Results in the automotive goods business declined primarily because of the surge in demand prior to the consumption tax hike, the fall in demand afterwards, and slumping new-car sales.

For the fiscal year ended March 31, 2015, the Company Group’s net sales fell by 9.6% year on year, to ¥209.4 billion, operating income was down 54.1%, to ¥6.4 billion, and net income was down 52.9%, to ¥4.6 billion.

Net sales fell principally because of a surge in demand prior to the April 2014 consumption tax hike, a longer-than-expected cooling of personal consumption afterward, and a 6.9% year-on-year drop in domestic new car sales, all of which together resulted in an 11.5% decline in sales of automotive goods at domestic stores. Falling unit prices for car navigation systems and lighter (compared to the previous year) snowfall in major cities also took a toll on sales. On a positive note, sales in the statutory safety inspections and maintenance, and automobile purchase and sales, businesses, which we have been striving to enlarge, maintained their levels from the prior year, even amid the adverse market conditions.

Lower net sales, despite enhanced sales promotion measures, resulted in a 2.1 percentage point year-on-year decline in the gross margin. Concentrated efforts were made to reduce controllable expenses, particularly in the second half, but despite a ¥2.5 billion, or 3.9%, year-on-year reduction in SG&A expenses, earnings declined by a significant margin.

Significant progress was achieved in laying the groundwork for our transition to a “one-stop car goods and service” business format. Making our achievements pay off in greater earnings is the key issue going forward.

With the fiscal year ended March 31, 2015 as the first of four years over which we will implement the 2014 Medium-Term Business Plan, we achieved significant progress in laying the groundwork for our transition to a “one-stop car goods and service” business format that provides a comprehensive range of support for customers’ car-related needs. These efforts will focus on the four primary segments of our core domestic AUTOBACS business - the automotive goods business, statutory safety inspections and maintenance business, automobile purchase and sales business, and E-commerce.

In the automotive goods business, we concentrated on tire sales during the fiscal year under review, opening six tire specialty stores, with more planned, and taking steps such as working with a major Japanese tire manufacturer to add the Esporte AB01 (Zero One) to our product line. This new tire design sold only by the Company Group gives customers an opportunity to purchase high-performance tires at economical prices. In addition, we consolidated our private-brand products - both car interior goods and products such as oil and batteries - under a single brand name, “AQ. (AUTOBACS Quality.),” customers can immediately recognize and trust for good value. While the automotive goods business did not contribute to earnings as hoped, steadfast efforts will be made going forward to improve the gross margin.

For the statutory safety inspections and maintenance business, meanwhile, the number of vehicles required to get a second inspection five years after purchase has been declining since the Lehman Brothers collapse in 2008. Measures taken in response have included the addition of an online reservation system, sales efforts targeting customers at stores, and full-scale outbound sales initiatives carried out via a call center. As a result, the number of vehicle inspections performed increased 1.4% year on year, to approximately 589,000, pushing the cumulative number of inspections performed since 1991 beyond five million.

The automobile purchase and sales business increased the number of CARS franchise stores to 451 from 359, as of the end of the previous fiscal year. Nationwide sales promotions and the strengthening of vehicle purchase and sales activities increased the total number of vehicles sold by 3.4% year on year, to approximately 23,900.

In the E-commerce business, steps aimed at sending customer traffic to stores included enhancement of the “AUTOBACS.COM” online shop, the addition of a product selection function to the online oil change reservation system, and the initiation of a service in which customers can bring products purchased on Amazon.co.jp to AUTOBACS stores for installation.

Actions such as these are being taken to lay the groundwork for our business transition. Translating them into higher earnings is our challenge going forward. We believe the key to the growth of the AUTOBACS chain is to help customers resolve concerns and fulfill desires related to their cars, and to deliver satisfying value.

Regarding business conditions, while personal consumption is gradually improving, weakness in new-car sales is expected to continue. Therefore, considering factors including the significant divergence of our fiscal 2015 performance from the paths set forth in the 2014 Medium-Term Business Plan, we have decided to partially revise the final operating income and quantitative targets for key issues included in the 2014 Medium-Term Business Plan. Implementation of measures targeting medium-to-long-term growth in the three pillars of our operations - the domestic AUTOBACS business, overseas business, and new business - will continue, with an eye toward achieving plan objectives.

Revision of Quantitative Targets in the 2014 Medium-Term Business Plan (Fiscal Year Ending March 31, 2015 to Fiscal Year Ending March 31, 2018)
(Announced July 30, 2015)

	Fiscal 2018 (Plan est. May 2014)	Fiscal 2018 (Revised July 2015)	Fiscal 2014 (Results) (Previous plan end)	Fiscal 2015 (Results)	Fiscal 2016 (Review)
Management Indicators
Operating income (¥ Billion)	18.0	15.0	13.9	6.4	10.0
ROE (%)	8.0	8.0	6.8	3.3	5.0
DOE (%)	3.0 or higher	3.0 or higher	4.1	3.7	3.7
Key Performance Targets
Statutory safety inspections performed (Thousands)	1,000	800	580	580	-
Value of automobiles purchased and sold (¥ Billion)	50.0	50.0	23.0	23.0	-

Given the increase in the average number of years cars are owned, we are aiming to maximize earnings via a business model in which statutory inspections are used as a medium through which to develop stronger customer relationships that can lead to greater sales in the automotive goods and statutory safety inspections and maintenance businesses.

