H2O Retailing : Consolidated Financial Statements for the First Quarter of the Fiscal Year Ending March 31, 2024 (1Q/FY2024)

Consolidated Financial Statements for the First Quarter of the Fiscal Year Ending March 31, 2024

(Japanese accounting standards)

Aug. 2, 2023

Corporate name:

H2O Retailing Corporation

Listing

Tokyo Stock Exchange

Securities code

8242

URL https://www.h2o-retailing.co.jp/en

Representative

Title:

President and Representative Director

(Name)

ARAKI Naoya

Inquiries

Title:

Executive Officers

(Name)

YOSHIMATSU Hiroyuki

(TEL)

[phone]

Scheduled date of filing of the financial report

Aug. 10, 2023

Scheduled date of dividend payment

―

Preparation of supplementary materials

:

Yes

Briefing session on financial results

:

Yes

(For institutional investors and analysts )

(Figures are rounded down to the nearest million yen.)

Consolidated Business Results of the Fiscal Year Ending Mar. 31, 2024 (Apr. 1, 2023 to Jun. 30, 2023)

(1) Consolidated operating results (Cumulative total)

(Percentages indicate year-on-year changes.)

Net sales

Operating profit

Ordinary Profit

Profit attributable

to owners of parent

Millions of yen

%

Millions of yen

%

Millions of yen

%

Millions of yen

%

1Q of FY2024

154,813

3.7

4,758

616.4

5,192

178.0

3,371

417.6

1Q of FY2023

149,352

30.7

664

―

1,867

―

651

△89.6

(NOTE) Comprehensive income

1Q of FY2024

10,413Millions of yen

(85.0%)

1Q of FY2023

5,627Millions of yen

(133.1%)

Earnings

Earnings

Per share

Per share

(Diluted)

Yen

Yen

1Q of FY2024

29.11

28.88

1Q of FY2023

5.29

5.25

(2) Consolidated financial Position

Total assets

Net assets

Owner's Equity ratio

Millions of yen

Millions of yen

%

1Q of FY2024

682,281

278,678

37.4

FY2023

686,423

272,814

36.2

(Reference) Owner's' equity

1Q of FY2024

255,148Millions of yen

FY2023

248,821Millions of yen

2. Dividends

Annual Dividends

First Quarter

Second Quarter

Third Quarter

Fiscal Year End

Total

Yen

Yen

Yen

Yen

Yen

FY2023

―

12.50

―

12.50

25.00

FY2024

―

FY2024 (Forecast)

12.50

―

12.50

25.00

(NOTE) Revision to recently disclosed dividends forecast

:

None

3. Forecast of Consolidated Business Results for the Fiscal Year Ending Mar. 31, 2024 (Apr. 1, 2023 to Mar. 31, 2024)

(Percentages indicate year-on-year changes for the full fiscal year and year-on-year changes for the quarter.)

	Net sales		Operating profit			Ordinary profit		Profit attributable	Earnings
					to owners of parent	Per share
	Millions of yen		%	Millions of yen		%		Millions of yen		%	Millions of yen	%	Yen
Half Year	322,000		5.8	7,000		528.3		6,700		136.3	2,000	△28.3	17.36
Full year	675,000		7.5	19,000		66.8		18,500		42.3	9,500	△42.0	82.46
(Note 1) Revision to recently disclosed consolidated business results forecast	: Yes

(Note 2) For the revision of the forecast , please refer to "P.3 2. of Attached Materials: Forecast of FY2024".

(Note 3) The Company has applied "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29, March 31,2020) and other standards from the beginning of the first quarter of FY2022.

Consolidated gross sales, which is equivalent to net sales up to FY2021 excluding the effects of changes in accounting policies, amounted to 496,000 million yen (up 7.5% year on year) for the first half and 1,040,000 million yen (up 6.2% year on year) for the full year.

These financial statements have been prepared for reference only in accordance with accounting principles and practices generally accepted in Japan.

Notes
(1) Changes in significant subsidiaries during the period	:	None
(Changes in specified subsidiaries resulting in changes in the scope of consolidation)
(2) Adoption of special accounting methods for preparing quarterly consolidated financial statements	:	None
(3) Changes in accounting policies, changes in accounting estimates or restatements
① Changes in accounting policies due to changes in consolidated accounting standards	:	None
② Changes in accounting policies other than (i)	:	None
③ Changes in accounting estimates	:	None
④ Restatement due to correction	:	None

(4) Number of share issued and outstanding (common shares)
①	Number of shares outstanding at the end of the	period	1Q of FY2024	125,201,396	Shares	FY2023	125,201,396 Shares
(including treasury share)
② Number of treasury shares at the end of the period
	1Q of FY2024	9,988,568	Shares	FY2023	8,813,548 Shares
③ Average number of shares outstanding
	1Q of FY2024	115,801,719	Shares	1Q of FY2023	123,215,448 Shares
(quarterly cumulative period)
(Note)	Quarterly financial results reports are exempt from quarterly review conducted by certified public accountants or an audit corporation.
(Note)	Explanations and other special notes concerning the appropriate use of business performance forecasts

・The forecasts of consolidated financial results in this document are based on information available as of the date this document is released. Actual business and other results may differ from the forecasts due to various factors. Please refer to the "P.3 2. of Attached Materials: Forecast of FY2024" for the assumptions upon which forecasts are based and the cautionary statements regarding the use of forecasts.

