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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
We'd like to start Marui Group's financial results briefing for the second quarter of the fiscal year ending March 2022. Today's materials can be downloaded from our corporate website. Please refer to the document titled Financial Results Briefing for the 6 months ended September 30, 2021, and future outlook. Today's session will begin with a 25-minute explanation of our financial results followed by Q&A session. We'll take your questions using the conference call system.
Please note that the video of the presentation will be uploaded on our website at a later date. Presenters for today are Mr. Aoi, President and Representative Director; and Mr. Kato, Managing Executive Officer and CFO. They present the financial results for the second quarter of the fiscal year ending March 2022. In addition to these 2 presenters, we have Mr. Saitoh, Managing Executive Officer and President of Epos Card; Mr. Aono, Senior Executive Officer and President of Marui; and Mr. Ogura, General Manager of IR Department, to answer your questions.
We have 3 topics on our agenda for today. First, Mr. Kato, Managing Executive Officer and CFO, will provide an overview of financial results for the second quarter of the fiscal year ending March 2022 and the full year outlook.
I am Kato. I'd like to explain the financial summary and the full year forecast. Thank you very much. First, these are the 3 highlights for the financial results. EPS, a key indicator, increased 39% to JPY 57.8. Even with the impact of COVID-19 in this fiscal year, it recovered to 90% over the 2019 pre-COVID level. The FinTech segment was the driver for the recovery with total transactions up 18%, a record high for the first half.
Consolidated operating income rose 2% to JPY 21.1 billion. And excluding special factors such as big data accounts receivable, actual operating income was up 7%. Let me explain the details. As for the consolidated results EPS grew significantly, up 39% to JPY 57.8 due to the increase in profit and the effect of capital optimization. EPS recovered to 90% of the pre-COVID-19 level.
Consolidated operating income was up 2% to JPY 21.1 billion, recovering to 94% over the pre-COVID level of 2019. As for the net income, due to a significant decrease in infection-related expenses, such as fixed costs during the store closures recorded as extraordinary losses, we saw a big rise in net income, up 37% to JPY 12.2 billion.
In terms of operating income by segment, the Retailing segment was down 65% to JPY 0.4 billion. All the FinTech segment was up 5% to JPY 23.8 billion, a 13% increase compared to 2019, which is 14th consecutive increase for the first half. I will explain the factors.
Here are the factors affecting our consolidated operating income. In the Retailing, the rent exemptions and the transfer of fixed cost to extraordinary losses during the store closures accounted for negative JPY 1.3 billion. while in the FinTech, due to the liquidated accounts receivable and interest repayment provisions, net impact was plus JPY 200 million. This totaled negative JPY 1.1 billion. Excluding those factors, income increased by JPY 1.5 billion, up 7% increase in both Retailing and FinTech.
This is our balance sheet. While cash advance decline, card credit grew and the total operating receivables increased by JPY 5.4 billion. The liquidity ratio was 25% at the same level as last year. Shareholders' equity decreased by JPY 6.9 billion, mainly due to the share buybacks for capital optimization and the shareholders' equity ratio was 31.4%. The total assets were almost the same as last year.
This is the status of cash flow. Core operating cash flow, which excludes the increase in operating receivables increased by JPY 12.5 billion year-on-year mainly due to the increase in income. Investment cash flow was JPY 8.4 billion of cash outflow, JPY 1.7 billion less than last year due to a decrease in tangible fixed asset investment. Financial cash flow was an outflow of JPY 3.3 billion due to the share buyback and other factors.
The recurring revenue, which is our LTV management index was up 6% to JPY 63.2 billion due to an increase in Retailings fixed term rent revenue. The ratio to the gross profit increased to 2.2 points to 67.5%.
This is the full year forecast. Based on the first half results, we recalculated our full year forecast. However, there is no change from the previous forecast announced earlier. EPS, an increase of JPY 69 to JPY 79.6; ROE, 5.9%; and ROIC, 3.2%. Total transaction volume is JPY 3.41 trillion, reaching JPY 3 trillion for the first time. Operating income, JPY 36.5 billion and net income JPY 16.5 billion.
