Our results reflect the scale of the challenges we faced, but I believe the year was one in which we made the fundamental changes that were needed for a new start.

For the fiscal year ending March 2017, the Company Group recorded net sales of ¥204.0 billion, down 2.0% year on year, operating income of ¥5.8 billion, down 13.0%, and profit attributable to owners of parent of ¥3.0 billion, down 31.0%.

The primary reason for the decline in net sales was a 2.0% year-on-year decrease in sales of automotive goods at domestic stores. Factors such as lower demand for winter/summer seasonal tire changes, due to the record warm winter in the previous fiscal year, resulted in lackluster first-half sales. In the second half, sales promotion efforts amplified in anticipation of greater demand for winter products led to a rebound in sales of mainly tires, oil, and batteries. The recovery, however, was not enough to make up for the drop in first-half sales. Furthermore, concentrated efforts to increase the inventory efficiency of franchisees resulted in lower sales for the Company, which wholesales goods to the AUTOBACS retail chain, and ultimately for the Company Group.

As for earnings, amid the decline in sales, domestic store subsidiaries moved ahead with earnings-enhancement initiatives, so even as gross profit fell 1.2% year on year, the gross margin improved by 0.2 percentage points. SG&A expenses included an increase in depreciation expenses related to logistics center improvements, but also advertising and promotion, and sales promotion, expenses that management improvements held down to about the previous year’s level. Operating income, however, declined despite such expense management efforts. Extraordinary losses of ¥2.6 billion, including items such as fixed asset impairment losses on land and buildings related to facilities for the benefit of employees and to stores, contributed to a decline in net income.

Though results were not what we had hoped for, I believe the year, as the first fiscal year covered by our new Medium-Term Business Plan, was one in which we were able to clearly identify issues going forward and lay the groundwork for our next steps.

One particularly important achievement was the streamlining of AUTOBACS retail chain operations. We achieved progress, for example, in reducing franchisee inventories and in improving the profitability of domestic store subsidiaries, a significant concern, to the point where the subsidiaries are now in the black. Furthermore, regarding the statutory safety inspections and maintenance, and automobile purchase and sales, operations, both of which are growth areas, our results continued on an upward path. This is the result of our actions to date taking hold and nationwide television commercials boosting awareness of our offerings in Japan. Meanwhile, in automotive goods, positive results were seen, for instance, from enhanced lines of dash cams and other high-profile goods and from expanded sales efforts for Pedal no Mihariban, a device to prevent accidents from sudden acceleration (accidents in which the accelerator is mistaken for the brake), and other safety products. Greater attention to initiatives such as these is emphasized in our new business plan, and I believe we have achieved a degree of progress toward that end.

The decline in customer traffic at domestic AUTOBACS stores is a key issue, and our top priority is to make our stores more attractive for customers.

At present, domestic AUTOBACS chain stores as a whole are seeing their sales trend lower, primarily because of declining customer traffic. Over the past 10 years, 20- and 30-year-olds have declined as a percentage of our Maintenance Members, so increasing the presence of young people and families in our customer base is a key issue over the medium-to-long term.

I think this is happening because of macro developments, such as the aging of Japanese society as a whole and the fact that younger generations are losing interest in cars as other things compete for their attention; and because of changes in our business environment, as exemplified by intensifying competition from car dealerships, internet retailers, and others entering our industry. But I also think we are not performing adequately in terms of offering compelling products and services that are keeping up with changes in customer preferences and lifestyles. In addition, given the growth of internet retailing and SNS usage, we also have to diversify the approaches we use to generate customer traffic.

Given that understanding, the Company Group’s top priority is to increase customer traffic by making all of our stores, and their product and service offerings, more attractive - in other words, to revive the competitiveness of the domestic AUTOBACS business. The Company Group’s business environment is experiencing a rapid progression of big changes, such as the growing use of electric and electronic technologies in cars, the growth of the car-sharing economy and other new markets, and the diversification of our customer base and customer needs, as women and the elderly come to make up a larger percentage of drivers. Such rapid and large-scale changes are expected to continue, and turning them into growth opportunities will require first of all that we clearly define the value we are offering from the customer’s perspective and differentiate ourselves from the competition.

