R Chiyoda / 8185 COVERAGE INITIATED ON: 2013.12.02 LAST UPDATE: 2021.08.02 Shared Research Inc. has produced this report by request from the company discussed in the report. The aim is to provide an “owner’s manual” to investors. We at Shared Research Inc. make every effort to provide an accurate, objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data and findings. We will always present opinions from company management as such. Our views are ours where stated. We do not try to convince or influence, only inform. We appreciate your suggestions and feedback. Write to us at [email protected]or find us on Bloomberg. Research Coverage Report by Shared Research Inc.
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R Chiyoda / 8185
COVERAGE INITIATED ON: 2013.12.02
LAST UPDATE: 2021.08.02
Shared Research Inc. has produced this report by request from the company discussed in the report. The aim is to
provide an “owner’s manual” to investors. We at Shared Research Inc. make every effort to provide an accurate,
objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data and findings. We will
always present opinions from company management as such. Our views are ours where stated. We do not try to
convince or influence, only inform. We appreciate your suggestions and feedback. Write to us at
Highlights ------------------------------------------------------------------------------------------------------------------------------------------------------------ 6 Trends and outlook ----------------------------------------------------------------------------------------------------------------------------------- 7
Monthly trends ----------------------------------------------------------------------------------------------------------------------------------------------------- 7 Quarterly trends and results ----------------------------------------------------------------------------------------------------------------------------------- 9 Company forecast for FY02/22 ------------------------------------------------------------------------------------------------------------------------------ 14 Medium- to long-term outlook ----------------------------------------------------------------------------------------------------------------------------- 18
Business ------------------------------------------------------------------------------------------------------------------------------------------------ 19 Description -------------------------------------------------------------------------------------------------------------------------------------------------------- 19 Profitability snapshot, financial ratios --------------------------------------------------------------------------------------------------------------------- 26 Strengths and weaknesses ------------------------------------------------------------------------------------------------------------------------------------ 27 Market and value chain ---------------------------------------------------------------------------------------------------------------------------------------- 28
Other information ---------------------------------------------------------------------------------------------------------------------------------- 34 History -------------------------------------------------------------------------------------------------------------------------------------------------------------- 34 Major shareholders --------------------------------------------------------------------------------------------------------------------------------------------- 34 Top management ----------------------------------------------------------------------------------------------------------------------------------------------- 34 Employees --------------------------------------------------------------------------------------------------------------------------------------------------------- 35 Dividends and Shareholder benefits ---------------------------------------------------------------------------------------------------------------------- 35
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Summary Business overview Chiyoda Co., Ltd. is a retailer specializing in low-price shoes; its mainstay business is shoe sales, which is operated by the parent
company. Chiyoda operates a network of stores adjacent to residential areas, including suburban roadside stores and stores
located within small shopping centers. Subsidiary Mac-House (TSE JASDAQ: 7603), in which Chiyoda holds a 61.0% stake, sells
casual apparel and jeans. The parent company’s shoe business had a total of 991 domestic stores in operation as of the end of
FY02/21, including 541 stores under the name Tokyo Shoes Retailing Center and 380 under the name Shoe Plaza. In terms of
format, roughly 50% are standalone format stores, 20% are roadside combination stores, and 30% are shop-in-shops; it also has
some stores located near train stations and in neighborhood shopping areas.
With most of its shoes being priced in the JPY3,000 range, the average spending per customer was JPY3,878 (FY02/21). Although
women’s shoes only account for slightly over 20% of sales, Chiyoda’s customers are predominantly housewives, leading the
company to conclude that many of its female customers are buying shoes for their husbands and children.
Margins are high at over 50% for men’s and women’s shoes due to a high share of Private Brand (PB) merchandise. Children’s
and athletic shoes have lower margins due to a higher share of National Brands (NBs). Shared Research estimates that the
difference in margins between PBs and national brands NBs is around 10pp.
