Hello, I am Yoshida. Thank you for attending today's briefing. I will report on our recognition of the current business environment and our response to it, as well as an overview of the first half financial results. After that, Mr. Egawa, who is in charge of finance and business management, will report on the details of the financial results. In the present environment, we are transitioning into a post-COVID-19 era. Mobility, particularly travel to Japan, has gained momentum, revitalizing the economy, and consumption is displaying positive trends. However, the future remains uncertain, with questions lingering about the potential impact of high prices on consumer spending. Inflation has significantly affected our business. After operating in a deflationary economy for an extended period, we've been exposed to a sharply inflationary environment since last year. In tandem with the substantial price increases, there is a growing momentum to increase wages in Japan.
There is also a rising likelihood that the era of ultra-low interest rates will start to shift. Examining consumer purchasing behavior, we observe a growing sensitivity to both price and value in products and services. This phenomenon is often referred to as the polarization of consumption. Customers are now scrutinizing products and services more discerningly, placing greater importance on the uniqueness of the product or service itself. In the realm of business operations, the pressing objective is to initiate substantial reforms that can transform the profit structure of the current model. This involves a thorough review of the cost structure and investment allocation from the perspective of enhancing productivity. It may even entail a comprehensive restructuring of the business framework. We acknowledge that navigating this wave of environmental change poses a significant challenge in the business landscape.
During such times, disparities among companies often become evident, with a company's ability to respond to inflation being a key determinant of its success or downfall. During this period, we view the AEON Group as uniquely positioned to amplify its competitive advantage, thanks to its considerable scale and the associated economies of scale. We consider this a substantial advantage that will propel the group forward. In this setting, our first half results reflect growth across all categories of profit, as evident in the accompanying graphs. Both operating revenue and operating profit achieved record highs. Broadly speaking, we attribute these positive financial outcomes to two key factors. Firstly, our product functions effectively navigated the challenges posed by the inflationary environment, bolstering our retail business. Secondly, our ability to adapt to the changing landscape following the COVID-19 pandemic with a multi-format approach led to increased revenues and profits.
Take My Basket, for instance, with its 1,000 stores in the Tokyo Metropolitan Area. It capitalized on the revival of foot traffic in urban areas following the relaxation of COVID-19 regulations. By expanding its customer base and enhancing product offerings for new customer segments, My Basket achieved a substantial boost in both revenue and profit. Furthermore, discount stores are garnering increased support from consumers who are increasingly mindful of maintaining their current living standards. AEON Big and Big-A have not only achieved sales growth but also boosted their gross profit margins. This was accomplished through a strategic expansion of their bulk product offerings and the promotion of their private brands. Moreover, AEON Entertainment and AEON Fantasy are benefiting from the upsurge in interest in entertainment and amusement that has followed the easing of COVID-19 restrictions. Consequently, both entities are reporting substantial profit growth.
We firmly believe that the diverse range of businesses and product categories under the AEON umbrella has played a pivotal role in driving up sales and profits. These businesses have adeptly harnessed global challenges as opportunities for growth. Among these segments, the retail business made the most significant contribution to the profit increase this time. This becomes apparent when we compare the profit distribution across business segments. Please look at the screen in front of you. The pie chart on the left represents the profit portfolio in terms of operating profit for the first half of fiscal year 2019, before the establishment of the Medium-term Management Plan, while the pie chart on the right reflects the profit portfolio for the first half of fiscal year 2023.
In fiscal year 2019, the primary profit drivers were the shopping center development business and the financial service business, together constituting over 70% of the group's total operating profit. In contrast, retail accounted for less than 20% of the operating profit, despite representing over 80% of the total operating revenue. This led to a distorted profit structure. Conversely, in fiscal year 2023, retail's operating profit expanded approximately 3.3x , elevating its share to 46%. Throughout the COVID-19 pandemic, the profits of the shopping center development business and the services and specialty store business were significantly impacted, indirectly leading to a higher proportion of profits from the retail business. However, with the world returning to normalcy, we anticipate the establishment of a profit structure where the retail business consistently generates stable profits in this fiscal year's results.
In 2021, when the Medium-term Management Plan was unveiled, the group articulated its objective: revival of the retail sector, with a focus in transforming scale into profit via digitalization and reforms in product and supply chains. This strategy aimed to bring about a substantial improvement in profits. It's worth noting that within the AEON Group, employees engaged in retail constitute approximately 70% of the group's overall workforce. The cornerstone of the AEON Group's business is rooted in retailing, serving as the primary point of customer engagement and support. We firmly believe that enhancing the competitiveness of our retail operations will, in turn, drive the competitiveness of the group's diverse business categories. The financial results for the first half of fiscal year 2023 provided some encouragement as they demonstrated a connection between the company's policies and their practical feasibility at the operational level.
We consider private brand growth and productivity improvement as the two pivotal elements for sustaining the reform of our retail profit structure. In the first half of fiscal year 2023, sales of our private brand surpassed JPY 600 billion. Notably, TOPVALU exceeds JPY 480 billion, which is 110% of last year's figure, and it is well on its way to achieving the JPY 1 trillion target by the end of this fiscal year. As I've reiterated multiple times since last year, the role of private brands has evolved significantly. They have transitioned from merely providing equivalent quality to national brands at a lower price to embodying our corporate philosophy now. They've become a source of differentiation and a key driver of our competitive advantage.