This is the forecast by segment. No change from the initial forecast. The Retailing segment's operating income will be up 35% to JPY 2 billion. And the FinTech segment will increase by 103% to JPY 41 billion due to the large amount of provision recorded last year for loss on interest repayment. Please refer to the assumptions on this page. That's all for me. Thank you very much.
I am Aoi. I'd like to start with the second topic, which is the review of our first half. About the retail situation, due to the 2 emergency declarations, number of customers visiting our stores was sluggish and the pace of recovery from COVID-19 slowed down. In reaction to the store closures in the previous fiscal year, the transaction grew 116% year-on-year but remain at 69% against the pre-COVID level of 2019.
Under the severe situation of COVID-19, nationwide commercial facilities vacancy rate, which is the percentage of a closed section of their floors, worsened from 5% to 8%. Even under such situation, our vacancy rate did not deteriorate and stayed at 3%, which is the level before COVID. There are 2 reasons. One reason is the rebalancing of categories, which we carried out in parallel with the fixed term rental contracts. Apparel has been largely affected by COVID-19.
Store closing rate for apparel tenants was 5% for the first half, which is more than double that of our other categories. On the other hand. Apparel tenants floor space has declined by half since we shifted to fixed-term rental contracts. They declined to about 20% of the total space, and that is contributing to the stable vacancy rate.
Another reason is the stronger partnerships. As we did in the previous term, we continue to provide rent exemptions during the store closures and provided support for their subsidy applications. In addition, we shared information with tenant employees regarding their health conditions as we do with our own employees so that Marui and our tenants could work together to prevent infection.
We accepted shops to be closed when they had someone ill, even when the infection was not confirmed. These flexible measures helped us control the number of infections. As a result, while many commercial facilities had to be closed due to the outbreak of more than 100 positive cases, we had no outbreak of clusters and were able to continue our business, which made our partners very happy.
Next is about the progress of stores that don't sell. We were able to have over 100 new tenants, even during the pandemic. 85% of them are experience-based non-merchandise sales tenants. If we continue at this pace, we will achieve our goal of becoming stores that do not sell in 5 years, with 70% of them being experiential and event-based.
These are some examples of new tenants that opened a store in the first half. This is the first real store of our core investment partner, BULK HOMME. This is the flagship store for their global expansion. This is Dai Nippon Printing's Tokyo Anime Center. We are consigned to operate the store, and we aim to become the center of Japan's anime culture. And this is Surugaya Purchasing Center, another co-investment partner. This is not only a store that does not sell but also a store that buys products from customers.
Next is the status of FinTech. Transactions slowed down due to the fifth wave, but for the full year, it was 118% exceeding the pre-COVID level. This is a breakdown of transactions. Rent, e-commerce and regular payments continue to perform well. Travel and entertainment, commercial facilities and dining, which had struggled in the previous fiscal year, also recovered.
This is the status of revolving and installment payments. With the recovery in transactions, the balance of revolving and installment payments, which had been stagnant, is expected to increase and reach a record high in the fiscal year ending March 2022. Here is the status of new cardholders. The number of new cardholders which had been concerning increased by 40,000 year-over-year due to the recovery in commercial facilities and online shopping.
Next is the status of co-creative investments. In the first half of the year, we invested JPY 700 million in 4 start-ups despite COVID. This brings our total investment in start-ups to 31 companies and JPY 13.4 billion. The IRR, which we use as a guideline for investment discipline is 35% and continues to exceed a hurdle rate of 10%.
The co-creation team, which was established to promote collaboration with investment partners had added 3 new teams: CAMPFIRE, BULK HOMME and DINETTE. We have also increased the number of employees involved in collaboration by 90, bringing a total to 24 teams with 212 people. We will accelerate our co-creation efforts with this further strengthened structure.