Brand development The company‘s main Private Brands (PBs) are Cedar Crest, Hydro-Tech and Bio-Fitter. The company has a strategy of increasing
the share of PBs in its brand portfolio to increase GPM, and aims for both PB ratio and GPM to reach 50% in the medium term.
Main store formats Tokyo Shoes Retailing Center (TSRC) Launched as the Tokyo Shoes Retailing Center in 1961, the company is a pioneer in the roadside shop concept in Japan. The
store network is built on roadsides and in small-scale shopping centers, with average floor space of around 99–495sqm, mainly
selling low-priced products. TSRC has also been renovating stores and opening more stores in front of train stations and in
neighborhood shopping areas with the aim of bringing in more female customers. In FY02/21, TSRC had sales of JPY34.2bn
(45.9% of Chiyoda’s parent sales) and 541 stores (down by 21 stores YoY).
Shoe Plaza Since its establishment in 1994, growth in this format has centered on suburban stores aimed at families. This format features
large stores and a wide range of NB sneakers. Due to the large share of NBs, average spending per customer is high. Shoe Plaza
customers are mainly in their 30s and 40s. Floor space is around 300-700sqm. Shoe Plaza has been opening more stores inside of
shopping centers with a brighter format and an emphasis on new arrivals. In FY02/21, Shoe Plaza had sales of JPY35.8bn (47.5%
of Chiyoda’s parent sales) and 380 stores (down by 8 stores YoY).
Sales and earnings trends ◤ For full-year FY02/21, Chiyoda recorded sales of JPY94.2bn (-17.0% YoY), an operating loss of JPY4.5bn (operating loss of
JPY1.2bn in FY02/20), and a net loss of JPY5.0bn (net loss of JPY1.6bn). Sales fell sharply on reduced demand for business
shoes and streetwear as consumers refrained from going out and the company shut some stores and reduced business
hours in response to the COVID-19 pandemic. Although the company worked to reduce SG&A expenses by negotiating
lower store rents and cutting advertising expenses, this was not enough to offset the impact of lower sales, leading to an
expansion in operating losses. Despite extraordinary gains of JPY308mn, including gains on the sale of marketable securities
of JPY264mn, extraordinary losses of JPY1.8bn, including impairment losses of JPY1.5bn, contributed to the company
booking substantial net losses for the year.
◤ Chiyoda has not yet formulated FY02/22 forecasts. The company indicated that it was unable to offer reasonable and
appropriate forecasts in regard to the impact on earnings and business activities from the COVID-19 pandemic given
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changes in the external environment, including the spread of mutated strains of COVID-19 and trends in regard to
emergency efforts to prevent the further the spread of the virus. Management also noted that it plans to review its product
lineup, strengthen its e-commerce business and digital marketing operations, and improve inventory efficiency while also
working to reduce fixed costs, including by closing unprofitable stores and improving store efficiency to cut labor
expenses. The company’s FY02/22 annual dividend forecast is JPY30 per share (the FY02/21 annual dividend was JPY37 per
share).
Strengths and Weaknesses Shared Research believes Chiyoda’s strengths to be 1) economies of scale, 2) low-cost neighborhood stores in attractive
locations, and 3) its handling of PBs. The company’s main weaknesses are 1) a lack of presence in large-scale shopping malls and
central urban areas, 2) its inventory control, and 3) its dependence on bargain sales. (For further details, see “Strengths and
weaknesses” section.)
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Recent updates Highlights On August 2, Chiyoda Co., Ltd. 2021, announced monthly sales data for July 2021; see the monthly trends section for further
details.
On July 12, the company 2021, announced monthly sales report for June 2021; see the monthly trends section for further details.
On July 9, 2021, the company announced earnings results for Q1 FY02/22; see the results section for details.
On July 1, the company 2021, announced monthly sales data for June 2021.
On June 14, 2021, the company announced monthly sales report for May 2021.
On June 1, 2021, the company announced monthly sales data for May 2021.
On May 18, 2021, Shared Research updated the report following interviews with the company.
On May 6, 2021, the company announced monthly sales data for April 2021.
