AEON Co.,Ltd. (8267) Q4 2026 Earnings Call Transcript

Q&A Session at the Financial Results Briefing for Fiscal Year 2025 April 9, 2026 Yoshida: Akio Yoshida, President and Representative Executive Officer Shikata: Motoyuki Shikata, Executive Vice President and Executive Officer, Business and Financial Strategy Egawa: Hiroaki Egawa, Executive Officer, Finance and Accounting Q1

What are the concrete measures for utilizing existing assets?

A１

Yoshida：We believe that this is the right time for the Group, not only for AEON Mall but also including supermarkets, to make more effective use of our existing assets. Construction costs have approximately doubled over the past five years, and an increasing number of developers have been suspending or canceling new development projects. By contrast, the existing assets held by our Group are carried at relatively very low book values, which allows us to revitalize them with significantly less investment than would be required for new stores. Our fundamental approach is to refresh the content and transform the functions of the facilities themselves. In the supermarket business, we are promoting revitalization as part of a challenge to adopt new business models. As for AEON Mall, we plan to advance revitalization accompanied by functional transformation, such as revising the tenant mix to increase the weighting of serviceoriented tenants and converting common areas into spaces that encourage longer stays.

Q2

What impact does the situation in the Middle East have on domestic and overseas operations, and what is the outlook going forward?

A２

Yoshida: While there remains a degree of uncertainty regarding the outlook for the situation in the Middle East, we recognize that the area where cost impacts are most likely to materialize is electricity expenses. Gasoline prices, supported by government subsidies, are relatively stable at present. Electricity costs, however, are expected to reflect higher fuel prices that rose between March and April, with the impact likely appearing from May through July. We have already factored in a certain level of increase. In response, we are accelerating energy-saving investments and have begun considering and implementing countermeasures. As for our overseas malls and stores, we have not observed any decline in customer traffic or sales at this point, and stable organic growth continues. Additionally, if rising electricity costs lead consumers to limit air-conditioning use at home, the relative value of AEON Malls—offering comfortable and climate-controlled environments—could increase. In that sense, while there are negative factors, we also see the potential for certain positive effects.

Q3

The retail business showed signs of deceleration in the fourth quarter, and AEON Retail’s gross margin, which was expected to recover in the fourth quarter, also came in somewhat weaker than anticipated. How do you reflect on the retail business overall, and what room do you see for improvement from a long-term perspective?

A３

Shikata: We recognize that the fourth quarter remained a challenging period overall. In particular, the impact of a further strengthening in customers’ price sensitivity was significant. At AEON Retail, we adopted a strategy of lowering prices and accepting a slight decline in gross margins in order to secure sales volume, and the effects of this approach extended through the fourth quarter. We do not view this situation as temporary; rather, we believe a structural transformation is required. Beyond products themselves, it is necessary to transform the infrastructure that supports store operations and to fundamentally change the business model. Specifically, in the deli category, we will move away from relying solely on in-store processing and accelerate the use of process centers. In apparel, we will further promote specialization and quickly establish an SPA-type model, enabling us to build a structure in which we can control costs internally. Improvements to store operations alone have their limits, so by transforming the underlying infrastructure as well, we will work to improve profitability across the retail business as a whole.

Q4

What is the required timeframe for system modifications in response to the government’s consideration of reducing the consumption tax on food to zero, and what impact do you anticipate?

A4

Yoshida: We have experience with system modifications from past consumption tax revisions, and compared with those times, we believe the required cost for this round of system changes will remain within a manageable range. As for the impact, we do not assume that the entire reduction from the current 8% consumption tax will be spent solely on food. It is necessary to consider the possibility that some of the savings will be allocated to other areas of consumption, such as leisure. Given that our Group operates a multi-format business model, we intend to respond from the perspective of capturing overall consumer spending, rather than focusing exclusively on food. With regard to the timeframe required for cashier systems and related system modifications, at this stage we are conservatively assuming approximately four to six months.

Q５

AEON Retail’s gross margin appeared weak in the second half. What is your thinking on pricing strategy in the new fiscal year? In addition, how do you plan to respond to rising cost inflation through food procurement and joint purchasing?

A５

Shikata: With inflation expected to accelerate further amid developments such as the situation involving Iran, we believe it is important to clearly communicate our pricing to

customers. In particular, within our TOPVALU private brand, BESTPRICE products are seeing increased brand switching from national brands, which we view as an opportunity. While promoting price competitiveness through private brands, we will leverage the Group’s procurement scale for national brands and advance price optimization through joint purchasing. In apparel, reflecting on last year’s challenges, we will thoroughly review our price lines and adjust them to appropriate price points that better meet customer expectations. Q6. Following moves such as making AEON Mall a wholly owned subsidiary last year, how will you proceed with decisions on listing versus delisting going forward? A6. Shikata: There is no change to our basic policy regarding listing and delisting. We place importance on what structure is optimal for each operating company at its stage of growth. Listing can be an option in phases where the company raises funds to grow. On the other hand, businesses such as AEON Mall and AEON Delight, which we strengthen as platforms and infrastructure for AEON, will be grown by utilizing them as common infrastructure for the Group. We announced yesterday regarding making GFOOT private; this decision was made to promote fundamental reform at the company and pursue business revitalization by operating it integrally with AEON Retail, and it does not mean we have changed our policy. Q7.

