PARCO
Develops and Operates fashion-focused shopping complexes centering around the PARCO stores; a J. Front Retailing Group company
TICKER:8251｜Tokyo First Section｜HP: https://www.parco.co.jp/en/｜PUBLISHED on: 2019.05.28

Business overview

Strengths and weaknesses

Develops and runs fashion-focused shopping complexes (mainly PARCO-branded)

Strengths

Launching Ikebukuro PARCO in 1969, the company stands out as Japan’s pioneerin fashion-focused shopping complexes. It operates 13 “urban stores,” notably
Shibuya PARCO, and six outlying “community stores” including Tsudanuma

Brand power and Shibuya PARCO thatserves as the flagship store and brandsymbol: The company expects the newly
refurbished Shibuya PARCO (scheduled toopen in fall 2019) will serve as a landmark
next-generation global shopping center.
Collective strengths to meet diversifying
needs for commercial real estate: The
company develops commercial facilities tomatch the region.

PARCO. The community stores have been struggling. PARCO’s main source ofrevenue is rental income (fixed-term leases with minimum rent guarantees andstep-down commissions). Medium-term plan calls for the company to actively
close unprofitable community stores and open urban stores. (Store counts are asof end-April 2019; Shibuya PARCO currently under reconstruction, and Kinshicho
PARCO that opened in March 2019 are included.)

Earnings
FY02/20 forecast: Operating revenue +29.2% YoY and operating profit +34.1%,
helped by new stores
FY02/19 performance: Operating revenue JPY90.0bn (-1.8% YoY), operating
profit JPY5.4bn (-53.7% YoY). Despite contribution from newly developed
properties, PARCO store business continued to deliver weak results.
FY02/20 company forecast: Operating revenue JPY116.2bn (+29.2% YoY),
operating profit JPY12.7bn (+134.1% YoY). Expecting contribution from four new
properties (Kinshicho PARCO, SAN-A Urasoe West Coast PARCO CITY, the new
Shibuya PARCO, and Kawasaki ZERO GATE [tentative name]). Company projects
growth in operating revenue and profit, helped by the rebound from losses on
store closures recorded the previous year.

Medium-term plan
FY02/18–FY02/22 plan, focus on achieving long-term vision
Long term vision: The company’s long-term vision has three aspects: prosperingin urban markets, designing unique urban offerings, and driving urban evolution.
As a group, PARCO aims to helps cities mature by fostering “personal fulfillment,
new aspirations, and contentment.” To do so, the company intends to augment
existing businesses, expand into new domains, and revamp its business portfolio
to generate more value.
Specific strategies are to: bolster market position of the urban stores (prioritize
expansion of urban stores, closing others); produce commercial real estate(develop ZERO GATE and diversify into other formats); and expand soft content(meet more diverse demand).
Numeric targets: FY02/22 targets versus FY02/17 results (figures in parentheses
exclude one-off factors, such as gain on sale of Shibuya ZERO GATE, gain on saleof Chiba parking area, and loss on closure of Otsu PARCO): Operating revenue+29% to JPY121.4bn (+29.1%), operating profit +3.5% to JPY14.7bn (+27.8%),
profit +6.9% to JPY9.3bn (+32.9%)

01/18

Leasing capability based on long-term
relationships with more than 2,000
tenants, as well as underlying incubation
expertise: The company works with talented
creators, provides them opportunities toopen shops, and cultivates them as tenants.

Weaknesses
An aging customer base: Trendconscious youth are a core customer
base, but Japan faces fewer childbirths
and an aging population.
Weak sales at community stores in
outlying areas, delayed reaction: The
company is being affected by regional
influences and contracts.
Transaction volume in the apparel
category down for six straight years: The
company aims to turn these sales around.

Profit growth drivers
To date: Fashion-centered PARCO operations
Medium-term: Stores that respond actively
to increasingly diverse demand, commercial
real estate development
IndicesMarket capitalization

JPY107.1 bn

Stock price (May 23, 2019)

JPY1,056

Shares issued (incl. treasury shares; '000)

101,463 shares

Foreign stockholding ratio (Dec. 31, 2018)
Book value per share (FY02/19)
PBR (FY02/19)
PER (FY02/20 Est.)
Dividend (FY02/20 Est.)

4.10 %
JPY1,255
0.85 x15.0 x
JPY26.00

Dividend yield (FY02/20 Est.)

2.44 %ROE (FY02/19)

2.7 %

R

PARCO｜8251｜

Research Espresso by Shared Research

Earnings results and forecasts (IFRS from FY02/18)

FY02/10
FY02/11
FY02/12
FY02/13
FY02/14
FY02/15
FY02/16
FY02/17
FY02/18
FY02/19
FY02/20 Est.

Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
IFRS
IFRS
IFRS
IFRS

Sales/
Operating profit
Recurring profit/
Net income / Profit
attributable to owners of the parent
Operating revenue
Pre-tax profit(JPYmn)YoY(JPYmn)YoY(JPYmn)YoY(JPYmn)YoY
261,076
-7.6%
8,601
-8.1%
8,554
-6.7%
4,108
10.1%
264,840
1.4%
9,218
7.2%
8,750
2.3%
4,400
7.1%
259,789
-1.9%
9,168
-0.5%
8,966
2.5%
4,319
-1.8%
264,779
1.9%
10,82418.1%
10,329
15.2%
5,083
17.7%
264,384-0.1%
12,196
12.7%
12,013
16.3%
6,778
33.3%
269,889
2.1%
12,508
2.6%
12,499
4.0%
6,294
-7.1%
276,358
2.4%
12,772
2.1%
12,673
1.4%
6,061
-3.7%
93,78014,203
13,6698,795
91,621-2.3%
11,713-17.5%
11,455-16.2%
7,809-11.2%
89,969-1.8%
5,425-53.7%
5,049-55.9%
3,370-56.8%
116,200
29.2%
12,700134.1%
10,500108.0%
7,100
110.7%

EPS
(JPY)
49.87
53.41
52.49
54.44
66.81
62.04
59.75
86.69
79.97
33.30
70.23

BPS
(JPY)
954.52993.52
1,028.21
1,020.92
1,072.57
1,115.83
1,148.00
1,188.67
1,244.97
1,255.30

ROA

ROE(based on RP /pre-tax profit)

4.5%
4.3%
4.2%
5.0%
5.6%
5.6%
5.5%
5.6%
4.5%
1.9%

2.2%
3.3%
5.0%
5.7%
6.7%
5.7%
4.7%
7.4%
6.3%
2.7%

Source: Shared Research based on company data
Notes: Figures may differ from company materials due to differences in rounding methods. Adopted IFRS from FY02/18. FY02/17 figures have been adjusted toreflect this change in accounting method. At the top of the table, accounting line items to the left of the slash are according to Japanese GAAP and items to
the right are according to IFRS, with the exception of “Recurring profit/Pre-tax profit.”

