Aeon Co Ltd

TSE:8267

Earnings Call Transcript

[江川 敬明, executive]

I'm Egawa. I'm in charge of Finance and Business Management. Thank you very much for taking time out of your busy schedule today to attend Aeon's financial results briefing. I'd like to provide an overview of the financial results for the third quarter of the fiscal year ending February 28, 2025.

Let me begin with Slide 1. Consolidated operating revenue for the third quarter reached JPY 7,470.5 billion, an increase of JPY 444.7 billion from the same period last year, marking a record high for the cumulative 9 months for the 13th consecutive year. Operating profit was JPY 117.5 billion, down JPY 25.2 billion from the same period last year. And ordinary profit was JPY 102.0 billion, down JPY 31.0 billion from the same period last year. Net loss attributable to owners of the parent company was minus JPY 15.6 billion, a decrease of JPY 34.0 billion from the same period last year.

Next, please take a look at Slide 2. As shown in the table on the left, the consolidated financial results for the third quarter are as follows: operating revenue totaled JPY 2.4711 trillion, an increase of JPY 156.6 billion. Operating profit was JPY 18.9 billion, down by JPY 6.2 billion, and ordinary profit was JPY 12.2 billion, down by JPY 8.9 billion, all compared to the same period last year. Net income attributable to owners of the parent company was a loss of JPY 21.1 billion, a decrease of JPY 16.1 billion. In the third quarter, operating revenue showed favorable progress. However, operating profit remained relatively unchanged from the first half of the year, falling short of our expectations. The main reasons behind this were weak sales of fall and winter items in September and October due to record high temperatures as well as underperforming sales of seasonal food products.

Overall, the retail business experienced sluggish performance. On the other hand, since November, clear signs of improvement have emerged as shown in the 2 graphs on the right. Following the policy announced by President Yoshida during the second quarter financial result briefing, we have been strengthening price appeal through TOPVALU BESTPRICE in the second half of the year to enhance customer attraction, aiming to expand sales and secure total gross profit. In addition, under the strong message of "we thoroughly support customers' daily lives," we rolled out measures aimed at firmly establishing early increases in the number of customers with a focus on the peak shopping season during the year-end and New Year holidays.

In terms of expenses, we've been further driving digital transformation to enhance productivity and reinforcing company-wide cost control efforts. These actions led to a success and reversal of the sales and revenue trend from November, and we have sustained the momentum through December. Achieving this turning point right before December, the most critical month for profitability is a significant step towards securing full year profits. Each graph on Slide 3 shows the performance trends for the cumulative results of the third quarter over the past 6 years. Operating revenue was at a record high.

Although operating profit decreased, it was the second highest ever recorded in the previous fiscal year. The quarterly net profit attributable to the parent company shareholders has turned negative due to the decline at the ordinary profit level, the non-recurrence of onetime special gains recorded in the previous fiscal year and the earlier recognition of store closure provisions and impairment losses. Slide 4 shows the performance by segment. Regarding operating revenue, all reporting segments experienced growth. As for operating profit, similar to the first half of the year, the GMS, Supermarket and Health & Wellness business were the main factors behind the overall underperformance.

However, there has been some recovery in the Financial Services, Shopping Center Development and Services and Specialty Store businesses. We'll explain the situation of each segment in more detail on the next slide. Page 6 of the slide focuses on the GMS business, which experienced a significant downturn in September and particularly in October. This resulted in an operating loss of JPY 19.2 billion, a decline of JPY 17.7 billion year-on-year. Profitability was impacted by sluggish demand for fall and winter products due to record high temperatures as well as lower profit margins in the Food segment caused by weak sales in certain categories. The upper right graph illustrates changes in operating profit and loss by company for the third quarter. Aeon Retail, along with regional GMS companies such as Aeon Hokkaido, Aeon Tohoku and Aeon Kyushu all reported declines in operating profit.

Despite the challenging conditions during the third quarter, we undertook structural reforms in achieving strong food and strong specialty. We also strengthened our pricing strategy to stimulate consumption amid declining consumer confidence, emphasizing price appeals through TOPVALU BESTPRICE, which is our price fighter private brand. In addition to enhancing DX initiatives, we restructured store operations, reallocated person hours and improved management methods to boost productivity and optimize the labor cost ratio. These efforts, combined with successful Aeon Black Friday sales promotions have reversed the trend since November with increases in both customer numbers and sales.

