BRIDGE REPORT
(9997)

東証1部

Bridge Report:(9997)Belluna the Fiscal Year March 2020

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President & CEO

Kiyoshi Yasuno

Belluna Co., Ltd. (9997)

 

 

Company Information

Market

TSE 1st Section

Industry

Retail (commerce)

President

Kiyoshi Yasuno

HQ Address

4-2 Miyamoto-cho, Ageo-shi, Saitama

Year-end

End of March

Homepage

https://www.belluna.co.jp/en/

 

Stock Information

Share Price

Number of Shares Issued

Total Market Cap

ROE (Actual)

Trading Unit

¥650

97,244,472 shares

63,208 million

5.8%

100 shares

DPS (Est.)

Dividend Yield (Est.)

EPS (Est.)

PER (Est.)

BPS (Actual)

PBR (Actual)

¥16.00

2.5%

¥53.77

12.1x

¥1,054.14

0.6x

* The share price is the closing price on June 16.
*Each number is based on earning results of the FY 3/20.

 

Earning trends

Fiscal Year

Net Sales

Operating Income

Net Income

Net Income

EPS

DPS

March 2017 (Actual)

146,083

10,882

12,188

5,802

59.68

12.50

March 2018 (Actual)

161,673

13,008

13,248

9,665

99.41

12.50

March 2019 (Actual)

177,648

12,005

15,309

10,343

106.39

15.00

March 2020 (Actual)

179,948

10,311

10,365

5,862

60.62

16.00

March 2021 (Forecast)

175,000

7,000

7,800

5,200

53.77

16.00

* Unit: Million yen
*Net income is profit attributable to owners of parent. Hereinafter the same shall apply.

 

This report outlines Belluna, the financial results for the term ended March 2020 and etc.

 

Table of Contents

Key Points
1. Company Overview
2.Fiscal Year March 2020 Earnings Results
3. Fiscal Year March 2021 Earnings Estimates
4. Conclusions
<Reference 1:The Fourth Management Plan: Management policy and activities>
<Reference: Regarding corporate governance>

Key Points

  • The sales for the term ended March 2020 were 179.9 billion yen, up 1.3% year-on-year. Sales have increased for all segments except for the General Mail Order Business and Other Business. Gross profit margin improved 1.3% and gross profit increased 3.6% year-on-year. However, SG&A expenses increased 6.0% year-on-year, because of media and distribution costs, and operating income declined 14.1% year-on-year to 10.3 billion yen. Ordinary income was 10.3 billion yen, down 32.3% year-on-year, due to the posting of foreign exchange losses and losses on the valuation of derivatives. Sales were almost in line with the revised estimate, while profit fell below the revised estimate.

     

  • The sales for the term ending March 2021 are projected to be 175 billion yen, down 2.8% year-on-year, and operating income is estimated to be 7 billion yen, down 32.1% year-on-year. The forecast factors in the impacts of COVID-19, mainly in the first half, and predicts sales and profit to decline. The dividend is to remain unchanged at 16.00 yen/share. The estimated payout ratio is 29.8%.

     

  • As for the novel coronavirus, currently, new business opportunities have emerged, due to the demand for staying home. However, there are also impacts of the decline in demand for going out, suspension of hotels and stores, etc. The segments most affected are the General Mail Order Business, the Retail Store Sales Business, and the Property Business. On the other hand, the impact on the Specialty Mail Order Business, the Solution Business, and the Finance Business was minor, and the situation is rather favorable for these businesses.

     

  • Although the forecast indicates a decrease in sales and profit due to the COVID-19 pandemic, there is something to be expected of the company’s business portfolio diversification effect, which is one of its characteristics and strengths. Further, it is also an opportunity for the General Mail Order Business, which has been stagnating for the recent few terms, to increase new customers and strengthen its business base.

     

1.Company Overview

Belluna is a leading general catalog retailer. In addition to the mail-order business specializing in some genres, this company operates the Retail Store Sales Business, the Solution Business for providing corporations with its know-how and infrastructure that have been nurtured through its mail-order business, and so on. Its strengths and characteristics include a database of customers who are mainly married women, and stable profitability and growth potential based on portfolio management. It also conducts M&A actively.

 

1-1 Corporate History

In 1968, Mr. Kiyoshi Yasuno, who is currently the representative director and president of the company, started the business of selling seals door-to-door under the name of “Yukado.” Then, starting with the mail-order sale of clothes, the company started dealing in food products, cosmetics, etc. While operating the Specialty Mail Order Business, the company has enriched its business portfolio, including the Finance Business, Property Business, Retail Store Sales Business, Solution Business, etc. targeted at mail-order customers. In March 2000, the company was listed on the first section of the Tokyo Stock Exchange. Belluna actively conducts M&As to fortify the business base.

 

1-2 Management Philosophy

◎Management Philosophy

Origin of our business

To contribute to our customers’ lifestyle and happiness, by taking an international perspective to be the first company to provide a wide range of customers across the nation with an abundance of food, clothing, lifestyle and recreational products and services, with superior systems and planning for improved convenience, economy, fashion and assortment.

