Q. You were appointed as Chairman with the change of Presidents. What are your thoughts as you reflect on your time as the President?

Hiramoto: I became President in June 2017 and served as Representative Director and President for seven years, during which time our performance was significantly influenced by external factors. The consumption tax was increased in October 2019, followed by a corresponding rush to buy and reactionary decline for a short while. The COVID-19 pandemic then hit, which no one could have predicted. K's Denki benefited greatly from demand that arose out of the need to stay at home during the pandemic. Moreover, demand for teleworking spread rapidly, and the special cash payment from the government provided the boost to help us unexpectedly achieve our highest ever profits in FY2021. However, in the post-COVID period, we faced a reactionary downturn from the record high profits, and amid the revitalization of experience-based consumption such as travel, alongside a heightened mindset of protecting lifestyles against the backdrop of rising prices, consumer sentiment toward home appliances/electronics declined and the replacement cycle for such products became longer.
Because of this, our profits have decreased since achieving the record high, but my stance never wavered in spite of that. I never once ordered employees to “sell more or work harder” just because it looked like profits were going to fall. Even during the COVID-19 pandemic, I continued to uphold the philosophy of putting our employees first. Specifically, we allowed each store manager to decide whether to reduce the store’s opening hours or to close it temporarily, and also established a special leave system for employees who wished to take leave to get their vaccinations. In FY2021, we paid out special allowances amounting to approximately 5 billion yen. We simply wanted to do everything possible to reduce the stress and burden on our employees during the COVID-19 pandemic, and to do everything in our power to prevent the spread of infection. Looking back now, I can take pride in saying that this had not been a mistake.
We also gained something from the COVID-19 pandemic. When we were confronted with the possibility that many stores could be forced to close temporarily for an extended period of time, we were worried if customers would be able to survive a month with a broken refrigerator, or whether they would suffer from heatstroke if their air-conditioner broke down during the hot season. Thinking about these questions gave us renewed awareness that the home appliances/electronics retail stores we operate have become a part of the infrastructure that supports social life. I believe that our employees are operating the stores with the same sense of mission as they do in times of disaster.

Q. You have been appointed Chairman. Could you tell us about your initiatives going forward?

Hiramoto: I aim to continue monitoring store development. Until now, our target had been to open 30 stores a year, but in the Medium-term Management Plan 2027^*2, we have set out the plan of opening 30 stores over three years (FY2025 to FY2027). In light of the current situation with store opening costs remaining high, we will open stores at a reasonable pace. This does not mean that we have become passive. It is unlikely that store opening costs will decrease in the future. We will constantly explore ways of accelerating the pace of store openings by reconstructing formats that are commensurate with such persistently high store opening costs. In addition, we will proactively refurbish stores that could not be refurbished during the COVID-19 pandemic. We also refrained from carrying out promotional activities at stores that opened during the pandemic, so we will refocus on promotional activities in such stores and re-examine existing stores.

(Extracted from the Medium-term Management Plan 2027 announced on May 9, 2024)

Hiramoto: I think that K's Denki's management policy, “Gambaranai Keiei,” is what is now commonly called “sustainability management.” The Company's purpose is to expand the “wa” (circle of harmony) with all the stakeholders around us through our business and to make a significant contribution to society. In order to achieve this, we have always put our employees first. Today, various social changes are taking place around us, such as population decline, environmental issues, and the growing move toward IT. However, if we continue to aim to create a company where employees can work with enjoyment and with peace of mind in the future, I believe we will not lose our way.
Going forward, I believe that we will be able to continue generating profits by continuing to open new stores based on stable financial capital and investing the customer service skills of our employees as human capital. We will then distribute the profits we earn to our stakeholders and use them to drive our next growth. This is the conviction that lies behind our Medium-term Management Plan 2027^*3, in which we have clearly set out our cash allocation, total payout ratio of 80%, and a consolidated dividend payout ratio of 40%. Moving toward this goal, we will continue to value our employees without “overdoing it.”

(Extracted from the Medium-term Management Plan 2027 announced on May 9, 2024)

Hiramoto: Finally, I wish to share an episode with everyone. Our employees are encouraging their own children to work in K's Denki. There have been many occasions at the informal job offer ceremony and official entrance ceremony when employees told me, “Actually, I'm the son or daughter of 〇.” If employees do not genuinely believe that we are a good company, they would not encourage their children to join us. Parents recommend K's Denki to their children, and their children also believe in it and become our colleagues. There is nothing more wonderful than this, and I could not be happier. I hope that K's Denki will continue to be such a company in the future.
Coincidentally, I handed over the President's baton to Yoshihara in the year of the 100th Hakone Ekiden race, the most famous Japanese road relay race. This will probably be something that we will remember for life. I hope that he will continue to run energetically toward the 100th anniversary of K's Denki and continue passing the baton to the next runner. That is my wish.