For previous releases and developments, please refer to the News and topics section.
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Trends and outlook
Monthly trends
Source: Shared Research based on company data Note: Due to the absorption of i-Walk, total store sales are reflected from September 2017 onward.
Reference Mac-House monthly performance
Source: Shared Research based on company data
Comparable-store sales YoY Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Q1 Q2 Q3 Q4 FYFY02/18 -7.6% 0.8% -3.9% -2.1% -3.0% -6.8% -10.3% -6.0% -5.7% -6.9% -5.2% -7.4% -3.4% -4.0% -7.3% -6.5% -5.2%
All-store sales YoY Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Q1 Q2 Q3 Q4 FYFY02/18 -8.3% 0.0% -4.8% -3.3% -4.2% -8.0% -9.2% -4.9% -4.6% -5.6% -3.7% -6.3% -4.2% -5.0% -6.1% -5.1% -5.1%
Store count Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Q1 Q2 Q3 Q4 FYFY02/18 1,054 1,051 1,050 1,050 1,048 1,040 1,080 1,082 1,085 1,087 1,085 1,080 1,050 1,040 1,085 1,080 1,080
Comparable-store YoY Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan FebFY02/18 Sales -13.6% -5.6% -6.7% -6.6% 0.7% -2.6% 1.4% -6.1% -7.1% -2.7% -7.7% -3.7%
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Q1 FY02/22 results (out July 9, 2021) Results summary
▷ Sales: JPY23.4bn (+11.9% YoY)
▷ Operating profit: JPY30mn (operating loss of JPY1.6bn in Q1 FY02/21)
▷ Recurring profit: JPY112mn (recurring loss of JPY1.6bn in Q1 FY02/21)
▷ Net loss*: JPY344mn (net loss of JPY1.3bn in Q1 FY02/21) *Net loss attributable to owners of the parent
Sales and profit both improved YoY in Q1 FY02/22. Sales recovered amid ongoing efforts to prevent the spread of COVID-19 and
in reaction to the downturn shown at the same point last year. In addition to the positive effects from improved sales and the
closing of unprofitable stores, the company returned to profitability thanks to a reduction in costs, including as a result of
improvements in personnel efficiency.
The company has yet to disclose FY02/22 earnings forecasts, for while the rapid spread of COVID-19 appears to have at least
temporarily halted, the operating environment remains somewhat uncertain. The company intends to provide its forecasts once
it becomes possible to make appropriate and reasonable calculations for such.
Performance by segment Shoe business
▷ Sales: JPY18.7bn (+10.5% YoY)
▷ Operating profit: JPY124mn (operating loss of JPY826mn in Q1 FY02/21)
▷ Comparable store sales: +14.0% YoY
▷ Store count: 991 (four stores opened, four stores closed)
Sales improved 10.5% YoY, with the increase attributable to a reaction to shorter operating hours and people refraining from
going out in Q1 FY02/21, a revised lineup of products, and price revisions on private brand products.
Earnings at the operating line moved back into positive territory. Despite progress in improving personnel efficiency, SG&A
expenses were up 0.2% YoY in reaction to the decline in advertising costs in Q1 FY02/21 as a result of the COVID-19 pandemic.
Earnings at the operating line turned positive as the increase in gross profit on the back of an improvement in sales exceeded the
expansion in SG&A expenses.
Shoe business initiatives
▷ Focusing on improving inventory freshness and responding to a changing environment, the company worked to revise its
product lineup. Based on the increased prevalence of telecommuting and the growing number of people focused on avoiding
crowds, the company expanded its lineup of running shoes, walking shoes, and sneakers that can be worn in business
environments. In business shoes, the company revised prices for mainstay private brand products to make them more attractive
to consumers.
▷ The company worked to improve efficiency in inventory by introducing an inventory management system that visualizes sales
information based on inventory status.
