Medium-Term Management Plan - (FY2017 to FY2019) 東証1部 8905

 
Medium-Term Management Plan - (FY2017 to FY2019) 東証1部 8905
Medium-Term Management Plan
        (FY2017 to FY2019)

            (東証1部:8905)
Medium-Term Management Plan - (FY2017 to FY2019) 東証1部 8905
Growth Initiatives

                     1
Medium-Term Management Plan - (FY2017 to FY2019) 東証1部 8905
Growth Initiatives

                              Overseas (China/ASEAN)                                                Japan

                                                                           Demographic change               Household change
                         High growth           Emergence of the
                                                                           (low birthrates, aging           (rise of single and
                     characteristics of the   modern SC with GDP
      Environment

                                                                                and falling                     dual-income
                         retail market              growth
        External

                                                                                population)                     households)

                                                                                        Change in consumption
                     Acceleration of store
                                              Concern of slowing                       behavior (EC penetration,
                         openings via
                                              Chinese economy                          propensity to save, sharing
                        competing DV
                                                                                               behavior)

                                                                            (2) Development of Latent Sources of
                                                                                Domestic Demand

                     (1) Capturing Asian Growth                             (3) Becoming the Overwhelmingly
      Initiatives

                         Opportunities                                          Dominant Mall in Each Region
       Growth

                                                                            (4) Capturing Urban Growth
                                                                                Opportunities

                        (5) Optimal Financing Mix / Organizational Structures to Support Growth

                                                                                                                                  2
Medium-Term Management Plan - (FY2017 to FY2019) 東証1部 8905
Growth Initiatives

                                              I.     Reaping benefits of rising brand penetration (via area-dominant strategy)
                       (1)                    II.    Development and management of superior malls
      Capturing Asian Growth Opportunities    III.   Measures to increase operating revenues
                                              IV.    Promotion of local management

                      (2)
                                              I. Happiness Mall project
        Development of Latent Sources of
                                              II. Promotion of localization
               Domestic Demand

                                              I.     Floor expansion and effective revitalization measures
                     (3)
                                              II.    New mall openings in untapped territory
         Becoming the Overwhelmingly
                                              III.   Development of new formats
         Dominant Mall in Each Region
                                              IV.    Improvement of ES for tenants

                                              I.     Establishment of branding for new OPA
                      (4)                            - Development of new format in urban locations
     Capturing Urban Growth Opportunities            - Promotion of renewal of existing stores and strategic S&B/refining
                                                     - Opening of New Stores in urban areas

                       (5)
                                              I. Financing to support growth business model
     Optimal Financing Mix / Organizational
                                              II. Promotion of diversity management
         Structures to Support Growth

                                                                                                                                 3
Medium-Term Management Plan - (FY2017 to FY2019) 東証1部 8905
Consolidated Business Targets

                                4
Medium-Term Management Plan - (FY2017 to FY2019) 東証1部 8905
Consolidated Business Targets

 ◆Consolidated Results
                             [Actual]                [Actual]              [Plan]               [Plan]

                                                                                                              Average growth
                            FY2016                  FY2017                FY2018               FY2019            rate over
                                                                                                                three years

       Operating
        revenue              ¥269.7 bn              ¥288.1 bn             ¥320.0 bn            ¥340.0 bn            +8.0 %

       Operating
        income                ¥44.9 bn                ¥49.2 bn             ¥53.5 bn             ¥60.0 bn            +10.1 %

      Change in Operating Income
                                                                                  Average
          (Billion yen)                                                         growth rate
                                                                                 over three
               70.0
                                                                                   years:
               60.0                                                                 +10.1%
               50.0

               40.0

               30.0                  Average                 Average
                                    growth rate             growth rate
               20.0                 over three              over three
                                      years:                  years:
               10.0                   +2.1%                   +2.1%

                   0
                          FY2010                  FY2013                  FY2016      FY2017      FY2018   FY2019
                                                                                                                               5
Medium-Term Management Plan - (FY2017 to FY2019) 東証1部 8905
Consolidated Business Targets

   • Overseas business achieved a ¥2.9 billion year-on-year improvement in profit in FY2017. There is no change to the FY2019 profit target of ¥5.0 billion,
     an ¥8.8 billion increase from FY2016.
   • Improvement in profitability of the urban shopping center business (OPA) was slow, and fell short of the FY2017 target by ¥2.1 billion. The FY2017
     profit target is changed to ¥2.0 billion, which is ¥2.0 billion lower than the initial target.
   • The domestic mall business performed well due to revitalization efforts such as floor area expansions and with FY2017 specialty stores sales +2.2%
     YoY, compared with the initial plan of +1%. Revenue of existing malls has improved, so we have revised our FY2019 profit target to ¥53.0 billion, up
     ¥2.0 billion from the initial target.

◆ Results by Segment                                                                                                                                 (Billion yen)

     Overseas Business (China/ASEAN)                               Domestic Mall Business                              Urban Shopping Center Business

                                 FY2019
            Increase over        (Plan)                                                                                                           FY2019
          three years: +8.8                                           Increase over                                                               (Plan)
              billion yen                                                                   FY2019
                                                                                                                                Increase over
                                                                    three years: +3.5                                         three years: +2.8
                                                                                            (Plan)
                                                                        billion yen                                               billion yen

           FY2016
          (Actual)                                                 FY2016
                                                                  (Actual)
                                                                                                                           FY2016
                                                                                                                          (Actual)

                                      FY2019                     Increase over                  FY2019
            Increase over             (Plan)
                                                               three years: +5.5
                                                                                                (Plan)
                                                                                    FY2018
          three years: +8.8                                       billion yen       (Plan)
             billion yen
                                                                         FY2017                                               Increase over
                           FY2018                                       (Actual)                                            three years: +0.8
     FY2016                (Plan)
                FY2017                                                                                                         billion yen              FY2019
    (Actual)   (Actual)                                      FY2016                                                                                     (Plan)
                                                            (Actual)
                                                                                                                    FY2016
                                                                                                                   (Actual)      FY2017     FY2018
                                                                                                                                (Actual)    (Plan)

                                                                                                                                                                 6
Medium-Term Management Plan - (FY2017 to FY2019) 東証1部 8905
Consolidated Business Targets

         We plan to open a total of 27 new malls during the three years of the medium-term management plan.
                                                                          <変更後計画>
       The number of mall openings overseas will exceed those in Japan as    our overseas shift gains momentum.
                                                  (10 malls in Japan, 12 malls overseas, 5 urban shopping centers)
      Overseas
      • New openings will decrease by 1 mall in China and 2 malls in Indonesia from the initial plan, but these are only delays, and our
        policy of accelerating mall openings is unchanged.

