FANCL Group Financial Results Briefing

Transcription

1 FANCL Group Financial Results Briefing For the period April 1, 2016 to March 31, 2017 April 27, 2017

2 Financial Highlights

3 Results by segment (Millions of yen) FY to March 2016 FY to March 2017 Change YoY Sales 90,850 96, % Cosmetics 55,016 56, % Nutritional supplements 28,612 32, % Other 7,221 7, % Hatsuga Genmai 2,604 2,490 (4.4%) Kale Juice 2,757 2,711 (1.7%) Operating income 1,204 2, % Ordinary income 1,421 2, % Net income 522 5, % Sales breakdown Results by cosmetics brand FANCL 44, % (Domestic: +2.4%, Overseas: -4.8%) ATTENIR 8, % boscia 2, % (+16.6% on local currency basis) Nutritional supplements 32, % (Domestic: +12.1%, Overseas: +13.5%) Inbound sales(estimated) (Unit: 100 million yen) /Q1 15/Q3 16/Q1 16/Q3 17/Q1 17/3Q

4 Analysis of change in Operating income Results Positive factors Negative factors (Millions of yen) Variable costs Fixed costs ,377 Opening of directlymanaged stores Reinforcement of R&D structure 3,835 Cosmetics: +1,976 Supplements: +98 Other: -1, ,244 1, FY2016 Operating income Increase in gross profit due to growth in sales Improvement in cost-of-sales ratio Marketing costs Other variable costs Personnel costs Other fixed costs FY2017 Operating income 4

5 Full Year Outlook

6 Full-year outlook to March 2018 (Millions of yen) FY to March 2017 FY to March 2018 Change YoY Sales 96, , % Cosmetics 56,926 62, % Nutritional supplements 32,085 35, % Other 7,294 7, % Hatsuga Genmai 2,490 2,490 (0.0%) Kale Juice 2,711 2,710 (0.1%) Operating income 2,244 6, % Ordinary income 2,385 6, % Net income 5,146 4,000 (22.3%) Sales breakdown Results by cosmetics brand FANCL 47, %(Domestic:+5.7% Overseas:-1.4%) ATTENIR 10, % boscia 2, %(+22% on local currency basis) Nutritional supplements 35, %(Domestic:+10.6% Overseas:+12.8%) 6

7 Full-year outlook: Analysis of change in operating income Plan Positive factors Negative factors (Millions of yen) Variable costs Fixed costs Opening of directlymanaged stores etc 6,121 Cosmetics: +592 Supplements: -16 Other: -26 1,696 1, ,000 2,244 Increase in FY2017 gross profit Operating income due to growth in sales Improvement in cost-of-sales ratio Marketing costs Other variable costs Personnel costs Other fixed costs FY2018 Operating income 7

8 (Ref.) Medium-term Management Plan Comparison with initial plan (estimated) (Units: Millions of yen) Medium-term management plan: Initial plan (announced 2015) Sales Operating income 1, Cross-selling targets not reached Review of store plan (End of FY18: stores) Review of Hatsuga Genmai and Kale Juice business strategy ATTENIR strong FANCL Cosmetics Wholesale channel expansion Full launch of intra-organizational sales Improvement to cost efficiency Total Plan for final year of Medium term Management Plan (FY18) (annnounced this time) 1, Prior to start of medium term plan (FY15) results Difference(1-2)

9 Summary of second year of Medium-term Management plan, Overview of new management structure

10 Year two of Medium-term Plan summary Although growing sales through advertising remains the right approach, the impact of the advertisements was below expectations, making for a challenging year Achievements and issues Achievements 1 FANCL Cosmetics Record-high sales for two consecutive periods 2 ATTENIR Returned to record-high customer levels of Supplements Positive results in new customer acquisitions. Mail-order customers at record-high level Issues 1 Unable to leverage effect of advertisements enough A mismatch in mass-advertising focused approach 2 Insufficient cross-selling 3 Issues with ability to attract customers to stores 10

11 New management structure, organizational change (from April 1) New management structure Chairman, Representative Director, Founder Kenji Ikemori Director, Vice Chairman Kazuyoshi Miyajima President & CEO, Representative Director Kazuyuki Shimada Organizational change 1 Establishment of new Marketing Division (concurrently headed by CEO Shimada) Consolidating the business strategy planning, product planning/development, and advertising functions that were previously separated by each business, and aiming to achieve greater collaboration across cosmetics and health businesses and the respective channels. 2 Establishment of Mail-Order Sales Division, combining catalog and online sales 3Establishment of new Corporate Sales Division Offering a variety of health solutions to companies with strong interest in healthy company management 11

12 Creating new value from innovation Cosmetics Maintain safety, trust of Mutenka, while developing new products and brands that are clearly differentiated from conventional low volume items Supplements Create a mid-price market through development of new products with innovative functions Grow these products into personal supplements of the future High Mid Price range (visual impression) New products Develop new sales channels, such as dispensary pharmacies Low Company A Existing products FANCL Company B This will be a year in which FANCL achieves significant change. Breaking out of its current shell to create a new market 12