Now let's move on to Chapter 3, future direction. I will explain this based on our dialogues with shareholders and investors. The following is an explanation of items: number 1 through number 3 based on the opinions and questions we have received from shareholders and investors since the announcement of our midterm management plan in May. As for 4, impact of BNPL on FinTech, we are currently conducting a study and we'll provide a detailed explanation at IR Day in December.
Let me begin with the strategy of stores that don't sell. Since the beginning of this year, we have seen cases of department stores and commercial facilities following our stores that don't sales strategy and imitating it. In response to this station, we have received questions about our strategy such as isn't your competitive advantage low because it can be easily imitated.
I would like to explain our strategy in this regard. First, our strategy of stores that don't sell consists of 3 layers: Retailing, FinTech and co-creative investment. The corresponding revenue is rent for Retailing, card LTV for FinTech, and financial return for co-creative investment. And the revenue structure is an inverted triangle shape that gets larger as you go from the bottom to the top.
If we focus only on the Retailing layer, we can say that imitation is indeed easy and barriers to entry are low. However, the second layer of Retailing and FinTech cannot be easily imitated because it is based on the integrated retail and financial business model that we have cultivated since our inception. Furthermore, when we reach the third layer, the trinity of Retailing, FinTech and co-creative investment, it is not easy to acquire the capability, and we need to take the risk of investing in start-ups.
Thus, while the barriers to entry are low in the first layer, the barriers to entry increase dramatically towards the third layer, where multiple capabilities are combined. We believe that our strategy of stores that don't sell is a comprehensive strategy that combines the 3 layers. And its superiority is not something that can be easily imitated by other companies.
Next is our efforts to promote DX. During the 5 years of the previous midterm plan, FinTech business scale doubled, while e-commerce was not able to grow. Both businesses depend on the use of IT and digital technology. But the question arises as to why FinTech was able to take advantage of this while e-commerce was not.
For more than half essentially since we introduced the industry's first computer in 1966, we have been developing our core credit card systems in-house training human resources and accumulating know-how. Thanks to these efforts, FinTech has been able to realize high ROI and achieve high growth without any serious accidents, such as system shutdowns or personal information leagues. Based on this track record, we thought that the human resources and know-how we have cultivated for core systems could be applied to e-commerce web systems.
However, in reality, the transfer of human resources and know-how to the web system did not go as well as expected. And we were not able to achieve the same results in e-commerce as in FinTech. We are embarrassed to say that we have finally come to understand that core systems and web systems are completely different worlds, even though they both are systems.
Core systems emphasize accurate, efficient, and stable processing of a larger amount of routine data while web systems require speedy updates of UI and UX in response to changes in customer needs and the environment. They require different talents and know-how. We believe that the failure to respond to these differences has been one of the reasons why e-commerce has been sluggish. Human resources for web systems will also be essential for the success of new businesses and co-creative investments in the future. This is the future direction based on these lessons.
Traditionally, our core system-related talents have supported our growth through the integrated business model of Retailing and FinTech. Going forward, we will increase our web system-related talents to realize the trinity business model, which includes Retail and FinTech plus investment for the future. By strengthening mid-career hiring and talent development of existing employees, we plan to increase the number of web system-related personnel to more than 250 in 5 years in addition to the 200 core system personnel.
Lastly, this is about impact. We have received some questions about impact goals set out in the midterm management plan and also about the governance structure related to these goals. So I would like to explain them to you. First, let me explain what impact is. The diagram on the left is based on the famous IKIGAI diagram. Impact is the area where the 4 rings overlap. They are what we want to do, what we can do, what we can earn and what our stakeholders want.
The diagram on the right, on the other hand, represents our definition of corporate value, which is harmony between stakeholder interest and happiness. Putting the 2 diagrams together, we can conclude that the value created by impact is stakeholder value, which is the very corporate value we are aiming for. Therefore, we will continue to enhance stakeholder value and improve corporate value through the realization of impact.
