Summary of Research Findings

For this research, 132 pachinko parlor operators were randomly sampled from a total of 2,392 pachinko parlor operators nationwide listed in the “YANO Pachinko Database”. We analyzed the business performance trends over the three years from FY20218 to FY2020 based on the average value of key indicators in their financial statements.

Noteworthy Topics

Financial Performance Trends of 132 Pachinko Parlor Operators

[Sales & Cost of Sales]

The average sales of pachinko parlor operators for FY2020 dropped by 25.6% from the previous fiscal year to 15,588 million yen. Impact of COVID-19 and gaming machine replacements caused the significant decline in sales. Meanwhile, on average, the sales cost sustained composition ratio of 85% over the past few years. For instance, it rose by 0.5 percentage points to 85.6% for FY2020.

[Gross Margin]

The average gross margin for FY2020 declined to 2,241 million yen, down 28.2% from the previous fiscal year. Although companies held down their sales cost to secure gross margin, composition ratio of gross margin fell by 0.5 points. The companies are struggling to cope with the sharp drop in sales.

[SG&A Expenses]

The average SG&A expenses for FY2020 decreased to 2,253 million yen, down 14.6% from the preceding fiscal year. On the other hand, the composition ratio of SG&A rose by 1.9 points year on year to 14.5%.
Purchasing cost of gaming machines is included in the SG&A expenses. The composition ratio of SG&A expenses has been over 10% for long time, weighing on pachinko parlor operators. Under the provisions of the Gaming Machine Guidelines revised in February 2018, pachinko parlors are required to replace old gaming machines with new gaming machines by the end of January 2022. Composition ratio of SG&A expenses rose slightly, because even though the companies cut down SG&A in accordance with the drop in sales, they couldn’t drive down the cost of machine replacements. As the replacements will be in the final phase in FY2021, the increase of SGA expenses continues to put a squeeze on profits.

[Operating Income]

For many years, the operators increased profit by cutting down the sales cost and SG&A. However, the companies incurred an average of 12-million-yen loss due to decline in sales in FY2020 owing to temporary closures of parlors ordered by the government during the COVID-19 crisis.

Research Outline