Focusing on Enhancement of Human Capital = Store-Centered Management Practices to Thrive during Uncertain Times and Achieve Sustainable Growth
Makoto Tani Chairman and CEO
Minoru Kanaya President and COO
SKYLARK HOLDINGS CO., LTD.
Thank you very much for your continued support.
We would like to report on the financial results for the first quarter of FY2025 and the progress of business strategies announced on May 15.
Message Summary
- In the January-March quarter, we achieved strong results. Revenue, operating profit, and net income increased compared to the previous year due to our store-centered management, product strategies, growth in delivery services, and mergers and acquisitions. Our return on equity (ROE) also exceeded the target.
- In a business environment where inflation is dividing consumers between those who prioritize savings and those who prioritize high quality, we aim to offer both excellent value and enhanced dining experiences.
- The key to growth lies in enhancing human capital. The focus should not be on cutting costs but on creating added value. We need to improve employee capabilities and productivity.
- Store-centered management (enhancing managers' managerial capabilities, focusing on recruitment, training and retention, and improving productivity) has led to better results.
- Our menu and promotion strategies and store remodeling have contributed to growth in existing stores. We will carefully select locations for new stores, focusing on profitability.
Business Results for the First Three Months of Fiscal 2025
For the January-March 2025 period, revenue was 111.7 billion yen (up 16.1 billion yen year on year), operating profit was 7.6 billion yen (up 1.5 billion yen year on year), and net income was 4.4 billion yen (up 0.9 billion yen year on year). Same-store sales increased a significant 109.7% year on year due to store-centered management, the introduction of items that effectively boost sales, price adjustments, and growth in delivery services. Operating profit rose as the revenue growth outweighed inflation's negative impact. Mergers and acquisitions (Sukesan Udon, Suki-ya Malaysia) led to a 5.8 billion yen increase in revenue and a 0.6 billion yen rise in profit. ROE was 8.8%, surpassing the target of 8%.
Business Environment
The global situation is changing rapidly, and the economic environment is becoming more uncertain. The U.S. tariff policy requires close attention as there are concerns that it could lead to an economic slowdown and a decline in consumer confidence.
Due to persistent inflationary trends, the upward pressure on costs is expected to continue increasing. We have recently been experiencing rising prices for rice and eggs. After careful consideration, we are passing on the minimum necessary price increases to maintain gross profits.
Wage increases are not keeping pace with rising prices, leading to uncertainty about the future and a gradually growing tendency to save more and spend less. Meanwhile, there remains a strong desire to spend on high-quality experiences within a limited budget. In response to these conditions, we are taking two approaches: developing menu items that provide excellent value for money while launching initiatives that enhance the dining out experience as a familiar leisure activity.
We expect consumers to be more selective when choosing menu items and to give greater consideration to their consumption choices. The restaurant industry has entered a phase of selection. Restaurant businesses may or may not be chosen. They may or may not achieve high productivity to overcome inflation. To promptly respond to this rapidly changing business environment, Skylark Group will step up its investment in human capital, the source of growth, to achieve sustainable growth by improving productivity and creating added value.
Enhancement of Human Capital = Store-Centered Management
As domestic demand contracts due to the declining birthrate and aging population, we need to create added value rather than cutting costs to generate profits. To create added value, we believe it is most important for each employee to enhance their skills to boost productivity. Boosting productivity involves more than just reducing headcount and improving efficiency. It means adding value to products and services through the strong performance of skilled personnel. Higher added value enables a virtuous circle in management. This can be reflected in prices, which will in turn lead to increased corporate earnings and ultimately higher wages.
In our store-centered management that is currently underway, we empower store managers by delegating authority to them. We drive digital transformation to support their operations and assist in hiring and developing human resources. We encourage managers to enhance their skills and proactively improve service quality and profitability.
<Store-centered management initiatives>
*Hereinafter, the term "manager" refers to the store manager, and "crew" refers to part-time employees.
Fostering managers' management skills:
- Reforming the manager evaluation system: emphasizing store profitability and enhancement of service quality.
- Changing the manager ranking system: creating a system that encourages managers' proactive store operations and recognizes their achievement of profit targets.
