2023 Aug 25
AEON Stores (Hong Kong) Co., Limited

AEON STORES 2023 INTERIM RESULTS DYNAMIC OPERATIONAL STRATEGIES ENSURE RESILIENCE AMID MARKET VOLATILITY

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 2023. Against the backdrop of a volatile COVID-19 situation and ongoing international tensions in the first half of 2023, the Group has demonstrated its remarkable resilience and visionary expansion strategies. The global economy has shown signs of improvement, but a full recovery remains elusive and the pace of retail market recovery remains slow. In the face of these uncertainties, AEON Stores has masterfully employed flexible operational tactics to maintain a strong competitive edge.

For the six months ended 30 June 2023, the Group recorded revenue of HK$[4,521.8] million (2022 1H: HK$5,048.7 million), representing a [decrease] of [10.4]% year-on-year. Gross profit margin stood at [28.8]% (2022 1H: 28.3%), while loss attributable to owners of the Company [decreased] to HK$[78.2] million (2022 1H: loss of HK$144.6 million). The Group maintained a strong cash position with cash and bank balances and short-term deposits totaling HK$[1,266.1] million as at 30 June 2023 (31 December 2022: HK$1,423.4 million).

After reviewing the dividend policy, the Board recommends an interim dividend of HK$[0.02] per share (2022 1H: HK$0.03 per share) in line with the Group’s steadfast commitment to deliver returns to its shareholders.

Mr. Takenori Nagashima, Managing Director of AEON Stores, said, “Amidst external geopolitical pressures, a testing European economic landscape, a resilient U.S. dollar exchange rate, and the lingering aftermath of the COVID-19 pandemic, AEON Stores remains a beacon of agility. Our nimble operational strategies, unyielding dedication to customer satisfaction and visionary expansion efforts have not only enabled us to weather the storm, but have propelled us forward. We have skillfully navigated market challenges and seized opportunities, as exemplified by our transformative initiatives in Hong Kong and Mainland China. These initiatives reflect our commitment to not only adapting to change, but thriving in a dynamic business environment.”

Hong Kong Operations

The recovery of Hong Kong’s retail market in the first half of 2023 unfolded with remarkable nuance, driven by a combination of factors including the easing of pandemic restrictions and the revival of tourism. AEON Stores skillfully harnessed these dynamics through its strategically curated "Welcome to Hong Kong" event, which reinvigorated both local consumer sentiment and tourist engagement.

Despite the upturn in the industry, challenges remained, particularly in the local daily consumables market. While tourism-related goods, especially jewelry and watches, experienced a surge in demand due to the recovery of the tourism industry and positive consumer sentiment, sales of essential commodities like food and supermarket products lagged behind. An interesting dichotomy emerged with the reopening of the borders, as the pent-up demand for outbound travel among local consumers counter-intuitively affected the performance of the local retail sector. This trend demonstrates the wide-ranging impact of global events on consumer behavior and highlights the need for adaptive strategies.

The Group adopted a multi-faceted and strategic response. In order to attract more tourists, the Group proactively engaged with the Hong Kong government's initiatives, including the "Hello, Hong Kong!" and "Happy Hong Kong" campaigns, as well as timely promotions to benefit from the Consumption Voucher Scheme. These efforts synergistically boosted local consumption, revitalized the economy, and had a somewhat positive effect on the retail industry. Furthermore, AEON Stores strengthened its "Made in Hong Kong" product series, capitalizing on the growing preference for locally sourced goods. This approach not only catered to changing consumer attitudes, but also highlighted the Group's commitment to supporting the local economy.

In collaboration with Daiso Industries Co., Ltd. (“DAISO”), the Group continued its strategic expansion of small specialty stores, strengthening its local presence and diversifying its offerings. The successful launch of the "KOMEDA'S Coffee" concept, originating from Nagoya, Japan, further accelerated the development of AEON Hong Kong's specialty restaurant chain business, with two more store locations in Tuen Mun and Tsim Sha Tsui added to the Group’s portfolio in June this year.

The Group’s Hong Kong operations recorded revenue of HK[$2,102.2] million in the first half of the year, decreasing [10.4]% (2022 1H: HK$2,347.2 million), while the loss of the Hong Kong operations [decreased] to HK$[71.6] million (2022 1H: loss of HK$76.1 million).

PRC Operations

As the COVID-19 prevention measures in Mainland China were eased in the first half of the year, the Group benefited from improved consumption, especially in premium products. In particular, the business performance of general merchandise stores (“GMS”) and individual supermarkets in prime business districts picked up significantly. Through dynamic strategies such as optimizing the food division’s product mix, expanding private label merchandise offerings, and streamlining intermediaries, the Group’s PRC operations recorded revenue of HK$[2,419.6] million for the first half of 2023 (2022 1H: HK$2,701.5 million). Notably, the losses of this division shrank massively to HK$[15.4] million (2022 1H: loss of HK$85.6).

During the period, the Group continued to adjust its operating network by closing an individual supermarket in Guangzhou in January and a GMS in Shenzhen in February to strategically reduce its financial burden.

Prospects

The Group has set its future course with a thoughtful and strategic approach to ensure the brand's unwavering growth and development. In the dynamic Hong Kong market, AEON Stores stands resolute in its commitment to digital transformation, a key strategy to address the challenges posed by declining purchasing sentiment and an industry-wide manpower shortage.

To address these challenges, the Group has leveraged technological innovation through the implementation of the "Mobile Assistant" to optimize back-office operations, improve labor efficiency, and effectively curb costs. Moreover, the Group's relentless pursuit of efficiency is manifested in the expanded use of tools such as the Self Payment Machine, "POS Express" and High-Speed Cash Recycler, which streamline both daily and back-end operations to enhance overall efficiency.

In addition, the Group is gearing up to enhance its online supermarket initiatives, leveraging digital platforms to provide a seamless shopping experience for its customers. The upcoming launch of a delivery service on the "AEON App" reflects the Group's dedication to meeting customer needs while capitalizing on the burgeoning e-commerce landscape. The Group also plans to introduce more innovative offerings tailored to evolving consumer preferences, fostering a deeper connection with its customers.

As for the offline business, the Group will also further expand its small specialty store network, deepen its strategic cooperation with DAISO, and open pop-up stores in suitable locations to attract more customers and improve business performance.

In Mainland China, AEON Stores remains steadfast in its pursuit of excellence. By accelerating product reform and differentiation strategies, the Group aims to align its offerings with post-pandemic consumer preferences. The focus on proprietary brands, coupled with an enhanced store network, positions the Group to capture opportunities arising from the gradual recovery of the retail market. The Group has opened one supermarket in Guangzhou in August 2023 and expects to open one more supermarket in Guangzhou, as well as refurbish several of its stores in the second half of 2023, as scheduled, to enhance customers' shopping experience.

Mr. Takenori Nagashima concluded, “With rising domestic prices discouraging tourist arrivals and spending, coupled with the cautious backdrop of a slowing Chinese economy and the steady flow of Mainland visitors to Hong Kong, the retail recovery trajectory is unfolding with nuanced subtleties. While the impact of the overall economic slowdown on consumer sentiment is undeniable, the Group will continue to uphold AEON’s fundamental principles of continuing to innovate with customers as our starting point, and remain dedicated to elevating the customer experience across both online and offline platforms. Our objective is resolute: to be the region’s preferred retailer, delivering satisfying products and services to our customers while creating enjoyable shopping experiences.”

 

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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