      Japan
      • We have slowed the pace of new mall openings as construction costs remain high.
      • At existing malls, floor area expansions are planned at eight malls over the three years, in addition to revitalization centered on
        tenant replacement upon the expiration of fixed-term leases of tenants at around 10 malls per year.

◆ Number of New Mall Openings and Malls to Be Revitalized
                           Overseas (China & ASEAN)                                                                               Japan
                                                                                                                                   [Actual]       [Plan]        [Plan]

                                 [Actual]       [Plan]       [Plan]                                                               [Actual]       [Plan]        [Plan]
    FY2017         FY2018       FY2019       Total                      FY2017         FY2018        FY2019        Total

 Overseas                                   5            3            4           12   Mall *1                                               5             4             1           10
    China                                   4            2            2            8   Urban Shopping Center                                 2             2             1            5
    ASEAN                                   1            1            2            4
                                                                                               FY2017         FY2018        FY2019        Total

                                                                                       Increase in floor area *2                             2             2             4            8
                                                                                       Renew al                                          12                8            10           30

                                                                                       *1(New mall) +*2(Increase in floor area)              7             6             5           18

                                                                                                                                                                                          7
Medium-Term Management Plan - (FY2017 to FY2019) 東証1部 8905
Consolidated Business Targets

       •   Capital investments in FY2017 included ¥50.0 billion in unplanned investments related
           to the purchase of existing assets of AEON MALL Hiroshima Fuchu and other properties in
           Japan.
       •   Because of the factor above, total investments for the three-year period have been
           adjusted upward by ¥50.0 billion from the initial plan to ¥500 billion.

  ◆ Capital Investment
                                   [Actual]                             [Plan]       [Plan]                              (Billion yen)

                                                                                                    Total of three
    Revised plan                   FY2017                              FY2018       FY2019
                                                                                                        years
                                                    Difference vs.                                                   Difference vs.
                                                     initial plan                                                     initial plan

    Capital Investment               ¥190.0                 +40.0        ¥190.0         120.0              500.0             +50.0

       Japan                           155.0                +55.0          140.0          75.0             370.0             +70.0

           Store openings of new
                                         80.0               +30.0            90.0         30.0             200.0             +30.0
           malls
           Revitalization of
                                         70.0               +40.0            30.0         40.0             140.0             +40.0
           existing malls

           Urban SC (OPA)                     5.0             -15.0          20.0             5.0            30.0                 ±0

       Overseas                          35.0                 -15.0          50.0         45.0             130.0               -20.0

           China                         15.0                   -5.0         10.0             5.0            30.0              -30.0

           ASEAN                         20.0                 -10.0          40.0         40.0             100.0             +10.0

                                                                                                                                         8
Medium-Term Management Plan - (FY2017 to FY2019) 東証1部 8905
Consolidated Business Targets

  •    Funding for the ¥500 billion in capital investments over the three years will be provided by the following sources:
         Operating cash flow: ¥270 billion Funds on hand: ¥30 billion Use of debt and REIT: ¥200 billion
  •    Overseas business is entering the stage of generating cash flow, and significant improvement in free cash
       flow can be expected in the next medium-term management plan and beyond.
  •    We will use leverage during this medium-term management plan, and will keep the net debt-equity ratio at around
       1.0 times to maintain financial soundness over the medium to long term.

  ◆ Financing Plans and Investment Breakdown                                                                                                              (Billion yen)

 <Initial plan>           3-year Plan                        <Revised plan>           3-year Plan                                      FY2018 (Plan)

                                   Funds on
             Japan                   hand       Use of                    Japan                 Funds on                   Japan
                                                                                                  hand       Use of                                         Use of
                                              debts, REIT,                                                                                       Funds on
                                                                                                           debts, REIT,                                   debts, REIT,
                                                  etc.                                                                                             hand
                                                                                                               etc.                                           etc.
                       Operating                                                    Operating
                       cash flow                                                                                                     Operating
                                                                                    cash flow                                        cash flow
            Overseas                                                     Overseas                                         Overseas

                         FY2017 (Plan)                                               FY2017 (Actual)                                   FY2019 (Plan)

                                   Funds on                                                                                Japan                            Use of
                                                                                                                                                 Funds on
             Japan                   hand       Use of                                                                                                    debts, REIT,
                                                                          Japan                 Funds on   Use of                                  hand
                                              debts, REIT,                                                                                                    etc.
                                                                                                  hand   debts, REIT,                Operating
                                                  etc.
                                                                                                             etc.                    cash flow
                       Operating
                       cash flow                                                    Operating
                                                                                    cash flow                             Overseas
            Overseas
                                                                        Overseas

                                                                                                                                                                          9
Overseas Business

                    10
(1) Capturing Asian Growth Opportunities

                                   I. Reaping Benefits of Rising Brand Penetration (via Area-Dominant Strategy)
                      Strategic area                                        Improvement of leasing conditions                             Benefits of Suzhou Area Dominant Strategy

                        Area-dominant strategy being implemented in 4
                           Chinese regions and 3 countries in ASEAN

                  Beijing / Tianjin / Shandong Area       - AEON MALL Beijing International Mall
                                                          - AEON MALL Beijing Fengtai                                                          Hanoi
                                                          - AEON MALL Tianjin TEDA
                                                          - AEON MALL Tianjin Zhongbei                                                                                      Vietnam
                                                          - AEON MALL Tianjin Meijiang                                                                           
                                                          - AEON MALL Hebei Yanjiao                                                                              - AEON MALL Long Bien
                                                                                                                                Phnom Penh                       - AEON MALL Ha Dong
                                                          - AEON MALL Tianjin Jinnan
                                                                                                                                                                 
