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Leading Conveyer Sushi Chain Kappa Create Holdings Reports Net Loss of 2.2B Yen

April 11, 2013

Kappa Create Holdings, located in Saitama City under the management of President Keiichi Tokuyama, announced its financial report card for the business term ended Feb. 2013. Despite turnover of 94.1 billion yen, up 1.6%, operating profit exhibited an outstanding reduction from 3.357 billion yen a year ago to 810 million yen, or down 76.1%. Ordinary earnings dropped 74.8% to 791 million yen and net loss of 2.234 billion yen was reported, which was net income of 1.532 billion yen in the previous year.

Domestic sushi-go-around business, the pillar operation of the company, posted remarkably unfavorable proceeds. In addition to loss triggered by the closures of some restaurants, another loss reported by restaurants that were a target of impairment loss for tangible assets, created 99 million yen in loss on retirement of noncurrent assets, 190 million yen in loss on restaurant closures, and 1.86 billion yen in impairment loss. The reduction of deferred tax assets came to 577 million yen and it was posted as deferred income taxes. The dividend was forgone.

Regardless of efforts to recover sales of existing conveyer sushi restaurants Kappa Sushi, sales progressively suffered from budget-minded consumers, relentlessly increasing competition, and irregular operations of restaurants. The increasing number of restaurant closures fueled rising cost of sales, leading proceeds to become significantly worse.

The company has introduced new strategies to heighten the value of a 105 yen/ plate deal, review restaurant operations which put too much emphasis on “bullet train lanes” to satisfy orders in recent years, and provide fresh products on regular conveyer lanes in a balanced, timely manner.

However, it has been taking a great deal of time to implement the strategies and currently the company is focusing more on this aspect of business.

The company became a holding company on September 1, 2012. It aims to clearly define sushi-go-around operations and the responsibility of each vendor company within the group; to invigorate existing operations; to share and streamline indirect operations in the group; and to stabilize and further develop its business foundation. The first year, however, witnessed disappointing numbers that were greatly lower than planned, ending in partial pay cuts on an executive level. On October 1, 2012, the Purchasing/ Manufacturing Department was separated from the group to independently launch a company called Kappa Create Supply Co. Ltd.

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