Yoshitsu Co., Ltd

Q4 2022 Earnings Conference Call

8/15/2022

spk00: Good day, ladies and gentlemen. Thank you for standing by, and welcome to Yoshihitsu's Financial Year 2022 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. This conference is being recorded today, Monday, August 15, 2022. If you have any objections, you may disconnect at this time. Joining us today from Yoshihitsu are the company's Principal Executive Officer, Mr. May Kanayama. and the company's principal accounting and financial officer, Mr. Yoichiro Haga. Before we continue, I would like to remind you that some of the information discussed on this call will contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks and uncertainties. The company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances or changes in its expectations except as may be required by law. Although the company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct. And the company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results in the company's registration statement, and in its other filings with the SEC. With that, I will now turn it over to Mr. May Kanayama, the company's principal executive officer. His opening remarks will be delivered in English by the company's IR representative. Mr. Kanayama, you may please go ahead.
spk06: Hi, everyone. Today, I'm here at the YOSHISU's March 2022 phone conference. Thank you.
spk02: Thank you, operator, and everyone for joining UCF's fiscal year 2022 earnings conference call today. On our call today, I will give you an overview of our performance for fiscal year 2022. Then our principal accounting and financial officer, Mr. Yorichiro Haga, will share the details of the company's financial review. Lastly, we will conduct a Q&A session to take your questions.
spk06: We were able to achieve a lot of results in March 2022. First of all, I would like to thank everyone We realized the IP of the company and wrote down the history of the company on the first page. By doing so, we were able to increase the number of customers of DEMP and Orochi, and we were able to successfully complete the business. In addition, in order to protect the customer and Sokyoen from the new COVID-19, we will implement a plan. As a result, sales increased by 3.1% compared to the previous year at $2,238,400,000 and recorded the highest record in the past. Online shop sales increased by 8.7% and departmental sales increased by 19.7%. The most serious result was Please. Please.
spk02: We're pleased to announce that we have closed out a successful year, although the resurgence of COVID-19 had a significant impact on our business. During fiscal year 2022, we have achieved several accomplishments. We completed our initial public offering successfully in January 2022 and listed on NASDAQ, which marked a new chapter in our company's history. We also actively expanded our business by adding more stores and wholesale customers. In addition, we implemented strict prevention measures to protect our employees and customers from the COVID-19. As a result, we generated a record revenue of $228.4 million, representing an increase of 3.1% from last fiscal year. Revenues generated from online stores increased by 8.7%, and revenue from franchise stores and wholesale customers increased by 19.7% during this challenging period. Our solid financial results demonstrated our efforts and dedication to execute the company's strategic initiatives, our capabilities to grow business, and the ability of our team to provide high-quality products and on parallel service to all the customers. 2022年8月19日現在当社は日本国内に直営11店舗香港に直営店舗は5店舗オンラインストアは25店舗北米国フランチャイズは19店舗カナダにフランチャイズ4店舗英国にフランチャイズ1店舗
spk06: As of August 15, 2022, we had 11 directly operated physical stores in Japan, five directly operated physical stores in Hong Kong, 25 online stores, eight franchise stores in the U.S.,
spk02: four franchise stores in Canada, one franchise store in the UK, and around 151 wholesale customers in Japan and other countries.
spk06: we will make more choices than ever before. We will also work hard to provide high-quality products and services to customers. These measures will improve our brand's reputation, strengthen existing customers' relationships, and enable new customers to operate. We continue expand our business globally and optimize of international warehouse operations in North America.
spk02: We will focus on diversifying our products and providing more options for our customers. We remain focused on providing high-quality products and invaluable service to our customers. We believe these initiatives will improve our brand awareness, strengthen relationships with existing customers, and attract new customers. We are confident about the flexibility and resilience of our business model and the strategic development initiative we are making.
spk06: Thank you very much for your support. I will explain in detail about the financial situation in March 2021 from Mr. Haka, who is in charge of finance, on behalf of the business people. Mr. Haka, please.
spk02: Thank you for your continued support to the company. Next, I will turn the call over to our principal accounting and financial officer, Mr. Yorichiro Haga, for a closer review of our financials for fiscal year 2022 on behalf of the management team. Mr. Haga, please go ahead.