This is the progress of the initiative. Impact is comprised of 3 themes and 6 priority items: work together with future generations to create the future, work together to bring happiness to individuals, and build a co-creation platform. Each of the group's operating company and department is currently working on putting together the specific details and the goals of these initiatives by the end of this fiscal year, especially the value creation story to balance impact with profit and capital efficiency.
Next is governance. In order to build a governance structure that will enable us to realize impact. In June this year, we welcomed Mr. Yasunori Nakagami of Misaki Capital as a representative of our shareholders; and Mr. Peter Pedersen as an expert in sustainability as an outside director. In November, the Strategy Study Committee was newly established as an advisory committee to the Board of Directors; and Mr. Nakagami will assume the Chairmanship of the committee. At the same time, Mr. Pedersen will assume the chairmanship of the Sustainability Committee. Through this new governance structure, we will practice the stakeholder management that we aim to achieve.
The future generation is an important stakeholder for us. In order to incorporate their opinions into our management, we have invited Ms. Kyoko Ozawa, former Chief Future Officer of Euglena and Mr. Sota Watanabe, CEO of Stake Technologies, a leader in public blockchain and Web 3.0 to represent Generation Z as advisers. Ms. Ozawa will also be a member of Sustainability Committee. Ms. Ozawa is currently 19 years old, and Mr. Watanabe is 26 years old. We will accelerate the creation of value for the future through co-creation with future generations. That's all for me. Thank you very much for your attention.
[Operator Instructions]
This is about FinTech. About the interest repayment, could you give us an update. I'm sure you'd be fine since you have a sufficient amount of allowance. But I'd like to know the trend, including the number of claims. And you reduced your allowance for bad debt significantly? And how should I look at this going forward? Will you be able to maintain this low level of provisions and achieve healthier level against the balance. Is there any possibility of raising the provisions again if the balance increases?
Thank you for your question. This is Saitoh. Regarding our actual results, amount of interest repayment for the first half was JPY 2.8 billion, which is generally in line with our plan. Now about the amount of lawyer acceptances, which is the leading indicator. In the first half of last year, many judicial scrivener offices and law firms were closed due to COVID-19. So it doesn't make sense to compare year-on-year. Based on our actual results, the accepted amount in the first half this fiscal year was down JPY 100 million from the second half of last year. The amount has been declining month by month. That is the status for loss on interest repayment.
Is it fair to say the amount to decline gradually from now on?
As I mentioned before, many of the cases will expire from now onwards. We project those claims to decrease year by year. Along with that, we expect that the loss on interest repayment will decline.
Considering the current level of provisions, can I expect that there is no need for additional provisions within this medium-term management plan.
As long as we see no deviation to the assumptions used when we recorded our provisions, we have no need. However, due to the uncertainties these days, we are carefully watching the situation.
Next, I'd like to explain about the allowance for bad debt. In the first half, expense for the bad debt allowance was 70% against the same period last year, we saw a major decline. During the last fiscal year, due to COVID-19, amount of transaction did not grow. As a result, the number of customers who have not paid their credit has decreased due to the declined usage. And this is what I have explained last year. As a result of this leading indicator, the delinquent loans are trending lower than previous year. Because there are less delinquent receivables, the delinquent balance is declining, leading to a decrease in provision for bad debt.
I assume that you make your projections based on the average of previous year's results. Am I right to understand that even when the balance increases, provision for the next 2 fiscal years will be lower than that?
Our provision for bad debt is basically regarded as variable cost. When we see an increase in transaction volume, the balance of receivables will also rise. And along with that, the provision will increase at a certain rate. Going forward, along with the growth in transaction volume, delinquent receivables may rise.
That means the month increase is only relative to the denominator growth.
Yes, you're correct. It doesn't mean that the things will deteriorate. Let's move to the next person.
