Business Overview 4. DX Regional Collaboration Project Signpost's DX and Regional Collaboration Project started in March 2022 with the establishment of the DX and Regional Collaboration Division. It aims to provide products and services that contribute to regional collaboration by collaborating with local financial institutions nationwide, utilizing its own DX technology and open innovation. In August 2022, it began working with Oita Made Co., Ltd., which was established with the investment of multiple companies in Oita Prefecture, including Oita Bank, to sell original products made in Oita Prefecture to both domestic and overseas markets and to match local companies and Signpost's products and services in order to promote the revitalization of Oita Prefecture's economy. In addition, in April 2024, it started offering DX support services for medium-sized and small businesses. As the first effort, it supports the creation of DX declaration by (The) Fourth Hokuriku Bank, Ltd. (Niigata City, Niigata Prefecture) to deploy DX declaration support services to the market. Furthermore, it will realize new solutions by commercializing its own technology and open innovation and promote regional collaboration through innovation.

The business segments of G-7 Holdings <7508> are disclosed as four: automobile-related business, business supermarket business, meat business, and qitabankuai. Looking at the business composition ratio for the interim period ending March 2025, the business supermarket segment is the main business, accounting for 58.0% of revenue and 76.4% of ordinary profit. Furthermore, when including the specialty food and private brand businesses, mini-supermarkets, and agricultural businesses included in the business supermarket, meat, and qitabankuai, food retail accounts for more than 70% of revenue.

1. Automobile-related business

The automobile-related business consists primarily of G-7 Auto Service, a franchisee of 'Autobacs' engaged in car goods sales and maintenance, G-7 Bike World which operates motorcycle goods sales and maintenance stores, G7 RETAIL MALAYSIA SDN.BHD. which operates 'Autobacs' franchise expansion and 'Bike World' in Malaysia, and G-7 Crown Trading Co., Ltd. which is engaged in automobile export sales.

G-7 Auto Service, which occupies over 70% of revenue composition, operates a total of 79 stores including 76 domestic stores (69 Autobacs and 7 Autobacs express inc) and 3 stores in Malaysia as of the end of September 2024. The domestic store locations are in Hyogo, Kyoto, Fukui, Okayama, Hiroshima, Chiba, and Ibaraki, with 38 stores in Hyogo, making up half of the total. It is the largest franchisee within the Autobacs group (597 domestic stores, 131 overseas stores) and maintains high profitability among the group by focusing on store operations such as employee productivity, gross profit margin, and inventory turnover. Additionally, there are 9 'BP Center' (sheet metal and painting) stores, one 'Suzuki Cars Osaka' store for new and used car purchasing and sales, and 5 outdoor specialty stores 'FIELD SEVEN' within 'Autobacs' sites, as well as 6 coin laundry shops 'Mamma Chao', 2 taiyaki specialty stores 'Yamayahonpo', and 2 Western confectionery specialty stores 'Chateraise'.

Bike World, which accounts for just under 10% of revenue composition, operates a total of 20 stores, with 15 stores in Japan and 5 stores in Malaysia as of the end of September 2024, and collaborates with the capital business partner Bike King & Company <3377> for joint stores in Japan. G-7 Crown Trading, accounting for just under 20% of revenue composition, mainly engages in export sales of used automobiles, with approximately 50% of sales going to Malaysia as the main selling destination, followed by the Middle East which accounts for 10-20%. The Malaysian subsidiary operates 5 'Bike World' stores and 3 'Autobacs' stores, but the sales scale remains modest at a few hundred million yen.

2. Business supermarket business

The business supermarket business is operated by G-7 Supermart, which develops 'Business Supermarket' as a franchisee. Store locations cover the Kanto, Chubu, Kansai, Kyushu, and Hokkaido regions, with the number of stores being 211 as of the end of September 2024, the largest within the business supermarket group (1,077 stores). By regional store count, Kanto has the most with 88 stores (23 in Tokyo, 18 in Kanagawa, 30 in Saitama, 17 in Chiba), followed by Chubu with 46 stores (29 in Aichi, 10 in Mie, 7 in Gifu), Kansai with 34 stores (23 in Hyogo, 11 in Osaka), Kyushu with 26 stores (17 in Fukuoka, 7 in Kumamoto, 2 in Nagasaki), and Hokkaido with 17 stores. The stores are expanding with a focus on employee productivity and inventory turnover, and in recent years, they have increased the number of stores in Kanto, Kyushu, and Hokkaido, while planning to aggressively expand in the Chubu region along with these areas.