Business overview
Comprehensive production of shopping complexes, centered on PARCO

Four business segments◤

Shopping Complex business: (51.6% of operating revenue in FY02/19) The
company’s core segment; this business centers on the development and operation of
PARCO complexes. (See “PARCO shopping center revenue structure.”) This businessfollows a hybrid model of retail and commercial real estate development. In addition
to PARCO, the company is developing other models, such as ZERO GATE, which

ZERO GATE

specializes in low- to medium-rise shopping complexes in prime urban areas. Unlike
PARCO, one or just a few tenants occupy the ZERO GATE complex, allowing tenants
full scope to showcase their brands. This model facilitates operational efficiency, andthe company does not incur marketing expenses. The Shopping Complex business isreturn to the basics for PARCO, which has

mainly operated by the parent company, PARCO CO., LTD.
◤

Retail business: (19.9%) Group company NEUVE A CO., LTD. develops and manages
specialty boutiques (called “select shops” in Japan) in four categories (wristwatches,
eyeglasses, cosmetics, and men’s personal items). It also develops business in othercategories. Across Japan, the PARCO group operates 171 select shops that specializes
in personal items. Shops located in properties other than the PARCO stores make up
71.3% of the total. The company is working to strengthen its existing business byadopting a scrap-and-build approach, focusing on original products, and improving
profit margins. Also, the company is accelerating the digital strategy, promoting omnichannel development, and strengthening marketing efforts.
Select shops featuring a wide selection of branded items handpicked bybuyers/managers test a merchandiser’s ability to choose precisely the products
customers want. The company also develops and offers some of its own products forsale. Personnel costs and real estate rents are the main expenses. Achieving high profit
margins is difficult under this model, but the company is attempting to boost margins
by trying out new store formats and through further digitalization. In FY02/19, thecompany booked impairment losses on unprofitable stores it closed, pushing the
Retail business into the red.

◤Space Engineering and Management business: (22.1%) This business is handled
by PARCO SPACE SYSTEMS CO., LTD., whose stated objective is to leverage thegroup’s expertise to maintain or increase the value of client assets. PARCO SPACESYSTEMS offers comprehensive solutions in areas covering interior design to facility
operation to meet clients’ diverse needs concerning space development andmanagement. The company handles a range of properties, including shopping malls
and other large commercial properties, specialty stores, showrooms, amusement
facilities, museums, and hotels. This business generates stable profit of 2–4%.

02/18

The name ZERO GATE signifies “starting fromthe ground up” (zero) to provide new valuethat offers a “gateway to the city” (gate); a
promoted various urban lifestyles themes todate, including fashion and culture.

R

PARCO｜8251｜◤

Research Espresso by Shared Research

Other businesses: (6.4%) Within Other businesses, in the entertainment business thecompany operates in the fields of theater, music, and film, and also produces softcontent. In the digital marketing business, the company facilitates PARCO’s use of
information and communication technologies and supports operations at around 300
commercial facilities and specialty stores.

Segment information(JPYmn)Shopping Complex
Sales / Operating revenue
Segment profit
Segment profit margin
RetailSales / Operating revenue
Segment profit
Segment profit margin
Space Engineering and Management
Sales / Operating revenue

FY02/15 FY02/16 FY02/17 FY02/18 FY02/19
JGAAP
JGAAP
IFRS
IFRS
IFRS
243,783
11,317
5%

248,078
11,5495%

53,864
13,17924%

51,351
10,96421%

51,1175,142
10%

19,802647
3%21,473694
3%21,532205
1%21,21675
0%19,754-25-

18,983

19,96920,52821,39921,882

Segment profit

328

433

773

652

662

Segment profit margin

2%

2%

4%

3%

3%

6,891

6,850

6,137

6,158

6,327

256
4%

132
2%

45
1%

53
1%

-297
-

Other
Sales / Operating revenue
Segment profit
Segment profit margin

Source: Shared Research based on company data

Business model for PARCO stores (Shopping Complex business)
Basic source of revenue is fixed-term leases with minimum rent guarantees and step-downcommissions.

Overall business flow
The company develops the overall flow of operations at PARCO shopping complexes. First,
it creates a proposal and plan based on the characteristics of a store’s location andenvironment, as well as potential customers’ needs. It then selects tenants, designs thespace, and prepares leasing contracts. Marketing (including advertising and promotional
activities to attract customers) as well as maintenance are handled by the company, so thatthe tenants can focus on sales activities. The company considers tenants to be equal
partners, emphasizing strong, win–win partnerships based on trust, common values, andmutual growth.

PARCO shopping complex revenue structure
After signing leasing contracts with tenants, the company assumes responsibility formarketing and advertising on their behalf. When a customer purchases items from atenant’s shop, the tenant passes these on to the company as daily sales deposits. After acertain period, the company pays sales deposits back to the tenant, net of fees andexpenses due. Accordingly, the company has no inventory risk. Once tenant revenue
exceeds a certain level, commission rates fall, incentivizing tenants to sell more.
The Shopping Complex business follows a hybrid model of retail and commercial realestate development, based on fixed-term leases with minimum rent guarantees and stepdown commissions. This means that higher-than-expected tenant sales deliver an upsidefor PARCO, which earns commissions on sales above a certain level in addition to fixedrental income. Meanwhile, if tenant sales are weaker than expected, the fixed rent clause in
its tenant agreements provides downside protection for PARCO. In addition, the company
makes proposals for and operates new and existing shopping malls and other buildings.
PARCO’s capabilities are varied, and hence so are its revenue sources.

03/18

R

PARCO｜8251｜

Research Espresso by Shared Research

Example: A customer buys a shirt for JPY1,000 from a PARCO tenant. PARCO subtracts JPY200 in costs forrent, commissions, and operation, and pays the tenant the remaining JPY800. If the tenant has purchased
the shirt for JPY500, it has earned an additional JPY300. PARCO has earned JPY200. From that amount,
PARCO subtracts JPY140 in expenses (personnel expenses, rents, outsourcing costs, and depreciation),resulting in a JPY60 gain.

Customer's payment

Deposit of daily sales
Revenue from tenant
Cost of sales (=tenant's sales
after rent deduction)

Repayment of deposits
after deducting rent (%of sales) and operating
expensesReceipt of sales
after rent deduction

Source: Shared Research based on company data

Origin of the company name
The company takes its name for the Italian word for park, conveying the idea of a place
where people come to share time and space with each other, relaxing and having fun.
Under this scenario, the company serves as the venue (the “parco”) for the key players:customers and tenant shops. PARCO sees its role as creating a place customers want tovisit. Accordingly, the company says it is constantly working to build a place that inspires
customers and makes them feel happy.