Given the trend toward smaller, higher-performance cars, unit prices for automotive goods are falling and vehicle lifecycles are lengthening. Contraction of the domestic automotive goods market, therefore, is anticipated going forward. Nevertheless, with the number of registered vehicles at approximately 60 million, and average service life exceeding 12 years, stable demand for maintenance, and statutory inspections and repairs can be expected.

Under the revised Medium-Term Business Plan, therefore, the Company Group will seek to maximize earnings by using maintenance, and especially statutory safety inspections, to strengthen relationships with customers.

Demand for statutory safety inspections, being driven by legal requirements, emerges at regular intervals, and many customers use statutory safety inspections as occasions for performing maintenance, including tire replacement, and even replacing their vehicle. Gaining statutory safety inspection customers, therefore, is very important for the automotive goods, as well as the statutory safety inspections and maintenance, businesses. Based on an analysis of purchase behavior, it is clear that sales approaches to customers who have already purchased an oil change often lead to sales of statutory safety inspections.

Our aim, therefore, is to strategically build a growth model that will target mainly our customer base of approximately 15 million point card members for focused marketing campaigns designed to migrate customers from oil changes to statutory inspections, and from statutory inspections to tire changes, and car purchases and sales.

To strengthen relationships with customers, the customer membership approach was improved in fiscal 2015. As a result, the “Maintenance Member” system, under which members can receive eight maintenance services, including oil and battery changes, at no charge was launched and “Point-Up Card” members will be encouraged to switch to this new system. At the same time, the CRM system was updated to enable tailored customer approaches based on vehicle type and purchase/sale data. Moving ahead, stores will be the focus in online and call center resource collaboration to advance omni-channel initiatives aimed at enhancing customer convenience. Efforts to achieve medium-to-long-term growth will be advanced by building enduring relationships with customers and strengthening customer contact points.

The senior executive officer will lead sweeping reforms to improve profitability at domestic store subsidiaries, which recorded an overall loss for fiscal 2015.

For fiscal 2015, domestic store subsidiaries recorded net sales of ¥67.8 billion, down 16.6% year on year, and an operating loss of ¥1.9 billion, versus operating income of ¥500 million for the previous fiscal year. Profitability improvement, therefore, is a matter of great urgency.

During fiscal 2015, we worked to optimize store deployments and management structures by transferring shares and stores to franchisees, restructuring operations through steps such as subsidiary combinations, and strengthening subsidiary management by transferring corporate human resources to their staffs. In fiscal 2016, sweeping reforms will be advanced under the senior executive officer who will lead profitability improvement efforts. The basic intent of these reforms is to expand net sales in the statutory safety inspections and maintenance, and automobile purchase and sales, businesses in line with overall Group strategies, while also identifying the causes of less-than-acceptable fiscal 2015 results in net sales, profit, and expenses, and devising solutions, for each of the 19 store subsidiaries. Reform initiatives will move forward mainly in retail pricing management improvement, negotiation of procurement terms with manufacturers, improvement of staff efficiency, and IT-related system cost savings.

Focusing mainly on the ASEAN countries, new-store openings will be accelerated with medium-to-long-term earnings in mind.

In fiscal 2015, actions were taken to solidify the foundation for making the overseas business an earnings generator over the medium-to-long term. Restructuring measures, including closings of unprofitable stores, were taken, and business foundations were reinforced with moves such as the opening of new stores in Thailand, the establishment of a local subsidiary in Malaysia, and expansion of non-Japanese staffing.

In fiscal 2016, maximum use will be made of partnerships with local companies primarily in the economically thriving ASEAN countries to accelerate store openings. Plans for the fiscal year call for the addition of 12 new stores, with six in Thailand, four in Malaysia, and two in Indonesia. The stores in Indonesia - the first in that country - will be opened by a joint venture with the INDOMOBIL Group.

In contrast with the large standalone store format used in Japan, overseas store openings, driven by the goal of raising brand awareness, will take place in shopping malls and other settings with concentrated retail activity and in population-dense areas, where multiple small-scale stores will be deployed. Furthermore, business development will take place not only at the retail level but also in wholesale and related businesses, where collaborations with local companies and M&A will be used when necessary to achieve the management priority on speed.

*Figures in ( ) reflect the change from the previous fiscal year end.

Stable dividends will continue at a DOE (Dividend on Equity ratio) of at least 3%, and share buybacks will be implemented as needed.

Shareholder returns is among the top management concerns at the Company. In line with our dividend policy of maintaining a DOE of at least 3%, our per-share dividend for fiscal 2015 came to ¥60, for a DOE of 3.7%. Adding to shareholder returns, we also implemented share buybacks totaling ¥5.5 billion, bringing the total shareholder return ratio to 222.2%.

For fiscal 2016 and beyond, there is no change in our policy of maintaining robust shareholder returns, while also pursuing capital efficiency, considering the requirements of business conditions, and maintaining financial stability.

As our policy on dividends, we intend to maintain a DOE of at least 3%, and continue to pay dividends at a stable level, as permitted by earnings. At the same time, we will also take steps for shareholder returns including share buybacks as necessary.