SenshukaiSh k i Co.,C Ltd.
Ltd
Second Quarter of Fiscal 2009
Earnings Presentation
Julyy 30,, 2009

Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

Contents

1 Results of Operations for Second Quarter of Fiscal 20091.
2. Highlights and Results Compared to Initial Targets for
Second Quarter of Fiscal 2009
3. Progress on the Medium-Term Management Plan
4. Consolidated Outlook for Fiscal 2009
5. Others

21. Results of Operations for Second Quarter of Fiscal 20093

2Q Fiscal 2009 Consolidated Results Highlights(Millions of yen)zNet Sales

zNet Sales¥76.3bn (-3.7%)

zOzOperatingti IncomeI- ¥0.47bn¥0 47b (-)

zNet Income-)¥0.73bn (*( ) represents year-on-year percentage changes
hzOperating Income

zNet Income

800

1,800

90,000

1 500
1,500

600

75,000

1,200
400

733

60,000

900
200

600

45,00079 211
79,211

 Catalog business sales lower from slump
in consumer spending Operating income down on sales decline
and higher inventory valuation losses Net income for quarter up on foreignexchange gains and gains on valuation ofcompound financial instruments.

7676,308
79 30879,211211

0300

1,39830,000-2000
15,000-474-300-600

02Q
Fiscal 2008

2Q
Fiscal 2009

2Q
Fiscal 2008

-510-400-600
600

2Q
Fiscal 2009

2Q
Fiscal 2008

2Q
Fiscal 20094

Consolidated Results of Operations for 2Q Fiscal 2009 (YoY Comparison)(Millions of yen)
2Q
Fiscal 2008

Comparison
to Net Sales

2Q
Fiscal 2009

Comparison
to Net Sales

Difference

YoY
Change %-2,903-3.7%

Net Sales

79,211-76,308-

Cost of Sales

40,898,51.6%

40,510,53.1%

-388

-0.9%

Gross Profit

38,312

48.4%

35,79746.9%-2,515-6.6%

SG&A Expenses

36,914

46.6%36,272

47.5%

-642

-1.7%

Operating Income

1,398

1.8%

-474

-0.6%

-1,872-

Ordinary Income

313

0.4%

1,064

1.4%

+751

239.7%Net Income

-510
510

-0.6%
0.6%

733

1.0%

+1,243-5

Consolidated Balance Sheet for 2Q Fiscal 2009
Accounts

Dec. 31,2008

Jun. 30,
2009

Difference

Remarks((Millions of yyen))

AssetsInventories: promoted a policy of inventory reduction

Current assets

49,99845,710

Fixed assets

54,06053,592104,059

99,302-4,75654,15338,449-15,703 contracts and weaker yen

Total assets-4,288 Accounts receivable-other: declined due to lower sales-468 Decrease in investments and other assets

Liabilities
Forward exchange contracts: declined due to cancellation of derivative

Current liabilities

Short-term bank loans: shift to long-term bank loans and bonds

Long-term liabilities

5,631

14,666+9,034 Increase in long-term bank loans and bonds

Total liabilities

59,784

53,115-6,669

Shareholders’ equity

54,830,55,142,+312 Booked a net income

Valuation and translation
adjustments-10,584-8,973+1,611 Impacted by deferred hedge gains (losses)

29

17-11

Total net assets

44 27444,27446 186
46,186+1 912+1,912

Total liabilities and net assets

104,059

99,302-4,756

Net Assets

Minority interests

6

Trends in the Sales for the First Half (YoY Comparison)(Monthly and YTD)
zConsolidated Sales (monthly)
2008(Millions of yen)2008

-2.0% -0.7%

2009

90,000

-8.4%
8.4%
-7.4%

14,000zConsolidated Sales (YTD)

2009

16,00012,000(Millions of yen)

-3.7%
3 7%

80,000

-5.5%

-3.3%

70,000+2.7%

60 00060,000-4.1%

10,00050,000

8,000

-4.9%

40,000

6 000
6,000

2 8%
-2.8%

30,0004,000

20,0002,000,

10,00000Jan.

