188 1,207 1,204 1,211 1,214 1,189 Openings 36 26 27 31 37 36 28 33 29 25 Closures 21 22 29 32 30 17 31 26 25 50 Hanamaru 312 327 341 371 390 432 479 512 522 490 Openings 27 28 30 29 44 52 59 48 30 18 Closures 8131614131010152050 Arcmeal 172 172 175 179 186 184 178 171 154 - Openings 355650010 - Closures 1522326716 - Kyotaru 350 330 328 329 315 329 330 333 335 288 Openings 22 19 21 14 12 25 19 21 17 14 Closures 32 39 23 13 26 11 18 18 15 61 Overseas 490 577 636 635 675 733 821 923 994 965 Openings 64 109 82 49 68 94 107 135 131 76 Closures 13 22 23 50 40 36 19 33 60 105 Other 195 191 179 178 169 189 171 253 258 236 Openings 5151817149 920135 Closures 6719303261733192027 Consolidated total 2,708 2,790 2,850 2,882 2,923 3,074 3,179 3,403 3,323 3,168 Openings 157 202 183 146 180 216 222 258 220 138 Closures 142 120 123 114 138 93 117 118 156 293 Per-store data (FY average; JPYmn) FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 FY02/21 Sales Yoshinoya 74.83 72.67 78.02 80.07 80.41 81.24 83.85 85.80 92.11 87.90 Hanamaru 50.24 60.34 56.55 54.83 56.53 58.10 59.40 58.54 59.75 40.24 Arcmeal 120.85 121.24 127.67 134.42 133.46 124.21 124.21 116.03 122.52 - Kyotaru 77.85 71.19 72.11 74.69 77.57 79.76 81.02 82.42 85.46 60.67 Operating profit Yoshinoya 3.88 1.61 2.41 3.41 2.57 3.20 4.20 2.92 4.89 3.45 Hanamaru 2.53 2.84 2.33 2.79 3.04 2.28 2.80 1.26 2.42 -6.25 Arcmeal 3.35 2.28 2.39 1.62 1.40 0.73 1.15 -4.82 -1.90 - Kyotaru -1.71 -0.40 0.07 0.78 0.90 0.22 0.96 0.49 1.37 -7.10 Source: Shared Research based on company data Notes: Eighty Withlink Holdings stores included under Other from Q2 FY02/19 Figures may differ from company materials due to differences in rounding methods. Figures from FY02/11 provided for continuity of segments. Arcmeal segment included in consolidated results through FY02/20 but will no longer be included starting FY03/21, with the company having sold all of its shareholding in Arcmeal Co., Ltd. in February 2020. Consolidated results include impact from the Kyotaru segment through FY02/21. Starting in FY02/22, this impact will no longer be included, reflecting the company’s April 2021 transfer of shares held in Kyotaru Co., Ltd.
06/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Recent updates Highlights
On August 12, 2021, Shared Research updated the report following interviews with Yoshinoya Holdings Co., Ltd.
On July 9, 2021, the company announced consolidated results for Q1 FY02/22; see the results section for details.
On July 5, 2021, the company released monthly store sales data for June 2021.
On June 7, 2021, the company released monthly store sales data for May 2021.
For previous releases and developments, please refer to the “News and topics” section.
07/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Trends and outlook
Quarterly trends and results
Cumulative FY02/20 FY02/21 FY 02/ 22 FY02/22 FY02/22 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1% of Est.1H Est.% of Est.FY Est. Sales 52,799 107,066 159,876 216,201 39,681 81,988 126,882 170,348 36,450 47.7% 76,400 23.5% 155,100 YoY 6.0% 6.7% 6.6% 6.8% -24.8% -23.4% -20.6% -21.2% -8.1% -6.8% -9.0% Gross profit 34,387 69,524 103,697 139,949 24,362 50,885 79,414 107,061 24,141 YoY 7.5% 7.9% 7.7% 8.0% -29.2% -26.8% -23.4% -23.5% -0.9% Gross profit margin 65.1% 64.9% 64.9% 64.7% 61.4% 62.1% 62.6% 62.8% 66.2% SG&A expenses 33,343 66,588 100,807 136,023 29,317 56,855 84,750 112,397 24,348 YoY 3.7% 3.5% 4.1% 5.1% -12.1% -14.6% -15.9% -17.4% -16.9% SG&A ratio 63.2% 62.2% 63.1% 62.9% 73.9% 69.3% 66.8% 66.0% 66.8% Operating profit 1,044 2,936 2,890 3,926 -4,955 -5,970 -5,336 -5,335 -206 - 700 - 2,700 YoY -5238.2%-3675.0%------Operating profit margin 2.0%2.7%1.8%1.8%------Recurring profit 1,254 3,023 3,351 3,369 -4,278 -5,004 -3,892 -1,964 2,520 84.0% 3,000 48.5% 5,200 YoY -810.5%-865.3%------Recurring profit margin 2.4%2.8%2.1%1.6%----6.9% - - Net income 1,097 1,879 1,774 713 -4,087 -5,708 -5,499 -7,503 1,533 80.7% 1,900 76.7% 2,000 YoY ------Net margin 2.1%1.8%1.1%0.3%----4.2% - - Quarterly FY02/20 FY02/21 FY 02/ 22 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1 Sales 52,799 54,267 52,810 56,325 39,681 42,307 44,894 43,466 36,450 Yoshinoya 26,656 28,057 27,406 29,566 26,124 25,761 26,948 26,782 25,230 Hanamaru 7,783 8,112 7,402 7,596 3,982 5,535 5,726 5,118 5,255 Arcmeal 5,2914,9674,5705,082----- Kyotaru 7,275 7,034 6,743 7,492 3,670 4,890 5,098 5,240 - Overseas 5,283 5,521 5,710 5,431 4,529 4,485 5,352 5,168 5,315 YoY 6.0% 7.4% 6.3% 7.6% -24.8% -22.0% -15.0% -22.8% -8.1% Yoshinoya 7.0% 8.2% 7.5% 8.4% -2.0% -8.2% -1.7% -9.4% -3.4% Hanamaru 5.8% 8.7% 4.2% 7.3% -48.8% -31.8% -22.6% -32.6% 32.0% Arcmeal -1.0%-0.5%-3.4%-1.9%----- Kyotaru 4.6% 4.6% 1.6% 7.0% -49.6% -30.5% -24.4% -30.1% - Overseas 5.6% 6.0% 2.7% 0.7% -14.3% -18.8% -6.3% -4.8% 17.4% Gross profit 34,387 35,137 34,173 36,252 24,362 26,523 28,529 27,647 24,141 YoY 7.5% 8.3% 7.1% 9.0% -29.2% -24.5% -16.5% -23.7% -0.9% Gross profit margin 65.1% 64.7% 64.7% 64.4% 61.4% 62.7% 63.5% 63.6% 66.2% SG&A expenses 33,343 33,245 34,219 35,216 29,317 27,538 27,895 27,647 24,348 YoY 3.7% 3.2% 5.3% 8.0% -12.1% -17.2% -18.5% -21.5% -16.9% SG&A ratio 63.2% 61.3% 64.8% 62.5% 73.9% 65.1% 62.1% 63.6% 66.8% Operating profit 1,044 1,892 -46 1,036 -4,955 -1,015 634 1 -206 Yoshinoya 1,445 1,844 1,113 1,533 -367 956 2,109 1,449 1,251 Hanamaru 517 691 78 -34 -1,581 -585 -456 -538 -393 Arcmeal -147-92-243173----- Kyotaru 283 48 -79 205 -1,330 -504 -185 -194 - Overseas 284 255 332 101 -175 85 396 269 358 YoY - 712.0% - 55.6% - - - -99.9% - Yoshinoya 182.8% 151.9% 22.3% 12.0% - -48.2% 89.5% -5.5% - Hanamaru 31.9%83.3%------Arcmeal ------Kyotaru 37.4%--606.9%----- Overseas 149.1% 27.5% 22.1% -54.1% - -66.7% 19.3% 166.3% - Operating profit margin 2.0% 3.5% - 1.8% - - 1.4% 0.0% - Yoshinoya 5.4% 6.6% 4.1% 5.2% - 3.7% 7.8% 5.4% 5.0% Hanamaru 6.6%8.5%1.1%------Arcmeal ---3.4%----- Kyotaru 3.9%0.7%-2.7%----- Overseas 5.4% 4.6% 5.8% 1.9% - 1.9% 7.4% 5.2% 6.7% Recurring profit 1,254 1,769 328 18 -4,278 -726 1,112 1,928 2,520 YoY - 370.5% - -96.2% - - 239.0% - - Recurring profit margin 2.4% 3.3% 0.6% 0.0% - - 2.5% 4.4% 6.9% Net income 1,097 782 -105 -1,061 -4,087 -1,621 209 -2,004 1,533 YoY ------Net margin 2.1%1.4%----0.5%-4.2% Source: Shared Research based on company data Notes: Figures may differ from company materials due to differences in rounding methods.
08/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Arcmeal segment included in consolidated results through FY02/20 but will no longer be included starting FY03/21, with the company having sold all of its shareholding in Arcmeal Co., Ltd. in February 2020. Consolidated results include impact from the Kyotaru segment through FY02/21. Starting in FY02/22, this impact will no longer be included, reflecting the company’s April 2021 transfer of shares held in Kyotaru Co., Ltd.
Yoshinoya monthly data
(YoY) FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 FY02/21 FY02/22 FY02/23 Comparable Sales -6.8% -4.9% -2.3% 7.3% 1.2% 0.8% 0.1% 1.4% 0.8% 6.7% -8.5% stores Customer count 1.0% -3.9% -6.8% 13.4% -6.4% -11.5% 1.7% 0.2% -0.2% 2.0% -11.4% Customer spend -7.2% -1.1% 4.8% -5.3% 8.2% 13.9% -1.6% 1.3% 1.1% 4.6% 3.2% All Sales -3.8% -3.3% 1.7% 11.2% 5.3% 3.9% 3.8% 4.8% 3.7% 9.4% -6.9% stores Customer count 3.9% -2.4% -3.1% 17.4% -2.6% -9.0% 5.3% 3.5% 3.0% 4.8% -9.8% Customer spend -7.0% -0.9% 4.9% -5.3% 8.2% 14.2% -1.5% 1.3% 0.7% 4.4% 3.2%
FY02/21 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb FY ComparableSales-10.5%-10.1%-0.6%-0.4% -5.6% storesCustomer count-16.2%-18.4%-3.7%-1.3% -10.4% Customer spend6.8%10.2%3.2%0.9% 5.4% AllSales -8.6%-8.4%1.0%1.2% -3.9% storesCustomer count-14.4%-16.8%-2.2%0.2% -8.8% Customer spend6.8%10.2%3.2%1.0% 5.4% FY02/21 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb FY Comparable Sales -1.8% -4.0% -7.3% -12.3% -5.7% -16.8% -9.2% 0.4% -6.6% -11.2% -9.5% -17.1% -8.5% stores Customer count 0.1% -1.0% -9.2% -18.9% -10.2% -19.8% -12.4% -7.6% -9.7% -15.3% -11.7% -19.8% -11.4% Customer spend -2.0% -3.0% 2.1% 8.1% 5.1% 3.7% 3.7% 8.7% 3.4% 4.8% 2.5% 3.3%3.2% All Sales 0.0% -2.4% -6.0% -11.0% -4.0% -15.4% -7.1% 2.7% -4.8% -9.6% -7.8% -15.6% -6.9% stores Customer count 2.1% 0.6% -7.9% -17.7% -8.6% -18.4% -10.3% -5.5% -7.9% -13.7% -10.1% -18.3% -9.8% Customer spend -2.0% -3.0% 2.1% 8.1% 5.1% 3.7% 3.6% 8.7% 3.4% 4.8% 2.5% 3.3%3.2% FY02/20 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb FY Comparable Sales 8.1% 4.8% 5.2% 7.1% 2.6% 13.9% 4.6% 8.2% 7.3% 11.3% 9.5% -2.1% 6.7% stores Customer count 2.3% -0.9% -0.6% 5.4% -0.7% 10.3% 0.2% 4.0% 4.7% 10.8% 6.2% -14.5% 2.0% Customer spend 5.6% 5.8% 5.8% 1.6% 3.4% 3.2% 4.3% 4.1% 2.5% 0.4% 3.1% 14.5% 4.6% All Sales 11.0% 7.8% 8.1% 10.6% 5.8% 17.3% 7.3% 10.4% 9.9% 13.6% 11.7% 0.1% 9.4% stores Customer count 5.6% 2.4% 2.6% 8.9% 2.3% 13.6% 2.8% 6.1% 7.3% 13.1% 8.4% -12.6% 4.8% Customer spend 5.1% 5.3% 5.4% 1.6% 3.4% 3.2% 4.3% 4.1% 2.5% 0.4% 3.1% 14.5% 4.4% FY02/19 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb FY ComparableSales 3.3%7.0%2.1%6.3%3.3%2.1%4.7%-0.7%-3.0%-1.2%-3.3%-7.4% 0.8% stores Customer count 3.6% 4.4% 2.9% 7.5% 2.9% 3.7% 3.0% -0.8% -5.4% -2.9% -4.5% -10.0% -0.2% Customer spend-0.3%2.5%-0.8%-1.2%0.4%0.3%1.6%0.1%2.5%1.8%1.3%3.0% 1.1% All Sales 6.6% 10.4% 5.3% 8.9% 6.3% 4.8% 7.5% 2.6% -0.4% 1.5% -0.8% -4.7% 3.7% stores Customer count 7.3% 8.1% 6.6% 10.7% 6.3% 4.4% 6.2% 2.8% -2.4% 0.1% -1.6% -7.1% 3.0% Customer spend -0.7% 2.1% -1.2% -1.6% 0.0% 0.4% 1.3% -0.3% 2.1% 1.4% 0.8% 2.6% 0.7% FY02/18 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb FY Comparable Sales 1.1% -8.4% 0.6% -5.5% -1.2% 0.2% 1.6% -15.1% 5.7% 4.5% 6.3% 36.3% 1.4% stores Customer count 0.4% -12.2% -0.7% -7.1% -2.5% -0.9% 0.9% -21.6% 3.1% 2.3% 5.1% 54.0% 0.2% Customer spend 0.8% 4.4% 3.5% 1.7% 1.3% 1.1% 0.8% 8.2% 2.6% 2.1% 1.2% -11.5%1.3% All Sales 4.6% -5.6% 3.6% -2.1% 1.9% 3.3% 4.5% -12.6% 8.3% 7.1% 9.3% 39.6% 4.8% stores Customer count 4.2% -9.3% 0.4% -3.6% 0.9% 2.6% 4.0% -19.0% 6.0% 5.3% 8.5% 58.3% 3.5% Customer spend 0.4% 4.1% 3.2% 1.5% 1.0% 0.7% 0.4% 7.9% 2.2% 1.8% 0.8% -11.8%1.3% Source: Shared Research based on company data
Q1 FY02/22 results
Consolidated results for Q1 FY02/22 (March –May 2021)
▷ Sales: JPY36.5bn (-8.1% YoY) ▷ Gross profit: JPY24.1bn (-0.9% YoY) ▷ Operating loss: JPY206mn (versus loss of JPY5.0bn in Q1 FY02/21) ▷ Recurring profit: JPY2.5bn (versus loss of JPY4.3bn in Q1 FY02/21) ▷ Net Income*: JPY1.5bn (versus loss of JPY4.1bn in Q1 FY02/21)
09/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
*Net income/loss attributable to owners of the parent
Factors affecting sales decline In Q1 (March-May 2021), sales fell 8.1%. However, in a comparison of YoY sales that excludes the impact of the eliminated Kyotaru segment (Kyotaru segment sales of JPY3.7bn in Q1 FY02/20 (March-May 2020)) following the company’s transfer of Kyotaru shares shows that sales increased 1.2% YoY (+JPY439mn), slightly up YoY. In Japan, despite the state of emergency declaration in January and April 2021 and its subsequent extension, sales were generally steady as rebound from the impact of shorter business hours and store closures in Q1FY02/21 had a positive effect on sales. As a result, sales in the Hanamaru segment recovered significantly. Strong comparable store sales in the US and China also contributed to overall sales as the Overseas segment booked higher sales.
Factors affecting profit With customer traffic on the decline in the wake of state of emergency declaration, the cost restructuring the company began in FY03/20 yielded results as the gross profit margin increased 4.8pp. SG&A expenses were down 16.9% and SG&A expense ratio was 66.8% (-7.1pp) as the company proceeded with reviewing personnel costs and advertising and promotion costs, lightening this burden. As a result, operating losses were significantly reduced from JPY5.0bn in the previous year to JPY206mn this year. The recurring profit moved back into the black due to an increase of JPY2.6bn in non-operating income as the company received subsidies in various forms such as incentive payments from local governments for complying with pandemic-related restrictions on businesses and subsidies from the national government to defray the cost of employee layoffs.
Sales by quarter Operating profit by quarter
Q1 Q2 Q3 Q4 (JPYmn) (JPYmn) Q1 Q2 Q3 Q4 250,000 7,000
216,201 5,000 3,926 200,000 2,700 56,325 1,036 170,348 3,000 155,100 1,892 150,000 43,466 1,000 1 52,810 1,044 634 -46 -1,000 -206 100,000 44,894
54,267 -4,955 -3,000 42,307 50,000 -5,000 52,799 -1,015 39,681 36,450 0 -7,000 -5,335 FY02/20 FY02/21 FY02/22 FY02/20 FY02/21 FY02/22
Source: Shared Research based on company data
10/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Breakdown of Q1 FY02/22 results by segment Yoshinoya Cumulative FY02/20 FY02/21 FY02/22 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Sales 26,656 54,713 82,119 111,685 26,124 51,885 78,833 105,615 25,230 YoY 7.0% 7.6% 7.6% 7.8% -2.0% -5.2% -4.0% -5.4% -3.4% Segment profit 1,445 3,289 4,402 5,935 -367 589 2,698 4,147 1,251 YoY 182.8% 164.6% 104.5% 68.5% - -82.1% -38.7% -30.1% - Segment profit margin 5.4% 6.0% 5.4% 5.3% - 1.1% 3.4% 3.9% 5.0% Quarterly FY02/20 FY02/21 FY02/22 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Sales 26,656 28,057 27,406 29,566 26,124 25,761 26,948 26,782 25,230 YoY 7.0% 8.2% 7.5% 8.4% -2.0% -8.2% -1.7% -9.4% -3.4% Segment profit 1,445 1,844 1,113 1,533 -367 956 2,109 1,449 1,251 YoY 182.8% 151.9% 22.3% 12.0% - -48.2% 89.5% -5.5% - Segment profit margin 5.4% 6.6% 4.1% 5.2% - 3.7% 7.8% 5.4% 5.0%
Source: Shared Research based on company data
▷ Segment sales for Q1 FY02/22: JPY25.2bn (-3.4% YoY) ▷ Segment profit for Q1 FY02/22: JPY1.3bn
Sales and profit increased: Q1 (March-May 2021), comparable store sales declined by 7.2% YoY and sales by 3.4% YoY due to the shortened business hours following the state of emergency declaration and subsequent extensions. Furthermore, sales were down 11.3% compared to Q1 FY02/20, which the company uses as the standard for recovery (see “Company forecast for FY02/22”).
Since the previous fiscal year, the company has conducted earnings structure reforms, including optimizing raw materials procurement, logistics costs, and human resources, in order to raise earnings to 90% of FY02/20 sales. Despite Q1 comparable store sales falling below 90% of FY02/20 results, earnings structure reforms were successful as Q1 segment profit eliminated the segment losses. Operating profit margin also improved to 5.0%, up 1.1pp from the 3.9% in Q1 FY02/21.
Same store sales by month: In Q1 FY02/22, Yoshinoya restaurants saw less customer traffic but higher spending per customer. Same store sales -10.5% in March, -10.1% in April, and -0.6% in May, with store traffic -16.2% in March, -18.4% in April, and -3.7% in May and average spending per customer +6.8% in March, +10.2% in April, and +3.2% in May as the company introduced high added value products with higher unit prices.
Yoshinoya store count: Total of 1,186 stores (opened no new stores and closed three during the period.). Closings were due to expiring contracts.
Major initiatives: Marketing initiatives aimed at increasing the frequency of store visits by core customers are as follows. Introduction of specials on its Yakiniku Beef Barbecue Bowl in March, its Extra Beef Black Curry meal set in April, and its Green Onions & Pork Bowl in May. Thanks to these efforts, its various yakiniku beef barbecue-based dishes proving to be strong sellers. Marketing initiatives aimed at attracting new customers included discounts for kids and other children’s specials as part of a joint promo with Pokemon Go in April, and a Rizap beef salad dish in May. To facilitate the further expansion of its takeout business, the company increased the number of Yoshinoya stores with special counters just to handle takeout orders. To meet the growing demand for delivery services, the company increased the number of stores offering delivery services to 837, an increase of 86 from the end of FY02/21.
11/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Hanamaru Cumulative FY02/20 FY02/21 FY02/22 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Sales 7,783 15,895 23,296 30,892 3,982 9,517 15,243 20,361 5,255 YoY 5.8% 7.2% 6.2% 6.5% -48.8% -40.1% -34.6% -34.1% 32.0% Segment profit 517 1,208 1,286 1,252 -1,581 -2,166 -2,622 -3,160 -393 YoY 31.9% 57.1% 90.2% 100.6% - - - - - Segment profit margin 6.6% 7.6% 5.5% 4.1% - - - - - Quarterly FY02/20 FY02/21 FY02/22 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Sales 7,783 8,112 7,401 7,596 3,982 5,535 5,726 5,118 5,255 YoY 5.8% 8.6% 4.1% 7.3% -48.8% -31.8% -22.6% -32.6% 32.0% Segment profit 517 691 78 -34 -1,581 -585 -456 -538 -393 YoY 31.9% 83.3% ------Segment profit margin 6.6% 8.5% 1.1% ------
Source: Shared Research based on company data
▷ Segment sales for Q1 FY02/22: JPY5.3bn (+32.0% YoY) ▷ Segment loss for Q1 FY02/22: JPY393mn (versus loss of JPY1.6bn in Q1 FY02/21)
Factors behind sales increase, narrower loss Despite the impact of the pandemic, a decrease in the number of stores closed compared to Q1 FY02/21 and the enhancement of its take-out and delivery services improved the status of store operations, leading to a 34.5% YoY increase in comparable store sales. As a result, segment sales were JPY5.3bn (+32.0% YoY). However, like the Yoshinoya segment, comparable store sales were still down 35.6% compared to Q1 FY02/20, which the company set at the standard. While comparable store sales recovered, they did not reach 90% of FY02/20 levels. While segment loss shrunk due to cost cutting from the previous fiscal year, there were still JPY393mn in losses.
Hanamaru store count As of the end of Q1 FY02/22, the Hanamaru segment had a total of 469 stores, having opened no new stores and closed six during the period.
Major initiatives Major marketing initiatives during the quarter included special menus such as its Torotama Fair menu in March, Chilled Udon Fair in May, and a special Hanamaru Udon Bento for takeout only. Promotional sales events included a March promotion to celebrate the rollout of its Japanese-style fried chicken, followed by its Hanamaru Undon Meat Festival in April, and by special introductory pricing on its new tempura menu in May. To meet the growing demand for takeout and delivery services, the company increased the number of Hanamaru stores equipped to handle delivery orders to 211, an increase of 19 from the end of FY02/21.
12/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Overseas segment Cumulative FY02/20 FY02/21 FY02/22 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Sales 5,283 10,804 16,514 21,945 4,529 9,014 14,366 19,534 5,315 YoY 5.6% 5.8% 4.7% 3.7% -14.3% -16.6% -13.0% -11.0% 17.4% Segment profit 284 539 871 972 -175 -90 306 575 358 YoY 149.1% 71.7% 48.6% 20.6% - - -64.9% -40.8% - Segment profit margin 5.4% 5.0% 5.3% 4.4% - - 2.1% 2.9% 6.7% Quarterly FY02/20 FY02/21 FY02/22 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Sales 5,283 5,521 5,710 5,431 4,529 4,485 5,352 5,168 5,315 YoY 5.6% 6.0% 2.7% 0.7% -14.3% -18.8% -6.3% -4.8% 17.4% Segment profit 284 255 332 101 -175 85 396 269 358 YoY 149.1% 27.5% 22.1% -54.1% - -66.7% 19.3% 166.3% - Segment profit margin 5.4% 4.6% 5.8% 1.9% - 1.9% 7.4% 5.2% 6.7%
Source: Shared Research based on company data
▷ Segment sales for Q1 FY02/22: JPY5.3bn (+17.4% YoY) ▷ Segment profit for Q1 FY02/22: JPY358mn
Sales and profit increased In overseas segment, same store sales improved due to fewer stores under curtailed business hours and closures. Strong sales in the US and China also helped as economic activity started to resume. Comparable store sales in Q1 (January—March 2021 overseas) in the major regions saw a 74.5% increase in China and 8.7% increase in the US while ASEAN comparable store sales fell 10.1%. The China and US regions exceeded the standard of 90% of Q1 FY02/20 sales, a standard that is used across the company, while ASEAN only recovered to 86% of those levels. With the rise in sales, segment profit increased.
Overseas store count As of the end of Q1 FY02/22, the overseas segment had a total of 965 stores in operation, having opened 17 new stores and closed 18 during the period. Approximately half of the closed stores were in Taiwan, where the company attempted to swiftly expand the number of stores.
In the US, same store sales have been trending above the Q1 FY/21 level due to the reopening of restaurants for indoor dining (starting in March) and strong demand on both the takeout and delivery. Same store sales in China were up sharply from a rebound in the same quarter last year when the widespread lockdowns forced the stores to temporarily close. In ASEAN, sales are on a recovery trend but remain at a low level, amid the spread of the COVID-19.
For details on previous quarterly and annual results, please refer to the “Historical performance and financial statements” section.
13/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Company forecast for FY02/22
Results outlook
FY02/19 FY02/20 FY02/21 FY02/22 (JPYmn) 1H Act. 2H Act. FY Act. 1H Act. 2H Act. FY Act. 1H Act. 2H Act. FY Act. 1H Est. 2H Est. FY Est. Sales 100,339 102,046 202,385 107,066 109,135 216,201 81,988 88,360 170,348 76,400 78,700 155,100 YoY 2.7% 1.2% 2.0% 6.7% 6.9% 6.8% -23.4% -19.0% -21.2% -6.8% -10.9% -9.0% Cost of sales 35,922 36,881 72,804 37,541 38,710 76,252 31,103 32,184 63,287 Gross profit 64,416 65,165 129,581 69,524 70,425 139,949 50,885 56,176 107,061 Gross profit margin 64.2% 63.9% 64.0% 64.9% 64.5% 64.7% 62.1% 63.6% 62.8% SG&A expenses 64,361 65,115 129,476 66,588 69,435 136,023 56,855 55,542 112,397 SG&A ratio 64.1% 63.8% 64.0% 62.2% 63.6% 62.9% 69.3% 62.9% 66.0% Operating profit 55 49 104 2,936 990 3,926 -5,970 635 -5,335 700 2,000 2,700 YoY -97.4% -97.4% -97.4% 5238.2% 1920.4% 3675.0% - -35.9% - - 215.0% - Operating profit margin 0.1% 0.0% 0.1% 2.7% 0.9% 1.8% - 0.7% - 0.9% 2.5% 1.7% Recurring profit 332 17 349 3,023 346 3,369 -5,004 3,040 -1,964 3,000 2,200 5,200 YoY -86.4% -99.2% -92.4% 810.5% 1935.3% 865.3% - 778.6% - - -27.6% - Recurring profit margin 0.3% 0.0% 0.2% 2.8% 0.3% 1.6% - 3.4% - 3.9% 2.8% 3.4% Net income -850 -5,150 -6,000 1,879 -1,166 713 -5,708 -1,795 -7,503 1,900 100 2,000 YoY ------Net margin - - - 1.8% - 0.3% - - - 2.5% 0.1% 1.3% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.