I am Takahashi from Mizuho Securities. I have 3 questions. First is about the Retailing business. This question is for Mr. Aono. Even under the tough environment in the first half, we were able to generate sufficient profit without going into the red. How are you going to achieve your full year forecast? What should be the focus? Should we simply expect to see a recovery due to the end of the emergency declaration and the return of the number of customers to your stores? Or you have been continuing to replace your stores are you expecting to generate profit from those new stores and from the new contents? Are there any different factors? What is your strategy for the second half to achieve the full year forecast? Could you elaborate on that?
I am Aono. I will explain. Against our full year forecast that we have announced, the transactions are the biggest factor for our second half. Since our income fluctuates in line with the amount of transactions, the biggest factor is the change in transactions depending on the COVID-19 situation. We do have 2 other risks. One is the vacancy rate that we mentioned earlier. Second is the decline in rents. Those are the 2 major risks. But as we explained earlier, vacancy rates and rents did not worsen in the first half, and we project that they will not happen in the second half or during the fiscal year. So if the impact of COVID-19's 6th wave on the transactions is not too large, we can achieve our full year forecast.
You've already disclosed your October results. Well, it was only in late October when the weather really changed and people started moving. So from the late October, did you start to see any changes in your total number of customers? Well, apparel still accounts for 20%. And do you see any change in the situation with apparel? What kind of changes have you noticed recently?
Since the state of emergency declaration was lifted on October 1, a gradual recovery trend has continued. Of course, we cannot return fully to the pre-COVID-19 level right away, but we saw an increase in trend by 15% in October. And in November, half of our stores are able to achieve the same level against the previous year. So if the situation of COVID-19 subsides going forward, we believe we can fully achieve our forecast.
Understood. My second question is about FinTech. This question is for Mr. Saitoh. In the presentation, you explained about the growth in rent, travel and entertainment businesses, and I do understand those numbers. This question is basically the same with the questions I asked for Retailing business. With regard to the transactions, can we expect a further growth in the second half? Is there a future growth? And what will be the main driver? Could you elaborate on that? I assume that you're seeing a fast recovery and in your balance and is there any particular usage by customers?
Thank you for the question. I think your question was about the outlook of transactions for the second half. Revenues in the strategic areas of rent, e-commerce and recurring payment grew steadily. -- and travel and entertainment and commercial facility in the lower part also saw a firm growth year-on-year. However, we are still far from making a full fledge recovery. One of our main business, travel and entertainment was still only 60% level against the fiscal 2019. Well, in this second half, now that the state of emergency deputation were lifted and people are going out and becoming more active if we can see a good recovery in travel and entertainment and food and bevels businesses, we believe that our card shopping transactions can further rise to the next level. But at this point, my crystal view is that the situation is not ready for a full-scale recovery yet.
Is it correct to say that rather than focusing on your past mainstream business, where customer was borrowing money and paying back immediately, you need to further work on recurring payment business, which has been your strategic focus for a long time in order to grow our profit?
Yes, the focus is the regular payment in e-commerce, which contributes to the continued usage. By growing those areas steadily, we are able to stabilize our revenue. We are determining to achieve that growth.
My last question goes to Mr. Aoi. It's about your initiative for achieving impact. You set up a strategy study committee. What do you expect from that initiative? Of course, I do understand the big objective of having dialogues with various stakeholders. I do understand that. But could you give us more details such as the frequency of meetings and topics of compensation. How will you engage Mr. Nakagami and Mr. Pedersen, who is the sustainability community chair to reflect their inputs into your management. Could you give us some specific information?
Thank you for the question. Well, today, we had the Board of Directors meeting. I had conversations with Mr. Nakagami and Mr. Pedersen. We are planning to hold a strategy study committee about every 2 months and Sustainability Committee 4x a year, as I remember. As for the Strategy Study Committee, we are expecting to receive inputs from a perspective of shareholders and investors.