Feb.

Mar.

Apr.

MayJun.

+2.7%

Jan.

Feb.

Mar.

Apr.

MayJun.

 Spring and summer merchandise off to solid start in January, but sales slumping since February as consumers holdoff on purchases.

7

Net Sales by Business Segment for Fiscal 2009 (YoY Comparison)((Millions of yen)y )2Q Fiscal 2008

-3.7%

2Q Fiscal 20091%
-77.1%

79,211 76,308

90,00067,560 62,758

75,00060,000+46.4%

45,000-9.8%
30,00015,000

5,402 7,912

6,247 5,637

0Hanpukai Business

Catalog Business

Other Businesses

Consolidated

 Sales increased in the “other businesses” as Dears Brain Inc. was made a consolidated subsidiary.

8Current Situation of Catalog Business

2Q
Fiscal 2008

2Q
Fiscal 2009

Difference

Net Sales(Millions of yen)

67,56062,758-4,801Semi-annual
number of activecustomers(10,000 members)

282

260

-22

Number of new customers declined
and retention rate dropped
Declined due to increased
percentage of Internet orders

Average sales percustomer(Yen)

12,98912,580-409

Semi-annual orderfrequency(Times)202.0

21
2.1+0 1+0.1

Catalog circulation(10 000 volume)(10,000Average sales per customer andnumber of customers declined

Order frequency increased

5,210

5,054-156

Declined due to online shift andmore efficient catalog distribution

9Current Situation of Hanpukai Business
Rebuilding of the Hanpukai Business Office vending box business(Ch k T
(ChokoTabeb BOX )As of June 30: about 20,000 boxes
Approximately 65% of these are in offices that arenot hanpukai (monthly delivery) program members.
Efforts to attract new hanpukai and catalog
subscribers have so far resulted in 700 new
memberships.

10Current Situation of Other Businesses(Millions of yen)

Net Sales

2Q
Fiscal 2008

2Q
Fiscal 2009

Difference
Sampling and gift
catalogs declined

B-to-B Operations

3,219

2,856-363

Storefront business(excluding outlet)

288

416

+128

Pet First Co., Ltd.

782

754

-27

Dears Brain Inc.

-3,275+3,275

We booked sales fromthe second half of 2008

Others1,112

607-504

Lower sales at B·B·S
Co., Ltd.

Total

5,402,

7,911,+2,509,

Opening of Kurasu
Fuku stores(total: 9 stores)

11

Overview of Cost-of-Sales Ratio and SG&A Expenses
zCost-of-sales Ratio (Consolidated)zSG&A Expenses (Consolidated)(Millions of yen)

-642

+1.5%
51.6%

53.1%

2Q Fiscal 2008

2Q Fiscal 2009 Catalog Business: Higher valuation losses(up approx. ¥1.9bn YoY)
• Increase due to change in the valuation of inventories• Increase due to the growth in inventories from bargain sales inthe previous fiscal year

36,91436,272

2Q Fiscal 2008

2Q Fiscal 2009

 Decrease in packing and freight due to improvement of delivery-toorder ratio Lower printing costs due to decrease in catalog circulation and thenumber of pages
 Increase in labor costs due to increase in consolidated subsidiaries
 Increase in depreciation due to new stores, headquarters and systems.

12

2. Highlights and Results Compared to Initial Targets for
Second Quarter of Fiscal 200913

Results Compared to Initial Targets for 2Q Fiscal 2009
(Milli(Millionsoff yen))

2Q Fiscal 2009
Initial Targets

Comparison
to Net Sales

2Q Fiscal 2009
Results

Comparison
to Net SalesDifference

Progress
Indicator %Net Sales

82,000-76,308--5,692-6.9%

Cost of Sales

42,09051.3%

40,51053.1%-1,580-3.8%

Gross Profit

39,91048.7%

35,79746.9%-4,113-10.3%

SG&A Expenses

38,61047.1%

36,27247.5%-2,338-6.1%

Operating Income

1,300

1.6%

-474

-0.6%

-1,774-

Ordinary Income

1,400

1.7%

1,064

1.4%

-336

-23.9%Net Income

970

1.2%

733

1.0%

-237
237

-24.4%
24.4%

14

Breakdown of Changes in Cost-of-Sales Ratio and SG&A Expenses(Comparison to initial budget)z Cost-of-sales Ratio
Increase in cost-of-sales ratio in line with higher valuation losses and higher bargain sales from catalogs,
websites and fax
zSG&A Expenses-2,33838,610(Millions of yen)