                                                          - AEON MALL Yantai Jinshatan
                                                                                                                                                                 - AEON MALL Tan Phu Celadon
                                                                                                                                                                 - AEON MALL Binh Duong Canary
                  Hubei Area                              - AEON MALL Suzhou Wuzhong                                                       Ho Chi Minh           - AEON MALL Binh Tan
                                                          - AEON MALL Suzhou Yuanqu Hudong
                                                          - AEON MALL Hangzhou Liangzhu Xingcheng
                                                          - AEON MALL Suzhou Xinqu                                        Cambodia
                                                                                                              - AEON MALLl Phnom Penh
                                                          - AEON MALL Nantong Xinghu
                                                                                                              - AEON MALL Sen Sok City
                                                          - AEON MALL Changshu Xinqu
                                Jiangsu / Zhejiang Area
                                                          - AEON MALL Wuhan Jinyintan
                                                          - AEON MALL Jingkai
                                                          - AEON MALL Wuhan Jinqiao

                                                          - AEON MALL Guangzhou Panyu Square                                                                            Indonesia
                                           *                                                                                                             - AEON MALL BSD CITY
                                                          - AEON MALL Foshan Dali
                                                                                                                                                         - AEON MALL Jakarta Garden City
                                                          - AEON MALL Guangzhou Jinsha                                                                   - (Tentative name) AEON MALL Sentul City
                         Guangdong Area                                                                                                                  - (Tentative name) AEON MALL Deltamas
                                                                                                                                     Jakarta

* Malls written in blue are scheduled to be opened                                                 * Malls written in blue are scheduled to be opened                      As of February 28, 2018

                                                                                                                                                                                                    11
(1) Capturing Asian Growth Opportunities

                         I. Reaping Benefits of Rising Brand Penetration (via Area-Dominant Strategy)
              Strategic area                      Improvement of leasing conditions          Benefits of Suzhou Area Dominant Strategy

       【Locations for Store Launches】
       Areas where economic growth can be expected and where a mall business can be
       expected to be viable.
        → ① Expanding middle-income class    ② Advancing motorization
              ③ Advancing regional development            ④ Lack of competing retail facilities

      Growth in Disposable Income / Per Capita GDP / Aggregate Retail Consumption
         ※2008 indexed at 100.

        ◆Hubei Province

                                                     2008                             2012               2016

                 Disposable income                   100                              158                223

                    Per capita GDP                   100                              194                277

            Aggregate retail consumption             100                              193                315
                                                                                                                                         12
(1) Capturing Asian Growth Opportunities

                            I. Reaping Benefits of Rising Brand Penetration (via Area-Dominant Strategy)
                Strategic area                                  Improvement of leasing conditions                 Benefits of Suzhou Area Dominant Strategy

               Monthly rent per tsubo for specialty stores at Suzhou Xinqu (third store) is
                         about 1.6 times that of Suzhou Wuzhong (first store).

    Comparison of Leasing Conditions: 3 Malls in the Suzhou Area (Comparison at 5 months after Opening)

                                     Monthly Rent per Tsubo                              *Suzhou Wuzhong indexed at 100

                                                                                                                                              AEON MALL
                                                                                                                                             Suzhou Yuanqu
                                                                                                                                                Hudong
                                                                                               AEON MALL
                                                                                              Suzhou Xinqu

                                                                        158
                                                143
                        100

                                                                                                        AEON MALL
                                                                                                      Suzhou Wuzhong

                      AEON MALL               AEON MALL              AEON MALL
                    Suzhou Wuzhong       Suzhou Yuanqu Hudong        Suzhou Xinqu
                       (1st store)             (2nd store)            (3rd store)

         < OPEN >    < Apr 2014 >          < May 2015 >              < Jan 2016 >                                                                             13
(1) Capturing Asian Growth Opportunities

                                    I. Reaping Benefits of Rising Brand Penetration (via Area-Dominant Strategy)
                      Strategic area                                  Improvement of leasing conditions                         Benefits of Suzhou Area Dominant Strategy

           ① The 3rd mall in the area, branding penetration has benefited leasing terms and top-line revenues have
            exceeded forecasts. Year 1 profitability achieved.
           ② For accounting purposes, real estate costs (proprietor lease fees) are averaged over the term of the non-
            cancellable term of the contract (8-years). Thus, operating expenses are held flat.
           ③ Looking forward, assuming top-line growth remains in-line with forecasts, profit generation expected to
            match Japan domestic malls (over 1bn JPY at gross operating profit base) in 6-7 years.

 AEON MALL Suzhou Xinqu
                                                                                                            Average and Staggered Lease Costs
 (Jan. 2016 opening)
                                                                                                          <Comparison>

                                                                                                                     Cash Leasing Cost: Staggered Structure for Actual Payment
                                                                                                                     Accounting Leasing Cost: Use of Contract-term Average
(Unit: RMB, Ths)

                      Operating Revenues
                      Operating Expenses
                      Operating Gross Margins

                                                             ②

                                                                                                            Year 1

                                                                                                                                                              Year 6

                                                                                                                                                                       Year 7

                                                                                                                                                                                 Year 8
                                                                                                                       Year 2

                                                                                                                                 Year 3

                                                                                                                                                    Year 5
                                                                                                                                           Year 4
                                                                                              ③           Average Lease Costs
           ①                                                                                              Initially, lease expenses not incurred are recognized
                                                                                                          for accounting purposes. From year 4, accounting
                                                                                                          lease costs become lower than actual cash costs.

             Year 1        Year 2          Year 3   Year 4       Year 5       Year 6      Year 7                                                                                          14
(1) Capturing Asian Growth Opportunities

                                               II. Development and Management of Superior Malls
           (1) Large-scale parking spaces in line with motorization                      (2) Ability to organize a store floor that is suitable for the destination

                                                      AEON MALL Wuhan Jinqiao                                                         AEON MALL Jakarta Garden City

  (3) Meet the demand for experimental consumption
                                                           (4) Holding events that will attract customers       (5) Pursuit of comfortable, secure and safe facilities
             by strengthening entertainment

                      AEON MALL Jakarta Garden City                             AEON MALL Jakarta Garden City                                                         15
(1) Capturing Asian Growth Opportunities

                                                     III. Measures to Increase Operating Revenues
                                                                                                             <Conduct of sales by area>
 ◆Increase in area marketing capability
                                                                                                                                     Jiangsu and
                                                                                                                                     Zhejiang area
                                                                    Rate of buying, number of items                                  A joint event was held
   Conducting promotion/events        Buying inclination                                                                             with Alipay
                                                                       purchased and sales per
  by area, not by individual stores    to be increased                 customer to be increased

                                                                                                                                      Vietnam
                                                                                                                                      A Black Friday sale was vigorously conducted.