We aim to be a professional, friendly presence as a retailer offering lifestyle products and services.

In reviving the competitiveness of the domestic AUTOBACS business, one of the directions we will pursue is a transition to a retailer that offers lifestyle products and services. Lifestyle products and services will be a new core business, adding to the value we offer through statutory safety inspections and maintenance, and it will provide a second avenue by which we will strive to increase customer traffic.

“Lifestyle products and services” enable customers to gain greater enjoyment from car-centric lifestyles. Cars are not only a mode of transportation; they provide the backdrop for life settings - road trips, casual drives, and time with family and friends. Imagining, creating, and offering products and services customers need to gain even greater enjoyment from such occasions is the role and appeal of AUTOBACS.

The goods we offer can be broken down into largely two types - discretionary goods, such as interior accessories and car navigation devices; and essential goods, such as tires, oil, and batteries. The key in offering them is to achieve the right balance. We aim to do this through two approaches. One is to provide customers with a selection of discretionary goods that are fun and will make customers want to come to our stores; the other is to redouble our efforts to make it as easy and convenient as possible for customers to purchase essential goods.

To communicate the new value arising from these initiatives to as many customers as possible, we will focus on getting customers to see the AUTOBACS chain primarily as a professional and friendly presence. We want customers to be completely at ease in relying on us as car professionals and to feel that we are a friendly organization they can freely consult on car-related matters. By being that kind of store, and having that kind of staff, we will strengthen our connections to our customers and create relationships that encourage customers to visit our stores time and time again.

Reviving the competitiveness of the domestic AUTOBACS business, nurturing drivers of future growth, and reforming our cost structure to build a platform for new growth.

Under the 2017 Medium-Term Business Plan (covering the fiscal years ending March 31, 2018 to March 31, 2020), we will focus on reviving the competitiveness of the domestic AUTOBACS business and on nurturing drivers of future growth, while also moving forward with cost structure reforms. Our goal is to achieve a rapid improvement in earnings and build a platform for medium- to long-term growth. As a checkpoint for growth, we are targeting consolidated operating income of ¥12.0 billion and consolidated ROE of 7.0% for the fiscal year ending March 2020.

In the domestic AUTOBACS business, we will move forward with concrete measures for offering lifestyle products and services from three perspectives – Know the customer, change products and sales approaches, and change customer contact points.

To “know the customer,” we will analyze customer needs and purchase behavior, and undertake marketing campaigns to promote compelling products and services. As one new initiative, we established ABT Marketing Co., Ltd. as a joint venture with a subsidiary of Culture Convenience Club Co., Ltd. (CCC) in March 2017. This new company will analyze customer membership data from both AUTOBACS SEVEN and CCC, and undertake promotional campaigns based on factors such as geographic region, car model, customer age, and gender to expand the number of customer segments served and serve each at a more detailed level.

To “change products and sales approaches,” we will vigorously pursue the development of new products. Given the diversification of roles cars have come to play in customers’ lives, we will offer products that enhance enjoyment and a sense of prosperity in terms of various themes, such as outdoor activities, car interiors, and garages. As one step along those lines, we established JACK & MARIE, Japan’s first car-centric lifestyle brand in June 2017. JACK & MARIE products are being offered through a retail channel separate from AUTOBACS stores, while JKM and GORDON MILLER products are being offered as derivative brands within the AUTOBACS chain. Apart from this particular initiative, we will also focus on offering products with the latest technical advances in categories such as safety and security, car electronics, and IoT.

To “change customer contact points,” we will develop new retail approaches. This means developing stores with a world view and atmosphere appropriate for offering lifestyle products and services, but also taking low-cost steps such as placing a carwash at store entrances or developing reservation-based specialized stores to increase customer contact points and make it easier for customers to purchase essential goods and services for their cars.

Adding to the above, we will also work to strengthen fundamental store earnings capability through steps such as building a structure for stable earnings from statutory safety inspections and maintenance, making store management more labor efficient, and achieving greater cost efficiency.

