Summary of Research Findings

This research is conducted on 123 pachinko parlor operators chosen randomly from a total of 2,078 pachinko parlor operators nationwide listed in the “YANO Pachinko Database”. Analysis of business performance transition is based on average values of major financial indices in their financial statements over 3 years from FY2019 to FY2021.

In FY2021, the average sales of the 123 companies was 14,758 million yen, with an average sales cost of 12,566 million yen (representing 85.1% by composition ratio), an average SG&A of 2,131 million yen (14.4%), and an average operating profit of 61 million yen (0.4%). By comparison of each index to data of the previous fiscal year, it shows that despite 0.7% decrease in sales, gross margin increased by 1.7% due to 1.1% decrease in sales cost. As the businesses also squeezed SG&A by 2.8% from the preceding fiscal year, they succeeded in turning operating profit into black. Still, their operating profit margin remains low at 0.4%.

Noteworthy Topics

Trends of Sales/Profit at 123 Pachinko Parlor Operators

[Sales & Sales Cost]

The average sales of pachinko parlor operators for FY2021 decreased by 0.7% from the previous fiscal year to 14,758 million yen.

Impacted by store closures and shortened business hours due to the pandemic restrictions on population movement, pachinko parlors saw considerable decline in sales, down 25.4% on year-on-year basis in FY2020. Although the restrictions are lifted gradually from FY2021, the market did not see full recovery. The fact that replacement of old gaming machines to new regulation-compliant machines is about to complete, i.e., much of the gaming machines that were popular among pachinko fans have been removed, is one of the reasons for slow sales recovery.

[Gross Margin]

Despite the sales shrinkage, decline in composition ratio of sales cost led to the increase of average gross margin to 2,192 million yen, up 1.7% from the previous fiscal year. Composition ratio of gross margin also rose by 0.4 percentage points from the previous fiscal year to 14.9%. The numbers indicate that the companies squeezed the sales cost to secure gross margin in their struggle with sluggish sales.

[SG&A]

The SG&A expenses for FY2021 decreased to 2,131 million yen by average, down 2.8% from the preceding fiscal year. In view of the composition ratio, SG＆A increased by 2.3 percentage points from 12.5% in FY2019 to 14.8% in FY 2020, but dropped by 0.4 percentage points in FY2021 to 14.4%. It shows that the composition ratio of SG&A exceeded 14% for two consecutive years. Although SG&A by value fell by 11.8% in FY2020 and by 2.8% in FY2021 from preceding fiscal year, because of a significant drop in sales since FY2020, the composition ratio of SG & A remains relatively high.

According to a similar study in the past, the composition ratio of SG&A has been exceeding 10% since FY2008. The pachinko parlor operators have been under pressure partly due to the cost of purchasing new machines to comply with the revision of the Pachinko Machine Regulation in February 2018, which mandated the parlors to remove the old machines by the end of January 2022. For FY2022 and beyond, the cost of installing smart gaming machines (smart pachinko machine and smart pachislot machines) and ancillary devices, as well as rising electricity prices, may lead to an increase of SG&A.

[Operating Profit]

Operating profit among the pachinko parlor operators for FY2021 was 61 million yen by average. While the composition ratio of operating profit at pachinko parlors had been in the 2% range for years, it fell into the red in FY 2020. Although the cut down in sales cost and SG&A contributed the recovery of operating profit by value in FY2021, the operating profit margin remains low at 0.4%.

Research Outline