Good afternoon. I am Yoshida. Before we begin today's earnings presentation, I would first like to express my deepest condolences to the families of those who lost their lives in the accidents that occurred at AEON MALL Kumamoto and AEON MALL Uki following the 2026 Kumamoto earthquake. I would also like to once again offer my sincere apologies to the bereaved families, those who were injured, and everyone affected by these tragic incidents. Regarding the explosion accident at AEON MALL Kumamoto, we established an independent Accident Investigation Committee composed entirely of external experts in order to ensure transparency and objectivity. The committee held its first meeting on August 20th and has already met six times. Its work is focused on determining the root cause of the accident and developing measures to prevent any recurrence.
Once we receive the committee's final report, we will promptly disclose the findings and reflect them in the development of new disaster prevention standards as well as in safety enhancement initiatives across all group facilities, including AEON MALL properties. At the same time, we are not simply waiting for the investigation to conclude. Where improvements to operational procedures, emergency manuals, and management systems can already be implemented, we are moving forward without delay. In addition, we have concluded inspections of gas-related facilities across group properties beyond the affected locations.
We are also continuing various support activities to assist recovery and reconstruction efforts in the areas impacted by the earthquake. Our thoughts remain with everyone affected, and we sincerely hope that those impacted can return to normal daily life as soon as possible. Aeon will continue to support these efforts as a group.
Now, I would like to begin today's presentation. Executive Vice President Motoyuki Shikata, who is responsible for business and financial strategy, will first walk you through the interim results.
Good afternoon. I am Motoyuki Shikata, Executive Vice President in charge of business and financial strategy. Thank you very much for joining Aeon's interim financial results presentation for the fiscal year ending February 2027. I appreciate your participation today. Now, please turn to the next slide. Today, I will cover five topics. First, our consolidated results. Second, the progress of our profit growth drivers. Third, the revenue structure reform for the recovery of the food retail business. Fourth, the progress of business structure reform. And finally, our outlook for fiscal 2026. Let me begin with our consolidated results. First, I would like to provide an overview of our consolidated results for the first half.
Operating revenue increased 13.8% year-on-year to JPY 5,904,100,000,000 . Operating profit increased 10.7% to JPY 130.7 billion. Ordinary profit increased 1.7% to JPY 108.2 billion. Profit attributable to owners of the parent increased 229.1% to JPY 13.3 billion. During the first half, three businesses that we position as key profit growth drivers delivered results that exceeded our expectations. The first was the health and wellness business, where demand for drugstores as essential social infrastructure supporting community health continued to expand and where we welcomed Tsuruha Holdings into the group in anticipation of future growth. The second was the developer and entertainment business, which successfully captured changing consumer preferences as consumers increasingly place value not only on ownership but also on experiences.
The third was the ASEAN business, which continued to benefit from favorable market growth across the region. These growth businesses more than offset the challenges faced by retail formats such as GMS, supermarkets, and discount stores. As a result, we demonstrated the strength of Aeon's multi-format business portfolio. Both operating revenue and operating profit reached record highs for a first-half period. This slide summarizes the results of each reporting segment. Next, I would like to discuss the progress of the business that we position as our profit growth drivers. I will begin with the health and wellness business. At Aeon, we believe that the health and wellness market will continue to expand steadily over the medium to long term. With this in mind, in January of this year, we welcomed Tsuruha Holdings into the group following its integration with Welcia.
As a result, operating profit in the health and wellness business increased significantly, up 162.9% year-on-year. In addition, we are steadily realizing the benefits of scale created through the integration. Both the Tsuruha Group and the Welcia Group improved profitability with operating profit margins increasing by 0.9 percentage points year-on-year. Consequently, operating profit at the Tsuruha Group increased 21.4% year-on-year to JPY 34.5 billion, while operating profit at the Welcia Group increased 27.1% to JPY 31.3 billion. Both groups achieved substantial profit growth and delivered record high earnings. Next, I would like to explain the progress of integration synergies and the drug and food model, one of our key strategic initiatives. Integration synergies among Tsuruha Holdings, Welcia, and Aeon are progressing ahead of schedule.
Against Tsuruha Holdings' annual synergy target of JPY 15 billion, we have already realized approximately JPY 8.5 billion or about 57% of the full year target. This performance exceeds our initial expectations. The primary drivers have been procurement integration, improved gross profit through supplier consolidation, and tighter control of promotional activities. At the same time, we are accelerating the rollout of the drug and food model. This initiative combines Tsuruha Holdings' nationwide network of specialist personnel with Aeon Group's food procurement capabilities, food-related know-how, and product development expertise. Through this combination, we are creating a store model that supports the health of local communities, not only through healthcare products but also through food. During the second quarter, we expanded the format by an additional 19 stores, bringing the total to 37 locations. Performance at these stores has been very encouraging.
