Summary of Financial Results for the Second Quarter of Fiscal Year 2023
(Six Months Ended June 30, 2023)[Japanese GAAP]
August 10, 2023

Company name: SENSHUKAI CO.,LTD.

Stock exchange: Tokyo Stock Exchange
Stock code:
8165
URL: https://www.senshukai.co.jp
Representative:
Mr. Kenji Kajiwara, President and Representative Director
Inquiries:
Mr. Tetsuya Takahashi,Managing Executive Officer, General Manager, Corporates Headquarters
Tel: +81-6-6881-3220
Scheduled date of filing of Quarterly Report: August 14, 2023
Scheduled date of payment of dividend: Preparation of supplementary materials for quarterly financial results: Yes
Holding of quarterly financial results meeting: Yes (A video of this meeting is planned to be posted on the
Senshukai website)(All amounts are rounded down to the nearest millions of yen)

1. Consolidated Financial Results for the 2nd Quarter of 2023 (January 1, 2023 – June 30, 2023)(1) Consolidated operating results (cumulative)(Percentages represent changes from the same period of the previous fiscal year)
Profit attributable toOperating profit
Ordinary profit
owners of parent

Net sales

Millions of yen%

26,635(6.2)(3,157)
2Q 2023
28,389(3,908)
2Q 2022
Note: Comprehensive income (millions of yen) 2Q 2023: (2,873) (-%)

Millions of yen%-

Millions of yen%

Millions of yen%(3,264)(3,656)-(3,268)(3,749)2Q 2022: (3,239) (-%)

Net income per share

Diluted net income per share

Yen

Yen

(69.73)
2Q 2023
2Q 2022(77.99)Note: Starting with the beginning of 2022, Senshukai has applied Accounting Standard for Revenue Recognition (AccountingStandards Board of Japan (ASBJ) Statement No. 29, March 31, 2020). All figures for 2Q 2022 incorporate this accounting
standard and comparisons with 2Q 2022 are omitted.

(2) Consolidated financial position
Total assets

Net assets

Millions of yen

Equity ratio

Millions of yen

33,815
19,146
2Q 2023
Fiscal Year 2022
38,92322,019Reference: Shareholders’ equity (millions of yen) 2Q 2023: 19,137

Net assets per share
%

Yen

56.6
56.5
Fiscal Year 2022: 21,999

408.87469.792. Dividends
1Q-endDividend per share
3Q-end2Q-endYen

Year-end

Total

Yen

Yen

Yen

Yen

Fiscal Year 2022
0.00
Fiscal Year 2023
0.00
Fiscal Year 2023 (forecasts)
Note: Revision to the most recently announced dividend forecast: None

-

0.00

0.00

-

0.00

0.00

3. Consolidated Outlook for Fiscal Year 2023 (January 1, 2023 – December 31, 2023)(Percentages represent changes from the same period of the previous fiscal year)
Profit attributable to Net income per
Operating profit
Ordinary profit
owners of parent
share

Net sales
Millions of yen%

Millions of yen% Millions of yen

Full Year 2023
55,000 (6.6)(3,800)(3,700)Note: Revision to the most recently announced consolidated outlook: None

% Millions of yen

%

Yen

-

-

(89.71)(4,200)* Notes(1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in changes inscope of consolidation): None
(2) Application of special accounting methods for presenting quarterly consolidated financial statements: Yes
Note: Please refer to “2. Quarterly Consolidated Financial Statements and Notes, ( 4) Notes to Quarterly Consolidated
Financial Statements (Application of Special Accounting Methods for Presenting Quarterly Consolidated Financial
Statements)” on page 9 for further information.

(3) Changes in accounting policies and accounting-based estimates, and restatements
1) Changes in accounting policies due to revisions in accounting standards, others: None
2) Changes in accounting policies other than 1) above: None
3) Changes in accounting-based estimates: None
4) Restatements: None

(4) Number of shares outstanding (common shares)
1) Number of shares outstanding at the end of the period (including treasury shares)
2Q 2023:

52,056,993 sharesFiscal Year 2022:

52,056,993 sharesFiscal Year 2022:

5,229,999 shares

2Q 2022:46,878,733 shares

2) Number of treasury shares at the end of the period
2Q 2023:5,251,309 shares

3) Average number of shares outstanding during the period
2Q 2023:

