TO OUR SHAREHOLDERS
I would like to express my appreciation for your continued support and understanding of the Company.
The 21st business term (the fiscal year ended June 30, 2020), as reported in the August 2019 announcement of the financial results for the 20th business term (the fiscal year ended June 30, 2019), was a period when we placed priority on accomplishing the main measures that still remained and extended the investment expansion phase for one year. With a view to medium- to long-term growth, we aggressively invested in various businesses including through the development and updates of Brand Official, a SaaS*-based service, the expansion of the E-commerce business, and the opening of a large flagship store in Harajuku.
However, in addition to the greater than anticipated deterioration of the environment surrounding our overseas business, the spread of the novel coronavirus (COVID-19) has had a major impact on the cosmetics industry as a whole, as well as the Company itself. Not only a cessation of inbound tourism which has thus far supported the growth of the cosmetics industry, or the temporary closure of stores, but it has also caused significant changes to our lifestyles, including reduced opportunities to wear makeup due to people staying home.
Under these circumstances, there are two courses of action that istyle should take.
The first is to dispose of and withdraw from unprofitable business. In order to improve the balance between earnings and expenses, which has worsened due to the double impact from sales decline and aggressive investment, we will engage in further business selection and focus. Firstly, we have made the decision to dispose of and withdraw from businesses such as the salon business and the E-commerce website that we operate in Malaysia. Going forward, we will continue to consider downsizing and withdrawing according our business policies and growth investment areas in an aim to improve earnings in the short term.
The second is to further strengthen our earnings divisions. Specifically, this refers to "continued emphasis on Brand Official," which is positioned as our second earnings pillar and "strengthened retailing capabilities linking real stores and online stores."
Under these circumstances, I believe that there may be some shareholders who are wondering why we would continue to operate stores.
To begin with, even in the midst of the COVID-19 outbreak, istyle’s retail sales strengths have grown since the previous fiscal year as the result of the rapid growth of E-commerce. In addition, the scale of real stores in Japan's cosmetics market remains overwhelmingly large.
However, the changes that are currently taking place in the world are irreversible. In order to continue to strengthen our sales capabilities going forward, we must build a highly profitable sales model that incorporates real stores by integrating them with online stores. We aim to realize a seamless purchasing experience that spans real stores and online stores by converting value that could only be obtained at real stores into data and online systems, and sharing this throughout the industry as a whole.
We are ashamed of the results of the 21st business term and deeply apologize to all of our shareholders. In the 22nd business term (the fiscal year ending June 30, 2021), the Company group will continue to work as one in our aim to put the Company back on a growth path and achieve an operating profit by undertaking the measures I have described above. I greatly appreciate your ongoing support and understanding.
Tetsuro Yoshimatsu, President and Chief Executive Officer
SaaS*: An abbreviation for "Software as a service." Refers to a service that provides users with software operated by providers via the Internet.