In the latter half of the previous fiscal year, TOPVALU underwent a repositioning strategy. This involved a renewal of the Best Price brand to better cater to the low price preference, while simultaneously reinforcing the value-oriented TOPVALU and organic Green Eye brands, which align with AEON's core values. A significant shift in the current landscape has been the notable increase in sales of Best Price, which aligns with a low price preference. This trend was evident from the previous fiscal year through the first quarter, resulting in an elevated proportion of Best Price in our product mix. However, in the second quarter, we observed an uptick in the composition of TOPVALU and Green Eye brands.
This shift is the result of our proactive efforts to develop products that introduce new value in terms of functionality, style, health, and environmental impact within the TOPVALU and Green Eye brands. Several of these products have proven to be major successes, with Premium Draft Beer being a notable example, surpassing one million bottles in sales within just one month after its launch. Additionally, we are intensifying our efforts in product development aimed at capturing Generation Z and Millennials, and we are particularly dedicated to attracting a younger audience that TOPVALU hasn't been able to reach previously. We are witnessing positive outcomes with products like Cafe Gohan, inspired by global food stall meals, and Craftel, a novel beverage concept merging craft and cocktail preferences, catering to the preferences of the younger demographic who are moving away from alcohol.
As highlighted at the outset of this report, My Basket, benefiting from an increasing customer base following the resurgence of urban activity, has witnessed notably robust sales among products designed for Generation Z and Millennials. In fact, certain products within My Basket's offerings have achieved sales figures surpassed only by AEON Retail, our largest sales operation. The brand strategy aimed at the younger generation, which is leading to shifts in the types of businesses generating substantial revenue, demonstrates that customers are consistently responding to our initiatives. Regarding TOPVALU's contribution to profits, the overall markup ratio for TOPVALU has been steadily increasing. This upward trend is primarily attributed to the proactive introduction of new value-added products and renewals, which have significantly influenced the profitability of group retailers. On the other hand, customers' frugal mindset is severely reflected in the numbers.
Although several retailers are witnessing an increase in the average unit price, the number of items purchased per customer remains sluggish, indicating persistent consumer hesitancy. To address this, alongside the stabilization of prices for certain raw materials like wheat and cooking oil, and through continued corporate initiatives such as enhancing delivery innovations and leveraging economies of scale, we have announced a price reduction on 31 TOPVALU products. This price reduction, encompassing items such as salad oil and ramen noodles, vital everyday essentials for our customers, will be implemented as of September 25th, in response to customer feedback and preferences. Following the announcement, the situation is as follows: The number of sales for the targeted products has shown a remarkable increase, with a significant 45% rise compared to the previous month.
In addition to promoting the purchase of value-added products, we are striving to secure profits from a gross profit mix perspective. TOPVALU is set to launch approximately 1,300 new or revamped items in the current fiscal year, marking an increase of about 1.5x compared to the previous year. We emphasize the significance of offering customers satisfying products and enhancing their shopping experience by meticulously crafting items that strike a harmonious balance between price-driven and value-added products. Moving forward, concerning productivity improvement, the AEON Group has been actively advancing initiatives such as the implementation of self-checkout registers and optimizing back-office operations through digital technologies since last year. However, our commitment to Store DX extends beyond merely enhancing current efficiency.
Considering the present demographic trends, it's imperative that over the next five to 10 years, the working-age population will continue to dwindle, exacerbating the labor shortage. It's reasonable to assume that even the situation where higher wages attract talent may no longer apply, implying that securing labor itself will become increasingly challenging. We envision an era in which the conventional way of operating within the retail industry, relying heavily on labor-intensive products, will undergo a thorough reevaluation. With this medium to long-term outlook in mind, we have developed a model that enhances the efficiency of self-checkout registers by approximately 30% and reduces the need for cashiers by around 30%. This is achieved by integrating self-checkout registers, RegiGo, walk-through settlement, and assisted self-checkout in the food sales area, which accounts for approximately 30% of the workforce dedicated to checkout operations.
We are vigorously pushing forward with the transition to self-checkout. In addition, we are implementing electronic shelf tags to enhance the efficiency of sales floor maintenance, a process that typically demands a significant amount of labor and time, including tasks like product removal and price tag replacement. Beyond the initiatives mentioned, we are actively engaged in several other labor-saving efforts, as illustrated on the screen you are currently viewing. Through the promotion of Store DX, we have been consistently enhancing man-hour sales and productivity in the GMS business, supermarket businesses, and discount store businesses. Simultaneously, to elevate the quality of our human resource operations, we will prioritize offering training opportunities and implementing risk management measures. We are accelerating these endeavors to drive the transformation of our profit structure.
Finally, we would like to explain a little about the purpose of the commencement of TOB for Inageya Company, announced recently on October 6th. While digital players focus on convenience through a standardized nationwide online infrastructure and monetized by retaining customers through loyalty point programs, our approach is centered on comprehending the distinct needs of consumers in each region. We strive to deliver a tailored blend of products and services that align with these specific needs. To realize this objective, we are actively pursuing regionalization efforts in each area to increase our presence, scale, and market share within those regions. In the Tokyo Metropolitan Area, Japan's largest market, with ongoing population concentration and migration trends, our multi-format store network includes AEON Retail, USMH, Daiei, and other GMS SM businesses, alongside My Basket, Big- A, and Ministop.
