AEON KYUSHU CO.,LTD.

Business Details

An SM/DS/GMS format business selling apparel, food, household and leisure goods across the entire Kyushu region. As a core company of the AEON Group in Kyushu, it operates multiple formats including MaxValu, The Big, and AEON. Food accounts for approximately 79% of sales, and the company's growth axis centers on value-focused living support measures addressing consumers' savings orientation, and rapid store openings of the urban compact supermarket format "MaxValu Express." As of the end of Q1 of FY2027 (ending February 2027) (end of May 2026), the total number of stores was 380, including 23 Tokiha Industry stores.

Recent Overview

Higher revenue and operating profit, but ordinary profit and net income declined YoY; scale expansion through Tokiha Industry subsidiary acquisition

In Q1 of FY2027 (ending February 2027) (March to May 2026), the company achieved higher revenue and profit, with operating revenue of ¥135,893 million (+3.0% YoY) and operating profit of ¥655 million (+18.3% YoY). However, ordinary profit declined to ¥489 million (-15.5% YoY) due to an increase in interest expense from ¥126 million to ¥187 million and the disappearance of gain on collection of guarantee deposits (¥180 million in the same period last year). On March 1, 2026, the company absorbed Joyful Sun (9 stores) through merger, and on March 10, 2026, made Tokiha Industry (23 stores in Oita Prefecture) a wholly owned subsidiary at an acquisition cost of ¥3,000 million. Tokiha Industry's deemed acquisition date is the end of the current quarter, so its impact on the income statement will begin from Q2 onward. Goodwill of ¥2,924 million (provisional value, amortized evenly over 20 years) was recorded, and total assets expanded to ¥225,851 million (up ¥19,419 million from the end of the prior fiscal year). The equity ratio declined from 29.2% to 26.5%.

Key Products

Growth Drivers

• Steady food sales performance: existing-store food sales at 100.8% YoY, supported by strengthened value-focused living support measures such as the new "Gachitoku" pricing strategy, the "Price Freeze Declaration" on approximately 3,500 Top Value items, and "Shiawase Plus (Support Pricing)," absorbing the rebound effect from the prior year's spike in rice and vegetable prices
• Rapid store openings for MaxValu Express: two new stores opened in Q1, bringing the total to 25 as of the end of May 2026, with quarterly sales strong at 127.1% YoY; promoting development of an even more compact store model
• Rapid growth of Welcia Plus: one new store opened in Q1, bringing the total to 17 as of the end of May 2026, with quarterly sales at 126.7% YoY
• Expansion of iAEON app membership and promotional strength: over 1.39 million members as of end of May 2026 (up 120,000 from the end of the prior fiscal year), AEON Pay transaction value at 140.8% YoY, Gaccha Coupon usage at 126.3% YoY
• Productivity improvements from DX investment: self-checkout introduced at 284 stores, electronic shelf labels introduced at 255 stores (with rollout beginning into non-food sales floors at GMS), and efficiency gains from optimized checkout placement for food
• Expansion of the retail media business: advertising revenue leveraging digital signage at 260 stores and in-store signage at 137 stores grew significantly to 144.3% YoY
• Scale expansion through M&A and formation of a dominant position in Oita Prefecture: full consolidation of Tokiha Industry (23 stores in Oita Prefecture) is expected to contribute to consolidated earnings from Q2 onward
• Growth in apparel and household/leisure goods: existing-store apparel sales at 105.5% YoY and household/leisure goods at 103.7% YoY, driven by AEON's joint "COOL de ACTION 2026" campaign for heat and UV protection products and strong sales of popular gaming consoles
• Capturing inbound demand: duty-free sales at 109.4% YoY, driven by strengthened measures targeting travelers from Taiwan and South Korea

Risks

• Prolonged inflation intensifying consumers' savings orientation and pressuring the gross profit margin (gross profit margin declined 0.2 percentage points YoY in Q1)
• Continued cost increases in labor, logistics, and utilities (large wage hikes implemented for four consecutive years; SG&A expenses at 101.9% YoY)
• Rising financial leverage: increase in borrowings associated with the Tokiha Industry acquisition, new store openings, and revitalization investments (long-term borrowings rose from ¥36,782 million to ¥43,952 million), equity ratio declining from 29.2% to 26.5%, and interest expense increasing from ¥126 million to ¥187 million
• M&A integration costs and upfront investment burden: Tokiha Industry acquisition cost of ¥3,000 million plus advisory fees of ¥66 million, with goodwill of ¥2,924 million (provisional) to be amortized over 20 years starting from Q2 onward
• Uncertainty regarding Tokiha Industry's earnings contribution: consolidation into the income statement is scheduled from Q2, but integration and revitalization investment costs may be incurred upfront
• Intensifying cross-industry competition: progressing oligopolization through M&A in the supermarket industry, and heightened competition from other industries over the "food" market
• Geopolitical risks such as Middle East tensions and currency fluctuations: rising raw material, energy, and logistics costs, and impact on inbound demand (continued impact from travel from China)
• Temporary operational adjustment risk associated with the net supermarket system migration: stable operation following completion of the migration across all 33 stores remains a challenge