News Release

2023 Mar 28
AEON Stores (Hong Kong) Co., Limited

AEON STORES RECORDS REBOUND IN 2022 REVENUE TO HK$9.57 BILLION INCREASES PENETRATION RATE OF PROPRIETARY BRANDS AND CONTINUES TO PROMOTE DIGITAL TRANSFORMATION

(HONG KONG, 28 March 2023) – AEON Stores (Hong Kong) Co., Limited (“AEON Stores” or the “Group”; Stock code: 984) has announced today its annual results for the year ended 31 December 2022. During the year under review, owing to the resurgence of COVID-19 coupled with the unstable geopolitical landscape, fluctuating energy prices and supply chain disruptions, various countries experienced significant slowdown in their growth. In the past year, the Group’s operations in Hong Kong and Mainland China (the “PRC”) continued to be affected. To cope with the situation, the Group timely and flexibly adjusted its business strategies and actively responded to the changes and challenges in the macro environment.

In the year 2022, the Group recorded a revenue of HK$9,571.3 million (2021: HK$9,554.9 million), increasing 0.2% year-on-year. Gross profit margin was 29.5% (2021: 28.9%). Loss attributable to owners of the Company for the year decreased to HK$219.9 million (2021: loss of HK$470.0 million). The Group maintained a strong cash position with cash and bank balances and short-term deposits amounting to HK$1,423.4 million (2021: HK$1,833.6 million).

The Board has recommended payment of a final dividend of HK2.0 cents (2021: HK2.0 cents) per share. Together with the interim dividend, the Group will pay a total dividend of HK5.0 cents (2021: HK5.0 cents) per share in 2022.

Mr. Takenori Nagashima, Managing Director of AEON Stores, said, “In 2022, the pandemic remained rampant across the globe, with COVID-19 variants driving infection cases significantly upwards. Business suspensions and shortened business hours had a jarring effect on the Group’s business and affected our overall sales performance. Despite of this, sales of proprietary brand merchandise improved substantially compared with last year, and there is room for further improvement. The online retail segment also maintained stable growth in the past year. In addition, the new AEON STYLE Yau Tong and the first KOMEDA'S Coffee in Hong Kong have received overwhelming response since their opening. With such encouraging business performance, we will strive to establish a strategic position in the changing business environment and seize opportunities arising from the ‘New Normal’.”

During the year, its staff cost decreased by 0.1% and its ratio to revenue maintained at 11.5% (2021: 11.5%). Other operating expenses, including advertising, promotion and selling expenses, maintenance and repair expenses, utility expenses and other expenses, increased by 1.1% year-on-year and the ratio of other expenses to revenue was 11.7% (2021: 11.6%).

Hong Kong Operations

The Group has overcome a difficult year in the 2022 with the outbreak of fifth wave of Covid-19 pandemic but has seized the business opportunity of the distribution of consumption voucher from the Government. In January 2022, the outbreak of the fifth wave of the pandemic hit the recovering economy and the retail sector remained weak. Consequently, the Group’s sales performance in the first quarter was affected. In the second quarter of 2022, fueled by a new round of Consumption Voucher Scheme introduced by the government and the relatively stable pandemic condition, the Group's sales performance was slightly improved. Its sales performance in the month, when the second round of the consumption voucher was issued by the government, was also better than that in other months. In the second half of the year, the external environment worsened. The stock markets slipped and the major central banks raised increased interest rates sharply. Under the pressure of global inflation, the interest rate on Hong Kong dollar denominated borrowings rose. Given the tightened financial conditions, no significant improvement was seen in the citizens' consumption sentiment. However, sales performance was stabilized in those months in the second half year when the government issued the other rounds of consumption voucher.

Facing the increase of merchandise costs pressure, the Group continued to increase the proportion of its proprietary brand products, such as TOPVALU and HomeCoordy to improve its gross margins.

After the opening of AEON STYLE in Mong Kok in 2021, the Group opened the fourth AEON STYLE store in Hong Kong in Domain, Yau Tong in February 2022, delivering higher quality, more convenient and more pleasant shopping experience to the customers in neighboring areas. To consolidate and optimize its resource allocation, the Group closed its Lam Tin Store in March.

As for the small specialty store business, the Group continued to advance its strategic cooperation with Daiso Japan (Daiso Industries Co., Ltd.) (“DAISO”) and expanded the network of such stores. In June, DAISO’s flagship store was opened in Mong Kok and it introduced Threeppy, a new brand adopting the theme "Happy Life Begins with 300 Yen", for the first time. With the existing foundation of DAISO, the store offers more products directly imported from Japan and more diverse product categories to satisfy the daily needs of different customers.