13 FY2018 Strategy

14 Overall policy ALL-FANCL ONE-FANCL Combining FANCL s research, manufacturing, business, and sales functions to strengthen its ability to generate profit 14

15 Advertising Strategy

16 Advertising strategy Shift to online advertising <Breakdown of advertising expenses (Cosmetics)> Offline Online Offline Online Corporate stance advertising Communicate Honest Quality stance. Enhance brand trust and loyalty Previous fiscal period This fiscal period Awareness, understanding of products Online (direct response advertising) Mass advertising channels including TV Purchase Mail order Directlymanaged Stores Wholesale Incorporating corporate stance into product advertising, communicating a consistent message 16

17 Cosmetics Business

18 FANCL Cosmetics: Expansion of customer base Mail order customer numbers (existing) Expansion of wholesale channel +6% Millions of yen 5,000 4,000 3,000 Trends in wholesale channel sales +60% +35% FY2013 FY2014 FY2015 FY2016 FY2017 *Existing customers who have made a purchase in the past four months (12-month moving average) Base product (facial lotion, emulsion) skincare users +24% 2,000 1, times No. of drugstores offering FANCL Cosmetics FY2014 FY2015 FY2016 FY2017 7,700 8,500 11,100 FY2013 FY2014 FY2015 FY2016 FY2017 Available at 18,000 FamilyMart and Circle K Sunkus stores from April this year *Existing customers who have made a purchase in the past four months 18

19 FANCL Cosmetics - Enhancement of target-based approach Strengthen offerings to current main target demographic Strengthen core base Cleansing, facial wash Increase contact points Base skincare Deepen relationships NEW Approach new target demographic Customer age groups Japan s female population (Area graph) New initiatives NEW + Cross-selling of products high in originality New market development Improve acquisition of younger age group customers with Active Conditioning Basic, Acne Care Consider new products and brands that are clearly differentiated from conventional low volume New brand targeting 60+ age group Full launch via mail order, Retail store and wholesale channels 19

20 Beauty BOUQUET: Start of full launch FY2017 H2 FY2018 Mail order Test launch Full launch Stores Six stores only Nationwide Drugstores Testing in Shizuoka area Area expansion Test marketing New customer numbers: 118% Customer breakdown Non-FANCL users 70% Age groups Aged % compared to plan Key theme: Improving rate of repeated purchases Launch of periodic purchasing service Beauty BOUQUET Club ~Customers continue periodic delivery due to their fondness for the brand~ Special services for periodic purchase members: Limited edition presents Support from specialist staff Events, campaigns etc. 1.0 billion in sales forecast in current period (previous period: 0.2 billion) 20

21 ATTENIR: Successive releases of innovative products Innovative new products Unique communication model utilizing the web facebook Twitter Emulsion = functions greater than just a cover for facial lotion. Making a difference to the face in the afternoon New DAY EMULSION morning beauty maintenance emulsion On sale April 17, 2017 Using highlights to retouch imperfections in the skin. Creating fresh, high definition skin. Skin quality retouch base layer, SKIN RETOUCHER On sale May 17, 2017 ATTENIR Fan Community LINE Successive releases of new products this fiscal period. Working to expand customer base and sales 21

22 Health Business

23 Supplements: Expanding the customer base Mail order supplements: New customer acquisitions Expansion of wholesale channels 2-year consecutive growth to record high 3.5 times (Million yen) 10,000 Trends in wholesale channel sales +40% 8,000 FY '15 FY '16 FY '17 6,000 Mail order supplements: Customer numbers (existing) 4,000 Previous peak -40% Bottom +50% Record level FY '06 FY '15 FY '17 *Existing customers who made a purchase in the past four months (yearly average) 2,000 FY '09 FY '11 FY '13 FY '15 FY '17 Store deployments Before Medium-term Management Plan FY2015 FY ,000 54,700 Expanded number of store deployments, and implemented enhancements including improved shelf positioning and multiple placements 23

24 Supplements: Strengthening cross-selling Cross-selling trends (spend per purchase) Essential Nutrient Pack (launching May 19, 2017) 115% 110% YoY spend per purchase (mail order supplements) Average (existing customers) Light users (5-9 purchases) All the essential nutrients for a healthy body in a single simple pack 105% 100% Vitamins B & C Triple mineral, Vitamin D, & Lactobacillus 95% 90% 85% 16/04 16/07 16/10 17/01 Quantity: 30 packs Price: 1,399 (incl. tax) Sales channel: mail order, retail stores DHA & EPA CoQ10, Vitamin E, & Carotene Promoted targeted cross-selling tailored to specific customer segments Increased follow-up educating initiatives to double that of the previous year Costs reduced to 93% YoY as a result of increased efficiency Strong cross-selling Products addressing customers varying latent needs 24