This positive trend continued through December. On the next slide, Page 7, I'll discuss Aeon Retail Company Limited, the main company in our GMS business. Aeon Retail reported an operating loss of JPY 16.2 billion, a decline of JPY 5.3 billion compared to the same period last year. As noted in the GMS business overview, performance in October faced challenges due to record high temperatures, which impacted sales of fall and winter apparel. In the food products category, while customer numbers were stable, sales of certain items fell short of expectations. Since November, positive trends have emerged, driven by enhanced sales promotions and initiatives centered on the Aeon Black Friday sale.

This year's Aeon Black Friday was our largest ever, featuring over 2,000 promotional products. These efforts successfully resonated with consumers' frugal mindset, resulting in a 20% year-on-year increase in net sales during the same period and a same-store sales growth of 105.2% in November. We also successfully captured delayed demand for winter goods. In apparel, gross profit margins improved by 0.5 percentage points year-on-year, supported by better markdown control and an improved markup ratio.

In the Food division, despite continued product price increases, we focused on lowering prices for selected TOPVALU BESTPRICE items and expanding sales of larger volume products to increase market share and customer numbers. Same-store sales in the third quarter were steady at 103.2% year-on-year. Furthermore, AI-driven management of the sales variation ratio has contributed to an improvement in gross profit margins since November. Regarding profit structure reforms, we intensified efforts to streamline back-office operations and tightly manage person hours, leading to reductions in SG&A expenses, including labor costs. By November, person hours productivity improved to 106.7% of the previous year's level. These efforts, combined with higher sales and gross profit resulted in an operating profit increase of JPY 2.8 billion for the month of November.

Sales during the year-end and New Year holidays have also been favorable, and we remain focused on achieving our full year targets. The next slide, Page 8, focuses on the Supermarket business. As prices continue to rise and consumers adopt an increasingly frugal mindset, we prioritize flexible store operations and stronger price appeals tailored to regional characteristics. However, operating profit declined to JPY 11.8 billion, a decrease of JPY 10.0 billion year-on-year. Performance in October was particularly affected by record high temperatures, which led to sluggish sales of seasonal products. In November, we initiated cost structure reforms with a focus on the next fiscal year and beyond.

As shown in the graph on the lower right, person hours productivity improved in November with results already beginning to emerge. In November, similar to the GMS business, the Supermarket business experienced an increase in customer numbers, rising to 101.4% of the previous year, driven by enhanced price appeals. Same-store sales reached 103.0%, recovering 2.4 percentage points from October. Operating gross profit increased by JPY 9.6 billion year-on-year in November and combined with reductions in SG&A expenses, operating profit for the month improved.

This positive trend continued in December and during the year-end and New Year sales season, positioning us for a stronger performance in the fourth quarter. The next slide, Page 9, highlights our discount store business. Despite an increase in net sales, operating profit declined to JPY 4.7 billion, a decrease of JPY 1.3 billion year-on-year. This was primarily due to rising raw material and distribution costs as well as challenges in the cost structure amid an increasingly competitive market environment. However, net sales have remained stable and are showing signs of growth. This improvement is driven by enhanced price appeals, particularly for fresh food products and the introduction of large volume products tailored to customer needs, resulting in higher sales per customer.

To further strengthen competitiveness and cost efficiency, we are advancing initiatives such as unifying store names, transitioning Accolade to Big A and establishing a robust discount business model. The next slide, Page 10, focuses on our Health and Wellness business. In this segment, we've been strengthening the business platform to support growth, including enhancing the prescription drugs category and expanding private brand offerings. However, operating profit for the period was JPY 22.6 billion, a decline of JPY 7.8 billion year-on-year, impacted by weak sales of seasonal products and the discontinuation of cigarette sales.

In the prescription drugs category, sales grew to 109.6% of the previous year, supported by an increase in stores dispensing prescription drugs and revisions to dispensing fees. To further strengthen the revenue base, we continue efforts to enhance gross profit margins, leveraging programs such as the Community Support System Special Benefit Plan. In the merchandise sales division, we focused on expanding the lineup of drugstore-specific private brand products, top value items and self-selection cosmetics by revitalizing sales floors. Additionally, sales promotions utilizing the WAON POINT service have driven a steady increase in customer numbers with Welcia membership now reaching 13.3 million.

