GEO HOLDINGS CORPORATION

Financial Data

Overview of Results of Operations, etc.

(1) Overview of Operating Results

(i) Results for the current fiscal year

For the business environment for this current fiscal year, while voluntary restraint on going out continued to prevent the spread of COVID-19 infection, there was an air of relaxation on this restraint from the second half of the fiscal year where signs were observed for consumption activities and economic activities returning to normal. However, there remained concerns over the resurgence of the spread of variant of coronavirus and the outlook was still uncertain.

In such an environment, the Group has continued various efforts such as requiring employees to wear masks and disinfect with alcohol by following guidelines from the relevant authorities, and providing our products and services by paying sufficient attention to the safety of customers and employees in our aim to “offer joy to your everyday life.”

In reuse (comprehensive) merchandise , 2nd STREET in which reuse clothing is its core merchandise was strongly affected by voluntary restraint on going out, however, its sales turned towards recovery from relaxation on this restraint from the second half of the current fiscal year. In reuse luxury items, wholesale of luxury watches, etc. to overseas continued to be strong due to active overseas market.

In reuse (media) merchandise, we were able to secure stock for reuse game device due to gradual improvement in the balance between demand and supply for brand new game device and gradual upturn in buying reuse game device. This stock enabled us to sell, thereby improving our business cycle. However, sales declined for reuse game software being unable to reach the level of sales that resulted from special demand that arose in 2020 from the public staying home. In reuse mobile device such as smartphones, etc., buying and selling showed signs of recovery from the launch of a new model iPhone.

In brand new game-related merchandise, as the special demand that arose for game-related merchandise from the public staying home from coronavirus calmed, and shortage in supply of home game device “Play Station 5” continued, sales did not exceed the sales of the previous fiscal year although sales increased for trading cards, AV accessories, and smartphone accessories.

In our rental business where we mainly rent videos such as DVDs, the falling trends in sales is continuing due to the reduced supply of new titles that has been continuing from the postponement of release of movies in theatres that has been continuing from the previous fiscal year, and also due to the spread of video streaming services.

As a result, sales for the current fiscal year resulted in 334,788 million yen (2.0% increase from the previous fiscal year), operating profit resulted in 8,173 million yen (89.6% increase from the previous fiscal year), ordinary profit resulted in 9,662 million yen (101.5% increase from the previous fiscal year), and profit attributable to owners of parent resulted in 5,985 million yen (where this was loss attributable to owners of parent of 752 million yen in the previous fiscal year). As change in accounting principles, we applied the Accounting Standard for Revenue Recognition (Accounting Standards Board of Japan Statement No. 29, March 31, 2020) from the beginning of the current fiscal year. Therefore, comparison with the results of the same period of the previous year is made with values based on different accounting standards. Please see “4. Notes to Consolidated Financial Statements, (5) Notes to consolidated financial statements, (Changes in accounting principles)” for details.

Notes:

* From the second quarter of this fiscal year, we changed the English term of “reuse (non-media)” merchandise to “reuse (comprehensive)” merchandise to clarify that “reuse (comprehensive)” merchandise comprehensively includes reuse merchandise other than “reuse (media)” merchandise.


The results for major merchandise are as follows.

Fiscal Year ended
March 31, 2022
(Millions of yen)
Increase from the
previous fiscal year
Reuse goodsComprehensive111,648142.7%
Media56,771102.4%
Brand new104,70797.2%
Rental42,98483.4%
Notes:

* From the current fiscal year, the sales for major merchandise other than for GEO, 2nd STREET, and OKURA are aggregated and compared by categorizing those merchandise into categories based on the attribute of each merchandise.

The group’s stores and facilities as at the end of the current fiscal year are as follows. ( ) show increase or decrease from the end of the previous fiscal year.

Directly managed storesFC Stores and DistributorsTotal
Newly
opened
ClosedNewly
opened
Closed
Total number of
GEO group stores
and facilities
1,7659587193391,9582
GEO972654139081,111(56)
2nd STREET7106125543176438
2nd STREET(overseas)261002610
OKURA TOKYO1951194
LuckRack19134199
WAREHOUSE100110(1)
Others9029(2)
Notes:

* The number of stores is counted based on each store name.

* GEO includes stores that buy and sell home game-related items, mobile phones, and smart phones, and rent DVDs where they operate under the store names of GEO and GEO mobile.

* 2nd STREET includes stores that buy and sell clothing, home appliances and other items where they operate under the names of 2nd STREET, Super 2nd STREET, 2nd OUTDOOR, and JUMBLE STORE, etc.

* 2nd STREET (overseas) which were counted as “Others” in the previous fiscal year, are separately indicated from the current fiscal year.

(ii) Future forecast

As the Group’s business environment, the reuse market is continuously growing, which reflects trends to create a circulating-oriented society, and the market for video and music software rental, which was our original business and core business in the past, is continuously shrinking.

As forecast for fiscal year ending March 31, 2023, it is anticipated that the effect from the spread of the infection of COVID-19 will gradually weaken but remain at a certain level throughout the first half of the year. Furthermore, there is a concern that the costs will increase such as from the rise of prices of goods, personnel costs, and utilities due to soaring of the resource prices.

At our reuse stores in which 2nd STREET is the core business, we anticipate recovery in sales for reuse clothing due to increase in occasions to go out due to an air of relaxation on the restraint from going out and our efforts to continue opening stores in order to achieve operating 800 stores by the end of the fiscal year ending March 31, 2023. For this purpose, we will continue with our efforts to improve store operations. With respect to wholesale to overseas of luxury items comprised mainly of luxury watches for which sales were strong during the current fiscal year, we anticipate that the soaring of the overseas reuse luxury items market will calm and that the sales ratio of overseas wholesale in reuse (comprehensive) merchandise will decrease.