46,814,264 shares* This quarterly financial report is not subject to quarterly review by certified public accountants or auditing firms.
* Cautionary statement with respect to forward-looking statements
Cautionary statement with respect to forecasts
The above projections are based on information available at the time of release of this report. Actual results could differ
significantly from these projections due to a variety of factors. For further details regarding the projections, please re fer to page3, “1. Qualitative Information on Quarterly Consolidated Financial Performance, (3) Explanation of Consolidated Forecasts andOther Forward-looking Statements.”
How to view supplementary information at the financial results meeting
A video of the meeting for the presentation of the financial results for the second quarter of 2023 is planned to be posted on the
Senshukai website soon. In addition, materials used for this presentation will be disclosed using the Timely Disclosure netwo rk(TDnet) and will be posted on the Senshukai website.

SENSHUKAI CO.,LTD. (8165) Financial Results for the Second Quarter of Fiscal Year 2023

Contents of Attachments
1. Qualitative Information on Quarterly Consolidated Financial Performance2(1) Explanation of Results of Operations

2(2) Explanation of Financial Position

3(3) Explanation of Consolidated Forecasts and Other Forward-looking Statements

3

2. Quarterly Consolidated Financial Statements and Notes

4(1) Quarterly Consolidated Balance Sheet

4(2) Quarterly Consolidated Statement of Income and Quarterly Consolidated Statement of Comprehensive
Income6

Quarterly Consolidated Statement of Income(For the Six-month Period)

6

Quarterly Consolidated Statement of Comprehensive Income(For the Six-month Period)

7(3) Quarterly Consolidated Statement of Cash Flows

8(4) Notes to Quarterly Consolidated Financial Statements

9(Going Concern Assumption)

9(Significant Changes in Shareholders’ Equity)

9(Application of Special Accounting Methods for Presenting Quarterly Consolidated Financial Statements ) 9(Additional Information)

9(Segment Information)

10(Significant Subsequent Event)11

3. Other

12-1-

SENSHUKAI CO.,LTD. (8165) Financial Results for the Second Quarter of Fiscal Year 2023

1. Qualitative Information on Quarterly Consolidated Financial Performance(1) Explanation of Results of Operations
In the first half (January 1 to June 30) of 2023, the Japanese economy is showing a gradual recovery trend against
the backdrop of an improved corporate earnings and income environment as economic activity returns to normal
with the easing of restrictions triggered by COVID-19. However, the outlook remains uncertain due to a marked risein commodity prices caused by soaring global resource prices and exchange rate fluctuations as well as concerns
about rising geopolitical risks.
In the retail industry, while the use of e-commerce for purchasing goods became more established, greater
opportunities to go outside have led consumers to increasingly shop at physical stores, and the use of mail -order andonline shopping has declined in reaction to this.
In this business environment, during the first half of 2023, the Group focused on implementing the measures set
forth in its medium-term management plan, including a digital shift of the mail-order and online shopping business,
profit structure reforms, and co-creation with partner companies. Although the effects of these measures are steadily
emerging, Belle Maison, the Group’s core mail-order and online shopping business, did not achieve sufficient cost
efficiency in acquiring orders to achieve its plan in the first half, and sales fell below the level of the first half of2022. As a result, net sales in the first half of 2023 decreased 6.2% YoY to 26,635 million yen, operating loss was
3,157 million yen (compared with a loss of 3,908 million yen in the first half of 2022), and ordinary loss was 3,268
million yen (compared with a loss of 3,749 million yen in the first half of 2022). Loss attributable to owners ofparent was 3,264 million yen (compared with a loss of 3,656 million yen in the first half of 2022).
Business segment performance was as follows.
(Mail-order and Online Shopping Business)
In the mail-order and online shopping business, which primarily uses catalogs and the Internet , the Group shiftedsales promotion expenses from catalogs to digital during the first half of 2023 and proactively implemented various
measures. Although the shift to digital is showing signs of success, the return rate of existing members (re-purchases
during the first half) was lower than expected. As a result, consolidated sales in the mail-order and online shopping
business decreased 5.2% YoY to 23,830 million yen in the first half of 2023. There was an operating loss of 3,315
million yen compared with a loss of 4,042 million yen in the first half of 2022.
(Corporates Business)
Consolidated sales in the corporates business, which provides products and services to corporations, decreased
16.7% YoY to 1,846 million yen in the first half of 2023. Operating profit decreased 94.5% YoY to 5 million yen.
The outsourcing services for logistics operations did not grow as expected.
(Insurance Business)
This business provides support, mainly to Belle Maison members, for choosing the most suitable insurance policies.
Consolidated sales increased 8.2% YoY to 231 million yen in the first half of 2023 and operating profit increased
19.5% to 115 million yen.
(Others)
Consolidated sales in other businesses, which include the childcare support business, decreased 10.6% YoY to 726
million yen in the first half of 2023. Operating profit was 36 million yen compared with a loss of 70 million yen in
the first half of 2022.

