the contribution of those non-Japan markets to revenue can be expected to increase steadily. The big action is outside Japan China is by far Aeon’s biggest market outside of Japan. The company has 21 malls already in operation and has plans for more, with a focus on inland areas in Hubei Province and Hunan Province that are under-malled and have the potential for high growth. It opened a mall in Hangzhou Qiangtang in June and another in Changsha is scheduled to launch in the second half of the year. In the May quarter, sales at the company’s existing malls in China grew by 6.7 per cent, thanks to 16 per cent growth in foot traffic, although customers are more thrifty this year and spent less on average than a year ago. This is reflected in the overall retail sales numbers released monthly by the country’s National Statistics Office. In June, retail sales were up 2.0 per cent year-over-year, which sounds weak and it is, considering that the base year bar was only set at +3.1 per cent. For the first half of the year as a whole, sales grew by 3.7 per cent. Thus, Aeon Mall’s portfolio performance in China is close to doubling the average national growth rate. China now contributes 15 per cent of Aeon’s total revenues and 66 per cent of its revenues outside Japan. Operating revenue at Aeon’s China malls grew by 14.2 per cent year-over-year in the quarter, while segment income fell by just under 10 per cent due primarily to malls that were closed. Southeast Asia: Vietnam and Indonesia blossom, Cambodia mixed In Vietnam Aeon Mall’s operating revenues grew by 14 per cent in the May quarter and segment income by 22 per cent. Specialty store sales at the company’s six malls rose by 8.8 per cent. Vietnam has become an important market for Aeon and it has big plans for growth there. It has an ongoing search for development opportunities in Hanoi, Ho Chi Minh City and the central area of the country. It is in the latter, in Hue, that Aeon will open its first mall later this year. There is, however, a fly in the ointment: Aeon wants to open malls in Vietnam faster but they are tied up in red tape and the development permitting process is causing such a significant delay that the company plans to have 50 malls up and running outside Japan by the end of this financial year have been slashed to just 44. Meanwhile, Aeon is striving to drive stronger customer traffic and raise the average ticket at its existing malls, with special events again one of the centrepieces of its efforts. Cambodia has been a lot more problematic. Specialty store sales across its three malls have been mostly flat with last year despite the renovation and extension of Aeon 1 in downtown Phnom Penh (more formally called Aeon Mall Phnom Penh). Operating revenue for the Cambodian portfolio was up 18 per cent in the May quarter but segment profit plunged by 42 per cent. Much of the difficulty is with the third, most recently opened mall, Aeon Meanchey, which has a significant vacancy problem and weak foot traffic. This is no fault of the mall design and facilities, which are outstanding. The big issue has been ongoing road construction in the vicinity of the mall and, though the company doesn’t mention it as a factor, the slow development of the primary trade area with residential and office building still in its early days. In this respect, the mall is ahead of its time and such is the potential of the growth corridor between the mall and downtown Phnom Penh less than 10 kilometres to the north, big things could eventually come to it. Aeon also operates five malls in Indonesia, the newest of which opened in March, in Delta Mas, east of Jakarta. The mall is in the heart of a massive urban development project integrating the mall with residential and office development. Company operating revenues in Indonesia grew by 36 per cent in the May quarter while segment income was flat amid signs of strengthening customer footfall. Japan: special events to drive foot traffic  In Japan, Aeon’s operating revenue was pretty much flat (+0.7 per cent) in the May quarter. However, costs, including electricity, fell, resulting in segment income growth of 14.2 per cent. Sales at mall specialty stores at Aeon’s 92 malls in Japan increased by 3.1 per cent year-over-year, with dining, entertainment, hobbies and services the star categories. The pattern is obvious: consumers are buying more into experiences and less into merchandise. To drive customer traffic, the company held hundreds of special events. More are planned, including sports events following partnership agreements being signed with Japan Rugby League One and other organizations. Moreover, sales were helped by the growth of international tourism, which in turn was aided by a weak yen. The company reported much the same story as the department stores: sales growth was strongest in tourist locations. No new malls will be opened in Japan this year but ground has been broken on two with a view to opening next year. Meanwhile, the company is busy renovating existing projects. Consolidated company operating revenue for the quarter ending May 31, which includes its business in Japan and overseas, was up 3.7 per cent from a year ago, to 103.4 billion yen. Net income rose by 7.8 per cent to 6.9 billion yen. Outlook: no change The company has made no changes to its outlook for the remainder of the year, expecting operating revenue growth of 7.2 per cent and a 19.1 per cent decline in net income.