Shibuya and PARCO
Shibuya PARCO, which opened its doors in 1973, epitomizes the company and the PARCO
brand. Located atop a hill 500 meters from Shibuya station, originally the location was notconsidered ideal for shopping. Even so, the company took on the challenge and worked tocreate an attractive commercial environment through efforts such as branding the roadleading to PARCO “Koen-dori” (park street) and building a theater. Over time, this area
evolved as Shibuya’s fashion hub.
Shibuya PARCO Part 2, which opened in 1975, led in the development of the Japanese“DC” brand trend, bringing together such names as Comme des Garçons and Y’s on asingle floor. By the late 1980s, the DC brand boom died down and “select shops” started
to emerge mainly around Harajuku. Shibuya became a center for street culture and thecrowds grew younger.
In 1981, Shibuya PARCO Part 3 opened. This shopping facility catered to increasingly
diverse consumer needs, focusing on lifestyle rather than fashion. Around that time,
Shibuya PARCO began leading the change in Shibuya’s image toward a creative andindividualistic part of Tokyo.
Shibuya in the 1990s was marked by a boom in popularity of mini-theaters. Riding thiswave, the company opened an independent movie theater in Shibuya PARCO Part 3 in
1999. At the height of the boom, this theater was known for its showing of Trainspotting,which became closely linked with mini-theaters. Since then, Part 3 has also housed art
galleries and a bookstore, and served as a venue for disseminating cultural information.
In the 2000s, Shibuya Mark City, a joint redevelopment project by Tokyu Corporation, Keio
Corporation, and Tokyo Metro, was launched. This facility added a flavor of Shibuya as aplace for internet startups and IT companies. In 2002, PARCO opened Shibuya ZERO GATE
to highlight Shibuya PARCO’s overall gateway role and soliciting fast fashion tenants.
Shibuya PARCO has also been instrumental in several mixed-culture projects. Shibuya
Hikarie opened in 2012, again changing Shibuya’s atmosphere into a city for internetcompanies and business. In 2015, the company decided to rebuild Shibuya PARCO.
The new Shibuya PARCO will house offices on the upper floors, and the company plans toactively solicit tenants whose business is outside the scope of fashion (such as a NINTENDO

04/18

R

PARCO｜8251｜

Research Espresso by Shared Researchshop). PARCO aims to house shops that meet demand from inbound tourists and attract a
global audience.

PARCO stores
The company operates 19 PARCO stores* across Japan. As of end-February 2019, it had
about 401,000sqm of floor space under operation, 820 companies under contract, 60 new
tenant companies under consideration for contracts, and around 2,000 tenants.
(* The count excludes the Shibuya store, which is under construction, and Kinshicho
PARCO that opened in March 2019.)

Store locations

Source: Company data

Information and list of each store
The table below indicates tenant transaction volume and YoY changes.
Tenant transaction volume
SapporoSendaiIkebukuro
Ueno
Shibuya
Shizuoka
NagoyaHiroshima
FukuokaUrban Store Group
Utsunomiya
Urawa
Shin-Tokorozawa
Chiba
Tsudanuma
Hibarigaoka
Kichijoji
Chofu
Matsumoto
Otsu
Kumamoto
Community Store Group
Total

FY02/15
11,891
13,13528,256
14,666
10,09635,215
16,98914,827145,078
4,478
17,441
9,051
5,718
8,811
7,460
7,274
16,915
7,477
4,276
5,173
94,078239,157

YoY
4.1%
-1.3%
-0.5%
8.9%
-2.0%
-1.1%
-1.6%
22.9%
2.3%
-6.1%
3.0%
1.9%
-10.4%
-3.4%
-1.5%
-4.0%
-1.0%
-0.7%
-4.9%
-0.2%
-2.9%
0.7%

FY02/16
12,415
13,30927,296
15,336
10,33936,772
16,645
19,573
151,689
4,311
16,869
9,303
5,157
8,526
7,255
6,934
17,064
7,219
3,613
5,135
91,389243,079

YoY
4.4%
1.3%
-3.4%
4.6%
2.4%
4.4%
-2.0%
32.0%
4.6%
-3.7%
-3.3%
2.8%
-9.8%
-3.2%
-2.7%
-4.7%
0.9%
-3.5%
-15.5%
-0.7%
-2.9%
1.6%

FY02/17
11,897
17,01525,767

YoY
-4.2%
27.8%
-5.6%

7,615
10,31036,287
15,932
19,417
144,245
3,576
17,319
9,385
4,302
8,106
7,066
6,904
16,950
7,133
3,500
5,482
89,727
233,973-50.3%
-0.3%
-1.3%
-4.3%
-0.8%
-4.9%
-17.0%
2.7%
0.9%-17.6%
-4.9%
-2.6%
-0.4%
-0.7%
-1.2%
-3.1%
6.8%
-1.8%
-3.7%

FY02/18
13,421
20,03028,4582,265
1,138
10,60034,671
16,71922,243
149,549
3,061
24,618
10,614
10,682
8,162
9,619
18,576
7,278
2,297
4,989
99,901
249,451

YoY
-2.2%
10.1%
2.7%
-87.4%
-1.6%
-9.4%
-1.6%
2.6%
-4.4%
-17.8%
1.3%
2.4%
7.8%
1.8%
3.2%
0.1%
-9.2%
-50.8%-20.1%-7.9%-5.8%

FY02/19
13,20020,19728,134
5,788
1,413
9,947
34,245
16,13622,350151,415
2,113
26,095
10,126

YoY
-1.6%
0.8%
-1.1%
24.2%
-6.2%
-1.2%
-3.5%
0.5%
1.2%
-31.0%
6.0%-4.6%

12,091
7,071
9,668
17,994
6,016

13.2%-13.4%

4,007
95,185
246,600-19.3%
-4.7%
-1.1%

0.5%
-3.1%
-17.3%

Source: Shared Research based on company data
Notes: Before the adoption of IFRS, transaction volume excluded rent, which is included thereafter. The samebase is used for calculating YoY figures. In March 2019, the company reorganized the stores into 13
urban stores, including Kinshicho PARCO, and six community stores. Information in the above table isexcerpted from the company’s FACTBOOK 2019. Shibuya PARCO closed its Part 1 and Part 3 facilities
in August 2016.

05/18

R

PARCO｜8251｜

Research Espresso by Shared Research

Apparel shops

Source: Company data

Store renovation
The company is renovating stores to proactively meet changing consumer demands(growth in experience-based consumption, foods and deli, and cosmetics categories), as
well as to meet the demands specific to a store’s location and environment. More than
10% of all leasing area of 401,000sqm is under renovation as of end-FY02/19. Renovation
has a positive YoY impact on operating revenue.
Scale of renovation
FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19
Zones renovated

450

425

380

441

289

348

Area (approximate space; sqm)

44,00046,00040,00055,00035,00037,000Effect (sales by renovated zones; YoY)
New store openings

11.0%
249

18.6%
233

16.6%
219

12.7%
225

26.7%
174

16.2%
193

Source: Shared Research based on company data

MUJI’s Wood-themed kids’ corner offering space for families

Restaurant corner at Sumida Food Hall offering local specialties

Source: Company data (Kinshicho PARCO opened in March 2019.)

