Vega Corporation Co., Ltd. · TSE:3542
Vega — Q2 FY2021 Earnings Presentation
53 slides from Vega's earnings presentation, Oct 30, 2020
Slide 1: 2Q FY2021 Business Results
2Q FY2021 BUSINESS RESULTS October 30 2020 Quarterly Financial Results for the Six Months Ended September 30, 2020 Vega corporation Co., Ltd. / Securities code: 3542 Copyright 2020 VEGA corporation. All Rights Reserved.
Slide 2: Agenda
1. Overview of Quarterly Financial Results for the Six Months Ended September 30, 2020 2. Report on LOWYA Business 3. Report on DOKODEMO Business 4. Financial Results Forecast 5. Appendix Copyright 2020 VEGA corporation. All Rights Reserved. 1
Slide 3: Financial Highlight
Financial Highlight Net sales 4,534 million yen ( 135.1 ％ YoY) 2Q Operating profit 409 million yen ( 1,976.3 % YoY) Results Overview First Net sales 9,883 million yen ( 148.0 ％ YoY) Half Operating profit 1,158 million yen ( 4,129.9 % YoY) Progress has been solid against financial results forecasts,
Slide 4: Overview of Company-wide Businesses
Overview of Company-wide Businesses Leverage the know-how, which we acquired through LOWYA’s D2C business, for DOKODEMO Exercise the power of creative content and technology to promote the two businesses Products Customers Process Furniture Sales In Japan Attract (e-commerce website Delivery CS and
Slide 5: Overview of Quarterly Financial Results
1 Overview of Quarterly Financial Results for the Six Months Ended September 30, 2020 Copyright 2020 VEGA corporation. All Rights Reserved. 4
Slide 6: Statement of Income
Statement of Income Achieved a 35.1% increase in net sales and a 1,876.3% increase in operating profit (Million yen) Three months Three months ended Sales ratio ended Sales ratio Change YoY Sept. 30, 2019 Sept. 30, 2020 Net sales 3,356 100.0％ 4,534 100.0% +1,177 135.1% Gross profit 1,893 56.4％ 2,724
Slide 7: Statement of Income (Cumulative)
Statement of Income (Cumulative) Achieved a 48.0% increase in net sales and a 4,029.9% increase in operating profit (Million yen) Six months Six months ended Sales ratio ended Sales ratio Change YoY Sept. 30, 2019 Sept. 30, 2020 Net sales 6,676 100.0％ 9,883 100.0% +3,206 148.0% Gross profit 3,761 56
Slide 8: Net Sales / Quarterly
Net Sales / Quarterly Net sales grew by 35.1% YoY to 4,534 million yen Gross margin continued to improve to 60.1% Net sales（Million yen) +35.1% 6,000 65.0% Net sales 5,349 Gross profit margin 5,000 62.5% 4,534 4,000 3,729 60.0% 3,371 3,541 3,440 3,356 3,320 60.1% 2,969 3,163 59.3% 3,000 57.5% 57.4%
Slide 9: Operating Profit / Quarterly
Operating Profit / Quarterly Operating profit grew by 1,876.3% YoY to 409 million yen （Million yen） 1,000 Dual measures of cost reduction and the enhancement of the flagship store bring results 800 748 Began to strengthen 600 Recovered profitability by the flagship store for improving gross profit a
Slide 10: Increases and Decreases in Operating Profit
Increases and Decreases in Operating Profit (Million yen) Positive factor Sales Cost of sales Negative factor Delivery expenses ↓347 Selling expenses Personnel ↓90 expenses Advertising ↓93 expenses Fixed ↓76 R&D expenses costs 409 ↓93 ↑11 ↓67 ＋388 million yen YoY 20 Three months↑1,148 Three months e
Slide 11: SG&A Expenses Ratio / Quarterly
SG&A Expenses Ratio (against Net Sales) / Quarterly (％) 56.8 57.2 57.4 56.5 55.4 55.5 2.9 1.9 54.2 2.6 2.5 51.7 2.1 1.8 3.3 2.8 2.5 1.9 1.2 3.3 50.4 2.1 1.6 0.6 2.4 4.5 12.6 44.9 11.8 12.5 14.7 12.6 1.0 11.9 10.6 3.0 10.4 0.6 10.3 8.1 12.5 11.5 11.1 11.6 12.2 11.6 11.3 10.2 7.8 10.1 16.3 16.1 17.1 1
Slide 12: Balance Sheet
Balance Sheet Maintained a sound financial foundation, including inventory levels (Million yen) Six months Six months Previous fiscal year Previous fiscal year ended ended (as of March 31, 2020) (as of March 31, 2020) Sept. 30, 2020 Sept. 30, 2020 Current assets 4,964 5,793 Current liabilities 2,242
Slide 13: Report on LOWYA Business
2 Report on LOWYA Business Copyright 2020 VEGA corporation. All Rights Reserved. 12
Slide 14: 2-1. Report on LOWYA Business
