In May 2024, AOKI Holdings formulated our Medium-Term Management Plan FY2024-2026 (hereinafter the “New Management Plan”), covering the three fiscal years from 2024 to 2026, and publicly announced its contents for the first time.
 

Behind this was the need to widely communicate the direction and numerical targets for the growth of the AOKI Group, along with the status of efforts to strengthen our management foundation, including governance, so that we could resolve the governance issues that arose in 2022.
 

Furthermore, while the economy and society are gradually returning to how things were before COVID-19, energy costs and raw material prices continue to soar globally due to events such as the invasion of Ukraine and the worsening situation in the Middle East. Meanwhile in Japan, rising labor costs due to labor shortages are also increasing customers’ focus on protecting their livelihoods. Given these circumstances, I believe that clearly articulating the direction of our Group’s B to C businesses, which revolve around customer service, is crucial in maintaining and enhancing the motivation of our most important management resource, our “human resources,” and in ensuring that we can recruit and retain employees who can work with peace of mind over the long term.

With this in mind, the New Management Plan describes the “Desired 10-year (FY2033) State” while also reaffirming the changes in the business environment surrounding our company. Using a backcasting approach with this, we have outlined “Reforms of Existing Business Models in Each Business” and “Creation of New Businesses for New Growth.”
 

Before introducing the main strategies, I would like to share an episode related to the concept of the New Management Plan, “RISING 2026.” This concerns the reaction of young and mid-career employees to the question by the Board of Directors: “Can we call it RISING if the target numbers do not reach the highest profits of the past?” Indeed, while it is not wrong for management to define management plans in numerical terms, the majority opined that “Numbers are results. What truly represents RISING for the AOKI Group is the challenge of transforming business models and creating new business pillars.” Together with many employees who carry the will to inherit the AOKI Group’s DNA of taking on new challenges, we will create a new growth story that is not a mere extension of the past. This occurrence renewed our strong commitment to that resolution.

The three-year planning period of the New Management Plan is positioned as a “stage for restructuring the business portfolio” through the “redesign and improved profitability of existing businesses” and the “development of new businesses.” Particularly in our three core businesses, we are working toward a fundamental review and refinement of the existing business models under the banner of “Conversion,” “Redesign,” and “Evolution.” Moreover, in business reform and new business development, we will expand our Group’s business by considering the life stages of various customers, including the young people, the elderly, and women, and by engaging in collaborations and M&A with other companies aiming to move closer to our vision of our “Desired 10-year (FY2033) State.”
 

As a performance target, we aim to achieve an operating profit of ¥30 billion within 10 years, and by achieving annual profit growth of around 10% over three years, reach ¥18 billion in the fiscal year ending 2026. During the next Medium-Term Management Plan period, we envisage a growth curve that will see us reach record profits.
 

Meanwhile, as a financial indicator, we aim to achieve a PBR of 1.0 by the fiscal year ending 2026, and AOKI Holdings will take the lead in controlling the initiatives of each subsidiary aimed at improving capital efficiency and investment efficiency.

In the New Management Plan, we have clearly stated the need to strengthen and utilize the management base necessary to support group growth including “human resources”, “store network”, “IT infrastructure”, and “customer data”, and we will pursue and realize synergies by utilizing shared know-how and assets, further strengthening governance.
 

First, in terms of “human resources”, we position this as our Group’s top priority and will work on the stable recruitment and development of talented individuals. For training, we will update education programs by utilizing the know-how accumulated over many years in various types of chain store operations, and implement flexible personnel placements between stores of different business types.
 

For our current Group “store network” of approximately 1,400 stores, we are working towards utilization that goes beyond existing business frameworks. For example, in some stores in the fashion business, we will seek to enhance profitability by expanding the customer base and customer numbers, as well as by improving store efficiency. This uses measures such as reducing the floor space used, and using that space to newly entice indoor golf operated by the AOKI Group’s entertainment business, or other tenants from external companies. Meanwhile, in the area of parking spaces, in addition to new solar power generation facilities, we also installed EV charging equipment in 2023, launching our charging service business.
 

Furthermore, the key to maximizing the effects of these measures lies in “IT infrastructure” and “customer data.” Our Group considers the accumulated data on over 45 million members as an asset. Combined with marketing activities and related DX measures promoted by each business segment, we are considering building an information infrastructure foundation that allows for the data's effective use across the Group.
 

Meanwhile, enhancing governance based on the recommendations from the Corporate Governance Inspection and Reform Committee remains an important theme. We have been responding to each of the five major items and over 80 recommendations from the Committee, starting with a transition to a company with an Audit and Supervisory Committee. Looking forward, we will continue working to strengthen and optimize our governance structure, by enhancing the supervisory functions of External Directors, increasing the effectiveness and authority of the Nomination and Remuneration Committee, and conducting study sessions on issues identified from evaluations of the effectiveness of the Board of Directors, and reviewing its composition.

Finally, with the announcement of AOKI Group’s first Medium-Term Management Plan, “RISING 2026,” we have received more feedback than ever before from shareholders, investors, business partners, and employees. Regardless of whether or not you agree with our policies and measures, our commitment to constantly reviewing individual initiatives from short-, medium-, and long-term perspectives while aiming for the Desired 10-year (FY2033) State remains unchanged, while taking into account the feedback we have received. Furthermore, the governance that forms the basis of these initiatives is essential for the AOKI Group to promote collaboration with diverse stakeholders both inside and outside the company through business reforms and the creation of new businesses. As such, we pledge to continue with strengthening governance.
 

Through these initiatives, we will continue to strive to ensure that many stakeholders experience the DNA of the AOKI Group—Enriching people’s lives.