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Thank you very much for your continued support.

We would like to report on the financial results for the third quarter of FY2024 announced on November 20.

Business Results for the First Nine Months of Fiscal 2024

For the January-September 2024 period, revenue was 294.7 billion yen (up 31.1 billion yen year on year), business profit* was 19.4 billion yen (up 6.5 billion yen year on year). Operating profit was 19.3 billion yen (up 9.3 billion yen year on year), and net income was 10.5 billion yen (up 4.1 billion yen year on year). Our existing stores performed well, with net sales increasing to 111.5% year on year. New store openings and brand conversions also exceeded our expectations, with both sales and profits rising as a result.

*Business profit is calculated by deducting the cost of sales and selling, general and administrative expenses from revenue

Breakdown of Results in the First Nine Months

Operational Strategies

Since the beginning of the year, we have been working to increase sales and improve our profit margin by introducing additional working hours during peak customer attraction times such as weekends. We have also visualized the time taken for final table cleanup after a customer leaves the store after checkout (cleanup time, CU time) with data, and efforts are being made at all stores (*) to reduce CU time, thereby increasing guest count. By allocating more working hours before peak lunch and dinner hours, we have also succeeded in improving the time taken to serve food, leading to better service without keeping customers waiting. We are also working to increase profitability and improve customer satisfaction by systematically improving operations and services through digital transformation (DX).

*Stores that have introduced table order tablet devices (around 2,500 stores)

Menu and Promotion Strategies

As prices continue to rise, we can see a consumer trend of choosing to eat out as an accessible leisure activity. To meet these needs, this summer, Gusto ran an Asian fair and a collaboration with Gogo Curry, offering fair menu items that create a special feeling of eating out that cannot be attained at home, leading to increases in guest count and average check. We also strengthened sales of eel dishes at our main brands Gusto, Yumean, Aiya and Karayoshi, and achieved sales results that greatly exceeded the previous year's sales, contributing to an increase in the average check.
As a measure against inflation, in response to the sharp increase in rice prices, we raised the price of the Rice, Miso Soup and Pickled Vegetables Set at Gusto and other major brands in September.
In promotions, we have increased advertising expenses in the second half of the year, optimized the distribution area for flyers and increased the number of flyers distributed, posted flyers on social media, and conducted sales promotions to attract more customers, including a churro tasting (a first attempt for the company) and time sale, and linked these efforts to an increase in guest count.
In terms of deliveries, to improve profitability of in-house orders and secure new orders at stores that do not yet offer home delivery, we have proceeded with the full-scale introduction of Wolt Drive and Uber Direct (orders received through in-house channels and delivered by drivers from other companies), which were introduced to approximately 750 stores.

New Store Openings, Brand Conversions and Store Remodeling

In 2024, we opened 21 new stores by September and expect to open 40 for the year. We have opened stores mainly in urban areas and in front of train stations, and have confirmed that the effect of opening these stores was 131% compared to sales at existing stores from January to September. Currently, a total of 60 stores have been confirmed for 2025, and we are in the process of selecting around 400 candidate locations.
Brand conversions were implemented at 60 stores between January and September, with a 150% effect on sales. In addition, the effect of eliminating cannibalization was +6%, contributing to an increase in revenue across areas with converted and neighboring stores.
Store remodelings were implemented at 52 stores, and had the effect of increasing guest counts by 6%.

*The increase in guest counts is at Skylark Restaurants stores.

Sukesan Udon M&A

In October 2024, we acquired all shares in Sukesan Co., Ltd. and welcomed Sukesan Udon to the Skylark Group. Sukesan Udon has enjoyed overwhelming support from customers as the soul food of Kitakyushu, and offers a variety of Japanese menu items centered on udon, at a low price range. Through this acquisition, we have filled a void in our brand position and strengthened our brand portfolio, which constitutes a significant plus for our future growth. Utilizing our network of 3,000 stores, we aim to expand nationwide through new store openings and store / brand conversions. In addition, by leveraging our supply chain infrastructure, such as our own factories and logistics network, we aim to improve the efficiency of the entire group. We plan to increase the number of Sukesan Udon stores to 200 over the next few years, while maintaining the quality and service that the chain has gained the support of customers.