Ideal employees of our company

Our employees approach challenges with a cheerful and positive attitude, to do whatever possible to proactively improve customer satisfaction and broaden their abilities, in order to always maintain the confidence of our customers.

Ideal state of our company

We aim to develop overwhelming superiority as we compete with other companies in the areas of food, clothing, lifestyle and recreational goods and services, and with an image of stability, growth, continuity, and profitability to become an excellent company that attracts capable personnel and makes a contribution to society.

 

In addition, Belluna set “Basic Mind,” which describes the mindset of Belluna’s employees, and “Basic Action. “Basic Mind” is composed of “the awareness as a party involved,” “the awareness of profit,” “a sense of playing a game,” “positive thinking,” and “the willingness to grow,” while “Basic Action” is composed of “1. Collecting information,” “2. Case studies,” “3. Utilizing data,” “4. Testing theories,” “5. Use of others,” “6. Intellectual understanding,” “7. Discussion” and “8. Reporting, contacting, and consulting.” These are what the employees of Belluna should return to when facing a challenging problem.
In addition, the company considered “CCBSKKKS” (C: Change, C: Challenge, B: Brushing up, S: Speed, K: (Kizuki) Awareness, K: (Kaizen) Improvement, K: (Kyakushikou / Kyakumichaku) Customers’ perspective and getting closer to customers, S: Case studies of SA class corporations) as a common factor in growing corporations and recognizes it as a milestone for its own growth.

 

1-3 Market Environment

According to “Commercial Statistics Table in 2014—Statistics for each business category (retail)” announced by the Ministry of Economy, Trade and Industry on March 9, 2016, the annual sales of products via mail order, catalogs, and the Internet amount to 3.9 trillion yen.
Detailed statistics have not been checked, but it seems that the catalog retail market has recently shrunk 1-2%, as competitors in the general mail-order field suffered a significant drop in sales while the online shopping market has grown rapidly.
Amid this situation, although it is concentrating on the online shopping business, the General Mail Order and Specialty Mail Order Business segments of Belluna, in which catalog retail accounts for 80% of total sales, achieved an annual sales growth rate of 4% in the past 5 years until the term ended March 2020 and are expanding their market share steadily.

 

◎Comparison of major mail-order companies

Code

Corporate name

Sales

Sales growth rate

Operating income

Profit growth rate

Operating income ratio

ROE

Market

cap

PER

PBR

3092

ZOZO

-

-

-

-

-

65.9%

688,110

-

19.5

4921

Fancl

127,000

+0.1%

14,500

+2.6%

11.4%

15.8%

410,612

38.0

5.7

4927

Pola Orbis HLD

190,000

-13.6%

19,000

-39.0%

10.0%

10.4%

505,932

58.2

2.6

8005

Scroll

75,000

+3.3%

1,900

-11.4%

2.5%

3.3%

13,056

9.2

0.6

8165

Senshukai

-

-

-

-

-

21.2%

21,447

-

0.5

9997

Belluna

175,000

-2.8%

7,000

-32.1%

4.0%

5.8%

59,416

11.4

0.6

* Unit: Million-yen, yen, x.
*Sales and operating income are the values estimated by the company for this term.
*ROE is the actual result of the previous term.
*Market Cap, PER and PBR are the values calculated from the closing prices on June 5, 2020.
*forecast for this term of ZOZO and Senshukai are undecided.

 

Compared with Scroll and Senshukai, which are competitors in the general mail-order field, Belluna has large sales and market cap, and high profit ratio and capital efficiency.

 

1-4 Business Contents

(1) Segments
Belluna operates seven business segments: General Mail Order Business, which is its core business, Specialty Mail Order Business, Retail Store Sales Business, Solution Business, Finance Business, Property Business, and Other Business. The General Mail Order and Specialty Mail Order businesses account for about 70% of total sales.

 

(Produced by Investment Bridge with reference to the material of Belluna.)

 

(Produced by Investment Bridge with reference to the material of Belluna.)

 

①General Mail Order Business
◎Outline
The company receives orders for and sells apparel, fashion goods, interior accessories, etc. via catalogs, flyers, and the Internet.

 

(Major catalogs)

(Taken from the website of Belluna)

 

◎Attributes of subscribers
As of the end of March 2020, the number of subscribers is about 20.3 million, and married women in their 40s or older account for about 80% of them.
The subscribers aged 65 to 69 years, who are major married women, make up 34.3 % of the population of this age group in Japan, indicating an overwhelming market share.

 

 

(Taken from the reference material of the company)

 

The number of loyal subscribers, who are defined as subscribers who have purchased products within 2 years after registration, was 5.11 million in the term ended March 2020.
Despite some fluctuations, it is steadily increasing.

 

(Produced by Investment Bridge with reference to the material of Belluna)

 

Belluna employs about 70 merchandisers, and offers more fashionable products than leading supermarkets and women’s apparel shops. Particularly, designs focusing on hiding Mrs’s figures which change with age are well-received by its user.
In addition, the company offers a variety of unrivaled catalogs targeted at customers in their 50s to 70s. Accordingly, it won overwhelming support from married women.

