Japan Foods reports fiscal 3Q net profit drops more than 50 percent on higher expenses

Plastic sushi keychains at Japan-based DaisoPlastic sushi keychains at Japan-based Daiso

Japan Foods reported on Wednesday that net profit for its fiscal third quarter dropped 51.3 percent on-year to S$1.2 million on higher expenses and its customer loyalty program.

Revenue for the quarter ended 31 December fell 6.3 percent on-year to S$17.5 million, the Singapore-based Japanese restaurant operator said in a filing to SGX after the market close on Wednesday.

For the nine-month period, net profit fell 42 percent on-year to S$2.8 million, mainly on higher expenses for new restaurant openings and higher costs from operating more restaurants, it said. Revenue for the nine months was S$50.8 million, down 1.7 percent on-year, it said.

The number of restaurants at end-December was 54, up from 48 restaurants and one food court outlet a year earlier, it said.

“During 9M2018, we had a number of store openings under new brands and along with this came renovation, manpower and other related expenses,” Takahashi Kenichi executive chairman and CEO of Japan Foods, said in the statement.

“However, we believe there will be interest in the new brands. The response has been very positive so far and we are optimistic that in the long run, these new brands will contribute healthy sales,” he said.

Over the nine-month period, revenue from restaurants operating under the Ajisen Ramen, Osaka Osho and Menya Musashi brands saw revenue fall a total S$3.9 million on-year, mainly on lower sales from existing restaurants and the closure and conversion of some outlets to other brands within its portfolio, it said.

Restaurants operating under the New ManLee Bak Kut Teh, Kazokutei, Dutch Baby Cafe and Fruit Paradise brands saw a combined revenue drop of S$1.8 million during the period, Japan Foods said.

But new restaurants, including Shitamachi Tendon Akimitsu, Curry is Drink, Menzo Butao, Kagurazaka Saryo and the one-Michelin-star rated Konjiki Hototogisu, contributed a S$5.5 million increase in sales on-year in the nine-month period, it said. The group has since opened a second Konjiki Hotogisu outlet at Great World City and plans to convert another restaurant to a third outlet, it said.

Japan Foods will also be taking steps to rejuvenate its more than 20-year-old Ajisen Ramen brand by creating a new extension called Kara-Men by Ajisen, which will feature a spicy broth, it said.

As on end-December, Japan Foods’ JFH Reward program had more than 100,000 registered members with reward points, or $J, valued at S$700,000 during the nine-month period, the company said.

Because members can offset restaurant bills with the reward points, the amount was deducted from revenue recognized in the first nine months of the fiscal year, as per accounting standards, it said.

Kenichi added that the amount of accumulated $J has grown by eight times over the nine-month period.

“More importantly, that over 60 percent of our members have visited our restaurants at least twice. We consider the program a success because in the competitive F&B environment; our ultimate goal is to retain a big pool of loyal customers,” he said.


Get the Shenton Wire morning briefing in your inbox