The UNITED ARROWS Group’s Medium-Term Management Plan

As the market environment changes drastically due to the spread of the COVID-19, we have revised the Medium-Term Management Plan announced in May 2020.

Medium-Term Management Plan (FY2021–FY2023)

The new Medium-Term Management Plan has the theme of “Weather the crisis and regain our earnings power.” We will respond to the irreversible changes caused by the corona disaster from the fiscal year ending March 2021 to the fiscal year ending March 2023. We will be reborn as a highly profitable corporate entity and lay the foundation for future growth. We will promote various measures under the two main initiatives: “Drastically review the revenue structure” and “Regain our earnings power.”

Drastically review the revenue structure

With respect to “Drastically review the revenue structure,” we will scrutinize unprofitable stores, businesses and subsidiaries and consider withdrawing from or streamlining unprofitable ones. We expect to close around 10% of consolidated stores as of November, 2020 and will continue to consider closures/streamlining. We will also implement structural reform of the headquarters organization. We will reorganize functions and operations, scrutinize useless operations and enhance productivity. We will expand the scope of introduction of the free address system while maintaining a work system that balances working at home and going to work, and consolidate the headquarters offices, which are currently dispersed in several locations, into two major bases, which will lead to the reduction of fixed costs.

Regarding personnel measures, we expect a decrease in the number of employees around 10% by the final fiscal year of the Medium-term Management Plan through factors such as restraint of hiring and a natural decrease due to retirees. By making operations more efficient, we will reassign staff members in key areas such as online sales and customer support. A remuneration system will be shifted to one that can be highly linked with business performance, correcting a downward rigidity of personnel expenses.

Regarding the improvement of gross profit margin by improving inventory efficiency, we have launched an inventory improvement project and are discussing how to hold inventory as it should be. We will identify factors that increase inventories, establish a system under which the inventory quantity can be controlled, set an indicator for managing the inventory status, and promote linkages with the evaluation system. Moreover, we will make efforts so that markdown sales and a reduction in inventory valuation losses can lead to a better gross margin. Through these measures, we intend to improve the Company’s revenue structure itself.

Regain our earnings power

With respect to “Regain our earnings power,” we will improve the revenue of core businesses, develop the new business, and promote OMO.

Improvement of profitability of our main business
Regarding the improvement of profitability of our main business, we will promote the improvement of products, sales and promotion. In terms of merchandise improvements, we will change seasonal merchandise and introduce season-less merchandise, shifting to a product plan that can respond to climate change, which we have been promoting since the fall /winter 2020 season. At the same time, we will develop products with an eye on new normal we will strengthen casual products in response to changes in business demand. We will expand products in the categories with high growth potential such as one-mile wear and wellness products including outdoor and yoga in a bid to increase sales.
Regarding the price range, lower prices will be offered mainly for casual products in the Trend-conscious market and the Basic trend-conscious market, aiming to acquire new demand. We will make these efforts successful by leveraging our strength of responding to changes in our customers.
In terms of sales/promotion, we will promote initiatives based on the relationships of trust we have cultivated with our customers. We will establish a contactless communication method by live streaming explanatory videos of products and online customer services. We will also improve the quality of comments on merchandise on the e-commerce site, boosting the product appeal for online shopping. By improving our online appeal, we will strengthen fixed-price sales even in online shopping, where the sales composition ratio tends to be high. In light of the COVID-19 pandemic, customers are expected to check and select products via the Internet before visiting a store and then buy them at a brick-and-mortar store in a short time, and these needs are anticipated to increase. Our sales staff both at retail stores and online stores will acquire a good ability to attract customers through these measures and deal with changes in customers’ buying styles. In addition to this, we will proceed with initiatives in parallel for each market, which will lead to improved profitability of existing businesses.
Business development in line with the new era
Regarding business development in line with the new era, we will develop new businesses with a concept that looks ahead to the new normal. We are considering a business format that is based on online sales instead of the conventional multi-store opening, and we plan to start from the latter half of the Medium-term Management Plan. This business is expected to attract new customers by offering the median price range between Green Label Relaxing and COEN.
Promoting OMO
We are promoting OMO based on two aspects: 1) enhancement of software and 2) innovation of hardware. In terms of the enhancement of software, we are proceeding with initiatives that can be started from now on, such as utilizing SNS by distributing product explanation videos, expanding the involvement of sales staff in online customer service and brushing up posted information. UNITED ARROWS LTD. ONLINE STORE is scheduled to be renewed during the fiscal year ending March 2022. By switching to a system that integrates logistics and systems, we will build an infrastructure that enables online services similar to those of physical stores. We will promote OMO by combining the new system with enhanced various initiatives.

Financial goals

The Company set the financial targets for the final fiscal year of the Medium-term Management Plan at ¥7 to 8 billion in consolidated operating income and 12-14% for ROE. We intend to disclose the dividend payout after scrutinizing financial conditions including the Company’s future investment plan, financial market developments and other necessary factors. We continue to recognize the improvement of shareholder value as an important management issue, and we would like to reward our shareholders and investors who support us by recovering our business performance as soon as possible.

Financial goals
Consolidated operating income for the final year of the Plan ¥7,000-8,000 million
(We intend to improve this from an expected loss of ¥6,500 million for FY2021 to an increase by ¥13,500-14,500 million on a cumulative basis for the next two years.)
ROE for the final year of the Plan 12-14%
(Remain unchanged)
Dividend payout ratio during the Plan Plan to disclose it after scrutinizing financial conditions, including the Company’s future investment plan, financial market developments, and other necessary factors
Sustainability promotion issues

“Promise to society: Creation of 5 values” has been part of our corporate philosophy, and our mission is to enhance the value we provide to all our stakeholders (customers, employees, suppliers, societies, and shareholders). Based on this philosophy, we have positioned our sustainability initiatives to be those that come after our management philosophy, and set up the sustainability statement and five themes “Supply chains,” “Resources,” “Communities,” “Human resource,” and “Governance.” We will set short-, medium- and long-term goals for each theme, incorporate them into the relevant divisions’ action plans, and strive to achieve them as companywide initiatives.