Company forecast for FY02/22
▷ For FY02/22, the company forecasts full-year consolidated sales of JPY155.1bn (-9.0% YoY), operating profit of JPY2.7bn (versus loss of JPY5.3bn in FY02/21), recurring profit of JPY5.2bn (versus loss of JPY2.0bn in FY02/21), and net income attributable to owners of the parent of JPY2.0bn (versus loss of JPY7.5bn in FY02/21). ▷ In April 2021, the company transferred all of the shares it held in Kyotaru Co., Ltd. Accordingly, the Kyotaru segment will cease to exist beginning in FY02/22 (Kyotaru segment results in March 2021 will not be included in consolidated FY02/22 results). In FY02/21, sales in the Kyotaru segment amounted to JPY18.9bn while operating loss was JPY2.2bn. ▷ The company made no changes to its full-year forecast at the time of its Q1 results announcement (July 9, 2021).
Sales forecast Having sold off both its Arcmeal and Kyotaru businesses, the company sees consolidated sales in FY02/22 coming in roughly 8% below where they were in FY02/20 (before the pandemic). Since the Japanese government’s second state of emergency declaration was lifted in March 2021, the company expects that domestic sales are slowly coming back but are unlikely to return to the pre-pandemic levels of FY02/20.
In Japan, the company has nearly completed its restructuring of unprofitable stores. The company is assuming sales at Yoshinoya restaurants will recovery to 90% of where they were pre-pandemic, but is not as hopeful in the short-term for its Hanamaru and ramen restaurants, the bulk of which are located in shopping centers and in urban areas, because it expects the effects of the COVID-19 pandemic to linger and impact from stores left over from its store strategy. In the medium-term, the company plans to develop the businesses and maintain employment while referencing store improvements taken in the Yoshinoya segment. Overseas, the company’s outlook for sales varies greatly by region which in turn depends heavily on the trends in the number of COVID-19 cases; accordingly, the company is assuming nearly a full recovery in sales in the US and China to the FY02/20 levels but sees hard times continuing in Indonesia, home to most of its restaurants that are in ASEAN countries, where impact from the pandemic is lingering.
Profit forecast The company has forecast operating profit in FY02/22 because during FY02/21, it endeavored to build a cost structure through which it could generate profit even if it only achieved 90% of the sales it reported in FY02/20. The company projects sales equivalent to 92% of those reported in FY02/20.
14/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
The company expects that its OPM in FY02/22 will be 1.7%, compared to 1.8% it reported in FY02/20. The company explains the decline in profit margin as a result of fewer visitors to stores due to the effects of the COVID-19 pandemic. In Q1 FY02/22 (March-May 2021), this impact was also felt as local municipalities once again asked businesses to shorten their operating hours and the fourth state of emergency was declared in the Tokyo Metropolitan Area in July 2021.
Regarding raw materials costs and personnel costs for part-time workers, the company explained that it has already procured nearly the entire annual portion of beef, its main ingredient, so this would not be a factor in higher costs. Regarding hiring, the company expects hiring-related costs to be in line with forecasts as supply and demand for personnel in the restaurant industry loosens due to the impact of COVID-19.
Business policy The company has always invested in employee training and compensation to help it retain employees in the past and plans to continue to do so in the future. With “redefining the restaurant business” having long been one of its guiding principles, the company is well aware of the need to add value by having the right people provide service and therefore, when it looks at dealing with unprofitable locations, its primary focus is on increasing operational efficiency on the “hardware” front and not on cutting personnel costs, which in the end would lead to a reduction in the service level provided to restaurant patrons. The company wishes to resume full-scale business reforms in accordance with its medium-term plan, including store conversions to the Cooking and Comfort format, once it is able to make projections concerning the impact of the COVID-19 pandemic.
Business reforms implemented in FY02/21 In terms of business reform, the company has endeavored to establish a business structure that is profitable even if sales are down 10% from their level in FY02/20, its assumption being that the ongoing uncertainty surrounding the pandemic makes it unlikely that customer traffic will recover fully anytime soon. In keeping with this, the company plans call for restoring profitability by cutting fixed costs and streamlining unprofitable operations while at the same time restoring sales growth by revising menus and services to cater to new customer lifestyles.
(1) Restoring profitability by cutting fixed costs and streamlining unprofitable operations On the topic of cutting fixed costs and streamlining unprofitable operations, the company sought to reduce both fixed costs and variable costs as a percent of sales while increasing selling prices. In doing so, it emphasized that its efforts to increase selling prices would go beyond simply rolling out new menu items and involve maintaining value-added services allowing customers to order hand-cooked food served by on-site staff. On the cost front, plans call for cutting costs in a number of different areas. At company headquarters, plans call for rethinking functions and reorganizing departments with the aim of shrinking headquarters staff, then further shrinking headquarters office footprint by having people work from home. On the restaurant labor front, the company is looking to find the right level of variable personnel costs with help from reductions in work hours and hiring costs, and by reducing in-store processing in favor of more processing at the plant level. The company also intends to bring down the logistics cost by reducing the frequency of deliveries (particularly at Hanamaru), negotiating lower rents, lowering system-related costs, and negotiating lower fees from outside contractors.
Through these structural reforms, the company initially aimed to achieve a JPY7.0bn reduction in fixed costs and reorganize unprofitable businesses by FY02/22. It forecast that this JPY7.0bn would comprise JPY2.2bn in reduced supplies costs and food losses, a JPY1.9bn reduction in manageable costs, JPY1.0bn in rationalization of variable personnel costs, JPY420mn in rationalization of head office headcount, a JPY250mn reduction of Hanamaru logistics costs, a JPY650mn cost reduction from the closure of loss-making stores, and a JPY150mn reduction from efforts to cut down the scope of its business. The company achieved JPY6.6bn in cost cutting in Q2, and by end-FY02/21, had reduced costs by JPY8.2bn, significantly more than its initial target.
When closing unprofitable stores and streamlining its business in FY02/21, the company prioritized the ongoing employment of its full- and part-time employees. Accordingly, it targeted efficient store expansion rather than personnel reduction. Specifically, it had aimed to close a maximum of about 150 directly operated stores in Japan and abroad (40 Yoshinoya stores, 30 Hanamaru
15/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
stores, 30 Kyotaru stores, and 50 stores overseas). However, the company ultimately closed about 200 of these stores due primarily to ongoing government requests asking businesses to temporarily cut back or cease operations.
(2) Restoring sales growth by revising menus and services to cater to new customer lifestyles Regarding sales recovery, the company is focusing on both reviving its in-store dining business as well as capturing more takeout demand. With these efforts, the group is looking to move away from its primary focus on in-store dining and, while taking demand into account, develop a store network that will allow it to expand its food takeout/delivery business as well. The company had already prepared for another abrupt swing in sales. The bulk of these measures are aimed at improving its customer traffic forecast, controlling work hours (including better scheduling of employees based on past experience), pre-selection of what stores should be temporarily closed and where and when operating hours should be limited, and how menus should be pared down.
16/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Past initial forecasts versus results
Past initial forecasts versus results
Results vs. Initial Est. FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 FY02/21 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Sales (Initial Est.) 170,000 173,000 175,000 185,000 193,000 202,000 211,000 208,000 172,300 Sales (Results) 164,599 173,418 180,032 185,738 188,623 198,503 202,385 216,201 170,348 Results vs. Initial Est. -3.2% 0.2% 2.9% 0.4% -2.3% -1.7% -4.1% 3.9% -1.1% Operating profit (Initial Est.) 5,500 3,000 3,300 3,000 3,400 4,400 4,100 1,000 -8,700 Operating profit (Results) 1,877 2,179 3,515 1,613 1,865 4,019 104 3,926 -5,335 Results vs. Initial Est. -65.9% -27.4% 6.5% -46.2% -45.1% -8.7% -97.5% 292.6% - Recurring profit (Initial Est.) 5,500 3,100 3,700 3,400 3,800 5,100 4,700 1,500 -7,800 Recurring profit (Results) 2,460 3,270 3,993 2,345 2,750 4,604 349 3,369 -1,964 Results vs. Initial Est. -55.3% 5.5% 7.9% -31.0% -27.6% -9.7% -92.6% 124.6% - Net income (Initial Est.) 1,900 1,000 1,000 800 1,900 2,100 1,700 100 -9,000 Net income (Results) -364 698 941 837 1,248 1,491 -6,000 713 -7,503 Results vs. Initial Est. -119.2% -30.2% -5.9% 4.6% -34.3% -29.0% - 613.0% - Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.
The company’s OPM trends low at 1–2%, owing to a cost structure based on a cost ratio of around 35% and an SG&A expense ratio ranging between 62—63%. Costs to sustain stores are high, with personnel expenses accounting for over 40% of SG&A expenses and rent around 15%. Cost increases can have a major impact on profit, as do sales performance versus target. (Taking FY02/18 as an example, a 1.0pp difference in the cost ratio had a JPY2.0bn impact on profit, which is almost half the JPY4.4bn operating profit forecast.) For net income, changes at the OP level and the difference between estimated and actual impairment values at stores (including taxes) also have an impact. (Estimates factor in about the same level of extraordinary losses including impairment as the preceding financial year; the company recorded a net loss in FY02/19 from booking impairment losses totaling JPY5.1bn.)
FY02/14: Sales exceeded the initial company forecast by 0.2%, but operating profit fell far short of target because the cost ratio was 0.6pp higher than expected. Recurring profit was not far off target due to a large non-operating profit of JPY1.1bn, including miscellaneous profit of JPY799mn. Net income was far below the company forecast, because of extraordinary losses that reached JPY1.1bn versus the expected JPY866mn, as well as tax liabilities.
FY02/15: Operating profit and recurring profit exceeded the initial company forecasts because sales were ahead of target due to brisk comparable store sales that absorbed a higher cost ratio (+0.5pp vs. forecast) and a small SG&A expense overshoot. Net income narrowly missed the initial forecast, as the company booked extraordinary gains of JPY340mn and extraordinary losses of JPY1.6bn (including a JPY1.5bn impairment loss) versus its forecast of JPY1.2bn in extraordinary losses. The tax effect also impacted the bottom line.
FY02/16: Sales were more or less on target and the cost ratio was 0.5pp lower than expected. However, SG&A expenses were sharply higher than forecast (SG&A expense ratio worsened by 1.3pp), causing operating profit and recurring profit to fall far short of initial forecasts.
FY02/17: Sales were 2.3% lower than expected largely due to weak comparable store sales and a cost ratio 1.0pp higher than expected. As a result, profits were sharply below forecast.
FY02/18: Although sales were slightly below the initial forecast, the cost ratio was on track and SG&A expenses were lower than expected. As a result, operating profit missed the initial forecast by a relatively narrow margin. However, net income fell far short due to a larger-than-expected impairment loss.
FY02/19: Operating profit undershot the initial forecast by a large margin owing to price hikes of main ingredients such as beef and rice and increased personnel expenses for hiring part-time workers to counter the labor shortage. The company booked a net loss for posting JPY5.1bn in impairment losses accompanying store closures.
FY02/20: Coinciding with its 120-year anniversary, the company in its mainstay Yoshinoya segment continued to introduce new beef-based products as part of its successful effort to attract customers. Other segments also showed growth, resulting in the
17/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
company repeatedly lifting its earnings forecasts from Q2. Profit significantly exceeded initial forecast thanks to the improvement in sales more than offsetting the increase in costs.
FY02/21: The company was forced to temporarily shut down restaurants and shorten operating hours in the wake of the pandemic but in the end was able to limit the hit to sales by measures including stepping up its delivery service, introducing new menu items, and running promotions at the Yoshinoya segment. On the earnings front, the company had initially projected large losses at all levels but thanks to concerted efforts to cut costs and improve operating efficiency, was able to make progress toward reducing costs to where it could generate roughly 90% of the profit it generated in FY02/20 on lower sales and bring losses in well below its initial projections.
Performance assumptions versus results
FY02/17 FY02/18 FY02/19 FY02/ 20 FY02/21 FY02/22 Est. Act. Diff. Est. Act. Diff. Est. Act. Diff. Est. Act. Diff. Est. Act. Diff. Est. Yoshinoya 4.5% 0.1% -4.4pp 2.4% 1.4% -1.0pp 2.6% 0.8% -1.8pp 0.4% 6.7% +6.3pp - -8.5% - 2.3% Comparable Hanamaru 0.3% -1.3% -1.6pp 0.2% 2.9% +2.7pp 1.0% -1.8% -2.8pp 2.5% 1.5% -1.0pp - -35.5% - 28.0% store sales YoY Arcmeal -0.3% -6.1% -5.8pp 1.5% -1.2% -2.7pp -0.2% -8.7% -8.5pp 2.2% 3.9% +1.7pp - - - - Kyotaru 0.4% 0.1% -0.3pp 1.0% -0.4% -1.4pp 3.6% 0.3% -3.3pp 2.1% 0.5% -1.6pp - -28.3% - - Yoshinoya Year-end 1,208 1,207 -1 1,219 1,200 -19 1,232 1,211 -21 1,232 1,214 -18 - 1,189 - 1,199 Openings 50 36 -14 40 28 -12 50 33 -17 38 29 -9 - 25 - 27 Closures 30 17 -13 28 31 +3 18 26 +8 16 25 +9 - 50 - 17 Net increase 20 19 -1 12 -3 -15 32 7 -25 22 4 -18 - -25 - 10 Hanamaru Year-end 439 432 -7 478 479 +1 524 512 -12 531 522 -9 - 490 - 489 Openings 50 52 +2 50 59 +9 49 48 -1 35 30 -5 - 18 - 7 Closures 1 10 +9 4 10 +6 4 15 +11 16 20 +4 - 50 - 8 Net increase 49 42 -7 46 49 +3 45 33 -12 19 10 -9 - -32 - -1 Arcmeal Year-end 187 184 -3 182 178 -4 178 171 -7 170 154 -16 - - - - Openings 1 0 -1 2 0 -2 4 1 -3 0 0 +0 - - - - Closures 0 2 +2 4 6 +2 4 7 +3 1 16 +15 - - - - Net increase1 -2 -3 -2 -6 -4 0 -6 -6 -1 -16 -15 - - - - Kyotaru Year-end 327 329 +2 340 330 -10 336 333 -3 339 335 -4 - 288 - - Store count Openings 20 25 +5 20 19 -1 22 21 -1 16 17 +1 - 14 - - Closures 8 11 +3 9 18 +9 16 18 +2 10 15 +5 - 61 - - Net increase 12 14 +2 11 1 -10 6 3 -3 6 2 -4 - -47 - - Overseas Year-end 780 733 -47 838 821 -17 960 923 -37 1,603 994 -609 - 965 - 1,004 Openings 115 94 -21 112 107 -5 147 135 -12 162 131 -31 - 76 - 72 Closures 10 36 +26 7 19 +12 8 33 +25 22 60 +38 - 105 - 34 Net increase 105 58 -47 105 88 -17 139 102 -37 140 71 -69 - -29 - 38 Other Year-end 173 189 +16 164 171 +7 176 253 +77 285 253 -32 - - 231 Openings 6 9 +3 4 9 +5 8 20 +12 36 13 -23 - 5 - 8 Closures 2 17 +15 29 33 +4 3 19 +16 5 20 +15 - 27 - 12 Net increase 4 20 +16 -25 -24 +1 5 1 -4 31 -7 -38 - -22 - -4 Consolidated Year-end 3,114 3,074 -40 3,221 3,179 -42 3,406 3,403 -3 4,160 3,323 -837 - 3,168 - 2,923 total Openings 242 216 -26 228 222 -6 280 258 -22 287 220 -67 - 138 - 114 Closures 51 93 +42 81 117 +36 53 118 +65 70 156 +86 - 293 - 71 Net increase 191 151 -40 147 105 -42 227 140 -87 217 64 -153 - -155 - 43 Cost ratio 35.3% 36.3% +1.0pp 35.0% 35.1% +0.1pp 36.1% 36.0% -0.1pp 35.5% 35.3% -0.2pp - 37.2% - 34.2% Costs SG&A ratio 62.9% 62.8% -0.1pp 62.9% 62.9% +0.0pp 62.0% 64.0% +2.0pp 64.0% 62.9% -1.1pp - 66.0% - 64.1% Source: Shared Research based on company data Notes: The number of store openings/closures does not match data in “Other” (result) for FY02/17, because a total of 28 Setaga-ya and FRJ stores have been added. Eighty Withlink Holdings stores included under Other from Q2 FY02/19 Arcmeal segment included in consolidated results through FY02/20, with the company having sold all of its shareholding in Arcmeal Co., Ltd. in February 2020. The segment was eliminated starting in FY02/21. Consolidated results include impact from the Kyotaru segment through FY02/21. Starting in FY02/22, this impact will no longer be included, reflecting the company’s April 2021 transfer of shares held in Kyotaru Co., Ltd. Due to investment cutbacks implemented in response to the COVID-19 pandemic, the company did not disclose initial store opening and closure forecasts for FY02/21.
Impairment losses Impairment losses FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 FY02/21 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Extraordinary losses 3,400 1,470 1,103 1,612 980 1,537 1,607 5,210 2,526 5,793 Impairment losses 1,579 1,397 1,030 1,494 933 1,409 1,298 5,107 2,479 4,528 Yoshinoya 292 593 390 496 383 246 370 1,064 917 603 Hanamaru 160 180 283 304 153 213 296 1,419 380 626 Arcmeal 132 161 69 85 102 404 414 944 46 - Kyotaru 440 270 166 205 110 69 121 385 44 2,181 Overseas 45 106 92 206 101 70 50 793 805 830 Other 77 84 27 174 67 403 43 99 111 128 Source: Shared Research based on company data Notes: Figures may differ from company materials due to differences in rounding methods. Arcmeal segment included in consolidated results through FY02/20 but will no longer be included starting FY03/21, with the company having sold all of its shareholding in Arcmeal Co., Ltd. in February 2020. Consolidated results include impact from the Kyotaru segment through FY02/21. Starting in FY02/22, this impact will no longer be included, reflecting the company’s April 2021 transfer of shares held in Kyotaru Co., Ltd.
18/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Medium-term plan: seeking to revamp existing business model
In Japan, the administration of vaccines as a COVID-19 countermeasure began in February 2021, but the pandemic nevertheless continues to have an impact in FY02/22. Under these circumstances, Yoshinoya HD once again postponed its announcement of the second stage of its medium-term management plan, which was originally scheduled to begin in FY02/21, when it released its results for the same financial year. In coordination with this move, the company has decided to view FY02/22 as a period during which it will establish strong foundations that will carry it into the post-pandemic era. Regardless of the different timings necessitated by these changes, the company has made no fundamental changes to the ideas specified in its medium-term management plan, its long-term vision, or its planned courses of action moving forward. It has indicated that it will quickly and flexibly adapt and respond to business environments surrounding the restaurant industry in the post-pandemic era.
As discussed below, the company has already released its long-term vision dubbed NEW BEGINNINGS 2025, outlining its aspirations for the next ten years. The long-term vision consists of three stages with medium-term plans designed for each stage. The three years to FY02/19 was the first stage—a period for sowing the seeds of growth. The company positions the second stage from FY02/21 as the expansion phase to produce results from the experiments and verification of the first stage. The final, third stage is the harvesting phase, a time to reap the rewards of the work in the first and second stages. FY02/20 laid the foundation for knowledge acquired in the first stage through trial and error to be applied in the next stage.
Basic approach under long-term vision The fundamental concepts that make up the long-term vision are as follows. Shared Research understands that the company intends to maintain its approach to running its businesses notwithstanding the impact COVID-19.
▷ Understand that achievement of growth through a traditional restaurant business model (i.e., opening fixed-format stores to ensure an efficient customer turnover) is difficult ▷ Aspire to build a business model that could potentially expand into the service industry by utilizing various tools including technology ▷ Create value-added by investing in people (see increasing personnel expenses as an opportunity rather than a cost burden)
Long-term vision
Source: Shared research based on company materials
In the past, each Yoshinoya HD group company had its own business model and achieved growth by putting its model into action while making constant improvements. The company has felt, however, that it became increasingly difficult to sustain robust growth in this way since the turn of the millennium, and a new business model that could be used over the longer term has been in need to replace existing business models and turn the situation around. The company plans on creating such a model, which will require around three years. Additionally, it sees the need to enforce reforms that significantly surpass previous efforts and to create innovation to attain dramatic progress. The company refers to such innovation as “redefining the restaurant
19/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
business” and has made it one of the themes of its long-term vision, which it will address as a group as it seeks to develop markets and provide value beyond the scope of existing restaurant businesses.
Results of the first stage of long-term vision (FY02/17–19) A comparison of the forecasts with the actual results during the first stage indicate that both sales and profit fell short of initial targets for each of the three years, particularly due to significant impairment losses in FY02/19 accompanying store closures. At the time the company formulated the first stage plan, it intended to engage in the initiatives outlined below. While the plan was in progress, it upheld the slogan “Try first, think next” and aimed to attain goals without becoming overly conservative from fear of failure.
▷ Provide new values to improve the profitability of existing businesses: New menus, improved store operations, and introduction of new marketing methods ▷ Achieve growth and scale expansion by opening stores in Japan and overseas: New formats and locations and accelerated opening of new stores overseas, mainly in Asia ▷ Create new businesses and build a foundation for operating new businesses: Use of existing management resources and technologies, creation of strategic business alliances
During the first stage, the company rolled out a new format, Cooking and Comfort, and a series of new menus at its mainstay Yoshinoya business, advanced store openings for Hanamaru, Kyotaru, and the overseas markets, and tested measures to streamline store operations. That said, Shared Research understands that several issues surrounding the company’s earnings structure remained unresolved. For example, amid intensifying labor shortage and promotion of workstyle reform, personnel-related costs (from in-store operation to distribution) finished higher than expected, and prioritization of store expansions at Hanamaru resulted in the lowering of store opening standards in some instances.
Medium-term plan (first stage)—initial forecasts versus results
Progress FY02/17 FY02/18 FY02/19 Progress FY02/17 FY02/18 FY02/19 (JPYmn) (stores, JPYmn) Initial Est. Sales 193,000 202,000 210,000 Initial Est. Store count 3,114 3,300 3,500 (A) Japan 175,400 180,000 185,000 (A) Japan 2,330 2,400 2,500 Overseas 17,600 22,000 25,000 Overseas 784 900 1,000 Act. (Est.) Sales 188,623 198,503 202,385 Act. (Est.) Store count 3,074 3,179 3,455 (B) Japan 172,017 178,769 181,223 (B) Japan 2,341 2,358 2,532 Overseas 16,606 19,734 21,162 Overseas 733 821 923 Difference Sales -4,377 -3,497 -7,615 Difference Store count -40 -121 -45 (B-A) Japan -3,383 -1,231 -3,777 (B-A) Japan 11 -42 32 Overseas -994 -2,266 -3,838 Overseas -51 -79 -77 Initial Est. Operating profit 3,400 4,300 6,000 Initial Est. Capex 16,800 16,000 19,000 (A) OPM 1.8% 2.1% 2.9% (A) Japan 11,300 10,500 12,200 Act. (Est.) Operating profit 1,865 4,019 104 Overseas 5,500 5,500 6,800 (B) OPM 1.0% 2.0% 0.1% Act. (Est.) Capex 11,373 10,749 13,279 Difference Operating profit -1,535 -281 -5,896 (B) Japan 8,698 8,940 8,103 (B-A) OPM -0.8pp -0.1pp -2.8pp Overseas 2,675 1,809 5,176 Initial Est. ROE - - 4.7% Difference Capex -5,427 -5,251 -5,721 Act. 2.2% 2.6% -11.1% (B-A) Japan -2,602 -1,560 -4,097 Difference --- Overseas -2,825 -3,691 -1,624 Source: Shared Research based on company data. Notes: Initial estimates are targets at the time the plan was announced. Figures may differ from company materials due to differences in rounding methods.
FY02/20: a year to improve management foundation for the second stage The second stage of the long-term vision was originally slated to begin in FY02/20 when first announced. However, deterred by the impact of major changes in the business environment during the first stage and the amount of time the company had to spend implementing and assessing a wide range of initiatives, the results for FY02/19 (the final year of the first stage) fell short of initial targets by a large margin. Consequently, the company repositioned FY02/20 as a period to improve its management foundation focusing on a smooth transition into the next stage, and will implement associated measures including initiatives left
20/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
undone from the first stage. Once its goal for FY02/20 is within reach, we believe the company will release the medium-term plan for the second stage, which is positioned as the growth phase of the long-term vision.
There are unresolved issues with some of the targets set out in the long-term vision, such as establishing new formats. However, renewed earnings power will help the move onto the second stage. Shared Research thinks that the company is ready for the next phase as Yoshinoya and all other segments staged an earnings recovery in FY02/20. Results included the transformation of restaurant formats through the trial run of the Cooking and Comfort concept in the first stage, which boosted sales per store. Also on the plus side were strengthened engagement of beef bowl fans and capturing new customers though the launch of a series of menus under the Core & More strategy, improvements to in-store operations, and earnings based store opening/closing policy.
The COVID-19 pandemic rocked the foundations of the restaurant industry from around the end of FY02/20. The company had no choice but to rethink its initial medium-term plan. As sales declined significantly in FY02/21, the company implemented cost structure reforms aimed at establishing a system through which it could generate profit with sales of the same scale as those it reported in FY02/20. At the same time, the company proceeded with a strategy of selection and concentration, transferring all of its shares held in Arcmeal Co., Ltd. and subsequently Kyotaru Co., Ltd.
Once the pandemic abates, it intends to manage in line with its long-term vision, and is looking for the growth strategy best suited to the transformed restaurant landscape. The second stage of its medium-term management plan is meant to deliver growth under the long-term vision. Shared Research thinks that under the second stage of its medium-term plan, the company will respond flexibly to the post-pandemic changes to the operating environment (for example, growth in take-out business), while addressing outstanding issues left over from before the outbreak of the pandemic and growing the success stories among its experiments.
21/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Business Business description
Major restaurant operator whose core business is Japan’s best-known gyudon beef bowl chain
Yoshinoya HD operates major restaurant chains in Japan and overseas. Its portfolio includes the mainstay Yoshinoya gyudon chain that boasts a 120-year history since the opening of its first store, and a wide variety of other restaurants*, which the company began acquiring from the late 1990s. As the creator of gyudon beef bowl, Yoshinoya is a household brand immediately associated with the dish. The company posted sales of JPY216.2bn in FY02/20, and ranks fifth out of 95 listed food-service companies in Japan (as of FY02/19). Yoshinoya HD also stands out for running more than 1,000 restaurants overseas.
Apart from the founding beef bowl business, formats as of end-February 2021 ranged from udon noodles to steak, sushi (take-out and conveyor belt sushi), and ramen. Brands other than Yoshinoya include Hanamaru Udon, Kyotaru, Kaisen Misakiko, and Setaga-ya.
Segment breakdown Segment Format Store names Store count Yoshinoya Gyudon Yoshinoya, Sobadokoro 1,189 Hanamaru Udon Self-service Hanamaru Udon 475 Curry udon Senkichi 15 Kyotaru Take-out sushi Mainly Kansai-style sushi Kyotaru 150 Edomae-style sushi Sushi Misakiko 8 Eat-in sushi Conveyor belt sushi Kaisen Misakiko 86 Sushi Misakimaru 21 Dalian, Nihonbashi Sui, other 23 Overseas Gyudon Yoshinoya 947 Udon Hanamaru 18 Other Ramen Setaga-ya, Hirugao, Bari-uma, Torinosuke, other 111 Source: Shared Research based on company data and website (as of February 2021)
The total number of restaurants (all formats, including take-out only stores) was 3,168 as of end-February 2021, breaking down into 2,203 in Japan and 965 overseas (ratio of 7:3). The number of directly operated restaurants stood at 2,244. Additionally, the company has a total of 924 franchisees operating Yoshinoya (Japan and overseas) and Hanamaru (Japan only) brand restaurants. (Ratio of directly operated restaurants to franchises is 71:29; franchise revenue and other financial details are undisclosed.)
