The global wave of inflation is pushing consumers towards DS business formats. Let’s explore the insider details.

With the booming rise of foreign tourists in Japan, inbound consumption thrives.
Pan-Pacific International Holdings, the operator of the discount store “Don Quijote,” reported a net profit of 24.6 billion yen for the July to September 2023 period. This represents a 33% increase compared to the previous year and the highest level ever recorded during the same period. The strong performance can be attributed to robust sales of duty-free products, driven by an increase in inbound tourists. Additionally, sales of summer clothing and leisure goods remained strong due to the lingering summer heat.

The revenue increased by 8% to 509.3 billion yen, and operating profit rose by 38% to 32.8 billion yen for the period from April to September. Both figures set new records. The sales operating profit margin was 6.5%, reaching its highest level in six years since the period from July to September in 2017 (6.4%).

The driving force behind this performance was the domestic discount business, with operating profit increasing by 44% to 18.9 billion yen. Existing store sales showed strong growth with an 11% increase. Sales of duty-free items, which were almost nonexistent in the same period of the previous year, reached 21.1 billion yen. The recovery in inbound tourism boosted the popularity of high-margin products such as cosmetics and pharmaceuticals. The sales composition by nationality of inbound tourists accounted for over 60% from South Korea, Taiwan, and Southeast Asia, with China, which was nearly zero the previous year, also contributing 20%. Sales of seasonal goods such as cooling products due to the lingering summer, as well as summer clothing and leisure goods, also saw growth.

The operating profit of the general supermarket business increased by 90% to 7.2 billion yen. Sales of seasonal items and cosmetics for the summer season contributed to this growth. Efficiency measures such as appropriate staffing and careful selection of sales promotions were also implemented. The overseas business struggled with a 29% decrease in operating profit, amounting to 1.7 billion yen. Expansion costs in Asia and North America, combined with rising wages, contributed to this challenging performance.

The earnings forecast for the fiscal year ending in June 2024 remains unchanged. Consolidated sales are expected to increase by 6% to 2.621 trillion yen compared to the previous year, and operating profit is anticipated to rise by 5% to 111 billion yen, setting a new record for the 35th consecutive year.

On the same day, the company also announced the transition of private brand (PB) from “StyleONE” to “UNY” for its subsidiary general supermarket, UNY. StyleONE was a common brand with supermarkets in the Kansai region, such as Izumiya and Hankyu Oasis, but the partnership will be dissolved by the end of March 2024. President Naoki Yoshida stated during the earnings briefing on the same day, “We are dissolving the partnership in a developmental manner to walk our respective paths. We will switch to a new brand name and start afresh.