Enhancement of Human Capital: Store-Centered Management

With the inflation that has followed the COVID-19 pandemic, we have entered an era where profit cannot be achieved simply by reducing costs. It is becoming increasingly important to accommodate different lifestyles. We are currently shifting our focus from cost reduction to store-centered management. We have introduced a performance incentive system and are revising the evaluation system to motivate restaurant managers, systematically helping them run their restaurants independently and reach objectives. We are enhancing our education and training systems to improve employees’ skills based on their individual capabilities. In our customer service training, we aim to ensure that each employee considers the perspectives of the customers. We are actively increasing wages by raising the base pay for full-time employees and revising the hourly rates for part-time workers.
We believe that these initiatives will create a virtuous cycle. Improving employees’ motivation and sense of belonging will lead to better service, and this, in turn, will increase customer satisfaction, the guest count, and the average check, resulting in increased revenue. The improvement of employee satisfaction and development which will be achieved by investing in human capital will be the source of the Company’s growth. We will increase our investment in human resources.

Advancing DX

We continue to drive development efforts for DX to further improve the convenience of customers and the productivity of employees. Cash-capable self-checkout has been introduced at 2,400 stores, with approximately 70% of customers now using either self-checkout or payment at the table. By deploying a call display board, we are seeking to visualize calls from customers and the time taken from starting to finishing clearing tables after customers leave stores (CU time), and linking this to reduced waiting times.
We are also continuing DX activities at our head office in the form of our "Problem Task Force." Since its launch in 2022, it has handled a cumulative total of over 300 cases solving various problems in daily operations, including the active use of generative AI to check menu books and summarize inquiries to head office, contributing to improved productivity.
We launched the Skylark Points Program in May this year. The number of times the app has been downloaded, the number of members and the point award rate are increasing steadily. The point program will also be used as an incentive program for employees. We will promote the use of the program in our customer relationship management (CRM), including the development of products and services that capture the segmentalized needs of customers and various promotions.

 

Promotion of ESG Initiatives

Our Sustainability Committee (chaired by the President, with membership consisting of the Chairman, all executive officers, and the presidents of Group companies)—under the supervision of our Board of Directors—plays the central role in building an ESG promotion system that is integrated with management.
We have set a target of reducing our environmental impact to 50% (compared to 2018) by 2030, and are engaged in various initiatives in areas such as decarbonization, elimination of plastics, and reducing food loss. We monitor the progress of each initiative by setting KPIs, such as the introduction of solar power generation in our stores and factories, the reduction of single-use disposable plastic items, and the reduction of leftover food. A number of ESG initiatives—such as proactive disclosure of environmental data and strengthening of our organizational structure for promoting ESG activities—have been recognized externally, and major ESG scores have been increasing year by year.
We are also actively engaged in activities that contribute to local communities, such as fundraising and support activities in the event of natural disasters such as earthquakes, support activities for children's homes, little league sports activities, and various other activities.
Going forward, we will continue to fulfill our mission as a restaurant company that provides food, and contribute to the creation of a sustainable society through initiatives for the global environment and local communities.

Future Market Outlook and Response to Inflation

Looking ahead, inflation is expected to continue increasing in light of the recent political, economic, and global situation. The number of people who are unable to keep up with high prices is increasing, and the desire to save money is spreading among consumers. On the other hand, as I mentioned earlier, due to the weakening of the yen, there is a tendency to refrain from travelling overseas and to enjoy eating out as a more accessible leisure activity. In our menu policy, we will continue to respond to polarized consumer needs by enhancing our lineup of good value products and products that offer value that is unique to eating out.
In response to soaring costs, we will continue our cross-divisional cost reduction project and strive to curb raw material costs by diversifying suppliers, further streamlining production and logistics, reviewing food ingredients and recipes, and reducing food losses. We will also aim to improve profitability by strengthening menu measures that will enable us to increase the average check, and improving customer satisfaction by improving service and quality at our stores, again linking this to an increase in the average check.

 

We ask for the continued support of all our stakeholders moving forward.

Makoto Tani  Chairman and CEO
Minoru Kanaya  President and COO
SKYLARK HOLDINGS CO., LTD.
November 20, 2024

FY2024 Q3 Skylark Financial Results Presentation Material