Overview of Capcom's Business and Outlook for the Future
We operate "Plaza Capcom" amusement facilities in Japan. These arcades are predominantly in large commercial complexes and host various events designed to attract families and female customers. We have diligently followed a scrap-and-build policy to maximize our efficiency in arcade operations.
Market Declines Slightly by 1.7%, Near Last Year's Level on Inexpensive, Nearby and Short-Duration Leisure Activities Market Has Stabilized from Stronger Management of Each Company's Existing Facilities
During the previous fiscal year (ended March 31, 2011), the number of facilities decreased after the domestic arcade facility market contracted for three straight years, its value decreasing to 495.8 billion yen (down 1.7% from the previous year); the rapid decline, which started in fiscal 2007 and lasted for three years has temporarily ceased.
Facilities decreased slightly to 18,638 locations (down 3.0% from the previous year).
This fiscal year (ended March 31, 2012) despite the voluntary restraint resulting from the Great East Japan Earthquake of March 2011 and its impact on consumer consciousness, inexpensive, nearby and short-duration leisure activities fueled the renewal of arcade facilities. However, electricity conservation from summer resulted in shorter hours of operation and flagging popularity of prizes, resulting in a market nearly the same as last year.
In terms of outlook for the future, concerns over planned power outages in certain areas and repercussions from last year's expansion of short-distance leisure cannot dispel the uncertainties. However, closing unprofitable facilities and augmenting investment in existing facilities, we expect to secure about the same level of investment in the development of new products as last year as the market stabilizes.
Operating Results for This Fiscal Year
Net Sales Up 0.9%, Operating Income Up 58. 0%, Achieved First Increase in Sales and Profits in Three Years by Establishing Customer-Oriented Community-Based Facilities
Capcom's strengths in this business category are: (1) specialization in opening mall-based large-scale facilities that quickly secure a long-term stable customer base, (2) the planning and operation of sales venues popular with customers and (3) the ability to maintain higher profitability than the competition by selling or shutting down unprofitable facilities to raise return on investment.
In this fiscal year, we held various events, updated existing facilities and implemented a "service day" in an attempt to create new demand, establishing customer-oriented community-based facilities. Furthermore, in addition to holding arcade experience tours for people 50 years and older, Capcom also worked to expand its customer base to include female, family and older-generation customers, while endeavoring to improve the earning capacity by controlling investments, reducing costs, and operating arcades in line with current market conditions.
Despite a slowdown in customer traffic and intensification of competition with other game consoles including smartphones, with which there is an overlap of the customer base, sales per customer increased as a result of these measures, along with the contribution mainly of proprietary coin-operated games.
In the absence of closing or opening of arcades during the current period, the total number of arcades remained the same as the end of the previous fiscal period at 37.
Achieving 101% of previous year existing store sales, net sales increased to 11,729 million yen (up 0.9% from the previous year) and operating income increased to 1,787 million yen (up 58.0% from the previous year), the first increase in sales and earnings in three years.
Outlook for the Next Fiscal Year
Thorough and Efficient Facilities Management, Closure of Unprofitable Facilities Increased Capital Expenditure Improves Earnings, Forecasting Operating Margin of 15.8%
Next fiscal year (ending March 31, 2013), although the arcade facilities market will likely bottom out, it will take time for a full-fledged recovery from the repercussions of the uptick in inexpensive, nearby and shortduration leisure activities after the earthquake disaster. Capcom will ensure profits through the continued efficiency of its management structure. We also aim to improve the earnings of existing facilities by increasing the amount of capital expenditure and carefully selecting existing facilities for upgrades and machines for investment.
In terms of the opening and closing of facilities, we will further strengthen efficient facilities and close unprofitable ones, while moving forward with the establishment of new facilities in areas with a high concentration of customers to establish new revenue streams. In the next fiscal year, we plan to open two new facilities, and close three old ones.
We forecast net sales of 12,000 million yen and operating income of 1,900 million yen in the next fiscal year.
This Year's Major arcades
"Plaza Capcom Oita"
"Plaza Capcom Morioka"
"Plaza Capcom Omagari"
"Plaza Capcom Ishinomaki"