Sales by merchandise category
In FY02/19, clothing accounted for 36.3% of transaction volume (40.8% in FY02/15),
personal effects for 17.7% (16.8%), sundries for 16.0% (15.4%), foods for 7.3% (6.1%),
restaurants for 8.3% (7.3%), and other categories for 14.4% (13.6%). Compared with
FY02/15 figures, sales of clothing were down as a percentage of transaction volume, while
personal effects, sundries, foods, and restaurants accounted for a larger share. The
company explains that this relative shift is partly due to a strategic focus on cosmetics andother personal effects, restaurants, and foods.
Paying customer count and average customer spend(comparable stores)
Paying customer count YoY
Avrage customer spend YoY

Source: Shared Research based on company data

06/18

FY02/15 FY02/16 FY02/17 FY02/18 FY02/19
-0.6%
2.6%
-3.4%
-0.3%
3.2%
1.2%
1.1%
0.6%
-1.4%
-4.8%

R

PARCO｜8251｜

Research Espresso by Shared ResearchYoY change in transaction volume by merchandise category
Clothing

Total
Comparable stores
Personal effects Total
Comparable stores
Sundries
Total
Comparable stores
Foods
Total
Comparable stores
Restaurants
Total
Comparable stores
Other
Total
Comparable stores

FY02/15 FY02/16 FY02/17 FY02/18 FY02/19
-2.3%
-2.5%
-6.8%
-11.0%
-6.0%
-2.9%
-4.0%
-4.0%
-6.4%
-5.9%
3.6%
4.5%
-2.2%
-5.2%
0.5%
3.4%
4.1%
-2.1%
-3.4%
-1.1%
4.2%
-2.7%
0.3%
-2.8%
1.4%
0.8%
-0.1%
0.2%
4.9%
-2.3%
-1.6%
-0.9%
1.4%
-4.0%
9.5%
-1.8%
-1.2%
-0.5%
0.3%
9.3%
12.3%
8.7%
-2.2%
-0.4%
4.3%
-0.9%
-3.9%
2.0%
-0.2%
9.1%
5.8%
-3.4%
-5.3%
-1.6%
4.1%
5.8%
-3.5%
-3.4%
4.7%
4.2%

Source: Shared Research based on company data
Notes: YoY figures before FY02/17 are based on “integrated store sales,” This category includes tenant sales,
PARCO Theater sales, and fixed-lease tenant revenue. In figures from FY02/18, integrated store sales are
replaced by tenant transaction volume calculated as sum of the tenant transaction volume of PARCO stores.

07/18

R

PARCO｜8251｜

Research Espresso by Shared Research

Retail apparel industry in Japan
According to the Ministry of Economy, Trade and Industry (METI) Current Survey ofCommerce in March 2019, total sales by department and retail stores (5,222 stores) was
down 5.2% YoY in calendar 2016, down 3% in 2017, and down 3.4% in 2018. On a samestore basis, the figures were minus 4.8% for 2016, minus 1.7% for 2017, and minus 2.3%
for 2018.
Shared Research attributes these downward apparel industry trends to falling unit prices
and a shift in sales channels from physical retail stores to online shopping. The role ofbricks-and-mortar stores is changing as apparel companies develop their online presence.
The apparel industry is being affected by the sharing economy and other consumer
preferences.

Peer comparison
Shared Research understands the company has no direct competitors that handle theoverall creation of fashion-oriented shopping complexes. That said, each PARCO store hascomparable peers: neighboring department stores and specialty stores with which thecompany competes in certain business areas.
Meanwhile, Shared Research sees online stores as a strong competitor in the apparelindustry targeting youths. Young consumers buy clothes online without hesitation. As longas the product is the same, they have no problem buying via the cheapest route.
Accordingly, Shared Research thinks competitors include online retailers such as ZOZO(TSE 3092), which operates ZOZOTOWN. Although fashion retailing is in difficult straits
overall, the online market is growing at around 10% per year. In Japan, online sales ofapparel account for 10% of the total, while the figure is 15–20% in Europe and the US.
Peer companies
TickerCompany

Fiscalyear

Sales(JPYmn)OP(JPYmn)3099

Mitsukoshi Isetan Holdings

FY03/19

1,196,803

29,229

2.4%

1.1%

2.3%

46.1%

8242

H2O Retailing

FY03/19926,872

20,422

2.2%

0.3%

0.8%

42.0%

8233

Takashimaya

FY02/19

912,848

26,661

2.9%

1.5%

3.7%

42.0%

3086

J. Front Retailing

FY02/19459,840

40,891

8.9%

2.7%

6.3%

45.0%

8252

Marui Group

FY03/19

251,415

41,184

16.4%

2.8%

8.9%

32.0%

3092

ZOZO

FY03/19

118,405

25,654

21.7%

20.2%

70.9%

28.6%

8905

Aeon Mall

FY02/19

312,976

52,987

16.9%

2.8%

8.7%

31.9%

644,364

30,674

9.1%

4.8%

15.5%

39.3%

Average

OPM

Source: Shared Research based on company data
Note: Figures may differ from individual company materials due to differences in rounding methods.

08/18

ROA

(RP-based)

ROE

Equityratio

R

PARCO｜8251｜

Research Espresso by Shared Research

Trends and outlook
FY02/19 results
Operating revenue was JPY90.0bn (-1.8%YoY), operating profit was JPY5.4bn(-53.7%YoY), and profit attributable to owners of parent was 3.4bn (-56.8%YoY).
Operating revenue and profit fell YoY amid weak performance in the Shopping Complex
and Retail businesses and the posting of losses from store closures.
The YoY decline in operating revenue came from a dip in comparable store sales hurt bycompetition and the sluggish performance of apparel tenants, which absorbed thecontributions from new store openings in FY02/18 and FY02/19 and the performance ofsubsidiary PARCO SPACE SYSTEMS. That said, half of the YoY profit drop can be attributed
to one-off factors such as store closures and decisions to end store operations. These
included losses associated with the closure of Utsunomiya PARCO and Kumamoto PARCO
stores, and the absence of the reversal of provision posted in the previous fiscal year in
relation to the closure of the Otsu store. An increase in impairment losses recorded byexisting PARCO stores also added to the YoY drop.
SG&A expense increased due to a rise in upfront spending to open new PARCO stores andexpenditure in the Entertainment business to open movie theaters. Advertising expenses,
mainly for existing PARCO stores, fell YoY.
Asset increased JPY13.5bn YoY, while interest bearing debt increased JPY9.0bn, mainly forthe purpose of funding the Shibuya redevelopment project. ROE fell to 2.7% due to lower
profit. ROA fell to 1.9% given fall in profit and increase in asset. Company views this dropas temporary and expects a recovery in FY02/20 or later.
Quarterly results (cumulative)
FY02/18