As of now, we hold a 10% share of the food market in this region. We consider the addition of Inageya to the AEON Group as highly significant, as it will further enhance our market share in the Tokyo Metropolitan Area, which is Japan's largest market. Inageya currently operates 133 supermarkets in the Tokyo Metropolitan Area, with a significant presence in Western Tokyo, an area where USMH has been less represented. This acquisition of Inageya will greatly complement our store network, particularly in this region. By merging with USMH, we aim to leverage synergies and create an Inageya that offers enhanced products, services, and store development. As we enter the second half of fiscal year 2023, we must navigate various uncertainties, including persistently high commodity prices.
Uncertain trends in the yen exchange rate and interest rates, and the prolonged economic slowdown in China, which can impact ASEAN countries. However, what holds paramount importance is our ability to respond promptly to the resurgence in service consumption and the increased demand from visitors to Japan, driven by the post-COVID-19 consumption sentiment, with agility and efficiency, ultimately improving our business performance. While a frugal mindset is certainly prevalent, we recognize the significance of developing a strategy that effectively encompasses both dimensions of consumption: the luxurious and the thrifty. It is vital for us to craft a design that resonates with these aspects and submit a compelling message. Our commitment is to diligently strive to meet the announced figures for the year. That is all from me. Mr. Egawa will now explain the details of the financial results.
I am Egawa, in charge of finance and business management.
I appreciate your attendance today amidst your busy schedules for AEON's financial results briefing. To get started, let's begin with an overview of the first half of the fiscal year, ending on February 29, 2024. During the first half of fiscal year 2023, we operated within the backdrop of a robust socioeconomic recovery. COVID-19 was reclassified as a Category Five infectious disease, and we experienced mounting inflationary pressures due to the worldwide surge in raw material prices and the weakening yen. Under these circumstances, our consolidated results for the first half of the year were as follows: Operating revenue was JPY 4,711.3 billion. Operating profit was JPY 117.6 billion.
Ordinary profit was JPY 111.9 billion, and net income attributable to owners of the parent was JPY 23.3 billion, with increases in both revenue and all types of profits. In addition, all types of profits from operating revenue to ordinary profit have reached record highs. Overall, we believe that the first half of the fiscal year, ending February 29, 2024, was a successful one. This slide shows the first half results for the five-year period from fiscal year 2019, before COVID-19, to the current year. Since fiscal year 2020, there has been a steady increase from operating revenue to net income attributable to owners of the parent company. Both of these figures are well above the pre-COVID-19 results. This slide shows the first half results by segment. Operating revenues increased in all reportable segments.
Operating profit experienced growth in our core retail segments, including GMS, supermarkets, discount stores, and health and wellness businesses. This was achieved through the expansion of the sales for our private brands, notably the highly profitable TOPVALU brand and effective cost management. I'm convinced that the retail business, with its key ability to adapt to changing environments, served as the primary driving force behind the Group's overall performance. Next, I will provide a segment-wise breakdown of the current situation on the following slides. First is the GMS business. The left-hand graph illustrates the transition in segment profits from fiscal year 2019, before the onset of COVID-19, to the current fiscal year. The GMS business made significant improvements in its performance during this first half of the year, returning to profitability for the first time in a decade since fiscal year 2013.
The upper right graph illustrates the breakdown of improved profitability by aggregating year-on-year changes in the operating profit of each company. Among the GMS business subsidiaries, regional GMS companies such as AEON Tohoku and AEON Kyushu, which were integrated into AEON during the COVID-19 period, made significant contributions to the first half profitability. As indicated by the lower graph, the GMS business as a whole achieved commendable sales growth despite the challenges of inflation and the polarization of consumer spending. This success can be attributed to our effective product and pricing strategies, which adapted to the evolving environment. The growth in gross operating profit outpaced the increase in SG&A expenses, leading to a boost in profitability. AEON Retail faced a challenging situation with a decline in its gross profit margin, primarily due to the worsening cost of sales. Consequently, its first quarter performance was below expectations.
However, we observed an improvement during the second quarter, leading to a recovery in the first half operating loss to the previous year's level. As a result, we anticipate full-year results to surpass the previous year's performance. During the second quarter, AEON Retail remained committed to expanding its sales floors in growth categories and diversifying its product offerings, all aimed at optimizing gross profit. This effort was part of our ongoing strategy to reform and strengthen our profit structure. Specifically, within the food products segment, we actively pursued product renewals for our TOPVALU brand and delicatessen offerings. In the thriving frozen foods category, we expedited the launch of specialized stores under the name @ FROZEN. These initiatives were undertaken to enhance our presence and offerings in these strategic areas.
In the health and beauty care segment, we observed a positive trend in gross profit margin due to our concerted efforts to broaden product offerings, particularly in cosmetics, to meet the rising demand for products related to outdoor activities. Additionally, our focus on pet care products, a growing market, also contributed to this improvement. Our merchandise inventories have been effectively managed, with levels generally maintained at appropriate levels. This achievement reflects our commitment to enhancing control over the timing of sales and product pricing. Regarding our efforts to reform our profit structure, our objective is to implement self-checkout registers and semi-self-checkout registers in the food section of all stores by the end of fiscal year 2023. Additionally, we are in the process of introducing self-checkout registers in non-food sales areas, beginning with high-priority stores, with the aim of extending this feature to all stores by fiscal year 2024.