Driven by increased customer traffic resulting from stronger food offerings, existing store sales and gross profit continue to post double-digit growth year-on-year, making a significant contribution to earnings expansion. In the second half, in addition to health and beauty care products, we will begin supplier integration in selected food categories and continue working to maximize synergies and realize them more quickly. We will also further expand the drug and food model and increase sales of private brand products, including TOPVALU, which performed strongly during the first half to accelerate growth. Now let us move to the developer and entertainment business. In Japan, rapidly rising construction costs have increased the barriers to developing new commercial facilities. Against this backdrop, we believe that our large-scale existing assets, including approximately 160 AEON MALL properties that were developed at lower construction costs in the past, represent a significant competitive advantage.
At the same time, the role that local communities expect commercial facilities to play continues to evolve along with changes in society and the surrounding environment. In response, we are expanding experience-oriented and time-spending content at our commercial facilities to address growing leisure demand, including services provided by Aeon Entertainment and Aeon Fantasy. During the first half, AEON MALL carried out revitalization projects at 11 malls. These projects enhanced the value of existing assets by providing opportunities for experiences, interaction, and entertainment in addition to traditional retail shopping. As a result, specialty store sales at revitalized malls grew significantly compared with malls that had not yet undergone revitalization, driving earnings growth.
In addition, stronger customer traffic and increased time spent within the malls enabled us to improve rental income and other ancillary revenues. These initiatives have been successful and all three core companies in the segment, AEON MALL , Aeon Entertainment, and Aeon Fantasy achieved record high earnings. Segment operating profit increased 32.3% year-on-year, representing substantial profit growth.
Next, I would like to discuss our overseas developer and entertainment business. AEON MALL 's overseas business also performed strongly during the first half. In China and Vietnam, profit growth continued to exceed that in Japan following the trend seen in the first quarter, resulting in a significant increase in profit. In China, we completed revitalization projects at three malls during the first half. By expanding dining zones and enhancing other features that strengthen customers' reasons to visit, we successfully increased customer traffic and contributed to earnings growth. In Vietnam, we revitalized four malls and both specialty store sales and customer traffic remain strong. In July, we opened AEON MALL Da Nang Thanh Khe . Like our malls in Japan, this new mall features enhanced entertainment and dining offerings and is designed to provide experiences and encourage longer stays.
The mall got off to a very strong start, welcoming as many as 550,000 visitors in just 10 days after opening. In addition, the mall represents a new asset-light development model that emphasizes capital efficiency. It operates under a master lease arrangement on the lower floors of a mixed-use complex that includes a hotel, offices, and residential facilities. This model allows us to limit our investment burden while establishing an early presence in trade areas where economic growth and urban development are progressing. Looking ahead, we plan to open two additional malls in Vietnam during the second half. AEON MALL Thanh Hoa is scheduled to open on October 18th, followed by AEON MALL Ha Long in November. Going forward, we will continue utilizing diverse development methods to accelerate expansion of our store network in growth markets.
Now, I would like to discuss Vietnam, which we regard as our highest priority country in overseas operations. In Vietnam, during the second quarter, consumer sentiment softened due to rising prices associated with the situation in the Middle East. Despite these conditions, our customer acquisition initiatives proved effective, and both same-store sales and customer traffic remained solid in our retail business. At the same time, we are developing a variety of store opening channels, including opening specialty format stores in third-party shopping centers. Through these initiatives, we are further expanding customer touchpoints and our trade areas. As a result, profit increased significantly year-over-year, reaching a record high. In Vietnam, our business development goes beyond opening retail stores. We are pursuing the creation of what we call the Aeon Living Sophia through a multi-format business approach.
One example is our health and wellness business. Tsuruha has started opening stores in Vietnam and currently operates two stores. In the second half, we also plan to open stores jointly with Aeon Vietnam. By leveraging the strengths of both companies, we intend to expand the drug and food format in Vietnam through the joint efforts of both companies. Next, I would like to discuss the revenue structure reform that we are implementing to restore earnings growth in our food retail businesses, including GMS, supermarkets, and discount stores. First, let me explain our analysis of the factors behind the underperformance of the food retail business during the first half. The operating environment remained challenging throughout the period.
External factors included the loss of the exceptional demand for rice seen in the previous year following the release of government rice reserves, rising costs associated with the situation in the Middle East, and an increasingly strong consumer preference for saving money. Our pricing policies and promotional initiatives also did not function as effectively as intended. Recognizing these issues, beginning in the second quarter, we took steps to rebuild both our pricing strategy and promotional approach. At the same time, we strengthened our value propositions, particularly in fresh foods and deli products. As a result of these efforts, we have begun to see improvements in both gross profit margins and customer traffic. Customer traffic declined significantly in June, primarily due to unfavorable weather conditions. However, although performance varies somewhat by region and business format, overall customer traffic has shown a recovery trend since July.