 

Customer segments
Female customer segments are divided into three ones: “Mrs” for customers in their 50s or older, “ Ranan” for customers in their 40s, and “ GeeRA(former Ryu-Ryu)” for customers in their 30s. The company offers products tailored for the preferences and needs of each age group.

 

(Produced by Investment Bridge with reference to the material of Belluna.)

 

◎Efforts for developing e-commerce
Catalogs are primary sales channels, but the company has been striving to promote online shopping in recent years.

 

(Produced by Investment Bridge with reference to the material of Belluna)

 

◎Strong points of each age group
While the repeat rate for senior customers is as high as over 50%, the company realizes improvement of the repeat rate for customers aged 30 or younger as its challenge. Also, customers in their 50s have the highest annual purchase amount. The challenge for the company will be to increase the number of simultaneous purchases for senior customers.

 

 

 

②Specialty Mail Order Business
By specializing in specific genres, the company adds characteristics to its product lineup, prices, and services. Therefore, the company can retain customers easily, and receive orders from repeat customers.

 

Main genre

Catalog/website

Outline

Food products, flowers, and wine

Belluna Gourmet

Belluna handles food products and flowers. In addition to the sale of individual products, it offers a “periodic distribution service” for delivering products to subscribers every month, a “gift service” for mid-summer gifts, and so on.

My Wine CLUB

Belluna directly imports wines that are rare in Japan, and won the largest share in the mail-order market for wine in Japan for 11 consecutive years (fiscal 2008 to fiscal 2018).

Cosmetics

Ozio

Belluna deals in cosmetics and supplements, such as facial washes, skin lotions, and milks, for which safety is pursued.

Nachulife

All-in-one cosmetics are mainly handled. Especially, the company offers products composed of mainly skin-friendly plant ingredients.

Supplements

Refre

Under the concept: “Tomorrow’s body, today’s body,” Belluna deals in healthy food products and supplements made from ingredients selected rigorously after many quality tests. In 2013, the company established Refre Laboratory, to secure the safety of food and the quality of products, prevent health hazards, and so on.

Mail order for nurses

Nursery

infirmière

Belluna operates “Nursery,” which offers products at reasonable prices, and “infirmière,” whose attractive features are its rich product lineup and collaborative products with other brands. It has an overwhelming share in the mail-order market for nurses.

 

 

(Produced by Investment Bridge with reference to the material of Belluna)

 

➂Retail Store Sales Business
Aiming for a synergistic effect between the mail-order, online, and physical store sales channels, the company is targeting customers who are unreachable by mail-order by placing kimono and apparel stores in shopping centers and shopping malls.

 

In Japanese clothing field, the company operates “BANKAN” and “Wamonoya,” which sell kimono and Japanese clothing-related products. In addition to them, Sagami Group Holdings Co., Ltd. was reorganized into a consolidated subsidiary in Jun. 2018.

 

Sagami Group Holdings runs stores under the two brand names “Sagami" and “Tokyo Masuiwaya.” They possess abundant knowledge and know-how about kimono culture and how to handle kimono, and excel in helping customers get dressed.
Apparel stores BELLUNA offer casual clothes at low prices, targeted mainly at women in their 40s and 50s.
The store area is about 30 tsubo (≒ 100 m2) for Japanese clothing stores, and 80 to 100 tsubo (≒ 265 to 330 m2) for apparel stores. The Japanese clothing stores are highly profitable, because there is a high average spending per customer.
As of the end of March 2020, there were 89 Japanese clothing stores and 83 apparel stores. The total number of stores was 172.

 


(Produced by Investment Bridge with reference to the material of Belluna)

 

④Solution Business
By utilizing the know-how and infrastructure that have been nurtured through the mail-order business for many years, Belluna offers the “service of enclosing promotional flyers” and the “mail-order agency service” to corporations.
In the service of enclosing promotional flyers, the company encloses the flyers, product samples, etc. of client companies with products and catalogs and ships them to customers, by utilizing its enormous customer database. It is possible to narrow down target customers according to the needs of client companies. Accordingly, client companies can expect effective sales promotion.

 

“The mail-order agency service” is to offer a series of functions, including the infrastructure and know-how of Belluna, to enterprises that sell products by mail order. Belluna comprehensively undertakes the tasks of managing stocks at distribution warehouses, operating call centers, and shipping products to customers.
Even enterprises that are starting the mail-order business do not need to prepare their own infrastructure, and they can offer products and services swiftly at low prices.

 

⑤Finance Business
It is a consumer finance business utilizing the database developed through the mail-order business.
The company mainly introduces loans to mail-order customers by enclosing flyers, etc. Since the company possesses the data of the past purchases and payments by customers, credibility is high and the balance of loan receivables is expanding steadily, while the percentage of credit losses is low compared with other companies.
Its profitability is high, partially because the cost for reeling in borrowers is low as mail-order customers are targeted.

(Produced by Investment Bridge with reference to the material of Belluna)

 

⑥Property Business
The company leases real estate, such as office buildings, operates hotels, and so on.

 

⑦Other Business
The company operates the wholesale business targeted at department stores and co-op shops, and the insurance business.