▷ In terms of sales promotions, the company bolstered digital marketing efforts, including by implementing discount and
information distribution services for customers who have downloaded its app and/or registered for the online newsletter. On
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the other hand, the company curbed print-based flyer advertising and worked to improve efficiency by reviewing the
allocation of advertising expenses.
Apparel business
▷ Sales: JPY4.6bn (+17.9% YoY)
▷ Operating loss: JPY96mn (operating loss of JPY736mn in Q1 FY02/21)
▷ Comparable store sales: +30.5% YoY
▷ Store count: 325 (one store opened, 12 stores closed)
Despite only a gradual recovery, sales improved compared to Q1 FY02/21, when the spread of COVID-19 resulted in people
refraining from going out, stores shortening their business hours, and the shuttering of commercial facilities in which the
company’s stores were located.
Operating losses in the business narrowed YoY. Despite an increase in sales costs in reaction to the decline in advertising activity
in Q1 FY02/21, SG&A expenses were down 8.1% YoY on a decline in the number of stores in operation.
Apparel business initiatives
▷ On the product side, the company bolstered its offerings for families, including by introducing items produced in collaboration
with the creators of popular anime titles, as well as by launching “full-line” sales by adding a lineup of children’ products to
brands that previously catered only to men and women.
▷ In the area of sales promotions, the company worked to increase online and brick-and-mortar customer traffic, using newspaper
inserts to attract customers to brick-and-mortar stores while enhancing content in the online store space.
For details on previous quarterly and full-year results, please refer to the Historical earnings results section.
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Company forecast for FY02/22 Chiyoda has not yet formulated FY02/22 forecasts. The company indicated that it was unable to offer reasonable and appropriate
forecasts in regard to the impact on earnings and business activities from the COVID-19 pandemic given changes in the external
environment, including the spread of mutated strains of COVID-19 and trends in regard to emergency efforts to prevent the
further the spread of the virus. Management also noted that it plans to review its product lineup, strengthen its e-commerce
business and digital marketing operations, and improve inventory efficiency while also working to reduce fixed costs, including
by closing unprofitable stores and improving store efficiency to cut labor expenses. The company’s FY02/22 annual dividend
forecast is JPY30 per share (the FY02/21 annual dividend was JPY37 per share).
Shared Research understands that both Chiyoda and Mac-House will engage in SG&A expenses reductions. SG&A expenses
(consolidated) were reduced by JPY5.8bn in FY02/21 (-11.0% YoY; JPY47.2bn in FY02/21) thanks to COVID-19-related rent
reductions/exemptions and employment subsidies, but it sees potential for still more SG&A expenses reductions in FY02/22.
Personnel costs were reduced by JPY1.6bn in FY02/21 (-8.8% YoY; JPY16.6bn), and the company plans on even further
reductions in FY02/22. The company will work to reduce personnel costs by adjusting store work shifts and reducing the number
of part-time employees, while it also expects to benefit from smaller headcount as it reduces the number of stores. Including rent
reductions/exemptions, rent was reduced by JPY1.1bn in FY02/21 (-8.5%; JPY12.4bn), and it sees potential for comparable
reductions in FY02/22. Advertising expenses were reduced by JPY1.6bn in FY02/21 (-34.5%; JPY3.0bn), and it plans to cut costs
in FY02/22. The company will curb flyer advertisements and TV commercials to cut down on overall advertising expenses, and
make use of tools such as SNS.
Chiyoda parent The company plans to review its product lineup, strengthen its e-commerce business and digital marketing, improve inventory
efficiency, and strive to reduce fixed costs by closing unprofitable stores and reducing labor costs through enhanced store
operation efficiency.
Store network In FY02/22, the company plans to open around 10 stores and close around 50 stores (in FY02/21, it opened 22 stores and closed
60 stores, bringing total stores at year end to 991 stores). Most new stores make a loss in their first year and turn profitable from
the second year, and the company sees the possibility of reducing the number of store openings to rein in losses.
Strengthening merchandise development The company plans to strengthen its development of high-quality and high-gross margin products, and brisk-selling PB sneakers.