Based on these early signs of improvement, I will now explain the four key measures aimed at reforming the earnings structure of our food retail business. The first measure is the restructuring of our pricing policy. Price increases by manufacturers continue across a wide range of products. Around 5,000 items saw price increases in September, and more than 3,000 items are expected to see price increases in October. We believe consumers will remain highly price conscious. We view this situation as an opportunity to expand sales of TOPVALU products. Therefore, during the second half, we will step up sales of TOPVALU Best Price, our price-focused private brand, and promote the switch from national brands to private brands.
For national brand products, we will leverage the scale advantages of group-wide procurement while focusing on items with high price elasticity that can help increase customer traffic and strengthen our pricing for these items. The second measure is the deployment of highly effective promotional initiatives. By implementing consistent promotional initiatives, including those on the sales floor and further advancing Everyday Low Price initiatives or EDLP, we will clearly communicate special offers and enhance customers' trust in our pricing. These first two measures, restructuring our pricing policy and deploying highly effective promotional initiatives, are aimed at recovering customer traffic. The third measure is creating reasons for customers to visit our stores and strengthening value-added products.
Within our private brand portfolio, including TOPVALU, we will focus on developing and selling products that give customers a reason to visit our stores by making them feel that these are products they can only buy at Aeon or that they want to buy at Aeon. Through these efforts, we will increase the number of TOPVALU mega items with annual sales exceeding JPY 1 billion from approximately 100 items currently to around 300 items. In parallel, we will improve the quality and differentiation of fresh foods, which customers purchase frequently, and strengthen value-added products such as deli items that meet needs for convenience and ready-to-eat options. These initiatives will increase the number of customers who continue to visit our stores for the unique value Aeon offers, while also improving our gross profit mix. The fourth and final measure is cost structure reform.
In the second half, we will implement cost structure reforms on a scale comparable to those carried out since the third quarter of fiscal 2024. Through consistent promotional initiatives and stricter investment discipline, we will optimize promotional expenses and facility-related costs. Additionally, we will reduce fixed costs through energy-saving initiatives and curb utility costs. To summarize our food retail earnings structure reform, we will first restore customer traffic through the restructuring of pricing policy and highly effective promotional initiatives. We will then establish the increased customer traffic as a lasting customer base through the creation of reasons to visit our stores and the strengthening of value-added products. By connecting this customer base to purchases and higher profitability categories, we will improve our gross profit mix. Finally, through cost structure reform, we will appropriately control SG&A expenses and transform our business into one that can consistently retain profits.
The second half is the most critical period of the year for our retail businesses, with several major sales events ahead, including Black Friday, Christmas, and the year-end and New Year's season. Furthermore, food retail is a business with short inventory turnover cycles, making it easier to realize the effects of improvement initiatives early. Accordingly, across the group, we will swiftly implement these four reform measures in our food retail business, transforming our earnings structure so that the business can generate profits while tracking the major sales events in the second half. Next, I would like to discuss the progress of our business structure reform initiatives. We have been steadily advancing business structure reform across the group since previous fiscal years, with the aim of optimally allocating management resources to priority business areas, improving overall group profitability, and enhancing capital efficiency.
We position the first two years of our new medium-term management plan, namely this fiscal year and next fiscal year, as a phase in which the effects of reforms implemented to date will steadily translate into earnings. We are accelerating our efforts accordingly. To date, we have implemented measures at more than 40 group companies, including business withdrawals, divestitures, and the consolidation and integration of businesses and functions. Going forward, we will continue advancing business structure reform and work to realize the benefits of these reforms at an early stage. Finally, I would like to discuss our outlook for fiscal 2026. There is no change to our full-year earnings forecast.
Looking ahead to the second half, we will continue pursuing further upside against our plan in our growth businesses, including health and wellness, developer and entertainment, and ASEAN. At the same time, we will restore performance in the food retail business by decisively implementing the earnings structure reforms discussed today. We will pursue both the expansion of our profit growth drivers and earnings structure reform in food retail in parallel, aiming to achieve our full-year earnings forecast. In addition, we will continue business structure reform without easing our efforts, driving improvements in capital efficiency and profitability across the group.
That concludes my presentation. Thank you very much for your kind attention.
I am Yoshida, President and CEO of Aeon. As Mr. Shikata explained earlier, our first-half results reflected a mixed performance across businesses. If I were to summarize the first half in a single sentence, I would describe it as a period in which performance became increasingly polarized across segments. Looking at the current business environment, economic indicators in Japan, including the Consumer Confidence Index and the Economy Watchers Survey, continue to show gradual improvement. However, many consumers remain cautious about everyday spending. Defensive consumption behavior has become increasingly entrenched and attracting customer traffic and increasing basket size remain common challenges across the retail industry.