2-1. Report on LOWYA Business Copyright 2020 VEGA corporation. All Rights Reserved. 13
Slide 15: LOWYA Business: Report for the Three Months Ended September 30, 2020
LOWYA Business: Report for the Three Months Ended September 30, 2020 We continued to make smooth progress in the enhancement of the flagship store and the improvement in profitability (Million yen) Three months Three months ended Sales ratio ended Sales ratio YoY Sept. 30, 2019 Sept. 30, 2020 Net sa
Slide 16: LOWYA Business: Sales Ratio by Sales Channel
LOWYA Business: Sales Ratio by Sales Channel Flagship store sales increased by 119.9% YoY, from 1,007 million yen to 2,214 million yen The proportion of sales at the flagship store rose from 30.3% in the previous 2Q to 49.5% Net sales Flagship store 49.5％ 50.0% (Million yen) Marketplace stores 46.4%
Slide 17: LOWYA Business: Change in Monthly Net Sales
LOWYA Business: Change in Monthly Net Sales Sales were subdued due to a full renewal of the flagship store from late August to early September (renewed on August 25), which resulted in the suspension of sales events and restrictions on the addition of new products. From mid-August, the impact of the
Slide 18: LOWYA Business: Net Sales by Sales Channel
LOWYA Business: Net Sales by Sales Channel The flagship store remained the main sales channel, and initiatives for implementing a full-scale D2C business model progressed smoothly *D2C (Direct to Consumer) is a format of business that involves direct sales exclusively online. Net sales by sales chan
Slide 19: LOWYA Business: Cost of Sales Ratio and Delivery Expense Ratio
LOWYA Business: Cost of Sales Ratio and Delivery Expense Ratio Cost of sales ratio and delivery expense ratio continued to improved, as we continued reviewing sales prices and product lineup （％） Cost of sales ratio 20 配送費率 Delivery expense ratio 48 原価率 47.0 46.5 46.4 46.2 17.9 18.0 17.9 17.7 46 44.2
Slide 20: LOWYA Business: Management Indicators
LOWYA Business: Management Indicators Rapid growth in demand due to the novel coronavirus has subsided, but we maintained high growth in the number of visitors compared to the previous year (up 99.8% at the flagship store) Fiscal year ending Fiscal year ended March 31, 2020 March 31, 2021 Item 1Q 2Q
Slide 21: 2-2. Report on LOWYA Flagship Store
2-2. Report on LOWYA Flagship Store Copyright 2020 VEGA corporation. All Rights Reserved. 20
Slide 22: LOWYA Business: Enhancing measures to increase contacts with customers
LOWYA Business: Enhancing measures to increase contacts with customers Enhance our approach to media frequented by users, to increase contacts with them Take an approach that matches each medium to purposefully boost contacts Google LOWYA Online advertising ・New users ・New purchasing ・Repeat purchas
Slide 23: LOWYA Business: SNS
LOWYA Business: SNS LOWYA Official Instagram - Number of followers exceeds 500,000 (*) Number of followers as of September 2020 Copyright 2020 VEGA corporation. All Rights Reserved. 22
Slide 24: LOWYA Business: Increase in Visitors
LOWYA Business: Increase in Visitors We used Instagram, our main platform for SNS marketing, as well as Twitter The number of visitors to the LOWYA flagship store grew steadily YoY number of visitors to the LOWYA flagship store (%) 297.4% 199.8% 178.6% 140.1% 127.4% 99.0% 1Q 2Q 3Q 4Q 1Q 2Q FY2020 FY
Slide 25: LOWYA Business: Exclusive Flagship Store Project
LOWYA Business: Exclusive Flagship Store Project Introduced new products in the interior line, targeting women with theme “OTONA KAWAII (feminine, classic, and cute)” We present proposals for women’s total coordination, based on the theme of “OTONA KAWAII (feminine, classic, and cute)” with the main
Slide 26: LOWYA Business: New Products
LOWYA Business: New Products Continued to add new products carefully selected for outstanding designs and trendiness Copyright 2020 VEGA corporation. All Rights Reserved. 25
Slide 27: LOWYA Business: Flagship Store E-commerce System Replacement