It also aims to strengthen cooperation between its product development department and overseas factories.
Strengthening e-commerce So far, the company has tried to promote omni-channels and introduce smartphone payment services, but has run into
difficulties. FY02/21 e-commerce sales on a parent basis were around JPY800mn (about 1% of overall sales), thus shrinking YoY. It
has had a lot of e-commerce issues, such as insufficient investment in human resources and systems, inability to accurately reflect
inventory status, and frequent stockouts. The company plans to work with outside experts to improve its systems.
Reassessment of headquarters configuration Some of the functions that have been concentrated in the head office will be returned to the district headquarters system and
authority will be given to each region. The company plans to perform fine-tuned merchandising according to each area and
location. At the same time, it will consider standardization of management systems and incorporate the points that should be
centrally managed and the benefits of district headquarters configuration.
Mac-House For 02/22, the company forecasts Mac-House sales of JPY21.3bn (+8.0% YoY) and operating profit of JPY200mn (versus a
JPY1.1bn loss in FY02/21). If it succeeds in meeting those targets, it would be the first operating profit since FY02/18. In line with
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the resignation of current president and representative director Hisami Kitahara, Mac-House expects to appoint Kazushi Sakashita
as company president and representative director and Koji Funahashi as its chairman on May 19.
On the merchandise front, the company plans to implement thorough inventory control, quality improvement, and brand
restructuring. It will pursue digital sales promotion, and strive to improve price per item and spending per customer. The
company intends to open carefully selected stores, close unprofitable stores, and raise the level of existing stores by remodeling.
In addition, in e-commerce sales, it will work to strengthen brand development and digital marketing.
On the profit front, gross margins are expected to rise further thanks to quality improvements and shortened lead times. So far,
the company has been promoting cost reduction by streamlining its headquarters organization and closing unprofitable stores.
In FY02/22, it will aim to achieve profitability by working with outside experts to further close unprofitable stores (it expects to
open approximately 10 stores and close 30–40 stores in FY02/22), and take action on utilities, credit card fees, and other costs.
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Net income Initial Est. 1,531 5,776 7,169 6,423 5,090 6,122 4,900 4,700 1,400 -Results 4,839 7,151 5,847 4,165 4,882 4,295 4,643 1,613 -1,643 -5,002Results vs. Initial Est. 216.1% 23.8% -18.4% -35.2% -4.1% -29.8% -5.2% -65.7% -217.4% -
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Medium- to long-term outlook FY02/20 undertakings In April 2019, Koji Funahashi, a scion of Chiyoda’s founding family, resigned as President and CEO due to the likelihood that the
company’s performance would fall far short of medium-term business plan targets. He was replaced by director and accounting
department head Shoji Sawaki.
As explained at a results briefing held in July 2019, areas of the medium-term business plan in which Chiyoda did not make
adequate progress included ensuring that product price points suited store location and product development matched store
format, establishing an organization and scheme for managing products from procurement through sale to increase the ratio of
products sold (at the original retail price) before the next model is released, and fundamentally restructuring the product
department to improve the accuracy of merchandising.
In light of this situation, Mr. Sawaki has stipulated a return to a “customers first” approach, and began actively working to
improve the freshness of its product lineup, improve the ratio of global brand sneakers sold at the original retail price, expand
the customer base by enhancing the lineup of inexpensive private brand products (a hybrid merchandising policy with both
private brands and global brands), and enhance the rollout of a multichannel e-commerce business.
In practice, the company stepped up efforts to clear slow-moving inventory by tightening the rule for booking inventory
valuation loss as a financial strategy to improve the freshness of sales floor displays. It reduced the number of product items
(stock keeping units; SKU) in March to improve freshness and launched a pilot store with standardized fixtures and fittings,
shelves, and shelving units, whose layout can be changed or extended easily. As well, parent e-commerce sales grew 18.4% YoY,
although still modest in scale.