* Hanamaru and Kyotaru became part of the group through M&A from the late 1990s onward (Yoshinoya HD acquired Kyotaru in 1999 and Hanamaru in 2004. The Kyotaru acquisition was essentially a rescue operation. The company acquired, but later sold or withdrew from businesses including Shanghai Express, R1, Ishiyaki Bibimbap, and Arcmeal. In March 2019, it announced the acquisition of shares in Withlink Holdings (unlisted) to make it a wholly owned subsidiary. Withlink operates ramen restaurants in Japan and overseas, mainly under the brands Bariuma and Torinosuke. ** As of April 1, 2019
Business portfolio overview
Yoshinoya, the earnings pillar of the group In FY02/21, the Yoshinoya segment accounted for 61% of sales, while the Hanamaru segment accounted for 12%, the Kyotaru segment 11%, the Overseas segment 12%, and the Other segment 4%. The company reported profits in the Yoshinoya and Overseas segments and losses in the Hanamaru and Kyotaru segments. Despite substantial impact from the COVID-19 pandemic in FY02/21, the company has noted growth in both the Hanamaru segment, which is generally expanding, and the Overseas segment, which has received full-scale support under the tenure of the company’s current president. As before, the Yoshinoya segment accounted for the majority of both sales and profit. The Yoshinoya business format also comprises most of the company’s Overseas segment, so the company will likely remain dependent upon this format moving forward.
22/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Profit driven by the Yoshinoya segment All segments incurred impact from the COVID-19 pandemic in FY02/21, and only the Yoshinoya and Overseas segments escaped substantial operating losses.
Segment profitability (FY02/21) Segment OPM Asset turnover ROA (OP-based) Yoshinoya 3.9% 2.0 7.9% Hanamaru -15.5% 1.5 -23.4% Kyotaru -11.7% 2.0 -23.2% Overseas 2.9% 1.2 3.4% Consolidated total -3.1% 1.3 -4.0%
Source: Shared Research based on company data (FY02/21 results) Note: Arcmeal segment included in consolidated results through FY02/20 but will no longer be included starting FY03/21, with the company having sold all of its shareholding in Arcmeal Co., Ltd. in February 2020. Consolidated results include impact from the Kyotaru segment through FY02/21. Starting in FY02/22, this impact will no longer be included, reflecting the company’s April 2021 transfer of shares held in Kyotaru Co., Ltd.
Yoshinoya’s segment profit tends to fluctuate significantly from year to year, so Yoshinoya’s performance essentially determines the performance of the group as a whole. Meanwhile, a high percentage of stores in the Hanamaru segment are located in shopping malls and other commercial facilities, which makes the operation of these stores susceptible to impact from the business policies of these facilities. In response to the COVID-19 pandemic, commercial facilities shortened their business hours or closed altogether, preventing the company from taking any substantial countermeasures. These circumstances were a primary factor contributing to the operating loss in FY02/21. The Kyotaru segment also incurred impact from the pandemic through temporary operating hour curtailments or closures and the tendency for consumers to remain indoors. These factors hit the segment’s restaurant format, an area of focus for the company, harder than its take-out sushi format. In April 2021, the company transferred all of its shares in Kyotaru Co., Ltd., a core subsidiary in the Kyotaru segment.
When comparing segment profits over time, observers should note that the consolidation of common companywide operations that accompanied the shift to a holding company structure had a commensurate positive impact on these segment profits. Specifically, observing segment profits over time reveals a trend of increase in segment adjustments associated with the conversion to a holding company structure, and these adjustments have exceeded JPY4.0bn starting in FY02/18. Due to these circumstances, individual segment profits appear to improve commensurately.
Sales by segment Sales (JPYmn) FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 FY02/20 FY02/21 Yoshinoya 87,667 86,553 92,997 95,318 95,607 97,281 101,082 103,607 111,685 111,685 105,615 Hanamaru 15,573 19,279 18,887 19,521 21,510 23,880 27,057 29,005 30,892 30,892 20,361 Arcmeal 20,666 20,853 22,150 23,793 24,357 22,979 22,482 20,247 19,910 19,910 - Kyotaru 27,638 24,205 23,725 24,537 24,976 25,682 26,695 27,323 28,544 28,544 18,898 Overseas 10,307 9,880 12,469 14,955 17,510 16,606 19,734 21,162 21,945 21,945 19,534 Other 6,479 5,882 4,737 3,420 3,492 4,180 3,508 3,061 5,652 5,652 7,997 Adjustments -2,449 -2,057 -1,549 -1,514 -1,716 -1,987 -2,058 -2,024 -2,431 -2,431 -2,062 Operating profit by segment OP (JPYmn) FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 FY02/20 FY02/21 Yoshinoya 4,551 1,916 2,873 4,061 3,054 3,835 5,064 3,522 5,935 5,935 4,147 Hanamaru 783 907 777 994 1,158 937 1,274 624 1,252 1,252 -3,160 Arcmeal 573 392 415 286 256 135 209 -841 -309 -309 - Kyotaru -606 -137 24 255 289 72 316 162 457 457 -2,213 Overseas -118 -210 286 568 557 913 1,243 806 972 972 575 Other 43 -43 57 -148 -158 -56 -6 -53 138 138 -528 Adjustments -424 -948 -2,254 -2,502 -3,544 -3,973 -4,082 -4,117 -4,521 -4,521 -4,155 Source: Shared Research based on company data Notes: Figures may differ from company materials due to differences in rounding methods. Arcmeal segment included in consolidated results through FY02/20 but will no longer be included starting FY03/21, with the company having sold all of its shareholding in Arcmeal Co., Ltd. in February 2020. Consolidated results include impact from the Kyotaru segment through FY02/21. Starting in FY02/22, this impact will no longer be included, reflecting the company’s April 2021 transfer of shares held in Kyotaru Co., Ltd.
23/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Challenges faced by the Yoshinoya segment The Yoshinoya segment underpins the company’s earnings through business scale and the strength of its brand recognition as a gyudon restaurant operator. However, Shared Research believes it is faced with several challenges that make earnings improvement difficult, such as factors leading to cost increases (higher personnel expenses and ingredient prices) and the business climate, which does not give room for the upward repricing of mainstay dishes.
Looking at its historical earnings results, a turning point for the Yoshinoya business came in 2003 with the BSE1 outbreak, when the company had to suspend sales of gyudon beef bowls for 949 days (from February 2004 to September 2006). Earnings levels continued to fall sharply thereafter.
The business environment also changed dramatically during this time. Remaining true to the brand image as a beef bowl chain, the company continued to position gyudon as its core product. Meanwhile, there were structural factors the company had to consider anew, such as increased demand for beef in China and other Asian countries, which had kept beef prices high after the BSE crisis. In response, the company has implemented a variety of measures, including the annual advance procurement of American beef, one of its main ingredients. Despite these measures, beef prices have continued to rise over the medium- to long-term, and the company faces ongoing challenges related to procurement cost. General cost control is also important due to factors such as rising personnel expenses and price increases associated with ingredients other than beef.
Faced with cost-related pressure on one hand, it has also been difficult for the company to raise product prices for complex reasons, including strategic moves of competitors Sukiya (a gyudon chain operated by Zensho Holdings Co., Ltd. [TSE1: 7550]) and Matsuya (a restaurant chain operated by Matsuya Foods Holdings Co., Ltd. [TSE1: 9887] offering set meals consisting of beef, vegetables, and rice) and the effects of a price hike in the past2. Further, the scope for opening new restaurants has been limited in the saturated domestic gyudon market, making earnings outlook even more unstable for the company, which markets beef bowls as its mainstay. (see “Yoshinoya segment” section following for details).
Restaurants are all experiencing tough operating conditions, with new companies entering a market that is shrinking due to population decline and facing tough competition from other food-service sectors such as convenience stores. Although the Yoshinoya segment has steadily increased earnings after the BSE crisis, we believe the company faces formidable challenges due to the limitations it shoulders in connection with gyudon and beef.
1 Bovine Spongiform Encephalopathy (BSE), commonly called mad cow disease, causes sponge-like cavities in the brains of bovines. US beef imports to Japan were banned for some time, because the disease can be passed to humans if they eat infected animals. Yoshinoya HD had to stop selling gyudon, because the company uses US beef. 2 A price hike in 2014 resulted in a double-digit drop in customer traffic.
Yoshinoya: Long-term earnings trends
(JPYmn) Sales Operating profit OPM 120,000 20.0% 16.7% 15.7% 100,000 13.0% 15.0% 80,000 10.0% 60,000 6.9% 6.2% 4.9% 5.2% 5.0% 5.3% 40,000 4.3% 3.9% 3.9% 3.7% 3.1% 3.2% 3.4% 5.0% 2.8% 2.4% 2.2% 20,000 0.0% 0 -1.9% -20,000 -5.0%
Source: Shared Research based on company data Note: Figures through FY02/10 are for the Gyudon-related business segment. Figures for FY02/11–FY02/13 are for the Domestic Yoshinoya segment. Figures from FY02/14 are for the Yoshinoya segment.
24/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Domestic sales price of US frozen short plate
Short plate wholesale price Cost ratio (RHS) (JPY/kg)
1,200 39.0% 38.2%
1,000 37.5% 38.0% 37.3% 37.2% 784 763 37.0% 800 724 922 673 667 584 36.3% 36.0% 559 559 600 36.0% 35.8% 607 584 35.0% 35.3% 35.1% 35.1% 400 34.0% 34.1% 200 33.0%
0 32.0% FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020
Source: Shared Research based on materials provided by the Agriculture & Livestock Industries Corporation Note: Prices are domestic sales prices, not Yoshinoya’s purchase prices (see “Earnings structure” section).
Yoshinoya segment
Yoshinoya FY02/17 FY02/18 FY02/19 FY02/20 FY02/21 (JPYmn) Cons. Cons. Cons. Cons. Cons. Sales 97,281 101,081 103,607 111,685 105,615 YoY 1.8% 3.9% 2.5% 7.8% -5.4% Segment profit 3,835 5,064 3,522 5,935 4,147 YoY 25.6% 32.0% -30.5% 68.5% -30.1% Segment profit margin 3.9% 5.0% 3.4% 5.3% 3.9% Source: Shared Research based on company data
Business model In the Yoshinoya segment, FY02/21 sales fell 5.4% YoY to JPY105.6bn and segment profit was down 30.1% YoY to JPY4.1bn before adjustments. As of end-February 2021, there were 1,189 Yoshinoya restaurants in Japan, located in all prefectures. Yoshinoya ranks second among the top three beef bowl companies by restaurant count, following Zensho Holdings (TSE1: 7550) that operates 1,942 Sukiya restaurants (as of end-FY03/20). Matsuya Foods Holdings (TSE1: 9887) ranks third with 963 Matsuya restaurants (as of end-FY03/20).
Yoshinoya restaurant formats
Cooking and Comfort format Suburban drive-thru format Yoshinoya franchise agreement
Yoshinoya Contract Five years period Renewal Sign a new contract at renewal; otherwise, contract is terminated automatically Affiliation fee JPY1.5mn Renewal fee JPY750,000 Guarantee JPY750,000 deposit Royalty Monthly fee equivalent to 3% of total payment sales Advertising Monthly fee equivalent to 1% of total charges sales Administrative JPY38,000/month per set of equipment charges JPY6,000/month per POS register, other Source: Shared Research based on Source: Shared Research based on company data Source: Shared Research based on company data company data
25/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Mainly directly operated restaurants Although some Yoshinoya restaurants are franchises, they only represent about 6% (68 outlets as of end-February 2021) of the total. Franchises are no longer particularly attractive to owners, because they require a relatively large investment (JPY40–50mn) and are not as profitable as they used to be. The company does not actively seek franchisees and takes a cautious approach to applicants. There are no new franchise openings in the pipeline. Yoshinoya HD receives in aggregate 4% of monthly sales as royalties and advertising costs from franchisees and sells them ingredients, but does not disclose franchise-related earnings. The chain’s average annual sales per restaurant amount to just under JPY90mn.
Core products Yoshinoya’s menu is diverse. The main ingredient is not limited to beef, but includes pork, chicken, and fish, and Yoshinoya restaurants also offer meal sets with side dishes in addition to its rice bowl dishes with various toppings. That being said, gyudon beef bowl remains the core product accounting for around 50% of sales.
Yoshinoya’s main menu (as of April 2021) Category Main menu (price in JPY including tax) Beef Bowl with Toppings of Green Gyudon Extra Beef Bowl Extra Onion Beef Bowl Gyudon (Beef Bowl) Onion and Raw Egg (387) (549) (505) (505) Pork Bowl Pork Bowl with Kimchi Pork and Cheese Bowl Butadon (Pork Bowl) (387) (505) (505) Yakiniku Beef Barbecue Meal with Yakiniku Beef Barbecue Meal Yakiniku Beef Barbecue Bowl Yakiniku Beef Barbecue Raw Egg (657) (712) (602) Ginger Sauce-marinated Grilled Grilled Beef Rib Bowl with Grilled Beef Rib Bowl Grilled Beef Rib and Cheese Bowl Grilled Beef Rib Bowl Beef Rib Bowl Kimchi (602) (602) (720) (720) Black Curry and Rice Extra Beef Black Curry and Rice Beef Black Curry and Rice Cheese Black Curry and Rice Curry and Rice (393) (657) (547) (503) Broiled Eel and Rice Box Set, with Broiled Eel and Rice Box Set, Broiled Eel and Rice Box Set, with Broiled Eel Broiled Eel and Rice Box Beef (Small Bowl) with Miso Soup Miso Soup and Beef (Small Bowl) and Rice Box (866) (1,029) (952) (1,100) Chinese-style Fried Chicken Fried Chicken Bowl Fried Chicken and Beef Bowl Fried Chicken Bowl with Tartar Sauce Fried Chicken Bowl (503) (613) (613) (613) Ham and Egg Meal with Natto Natto Meal with Ham and Egg Meal with Beef Grilled Salmon Meal with (fermented soybeans) Beef (Small Bowl) (Small Bowl) Beef (Small Bowl) One Soup and Three (404) (404) (503) (602) Dishes Breakfast Double Ham and Egg Meal Grilled Salmon Meal with Egg, Grilled Salmon Meal Natto Meal with Natto Natto, and Roasted Laver (602) (470) (580) (371) Ginger Sauce-marinated Grilled Pork Beef Plate Meal Grilled Beef Rib Meal Beef and Salmon Meal Meal set Meal (547) (657) (602) (657) Mini Beef Bowl Set Mini Curry Set Children, family (367) (305) Source: Shared Research based on company website
Customer base Yoshinoya’s main customers are men in their 40s and 50s. The male to female ratio is 8:2. The ratio of men is higher than at rival chains. The take-out weighting in FY02/21 trended at over 40%, contributing to sales (The weighting temporarily exceeded 60% during the state of emergency issued in response to the COVID-19 pandemic.). Starting in FY02/20, the company plans to widen its customer base by increasing the number of outlets providing home delivery, and has rapidly rolled out the service to 751 restaurants (73 use the Demae-can delivery service and 145 use UBER EATS [533 use both]) as of end-February 2021.
Average customer spend The average customer spend at Yoshinoya restaurants has trended up in the past 10 years accompanying the introduction of new menu items. The price settings are similar to those of rival chains. For a regular beef bowl (the standard dish), Yoshinoya, Sukiya1, and Matsuya (both regular and premium beef bowl) 2 all charge slightly less than JPY400. Pork bowls are also priced slightly less than JPY400 at Yoshinoya and Sukiya. Meal sets with a beef main dish cost between JPY600—700 at all three chains.
26/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
The limitations Yoshinoya faces on pricing are noted previously in the overview. The price of a standard-size beef bowl rose from JPY300 to JPY350 in 1980, to JPY370 in 1985, and to JPY400 in 1990. The price was cut to JPY280 in 2001 before sales were suspended following the BSE crisis. When sales resumed, the price was JPY380. The price was cut to JPY280 again in 2013, but has returned to JPY380 since 2014. In 2021, the price of a standard-size beef bowl was JPY387 (including tax).
1 Sukiya raised the prices of non-standard size beef bowls in November 2017 because of ingredient price increases (for beef and others) and rising labor costs. It hiked the price of the medium beef bowls by JPY10 and extra-large and mega beef bowls by JPY50.
2 Matsuya raised its prices on April 3, 2018, due to higher ingredient prices and labor costs. However, the price hike varied from region to region. While increasing the price of some items at all stores, the price of large premium beef bowls went up from JPY520 to JPY530 in Tokyo only, and the price of standard beef bowls from JPY290 to JPY320 outside Tokyo.
Store development The network of Yoshinoya restaurants already covers all core regions in Japan. Although the company has either opened or closed 20–30 restaurants each year, the total number has been stable at around 1,200. The company has been working to change its style of service by converting the traditional U-shaped-counter-format stores to the Cooking and Comfort format, rolling out in stages a remodeling program for around 500 restaurants starting FY02/19. In FY02/21, the company suspended its investment in these remodeling plans out of consideration for business environment changes caused by the COVID-19 pandemic. However, the company plans to resume this investment in FY02/22.
According to the company, it has verified sales growth of about 10% and an increase in take-out by about 30% at pilot stores that have been converted to the Cooking and Comfort format. These stores also saw an increase in female customers, a drop in average customer age by around two years, and reduced labor for the store staff. The company had remodeled 26 stores to the Cooking and Comfort format by end-FY02/19, 112 by end-FY02/20, and 134 by end-FY02/21. The company has also been introducing zigzag-shaped counters to offer better comfort at stores that are busy during lunchtime or are difficult to convert to the Cooking and Comfort format. It had switched seven stores to this format by end-FY02/19, 12 by end-FY02/20, and 34 by end-FY02/21.
Yoshinoya HD applies a set of standards to determine which restaurants should be closed (applies to all segments). The process begins with the recognition of a potential risk of impairment when a restaurant records negative operating cash flows after its second year of operation. The company will then estimate such a restaurant’s future cash flows, factoring in the variables considered during the budgeting process, and determine its present value. If this value falls far below the book value, the company will post an impairment loss, alleviating the restaurant’s cost burden. If the restaurant still sees no prospect of an earnings recovery after a given amount of time, it will be closed.
Sourcing ingredients The company does not disclose specifics of how it sources beef, its main ingredient. (See “Profitability snapshot” section for details on Yoshinoya HD’s policies regarding procurement and inventory).
Strengths and challenges Brand power The company created the gyudon beef bowl, and most people are quick to associate the two. Yoshinoya is an iconic gyudon chain, often called by its nickname Yoshigyu, popularized by its catchphrase “Tasty, cheap, and fast.” It has been the subject of many stories, including Yoshinoya’s commitment to flavor and quality proven by the decision to suspend sales after the BSE outbreak that made sourcing US beef difficult, rather than resorting to other beef. With a core fan base (a solid 50% of its orders being for gyudon versus 30–50% for rival chains), Yoshinoya’s brand power is a key differentiating factor.
A 2020 a comprehensive ranking of corporate brands released by Nikkei Research Inc.1 placed Yoshinoya 255th among 600 Japanese companies, and sixth in the food service business after Starbucks Coffee Japan (145th), MOS Food Services (161st), McDonald’s Japan (170th), Kentucky Fried Chicken Japan (182nd), and Mister Donut (190th).
27/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Flavor Although flavor perception is individual, Shared Research believes that Yoshinoya’s food is generally considered tasty and, more importantly, the company is committed to achieving the best possible flavor. The cut of beef used in its dishes is short plate2 and the company is well known for using only US beef, but the crucial ingredient is in fact the sauce. Yoshinoya’s traditional sauce is fermented, using liberal quantities of white wine, which only works well with grain-fed beef3 as using other beef would result in a slightly unpleasant odor. The company explains that it can only use US beef4, because it needs to ensure taste consistency at all of its restaurants and no other country can supply grain-fed beef in sufficient quantities. Yoshinoya is committed to its traditional recipe, including the selection of ingredients other than beef such as onions, rice, and ginger.
Like all Yoshinoya HD group companies, Yoshinoya prioritizes quality in developing new products and does not succumb to a policy of sacrificing quality to cut costs and achieve a lower sales price. The company avoids such a policy because it believes that its adoption would produce a substandard dish. Put another way, the company’s priority is excellent quality while keeping meals tasty and inexpensive, rather than focusing on where ingredients are produced. At the same time, it will actually upgrade mainstay products when costs go down, sparing no effort to improve flavor and quality.
1 Nikkei Research brand perception survey: A survey that evaluated and analyzed in multiple ways the brand power of major Japanese companies from the viewpoints of the consumer and business person. Each company was given five category scores, which were totaled to produce an overall rating score. Consumers rated companies on originality, premium (how much more they are prepared to pay for the company’s product or service than those of other companies), recommendation (likelihood of recommending the company’s products and services to others), their own need for the product/service, and attachment to the product/service. Business people rated the company for originality, premium, recommendation, usefulness (how useful the company’s product/service is to their business), and attractiveness as business (whether or not they would like to work for the company).
2 Short plate: The best beef for gyudon has a 60:40 red meat to fat ratio. This part of beef used to be sold as a cheap cut in the US, but after Yoshinoya started buying it, it was cut into the size specified by the company and named “Japan spec.”
3 Grain-fed beef: Grass-fed beef is reared on pasture, while grain-fed beef is fed grain after being reared on pasture. Grass-fed beef has a large proportion of red meat and tastes more “meaty.” Meanwhile, the longer the period of grain feeding, the higher the fat content and richer the flavor.
4 US beef: Yoshinoya considered using Australian beef one or two years before the BSE outbreak to avoid the risk of depending only on the US as a supplier, but abandoned the idea for various reasons. The company concluded that gyudon made from grass-fed Australian beef could not bring out the signature taste of Yoshinoya beef bowl, and there was not enough grain-fed Australian beef to satisfy its needs. See the “Profitability snapshot” section for the company’s thoughts on the cost of Australian beef.
US beef cuts
Source: Shared Research based on US Meat Export Federation data
Challenge: Overdependence on gyudon Yoshinoya’s strength is also its main weakness. The business is highly dependent on gyudon, and therefore the earnings structure is easily affected by beef prices.
28/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Basic strategy Expand customer base The company plans to continue revamping restaurants and menu items to expand its customer base and reduce the impact of beef prices on earnings. Given that men represent a larger share of customers than at its competitors, the company expects a proportional positive effect from measures to expand its customer base.
Regarding restaurants, Yoshinoya traditionally adopted a store layout with a U-shaped counter in the center of the floor to achieve maximum efficiency of in-store operations. However, in order to expand its customer base with women, families, and customers who order to go, the company has been introducing self-service-format restaurants, which it thinks also lead to operational efficiency and easier working conditions. It increased the number of stores adopting this new style of service (Cooking and Comfort) to 134 outlets by the end of FY02/21.
Regarding menus, the company plans to build on efforts to diversify menu items by stepping up its health-focused approach. Yoshinoya offers Salacia Gyudon (a beef bowl containing salacinol that suppresses elevation of blood glucose levels) at its restaurants. It also sells frozen Pep Gyu (a gyudon topping containing peptides that inhibit triglycerides) and GABA Gyu (containing GABA, which regulates the autonomic nervous system and lowers blood pressure) by mail order. The company also plans to attract more families by running a “half price for children” campaign.
Strengthening services Another focus is strengthening the quality of its services. Traditionally, as expressed in the catchphrase “Tasty, cheap, and fast,” Yoshinoya’s priority was providing a quick service. However, the company believes that in today’s environment, there is less pressure from customers to be quick. Busy people do not eat in restaurants. Assuming that customers who go to restaurants are seeking something more than satisfying their hunger, the company is training and deploying employees to provide a thoughtful and energetic service, prioritizing customer comfort and ambience. It also provides detailed guidance regarding its own unique customer service methods, which include greeting customers more intimately with “konnichiwa” (roughly, “hello”), rather than “irasshaimase” (a stiffer, more formal traditional greeting), when they enter the store. It also plans to apportion savings from the use of technology to improving customer service.
Appropriate pricing In Yoshinoya’s case, the central topic of interest is always whether the company will raise the price of its mainstay product, standard-size gyudon. While the price of the standard-size beef bowl has not changed in recent years, the company has managed to increase the overall spending by raising prices of other menu items and introducing new items. The company’s policy on pricing is to make a comprehensive decision based on a market-oriented approach, while also taking factors such as ingredient prices into consideration. It plans to increase prices as appropriate for products with more added value and new products. Shared Research believes that the company’s urgent product development efforts are leading to increase in average customer spending. These efforts include expansion in available sizes for gyudon, the company’s signature product (development of an extra-large size for core fans); development of higher-priced premium menu items targeting customers desiring higher-end choices; and collaboration with other companies aimed at cultivating products that appeal to health-conscious customers. Shared Research also concludes that these efforts were a major factor supporting segment profit in FY02/21 as the restaurant industry incurred tremendous impact from the COVID-19 pandemic.
Hanamaru segment
Hanamaru FY02/17 FY02/18 FY02/19 FY02/20 FY02/21 (JPYmn) Cons. Cons. Cons. Cons. Cons. Sales 23,880 27,057 29,005 30,893 20,361 YoY 11.0% 13.3% 7.2% 6.5% -34.1% Segment profit 937 1,274 624 1,252 -3,160 YoY -19.1% 36.0% -51.0% 100.6% - Segment profit margin 3.9% 4.7% 2.2% 4.1% - Source: Shared Research based on company data
29/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Business model In the Hanamaru segment, FY02/21 sales were down 34.1% YoY to JPY20.4bn while the segment loss amounted to JPY3.2bn (versus segment profit of JPY1.3bn in FY02/20). The Hanamaru business operated 490 restaurants in Japan as of end-FY02/21, breaking down into 475 Hanamaru Udon (self-service udon noodle restaurants) and 15 Senkichi (subsidiary business specializing in curry udon) restaurants. There are Hanamaru Udon restaurants in all prefectures except Saga and Miyazaki. Some restaurants have names other than Hanamaru Udon, because they are located in shopping centers and named according to the shopping center’s preference.
According to the Hanamaru website, sales per restaurant stood at JPY68.8mn in FY02/20. Sales figures disclosed on the website include both segment sales and those of the franchises.
Mainly directly operated restaurants Of the 490 restaurants accounted for in the segment as of end-FY02/21, 402 were directly operated restaurants and 88 were franchises (18.0% of total). Like Yoshinoya, the number of franchises is in a downtrend because the company is not actively seeking franchisees. The company receives a royalty and other payments and sells ingredients to franchisees, but does not disclose these franchise-related sales. Starting in FY02/16, the company had been opening about 50 stores annually but changed this target to about 30 stores per year in FY02/20 with the goal of achieving a stable balance between growth and management capabilities. In FY02/21, the COVID-19 pandemic limited store openings to 18 locations (with 50 closures).
Hanamaru franchise agreement Hanamaru restaurant
Hanamaru Contract Five years period Renewal Sign a new contract at renewal by mutual agreement within three months before termination Affiliation fee JPY3.5mn (JPY2.5mn for six+ stores) Renewal fee First renewal: no charge All other renewals: JPY500,000 Paperwork charge of JPY50,000 Store opening JPY1.5mn charge Guarantee JPY2.5mn deposit Royalty Monthly JPY180,000 per store payment Source: Shared Research based on company data Advertising Monthly fee equivalent to 0.5% of total and sales sales promotion charges Administrative JPY21,000/month charges Source: Shared Research based on company data
Core products The basic ordering style is adding toppings such as tempura to udon noodles. Noodles can be ordered in small, medium, and large portions. The mainstay product is Kake (plain noodles in broth), accounting for 20% of total sales in the summer and 30% in the winter. Prices are JPY220 for small, JPY320 for medium, and JPY420 for large (not including tax; prices revised upward on May 26, 2020). Menu items in the next price range of around JPY300–600 (depending on the amount of noodles) include cold udon noodles with broth with or without a soft-boiled egg, noodles with hot dipping sauce, and cold plain noodles. Noodles that come with toppings such as pork or beef are generally priced in the range of JPY500–800.
Customer base Hanamaru does not have a core customer base. Customers range from office workers to young families (shopping center locations). The male to female ratio is close to 50:50.