 

1-5 Characteristics and Strengths

➀Customer database and know-how mainly for married women, which have been nurtured through the mail-order business for about 40 years
As mentioned in the section of business contents, about 80% of over 20 million subscribers of Belluna are married women in their 40s or older.
Belluna’s female subscribers aged 65 to 69 years, who are dominant among married women, account for 34.3% of the population, 1 in 3 people of this age group in Japan.

 

The competitive customer database and know-how, which have been developed through the mail-order business for about 40 years, are significant features that contribute to the creation of corporate value.
In the mail-order sale business, which is its mainstay, Belluna won strong support from married women by proposing products that can meet their needs based on the requests from customers, etc. grasped through sales and purchase activities and questionnaire surveys.
In the finance business, the company earn sales and profit stably by utilizing its database. In the solution business, the company creates new business opportunities by offering its customer database, know-how, and infrastructure.

 

➁Stable profitability and growth potential based on portfolio management
Another characteristic of Belluna is the business model called “portfolio management,” which actualizes stable growth potential and profitability by conducting business in a multifaceted manner while utilizing its managerial resources nurtured through the mail-order business.
Based on this business model, the company disperses the risks of changes in social situations and economic trends, allows each business to exert its strengths as a mainstay, brings out the synergy among businesses, and actualizes stable profitability and growth potential.

 

1-6 Shareholder Return

Belluna determines dividends while considering its business performance and strategic investments for mid-term growth. This term(FY3/20), the company plans to pay 16 yen/share, up 1 yen/share from the previous year.
The company has been implementing a shareholders’ benefit plan, and gives benefits twice a year to shareholders who hold 100 or more shares as of the end of March and the end of September every year. For the purposes of expressing gratitude to shareholders and deepening shareholders’ understanding, the company announced the enrichment of the shareholders’ benefit plan in November 2017, adding complimentary coupons that can be used in Belluna Net. There is no revision to the criteria for receiving shareholders’ benefits, the date of issuance of coupons, or their effective periods.

 

 

100 to 499 shares

500 to 999 shares

1,000 or more shares

Shareholders can choose any of the following:

“General mail-order coupon,”

“Coupon exclusively for online shopping,” and

“Belluna’s product (food product/wine)”

Worth 1,000 yen

Worth 3,000 yen

Worth 5,000 yen

Accommodation coupon of Urabandai Lake Resort

1 coupon

2 coupons

4 coupons

Accommodation coupon of Le Grand Kyu Karuizawa

1 coupon

1 coupon

1 coupon

*The accommodation coupon of Le Grand Kyu Karuizawa is distributed once a year (issued in early December).

1-7 ROE analysis

 

FY3/14

FY3/15

FY3/16

FY3/17

FY3/18

FY3/19

FY3/20

ROE (%)

10.0

8.4

4.4

7.0

10.9

10.8

5.8

Net Income Margin (%)

5.59

5.30

2.69

3.97

5.98

5.82

3.26

Total Asset Turnover (times)

1.02

0.85

0.84

0.86

0.86

0.87

0.81

Leverage (times)

1.75

1.85

1.97

2.06

2.12

2.13

2.22

 

In the term ended March 2020, due to the decrease of net income margin, ROE is 5% range. The goal of the fourth management plan is to achieve ROE of 10% or more by the end of the final year of the plan in the term ending March 2022.

 

 

2. Fiscal Year March 2020 Earnings Results

(1) Consolidated Business Results

 

FY3/19

Ratio to sales

FY3/20

Ratio to sales

YoY

Ratio to Initial estimate

Ratio to revised estimate

Sales

177,648

100.0%

179,948

100.0%

+1.3%

-2.7%

0%

Gross profit

101,364

57.1%

105,062

58.4%

+3.6%

-

-

SG&A expenses

89,359

50.3%

94,751

52.7%

+6.0%

-

-

Operating income

12,005

6.8%

10,311

5.7%

-14.1%

-26.4%

-6.3%

Ordinary income

15,309

8.6%

10,365

5.8%

-32.3%

-30.9%

-5.8%

Net income

10,343

5.8%

5,862

3.3%

-43.3%

-44.2%

-16.3%

*Unit: Million yen
*Net income is profit attributable to owners of parent. Gross profit is gross profit-net.

 

Sales increased while operating income decreased. Both sales and profit fell below its initial estimate
The sales for the term ended March 2020 were 179.9 billion yen, up 1.3% year-on-year. Sales have increased for all segments except for the General Mail Order Business and Other Business. Gross profit margin improved 1.3% and gross profit increased 3.6% year-on-year. However, SG&A expenses increased 6.0% year-on-year, because of media and distribution costs, and operating income declined 14.1% year-on-year to 10.3 billion yen. Ordinary income was 10.3 billion yen, down 32.3% year-on-year, due to the posting of foreign exchange losses and losses on the valuation of derivatives.
In January 2020, the cost of sales ratio of the General Mail Order Business is predicted to fall below the estimate. For the Retail Store Sales Business, orders in sales through events by SAGAMI Co., Ltd. stagnated in the third quarter due to the typhoon. As for the Property Business, commencing operations for the overseas hotel, which opened in the previous term, was delayed, etc. Thus, the business forecast was revised downwardly.
Sales were almost in line with the revised estimate, while profit fell below the revised estimate.