3. Meat Business

The meat business is operated by G-7 Meat Terabayashi, which develops the meat retail store "Oniiku no Terabayashi" nationwide. Since becoming a subsidiary in 2015, a simultaneous store opening strategy with "Grocery Supermarket" has been promoted, expanding the number of stores. Additionally, there is an Andes Food Division that develops wholesale sales for restaurants and catering providers in the metropolitan area (after acquiring Andes Foods Inc. as a subsidiary in 2020, it was absorbed and merged).

As of the end of September 2024, the number of stores will total 188, with "Oniiku no Terabayashi" having 175 stores and Andes Foods having 13 stores. The regional number of stores shows that Kanto has the most with 71 stores, followed by Kansai with 36 stores, Chubu with 34 stores, Kyushu with 26 stores, and Hokkaido with 14 stores. Approximately 90% of "Oniiku no Terabayashi" are located within "Grocery Supermarket" or "Megumi no Sato" stores, expanding while enhancing group synergy.

4. Other Businesses

Other businesses include G-7 Ricoss Stores, which operates the mini supermarket "Ricoss", G7 Japan Food Service, which develops specialty foods and private brands (hereinafter referred to as PB), G7 Agri Japan, which operates the farm product direct sales store "Megumi no Sato", and G7 Retail Japan, which operates franchises of women's health exercise classes "Curves" and bicycle sales stores "Treasure Cycle", etc. For the mid-term period ending March 2025, the revenue composition ratio is 47% for the mini supermarket business and 36% for the specialty foods and PB business, accounting for over 80% of the two businesses.

The mini supermarket "Ricoss" operates in Tokyo and Kanagawa, having opened 58 stores (45 in Tokyo and 13 in Kanagawa) as of the end of September 2024. The average revenue per store is approximately 0.18 billion yen, which is slightly less than 40% of "Grocery Supermarket" levels. When it became a subsidiary in April 2020 by acquiring shares from Uny Inc., there were 73 stores, but due to the lull in demand for stay-at-home needs, sales have stagnated, and the cleanup of unprofitable stores has been gradually progressing. Since April 2023, the management system has been refreshed, leading to gradual improvements in profitability.

In the specialty foods and PB business, local specialties and products are discovered and sold at department stores, specialty shops, and e-commerce shops, among others, in addition to developing, manufacturing, and selling various PB products focused on frozen and processed foods. Regarding specialties and regional specialties, more than 60,000 products are sourced from over 7,000 manufacturers nationwide. Additionally, in July 2023, Mitsuwa Shuhahn Co., Ltd., which conducts online sales of alcoholic beverages, was made a subsidiary. Mitsuwa Shuhahn sells local sake from various regions across Japan through platforms like Rakuten Market, Yahoo! Shopping, and Amazon. It possesses strengths in know-how and product planning for operating online shopping, with monthly sales being relatively small at 10 to 20 million yen, but aims for synergy by sharing the know-how of Mitsuwa Shuhahn within the group.

Regarding "Megumi no Sato", all unprofitable stores in Chubu and Kanto were closed in the fiscal year ending March 2023, and currently, there are 20 stores in Kansai (17 in Hyogo, 1 in Osaka, 2 in Nara), of which 9 are located within "Grocery Supermarket". A consignment sales method from producers is adopted, and about 20% of the sales amount is accounted for as commission income in the revenue. Therefore, there is no risk of product disposal loss, making it a business model that can secure stable revenue.

Additionally, as a franchisee, 25 locations of the women's fitness class "Curves" have been opened (Kanagawa Prefecture), and 1 location of the bicycle shop "Treasure Cycle" has been opened (Hyogo Prefecture), while also challenging new formats by planning to open 1 outlet store "RJ market" in June 2024.

(Written by FISCO guest analyst, Jo Sato)