■Future Outlook of Kichiri Holdings <3082>

2. Future growth strategy. (1) Elementary and junior high school department. Step <9795> has been working on increasing its share in the Yokohama-Kawasaki area, where an increase in the number of students is expected, as its most important priority in order to continue to grow as a teaching institute specialized in Kanagawa prefecture in the medium to long term. The number of successful applicants at public schools in Yokohama City in the spring of 2024 widened the gap with other schools, and for the second consecutive year, the number of successful applicants to Yokohama Suiran High School, which is considered the most difficult school in the prefecture, accounted for over 40% of the total successful applicants, further strengthening the brand power in the Yokohama area. The company aims to continue to achieve overwhelming numbers of successful applicants at Yokohama Suiran in the future. In the case of the company, the selection of desired schools is left up to the students' initiative, so it is unlikely that the number of successful applicants to Yokohama Suiran High School will suddenly increase. However, the company expects that the number of successful applicants will continue to increase in the future, as they plan to increase the number of students in the Yokohama-Kawasaki area. Regarding Tama High School, which is considered the most difficult in Kawasaki City, the number of successful applicants in the spring of 2024 was 59, which is 17 less than the previous year, and the difference with the top institute (124) has widened. It is believed that this is due to a decrease in the number of expectations from STEP students, as well as the influence of the top institute increasing its number of schools and strengthening them in the vicinity of Tama School. However, the company has increased the number of schools and students along the JR Nanbu Line and Odakyu Line in recent years, so it is expected to take the top position within the next two years. (2) High school department. Among the students attending public junior high schools in Kanagawa prefecture, the proportion of STEP students was 11.0% as of October 2023. Of this, 14.5% were in areas other than Yokohama and Kawasaki, 9.2% were in Yokohama City, and 5.0% were in Kawasaki City. On the other hand, according to population forecasts up to 2030, the northern part of Yokohama City and Kawasaki City are expected to continue to increase, while the western part of the prefecture and Yokosuka City are expected to continue to decline, making it reasonable to expand the number of schools and increase the share in the Yokohama-Kawasaki area. As an immediate goal, the company aims to increase the share of junior high school department students in the Yokohama-Kawasaki area to about 15%, and plans to open new schools at a pace of approximately 3 to 4 schools per year in these areas. It is believed that it will be possible to achieve a 15% share in the Kawasaki area with around 15 schools and in the Yokohama area with around 25 schools, and the expansion of share in the Yokohama-Kawasaki area could increase the number of students to 1.34 times the current level, assuming that the number of STEP students at other public junior high schools remains stable. If this is achieved over a 10-year period, the increase in the number of students would be an annual rate of 3%. Looking at the share of students in major urban areas, there are regions that have higher shares than 15%, such as Fujisawa City, where the company is headquartered, at 26.0%, Kamakura City at 22.7%, and Ebina City at 19.9%, so there is sufficient potential for the Yokohama-Kawasaki area to achieve a share of over 15% in the long term. In fact, the share has already been extended to the 16% range in Aoba and Totsuka districts of Yokohama City. The pace of school development depends on the development of teachers and the availability of appropriate real estate. As for the search for real estate, the market environment for finding property has become easier compared to before, as competitor institutes withdraw from the market or financial institutions consolidate their sales bases. In fact, the Hi-STEP Shin-Yurigaoka School was opened in a property that had been withdrawn by a competitor institute.

The company has set a policy of aiming for medium- to long-term growth by actively expanding the high-attracting mall and suburban restaurant formats as part of its future growth strategy. It also aims to nurture overseas businesses, DX businesses, and regional revitalization projects as future growth strategies. Regarding the urban dining format that has been driving performance before the pandemic, the company still plans to open new stores if suitable properties become available, but for the time being, it will focus on expanding the prosperous mall and suburban restaurant formats.

(1) Growth Strategy of Restaurant Formats

As part of the growth strategy for mall and suburban restaurant formats, in addition to expanding into large-scale commercial facilities as traditionally promoted, the yakiniku format 'Meat Man Gyuman' has also been performing well, and further expansion is planned. There is still significant room for store openings within commercial facilities. The commercial facilities where the company opens stores meet two or more of the following five criteria: sales exceeding 20 billion yen, presence of a cinema complex, other customer attraction elements such as karaoke, a well-equipped large parking lot (2,000 vehicles or more), and adjacency to major train stations. The targeted areas are the Kanto, Chukyo, and Kinki regions, with the company estimating that more than 130 facilities meet the criteria. Apart from existing facilities where openings are possible, newly developed commercial facilities will also be targeted. The potential to open multiple formats within one commercial facility exists, and the main 2 formats 'Ishigamaya Hamburg' and 'VEGEGO' have achieved top-class performance in sales per tsubo, establishing strong relationships with suppliers to the extent that they are approached during the initial development stages of commercial facilities. As a result, the number of store locations within commercial facilities, which was 59 at the end of the previous period, could potentially expand to over 100 in the medium term.