For game software which is a core reuse merchandise handled by GEO, it is anticipated that download sales without mediation by a retail store will gradually increase. However, because a game software creates an asset value for the reuse market by being distributed as a packaged game software, we anticipate that sales for reuse software will grow soundly together with the sales for brand new game software. We also believe that the demands for used smartphones and tablets are rising due to rise in the price for brand new smartphones and tablets.

As outlook for brand new merchandise, it is anticipated that the shortage in the supply of some game device partly caused by shortage in semiconductors, etc. will gradually calm and we will continue to reinforce sales for game-related item, AV accessories, and smartphone accessories, etc.

In our rental business, we anticipate that the falling trends in sales will continue due to the shrinking rental market from the spread of video streaming services. However, our share in sales is continuing to rise and we project that our rental business will continue to contribute to our profits by further pursuing efficiency of our store operations.

In the same manner, we will aim to achieve growth over the long run by rearranging GEO’s sales floor to respond to the shrinking rental market, open new stores for off price store Luck Rack which is a new retail format, and by enhancing recognition of our EC business and digital contents business that are growing.

From the above, as forecast for consolidated results for fiscal year ending March 31, 2023, we project sales of 350,000 million yen (4.5% increase from the previous fiscal year), operating profit of 7,000 million yen (14.4% decrease from the previous fiscal year), ordinary profit of 7,600 million yen (21.3% decrease from the previous fiscal year), and profit attributable to owners of parent of 3,800 million yen (36.5% decrease from the previous fiscal year).

(2) Overview of consolidated financial position

(i) Current assets

Current assets as of the end of the current fiscal year was 117,970 million yen, which increased 4,282 million yen from 113,687 million yen as of the end of the previous fiscal year. The main factors for this increase were an increase of 9,219 million yen in merchandise, while cash and deposits decreased 6,260 million yen.

(ii) Non-current assets

Non-current assets as of the end of the current fiscal year was 56,405 million yen, which increased 354 million yen from 56,050 million yen as of the end of the previous fiscal year. The main factors for this increase was an increase of 759 million yen in deferred tax assets, while rental assets decreased 416 million yen.

(iii) Current liabilities

Current liabilities as of the end of the current fiscal year was 36,057 million yen, which decreased 4,981 million yen from 41,038 million yen as of the end of the previous fiscal year. The main factor for this decrease was a decrease of 5,332 million yen in other.

(iv) Non-current liabilities

Non-current liabilities as of the end of the current fiscal year was 61,124 million yen, which increased 5,407 million yen from 55,717 million yen as of the end of the previous fiscal year. The main factor for this increase was an increase of 6,106 million yen in long-term borrowings.

(v) Net assets

Net assets as of the end of the current fiscal year was 77,193 million yen, which increased 4,210 million yen from 72,982 million yen as of the end of the previous fiscal year. The main factors for this increase was an increase in retained earnings due to accounting 5,985 million yen in profit attributable to owners of parent and decrease of retained earnings from payment of 1,229 million yen as dividend of surplus.

(3) Cash Flows

Cash and cash equivalents (“cash”) at the end of the current fiscal year decreased by 6,725 million yen from the end of the previous fiscal year and resulted in 47,851 million yen.

The situations of each cash flow and their main factors for the current fiscal year are as follows.

(Cash flows from operating activities)
As a result of operating activities, cash decreased 5,731 million yen (where this increased 12,428 million yen in the previous fiscal year).

The main factors for this decrease were although there were profit before income taxes of 8,101 million yen, and depreciation of 4,870 million yen, there were increases in inventories of 8,990 million yen, decrease in accrued consumption taxes of 5,028 million yen, and income taxes paid of 5,469 million.

(Cash flows from investing activities)
As a result of investing activities, cash decreased 6,694 million yen (where this decreased 8,225 million yen in the previous fiscal year).

The main factor for this decrease was expenditures of 5,002 million yen from purchasing property, plant and equipment.

(Cash flows from financing activities)
As a result of financing activities, cash increased 5,595 million yen (where this increased 14,683 million yen in the previous fiscal year).

The main factor for this increase was income from long-term borrowings of 12,000 million yen, while there were expenditures of 5,012 million yen from repaying on long-term borrowings.

(4) Basic policy in distributing profits and dividends for the current and next fiscal year

One of the Company’s top management priorities is to return profit to shareholders. For this purpose, the Company will continue to endeavor to establish a sound managerial base and improve profitability. The Company’s policy is to pay dividends that reflect the performance and the Company currently pays dividends twice a year at interim and year-end as dividend of surplus.

The shareholders meeting decides the dividend of surplus for the year-end dividend, and the board of directors decides this for the interim dividend.

Pursuant to the above basic policy, an interim dividend of 12 yen per share was paid and a year-end dividend of 12 yen is scheduled to be paid.

The Company paid dividends as follows over the recent five (5) years.

(per share in yen)

Fiscal Year ended
March 31, 2018March 31, 2019March 31, 2020March 31, 2021March 31, 2022
Interim1717171712
Year-end1717171712
Total3434343424

As dividends for the fiscal year ending March 31, 2023, the Company is scheduled to pay an interim dividend of 12 yen per share and a year-end dividend of 12 yen per share, which results in an annual dividend of 24 yen per share. These dividends are based on the Company’s judgement that it is still on its path to recover profits.