 ◆Increase in floor value                                                                <Meeting for invitation of tenants>
                                                                                                                              AEON MALL Yantai Jinshatan
     Increase in the number of                                                                                                (FY2018 to be opened)
          malls in an area
                                             Proceeding to the stage of rent                                                  Participation of 265 tenant companies;
                                         Increases through active negotiations                                                409 persons in total
                                               on rents and replacements                                                      (156 merchandising business companies,
   Increase in the ability of each                                                                                             109 restaurants and other companies)
     mall to attract customers

                                                                                                      <Use of the areas of a mall>
 ◆Increase in incidental income

    Ability to attract customers      Use of the areas of a mall               Increase in
       and branding ability           as media (for advertising)            ancillary revenue

                                                                                                      China:                             Cambodia:
                                                                                                      fee-charging event using the       ornaments with sponsors
                                                                                                      events space                                                             16
(1) Capturing Asian Growth Opportunities

                                  New Mall Openings: Medium-Term Management Plan

                     Over the next three years, a total of 12 new malls are planned –
                                    eight in China and four in ASEAN

                                                                      3-year Plan                                     Total for
                          End of FY2016                                                                                                End of FY2019
                                            FY2017(Actual)            FY2018(Plan)         FY2019(Plan)               3-years

          Overseas                  19                        5                      3                      4                     12               31
             China                  13                        4                      2                      2                     8                21
             ASEAN                   6                        1                      1                      2                      4               10

                                           Number of stores       Number of stores       Number of malls
                                           opened in China        opened in ASEAN        opened overseas (in Total)

                                                                                                                                       (Plan)   (Plan)   17
(1) Capturing Asian Growth Opportunities

                                           Overseas Business: Operating Income

       Turned profitable in FY2017 Q4 (3 months)        → Entering the profit expansion stage

                                                                                                         [Plan]
      【Overseas Business Operating Income Trend】
                                                                                                        FY2019
                                                                                                      ¥5.0 bn

                                                                                    [Plan]

                                                                                  FY2018
                   [Actual]            [Actual]               [Actual]
                                                                                ¥1.0 bn
                   FY2015             FY2016                 FY2017
                 - ¥5.4 bn         - ¥3.7 bn               - ¥0.8 bn
        0                                                                       Profit improvement   Profit improvement

                                                           Profit improvement
                                                                                +¥1.8 bn             +¥4.0 bn
                                                           +¥2.9 bn

                                   Profit improvement
                                   +¥1.6 bn

                                                                                                                          18
(1) Capturing Asian Growth Opportunities

                                                                             Beijing and Tianjin Areas
  
                                                                                     AEON MALL Yantai Jinshatan
                     * The stores shown in red are scheduled to be opened.

                                                                                            Scheduled opening date     Site area       Total leasing area   Parking             Number of specialty stores

                                                              AEON MALL Yantai Jinshatan           FY2018            About 111,000 ㎡      About 79,000 ㎡     About 2,800 cars                  Undisclosed

                                                                                                                                                                                                      19
(1) Capturing Asian Growth Opportunities

                                                                                    Jiangsu and Zhejiang Areas

                                                                                                                    AEON MALL
                                                                                                                                        AEON MALL Changshu Xinqu
                                                                                                               Suzhou Yuanqu Hudong
                                                          AEON MALL
                                                         Suzhou Xinqu

                                                                    AEON MALL
                                                                  Suzhou Wuzhong

                                                                                               Scheduled opening date             Site area               Total leasing area          Parking                Number of specialty stores

                                                     AEON MALL Changshu Xinqu                         FY2019                 About 149,000 ㎡                 About 63,000 ㎡            About 3,700 cars                      Undisclosed

 * The stores shown in red are scheduled to be opened.

                          Hubei Area                                                                                                           Guangdong Area

                                                                                                                                                          AEON MALL Guangzhou Jinsha

                                                                                    * The stores shown in red are scheduled to be opened.
                                                                                                         Scheduled opening date               Site area          Total leasing area      Parking              Number of specialty stores

                                                                        AEON MALL Guangzhou Jinsha               FY2018                  About 85,000 ㎡             About 65,000 ㎡        About 3,600 cars                   Undisclosed
                                                                                                                                                                                                                                           20
(1) Capturing Asian Growth Opportunities

                                                                           Vietnam
                                                                              AEON MALL Ha dong
         Hanoi

 Ho Chi Minh

                                * The stores shown in red are scheduled to be opened.

                                                                         Scheduled opening date    Site area       Total leasing area        Parking             Number of specialty stores

                                                                                                                                              About 2,100 cars
                                        AEON MALL Ha dong                       FY2019            About 98,000 ㎡      About 74,000 ㎡                                       About 200 stores
                                                                                                                                        About 9,000 motorbikes

                               Agreement Reached between the Hanoi Peopleʼs Committee and Aeon Co., Ltd.
         “Comprehensive Memorandum of Understanding on Investment and Business Advancement in Hanoi”

                                                    Outline of Comprehensive Memorandum
                                                    ・From 2017 thru 2020, Aeon agrees to advance, via Aeon Group Companies, investments/ business activity
                                                     toward the modernization of Hanoi. Hanoi, agrees to cooperate to allow for the smooth execution of
                                                     investments/ business activity.
                                                    ・For expanded sales of Vietnamese products, Aeon agrees to cooperate in helping advance Vietnamese
                                                     exports using its domestic/ overseas networks. Aeon further agrees to cooperate with Hanoiʼs PR activities.
                                                    ・Scope of Aeon Groupʼs Investments/ Business Activity:
                                                       ① Retail Business(GMS, SM, CVS) ② Development, Construction, Management of Malls
                                                       ③ Finance / Services Businesses      ④ Import/Export of Product and Product Development

                                                              Inclusive of the FY2019 Planned Opening of AEON MALL Hadong,
                                                   Aggressive Advancement of Development of Large-scale Shopping Malls in Hanoi Planned                                                       21
(1) Capturing Asian Growth Opportunities