-2-

SENSHUKAI CO.,LTD. (8165) Financial Results for the Second Quarter of Fiscal Year 2023

(2) Explanation of Financial Position(Balance sheet position)
Assets totaled 33,815 million yen at the end of the second quarter of 2023, a decrease of 5,107 million yen from theend of 2022.
Current assets decreased 4,977 million yen to 19,610 million yen. The factors included decreases of 2,110 million
yen in accounts receivable-other and 2,005 million yen in cash and deposits. Non-current assets decreased 130
million yen to 14,204 million yen. The factors included decreases of 81 million yen in property, plant and equipment
and 174 million yen in intangible assets, while there was an increase of 126 million yen in investments and otherassets.
Current liabilities decreased 1,993 million yen to 11,108 million yen. The factors included decreases of 994 million
yen in accounts payable-trade and 825 million yen in other. Non-current liabilities decreased 241 million yen to
3,560 million yen. The main factors included a decrease of 310 million yen in long-term borrowings.
Net assets decreased 2,873 million yen to 19,146 million yen. The factors included booking of loss attributable toowners of parent of 3,264 million yen. As a result, the equity ratio was 56.6%.
(Cash flow position)
The balance of cash and cash equivalents at the end of the second quarter of 2023 was 7,282 million yen, a decreaseof 2,005 million yen from the end of 2022.
Operating activities used net cash of 1,691 million yen (net cash used of 4,079 million yen in the same period of2022). The main cash inflows include a decrease in other current liabilities of 1,837 million yen. The main cash
outflows include loss before income taxes of 3,348 million yen, a decrease in trade payables of 996 million yen anda decrease in other current liabilities of 938 million yen.
Investing activities provided net cash of 4 million yen (net cash used of 273 million yen in the same period of 2022).
The main cash inflows include proceeds from collection of loans receivable of 72 million yen. The main cash
outflows include 79 million yen for the purchase of intangible assets and 74 million yen for purchase of property,
plant and equipment.
Financing activities used net cash of 368 million yen (net cash provided of 482 million yen in the same period of2022). The main cash outflows were repayments of long-term borrowings of 310 million yen.
(3) Explanation of Consolidated Forecasts and Other Forward-looking Statements
Senshukai currently maintains its consolidated forecasts for fiscal year 2023 (January 1, 2023 to December 31, 2023)
that was released on June 23, 2023.

-3-

SENSHUKAI CO.,LTD. (8165) Financial Results for the Second Quarter of Fiscal Year 2023

2. Quarterly Consolidated Financial Statements and Notes(1) Quarterly Consolidated Balance Sheet(Millions of yen)
2Q 2023(As of Jun. 30, 2023)

Fiscal Year 2022
(As of Dec. 31, 2022)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade, and contract
assetsMerchandise and finished goods

9,287

7,282

1,940

1,981

6,871

6,148

Accounts receivable-other

5,147

3,036

Other

1,423

1,353

Allowance for doubtful accounts

(82)

(192)

24,587

19,610

Buildings and structures, net

3,804

3,735

Land

5,402

5,402

123

110

9,331

9,249

Other

1,465

1,290

Total intangible assets

1,465

1,290

Investment securities

2,417

2,643

Other

Total current assets
Non-current assets
Property, plant and equipment

Other, net
Total property, plant and equipment
Intangible assets

Investments and other assets
1,157

1,022

Allowance for doubtful accounts

(37)

(1)

Total investments and other assets

3,538

3,664

14,335

14,20438,92333,815

Total non-current assets
Total assets-4-

SENSHUKAI CO.,LTD. (8165) Financial Results for the Second Quarter of Fiscal Year 2023

(Millions of yen)
2Q 2023(As of Jun. 30, 2023)

Fiscal Year 2022
(As of Dec. 31, 2022)
Liabilities
Current liabilities
Electronically recorded obligations-operating

