■Future Outlook LeTech <3497> expects an increase in sales and ordinary income of more than 20%, with sales of 2.14 billion yen (+33.8% YoY), operating income of 150 million yen (+7.7% YoY), ordinary income of 100 million yen (+21.7% YoY), and net income of 1.03 billion yen (-11.4% YoY) for the July 2024 term, and has maintained its initial forecast (announced in September 2023).
1. Performance Outlook for March 2025
Consolidated sales for the fiscal year ending March 2025 at G-7 Holdings <7508> are expected to increase revenue by 14.0% compared to the previous fiscal year, reaching ¥2.2 billion. Operating profit is also expected to increase 18.5% to ¥820 million, ordinary profit is expected to increase 16.1% to ¥850 million, and net income attributable to parent company shareholders is expected to increase 8.2% to ¥560 million, showing a trend of increased revenue and income and the highest levels reached in three periods for each of the profits. The company aims to achieve increased revenue and profit for all of its businesses, including the business super business, which serves as a leading force, and the automobile-related business that struggled in the previous period (loss-making businesses are expected to reduce losses). Although there is a possibility that the abolition of the government subsidy for electricity charges (up until use in May 2024) and the increase in personnel costs may again become cost-increasing factors, the company will absorb such cost increases through increased revenue effects, improvement of gross profit margin, and cost reduction through improved operational efficiency.
The business super business is expected to be the leading force, aiming for increased revenue and income (reducing losses for loss-making businesses) for all of its businesses, including the automobile-related business that struggled in the previous period. In addition to the increase in personnel costs, the abolition of the government subsidy for electricity charges (up until use in May 2024) may also become a cost-increasing factor. However, such cost increase will be absorbed by increased revenue effects, improved gross profit margin, and cost reduction through improved operational efficiency.
The company plans to open 27 new stores, including 12 business super stores, 12 otona-no-terabayashi meat stores, two curves, and one bike world. For the business superstores, the company intends to open new stores actively if suitable properties are found.
In addition, the company announced that on May 13, as part of its further expansion of the business super business, it will acquire all shares of Bon-Santé, the parent company of 15 business superstores (3 in Tokyo, 9 in Saitama, 2 in Chiba, and 1 in Kanagawa), which operates in the capital region, from its parent company L.I.H. Ltd. <5856> for ¥560 million*. Bon-Santé operates in not only the business super business but also the meat business, but it will transfer only the business super business after it splits off the meat business. Bon-Santé's sales in the fiscal year ending March 2023 are estimated to be ¥1.4464 billion for sales and ¥14 million for operating profit, while the meat business is believed to have had losses. The acquisition is scheduled for July 1, 2024, and is expected to be included in consolidated results from the second quarter. Although it has not been decided how to amortize goodwill and other intangible assets, Bon-Santé's performance is factored into the fiscal year ending March 2025 plan. It is estimated to be a factor in increasing sales by just over ¥10 billion. The company expects that the expansion of store branches to 88 in the Kanto region due to the subsidiary's establishment will generate many synergies in the business super business.
*The acquisition price may fluctuate depending on the examination of the assets to be succeeded by the corporate split.
(1) Automotive-related business Sales of the automotive-related business, while at a continuous all-time high with a YoY 6.3% increase to 43,386 million yen, saw a continued profit reduction for the second term in a row with YoY 28.0% down to 1,598 million yen in ordinary income. Sales were driven by the overseas used car market of G-7 Crown Trading, but profits were curtailed by G-7 Auto Service, and G-7 Bike World. G-7 Auto Service performance was a decrease in revenue of about 1% YoY and a reduction of double digits in operating profit. It was mainly due to the slowdown in sales of winter products such as winter tires and tire chains with good profitability and the decrease in service revenues, such as tire fitting charges, that accompanied it. The YoY growth rate of monthly sales was a decrease of more than 10% in both December 2023 and January 2024, indicating sluggish winter business performance. Among the major categories, tire sales decreased by 5.1% YoY and car AV sales decreased by 7.5. On the other hand, consumables such as oil increased by 8.5% and batteries by 7.4%, due to the recovery of demand for driving, and for car sales and purchases, the results were solid, increasing 2.2%. The number of Autobacks stores across Japan remained flat at 69 YE compared to the previous year-end. Other than Autobacs, two stores were opened for the cake shop Chateraise, but had little impact on performance.
For the automobile-related business, Autobacs has no plans for new stores, and aims to increase revenue and profit by focusing on increasing sales in existing stores and improving productivity. Tire sales trends are key, but the fiscal year ending March 2025 assumes normal snowfall and a recovery in winter tire sales. By the way, the assumption for domestic same-store sales for the entire Autobacs group is expected to increase by 3.5% compared to the previous fiscal year, with almost the same growth expected.
In addition, Autobacs headquarters announced on April 2024 that it will change the franchise chain package and royalty rate from April 2024. Specifically, it will lower the wholesale price of goods to FC stores from headquarters and increase the royalty rate attached to retail sales from 1% to 9%. In addition, in order to provide customers with high-quality services that are homogeneous nationwide, it is proceeding with the introduction of unified tools such as DX promotion and member apps at all stores. This strategy is aimed at achieving growth by truly integrating the headquarters and FC companies, increasing customer touchpoints, gaining customer support by developing and providing products and services from a customer perspective, and expanding market share. Although there will be an increase in royalty expenses for the same company, the same level of cost reduction is expected, and the impact on performance is considered neutral. In the medium term, it is expected that the improvement of Autobacs' product strength and services will lead to an increase in store sales.
G-7 Bike World plans to increase its revenue and profit. As already mentioned, the monthly revenue of existing stores has started to turn positive as of March 2024, and signs of hitting the bottom have emerged, it is expected that the worst period has been overcome. If good weather continues in the future, the sales of bike accessories are expected to increase due to the recovery of touring demand for bikes. It is planned to open 1 new store as a new venture, but the property has not yet been finalized.
The Malaysian subsidiary "Bike World" of the overseas business is expected to increase revenue and profit. As for "Autobacs", it aims to turn profitable in the fiscal year ending March 2025, but the situation is still struggling and there is a possibility that the level will continue to be the same as last year. On the other hand, the automobile export and sales business is expected to continue to increase revenue and profit, thanks to the tailwind of the weaker yen, and it seems that they are considering opening overseas branches for further expansion.
(Written by FISCO guest analyst, Jo Sato)