Aeon Mall, Japan’s biggest mall operator and an increasingly influential one throughout Southeast Asia, has turned in another record quarter for operating revenue, but not every one of its markets is singing from the same songbook. While Japan and Vietnam are delivering, China is problematic and Cambodia is still stubbornly weak. On January 9, Aeon reported operating revenue of 332.7 billion yen ($2.1 billion) for the third quarter ending November 30, representing an increase of 6.0 per cent f
t from the same period a year ago. Operating income kicked up in the double digits but net income took a hit from restructuring costs, reaching 12.3 billion yen ($77.7 million, down 16.5 per cent year-on-year).
Operating revenue rose by 3.2 per cent in Japan despite no new malls being opened there, by 13.9 per cent in China, 13.7 per cent in Vietnam, 11.1 per cent in Cambodia, and 34.3 per cent in Indonesia. However, the bottom line was mixed: sharply down in China and Cambodia, up strongly in Japan, Vietnam and Indonesia. China now accounts for 15 per cent of the company’s operating revenues and two-thirds of its non-Japan operating revenue.
Specialty store metrics at the company’s malls reflected rising prices and higher average transaction values in Japan, with sales growth at the Japan malls of 6.2 per cent and customer traffic growth of 3.2 per cent.
Interestingly, those malls in Japan that were renovated in 2023 or 2024 have experienced more than twice the sales growth of those that were not. Also striking is that the increase in sales is weighted heavily toward dining and entertainment. Leading categories were amusement (+12.7 per cent), dining (+8.9 per cent) and accessories (+8.4 per cent), while traditional mall mainstays like apparel (+2.9 per cent) experienced much less robust growth.
It should also be noted that Aeon is making strenuous efforts to target international tourists at its malls near airports and tourist attractions and this is paying off materially with an increase in duty-free sales, which in the third quarter about doubled the intake of the same quarter a year ago. It is catering more to group travellers by welcoming large buses, producing multilingual directory maps and supporting payment methods favored by foreign visitors.
Struggles in China
China, Aeon’s largest national market outside Japan, has been a struggle for its tenants: specialty store sales have fallen year-on-year for the past two quarters and are now just 1.3 per cent up for the first nine months of the year. Customer traffic has risen by 9.0 per cent though, so visitors to the malls are just spending a lot less. This has been a familiar pattern all year, as the company noted in its own quarterly analysis:
“Customer preferences for low-priced products persisted throughout the cumulative consolidated third quarter amid a prolonged slump in the real estate market and a difficult employment environment, especially among young people.” Preliminary results for the fourth quarter suggest that sales may have edged up a squeak, but with emphasis on the word ‘squeak’. Just as dining and entertainment tenants in the company’s malls in Japan are easily leading category sales growth, the same trend is even more pronounced in China. There, merchandise sales in the aggregate have wobbled downward in just about every month of the year so far.
Vietnam is Aeon’s star in Southeast Asia
In Vietnam, Aeon Mall’s operating revenues grew strongly and specialty store sales continued their very robust upward trend, rising by 5.8 per cent, only slightly easing from the tempo of the first half. Early projections indicate a continuation of that trend through the fourth quarter. And better yet, unlike in China, consumers in Vietnam still have an appetite for buying up merchandise rather than just coming to the mall to have a good feed. Year to date, sales are up 7.5 per cent and customer traffic up 2.2 per cent. Average ticket is therefore rising strongly. The company’s new mall in Hue mall has more than 51,000 square metres of leasable area and 140 specialty stores, the vast majority of which are new to the central region. The company says 70,000 customers visited the mall on opening day. Aeon is excited about its prospects in Vietnam and wants to expand aggressively, although it will come up against perennial oversupplier of retail space in home-grown developer Vincom.
Meanwhile, Cambodia, where Aeon operates three world-class malls in Phnom Penh, has been a problem area and it is quite an achievement for the company to have wrung out a double-digit increase in operating revenues. GDP growth has been up there amongst the best in Asia, but don’t say anything about that to the country’s embattled retailers. Vacancy in the capital is epidemic and occupancy has dropped below 60 per cent according to CBRE. Not surprisingly, retail rents have been heading in the same direction. Specialty stores sales have picked up a bit in September and October but then things went a quiet again in November. Sales growth there, to the extent that there is any, is coming off a low base.
Cambodia will eventually be a retail success story because the real estate platforms built by Aeon and its main competitor Chip Mong are terrific.
Mall openings to slow
In view of current trends and perception of risk, Aeon has had to downsize its revenue projections and also its mall opening plans. It will now open only two malls in Japan this year instead of three malls, one in China instead of two, and none in ASEAN instead of the two originally planned. If all goes to this latest plan, the company will be operating 98 malls in Japan by the end of this year, 25 in China and 16 across Vietnam, Cambodia and Indonesia.
This mild setback will not deter Aeon from its ambitions in Southeast Asia where it has a lot of stock in future growth; rather it is learning from its mistakes, and the mistakes of others, and calibrating the pace of its developments with market realities. At the same time, it is continuing its program of renovating existing malls to improve the customer experience.
Further reading: Hot property: What’s driving Aeon Mall’s record-high results.