For example, in today's presentation, I briefly explain about the barriers to entry when I talked about our strategy. For investors, whether the entry barriers are high is a key point of concern. Well, this kind of topic is what we want to discuss from now onwards. We haven't really talked about this kind of approach at the Board of Directors meetings ordering the management meetings in the past. So if we can start talking about those things, they will be quite effective and beneficial.
In addition, Mr. Pedersen said that sustainability is an integral part of management strategy. They need to be discussed in tandem so he wants his sustainability committee to sometimes join with the strategy committee, exchanging opinions and being interactive and collaborating. He said he'd like to contribute to the strategy planning in such manner. By doing so, we'd like to increase our corporate value in a tangible way.
I am Kanamori from Okasan Securities. I have 2 questions. I'd like to confirm some numbers. First is about the number of new cardholders. You explained about the new enrollment, but how should we view this?
Second is about the initiatives on e-commerce, where it is difficult to see a recovery in the sales situation. As for the new cardholders, as you have explained, the number of new enrollments for the first half increased by 40,000 year-on-year. Since the number of new enrollments increased by 30,000 already in the first quarter, it seems there wasn't much of an increase if you just cut out the second quarter. The total number of cardholders is now 7.06 million. Looking at this level, it seems that the situation has not really changed since the first quarter. At Marui, I understand that you focus more on increasing the active usage by cardholders rather than only chasing the number of members. You're trying to change the contents of your business. However, the lack of growth in the number of cardholders concerns me a little bit. I'd like to hear your objections on this. This is my first question.
Thank you for the question. Saitoh will explain.
First is about the new enrollment for the first half, which was 270,000, up 40,000 from the same period last year. Let me explain the company's view on the result. Last year due to impacts like store closures, we had to recruit new enrollments under very tough situations, which resulted in a sharp decline in new cardholders. In the current fiscal year, a state of emergency continued almost every month from April to July, and we also had the same high preventive measures imposed. So the business environment continued to be very difficult. Under such environment, our store base enrollment increased year-on-year to the reactionary rise from last year's store shoppers. So how should we look at 270,000?
Before COVID-19, we normally had 400,000 new members in 6 months. So we are still at the 60% level. We are still far from achieving a full recovery. This is our understanding. However, if you look at the breakdown of the drop from 400,000 to 270,000, it is mainly due to the impact of COVID-19, such as a decrease in demand for overseas travel and the shorter business hours and store closures. So when COVID-19 subsides, we can expect a good recovery.
But on the other hand, we cannot just wait for COV19 to settle down. What we are strengthening for post-COVID-19 is the online enrollment. Online enrollment increased by 10,000 year-on-year. However, enrollment from online ads is declining. We see more new enrollments coming from our strategic focus, amine and e-commerce. They were up 1.7x, main reason for the strong growth of online enrollment. In that sense, our initiatives are delivering tangible results.
As for the total number of cardholders, as we pointed out, the actual number of cardholders in the first half was 7.06 million, a decrease of about 30,000. This was due to a decrease in new enrollment and a temporary increase in the number of cancellations.
Please refer to this screen. Epos Card was launched in 2006. And at this point, we migrated 1 million members from the former Marui Red Card to the new card. Among those customers, the third exploration renewal concentrated in this period. This is the extraordinary reason why the number of cancellations increased. In the months ahead, we expect a number of new cardholders to expand and the cancellations to settle down. so that we can expect an increase in the total number of cardholders. I hope it answered your questions.
As for the online advertising during the first quarter results briefing, I remember you explained that due to the intensified competition to acquire online enrollment, you did not use all the sales promotion cost allocated for online advertising. Is it correct to say that even in the second quarter, the sales promotion expenses were kept below the budget because of the prolonged restrictions on [ human resources ]. I apologize for the detailed question.
We had a plan to pay a certain amount of affiliate fees for online advertising in the first half of the year. But the acquisition cost per page from online advertising has skyrocketed from about JPY 10,000 a year before the last year to JPY 30,000. Because [ card-less ] entry would require a huge cost, we are controlling costs by monitoring the overall acquisition situation.