- Introducing a performance-based incentive system: rewarding individual sales divisions with additional bonuses based on their achievement of profit targets to enhance proactive store operations and foster cooperation among managers.
- Granting managers greater authority to assess the crew.
Enhancing recruitment, employee development, and retention:
- Improving OJT (on-the-job training).
- Reviewing the crew evaluation system: encouraging the crew to improve their skills and increase motivation.
- Introducing a points reward system for the crew: the system significantly contributes to securing part-time employees who work on Saturdays and Sundays, and during busy seasons.
Productivity improvement:
- Introducing a one-time crew member system: securing manpower during unexpected staff vacancies.
- Implementing a schedule management app: significantly improving efficiency in creating shift schedules.
- Fundamentally reviewing the distribution of store work hours.
The outcomes of these initiatives are reflected in data directly connected to financial results.
- Improved crew retention has increased the number of crew members enrolled, which has reduced the number of new hires.
- As crew members work for longer periods, their operational proficiency improves, leading to increased productivity.
- We increased the total number of working hours on weekends and national holidays, when our stores are busiest, to maximize sales and enhance seat turnover rates and service quality. As a result of the increased working hours, we saw a decrease in the ratio of personnel expenses due to a rise in sales, and this consequently improved our profit margins.
The restaurant business is a business where people serve other people. Enhancing employee skills results in consistent service and higher quality, which ultimately increases customer satisfaction. Stable customer support is unquestionably the driving force behind the growth of the restaurant chain.
By investing in people, who are the source of growth, we aim to create a virtuous circle that leads to increased corporate earnings, thereby achieving the sustainable growth of our Group and contributing to creating a virtuous circle for the Japanese economy.
Progress of Business Strategies
Growth of Existing Stores
Our growth strategies focus on achieving growth in our existing stores. They are achieving a growth rate that exceeds the target set in the Medium-Term Management Plan due to the aforementioned store-centered management, effective marketing strategies, and store remodeling.
- Under our menu strategies, we introduced menu items and pricing to cater to polarizing consumer preferences, resulting in increases in the guest count and average check.
- In our sales promotions, we are optimizing media use based on brand characteristics and distributing coupons for priority stores. These initiatives are contributing to our ROI (return on investment) increasing year after year.
- In our store remodeling, we reviewed our standards and are changing operations for a more efficient return on investment.
Opening new restaurants and overseas expansion
Given the uncertain economic environment and rising construction costs, our policy for opening new restaurants will focus on carefully selecting locations to ensure profitability, rather than aiming to meet the target number of stores set out in our Medium-Term Managing Plan.
- In Japan, we are only opening new restaurants where we expect a high return on investment, particularly in urban areas and near train stations. The new restaurants are achieving sales and profit margins that exceed those of existing ones.
- We also carefully select locations overseas. In the first quarter, we opened four restaurants (three in Taiwan and one in Malaysia).
M&A
Sukesan Udon and Suki-ya Malaysia, which have recently joined our Group, are contributing significantly to its earnings. We plan to continue actively exploring business opportunities that will generate strong synergies with our Group.
- Sukesan Udon opened four restaurants in the Kanto region by the end of April. All of these restaurants recorded sales that exceeded our expectations. In the current fiscal year, we will enhance our supply chain and prepare for new operations. From 2026, we will expedite store openings nationwide.
- We can potentially open 70 or more Suki-ya restaurants in Malaysia. We are considering opening new restaurants in Muslim markets, particularly in Indonesia.
Promotion of ESG Initiatives
We view environmental, social and governance (ESG) initiatives as essential to our growth strategies. Our management will institute a system to promote ESG practices and sustain our ESG activities. Our principal ESG activities in the first quarter are as follows.
- In our decarbonization efforts, we introduced solar power generation at a total of 258 solar power generation facilities by entering into offsite PPAs (power purchase agreements).
- Shabu-Yo's Komamedori Project, which aims to reduce food losses, received the Consumer Affairs Agency Commissioner's Award, which recognizes companies for outstanding consumer-oriented management.
- We were recognized as an A List Company, the highest rating, by CDP for Climate Change and Water Security
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.
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.
May 15, 2025
FY2025 Q1 Skylark Financial Results Presentation Material