We continue to believe that price remains one of the most important drivers of purchasing decisions. At the same time, consumers remain willing to spend on areas where they perceive clear value. This includes health and wellness, entertainment and experiences, dining out, and other lifestyle-related categories. As a result, selective consumption continues to accelerate. The challenge for retailers today is not to focus on price alone. Rather, it is to understand customer needs through the dual lens of price and value. Those companies that can successfully address both dimensions will be the ones that continue to grow. Turning to ASEAN, inflationary pressures resulting from geopolitical tensions in the Middle East have created some challenges for consumers.
Nevertheless, the region continues to maintain strong economic growth. Vietnam, in particular, remains one of the fastest-growing economies in Southeast Asia, with recent real GDP growth exceeding 8%. As the middle-income population expands, the consumer market continues to grow steadily. As Mr. Shikata explained earlier, the business identified as growth engines in our medium-term management plan continued to outperform expectations during the first half. These include the health and wellness business, the developer and entertainment business, and our ASEAN operations, particularly Vietnam. What these businesses have in common is that they are capturing structural growth opportunities. They are benefiting from changes in consumer behavior, evolving customer needs, and expanding markets driven by economic growth. We believe these results validate the strategic choices we made when formulating our medium-term management plan.
They also confirm that the investments and business reforms we have pursued over the past several years have been moving in the right direction. Going forward, we will further strengthen our competitive advantages in these growth businesses and accelerate investment where appropriate. By doing so, we intend to continue expanding the foundation for sustainable profit growth across the group. Next, I would like to discuss our health and wellness business. As outlined in our medium-term management plan, we position health and wellness as the single largest profit growth driver for this plan period. We believe the market itself will continue to expand over the medium to long term, supported by structural trends such as population aging and increasing health awareness. At the same time, however, the industry is entering a period of significant transformation.
Intensifying competition, industry consolidation, regulatory changes, and labor shortages are all creating pressure for traditional business models to evolve. We believe that simply maintaining conventional drugstore operations will not be sufficient to sustain competitiveness over the long term. Our goal is to build a comprehensive health and wellness platform that supports customers throughout every stage of life through both products and services. To achieve that goal, we have been steadily strengthening our business foundation. In particular, we are already seeing substantial progress from the integration of Tsuruha Holdings, Welcia, and Aeon. The speed of synergy realization has exceeded our expectations and gives us a high degree of confidence in the future potential of this business. The role this business plays in society is becoming increasingly important. In many regional areas of Japan, access to medical services is gradually becoming more limited.
As a result, demand for drugstores as local health hubs is expected to continue rising. To increase our value as community infrastructure, we intend to expand beyond the traditional scope of merchandise sales and dispensing services. Going forward, we will broaden our business coverage into adjacent areas such as food, preventive care, wellness services, and daily life support services. By doing so, we aim to meet a wider range of customer needs while strengthening our role within local communities. In addition, we will leverage the infrastructure and customer base of the Aeon Group to begin expanding this business outside Japan. Particularly in ASEAN, we see significant opportunities to replicate and scale our health and wellness model over the long term. Please turn to the next slide.
Next, I would like to discuss the developer and entertainment business. Within our medium-term management plan, this business has a clear mission. Its role is to maximize the value of our real estate assets and become a major driver of profit growth in high value-added service areas. Importantly, we believe that recent growth in this business is not the result of temporary tailwinds. Rather, it reflects our success in responding to long-term structural changes in consumer behavior. Consumers today place greater value on experiences and how they spend their time. As spending shifts toward experience-based consumption, demand for entertainment and leisure activities continues to expand. We therefore see shopping centers not simply as places where consumers purchase goods. We believe they must evolve into community destinations that bring people together, create opportunities for interaction, and provide social value.
In many cases, they also play an important role as community infrastructure that complements public services and administrative functions. At the same time, as society becomes increasingly digital, the value of physical space is changing. People can purchase products online. What they cannot obtain online is the experience that comes from gathering, interacting, and spending time in a physical environment. That is why we believe entertainment will serve as the central pillar of the next generation of shopping centers. We also expanded experiential zones built around popular intellectual property content. These initiatives significantly improve customer traffic and strengthen the attractiveness of our malls. We are also seeing strong mutual reinforcement between the entertainment business and the developer business. Entertainment content increases visits to our facilities, while the facilities themselves provide attractive venues for those entertainment experiences. This positive cycle is becoming increasingly evident.