36,272(Millions of yen)

40,000

Packing and freight
Sales promotion expenses
Catalog-related expenses
Labor costs
Rent
Other expenses

35,00030,00025 00025,00020,00015,00010,000,5,0000
Fiscal 2009
Initial Targets

2Q Fiscal 2009
Results-688-390-290-228-103-639-2,338
2 338

Cut each costs

15Highlights from First Half of Fiscal 2009 (1)Developments in our Chinese Mail-Order BusinessChinese mailmail-order
order subsidiary Shanghai
Senshu Merchant and Commerce Co., Ltd.
opened Belle Maison Kurasu Fuku store onJanuary 17.

On July 10, launched online shop inside Tao Bao,
China’s largest online shopping site
Transaction value: 1.5 trillion yen
Members: 98 million

16

Highlights from Second Quarter of Fiscal 2009 (2)Senshukai a participant in eco-point
program!

Established K. Sense Consumers can exchange eco-points
eco points for:(1) Belle Maison gift certificates(2) Belle Maison delicacies from all over Japan(3) Belle Maison eco-friendly goods

 Joint venture with Kadokawa group subsidiary
Kadokawa SS Communications Inc.
Operating mail-order and marketing businesses
targeting seniors, leveraging monthly magazine
Mainichi ga Hakken (Everyday Brings a NewDiscovery) subscriber base of around 110,000.
~Aimingg for 5 billion yyen in sales three yyears from now.

17

18

3. Progress on the Medium-Term Management Plan
(Fiscal 2008 – 2010)19

Promotion of Channel Mix (Internet Sales, Number of Stores and Sales)zInternet Sales

zNumber of Stores and SalesInternet only

(Millions of yen)Store sales

Via catalog

90,000(Millions of yen)

(Number of stores)

5,000

90 00090,00040,00060,000

+5.6%

60
48

72,0004,000

32,94834,787

14,956

13,71933

3,000

17,992
,

29

30
4,300

2 000
2,000
41,00020

3,100

50,0001,000

21,068

1 100
1,100

0

10

1,200,0
1H Fiscal 2008 1H Fiscal 2009
Results
Results

Fiscal 2009
Targets

5040

31,00027

30,000

Number of stores

Fiscal 2010
Targets

Customer reads a catalog then purchases by Internet,
entering catalog number* Internet only: Customer makes purchase through the Internet byputting product into online shopping cart

1H Fiscal 2008 1H Fiscal 2009
Results
Results

0Fiscal 2009
Targets

Fiscal 2010
Targets* Via catalog:* Plan to open new Kurasu Fuku stores during the year

20

Majoor components of cost-of-sales
ratio

Major componennts of distribution
nrelated vaariable cost

SCM Promotion (Status of Each Indicator)

2Q Fiscal 2008
Results

Rapid delivery ratio

77.7%

Degree ofImprovement

2Q Fiscal 2009
Results

85.9%

Improved
Delivery-to-orderratio

143.3%

126.8%

Import ratio

71.3%

70.2%

Direct transaction
ratioti

21.4%

19.4%

Inventory turnover

3.9 times

4.2 times

Improved
Inventories¥18.2 billion¥16.0 billion* Rapid delivery ratio: The ratio of products in stock that are available for immediate delivery* Delivery-to-order ratio = number of deliveries / number of orders* Direct
Di t transaction:tti
Our
O own SPA transactionsttithatth t are nott via
i tradingt di companiesi* Inventories: Annual average of inventories of catalog products