○Attached Material

1.Status of financial results	2
2.Forecast of FY2024	3
3.Quarterly Consolidated Financial Statements	4
(1)	Quarterly Consolidated Balance Sheets	4
(2)	Quarterly Consolidated Statements of Income and Quarterly Consolidated Statements of Comprehensive Income	6

1

1. Status of financial results

• Sales

Consolidated net sales were ¥154,813 million, 103.7% year on year. Consolidated gross sales, which are equivalent to net sales up to the fiscal year before the application of Accounting Standard for Revenue Recognition, excluding the effects of changes in accounting policies, amounted to ¥244,693 million, 107.4% year on year. In Department Store business, in addition to steady domestic consumption, sales grew due to a recovery in inbound sales. In Supermarket business, sales increased year on year at existing stores due to a rise in unit prices, resulting an increase in overall consolidated sales.

• Operating Profit and Ordinary Profit

Operating profit increased significantly to ¥4,758 million, 716.4% year on year and ordinary profit to ¥5,192 million, 278.0% year on year as a result of improved profits in Department Store business due to sales growth and in each segment.

(Department Store business)

Domestic sales were favorable with the downgrading of the position of COVID-19 and society returning to pre-COVID-19 level. Inbound sales also recovered, mainly in high-end items, exceeding 1Q of FY2019 results.

At Hankyu Main Store, sales in all categories increased from the previous year due to further recovery of outgoing needs. Overall sales of fashion, including cosmetics, were strong, and sales of jewelry, watches, and luxury brand fashions continued to grow.

Selling, general and administrative (SG&A) expenses were lower than planned due to efforts to control costs, such as advertising expenses, despite increases in utility expenses and sales related expenses.

As results of the above, gross sales were ¥123,508 million, 113.6% year on year and operating profit was ¥3,296 million, 269.3% year on year.

(Supermarket business)

In Supermarket business, gross sales were ¥103,098 million,101.8% year on year and operating profit was ¥1,842 million, 432.2% year on year.

At Izumiya・Hankyu Oasis Co., Ltd. and Kansai Super Market Ltd, which operate supermarkets, sales at existing stores increased from the previous year, partly due to the continued upward trend in average spend per customer caused by price hiking. And, in the previous year, sales struggled due to a decline in demand for eating at home as a result of a decrease in the number of people infected with COVID-19, and this year's sales were a reaction to that decline.

Izumiya Co., Ltd. and Hankyu Oasis Co., Ltd. merged in Apr. 2023 to form Izumiya・Hankyu Oasis Co., Ltd. has promoting measures such as centralization of organization and human resources, streamlining of sales headquarters functions, and management of stores by area unit that cross over trade names.

Existing store sales were 103.5% year on year (99.8% for the number of customers, 103.7% for average spend per customer).

In Izumiya and Hankyu Oasis, which are undergoing restructuring, worked to improve productivity by thoroughly implementing chain operations, increase sales and improve gross profit margin by rebuilding merchandising in accordance with the characteristics of each market area, improve gross profit margin by further integrating purchases, and review expenses.

SG&A expenses were lower than both the previous year's result and forecast due to continued efforts to optimize store staff organization through chain operations, and reduced personnel costs more than planned.

Kansai Super Market Ltd. promotes measures based on three categories: health management (e.g. promotion of taking 7 continuous holidays, support for smoking cessation), productivity improvement (e.g. pilot test to expand the number of stores introducing electronic shelf tags), and education (e.g. training sessions for management executives, store managers and division manager to share information and unify their intentions).

Existing store sales were 103.7% year-on-year (99.0% for the number of customers, 104.7% for average spend per customer).

SG&A expenses were lower than the previous year's results and forecasts due to overall cost controls, while utility expenses increased. Regarding stores remodeling in both companies, three stores were remodeled.

Profits at food manufacturing subsidiaries increased due to growth in specialty store sales at HANKYU delica i, Inc. and Hankyu Bakery Co., Ltd.

2

(Shopping Center business)

In Shopping Center business, gross sales were ¥8,087 million, 88.7% year on year and operating profit was ¥1,020 million, 171.2% year on year.

In H2O Shopping Center Development Co., Ltd., which operates management of Izumiya Shopping Center and sales of apparel and home products at Izumiya stores, worked to strengthen profitability, optimize expenses, and strengthen collaboration with local communities. Efforts to increase tenant sales and the installation of new event parcels were better than planned, but profits declined due to the reduction of direct operation area and the closure of Izumiya Shopping Center stores.

Oi Development Co., Ltd., which operates business hotels, posted increases in both sales and profits as occupancy rates exceeded 90%, reflecting the success of aggressive efforts to capture demand through flexible pricing measures under recovering both business and tourism demand.

(Other business)

In other business, gross sales were ¥9,998 million, 113.5% year on year and operating profit was ¥2,165 million (operating loss of ¥769 million in the previous year). The impact of COVID-19 eased, and sales of specialty store subsidiary increased. The subsidiary in the other business, which excludes the holding company, posted an increase of ¥177 million, resulting in an increase in profit in the other business.

• Profit attributable to owners of parent

Profit attributable to owners of parent was ¥3,371 million, 517.6% year on year due to an extraordinary income of ¥723 million including gain on sales of non-current assets by H2O Shopping Center Development Co., Ltd. and an extraordinary loss of ¥398 million including loss on retirement of non-current assets associated with the renovation of Hankyu Main Store and the remodeling of Kobe Hankyu and Takatsuki Hankyu.

2. Forecast of FY2024

During the first quarter of the consolidated fiscal year (April 1, 2023 to June 30, 2023), consolidated gross sales were generally in line with plans, while SG&A expenses were lower than planned as a result of cost reduction efforts, particularly in Department Store and Supermarket businesses.

As results of the above, consolidated results for the first quarter of the fiscal year exceeded the forecast significantly. Accordingly, we have revised our consolidated forecasts for the first half of the fiscal year and for the full fiscal year.

3