LOWYA Business: Flagship Store E-commerce System Replacement Totally replaced the core system package of the LOWYA flagship store with our proprietary EC system Purpose Effects Value added Install a highly flexible and ✔Expand the flexibility of our ✔ Mobile-friendly expandable system to meet our se
Slide 28: LOWYA Business: Brand Recognition Survey
LOWYA Business: Brand Recognition Survey Recognition rate of LOWYA’s logo stands at 8% nationwide We expect to expand sales with further increases in brand recognition LOWYA logo recognition rate 9.0% 8.0% Achieved the current level 7.0% of sales with a recognition 8.0% rate of 8% 6.0% 6.3% Plenty o
Slide 29: 2-3. Outlook for the Furniture and Interior E-commerce Market
2-3. Outlook for the Furniture and Interior E-commerce Market Copyright 2020 VEGA corporation. All Rights Reserved. 28
Slide 30: Furniture and Interior E-commerce Market Scale [Growth (1)]
Furniture and Interior E-commerce Market Scale [Growth (1)] Even as the furniture and interior market remains flat since before the advent of the novel coronavirus, e-commerce is a growth market, expanding with a CAGR* of 5.26% (from 2015 to 2019) *CAGR: Compound Average Growth Rate Furniture and in
Slide 31: Furniture and Interior E-commerce Market Scale [Growth (2)]
Furniture and Interior E-commerce Market Scale [Growth (2)] Further growth in the scale of the Japanese B to C e-commerce market was forecast even before the advent of the novel coronavirus The rate of e-commerce shift for furniture and interior products remains relatively low compared to other prod
Slide 32: Furniture and Interior E-commerce Market Scale [Short- to Medium-term Outlook]
Furniture and Interior E-commerce Market Scale [Short- to Medium-term Outlook] If it is assumed that the past growth rate will continue, the furniture and interior e-commerce market is expected to grow to 396.7 billion yen by 2024 The market is forecast to expand even more, as the impact of the nove
Slide 33: Furniture and Interior E-commerce Market Scale [Long-term Outlook]
Furniture and Interior E-commerce Market Scale [Long-term Outlook] The furniture and interior e-commerce market is expected to continue to expand, with the advance of the shift to e-commerce. In addition, by enhancing merchandising in peripheral domains, we will look to the expansion of these market
Slide 34: 2-4. LOWYA Business – Future Development
2-4. LOWYA Business – Future Development Copyright 2020 VEGA corporation. All Rights Reserved. 33
Slide 35: Future Development: Full-scale D2C
Future Development: Full-scale D2C Shift to flagship store as the main way of attracting customers and the main sales channel Establish the D2C business model by attracting customers through flagship store Attracting customers and selling through flagship store Marketing Product development Import W
Slide 36: Future Development: Flagship Store Growth Rate
Future Development: Flagship Store Growth Rate Measures aimed at establishing the D2C business model have proven effective, with the flagship store growth rate greatly exceeding market growth Rate of change in net sales, indexed to FY2016 1,000 LOWYA flagship store 900 800 700 600 500 U.S.: Company
Slide 37: Future Development: Advertising Effectiveness
Future Development: Advertising Effectiveness Enhancements to the flagship store were accelerated since FY2018, and sales have grown in line with our strategy Continue to implement measures to strengthen sales, including increasing advertising expenses, 2,500 planning to maintain our growth momentum
Slide 38: Future Development: Business Model Transformation
Future Development: Business Model Transformation Expand product categories in line with the increase in visitors Commence offering products developed by other companies in addition to existing products we developed Begin trial operation from 3Q Platform model Selection model Original shop model Pro
Slide 39: Future Development: Target Total Distribution Volume of Billion Yen
Future Development: Target Total Distribution Volume of 100 Billion Yen Low recognition High recognition Gaining a foothold Brand recognition and scale towards improving profit expansion Establish the brand Penetration of the brand Build up fans 100 billion yen Flagship store ・ Marketplace stores Fi