To expedite the development of AEON Hong Kong’s specialty restaurant chain business, the Group entered into a regional franchise agreement in May 2022 with KOMEDA Co., Ltd, a well-known coffee shop chain, which originated from Nagoya, Japan, with the aim of operating business of "KOMEDA’S Coffee" in Hong Kong. The first “KOMEDA'S Coffee" in Hong Kong was opened at AEON STYLE Whampoa Store in October, offering customers "the most relaxing place" and a brand-new Japanese dining experience.

Revenue from Hong Kong operations for the year increased by 1.5% to HK$4,585.3 million (2021: HK$4,516.2 million). Segment results changed from loss of HK$184.1 million last year to loss of HK$124.2 million this year, mainly due to improvement in revenue via the Group’s actions in adjusting the merchandise mix, optimizing the stores network, strengthening marketing and promotion, accelerating the progress of digitization to optimize the system and streamline the process, etc.

PRC Operations

During the reporting period, there were mass COVID-19 outbreaks in the PRC, with confirmed cases in Guangdong Province and Shenzhen. To comply and follow respective pandemic prevention measures imposed by local governments, the Group had to temporarily shut down some of its stores and shorten business hours during the year, resulting in a reduction in overall customer flow and causing certain impact on its business. Revenue of the PRC business for the year dropped 1.0% year-on-year to HK$4,986.0 million (2021: HK$5,038.7 million), with a loss of HK$117.5 million (2021: loss of HK$265.0 million).

During the year, the Group continued to review the performance of its stores and closed the underperforming stores to lighten its financial burden. In addition, the Group executed its previously set store opening plan and inaugurated a new supermarket in Guangzhou in December.

Prospects

In response to the continuous development of the market and technology, rapid changes in customer spending habits and fierce competition in the retail and department store industry, the Group has kept abreast of the times and adjusts its business strategies in due course. In the future, the Group will implement three major development strategies to improve operational performance: 1) conduct merchandise reform; 2) accelerate digital transformation; and 3) optimize physical stores. In addition to increasing product categories and achieving product differentiation based on customer preferences, the Group will also increase the penetration rate of its proprietary brands to increase revenue and profitability. In terms of online marketing, the Group will improve efficiency of delivery and enhance the functions of AEON App to strengthen the efficiency of retail operations by making full use of online platforms. Physical stores will also be upgraded to provide customers with a more comfortable shopping experience. Besides, the Group will conduct diversified online and offline promotions to attract more new and existing customers, improve performance and enhance the overall competitiveness of the Group.

In Hong Kong, in addition to further expanding DAISO’s network of small specialty store, the Group will also explore more strategic cooperation opportunities with other well-known Japanese brands and provide diversified, superior merchandise with good value-for-money to articulate its “high quality, diversity and uniqueness” positioning. The Group also plans to open more KOMEDA'S Coffee stores in 2023 to gradually expand its catering business. In the post-pandemic era, the Group will continue to advance its digital transformation, such as improving operational efficiency and controlling costs through the adoption of “Mobile Assistant”, as well as introduce self-serve cash registers and automated background cash processing machines and expand the application scope of the AEON App. Such actions will help the Group bring together online and offline strengths and maximize benefits.

Regarding the PRC operations, as the Chinese government actively reopens its borders, the Group believes economic activities in the country will gradually return to normal and the sentiment in the retail market will also pick up progressively. The Group will continue to review its store mix and make appropriate arrangements. In addition, the Group will explore more expansion opportunities based on market development.

Mr. Takenori Nagashima concluded, “To address continuous market developments and technological advancements, rapid changes in customer spending habits, and fierce competition in the retail and department store segments, we have kept abreast of the times and adjusted our business strategies in a timely manner. In addition, we have formulated three major strategies to improve our business performance, including implementing product reform, accelerating digital transformation, and developing new physical stores while revitalizing existing stores, with our primary focus on increasing the number of points of sale for developed merchandise with higher profit margins. We have also launched direct sales programs in the PRC and Hong Kong to reduce our reliance on consignment products while increasing sales of products from our own supply chain. In terms of digital transformation, we plan to implement various product promotions to encourage customers to use the ‘AEON App’ and increase the proportion of online and delivered orders by enhancing the core functions of the App. We have officially launched the AEON App in Hong Kong in November 2022, which we will continue to optimize and improve, and is set to facilitate the growth of our online supermarket business in the region. By upholding our ‘Customer First’ philosophy and ‘everything we do, we do for our customers’ service principle, we will strive to provide the best services to our customers and enhance both online and offline shopping experiences to become the retailer of choice for customers in the region.”

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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, 30 independent Living PLAZA by AEON, 32 independent Daiso Japan, 1 independent Bento Express by AEON and 4 Mono Mono and 4 KOMEDA'S Coffee in densely populated districts in Hong Kong. It also operates 21 GMS and 15 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

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