Anticipating future workforce challenges, starting from the second half of this fiscal year, we will prioritize the reduction of fixed operations and the reallocation of our human resources toward growth areas to expedite our expansion. Next is the supermarket business. The supermarket business had experienced a consistent decline since 2020, following a surge in demand brought about by the COVID-19 pandemic. However, it successfully reversed this trend in the first half of the current fiscal year. Despite ongoing challenges with negative real income growth, we managed to tap into the rising customer awareness of maintaining their current living standards. This allowed us to make significant strides in expanding the presence of TOPVALU and effectively addressing the demand for bulk purchases. Alongside the increase in sales, we also witnessed an improvement in the gross profit margin, leading to a boost in income.
The upper right graph illustrates the changes in operating profit by company. Notably, My Basket, which expanded its store presence in the Tokyo Metropolitan Area, played a pivotal role in driving segment performance with a significant increase in profit. My Basket has experienced a surge in the customer base attributed to the rebound in urban foot traffic. This, in combination with enhanced operational efficiency improvements, such as expanding stores with self-checkout registers only and more accurate product ordering through data analysis, has led to a substantial increase in profit. The next slide is the discount store business. Similar to the supermarket business, the discount store business has also undergone a notable turnaround in its performance during the first half of the current fiscal year, resulting in a substantial increase in profits.
Anticipating shifts in purchasing power driven by inflation, the discount store business proactively introduced its own private brands and expanded the sales of high-volume products. This strategic approach successfully appealed to price-conscious customers. Consequently, we observed an increase in the operating gross profit margin, accompanied by a reduction in the SG&A to sales ratio. This reduction was due to heightened operational efficiency, resulting from investments in labor-saving fixtures and material handling equipment. These improvements collectively led to a significant enhancement in the operating profit margin. Next is the health and wellness business. Reversing the decline in profit seen during the first quarter, our operating profit in the second quarter achieved a record high. This success can be attributed to customers' increased health consciousness in the post-COVID-19 era, as well as our product and pricing strategies that capitalized on the seasonal effects of the heat wave.
Dispensing sales continued to experience substantial growth, driven in part by the expansion of our store network offering prescription drugs and an increase in the number of prescriptions processed. In the merchandising sector, sales of cosmetics performed exceptionally well, benefiting from increased opportunities for outdoor activities. Seasonal products like sun protection and body care items also enjoyed robust sales. As part of our strategy to cater to the recovering demand from visitors to Japan, Welcia Holdings intends to significantly increase the number of duty-free stores. Currently, we operate in 400 stores, and our goal is to expand this number to 1,000 stores by the end of February 2024. In addition to meeting the demand for pharmaceuticals and cosmetics, we aim to tap into the daily needs of travelers as well. Next is the financial services business.
In Japan, there was an uptick in credit card shopping transaction volume, cash advance transaction volume, and the balance of operating receivables. However, income experienced a decline due to a rise in bad debt-related expenses, primarily stemming from an increase in the receivables balance. Additionally, there was an increase in sales promotion expenses, which could be seen as upfront investments, including online advertising and cashback programs, all aimed at expediting the customer base for AEON Card and AEON Pay. In the second half of this fiscal year, we intend to recover by boosting the usage of AEON Pay and participating in local consumption stimulation programs, thereby enhancing collaboration with local governments. This strategy, combined with the profit effect of operating receivables accumulated in the first half of the fiscal year, is expected to contribute to our recovery.
Internationally, the operating environment was challenging, influenced not only by macroeconomic factors, but also by the discontinuation or reduction of debtor protection measures implemented by various governments. During the first half of the year, the Mekong and Malay areas experienced an increase in the allowance for doubtful accounts due to deteriorating repayments from low-income groups, leading to a decline in profits. However, in the second quarter, the Malay area returned to profitability, and the Mekong area nearly reached the previous year's performance level. Overall, our overseas business displayed a significant improvement from the first quarter to the second quarter. Next is the shopping center development business. Segment income was JPY 25.0 billion, an increase of JPY 2.0 billion from the previous year.
In Japan, with a prolonged heatwave and the rising need for our malls to serve as cool sharing spaces, we intensified our efforts to attract customers in collaboration with local communities across the country. Specialty store sales in Japan registered an increase, with double-digit growth observed in the dining, amusement, and service sectors. In ASEAN, Vietnam managed to secure a profit increase, notwithstanding the partial impact of a slowdown in economic growth due to sluggish external demand and other factors. As a collective, ASEAN as a whole achieved growth in both sales and profit. In China, following the shift away from the zero COVID-19 policy, sales at specialty stores within existing malls experienced a significant boost, rising by 29% compared to the previous year. The upper right graph indicates a decrease of JPY 0.3 billion.
However, it's important to note that fixed costs incurred during the temporary closure period associated with COVID-19 were treated as an extraordinary loss in the previous year. When factoring this in, the actual increase in operating profit was approximately JPY 1.3 billion. In the second half of the fiscal year, alongside our efforts to enhance customer engagement through events, we are dedicated to enhancing profitability. This will be achieved by boosting revenue through the effective utilization of mall assets and implementing cost reduction measures. Next is the services and specialty store business. Operating profit for the first half was JPY 11.6 billion, an increase of JPY 5.6 billion from the previous year. In the post-COVID-19 era, each of our companies intensified efforts to encourage in-store visits, thereby increasing the number of customers.