 

(2) Trend of each segment

 

FY3/19

Composition

Ratio

FY3/20

Composition

Ratio

YOY

Ratio to revised estimates

Sales

 

 

 

 

 

 

General Mail Order Business

77,603

43.7%

73,378

40.8%

-5.4%

-0.6%

Specialty Mail Order Business

47,852

26.9%

49,774

27.7%

+4.0%

+3.7%

Retail Store Sales Business

28,146

15.8%

30,402

16.9%

+8.0%

-2.0%

Solution Business

6,257

3.5%

8,330

4.6%

+33.1%

-2.1%

Finance Business

3,829

2.2%

4,396

2.4%

+14.8%

+1.5%

Property Business

8,072

4.5%

8,690

4.8%

+7.7%

-1.1%

Other Business

6,912

3.9%

5,943

3.3%

-14.0%

-24.2%

Adjustments

-1,026

-

-968

-

-

-

Total

177,648

100.0%

179,948

100.0%

+1.3%

-0.0%

Operating income

 

 

 

 

 

 

General Mail Order Business

3,816

4.9%

1,713

2.3%

-55.1%

-2.4

Specialty Mail Order Business

3,260

6.8%

3,906

7.8%

+19.8%

+1.9

Retail Store Sales Business

1,000

3.6%

310

1.0%

-69.0%

-4.5

Solution Business

2,272

36.3%

2,652

31.8%

+16.7%

+1.5

Finance Business

1,759

45.9%

1,874

42.6%

+6.5%

+1.3

Property Business

244

3.0%

658

7.6%

+169.7%

-0.6

Other Business

237

3.4%

-392

-

-

-6.0

Adjustments

-586

-

-410

-

-

-

Total

12,005

6.8%

10,311

5.7%

-14.1%

-6.9

*Unit: Million yen
*The composition ratio of income means the ratio of income to sales. the unit of ratio to estimates in operating income is 100 million yen.

 

◎General Mail Order Business
Sales and profit declined.
Sales and profit declined due to the increase in shipping charges and the limited number of issues of catalogs, etc. resulting from increased costs of papers.

 

◎Specialty Mail Order Business
Sales and profit grew.
Sales were favorable mainly in the cosmetics and wine businesses.

 

◎Retail Store Sales Business
Sales grew and profit decline.
Profit fell due to the influence of loss incurred in the first quarter resulting from costs exceeding revenues on Sagami Group Holdings Co., Ltd, which was acquired in the previous term.

 

◎Solution Business
Sales and profit grew.
Both the mail-order agency service and the service in enclosing promotional flyers performed well.

 

◎Finance Business
Sales and profit rose.
The balance of loan receivables in the domestic consumer finance business increased. Sales was below its estimates, while profit exceeded it.

 

◎Property Business
Sales and profit grew.
Sales grew thanks to the opening of new hotels in the previous term, and there were no expenditures on opening of new hotels in this term.

 

◎Other Business
Sales decreased and loss expanded.
Regarding Maimu Co., LTD., which runs the apparel rental business, many graduation ceremonies were cancelled, and cancellations increased due to the spread of COVID-19.

 

(3) Financial Condition and Cash Flows

◎Main BS

 

End of March 2019

End of March 2020

 

End of March 2019

End of March 2020

Current assets

99,244

103,683

Current liabilities

53,463

50,135

Cash and deposits

22,071

22,788

Trade payables

17,093

18,225

Trade receivable

9,739

9,391

Short-term interest-bearing debts

14,368

12,046

Inventories

22,319

22,313

Noncurrent liabilities

59,790

70,467

Noncurrent assets

114,542

119,445

Long-term interest-bearing debts

55,339

65,774

Property, plant and equipment

83,204

88,651

Total liabilities

113,253

120,602

Intangible assets

11,253

11,827

Net assets

100,533

102,525

Investments and other assets

20,084

18,966

Retained earnings

80,816

85,177

Total assets

213,786

223,128

Total liabilities and net assets

213,786

223,128

*Unit: Million yen

 

Total assets increased 9.3 billion yen to 223.1 billion yen thanks to the increase in property, plant and equipment, etc. Total liabilities rose 7.3 billion yen to 120.6 billion yen due to the increase in long-term loans payable, etc. As retained earnings grew etc., net assets increased 1.9 billion yen to 120.5 billion yen. As a result, capital-to-asset ratio decreased 1.0 points from the end of the previous term to 45.7%.

 

◎Cash Flows

 

FY3/19

FY3/20

YOY

Operating CF

8,558

6,624

-1,934

Investing CF

-12,724

-11,108

+1,616

Free CF

-4,166

-4,484

-318

Financing CF

3,577

5,712

+2,135

Balance of cash equivalents

21,351

22,292

+941

*Unit: Million yen

 

The surplus of operating CF shrank due to the decrease in net income before taxes and other adjustments, etc. and the deficit of free CF expanded. The surplus of financing CF expanded due to the increase in proceeds from long-term loans payable. The cash position improved.

