The operating environment during fiscal 2013, the fiscal year ended March 31, 2013, saw demand for automotive goods generally rise in line with demand, buoyed by an increased number of new cars sold, mainly light automobiles and hybrid vehicles, encouraged by government subsidies for the purchase of fuel efficient vehicles. Even after the termination of the subsidies, demand for goods such as snow tires and tire chains remained strong, supported by the effects of cold weather nationwide and snowfall in the Kanto region. On the other hand, unit prices of car navigation devices declined as demand for car navigation devices and digital TV tuners for automobiles fell back after surging with the changeover to terrestrial digital television broadcasting in 2011, and a change in the price range for strong-selling navigation devices. Prices also reflected a more competitive environment, especially with car dealers, among the market participants.

In this business environment, the Company focused its efforts on measures guided by the AUTOBACS 2010 Medium-Term Business Plan. The plan aims to increase store profitability and market share as the core of its business strategy. In the automotive goods business, the Company reinforced sales initiatives tailored to specific models benefitting from government subsidies for the purchase of fuel efficient vehicles. Meanwhile, in sales of snow tires and wheel sets the Company took initiatives to focus on customer convenience by improving the lineup of such goods and offering them in a set unit in each store. As a result of these efforts, the Company generated solid sales of tires, wheels, interior accessories, and car washing goods. At the same time, we were unable to respond swiftly to changes in the markets for such car electronics offerings as car navigation systems. Overall automotive goods sales therefore declined from a year earlier. In the statutory safety inspections and maintenance business, however, the number of automobiles receiving statutory safety inspections grew by 7.1%, to around 573,000. This growth reflected the full-fledged roll-out of our Statutory Safety Inspection Contact Center in April 2012 and extensive efforts to expand sales through telephone and online promotions. On top of that, we established three state-of-the-art auto body repair and painting centers that helped boost bodywork repair sales. In automobile purchase and sales, we increased the number of AUTOBACS CARS franchises from 175 stores at the close of the previous year, to 244, offsetting the impact of lower unit sales to used car distributors as these fell back after surging a year earlier. The number of cars sold thus rose 2.9%, to around 18,400.

As a result of these efforts, the Company's consolidated net sales declined by 3.0% year on year to ¥230.2 billion. Operating income fell 7.1% to ¥12.7 billion, despite efforts to reduce selling, general and administrative expenses. Net income fell 9.7% to ¥7.6 billion due mainly to recording loss on sales of investment securities, net, and an increase in the income tax burden. On the other hand, these declines were partially offset by a recording of a ¥0.1 billion difference in the estimated loss following withdrawal from our business in North America based on the terms of a lawsuit settlement agreement.

Store reform measures for enhancing store profitability, a pillar initiatives of the AUTOBACS 2010 Medium-Term Business Plan, resulted in higher central shelves sales and customer numbers at many outlets. However, the pace of improvements was mixed, prompting management to continue examining measures at stores with comparatively little improvement, and devising further improvements while continuing the measures. During the year under review, we started remodeling at Super AUTOBACS outlets. We sought to reflect the customer attributes and area characteristics of each store location, developing sales floors that would give full play to the strengths of Super AUTOBACS stores while differentiating them from competitor stores.

On the human resources and store operation reform fronts, we continued advanced customer service training while conducting strategy reinforcement training for all the managers of all stores to enhance their managerial capabilities. Assistant managers also received the training to enhance the managerial capabilities of all store executives.

One of our measures to increase market share is new store openings. We opened 30 stores in keeping with our initial plan. We are actively opening stores in areas where there are no Group stores; for example, commercial zones with no automotive goods stores and commercial zones with gaps between other stores where stores had not yet been opened.

Overseas, in an effort to improve profitability in each region, we opened one store and closed three in China while opening one store each in Malaysia and Taiwan. We will keep looking into expanding our business, particularly in the fast-growing ASEAN region. We will seek to capture further profit growth opportunities and are verifying our initiatives from a long-term perspectives.

For more details about progress on the AUTOBACS 2010 Medium-Term Business Plan, please see Feature: Growth Strategy.

The Group considers returns to shareholders to be one of its most important management priorities.

We are investing in opening new stores and in other areas as we carry out the growth strategies of the AUTOBACS 2010 Medium-Term Business Plan. We will continue to provide shareholder returns while ensuring that we maintain efficient and strong balance sheets. We have a consolidated dividend on equity target of around 3%. In the fiscal year ended March 31, 2013, we paid an annual dividend of ¥156 per share, up ¥11 from a year earlier. The dividend on equity ratio was 3.4%. We also repurchased 1.8 million shares for ¥7,193 million and canceled 5 million treasury shares.

We made a 1:3 stock split to broaden our investor base and enhance the liquidity of our shares. In the years ahead, we aim to keep enhancing shareholder returns not only through dividends but also through other initiatives.

We expect that the operating climate will remain very tough in the fiscal year ending March 31, 2014. This would reflect a fall-back from the surge in new car sales due to government subsidies for the purchase of fuel efficient vehicles, falling ASP of car navigation systems, and soaring gasoline prices as a result of a lower yen and other factors. Under these conditions our product strategies will include tackling the revenue-reducing impact of declining ASP of car navigation systems by reinforcing tire sales in particular, as well as expanding statutory safety inspections and car sales. We will endeavor to increase the local market shares of each store by encouraging repeat visits by AUTOBACS members and by reinforcing initiatives to attract customers near stores. On top of that, we will continue opening stores in areas in which we have had no presence and pursue e-commerce to bolster our overall market share. We will also focus on enhancing the earnings at our domestic store subsidiaries.

The fiscal year ending March 31, 2014, is the final year of the AUTOBACS 2010 Medium-Term Business Plan. Given that the business climate is tougher than we originally envisioned, we project consolidated operating income for the year of ¥13.5 billion, against a plan target of ¥16 billion, and we expect a 5.8% return on equity versus the originally planned 7.0%. Although it will be hard to reach our numerical targets, we will steadily implement the measures of the AUTOBACS 2010 Medium-Term Business Plan to reinforce the capabilities of each store, increase our market share, and achieve our corporate slogan of "Anything about cars, you find at AUTOBACS."

The AUTOBACS 2010 Medium-Term Business Plan will be completed in the fiscal year ending March 31, 2014. Our next strategy will be to focus first on expanding AUTOBACS business earnings while exploring new business opportunities to generate stable, ongoing growth.

In our AUTOBACS business, we will strive to enhance our value to customers and increase their support for us, thereby reinforcing the profitability of individual stores and our market share. We will swiftly address changes in the operating climate and decisively cultivate new businesses in Japan and abroad to drive future earnings while remaining committed to the AUTOBACS business so we can realize medium- and long-term corporate growth.