HEIWADO CO.,LTD.

Business Details

A general retail business selling food, apparel, daily necessities, and other goods. Centered on Heiwado Co., Ltd., the Group's core company, it forms a regional chain with Shiga Prefecture, the Kyoto-Osaka-Kobe area, Hokuriku, and Tokai as its main trading areas. It operates multiple formats including Al Plaza (General Merchandise Store) and Friend Mart (Food Supermarket), and also includes department store operations in Hunan Province, China (Heiwado (China) Co., Ltd.) and the books and fitness business (Direct Shop Co., Ltd.). The consolidated subsidiary Yanagen Ale was merged into and absorbed by Heiwado on a standalone basis in fiscal 2025.

Recent Overview

Revenue increased, but standalone operating profit declined due to a lower gross margin; segment profit increased significantly due to higher dividends from subsidiaries.

In the first quarter of FY2027 (ending March 2027) (February 21, 2026 to May 20, 2026), the Retail Business saw Heiwado's standalone operating revenue grow 5.2% year on year, driven by new store effects, growth at existing stores, and the effect of the merger with Yanagen Ale. On the other hand, gross operating profit was insufficient due to a decline in gross margin, and standalone operating profit fell 17.6% year on year. Segment profit (ordinary income basis) increased substantially to ¥5,011 million (up 48.5% year on year) due to higher dividends from consolidated subsidiaries. In the China business, revenue declined on a yuan basis due to reduced sales floor space from a major renovation, but profit increased; at Direct Shop, the loss amount narrowed.

Key Products

Growth Drivers

• Increase in sales due to new store effects and growth at existing stores (Heiwado standalone operating revenue up 5.2% year on year)
• Business integration and scale expansion through the merger of Yanagen Ale into Heiwado on a standalone basis
• Addressing the needs of child-rearing households: strengthening pricing on everyday-use products, differentiation through fresh food and private brand products
• Deepening communication enhancement and customer data-driven marketing utilizing the HOP App
• Expansion of store openings in priority areas across multiple formats based on the dominant area strategy, and expansion of new channels such as small-format stores and online supermarkets
• Increased order volume from Bestone Co., Ltd.'s new deli center production growth and productivity improvement initiatives at Heiwado
• Cost structure reform through workforce development enabling stable sales floor operations by part-time employees and review of business processes

Risks

• Insufficient gross operating profit due to declining gross margin pressuring standalone operating profit (down 17.6% year on year in Q1 FY2027, ending March 2027)
• Significant rise in labor costs (higher wage rates) pushing up selling, general and administrative expenses, continuously pressuring operating margin
• Impact of China's economic slowdown, intensifying competition, and reduced sales floor space from major renovation at the China business (Heiwado (China) Co., Ltd.)
• Impact of continued price increases leading to consumer thrift and purchase restraint, and effects on customer traffic
• Intensifying price and service competition across format boundaries (including rising logistics costs and store operating expenses)
• Deteriorating business environment for Direct Shop due to the shrinking books and magazines market and intensifying competition in the fitness industry
• Risk of continued impairment losses at multiple stores and occurrence of store closure loss provisions