30/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Average customer spend The average customer spend at Hanamaru restaurants is trending up, but many customers only order a small portion of plain noodles in soup (the lowest priced item on the main menu), which keeps overall spending down. On May 26, 2020, the company revised the prices associated with some of its products, including its mainstay Kake product.
Store development About 60% of Hanamaru restaurants are in shopping centers while the other roughly 40% are roadside restaurants. The latter category is nearly evenly divided between restaurants in suburban locations and mixed-use buildings. Restaurants in mixed-use buildings mostly occupy basement and second floor properties, which are relatively low in rent.
Five noodle factories in Japan Hanamaru has noodle factories in Hokkaido, Chiba, Shizuoka, Takamatsu, and Okinawa.
Strengths and challenges Hanamaru is working on health-conscious menu development and offers Salad Udon, which contains brightly colored vegetables.
The company raised price settings in March 2019 and again in May 2020 to address the issue of average customer spend, which had remained low because of the price of small portion plain noodles in soup, showcased for its reasonable pricing at the time the Hanamaru brand was launched. The company continues to be faced with other issues, however, such as the difficulty of expanding store network in central Tokyo due to limitations (the kitchens cannot be made any smaller under the current format, and sales are not high enough to justify higher rent).
Basic strategy Continue aggressive expansion plan The domestic market for soba and udon noodle restaurants exceeds JPY1tn, and yet the top two companies—Hanamaru and industry leader Marugame Seimen (operated by Toridoll Holdings [TSE1: 3397])—combined account for only a 10% share. The company sees considerable scope for expansion, because many noodle restaurants are family businesses that could close due to causes such as succession-related issues. Hanamaru will continue to open new outlets mainly in suburban areas (including those in shopping centers) targeting a total of 1,000.
Kyotaru segment (through FY02/21)
Kyotaru FY02/17 FY02/18 FY02/19 FY02/20 FY02/21 (JPYmn) Cons. Cons. Cons. Cons. Cons. Sales 25,681 26,695 27,323 28,544 18,898 YoY 2.8% 3.9% 2.4% 4.5% -33.8% Segment profit 72 316 162 457 -2,213 YoY -75.1% 338.9% -48.7% 182.1% - Segment profit margin 0.3% 1.2% 0.6% 1.6% - Source: Shared Research based on company data
Business model In the Kyotaru segment, FY02/21 sales finished at JPY18.9bn, down 33.8%% YoY, and the segment loss amounted to JPY2.2bn (versus segment profit of JPY457mn in FY02/20). The Kyotaru segment comprises take-out sushi, and eat-in (conveyer belt) sushi restaurants, with sales split about even, according to the company. All stores/restaurants are in Tokyo and its three neighboring prefectures, with the majority in Tokyo. Annual sales per store/restaurant (simple segment average) were JPY61mn in FY02/21. The company does not disclose annual sales of individual brands. The company had previously focused on opening Kaisen Misakiko conveyor belt sushi restaurants.
31/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Kyotaru/Sushi Misakiko (take-out sushi) store Kaisen Misakiko conveyer belt sushi restaurant
Source: Shared Research based on company data Source: Shared Research based on company data
Take-out sushi In FY02/21, the company had 158 take-out sushi stores operating under two brands: Kyotaru (known for the Kansai-style pressed sushi), and Sushi Misakiko (selling the hand-shaped, Edomae-style sushi). All stores were located near railway stations or in department stores and supermarkets.
Sushi restaurants The company operated a total of 130 eat-in sushi restaurants. Main brands are urban conveyor belt sushi restaurant Kaisen Misakiko (86 restaurants at end-FY02/21) and conventional sushi restaurant Sushi Misakimaru (21). Due to their city center locations, these restaurants enjoy a diverse customer base (the lunch trade, homemakers who eat two or three plates of sushi as a snack, office workers, etc.). Restaurants with touch panel ordering attract many foreigners as well. The male to female ratio is 55:45.
Kaisen Misakiko has had restaurants in city center locations since around the year 2000, and has built up the experience and expertise of operating in small spaces. Although it is a conveyor belt sushi restaurant, its concept is to offer a menu with a wide range of prices to a broad customer base (versus major roadside conveyor belt chains that target families and have uniform prices).
Transfer of shares held in Kyotaru Co., Ltd. Selection and concentration of group businesses In April 2021, the company transferred all shares it held in wholly owned subsidiary Kyotaru Co., Ltd., which was essentially responsible for managing the Kyotaru segment, to Sushiro Global Holdings Ltd. (TSE1:3563). The share transfer date was April 1, 2021.
As business environments surrounding the restaurant industry change due to the COVID-19 pandemic, Yoshinoya HD is striving to optimize its business portfolio. In accordance with this aim, the company reached the decision to transfer Kyotaru after thoroughly considering the strategic allocation of resources to growth areas. Sushi-related business in Japan, particularly business associated with conveyor belt sushi restaurants, is characterized by a fierce race to automate production processes with large-scale equipment. In view of these circumstances, the company also felt that its investment in Kyotaru might be insufficient when compared to its investment in Yoshinoya and Hanamaru. Furthermore, the parties involved in the transfer made the determination that Kyotaru would benefit from joining a major conveyor belt sushi chain through synergistic effects such as the streamlining of procurement channels and enhanced product appeal.
The corresponding share transfer date was April 1, 2021, which means that Kyotaru was under the company’s umbrella for one month of FY02/22 (March 2021). However, results from the Kyotaru segment during this period will be excluded from consolidated results and the segment will be eliminated starting in FY02/22.
32/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Overseas segment
Overseas FY02/17 FY02/18 FY02/19 FY02/20 FY02/21 (JPYmn) Cons. Cons. Cons. Cons. Cons. Sales 16,606 19,734 21,162 21,945 19,534 YoY -5.2% 18.8% 7.2% 3.7% -11.0% Segment profit 913 1,243 806 972 575 YoY 63.9% 36.1% -35.2% 20.6% -40.8% Segment profit margin 5.5% 6.3% 3.8% 4.4% 2.9% Source: Shared Research based on company data
Business model In the Overseas segment, FY02/21 sales fell 11.0% YoY to JPY19.5bn while segment profit was down 40.8% YoY to JPY575mn. The overseas business consists of Yoshinoya and Hanamaru restaurants.
Overseas restaurants Store count (year-end) Format 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 US Direct/FC 97 95 96 102 105 102 103 101 101 103 106 Taiwan Direct 55 53 55 51 48 52 58 64 68 80 73 Shanghai Direct 18 21 24 22 14 9 8 9 10 14 16 Qingdao Direct 3 8 10 16 19 23 21 Shenzhen Direct 11 12 15 18 18 18 28 37 50 50 45 Fujian Direct 4 3 3 5 5 11 12 15 17 12 11 Wuhan Direct 1 4 9 17 22 28 26 Sichuan Direct 1 4 8 9 Chongqing Direct 4 6 4 Jiangxi Direct 1 5 8 Henan Direct 2 5 7 Beijing FC 134 166 202 226 207 211 214 219 236 258 262 Liaoning FC 41 44 56 62 67 69 73 81 89 92 90 Yoshinoya Heilongjiang and Jilin FC 1 8 11 12 12 10 18 24 27 26 Inner Mongolia FC 6 6 8 9 10 10 12 12 14 13 14 Hong Kong FC 47 52 57 60 60 56 58 61 62 61 51 Qinghai FC 1 2 2 2 Anhui FC 1 10 Singapore Direct 18 18 18 21 19 16 12 17 16 13 11 Philippines FC 6 5 7 6 7 7 12 11 12 9 3 Indonesia FC 2 11 19 24 35 48 57 73 94 115 127 Thailand FC 3 9 18 20 16 15 15 20 19 19 Cambodia FC 1 4 2 3 3 2 2 2 Malaysia Direct 4 9 12 10 8 3 VietnamFC 1 Total 439 490 577 636 635 655 703 783 879 954 947 Shanghai Direct 11 11 12 16 23 24 20 13 Qingdao Direct 1 3 3 3 0 Fujian Direct 1 1 4 3 1 Wuhan Direct 1 3 3 2 2 2 1 Hanamaru Shenzhen Direct 2 3 0 Malaysia Direct 4 9 9 7 8 3 Indonesia Direct 2 1 0 Total 0 0 0 11 12 19 30 38 44 40 18 Source: Shared Research based on company data
Yoshinoya business Yoshinoya has a long history of overseas restaurant operation—40 years in the US, 30 years in Taiwan, and 25 years in China. As of end-FY02/21, the company had 947 restaurants in 11 countries. Of these, 106 outlets were in the US (of which 26 were franchises) and 462 franchises and 140 directly operated restaurants were located in China, where the management structure varies from region to region. The ASEAN region had a total of 166 restaurants: three directly operated restaurants in Malaysia and 11 in Singapore, and the restaurants in other countries operated as franchises.
33/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
An overseas restaurant (US) An overseas restaurant (Shanghai)
Source: Shared Research based on company data Source: Shared Research based on company data
Yoshinoya’s management policy for overseas restaurants (including franchises) used to differ depending on the region or the business partner1, but going forward, the company will follow a clearly defined policy: existing franchises will continue to operate as franchises and other restaurants will be directly operated if they are in countries where business growth to about 100 restaurants can be anticipated, or if not, operated via joint ventures or simple franchises (the company will prioritize brand penetration, while also taking its own resources and partners’ strengths and wishes into consideration).
Malaysia is an exception to this rule because the company is running its own restaurants to advance its Halal compliance strategy. It also converted franchise restaurants in Singapore to directly operated restaurants in 2017, because it could not gain sufficient reinvestment from franchisees. In China, management structures differ by province, but the company has established a management company in Shanghai to oversee overall operations. In February 2021, Yoshinoya International Philippines Inc., a consolidated subsidiary of the company, concluded a joint venture agreement with Jollibee Foods Corporation, the largest restaurant operator in the Philippines, with the goal of expanding the Yoshinoya brand in that nation.
Franchise agreements vary, but the company generally charges similar fees as in Japan (4% of sales in the form of royalty payment + advertising charges). Yoshinoya does not disclose a breakdown of overseas sales (overseas chains2, directly operated restaurants, or franchise-related revenue3).
1 Yoshinoya previously granted franchises on request from overseas applicants (excluding the US). The company expanded its business to the US initially to source ingredients, not to run restaurants. This passive stance on the overseas business was due to having limited management resources to spare, because the domestic business was growing quickly at the time.
2 Restaurants in North China are run by franchisee Hop Hing Group Holdings Ltd (HKG: 0047). According to Hop Hing Group materials, the Yoshinoya business posted sales of CNY1.4bn (approximately JPY22.4bn) in 2020.
3 Yoshinoya HD non-consolidated earnings include franchise revenue (JPY2.3bn in FY02/21), but this refers to Yoshinoya brand usage fees from domestic and overseas subsidiaries, not the total consolidated franchise revenue from other companies.
Hanamaru business The company opened its first overseas Hanamaru restaurant in 2013 and now has directly operated restaurants in China, Malaysia, and Indonesia.
Strengths and challenges Being a well-established brand in Japan is the company’s greatest selling point abroad. Another strength is its 40-year history of doing business overseas*, establishing relationships with leading local partners and fostering experienced local employees. Yoshinoya HD is steadily devolving authority to local management and preparing to accelerate the opening of more restaurants. Meanwhile, the menus at its overseas restaurants vary widely from region to region, but, as in Japan, gyudon beef bowls account for 50% of sales. The company says leveraging its strength in regions with low brand awareness is difficult, and customer footfall and overall performance suffer as a result.
* Yoshinoya HD ranks among the top Japanese restaurant operators in number of overseas restaurants. Among listed companies, Toridoll Holdings Corporation (TSE1:3397; mainstay brand: Marugame Seimen) operates in Japan and overseas. It expanded outside Japan after setting up a US subsidiary
34/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
in 2009. At end-March 2020, overseas restaurants accounted for 628 of the group total of 1,781. Saizeriya Co., Ltd. (TSE1:7581) opened its first overseas outlet in 2003. It had 428 outlets overseas in FY08/20.
Basic strategy Aggressive expansion Although the company has a long history of overseas restaurants, its stance on the business was somewhat passive in the past. However, its policy changed from around 2010 to one of aggressive expansion. The food-service market is expected to continue expanding in the ASEAN and Chinese markets amid the increase in purchasing power fueled by population and economic growth and by changing lifestyles. Yoshinoya HD plans to invest resources proactively in these markets. In the US, its restaurant openings have hit a ceiling in California (majority of US outlets are near Los Angeles), but the company plans to expand into other states. According to the company, the number of Yoshinoya restaurants overseas is due to exceed the number in Japan (around 1,200) in three to five years.
Commitment to localization Since Yasutaka Kawamura took over as president of Yoshinoya HD, the company has consistently advanced localization. Establishing management companies to oversee operations in China and Malaysia is part of this strategy. The company previously provided guidance to overseas businesses from Japan. However, seeing that local resources have gained sufficient experience, the company has now devolved all functions from investment decisions to franchisee training to the local companies, with the exception of research into new business areas. The new policy is “You can do whatever you like, provided you don’t change the signage and recipes.”
Other
In the Other segment, the company posted FY02/21 sales of JPY7.2bn (+51.5% YoY) and a segment loss of JPY528mn (versus segment profit of JPY138mn in FY02/20). The company does not disclose a sales breakdown by business category or brand. Green’s Planet Co., Ltd., a snack manufacturer, was split off in FY02/18 via an MBO. Although stores’ tenancy agreements are still in place, the company plans to make changes in stages.
The other business in this segment is Setaga-ya, which operates a number of brands of restaurants serving authentic cuisine made by highly trained chefs. As of end-February 2021, Setaga-ya had 26 restaurants (directly operated and franchise), including four overseas. In addition, equity-method affiliate FRJ runs three Niku-ankake Chahan Chao restaurants. The company also made Withlink Holdings, which operates 76 ramen restaurants (mainly franchises), a consolidated subsidiary in FY02/20. Yoshinoya HD will continue to invest and form alliances in business categories with growth potential.
Setaga-ya restaurant Bariuma restaurant (operated by Withlink Holdings)
Source: Shared Research based on company data and website information.
Group strategy
Diversification and business model reform Broad strategies are as follows:
▷ Put into action measures to maintain and increase the scale and earnings of the Yoshinoya segment
35/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
▷ Promote growth of other segments among other initiatives to reduce the impact of the Yoshinoya business (and ultimately beef prices) on overall earnings ▷ Reform and innovate business models beyond the existing restaurant business, which is limited in growth potential
Concrete examples can be found in menu diversification (offering pork, chicken, and fish dishes as well as beef), and the acceleration of Overseas segment growth (delegating authority overseas and advancing localization). Additionally, “redefining the restaurant business” was a major theme outlined in the company’s long-term vision. The company has implemented a slew of initiatives toward this goal, such as the use of technology with a view to not only saving labor but obtaining a new revenue source (as a service provider)1. It is also working to develop products and services that respond to consumers’ health consciousness among other latest trends (see “Medium-term plan” and “FY02/19 company forecast” sections for details).
Making the most of people: continued focus on directly operated restaurants in the domestic businesses The company has a tradition of valuing people (all stakeholders) as expressed in its management principle “for the people.” Yoshinoya HD is confident that it offers equal employment opportunities to all and actively offers education programs to employees, thereby making a positive difference to society. Under the current medium-term plan, the company positions personnel expenses as an investment to improve the quality of customer service for added value, rather than as simple cost. The company believes that, in the event it decides to diversify into the service sector, its human resources around the country would prove to be a strong asset.
As a company that values its people, Yoshinoya HD says it does not take the easy option of raising profit margins by converting directly operated restaurants into franchises, splitting off restaurants and employees.
Acquiring growth businesses The company plans to actively seek acquisition opportunities. The strategy is to target companies with a big growth potential (e.g., from ten stores to 100), and bring these businesses to the organization along with the entrepreneurs who launched them. It does not plan on acquiring existing large businesses that will make a quick earnings impact or rescuing businesses in need of a turnaround, as it has done in the past. Recent examples are investments in Setaga-ya (ramen business)2, in which the company took a 66.5% stake in June 2016; consolidated subsidiary FRJ, which runs the Niku-ankake Chahan Chao chain (fried rice restaurants); and Withlink (ramen business; became an equity-method affiliate in Q2 FY02/19 and a consolidated subsidiary in FY02/20).
Segment restructuring After transferring all shares held in Arcmeal in FY02/20, the company transferred all of its shares in Kyotaru in April 20213. Hanamaru continues to grow, has a high profit margin, and benefits from various synergies with Yoshinoya in terms of restaurant format and operations. At the same time, the company believes that the product offerings of Hanamaru and Yoshinoya are complementary, because they are totally different categories.
1 For example, Yoshinoya HD thinks employee scheduling software and automated dishwashing lines that utilize voice recognition systems and AI could be a new revenue source, because of potential demand among other food-service and retail companies. In the past, the company has developed—jointly with manufacturers—rice dispensing robots and specialized refrigerators for eggs, but did not turn a profit on these ideas.
2 The company regards ramen restaurants as an effective category for overseas expansion.
3 After withdrawing from the Dunkin Donuts business in 1998, the company has frequently reviewed its business portfolio by selling or liquidating smaller acquisitions such as ramen and yakiniku (grilled meat) chains.
36/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Group structure
The Yoshinoya HD group comprises the holding company, 46 consolidated subsidiaries, and five equity-method affiliates (as of FY02/21 and including Kyotaru Co., Ltd.). The main domestic segments are Yoshinoya and Hanamaru. The company has multiple businesses in different regions and locations overseas, and they collectively fall under the Overseas segment.
The Yoshinoya segment is made up of Yoshinoya Co., Ltd. and five regional companies that oversee restaurant operations in each region (Okinawa Yoshinoya, Nishinihon Yoshinoya, Kansai Yoshinoya, Nakanihon Yoshinoya, and Kitanihon Yoshinoya; all consolidated subsidiaries). The regional companies were established initially to accommodate the different business formats, some companies operating as a joint venture and others running franchises, and to enable swift operational and management decisions (including personnel matters) factoring in region-specific elements.
In the Overseas segment, Yoshinoya America, Inc. (wholly owned) oversees the US business, Taiwan Yoshinoya (around 85% owned) oversees the Taiwanese business, and Yoshinoya China Holdings (wholly owned) oversees the Chinese business, which consists of business corporations in each province. Asia Yoshinoya International Sdn. Bhd., also wholly owned, oversees Yoshinoya’s business in the ASEAN region.
In other segments, Hanamaru Inc. and Kyotaru Co., Ltd., run their respective businesses.
Yoshinoya HD is centralizing management of its domestic businesses. The holding company oversees the whole group, as well as performing group infrastructure functions such as general administration, purchase of most ingredients, raw material development, R&D, and system development and operation.
Yoshinoya Holdings group structure Companies in Japan
▷ Yoshinoya segment: Yoshinoya Co., Ltd. and five other consolidated subsidiaries ▷ Hanamaru segment: Hanamaru, Inc. and one other consolidated subsidiary ▷ Kyotaru segment: Kyotaru Co., Ltd. and two other consolidated subsidiaries ▷ Other segment: 14 consolidated subsidiaries, nine unconsolidated subsidiaries, one equity-method affiliate, and two non-equity-method affiliates
Overseas companies
▷ Yoshinoya America, Inc. ▷ Yoshinoya China Holdings Co., Ltd., Yoshinoya F&B Management (Shanghai) Co., Ltd., ten other consolidated subsidiaries, and three equity-method affiliates ▷ Asia Yoshinoya International Sdn. Bhd., Yoshinoya Hanamaru Malaysia Sdn. Bhd., two consolidated subsidiaries, and one equity-method affiliate ▷ Taiwan Yoshinoya Co., Ltd. ▷ One other consolidated subsidiary overseas
Notes: The company sold all of its shareholdings in subsidiary Arcmeal Co., Ltd. in February 2020. In April 2021, the company sold all of its shareholdings in consolidated subsidiary Kyotaru Co., Ltd.
37/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Profitability snapshot Sales Yoshinoya HD does not disclose a sales breakdown of directly operated restaurants/stores and franchise-related revenue, but we think franchise-related revenue is limited, because there are few franchises in Japan (fewer than 200 in total for Yoshinoya and Hanamaru) and overseas sales are still on a small scale1.
Domestic sales are more or less determined by growth of comparable store sales, because the number of new restaurant openings is limited in Japan (excluding Hanamaru and Kaisen Misakiko). For the overseas business, it is difficult to estimate growth, because the company does not disclose earnings breakdowns (the same applies to Kaisen Misakiko in Japan, which the company describes as a growing business). The company’s definition of an existing restaurant is one opened two financial years ago or earlier. Using Yoshinoya as an example, restaurants in their first year are “new restaurants,” those in their second year are “new existing restaurants,” and those in their third year or older are existing restaurants. Only existing restaurants are used to calculate comparable store sales2.
1 Royalty revenues recorded in Yoshinoya HD’s non-consolidated sales are usage fees for the Yoshinoya brand charged to domestic and overseas subsidiaries.
2 Restaurants that were remodeled in the current financial year are excluded from the scope of “existing restaurants” for the Arcmeal and Kyotaru segments but are included in the scope for the Yoshinoya and Hanamaru segments.
Cost of sales The company’s cost ratio is approximately 35–38%. Although undisclosed, we understand that the figures vary between brands, being low for Hanamaru and high for Yoshinoya. The overall cost ratio remains high versus rival chains, because beef bowls make up a large share of sales and the company has not made big revisions to their unit prices. CoS includes labor costs and depreciation of food processing facilities, but considering processing-related expenses as part of ingredient costs, we can say that almost 100% of CoS comes from ingredients.
Yoshinoya HD has a history of being strongly impacted by beef market prices. Its main ingredient is frozen US short plate1. Specific purchasing routes or pricing methods are not disclosed, because this information could affect market prices, but it appears the company holds two to five months’ inventory depending on market conditions. According to the company, it can estimate ingredient costs for up to a year ahead2.
As such, while the cost ratio varies from year to year, the difference between forecast and actual cost ratio is relatively moderate compared to actual market price fluctuations. Meanwhile, sales and SG&A expense estimates are derived based on the ingredient cost assumptions, and the disparity between these projections and actual figures could lead to the differences in the company’s earnings forecasts and performance (see the “Past initial forecasts versus results” section for details)3.
1 At present, sourcing ingredients from other countries would not lead to cost reduction. The price of Australian beef is similar to that of US beef, and buying Australian beef can actually increase costs, because it is not usually sold in small cuts like US beef, which means the company would have to find other uses for cuts that it does not use.
2 For this reason, the domestic trade price released by the Agriculture & Livestock Industry Corporation and the cost ratio disclosed by the company generally follow the same trend, but the domestic trade price does not necessarily equal the company’s purchase price (see below). Overseas restaurants purchase at spot prices, which means they are directly affected by beef market prices.
3 The company uses the weighted average cost method or final purchase cost method in accounting for inventory assets. If prices have fallen sharply between the beginning and end of a financial year, a valuation loss (write-down of book value) occurs. The company recorded write-downs of book value of JPY547mn in FY02/16 and JPY542mn in FY02/17.
38/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Domestic wholesale prices and Yoshinoya HD’s cost ratio
Short plate wholesale price Cost ratio (RHS) (JPY/kg)
1,200 39.0% 38.2%
1,000 37.5% 38.0% 37.3% 37.2% 784 763 37.0% 800 724 922 673 667 584 36.3% 36.0% 559 559 600 36.0% 35.8% 607 584 35.0% 35.3% 35.1% 35.1% 400 34.0% 34.1% 200 33.0%
0 32.0% FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020
Source: Shared Research based on company and Agriculture & Livestock Industry Corporation data
SG&A expenses The SG&A expense ratio remains at a high level of 60–63%. Although most items are fixed expenses in nature, the company is continuing to open new restaurants and basic salaries are trending up, resulting in higher expenses.
In FY02/20, personnel expenses accounted for 45.5% of SG&A expenses, followed by restaurant costs such as rents and utilities (20.9%). These two cost items amounted to 44% of sales. Other main expenses are depreciation and amortization (depreciation and goodwill amortization) and advertising and promotions.
Looking at expense trends over time, hiring and training costs are increasing amid the labor shortage, including the cost of hiring part-time workers and efforts to improve retention rates. Personnel expenses as a share of sales, which trended around 28% between FY02/14 and FY02/20, sometimes rise to almost 30%. Depreciation has also increased in the past few years due to investments, although its share of sales has not changed much.
As a result, the company’s OPM has been a weak 1–2% in the past few years.
SG&A expenses
SG&A expenses FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Personnel expenses 48,345 47,543 47,345 48,332 49,964 51,004 53,652 56,929 60,035 61,851 Rents and utilities 24,507 24,020 24,739 25,579 26,164 26,157 26,525 27,972 29,255 28,439 Advertising expenses 3,099 3,604 3,159 3,460 3,081 3,442 4,247 4,609 4,292 5,235 Depreciation and goodwill amortization 5,858 5,659 5,819 5,501 5,252 5,697 6,244 6,584 7,044 8,024 Other 24,218 23,730 22,674 23,707 24,515 26,917 27,703 28,799 28,851 32,474 Total 106,027 104,556 103,736 106,579 108,976 113,217 118,371 124,893 129,477 136,023 % of sales Personnel expenses 28.2% 28.7% 28.8% 27.9% 27.8% 27.5% 28.4% 28.7% 29.7% 28.6% Rents and utilities 14.3% 14.5% 15.0% 14.7% 14.5% 14.1% 14.1% 14.1% 14.5% 13.2% Advertising expenses 1.8% 2.2% 1.9% 2.0% 1.7% 1.9% 2.3% 2.3% 2.1% 2.4% Depreciation and goodwill amortization3.4%3.4%3.5%3.2%2.9%3.1%3.3% 3.3% 3.5% 3.7% Other 14.1% 14.3% 13.8% 13.7% 13.6% 14.5% 14.7% 14.5% 14.3% 15.0% Total 61.9% 63.0% 63.0% 61.5% 60.5% 61.0% 62.8% 62.9% 64.0% 62.9% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.
39/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Capital expenditures and depreciation
(JPYmn) FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 FY02/21 New 2,794 3,407 3,364 3,672 4,664 4,932 5,525 4,672 4,557 2,799 Renovation 1,718 4,038 2,099 3,556 6,054 3,766 3,415 3,431 4,802 1,144 Other 1,303 647 565 1,225 2,161 2,675 1,809 5,146 5,254 1,292 Depreciation 5,829 5,834 5,399 5,088 5,433 5,915 6,286 6,700 7,715 7,191 Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods. Note: Includes figures from FY02/10 onward for which the company discloses a breakdown of capital expenditures
Extraordinary gains/losses The company records impairment losses (including retirement losses) regularly. At just over 1% of total assets, they do not stand out among companies that operate multiple stores, but have a large impact on net income (including tax effects) because of the company’s relatively low level of recurring profit.
Seasonality of financial results (difference between 1H and 2H) The company’s financial results display a slight shift in balance between 1H and 2H. In these instances, sales are generally higher in 2H whereas profits are higher in 1H. The main reasons are as follows: Sales peak in Q4 (December–February) at Kyotaru, as well as the Overseas segment whose financial year ends two months before the domestic segments (January–March sales are consolidated in Yoshinoya HD’s Q1 [March–May] earnings). Meanwhile, profits tend to slump significantly in Q3 (September– November) and Q4 at Hanamaru, and in Q4 in the Overseas segment. Net income is at a very low level in 2H, because impairment losses associated with store closings and other factors are recorded at the end of the financial year. (Depending on market prices, there is also a possibility of booking inventory valuation losses.) The company also records shareholder incentive costs in Q1 and Q3 totaling around JPY700mn per year.
40/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Strengths and weaknesses
Strengths
◤ Brand power: Core company Yoshinoya created gyudon. 120 years since the opening of the first Yoshinoya restaurant, the brand has become popularized by its nickname “Yoshigyu” and slogan “Tasty, cheap, and fast,” and has grown to be a household name in Japan. Widely known stories include the brand’s commitment to quality during the BSE outbreak and subsequent US beef ban, when the company suspended sales of gyudon after it determined the distinctive Yoshinoya flavor could only be created with US beef. The menu has since diversified, but with a core fan following, 50% of orders are still for gyudon.
