December 29, 2016 5:00 am JST
Earnings preview

FamilyMart Uny suffers post-merger growing pains

Integration costs seen limiting profit for now

A Circle K convenience store converted into a FamilyMart in Nagoya.

TOKYO -- Merger-related expenses weighed on the earnings of FamilyMart Uny Holdings for the nine months ended November, as the company upgraded and refurbished stores for a new start.

The company was born from the Sept. 1 marriage of convenience store operator FamilyMart and supermarket company Uny Group Holdings. Operating profit reached about 42 billion yen ($356 million), down roughly 5% from combined profits reported by the predecessors a year ago. The 42 billion yen figure is the sum of March-August profit at FamilyMart and expected September-November profit at the new entity.

Gross operating revenue, the equivalent of sales, slid an estimated 7% on the year to 530 billion yen. But this was due largely to unloading money-losing operations previously held by Uny.

By segment, streamlined operations in general-merchandise stores bolstered profit, while heavy integration costs weighed on the convenience store business.

In the convenience store business, renovation costs piled up for changing signs from the Uny-era "Circle K" and "Sunkus" to "FamilyMart" and updating in-store equipment. Existing-store sales at Circle K and Sunkus locations plunged, with efforts to boost their brand power bearing little fruit.

The integration efforts also consumed much manpower, leaving few employees available to train store staffers. Operating profit for the convenience store segment likely fell short of plans.

On the other hand, operations in general merchandise stores look to have outperformed expectations. Closing unprofitable stores ahead of the integration and booking asset write-downs in advance paid off.

The store count numbered 216 as of the end of November, down 14 from a year earlier. But the business captured demand from dual-income families and seniors by strengthening the lineup of such foods as skewered chicken and tempura. And cost-cutting in logistics, personnel allocation and elsewhere created synergies.

Profit margins are improving thanks to Uny's unloading such poorly performing units as kimono retailer Sagami, sold to an investment fund.

FamilyMart Uny will revamp registers to raise efficiency while continuing to renovate stores and improve cooked foods. Such upfront spending will likely limit earnings for the time being.

The company will announce nine-month results Jan. 10, likely maintaining its full-year guidance of a 56.5 billion yen operating profit on operating revenue of 911.6 billion yen.

(Nikkei)

FamilyMart UNY Holdings Co. Ltd.

Japan

Market(Ticker): TKS(8028)
Sector:
Industry:
Retail Trade
Food Retail
Market cap(USD): 7,096.75M
Shares: 126.71M

SAGAMI Co., Ltd.

Japan

Market(Ticker): TKS(8201)
Sector:
Industry:
Retail Trade
Apparel/Footwear Retail
Market cap(USD): 44.71M
Shares: 40.83M

Get Insights on Asia In Your Inbox

To read the full story, Subscribe or Log in

Get your first month for $0.99

Redeemable only through the Subscribe button below

Once subscribed, you can…

  • Read all stories with unlimited access (5 articles per month without subscription)
  • Use our smartphone and tablet apps

To read the full story, Subscribe or Log in

3 months for $9
SUBSCRIBE TODAY

Take advantage of this limited offer.
Subscribe now to get unlimited access to all articles.

To read the full story, Update your account

We could not renew your subscription.
You need to update your payment information.

To read the full story, Subscribe or Log in

Once subscribed, you can…

  • Read all stories with unlimited access (5 articles per month without subscription)
  • Use our smartphone and tablet apps

To read the full story, Subscribe or Log in

3 months for $9
SUBSCRIBE TODAY

Take advantage of this limited offer.
Subscribe now to get unlimited access to all articles.

To read the full story, Update your account

We could not renew your subscription.
You need to update your payment information.