spk04: Thank you, Mr. Kanayama. Good morning, everyone. On behalf of the management team, I will provide a brief financial overview of fiscal year 2022. Our business has been affected by various uncertainties and challenges during fiscal year 2022, but we generated a record revenue with our strong business fundamentals. Total revenue net 3.1% to $228.4 million for fiscal year 2022. From $221.5 million for the same period of last year, the increase was due to the increased revenue from online stores, franchise stores, and wholesale customers. which was partially offset by the decrease in revenue from directly operated fiscal stores. Revenue from directly operated fiscal stores down by 63.3% to $10.8 million for fiscal year 2022. The decrease was mainly due to the threat of emergency declares by the Japanese government in April 2021 in response to the COVID-19 pandemic. Almost all the company's physical stores were temporarily closed from late April 2021 to the end of May 2021. As these companies' physical stores They opened in June 2021. Most of the company's physical stores remained closed on Saturdays or Sundays, and the opening hours were shortened on weekdays. After July 2021, most of the company's physical stores resumed their business with working hours reduced by one to three hours every day. The company's physical store business was still negatively affected during fiscal year 2022. Revenue from online stores up by 8.7% to $121.2 million for fiscal year 2022. The increase was due to the growing popularity of the online shopping, given that the e-commerce industry has been rapidly expanding in recent years. In order to seize the opportunities, the company expanded its online store network by opening new stores on multiple popular and reputable third-party e-commerce marketplaces in overseas regions. while improving the efficiency of its supply chain and short-storage and inventory management. Revenue from franchise stores and wholesale customers up by 19.7% to $96.4 million for fiscal year 2022. With the improvement of the company's supply chain, storage, and logistics capacity, The company added five new franchise stores and increased sales to overseas wholesale customers on a per-custom basis during fiscal year 2022. Gross profits decreased slightly by 2.3% to $39.1 million for fiscal year 2022. Overall gross margin was 17.1% for fiscal year 2022. Operating expenses increased by 7.5% to $32.7 million for fiscal year 2022. The increase was due to the increase in sitting expenses, transaction commissions, consulting, and professional service fees, payroll, employees, business expenses, and bonus expenses. Net income was $3.3 million for fiscal year 2022. Basic and diluted earnings per share were $0.10 for fiscal year 2022. As of March 31st, 2022, the company has cash of $17.7 million. As of March 31st, 2022, the company has accounts receivable balance due from third parties and related parties of $34.8 million and $6.3 million respectively. Approximately 52.1% of the balance of March 31, 2022 has been subsequently corrected and the remaining balance is extended to fully correct by September 30, 2022. The corrected balances of such receivables provide cash available for use and companies operations as working capital if necessary. As of March 31, 2022, the company had merchandise inventories of $30.2 million, which the company believes can be sold quickly based on its analysis of the current trending demand for its products. For fiscal year 2022, net cash used in operating activities was $12.3 million. Net cash used in investing activities was $2.9 million. Net cash provided by financing activities was $18.3 million. We feel very positive about our overseas e-commerce business and aim on exceeding approximately 11 percent, increasing our revenue in fiscal year 2023. We remain confident in our business and the potential to grow, but we might expect to see low transportation costs and high proportion and advertising expenses and facility related costs. Now, I'd like to turn the discussion over to the operator for any questions.
spk00: Thank you. We will now begin the question and answer session. To ask a question, please press star then 1 on your touchscreen phone. If you are using a speaker phone, we ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. Today's first question comes from Lucas Chang with Johnson's Company. Please go ahead.
spk03: Hi, Company. Thank you for sharing the information. I think in the remarks, Mr. Kanayama mentioned that the company plans to optimize the international warehouse operations in North America. So what are the approaches for the company to achieve this?