FY02/19

Cumulative (IFRS)(JPYmn）

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Operating revenue

23,50845,23068,252

91,621

22,02644,184

66,272

89,969

YoY

-0.8%

-4.1%

-1.8%

-2.3%

-6.3%

-2.3%

-2.9%

-1.8%

Shopping Complex

12,85025,51338,23551,351

12,87225,49038,176

51,117

YoY

-6.5%

-7.2%

-6.2%

-4.7%

0.2%

-0.1%

-0.2%

-0.5%

% of total

54.7%

56.4%

56.0%

56.0%

58.4%

57.7%

57.6%

56.8%
19,754Retail5,199

10,597

15,17921,216

4,934

9,927

14,190

YoY

1.4%

1.9%

-0.1%

-1.5%

-5.1%

-6.3%

-6.5%

-6.9%

% of total

22.1%

23.4%

22.2%

23.2%

22.4%

22.5%

21.4%

22.0%
21,882

Space Engineering and Management

5,695

10,273

16,781

21,399

4,949

9,990

15,477

YoY

-0.1%

-3.3%

9.2%

4.2%

-13.1%

-2.8%

-7.8%

2.3%

% of total

24.2%

22.7%

24.6%

23.4%

22.5%

22.6%

23.4%

24.3%
6,327

Other

1,931

2,781

4,689

6,158

1,154

2,692

4,448

YoY

45.6%

-8.0%

1.9%

0.3%

-40.2%

-3.2%

-5.1%

2.7%

% of total

8.2%

6.1%

6.9%

6.7%

5.2%

6.1%

6.7%

7.0%

Operating profit

3,497

6,666

9,660

11,713

2,750

5,707

8,139

8,723

2.5%

-31.4%-22.7%-17.5%-21.4%-14.4%-15.7%-25.5%YoY
Shopping Complex

3,245

6,617

9,465

10,964

2,767

5,764

8,213

5,142

YoY

6.1%

-28.5%-21.3%-16.8%-14.7%-12.9%-13.2%-53.1%% of total

92.8%

99.3%

98.0%

93.6%

100.6%

101.0%

100.9%

58.9%

Segment profit margin

25.3%

25.9%

24.8%

21.4%

21.5%

22.6%

21.5%

10.1%

-18

-192

-305

Retail
YoY

75

32

-3

-180

-25

-63.4%-277.8%-98.4%-41.0%-133.3%% of total

-0.5%

-2.9%

-3.2%

0.6%

1.2%

-0.1%

-2.2%

-0.3%

Segment profit margin

-0.3%

-1.8%

-2.0%

0.4%

0.6%

0.0%

-1.3%

-0.1%

323

299

693

652

83

165

405

662

10.3%

-23.8%

32.2%-15.7%-74.3%-44.8%-41.6%

1.5%

Space Engineering and Management
YoY% of total

9.2%

4.5%

7.2%

5.6%

3.0%

2.9%

5.0%

7.6%

Segment profit margin

5.7%

2.9%

4.1%

3.0%

1.7%

1.7%

2.6%

3.0%

-43

-55

-122

Other
YoY

53

-119

-198

-250

-297

17.8%

176.7%

260.0%

104.9%-660.4%% of total

-1.2%

-0.8%

-1.3%

0.5%

-4.3%

-3.5%

-3.1%

-3.4%

Segment profit margin

-2.2%

-2.0%

-2.6%

0.9%

-10.3%

-7.4%

-5.6%

-4.7%

Source: Shared Research based on company data
Note: Figures may differ from individual company materials due to differences in rounding methods. Includes internal transactions.

09/18

R

PARCO｜8251｜

Research Espresso by Shared Research

Outlook for FY02/20
For FY02/20, which is the third year of its medium-term plan, the company forecasts
JPY116.2bn in operating revenue (+29.2% YoY) and JPY12.7bn in operating profit (+134%
YoY). (The change in accounting practice from the adoption of IFRS 16 accounts for a
JPY1.1bn increase in the forecast for operating profit; i.e. fees previously recorded as landand building lease fees declines as they are now recorded as depreciation and interest
income.)
The company expects a significant recovery in operating profit, partly owing to theabsence of store closure-related losses seen in FY02/19 (based on decisions to close
Utsunomiya PARCO and Kumamoto PARCO). Key positive contributions reflected in theforecast are: +JPY1.6bn from existing PARCO stores, +JPY3.1bn from the reversal impact ofstore closures, and +JPY1.2bn from new stores slated to open during the year (Kinshicho
PARCO, SAN-A Urasoe West Coast PARCO CITY, the new Shibuya PARCO, and Kawasaki
ZERO GATE [tentative name]). Negative factors include costs related to new store
openings such as reception fees and costs associated with the rollout of a point awards
system, which come to a total of JPY817mn.
The company forecasts capital expenditure of JPY17.7bn, which includes costs associatedwith the Shibuya redevelopment project. It plans on a dividend payment of JPY26 per share(interim and year-end dividends of JPY13 each), including a special dividend of JPY2
commemorating PARCO’s 50th anniversary.

Progress versus the medium-term plan
Five stores opened out of the 12 development projects in the pipeline; four are making steadyprogress.
The company budgets JPY66.8bn in total capital expenditure over the five-year period of
the current medium-term plan, of which it has spent JPY27.3bn in FY02/18 and FY02/19
combined. In FY02/20, it forecasts an operating profit of JPY11.6bn (before adjustment
based on IFRS 16), driven by new store openings and recovery in comparable store sales.
In FY02/22, the company targets an operating profit of JPY14.7bn.
Name
PARCO

PARCO_ya UENO

FY2017

Opening schedule
FY2018FY2019

Kinshicho PARCOMarch

New Shibuya PARCO

Fall

North Building of Daimaru Shinsaibashi
New format

SAN-A Urasoe West Coast PARCO CITYZERO GATE

Kyoto ZERO GATE

November
March

Sannomiya ZERO GATE

September

Kawasaki ZERO GATE (tentative)

Source: Shared Research based on company data

10/18

SpringSummerHarajuku ZERO GATETOTALFY2021

November

Early Fall9（５launched, ４ currently underway）

R

PARCO｜8251｜

Medium-term business plan (FY02/18-FY02/22)
The company’s long-term vision has three aspects: prospering in urban markets, designing
unique urban offerings, and driving urban evolution.

Medium-term plan strategies
Bolster market position of the urban stores (prioritize expansion of urban stores, closing
others)◤

The company intends to concentrate its management resources on the developmentof urban stores. Of the 12 development projects, five stores have opened, and four
projects are underway; the remaining three are also being developed (as of FY02/19).
It will aim to make visiting brick-and-mortar stores attractive for the consumers bycreating space for experience-oriented activities and adding unique value to store
visits. It will also cultivate new tenants, and focus on proposing lifestyles along
themes such as personal fulfillment and sharing, with a view to providing enjoymentthat transcends the conventional retail experience.

◤

The company plans to aggressively invest in stores from which it can expect sufficient
return, notably the new Shibuya PARCO opening in the fall of 2019. The company
positions Shibuya PARCO as the starting point of the brand’s unique qualities, andintends to develop the new and revamped Shibuya PARCO into a next-generationcommercial space showcasing untapped concepts. It also plans to share some of theconcepts employed at Shibuya PARCO more broadly throughout its urban stores andseeks to elevate the PARCO brand as a whole to the next level. By developing multipurpose commercial complexes, the company will also work to expand touchpoints
with companies outside of the fashion industry. Collaboration with the Shibuya
district to create an “Entertainment City,” development of soft content, andenhancement of brand awareness on a global scale leveraging the revamped PARCO
stores (the next-generation commercial properties) are also among the company’s
strategies. Meanwhile, it will also continue to implement store closures and formatchanges, keeping abreast of individual store performances and regional market
conditions.

New Shibuya PARCO’s image

Source: Company data

Introduce tenant services aligned with advancement in e-commerce
◤

11/18

On the information and communication technologies front, the company plans on
introducing a proprietary platform through which tenants can maximize
communication with consumers and expand their fan base. It also hopes to step up
its customer strategies utilizing this platform; for example, online, it will accumulate

Research Espresso by Shared Research

R

PARCO｜8251｜
purchase data and analyze customer activities monitoring around-the-clock online
customer transactions, and offline, it will work to improve storefront operations by
developing a system where tenants can manage inventory data. Fintech, house cards,
and diversifying payment methods are additional areas the company plans toaddress. PARCO will also step up online efforts to attract more customers using its
original smartphone app, social media, and tenant blogs.
◤

POCKET PARCO: a specific initiative in this area is the use of original app POCKETPARCO. The company will provide lifestyle proposals, entertainment information, andpromote brick-and-mortar stores around the clock via the app, encouraging
customers to come visit the stores and enjoy shopping as well as other activities.