We successfully tapped into the burgeoning travel and leisure demand, driven by the rebound in foot traffic and newfound demand brought on by record-breaking heat waves, resulting in double-digit sales growth. The gross profit margin saw a substantial improvement due to effective inventory control and the expansion of sales for high-margin products. Among individual companies, as depicted in the graph on the lower right side, AEON Fantasy, which seized upon the post-COVID-19 pandemic demand, and AEON Entertainment, the operator of AEON Cinema, both achieved a remarkable increase in profit. G- Foot, actively pursuing an earnings structure reform with the goal of achieving operating revenue profitability in the current fiscal year, and COX, focused on enhancing its brand power and revamping its merchandising strategies, significantly contributed to better than anticipated revenue and profit growth within the services and specialty store business segment. Lastly, the international business.
Segment operating profit was JPY 5.8 billion, a decrease of JPY 1.5 billion from the previous year. Within our China business, the relaxation of COVID-19 restrictions spurred a recovery in customer numbers, leading to an increase in both sales and profits. Notably, the Hubei area maintained robust sales and profits. Conversely, in the ASEAN region, profits declined significantly, primarily attributed to a substantial drop in demand for apparel and home furnishing products, particularly in Malaysia and Vietnam. This decline was a result of consumers prioritizing the preservation of their current living standards amidst sluggish demand due to the deteriorating macroeconomic situation. As we look ahead to the second half of the fiscal year, our company will intensify its focus on enhancing price appeal, particularly for essential products, and remain attentive to customer preferences regarding their lifestyles.
Additionally, we're pleased to report that performance in Vietnam is on a steady path of improvement, partly attributed to economic boosting measures, such as the reduction in the value-added tax rate starting in July. This slide outlines the assumptions related to the impact of electricity costs and wage increases on the current year's consolidated earnings forecast in comparison to the actual results for the second quarter. As previously announced in April, the annual forecast for the current fiscal year anticipates an increase of approximately JPY 30 billion in utility costs and JPY 50 billion in personnel expenses. In terms of utility costs, similar to the first quarter, we continue to make headway in controlling electricity consumption by replacing energy-efficient and energy-generating equipment, such as refrigerated freezer cases. Thanks to government measures aimed at mitigating the rise in utility costs, electricity expenses were substantially lower than initially projected.
This resulted in many of our group companies operating below their anticipated costs. Consequently, consolidated utility costs came in lower than anticipated, with a year-on-year difference of JPY -0.5 billion for the second quarter and a year-on-year difference of JPY 5.5 billion for the total of the first half. The effect on personnel expenses for the second quarter showed an increase of JPY 14.0 billion compared to the same period of the previous year, and for the total of the first half, an increase of JPY 25.0 billion compared to the same period of the previous year, which is broadly in line with our expectations. Looking ahead to the second half of the fiscal year and beyond, the entire group will persist in its endeavors to enhance productivity.
Our business performance forecast remains unaltered from the projection announced at the start of the fiscal year. Looking forward to the second half of the fiscal year, we maintain a conservative outlook on business performance due to the persistently high prices, the anticipation of a mild winter towards the end of the year, and the prevailing economic uncertainty that has endured for some time. As demonstrated in today's presentation, our business performance has remained robust. We are committed to ongoing collaboration as a group, implementing various measures to meet and even exceed our full year forecasts. Finally, I would like to mention two sustainability initiatives in the first half of this fiscal year. Firstly, in August 2023, we reached a significant milestone by becoming the pioneering retailer to issue a Sustainability-linked Bond, with the bond's terms linked to our progress in achieving sustainability goals.
Alongside the overarching goal of reducing CO₂ emissions, we established three ambitious target items, including reducing disposable plastic use and reducing food waste generation. These targets exemplify the Group's dedication to realizing a sustainable society. Secondly, in August, we made an announcement regarding our decision on marine products from Fukushima Prefecture in our offerings. We are committed to actively collaborating with producers to uphold a sustainable production and distribution system, all the while ensuring the safety of these products based on scientific evidence. AEON will continue to aim for sustainable management that enriches customers, regional society, and living, using our diverse assets, including the products and services provided by the company. That concludes my briefing. Thank you for your attention.
I understand that the first half results were favorable, but I would like to know whether the operating profit of each segment was above or in line with the plan?
Overall, the progress rate against the initial forecast exceeds 50%, which we consider quite satisfactory. Notably, the GMS, supermarket, and discount store business segments have performed exceptionally well, indicating a strong performance by retailers. Three main businesses had better-than-expected numbers. Slight decreases were observed in the financial services business and the shopping center development business. In the financial services business, the increase in the balance of operating receivables led to higher bad debt-related expenses. The top line has shown growth from the first quarter to the second quarter, giving us confidence that profits will continue to increase in the future. In the shopping center development business, while both sales and profits have improved, our expectations are even higher for the second half of the year and beyond. What are your short-term and medium-term outlooks for the future? What are the primary challenges you anticipate in the next six months?
The Medium-term Management Plan, which has well-defined objectives, will require adjustments in response to changing environmental assumptions compared to its initial formulation. Kindly provide updates on the progress within the key priority areas outlined in the Medium-term Management Plan... Over the second half of the fiscal year, and in order to conclude the Medium-term Management Plan, the most important thing we need to focus on is products. This Medium-term Management Plan was first drafted before COVID-19 and was announced just before the pandemic. There was no assumption of a prolonged pandemic or inflation. However, I think the five items listed at that time are rather appropriate for this environment. One is the strengthening of our private brands, our unique products. Another is digital transformation as a business and as a way to promote efficiency. One more is health and wellness, both mentally and physically. This is very pertinent to COVID-19.
