Ito-Yokado improves profits after reducing stores. Retail reform considered through the lens of differences with Aeon

When I hear the name Ito-Yokado, I used to associate it with a strong retail image.

Food. Clothing. Daily necessities. Household goods.

It was a large supermarket where you could find almost anything if you went as a family. It was the quintessential general merchandise store.

However, recently there has been a lot of news about store closures, and it has become harder to feel the same strength as in the past. In fact, Ito-Yokado has been reducing its number of stores and has also withdrawn from the apparel business.

That is why I thought Ito-Yokado was in a difficult position.

However, recent news has presented a slightly different perspective.

Sales are down. But profits are improving.

This is the interesting part.

This article is not about whether to buy or not buy it as a high-dividend stock. It is about whether we should judge retail solely by the number of stores or sales figures.

Conclusion

Ito-Yokado is not simply reviving as the general merchandise store it once was.

Rather, I see it as being in the process of discarding its old form and rebuilding into a retailer that retains profit.

Reducing stores. Withdrawing from apparel. Strengthening food. Making fresh fish and meat sections like specialty stores. Attracting new customer segments with low-priced private brands.

This is not just a simple contraction.

Narrowing down sales floors that were spread too thin. Stopping weak businesses. Concentrating on strong food categories. Increasing the profit margins of the remaining stores.

This is the trend.

In retail, you cannot judge the situation solely by whether the number of stores is increasing. It is also not enough to look only at whether sales are large.

Are the remaining stores in a shape that can generate profit? This is what is important.

The old Ito-Yokado was a store where you could find everything

In the past, Ito-Yokado was strong as a general merchandise store.

Buying groceries. Buying clothes. Buying daily necessities. Buying children's goods. Also stocking up on household goods.

It was a store where you could get most things done if you went as a family.

However, the competition is too strong now.

For clothing, there is Uniqlo and Shimamura. For daily necessities, there are drugstores and home centers. For food, there are food supermarkets like Yaoko, Lopia, OK, and Life. There is also online shopping.

In this environment, large stores that handle everything in-house have become a burden.

Large sales floors. Many staff members. High fixed costs. The burden of maintaining weak sales departments.

The comprehensive strength that was a strength in the past has now become a weight.

Therefore, it is natural that Ito-Yokado reduced its number of stores. It was because it was difficult to continue in the old format.

So, why does Aeon seem to be increasing?

A question arises here.

If general merchandise stores are struggling, why does Aeon seem to be increasing?

This question is quite important.

The answer is that Aeon is not competing solely with old-fashioned general merchandise stores.

Aeon is not simply a company that is increasing the number of large supermarkets.

They build malls. They own food supermarkets. They strengthen private brands. They also have drugstores. They have finance. They include specialty stores. They also include movie theaters and restaurants. They collect rent from tenants.

In other words, Aeon is not just a company that sells all its products itself. It is a company that creates commercial zones where people gather.

This is where it differs from old-fashioned general merchandise stores.

When you go to an Aeon Mall, it is not made up solely of Aeon-operated stores. It includes Uniqlo, GU, Muji, restaurants, movie theaters, clinics, arcades, and food courts.

Even if their own clothing line is weak, if they bring in strong specialty stores, people will come. They capture daily demand with food, create dwell time with the mall, and can also generate revenue through finance and cards.

Therefore, the fact that Aeon appears to be growing and the fact that traditional general merchandise stores are struggling are not contradictory.

Ito-Yokado is restructuring from a general merchandise store to one centered on food. Aeon is creating a lifestyle infrastructure-type commercial zone that includes general merchandise stores.

This is the difference.

Ito-Yokado is restructuring by shifting toward food.

It is natural for Ito-Yokado to focus on food.

Clothing and general goods are easily taken by specialty stores and the internet. However, food provides a reason to go shopping on a daily basis.

Especially fresh fish, meat, prepared foods, produce, and daily delivered goods.

These areas provide a reason to visit the store.

In this news as well, the specialization of fresh fish and meat, and the strengthening of low-priced private brands are mentioned.

This is easy to understand.

If they are just cheap, they will clash head-on with OK and Lopia. If they are just convenient, they will lose to convenience stores and drugstores.

Therefore, it seems that Ito-Yokado is trying to create a reason to visit by combining freshness, expertise, prepared foods, and a sense of value within their food offerings.

It is difficult to say 'come because we have everything' like in the old days. I think they are trying to change into a form where there is a reason to go if you want to buy food.

If profits increase even with declining sales, the perspective changes.

If you reduce the number of stores, sales will tend to decline.

This is natural. If you close a store, the sales from that store will disappear.

Therefore, if you only look at sales for a company that is reducing its stores, you will misjudge the situation.

What is important is whether the remaining stores are becoming profitable.

Closing unprofitable stores. Withdrawing from weak sales areas. Focusing on food. Improving gross profit margins. Reducing fixed costs.

If operating profit is increasing as a result of this, the substance of the business has changed.

In retail, even if sales are high, it is weak if no profit remains. Conversely, if profit margins are improving even as sales decline, the substance of the business may be getting better.

This is what I want to confirm with the news about Ito-Yokado.

Has the old Ito-Yokado returned? Or is it trying to transform into a different form of retail?

I believe it is the latter.

Retail should be viewed by 'reasons to visit' rather than store count

What is important in retail is not just the number of stores.

Why do people go to that store? Is there a reason to choose that store over others?

This is the point.

I go because it's cheap. I go because it's close. I go because the prepared food is strong. I go because the fresh fish is good. I go because the meat is good. I go because the private brand is cheap. I go because it's easy to visit with children. I go because I can do some incidental shopping.

Stores with a reason to visit are strong.

Conversely, stores that have everything but are mediocre in every aspect are in a tough spot.

The general merchandise stores of the past had 'having everything' as their strength. But now, specialty stores have become too strong.

That is why retail needs to decide where to win rather than selling everything.

In the case of Ito-Yokado, that is food. In the case of Aeon, it is a commercial sphere that combines not only food but also malls, specialty stores, finance, and private brands.

Even though they are both retail, their ways of fighting are different.

My assessment

Ito-Yokado is not simply reviving as the general merchandise store it used to be.

I see it as being in the middle of rebuilding into a retail business that retains profit by reducing stores, withdrawing from apparel, and focusing on food.

Therefore, I do not judge it as a failure just because the number of stores is decreasing. Conversely, I do not say it is a complete recovery just because profits are improving.

What is important is whether the remaining stores are in a shape that can earn money.

Will strengthening food products bring customers back? Can they create reasons to visit through fresh fish, meat, and prepared foods? Can they capture a new customer base with low-priced private brands? Can they maintain their operating profit margin?

We will check these points.

The reason Aeon appears to be growing is not because traditional general merchandise stores are strong. It is because they are creating commercial zones that combine malls, food, specialty stores, finance, and private brands.

If you think about these differences separately, retail news becomes much easier to read.

The news about Ito-Yokado is also a story about how a retailer that was once strong has fallen on hard times. At the same time, it is a story of retail reform, improving profit margins by reducing the number of stores.

It is interesting as a way of thinking when looking at retail, regardless of whether you buy or not.