Produce commercial real estate, expanding into diverse development formats◤

The company intends to steadily generate profit by addressing development needs
in uncultivated locations. It aims to increase the share of profit derived fromcommercial real estate production to 24% of the total by the end of the current
medium-term plan. The company will be involved in development projects of diverse
properties in a wide range of roles from the planning and design phase to tenant
selection and property operation.

◤

As another area of focus, the company plans to offer solutions to business operators(such as commercial facilities and museums), leveraging the know-hows ofsubsidiaries PARCO SPACE SYSTEMS and PARCO Digital Marketing. It will utilize thecollective expertise and knowledge acquired through the group’s experience in the
PARCO store business. The company’s strength lies in its ability to provide
individualized solutions that suit the needs of its business partners.

Expand soft content (meet more diverse demand)◤

PARCO believes needs that cannot be met with the conventional PARCO store
approach emerge as cities mature. While being mindful of the group’s values–“personal fulfilment,” “new inspirations,” and “contentment”, the company will
respond to the diversifying needs of maturing cities. Specifically, it plans to develop
soft content. In the Entertainment business, it targets the enhancement of original
live entertainment and create a new entertainment space centering on the new
Shibuya PARCO theater.

◤

In the Retail business (NEUVE A), the company will focus on the specialty boutiquesin the existing four categories and develop new categories. It will also push forward
digital strategies including the use of online sales channels.

◤

Regarding overseas initiatives, the company plans to raise brand recognition in Asia.
It will also consider introducing soft content of the PARCO group and opportunities
for collaboration with overseas shopping centers and business operators.

Collaboration with the J. Front Retailing Group (JFR)
PARCO is making progress collaborating with the J. Front Retailing Group, which has
department stores Daimaru and Matsuzakaya under its umbrella. For example, PARCO_ya,
the company’s store format targeting adults, became a key tenant in Ueno Matsuzakaya’s
newly opened South Wing. The company plans to open another shop in the North Wing of
Daimaru Shinsaibashi (Osaka) in the spring of 2021. Projects are not limited to those that
use JFR’s assets. The two companies have joined hands in regional projects (in Nagoya,
Kyoto, and Kobe) opening ZERO GATE stores in the vicinity of Daimaru and Matsuzakaya
stores, and have launched joint promotion activities among existing PARCO stores andJFR’s department stores in the same regions. We understand the partnership is highly
synergistic for JFR, which shares a similar urban-store focus. PARCO’s strengths in store
development and tenant incubation are an asset for JFR, and as such, we expect to see
more collaborations down the road.

12/18

Research Espresso by Shared Research

R

PARCO｜8251｜

Research Espresso by Shared Research

Numeric targets
The company adopted IFRS starting FY02/18. Targets for FY02/22, the final year of thecurrent medium-term plan, versus FY02/17 results (figures in parentheses exclude one-off
factors, such as gain on sale of Shibuya ZERO GATE, gain on sale of Chiba parking area, andloss on closure of Otsu PARCO): Operating revenue +29% to JPY121.4bn (+29.1%),
operating profit +3.5% to JPY14.7bn (+27.8%), profit attributable to owners of parent+6.9% to JPY9.3bn (+32.9%)
FY2016FY2021(JPYmn) (* adjusted for one-off factors in FY2016)

Act.*

Targets

ChangeCAGR

Sales / Operating revenue

94,000Operating profit

14,200

121,400

27,4007%14,700

500

OPM

15%

12%

1%

2,300

7%

Net income (Profit) attributable to owners of the parent

7,000

9,300

ROE

6.1%

6.5% or higher

Source: Shared Research based on company data
Note: One-off factors include gain on sale of Shibuya ZERO GATE, gain on sale of Chiba parking area, and loss
on closure of Otsu PARCO

The Company aims to shift the OP weighting of its PARCO store business (87% of total
operating profit) to other growth businesses, and revamp the business portfolio. In its planfor FY02/22, PARCO estimates 65% of total operating profit to come from the PARCO store
business, 24% from the development of commercial real estate, and 11% fromentertainment and other businesses. The current medium-term plan consists of 12
development projects including opportunities to create multi-purpose complex andproperties adopting other formats. There are many needs to upgrade properties in urban
areas, and the demand is high. The company sees this as an opportunity to increase realestate-related profit.
Operating profit by breakdown by business category
FY2016 results

FY2021 plan

(excluding one-off factors)
Store business

87%

PARCO Store business

65%

Development projects

6%

Commercial Real Estate Production business

24%

Other

7%

Neuve A, Entertainment business, other11%

Source: Shared Research based on company data

Capital expenditure plan
Over the five years, the company targets total capital expenditure of JPY66.8bn, of which
JPY40.4bn (around 60%) will be for strategic investment aimed at future growth and
JPY26.4bn for recurring investment. As for cash flow, it expects to provide over JPY77.3bn
in net operating cash flow over the five-year period.

13/18

R

PARCO｜8251｜

Strengths and weaknesses
Strengths◤

Brand power and Shibuya PARCO that serves as the flagship store and brandsymbol: PARCO has high brand recognition in Japan, and Shibuya PARCO acts as thecompany’s flagship store and brand symbol. In recent years, Shibuya has gained
global recognition for its youth culture and as the part of Tokyo where new fashions
and cultural trends are born. In addition to Shibuya fashion, since the 1970s Shibuya
PARCO has been instrumental in the development of Shibuya’s culture and the area
itself. As such, the company positions the store as the starting point of PARCO’s
unique qualities. In autumn of 2019, the refurbished Shibuya PARCO will reopen as a
new Shibuya landmark. This next-generation global shopping center will provide
office space, educational facilities, an entrepreneurial center, and cultural spaces,
including a theater. The company intends to share some of the concepts employed at
Shibuya PARCO more broadly throughout its urban stores and seeks to elevate the
PARCO brand to the next level. For these reasons, Shibuya PARCO is an invaluableasset for the company.

◤

Collective strengths to meet diversifying needs for commercial real estate:
The group has a demonstrated ability to create and maintain appealing store spaces
through analysis, planning, tenant selection, advertising, marketing, andrefurbishment. Every year, the company refurbishes about 10–15% of its total leased
space, replacing half with new stores. The company focuses on creating retail spacesthat are fresh and attractive. By contrast, other shopping mall operators typicallybuild shopping malls that are similar regardless of location and other needs, selecting
similar sets of tenants. PARCO stores are also different from each other. One example
of producing a mall that matches the needs of the area is the company’s biggest
shopping mall, SAN-A Urasoe West Coast PARCO CITY, which is set to open in
Okinawa in June 2019. In this project, PARCO used its tenant network to solicit
tenants that best fit the property and worked to create stores that can attract locals,
as well as customers from other parts of Japan and overseas. The company sees its
collective strengths reflected in its ability to create commercial facilities that matchthe individual needs of the area.