In addition, regional dominance, green transformation, and ASEAN are mentioned in the plan. These are all very important initiatives in the current environment. Meanwhile, the positioning of private brands has changed a lot in the market. In the midst of this inflation, we announced a price freeze last year, which led to a sharp rise in recognition of TOPVALU. Customers exhibited a significant interest in AEON's original concept products, as opposed to what is commonly referred to as national brand replacement price products. This resulted in stronger sales. From the second half of the fiscal year to the next fiscal year, we hope to rapidly increase sales of our private brand products. In particular, we want to make our food and health and beauty care sales comparable to national brands. TOPVALU alone is expected to exceed JPY 1 trillion this fiscal year.
We also make unique regional brands called Local Private Brands, and we also make private brands by business category. In terms of private brands' total sales, we are aiming for around JPY 1.4 trillion-JPY 1.5 trillion this year. How can we bring the final private brands composition to a higher state? We want to focus on it the most because it will lead to profitability. Digital transformation is still being enhanced. Digital transformation on the sales floor has advanced considerably, so productivity has increased, and service to customers has also advanced through signage, et cetera. However, data on customer behavior is still held by individual companies. If this is replaced with group uniform data, the value of the data will increase greatly, so we need to proceed rapidly.
That way, we can see individual customers, and the product assortment by category can be made with high accuracy. We are working on it and hope to have it in place as soon as possible. ASEAN, which has stalled due to the impact of the Chinese economy, must be promptly prepared for the coming environment now. In many countries in ASEAN, the average age is still less than 30 years old. So during this medium-term management plan, we intend to prepare assets and create a system that will allow us to properly capture them when they become the child-rearing generation. As for green transformation, reducing CO₂ emissions from our business is a matter of course. However, as for our business characteristics, we want to work with our customers. We want to build an AEON-like green transformation that firmly utilizes a circular economy and regional circulation.
We will have this also in place by the end of the Medium-term Management Plan. In this way, if we continue to make improvements with targets for each of the items in the Medium-term Management Plan, we'll become a company that continuously receives the support of our customers. Retail companies have consistently delivered robust performance since the first quarter. Do you anticipate this trend carrying forward into the second half, including for AEON? Additionally, could you outline the potential risk factors you envision for the upcoming fiscal year and beyond? AEON's retail business has successfully undertaken structural improvements in its earnings, providing a foundation for consistent profitability. Nevertheless, we anticipate a more challenging business environment in the second half of the year compared to the first. During the initial six months, favorable seasonal factors, such as an exceptionally hot summer, played to our advantage.
However, it remains uncertain how the second half will unfold. Nonetheless, we are observing a reduction in the structural impact of the external environments on profits, owing to our ongoing efforts to streamline and tighten expenses. In the event of an increase in the PB sales ratio, we can anticipate a corresponding rise in the markup ratio and subsequently an expansion in the top line. By directing our efforts toward this aspect and maintaining prudent cost control, we can reasonably expect to stabilize profits to a certain extent. In relation to the drugstore industry, at the time of the Tsuruha Holdings incident, you mentioned that AEON acknowledges the significance of restructuring, both at the local level and among major industry players. Could you elaborate on AEON's participation in the reorganization of these key industry players?
Are there any assumptions you can share regarding the conditions that would signal a full-fledged restructuring of the drugstore industry? One of the pillars of our policy is promoting health and wellness, encompassing both mental and physical well-being. In today's world, in many areas, there is a lack of fairness to health equity. An example of this is health disparities, where individuals with higher incomes receive better medical care, while those with lower incomes do not have the same access. Another example is that it is difficult to secure medical care in some regions. AEON wants to create a society where everyone can receive uniform services, and that is why health and wellness is a major focus. And that is why health and wellness is a major focus of the company. Even major companies will not become a unified corporate entity unless these ideological elements are brought together.
We have formed a capital and business alliance with Tsuruha Holdings and are doing various things, such as working on private brands together. We sometimes talk about what kind of structure is necessary to realize what we and customers really want, but there's no story to share right now. Basically, AEON has been conducting M&A in the form of heart-to-heart mergers. If we put those ideas together properly, I think it will eventually take that form. We anticipate a decline in electricity and other costs during the latter part of the year. The reduction in costs and the positive developments observed in the first half of the fiscal year lead us to believe there may be significant upward potential from our initial guidance. Why did you leave the forecast for fiscal 2023 unchanged, nevertheless?
You've aptly pointed out that our progress in the first half has been satisfactory, and we are well-positioned to meet our guidance. We maintain confidence in achieving our fiscal year forecast. However, for the second half of the year, there are several risk factors to consider. There's a concern that inflation may persist, and we're observing a deterioration in the consumption environment, both domestically and internationally. Furthermore, the third quarter traditionally proves challenging for profit generation, and it's of paramount importance to navigate this period successfully. While we would welcome an upward trend, we recognize that the third quarter's performance is critical to achieving our annual targets. Hence, we've opted to maintain our guidance, albeit in a somewhat conservative fashion. While it's true that the GMS and supermarket segments are showing signs of improvement, they have yet to attain a 1% operating profit margin.