Looking ahead, we will continue incorporating unique content and new experiential value into our properties. By doing so, we intend to further strengthen the competitive advantage and earning power of the developer and entertainment business. Please turn to the next slide. Among our ASEAN businesses, Vietnam has emerged as one of the most important growth engines for the entire group. Vietnam itself continues to be one of the fastest-growing economies in the ASEAN region. What is particularly encouraging is that our business is expanding at a pace that exceeds the growth of the market itself. Our shopping mall operations provide a good example. Most facilities continue to outperform plan, and several of our malls now rank among the top 10 flagship malls in Japan in terms of visitor traffic. We believe this growth is being driven by several long-term structural factors. Population growth continues. Urbanization continues.
The middle-income population continues to expand. At the same time, the Aeon shopping center model, which combines shopping convenience with entertainment and experiential value, has been strongly embraced by customers. We are also encouraged by reports that the Vietnamese government may further relax restrictions on foreign participation in the retail sector. Unlike some more mature retail markets, Vietnam has not yet undergone significant industry consolidation. As a result, we believe the current period presents an important opportunity to establish scale and build a strong business foundation through accelerated store expansion. Capturing scale early will allow us to benefit from the country's economic growth while generating meaningful operating leverage in the years ahead. At the same time, we must also think beyond the current growth phase.
Today, Vietnam is benefiting from a demographic dividend. However, over the long term, we believe the country may eventually face some of the same social challenges that Japan has already experienced. To prepare for that future, we are taking a long-term perspective. Rather than focusing solely on expanding store numbers, we are building the capabilities, formats, and service infrastructure that customers may require in the future. Our objective is to establish a highly competitive multi-format business platform that can continue growing alongside Vietnamese society over the long term. We believe Vietnam will remain one of the most important growth opportunities for Aeon for many years to come.
Next, I would like to discuss our initiatives for the food retail business. Mr. Shikata has already explained the specific measures we will implement during the second half. Therefore, I would like to focus on the initiatives that extend beyond this fiscal year and that will serve as the foundation for restoring long-term competitiveness. Our efforts are centered on two priorities. The first is the rebuilding of price and value. The second is strengthening competitiveness in fresh food and deli categories.
Let me begin with price and value. In order to improve our price competitiveness sustainably, we must first create the resources that can make price investment possible. For national brand products, our focus will be on selectively investing in items with strong brand recognition and high-price transparency, where customers are most likely to compare prices across retailers. At the same time, we will expand group-wide procurement and concentrate sales volume on prioritized SKUs. By increasing sales per SKU, we can improve purchasing efficiency, lower procurement costs, and reduce pressure on profitability. Private brand products will play a different role. TOPVALU Best Price will remain the centerpiece of our value proposition. Our objective is to provide customers with overwhelming price value while maintaining healthy profitability.
To achieve this, we will clearly identify priority products for group-wide expansion and increase scale through broader deployment across growth formats, including drugstores and My Basket. Greater scale will allow us to further reduce costs and strengthen competitiveness. At the same time, value-added TOPVALU products and Green Eye products will focus on creating differentiated categories rather than merely competing on price. We plan to build category leadership in areas such as health and wellness, restaurant quality offerings, premium deli products, and seasonal or trend-driven merchandise. By continuously strengthening both value-oriented and value-added products, we will rebuild the balance between price competitiveness and differentiated value. Please turn to the next slide. The second pillar of our strategy is strengthening fresh food and deli categories. This initiative is important not only because it improves profitability, but also because it directly strengthens customer traffic.
As I mentioned earlier, selective consumption continues to expand. Even within food retail, consumers are increasingly willing to spend on products that deliver superior quality, convenience, health benefits, and overall value. This trend creates opportunities for differentiation. Grocery and daily necessities can be purchased through e-commerce and are often subject to direct price competition from discount retailers. Fresh food and deli products are fundamentally different. Purchasing decisions in these categories are influenced by freshness, taste, ingredients, presentation, and convenience. As a result, these represent the areas where true differentiation is most achievable. One of our key initiatives will be product development originating from fresh foods. By increasing the deli conversion of fresh ingredients and expanding private brand offerings in this category, we aim to simultaneously enhance customer value and profitability. We believe this represents a significant opportunity to strengthen our competitive position in food retail over the long term.
Please turn to the next slide. As part of these efforts, we announced today the establishment of a joint venture, VegeTech Topvalu Kanto Company Limited, together with VegeTech. The new company will operate a dedicated Aeon Group processing facility. Vegetables harvested from nearby group-owned farms and partner farms will be processed under strict temperature control conditions throughout the entire production process. Products will then be supplied to Group stores across the Kanto region. This initiative will create advantages throughout the supply chain. Lead times from procurement to store shelves will be shortened. Cold chain capabilities will be enhanced. Automation and scale benefits will improve productivity. Together, these measures will allow us to supply products that are highly competitive in terms of freshness, quality, taste, and price. More broadly, this investment reflects our commitment to advancing what we call the SPA transformation of food.