4,872

4,799

Accounts payable-trade

2,465

1,470

Short-term borrowings

620

620

Income taxes payable19

29

Contract liabilities
Provision for bonuses for directors (and otherofficers)
Provision for sales promotion expenses

589

480

5

-

-

6

Provision for bonuses

31

30

Other

4,496

3,670

Total current liabilities

13,101

11,108

3,285

2,975

6

6

Non-current liabilities
Long-term borrowings
Retirement benefit liability
Other
Total non-current liabilities
Total liabilities

510

579

3,802

3,560

16,903

14,669Net assets
Shareholders’ equity
Share capital

100

100

Capital surplus

30,08430,084Retained earnings(4,108)(7,372)

Treasury shares(2,953)(2,953)

Total shareholders’ equity

23,122

19,857286

473

Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Revaluation reserve for land
Foreign currency translation adjustment
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

-5-

51

243

(1,516)(1,516)56

79(1,123)

(719)

20

8

22,01919,14638,92333,815SENSHUKAI CO.,LTD. (8165) Financial Results for the Second Quarter of Fiscal Year 2023

(2) Quarterly Consolidated Statement of Income and Quarterly Consolidated Statement of Comprehensive
Income(Quarterly Consolidated Statement of Income)(For the Six-month Period)
2Q 2022(Jan. 1, 2022 – Jun. 30, 2022)(Millions of yen)
2Q 2023(Jan. 1, 2023 – Jun. 30, 2023)

Net sales

28,38926,635

Cost of sales

14,40013,177Gross profit

13,98913,458Selling, general and administrative expenses

17,897

16,615

Operating loss

(3,908)(3,157)

Interest and dividend income
Share of profit of entities accounted for using equity
methodGain on adjustment of account payable

21

20

4

-

89

96

Other

223

171

Total non-operating income

338

289

23

24

-

2

98

174

Penalty loss

-

139

Other

56

60

Total non-operating expenses

178

400

(3,749)(3,268)Non-operating income

Non-operating expenses
Interest expenses
Share of loss of entities accounted for using equity
methodCommission expenses

Ordinary loss
Extraordinary income
Gain on sale of investment securities-

3

Gain on sale of shares of subsidiaries and associates

134-

Subsidy income

187-

Total extraordinary income

321

3

Extraordinary losses
Loss on sale and retirement of non-current assets
Loss on tax purpose reduction entry of non-current assets
Impairment losses
Total extraordinary losses
Loss before income taxes
Income taxes
Loss
Loss attributable to non-controlling interests
Loss attributable to owners of parent

-6-

4

4

172

-

-

79

176

83

(3,604)(3,348)52(72)(3,656)(3,276)(0)(11)(3,656)(3,264)SENSHUKAI CO.,LTD. (8165) Financial Results for the Second Quarter of Fiscal Year 2023

(Quarterly Consolidated Statement of Comprehensive Income)(For the Six-month Period)
2Q 2022(Jan. 1, 2022 – Jun. 30, 2022)(Millions of yen)
2Q 2023(Jan. 1, 2023 – Jun. 30, 2023)(3,656)(3,276)

Valuation difference on available-for-sale securities

15

186

Deferred gains or losses on hedges

391

192

3

12

6

11

416

403

(3,239)(2,873)(3,239)(2,861)

(0)

(11)

Loss
Other comprehensive income

Foreign currency translation adjustment
Share of other comprehensive income of entities
accounted for using equity method
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners ofparentComprehensive income attributable to non-controllinginterests-7-

SENSHUKAI CO.,LTD. (8165) Financial Results for the Second Quarter of Fiscal Year 2023

(3) Quarterly Consolidated Statement of Cash Flows
2Q 2022(Jan. 1, 2022 – Jun. 30, 2022)(Millions of yen)
2Q 2023(Jan. 1, 2023 – Jun. 30, 2023)(3,604)
730
(41)
17

(3,348)
372
79
73
(0)

30

6

(21)
23

(20)
24

(4)

2

4
172
-

4
(3)

(134)

-

(187)
(170)
267
1,837
(1,500)104(1,914)172(4,218)50(22)
111(4,079)

(26)
719
1,837
(996)
(109)
(938)
595
(1,729)59(23)
2(1,691)(40)(1,166)
187
(15)
-

(74)
(79)
0
3

626

-

30
103
(273)

72
81
4

1,000
(340)

(310)