The next slide, Page 11, focuses on the Financial Services business. Operating profit in this segment totaled JPY 38.3 billion, marking a significant increase of JPY 11.1 billion year-on-year. Despite higher compensation expenses for customers affected by special fraudulent card usage and increased bad debt-related expenses due to the rising number of phishing scams in Japan, operating profit grew driven by the expansion of card revenues and financial revenues. In Japan, credit card shopping transaction volume grew steadily at 106% year-on-year, while cash advance transaction volume remained stable.

Card revenues continued to expand and the profitability of operating receivables improved, supported by an increase in the balance of high-yield receivables. On the cost side, the loan loss ratio, excluding the impact of fraudulent activities, remained stable at below 1%. Member acquisition costs were controlled through enhanced fraud prevention measures and operational efficiency improvements, further strengthening cost management. Overseas, transaction volume grew and operating revenue reached record highs across all 3 regions. In Greater China, profit growth was strong, driven by effective strategies to capture consumption demand from Hong Kong residents in Mainland China and by strengthening credit through the use of credit scores.

In the Mekan region, however, profits were flat compared to the same period last year, reflecting higher personnel and bad debt-related expenses. In the Malay region, despite higher expenses associated with the launch of the digital bank, the region achieved profit growth, excluding those costs. The next slide, Page 12, highlights the Shopping Center Development business. Operating profit in this segment reached JPY 38.6 billion, a year-on-year increase of JPY 4.0 billion. This was driven by strong specialty store sales and increased customer traffic at existing malls in Japan and overseas, supported by significant contributions from Aeon Black Friday and demand of visitors to Japan. In the third quarter, domestic sales at specialty store sales in existing malls were robust, rising to 106.2% year-on-year.

During Aeon Black Friday in November, specialty store sales surged to 120.1% year-on-year. Additionally, duty-free store sales doubled compared to the previous year, driven by the weak yen and enhanced efforts to capture inbound demand, resulting in higher profits. In China, where the real estate market has been stagnant for an extended period, specialty store sales declined year-on-year despite steady increases in customer traffic. This was primarily due to heightened price sensitivity among consumers, reflecting weakened consumer confidence amid a challenging employment environment, particularly for younger generations. In the ASEAN region, specialty store sales in Vietnam remained strong, supported by the systematic implementation of Aeon Black Friday and other seasonal events.

In Cambodia, while customer numbers are recovering, foreign consumption has been slow to return, prompting continued focus on customer attraction initiatives to improve profitability. In Indonesia, progress is filling vacant floor space in existing malls has boosted rent income, contributing to improved profits.

The next slide on Page 13 focuses on our Services and Specialty Store business. Supported by the solid performance of our major operating companies driven by the recovery of same-store sales in Japan and overseas as well as the steady rollout of new businesses, operating profit reached JPY 16.5 billion, an increase of JPY 4.3 billion year-on-year.

Looking at the third quarter results by company, Aeon Delight achieved profit growth by expanding its market share among existing customers and acquiring new customers. To enhance efficiency, the company is actively leveraging IoT and digital technologies to strengthen its competitiveness in facility management operations. At Aeon Fantasy, operating profit increased by JPY 200 million year-on-year. Performance was bolstered by the success of the new playground business model, along with strong contributions from its main divisions. The company also successfully managed other SG&A expenses while controlling increases in certain costs such as personnel expenses. In the Services and Specialty Store business, we continue to strengthen our business platform by focusing on profit structure reform and new market development.

To enhance future competitiveness, we are advancing DX initiatives, developing new services, evolving our business model and further reinforcing human capital. Slide 14 highlights our international business. Operating profit for this segment was JPY 5.8 billion, a decrease of JPY 1.2 billion compared to the previous year. In the third quarter, Hong Kong and East China impacted by a challenging consumption environment, underperformed, contributing to an overall decline of JPY 0.3 billion for China. While performance in ASEAN countries was somewhat soft, Malaysia and Vietnam showed resilience, achieving profit growth in both the third quarter and the first 9 months of the fiscal year.

In China, performance varied by region, which we attribute primarily to macroeconomic factors. Inland regions performed well, whereas coastal areas faced more significant challenges. In the ASEAN region, Malaysia maintained profit growth, supported by successful customer attraction initiatives such as a campaign celebrating the 40th anniversary of the company's founding there as well as efforts to remodel existing stores and improve mall occupancy rates. In Vietnam, third quarter sales reached 121.4% of the previous year, driven by enhanced sales promotions and optimized product assortments.