We intend to continue investing upstream in the supply chain and building stronger sourcing and production capabilities. Our goal is to maximize freshness value while ensuring a stable and sustainable supply system. We will provide additional details regarding future expansion plans as decisions are finalized. Please turn to the next slide. Next, I would like to discuss our initiatives for the GMS business. Over the past several years, food has supported the overall performance of the GMS business as its share of sales increased while non-food categories faced challenges. However, this year, the profitability of food deteriorated significantly, leading to lower overall GMS profitability. When we analyze store profitability across factors such as format, location, and scale, we find the competitiveness challenges are concentrated in standalone stores, particularly traditional box format locations.
For these stores, we intend to leverage the expertise developed through our developer businesses, including AEON MALL , to improve asset profitability on a location-by-location basis. Specifically, we will optimize sales floor space allocated to underperforming categories, improve merchandising productivity, and increase profitability per square meter. At the same time, newly created space will be utilized to introduce categories and tenants that better reflect local market characteristics. By continuously refreshing the sales floor, we aim to improve customer traffic and earnings power. We are also expanding initiatives that utilize GMS product development and procurement capabilities across the entire Group. Beginning in the second half, we will supply basic healthcare and household products to supermarket formats, enabling the Group to consolidate purchasing volumes and strengthen both cost competitiveness and pricing power.
As Mr. Shikata explained earlier, both the supermarket and GMS businesses will deepen cost structure reform during the second half. While securing a reasonable level of profit through cost controls, we will concentrate investments on highly effective promotional activities. This disciplined allocation of resources will support earnings recovery. In addition, United Super Markets Holdings recently announced plans to close approximately 100 unprofitable stores over the four years leading to 2030 as part of its structural reform program. However, closure does not necessarily mean abandonment. Depending on location and trade area characteristics, we intend to repurpose many of these assets within the group by converting them into formats such as My Basket, discount stores, or drugstores. Through asset conversion, we will seek to preserve and enhance the overall earnings contribution of the group. Please turn to the next slide.
Finally, I would like to discuss our financial policy. As interest rates continue to rise, investment discipline and cash generation capability have become more important than ever. Our commitment to growth investment remains unchanged. However, we believe that investment efficiency must now play a larger role in capital allocation decisions. In Japan, rising construction costs have raised the hurdle for new development projects. Fortunately, Aeon possesses a significant portfolio of assets developed at substantially lower historical construction costs. This represents a major competitive advantage today. AEON MALL provides a clear example. Facilities that recently completed revitalization investments delivered first-half specialty store sales at 106% of the prior year level, while operating profit increased to 125% of the prior year level. These results demonstrate that remodeling existing assets can generate highly attractive returns on investment.
By enhancing the value of existing assets, we can improve capital efficiency while generating additional growth. Vietnam represents another important capital allocation priority. This year, we are planning the highest level of new store openings in our history within the Vietnamese market. Many of these projects are already outperforming our original expectations, confirming the quality of our investment opportunities. We view Vietnam today as being in a phase of building a long-term growth platform. For that reason, we intend to continue investing aggressively in the market. Our approach is straightforward. We will accelerate investment in growth areas where we see strong returns and long-term strategic significance. At the same time, we will rigorously review profitability and strategic relevance in other areas and allocate resources only to opportunities with attractive return potential.
By maintaining this disciplined approach, we aim to improve capital efficiency while continuing to deliver sustainable growth. In closing, we will continue to pursue both the expansion of our growth businesses and the structural transformation of our retail operations. These two initiatives will serve as the twin engines of Aeon's medium-to-long-term growth strategy. By advancing both the expansion of our growth businesses and the structural reform of our retail operations, we aim to achieve sustainable medium- to long-term growth.
Thank you very much for your continued support and interest in Aeon. That concludes my remarks.
Second quarter results were weaker than expected. How do you assess performance by segment relative to internal plans? In addition, while management outlined measures to improve performance in the second half, what do you see as the key drivers of earnings recovery from a finance perspective?
In the first half, the health and wellness, developer and entertainment, and ASEAN businesses delivered solid results, while the three core retail businesses, namely GMS, Supermarket and Discount Store, significantly underperformed internal expectations. The gap between strong-performing and underperforming businesses widened more than anticipated. Although we expected some recovery in the retail businesses during the second quarter, this did not materialize, resulting in first-half performance falling behind the level required to achieve the full-year plan. The recovery of the three retail businesses will be our top priority in the second half. Through the first half, it became clear that pricing measures alone are not sufficient.
Going forward, we will combine pricing policies, promotional initiatives, and merchandising strategies to strengthen our product value proposition and restore customer support. First-half operating profit reached 38.4% of the full-year target, representing a shortfall of approximately JPY 15 billion-JPY 20 billion versus our internal plan. We intend to address this through the turnaround of the retail businesses and rigorous cost control measures. In addition, continued strong performance and potential upside from the health and wellness and developer and entertainment businesses should support our efforts to achieve the full-year earnings forecast.