◤ Wealth of knowledge and experience in overseas restaurant operation: The company has a 40-year history of doing business overseas and leads the field in overseas store count with a total of over 900 directly operated and franchise restaurants abroad. (The runner up is Toridoll, which operates Marugame Seimen.) The challenge for food-service companies expanding overseas is in devising the same business structure (from purchase of ingredients to hiring and training of personnel and opening of new restaurants) as in Japan in a foreign country with different economic conditions and consumer attributes. The company has accumulated expertise through years of experience, and has also nurtured local talent, with employees working since the early days in local management ranks. Amid a saturating domestic market, Japanese restaurant chain operators share a common challenge of ensuring growth by opening restaurants abroad, particularly in China and the ASEAN region, and Yoshinoya HD is at an advantage in terms of experience and personnel.
◤ Enterprising culture that drives new initiatives: The company has always been a step ahead of the times. It created an online network of all its restaurants in the 1970s, introduced drive-thru restaurants before McDonald’s, started opening 24 hours before convenience stores, and developed kitchen equipment with manufacturers. It is currently undertaking business model reforms under the slogan “Redefining the restaurant business,” and is actively developing new software and hardware technologies to solve labor shortage and other problems. If successful, the company is considering making new technologies into money-making businesses through patent usage revenue. Shared Research considers this enterprising culture to be a major strength for the company as it develops strategies to succeed in the maturing restaurant business.
Weaknesses
◤ Selling points of mainstay products also causing constraints: The company faces limitations because of its tradition and the nature of its core products. For example, gyudon that still accounts for over half of all orders at Yoshinoya restaurants works against the progress of menu diversification. The company is also reluctant to change the price of gyudon, because it is such a well-known product. This has a number of negative consequences, including earnings deterioration. When Yoshinoya raised the price of gyudon in the past, customer traffic declined sharply. This experience has made the company cautious about changing its pricing. The existence of the traditional sauce also constrains ingredient purchases. A similar pattern can be found in Hanamaru’s core product, kake udon noodles (small portion), which was originally priced at JPY130 as part of an ambitious launch strategy. Although the company succeeded in making it an iconic dish, today it has become an obstacle to raising average customer spend.
◤ Structural risk in procuring main ingredient beef: Ingredients account for a significant share of the company’s costs. The beef used in Yoshinoya’s gyudon is a cut called short plate. The company cannot use any other cut, nor is it realistic to source it from Australia, which does not sell beef in such small units and would produce considerable wastage. Thus, Yoshinoya’s costs are determined by supply and demand of US short plate. In addition, market prices of short plate remain high because of growing demand in China and other Asian countries. Yoshinoya HD’s OPM (1.9%) is one of the weakest among the top 20 listed restaurant companies (simple average: 4.8%) in Japan because of the cost of beef, which the company must purchase in large quantities.
◤ Saturated market and insufficient synergies among brands: With the exception of Hanamaru and Kaisen Misakiko, the company’s portfolio consists of businesses that are close to the saturation point from competition with prepared meal operators and aggressive restaurant openings by rivals. Although the company is branching out into ramen, it is still small in scale, and lacks the power to drive earnings in Japan. The company says that Yoshinoya, Hanamaru, and Kaisen Misakiko have the advantage of common expertise in operating small restaurants, but other businesses are not benefiting from economies of
41/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
scale because of differences in format (counter service versus table service), ingredients (meat, fish, flour), and even cuts and quantities of beef, despite beef being an ingredient they have in common.
42/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Market and value chain Restaurant market trends
The restaurant market in which Yoshinoya HD operates contracted to JPY22.8tn in 2011 after peaking in 1997 at JPY29.1tn according to the Japan Foodservice Association (JF). The market recovered somewhat to JPY25.7tn in 2017. Amid a shrinking population, the restaurant business faces tough operating conditions with competition from take-out food businesses such as convenience stores, food supermarkets, home delivery and catering services. Personnel expenses are rising due to the labor shortage, resulting in cost pressure.
Domestic restaurant market Restaurant counts of top three gyudon companies
(JPYtn) Restaurant market YoY (RHS) Sukiya Yoshinoya 2,500 30.0 4.0%
25.9 26.0 3.0% 1,984 1,980 1,969 1,963 2,000 1,913 1,944 1,931 1,934 1,942 25.0 2.0%
20.0 1.0% 1,500 0.0% 1,173 1,174 1,190 1,188 1,207 1,200 1,211 1,214 1,189 15.0 -1.0% 996 975 964 958 963 1,000 950 943 953 953 10.0 -2.0%
-3.0% 5.0 500 -4.0%
0.0 -5.0% 0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 FY02/21
Source: Shared Research based on Japan Food Association data Source: Shared Research based on company financial results Note: Financial years of Sukiya (Zensho Holdings) and Matsuya (Matsuya Foods Holdings) end in March.
By business category, the domestic beef bowl restaurant market, to which the Yoshinoya segment belongs, is saturated. While data showing the size of the market is not available, trends in the number of restaurants of the top three companies (Yoshinoya, Sukiya, and Matsuya) indicate that growth has stalled since FY2013.
Soba and udon restaurant market Sushi restaurant/store market
(JPYtn) Soba and udon (noodels) YoY (RHS) (JPYtn) Sushi YoY (RHS)
1.40 8.0% 1.60 8.0% 1.31 1.55 1.30 1.52 6.0% 6.0% 1.50 1.20 4.0% 4.0% 1.40 1.10 2.0% 2.0% 1.00 1.30 0.0% 0.0% 0.90 -2.0% 1.20 -2.0% 0.80 -4.0% 1.10 0.70 -4.0% -6.0%
0.60 -6.0% 1.00 -8.0% 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: Shared Research based on Japan Food Association data Source: Shared Research based on Japan Food Association data In contrast, the market for soba and udon noodle restaurants, to which Hanamaru belongs, is continuing to grow. According to JF, the market trended at about JPY1.1tn for many years from around 1995, but began growing in 2013 and reached JPY1.31tn in 2019.
43/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Competition
Yoshinoya HD ranks fifth out of 95 major listed restaurant companies after Zensho Holdings (TSE1: 7550), Skylark (TSE1: 3197), McDonald’s Holdings Japan (TSE1: 2702), and Colowide (TSE1: 7616).
Companies and brands that compete with Yoshinoya HD’s businesses are as follows. Rival beef bowl chains are Zensho Holdings’ Sukiya and Matsuya Foods’ (TSE1: 9887) Matsuya. For udon noodle chains, Toridoll Holdings’ (TSE1: 3397) operates Marugame Seimen in Japan and overseas. For sushi, major conveyor belt chains mostly operate in suburban locations with few restaurants in city centers, which means there is limited competition for Kaisen Misakiko. The main competitor in the take-out sushi business is an unlisted company, Chiyoda Sushi.
Competition
Store (company) Yoshinoya Sukiya (Zensho Holdings), Matsuya (Matsuya Foods) Hanamaru Marugame Seimen (Toridoll Holdings) Kyotaru Kyotaru Chiyoda Sushi (Chiyoda Sushi)
Kaisen Misakiko, other - Source: Shared Research based on company data
Zensho Holdings (TSE1: 7550) The leading restaurant company in Japan was founded in 1982, when it opened a box lunch store and a Sukiya beef bowl restaurant. After acquiring various chains, the company today has a diverse range of restaurants including Sukiya, Coco’s (family restaurant), Big Boy (steak), Jolly Pasta (pasta), Hamazushi (conveyor belt sushi), Hanaya Yohei (Japanese cuisine, mainly shabu shabu), Seto Udon (self-service udon noodles), and Moriva Coffee (café). Zensho also has a retail (food supermarket) business, because it aims to establish a mass merchandising system that plans, designs, and controls all processes from menu development to ingredient purchase, production, processing, distribution, and sales.
Skylark Holdings (TSE1: 3197) In 1970, this company opened Skylark, a pioneering suburban family restaurant in Japan. It continued to develop new chains such as Jonathan (coffee shop), Barmiyan (Chinese restaurant), Aiya (Japanese restaurant) and Gusto, a new type of budget family restaurant launched in 1992 after the end of the tech bubble. Current brands are Gusto, Jonathan, Bamiyan, Aiya, Steak Gusto, Japanese restaurant Yumean (Japanese restaurant), Italian restaurant Grazie Gardens, seafood and sushi restaurant Totoyamichi, and shabu shabu restaurant Shabuyo.
Matsuya Foods Holdings (TSE1: 9887) Japan’s third-largest beef bowl chain with about 1,000 restaurants. The company also has a pork cutlet chain called Matsunoya and conveyor belt sushi chain Sushimatsu. The company operates pork cutlet restaurants overseas.
Toridoll Holdings (TSE1: 3397) Founded in 1990, Toridoll Holdings opened its first self-service udon restaurant in 1995. The company today runs the following chains: Marugame Seimen (self-service udon), Toridoll (family dining focused on yakitori), and Butaya Tonichi (pork cutlet bowl and sautéed pork). The company ran 845 Marugame Seimen restaurants in Japan and 230 overseas (including franchises) in FY03/20.
44/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Earnings summary of Yoshinoya HD and its main competitors
Yoshinoya Holdings (9861) Zensho Holdings (7550) Matsuya Foods (9887) (JPYmn) FY02/19 FY02/20 FY02/21 FY03/18 FY03/19 FY03/20 FY03/18 FY03/19 FY03/20 Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Sales 202,385 216,201 170,348 579,108 607,679 630,435 93,006 98,159 106,511 Gross profit 129,581 139,949 107,061 327,622 346,453 362,754 62,721 65,931 71,393 SG&A expenses 129,477 136,023 112,396 310,010 327,619 341,835 58,601 62,046 66,313 Operating profit 104 3,926 -5,335 17,611 18,834 20,918 4,120 3,885 5,079 Recurring profit 349 3,369 -1,964 17,656 18,211 19,903 4,375 4,183 5,438 Net income -6,000 713 -7,503 8,001 9,924 11,978 2,381 2,198 2,604 Gross profit margin 64.0% 64.7% 62.8% 56.6% 57.0% 57.5% 67.4% 67.2% 67.0% SG&A ratio 64.0% 62.9% 66.0% 53.5% 53.9% 54.2% 63.0% 63.2% 62.3% Operating profit margin 0.1% 1.8% -3.1% 3.0% 3.1% 3.3% 4.4% 4.0% 4.8% ROE -11.1% 1.5% -17.2% 11.8% 14.2% 15.1% 6.2% 5.5% 6.2% ROA (RP-based) -5.4% 2.8% -1.5% 6.0% 5.4% 5.4% 7.6% 6.8% 7.9% Total assets 111,849 126,167 131,921 296,769 377,779 365,853 58,308 65,026 73,173 Net assets 50,025 48,385 40,142 82,204 87,083 86,793 39,078 40,808 42,953 Equity ratio 46.5% 40.0% 0.0% 22.7% 19.1% 23.7% 67.0% 62.8% 58.7% Operating CF 2,830 14,038 2,722 37,162 33,129 33,575 6,724 5,085 9,142 Investing CF -9,034 -8,453 -5,168 -24,663 -52,143 -35,188 -4,239 -6,677 -9,324 Financing CF 2,461 288 17,810 -9,073 50,300 -25,753 -2,507 2,289 2,437 Cash and deposits 16,971 22,604 37,900 26,142 57,240 28,928 8,814 6,311 8,563 Interest-bearing debt 38,175 50,064 68,341 137,099 196,236 180,788 5,952 9,393 12,990 Net debt 21,204 27,460 30,441 124,177 155,378 151,860 -990 5,179 4,427 Toridoll Holdings (3397) Skylark Holdings (3197) Royal Holdings (8179) FY03/18 FY03/19 FY03/20 FY12/18 FY12/19 FY12/20 FY12/18 FY12/19 FY12/20 IFRS Cons. IFRS Cons. IFRS Cons. IFRS Cons. IFRS Cons. IFRS Cons. Cons. Cons. Cons. Sales 116,504 145,022 156,478 366,360 375,394 288,434 133,896 140,578 84,304 Gross profit 85,644 105,904 116,273 254,959 261,348 197,146 95,116 93,540 52,630 SG&A expenses 77,685 98,634 107,392 230,538 236,930 212,637 89,407 92,922 75,853 Operating profit 7,635 2,302 4,367 22,857 20,562 -23,031 5,709 4,648 -19,269 Recurring profit 7,175 1,337 2,837 18,596 16,729 -26,433 5,765 4,639 -19,855 Net income 4,665 221 1,941 11,438 9,487 -17,214 2,791 1,923 -27,532 Gross profit margin 73.5% 73.0% 74.3% 69.6% 69.6% 68.4% 71.0% 68.5% 62.4% SG&A ratio 66.7% 68.0% 68.6% 62.9% 63.1% 73.7% 66.8% 68.1% 90.0% Operating profit margin6.6%1.6%2.8%6.2%5.5%-8.0%4.1%3.3%-22.9% ROE 13.2% 0.8% 4.9% 8.9% 7.2% -14.0% 5.5% 3.8% -76.8% ROA (RP-based) 8.2% 1.2% 1.8% 5.7% 4.3% -5.9% 5.9% 4.6% -19.1% Total assets 111,525 117,979 209,978 330,671 453,979 441,672 99,528 102,540 105,896 Net assets 37,470 35,090 46,565 130,453 132,817 113,761 51,125 52,028 21,011 Equity ratio 32.5% 28.8% 21.6% 39.5% 29.3% 25.8% 50.1% 49.6% 19.7% Operating CF 9,862 8,416 29,593 31,571 67,825 36,724 8,478 9,849 -7,234 Investing CF -39,860 -14,210 -12,986 -19,667 -20,446 -15,742 -6,121 -5,941 -9,918 Financing CF 35,039 5,534 -5,190 -8,049 -47,350 -22,921 -4,591 -4,774 26,590 Cash and deposits 14,798 14,398 25,801 18,908 18,979 17,030 5,305 4,449 13,890 Interest-bearing debt 50,024 59,138 58,031 133,054 129,318 145,845 5,420 3,553 30,147 Net debt 39,008 48,276 32,230 114,146 110,339 128,815 22,263 27,051 16,257 Source: Shared Research based on company data
The following chart plots sales of the top 20 restaurant companies on the X axis and OPM on the Y axis. We can see that although Yoshinoya is a major company in terms of sales, its OPM is lower than those of most of its rivals. From 2020 to 2021, the COVID-19 impacted the restaurant industry more than any other. Along with the company, which reported operating losses in FY02/21, Skylark Holdings and Royal Holdings both incurred substantial operating losses. Due in part to these circumstances, Shared Research believes that the earnings performances of each of companies in the industry are starkly disassociated from their typical levels. Accordingly, the chart below indicates the companies’ positions in FY02/20.
45/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
OPM distribution of top 20 restaurant companies in terms of sales
（％）
12.0
Saint Marc 9.8% 10.0 McDonald's 9.2%
Doutor 7.8% 8.0 Ohsho 7.0% Sushiro 6.7% Skylark 6.2% 6.0 Toridoll 6.6% MOS 5.2% Saizeriya 5.6%
Matsuya 4.4% Kura 5.2% 4.0 Royal 4.1% Joyfull 3.3% Zensho 3.0% Create 3.3%
2.0 Colowide 1.7% Kappa Create Watami 0.7% 0.5% Yoshinoya 0.1% 0.0 KFC HD Japan 0.6% 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 (JPYmn) Source: Shared Research based on company data The top 20 restaurant companies in terms of sales are Zensho Holdings (7550), Skylark 3197), McDonald’s Holdings Japan (2702), Colowide (7616), Yoshinoya HD (9861), Sushiro Holdings (3563), Saizeriya (7581), Royal Holdings (8179), Doutor NRS Holdings (3087), Kura Corporation (2695). Create Restaurants Holdings (3387), Toridoll Holdings (3397), Watami (7522), Matsuya Foods (9887), Kappa Create (7421), Ohsho Food Service (9936), Kentucky Fried Chicken Japan (9873), MOS Food Services (8153), Saint Marc Holdings (3395), and Joyfull (9942). Ranked by sales in the most recent financial year.
46/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Historical performance and financial statements Income statement
Income statement FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 FY02/21 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Sales 165,883 164,599 173,418 180,032 185,738 188,623 198,503 202,385 216,201 170,348 YoY -3.2% -0.8% 5.4% 3.8% 3.2% 1.6% 5.2% 2.0% 6.8% -21.2% Cost of sales 56,525 58,985 64,659 67,540 70,907 68,386 69,590 72,804 76,252 63,286 Gross profit 109,358 105,613 108,758 112,491 114,830 120,237 128,912 129,581 139,949 107,061 YoY -1.6% -3.4% 3.0% 3.4% 2.1% 4.7% 7.2% 0.5% 8.0% -23.5% Gross profit margin 65.9% 64.2% 62.7% 62.5% 61.8% 63.7% 64.9% 64.0% 64.7%62.8% SG&A expenses 104,556 103,736 106,579 108,976 113,217 118,371 124,893 129,477 136,023 112,396 SG&A ratio 63.0% 63.0% 61.5% 60.5% 61.0% 62.8% 62.9% 64.0% 62.9% 66.0% Operating profit 4,801 1,877 2,179 3,515 1,613 1,865 4,019 104 3,926 -5,335 YoY -6.2% -60.9% 16.1% 61.3% -54.1% 15.6% 115.5% -97.4% 3675.0% -235.9% Operating profit margin 2.9% 1.1% 1.3% 2.0% 0.9% 1.0% 2.0% 0.1% 1.8% -3.1% Non-operating income 1,634 1,459 1,887 1,291 1,509 1,606 1,502 1,350 1,779 5,245 Non-operating expenses 1,124 876 796 813 777 721 916 1,105 2,335 1,874 Recurring profit 5,311 2,460 3,270 3,993 2,345 2,750 4,604 349 3,369 -1,964 YoY -3.6% -53.7% 32.9% 22.1% -41.3% 17.3% 67.4% -92.4% 865.3% -158.3% Recurring profit margin 3.2% 1.5% 1.9% 2.2% 1.3% 1.5% 2.3% 0.2% 1.6% -1.2% Extraordinary gains 1,221 0 0 340 4 1,487 23 7 188 37 Extraordinary losses 3,400 1,470 1,103 1,612 980 1,537 1,607 5,210 2,526 5,793 Impairment losses 1,579 1,397 1,030 1,494 933 1,409 1,298 5,107 2,479 4,528 Income taxes 1,937 1,315 1,545 1,881 544 1,460 1,544 1,201 310 -133 Implied tax rate 61.8% 132.8% 71.3% 69.1% 39.7% 54.1% 51.1% -24.7% 30.1% 1.7% Net income attributable to non-controlling interests -115 38 -76 -101 -12 -9 -16 -53 8 -85 Net income 1,310 -364 698 941 837 1,248 1,491 -6,000 713 -7,503 YoY 242.9% - - 34.8% -11.1% 49.1% 19.5% - - - Net margin 0.8% -0.2% 0.4% 0.5% 0.5% 0.7% 0.8% -3.0% 0.3% -4.4% EBITDA 10,849 7,919 7,841 8,847 7,267 8,017 10,522 7,019 11,879 2,103 EBITDA margin 6.5% 4.8% 4.5% 4.9% 3.9% 4.3% 5.3% 3.5% 5.5% 1.2% Comparable-store sales YoY FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 FY02/21 Yoshinoya -4.9% -2.3% 7.3% 1.2% 0.8% 0.1% 1.4% 0.8% 6.7% -8.5% Hanamaru -7.3% -0.7% 0.2% 0.0% 1.5% -1.3% 2.9% -1.8% 1.5% -35.5% Arcmeal -6.7% 1.2% 6.0% 6.7% 1.8% -6.1% -1.2% -8.7% 3.9% - Kyotaru -4.3% 1.3% -0.7% 1.3% 0.8% 0.1% -0.4% 0.3% 0.5% -28.3% Store count FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 FY02/21 Yoshinoya 1,189 1,193 1,191 1,190 1,188 1,207 1,204 1,211 1,214 1,189 Openings 36 26 27 31 37 36 28 33 29 25 Closures 21 22 29 32 30 17 31 26 25 50 Hanamaru 312 327 341 371 390 432 479 512 522 490 Openings 27 28 30 29 44 52 59 48 30 18 Closures 8131614131010152050 Arcmeal 172 172 175 179 186 184 178 171 154 - Openings 355650010 - Closures 1522326716 - Kyotaru 350 330 328 329 315 329 330 333 335 288 Openings 22 19 21 14 12 25 19 21 17 14 Closures 32 39 23 13 26 11 18 18 15 61 Overseas 490 577 636 635 675 733 821 923 994 965 Openings 64 109 82 49 68 94 107 135 131 76 Closures 13 22 23 50 40 36 19 33 60 105 Other 195 191 179 178 169 189 171 253 258 236 Openings 5151817149 920135 Closures 6719303261733192027 Consolidated total 2,708 2,790 2,850 2,882 2,923 3,074 3,179 3,403 3,323 3,168 Openings 157 202 183 146 180 216 222 258 220 138 Closures 142 120 123 114 138 93 117 118 156 293 Per-store data (FY average; JPYmn) FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 FY02/21 Sales Yoshinoya 74.83 72.67 78.02 80.07 80.41 81.24 83.85 85.80 92.11 87.90 Hanamaru 50.24 60.34 56.55 54.83 56.53 58.10 59.40 58.54 59.75 40.24 Arcmeal 120.85 121.24 127.67 134.42 133.46 124.21 124.21 116.03 122.52 - Kyotaru 77.85 71.19 72.11 74.69 77.57 79.76 81.02 82.42 85.46 60.67 Operating profit Yoshinoya 3.88 1.61 2.41 3.41 2.57 3.20 4.20 2.92 4.89 3.45 Hanamaru 2.53 2.84 2.33 2.79 3.04 2.28 2.80 1.26 2.42 -6.25 Arcmeal 3.35 2.28 2.39 1.62 1.40 0.73 1.15 -4.82 -1.90 - Kyotaru -1.71 -0.40 0.07 0.78 0.90 0.22 0.96 0.49 1.37 -7.10 Source: Shared Research based on company data Notes: Figures may differ from company materials due to differences in rounding methods. Figures provided from FY02/11 for continuity of segments. Arcmeal segment included in consolidated results through FY02/20 but will no longer be included starting FY03/22, the company having sold all of its shareholding in Arcmeal Co., Ltd. in February 2020.
47/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Balance sheet
Balance sheet FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 FY02/21 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. ASSETS Total current assets 26,805 24,242 30,079 39,503 36,984 38,600 37,124 33,424 41,303 57,145 Cash and deposits 17,299 14,244 18,174 27,087 21,287 25,474 21,913 16,971 22,604 37,900 Notes and accounts receivable 3,227 2,757 3,412 4,023 3,362 3,727 5,764 5,829 8,005 6,381 Inventories 3,631 5,100 5,749 5,140 8,839 5,771 5,743 6,345 6,985 7,125 Other 2,653 2,146 2,747 3,258 3,498 3,629 3,708 4,283 3,716 5,744 Allowance for doubtful accounts -5-5-3-5-2-1-4-7-8-7 Total fixed assets 67,565 67,095 65,444 69,155 74,307 76,346 78,489 79,260 84,863 74,775 Total tangible fixed assets 38,851 38,737 38,236 39,857 44,521 45,178 46,611 46,234 51,595 42,396 Buildings and structures 25,131 25,354 24,803 25,405 28,008 28,362 29,402 27,220 28,706 24,797 Machinery, equipment, and vehicles 509 519 460 613 743 1,144 1,669 1,833 2,287 1,860 Tools, furniture, and fixtures 1,564 1,499 1,591 1,623 2,095 2,447 2,755 2,677 2,808 1,773 Land 8,781 8,592 8,621 8,793 8,859 8,173 8,127 8,111 8,066 5,375 Lease assets 2,707 2,603 2,623 3,189 4,273 4,849 4,251 5,607 6,540 5,822 Construction in progress 157 168 135 232 541 200 404 784 599 254 Total intangible assets 3,020 4,076 3,497 3,096 3,067 3,875 4,102 4,155 5,233 4,528 Goodwill 214 1,685 1,471 1,242 1,055 1,537 1,405 1,244 1,797 1,536 Other 2,806 2,390 2,025 1,854 2,012 2,338 2,696 2,910 3,435 2,992 Investments and other assets 25,693 24,282 23,710 26,200 26,717 27,292 27,775 28,870 28,034 27,849 Investment securities 877 999 1,087 4,668 4,278 4,335 4,546 5,320 3,666 3,473 Long-term loans receivable 568 505 546 577 511 477 467 289 346 2,230 Other 858 743 852 539 484 643 667 648 1,186 1,204 Allowance for doubtful accounts -212 -202 -181 -212 -167 -222 -202 -76 -45 -60 Total assets 94,371 91,338 95,524 108,658 111,292 114,947 115,613 112,685 126,167 131,921 LIABILITIES Total current liabilities 34,032 31,115 38,673 31,533 31,563 32,530 33,681 31,255 37,963 46,688 Notes and accounts payable 3,865 4,116 4,776 6,753 5,741 5,053 5,985 5,607 6,313 4,140 Short-term debt 20,158 17,665 22,918 10,416 13,752 14,493 13,307 12,470 14,691 27,738 Short-term borrowings 14,831 11,630 17,698 5,162 5,224 5,321 5,805 6,087 6,265 18,687 Current portion of corporate bonds 750 Current portion of long-term borrowings 4,454 5,235 4,614 4,526 7,665 7,397 6,465 5,031 5,793 6,783 Lease obligations 873 800 606 728 863 1,025 1,037 1,352 2,633 2,268 Income taxes payable 978 382 1,455 1,063 551 463 1,011 517 691 284 Other 9,031 8,952 9,524 13,301 11,519 12,521 13,378 10,938 14,521 12,814 Total fixed liabilities 14,754 16,832 13,438 18,186 21,994 25,207 24,124 31,404 39,818 45,089 Long-term debt 9,036 11,375 8,571 13,824 17,577 20,807 19,754 27,057 35,373 40,603 Deferred tax liabilities 76 98 12 25 86 0 2 2 2 64 Other 5,642 5,359 4,855 4,337 4,331 4,400 4,368 4,345 4,443 4,422 Total liabilities 48,787 47,948 52,112 49,719 53,558 57,737 57,805 62,659 77,782 91,778 NET ASSETS Capital stock 10,265 10,265 10,265 10,265 10,265 10,265 10,265 10,265 10,265 10,265 Capital surplus 11,139 11,139 11,139 11,139 11,560 11,551 11,534 11,497 11,504 11,519 Retained earnings 42,689 41,105 40,776 38,532 38,077 38,035 38,236 30,944 29,332 21,183 Treasury stock -18,089 -18,089 -18,089 -733 -741 -744 -712 -682 -639 -604 Shareholders' equity 46,004 44,420 44,091 59,203 59,161 59,107 59,324 52,024 50,462 42,363 Valuation differences on securities -11 -4 -3 6 -3 4 7 -6 -10 1 Foreign currency translation adjustments -1,879 -1,701 -1,339 -826 -1,650 -2,353 -2,040 -2,547 -2,631 -2,737 Remeasurements of defined benefit plans -49 -14 -13 -28 -25 -24 -35 Non-controlling interests 1,469 675 663 602 240 464 544 579 588 550 Total net assets 45,584 43,390 43,412 58,938 57,733 57,209 57,807 50,025 48,385 40,142 Total liabilities and net assets 94,371 91,338 95,524 108,658 111,292 114,947 115,613 112,685 126,167 131,921 Working capital 2,993 3,741 4,385 2,410 6,460 4,445 5,522 6,567 8,677 9,366 Total interest-bearing debt 29,194 29,040 31,489 24,240 31,329 35,300 33,061 39,527 50,064 68,341 Net debt 11,895 14,796 13,315 -2,847 10,042 9,826 11,148 22,556 27,460 30,441 Days in accounts receivable 7.6 6.6 6.5 7.5 7.3 6.9 8.7 10.5 11.7 15.4 Days in inventory 25.0 27.0 30.6 29.4 36.0 39.0 30.2 30.3 31.9 40.7 Days in accounts payable 26.6 24.7 25.1 31.2 32.2 28.8 28.9 29.1 28.5 30.1 Cash conversion cycle 5.96 8.96 12.02 5.81 11.08 17.04 9.97 11.70 15.05 25.96 Current ratio 78.8% 77.9% 77.8% 125.3% 117.2% 118.7% 110.2% 106.9% 108.8% 122.4% Fixed ratio 153.2% 157.1% 153.1% 118.5% 129.2% 134.5% 137.1% 152.4% 168.2% 176.5% Net debt / Equity ratio 0.26 0.34 0.31 -0.04 0.22 0.22 0.24 0.48 0.60 1.73 Equity ratio 46.7% 46.8% 44.8% 53.7% 51.7% 49.4% 49.5% 43.9% 37.9% 30.0% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods. Note: Leases included in loans
Assets Fixed assets, accounting for around 40% of the total assets, trended upward from FY02/14 to FY02/18 as the company continued to open new restaurants. However, in FY02/19 it closed multiple restaurants and booked corresponding impairment losses in an effort to restructure. Other items under assets include cash and deposits (slightly below 20%) and lease and guarantee deposits (10% plus). In FY02/21, Yoshinoya HD’s assets grew in scale YoY thanks to the company’s efforts to strengthen its acquisition of ready liquidity in response to the COVID-19 pandemic.
