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Management Policy

Corporate Strategy

(1) Basic Management Policies

AEON MALL Co., Ltd. is a Life Design Developer (note), creating the future of community living as we pursue our basic principle that the customer comes first.

In pursuit of this philosophy, we develop malls localized to the characteristics of each community we serve in Japan and around the world. In this way, we contribute to better individual lifestyles and community growth.

(Note) Life Design is the process of designing future living across the many life stages of our local customers, providing functions beyond the traditional framework of commercial facilities. Life Design extends beyond shopping to include personal interactions, cultural education, and more.

(2) Target Performance Indicators

AEON MALL Co., Ltd. has defined return on invested capital of 6%, equity ratio of 30%, and net debt-equity ratio of 1.0 times as key management indicators. We observe these indicators as reflections of profitability and financial strength.

The Company recorded the following indicators for the fiscal year ended February 2019:

Return on Invested Capital: 4.4%
Equity Ratio: 31.9%
Net Debt-Equity Ratio: 1.1 times

(Note) Return on Invested Capital: Operating Income x (1-Effective Tax Rate) / Average Equity for the Fiscal Year + Average Interest-Bearing Debt for the Fiscal Year)
Equity Ratio: Equity / Total Assets
Net Debt-Equity Ratio: (Interest-Bearing Debt - Cash and Deposits) / Equity

(3) Medium-Term Management Strategies and Priorities

We have defined five initiatives through which we will build a resilient foundation delivering sustainable growth and high profitability: (1) Capture growth opportunities in Asia; (2) Develop latent sources of domestic demand; (3) Become the overwhelmingly dominant mall in each region; (4) Capture urban growth opportunities; and (5) Implement an optimal financing mix and build organizational structures that support growth.

(i) Capture Growth Opportunities in Asia
Specialty store sales in China andASEAN continue to show double-digit growth. We will develop our businesses in these regions as our growth drivers for the foreseeable future. In conjunction with growing the number of malls we operate, we will also move forward measures to become the dominant presence in each area. As our existing malls become more profitable, new malls are becoming more profitable at earlier stages, contributing to future profits.

We will continue to open malls that dominate the competitive landscape in China and ASEAN. Our focus in China will be building new walls in Hubei Province and other interior regions that demonstrate higher economic growth compared to China’s coastal areas. In ASEAN, we will press forward in growing our businesses in Vietnam, Cambodia, and Indonesia. In particular, we plan to accelerate small openings in key areas of the growing Vietnamese market.

As we open new malls and improve our brand recognition, we expect to achieve further profits by attracting more customers and improving the terms of our tenant leases. At the same time, we intend to expand floor space and conduct renovations timed strategically with the conclusion of lease agreements with specialty stores.

Further, we plan to improve the speed of our decision-making and secure higher growth by improving our expertise in management and operations as a result of opening more locations overseas. We will also strive to localize mall management and cultivate human resources capable of working on a global scale. We believe these efforts will result in a strong foundation driving profit growth overseas.

(ii) Develop Latent Sources of Domestic Demand
We intend to generate new demand in Japan by addressing a greater range of consumer segments, responding to local community needs across a wider range of customer age groups.

We will reach deeper into existing market areas by playing a stronger role in providing more functions to the community to our malls, serving as an important member of the community. Examples of our efforts here include unique mall-based activities tailored to the community, as well as public functions meeting the diverse needs of local citizens, including government offices, post offices, and libraries. We will also work to create stronger relationships with local community groups.

In addition to our traditional family target segment, we intend to target seniors and other age groups. AEON MALL aspires to be a space for customers to find happiness. We are rolling out Happiness Mall initiatives to build stronger communities based on four pillars: Health, Wellness, Community, and Opportunity.

At the same time, we plan to strengthen our ability to attract customers through a number of tactical measures.
These measures include leveraging social media, adapting digital technology to small infrastructure, introducing popular leading specialty stores from overseas, and working closely with specialty store companies in mall operations.

(iii) Become the Overwhelmingly Dominant Mall in Each Region
Competition among malls in Japan is intensifying, partly due to the popularity of e-commerce. We must establish an overwhelmingly dominant position in each region as our industry experiences a shakeout. To achieve this position, we plan to create competitive advantages in Japan through aggressive expansions and renovations of existing malls as well as through the introduction of new malls in unserved areas, selected carefully through in-depth area marketing.

As consumer needs continue to diversify, we must do more than rely on traditional mall formats. Accordingly,
we intend to develop new formats offering an integrated approach, including regional innovative commercial facilities.

We will work together with specialty store companies to help them address labor shortages and other issues.
Our efforts will include raising employee satisfaction through on-site daycare facilities and upgraded employee break rooms.

Through our efforts, we believe we will secure our position as the overwhelmingly dominant malls in each region of Japan, enjoying high market share, the ability to attract customers, and support from our specialty store tenants.

(iv) Capture Urban Growth Opportunities
OPA Co., Ltd. develops urban shopping centers in Japan. The company plans to improve profits through new shopping centers and greater efficiency at existing facilities through major renovations, including scrap-andbuild projects. The company will build greater brand recognition as a new OPA.

(v) Implement Optimal Financing Mix and Build Organizational Structures That Support Growth
AEON MALL is building a solid financial base to support our medium- to long-term growth strategy. We are doing this through better asset and investment efficiencies, as well as maximized cash flows. We promote diversity in management to cultivate an inclusive diverse human resources approach that drives corporate growth. At the same time, we are strengthening management systems and governance, sharing our business expertise developed in Japan and fostering faster decision-making.