                                                                                                        Indonesia

                                            AEON MALL Jakarta Garden City               (Tentative Name)AEON MALL Sentul City(Expected Opening in FY2019)
                                                                                           Launch via Master Lease Arrangement with Local Developer

                                                                                                                                                                           Owner: Sentul City Company (PT
                                                                                                                                                                           SENTUL CITY TBK)
 AEON MALL BSD CITY                                                                                                                                                        In a development area in Western Java,
                                                                                                                                                                           Bogor (about a 1-hour drive from central
                                                                                                                                                                           Jakarta), Sentul City is developing a
                                                  AEON MALL Delta Mas
                                                    (tentative name)                                                                                                       roughly 3,000ha project incorporating
                                                    (Scheduled to be opened)                                                                                               residences, offices, schools, hospitals, a
                                                                                                                                                                           golf course, a sports facility, and a
                                                                                                                                                                           convention center.

                                                                                                                Scheduled opening date       Site area         Total leasing area           Parking                 Number of specialty stores

                                                                                 AEON MALL Sentul City                 FY2019               About 78,000 ㎡        About 71,000 ㎡             About 3,000 cars                 About 250 stores
               AEON MALL Sentul City
                  (tentative name)                                               AEON MALL Delta Mas                   FY2022              About 200,000 ㎡             Undisclosed                  Undisclosed                    Undisclosed
                 (Scheduled to be opened)

                       * The stores shown in red are scheduled to be opened.

                                                                                                    Cambodia
                 * The stores shown in red are scheduled to be opened.
                                                                               AEON MALL Sen Sok City
                                                                                                                                                                 Located about 10 kilometers north of the center
                                                                                                                                                                 of Phnom Penh. Housing development is
                                                                                                                                                                 underway in the area surrounding the planned
       AEON MALL                                                                                                                                                 site. Good access not only from neighboring
       Sen Sok City                                                                                                                                              areas, but also from the center of Phnom Penh.
  (Scheduled to be opened)

                                                                                                              Scheduled opening date       Site area         Total leasing area           Parking                 Number of specialty stores

                                                 AEON MALL                                                                                                                                 About 2,500 cars
                                                                               AEON MALL Sen Sok city               June 2018            About 100,000 ㎡        About 80,000 ㎡                                              About 200 stores
                                                 Phnom Penh                                                                                                                          About 2,000 motorbikes

                                                                                                                                                                                                                                                 22
Domestic Business

                    23
Domestic Business

                                              SC Industry Comparison with the U.S.

             ・Large-scale malls in the U.S. are 6.4x that of Japan. Population per mall is
              0.4x that of Japan suggesting excess supply overhang in the U.S.
             ・Large-scale malls per capita remains low in Japan suggesting the SC
              market is substantially different from the U.S.

           SC Comparison: Japan vs U.S.
                                                                   Japan                    U.S.              U.S./Japan
                                                               (As of Dec 2017)        (As of Dec 2016)

               Large-scale Mall Count※                                      190                  1,222                     6.4x

               Population(millions)                                      126.9                   323.3                     2.5x

               Population per Mall(thousands)                               668                     264                    0.4x

               Total SC Sales(¥, Billions)                             31,986                291,745                       9.1x

               Total Retail Sales(¥, Billions)                       142,514                 532,204                       3.7x
               Share of SC Sales Relative to
               Total Retail Sales                                       22.4%                  54.8%                       2.4x

            ※Japan data based on 40,000㎡+. US data based on RSC, SC component of SRSC.
            ※U.S. Total SC Sales, Total Retail Sales based on US$=¥109.84 (avg. rate for CY2016).
            ※Source: Japan Council of Shopping Centers, AEON MALL calculations based on METI “Statistical Research of Commerce Trends.”
                                                                                                                                          24
Domestic Business

                                                           Assessing the Domestic Market

                                                                                  Change in                         Change in
     Change in Demographics                    Change in Family Structure
                                                                             Consumption Behavior             Information Environment

     Selection and elimination                      Stagnant business
                                                                            Expansion of e-commerce            Decrease of labor force
        of physical stores                        in the apparel industry

             Progression of Battle for Domestic Commercial Facilities
                    Successive Closure Rival Large-scale SCs                        Opportunity to Secure ¥810 billion in Sales
                         due to Industry Consolidation                                          and 40,000 in Staff

         Development of Latent
      Sources of Domestic Demand                          Becoming the Overwhelmingly                Capturing Urban Growth
      (Expansion of target age, Cultivation of existing   Dominant Mall in Each Region                    Opportunities
                     business areas)

            Capitalize on and benefit from accelerating
          consolidation of the commercial property sector
                                                                                                                                         25
(2) Development of Latent Sources of Domestic Demand

                                       I. Happiness Mall Project

               - HEALTH -                                          - WELLNESS -
        Health in body                                 Casual enjoyment of
           and mind                                      art and culture

          - COMMUNITY -                                       - OPPORTUNITY -
  Activities that promote
                                                    Creating opportunities to
    social interaction
                                                     encounter new values
      among people
                                                          and lifestyles
    in the community

        A place for customers to create happy memories
                                                                                  26
(2) Development of Latent Sources of Domestic Demand

                                                     I. Happiness Mall Project

      HEALTH                         Mall Walking                                Yoga Class         AEON MALL Okinawa Rycom

     Health in body and mind

  Opera de AEON MALL: Enjoying Opera                                                            WELLNESS
  Held in the cinema complex at AEON MALL Nagakute
  and AEON MALL Tokoname

                                                                                              Casual enjoyment of art and culture

                                                                                                                                27
(2) Development of Latent Sources of Domestic Demand

                                               I. Happiness Mall Project

COMMUNITY                          Tsugaru City Library                       CHITA CAT Project

  Activities that promote social
 interaction among people in the
                                                  AEON MALL Tsugaru Kashiwa                           AEON MALL Tokoname
           community

   Nationwide AEON Association Shops
   Role-Playing Contest                                                               OPPORTUNITY

                                                                                             Creating opportunities to
                                                                                        encounter new values and lifestyles