 

(4) Topics

◎ Reorganization of a company that introduces and dispatches medical personnel in Singapore into a subsidiary
In January 2020, the company obtained all shares of JOBSTUDIO PTE LTD, which operates a medical personnel introduction and dispatching business aimed at medical institutions in Singapore.

 

(Overview of JOBSTUDIO PTE LTD)
Established in October 2010. It has been growing steadily by introducing and dispatching personnel from various occupational categories, mainly doctors and nurses, to prominent medical institutions in Singapore. Belluna recognizes that JOBSTUDIO PTE LTD had established a powerful brand and gained firm trust in Singapore.
In September 2019, sales were about 480 million yen and net income before taxes was 89 million yen.

 

(Background of the acquisition)
Belluna sells products aimed at nurses through Nurse Stage Co., Ltd. Moreover, the mail-order business targeting nurses boasts the largest domestic sales. (Disclosed by Belluna)
Moreover, in FY 2018, Nurse Stage Co., Ltd. launched the nursing staff introduction business targeting domestic medical institutions.
The company considered that including JOBSTUDIO PTE LTD in the Group will provide an opportunity to establish a business for personnel introduction from all Asian countries to Japan, etc. including the continuation and flourishing of the medical personnel introduction and dispatching business in all Asian countries, mainly Singapore, and selling products related to medical institutions and medical personnel. Further, it will contribute to increasing the corporate value, and thus decided to acquire its shares.

 

3.Fiscal Year March 2021 Earnings Estimates

(1) Full-year Earnings Estimates

 

FY 3/20

Ratio

to sales

FY 3/21

(Est.)

Ratio

to sales

YOY

Sales

179,948

100.0%

175,000

100.0%

-2.8%

Operating income

10,311

5.7%

7,000

4.0%

-32.1%

Ordinary income

10,365

5.8%

7,800

4.5%

-24.8%

Net income

5,862

3.3%

5,200

3.0%

-11.3%

*Unit: Million yen
*The estimated values are those announced by the Company. Net income is profit attributable to owners of parent.

 

Sales and profit are expected to decrease
The sales for the term ending March 2021 are projected to be 175 billion yen, down 2.8% year-on-year, and operating income is estimated to be 7 billion yen, down 32.1% year-on-year. The forecast factors in the impacts of COVID-19, mainly in the first half, and predicts sales and profit to decline. The dividend is to remain unchanged at 16.00 yen/share. The estimated payout ratio is 29.8%.

 

 

1H of FY3/21(Est.)

YOY

 

2H of FY3/21(Est.)

YOY

 

Sales

77,900

-8,322

97,100

+3,374

Operating income

-600

-4,463

7,600

+1,152

Ordinary income

-100

-3,396

7,900

+831

Net income

-60

-1,738

5,260

+1,076

*Unit: Million yen
*The estimate values of 1H are announced by the company, 2H are deducted 1H from the estimate values of FY3/21 Net income is profit attributable to owners of parent.

 

(2) Trends of each segment

 

FY 3/20

Composition ratio

FY 3/21

(Est.)

Composition

ratio

YOY

Sales

 

 

 

 

 

General Mail Order Business

733.8

40.8%

699.8

40.0%

-4.6%

Specialty Mail Order Business

497.7

27.7%

531.2

30.4%

+6.7%

Retail Store Sales Business

304

16.9%

257.2

14.7%

-15.4%

Solution Business

83.3

4.6%

91.6

5.2%

+10.0%

Finance Business

44

2.4%

45.6

2.6%

+3.6%

Property Business

86.9

4.8%

94.7

5.4%

+9.0%

Other Business

59.4

3.3%

69.0

3.9%

+16.2%

Adjustments

-9.7

-

-39.1

-

-

Total

1799.5

100.0%

1,750.0

100.0%

-2.8%

Operating income

 

 

 

 

 

General Mail Order Business

17.1

2.3%

-1.2

-

-

Specialty Mail Order Business

39.1

7.8%

45.0

8.5%

+15.1%

Retail Store Sales Business

3.1

1.0%

-19.7

-

-

Solution Business

26.5

31.8%

25.9

28.3%

-2.3%

Finance Business

18.7

42.6%

22.4

49.1%

+19.8%

Property Business

6.6

7.6%

2.7

2.9%

-59.1%

Other Business

-3.9

-

2.2

3.2%

-

Adjustments

-4.1

-

-7.3

-

-

Total

103.1

5.7%

70.0

4.0%

-32.1%

*Unit: 100 million yen
*The composition ratio of income means the ratio of income to sales.

 

As for the novel coronavirus, new business opportunities have emerged due to the demand from people staying home. However, there are also impacts from the declined demand for going out, suspension of operation of hotels and stores, etc.
The segments most affected are the General Mail Order Business, the Retail Store Sales Business, and the Property Business.
The impact on the Specialty Mail Order Business, the Solution Business, and the Finance Business was minor, and the situation is rather favorable for these businesses.

 

◎General Mail Order Business

 

1H of FY 3/20(Act.)

1H of FY 3/21(Est.)