However, FY02/20 resulted in sales of JPY113.5bn (-4.2% YoY) and an operating loss of JPY1.2bn (versus operating profit of
JPY1.7bn in FY02/19). The Shoe and Apparel businesses both faced tough competition as well as poor weather, which resulted in
sales decline. In effort to put a fresher lineup of merchandise in its stores, the company wrote down inventories and disposed of
slow-moving stock, which resulted in ongoing operating losses.
FY02/21 undertakings Managing director and head of sales Tadao Sugiyama became President and CEO as well as head of store operations in May
2020.
Owing to the impacts of COVID-19, FY02/21 resulted in sales of JPY94.2bn (-17.0% YoY) and an operating loss of JPY4.5bn
(versus a JPY1.2bn loss in FY02/20). Sales declined as a result of temporary closures and reduced business hours at a number of
stores, and weak demand for business shoes and clothes for going out due to consumers’ voluntary restraint on excursions. The
company made efforts to lower SG&A expenses, such as by cutting back on advertising expenditures and negotiating for lower
store rent, but it was not enough to fully compensate for the impact of the decline in sales, resulting in a heavier operating loss.
FY02/22 undertakings In May 2021, current President and CEO Tadao Sugiyama is scheduled to resign and be placed by Masatoshi Machino. Machino
joined the company in 1991, became head of Chubu region operations in 2016, global brands general manager in 2017, head of
Kanto area sales in 2018, and executive officer and head of Kanto region store operations in 2020.
Shared Research understands that, under Machino’s new management, the company will continue to aim to improve earnings by
revising its product lineups, enhancing its e-commerce business and digital marketing, improving inventory efficiency. It will also
work to reduce fixed costs by closing unprofitable stores and curtailing personnel expenses through more efficient store
operations.
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Business
Description Chiyoda Co., Ltd. is a retailer specializing in low-price shoes. The company operates a network of stores adjacent to residential
areas, including suburban roadside stores and stores located within small shopping centers. Subsidiary Mac-House sells casual
apparel and jeans.
Business overview At the end of FY02/21, Chiyoda operated 991 stores in the Shoe business, of which about 64% were roadside stores, 30% were
in shopping centers, and 4% in areas near train stations and in neighborhood shopping areas.
The store network totaled 1,551 in FY02/00, but steadily shrank due to the closure of unprofitable stores through FY02/09, after
the global financial crisis. Chiyoda opened more stores than it closed during FY02/10. Since then, the number of stores has been
declining.
Since Chiyoda began in Koenji, Tokyo, stores are concentrated in the Kanto region, at about 35% of the total. From FY02/14, the
company started prioritizing low-cost store openings in smaller shopping centers, occupying spaces vacated by other retailers.
Since FY02/17, it has strengthened openings in densely populated areas.
Chiyoda store count (year-end), openings, closures (parent-level)
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Business model Brand development There are three key Private Brands (PBs): Cedar Crest, Hydro-Tech and Bio-Fitter; many other PBs; 16 National Private Brands
(NPBs) and global National Brands (NBs). The company has a strategy of increasing the share of PBs in its brand portfolio to
increase GPMs, and aims for PBs to comprise 50% of sales in the medium term.
PB ratio and GPM (parent)
Source: Shared research based on company data
Private Brands (PB) PBs are original brands Chiyoda develops with a great degree of freedom. The company starts with product design, selects the
factories, and sets prices. The company has buyers assigned responsibility for the development of each PB. These buyers
communicate to suppliers the desired product design and features. The suppliers (trading companies, manufacturers, and
partner factories) produce or procure the shoes, which Chiyoda then sells in its own stores.
Core Private Brands
◤ Cedar Crest: An outdoor shoe brand born in the US. Chiyoda has trademark rights for Japan, China, and South Korea.
Chiyoda controls the entire manufacturing and marketing process from design through price setting. In addition to
outdoor shoes (deck shoes and work boots), Chiyoda also offers casual shoes and sneakers. Prices are generally in the
JPY3,000–8,000 range, although some work boots sell for over JPY10,000.