31

-

(186)
(22)
482

(0)
(43)
(14)
(368)

82

50

(3,787)
15,665
11,878(2,005)
9,287
7,282

Cash flows from operating activities
Loss before income taxes
Depreciation
Impairment losses
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in provision for sales promotion
expenses
Interest and dividend income
Interest expenses
Share of loss (profit) of entities accounted for using
equity method
Loss (gain) on sale and retirement of non-current assets
Loss on tax purpose reduction entry of non-current assets
Loss (gain) on sale of investment securities
Loss (gain) on sale of shares of subsidiaries andassociates
Subsidy income
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Decrease (increase) in other current assets
Increase (decrease) in trade payables
Increase (decrease) in contract liabilities
Increase (decrease) in other current liabilities
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes refund (paid)
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Subsidies received
Purchase of investment securities
Proceeds from sale of investment securities
Proceeds from sale of shares of subsidiaries resulting inchange in scope of consolidation
Proceeds from collection of loans receivable
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Proceeds from long-term borrowings
Repayments of long-term borrowings
Proceeds from share issuance to non-controllingshareholders
Dividends paid
Repayments of installment payables
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period-8-

SENSHUKAI CO.,LTD. (8165) Financial Results for the Second Quarter of Fiscal Year 2023

(4) Notes to Quarterly Consolidated Financial Statements(Going Concern Assumption)
Not applicable.
(Significant Changes in Shareholders’ Equity)
Not applicable.
(Application of Special Accounting Methods for Presenting Quarterly Consolidated Financial Statements)(Calculation of tax expense)
Tax expenses are calculated by first determining a reasonable estimate of the effective tax rate after the applicationof tax effect accounting with respect to profit before income taxes for the fiscal year that includes the applicable
quarter and multiplying the profit before income taxes for that quarter by that rate. However, Senshukai uses
legally stipulated effective tax rates to calculate tax expenses when the use of estimated tax rates produces a clearly
irrational result.
(Additional Information)(Application of the Practical Solution on the Accounting and Disclosure Under the Group Tax Sharing System)
Senshukai and some of its consolidated subsidiaries in Japan have transitioned from the consolidated tax system
to the group tax sharing system from the first quarter of 2023. Consequently, the accounting treatment anddisclosure of income tax, local income tax, and tax effect accounting are in accordance with the “Practical Solution
on the Accounting and Disclosure Under the Group Tax Sharing System” (Practical Solution No. 42, August 12,2021; hereafter, Practical Issues Task Force (PITF) No. 42). Moreover, on the basis of PITF No. 42, Paragraph 32(1), no impact is deemed to arise from changes in accounting policies as a result of the application of PITF No. 42.
Regarding the accounting and disclosure of income tax, local income tax, and tax effect accoun ting, PITF No. 42
was applied from the end of 2022.
(Uncertainty of accounting estimates)
During the second quarter of 2023, the Japanese economy made progress in normalizing activity with the relaxationof restrictions on behavior imposed due to the COVID-19 pandemic. However, the outlook remains uncertain due
to a combination of prolonged geopolitical risks such as the situation in Ukraine, rising prices resulting fromsoaring energy and raw material costs, and tightening of global financial conditions to control inflation. Senshukai
assumes that these factors will have only a limited effect on accounting estimates. Although Senshukai is using
the best possible estimates based on information that is currently available, a change in the business climat e orproblems may have an effect on the financial condition, results of operations and cash flows of the Senshukai
Group.

-9-

SENSHUKAI CO.,LTD. (8165) Financial Results for the Second Quarter of Fiscal Year 2023

(Segment Information)
I 2Q 2022 (Jan. 1, 2022 – Jun. 30, 2022)
1. Information related to sales and profit or loss for each reportable segment
Reportable segment
Mail-orderand online
shopping
business

Corporates
business

Insurancebusiness

Sub-total

Others(Note 1)

Total

(Millions of yen)Amounts
shown onquarterly
Adjustment consolidated
statement ofincome(Note 2)

Net sales
Sales to customers
25,1452,217
214
27,577811
28,38928,389Inter-segment
118
20
139
0
139
(139)
sales or transfers
Total
25,2632,238
214
27,716812
28,529(139)
28,389Segment profit(4,042)107
97(3,837)(70) (3,908)(3,908)(loss)
Notes: 1. Others represent the businesses which are not included in any of the reportable segments and consist of thechildcare support business and manufacturing and sales of cosmetics.
2. Segment profit (loss) is adjusted to be consistent with the operating loss on the quarterly consolidated statement ofincome.