48/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Liabilities Interest-bearing debt including lease obligations is the largest item at over 50% of total. Although this item decreased after disposal (sale) of treasury stock in August 2014, it has continued to increase again from FY02/15. In FY02/19, the company raised over JPY10.0bn in long-term borrowings. In FY02/21, short-term borrowings rose due to the company’s efforts to increase ready liquidity in response to the COVID-19 pandemic.
Net assets Thanks to reserves from the past years, net assets accounted for 44% of total assets at end FY02/19, despite a drop in retained earnings. Net assets grew sharply after the sale of treasury stock in FY02/15, but have declined slightly since, because the company has paid dividends in excess of net income through FY02/17 under its stable dividends distribution policy. Net assets declined by about JPY8.0bn YoY in FY02/21 due to a decrease in retained earnings.
49/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Cash flow statement
Cash flow statement FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 FY02/21 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cash flows from operating activities (1) 8,109 6,212 7,570 11,833 433 10,104 9,374 2,830 14,038 2,722 Cash flows from investing activities (2) -3,218 -6,937 -4,258 -9,201 -12,365 -6,526 -8,379 -9,034 -8,453 -5,168 Free cash flow (1+2) 4,891 -725 3,312 2,632 -11,932 3,578 995 -6,204 5,585 -2,446 Cash flows from financing activities -3,199 -2,473 481 5,595 3,843 1,085 -4,200 2,461 288 17,810 Depreciation and amortization (A) 6,048 6,042 5,662 5,332 5,654 6,152 6,503 6,915 7,953 7,438 Capital expenditures (B) -4,058 -5,823 -4,322 -5,891 -8,656 -7,699 -7,461 -7,371 -7,747 -4,318 Change in working capital (C) -413 748 644 -1,975 4,050 -2,015 1,077 1,045 2,110 689 Simple FCF (NI + A + B - C) 3,713 -893 1,394 2,357 -6,215 1,716 -544 -7,501 -1,191 -5,072 Source: Shared Research based on company data * Note: Figures may differ from company materials due to differences in rounding methods.
Cash flows from operating activities The main items under cash flows from operating activities are depreciation, pre-tax profit, impairment losses, and income and other taxes, to which increase/decrease in working capital is added. In the five years spanning FY02/14 through FY02/18, the base cash (profit before extraordinary gains/losses [JPY2.0–4.0bn] + depreciation [JPY5.0–6.0bn] – income taxes [JPY1.5–2.0bn]) trended between JPY5.0bn and JPY8.0bn. Cash flows from operating activities dropped significantly in FY02/19 as the company recorded a pre-tax loss, before improving markedly in FY02/20 on a sharp rise in earnings due to a strong performance from the Yoshinoya segment. Business environments surrounding all segments deteriorated due to the COVID-19 pandemic in FY02/21, and cash provided by operating activities fell back its level in FY02/19.
Cash flows from investing activities Acquisition of fixed assets accompanying the opening of new restaurants is the main item. Capital expenditures over the past ten years stood at around JPY4.0–8.6bn. In the five years from FY02/15 to FY02/19, capital expenditure levels trended slightly above depreciation. In FY02/21, the company cut back on capital investment in response to the COVID-19 pandemic and cash used in investing activities fell YoY as a result.
Cash flows from financing activities The main items are increase/decrease in borrowings and dividends (approximately JPY1.3bn). In FY02/21, cash provided by financing activities rose drastically due to an increase in short-term borrowings (inflow of JPY13.0bn) incurred in preparation for deteriorating business environments caused by the COVID-19 pandemic.
50/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Historical performance
Full-year FY02/21 results
Full-year consolidated results for FY02/21 (March 2020–February 2021)
▷ Sales: JPY170.3bn (-21.2% YoY) ▷ Gross profit: JPY107.1bn (-23.5% YoY) ▷ Operating loss: JPY5.3bn (versus profit of JPY3.9bn in FY02/20) ▷ Recurring loss: JPY2.0bn (versus profit of JPY3.4bn in FY02/20) ▷ Net loss*: JPY7.5bn (versus net income of JPY713mn in FY02/20)
*Net income/loss attributable to owners of the parent
Factors behind sales decline Sales declined by JPY45.9bn in FY02/21. Primarily contributing to this decline were the company’s transfer of shares held in Arcmeal Co., Ltd. (downward impact of JPY19.8bn) and a decrease in existing store sales that was due to the COVID-19 pandemic (downward impact of JPY27.7bn). In response to the pandemic, the company shortened business hours and implemented temporary shutdowns of restaurants operated by group companies. These measures had downward impacts of JPY8.4bn in the Yoshinoya segment, JPY11.3bn in the Hanamaru segment, JPY6.0bn in the Kyotaru segment, and JPY1.6bn in the Overseas segment. Restaurant operations in Japan were able to resume after the government lifted the state of emergency declaration in May 2020 and, overseas, operations restarted after the lifting of stay-at-home orders. But just as restaurant sales at individual segments were bouncing back with the help of new menu items and sales promotions, another state of emergency declaration issued in January 2021 once again brought stay-at-home advisories and restrictions on business operating hours, leaving sales during 2H FY02/21 down as well.
Factors affecting profit The operating loss came to JPY5.3bn, narrowed from the company’s forecast by JPY3.4bn. The company negotiated for lower rents, slashed manageable expenses, and implemented groupwide structural reforms. These efforts led to cost reductions of JPY8.2bn, exceeding the company’s initial target of JPY7.0bn. As a result, the company generated profit in 2H (September 2020– February 2021). In FY02/21, Yoshinoya HD focused on cash flow, curbing spending on new store openings and renovations and closing stores that were unprofitable or where sales were unlikely to recover. However, the company ultimately reported net loss attributable to owners of the parent of JPY7.5bn, this figure including extraordinary losses of JPY5.8bn booked in connection with the pandemic and impairment losses on store closures and the decreased profitability of store assets.
Sales by quarter Operating profit by quarter
Q1 Q2 Q3 Q4 (JPYmn) (JPYmn) Q1 Q2 Q3 Q4 250,000 6,000 3,926 216,201 4,000 202,385 1,036 200,000 56,325 170,348 2,000 104 1,892 52,369 1 666233 1,044 634 0 -178 150,000 43,466 -46 -617 52,810 49,677 -2,000 -4,955 100,000 44,894 -4,000 50,545 54,267 -1,015 42,307 -6,000 50,000 -5,335 52,799 -8,000 49,794 39,681
0 -10,000 FY02/19 FY02/20 FY02/21 FY02/19 FY02/20 FY02/21
Source: Shared Research based on company data
51/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Breakdown of results by segment Yoshinoya
Cumulative FY02/19 FY02/20 FY02/21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4 Q1Q2Q3Q4 Sales 24,908 50,841 76,332 103,607 26,656 54,713 82,119 111,685 26,124 51,885 78,833 105,615 YoY 3.8% 4.7% 3.8% 2.5% 7.0% 7.6% 7.6% 7.8% -2.0% -5.2% -4.0% -5.4% Segment profit 511 1,243 2,153 3,522 1,445 3,289 4,402 5,935 -367 589 2,698 4,147 YoY -44.2% -36.7% -32.0% -30.5% 182.8% 164.6% 104.5% 68.5% - -82.1% -38.7% -30.1% Segment profit margin 2.1% 2.4% 2.8% 3.4% 5.4% 6.0% 5.4% 5.3% - 1.1% 3.4% 3.9% Quarterly FY02/19 FY02/20 FY 02/ 21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4 Q1Q2Q3Q4 Sales 24,908 25,933 25,491 27,275 26,656 28,057 27,406 29,566 26,124 25,761 26,948 26,782 YoY 3.8% 5.5% 2.0% -0.9% 7.0% 8.2% 7.5% 8.4% -2.0% -8.2% -1.7% -9.4% Segment profit 511 732 910 1,369 1,445 1,844 1,113 1,533 -367 956 2,109 1,449 YoY -44.2% -30.3% -24.4% -27.8% 182.8% 151.9% 22.3% 12.0% - -48.2% 89.5% -5.5% Segment profit margin 2.1% 2.8% 3.6% 5.0% 5.4% 6.6% 4.1% 5.2% - 3.7% 7.8% 5.4% Source: Shared Research based on company data
Yoshinoya: Existing store monthly sales
(%) Sales Customer count Customer spend 60 50 40 30 20 10 0 -10 -20 -30 Jul Jul Jul Jul Jul Jan Jan Jan Jan Jan Oct Oct Oct Oct Oct Apr Apr Apr Apr Apr Jun Jun Jun Jun Jun Feb Feb Feb Feb Feb Sep Sep Sep Sep Sep Mar Mar Mar Mar Mar Dec Dec Dec Dec Dec Aug Nov Aug Nov Aug Nov Aug Nov Aug Nov May May May May May FY02/17 FY02/18 FY02/19 FY02/20 FY02/21 Source: Shared Research based on company data
▷ Segment sales: JPY105.6bn (-5.4% YoY) ▷ Segment profit: JPY4.1bn (-30.1% YoY) ▷ The Yoshinoya segment had a total of 1,189 stores in operation at end-FY02/21, having opened 25 new stores and closed 50 during the period.
Factors behind sales decline Segment sales fell as same store sales declined 8.5% YoY as a result of reduced operating hours at stores due to the COVID-19 outbreak. The company offered both takeout and delivery services at its stores, and takeout orders accounted for over 40% of sales while delivery orders accounted for 3%. While the state of emergency was in effect, takeout orders temporarily accounted for as much as 60% of sales.
Existing store sales On a monthly basis, existing store sales were down 1.8% YoY in March 2020, down 4.0% in April, down 7.3% in May, down 12.3% in June, down 5.7% in July, down 16.8% in August, down 9.2% in September, up 0.4% in October, down 6.6% in November, down 11.2% YoY in December 2020, down 9.5% YoY in January 2021, and down 17.1% YoY in February. Customer traffic was sluggish due to the COVID-19 pandemic, moving up 0.1% YoY in March 2020, down 1.0% in April, down 9.2% YoY in May, down 18.9% in June, down 10.2% in July, down 19.8% in August, down 12.4% in September, down 7.6% in October, down 9.7% in November, down 15.3% YoY in December, down 11.7% YoY in January 2021, and down 19.8% in February. Average spending per customer was down 2.0% YoY in March 2020, down 3.0% in April, up 2.1% in May, up 8.1% in June, up 5.1% in July, up 3.7% in August, up 3.7% in September, up 8.7% in October, up 3.4% in November, up 4.8% YoY in December 2020, up 2.5% YoY in January 2021, and up 3.3% YoY in February. Leading to the rise in average spending per customer was the company’s ongoing development of new menu offerings based on its comprehension of customer demand, which helped it achieve a menu comprising relatively high-priced items offering high added value.
52/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Major initiatives Major initiatives during the period included the Children’s and Home Meal Support campaign in March; in April, the company carried out a 15% Off Beef Bowl Take-Out campaign and sold Take-Out Only Family Meal Sets. While flexibly implementing each initiative to support consumers during the pandemic as a part of the food infrastructure, the company responded swiftly to customer needs as they shifted from in-store dining to takeout. Further, to meet the growing demand for food delivery, the company aggressively expanded its home delivery service to 751 stores.
On the menu front, the company made it a basic policy to develop products that can be enjoyed even for take-out. In April it rolled out Nikudaku Gyudon (beef bowl with an extra serving of beef) and Stamina Cho Tokumori Don. In June the company introduced Gyutan Mugitoro Gozen (grilled beef tongue served alongside dishes including mugitoro) as a limited time offer, and in October it rolled out winter favorite Gyusuki Nabezen (beef sukiyaki served alongside raw egg, rice, and pickled vegetables) as well as Kuroge Wagyusuki Nabezen (Japanese black beef sukiyaki served alongside raw egg, rice, and pickled vegetables), and in January 2021 rolled out Gyuno Nabeyaki Gozen (premium beef and noodle bowl). As for sales initiatives, in May, July, September, and November the company introduced Pokemori campaigns, which were well received in FY02/20. In addition, it carried out an Extra-large Festival in June and participated in the premium meal voucher program of the Go To Eat campaign in November.
Reasons for decline in profit In Q1 FY02/21 (March–May 2020), the company reported losses in the Yoshinoya segment due primarily to substantial impact from the COVID-19 pandemic. However, the company later generated segment profit in Q2 (June–August 2020) after implementing structural reforms in the middle of the quarter. These structural reforms primarily targeted cost improvement (achieved a downward impact of JPY2.2bn on annual costs in the Yoshinoya segment), curtailment of store expenses and distribution costs (JPY1.6bn), and reduction of headquarters expenses (JPY1.3bn). Improvements in the Yoshinoya segment were associated with anywhere from 50% to over 80% of these downward impacts on annual costs. Segment profit fell 30.1% YoY due to a large decline in sales during 1H and another decrease in sales caused by a second state of emergency declaration in Q4 (December 2020–February 2021). However, the company reported a YoY segment profit increase of JPY912mn in 2H thanks to the structural reforms mentioned previously.
Hanamaru Cumulative FY 02/ 19 FY02/20 FY02/21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4 Q1Q2Q3Q4 Sales 7,354 14,821 21,928 29,005 7,783 15,895 23,296 30,892 3,982 9,517 15,243 20,361 YoY 9.7% 8.9% 7.6% 7.2% 5.8% 7.2% 6.2% 6.5% -48.8% -40.1% -34.6% -34.1% Segment profit 392 769 676 624 517 1,208 1,286 1,252 -1,581 -2,166 -2,622 -3,160 YoY -15.5% -24.2% -44.3% -51.0% 31.9% 57.1% 90.2% 100.6% - - - - Segment profit margin 5.3% 5.2% 3.1% 2.2% 6.6% 7.6% 5.5% 4.1% - - - - Quarterly FY02/19 FY02/20 FY02/21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4 Q1Q2Q3Q4 Sales 7,354 7,467 7,107 7,077 7,783 8,112 7,401 7,596 3,982 5,535 5,726 5,118 YoY 9.7% 8.1% 4.9% 6.0% 5.8% 8.6% 4.1% 7.3% -48.8% -31.8% -22.6% -32.6% Segment profit 392 377 -93 -52 517 691 78 -34 -1,581 -585 -456 -538 YoY -15.5% -31.6% - - 31.9% 83.3% ------Segment profit margin 5.3% 5.0% - - 6.6% 8.5% 1.1% - - - - - Source: Shared Research based on company data
▷ Segment sales: JPY20.4bn (-31.4% YoY) ▷ Segment loss: JPY3.2bn (versus profit of JPY1.3bn in FY02/20) ▷ The Hanamaru segment had 490 stores in operation as of end-FY02/21, having opened 18 new stores and closed 50 during the period.
Factors behind sales decline Existing store sales declined to approximately 70% of FY02/20 results due to large-scale closures and shortened business hours of stores inside commercial outlets (about 60% of existing stores in the Hanamaru segment) in the wake of the pandemic. Sales
53/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
have generally recovered with the reopening of commercial buildings, but the situation remains challenging, with fewer people commuting to urban areas as teleworking becomes more common and lower occupancy rates for food court seating within commercial facilities. Average annual spending per customer at the segment’s existing stores rose about 7% thanks in part to price revisions conducted in May 2020. However, customer traffic fluctuated by quarter and trended 30–50% lower YoY. In FY02/21, takeout orders accounted for 5% of sales and delivery orders counted for 2% of sales.
Major initiatives Major initiatives during the period included product initiatives such as the Torotama Fair in March, the Cold Udon Fair in June, the Warm and Thick! Ankake Fair in September, and the introduction of Extra Toppings! Pork Miso Udon in November; in January 2021, it began offering Japanese style fried chicken from the company group restaurant Tori-Sen, which specializes in fried chicken dishes, that were also available for takeout. For sales initiatives, the company sold its popular tempura season tickets in March and September, held a collaborative campaign with the character Koupen Chan in July, participated in the Go to Eat Campaign (premium food tickets) in November, and began sales of “Udon Tickets” in December. To address the rising takeout/delivery demand, the company increased the number of stores offering takeout to 192 stores, up 117 stores from end-FY02/20. Additionally, it flexibly implemented measures such as revising the price of Kake Udon (udon noodles in a simple soup stock).
Reasons for segment loss The company was unable to thoroughly implement its cost-cutting measures, partly because a high percentage of stores in the Hanamaru segment are located within commercial facilities. In Q2 (June–August 2020), the company implemented structural reforms, and the operating loss fell to about one-third of its level in Q2 FY02/20. However, these structural reforms did not generate enough cost savings to produce operating profit because segment sales fell by 30–50% YoY due to the COVID-19 pandemic.
Kyotaru Cumulative FY02/19 FY02/20 FY 02/ 21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4 Q1Q2Q3Q4 Sales 6,958 13,684 20,319 27,323 7,275 14,309 21,052 28,544 3,670 8,560 13,658 18,898 YoY 2.2% 2.4% 2.9% 2.4% 4.6% 4.6% 3.6% 4.5% -49.6% -40.2% -35.1% -33.8% Segment profit 206 190 133 162 283 331 252 457 -1,330 -1,834 -2,019 -2,213 YoY -15.6% -31.4% -15.8% -48.7% 37.4% 74.2% 89.5% 182.1% - - - - Segment profit margin 3.0% 1.4% 0.7% 0.6% 3.9% 2.3% 1.2% 1.6% - - - - Quarterly FY02/19 FY02/20 FY02/21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4 Q1Q2Q3Q4 Sales 6,958 6,726 6,635 7,004 7,275 7,034 6,743 7,492 3,670 4,890 5,098 5,240 YoY 2.2% 2.5% 3.9% 0.9% 4.6% 4.6% 1.6% 7.0% -49.6% -30.5% -24.4% -30.1% Segment profit 206 -16 -57 29 283 48 -79 205 -1,330 -504 -185 -194 YoY -15.6% - - -81.6% 37.4% - - 606.9% - - - - Segment profit margin 3.0% - - 0.4% 3.9% 0.7% - 2.7% - - - - Source: Shared Research based on company data
▷ Segment sales: JPY18.9bn (-33.8% YoY) ▷ Segment loss: JPY2.2bn (versus profit of JPY457mn in FY02/20) ▷ The Kyotaru segment had a total of 288 stores in operation at end-FY02/21, having opened 14 new stores and closed 61 during the period.
Factors behind sales decline Sales declined as same store sales fell approximately 30% YoY due to widespread closures and shortened business hours of stores in the wake of the pandemic, and as bento sales at events were down due to government requests to refrain from going out. With the reopening of commercial buildings, sales have been recovering particularly for the take-out business (offering sushi and other menus), but the situation remains challenging for the restaurant business due to government advisory notices encouraging people to stay at home during the evening.
54/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Major initiatives Major initiatives during the period included product initiatives that expanded the company’s takeout product lineup to address rising takeout demand, such as the Sushi Party Set (home sushi party set) across all restaurant formats and Chirashizushi no Tane at Kaisen Misakiko. The company expanded the number of stores offering takeout to 136 stores, up 134 stores from end-FY02/20. Further, the company rolled out seasonal menus across all restaurant formats featuring seasonal ingredients that were carefully selected, for example by using Bugo winter yellowtail and Kinka mackerel. Sales initiatives included the 88th Anniversary Akafuji Sale and the popular Nakamaki Sale in the takeout business, as well as the Bluefin Tuna Festival, the JPY99 Sale (for red plates usually priced at JPY110), and the Go To Eat campaign in the restaurant business.
Overall, average customer spending at existing stores in the Kyotaru segment was level YoY, but sales fell 30–50% YoY because customer traffic declined 20% YoY in the take-out business and 60% YoY in the restaurant business. This restaurant business, which the company had considered to be a growth area and includes the urban rotary sushi restaurant Kaisen Misakiko, incurred substantial impact from factors such as requests issued in response to the COVID-19 pandemic by the Japanese government asking consumers to remain indoors and urging businesses to shorten their operating hours.
Segment loss and business transfer Structural reforms launched in the middle of Q2 (June–August 2020) reduced segment loss in the same quarter by more than 50%. In 2H, the company closed stores and implemented other cost-cutting efforts, and quarterly segment loss narrowed to around JPY100mn.
On April 1, 2021, the company finalized the sale of its entire stake in Kyotaru with the transfer of its shareholdings in Kyotaru to the buyer, Food & Life Companies Ltd. (TSE1: 3563; name changed from “Sushiro Global Holdings Ltd.” on April 1, 2021).
Overseas segment Cumulative FY02/19 FY02/20 FY02/21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4 Q1Q2Q3Q4 Sales 5,005 10,212 15,770 21,162 5,283 10,804 16,514 21,945 4,529 9,014 14,366 19,534 YoY 8.4% 7.2% 7.1% 7.2% 5.6% 5.8% 4.7% 3.7% -14.3% -16.6% -13.0% -11.0% Segment profit 114 314 586 806 284 539 871 972 -175 -90 306 575 YoY -63.7% -53.3% -46.1% -35.2% 149.1% 71.7% 48.6% 20.6% - - -64.9% -40.8% Segment profit margin 2.3% 3.1% 3.7% 3.8% 5.4% 5.0% 5.3% 4.4% - - 2.1% 2.9% Quarterly FY02/19 FY02/20 FY02/21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4 Q1Q2Q3Q4 Sales 5,005 5,207 5,558 5,392 5,283 5,521 5,710 5,431 4,529 4,485 5,352 5,168 YoY 8.4% 6.1% 7.0% 7.6% 5.6% 6.0% 2.7% 0.7% -14.3% -18.8% -6.3% -4.8% Segment profit 114 200 272 220 284 255 332 101 -175 85 396 269 YoY -63.7% -44.1% -34.6% 41.9% 149.1% 27.5% 22.1% -54.1% - -66.7% 19.3% 166.3% Segment profit margin 2.3% 3.8% 4.9% 4.1% 5.4% 4.6% 5.8% 1.9% - 1.9% 7.4% 5.2% Source: Shared Research based on company data
▷ Segment sales: JPY19.5bn (-11.0% YoY) ▷ Segment profit: JPY575mn (-40.8% YoY) ▷ The total overseas store count at end-FY02/21 was 965, the company having opened 76 new stores while closing 105 during the period.
Factors behind sales decline Sales decline was attributed to large-scale store closures and shortened business hours due to curfews implemented in various areas in the wake of the pandemic.
In the US, COVID-19 infections continue to rise and the ban on in-store dining remains, but same store sales are recovering to year-ago levels thanks to demand for takeout. In China, where business is resuming, same store sales are still down slightly YoY
55/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
but are recovering. Meanwhile, sales have fallen YoY in the ASEAN region, where the COVID-19 continues to spread. Recovering business environments in the US and Taiwan primarily contributed to the generation of segment profit.
Q3 FY02/21 results
Consolidated results for cumulative Q3 FY02/21 (March 2020–November 2020)
▷ Sales: JPY126.9bn (-20.6% YoY) ▷ Gross profit: JPY79.4bn (-23.4% YoY) ▷ Operating loss: JPY5.3bn (versus profit of JPY2.9bn in cumulative Q3 FY02/20) ▷ Recurring loss: JPY3.9bn (versus profit of JPY3.4bn) ▷ Net loss*: JPY5.5bn (versus net income of JPY1.8bn)
*Net income/loss attributable to owners of the parent
▷ Factors behind sales decline: The COVID-19 outbreak led to shortened business hours and temporary suspensions of operations at company group companies, which, among other factors, led to a 20.6% decline in sales YoY. It should be noted, though, that this YoY figure reflects results in cumulative Q3 FY02/20, which includes sales at the former Arcmeal Co., Ltd. (JPY14.8bn), and when adjusted for that, sales under the current business portfolio were actually down 12.6%. Operations have resumed since the lifting of the state of emergency in Japan, and since the lifting of instructions to stay at home overseas.
Sales were on a recovery trajectory, with YoY decline in sales narrowing quarter by quarter, due to the introduction of new items and proactive sales promotion activities in each segment. However, with shortened operating hours at some stores and requests to refrain from going out by the Japanese government and local governments in the wake of the COVID-19 spread,
sales fell below the levels of cumulative Q3 FY02/20. ▷ Factors affecting profit: Gross profit was down 23.4%, but the GPM has been improving quarter by quarter since the start of FY02/21. The company says that the flow of supplies such as beef and rice is in good shape, and conditions are conducive to
benefitting from reduced food losses and other CoS improvement measures. The company cut costs, and SG&A expenses
shrank 15.9%, but the sluggish sales performance resulted in an operating loss. However, in Q3 alone (September‒November 2020), the company returned to operating profitability due partly to its ongoing cost reduction measures, including cost
structure reform implemented through 1H through such measures as negotiating rent reductions and cutting spending where possible. In fact, earnings were in the black at the operating profit level, even with the absence of the former Arcmeal, which generated operating loss of JPY482mn in cumulative Q3 FY02/20), taken into consideration. ▷ The recurring loss shrank, thanks partly to subsidy income (JPY997mn) following the COVID-19 pandemic. However, the company posted a net loss attributable to owners of the parent of JPY5.5bn, JPY7.3bn wider YoY, due to significant sales declines and JPY2.7bn in extraordinary losses, which included impairment losses related to store closures and decreased profitability of store assets as well as losses related to the COVID-19 outbreak (a JPY607mn portion of fixed costs incurred during store closures in accordance with governmental and administrative orders and guidelines). In response to the ongoing downtrend in sales due to the COVID-19 pandemic, the company is focusing on cash flow in FY02/21, curbing investment in store openings and renovations that had been planned for the period, and closing stores that are unprofitable or where sales are not expected to recover.