                                                                                                                              28
(2) Development of Latent Sources of Domestic Demand

                                                                        II. Promotion of Localization

◆The Ultimate in Localization 2017                    Mall              Title of Plan                  Plan Description                                                        Mall             Title of Plan                          Plan Description

                                                                                                       Conducted events and promotions focusing on Hokkaido milk in            AEON MALL                                               An event held to encourage enjoyment of the town of Kakamigahara
  Malls collaborated in six categories –              QUALITE PRIX      New! Sapporo Au Lait!          cooperation with local businesses                                       Kakamigahara
                                                                                                                                                                                                AEON MALL of Book Town                 with communication through books

    Industry               Education                  AEON MALL
                                                                        August 10 (Hatto ) Day
                                                                                                       A promotion to learn about and enjoy Kasukabe's straw hats that are
                                                                                                       known throughout Japan
                                                                                                                                                                               AEON MALL        Energize Yamatokoriyama with           Promoted Yamatokoriyama as "the Goldfish City" by extending the
                                                      Kasukabe                                                                                                                 Yamatokoriyama   Goldfish Scooping!                     fun of goldfish scooping to children in the region.
    Government             Private Organizations
    Culture & History Products                        AEON MALL
                                                      Lake Town Mori
                                                                        GO!GO!
                                                                        Bicycle Kingdom Saitama
                                                                                                       Saitama has a deeply rooted bicycle culture.
                                                                                                       This PR event highlighted the appeal of Koshigaya through bicycles.
                                                                                                                                                                               AEON MALL
                                                                                                                                                                               Wakayama
                                                                                                                                                                                                Wakayama Sakejo Festival
                                                                                                                                                                                                                                       Spotlighted women who are playing active roles in Wakayama, with
                                                                                                                                                                                                                                       sake as the focal point

   – to highlight the appeal of the region where      AEON MALL         Discover! West Tama Treasure
                                                                                                       A collaborative event with eight cities in Western Tama, the nearby                      Fun with Masking Tape
                                                                                                       trade area, with the mall serving as a bridge to convey their           AEON MALL        〜Adding color to AEON MALL Kurashiki An art event that used masking tape on the temporary enclosures
  the mall is located. In FY2017, out of 244 plans    Hinode            Chest                          attractions                                                             Kurashiki        〜
                                                                                                                                                                                                                                     necessitated by renewal construction

  proposed, 12 were selected and implemented.         AEON MALL
                                                                        Hino Film Commission
                                                                                                       Held screenings of movies shot in Hino City, using AEON MALL to
                                                                                                       showcase Hino as a filming location, with the aim of revitalizing the   AEON MALL
                                                                                                                                                                                                Koto Monozukuri Festival
                                                                                                                                                                                                                                       A PR event for manufacturing in Niihama held with local
                                                      Tamadaira Woods                                  region                                                                  Niihama                                                 manufacturers and trade schools

                                                                                                                                                                                                                                       “Toshibi,” a traditional birthday celebration in Okinawa, was held
                                                      AEON MALL         Making Jazz More Familiar      A plan that used AEON MALL Okazaki as a base for promoting              AEON MALL
                                                                                                                                                                                                Ultimate Toshibi                       throughout the mall in cooperation with specialty stores and the
                                                      Okazaki           〜Popular Songs from Jazz〜      Okazaki's jazz culture                                                  Okinawa Rycom                                           Kitanakagusuku Tourism Association

 ◆Expansion of Public Functions
                                                                Social Functions Undertaken by Malls

                                        (ii) Creation of                                                                                                                       (iv) Regional                                       (v) Coexistence with
         (i) Sales activities
                                         employment                               (iii) Public Functions                                                                       development                                            the environment

 Administrative Branch Office              Clinic                                                             Postal Office                                                                                     Library

                 Facilities that are essential to the community, and that are counted on                                                                                                                                                                                                                    29
(3) Becoming the Overwhelmingly Dominant Mall in Each Region

                                I. Floor Expansion and Effective Revitalization Measures

   Planned Mall Segmentation in FY2025

                                                            “A” Mall
                                                            The mall that is most supported by customers=The mall that is No. 1
                                                            in the region in attracting customers
                                                                    Overwhelmingly dominant malls in the region:
                                                                                         40% or more
                                                                                                 +
                                                                  Including malls that are No. 1 in the region:
                                                                                      70% or more

                                                                         Note: Excludes 70 large-scale commercial facilities that AEON MALL manages and
                  圧倒的地域№1モール
                  Overwhelmingly dominant malls in the region
                                                                                                             operates on behalf of AEON Retail Co., Ltd.

                  地域№1モール
                   Malls that are No. 1 in the region

                  ストロングセカンド
                  Strong second

                  機能⾒直し
                  Functional overhaul

                                                                                                                                                           30
(3) Becoming the Overwhelmingly Dominant Mall in Each Region

                                    I. Floor Expansion and Effective Revitalization Measures

3-Year Revitalization Plan
                                                 [Actual]              [Plan]                  [Plan]

                                                FY2017               FY2018                  FY2019                 3-year Total

                     Expansion of
                      floor area
                                                2 malls              2 malls                 4 malls                   8 malls

                        Renewal                12 malls              8 malls                10 malls                  30 malls
                                                                           * Excludes large commercial facilities of AEON Retail Co., Ltd.

Approach to revitalization

          The average age of AEON MALL buildings is 10.9 years. Their value will be increased through revitalization.
          - We are implementing the large-scale revitalization (renewal) of existing shopping malls and increasing their appeal and
          freshness to improve their earning power. -

                                                                                                    Creation of categories that
                                                                                                   attract new customer groups

                    Revitalization       =        Creation of needs
                                                 to generate the “+α”
                                                                                                     Creation of categories that
                                                                                                         create new needs

                                                                                                                                             31
(3) Becoming the Overwhelmingly Dominant Mall in Each Region

【圧倒的な地域№1モールへの進化】 I. Floor Expansion and Effective Revitalization Measures

       With construction costs remaining high, we will carefully select new mall openings
           in untapped territory, and will invest resources in floor area expansion and
                      renovation, which have higher investment efficiency.