The average sales per store is estimated to be 80 to 100 million yen, and if the number of stores doubles in the future, it is expected that the increase in sales will be approximately 6 billion yen, leading to steady growth in performance due to the expansion of the number of stores.

(2) Regional Revitalization Business

In relation to the regional revitalization business, leveraging the expertise accumulated in operating restaurant chains, the company started supporting hometown tax payments in Tsuruga City from April 2023, aiming to contribute to the development of local industries and the overall vitality of Japan. It is entrusted with a range of tasks related to hometown tax payments, such as planning and development of return gifts, shipping and settlement management, operation and management of a portal site, and handling inquiries, and records a certain percentage of the contracted amount as revenue. Leveraging its product development and production capabilities, the company promotes PR and branding of local specialty products in Tsuruga City, contributing to the growth and expansion of regional businesses as well as employment promotion. Tasks such as shipping and settlement management and inquiry handling are carried out using expertise from the PFS business. Companies with expertise in both areas are rare, and the product development and production capabilities that contribute to the expansion of local specialty product demand are considered a differentiating factor from other businesses. Further growth in orders is expected in the future.

(3) DX Business In the DX business developed by ApplyNow, efforts are made to expand the business in the recruitment interview area with BPaaS※ business as the main axis. The company's services such as "Interview Cloud" and "ApplyNow", which can achieve both cost reduction and efficiency improvement, in the face of rising recruitment costs due to chronic labor shortages, have a great potential demand in industries such as the food service and retail sectors, which have a large number of part-time staff. In particular, with "Interview Cloud", everything from submitting resumes to submitting entry documents can be done online, and interviews are conducted by professional interviewers, reducing the workload of recruitment staff. The period from application to interview can also be shortened to an average of 3 days, about half of the common period (7 to 10 days). As the period shortens, the hiring rate tends to improve, so the cost reduction effect in recruitment costs can also be expected. The company plans to continue to enhance its functions, strengthen agency measures, and digital marketing, while proceeding with acquiring new customers primarily from major corporations.

In the DX business developed by ApplyNow, efforts are made to expand the business in the recruitment interview area with BPaaS※ business as the main axis. The company's services such as "Interview Cloud" and "ApplyNow", which can achieve both cost reduction and efficiency improvement, in the face of rising recruitment costs due to chronic labor shortages, have a great potential demand in industries such as the food service and retail sectors, which have a large number of part-time staff. In particular, with "Interview Cloud", everything from submitting resumes to submitting entry documents can be done online, and interviews are conducted by professional interviewers, reducing the workload of recruitment staff. The period from application to interview can also be shortened to an average of 3 days, about half of the common period (7 to 10 days). As the period shortens, the hiring rate tends to improve, so the cost reduction effect in recruitment costs can also be expected. The company plans to continue to enhance its functions, strengthen agency measures, and digital marketing, while proceeding with acquiring new customers primarily from major corporations.

* BPaaS (Business Process as a Service) is a service that outsources specific business processes to external companies (BPO) and utilizes SaaS to achieve business efficiency.

(4) Overseas Business In the overseas business, Ishigamaya Hamburg and CHAVATY were opened in Jakarta, the capital of Indonesia, in 2019, and the second Ishigamaya Hamburg store is scheduled to open in the fall of 2024. The strategy is to first establish a business foundation in Indonesia, including human resources, stores, purchasing, and logistics, and then expand horizontally in the high economic growth Southeast Asian market. Regarding overseas business, the policy is to work on developing the business with a long-term perspective.

In the overseas business, Ishigamaya Hamburg and CHAVATY were opened in Jakarta, the capital of Indonesia, in 2019, and the second Ishigamaya Hamburg store is scheduled to open in the fall of 2024. The strategy is to first establish a business foundation in Indonesia, including human resources, stores, purchasing, and logistics, and then expand horizontally in the high economic growth Southeast Asian market. Regarding overseas business, the policy is to work on developing the business with a long-term perspective.

(Written by FISCO guest analyst, Jo Sato)