◤ Hydro-Tech: The company developed this brand with an emphasis on functionality in addition to comfort. Initially, the
brand specialized in shoes featuring proprietary water-resistant material and anti-slip properties based on an outsole made
from a ceramic and walnut compound. At present, the brand has a lineup encompassing a diverse array of properties,
including breathability and lightness. In May 2013, the brand added a line of women’s shoes to its men’s and sneaker lines.
Prices range from around JPY4,990—10,000. Launched in 2003.
◤ Bio-Fitter: This brand emphasizes comfort with a lightweight design and cushioning. Full line, including men’s, women’s
and children’s shoes as well as sneakers. Prices are in the JPY2,000–3,000 range. Launched in 2005.
Composition of global brand sneakers (with relatively lower GPM) in uptrend in FY02/15、FY02/16、and FY02/17
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National Private Brands (NPB) NPBs are brands sublicensed for the Japanese market. While Chiyoda needs to obtain approval from the license owner, it has a
great degree of freedom to create products for the local market. Just as with PBs, Chiyoda’s buyers tell the suppliers (trading
companies, manufacturers and partner factories) what sort of design they want. The suppliers deliver the products to Chiyoda,
which sells them in its stores. The company pays the license owner royalty fees. There are many brands, including Keds, Savoy,
McGregor and Texaco.
National Brands (NB) This category includes global NBs (Nike, Converse, New Balance) and domestic NBs, from major brands like Asics, to minor ones.
Chiyoda believes that one reason its comparable store sales stagnated in the past was a heavy reliance on PBs in the mix. To
attract more customers, the company now feels it needs to increase the weight of major brands, while lowering the share of
minor domestic NBs. At the same time the company thinks it can improve GPMs of NBs by centralizing the procurement; until
recently, its regional buyers have been purchasing the domestic NBs separately on a territory-by-territory basis, without much
central coordination.
National Private Brands (NPB) placement
Source: Shared Research based on company data Note: ‘Newly introduced’ from February 2016
Store formats Store formats include Kutsu-Chiyoda and SPC, Tokyo Shoes Retailing Center (TSRC), and Shoe Plaza.
Store format placement
Source: Shared Research based on company data
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Kutsu-Chiyoda and SPC From its founding in 1936 (first shop opened in Koenji, Tokyo) Chiyoda aimed to operate stores as an integral part of the local
community. In recent years, this format has been on a declining trend (In FY02/17, 28 stores were transformed into the Shoe
Plaza and TSRC formats). There were 70 stores at end-FY02/21. Per-customer spending is over JPY4,200, which is higher than
other formats, with high GPM, but customer traffic is low and OPM relatively low.
Kutsu-Chiyoda stores have five sales staff on average, 50–60% of them part-timers. This ratio of part-time staff members is lower
than at other formats due to the small size of the Kutsu-Chiyoda stores—mostly 130–200sqm outlets located inside general
merchandise stores (GMS) such as Jusco (owned by Aeon, TSE1: 8267) and Ito-Yokado (Seven & I Holdings, TSE1: 3382). As
customer traffic per store is low, the profitability of this format is lower than for the other formats.
The SPC format’s merchandise lineup centers on a select range of sneakers, and targets the youth market. Shops are in central
Tokyo and Yokohama, typically in so-called fashion buildings (buildings filled with retail stores), and neighborhood shopping
centers (NSC). The store manager has a certain level of authority, such as the right to sell selected focus brands. The average
store is around 165–265sqm and has five sales staff, with up to 70% of staff part-timers.
