Q&A Session at the Second Quarter Financial Results Briefing for the Fiscal Year Ending February 28, 2027
October 13, 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
Second-quarter results were weaker than expected. How do you assess performance
by segment relative to internal plans? In addition, while management outlined
measures to improve performance in the second half, what do you see as the key
drivers of earnings recovery from a finance perspective?
Ａ1
Egawa：In the first half, the Health & Wellness, Developer & Entertainment, and
ASEAN businesses delivered solid results, while the three core retail businesses,
namely GMS, Supermarket and Discount Store, significantly underperformed
internal expectations. The gap between strong-performing and underperforming
businesses widened more than anticipated. Although we expected some recovery in
the retail businesses during the second quarter, this did not materialize, resulting in
first-half performance falling behind the level required to achieve the full-year plan.
The recovery of the three retail businesses will be our top priority in the second half.
Through the first half, it became clear that pricing measures alone are not sufficient.
Going forward, we will combine pricing policies, promotional initiatives and
merchandising strategies to strengthen our product value proposition and restore
customer support. First-half operating profit reached 38.4% of the full-year target,
representing a shortfall of approximately ¥15 billion to ¥20 billion versus our internal
plan. We intend to address this through the turnaround of the retail businesses and
rigorous cost-control measures. In addition, continued strong performance and
potential upside from the Health & Wellness and Developer & Entertainment
businesses should support our efforts to achieve the full-year earnings forecast.
Ｑ2
Given the rapidly changing external environment, how much progress are you seeing
from the initiatives currently underway? Do you believe the medium-term
management plan needs to be updated, or is the current framework still sufficient?
Ａ2
Yoshida：The three growth areas identified in our medium-term management plan,
namely ASEAN, Developer & Entertainment, and Health & Wellness, have delivered
results in line with or above our expectations. On the other hand, progress in food
retail structural reform has lagged behind our original assumptions, and we recognize
that our response to changes in the operating environment has not been fast enough.
That said, the strength of our multi-format business portfolio has been evident. During
the pandemic, our food business supported overall Group performance, while today
businesses that capture demand for experiential consumption and entertainment are
supporting earnings.
Going forward, food retail reform will remain a key management priority. We intend
to address gaps versus our original plan through initiatives centered on merchandise
and logistics reforms. At the same time, we believe this is an important period to lay
the groundwork for the next generation of growth businesses while continuing to
strengthen those currently performing well. The external environment remains highly
dynamic, including developments such as a potential consumption tax reduction.
While preparing for changing consumer behavior, our commitment to rebuilding the
food retail business remains unchanged. Our immediate priority is to offset the firsthalf shortfall through cost controls while also driving top-line growth.
Ｑ3
While some competitors have remained profitable despite the challenging environment
how do you view the key challenges facing AEON’s supermarket business? In addition,
why has the supermarket business struggled while My Basket and Drug & Food
formats have continued to perform strongly?
Ａ3
Shikata：One challenge has been our inability to fully communicate the value of our
products, rather than focusing solely on price. Competition, particularly in fresh foods
and delicatessen products, has intensified, and we believe we have not differentiated
ourselves sufficiently in these categories. In addition to selling raw fresh foods, we will
expand higher value-added products through processing and prepared-food
development. Demand for convenience continues to increase, particularly among
dual-income households in metropolitan areas, and we intend to respond more
effectively to those needs. As for My Basket, its strong performance reflects changing
shopping patterns in urban areas, where consumers increasingly value convenience
and proximity. By offering both convenience-store-like accessibility and fresh food
products, My Basket has been able to differentiate itself successfully. Going forward,
we will leverage merchandising and customer insights accumulated through My
Basket to further promote our Drug & Food format. Through a combination of
traditional supermarkets, small-format food stores, and drugstores, we aim to provide
food solutions that better meet customer needs.
