2024 Mar 28
AEON Stores (Hong Kong) Co., Limited

AEON STORES ANNOUNCES 2023 ANNUAL RESULTS CONTINUES TO DRIVE OPERATIONAL REFORM COMMITTED TO ENHANCING EFFICIENCY AND PRODUCTIVITY

(HONG KONG, 28 March 2024) – AEON Stores (Hong Kong) Co., Limited (“AEON Stores” or the “Group”; Stock code: 984) today announced its annual results for the year ended 31 December 2023. During the year, the global economy experienced moderate growth amid inflation and geopolitical tensions, and economies around the world underwent adjustment and recovery. However, the Group’s business was affected by the overall sluggish trade and investment activity, as well as the weak economic recovery in Hong Kong and Mainland China, with the pace of recovery being slower than expected. In light of this, the Group actively adjusted its business strategies and implemented a series of reforms to address market changes and challenges.

In 2023, the Group recorded revenue of HK$8,692.9 million (2022: HK$9,571.3 million), representing a decrease of 9.2% year-on-year. Gross profit margin declined slightly to 29.2% (2022: 29.5%). Loss attributable to owners of the Company for the year decreased to HK$188.7 million (2022: loss of HK$219.9 million). The Group maintained a strong cash position with cash and bank balances and short-term deposits amounting to HK$1,149.6 million (2022: HK$1,423.4 million).

Mr. Takenori Nagashima, Managing Director of AEON Stores, said, “In 2023, the Mainland China and Hong Kong markets gradually recovered from the impacts of the epidemic. However, the Group still faces challenges in its business operations, such as inflation, high interest rates and sluggish consumption. To address these issues, we have adapted our business strategy to better understand consumer needs. We have consistently optimized our product mix and store portfolio, focusing on increasing the proportion of private label brand merchandise and expanding direct imports to improve profit margins. With the steady growth of our e-commerce business, we will continue to prioritize our digital transformation and actively expand our online presence to maximize profitability. Despite the challenging market environment, we are committed to implementing operational reforms that will enhance the Group's efficiency.”

During the year, the Group’s staff costs decreased by 7.9% and their ratio to revenue was maintained at 11.7% (2022: 11.5%). Other operating expenses, including advertising, promotion and selling expenses, maintenance and repair expenses, utility expenses and other expenses, decreased by 5.3% year-on-year and the ratio of other expenses to revenue was 12.2% (2022: 11.7%).

Hong Kong Operations

In 2023, Hong Kong's economy experienced a gradual recovery, although the macro environment remained complex and volatile. The retail and catering industries in Hong Kong faced challenges and experienced lackluster performance due to the lower-than-expected number of tourists to Hong Kong and related consumption, the outbound travel frenzy among Hong Kong residents, and the increase in “northbound” travel. In view of this, the Group has strategically enhanced the promotion of product categories with outstanding performance, and sales of travel-related, health-related, and cosmetic products have increased significantly. The Group also continued to increase the number of directly imported product categories and the proportion of its private label brand merchandise, including TOPVALU, HÓME CÓORDY and PEACE FIT COOL and WARM, in order to reduce procurement costs and improve gross profit margin.

During the year, the Group continued to expand its store network, promote its small specialty store business and opened a new Daiso Japan store in Wong Tai Sin. In June, the Group opened two “KOMEDA’S Coffee” branches in Tuen Mun and Tsim Sha Tsui in order to accelerate the development of AEON Hong Kong’s specialty restaurant chain business. The Group also embarked on several new endeavours during the year. In addition to opening a pop-up store in Mong Kok, it introduced new tenants such as "SUKIYA" and "GYU SHIGE", in the hope of attracting more customers with brand new environments and experiences and improve business performance.

To improve operational efficiency, the Group optimized its supplier selection criteria and saved procurement costs during the year. It also upgraded the AEON App by adding the AEON β membership system and improving the original design and services to create a better user experience, and launched the Net Super online supermarket covering Hong Kong Island, Kowloon and the New Territories (with the fastest delivery time of 5 hours) to improve the performance of the online business. In terms of operations and management, with the help of its “Mobile Assistant”, the Group strengthened back-end operations and support, streamlined daily work processes and improved the work efficiency of employees.

