2022 Aug 26
AEON Stores (Hong Kong) Co., Limited

AEON STORES RECORDS INCREASE IN REVENUE IN 2022 FIRST HALF AMID DIFFICULT BUSINESS ENVIRONMENT

AEON Stores (Hong Kong) Co., Limited (“AEON Stores” or the “Group”; Stock code: 984) has announced today its interim results for the six months ended 30 June 2022. The Coronavirus Disease 2019 (“COVID-19”) has lingered on for almost three years and continued to impact the retail market and business operation in the period. Although many regions have become accustomed to the effect of the pandemic and the resultant "new normal", COVID-19 still had a negative impact on the world across various facets, and combined with geopolitical risks, has continued to affect the global economy. In the face of these challenges, the Group continued to adopt flexible business strategies to maintain market competitiveness.

In the six months ended 30 June 2022, the Group’s revenue increased by 5.0% year-on-year to HK$5,048.7 million, while gross profit margin increased by 0.1% to 28.3% (2021 1H: 28.2%). The Group recorded a loss attributable to owners of the Company of HK$144.6 million (2021 1H: loss of HK$245.4 million) for the period. The Group maintained a healthy cash position with cash and bank balances and short term time deposits amounting to HK$1,678.0 million as at 30 June 2022 (31 December 2021: HK$1,833.6 million).

After reviewing the dividend policy, the Board recommended payment of an interim dividend of HK$0.03 per share (2021 1H: HK$0.03 per share) to adhere to its philosophy of bringing returns to shareholders.

Mr. Isao Sugawara, Executive Director and Managing Director of AEON Stores, said, “During the first half of the year, the Group’s business was impacted by the ongoing difficult market environment, stemming from the continued COVID-19 outbreak in Hong Kong and PRC, as well as wider macroeconomic factors. In the face of challenges, the Group adopted flexible business strategies in order to remain competitive and match evolved customer needs under the “new normal”. The Group continued to elevate its portfolio of innovative and quality assured Japanese products, placing emphasis on own brands such as “TOPVALU” and “HÓME CÓORDY”, and focusing on direct-importing more merchandise from Japan to capitalize on the procurement channels of AEON Japan. Consequently, the Group managed to raise revenue under such circumstances and improved its results.”

Hong Kong Operations

The outbreak of the fifth wave of the pandemic in January 2022 again disrupted the gradual recovery of the local economy in the first half year. Local consumption sentiment continued to be sluggish amid various social distancing measures. However, boosted by the distribution of the first round of consumer vouchers in April 2022, local consumer activity became more dynamic and the Group's sales performance also improved in the second quarter when compared with the first quarter.

In the first half of 2022, the Group opened its fourth AEON STYLE store in Yau Tong. The layout of the new store has been planned to accommodate the lifestyle of young families and office workers in the vicinity, and also introduced various new Japanese-related elements, including a wide range of high-quality merchandise at affordable prices, as well as new lifestyle solutions to provide an enriched shopping experience and enjoyable, healthy and quality shopping fun. Besides, the Group entered into a regional franchise agreement with KOMEDA Co., Ltd. from Japan in May, to open "KOMEDA's Coffee" in Hong Kong, accelerating the development of AEON Hong Kong's specialty restaurant chain business. The Group’s Hong Kong operations recorded a 4.2% increase of revenue to HK$2,347.2 million in the first half of the year (2021 1H: HK$2,252.6 million), while loss of the Hong Kong operations decreased to HK$76.1 million (2021 1H: loss of HK$105.9 million).

During the period, the Group continued to advance its strategic cooperation with Daiso Industries Co., Ltd. (“DAISO”) and its related store network expansion plan. It opened 1 DAISO flagship store in Mongkok in June and introduced Threeppy, a new brand adopting the theme "Happy Life Begins with 300 Yen", for the first time to offer more diversified products to satisfy the daily needs of customers.

