| The year ended August 31, 2008 was marked by the beginning of a period of severe culling in restaurant chains, with companies intensifying competition to attract customers. Market conditions were also severe for Saizeriya, where sales at existing restaurants declined for the ninth consecutive month in comparison with the previous year. In the face of slowing consumer spending, our competitors tried to attract customers through advertising and promotional campaigns, aiming to guarantee their sales. Under these conditions, Saizeriya put effort into enhancing its competitiveness by further improving the vertical direct-to- consumer production and sales systems that are unique to the Company, such as by refining its core products, strengthening outlet operations and promoting efficient production and logistics systems. As a result, the Company booked consolidated net sales of \84,949 million in the fiscal year under review, up 2.5% from the previous year, ordinary income of \7,853million, down 5.4%, and net income of \4,011 million, down 9.1%. I would like to explain the following three points in regard to our business performance for the current period, along with the issues we have to tackle in the future. |
1. Enhancement of core products
Amid intensifying competition in the dining-out industry, our competitors tried to attract customers through advertising and marketing campaigns such as TV commercials and discount cards. Saizeriya considered it most important to create products that are priced reasonably enough for our customers to be genuinely willing to choose them. From this viewpoint, the Company worked on creating core products through refining our products. The Company's efforts to improve the quality of its products by further refining popular products and narrowing down targeted items are well under way, and current sales at our existing restaurants have picked up on a year-on-year basis. We expect that per-customer spending, the number of customers and sales will slowly grow together in and after the next fiscal term.
2. Response to surge in the prices of ingredients
The Company procures most of its ingredients by itself and employs vertical merchandising from production up to the point at which food is consumed by customers. If ingredients are purchased from other companies, the main effect of surges in material costs is an increase in menu prices. In contrast, the direct-to-consumer production and
sales system operated by the Company allows for numerous improvements at every stage of the process, such as enhancing productivity by focusing product lines at plants and curbing shipping costs by improving transport efficiency and transportation methods. Given this, we believe that Saizeriya is the company best able to hammer out reform and improvement measures, as it employs a more vertical direct-to-customer production and sales system than any other food service provider. With shortage of ingredients due to the surge in prices, the Company will strive to offer its products at unchanged prices by taking full advantage of its direct-to-customer production and sales system, as well as absorbing the increasing cost of ingredients by streamlining the entire process.
3. Overseas operations and future outlook for the domestic market
Our overseas operations, primarily in cities across China, have been performing well. Thanks to strong business performance in Shanghai, where 20 stores are now being operated, we opened new restaurants in Guangzhou, Beijing and Taiwan during the current fiscal year.
For the year ending August 2009, the Company will strive to further enhance its restaurant management, lower costs and improve productivity. The Company expects to achieve an increase in per-customer sales by improving the side-dish items that complement popular products. The refinement of core products will improve productivity at plants, as well as increase gross profits. In the fiscal year ending August 2009, its profits are expected to show an upward trend through the strengthening of management ability.
We ask for your understanding of Saizeriya's corporate efforts for the future, and look forward to enjoying continued support from you, our shareholders.
