A Message from Management

A Message from Management

A Message to Our Shareholders

Michinobu Yasumoto
President and CEO

February 29, 2020 marks the end of our 73rd fiscal year, and I would like to provide an overview of the Group’s business.
The Onward Group in its management philosophy defines its business domain as “a world of fashion that gives refreshment and beauty to people’s lives.” By offering fashion as an integral part of consumer culture, the Group creates new lifestyles and values that contribute to the enrichment of life for all people.
In fiscal year 2020, we have been withdrawing from unprofitable businesses, reducing the size of our business, and closing unprofitable stores in each of our markets in North America, Europe, Asia and Japan, as part of the Group’s global business structural reforms. Also, as part of our growth strategy, we have been advancing initiatives focused on the three pillars of digital, customization, and lifestyle.
In fiscal year 2021, the business environment is expected to be extremely challenging due to the impact of the spread of the novel coronavirus disease (COVID-19). However, while maintaining a stable financial base, we will continue to implement business structural reforms and steadily advance our growth strategy.
We will continue striving to provide high-quality products and services that satisfy all stakeholders, including our shareholders. Thank you for your continued support and understanding.

Business Environment and Operating Performance

The global business environment surrounding the company is becoming increasingly uncertain with the intensification of economic friction between countries, the United Kingdom’s exit from the European Union, and the tension in the Middle East situation, in addition to the global spread of COVID-19.
To respond to the changes in this business environment, we have been withdrawing from unprofitable businesses, reducing the size of our business, and closing unprofitable stores in each of our markets in North America, Europe, Asia and Japan, as part of the Group’s global business structural reforms. In parallel with our global business structural reforms, we are pursuing a growth strategy focused on the three growth pillars of digital, customization, and lifestyle.
As we accelerate growth by strengthening and expanding business foundations through the creation of new business, M&A, and other means, the Group uses EBITDA (earnings before interest, taxes, depreciation, and amortization) as a key performance indicator in order to facilitate easy comparison between companies regardless of differences in accounting standards. In the fiscal year ended February 29, 2020, the Group recorded EBITDA of 5,079 million yen (a 61.7% year-on-year decrease).

Consolidated Operating Performance in FY02/20
Net sales: ¥248,233 million (+3.2% YoY)
Operating profit: -¥3,061 million (-)
Ordinary profit: -¥3,835 million (-)
Profit attributable to owners of parent: ¥52,135 million (-)

Overview by Business Segment

Apparel Business

The domestic business recorded solid sales in e-commerce, primarily at Onward Kashiyama Co., Ltd., the Group’s core operating company. Sales and operating profit also improved for Onward Trading Co., Ltd., which plans and sells corporate uniforms and sales promotion goods. However, sales at physical stores were severely challenged given the consumption tax increase, natural disasters such as torrential rains and typhoons, and the impact of unseasonable weather conditions including a warm winter. Consequently, the domestic business overall recorded lower sales and operating profit.
As for the overseas business, in Asia, operating profit increased despite a decline in sales, as a result of global business structural reforms implemented in Asia. In Europe and North America, sales and operating profit declined as the business structural reform will not contribute to the results until the next fiscal year. In the year ended February 29, 2020, the overseas business overall recorded lower sales and operating profit.
As a result, the Apparel Business overall recorded lower sales and operating profit.

Lifestyle Business

With the addition of Yamato Co., Ltd., the gift catalogue business we acquired in March 2019, to our Lifestyle Business, we are further expanding in the new business area of “gifts.” The Lifestyle Business recorded increased sales and operating profit due to the significant contribution from the new subsidiary Yamato. Co., Ltd., as well as the operating profit improvement from the launch of new brands at Chacott. Co., Ltd.

Outlook for FY02/21

At this stage, it is difficult to reasonably estimate the impact of the spread of COVID-19 on the Group’s consolidated business results, and accordingly the consolidated earnings forecast for the year ending February 28, 2021 is yet to be determined. In the future, we will carefully assess the pandemic’s impact on our business performance and make a public announcement as soon as a reasonable forecast can be disclosed. It is expected to take some time to see a recovery in consumer demand given the decline in consumer sentiment associated with shortened trading hours and suspension of business for shopping facilities including department stores and shops in station buildings, the slump in domestic inbound demand, and consumers refraining from going out.
In response to such extreme changes in the business environment, the Group is accelerating its global business structural reforms to strengthen the corporate structure and improve profitability. The Group will also continue to advance its growth strategy with a medium- to long-term perspective focused on the three pillars of growth around digital, customization, and lifestyle.
Regarding profit distribution, Onward Group positions the return of profits to shareholders as one of the most important measures for management. Our policy is to maintain the dividend payout ratio at 35% or more, and to provide stable and appropriate shareholder returns linked to performance.
The dividend for the year ending February 28, 2021 remains undecided at this stage as the consolidated earnings forecast is yet to be determined.