IR―FINANCIAL DATA―

Result Summary

pdfはこちら FY2016 Q2 Business Results
Additional comments

For FY2016 Q2, the Total transaction value resulted as 86,495 million yen (+28.3% increase Y/y), Net sales resulted as 31,566 million yen (+40.8% increase Y/y), Operating profit resulted as 10,588 million yen (+51.1% increase Y/y), Recurring profit was 10,630 million yen (+49.2% increase Y/y), and Net profit was 8,059 million yen (+68.3% increase Y/y).

We could maintain the growth momentum from the second half of the last fiscal year, and we could overachieve our original corporate plan (undisclosed). We honestly think that realizing such high growth was merely owing to the fact that we were continuously implementing effective sales measures during this first half that had worked well in the second half of the last fiscal year such as an accelerated shop opening, aggressive coupon campaigns with the brands, and the replacement of our CRM system.

From these reasons, our internal growth rate target in the latter half is settled as slightly lower than that of the first half. Considering a high growth we already achieved in the latter half of the last fiscal year, further growth is to be required which will be challenging. We are now carefully preparing for the second half to achieve our corporate plan throughout the year.

Breaking down each business segment, the ZOZOTOWN business resulted as 83,191 million yen in the total transaction value (+39.2% increase Y/y), the BtoB business was 2,899 million yen (-62.0% decrease Y/y), the Flea Market business was 404 million yen (No comparison because of newly established business). Within the ZOZOTOWN business, consignment sales resulted as 77,929 million yen (+37.5% increase Y/y), the purchased stock business resulted as 106 million yen (-71.2% decrease Y/y), and ZOZOUSED business was 5,155 million yen (+89.2% increase Y/y).

Behind the maintenance of such a high growth of ZOZOTOWN business from the latter half of the last fiscal year, new shop opening in this quarter, sales contributions from 280 shops opened in the last fiscal year, and coupon campaigns with the brands started aggressively from October 2015 can be cited as possible reasons. By utilizing our newly-replaced CRM system which have been implemented in order since September 2015, we communicated with our users proactively and it contributed to the expansion of the total transaction value.

<Number of new shop openings>
By the end of September 2016, we ended with 872 shops and 3,608 brands (842 shops and 3,538 brands as of June 2016). We have welcomed 54 new shops while 21 shops closed on ZOZOTOWN during this second quarter. To deal with diversified customer needs, we are planning to open attractive shops aggressively in the latter half period as well.

<Number of total annual buyers>
The number of total buyers resulted as 5,252,541 during October 2015 to September 2016 period (+ 42.0% increase Y/y, + 8.7% increase Q/q). For active members, the number reached 3,059,991 which resulted + 27.4% increase Y/y and + 7.6% increase Q/q. The high increase of the number was supported by an organic growth effect from the rise of unique users as well as by the aggressive new shop opening and effective promotion activities including the coupon campaigns with our brands. For guest members, the number resulted as 2,192,550 which is + 69.1% increase Y/y and + 10.3% increase Q/q by adjusting the usability of the guest accounts in order to become even more friendly.

<Annual purchase amount, annual purchase pieces, and number of shipments>
The annual purchase amount per active member was 48,556 Yen (+5.2% increase Y/y, -0.2% decrease Q/q), and the annual purchase pieces resulted as 10.4 pieces (+21.6% increase Y/y, +5.3% increase Q/q). Similar to the explanation above, the aggressive coupon campaigns and the replacement of our CRM system led to the increase in purchase frequency of our users that making them purchase more items. The annual purchase amount showed the slight decrease on a Q/q basis due to the increase in the proportion of new users among active members. This is because increased proportion of such new users are inclined to spend lesser annual purchase amount than existing users. This always happens when acquiring new users at a good rate, so when it is limited to the existing users only, the annual purchase amount is still growing on a Q/q basis.

Explaining about the guest members, the annual purchase amount and annual purchase pieces were 8,872 Yen (-2.4% decrease Q/q) and 1.7 pieces (+2.0% increase Q/q), respectively. The number of shipments in this 2Q was 5,391,093 (+61.9% increase Y/y).

<Average retail price and average purchase amount>
For FY2016 Q2, the average retail price resulted as 3,855 yen, which was 14.7% decrease Y/y. And the average purchase amount resulted as 7,941 yen, which was 14.4% decrease on a Y/y basis. Since FY 2015 Q3, we have seen a double-digit based decrease of the average retail price on a Y/y basis. The main factors causing such decrease were the increasing sales proportion of discounted sales as well as ZOZOUSED sales, also the drop in the average price of non-discounted items due to successive opening of new shops that had relatively low price points. We are planning to open many new shops in the latter half, though some of them would be relatively lower price point ones, hence we are expecting the further decrease in the average retail price for a while.

