Yamada Denki profits from strategy change
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Japanese electronics retailer Yamada Denki saw its operating profit surged to 2.5 times the year-earlier level in its latest quarter.
The company says this reflects a strategic pivot to highly profitable white goods from digital electronics, which are susceptible to price drops.
Logging 6.4 billion yen (US$62.4 million) in operating profit for the April-June period, the company says air conditioners sold briskly, as did ultra-high-resolution 4K televisions ahead of the Olympic Games in Rio de Janeiro.
However, sales for the quarter fell 2 per cent to 363.7 billion yen. Widespread clearance sales ahead of store closures last year account for part of the comparative drop.
Yamada Denki’s gross margin widened 0.4 points to 28 per cent following the closure of about 60 unprofitable locations last year. It has also remodelled about 200 stores a year since 2014, allowing more space for home appliances such as refrigerators and washers at the expense of personal computers.
Coming from a human resources background, the company’s new president appointed in April, Mitsumasa Kuwano, has spearheaded reforms to the company’s staffing strategy, such as putting more workers on the sales floor during busy periods.
Questions & Answers
Q.What is the main reason for Yamada Denki's increase in operating profit?
What is the main reason for Yamada Denki's increase in operating profit?
The company attributes the profit surge to a strategic shift from digital electronics to more profitable white goods, such as air conditioners and home appliances. This change helped improve their profit margins.
Q.Did Yamada Denki's overall sales also increase during this period?
Did Yamada Denki's overall sales also increase during this period?
No, the company's sales for the quarter actually fell by 2 per cent. Part of this decline is due to widespread clearance sales that occurred last year ahead of store closures.
Q.How has the company's retail footprint changed recently?
How has the company's retail footprint changed recently?
Yamada Denki closed approximately 60 unprofitable locations last year, which contributed to widening its gross margin. Also, it has remodelled around 200 stores annually since 2014.
Q.What changes has the new president, Mitsumasa Kuwano, brought to the company?
What changes has the new president, Mitsumasa Kuwano, brought to the company?
Mitsumasa Kuwano, appointed in April, has focused on reforming the company's staffing strategy. This includes deploying more workers onto the sales floor during peak business periods to enhance customer service.
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