25 Food with functional claims labeling Food with functional claims labeling Wholesale sales ranking (Jan 2017) Food with functional claims labeling line-up 1 Calolimit 30 doses 2 3 Enkin 30 days supply Calorie Limit for the Mature Aged Hatomugi Blend Tea (Distributor: DyDo DRINCO INC.) Labeling approved for all 14 products. Applications planned for 10 or more products in FY2018 Develop star products into series 4 Major sweets producer (chocolate) 5 Major food producer (vegetable juice) Survey by TRUE DATA Customer Communications, Ltd. Sponsored by Health & Beauty Retail Monthly Sumaho Enkin Launched March 2017 Calorie Limit for the Mature Aged Set to launch June 20,

26 Sumaho Enkin (for smart Phone, PC users) Comparison with Enkin Online ad campaign Sumaho Enkin Enkin Education al Media tie-up LINE au JACK Functionality Eye fatigue relief Anti-aging eye care Target People under 45 People 45 years and over Proportion of Enkin users and non-users among Sumaho Enkin customers Enkin users 20% Non-Enkin users 80% Low market cannibalization, with only 20% of Sumaho Enkin customers being Enkin users. Mutual customer development campaign with JINS New sales channels Convenience and drug stores, SM, GMS Eyeglass chain stores Bookstores Plan to achieve 6.8 billion in sales of Enkin products (+27% YoY) this fiscal period. 26

27 Channel Strategy

28 Mail order - Shift to internet as main channel Reforming mail order model to reflect customer lifestyle changes (1)Shift from catalogue mail order to internet shopping (2)Develop information appropriate to every age group, and disseminate via optimum medium (3)Improve profitability of mail-order channel Catalogue logistical costs, leveraging automatic mail marketing Mail order channel communication reform Currently Going forward 20s Catalogue 30s Focus on smartphone, PC and digital medium 40s 50s~ All age groups receive the same information Catalogue Re-do content taking core target market into consideration Reduction of catalogue costs Reconsider communication methods to customers in 20s to 40s Refine sending target 28

29 Retails stores - Customer growth initiatives 125% 120% 115% 110% 105% 100% 95% 90% FY2017 new acquisitions (YoY) 1Q 2Q 3Q 4Q FANCL beauty & health A new style of store targeting young people Stores in Marronnier Gate Ginza 2 and Shinjuku Marui main building opened in March 2017 New products, campaigns, information Coupons limited to app Personalised recommendations The stores centre around an internal and external beauty philosophy, and aim to be a place where customers can have a relaxing experience and consult with staff Seasonal cherry blossom display Mobile app for members Establish successful model stores and continue to roll out stores in urban commercial facilities with predominantly younger customers 29

30 Overseas: FANCL brand Enhance a closer relationship with the distributor by developing territory products Number of territory products developed 29 products 25 products 17 products FY 17 H1 FY 18 H2 FY 18 H1 YOGURT FACIAL TREATMENT T ZONE MASK ESSENCE Q10 Channel strategy Stores Accelerate store openings in China, to reach 190- store New expansion into Malaysia E-commerce Start E-commerce business in Hong Kong in H1 Followed by expansion into China and other Asian countries (Number of Stores) End of 2016 End of 2017 (plan) Hong Kong 39 Approx. 40 China 173 Approx. 190 Taiwan 8 Approx. 10 Singapore 5 Approx. 10 Malaysia

31 Overseas boscia brand BOtanical SCIence with Advanced technology Introducing innovative products, achieving growth, via cosmetics specialty store Sephora (Thousands of dollars) 30,000 Sales 25,000 20,000 15,000 10,000 BLACK series 5, (plan) Aiming to achieve wholesale-base sales of 4.0 billion within a few years TSUBAKI series SAKE series Responding to further anticipated sales growth with expansion of contract manufacturing this period. Also increasing speed of new product development and focusing on reducing manufacturing costs 31

32 Measures to address rising delivering costs Strengthening Designated Delivery Place service A unique FANCL service first launched in 1997 to support women s empowerment. The service allows prior designation of a delivery location without need for inperson package receipt. Example delivery places Stepping up notifications on website from May Gas meter box Bicycle basket *Sample screenshot Promoting the use of Designated Delivery Place service as part of social responsibility, and to further reduce delivery costs. 32

33 Capital policy, Medium-term policy

34 Capital policy, looking to the next Medium-term Plan Capital policy Basic policy Current period: Base - improve capital efficiency by improving profit ratio Fast development of structure capable of ROE 8%+ Aware that shareholder returns are an important management issue <Continuation of special dividend> Usual performance-based dividend payments (dividend pay-out ratio of at least 40%, minimum 34) + Special dividend 24 = 58 per share Looking towards formulation of next Medium-term Management Plan Focus firmly on profitability, not only increasing profits from sales growth Efficient use of promotional and advertising expenses Develop a logistics system to handle anticipated future distribution increase Redevelop IT foundations, utilizing latest technology, e.g. AI Further promote reforms to employee work styles Consider current capital policy based on management stage and growth investment 34

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