spk01: Thank you for your interest in our overseas business. Regarding our overseas warehouse,
spk06: We are currently proceeding with the consultation. We plan to build a large number of warehouses in the U.S. and Canada. With the establishment of these warehouses, franchise stores will be able to speed up their sales. At the same time, we will be able to reduce the demand for franchises. Thank you very much for your interest in our business. Currently, we're negotiating with potential partners
spk02: regarding the overseas establishment of warehouses. We plan to build several large integrated warehouses in the United States, Canada, and other places. By setting up overseas warehouses, we can quickly supply goods to franchise stores as well as other wholesalers, which is expected to expand over customer base. It is worth mentioning that We have also made the same strategic arrangement in Hong Kong for our business expansion.
spk03: Thank you for your answer. And my second question is, since Japan has reopened for tourism and needs some quarantine requirements, so what do you expect to see the business of the physical stores and how you are thinking about outlook for the next six or seven years?
spk01: Nihon no kankou ga saikai sare, meneki, keneki jouken ga kagawa sa remashita tame, jittai tenpo no bizinesu wa dono you ni naru to yosou sa rete masu deshou ga? Mata, lainendo no mitoushi ni tsukimashite dono you ni kagai te imasu deshou ga? Go kyouji onegai itashimasu.
spk04: Jittai tenpo no uriage wa sukoshizu modotte kuru to soupei shite orimasu. For this reason, we are working hard to increase our customer base. Recently, we have also participated in live distribution and sales. We set up a corner to introduce actual stores, shopping information corners, and cosmetics, and use the Internet to improve brand power and popularity. However, due to the global pandemic, we are reviewing our actual store management model again. We will continue to improve. We are focusing not only on inbound stores, but also on attracting more local customers so that stores can develop. Yes.
spk02: We're excited about the recovery of the tourism in Japan, and we believe sales at our physical stores will surely pick up gradually. In the meantime, we're working to attract more customers. Recently, we developed our live streaming in commerce business, which is a popular trend right now. We also set up a space at our stores to do live streaming and shared some tips about choosing merchandise and cosmetics knowledge. We aim to attract more customers and enhance our brand awareness by leveraging the power of the internet and live streaming. On the other hand, we have also reassessed our current business model after experiencing the challenges associated with COVID-19 pandemic. And we realize that it is necessary for us to make some change. We need to generate generate revenues through virus streams at our physical stores instead of relying solely on overseas tourists, which we are currently working on. In order to achieve this, we have taken some necessary measures, including adding billboards in the streets and hosted promotional activities, which have been effective in attracting customers. With these efforts, our goal is to consistently build our brand popularity to have a good impression and gain the trust from our customers. Thank you.
spk00: Thank you. Our next question comes from David Lee, a private investor. Please go ahead.
spk05: Hi, Ira. I found the company's strength to practice. And I noticed that the company plans to enter into Malaysia market. So does the company have plans to further its plan into Southeast Asia market? Or are there any regions the company plans to enter? Thank you.
spk01: I heard that the company is planning to enter into the Malaysia market. Are there any plans to expand the market in Southeast Asia? Are there any other areas you are planning to expand? Mr. Kanayama, please. Yes. Of course, we are planning to expand the market in Southeast Asia.
spk06: We are planning to expand the market in Southeast Asia. We plan to expand the market in Southeast Asia. We plan to expand the market in Southeast Asia. We are planning to expand to the broad Southeast Asia market.
spk02: We are planning to partner with some high-profile business partners in the local market to set up distribution channels in specific regions or countries in general as it is in the preparation of launching new stores in Southeast Asia. It is also in our future blueprint to further our business to New Zealand and Australia. Thank you.
spk00: Thank you. Our next question today, I'm sorry, as a reminder to ask a question, please press star then 1. Our next question today comes from Kathleen Long, a private investor. Please go ahead.
spk07: Oh, hi, company. Given the current product offerings, does the company plan to extend your product lines besides beauty and healthy products?
spk01: Yes.
spk06: We are working on the product line for a long time. Now, we are working on products that are not in the focus of other companies. For example, we are working on products that are in the focus of other companies. For example, we are working on products that are in the focus of other companies. For example, we are working on products that are in the focus of other companies. For example, we are working on products that are in the focus of other companies. For example, we are working on products that are in the focus of other companies. We are looking for various fields such as shampoo, body soap, baby products, water bottles, shopping bags, sanitary products, masks, drinks, food, etc. We are trying to innovate. We are still employing doctors with 25 years of experience in the field of medical devices.