YoY

Sales

360.2

329.0

-8.7%

Operating Income

8.3

-10.4

-18.8

*Unit: 100 million yen

 

The company foresees that the effects will linger until September and considered it in its plan.
For existing customers, the sales of furniture and sundries are favorable, but it is projected to slow down, particularly for outdoor clothing.
For new customers, as stores are closed, their response is favorable. It will increase the cost for gaining new customers.
Although the response of existing customers is slow, new customers are increasing. The company considers this year as the time to pave the way for increasing sales and profit from the next term by actively pouring efforts in increasing new customers.

 

◎Retail Store Sales Business

 

1H of FY 3/20(Act.)

1H of FY 3/21(Est.)

YoY

Sales

156.7

98.1

-37.4%

Operating Income

3.4

-24.9

-28.3

*Unit: 100 million yen

 

Regarding apparel shops, as of May 15, 43 out of 84 shops were temporarily closed, but they were reopened step by step during the first half and the company expects operations to go back to normal in the second half. As for BANKAN Wamonoya, as of May 15, 28 out of 88 stores were temporarily closed, and they were reopened step by step during the first half, and operations are expected to go back to normal in the second half.
For Sagami Group Holdings, as of May 12, 56 out of 159 stores were temporarily closed, but they were reopened step by step during the first half, and operations are expected to go back to normal in the second half. The company perceives this as an opportunity to reform the organizational structure and it will start to convert it into BANKAN in full swing.

 

◎Property business

 

1H of FY 3/20(Act.)

1H of FY 3/21(Est.)

YoY

Sales

44.5

27.8

-37.6%

Operating Income

3.0

-3.5

-6.5

*Unit: 100 million yen

 

Domestic hotels are expected to be temporarily closed or run at a low capacity during the first half; although the impact will linger through the second half, it will gradually decrease.
Overseas hotels are expected to be temporarily closed or run at a low capacity during the first half. The cost reduction policies from the previous second half were crowned with success and the company sees that the effects on the first half's profit are limited.
Regarding the real estate rental business, the company mainly owns office buildings, thus the business was almost unaffected.
As for other business, the operation of the sunlight business, which started in 2019, exceeded estimates and is expected to yield an increase in sales and profit.

 

4.Conclusions

Although the forecast indicates a decrease in sales and profit due to COVID-19 pandemic, there is something to be expected of the company’s business portfolio diversification effect, which is one of its characteristics and strengths. Further, it is also an opportunity for the General Mail Order Business, which has been stagnating for the recent few terms, to increase new customers and strengthen its business base.

<Reference1: The fourth management plan: Management policy and activities>

The company is currently implementing the fourth management plan. Although there are changes to the business environment because of COVID-19, the company aims to expand the business with the following basic concepts:

 

(1) The management environment

The company will set a management policy that is able to flexibly respond to changes in the external environment such as the prevailing deflation mindset, the advance of the Internet, the increase of delivery service ("takkyubin") and shipping costs, by changing the internal environment such as “expansion of single item sales including Ozio, Nursery, and wine,” “developing each portfolios,” and “recovery of the hotel business.”

 

(2) The fourth management plan

Positioning
After achieving record-high sales and profit in the third management plan, in the fourth management plan, the company will incorporate changes in the external environment and lay the groundwork to achieve its goals.
The company will aim for revising upwardly estimates, while steadily achieving its sales and profit goals.

 

3) Measures for the four main businesses

The company will work towards expanding and strengthening its 4 main businesses. They are “the revitalization of the General Mail Order business,” “expansion of the Specialty Mail Order business,” “expansion and profitability improvements of the Retail Store Sales business,” and “reinforcement of the Property business, particularly the profitable hotels.”

 

①Stable growth of the General Mail Order business
In the summer season, sales were adversely affected by the reduction in the number of catalogs sent due to the lack of papers, however, the company is actively taking efforts in maintaining the performance and for regrowth.

 

◎Expansion of catalog retail
The company recognizes the General Mail Order business as a mature department in the fourth management plan and aims to keep sales between 75 and 80 billion yen.
In order to achieve this goal, the company will compliment “the revitalization of paper,” “providing products for a wide range of customers from people in their 20s to 70s,” “strengthening the men’s underwear business,” and “developing products that reflect the characteristics of Belluna.”
The characteristic feature of Belluna is the method of delivering products to subscribers periodically. The Company originally adopted this method, and will develop products in accordance with this style of selling.

 

◎Upgrading of online shops
The company will work on creating a winning strategy specialized for each business aimed at women and young generation.

 

Regarding the “Belluna website for married women,” the company started its regrowth in the summer season of 2019.
The company will enhance the product content targeted at married women by introducing products exclusively for online sale, featuring items to hide figures or large sizes, etc. Also, the company will try to reduce dependency on sale items and make the website focusing on items of regular prices.

 

The concept behind the “RyuRyu mall”, a fashion EC mall targeting young customers and opened in June 2019, is to develop a variety of sizes aimed at young customers in their 20s to 30s and takes advantage of the company’s experience in developing products including abilities of selection and recommendation to customers.
The company is in the trial-and-error stage currently, but it will bring the business to a growth path in the second half.