Core operations for new growth will be nurtured by moving forward with the strengthening of new-business* and overseas-business initiatives.

For the Company Group, which draws nearly 90% of its consolidated net sales from its core domestic AUTOBACS business, the nurturing of future growth drivers is a high priority. New-business* and overseas-business initiatives will play leading roles in this effort.

Among new businesses, the used car purchasing, and BtoB, businesses are being viewed as particularly important, and steps, including the reallocation of human resources, will be taken to strengthen them.

The used car purchasing business, which opened its first store in March 2016, now has a total of nine stores specializing in the purchase of used cars, and vigorous efforts are being made to develop this new business. In urban areas with few AUTOBACS stores, we will accelerate store openings with minimal initial investments by using third-party retail facilities that are already sufficiently equipped for doing business.

The BtoB business, a new undertaking, will wholesale goods handled by AUTOBACS to not only domestic store subsidiaries and franchisees but also home-improvement and discount stores, automobile repair businesses, used car dealers, and other retail outlets. The aims in doing this are to broaden retail opportunities and to leverage synergies with the domestic AUTOBACS business, by increasing sales volume to lower the cost of goods.

Regarding overseas business, we will continue to focus on the ASEAN region as we build a business model tailored to the sales channels and needs of individual countries and regions. At the same time, by developing wholesale, as well as retail and service businesses, we will seek to make the most of scale advantages, just as we aim to do in the BtoB business.

* Beginning with the first quarter of the fiscal year ending March 31, 2018, this reporting segment is being referred to as the “used car buying, dealer and BtoB business.”

In addition to strengthening our organizational capabilities, we are paying particular attention to skill enhancement for employees dealing directly with customers.

In enhancing our ability to implement the various measures included in our Medium-Term Business Plan, strengthening our fundamental organizational capabilities is essential. In April 2017, therefore, we introduced a managing executive officer system to strengthen and accelerate implementation capabilities, and created the position of Head of Corporate Administration to lead cost structure reforms for the group.

In addition, because the awareness and motivation of individual employees is important for AUTOBACS to be a professional, friendly presence for customers, we will continue to focus on the development and invigoration of human resources.

Toward that end, we established Chain Growth Co., Ltd. in March 2017. Plans call for this new company to lead activities such as the education of automobile mechanics at the training facility, provision of mechanics to chain stores, and human resource consulting for franchisees. To create a culture of rewarding high-performing employees, we held the AUTOBACS Awards ceremony in March to recognize stores and employees that emerged in customer feedback as excelling in customer service. The strength of the AUTOBACS brand relies on the actions of employees in face-to-face contact with customers. Going forward, we aim to be meticulous in taking measures that help us to create rewarding workplaces.

Expect much from AUTOBACS as we offer new excitement for the motorized society going forward.

Having designated the two years comprising the first half of the period covered by the 2017 Medium-Term Business Plan as a seed-sewing, development phase for creating the new AUTOBACS, we will use this time to build appeal and a foundation for great achievements during the harvesting phase.

Five and ten years in the future, car-centric lifestyles will have undergone much greater change than they have to date, for example, as electric automobiles gain popularity and driverless vehicles become a reality. For the Company Group, offering products and services for new lifestyles within a new motorized society is our role, and a growth opportunity.

AUTOBACS has a history of achieving growth by offering car-centric lifestyle products and services ahead of their time. Car navigation systems, for example, are now ubiquitous, but AUTOBACS was the first retailer to realize their potential and actively promote them at a time when they were still very expensive. Because of that, customers chose to purchase these products at AUTOBACS when prices became more affordable and widely accessible.

It is in our DNA to identify value in underappreciated products and then take it upon ourselves to create a market for them. And it is through such initiatives that every one of our staff members have felt the excitement of working here and passed that excitement on to customers. As the motorized society moves forward, we will strive to achieve solid growth by continuing to be the first to bring customers new products and services, and we will actively return the fruits of our efforts to shareholders and other investors.

We look forward to the ongoing support of our shareholders and other investors as we move forward along this path.