Ｑ4
While PB expansion and EDLP initiatives have been in place for some time, how has
your pricing strategy evolved? In addition, how do you intend to balance profitability
with the expansion of value-added products?
Ａ4
Shikata：Based on lessons learned during the first quarter, we shifted our pricing
strategy in the second quarter from one centered on national brands to one that places
greater emphasis on private brands. With Japan's Engel coefficient currently at around
30%, we believe it is important to differentiate ourselves by leveraging the strengths
of our private brands rather than focusing solely on price comparisons with
competitors. Specifically, we have positioned TOPVALU Best Price as our key pricefocused brand and aim to offer products at prices below comparable national-brand
items. Because private-brand products allow us to control costs related to logistics,
packaging materials, and product specifications, they provide greater flexibility to
improve price competitiveness while maintaining profitability. For national-brand
products, we are utilizing the Group’s centralized procurement capabilities,
narrowing SKUs where appropriate and leveraging scale to strengthen negotiations
with suppliers. Our objective is not simply to raise prices to secure margins. Rather,
we are focused on achieving appropriate pricing through cost improvements. At the
same time, for value-added TOPVALU products that offer unique features
unavailable through national brands, we intend to secure appropriate margins
through market-based pricing.
Q5
Could you provide an update on the impact of the Kumamoto earthquake, including
the potential for additional losses and the timing of a clearer assessment?
Ａ5
Egawa：In the first half, we recorded disaster-related losses of ¥4.198 billion as
extraordinary losses associated with the Kumamoto earthquake. These mainly
consisted of inventory damage at AEON Kyushu and fixed-asset damage at AEON
Mall. Restoration expenses and other disaster-related costs have also been recognized
to the extent they can be reasonably estimated. However, investigations into the cause
of the accident, assessments of facility damage, discussions with tenants, and
insurance claim procedures are still ongoing. Accordingly, we are not yet in a position
to estimate the final amount of losses or any additional charges that may be
recognized. The losses are covered under multiple insurance policies, although
discussions with insurers remain ongoing. While we aim to recognize insurance
recoveries within the current fiscal year if possible, we are not yet in a position to
provide a specific timetable. At this stage, neither the amount nor the timing of
insurance recoveries has been finalized.
Q6
Have post-earthquake gas facility inspections been conducted in cooperation with gas
utility companies?
Ａ6
Shikata：Following the Kumamoto earthquake and subsequent explosion incident, we
conducted inspections at all Group facilities using gas, not only AEON Mall locations,
based on the assumption that gas could be one of the potential causes. These
inspections are being conducted not only internally but also in cooperation with gas
management companies and other external parties as part of our ongoing efforts to
verify and ensure safety.
Q7
The accident investigation committee has already met six times. Has anything been
clarified so far, and is there any indication as to when interim or final reports may be
released?
Ａ7
Yoshida：At this stage, only limited information has been shared with us by the
investigation committee. While we have been informed that meetings have been held,
we have not been provided with detailed information regarding the content of the
investigation or its progress. We have also not received any indication from the
committee as to when an interim or final report may be issued. The committee
continues to conduct on-site inspections and frequent meetings, and our
understanding is that it is currently carrying out a detailed investigation.
Q8
How do you view industry consolidation and M&A opportunities among regional
supermarket operators? In addition, what role should AEON play in addressing
underserved communities?
Ａ8
Yoshida：We expect industry consolidation among regional supermarket operators to
continue; however, we do not pursue M&A for defensive purposes. In addition to
assessing whether a potential partnership or integration would enable us to expand
our regional market share and secure stable earnings, we place importance on whether
combining AEON’s scale with a partner’s strengths in areas such as fresh fish, produce,
and delicatessen products would enhance the competitiveness of both parties.