Okay. I understood. The second question is about EC. This has been identified as a challenge, and you explained about this during the presentation. The material says that you are hiring 250 web system-related personnel. And I think this means that you are hiring people in advance. Unless the EC top line and transactions increase in the short term, I believe there is a risk of excess costs. What are your thoughts on this risk?
Yes. Thank you. As you pointed out, we are aware that EC has been concerning as EC usage has been increasing for a long time during pandemic. In the first half of the fiscal year, EC sales were 86% over the previous year. Our forecast for the current fiscal year is JPY 18.5 billion in transactions, which is the third consecutive year of sales decline. However, we recognize that the slump in e-commerce is not a short-term issue, but a fundamental program. We believe that this is due to a lack of progress in improving UI and UX, aging systems and the lack of a solid foundation for the uniqueness of the website.
We would like to restructure these drastic issues over the next 2 years. The most important of these is the use of web-related human resources, as I mentioned earlier. By utilizing web-related human resources, we will be able to revise our structure and replace aging systems in a fundamental way. In addition, for EC that operates real stores, we would like to expand EC to JPY 30 billion in the fiscal year ending March 2026 by expanding event-based EC.
As for the issue of cost and profit that you were worried about earlier, we will naturally incur costs as an upfront investment, but we will do so to the extent it will not affect the current operating income of Retailing and FinTech. In fact, we believe that our corporate value will be enhanced by having web-related human resources playing their roles. So there's no need to worry about that.
We will now move on to the next person.
This is Kawano from Goldman Sachs Securities. You can answer my questions quickly. I have 3 questions. First question. I know that it hasn't been long since you announced the operating income targets for the period from fiscal year March 2024 to fiscal year March 2026 in your midterm plan, which JPY 12 billion for Retailing, JPY 53 billion for FinTech, JPY 2 billion for investment for the future and JPY 60 billion on a consolidated basis. I can only hope that COVID will have contained by then. But when we look at each of the business segment, do you think that you are making good progress or that something is lacking? I know it has only been a short time since the announcement. But what are your impressions? And do you have any opinions on the progress?
Thank you very much. I will answer your question. As you said, we have just made an announcement of midterm plan. What I'm thinking about is that the speed of our efforts toward the near future is accelerating. Therefore, I believe that by increasing this acceleration, we will be able to achieve the goals you mentioned earlier, which are ambitious ones that require challenges.
Now you have mentioned the near future. The percentage of experienced-based stores in the retailing sector has been increasing and a range of tenants has been expanding. While their satisfaction and KPIs need to be realized, the number of customers visiting your stores should not decline. What do you think of the current status of experience-based stores and their growth potential?
Each of our core creative investments and collaboration partners has its own KPIs. And therefore, we are working with a common goal in order to achieve them. Let me briefly talk about Mercari station. For example, at the General Meeting of Shareholders, a shareholder of Mercari said I became a fan of the Mercari station in Shinjuku Marui Main Building. I became such a fan that I also became a shareholder. It shows great qualitative recognition that we receive.
In order to further promote collaboration to collect data on their KPIs, we seconded one of our staff members to the company to help them measure and achieve KPIs. We are working on initiatives with each of our co-creative investment partners. We are still in the middle of the process and are still in the trial and error stage by achieving the targets we have set together. We hope to further spread this initiative and expand the number of partners, new tenants and also start-ups.
Is it safe to assume that the expansion will have little impact on store visits?
For example, apparel is an area that is shrinking. As we explained today, we assume risks of not doing certain things. If we hadn't scaled down our apparel business over the past 5 or 6 years, our vacancy rate will have worsened to about 5%, which is the same as the of commercial facilities nationwide. We understand your concerns because one may say store that don't sell is a hypothesis as it doesn't exist anywhere else in the world. On the other hand, we think it is a strategy well worth doing considering the risk in 5 to 10 years of just continuing to focus solely on setting.