Slide 40: Report on DOKODEMO Business
3 Report on DOKODEMO Business Copyright 2020 VEGA corporation. All Rights Reserved. 39
Slide 41: DOKODEMO Business: Business Model
DOKODEMO Business: Business Model A platform with all functions necessary for cross-border e-commerce, including settlement, logistics and CS Seller companies are limited to Japanese companies, but products are delivered to users in countries and regions round the world Japan Global Direct delivery
Slide 42: DOKODEMO Business: Management Indicators
DOKODEMO Business: Management Indicators Gross merchandise sales grew rapidly, while membership and the number of APP DLs increased smoothly The number of products and the number of brands decreased YoY, as handling of reusable products declined due to the partial suspension of logistics, but the de
Slide 43: DOKODEMO Business: Gross Merchandise Sales (GMS)
DOKODEMO Business: Gross Merchandise Sales (GMS) GMS grew by173.8% YoY, as we resumed investment in advertising We plan to continue to inject the online marketing know-how developed through our furniture e- commerce business (Million yen) New customer GMS Repeat customer GMS Ratio of repeat customer
Slide 44: DOKODEMO Business: Proportion of Deliveries by Country Based GMS
DOKODEMO Business: Proportion of Deliveries by Country Based GMS Deliveries to Asia, primarily Taiwan, account for 83.5%of GMS Canada Proportion of deliveries by UK 3.6％ country 1.0％ South Korea Middle East 1.3％ US 1.0％ Hong Kong Oceania Latin America 4.7％ 0.1％ 3.2％ 11.1％ Europe 3.8% North America T
Slide 45: DOKODEMO Business: Market Scale
DOKODEMO Business: Market Scale B to C cross-border e-commerce is a giant, trillion-dollar market Only around 6% of Japanese have experience using cross-boarder e-commerce, but in other regions it is used by more than half the population. Even with a platform specialized for seller companies in Japa
Slide 46: Financial Results Outlook
4 Financial Results Outlook Copyright 2020 VEGA corporation. All Rights Reserved. 45
Slide 47: Cumulative Progress Rate
Cumulative Progress Rate A cumulative progress rate exceeding 50% was achieved against the lower forecast range for all indicators during the six months ended September 30, 2020 Cumulative progress rate (Million yen) Progress rate Lower Upper 1H results (against upper to lower forecast) forecast for
Slide 48: Appendix
5 Appendix Copyright 2020 VEGA corporation. All Rights Reserved. 47
Slide 49: Appendix: LOWYA Business / Positioning
Appendix: LOWYA Business / Positioning Establishing the fast interior category in the “trendy & low price” space of the furniture and interior products market Trendy area High price High-class High-class antique overseas High-quality furniture furniture standard Traditional furniture furniture Selec
Slide 50: Appendix: LOWYA Business / Service Vision
Appendix: LOWYA Business / Service Vision Offer “memorable experiences” As a provider of “fast interior” that go beyond value expected by customers Fulfill satisfaction and inspiration by creating design that reflects a variety of tastes and trends. Copyright 2020 VEGA corporation. All Rights Reserv
Slide 51: Appendix: LOWYA Business / Customer Data
Appendix: LOWYA Business / Customer Data (Male vs. Female, Area Distribution, and Generation Distribution) Showing higher ratio of female in their 30’s, mainly in the Tokyo metropolitan area (July 2020 to September 2020) Ratio of male Area Age distribution vs. female distribution ■ Kanto 42.0％ 29 an
Slide 52: IR Inquiries
IR Inquiries vega_ir@vega-c.com Copyright 2020 VEGA corporation. All Rights Reserved. 51
Slide 53: Disclaimer on forward-looking statements
Views and forecasts in this document were prepared based on the judgment of the Company at the time of preparation. These statements are based on current expectations, forecasts, and assumptions that are subject to risks, and contain uncertainties that could cause actual outcomes to differ materiall