2024 Aug 29
AEON Stores (Hong Kong) Co., Limited

AEON STORES ANNOUNCES 2024 INTERIM RESULTS FOCUSES ON OPERATIONAL REFORMS FURTHER ENHANCE OPERATIONAL EFFICIENCY

AEON Stores (Hong Kong) Co., Limited (“AEON Stores” or the “Group”; Stock code: 984) has today announced its interim results for the six months ended 30 June 2024. In the first half of 2024, the global economy remained fraught with uncertainties amid high interest rates and persistent geopolitical risks. Internal and external factors led to a slow recovery of the Hong Kong and Mainland China economies and affected consumer confidence. In the face of continuous market changes and challenges, the Group reviewed and adjusted its own business strategies from time to time and actively implemented internal reforms in order to maintain its competitive edge in the market.

For the six months ended 30 June 2024, the Group recorded revenue of HK$4,052.1 million (2023 1H: HK$4,521.8 million), representing a decrease of 10.4% year-on-year. Gross profit margin decreased by 0.4% to 28.4% (2023 1H: 28.8%), while loss attributable to owners of the Company increased to HK$171.1 million (2023 1H: loss of HK$78.2 million). The Group maintained a strong financial position with cash and bank balances and short-term deposits totaling HK$931.2 million as at 30 June 2024 (31 December 2023: HK$1,149.6 million).

Mr. Takenori Nagashima, Managing Director of AEON Stores, said, “In the first half of 2024, the macroeconomic environment was filled with uncertainty, dragging down the recovery progress of the Group's businesses in Hong Kong and Mainland China. We actively adjusted our business strategies, continuously increasing the proportion of our private brand merchandise, expanding the range of directly imported goods, increasing product variety, and optimising the mix to enhance sales and profitability. During the period, the Group also successfully improved productivity and comprehensively promoted cost reduction and efficiency improvements by optimising store networks and enriching various business formats, in line with our ongoing digital transformation efforts. These comprehensive approaches have further strengthened the Group’s market share and laid a solid foundation for future growth.”

During the period under review, the Group’s staff costs decreased by 1.4% and their ratio to revenue was maintained at 12.0% (2023 1H: 10.9%). Other operating expenses, including advertising, promotion and selling expenses, maintenance and repair expenses, utility expenses and other expenses, decreased by 4.5% year-on-year and the ratio of other expenses to revenue was 12.5% (2023 1H: 11.7%).

Hong Kong Operations

In the first half of 2024, Hong Kong’s overall economy was still in the recovery stage and public consumption sentiment has not improved significantly. The boom in Hong Kong people’s travelling north and overseas continued, which adversely affected the local tourism, F&B and retail industries. During the period under review, the Group continued to increase the proportion of its private brand merchandise, launched more diverse products under TOPVALU, HÓME CÓORDY and PEACE FIT WARM/COOL, and imported more product varieties directly from Japan and Southeast Asia. The Group has organised a wide range of promotional activities and improved and optimised the product mix to cater for customers' preferences, successfully providing customers with more diversified products and services, improving sales performance and reducing procurement costs.

The Group continued to actively expand its store network to promote the development of various businesses and to meet the needs of different consumer groups. In June this year, the Group opened Hong Kong’s fourth KOMEDA'S Coffee in Tsuen Wan. The Group also entered into a strategic cooperation arrangement with IDEA Co., Ltd. from Japan and opened the first Okonomiyaki Japanese chain restaurant "Tsuruhashi Fugetsu" in Hong Kong in July to strengthen its F&B business layout. During the period under review, the Group also completed the upgrade of its Tsuen Wan store to become the fifth AEON STYLE location in Hong Kong and the first in the New Territories. AEON STYLE Tsuen Wan and AEON STYLE Kornhill also completed their contract renewals and will continue to provide comprehensive lifestyle experiences.

During the period under review, the continuous development of the e-commerce business resulted in a significant year-on-year increase in online sales. The upgraded AEON App provides users with a better shopping experience and encourages customers to make purchases, so the related revenue increased by nearly threefold over the last corresponding period. In addition to Foodpanda, the Group has also entered into a business cooperation arrangement with Deliveroo to provide more goods delivery services to customers through third-party takeaway platforms. In terms of operations and management, the Group continued to optimise its “Mobile Assistant”, added the self-payment machine function, implemented full self-payment procedures in certain stores, introduced electronic price tags in the Yau Tong supermarket, strengthened support for back-end operations, streamlined work processes, and improved staff efficiency.