What is driving the differences in outcomes among segments and between companies, and how does AEON manage control as a Group?

A7.

Yoshida: In retail, responsiveness to local regions is extremely important. Each region has its own characteristics in tastes and demand, and regional supermarkets are very strong in this respect. Leveraging such regional characteristics remains important, and we place emphasis on product development and assortments that respond to local tastes and needs. The largest factor behind the differences is the degree of utilization of private brands and Group synergies. TOPVALU sales have expanded from just under ¥800 billion when I assumed office to approximately ¥1.2 trillion now—about 1.5 times the level at the time. We believe this reflects that management teams across the Group recognized the importance of private brands, understood that scale is necessary to make them a Group strength, and executed accordingly. In logistics and procurement, while we have optimized by operating company, there is growing recognition that by running a cross-Group horizontal approach, we have further room to improve efficiency. Even simply redesigning duplicative deliveries can produce a large improvement effect, and as we promote consolidation of logistics and procurement, the value of Group synergies is becoming clearer. In addition, in private brand development, the presidents of major operating companies have continued initiatives to share product value through tastings.

This has heightened awareness of unified Group management centered on PB. As the scale of PB expands, collaboration with manufacturers also becomes easier, and we believe this will accelerate further going forward. Q8.

From the third quarter onward, margin deterioration due to stronger promotions coincided with slower improvements in labor productivity, leading to a weaker fourth quarter. What are your short-term measures and timeframe to improve the profit mix?

A8.

Shikata: We recognize that this situation is not temporary, and that a structural model change is necessary. Since the third quarter of last year, we have prioritized customer traffic by strengthening promotions even if it meant lowering gross profit to a certain extent; however, we reflect on the fact that we proceeded before the earnings structure for gross profit was sufficiently in place, leaving margin deterioration behind. Going forward, we will position Best Price as a ‘price fighter’ to acquire customer traffic, while securing appropriate margins for standard TOPVALU items and national brands. By organizing products and pricing lines by category, we will work to improve the profit mix. Labor productivity improved to 104% year on year, but there are limits to further improvement; therefore, we will go further by reducing in-store processing through process center utilization and by re-examining logistics and work processes themselves, and we will promote a transition to a business model that can balance customer traffic and gross profit even in an inflationary environment.

Q9.

Since you became President, it appears that consolidation of subsidiaries and logistics investments have accelerated. Will it still take time for these measures to be realized? What is your sense of progress and what challenges remain in making Group synergies visible?

A9.

Yoshida: Compared with the past, it has clearly become easier to move forward, and it has become easier to align the Group. In the background, the top management of each operating company has come to share the recognition that, under a future business environment where various costs rise amid inflation, it will be difficult to achieve sustainable growth through company-by-company optimization alone. Investments in private brand development, DX, and logistics cannot be viable without a certain scale, and understanding is deepening that by working as one Group we can substantially change the cost structure. In logistics as well, we have formed projects to optimize across formats by region, and we are advancing design with the presidents of each company participating. Our experience since COVID of countering sharp increases in electricity and labor costs through scale has supported these initiatives. For joint procurement, too, we intend to consult with manufacturers, clarify order volumes, link them to planned production, and expand these initiatives sustainably.

Q10. The medium-term management plan that started in FY2021 fell short of targets for operating revenue and operating profit. For both revenue and profit, where were efforts insufficient, and which measures were more effective than expected? A10.

Shikata: We recognize that results fell below the target figures we initially set in the medium-term management plan. In the background, the impact of environmental changes that exceeded assumptions has been significant. For example, electricity costs alone have increased by more than approximately ¥100 billion over the past five years, and labor costs have risen by a similar amount, resulting in additional costs totaling roughly ¥200 billion. We ask for understanding that our performance reflects results achieved after absorbing these cost increases. At the same time, we do not attribute the outcome solely to environmental changes; we also recognize that there were areas where our efforts were not sufficiently decisive. In terms of what worked, strengthening private brands was a key success. Our policy of evolving the supply chain and cultivating AEON-unique products became a major source of competitiveness in an inflationary environment. PB sales, which we set as a KPI at the outset, have now expanded to approximately ¥1.8 trillion, and we believe we have achieved a certain level of results. On the other hand, the area that underperformed our assumptions was digital initiatives. While online supermarkets grew, we did not succeed in establishing an OMO model* in which digital—including non-food e-commerce—and stores are fully integrated. We will incorporate these lessons into the next medium-term management plan. *OMO: Online Merges with Offline (integration of online and offline/physical stores) END