II 2Q 2023 (Jan. 1, 2023 – Jun. 30, 2023)
1. Information related to sales and profit or loss for each reportable segment
Reportable segment
Mail-orderand online
shopping
business

Corporates
business

Insurancebusiness

Sub-total

Others(Note 1)

Total

(Millions of yen)Amounts
shown onquarterly
Adjustment consolidated
statement ofincome(Note 2)

Net sales
Sales to customers
23,8301,846
231
25,909726
26,635
26,635Inter-segment
120
24
144
0
145
(145)
sales or transfers
Total
23,9501,871
231
26,054726
26,780(145)
26,635
Segment profit(3,315)5
115(3,193)36(3,157)(3,157)(loss)
Notes: 1. Others represent the businesses which are not included in any of the reportable segments and consist of thechildcare support business. The manufacturing and sales of cosmetics business, which was included in Others, was
excluded from the scope of consolidation following the sales of all of the shares of Huit laboratories, Inc. held by
the Company on April 1, 2022.
2. Segment profit (loss) is adjusted to be consistent with the operating loss on the quarterly consolidated statement ofincome.

- 10 -SENSHUKAI CO.,LTD. (8165) Financial Results for the Second Quarter of Fiscal Year 2023

(Significant Subsequent Events)(Changes in contractual terms in commitment line agreement)
Due to an increased likelihood of breaching the financial covenants in the commitment line agreement as stated innotes to the quarterly consolidated balance sheet in the Quarterly Report for the first quarter of the fiscal year
ending December 31, 2023, based on a resolution of the Board of Directors’ meeting held on August 4, 2023, theGroup reached an agreement with the financial institutions on August 9, 2023, to reduce the total committed
amount and reassess the content of the financial covenants in the commitment line agreement, which totals 10,000
million yen. The term of the agreement is unchanged.
1.

Total commitment amount after change: 8,000 million yen

2.

Release of collateral on investment securities

3.

Removal of financial covenant clauses

4.

Interest rate after the change

Base rate + spread (an additional 0.5% will be added if the operating loss reported in the consolidated statementof income for the fiscal year ending December 31, 2023, is greater than 3,800 million yen)
(Renewal of overdraft agreement)
In accordance with a resolution of the Board of Directors’ meeting held on July 14, 2023, in order to cope with theimpact on the Company of deteriorating consumer confidence due to price increases of daily necessities and theincreasingly competitive business environment stemming from the rising number of new entrants into mail orderand online shopping, on August 4, 2023, the Company renewed the term of the special overdraft agreement withthe financial institution it does business with for 3,000 million yen. The details of the renewal are as follows.
Lender: Sumitomo Mitsui Banking Corporation
Contract signing date: August 4, 2023
Contract maturity date: July 31, 2024

- 11 -SENSHUKAI CO.,LTD. (8165) Financial Results for the Second Quarter of Fiscal Year 2023