For ZOZOUSED which is included in the ZOZOTOWN business, we were able to grow at a good level which was 89.2% growth Y/y. Similar to the last quarter, we have actually prioritized refreshing the fulfillment structure including purchase operations of second hand clothing. This is not only for the growth in this fiscal year, but also to establish an effective operational structure to deal with a larger volume for our next stage while also securing for firm profitability starting now.

For the BtoB business which resulted as minus growth on Y/y basis, but this is in line with our original corporate plan (undisclosed). We are shifting to the new model where our consolidated subsidiary aratana inc will be in charge of operations, therefore, FY2015~FY2016 will be the off-crops season as we have already announced. While we shift towards our new business model, some of the brands will move on to different partners, or decide to do it on their own websites, resulting the changes in the transaction volume according to such transition schedules. We will focus on developing websites for brands which will partner with the aratana model for the time being.

Let us move on to the ZOZOFURIMA business. This service was launched in December, 2015, and transaction volume resulted as 404 million yen for this second quarter consolidated accounting period. We pursue to develop secondhand market by cooperating with assets of ZOZOFURIMA and ZOZOUSED which will lead to the expansion of fashion e-commerce market and user base.

Net Sales resulted as 31,566 million yen (+40.8% increase Y/y), and Gross Profit resulted as 28,604 million yen (+36.8% increase Y/y). Gross profit margin (to the total transaction value) resulted as 33.1%, increased by +2.1% from 31.0% in the year-earlier period. A revision of our shipping policy as well as launching the paid membership system led to a higher growth in other revenues, rise in the sales revenue ratio of ZOZOUSED towards the total transaction volume by +1.9%.

The SG&A ratio towards the transaction volume increased by +0.2% from 20.6% to 20.8% on a Y/y basis. The ratio of promotion spending toward the total transaction value decreased by 0.2% on a Y/y basis. On the other hand, both HR cost burden arising from the growth of ZOZOUSED as well as shipping cost burden increased by 0.4% and 0.2% (towards the total transaction value), respectively. This all led the increase in the SG&A ratio. Remarkable promotion activities in this 2Q were re-targeting ad and promotion campaigns for WEAR overseas development. As a result, operating profit margin (to the total transaction value) was 12.2%, improved by 1.8% from 10.4% in the year-earlier period.

Finally, as of the end of September 2016, one of our subsidiary Blacket Inc. spun off from StartToday Group by way of MBO.

Guidance for FY2016

The corporate plan for FY2016 is, 195,000 million yen for Total Transaction Value (+22.3% Y/y), 69,000 million yen for Net Sales (+26.8% Y/y), 22,140 million yen for Operating Profit (+24.7% Y/y), 22,150million yen for Recurring Profit (+23.9% Y/y), and 15,260 million yen for Net Profit (+27.3% Y/y). No change from our original guidance. The payout ratio for each dividend is planned to be 40%, at 20.6 yen (at the price after share split).

Breaking down the total transaction value, the ZOZOTOWN business is planned to be 185,000 million yen (+26.6% Y/y), the BtoB business is planned to be 5,000 million yen (-62.4% Y/y), and the ZOZOFURIMA business is planned to be 5,000 million yen (to 43.5 times of what it was for FY2015). Within the ZOZOTOWN business, the consignment model is planned to be 17,280 million yen (+25.7% Y/y), the purchase stock model is planned to be 200 million yen (-71.2% Y/y), and ZOZOUSED is planned to be 12,000 million yen (+50.8% Y/y).

The ZOZOTOWN business will continue to be the leading force in the business for FY2016. Welcoming new brands aggressively, working together with our brands on the point campaigns, will be the key factors, helping us achieve the higher growth. We will also seek for this higher growth by begin new projects, in order to keep the strong growth momentum we have achieved during the second half of FY 2015. For our high growth business ZOZOUSED, we plan to strengthen purchase amount and quality, as well as optimize the business flow. For the BtoB business, FY2016 will also be an off-crops season. We cannot share detailed plans of opening and closing shops, though have included the information within the plan. For the ZOZOFURIMA business which was launched in December, 2015, we would like to expand the second hand market itself, using the item database of ZOZOTOWN and WEAR, differentiating it from competitors.

For profitability, we are aiming towards an 11.4% operating profit margin (0.3 point increase Y/y). Startup costs for the ZOZOFURIMA business are included within the plan, which will make the improvement in profitability limited, though the OPM for the ZOZOTOWN business shall improve based on the marginal utility. The budget for promotional activities shall be up to 2% of the total transaction value.