Strong performance from new stores, along with stable growth in existing stores further contributed to these results. Slide 16 outlines the projected impact of cost increases on consolidated financial results and the actual results for the first 9 months of fiscal 2024. At the start of the fiscal year, we anticipated year-on-year increases of JPY 10 billion in utility costs, JPY 4 billion in logistics costs and JPY 65 billion in personnel costs. Through the cumulative third quarter, utility expenses rose by JPY 4.6 billion compared to the prior year, driven by record high temperatures and a sharp rise in electricity market prices.

For the full year, we expect the total increase to slightly exceed JPY 10 billion. Logistics costs increased by JPY 2.9 billion over the 9-month period. To address these challenges, we are working to realize group-wide benefits through logistics efficiency improvement initiatives and will consider implementing additional measures promptly. Finally, the impact of wage increases, excluding newly consolidated subsidiaries was JPY 42.7 billion, slightly below initial projections. This reflects the positive effects of DX investments and progress in controlling person hours through frontline level efforts. Slide 17 highlights the December sales performance covering the period from Christmas to New Year's.

Christmas sales generally aligned with our expectations, while sales during the year-end and New Year's period, the busiest of the year, exceeded initial projections slightly. Aeon Malls, in particular, have become key entry points for attracting customers, leading to increased sales in the GMS, Services and Specialty Store businesses within the malls. Additionally, the food departments across the GMS, Supermarket and Discount Store businesses have performed strongly. Sales in the Health and Wellness business have also grown, driven by increased demand for pharmaceuticals and hygiene products amid the influenza outbreak. Turning to Page 18, regarding the forecast for this fiscal year. There are no changes from the announcement made at the beginning of the period.

While progress through the third quarter has been challenging, the strong momentum observed in November has continued into December and the year-end and New Year holidays, resulting in significant sales growth at Aeon Mall and other businesses. We anticipate earnings growth across the group in January and a substantial increase in sales for the fourth quarter. To recover from the negative consolidated results through the third quarter and achieve our full year targets, we'll continue to focus on enhancing profitability. The entire group remains committed to meeting the trust you have placed in us through concerted efforts and dedicated action. That is all I have to say. Thank you very much for your attention.

[Unknown Analyst]

Could you share the differences in performance across segments compared to the plan? Do you consider the JPY 270 billion operating profit target for fiscal 2024 achievable? Or is it a challenging goal? How do you currently assess the company's ability to recover from delays in the fourth quarter?

[江川 敬明, executive]

This is Egawa. When discussing the ups and downs across our segments, starting with the challenges, the Retail business stands out. This includes GMS, Supermarket, Discount Store and Health and Wellness, all of which faced significant difficulties. The primary reasons were tough conditions in September and October. And although November showed a strong recovery, the 3-month period overall was challenging for the retail business. On the positive side, while there was no standout segment, we did achieve our targets in the Shopping Center Development business, led by Aeon Mall. The number of customers returned and sales at specialty stores rebounded, signaling a positive trend in the third quarter.

The Services and Specialty Store business showed a mix of results varying by company, but overall, it performed reasonably well. In the Financial Services business, while there were concerns about malicious use and related costs, we believe we are on track to meet our budget even after accounting for these expenses. Looking at the full year outlook, the hurdles remain very high. It would not be an exaggeration to say the challenges are considerable. The third quarter was particularly tough for the Retail business, but the strong recovery in November was encouraging. That said, gross profit remains insufficient. To address this, we adopted a strategy in the second half of the year to lower pricing, especially for our TOPVALU BESTPRICE products to attract more customers.

November saw the combined effects of colder weather, target sales promotions and this pricing strategy, which yielded positive results. Specifically, net sales in the retail business in November reached 105% of the previous year's figure, with a gross profit margin improvement of approximately 0.3 percentage points compared to the first half, driven by a significant increase in sales of TOPVALU products. Additionally, sales in the Food Products division improved by 0.5 percentage points from the previous month, which we see as another positive indicator.

The year-end and New Year holiday period, coupled with favorable weather, boosted customer numbers, aided by our strengthened event strategies. Our main goal now is to sustain this momentum into the fourth quarter, which typically sees a high volume of sales and profits. Regarding costs, since November, we have issued a company-wide directive to strengthen cost controls. For personnel costs, we are optimizing staffing levels based on the investment effects of DX. Sales promotion expenses are also under review to focus only on highly effective measures. Furthermore, we are narrowing down capital expenditures, particularly for repairs to essential items, promoting this effort across the group. In the fourth quarter, we aim to reduce costs by approximately JPY 30 billion compared to budget levels across the group.

