4. For the whole financial year ending February 28, the company reported operating revenues of 449.8 billion yen ($3.1 billion), an increase of 6.3 per cent on the preceding year. Operating revenue rose 12.4 per cent but some extraordinary losses associated with two malls that Aeon closed, one in Tokyo and the other in Osaka, contributed to a net income decline of 30.1 per cent to 20.4 billion yen ($141 million). Operating revenues increased across all five markets in which the company operates (Japan, China, Vietnam, Cambodia and Indonesia), but while Japan, Vietnam and Indonesia yielded solid income growth, China and Cambodia both underperformed on the bottom line. Specialty store sales at the company’s 92 malls in Japan enjoyed sales growth of 5.4 per cent. Eleven of the malls were renovated during the year, a refreshment task that is essential to maintaining a healthy portfolio and justifying higher rents. Another focus that has become critical to driving foot traffic are special events and Aeon held plenty of them throughout the year, not just in the traditional holiday periods but also during the unseasonably hot summer when the company successfully marketed its malls as cool retreats, or as the company dubbed them ‘Cool Share’ spots.   The company also gave a special callout to international tourists, reporting that duty-free sales had doubled during the year. This is consistent with reports from Japan’s department store chains that have consistently reported strong growth in duty-free sales throughout the past 12 months. The result has been a pronounced outperformance by stores in tourist-oriented locations.  No China surprise Operating revenue in China, where Aeon operates 21 malls, grew by 15.5 per cent during the year to 68.1 billion yen ($473.2 million). Thus, China accounts for just over 15 per cent of the company’s revenue and 65 per cent of its non-Japan revenue. However, operating income in China was down 27.4 per cent to 4.7 billion yen ($33.0 million), only 9 per cent of the company’s total.  Specialty stores sales edged up by 1.7 per cent, but most of the interest is in food and beverage and entertainment, while the company noted declining sales at tenants selling apparel and accessories. Aeon, like other retail entities with interests in China, has poor consumer fundamentals, including weak confidence. It is doubtful that this situation will improve in the short term given the current trade dynamics.  Vietnam is Aeon’s darling, Cambodia not so much In Vietnam, Aeon Mall’s operating revenues grew by 13.5 per cent to 17.3 billion yen ($120 million). Operating income was also up strongly. Both metrics were driven by same-centre sales growth for specialty stores of 7.4 per cent, and to a lesser extent by the opening of a new mall in Hue. Aeon has its sights set on expansion in Vietnam, which will bring it into hot competition with Vincom. Vincom has carried out its own aggressive expansion around the country in recent years and the results have been patchy in terms of consumer uptake.  Aeon needs to be wary of getting ahead of the market in Vietnam, a mistake it has made already in Cambodia.  Aeon operates three superregional malls in the Phnom Penh metro, which generated operating revenues of 9.3 billion yen ($64 million), representing 10 per cent growth on the preceding 12 months. Specialty store sales edged up by 1.7 per cent. However, again, it came at a cost to the bottom line: expenses associated with initiatives to drive more foot traffic to the malls pushed down operating income by almost 75 per cent. Part of the problem is that a lot of the big spenders in Phnom Penh are expats ― this refers specifically to professionals who come to live in the capital to manage or play other high-paid roles in multinational companies ― but weak foreign investment due to pullbacks by the Chinese particularly has resulted in much slower growth than expected. The sluggish foot traffic has, in turn, discouraged retailers from opening and the vacancy rates are eye-popping. According to CBRE, retail vacancy in Phnom Penh is shy of 60 per cent. This doesn’t do much to prop up rents either, which have shown no sign of heading north.  In Indonesia, Aeon operates five malls that generated operating revenues of 9.9 billion yen ($68.4 million), up 35.7 per cent from the previous year, resulting in a swing from a 269 million yen loss to a 259 million profit. The results received uplift from the opening of Aeon’s fifth mall in the country, in Bekasi Province in East Jakarta, but also benefited from higher foot traffic at existing malls and improved occupancy rates. New malls: not so fast Aeon’s decision at the end of last year to tone down its revenue projections and modify its mall opening plans for this year has turned out to be prescient in view of escalating geopolitical and other economic risk factors. The plan now is for the launch of two malls in Japan this year (down from the three originally planned), a single opening in China (down from two) and zero in its other markets (down from two).  Like other mall developers in the region, Aeon has mistakes to learn from, but so far it has not made the kind of monumental blunders that others have in overbuilding secondary and tertiary markets. It still has ambitions for growth, though, and dominant developers in Vietnam and Indonesia are on notice that the competition will intensify, and the quality of that competition will be high.