Compatibility in corporate philosophy and management approach is also an important
consideration. We believe drugstores can play an increasingly important role in
maintaining access to food and essential services in regional communities. Through
our Drug & Food strategy, centered on Welcia, we are strengthening food offerings
while leveraging the AEON Group’s food supply chain, enabling even small-format
stores to provide one-stop shopping convenience. We also intend to leverage
initiatives such as Tsuruha Holdings’ “Life Store” concept and Welcia’s mobile sales
vehicle, “Uetan-go,” to further expand services that meet the needs of local
communities.
Q9
How far has the Group progressed with supply-chain and logistics reform, and have
there been any changes to the overall optimization strategy?
Ａ9
Shikata：We continue to integrate functions that were previously operated separately
by individual Group companies on a regional basis. While these initiatives are still in
the early stages, progress is being made. For example, products manufactured at Craft
Delica in Funabashi, which previously mainly supplied GMS stores, are now being
distributed to U.S.M.H stores and My Basket locations, creating a shared deli
platform across the Group. In addition, AEON Kawaguchi East Cross Dock, which
began chilled distribution operations in December last year, expanded its capabilities
to include ambient-temperature deliveries in July. Designed as a next-generation
small-format distribution model, the facility supports not only supermarkets but also
small-lot deliveries for formats such as My Basket, enabling shared logistics
infrastructure and avoiding duplicate investments. Because supply-chain reforms
require significant infrastructure development, benefits will not be realized
immediately. Nevertheless, we intend to continue implementing these initiatives over
the five-year medium-term plan period.
Q10
How will restructuring investments and losses affect earnings going forward? Are
restructuring-related losses likely to increase from the third quarter onward?
Ａ10
Egawa：Some restructuring initiatives, including the sale of our retail business in
Thailand and the liquidation of AEON Fantasy’s China business, have already been
provisioned for through impairment losses and reserves. As a result, the completion of
these transactions is not expected to generate significant additional losses. That said,
some projects currently under consideration could result in further losses. If such
losses occur, they are more likely to be recognized in the fourth quarter rather than the
third quarter. Material extraordinary losses may be recorded; however, we are not
providing a specific estimate at this time. Regarding investment expenditures, we are
prioritizing logistics and supply-chain infrastructure while moderating new store
investments. These expenditures are already incorporated into the ¥2.4 trillion capital
investment plan under our medium-term management plan and will generally be
capitalized and depreciated over extended periods rather than immediately impacting
earnings.
Q11 If the food consumption tax rate is reduced from 8% to 1%, would AEON pass the
reduction on to consumers? How do you expect such a measure to affect consumption
and the Group’s performance?
Ａ11
Yoshida：Should such a tax reduction be implemented, we would reflect the reduction
in food prices. We estimate that the current Engel coefficient of around 30% could
decline by approximately two percentage points to around 27.5% to 28%. However,
even after such a reduction, it would remain above the roughly 25% levels seen during
the deflationary period. Consumers are currently prioritizing food spending at the
expense of other discretionary expenditures. As a result, a portion of the additional
disposable income generated by a tax cut could be directed toward travel, leisure
activities, fan-related spending, and Health & Wellness-related spending. Food
consumption may also benefit from a shift from dining out to home-meal replacement
products. However, our focus is not simply on whether the tax reduction benefits the
food business, but rather on how AEON can capture increased consumer spending
across its multi-format portfolio, including shopping malls, entertainment, and Health
& Wellness operations
Q12 Is Green Beans expanding in line with your original plan, and have you changed your
strategy in response to the current operating environment?
Ａ12
Yoshida：Green Beans is currently in the customer acquisition phase. As the business
has expanded, we have gained greater insight into which geographic areas demonstrate
stronger demand and differences in average basket value across regions. Based on these
findings, we are strengthening our approach to customer acquisition. Membership has
reached approximately 1.2 million, and we aim to add roughly another one million
members next year. At this stage, our priority remains building the customer base
rather than maximizing profitability. We are also seeing growth in the number of heavy
users, with some customers having used the service more than 30 times. In addition to
acquiring new members, we will continue to focus on increasing engagement among
existing customers.
END