If we can sustain sales at 104% or higher for the remaining period of the fourth quarter, coupled with continued gross profit improvements and cost reductions, we are confident in achieving the operating profit targets we have announced. For net income, a rise in operating profit, particularly from the Retail business would significantly contribute to net income. We are also taking decisive steps to manage extraordinary losses and profits with the aim of achieving our budget for net income. Around this time last year, there was similar news about a 7% increase in hourly wages for part-time employees, which I believe was a very good decision from a human capital perspective. However, I'm curious about how you plan to offset the rise in labor costs through sales and gross profit.

[Unknown Analyst]

Additionally, what was the rationale behind the decision to increase labor costs and part-time wages? And how do you intend to secure overall profits?

[四方 基之, executive]

This is Shikata. Over the past 2 years and again this year, our company has increased wages. As I mentioned last year, the part-time workers on our front lines are not only our employees, but also members of the local community. By investing in them, we are contributing to the revitalization of these communities. While this is an investment that must yield returns, the wage increases over the past 2 years have made it easier to recruit frontline staff and have significantly boosted employee motivation. I firmly believe that retail is a people-centered industry and companies cannot thrive without investing in their people.

So why is Aeon able to make these investments? One key reason is our focus on digital transformation. By transitioning from a labor-intensive service model to one driven by mechanization and digital innovation, we have improved work efficiency and eliminated certain tasks altogether. For example, we have increased the use of self-checkout registers and more recently, implemented electronic shelf tags. These digital tags allow us to update prices instantly, eliminating the need to manually change paper price tags and reducing pricing errors at checkout.

By accumulating these kinds of efficiency improvements, we are enhancing productivity across the board. At Maxvalu Tokai Company Limited, for instance, we are closely monitoring not just sales and profits, but also the number of person hours invested daily. Even as hourly wages for part-time workers have risen, we are keeping total personnel costs under control by managing the number of hours worked. This approach has been rigorously implemented across the Group, including at Aeon Retail Company Limited since the third quarter, allowing us to maintain control over personnel costs.

Looking ahead, we intend to continue investing in part-time staff this year as well. By turning these personnel investments into profits, we aim to revitalize our business while further contributing to the communities we serve. This is mainly a retail-focused discussion. You explained that while the high temperatures in September and October were a struggle, the improvement trend has been strengthening since November. Looking at the monthly sales figures, I think things are getting better.

The plan is for profits to recover significantly in the fourth quarter. I think the improvement accompanying the drop in temperature is significant. But in addition to that, I would like to ask you to summarize the major factors behind the improvement in profits through self-help efforts. In terms of procurement, we are making the most of economies of scale, and we are also reducing and improving costs by focusing on what is necessary. And I think this will be a major factor in improving profits. In addition to this, we're also strengthening our price response and sales promotion initiatives to simulate consumption, such as Aeon Black Friday.

[Unknown Analyst]

You are implementing various measures such as thorough management of sales changes and productivity improvements through digital transformation. But I would like to ask you how you view the measures that are contributing the most to business performance.

[Eizou Okada, executive]

This is Okada. Firstly, regarding GMS, the improvement of profit in apparel from October to November made a significant contribution. Historically, we have promoted products less affected by temperature fluctuations even during abnormal weather conditions. However, October's unexpectedly high temperatures resulted in negative sales. Starting in November, sales rebounded strongly, driven by temperature independent product sales and the success of Aeon Black Friday promotions. In the Food Products division, sales of fresh food and groceries, which had been sluggish, also contributed significantly.

Our pricing strategy for fresh food and groceries proved particularly effective. The improvement between October and November was not due to an increase in the unit price per item, but rather a rise in the number of customers. We believe this positive reception of our pricing strategy led to the notable sales growth in November. As a result, markdown ratio went down, partially thanks to our efforts to address disparities across companies, stores and businesses based on insights from the first half of the year. This was particularly evident in November, where the markdown ratio improved by 0.5 percentage points. Additionally, the sales promotion of TOPVALU and private brand products contributed significantly.

Sales growth was achieved while maintaining markup ratios driven by effective external messaging, such as the step-by-step savings campaign, which resonated well with customers. Internally, this initiative gained strong employee support, becoming a group-wide effort to promote sales. This approach led to the creation of effective sales areas, significantly boosting sales. Furthermore, the increased market share of supermarket companies contributed to overall sales growth and gross profit. Looking at the quarterly gross profit margin for Aeon Retail Company Limited, it was minus 0.0 percentage points in the first quarter, minus 0.4 percentage points in the second quarter and minus 0.2 percentage points in the third quarter.