Despite the rise in electricity and labor costs, the profit levels appear to differ significantly, even if the direction aligns with our objectives outlined in the midterm management plan. Notably, very few other GMS and supermarket companies are achieving a 1% profit margin. In contrast, some companies like AEON Kyushu have made substantial improvements over the past four to five years, while others, like USMH, exhibit considerable variability. In the larger context, it appears that the GMS and supermarket segments still have a considerable distance to cover in reaching the profit levels that would significantly contribute to AEON. What are your perspectives on this matter? Profit margins in both the GMS and supermarket businesses remain relatively low. AEON Retail's private brand sales ratio now stands at about 22%. Given the current inflation and increasing costs, there's potential for further top-line expansion by increasing this ratio.
GMS has made significant strides in improving operational efficiency by leveraging tools like DX on both the sales floor and in the back office. Consequently, it's beginning to realize a profit. We now acknowledge that the next phase involves increasing the top-line revenue and undertaking structural improvements in the apparel and home furnishing categories within GMS. A substantial profitability gap exists among supermarket companies as well. With cost control efforts underway in this segment, the critical focus shifts to enhancing gross profit. The challenge lies in producing products that do not suffer from reduced sales due to escalating costs. While the discount store business may not be of substantial scale, it has experienced considerable growth recently. Instead of discounting individual product prices, the company has embraced a strategy of selling bulk quantities of products at discounted rates, thereby maintaining the same sales per customer.
However, achieving the desired profit margin hinges on further enhancements to our product offerings. Despite the possibility of sounding repetitive, I emphasize that cost reductions have notably bolstered the company's operational stability. Despite the company's growth and scale, I sense that the advantages of this expansion have not been evenly distributed among individual entities within the group. Given AEON's position as an industry leader, I would appreciate witnessing improved profitability across the board, even in the face of potential challenges like cost increases due to inflation. Inflation tends to benefit larger companies as their size allows for more effective measures to be implemented. Therefore, by expanding our private brands, we can place bulk orders for individual items, streamline logistics, and significantly bolster profits... We are actively pursuing these strategies to create opportunities for growth.
Regarding TOPVALU, I think we are gradually moving away from the cheaper version of national brands. Is this because the change in consumers has accelerated greatly or changed due to COVID-19? In such a situation, is it advantageous for product development to be very close to consumers rather than the manufacturers and have various products and consumption situations? I believe that TOPVALU's ability to create products from the customer's point of view is the only asset that retail has going into production. We can immediately check the reaction to the products we have made. To increase the number of young customers and create a customer cycle, we wanted to attract young customers to AEON with our products. We have created quite a lot of items from the customer's point of view and based on the customer's opinions, while listening to the opinions of young customers.
Now, there are a number of products that have become a hit. For example, Craftel is a non-alcoholic cocktail costing about JPY 350. It has a very spicy taste, but is selling well at My Basket near universities. This item is sold more at My Basket than GMS Shinagawa Seaside, which is one of our flagship stores. The product has been developed not from the manufacturer's point of view, but by asking students and various people what they want and what kind of flavors they prefer. Now our efforts are bearing fruit. I believe this is a crucial aspect as retail transitions into manufacturing, and I aim to leverage it as a competitive advantage. In the case of Green Beans, how do you assess the ongoing challenges, such as the number of registered members?
As for Green Beans, it launched in July, and so exactly three months have passed. During the past three months, we have focused on ensuring that the system operates properly and that our directly managed deliveries are running smoothly without incident. In the past three months, we have made a solid start without much promotion. Until now, we have not experienced any problems with the system or delivery at all. In fact, we have received word-of-mouth reviews on social networking sites and other media for our delivery, saying that we are not a so-called courier and that we provide solid customer service. Amid this situation, the customer base is steadily expanding. In particular, the company is building the customer base mainly in areas where AEON has few contacts, such as Minato-ku, Chuo-ku, and Shinjuku-ku of Tokyo, where a relatively large number of people live in tower condominiums.
While we will thoroughly utilize the outcomes of the previous three months, we are also diligently planning the marketing strategy for the next 3 months, and we will begin the production of TV commercials. We will build footholds in Tokyo's 23 wards together with these. Regarding GMS reforms, I believe that reforms for food are almost complete and that you are just starting on apparel, but I have the impression that daily necessities are not attracting customers very well. By when and what kind of reforms will be implemented for apparel and daily necessities? Regarding the GMS reform, the food products business, which has the largest sales and the highest percentage of profits, is now taking shape to some extent. We are reforming apparel products this term. We created the Funabashi model from the style of the sales floor in Funabashi City.
We introduced a self-checkout system and changed the staffing and the sales floor's layout. Soon, we will be inserting a new form of Kids Republic, which handles products for children. Regarding that, we have redone things in the same place and achieved double-digit growth. This time, we will expand and develop that as a positive model. Home furnishing products are just in the planning stages. We will implement them from the second half of this fiscal year to next year and hope to launch the first store with a new model next year. We will verify it, and if it is good, we will expand it. Home furnishing products are a small component of sales. Nonetheless, it's crucial to recognize that the category holds a significant place in the overall composition of a GMS that offers one-stop shopping.
In the face of inflation, the industry, including the furniture sector, encounters challenges and is susceptible to consumers exercising restraint in their purchasing decisions. We are working from the viewpoint of what our product lineup should be in light of this. You recently reduced the prices of your private brand products. Are you aware that due to the stagnation in the price hikes of national brands, consumers may not opt for your private brands unless you further lower their prices? What is your perspective on the current consumer environment? As for price reductions, they are polarized. Best Price has been growing strongly all along. During the second quarter, products like Green Eye and Red Label TOPVALU, which follow a distinct concept from national brands, have experienced strong sales. That's one chunk.