21

22

4 C
4.
Consolidated
lid d OutlookO l k forf Fiscal
i l 2009

23

Consolidated Earnings Forecasts for Fiscal 2009 (YoY Comparison)(Millions of yen)
Fiscal 2008

Comparison
to Net Sales

Fiscal 2009

Comparison
to Net Sales

Difference

YoY
Change %Net Sales

158,285-

152,480--5,805-3.7%

Cost of Sales

81,912

51.7%

79,20151.9%-2,711-3.3%

Gross Profit

76,37348.3%

73,27848.1%-3,095-4.1%

SG&A Expenses
E73 960
73,960

46 8%
46.8%

72 17872,178

47 3%
47.3%

-1,782
1 782

-2.4%
2 4%

Operating Income

2,413

1.5%

1,100

0.7%

-1,313-54.4%

Ordinary Income-4,553-2.9%

2,1001.4%+6,653-Net Income-6,271,-4.0%

1,510,1.0%+7,781,-24

Important Projects on Fiscal 2009 Agenda
Improved profits in second half Reducing catalogs in circulation
Æ Optimizing number of catalogs sent to each customer
Aiming to reduce circulation by 6 million:
from 43 million to 37 million

New e-commerce business

Aiming for e-commerce frameworkthat transcends current Belle Maison
business model

New ECbusiness

General mail-order (web)General mail-order ((catalog)g) CuttingC i printing
i i paper costs(9% reduction year-on-year)

BelleMaison
HanpukaiRevampp of Belle Maison business

Websiteevolution

B ll
BelleMaison
webBelleMaison
catalog

Developments
MonthlyClubMonthlyMhlClubMonthlyClub

 Looking to improve catalog business operating
income!

Æ Seeking improved cost structure through detailed
review of present operations• Formed project teams to implement marketing,product management, and supply chain
management reforms

Established e-commerce development section inT k BTokyoBusiness
iDi
Divisioni i on July
J l 1

 Seeking framework that goes beyond Belle
Maison model((1)) Building
g business model that creates customer value(2) Aiming to provide services offered nowhere else

25Projected Net Sales by Business Segment for Fiscal 2009
(YoY Comparison)(Millions of yen)

Fiscal 2008

-3.7%

Fiscal 2009 Forecast

158,285-5.8%

180,000
160,000

131,886

152,480

124,178

140 000
140,000
120,000
100,000
80 00080,000+25 3%+25.3%-12.3%

60,00040,00013,699 17,171

12,698 11,131

20 00020,0000Hanpukai Business

Catalog Business

Other Businesses

Consolidated WeW expect lowerlsalesl ini theh hanpukaihk andd catalogl businesses,b iandd an increaseiini sales
l in
i theh “other“ h businesses”
b i” duedto a contribution from Dears Brain Inc.

26

5. Others
Oh27

Dividend and Date of Earnings Announcementz Senshukai has consistently maintained a dividend payout ratio of 30% as part of its
shareholder return policy. Senshukai had initially planned to pay a total annual dividend of 17
yen per share. However, the Company regrets to announce that it has reduced the 2Q dividend
to 6 yen per share and anticipates a lower year-end dividend of 6 yen per share, for a total
annuall dividend
di id d off 12 yen. The
Th change
htakesk intoiaccount 2Q results
l andd downwardly
ddl revisedi destimates for fiscal 2009, as well as future business developments and our dividend policy ofreturning profits to shareholders.
The total annual dividend represents an expected dividend payout ratio for the group of 37%.
z Date of earnings announcements for Fiscal 2009
 Third quarter of Fiscal 2009

October 23, 2009 (Friday) FiscalFi l 2009

JJanuary28
28, 2010 (Thursday)(Th d ) Earnings presentation

January 29, 2010 (Friday)* The forward-looking statements contained in this earnings presentation are based on information that
was available at the time. These forward-looking statements are subject to factors such as assumptions
and risks that are known to exist or that may occur in the future. Any of these factors that are subject tochange, or other risk factors could cause the actual results and operating performance to be significantly
different to the forecasts presented here.
here28