While 85% of the new tenants are experienced and service-oriented and our product sales-based tenants are holding back from opening new stores due to the pandemic. 85 out of 100 tenants see this as an opportunity and are actively opening new stores. Therefore, we do believe that this strategy is based on the needs of our customers and business partners, including new ones as opposed to one-sided and an unrealistic hypothesis.
Does it mean that it is in line with the needs of tenants?
That's right. Business that were previously unable to make a move because they were mainly focused on product sales or unable to open real stores because they were mainly focused on e-commerce as well as small businesses, such as the individuals who participate in base -- experience-based stores are now able to take advantage of this opportunity. They are very happy to have this opportunity and are working very hard. By collaborating with them, we hope to create a new commercial facility.
Lastly, I would like to ask about the near future. I believe you will be explaining the impact of buy now, pay later on FinTech at IR Day on December 9. And I know you have been doing research. But are there any risks that you are aware of at this point? For instance, I heard that it is mainly young population who want to use BNPL. So what do you think about the risk that this may have an impact on the slowdown of acquiring new cardholders? It may not be so significant since the scale of this is still small. But on the other hand, the pace of expansion is very fast. So I am concerned.
Do you mind if I answer the question. This may sound like a preview. The reason why we are spending some time is that the more we look into it, the more we find it very interesting. In conclusion, we believe that both the threat and opportunity are significant. We don't want to worry you too much about the threats. So we would like to say that we recognize the vast coverage of our measures. And we will also like to explain how we seize the opportunities.
There is a reason why it is taking some time before explanation. There are various players in the BNPL area. Some rely on merchant income as their main revenue stream, while others rely on fees and interest from consumers and users as their main source of revenue. In some cases, such as in the case of developing countries, the growth is centered on customers who cannot afford credit cards. While in developed countries, the growth is centered on credit card holders. We will identify the overall picture, then explain what the threats and opportunities are as well as our responses and strategies.
It raises the question from the standpoint of economic rationality. When I compare what consumers effectively bear or the fees paid at convenience stores with interest rates. If this methodology works, there may be an opportunity for Epos Card with different form of service. Do you have any thoughts on this viewpoint? I don't have any good idea though.
As you said, BNPL is very similar to credit card services in some ways. But I believe that BNPL is expanding the service of payment and credit transactions to areas that credit cards have never been able to handle before. Therefore, not only BNPL, but I believe that there are opportunities to expand our services to areas that we have not tackled before, such as the use by minors and the use of more casual payment methods, such as convenience stores. We will talk about this as well.
Since we only have time for 1 more question. I would like to know what changes you have seen in FinTech since the state of emergency was lifted. Can we expect to see a further acceleration in the growth of revolving and installment transactions in areas such as travel, entertainment and dining out. Regarding acquisition of cardholders, I think that overseas travel is still not expected for the time being. But now the stores are operating as usual, is the number of new cards increasing on a monthly basis. You can tell us about this on a qualitative basis.
Thank you for your question. Since the state of emergency was lifted in October, we have been watching the daily figures with the expectation that people start activities and also the use of cards will expand. However, though, on the other hand, I think that most people are still taking a wait-and-see attitude. Credit card transactions has increased by 4 to 5 points compared to the trend until September. However, my honest impression is that the increase is somewhat restrained as opposed to being robust. There is no trend of a sudden increase in travel at this point based on the situation with the use of cards. It will depend on COVID to determine how they will move in the future. But I'm sure there will be various developments such as the restart of go-to travel campaign. So we will be watching the situation carefully.
Is the situation similar in terms of acquiring card holders?
The number of new cardholders has been increasing due to various initiatives outside of COVID along with the removal of shortened hours at stores. But so far, we have not seen any trend of sudden change in October.
It appears that there are no other questions. As the time has come, this will conclude the financial results briefing today. We would like to ask you to fill out a questionnaire about the briefing. URL are sent to you via e-mail. Thank you very much for taking time out of your busy schedule to join us today.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]