As for Best Price, the company has carefully selected 31 items and reduced prices on products such as ramen noodles and oil that customers have high needs for and would like to buy more if they were a little cheaper. This has proved popular. In doing business, a very important point is not to see a fall in the number of customers who come to stores. If customers come to stores, they will purchase goods, including Green Eye and Red Label TOPVALU. It is a price reduction designed to ensure gross margins in total. After all, the response was in the context of a perception that price sensitivity has risen slightly. Since the prices of wheat and oil have stabilized considerably and some improvements have appeared in terms of logistics, we have chosen items that can reflect this. I would like to reconfirm the concept of private brands.
There has been pressure from manufacturers to raise prices, especially national brands, for a long period of time since around the second half of last year. For about a year, price increases have been happening. According to your data, the unit price of each item has increased and the private brand sales have gone up, but the number of items purchased has been low. Starting in the second half of this year, there will be more reductions in the price itself, including at peer companies and other industries. The company has also implemented price reductions on 31 items. Do you think that the risk of being forced to lower the core price range of private brand products beyond what the company expects is still small?
Or is there an option in the future to change the policy of reinforcing Best Price if this environment proves to be more challenging than expected? Basically, we are working on three pillars. Green Eye is a special zone for loyal customers who prefer organic and sustainable products. Red Label TOPVALU and Best Price are built on a two-tier structure. In reality, support for Best Price remains unchanged. While comparing the same product, for example, other ramen noodles and Best Price's ramen noodles, the price is obviously different. It is designed at a price that fully satisfies customers without reducing the price too much from the current level. I'm not talking about cutting all of these prices. As the cost of oil and wheat go up or down, the cost of products that are a little higher in Best Price follow suit.
I think Best Price will move too, if the cost falls. Since Red Label TOPVALU is a value-added type, we would like to figure out how we can propose new products that national brands can't come up with easily. That is a new opportunity we are exploring. We have opted to introduce products aimed at only a younger demographic. Craftel, a non-alcoholic cocktail, is offered at a price of 350 JPY per bottle, which is considered relatively high. However, the reason why it sells well is that it directly reflects customer preferences. By handling this segment effectively, we anticipate that as the private brand portfolio expands, it will gradually shift the image and value of products to the company itself. Many companies have a private brand ratio of 50% or more overseas.
Japan will eventually follow suit, but we must carefully consider to what extent we will raise the private brand ratio. This year, TOPVALU sales will be JPY 1 trillion, and if we include other private brands, JPY 1.4-JPY 1.5 trillion. However, the first targeted design would obviously require about twice that amount. Consequently, the product scale will be comparable to that of a major manufacturer. As a result, we need to establish a comprehensive system, which includes a manufacturing setup to support this growth. About the segment of the adjustment, I understand that the results of other private brands, commodity functional companies, and logistics functional companies are included here. However, due to the review of transaction terms and price range, et cetera, from the second half of last year, the adjustment amount has been in the black this fiscal year since the first quarter.
The company remained in the black in the second quarter. The business performance has improved since the second half of last year, and the number in the adjustment has improved. Should we expect this adjustment's profit increase to be mild in the third and fourth quarters? On the other hand, there is a segment called Other. The deficit here is gradually increasing. You plan to continue building Customer Fulfillment Centers sequentially over the third and fourth quarters. If a temporary increase in the deficit occurs in other budget items, is it already factored into the overall budget? There must also be upfront expenses as we move into the third and fourth quarters. I want to know the outlook and direction. The amount recorded in adjustment was up JPY 5 billion in the first quarter and up JPY 5 billion again this time.
Compared to last year, it is almost zero in the second half of the year. The actual amount will be around JPY 2 billion-JPY 3 billion, but the comparison to last year is zero. This adjustment amount is mostly for companies, namely AEON TOPVALU and AEON Global SCM, which means that AEON TOPVALU is selling well. We are also replacing products, so the product portion is also expanding. AEON Global SCM has reduced costs and accumulated profits by improving logistics efficiency and other measures. This company is positioned as a functional company and is for group companies. So this is not a company that accumulates profits. In the future, this company will contribute to group companies by reducing the cost of goods and logistics costs. Please understand this as a mix-up with the profit of this segment.
Regarding the numbers in this segment, others, most of them are from AEON Next, which operates Green Beans, but they will certainly be inflated in the second half. However, there are a number of issues to be addressed, and we are working on them. Therefore, we are confident that we can exceed our expectations with a deficit of less than JPY 10 billion. In light of the logistics challenges anticipated for 2024, where a shortage of labor and other factors may impede the transportation of goods, I assume that many companies are aware of this impending crisis. Can you provide insight into whether your company is actively pursuing logistics reforms, such as reducing delivery frequency or implementing joint delivery initiatives to address these concerns? We have seen the 2024 issue as a major challenge for several years.
The company is making a regional shift in the form of regional restructuring. Under such circumstances, the company is conducting trials to integrate business types such as supermarket, whose brand name is MaxValu, and GMS in AEON Kyushu. Instead of running routes by each type or industry, we are now reorganizing the distribution routes by area and streamlining them for each. This has paid off, and the company is preparing to roll out the model to other areas in 2024. At the same time, we believe that logistics is an issue that we will discuss not only with our own companies, but also with other companies. In Kyushu, the Tokyo Metropolitan Area and Hokkaido, we will establish panels to resolve logistics issues beyond each company and address these issues while sharing information with other companies.