The Group’s Hong Kong operations recorded revenue of HK$1,897,4 million in the first half of the year, decreasing 9.74% (2023 1H: HK$2,102.2 million), while the loss of the Hong Kong operations amounted to HK$144.3 million (2023 1H: loss of HK$71.6 million).

Mainland China Operations

The downturn in the real estate industry and sluggish consumption continue to weigh on domestic economic and retail growth, and a weak labour market has further reduced consumers’ overall purchasing power. During the period under review, sales of the Group’s private brand merchandises increased significantly, reflecting the initial success of the Group’s strategy of emphasising product differentiation. In addition, the Group continued to review and optimise the existing store layout. In May, it completed a major revitalisation and renovation of the Sun City Mall store in Guangzhou. During the period, it signed the contracts for two stores, the Canton Tower Plaza store and the Paso Plaza store on Guangzhou Airport Road, which are scheduled to open in 2025 and September 2024 and respectively, to further expand the Greater Bay Area market. In order to attract more local customers and cater for the "northbound" consumption boom of Hong Kong people, the Group continued to review the merchandise and merchant mix of its stores and strengthened its fresh and cooked food offerings. As a result, turnover of several stores improved and profitability was achieved.

Revenue from the Mainland China business in the first half of the year decreased by 10.95% to HK$2,154.7 million (2023 1H: HK$2,419.6 million). The loss from the Mainland China operations was HK$36.9 million (2023 1H: loss of HK$15.4 million).

Prospects

In terms of Hong Kong operations, the Hong Kong government is actively promoting the mega-event economy, and has introduced various measures to support small and medium enterprises in the retail sector; the PRC government has raised the duty-free allowance for Mainland residents returning from Hong Kong and Macau and increased the number of Mainland cities eligible for the Individual Visit Scheme; coupled with the market view that the U.S. Federal Reserve is very likely to cut interest rates in the second half of this year, it is expected to give a greater momentum for the Hong Kong retail sector to revive. However, changes in the consumption patterns of tourists and residents and the strong Hong Kong dollar exchange rate will still affect the Hong Kong retail market in the short term. The government expects that the retail sector will remain weak until the end of this year or early next year.

In response to the slow economic recovery, the Group will continue to implement the following strategies. In terms of procurement and sales, the Group will: 1) leverage the scale and supply chain advantages of AEON Group to further increase sales of its private brands and provide customers with affordable and high-quality products while improving the Group’s overall gross profit margin; 2) adjust the store operating network, optimise existing stores and strengthen the business of high-margin small specialty stores such as Living PLAZA by AEON, Daiso Japan, and Mono Mono, and increase sales by improving the product mix; 3) further expand its catering business by opening KOMEDA'S Coffee branch and the new business format JELYCO DO By KOMEDA etc., in order to cover a broader and wider customer base and achieve cross-business synergies.

The Group will continue to strengthen its digital transformation to enhance the growth of e-commerce and bolster its level of operational management. In the second half of the year, the Group will work with Octopus to optimise the system and introduce JoyYou card discounts, and will develop self-service functions on the customer app to speed up the processing of delivery services, and introduce a central management system for self-service checkout to expedite the handling of customer enquiries, so as to provide customers with a better and more convenient shopping experience. At the same time, the Group will further optimise the "Mobile Assistant" to enable store employees to view various data more accurately and quickly, thereby improving their work efficiency.

Regarding the Mainland China operations, with the PRC government's continued implementation of real estate support measures and a number of proactive fiscal measures, the Mainland China economy is expected to improve in the second half of the year. The Group will actively adjust its business strategy and proactively seize the opportunities presented by the trend of "northbound" travel among Hong Kong residents to increase the sales of stores in the Greater Bay Area. By accelerating product reform and broadening differentiation, the Group will strengthen key product categories to enhance its appeal to customers. At the same time, it will further increase sales of its own private brand merchandise and improve profit margins. As for internal management, the Group will continue to strictly control and reduce costs, increase efficiency, and streamline internal processes to improve productivity.

Mr. Takenori Nagashima concluded, “Although the market environment remains complex and volatile, the Group will continue to uphold its business philosophy of ‘everything we do, we do for our customers’, actively recognise changes in the market and customer needs, and continue to promote reforms and innovations in order to enhance management efficiency and productivity, with a view to providing customers with satisfactory products and services in return for their longstanding support. At the same time, the Group will capitalise on its strengths to enhance its competitiveness in the market, and continue to move towards the goal of becoming the ‘retailer of choice for all 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, 31 independent Living PLAZA by AEON, 31 independent Daiso Japan, 1 independent Bento Express by AEON, 4 Mono Mono and 4 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