       8
                                   New malls         Malls with expanded floor area
              7
       7

       6
                         5                       5
       5
                                   4                              4               4
       4

       3
                                   2             2                2
       2
                         1                                                        1
       1
              0
       0
            2014年度     2015年度    2016年度        2017年度          2018年度          2019年度
           FY2014     FY2015     FY2016        FY2017          FY2018           FY2019
                                                                (Plan)           (Plan)     32
(3) Becoming the Overwhelmingly Dominant Mall in Each Region

                                        I. Floor Expansion and Effective Revitalization Measures
 AEON MALL Hiroshima Fuchu                                                     YoY change in sales at specialty stores
 (Grand opening after expansion of floor area on Nov. 18, 2016)                after expansion of floor area: 137.5%
                                                                               (Period from Nov. 18, 2016 to November 17, 2017)

                                              Expanding floor area                                 After expansion of floor area

 AEON MALL Kofu Showa                                                          YoY change in sales at specialty stores
 (Grand opening after expansion of floor area on Nov. 23, 2017)                after expansion of floor area: 170.2%
                                                                               (Period from Nov. 23, 2017 to February 28, 2018)

                                            Expanding floor area

                                                                                                                      After expansion
                                                                                                                        of floor area

                                                                                                                                        33
(3) Becoming the Overwhelmingly Dominant Mall in Each Region

                                              I. Floor Expansion and Effective Revitalization Measures
 AEON MALL Miyazaki
 Expansion - Renewal Open: March 16, 2018
                                                                                  Opening: May 2005
                                                                                  Site area: 200,000m2 Total leasing area: 84,000m2 (+14,000m2)
                                                                                  Parking: 4,300 cars (+300 cars) Specialty stores: 240 stores (+70 stores)

                                                                                                          Construction of hinata TERRACE
                                                             Expanding               An open-air courtyard situated between the
                                                             floor area              existing building and the expansion building
                                                                                     features children’s play structures in the lawn
                                                                                     area facing the food court and cafe.
        Construction of South Mall with Expanded Building

 A new two-story building with expanded floor area was constructed on the south
 side of the property, which had been used as a parking lot.

                                                                                             The existing North Mall also underwent a major renovation

<2F:Four zones composed by Kids entertainment & Hobby, etc.

                                                                                                                                                         34
(3) Becoming the Overwhelmingly Dominant Mall in Each Region

                                I. Floor Expansion and Effective Revitalization Measures

AEON MALL Sakai Kitahanada
Renewal Open: 20 Mar. 2018
                                                                       West Mall Zone
                                         Large specialty stores focusing on daily needs opened on a former department store site
 Opening: Oct. 2004
 Site area: 58,000m2                   1F
 Total leasing area: 72,000m2                 The world’s largest MUJI store – featuring a dedicated food section
 Parking: 2,800 cars
 Specialty stores: 170 stores

                                       2F                                                              3F
                                    Newly opened outlets of UNIQLO and GU, two                     Electronics and sporting
                                    major casual fashion stores, are among their                   goods stores, cafes and
                                    largest in Osaka                                               drugstores, etc. offer Health
                                                                                                   and Wellness

                                                                                                                                   35
(3) Becoming the Overwhelmingly Dominant Mall in Each Region

                                         I. Floor Expansion and Effective Revitalization Measures

     AEON MALL Kumamoto                           Building with additional floor space opens in summer of 2018

                                                                                             Opening:            Oct. 2005
                                                                                             Site area:          207,000m2
                                                                     Expanding floor area    Total leasing area: 84,000 m2 (+11,000m2)
                                                                                             Parking:            5,000 cars (+500 cars)
                                                                                             Specialty stores:   200 stores (+40 stores)

  AEON MALL Higashiura                                                                       AEON MALL Takaoka
  Building with additional floor space opens in spring of 2019                               Building with additional floor space opens in autumn of 2019

                                                   Expanding floor area                      Site of planned floor
                                                                                                area expansion

  Opening: July 2001                                                                    Summary of Expansion Plan
  Site area: 110,000m2 Total leasing area: 75,000m2 (+12,000m2)
                                                                                        Site area: 64,000m2 (Total of main building and expansion
  Parking: 4,600 cars Specialty stores: 170 stores (+50 stores)
                                                                                        building: 192,000m2)
                                                                                        Specialty stores: 70 stores
                     Expanding the floor area of malls that are already No. 1 in their region.
                         Further Enhancing Dominant No. 1 Position                                                                                     36
(3) Becoming the Overwhelmingly Dominant Mall in Each Region

                                                   II. New Mall Openings in Untapped Territory

3-Year Plan for New Mall Openings
                                                                                     3-year Plan
                                              End of                                                                            Total for 3
                                                                                                                                                       FY2019
                                             FY2016                 FY2017              FY2018                 FY2019             years
                                                                    (Actual)              (Plan)                (Plan)

                 Malls                              147                        5                   4                     1                    10                155
             •    The property management contract for SHOPPING CENTER SOYOCA FUJIMINO ended on Feb. 20, 2018.
             •    The property management contract for Nara Family ended on Feb. 28, 2018.

FY2018 Plan for New Mall Openings in Japan                                                                            * Only new malls already announced are included above.

                     Name of facility                 Location            Scheduled opening date           Site area           Total leasing area           Parking

          AEON MALL Zama                      Zama, Kanagawa Pref.             March 16, 2018                   58,000 ㎡                50,000 ㎡              2,500 cars

          THE OUTLETS HIROSHIMA              Hiroshima, Hiroshima Pref.         Spring of 2018         About   268,000 ㎡     About      53,000 ㎡    About     4,000 cars

          AEON MALL Iwaki Onahama              Iwaki, Fukushima Pref.          Summer of 2018          About    44,400 ㎡     About      50,200 ㎡        Undisclosed

          AEON MALL Tsu-Minami                     Tsu, Mie Pref.              Autumn of 2018          About   108,000 ㎡     About      60,000 ㎡        Undisclosed

                                                  THE OUTLETS HIROSHIMA                                                              AEON MALL Iwaki Onahama                    37
(3) Becoming the Overwhelmingly Dominant Mall in Each Region

                                      II. New Mall Openings in Untapped Territory

   AEON MALL Zama (Kanagawa Pref., Zama City)

                                                                         Opening: March 16, 2018
                                                                         Land Area: 58,000㎡ Lease Area: 50,000㎡
                                                                         Parking Space: 2,500 Specialty stores: 160

                   One of the largest food areas in the city                                      ZAMAIRO PROJECT

  1F Food Hall            2F Restaurants                 3F Food Court              Parent/child workshops, activities where people
                                                                                    can find a new hobby, and seasonal events jointly
                                                                                    developed with the community are held. Project
                                                                                    details are broadcast on the original program
                                                                                    ZAMAIRO CHANNEL.