Revenue from Hong Kong operations for the year decreased by 9.7% to HK$4,140.9 million (2022: HK$4,585.3 million). The segment result changed from a loss of HK$124.2 million last year to a loss of HK$149.9 million this year.

PRC Operations

The Mainland China economy did not recover as strongly as anticipated following the epidemic in 2023 due to the severe recession in the real estate market. During the year, the Group continued to adjust its operating network and reviewed the sales performance of its stores. A number of stores, such as Guangda Store in Guangzhou and Huizhou Store, achieved satisfactory results after extensive revitalization and renovation. The Group also opened three stores in the GBA, including AEON Guangzhou Zhongshansi Road Store, AEON Guangzhou Nansha Yuefangcheng Store and AEON Zhuhai Shizimen Store.

Revenue from the PRC business for the year was HK$4,552.0 million (2022: HK$4,986.0 million). The loss from the PRC operations decreased to HK$61.5 million (2022: loss of HK$117.5 million).

Prospects

In Hong Kong, persistently high interest rates and asset market price adjustments may continue to affect the local economy, while consumer sentiment will remain rational and cautious. The preference of travelers visiting Hong Kong for cultural and experiential travel rather than shopping, and the Hong Kong public’s penchant for outbound travel rather than staying and spending in Hong Kong, will also pose a downside risk to the prospects of the local retail industry. The Group’s operations will continue to face many challenges in 2024.

The Group has formulated various strategies to respond to the situation. In view of the current business performance, the Group will continue to: 1) increase the proportion of its own brands such as TOPVALU and HÓME CÓORDY; 2) leverage the advantages of the AEON Japan Group and various channels to introduce more well-known Japanese brands to Hong Kong stores, while expanding the range of products imported directly to Japan and Southeast Asia; 3) strengthen the development of Living PLAZA by AEON, Daiso Japan, Mono Mono and KOMEDA'S Coffee in order to give full play to the Group’s synergies and increase the overall profit margin more effectively; and 4) further expand the Net Super online business to enhance the competitiveness of the online businesses.

In terms of internal management, the Group will continue to review the workflow and performance of each division to eliminate unnecessary procedures in order to make more effective use of resources and enhance operational efficiency and productivity. In addition, the Group will continue to promote digital transformation, such as expanding the application of electronic price tags, self-service checkouts, "POS Express" and high-speed cash recyclers, with the support of "Mobile Assistant" and the delivery service of AEON App, to simplify the daily and back-end work of the stores, while providing customers with a more convenient and comfortable shopping experience.

Regarding the PRC operation, in addition to the above strategies, the Group will reform the store format. It will create a new integrated department store format and reform the operating model of community food supermarkets to provide better services and better meet customer needs with a new look, thereby enhancing the Group's competitiveness. In addition, the Group plans to open new AEON stores in the Greater Bay Area in the coming year and will continue to tap the expansion opportunities in this region.

Mr. Takenori Nagashima concluded, “Despite the various positive measures taken by the government to stimulate the economy, the market is still under pressure from the economic downturn in the short term and the recovery of the retail sector has been slow. However, as interest rate cuts are expected to intensify, this will help the retail market to recover. In the face of the uncertain market outlook, by upholding our ‘Customer First’ philosophy and ‘everything we do, we do for our customers’ service principle, the Group will continue to make customer-centric innovations, provide customers with the best online and offline shopping and service experiences, and strive to become the retailer of choice for customers in the region to continuously enhance the competitiveness of the Group's brands.”

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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 merchandise stores (GMS). Currently, it operates 10 GMS, 2 independent supermarkets, 33 independent Living PLAZA by AEON, 30 independent Daiso Japan, 1 independent Bento Express by AEON and 4 Mono Mono and 3 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