 

②Expansion of the Specialty Mail Order business
The business progressed well with operating income increasing year on year and exceeding the estimate.
The company expects further growth of the cosmetic mail-order “Ozio” and the wine business. In particular, it will actively expand the cosmetic mail-order business inside and outside Japan.

 

◎Cosmetic mail-order “Ozio”
“Beauty Opener,” which is a serum containing shell membrane, became the top selling item for two consecutive years (according to a survey by Tokyo Shoko Research, Ltd., provided by Belluna). In addition, “Beauty Cleansing Balm” is also showing signs of becoming another hit product.
The number of new customers is increasing steadily.

 

◎Wine mail-ordering service
It topped the sales ranking of domestic wine mail-order services for 11 consecutive year with sales amounting to 4.1 billion yen in the fiscal year 2018. The number of bottles sold was approx. 5.8 million, up 20% from the previous year. The steady increase in online sales largely contributed to the growth.

 

③Expansion of the Retail Store business and improving profitability
(Japanese clothing stores)
◎BANKAN Wamonoya
As a result of opening and closing of stores, the number of stores was 83 as of the end of September 2019. Sales and profit grew in the first half, and the company will aim to catch up with the estimate in the second half.

 

◎Sagami Group Holdings Co., Ltd.
The company is encouraging the improvement in awareness by reforming the organizational structure. The first Sagami New Concept Shop (Komaki, Aichi Prefecture) was opened in November 2019 with the aim to introduce BANKAN Wamonoya’s management and operation systems.

 

The company plans to open a total of three shops in the current term.

 

◎Apparel shops
The company will shift to pursuing growth steadily. It will reduce the speed of opening new shops down by 15 to 20 annually.

 

④Strengthening the Property business with a focus on profitable hotels
The progress of resort hotels running behind the schedule caused the results to deviate from their estimates.
The company will actively shore it up for early recovery.

 

<Reference: Regarding corporate governance>

◎Organization type, and the composition of directors and auditors

Organization type

Company with audit and supervisory committee

Directors

8 directors, including 2 external ones

 

◎Corporate Governance Report
Last Update: June 28, 2019.

 

<Basic policy>
Our basic policy for corporate governance is to streamline business operation by allowing operating officers to have the authority and responsibility for their businesses under the policy determined by the board of directors, and establish compliance systems and effective management systems by enhancing the fairness and transparency of business administration. In addition, we organized a compliance committee inviting outside intellectuals, granting it authority, so that a third party’s viewpoint would be reflected in management decisions.

 

<Disclosure Based on the Principles of the Corporate Governance Code (Excerpts)>

Principles

Reasons for not implementing the principles

<Supplementary Principle 1-2-(4)>

Taking shareholder composition into account, we post English convocation notices on our website to make it easier for shareholders to examine items on the agenda, whether they are from Japan or overseas. We will consider using an electronic voting platform in the future.

<Supplementary Principle 4-10-(1)>

We currently have two independent outside directors. The independent outside directors express their opinions and provide advice as necessary to both individual directors and the Board of Directors, utilizing their specialized knowledge and extensive experience. From now on, we will consider setting up a voluntary organization whose main members consist of independent outside directors if necessary.

<Supplementary Principle 4-11-(3)>

As for the analysis and evaluation of the effectiveness of the board of directors, we will keep discussing concrete evaluation methods, etc. from the viewpoint of upgrading the functions of the board of directors.

 

<Disclosure Based on the Principles of the Corporate Governance Code (Excerpts)>
We disclose the compliance with each principle of the corporate governance code under “Our Efforts Towards the Corporate Governance Code” at the following company website (corporate governance).

 

Principles

Disclosure contents

【Principle 1-4】

In order to foster good business relations with business partners and carry out business smoothly, we may hold their shares as requested by them. We judge whether or not to invest while comprehensively considering the benefits to our corporate group due to the strengthening of business relations, investment amounts, etc. As for the exercise of voting rights, we check whether proposed bills would degrade shareholder value, and consider the situations of target companies for investment, etc.

【Basic principle 5】

 

 

 

 

 

In order to contribute to sustainable growth and the mid/long-term improvement of corporate value, we recognize that we should have constructive dialogues with shareholders also outside general meetings of shareholders and explain our management policy to shareholders clearly and understandably, to win the understanding of shareholders. Therefore, we strive to proactively have dialogues with investors by developing IR systems and holding individual IR meetings and sessions for briefing our company to individual investors in addition to the results briefing session held twice a year, so that they will understand our company more deeply.

 

 

 

 

This report is intended solely for information purposes, and is not intended as a solicitation to invest in the shares of this company. The information and opinions contained within this report are based on data made publicly available by the Company, and comes from sources that we judge to be reliable. However, we cannot guarantee the accuracy or completeness of the data. This report is not a guarantee of the accuracy, completeness or validity of said information and or opinions, nor do we bear any responsibility for the same. All rights pertaining to this report belong to Investment Bridge Co., Ltd., which may change the contents thereof at any time without prior notice. All investment decisions are the responsibility of the individual and should be made only after proper consideration.

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