Given the rapidly changing external environment, how much progress are you seeing from the initiatives currently underway? Do you believe the medium-term management plan needs to be updated, or is the current framework still sufficient?
The three growth areas identified in our medium-term management plan, namely ASEAN, developer and entertainment, and health and wellness, have delivered results in line with or above our expectations. On the other hand, progress in food retail structural reform has lagged behind our original assumptions, and we recognize that our response to changes in the operating environment has not been fast enough. That said, the strength of our multi-format business portfolio has been evident. During the pandemic, our food business supported overall group performance, while today, businesses that capture demand for experiential consumption and entertainment are supporting earnings.
Going forward, food retail reform will remain a key management priority. We intend to address gaps versus our original plan through initiatives centered on merchandise and logistics reforms. At the same time, we believe this is an important period to lay the groundwork for the next generation of growth businesses while continuing to strengthen those currently performing well. The external environment remains highly dynamic, including developments such as the potential consumption tax reduction. While preparing for changing consumer behavior, our commitment to rebuilding the food retail business remains unchanged. Our immediate priority is to offset the first half shortfall through cost controls while also driving top-line growth.
While some competitors have remained profitable despite the challenging environment, how do you view the key challenges facing Aeon's supermarket business? In addition, why has the supermarket business struggled while My Basket and drug and food formats have continued to perform strongly?
One challenge has been our inability to fully communicate the value of our products rather than focusing solely on price. Competition, particularly in fresh foods and delicatessen products, has intensified, and we believe we have not differentiated ourselves sufficiently in these categories. In addition to selling raw, fresh foods, we will expand higher value-added products through processing and prepared food development. Demand for convenience continues to increase, particularly among dual income households in metropolitan areas, and we intend to respond more effectively to those needs. As for My Basket, its strong performance reflects changing shopping patterns in urban areas where consumers increasingly value convenience and proximity.
By offering both convenience store-like accessibility and fresh food products, My Basket has been able to differentiate successfully. Going forward, we will leverage merchandising and customer insights accumulated through My Basket to further promote our drug and food format. Through a combination of traditional supermarkets, small format food stores, and drugstores, we aim to provide food solutions that better meet customer needs.
While PB expansion and EDLP initiatives have been in place for some time, how has your pricing strategy evolved? In addition, how do you intend to balance profitability with the expansion of value-added products? Based on lessons learned during the first quarter, we shifted our pricing strategy in the second quarter from one centered on national brands to one that places greater emphasis on private brands. With Japan's Engel coefficient currently at around 30%, we believe it is important to differentiate ourselves by leveraging the strengths of our private brands rather than focusing solely on price comparisons with competitors.
Specifically, we have positioned TOPVALU Best Price as our key price-focused brand and aim to offer products at prices below comparable national brand items. Because private brand products allow us to control costs related to logistics, packaging materials, and product specifications, they provide greater flexibility to improve price competitiveness while maintaining profitability. For national brand products, we are utilizing the group's centralized procurement capabilities, narrowing SKUs where appropriate, and leveraging scale to strengthen negotiations with suppliers. Our objective is not simply to raise prices to secure margins. Rather, we are focused on achieving appropriate pricing through cost improvements.
At the same time, for value-added TOPVALU products that offer unique features unavailable through national brands, we intend to secure appropriate margins through market-based pricing. Could you provide an update on the impact of the Kumamoto earthquake, including the potential for additional losses and the timing of a clearer assessment? In the first half, we recorded disaster-related losses of JPY 4.198 billion as extraordinary losses associated with the Kumamoto earthquake. These mainly consisted of inventory damage at Aeon Kyushu and fixed asset damage at AEON MALL . Restoration expenses and other disaster-related costs have also been recognized to the extent they can be reasonably estimated.
However, investigations into the cause of the accident, assessments of facility damage, discussions with tenants, and insurance claim procedures are still ongoing. Accordingly, we are not yet in a position to estimate the final amount of losses or any additional charges that may be recognized. The losses are covered under multiple insurance policies, although discussions with insurers remain ongoing. While we aim to recognize insurance recoveries within the current fiscal year, if possible, we are not yet in a position to provide a specific timetable. At this stage, neither the amount nor the timing of insurance recoveries has been finalized.
Have post-earthquake gas facility inspections been conducted in cooperation with gas utility companies?
Following the Kumamoto earthquake and subsequent explosion incident, we conducted inspections at all group facilities using gas, not only AEON MALL locations, based on the assumption that gas could be one of the potential causes. These inspections are being conducted not only internally, but also in cooperation with gas management companies and other external parties as part of our ongoing efforts to verify and ensure safety. The Accident Investigation Committee has already met six times.