Segment results for cumulative Q3 FY02/21 Yoshinoya
▷ Segment sales: JPY78.8bn (-4.0% YoY)
56/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
▷ Segment profit: JPY2.7bn (versus profit of JPY4.4bn in cumulative Q3 FY02/20) ▷ Segment sales fell as same store sales declined 7.2% YoY as a result of reduced operating hours at stores due to the COVID-19 outbreak. ▷ The segment profit margin in Q3 (September–November 2020) came to a two-year high of 7.8% thanks to price stability on supplies such as beef and rice as well as efforts at the individual store level to reduce food loss, which contributed to CoGS
improvement. As a result, the segment profit margin for the nine months through Q3 (March‒November 2020) recovered to 3.4%. ▷ On a monthly basis, same store sales were down 1.8% YoY in March, 4.0% in April, 7.3% in May, 12.3% in June, 5.7% in July, 16.8% in August, 9.2% in September, up 0.4% in October, and down 6.6% in November. Customer traffic was up 0.1% YoY in March, down 1.0% in April, down 9.2% YoY in May, down 18.9% in June, down 10.2% in July, down 19.8% in August, down 12.4% in September, down 7.6% in October, and down 9.7% in November. Average spending per customer was down 2.0% YoY in March, down 3.0% in April, up 2.1% in May, up 8.1% in June, up 5.1% in July, up 3.7% in August, up 3.7% in September, up 8.7% in October, and up 3.4% in November. Sluggish customer traffic was offset by higher average ticket driven by updates to merchandise menus and sales promotion activities. ▷ The Yoshinoya segment had a total of 1,206 stores in operation at end-Q3 FY02/21, having opened 21 new stores while closing 29. ▷ Major initiatives during the period included the Children’s Meal Support campaign in response to nationwide school closures from early March, which expanded to the Home Meal Support campaign following the government’s requests to refrain from going out in late March. In April, the company carried out a 15% Off Beef Bowl Take-Out campaign and sold Take-Out Only Family Meal Sets in response to the emergency declaration and requests to refrain from going out. While flexibly implementing
each initiative to support consumers during the pandemic as a part of the food infrastructure, the company responded swiftly to customer needs as they shifted from in-store dining to takeout. Takeout is running at about 40% of overall sales. Further, to meet the growing demand for food delivery, the company aggressively expanded its home delivery service to 712 stores. On
the menu front, the company made it a basic policy to develop products that can be enjoyed even for take-out. In April it rolled out Nikudaku Gyudon (beef bowl with an extra serving of beef) and Stamina Cho Tokumori Don. In June the company introduced Gyutan Mugitoro Gozen (grilled beef tongue served alongside dishes including mugitoro) as a limited time offer, and in October it rolled out winter favorite Gyusuki Nabezen (beef sukiyaki served alongside raw egg, rice, and pickled vegetables) as well as Kuroge Wagyusuki Nabezen (Japanese black beef sukiyaki served alongside raw egg, rice, and pickled vegetables). As for sales initiatives, in May, July, September, and November the company introduced Pokemori campaigns,
which were well received in FY02/20. In addition, it carried out an Extra-large Festival in June and participated in the premium meal voucher program of the Go To Eat campaign in November.
Hanamaru
▷ Segment sales: JPY15.2bn (-34.6% YoY) ▷ Segment loss: JPY2.6bn (versus profit of JPY1.3bn in cumulative Q3 FY02/20) ▷ Sales declined to approximately 70% of cumulative Q3 FY02/20 sales due to large-scale closures and shortened business hours of stores inside commercial outlets as a result of the COVID-19 outbreak. With the reopening of commercial outlets, sales have been recovering since Q2 (June—August 2020), but the situation remains challenging in areas where the company has a relatively large number of stores, with fewer people commuting to urban areas and lower occupancy rates for food court seating.
57/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
▷ As sales struggle amid severe business conditions, the company is taking steps such as rationalizing deliveries, but absorbing fixed costs remains difficult. However, operating losses have been shrinking quarter by quarter ever since Q1 as the company has been liquidating loss-making stores such as those in food courts and other suboptimal locations. ▷ The Hanamaru segment had 498 stores in operation as of end-Q3 FY02/21, having opened 18 new stores and closed 42 stores during the period. ▷ Major initiatives during the period included product initiatives such as the Torotama Fair in March, the Cold Udon Fair in June, the Cold and Spicy! Cool Spicy Tantan Udon Fair in August, the Warm and Thick! Ankake Fair in September, and the introduction of Lots of Ingredients! Pork Miso Udon. For sales initiatives, the company sold its popular tempura season tickets in March and September, and held a collaborative campaign with the character Koupen Chan in July. To address the rising takeout/delivery demand, the company also offered a new Takeout Only JPY500 (tax included) Menu, and increased the number of stores offering takeout to 171 stores, up 96 stores from end-FY02/20. Takeout accounts for 4% of sales, and deliveries 3%. In November, the company carried out the 100-yen Takeout Tempura campaign and participated in the premium meal voucher program of the Go To Eat campaign. Additionally, it flexibly implemented measures such as revising the price of Kake Udon (udon noodles in a simple soup stock).
Kyotaru
▷ Segment sales: JPY13.7bn (-35.1% YoY) ▷ Segment loss: JPY2.0bn (versus a profit of JPY252mn in cumulative Q3 FY02/20) ▷ Sales declined as same store sales fell approximately 30% YoY due to large-scale closures and shortened business hours of stores as a result of the COVID-19 outbreak, and as bento sales at events were down due to government requests to refrain from going out. With the reopening of commercial outlets, sales have been recovering particularly for the take-out business, which accounts for around 70% of all stores, but the situation remains challenging for the restaurant business, which accounts
for around 30%, due to a drop in alcohol demand. Takeout sales in Q3 appear to have returned to roughly the same level as seen in Q3 FY02/20. Shared Research attributes the segment’s revenue decline primarily to poor performance in restaurant operations, which account for approximately 50% of the segment. ▷ Operating losses continue to shrink as the company liquidates stores in the restaurant business in the face of adverse business conditions. ▷ The Kyotaru segment had a total of 294 stores in operation at end-Q3 FY02/21, having opened 12 new stores and closed 53 during the period. ▷ Major initiatives during the period included product initiatives that expanded the company’s takeout product lineup to address rising takeout demand such as the Sushi Party Set (home sushi party set) across all restaurant formats and Chirashizushi no Tane at Kaisen Misakiko. The company expanded the number of stores offering takeout to 94 stores, up 92 stores from end-FY02/20. Further, the company rolled out seasonal menus across all restaurant formats featuring seasonal ingredients that were carefully selected, for example by using chilled distribution for salmon, the most popular sushi item. Sales initiatives included the 88th Anniversary Akafuji Sale and the popular Nakamaki Sale in the takeout business, as well as the Bluefin Tuna Festival, the JPY99 Sale (for red plates usually priced at JPY110), and the Go To Eat campaign in the restaurant business.
Overseas
▷ Segment sales: JPY14.4bn (-13.0% YoY) ▷ Segment profit: JPY306mn (-64.9% YoY)
58/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
▷ Sales decline was attributed to large-scale store closures and shortened business hours due to curfews implemented in various areas as a result of the COVID-19 outbreak. ▷ After turning the corner into profitability in Q2 (Jun–August 2020), operating profit grew again in Q3 (September–November 2020) thanks to progress in liquidating unprofitable stores in China, where business conditions are recovering, as well as to the fact that the severe business environment in ASEAN has had little impact on earnings since most contracts are of the franchise chain variety. ▷ The total overseas store count at end-Q3 FY02/21 was 961, the company having opened 54 new stores while closing 87. ▷ In the US, COVID-19 infections continue to rise and the ban on in-store dining remains, but same store sales are recovering to the cumulative Q3 FY02/20 level by capturing demand for takeout. Sales have fallen slightly below the cumulative Q3 FY02/20 level but are recovering in China, where business is resuming. Meanwhile, sales have fallen YoY in the ASEAN region, where the COVID-19 continues to spread.
1H FY02/21 results
Consolidated results for 1H FY02/21 (March 2020–August 2020)
▷ Sales: JPY82.0bn (-23.4% YoY) ▷ Gross profit: JPY50.9bn (-26.8% YoY) ▷ Operating loss: JPY6.0bn (versus profit of JPY2.9bn in 1H FY02/20) ▷ Recurring loss: JPY5.0bn (versus profit of JPY3.0bn) ▷ Net loss*: JPY5.7bn (versus net income of JPY1.9bn)
*Net income/loss attributable to owners of the parent
▷ Factors behind sales decline: The novel coronavirus outbreak led to shortened business hours and temporary suspensions of operations at company group companies, which caused a significant decline in sales. In Japan, sales had been recovering as operations gradually resumed after the lifting of the state of emergency. Despite the recovery in sales, which had been ongoing since Q2 (June–August 2020), 1H sales fell YoY due in part to the government’s request asking companies in the
restaurant industry to restrict their business operations in August, when risks associated with the COVID-19 pandemic were rising in Japan. Sales in 1H were also JPY912mn below the company’s initial 1H forecast. ▷ Factors affecting profit: In 1H FY02/21 (March–August 2020), GPM was 62.1% (-2.8pp YoY). The company cut its cost of sales by JPY1.0bn thanks primarily to efforts aimed at reducing food loss conducted in accordance with broader structural reforms. However, its cost to sales ratio temporarily worsened due to a number of factors including the decrease in sales. The company proceeded with efforts to implement group-wide structural reforms and lower costs, achieving decreases of about JPY600mn through negotiations aimed at rent reduction and JPY1.0bn through cuts to expenses and executive compensation. Thanks to these efforts, SG&A expenses decreased; however, the SG&A expenses to sales ratio increased to 69.3% (+7.1pp YoY) due to a decline in sales. As a result of these factors, operating loss was JPY6.0bn (versus operating profit of JPY2.9bn in 1H FY02/20), JPY830mn narrower than the company’s initial projections. Recurring loss also decreased to JPY5.0bn thanks in part to the booking of subsidies (JPY860mn) as non-operating income. ▷ Booking of extraordinary loss: In total, the company recorded JPY2.1bn in extraordinary loss associated with a substantial decrease in sales, store closings, impairment loss caused by a decline in the profitability of store assets, and loss incurred due to the COVID-19 pandemic. This JPY2.1bn in extraordinary loss included JPY1.4bn in impairment loss associated with unprofitable store closures planned at the beginning of the term (the company called for the closure of as many as 150 directly operated stores in Japan and overseas during the year), a JPY595mn portion of fixed costs incurred while stores were closed in
59/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
accordance with instructions and guidelines released by government agencies booked as loss associated with the pandemic, and JPY130mn in other extraordinary loss. As a result, net loss attributable to owners of the parent was JPY5.7bn (versus JPY1.9bn in net income attributable to owners of the parent in 1H FY02/20). In FY02/21, the company has adopted a stance of focusing on cash flow in response to declining sales. It has curtailed spending on store openings and renovations while closing both unprofitable stores and stores at which sales are not expected to recover.
Segment results for 1H FY02/21 Yoshinoya
▷ Segment sales: JPY51.9bn (-5.2% YoY) ▷ Segment profit: JPY589mn (versus profit of JPY3.3bn in 1H FY02/20)
Segment sales fell as same store sales declined 8.1% YoY as a result of reduced operating hours at stores due to the novel coronavirus outbreak. Same store sales were down 8.1% YoY. On a monthly basis, same store sales were down 1.8% YoY in March, 4.0% in April, 7.3% in May, 12.3% in June, 5.7% in July, and 16.8% in August. Customer traffic was up 0.1% YoY in March, down 1.0% in April, down 9.2% YoY in May, down 18.9% in June, down 10.2% in July, and down 19.8% in August. Average spending per customer was down 2.0% YoY in March, down 3.0% in April, up 2.1% in May, up 8.1% in June, up 5.1% in July, and up 3.7% in August. Growth in customer traffic was sluggish due to the COVID-19 pandemic but an increase in average customer spend covered for this deficit.
Take-out and delivery sales ratio (fluctuates greatly according to the time of year, so the following figures represent the general impression at end-Q2; also applies to all other segments) was 38% for take-out and 2% for delivery. The Yoshinoya segment had a total of 1,213 stores in operation at end-1H FY02/21, having opened 17 new stores while closing 18.
Major initiatives during the period included the Children’s Meal Support campaign in response to nationwide school closures from early March, which expanded to the Home Meal Support campaign following the government’s requests to refrain from going out in late March. In April, the company carried out a 15% Off Beef Bowl for Take-Out campaign and sold Take-Out Only Family Meal Sets in response to the emergency declaration and requests to refrain from going out. While flexibly implementing each initiative to support consumers during the pandemic as a part of the food infrastructure, the company responded swiftly to customer needs as they shifted from in-store dining to take-out. Further, to meet the growing demand for food delivery, the company aggressively expanded its home delivery service to 645 stores. On the menu front, in March the company introduced Asagyu Set (morning beef bowl set) to capture demand for breakfast, and in April it rolled out Gyudaku Gyudon (beef bowl with an extra serving of beef) in response to the demand of some customers for more of Yoshinoya’s beef and Stamina Chomori Don, the largest beef bowl ever to be put on menu since Yoshinoya’s founding. In June the company introduced Gyutan Mugitoro Gozen (grilled beef tongue served alongside dishes including mugitoro), and in August it rolled out Nikudaku Gyu Karee (curry with extra beef). As for sales initiatives, in May and July the company introduced Pokemori campaigns, which were well received in FY02/20.
Hanamaru
▷ Segment sales: JPY9.5bn (-40.1% YoY) ▷ Segment loss: JPY2.2bn (versus profit of JPY1.2bn in 1H FY02/20)
Sales declined to approximately 60% of their level in 1H FY02/20 due to large-scale closures and shortened business hours of stores inside commercial outlets as a result of the novel coronavirus outbreak. Same-store sales in 1H (March–August 2020) were 42.9% lower YoY (-52.1% YoY in Q1 and -33.3% YoY in Q2). In Q2, after the state of emergency was lifted in May 2020, monthly sales gradually began to recover, and quarterly decline in same-store sales contracted. Take-out and delivery sales each accounted for 2% of segment sales. The Hanamaru segment had 509 stores in operation as of end-1H FY02/21, having opened 13 new stores and closed 26 stores during the period.
60/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Major initiatives during the period included product initiatives such as the Torotama Fair in March, the Cold Udon Fair in June, and the Cold and Spicy! Cool Spicy Tantan Udon Fair in August. For sales initiatives, the company sold its popular tempura season tickets in March, and held a collaborative campaign with the character Koupen Chan in July. The company also offered a Take-Out Only JPY500 (tax included) Menu, and increased the number of stores offering take-out to 191 stores, up from 95 stores at end-FY02/20. Additionally, the company extended tempura season ticket sales and revised the price of Kake Udon (udon noodles in a simple soup stock).
Kyotaru
▷ Segment sales: JPY8.6bn (-40.2% YoY) ▷ Segment loss: JPY1.8bn (versus a profit of JPY331mn in 1H FY02/20)
Sales declined as same store sales fell approximately 40% YoY due to large-scale closures and shortened business hours of stores as a result of the novel coronavirus outbreak, and as bento sales were down due to self-restraint in relation to events. Same-store sales in 1H declined 37.5% YoY (-46.8% YoY in Q1 and -27.1% YoY in Q2). As in the Hanamaru segment, monthly sales began recovering moderately in Q2, and quarterly decline in same-store sales contracted. Take-out and delivery sales (excluding take-out sushi restaurant sales) accounted for 4% and 5% of segment sales, respectively. The Kyotaru segment had a total of 325 stores in operation at end-1H FY02/21, having opened 11 new stores and closed 21 during the period.
Major initiatives during the period included product initiatives that expanded the company’s take-out product lineup such as the Ouchi de Sushipa (home sushi party set) across all restaurant formats, Chokotto Sushi aimed at kids at Kyotaru, and Chirashizushi no Tane at Kaisen Misakiko. The company expanded the number of stores offering take-out to 71 stores, up from 69 stores at end-FY02/20. Further, the company rolled out seasonal menus across all restaurant formats featuring seasonal ingredients particular to certain regions, such as warayaki katsuo (bonito roasted over a straw fire) from Shizuoka Prefecture. Sales initiatives included the 88th Anniversary Akafuji Sale, the popular Nakamaki Sale, and special day sales such as for Hinamatsuri (Girls’ Day) in the take-out business, as well as the Bluefin Tuna Festival and the JPY99 Sale (for red plates usually priced at JPY110) in the restaurant business.
Overseas
▷ Segment sales: JPY9.0bn (-16.6% YoY [overseas 1H sales are sales generated from January through June 2020]) ▷ Segment loss: JPY90mn (versus profit of JPY539mn in 1H FY02/20)
Sales decline was attributed to store closures and shortened business hours due to curfews implemented in various areas as a result of the novel coronavirus outbreak. The total overseas store count at end-1H FY02/21 was 956, the company having opened 29 new stores while closing 67.
In June 2020, same-store sales in the US recovered to the same level as in June 2019, while in China they were down about 20% YoY and in the ASEAN region they were down about 40% YoY. In the US, the ban on in-store dining remained in effect, but the company captured take-out demand, and same-store sales pulled even YoY in May 2020 and have remained level since. Performance in China hit a nadir in February 2020 but has been recovering since businesses were reopened; as of August 2020, same-store sales were roughly level YoY. COVID-19 continues to spread in the ASEAN region and same-store sales trended downward through May 2020. Since June, same-store sales have begun gradually rising and as of August 2020, had recovered to a level about 20% lower YoY.
Q1 FY02/21 results
Consolidated results for Q1 FY02/21 (March–May 2020)
▷ Sales: JPY39.7bn (-24.8% YoY)
61/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
▷ Gross profit: JPY24.4bn (-29.2% YoY) ▷ Operating loss: JPY5.0bn (versus profit of JPY1.0bn in Q1 FY02/20) ▷ Recurring loss: JPY4.3bn (versus profit of JPY1.3bn) ▷ Net loss*: JPY4.1bn (versus net income of JPY1.1bn)
*Net income/loss attributable to owners of the parent
▷ Sales: Q1 consolidated sales of JPY39.7bn were down 24.8% or JPY13.1bn YoY. With the company having restaurant operations around the world, it was especially hard hit by the coronavirus pandemic, this factor alone accounting for JPY9.0bn of JPY13.1bn decline in sales in Q1. In Japan, group companies shortened business hours and temporarily closed about 1,000 stores in response to requests by local governments, the state of emergency declaration by the national government, and downturns in business caused by sweeping school closures. On top of the hit to sales at its various restaurant chains resulting from the company’s pandemic mitigation measures, sales were also hit hard by a sharp drop in in-store dining as more and more people stayed at home. At the segment level, the company put the drop in sales resulting from the pandemic at JPY1.1bn at the Yoshinoya segment, JPY4.5bn at the Hanamaru segment, and JPY2.7bn at the Kyotaru segment. Overseas, in China, the company closed or shortened business hours at almost all of its stores in February, after the Chinese New Year. In the US and Southeast Asia, the company began shortening business hours and closing many stores in response to
government-imposed lockdowns in March. In addition to the hit to sales from the coronavirus pandemic, the sale of the company’s entire stake in Arcmeal last fiscal year means Arcmeal is not included in consolidated results this fiscal year; this reduced consolidated sales in Q1 by another JPY5.2bn. ▷ Earnings: The company reported a net loss of JPY4.1bn, down JPY5.2bn versus a profit of JPY1.1bn in Q1 FY02/20. The loss reflected the hit to earnings from sharp drop in sales, and was further aggravated by extraordinary losses of some JPY1.0bn taken in connection with coronavirus pandemic-related charges and asset impairment losses booked in connection with
permanent store closures and store assets whose earnings capacity had declined. These losses were only partially offset by group-wide efforts to cut costs, including cuts in various program expenditures and reductions in rent payments negotiated for the duration of temporary store closures. Factors leading to the Q1 recurring loss included a JPY4.4bn negative impact of the
drop in sales, one-time costs of JPY930mn stemming from the restrictions on store operations resulting from the pandemic, and an additional JPY350mn in expenses resulting from the increase in takeout orders and various infection mitigation measures. On the plus side, the losses were partially offset by the JPY140mn contribution from the sale of Arcmeal and
additions to earnings from the 40 new store openings and 60 store closures made during Q1 this year. Further, losses were mitigated in part by the JPY639mn in employment adjustment subsidy payments that the company expects to receive for Q1, these subsidiaries being booked as non-operating income. At the pre-tax profit level, the company booked extraordinary losses of JPY554mn in connection with the fixed costs incurred during store closures made in response to government directives. In this relation, we note that only the fixed costs incurred during the time store were closed in response to government directives were counted under extraordinary losses (most of these being at the Hanamaru chain), and that the operating costs incurred by the stores where it shortened operating hours or closed temporarily based on management’s judgment (and not as a result of force majeure) were booked as regular operating expenses. The total impact of the pandemic on the company’s costs, then, is the sum of pandemic-related increases in operating costs plus the related extraordinary losses. ▷ With respect to operating activities, the company said its main focus during the quarter was on cash flow, and with this uppermost in its mind it quickly took steps to cope with the drastic change in the operating environment and control spending across the entire group. Specific actions taken by the company during the quarter included cutbacks in capital spending on new store openings and store remodelings (including remodels of Yoshinoya stores to switch over to its Cooking and Comfort
62/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
format), cuts in spending at new stores, cuts in personnel-related spending where possible, and negotiated reductions in rents. To help it get through the difficult operating environment, during the quarter the company also secured a total of JPY20.0bn out of the JPY23.0bn in additional working capital it was looking to raise during the year.
Segment results for Q1 FY02/21 Yoshinoya
▷ Segment sales: JPY26.1bn (-2.0% YoY) ▷ Segment loss: JPY367mn (versus profit of JPY1.4bn in Q1 FY02/20) ▷ Segment sales held up well amid the pandemic both in absolute terms and relative to other segments. The company attributed the relatively small decline in segment sales to a combination of (1) steps taken during the quarter to better meet changes in customer needs, including the addition of new menu items and an expanded takeout menu, and (2) the relatively large number of Yoshinoya outlets that were unaffected by pandemic-related restrictions (either shorten operating hours or temporary closures) because they were either roadside stores or located in buildings where the owner wanted to keep businesses open. ▷ Same store sales in Q1 were down up 4.4% YoY. On a monthly basis, same store sales were down 1.8% YoY in March, 4.0% YoY in April, and 7.3% YoY in May. Customer traffic was up 0.1% YoY in March, down 1.0% YoY in April, and down 9.2% YoY
in May. Average spending per customer was down 2.0% YoY in March, 3.0% YoY in April, and up 2.1% YoY in May. As evidenced by the monthly figures, customer traffic slowly ebbed once the government’s state of emergency declaration went into effect. ▷ The Yoshinoya segment had a total of 1,217 stores in operation at end of Q1 FY02/21, having opened seven new stores while closing four. ▷ Major sales initiatives during the period included the Children’s Meal Support campaign in response to nationwide school closures from early March, which expanded to the Home Meal Support campaign following the government’s requests to refrain from going out in late March. In April, the company carried out a 15% Off Beef Bowl Take-Out campaign and sold Take-Out Only Family Meal Sets in response to the emergency declaration and requests to refrain from going out. While
flexibly implementing each initiative to support consumers during the pandemic as a part of the food infrastructure, the company responded swiftly to customer needs as they shifted from in-store dining to takeout. Further, to meet the growing demand for food delivery, the company aggressively expanded its home delivery service to 546 stores. On the menu front, in
March the company introduced Asagyu Set (morning beef bowl set) to capture demand for breakfast, and in April it rolled out Gyudaku Gyudon (beef bowl with an extra serving of beef) in response to the needs of customers who wished to have more of Yoshinoya’s beef and Stamina Chotokumori Don, the largest beef bowl ever put on menu since Yoshinoya’s founding. As a takeout sales initiative, in May Yoshinoya put Pokemori Set on its takeout-only menu as a special draw after seeing how well Pokemori Set sold last year. Takeout/delivery sales accounted for roughly 48% of segment sales in Q1, well above the 30% figure the segment usually sees and a good indication that the proportion of customers using Yoshinoya’s takeout and delivery service is increasing.
Hanamaru
▷ Segment sales: JPY4.0bn (-48.8% YoY) ▷ Segment loss: JPY1.6bn (versus profit of JPY517mn in Q1 FY02/20) ▷ The sharp decline in segment sales reflected a 52.1% drop in same store sales during the quarter, a large number of Hanamaru restaurants having been forced to either shorten operating hours or temporarily close in respond to the coronavirus pandemic.
63/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Approximately 60% of Hanamaru restaurants are located in buildings where the building owner determines the hours of business operations for the building. ▷ The Hanamaru segment had 525 stores in operation as of end of Q1 FY02/21, having opened seven new stores and closed four stores during the quarter. ▷ Major sales initiatives during the quarter included special menus such as the Torotama Fair menu in March and a Takeout Only JPY500 (tax-included) menu in April. Sales initiatives in March included the offering of its ever-popular Tempura Season Tickets, this time extending period for which the tickets were valid. At those stores still open, Hanamaru raised the price of Kake Udon (udon noodles in a soup stock), increased the number of stores offering takeout, and expanded its takeout menus with additions such as its Nico-Hanamaru Set and takeout boxed lunches. With respect to the price hike, the company said they had little impact on Q1 results as they only went into effect on May 26.
Kyotaru
▷ Segment sales: JPY3.7bn (-49.6% YoY) ▷ Segment loss: JPY1.3bn (versus a profit of JPY283mn in Q1 FY02/20) ▷ The sharp decline in segment sales reflected the large number of Kyotaru restaurants that were forced to either shorten operating hours or temporarily close in respond to the coronavirus pandemic because, like many Hanamaru restaurants, they
are located in buildings where the building owner determines the hours of business operations for the building. ▷ The Kyotaru segment had a total of 329 stores in operation at the end of Q1 FY02/21, having opened five new stores and closed 11 during the quarter. ▷ Major sales initiatives during the period included menu changes that expanded the company’s takeout menu to include items such as the Ouchi de Sushipa (home sushi party set) across all restaurant formats, Chokotto Sushi aimed at kids for Kyotaru, and Chirashizushi no Tane for Kaisen Misakiko. The company rolled out special seasonal menus across all restaurant formats
featuring seasonal ingredients peculiar to certain regions, such as warayaki katsuo (bonito roasted over a straw fire) from Shizuoka Prefecture. Other sales initiatives included the 88th Anniversary Akafuji Sale, the ever-popular Nakamaki Sale, and special one-day takeout sales events for holidays such as Hinamatsuri (Girls’ Day), as well as the Bluefin Tuna Festival and the JPY99 Sale (for red plates usually priced at JPY110) at its dine-in restaurants.
Overseas
▷ Segment sales: JPY4.5bn (-14.3% YoY) ▷ Segment loss: JPY175mn (versus profit of JPY284mn in Q1 FY02/20) ▷ The drop in segment sales reflected store closures and shortened business hours due to curfews implemented in various areas as a result of the coronavirus pandemic. The company put the total impact of the lockdowns on sales at its directly operated overseas stores at roughly JPY500mn, JPY300mn of this in China and JPY100mn of this in North America. ▷ The total overseas store count at end of Q1 FY02/20 was 984, the company having opened 20 new stores while closing 30.