spk02: We are working hard to enrich our product offering. We are currently the sole retailer to offer trendy toys and rare ones with high value which our competitors have not been able to offer. At the same time, we are also working on the development of our private label products So far, we have developed products such as shampoo, shower gel, shower products for baby, grocery bags, thermos cups, disposable face masks, and natural water. We're also exploring in virus fields with innovation and making some good progress. In addition, an experienced expert holding a PhD degree with 25 years of experience in a medical device field recently joined us to empower with R&D team to develop more new products. Thank you.
spk07: Thank you for sharing. And I have one more question. So could you please elaborate the company's initiatives to improve the probability? .
spk01: I'm sorry. Can you tell us about the efforts to improve the economy? Mr. Haga, please. Yes.
spk04: In March 2022, in order to reduce the impact of COVID-19, we continued to improve our reputation and brand, improve our product management, improve our business model, and increase our marketing. Specifically, we invested more money in our advertising activities, Not only the signboard, but also the famous internet platforms, such as YouTube and Facebook. We are also setting up our own channels and talk banners. We are also planning to launch our own stores, and we hope to expand our business as well as improve our brand power. And then, overseas shipping. Also, the customization of the system, the integration of the system, the situation of the import and export of the stock products, such things are understood in real-time. Also, the popular situation in the market, this is also understood in real-time, and we are designing a mechanism that allows us to respond more quickly and accurately to the supply and demand survey. We also believe that we will be able to reduce the cost of water production. On the other hand, we have signed a contract with a well-known agent agency, and we are continuing to recruit people with a lot of experience. By gathering more talented people and enriching various departments, We are working to make our team more active and cooperative. We are also developing a management model that relies on revenue from only certain areas. We are also developing a management model that relies on revenue from only certain areas. We are also developing a management model that relies on revenue from only certain areas. We are also focusing on the development of new stores and franchise stores in North America. We hope that this kind of business plan will continue to develop in the future. Currently, due to the pandemic, not only our company, We are faced with many difficulties and challenges, but we believe that there is a chance for companies to improve in such a situation. We believe that it is valuable for companies to overcome such challenging situations and secure a black market.
spk02: During the fiscal year 2022, to mitigate the negative impact of COVID-19, we will continue to enhance our brand awareness, refine products management, reduce shipping costs, optimize operations, and diversify marketing. Specifically, we invested more in our advertising campaigns, continuing to build our own channels and advertising banners, not only on street signs, but also on virus internet platforms such as YouTube and Facebook. We also plan to expand the number of physical stores, which is also a way of branding. By importing Japanese inventory management system into the overseas warehouse space, we can quickly grasp the status of products entering and leaving the warehouse and popular products in the market, respond to distribution and products purchase more quickly and accurately, and reduce shipping costs and unnecessary purchase of goods. In addition, we have contracted with a well-known job recruitment agents in Japan to continue recruiting experienced employees. We aim to form a more experienced team to run the business better and more effectively. In addition, we are diversifying our sales channels and market development. We are also working on expanding our EC channel in countries and regions such as UK and Southeast Asia, opening new warehouses and franchises in North America. and developing wholesaler customers. Based on the above management plans, we can expect a lot of growth in the next fiscal year. At present, we're facing many difficulties and challenges caused by the epidemic, but this is also an opportunity for company reform. A company that has overcome many difficulties and is still profitable is a company worth of investors' trust. I can confidently say that Yousef is one of such company. Thank you.
spk07: Thank you.
spk00: Thank you. Showing no further questions, let me turn the call over to the company's IR representative from Ascent Investment Relations for closing remarks.
spk02: Thank you very much for joining this conference call. If you have any questions, please contact us through email at ir at ystbek.co.jp or reach our IR Council Assistant Investor Relations at tina.xiao at ascent-ir.com. Management will respond to your question as soon as possible. We appreciate your interest and support in UCEDD and look forward to speaking with you again next time.
spk00: Thank you again for attending the OC2's fiscal year 2022 earnings conference call. This concludes our call today, and we thank you all for listening in. Goodbye.
Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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