PRC Operations

In the first half of 2022, the domestic outbreak of the pandemic was present in many parts of the PRC and affected most provinces in the country, placing pressure on the consumer market’s operation. Sporadic infection cases were reported in Guangdong Province and Shenzhen from time to time, and the situation was particularly severe at the beginning of the year. Stringent prevention and control measures, such as community lockdowns, suspension of public transportation and suspension of work and schooling, largely shut down areas and hindered the day-to-day operations of enterprises. Some of the Group’s stores in the Mainland had to be temporarily suspended at the request of the authorities, thus affecting its business performance.

In spite of the negative environmental factors in the first half year, revenue from the PRC operations increased 5.8% to HK$2,701.5 million (2021 1H: HK$2,554.5 million); one loss-making store was closed and loss of the PRC operations decreased to HK$85.6 million (2021 1H: loss of HK$123.4 million).

Prospects

Global health issues remain a concern along with risk of resurgence of the pandemic. In addition, problems such as widespread real estate market risk, the continuous spread of global inflationary pressure and a high unemployment rate will continue to add pressure on the PRC and Hong Kong economy, and in turn the general consumer sentiment and retail performance in the latter half of the year. In the face of rapidly changing consumption behaviour under the “new normal,” the Group will flexibly adopt various measures to improve its business performance.

In Hong Kong, the Group has plans for various promotional activities and the launching of different product offers to leverage on related opportunities in the market, such as the launch of Phase II of the Consumption Voucher Scheme in early August, in order to generate revenue for the Group while boosting local consumption. Meanwhile, the Group’s first "KOMEDA's Coffee" shop is expected to open in the AEON STYLE Whampoa in October. It will present a new Japanese style coffee shop design and the Group looks forward to offering a novel, yet comfortable and satisfying lifestyle experience to customers. The Group will also continue to further expand its network of small specialty stores and deepen its strategic cooperation with Daiso.

Regarding PRC operations, given the sporadic outbreaks and possibility of pandemic resurgence in Guangdong Province, the Group will focus on achieving progress through prudent cost control to promote continuous improvement in business performance. Leveraging its global supply chain to increase the proportion of proprietary brands, the Group expects to boost profitability while accelerating product reform and expanding differentiation. At the same time, it will continue its digital transformation and consolidation and the upgrade of other digital platforms, and strive to improve operational efficiency by optimising and expanding O2O commerce and CRM. As for the store network, the Group will continue to improve its store structure and mix, with a new supermarket set to open in Guangzhou in December 2022 as originally planned.

Mr. Sugawara concluded, “The pandemic has posed unprecedented challenges for people and society around the world, resulting in a continued impact on the global economy and business environment. The Group believes the rising influence of health-conscious consumer behaviour will be a continuing trend and consumers will keep pursuing a higher-quality living standard in the long term. As such, the Group will adhere to our ‘Everything we do, we do for our customers’ commitment and stay ahead of market trends to bring quality merchandise and the best shopping experiences to customers. We would like to express our sincere gratitude to all our customers and stakeholders that have supported us as we continue to take on various market challenges. We will continue to review and adjust existing strategies where necessary, consolidate our fundamental strengths and carry out internal reforms in order to enhance operational productivity and maintain long-term market competitiveness.”

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About AEON Stores
AEON Stores was established in Hong Kong in 1985 and listed on the Hong Kong Stock Exchange in 1994. The Group is mainly engaged in the operation of general retail businesses (General Merchandise Stores and Independent Supermarkets). Currently, it operates 10 GMS, 2 independent supermarkets, 31 independent Living PLAZA by AEON, 31 independent Daiso Japan, 4 Mono Mono, 4 KOMEDA'S Coffee and 1 JELYCO DO By KOMEDA'S Coffee in densely populated districts in Hong Kong. It also operates 21 GMS and 17 independent supermarkets in Guangdong Province, the PRC.

For more information：
AEON Stores (Hong Kong) Co., Limited
Corporate Communication Department
Tel.：（852）2165 0777
Email：aeonpr@aeonstores.com.hk