64/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Other information
History
Yoshinoya HD Date Description 1899 Yoshinoya restaurant opened in Nihonbashi as a family-run business Dec 1958 Established Yoshinoya Co., Ltd. (now Yoshinoya Holdings Co., Ltd.) Apr 1973 Started franchise expansion; first Yoshinoya franchise restaurant opened in Odawara Nov 1977 Established Yoshinoya W est, Inc. (now Yoshinoya America, Inc.), to expand store network in the West Coast of US Jul 1980 Yoshinoya Co., Ltd. filed for corporate reorganization proceedings Mar 1983 Received reorganization plan approval Mar 1987 Completed reorganization proceedings Mar 1988 Merged with D&C Co., Ltd., the operator of Dunkin Donuts Japan, and changed company name to Yoshinoya D&C Co., Ltd. Jan 1990 Yoshinoya D&C Co., Ltd. stock approved by the Japan Securities Dealers Association for over-the-counter trading 1993 Est ablished subsidiary Hokkaido Y oshinoya 1996 Yoshinoya restaurant count in Japan reached 500 1997 Established subsidiary Okinawa Yoshinoya Sep 1998 Yoshinoya D&C Co., Ltd. withdrew from the Dunkin Donuts business; planned openings of Yoshinoya restaurants in Japan completed Oct 1999 Acquired shares in Kyotaru Co., Ltd. (made it a wholly owned subsidiary in Jul. 2011) Nov 2000 Yoshinoya D&C Co., Ltd. stock listed on the First Section of the Tokyo Stock Exchange Apr 2004 Temporarily suspended gyudon sales at Yoshinoya restaurants in Japan due to a ban on imports of US beef Jun Acquired shares in Hanamaru (made it a wholly owned subsidiary in Dec. 2012) Jun Yoshinoya restaurant count in Japan reached 1,000 Apr 2005 Acquired share in Kyushu Yoshinoya (now Nishinihon Yoshinoya) Oct 2007 Introduced a pure holding company system, renamed to Yoshinoya Holdings Co., Ltd., and established Yoshinoya Co., Ltd. through a incorporation-type company split Nov Acquired shares in Shikoku Yoshinoya (now Nishinihon Yoshinoya) Feb 2008 Subscribed for shares in Don (now Arcmeal) through a third-party allotment (made it a wholly owned subsidiary in Sep. 2015) Dec 2009 Established subsidiary Nakanihon Yoshinoya Mar 2010 Established subsidiary Kitanihon Yoshinoya Dec 2013 Established subsidiary Nishinihon Yoshinoya Nov 2014 Established Asia Yoshinoya International Sdn. Bhd. to supervise business operations in ASEAN countries Jun 2015 Established Yoshinoya China Holdings Co., Ltd. to supervise business operations in China Feb 2020 Sold all shares in A rcmeal t o A nrakut ei Apr 2021 Sold all shares in Kyot aru t o Food & Life Companies
May 2021 Transfer all shares of Kyotaru to FOOD & LIFE COMPANIES
Source: Shared Research based on company data
Yoshinoya, known as the creator of gyudon beef bowls, will in 2019 be celebrating its 120th anniversary since the opening of its first gyudon restaurant. The company has been operating restaurant chains for 45 years and opened its first overseas restaurant 42 years ago. Its business grew sharply after the opening of the second Yoshinoya restaurant in 1968. The restaurant count reached 100 in 1977 and topped 200 in 1978, backed by the company’s commitment to taste and innovative ideas such as the use of US beef. However, the procurement of beef fell behind the speed of restaurant expansion as beef imports had not been deregulated yet. The company lost customers after it mixed freeze-dried beef (imports of which were not restricted) with fresh beef and raised the price of gyudon. It also ran out of capital after opening new stores too quickly and filed for bankruptcy and rehabilitation under the Corporate Reorganization Act in 1980. Learning from failure, Yoshinoya’s employees reaffirmed that customers will go elsewhere if their gyudon isn’t tasty and that there can be no Yoshinoya without the customers. The company stopped using freeze-dried beef and embarked on a major restructuring exercise. These efforts were rewarded in 1987 when the company completed its reorganization and registered its stock as an OTC-traded security.
65/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Yoshinoya’s first M&A was the acquisition of Dunkin Donuts in 1988, but the company did not diversify in earnest until the late 1990s, when it sold Dunkin Donuts (1998). The company acquired Kyotaru in 1999, Hanamaru in 2004, and Don (now Arcmeal) in 2008 (and a few other brands, which were since sold or liquidated). The BSE crisis struck in 2003 during this period of diversification. Unable to procure beef, Yoshinoya had to stop selling gyudon, and as beef prices climbed and remained at a high level, its profit structure came under severe pressure. Today, led by President Kawamura, Yoshinoya HD is once again focusing on overseas expansion, as well as various initiatives to renew its business model (see “Medium-term plan” and “Group strategy” sections).
Hanamaru Kyotaru
Date Description Date Description May 2000 Opened the initial restaurant Hanamaru Udon Mar 1932 Opened as a Japanese style restaurant in Kita in Takamatsu city Shimogyo-ku, Kyoto Nov 2001 Established Hanamaru Co., Ltd. Mar 1938 Opened Kyotaru, a Japanese style restaurant, May 2002 Started franchise operation in Nihonbashi Feb 1950 Established Heian Kogyo Co., Ltd. Dec Started operation at Takamatsu factory Apr 1951 Developed chakin sushi Apr 2003 Started operation at Chiba factory Jul 1952 Opened the first Kyotaru store, selling chakin Apr Store count exceeded 50 and Kansai-style sushi; expanded network of Aug Store count exceeded 100 directly operated stores Dec Store count exceeded 150 Apr 1954 Renamed to Kyotaru Co., Ltd. Jun 2004 Signed agreement on capital and business tie- Nov 1979 Opened the first Kyotaru family restaurant up with Yoshinoya D&C Co., Ltd. Jul 1980 Approved for over-the-counter trading (listed Jul Started operation at Shizuoka factory on the Second Section of the Tokyo Stock May 2006 Became a consolidated subsidiary of Yoshinoya Exchange in 1983) D&C Co., Ltd. Jun 1984 Listed on the First Section of the Tokyo Stock Jun 2007 Started operation at Okinawa factory Exchange Oct Store count exceeded 200 Jan 1997 Filed for company reorganization proceedings Nov 2008 Store count exceeded 250 Nov 1997 Opened first conveyor belt sushi restaurant Jul 2009 Established Hanamaru Restaurant under the name Kaisen Misakiko Management (Shanghai) Co., Ltd. as a Feb 2001 Opened Sushi Misakimaru, an Edomae-style subsidiary sushi restaurant with flat rate of JPY100 per Feb 2011 Opened the first overseas store Hanamaru piece of sushi Udon World Expo Feb 2002 Completed company reorganization proceedings Mar Store count exceeded 300 Sep 2005 Listed on the JASDAQ market of the Tokyo Feb 2014 Made Senkichi Co., Ltd. a subsidiary Stock Exchange Apr 2015 Opened the first restaurant in Malaysia, Mid Dec 2010 Opened a take-out Edomae-style sushi store, Valley Megamall Sushi Misakiko May Store count exceeded 350 Apr 2011 Consolidated production to Funabashi factory May 2016 Started operation at Hokkaido factory and started a single factory operation Jul 2011 Became a wholly owned subsidiary of Oct Store count exceeded 400 Yoshinoya Holdings Co., Ltd. through share Feb 2018 Store count exceeded 450 exchange Source: Shared Research based on company data Source: Shared Research based on company data
News and topics April 2021 On April 6, the company announced revisions to its full-year FY02/21 consolidated forecast and the booking of non-operating income and extraordinary losses.
Revisions to consolidated FY02/21 forecast Sales: JPY170.3bn (previously JPY172.3bn) Operating loss: JPY5.3bn (previously JPY8.7bn) Recurring loss: JPY2.0bn (previously JPY7.8bn) Net loss*: JPY7.5bn (previously JPY9.0bn) EPS: -JPY116.09 (previously -JPY139.30) *Net loss attributable to owners of the parent
Reasons for the revisions The company lowered its sales forecast by about JPY2.0bn to factor in the impact of complying with the requests by local authorities to shorten business hours in line with the national government declaring a state of emergency in January 2021.
66/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
In Q3, the domestic Yoshinoya segment benefitted from new product introductions and successful sales strategies, and the overseas segment saw sales recover, particularly in China and the US. Nevertheless, sales still fell short of the company’s target. On the other hand, profit appears to have benefitted from the rapid and thorough implementation of companywide cost-cutting measures, including in purchasing costs. Thanks to its success in cost management in areas such as cost losses and working hours, the company for earnings at the operating line expects a move into the black in 2H as well as a narrowing in previously expected full-year loss. Factoring in the impact from the COVID-19 pandemic, the company estimates non-operating income, including assistance funds from local governments to prevent the spread of the virus and employment adjustment subsidies in line with the closure of stores, of JPY3.3bn, but also impairment losses booked under extraordinary losses of JPY4.5bn in line with its review of future value due to the closure of stores and a deterioration in profitability.
March 2021 On March 1, 2021, the company announced the conclusion of a committed credit line agreement.
The company announced that it has concluded a committed credit line agreement (with term-out option) to enable flexible and stable financing for business expansion, which will allow it to secure funds necessary for the future growth of its corporate group and to further stabilize its financial base.
The details of the agreement are included below. This agreement will have minimal impact on the company’s earnings outlook for FY02/21. Amount of agreement: JPY25.0bn Date of conclusion: February 26, 2021 Agreement type: Committed credit line agreement (with five-year term-out option) Period of commitment: February 26, 2021–February 28, 2023 (two years) Collateral: Unsecured and non-guaranteed Arrangers: Mizuho Bank, Ltd. and Sumitomo Mitsui Banking Corporation Participating financial institutions: Mizuho Bank, Ltd., Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd., Norinchukin Bank, Resona Bank, Limited, and Sumitomo Mitsui Trust Bank, Limited
February 2021 On February 26, 2021, the company announced the transfer of a consolidated subsidiary (share transfer).
Yoshinoya HD announced that, at a meeting of its board of directors held the same day, it had resolved to transfer all of the shares issued by Kyotaru Co., Ltd., its consolidated subsidiary, and held by the company to Sushiro Global Holdings Ltd.* (TSE1: 3563). On the same day, it also announced that it had concluded the share transfer agreement with Sushiro.
The business environment surrounding the restaurant industry, including Kyotaru, is becoming more severe as a result of the spread of COVID-19, and this is having a major impact on Kyotaru, which had been opening new stores mainly in urban areas. In the current climate, Yoshinoya HD decided that the best way to optimize its business portfolio and strategically allocate resources to growth businesses was to transfer all its shares in Kyotaru. The company also judged that the transfer of Kyotaru to Sushiro would serve to sustain growth and raise the corporate value of Kyotaru due to the expected synergistic benefits, such as increased product appeal and improved productivity, and the integration of purchasing routes leading to economies of scale.
The non-disclosure agreement between the two companies does not permit the disclosure of the share purchase price (a decision made based on third-party due diligence). The resolution at the board of directors’ meeting and the conclusion of the share transfer agreement both took place on February 26, 2021. The share transfer is scheduled to take place on Thursday, April 1, 2021. The impact the share transfer will have on FY02/21 consolidated performance is currently being determined. For further details, please refer to the company’s press release.
*SR note: Sushiro Global Holdings Ltd. changed its name on April 1, 2021. Please refer to the main text for details.
67/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
On February 16, 2021, the company announced the conclusion of a joint venture agreement with Jollibee Foods Corporation.
On the same day, the company announced that its subsidiary Yoshinoya International Philippines Inc. and Jollibee Foods Corporation, the leading restaurant operator in the Philippines, had signed an agreement to form a joint venture, aimed at growing the Yoshinoya brand in the Philippines as part of the company’s efforts to expand its overseas business.
Data on the new joint venture Company name: Jollibee Yoshinoya Inc. Established: May 2021 (tentative) Location: Pasig, The Philippines Shareholders (equity stake): Jollibee Foods Corporation (50%), Yoshinoya International Philippines Inc. (50%) Capital: PHP130mn
Purpose of the new joint venture The Yoshinoya group sees high market potential and opportunities for strategic expansion in the Philippines. It has been franchising Yoshinoya restaurants in the country since 1992. Jollibee Foods Corporation is the Philippines’ largest food service and restaurant company, with restaurant brands both in the Philippines and worldwide (as of end-December 2020, it had 3,257 restaurant locations in the Philippines). Through the new joint venture, the company aims to develop the Yoshinoya brand together with Jollibee Foods, and achieve mutual business growth. Under a franchise agreement regarding the Yoshinoya brand, Yoshinoya International Philippines Inc. and the joint venture will accelerate the opening of more restaurants. The company plans to open 50 Yoshinoya stores in the Philippines over the next ten years. Please see the press release for further details.
October 2020 On October 9, 2020, the company announced that it had recorded extraordinary losses.
July 2020 On July 28, 2020, the company announced its consolidated earnings forecast and revised dividend forecast.
On the same day, the company made an announcement regarding a reduction in executive compensation.
68/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Corporate governance and top management Corporate governance Form of organization and capital structure Form of organization Company with Audit & Supervisory Board Controlling shareholder None Directors and members of Audit & Supervisory Board Number of directors per Articles of Incorporation 13 Number of directors 5 Directors' terms per Articles of Incorporation 1 year Chairperson of the Board of Directors President Number of outside directors 2 Number of independent outside directors 2 Number of members of Audit & Supervisory Board per Articles of Incorporation 5 Number of members of Audit & Supervisory Board 4 Number of outside members of Audit & Supervisory Board 2 Number of independent outside members of Audit & Supervisory Board 2 Other Participation in electronic voting platform Y Providing convocation notice in English On the web Implementation of measures regarding director incentives Performance-linked compensation, other Eligible for stock option - Disclosure of executive officers' compensation None Policy on determining amount of compensation and calculation methodology Y Takeover defenses Y Source: Shared Research, based on company data As of May 2021
Top management President and Representative Director Yasutaka Kawamura Yasutaka Kawamura joined Yoshinoya Co., Ltd. in 1993 (assigned to a sales department in the Kansai region). He was put in charge of business development in the planning office in March 2003, became a director of Hanamaru Inc. in July 2004, was appointed president and CEO of Hanamaru in April 2007 and director of Yoshinoya HD in May 2010, and took over as president and CEO of Yoshinoya HD in 2012. Kawamura has also served as director of Yoshinoya America Inc. since August 2013 (current), president and CEO of Yoshinoya Co., Ltd. (current) and president and CEO of Yoshinoya Asset Management Service Co., Ltd. (current) since September 2014, and director of Asia Yoshinoya International since January 2015 (current) and of Yoshinoya China Holdings since June 2015 (current).
69/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Dividend policy
Dividends FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 FY02/21 Dividend per share (JPY) 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 0.0 Payout ratio 77.7% - 147.2% 123.2% 152.7% 103.4% 86.5% -21.5% 181.2% - Source: Shared Research based on company data
The company’s dividend payout ratio exceeded 100% until FY02/17. Its basic dividend policy is profit distribution in the form of stable, long-term dividends, with the final decision based on a range of factors such as management environment and demand for capital, consolidated earnings trends, and the minimum capital required for aggressive business development for the growth of the Yoshinoya Group. The company also has an ongoing shareholder incentive program*.
* Yoshinoya HD’s shareholder incentive program offers 20 JPY300 vouchers per year to shareholders with 100 – 999 shares (one unit = JPY6,000).
Major shareholders
Shareholding Top shareholders Shares held ratio Japan Trustee Services Bank, Ltd. 5,968,100 9.23% The Master Trust Bank of Japan, Ltd. 2,643,300 4.09% JP Morgan Securities Co., Ltd. 886,500 1.39% Kisshokai 619,350 0.96% State Street Bank West Client - Treaty 505234 569,200 0.88% MUFJ Morgan Stanley Securities Co., Ltd. 538,700 0.83% Trust & Custody Services Bank, Ltd. 519,144 0.80% BNYM SA/NV FOR BNYM FOR BNYM GCM CLIENT ACCTS M ILM FE 418,899 0.65% Ueda Yagi Tanshi Co., Ltd. 347,486 0.54% Taiju Life Insurance Company Limited 326,800 0.51% SUM 12,837,479 19.88% Source: Shared Research based on company data As of end of February 2021
Employees
No . o f e mp lo y e e s FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 FY 02/ 21 (year-end) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Yoshinoya 1,269 1,221 1,210 1,298 1,322 1,380 1,288 1,328 1,311 1,315 Part-time 7,890 7,601 8,321 8,463 8,195 8,019 8,671 8,674 9,045 7,781 Hanamaru 274 421 443 453 361 418 415 437 411 388 Part-time 935 981 1,038 1,143 1,358 1,527 1,746 1,905 2,036 1,456 Arcmeal 355 347 348 357 379 399 384 365 329 - Part-time 2,165 2,124 2,251 2,407 2,276 2,101 1,789 1,841 1,814 - Kyotaru 522 522 517 509 500 518 518 518 526 527 Part-time 2,204 2,150 2,092 2,150 2,144 2,122 2,310 2,391 2,371 1,698 Overseas 485 460 431 507 876 1,068 1,101 1,301 1,453 1,314 Part-time 1,532 1,468 1,413 1,060 1,303 1,620 2,103 2,154 2,111 1,830 Other 224 195 152 100 98 139 107 136 250 233 Part-time 582 601 477 209 247 341 212 254 414 330 Corporate 201 173 100 122 162 329 355 307 301 266 Part-time000000314314320300 Total Regular 3,330 3,339 3,201 3,346 3,698 4,251 4,168 4,392 4,581 4,043
Part-time 15,308 14,925 15,592 15,432 15,523 15,730 17,145 17,533 18,111 13,395 Source: Shared Research based on company data Notes: Part-time employees are the average number employed in financial year The increase in the number of corporate part-time employees in FY02/18 is due to centralizing group headquarter functions. Arcmeal segment included in consolidated results through FY02/20 but will no longer be included starting FY03/21, the company having sold all of its shareholding in Arcmeal Co., Ltd. in February 2020.
70/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Employees per store/restaurant by segment (full-time and part-time employees) FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 FY 02/ 21 Yoshinoya 7.707.398.008.208.017.798.278.268.537.47 Hanamaru 3.88 4.29 4.34 4.30 4.41 4.50 4.51 4.57 4.69 3.51 Arcmeal 14.65 14.37 14.85 15.44 14.27 13.59 12.21 12.90 13.92 - Kyotaru 7.798.107.958.088.398.028.578.748.656.76
Source: Shared Research based on company data Notes: Figures for part-times employees in the Overseas segment have been omitted as overseas franchises are large in number and varying in working conditions. Arcmeal segment included in consolidated results through FY02/20 but will no longer be included starting FY03/21, the company having sold all of its shareholding in Arcmeal Co., Ltd. in February 2020. Kyotaru figures are shown until FY02/21 as the segment was eliminated from FY02/22 due to a transfer of shares of Kyotaru.
Part-time employees per store/restaurant by segment FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 FY 02/ 21 Yoshinoya 6.736.386.987.116.896.707.197.187.466.40 Hanamaru 3.02 3.07 3.11 3.21 3.57 3.72 3.83 3.84 3.94 2.78 Arcmeal 12.66 12.35 12.97 13.60 12.47 11.36 9.88 10.55 11.16 - Kyotaru 6.216.326.366.546.666.597.017.217.105.11
Source: Shared Research based on company data Notes: Figures for part-times employees in the Overseas segment have been omitted as overseas franchises are large in number and varying in working conditions. Arcmeal segment included in consolidated results through FY02/20 but will no longer be included starting FY03/21, the company having sold all of its shareholding in Arcmeal Co., Ltd. in February 2020. Kyotaru figures are shown until FY02/21 as the segment was eliminated from FY02/22 due to a transfer of shares of Kyotaru.
By the way
There are a few theories associated with the origin of the company’s name. According to one, the name was derived from Yoshino, Fukushima-ku, Osaka, the hometown of founder Eikichi Matsuda. Another theory suggests the name came from the Yoshino cherry trees as the founder was particularly fond of cherry blossoms.
Yoshinoya’s famous catchphrase “Tasty, cheap, and fast” was “Fast and tasty” when the company was first established, because gyudon was not an inexpensive meal at the time. The words “Fast, tasty, and cheap” (in that order) appeared on the sign of the Shinbashi restaurant when it opened in 1972. Although the price still wasn’t cheap in absolute terms, “cheap” was added, because it was an economical way to eat beef. The word order was based on the order of impressions customers formed from the moment they entered the restaurant. In 1993, when a poor rice crop in Japan resulted in the use of some foreign rice, the company received feedback from customers that it didn’t taste good. After making improvements, the company put “tasty” at the beginning of the phrase in 1994 (“Tasty, fast, and cheap” to convey the message that quality improvements were made). The word order was changed to “Tasty, cheap, and fast” in 1997 to emphasize the low price when the consumption tax rate went up in 1997, before switching around again to “Tasty, fast, and cheap.” Since 2003 it has been “Tasty, cheap, and fast,” because the company believed it had successfully combined tastiness and low price, and aimed to improve service quality rather than providing a fast service.
71/73 Yoshinoya HD / 9861 RCoverage LAST UPDATE: 2021.08.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
Profile
Company Name Head Office Daiwa River Gate 18th floor Yoshinoya Holdings Co., Ltd. 36-2 Hakozakicho, Nihonbashi, Chuo-ku Tokyo Phone Listed On November 2000 +81-3-5651-8800 (Over-the-counter trading from January 1990) Established Exchange Listing December 1958 First Section of the Tokyo Stock Exchange Website Financial Year-End https://www.yoshinoya-holdings.com/english/index.html February IR Contact IR Web - https://www.yoshinoya-holdings.com/english/ir/index.html
72/73 About Shared Research Inc. RCoverage Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
We offer corporate clients comprehensive report coverage, a service that allows them to better inform investors and other stakeholders by presenting a continuously updated third-party view of business fundamentals, independent of investment biases. Shared Research can be found on the web at https://sharedresearch.jp.
Current Client Coverage of Shared Research Inc.
Advance Create Co., Ltd. Dream Incubator Inc. KI-Star Real Estate Co., Ltd. RESORTTRUST, INC. ADJUVANT COSME JAPAN CO., LTD. Earth Corporation KLab Inc. ROUND ONE Corporation Aeon Delight Co., Ltd. Edion Corporation Kondotec Inc. RYOHIN KEIKAKU CO., LTD. Aeon Fantasy Co., Ltd. Elecom Co., Ltd. Kumiai Chemical Industry Co., Lt d. SanBio Company Limit ed Ai Holdings Corporation en Japan Inc. Lasertec Corporation SANIX INCORPORAT ED AI inside Inc. Estore Corporation. Locondo, Inc. Sanrio Company, Ltd. AirTrip Corp. euglena Co., Ltd. LUCKLAND CO., LTD. Sanyo Trading Co., Ltd. ALINCO INCORPORATED FaithNetwork Co., Ltd. Marumae Co., Ltd. SATO HOLDINGS CORPORATION and factory, inc. Ferrotec Holdings Corporation MATSUI SECURITIES CO., LTD. SBS Holdings, Inc. ANEST IWATA Corporation FIELDS CORPORATION Media Do Co., Ltd. Seikagaku Corporation AnGes Inc. Financial Products Group Co., Ltd. Medical System Network Co., Ltd. Seria Co.,Ltd. Anicom Holdings, Inc. First Brothers Co., Ltd. MEDINET Co., Ltd. Serverworks Co.,Ltd. Anritsu Corporation FreeBit Co., Ltd. MedPeer,Inc. SHIFT Inc. Apaman Co., Ltd. Gamecard-Joyco Holdings, Inc. Mercuria Holdings Co., Lt d. Shikigaku Co., Lt d. ARATA CORPORATION GameWith, Inc. Metaps Inc. SHIP HEALTHCARE HOLDINGS, INC. Artspark Holdings Inc. GCA Corporation Micronics Japan Co., Ltd. SIGMAXYZ Inc. AS ONE CORPORATION Good Com Asset Co., Ltd. MIRAIT Holdings Corporation SMS Co., Ltd. Ateam Inc. Grandy House Corporation Monex Goup Inc. Snow Peak, Inc. Aucfan Co., Ltd. GiG Works Inc. MORINAGA MILK INDUSTRY CO., LTD. Solasia Pharma K.K. AVANT CORPORATION Hakuto Co., Ltd. Mortgage Service Japan Limited. SOURCENEXT Corporation Axell Corporation Hamee Corp. MRT Inc. Space Value Holdings Co., Ltd. Azbil Corporation Happinet Corporation NAGASE & CO., LTD Star Mica Holdings Co., Ltd. AZoom, Co., Ltd. Harmonic Drive Systems Inc. NAIGAI TRANS LINE LTD. Stream Media Corporation Base Co., Ltd HENNGE K.K. NanoCarrier Co., Ltd. Strike Co., Ltd. BEENOS Inc. Hoosiers Holdings NEC Networks & System Integration Corporation Sunnexta Group Inc. Bell-Park Co., Lt d. Hosokaw a Micron Corporat ion Net Marketing Co., Ltd. SymBio Pharmaceut icals Limit ed Benefit One Inc. Hope, Inc. Net One Systems Co.,Ltd. Synchro Food Co., Ltd. B-lot Co.,Ltd. HOUSEDO Co., Ltd. Nichi-Iko Pharmaceutical Co., Ltd. TAIYO HOLDINGS CO., LTD. Broadleaf Co., Ltd. H2O Retailing Corporation NIHON CHOUZAI Co.,Ltd. Takashimaya Company, Limited CanBas Co., Ltd. IDOM Inc. Nihon Denkei Co., Ltd. Take and Give Needs Co., Ltd. Canon Marketing Japan Inc. IGNIS LTD. Nippon Commercial Development Co., Ltd. TEAR Corporation Career Design Center Co., Ltd. i-mobile Co.,Ltd. Nippon Koei Co., Ltd. Tenpo Innovation Inc. Carna Biosciences, Inc. Inabata & Co., Ltd. NIPPON PARKING DEVELOPMENT Co., Ltd. 3-D Matrix, Ltd. CARTA HOLDINGS, INC Infocom Corporation NIPRO CORPORATION The Hokkoku Bank,Ltd. CERES INC. Infomart Corporation Nisshinbo Holdings Inc. TKC Corporation Chiyoda Co., Lt d. Int elligent W ave, Inc. Nisso Corporat ion T KP Corporation Chori Co., Ltd. ipet Holdings CO., Ltd. NS TOOL CO., LTD. Tsuzuki Denki Co., Ltd. Chugoku Marine Paints, Ltd. Itochu Enex Co., Ltd. OLBA HEALTHCARE HOLDINGS,Inc. TOCALO Co., Ltd. cocokara fine Inc. ItoKuro Inc. OHIZUMI MFG. CO., LT D. TOKAI Holdings Corporation COMSY S Holdings Corporat ion JAFCO Co.,Ltd. Oisix ra daichi Inc. T okyu Construction Co., Ltd. COTA CO.,LTD. JMDC Inc. Oki Electric Industry Co., Ltd. TOYOBO CO., LTD. CRE, Inc. JSB Co., Ltd. ONO SOKKI Co., Ltd. Toyo Ink SC Holdings Co., Ltd. CREEK & RIVER Co., Ltd. JTEC Corporation ONWARD HOLDINGS CO.,LTD. Toyo Tanso Co., Ltd. Daiichi Kigenso Kagaku Kogyo Co., Ltd. J Trust Co., Ltd Pan Pacific Int ernat ional Holdings Corporat ion T ri-St age Inc. Daiki Axis Co.,Ltd. Japan Best Rescue System Co., Ltd. PARIS MIKI HOLDINGS Inc. T SURUHA Holdings Daiseki Co., Ltd. JINS HOLDINGS Inc. PCA CORPORATION VISION INC. Daiwabo Holdings Co.,Ltd. JP-HOLDINGS, INC. PIGEON CORPORATION VISIONARY HOLDINGS CO., LTD. Demae-Can CO., LTD. KAMEDA SEIKA CO., LTD. Premium Water Holdings V-cube,Inc. DIC Corporat ion Kanamic Network Co., LTD. P3, inc. W orld Holdings Co., Ltd. Digital Arts Inc. KANEMATSU CORPORATION QB Net Holdings Co., Ltd. WOW WORLD Inc. Digital Garage Inc. kaonavi, inc. RACCOON HOLDINGS, Inc. YELLOW HAT LTD. Doshisha Corporation KFC Holdings Japan, Ltd. Raysum Co., Ltd. YOSHINOYA HOLDINGS CO., LTD. ZAPPALLAS, INC. Attention: If you would like to see companies you invest in on this list, ask them to become our client, or sponsor a report yourself.
Disclaimer: This document is provided for informational purposes only. No investment opinion or advice is provided, intended, or solicited. Shared Research Inc. offers no warranty, either expressed or implied, regarding the veracity of data or interpretations of data included in this report. We shall not be held responsible for any damage caused by the use of this report. The copyright of this report and the rights regarding the creation and exploitation of the derivative work of this and other Shared Research Reports belong to Shared Research. This report may be reproduced or modified for personal use; distribution, transfer, or other uses of this report are strictly prohibited and a violation of the copyright of this report. Our officers and employees may currently, or in the future, have a position in securities of the companies mentioned in this report, which may affect this report’s objectivity.
Japanese Financial Instruments and Exchange Law (FIEL) Disclaimer: The report has been prepared by Shared Research under a contract with the company described in this report (“the company”). Opinions and views presented are ours where so stated. Such opinions and views attributed to the company are interpretations made by Shared Research. We represent that if this report is deemed to include an opinion from us that could influence investment decisions in the company, such an opinion may be in exchange for consideration or promise of consideration from the company to Shared Research.
Contact Details Shared Research Inc. 3-31-12 Sendagi Bunkyo-ku Tokyo, Japan https://sharedresearch.jp Phone: +81 (0)3 5834-8787 Email: [email protected]
73/73