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Thank you very much for your continued support.

We would like to report on the financial results for the fourth quarter of FY2024 as well as our Medium-Term Management Plan announced on May 15.

Business Results for the First Three Months of Fiscal 2024

For the January-March 2024 period, revenue was 95.6 billion yen (up 11.0 billion yen year on year), business profit* was 6.4 billion yen (up 4.4 billion yen year on year). operating profit was 6.1 billion yen (up 6.5 billion yen year on year), and net income was 3.4 billion yen (up 4.1 billion yen year on year).
In addition to a steady recovery in demand for eating out, our establishment of a business foundation for future growth focused on menu strategies, store operations, store development strategies, and digital transformation (DX), has resulted in an increase in sales and profits. We were able to make a good start, with both sales and profits exceeded our guidance.

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

Business Foundation and First Quarter Results

(1) Menu strategies

In the revision of the grand menu in fall 2023, with Gusto and other family dining brands, we expanded the range of affordable small portion dishes, selectable menu items and value menu items, offering good value for money and the enjoyment of choosing. This has led to an increase in the number of dishes, and had the effect of increasing the average check.
Gusto held its first "Motsunabe Fair," supervised by the famous motsunabe (offal hot pot) restaurant Yamaya, and launched a cross-brand promotion in collaboration with the popular anime Spy Family. Meanwhile Bamiyan held a "Bamiyan Taiwan Fair" in collaboration with companies in Taiwan. In this way, our brands actively rolled out menu items and promotions seeking to enhance the value of the dining out experience for customers. This has attracted customers to visit stores, in turn leading to an increase in sales of products with a high unit price and a decrease in discount rates, contributing to an increase in guest counts and average checks.

(2) Enhancement of store operations

We are working to improve the quality of our services and products by enhancing our recruitment and education/training activities. In terms of recruitment, we are also actively hiring non-Japanese crew members. Group training by non-Japanese instructors is held on a regular basis, leading to smooth acceptance of personnel at stores and immediate effectiveness at work. We have also enhanced our on-the-job (OJT) and online training. As a result, our services have improved, with a 1.5-fold increase in customer compliments from last year.
By deploying more staff on weekends when there are a lot of customers, we are increasing turnover and maximizing sales and profits, and we are now seeing the effects of that.

(3) Store development strategies

We are accelerating our strategy of opening stores mainly in urban station-front locations. By April of this fiscal year we had opened nine new stores, and we have confirmed that the effect of opening these stores was 140% compared to sales at existing stores.
Brand conversions were implemented at 27 stores, with a +39% effect on sales. In addition, the effect of eliminating cannibalization was +11%, contributing to an increase in revenue across areas with converted and neighboring stores.
Store remodelings were implemented at 13 stores, and had the effect of increasing guest counts by +5.9%.
The installation of roadside guiding signage to improve store visibility was completed at 117 stores, resulting in a +3.1% increase in guest counts. In addition, 205 stores have completed changes to parking lot signage, seeing a +1.2% increase in guest counts.
New store openings, as well as brand conversions, store remodelings, guiding signage, and store signage which contribute to existing store sales have all been more effective than planned.

(4) Driving digital transformation (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 paying using either self-checkout or payment at the table. By deploying a call display board, the time taken to start calling new customers and clearing tables after customers leave stores has been shortened, leading to reduced waiting times. In DX at our head office, 34 DX projects were implemented in the first quarter, such as menu book checks using generative AI, contributing to improved productivity.
As a most recent topic, the Skylark Point Program will start on May 16th. The program is designed to enable customers to accumulate and use points at our 2,600 stores nationwide using the Skylark app, and also has the advantage of enabling mutual accumulation of points from other companies. The point program will also be used as an incentive program for employees, to develop products and services that capture the segmentalized needs of customers, and for various promotions.

Progress of ESG Initiatives

In terms of progress in ESG, in environmental initiatives, we introduced solar power generation equipment at the Gifu Merchandizing Center and three stores in the Chubu region in March. As a result, we expect to replace 612MWh of electricity usage with renewable energy and reduce CO2 emissions by approximately 280 tons per year.
In social contribution, we donated a total of approximately 20 million yen collected from customers to Ishikawa, Toyama, and Niigata prefectures, as support for recovery from the Noto Peninsula earthquake that occurred in January. Skylark employees also volunteered to provide meal support until the end of March, providing around 20,000 meals at evacuation centers in Ishikawa and Toyama prefectures. In the wake of the Eastern Taiwan Earthquake in April, Skylark will match and donate the same amount collected through in-store donations to the Taiwanese authorities. We also plan to extend the Bamiyan Taiwan Fair until the end of June, and donate a portion of sales of selected menu items as products including donations.
In our efforts to enhance governance, in addition to the existing external ESG evaluation of executive compensation, we will add new targets for "Employee Engagement Score," "Overall Customer Satisfaction," and "CO2 Emissions" to further increase executive involvement and achievement of ESG targets.
ESG evaluations from external organizations are continuing to improve. We have received an "A⁻" rating from CDP—an international environmental non-profit organization—in the areas of climate change, water security, and supplier engagement. In addition, we have been selected as a constituent of all six ESG indices for domestic equity used by Japan’s Government Pension Investment Fund (GPIF). We are the first restaurant company to be selected.

