AEON Co.,Ltd. (8267) Q3 2026 Earnings Call Transcript

Q&A Session at the Financial Results Briefing for the Third Quarter, Fiscal Year 2025 January 8, 2026 Shikata : Motoyuki Shikata, Executive Officer, Business Structure Transform Egawa : Hiroaki Egawa, Executive Officer, Finance and business Management Okada: General Manager, Business Management Department Q1

Performance versus company plan and segment-level variances

A１ Egawa：For the cumulative results through the third quarter, operating revenue exceeded the prior year across all segments. That said, we observed some shifts in trend compared to the first half. Versus our initial plan, the Shopping Center Development business delivered record-high profits both domestically and internationally, outperforming expectations. The Health & Wellness business also exceeded projections, driven by strong performance in both product sales and dispensing operations. Conversely, although the Supermarket business delivered revenue and profit growth, intensified pricing strategies led to a slight erosion in gross margin, resulting in a minor shortfall against plan. Looking ahead to the fourth quarter, we expect profitability to improve through structural reforms such as accelerated DX initiatives, greater utilization of process centers, and enhanced group synergies. In International business, Vietnam continued to perform well, whereas Malaysia posted somewhat soft results, and recovery in China remains delayed due to weak consumer sentiment. Overall, compared to the assumptions at the start of the fiscal year, the International business is trending slightly below expectations. Q2

Why was the upward revision to full-year operating profit limited to \5 billion despite the inclusion of Tsuruha?

A２ Egawa: Regarding Tsuruhaʼs fourth-quarter figures, we have not yet received official data from Tsuruha due to restrictions on information sharing during the TOB period. Accordingly, the impact of consolidation is calculated based on our internal estimates. Amortization of goodwill is also incorporated on an estimated basis, offsetting part of the incremental profit. Additionally, we need to account for downside risk in the consolidated fourth-quarter results, given the number of uncertainties. For these reasons, the revision was made with a conservative stance, reflecting uncertainties in Q4 performance. Q3

Could you clarify the approach behind the \5 billion upward revision to operating profit, and whether amortization of goodwill and step acquisition gains are factored in?

A３

Egawa: At this point, we are refraining from disclosing a detailed breakdown of the incremental operating profit—such as the specific contribution from Tsuruha or the amount of goodwill amortization. Conceptually, please understand that the revision was made with a conservative stance, reflecting uncertainties and downside risks in Q4 performance. As you correctly noted, the reduction in minority interest outflows from AEON Mall and AEON Delight are incorporated. Combined, these factors are expected to contribute approximately \10 billion to profit.

Q4

Regarding the improvement rate in labor productivity and the trend in personnel expenses, why does the improvement appear modest in Q3, and what is your outlook going forward?

A4

Shikata: As you pointed out, the improvement in labor productivity for Supermarkets and GMS appears to have slowed somewhat. In GMS, last year we faced challenges with pricing policies from the first half through Q3, which led us to shift our focus from gross margin ratio to gross margin amount starting in Q3 last year. At the same time, we implemented measures to reduce operating costs. As a result, this yearʼs improvement builds on last yearʼs initiatives, making the incremental improvement appear relatively smaller, even though we have achieved gains exceeding those of the prior year. We will continue to drive improvements in Q4. Currently, productivity gains are primarily driven by DX initiatives, particularly around checkout operations. However, we acknowledge that these improvements are approaching their natural ceiling. Therefore, as second and third levers, we are advancing measures such as shifting in-store processing and deli preparation to process centers, and reducing back-office workload through AI-driven work schedule optimization. Looking ahead to the next fiscal year, we aim to further enhance labor productivity.

Q５

What were the key drivers behind the decline in GMS gross margin, and what is your outlook for Q4 and beyond?

A５

Okada: As you noted, GMS gross margin at AEON Retail deteriorated by 0.7 percentage points year-on-year in Q3. The primary factor was Apparel, where intensified price appeal from August led to markdowns. However, these initiatives also delivered positive outcomes, including higher customer traffic and increased items per transaction. Apparel sales grew approximately 7% in Q3, with unit sales also rising. As a result, revenue growth contributed to cumulative profit improvement through Q3.

While markdowns on winter merchandise drove a sharper-than-anticipated margin contraction in Q3, we plan to restore margins in Q4 through initiatives such as introducing spring merchandise. Q６ How is the progress on business structure reforms, and what are the remaining challenges and opportunities for improvement? A６

Shikata: Looking back, we have executed a range of structural reform measures since spring. Recently, these include the reorganization of Health & Wellness business involving Tsuruha and Welcia, the restructuring of supermarket companies in Kanto region centered on U.S.M.H announced at the end of December, and the integration of Daiei and Koyo in the Kansai region, advancing our regional shift strategy. Additionally, AEON Delight and AEON Mall were taken private and became wholly owned subsidiaries as part of structural reforms to drive growth. Beyond publicly announced initiatives, we have also implemented measures behind the scenes, including actions at subsidiary and sub-subsidiary levels. For some companies, we are pursuing liquidation, divestment, or integration, though challenges remain. Looking ahead, we are reviewing the optimal structure for subsidiaries, sub-subsidiaries, and even third-tier entities, with the aim of accelerating structural reforms further in the next fiscal year.

Q７

Regarding the next medium-term plan, how sustainable are the improvements in retail profitability, and what additional measures are being considered?

A7

Shikata：Our goal is to ensure that improvements in retail profitability are not temporary but sustainable and scalable. Details will be shared in April, but conceptually, addressing inflation is becoming increasingly critical. While we will maintain pricing strategies amid rising costs, the key is to strengthen our ability to preserve margins rather than simply sacrificing gross profit. Reflecting on the previous medium-term plan, early initiatives around private brand (PB) product strategies proved effective. In an inflationary environment, having strong PB offerings is a significant advantage, contributing to revenue growth, increased customer traffic, and improved profitability. That said, we recognize this alone is not sufficient. The next focus is store operations reform, complemented by DX initiatives and upstream supply chain measures. We will advance reforms across the entire supply chain— including logistics and process centers—beyond in-store operations. This approach aims to build a business model with structural resilience and inherent flexibility, rather than relying solely on markdown-driven price elasticity. We intend to present this vision in April. END