ring that Aeon Mall is in an industry known for companies that like to preen themselves before the investment community, the company is realistic about where it stands and how hard it is to get back to pre-Covid levels for footfall, store sales, leasing revenues and the bottom line: income. Operating costs have grown faster than revenues, which are derived primarily from leasing space in its shopping centres. So although Aeon is clearly ahead of 2021, that is a somewhat weak milestone and the company isn’t making a big song and dance about it. So, what’s the problem? The main issue is sluggish growth of sales in its native Japan, where operating income fell by $2.9 billion yen (about $30.8 million) in the most recent quarter, ending 31 May, compared with the same period in 2019. Specialty store sales have dragged at Aeon’s 83 malls and have consistently been down double-digit percentages compared with 2019, particularly in the all-important apparel segment, where sales have been off close to 20 per cent over the two-year period. The good news is that the situation is slowly normalising and should get even better as border restrictions are relaxed and tourists re-enter the country on a large scale. Gains from overseas malls (especially in Vietnam) haven’t been able to offset the sluggishness in Japan. In China, Covid-19 countermeasures have closed malls at various times. Specialty store sales at China malls reached their nadir as a comparison with 2019 in April and May, with the lockdown in Shanghai. China sales were down about 35 per cent compared with April 2019. Business has been steadily building again since then, and by the end of the first half, sales were within striking distance of the comparable period in 2019. The Vietnam business, on the other hand, has followed a higher trajectory and it is little wonder that the company is keen to get more malls on the ground there. Specialty store sales throughout this year have consistently exceeded the level of 2019 by close to 50 per cent. Although cinemas and other entertainment facilities have remained slow, merchandise and food sales have been strong and Aeon hopes that the Vietnam Government’s pro-growth economic policies will keep consumer spending at its malls buoyant throughout the remainder of the year. In Cambodia, Aeon has two large and important malls in Phnom Penh that have attracted overseas brands to the country. Specialty store sales have been on an upward trajectory throughout the past few months, after a sluggish start to the year. The three-year plan Aeon’s business in Japan is mature but the company is still identifying and exploiting opportunities. It opened Phase 1 of a factory outlet centre (The Outlets Kitakyushu) in April, configured as a single-level open-air urban village with 160 shops. And a conventional enclosed mall in Toki, near the city of Nagoya, is scheduled to open later this year. Its pipeline for 2023-25 includes no fewer than nine mall projects. Apart from new malls, the company has an ambitious revitalisation program for existing ones. Last year, it spent 30 billion yen on revitalisations in Japan, and this year it expects to spend another 23 billion yen. Clearly, Aeon’s leadership is well aware of the need to diversify its formats and not put all its eggs in one basket, even when its malls represent a proven business model. It is, however, in the fortunate position of having significant greenfield growth opportunities in the region. In developing South-east Asia, where it is pinning a lot of its hopes for the future, only Thailand is really outside its purview, since that country already has an established and highly sophisticated mall culture with at least three large, entrenched players. Aeon Mall is aiming to have 52 malls in operation overseas by the end of 2025, with China, Vietnam, Cambodia, and Indonesia the main targets. Currently, it has 33, with 22 of them in China, which account for 70-75 per cent of overseas operating revenue. Overseas malls as a whole account for almost 20 per cent of operating revenue for the company now, a figure that is set to grow substantially as Aeon implements its development plans. In 2021, the company opened only two malls outside Japan: Aeon Mall Tanjung Barat in Jakarta, and Aeon Mall Guangzhou Xintang in China. To get to its target of 52 would involve opening 17 malls in three years from 2023-25, which would mean a very big step-up in activity. The company envisages 29 malls in China by the end of 2025, and 23 combined in Vietnam, Cambodia and Indonesia. First off the production line will likely be Aeon Meanchey in Phnom Penh, its third mall in the Cambodian capital, with a leasable area of almost 100,000sqm.  Vietnam is a particularly attractive target, despite the presence of a formidable local competitor in the form of Vincom. Aeon already has six operational shopping centres in the country: two each in Ho Chi Minh City and Hanoi, another in the northern port city of Haiphong, and one in Binh Duong, in the south. It has announced the development of six more, in Hanoi, Thanh Hoa, Thua Thien-Hue, Binh Duong, and most recently in Danang and Dong Nai. In all, Aeon plans to have 16 malls up and running in Vietnam over the next few years, a demanding task after it opened only two last year. Aeon is a seasoned operator that has adapted well to mall development outside of Japan. Some things it cannot control, though, and so far 2022 has delivered some unpleasant surprises, exemplified by the China lockdowns.  Now, all it needs is a few months of plain old boring.