◤

Leasing capability based on long-term relationships with more than 2,000
tenants, as well as underlying incubation expertise: PARCO has worked withtenants since the 1960s, cultivating them as demand has changed with the times andemphasizing relationships based on equal partnership. The company currently has
more than 2,000 tenants and exhibits strength in selecting tenants that match thetimes and can meet local needs. PARCO also focuses on incubating new brands. It hasoften been the first to introduce up-and-coming tenants, with whom it developed
new formats, and jointly supported new talents (designers and creators). The
company has helped such Japanese brands as MUJI, FrancFranc, and Samantha
Thavasa to grow and succeed. From the beginning, the company provided prime
shopping spaces, giving creative talent a chance to open stores and become
successful tenants. Such support has paved the way for long-term win–win
relationships. Incubated brands become an asset for PARCO, as they help to increasecustomer traffic and satisfaction and bolster its leasing capability.

Weaknesses◤

An aging customer base: PARCO’s customer base is aging, along with the general
Japanese population, but new fashion and lifestyle ideas remain PARCO’s key focus.
Young people thus remain the company’s most important customer group andbiggest fans. However, women aged 29 and under now make up just 25% of thecustomer base (down from 31% a decade ago), whereas women aged 50 and older
account for 24% (up from 13%). (This information is based on data from more than
2mn PARCO card members as of FY02/19. PARCO card use accounted for 20.7% of

14/18

Research Espresso by Shared Research

R

PARCO｜8251｜
total transaction volume). Shared Research believes the company will need toaddress this issue carefully, as appealing to an older customer base would create therisk of growing out of touch with the needs of younger customers.
◤

Weak sales at stores in outlying areas, delayed reaction: Sales at “community”
stores, located in outlying areas, have been struggling as the Japanese population
ages and decreases. Although the company is responding to these changing
demographics and regional characteristics through its scrap-and-build andrefurbishment policy, making decisions on closing tenant shops and changing
business formats become time-consuming as the company needs to review theexisting contracts and consider the impact of changes on local communities.

◤

Transaction volume in the apparel category down for six straight years:
Although clothing has also declined as a percentage of total transaction volume, itremains the largest category, at 36%. Although it has been refurbishing andchanging store formats in response to the growth in experience-based consumption,
this percentage is still high, in light of the prolonged sluggish performance of theapparel industry. PARCO’s transaction volume in the apparel category has fallen every
year since FY02/14. However, the company is not resigned to the prospect of falling
clothing sales. The PARCO image is still supported by fashionable merchandise andstores. The company recognizes the need to both improve its product mix andstrengthen clothing sales, and hopes the newly refurbished Shibuya PARCO will
provide the spark.

15/18

Research Espresso by Shared Research

R

PARCO｜8251｜

Research Espresso by Shared Research

Income statement
FY02/10

FY02/11

FY02/12

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20(JPYmn)

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

IFRS

IFRS

IFRS

IFRS Est.

Sales / Operating revenue

261,076

264,840

259,789

264,779

264,384

269,889

276,358

93,78091,621

89,969116,200

YoY

-7.6%

1.4%

-1.9%

1.9%

-0.1%

2.1%

2.4%

-66.1%

-2.3%

-1.8%

29.2%

Gross profit

39,412

39,19938,92742,567

43,77645,26946,65531,302

29,263

28,108

YoY

-7.0%

-0.5%

-0.7%

9.4%

2.8%

3.4%

3.1%

-32.9%

-6.5%

-3.9%

GPM

15.1%

14.8%

15.0%

16.1%

16.6%

16.8%

16.9%

33.4%

31.9%

31.2%

-

8,601

9,218

9,168

10,824

12,196

12,508

12,772

14,203

11,713

5,425

12,700

YoY

-8.1%

7.2%

-0.5%

18.1%

12.7%

2.6%

2.1%

11.2%

-17.5%-53.7%

134.1%

OPM

3.3%

3.5%

3.5%

4.1%

4.6%

4.6%

4.6%

15.1%

12.8%

6.0%

10.9%

8,554

8,750

8,966

10,32912,013

12,49912,673

13,66911,455

5,049

YoY

-6.7%

2.3%

2.5%

15.2%

16.3%

4.0%

1.4%

7.9%

-16.2%-55.9%

RPM / Pre-tax profit margin

3.3%

3.3%

3.5%

3.9%

4.5%

4.6%

4.6%

14.6%

12.5%

5.6%

4,108

4,400

4,319

5,083

6,778

6,294

6,061

8,795

7,809

3,370

7,100

YoY

10.1%

7.1%

-1.8%

17.7%

33.3%

-7.1%

-3.7%

45.1%

-11.2%-56.8%

110.7%Net margin / Profit margin

1.6%

1.7%

1.7%

1.9%

2.6%

2.3%

2.2%

9.4%

8.5%

3.7%

6.1%

Operating profit

Recurring / Pre-tax profit

Net income / Profit attributable to owners of the parent

Source: Shared Research based on company data
Notes: Figures may differ from company materials due to differences in rounding methods.
Under IFRS, operating revenue includes tenant rent, theater sales and tenant expenses. Under Japanese GAAP, sales
include transaction volume of tenants with commission contracts and theater sales.
Under IFRS, operating expense indicates store-related expense. For Japanese GAAP, CoGS includes tenant transaction
volume after deducting tenant rents, as well as CoGS for theater.
Under Japan GAAP, operating profit does not include extraordinary profit/loss or non-operating income/loss. Under
IFRS, these are included, but net financial income/loss are excluded.
Due to the adoption of IFRS 16, operating leases are included in assets from end-FY02/19, causing total assets toincrease. This change had a JPY91.3bn impact.

Per share data(split-adjusted; JPY)

FY02/10

FY02/11

FY02/12

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

IFRS

IFRS

IFRS

Shares issued (year-end; '000)

82,47682,47682,476

101,463

101,463

101,463

101,463

101,463

101,463

101,463

EPS

49.87

53.41

52.49

54.44

66.81

62.04

59.75

86.69

79.97

33.30

Dividend per share

16.00

17.00

17.00

18.00

18.00

18.00

20.00

23.00

23.00

24.00

Book value per share954.52993.52

1,028.21

1,020.92

1,072.57

1,115.83

1,148.00

1,188.67

1,244.97

1,255.30

Source: Shared Research based on company data
Notes: Figures may differ from company materials due to differences in rounding methods.

Balance sheet(JPYmn)Current assets

FY02/10

FY02/11

FY02/12

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

IFRS

IFRS

IFRS

26,14628,241

23,31728,991

22,396

27,41023,89433,547

39,245

9,023

12,253

7,437

10,463

3,529

4,333

6,840

10,522

12,464

8,690

160,947

193,894

185,380

177,251

198,360

158,636

172,215215,258

222,590

232,620

Tangible fixed assets

96,451

130,642

126,490

123,698

154,590

158,636

172,215

179,843

186,791

195,617

Intangible fixed assets

11,77911,676

11,738

11,844

11,847

12,011

11,641

1,570

1,494

1,696

Investments and other assets

52,716

51,57447,152

41,70831,921

28,771

28,564

1,356

721

510

Total assets

187,093

222,135

208,697

206,243

220,757

226,830

236,315

248,806

261,835

275,369

Current liabilities

40,38946,961

49,68736,37541,03047,47250,732

54,63652,51453,798Fixed liabilities

68,04693,30674,432

66,29570,902

66,146

69,10873,56883,01094,662

Total liabilities

108,435

140,267

124,120

102,670

111,933

113,618

119,841

128,205

135,524

148,460

38,48773,44759,53637,37550,42445,22954,51858,09952,82061,74078,657

81,86884,577

103,573

108,823

113,211

116,474

120,600

126,311

126,908

Cash and deposits
Fixed assets

Interest-bearing debt
Total net assets

Source: Shared Research based on company data
Notes: Figures may differ from company materials due to differences in rounding methods.