                                                                                                                                        38
(3) Becoming the Overwhelmingly Dominant Mall in Each Region

                                         III. Development of New Formats

                             Retail Space for Community Origination

                                                                           ③ Harmony with
          ①A Full-fledged Outlet Mall            ② Entertainment
                                                                           Local Community

            THE OUTLETS HIROSHIMA
          Opening Scheduled for April 27, 2018

                                                                                             39
(3) Becoming the Overwhelmingly Dominant Mall in Each Region

                                              IV. Improvement of ES for Tenants

             Decrease in working age population due to falling birth rates
             and population aging (labor shortage)                                Solutions to issues that
                                                                                         go beyond
                                                                                   DV/tenant boundaries
             Increase in tenants’ employee turnover rates and hiring frequency

           (1) Employee lounges where employees can recharge themselves and enjoy some alone-time.
           (2) Employee benefits in which time and economic value can actually be experienced.
           (3) Child-care support that enables employees with children to work with peace of mind
           (4) WAON points awarded to employees according to their attendance
           (5) Mental and physical support that results in happy employees

      Promote the creation of facilities that meet the needs of an increasingly diverse society
                     and make working and continuing to work at them easy
                                Create malls that tenants will choose                                        40
(4) Capturing Urban Growth Opportunities

                                                              I. Establishment of Branding for New OPA

                             Promotion of renewal of existing stores and
                             strategic S&B/refining

                             Development of new format in urban                                    Strengthening of profitability of
                             locations                                                                 urban shopping centers

                             Opening of new stores in urban areas

  3-Year Plan for openings of new urban shopping centers

                                                              End of                                 3-year Plan                            Total for 3-     End of
                                                              FY2016               FY2017               FY2018              FY2019            years          FY2019

                Urban shopping center                                20                     2                    2                    1                5          24
              Note: Sannomiya OPA closed on February 28, 2018.

  Plan for openings of new urban shopping centers in Japan (FY2018)                                                                  (tentative) Naha OPA
              Name of facility                Location           Schedulled opening date        Site area        Total leasing area

   (tentaive) Naha OPA
   (Master Lease)
                                        Naha, Okinawa Pref.         Autumn of 2018         About     12,800 ㎡    About      5,200 ㎡

   (tentaive) Hachioji OPA
   (Master Lease)
                                          Hachioji, Tokyo           Autumn of 2018         About      4,000 ㎡    About      6,200 ㎡

                                                                                                                                                                       41
5) Optimal Financing Mix / Organizational Structures to Support Growth

                                I. Financing to Support Growth Business Model

                                                                                42
5) Optimal Financing Mix / Organizational Structures to Support Growth

                                                                       II. Promotion of Diversity Management
 Selected as a “Nadeshiko Brand” for FY2017 for the Second Straight Year
  The “Nadeshiko Brand” program highlights companies listed in the First Section of the
  Tokyo Stock Exchange from each industry that actively promote the participation of
  female employees, including creating a supportive working environment. Selected
  companies can also be considered as “companies with growth potential” in the sense
  that they have the ability to make use of diverse human resources and the ability to
  adapt to a changing environment.

   About the “Nadeshiko Brand” program
   The aim of the Nadeshiko Brand is to introduce certain listed companies that are outstanding in terms of encouraging the empowerment of women in the
   workplace as attractive securities investment opportunities to investors who put emphasis on improving corporate value in the mid- and long-term, in an
   aim to promote investment in such enterprises and accelerate efforts encouraging women’s success in the workplace Since FY2012, METI and the TSE
   have been scoring enterprises according to their progress in the encouragement of women’s success while screening them based on financial indicators.

 Expanding Day-Care Facilities as “Company-Led Childcare Businesses”
 The AEON Yume-Mirai Nursery School at AEON MALL and Aeon Group shopping complexes is an on-site
 childcare service for preschool-aged children of employees of the Aeon Group and tenant specialty stores. With
 the aim of supporting the lifestyle of both managing a career and raising children, these facilities operate at 12
 locations nationwide, including facilities established in partnership with other childcare service providers. Eight of
 them are certified as “company-led childcare services” by the Cabinet Office (as of February 2018).
 Company-led childcare business
 Implemented for the purpose of contributing to reducing the number of children on
 the waiting list for a childcare center and supporting the lifestyle of both managing
 a career and raising children by increasing childcare services that allow diverse
 working styles based on company-led, in-house childcare business.

     ■Aeon Group in-house nursery schools that have been established (as of February 28, 2018)
     In our company’s malls
       ①AEON MALL Makuhari Shintoshin (approved by Chiba City) ②AEON MALL Okinawa Rycom (approved by Kitanakagusuku)
       ③AEON MALL Tokoname (approved by Tokoname City) ④AEON Lake Town Mori (approved by Koshigaya City) ⑤AEON MALL Natori (company-led childcare business )
       ⑥AEON MALL Nagoya Chaya (company-led childcare business ) ⑦AEON MALL Nagakute (company-led childcare business)
       ⑧AEON MALL Mito Uchihara (company-led childcare business) ⑨AEON MALL Shin Komatsu (company-led childcare business ) ⑩AEON MALL Tokushima (company-led
       childcare business ) ⑪AEON MALL Matsumoto (company-led childcare business) ⑫AEON MALL Kobe Minami (company-led childcare business)

     AEON Yume-Mirai Nursery Schools established in commercial facilities of Aeon Group companies
      ①AEON Style Shonan Chigasaki (approved by Chigasaki City) ②AEON TOWN Aira (company-led childcare business)                                             * Two other centers are operated
      ③AEON MALL Saga Yamato (approved by Saga City) ④AEON Fukuoka Higashi (company led childcare business)                                                  based on alliances with general
                                                                                                                                                             childcare business operators.
      ⑤AEON Otogana (company-led childcare business) ⑥AEON Haebaru (company-led childcare business)
                                                                                                                                                                                                43
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