Formulation of Medium-Term Management Plan

We have announced financial targets for the period up to 2027 as part of our medium-term management plan. Under this medium-term management plan, we will aim to achieve sustainable growth and increase corporate value by implementing growth strategies of opening new stores, growing existing stores, overseas expansion, and mergers and acquisitions (M&A) based on enhancement of human capital, promotion of digital transformation (DX), and promotion of environmental initiatives.

Management Strategy

(1) Opening of new restaurants

We currently have approximately 3,000 stores nationwide, mainly in roadside locations. During the past few years, new stores in large-scale commercial facilities and station-front locations have attracted more customers than planned and made high profit contributions, contributing 13.4% of operating profits for only a 9.7% share of store numbers. Going forward, we will accelerate our opening of stores in high-level commercial clusters, in front of the stations of private railway lines in metropolitan areas and other station-front locations in regional cities, and increase our number of stores in multiple business categories in medium-sized regional cities.
We estimate that we have the capacity to open over 1,000 new stores in Japan, and plan to open around 300 new stores over the next three years.

(2) Existing store growth

Existing store growth will continue to drive brand conversions and store remodelings in line with market changes.
In our menu strategy, we will continue to pursue improvements in guest count and average check through menu plans and promotions that capture a wide range of usage motivations and increase the value of dining out experiences. We will also continue to engage in initiatives to improve the quality of our products and services, to set prices that are commensurate with value in response to inflation.
Through the implementation of these measures, we aim to achieve average annual sales growth of 3–4% for existing stores (+1% annual average guest count, +2–3% annual average check)

(3) Overseas expansion

We currently have 72 restaurants in Taiwan, four restaurants in Malaysia, and one restaurant in the United States.
In Taiwan, store numbers and sales have grown steadily. Last year, we began operation of a new factory, laying the foundation for the expansion of store openings. We plan to open 10 base stores every year, aiming to reach 100 stores by 2027.
In Malaysia, we currently have stores in Kuala Lumpur, with a fifth store planned to open in Penang, a short distance away from there. These stores will be used as a foothold for future expansion into other Southeast Asian countries such as Indonesia and the Philippines.
In the US, we are also seeing very strong performance as our operations and earnings structure continue to improve. In the US market, we can expect three times the average check and twice the guest count compared to Japan. If we can create a track record with around 3–5 stores, we believe that we will be able to expand rapidly with franchise stores.
In overseas expansion, we plan to open approximately 100 new stores by 2027.

(4) M＆A

Over the next three years, we will begin full-scale expansion of our business through M&A. By targeting existing restaurant chains that require resources to expand their store openings, and restaurant start-ups with excellent concepts that are considering business expansion, we will leverage our infrastructure and strengths to strongly support business development and engage in active considerations for building win-win relationships.

Key Pillars

(1) Enhancement of human capital

We are increasing our investment in human capital, based on our belief that active involvement by diverse human resources and employee growth and engagement are essential for enhancing corporate value.
We believe that it is important to create a positive cycle in which wages are raised, employee satisfaction and motivation are increased, services are improved, and customer satisfaction is achieved; enabling price increases, causing corporate profits to rise, and enabling further wage increases to be returned to employees. As part of our efforts to improve employee motivation, we are working to transform our organizational framework to store-centered management, in which authority is delegated to store managers.
In anticipation that the problem of labor shortages will become increasingly serious in the future, we have been implementing DX at stores to reduce the burden on operations and create an environment where all employees can work comfortably. In addition to promoting the employment of seniors and non-Japanese employees, we will take all possible steps to secure human resources, including a system for promoting employees to full-time employees (meeting the needs of those wishing to return to work as full-time employees after raising children) and further increasing the promotion of foreign nationals to full-time employees. We will also increase efforts to promote diversity by creating an environment and personnel system in which a diverse range of human resources can play active roles.

(2) Driving digital transformation (DX)

We have been engaged in DX for customers and employees for some time, and have been working to improve customer convenience and employee productivity through the introduction of floor service robots to deliver food to tables, payment at tables using terminals, and self-checkout. Going forward, we will seek to implement further innovations and improve productivity throughout our value chain, such as by improving the efficiency of back-office operations at stores, upgrading factory systems (using AI/robots), and universalizing employee communication through multilingual support. We will also consider building global IT infrastructure, such as restructuring mission-critical systems that can be used globally and locally to promote overseas expansion and accelerate M&A, and partnering with local companies. We will also drive the development of DX human resources, and continue to strengthen DX investment with a view to medium- to long-term growth.

(3) Promotion of ESG initiatives

We consider the promotion of ESG initiatives to be an important management issue. 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.

In implementing our medium-term management plan, we will make maximum effective use of the Group's management resources and strengths and pursue value creation in the restaurant business, to achieve our goals and aim for sustainable corporate growth.

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, 2024

FY2024 Q1 Skylark Financial Results Presentation Material