Kutsu-Chiyoda and SPC performance (all stores)
Source: Shared Research based on company data
Kutsu-Chiyoda and SPC format examples
Source: Shared Research based on company data
Tokyo Shoes Retailing Center (TSRC) Launched as the Tokyo Shoes Retailing Center in 1977, the company is a pioneer in the roadside shop concept in Japan. Its
customers are mainly in their 40s–60s, and sells primarily low priced merchandise. The store network is built on roadsides and in
NSC, with average floor space of around 100–500sqm. The stores have three to four sales staff on average, with up to 70% part-
timers. This is one of the key store formats. Women’s shoes account for 25% of sales, men’s for 30%, sneakers for 35%, and
children’s for 10%. Per-customer spending at around JPY3,500 is lower than other formats. From 02/16, the company has
proceeded with the implementation of a new urban TSRC format for “shotengai” shopping districts. The primary color of the
signboard has been changed from red to white, and the new format is intended to appeal to women and foreign visitors.
1997 1999 2002 2004 2007 2012 2014 2016No. of stores 19,256 17,450 14,798 13,530 12,311 8,835 8,933 6,707No. of employees per store 3.0 3.1 3.4 3.4 3.7 4.2 4.0 5.5Annual sales per store (JPYmn) 51.7 48.2 48.6 50.1 56.2 63.7 74.4 101.0Floor area per store (sqm) 89.5 93.8 101.5 103.4 119.1 151.4 134.0 140.7
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Profitability comparison
Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods. Note: From FY02/13, G-Foot’s financial year-end is February. Previously it was January.
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His successor Tadao Sugiyama (born in 1952) joined Chiyoda in 1972. He became general manager of Kanto region sales in
2010, executive officer and general manager of Kanto region sales in 2012, director in 2013, managing director in 2018, and
concurrently head of sales in 2019. He took over as President and CEO in May 2020.
Newly appointed President and CEO Masatoshi Machino (born in 1958) joined Chiyoda in 1991. He became head of Chubu
region operations in 2016, global brands general manager in 2017, head of Kanto area sales in 2018, and executive officer and
head of Kanto region store operations in 2020. He is scheduled to become President and CEO in May 2021.
Employees In FY02/20, Chiyoda had 1,774 full-time employees. The annual average number of temporary staff was 4,144.
In FY02/20, the parent company employed 1,441 staff, with key statistics as follows:
▷ Average age: 45.6
▷ Average years of service: 21.2 years
▷ Average annual salary: JPY4.9mn
The company’s retention rate is high. Given that the average employee is 45.6 years old and average length of service is 21.2
years, almost everyone who joined around the age of 20 must still be with the company. The Chiyoda group has a Chiyoda
Union, which belongs to the Japanese Federation of Textile, Chemical, Food, Commercial, Service and General Workers’ Unions
and Specialty Store Union Association. It seems that the presence of the unions is contributing to Chiyoda’s high retention rates.
Dividends and Shareholder benefits Under the policy of conducting ample returns stably to shareholders for the long term, Chiyoda aims at a consolidated dividend
payout ratio of 50% and a consolidated total return ratio of 100%. For the medium-term plan, the company added another
target of DOE at 3.5% or more and plans to revise the shareholder benefit plan to enhance services for individual shareholders.
Chiyoda gives shareholders with parcels of at least 100 shares discount coupons twice a year. On August 31 and the last day of February they receive
five 20%-off vouchers redeemable at Kutsu-Chiyoda, Shoe Plaza, TSRC and SPC shops.
Source: Shared Research based on company data
FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 FY02/21(JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons.Total dividends a) 1,986 2,374 2,764 2,719 2,844 2,609 2,643 2,631 2,635 1,318 Total treasury stock acquired b) 0 501 2 2,001 2,006 2,000 2,002 2,001 1 - Total returns to shareholders c) = a) + b) 1,986 2,875 2,766 4,720 4,850 4,609 4,645 4,632 2,636 1,318 Net income attributable to parent company sh d) 4,839 7,151 5,847 4,165 4,882 4,295 4,643 1,613 -1,643 -5,002
Dividend payout ratio a) / d) 41.0% 33.2% 47.3% 65.3% 58.3% 60.7% 56.9% 163.1% -160.4% -26.3%Total shareholder return ratio c) / d) 41.0% 40.2% 47.3% 113.3% 99.3% 107.3% 100.0% 287.2% -160.4% -26.3%
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