16/18

42,749-

R

PARCO｜8251｜

Research Espresso by Shared Research

Cash flow statement(JPYmn)FY02/10

FY02/11

FY02/12

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

IFRS

IFRS

IFRS

Cash flows from operating activities

8,921

12,025

11,274

13,9389,864

15,281

14,652

7,690

21,386

4,529

Cash flows from investing activities-7,405-42,290-584-2,139-27,886-7,612-19,325-4,961-11,552-13,909

Cash flows from financing activities-3,61733,536-15,483-8,826

11,049-7,206

7,203

1,210

-7,897

5,610

Source: Shared Research based on company data Figures may differ from company materials due to differences in rounding methods.

Financial indicators
FY02/10

FY02/11

FY02/12

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

IFRS

IFRS

IFRS

ROA (based on RP / pre-tax profit)

4.5%

4.3%

4.2%

5.0%

5.6%

5.6%

5.5%

5.6%

4.5%

1.9%

ROE

5.3%

5.5%

5.2%

5.4%

6.4%

5.7%

5.3%

7.5%

6.3%

2.7%

Equity ratio

42.0%

36.8%

40.5%

50.2%

49.3%

49.9%

49.3%

48.5%

48.2%

46.1%

Total asset turnover

137.9%

129.4%

120.6%

127.6%

123.8%

120.6%

119.3%

38.7%

35.9%

33.5%

1.6%

1.7%

1.6%

1.9%

2.6%

2.3%

2.2%

9.4%

8.5%

3.7%

Net margin / Profit margin

Source: Shared Research based on company data

Dividend policy
The company’s policy is to maintain stable dividends, while ensuring sufficient internal reserves for
future business investment. For FY02/20, the company’s dividend forecasts is JPY26, resulting in a
dividend payout ratio of 37%. JPY2 is an extraordinary dividend to commemorate the company’s 50th
anniversary.
(JPY)

FY02/10

FY02/11

FY02/12

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20 Est.

16.0

17.0

17.0

18.0

18.0

18.0

20.0

23.0

23.0

24.0

26.0

32.1%

31.8%

32.4%

33.1%

26.9%

29.0%

33.5%

31.0%

29.9%

72.1%

37.0%

Dividend per share
Payout ratio

Source: Shared Research based on company data

Shareholders
Top shareholders

Shares held('000)

Shareholding
ratio
64.98%

J. Front Retailing Co., Ltd.

65,922

Aeon Co., Ltd.

8,272

8.15%

Credit Saison Co., Ltd.

7,771

7.66%

Japan Trustee Services Bank, Ltd. (Trust account)

3,571

3.52%

MUFG Bank, Ltd.

930

0.92%

BARCLAYS BANK PLC A/C CLIENT SEGREGATED

906

0.89%

Japan Trustee Services Bank, Ltd. (Trust account 9)

758

0.75%

UBS AG LONDON ASIA EQUITIES

631

0.62%

The Master Trust Bank of Japan, Ltd. (Trust account)

614

0.61%

J.P. MORGAN BANK LUXEMBOURG S.A. 1300000

589

0.58%

89,20488.68%

Sum
Total shares issued

100.00%Source: Shared Research based on company data (as of end-February 2019)In 1969, the company’s predecessor Tokyo Marubutsu became part of the Seibu
Department group. After the dissolution of the Saison group, the Mori Trust group became
the company’s largest shareholder, under which the company focused on refurbishingstores and clarifying concepts and themes for its retail space. Thereafter, it entered into a
capital alliance with the Development Bank of Japan and issued convertible bonds, which
made Mori Trust the second-largest shareholder. In 2011, the Aeon group got involved.
With Aeon, PARCO worked to strengthen urban shopping malls and develop businessoverseas. However, such trials and talks were not successful, and the business alliance
failed.

17/18

R

PARCO｜8251｜

Research Espresso by Shared Research

In March 2012, J. Front Retailing acquired the shares held by the Mori Trust group, thus
becoming the largest shareholder. Moreover, via a takeover bid capital alliance, J. Front
Retailing became PARCO’s parent company, with a 65% stake.

Corporate governanceForm of organization and capital structure
Form of organization
Controlling shareholder and parent company

Company withnominating and other committees
J. Front Retailing (3086)

Directors and Audit & Supervisory Board members
Number of directors under Articles of Incorporation

15

Number of directors

8

Directors' terms under Articles of Incorporation (years)
Chairman of the Board of Directors

2
President

Number of outside directors

4

Number of independent outside directors

4

Number of outside members of Audit & Supervisory Board

4

Number of independent outside members of Audit & Supervisory Board

4

Source: Shared Research based on company data.
Note: As of May 26, 2018

The company became a company with nominating and other committees in 2003 toaccelerate the decision-making process and ensure proper execution of operations with aview to strengthen its governance structure.

History
Established as Ikebukuro Station Building Co., Ltd. in 1953. With the capital participation of
Marubutsu Co., Ltd., the company made a shift from managing station buildings tooperating department stores. It opened Ikebukuro PARCO in 1969. In 1970, the company
changed its name to PARCO. Following new store openings and closures, the company
currently operates 19 PARCO stores.

Disclaimer
This document is provided for informational purposes only. No investment opinion or advice is provided, intended, or solicited. Shared
Research Inc. offers no warranty, either expressed or implied, regarding the veracity of data or interpretations of data included in thisreport. We shall not be held responsible for any damage caused by the use of this report.
The copyright of this report and the rights regarding the creation and exploitation of the derivative work of this and other Shared
Research Reports belong to Shared Research. This report may be reproduced or modified for personal use; distribution, transfer, or otheruses of this report are strictly prohibited and a violation of the copyright of this report. Our officers and employees may currently, or in
the future, have a position in securities of the companies mentioned in this report, which may affect this report’s objectivity.

Japanese Financial Instruments and Exchange Law (FIEL) Disclaimer
The report has been prepared by Shared Research under a contract with the company described in this report (“the company”).
Opinions and views presented are ours where so stated. Such opinions and views attributed to the company are interpretations made by
Shared Research. We represent that if this report is deemed to include an opinion by us that could influence investment decisions in thecompany, such opinion may be in exchange for consideration or promise of consideration from the company to Shared Research.

Contact details
Shared Research Inc.
3-31-12 Sendagi Bunkyo-ku Tokyo, Japan
http://www.sharedresearch.jp
Phone: +81 (0)3 5834-8787
Email: info@sharedresearch.jp

18/18