■ Medium-term Management Plan 1. The goal of the medium-term management plan The outline of the "Medium-term Management Plan 2025" (fiscal year from February 2024 to February 2026) that Veru, Inc. is currently working on is as follows. The company believes that the market environment will change after the end of the corona pandemic. Regarding the changing societal situation, the company assumes various management challenges arising from the normalization of economic activities and the consequent labor market shortages, uncertain future risks, the rise of marketing needs due to the evolution of technology and the increasing complexity of customer touchpoints. As for the company's market, it predicts the importance of securing highly skilled personnel through marketing technology utilization and the increase in effective BPO demands in both the defensive and offensive areas amid various management challenges, as well as rising labor costs due to a shortage of human resources and the automation of customer correspondence. In April 2023, the company established a new corporate brand slogan, "How will you respond to that voice?". Although it has been listening to the needs of society, companies, and consumers by listening to the people's voices and solving problems with meticulous communication, the problems that can be solved by interpreting the "voice" are becoming more multifaceted and complex due to technological innovations. Meanwhile, the new epoch of "NEW BPO," which the company group aims to achieve as a slogan, is to model the process of turning many of the voices gathering at the CX site (customer response department) into values related to management decisions and to lead to the optimal action by utilizing data. NEW stands for Next, Engage, and Widen, aiming to delve into all the voices (maximizing the performance of 40,000 people, enhancing the utilization of data), connect stakeholders (collaboration with partners), and broaden the sphere of influence (growth strategy for expanding into new business domains). In other words, it is considered that the company aims to utilize a wide range of collaborations with companies more than in the past, not only in contact centers but also in marketing and other areas. In the "Medium-term Management Plan 2025," the company has set three key policies and plans to make additional investments of a total of over 15 billion yen for three years from fiscal year 2024 to achieve them. As a result, it has set quantitative targets to achieve sales revenue of 180 billion yen (an average year-on-year increase of 7.1%), operating profit of 16.5 billion yen (an operating margin of 9.2%), net income after tax of 11 billion yen (an average year-on-year increase of 11.8%), ROE of 14.4%, and a dividend payout ratio of 50% for the final fiscal year ending in February 2026. It is a goal-setting that exceeds the sales revenue average annual increase of 5.3% and the tax-exempted income average annual increase of 8.7% in the previous medium-term management plan, based on the assumption regarding the changing social and economic environment. Although the first year of the plan, the fiscal year ending in February 2024, started off tough due to the unexpected decrease in high-profit corona-related businesses, the company aims to achieve its target for the final year by investing in organic growth (growth by internal resources) and reform through generated AI after the fiscal year ending in February 2025.
3. Growth Strategy
Art Nature <7823> continues to develop a growth strategy for value creation based on strengths and environmental awareness. It promotes differentiation strategies with other companies in the men's business, strengthens coordination between businesses and creates new customer touchpoints in the women's business. It expands the number of stores and strengthens sales strategies for existing customers in women's ready-to-wear, enhances efforts to increase brand awareness in other businesses, and promotes business development in new areas. Furthermore, it is already estimated to have the top share (about 35%) in the hair industry, but aims to increase its share to 40% and also aims for the top position in women's business, which has been lagging behind.
In the men's business, the plan is to maintain 1.5% growth by promoting differentiation strategies with other companies. Therefore, it will promote the development of high-value-added products that do not lose to competitors' prices, revise the prices of existing models according to high raw material costs, enhance the receiving system by increasing personnel and creating a safe environment for customers to visit, and promote campaigns to increase awareness of wigs, such as strengthening promotion to non-senior age groups using SNS and online channels.
In the women's business, the plan is to secure 5.4% growth through the creation of new customer touchpoints and the strengthening of coordination between businesses. Therefore, it promotes the development of mega-hit products following "Styria" and "Feelin", the creation of new customer touchpoints through the enhancement of the company's app, and the expansion of hybrid stores and advertising in collaboration with the women's ready-to-wear business. In particular, it aims to secure the replacement demand for the hit product "Feelin" in the previous mid-term management plan. As for the new customer touchpoints, it will construct new channels utilizing SNS and online channels important at present, in addition to response sales by conventional advertising. Also, it will improve customer service by strengthening coordination with women's ready-to-wear business and expanding their hybrid stores and other collaborations.
In the women's ready-to-wear business, the plan is to achieve 12.7% growth through the expansion of the number of stores and the strengthening of sales strategies for existing customers. Therefore, it enhances the production system to improve productivity by revising the contents of supply system and after-maintenance, and improving the approach to customers by developing human resources and optimizing sales plans to increase repeat customers. Moreover, it will introduce order-made products that stimulate the potential demand of women's wig users, revise prices of existing models in response to the high raw material costs, and expand into areas where stores have yet to be opened (with a plan to open nine stores by the end of March 2026).
In other businesses, such as mail order and overseas businesses, it promotes the enhancement of efforts to expand the recognition of the Art Nature brand, the resumption of business activities overseas after the COVID-19 pandemic, and the emphasis on profitability in operation. Moreover, it aims to develop and expand businesses related to "beauty and health" that are adjacent to the main business, aiming for revenue of 3 billion yen (up to 10 billion yen maximum) by the end of March 2026. Also, it will not change its policy to focus on Southeast Asia, even though it has announced its withdrawal from the sales business in China, where wig demand can still be expected.
On the other hand, the capital plan in the medium-term management plan aims for active business investment to achieve sustainable growth, such as aggressive investment of 3 billion yen per year in the women's business, relocation, renovation, and IT system investment of existing stores, and improvement of shareholder returns including attractive dividends, for which it has planned to allocate sales cash flow of approximately 3 billion yen to 5 billion yen. Moreover, it is considering 10 billion yen as the upper limit for acquiring and expanding businesses in new fields for the next three years, and plans to allocate cash on hand (cash and deposits balance of 19.3 billion yen at the end of March 2024).
(Author: FISCO guest analyst Nobumitsu Miyata)