H2O to invest ¥60 bn through 2017

Jun 14

H2O is a powerhouse in Kansai and its investment programme for the next decade looks set to confirm its dominance in key cities from Osaka down to Fukuoka in Kyushu.

H2O Retailing continues to cement its position as one of the leading retailers in Kansai and Kyushu through selective investments in new retail facilities, upgrades and mergers. It now says it will invest a further ¥60 billion in the three years through FY2017. The investment is part of a 10 year plan called GP10-II and is dubbed GP10-II Phase 1.

As a result of the investment, H2O is forecasting sales of ¥950 billion in FY2017 producing operating profit of ¥30 billion. In FY2014 sales jumped 46.5% to ¥845 billion and operating profit rose 23.4% to ¥21.3 billion. The spike in sales was partly as a result of the merger with Izumiya last June, but strong sales at its department stores and supermarkets also helped.

Profitability has been improving on the back of the higher sales as well as cuts to overhead across the group, and despite losses at Izumiya from store closures. It plans to raise profitability further over the next three years by ruthlessly cutting stores and buildings with low sales densities, particularly at Izumiya.

It will also further consolidate its role as a regional retail powerhouse through more acquisitions. Although the Kansai population continues to fall overall, H2O is focusing on cities where populations are expected to remain stable or even grow, notably Osaka, Kobe, Okayama, Hiroshima and further south to Fukuoka, with a total catchment of 20 million. It aims to become a lifestyle retailer for all population segments in the Kansai area. To further unify group operations and marketing, it will adjust its department store credit card to include all group stores including Izumiya, and launch a group wide prepaid card.

Upcoming highlights in terms of stores include the rebuilding of Hanshin Department Store in Umeda for ¥45 billion, with planned completion by Autumn 2021. A first new section will open in Spring 2018. The new build is part of a much larger redevelopment project called Umeda 1-Chome 1-Ban which will complete in 2022 and include a 38 story office tower. Almost as an aside to such aggressive investment at home, H2O will also rebuild its SC/Department Store in Ningbo in China.