Has anything been clarified so far, and is there any indication as to when interim or final reports may be released?
At this stage, only limited information has been shared with us by the investigation committee. While we may have been informed that meetings have been held, we have not been provided with detailed information regarding the content of the investigation or its progress. We have also not received any indication from the committee as to when an interim or final report may be issued. The committee continues to conduct on-site inspections and frequent meetings, and our understanding is that it is currently carrying out a detailed investigation.
How do you view industry consolidation and M&A opportunities among regional supermarket operators? In addition, what role should Aeon play in addressing underserved communities?
We expect industry consolidation among regional supermarket operators to continue. However, we do not pursue M&A for defensive purposes. In addition to assessing whether a potential partnership or integration would enable us to expand our regional market share and secure stable earnings, we place importance on whether combining Aeon's scale with the partner's strengths in areas such as fresh fish, produce, and delicatessen products would enhance the competitiveness of both parties. Compatibility in corporate philosophy and management approach is also an important consideration. We believe drugstores can play an increasingly important role in maintaining access to food and essential services in regional communities.
Through our drug and food strategy centered on Welcia, we are strengthening food offerings while leveraging the Aeon Group's food supply chain, enabling even small format stores to provide one-stop shopping convenience. We also intend to leverage initiatives such as Tsuruha Holdings' Life Store concept and Welcia's mobile sales vehicle, Uetan-go, to further expand services that meet the needs of local communities.
How far has the group progressed with supply chain and logistics reform, and have there been any changes to the overall optimization strategy?
We continue to integrate functions that were previously operated separately by individual group companies on a regional basis. While these initiatives are still in the early stages, progress is being made. For example, products manufactured at Craft Delica in Funabashi, which previously mainly supplied GMS stores, are now being distributed to USMH stores and My Basket locations, creating a shared deli platform across the group. In addition, Aeon Kawaguchi East Cross Dock, which began chilled distribution operations in December last year, expanded its capabilities to include ambient temperature deliveries in July.
Designed as a next-generation small format distribution model, the facility supports not only supermarkets, but also small lot deliveries for formats such as My Basket, enabling shared logistics infrastructure and avoiding duplicate investments. Because supply chain reforms require significant infrastructure development, benefits will not be realized immediately. Nevertheless, we intend to continue implementing these initiatives over the five-year medium-term plan period.
How will restructuring investments and losses affect earnings going forward? Are restructuring-related losses likely to increase from the third quarter onward?
Some restructuring initiatives, including the sale of our retail business in Thailand and the liquidation of Aeon Fantasy's China business, have already been provisioned for through impairment losses and reserves. As a result, the completion of these transactions is not expected to generate significant additional losses. That said, some projects currently under consideration could result in further losses. If such losses occur, they are more likely to be recognized in the fourth quarter rather than the third quarter. Material extraordinary losses may be recorded. However, we are not providing a specific estimate at this time.
Regarding investment expenditures, we are prioritizing logistics and supply chain infrastructure while moderating new store investments. These expenditures are already incorporated into the JPY 2.4 trillion capital investment plan under our medium-term management plan and will generally be capitalized and depreciated over extended periods rather than immediately impacting earnings.
If the food consumption tax rate is reduced from 8% to 1%, would Aeon pass the reduction on to consumers? How do you expect such a measure to affect consumption and the group's performance? Should such a tax reduction be implemented, we would reflect the reduction in food prices. We estimate that the current Engel coefficient of around 30% could decline by approximately two percentage points to around 27.5%-28%. However, even after such a reduction, it would remain above the roughly 25% level seen during the deflationary period. Consumers are currently prioritizing food spending at the expense of other discretionary expenditures.
As a result, a portion of the additional disposable income generated by a tax cut could be directed toward travel, leisure activities, fan-related spending, and health and wellness-related spending. Food consumption may also benefit from a shift from dining out to home meal replacement products. However, our focus is not simply on whether the tax reduction benefits the food business, but rather on how Aeon can capture increased consumer spending across its multi-format portfolio, including shopping malls, entertainment, and health and wellness operations.
Is Green Beans expanding in line with your original plan? Have you changed your strategy in response to the current operating environment?
Green Beans is currently in the customer acquisition phase. As the business has expanded, we have gained greater insight into which geographic areas demonstrate stronger demand and differences in average basket value across regions. Based on these findings, we are strengthening our approach to customer acquisition. Membership has reached approximately 1.2 million, and we aim to add roughly another one million members next year. At this stage, our priority remains building the customer base rather than maximizing profitability. We are also seeing growth in the number of heavy users, with some customers having used the service more than 30x . In addition to acquiring new members, we will continue to focus on increasing engagement among existing customers.