3. Other(Important Matters Regarding Going Concern Assumption, etc.)
Due to issues related to the replacement of our core system implemented in January 2022, the Senshukai Groupexperienced a significant fall in sales for 2022 when compared to 2021. We recorded substantial losses in 2022,with an operating loss of 8,139 million yen, ordinary loss of 7,889 million yen, and loss attributable to owners ofparent of 10,976 million yen. In the first half of 2023, the Group recorded an operating loss of 3,157 million yen,ordinary loss of 3,268 million yen, and loss attributable to owners of parent of 3,264 million yen. These
circumstances raise significant doubts about the Group’s ability to continue as a going concern. The Group is
taking the following measures to resolve this situation.
(Measures to improve results of operations)
The Senshukai Group will continue to focus on numerous measures to improve results of operations. To achieve
an early return to profitability, the main objective is the transformation of the group’s business model by placing
priority on goals of the medium-term management plan, including the digital shift of the mail order and online
shopping business, profit structure reforms, and co-creation with partner companies.
Progress report(1) Digital shift of the mail-order and online shopping businessThis business is currently reexamining promotions centered on catalogs and shifting resources to digitalpromotional activities using social networking services (SNS) and other digital channels. As part of these efforts,
we have been creating banners, developing landing pages (pages to which advertisements are linked), andenhancing product details aligned with the sales funnel for our targeted products, which has resulted in improved
session numbers and conversion rates for these products.
Moving forward, in web advertising, we will undertake promotions that not only promote single products but also
lead to “lifestyle proposals” in order to improve efficiency and maximize effectiveness.
(2) Profit structure reforms
By moving away from traditional catalog-optimized business operations towards carefully selecting products andnarrowing down the number of types, we will further refine our proposals for or iginal products and services thatmeet customer needs, streamline business operations such as product development and inventory management,
and improve gross profit margins.
Regarding the commitment of sales promotion expenses, we will build a high-quality membership base byemphasizing measures that not only acquire new members but also foster deeper relationships with existing
members, leading to maximize the retention rate and purchase frequency.
As part of these measures, the “kimawari” merchandise purchasing service, which had its grand opening inNovember 2022, has contributed to an increase in the product purchase rate after the use of this service. As one of
the key measures to improve Belle Maison’s profitability, we will accelerate efforts to strengthen the system andexpand the range of products to be purchased.
In addition, in the high-margin advertising solutions business, we will develop a new advertising menu utilizing
Belle Maison Net, one of Japan’s largest e-commerce sites in terms of female members, to improve the profitabilityof the entire group.
(3) Co-creation with partner companies
Our collaboration with East Japan Railway Company (JR East) is making steady progress. The Belle Maison JRE
MALL store has become the main store on JR East’s e-commerce site JRE MALL, and Iihana Dot Com and Kurasu
Gourmet operated by the Senshukai Group have also opened stores to increase sales. The in-station Disney Fantasy
Shop by Belle Maison is also performing well, driven by a recovery in railroad traffic and an increase in demand
from foreign tourists visiting Japan. In addition, business synergies have been expanding since our distribution
center took over the online shopping logistics of LUMINE Co., Ltd. from April.

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The aforementioned “kimawari” merchandise purchasing service, co-created with Aucnet Inc. for information
distribution support services, is positioned as a strategy to strengthen ties between customers and the Belle Maison
brand.
As for other services, we are building a system that enables ordering and payment for services provided by partnercompanies on Belle Maison Net, based on a system replaced in 2022 that will enable flexible development. As thefirst such service, the existing home-delivery laundry and dry-cleaning service was revamped and salescommenced from May. Going forward, we intend to expand this system and develop a menu of services pleasing
to our customers that goes beyond the traditional handling of goods in order to build a structure that will allow
Belle Maison fans to use our services on a continuous basis.
Senshukai’s financial position was sound as of the end of the second quarter of 2023 with an equity ratio of 56.6%.
Furthermore, cash and deposits totaled 7,282 million yen and there is a 5,000 million yen overdraft facility.
Regarding this amount, no due date has been set for the sum of 2,000 million yen and the contractual due date ofApril 26, 2024, for the sum of 3,000 million yen has been extended to July 31, 2024, as stated in the Significant
Subsequent Events section. In all cases, there were no borrowings outstanding at the end of the second quarter of2023. As a result, there are no concerns about liquidity.
Moreover, Senshukai has entered into a commitment line agreement totaling 10,000 million yen with financial
institutions. However, due to an increased likelihood of breaching the financial covenants in the commitment line
agreement as stated in notes to the quarterly consolidated balance sheet in the Quarterly Report for the first quarterof the fiscal year ending December 31, 2023, we reached an agreement with the financial institution s on August 9,2023, regarding a reassessment of the content. As a result, we have removed the financial covenant clauses of thisagreement, released the collateral for investment securities, and revised the total amount to 8 ,000 million yen. The
expiration date of this agreement remains unchanged on March 29, 2024, with the option to borrow for a maximumof six months from the execution date. There were no borrowings outstanding under this agreement at the end of
the second quarter of 2023, and we will take other actions in order to continue receiving the support of thesefinancial institutions.
For these reasons, we believe that there are no significant uncertainties about the going concern assumption.
We plan to return to profitability at an early stage by continuing to adapt with flexibility to changes in the businessclimate and taking actions that are needed in a timely manner. From a longer perspective, our goal is to become
an organization that can earn the support of customers for many years and meet the expectations of all stakeholders.

* This financial report is solely a translation of summary of “Kessan Tanshin” (in Japanese, including attachments), which has
been prepared in accordance with accounting principles and practices generally accepted in Japan, for the convenience ofreaders who prefer an English translation.

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