[Unknown Analyst]

Well, I'm sure you aim to increase it further. Based on the trend, is it reasonable to assume that the margin bottomed out in the second quarter and that the rate of decline will now moderate? I'd like to ask what changes you anticipate in the fourth quarter from this point.

[Eizou Okada, executive]

Okada speaking. At Aeon Retail Company Limited, we are closely monitoring the number of days it takes for products to turn over. While there were discrepancies between companies in the first half of the year and the turnover period did not improve as expected, efforts to reduce debt stock and expand sales of popular items are gradually yielding results. As a result, we were able to improve the gross profit margin, particularly in apparel despite challenging sales. In November, significant sales growth contributed positively to the gross profit margin.

As apparel inherently carries a high gross profit margin, an increase in its composition ratio naturally leads to an overall improvement in the company's gross profit margin. Inventory turnover has continued to improve in line with sales growth. Additionally, the transition to seasonal products is progressing well. We believe that if we can maintain strong sales volumes, we will be able to secure a sufficient gross profit margin moving forward. I would like to reconfirm the sales strategy for the retail business, which is currently focused on food products and the outlook for the future.

While the gross profit margin for apparel has certainly improved in the GMS business in September, October and November, the gross profit margin for food products has been on a negative trend for 3 consecutive months. In the second quarter financial reporting, President Yoshida commented that the price increases for national brand food products in September and October would be implemented for those that could be raised, while the company would work to attract customers by strengthening the low price range, including best price for private brand products.

[Unknown Analyst]

I would like to ask you to confirm again how the margins for food products in September, October and November turned out compared to your expectations. Also, I'd like to ask you to reconfirm whether this policy means that you will have to further strengthen your low price strategy for private brand products as it seems that there will be many more price increases for food products in the next fiscal year.

[四方 基之, executive]

This is Shikata. Teikoku Data Bank recently announced that the number of food items with price increases from January to April this year will exceed 6,000. We, too, will continue to address price increases, particularly in the food category moving forward. At the same time, while consumer spending is not rising in line with the CPI, the angle coefficient is increasing. Therefore, as President Yoshida mentioned in the second quarter financial report, we will rigorously implement our pricing policy. In the second half of the year, our pricing strategy has led to an increase in customer numbers.

By focusing on growing the number of customers, we aim to improve total gross profit. While we are seeing progress, we believe there is still room for improvement. One key initiative has been the expansion of our yellow private brand products, BESTPRICE. In November, we introduced the tagline step-by-step savings and reduced prices while increasing quantities of private brand products. This approach has been a critical factor in our success. However, the full impact of these measures has yet to be realized in the third quarter.

As such, we'll continue promoting private brand products, especially during the high demand year-end and New Year period, focusing on both the third and fourth quarters. Alongside these efforts, we are emphasizing our high value-added red TOPVALU products. For example, sales of Christmas-related items, such as oven-ready roast chicken have shown strong growth. Our goal is to improve customer numbers and gross profit while maintaining a balanced focus on both yellow and red TOPVALU products. Additionally, we are paying close attention to controlling sales turnover. In the first half of the year, the markdown rate for delicatessen products was particularly high. In the second half, we have successfully managed this issue.

Moving forward, we aim to further enhance overall gross profit by concentrating on 2 key areas: improving the pricing and profitability of private brand products and reducing markdown frequency, particularly for delicatessen items.

[Unknown Analyst]

Ultimately, are you aiming to increase the gross profit margin on food products in the fourth quarter? While there was mention of the amount, do you also believe the rate itself could improve if things go well?

[四方 基之, executive]

Shikata speaking. I would frame this as an improvement of overall gross profit rather than gross profit margin. This is closely tied to managing the markdown ratio rather than actively increasing the gross profit margin itself. Our approach is to secure the gross profit margin by increasing sales volume while maintaining a stable gross profit margin. In the fourth quarter, our focus is not on rapidly raising the gross profit margin rate, but on achieving steady progress through this balanced approach.

[Unknown Analyst]

While a response such as it's completely blank is acceptable, KKR is moving forward with the sale of Seiyu, including the Kanto area, and Aeon's name has been mentioned as one of the potential candidates. If you can comment on this, please let us know.

[四方 基之, executive]

This is Shikata. We're unable to address individual cases.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]