SENSHUKAI CO.,LTD.

(Tokyo Stock Exchange, First Section: 8165)

Fiscal 2016 Earnings Presentation
February 2, 2017

Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

Contents

1.

Consolidated Results of Operations for Fiscal 20162.

Overview by Segment

3.

Consolidated Earnings Outlook for Fiscal 2017

4.

Progress in the Medium- to Long-term Management Plan
”Innovate for Smiles 2018”

5.

Others

6. Reference: About Senshukai

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2

1. Consolidated Results of Operations
for Fiscal 2016

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Fiscal 2016 Consolidated Statement of Income (YoY Comparison)(Millions of yen)

2015

YoY change

2016% to netsales% to net
sales

Difference

Change in% to netsales

Net sales

134,321

Cost of sales

73,442

54.7%

67,08752.0%-6,355-2.7%

Gross profit

60,87945.3%

61,986

48.0%

1,107

2.7%

SG&A expenses

64,31647.9%

60,79147.1%-3,525-0.8%

Operating income-3,437

-2.6%

1,194

0.9%

4,631

3.5%

Ordinary income-2,540

-1.9%

1,673

1.3%

4,213

3.2%

Profit attributable toowners of parent-5,307

-4.0%

1,420

1.1%

6,727

5.1%

129,074-5,247

Net sales decreased 3.9% year-over-year due to the decrease in sales in the mail-order businessdespite higher sales in the bridal, corporates and other businesses.
Operating income moved into the black as the improvement in the cost to sales ratio and the
reduction in SG&A expenses offset the impact of lower sales.
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Fiscal 2016 Consolidated Balance Sheet (YoY Comparison)(Millions of yen)Dec. 31, 2015

Dec. 31, 2016

Difference

Assets• Current assets• Non-current assets
Total assets

51,94753,404105,352

52,61849,341
101,959670-4,063-3,392

31,41020,236
51,64729,29820,08849,387-2,111-147-2,25957,159-3,48127
53,705
105,352

58,399-5,89064
52,572
101,959

1,239-2,40936-1,133-3,392

Liabilities• Current liabilities• Non-current liabilities
Total liabilities

Net assets• Shareholders’ equity• Accumulated other comprehensive income• Non-controlling interests
Total net assets
Total liabilities and net assets

Non-current assets decreased due to decreases in property, plant and equipment (-¥2,418mn), andinvestment securities (-¥1,225mn).
Current liabilities decreased due to a decrease in accounts payable-other (-¥1,970mn).
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Fiscal 2016 Consolidated Statement of Cash Flows (YoY Comparison)(Millions of yen)

2015

2016

Difference

Net cash provided by (used in)operating activities

3,400

3,825

424

Net cash provided by (used in)investing activities-8,053

94

8,147

Net cash provided by (used in)financing activities

11,060-1,580-12,641

Cash and cash equivalents at end of
period

14,303

16,6002,297

2016 highlights
Net cash provided by (used in) operating activities:
profit before income taxes (+¥1,957mn), depreciation (+¥3,231mn), increase in inventories (-¥2,565mn)
Net cash provided by (used in) investing activities:
purchase of property, plant and equipment (-¥1,583mn), proceeds from sales of property,
plant and equipment (+¥1,021mn), proceeds from sales of investment securities (+¥916mn)
Net cash provided by (used in) financing activities:
repayments of long-term loans payable (-¥2,117mn)
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Fiscal 2016 Consolidated Sales by Business Segment (YoY Comparison)(Millions of yen)
2015
2015年度-6.5%
113,976

106,606

2016
2016年度

10.1%
16,81815,281

8.6%
4,214

4,576

26.5%
848

Mail-order
通販 business

Bridalbusiness
ブライダル

Corporates
法人 business

1,072
Othersその他* “Others” represents services business primarily offering insurance and credit card services, and childcare business
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Fiscal 2016 Consolidated Operating Income by Business Segment(YoY Comparison)(Millions of yen)
2015
2015年度

10.1%
682

751

40.6%
367

517

2016
2016年度

50.9%
97

146

-240

-4,597Mail-orderbusiness
通販

Bridalbusiness
ブライダル

Corporates
法人business

Othersその他* “Others” represents services business primarily offering insurance and credit card services, and childcare business
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8

2. Overview by Segment

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Overview of the Mail-order Business (YoY Comparison)

2015

2016

Net sales(Millions of yen)

113,976

106,606-7,370Operating income(Millions of yen)

-4,597

-240

4,357

Annual number of active
customers (10,000 members)

363.1

337.9

-25.2

Annual number of new customers(10,000 members)

80.5

74.5

-6.0

10,336

10,575

239

Average sales per order (Yen)

Difference

Main factors

 Higher unit price

Annual order frequency per
customer (Times)

2.84

2.75

-0.09

 Decrease in thenumber of current
customers with a highorder frequency

Catalog circulation(10,000 volume)

6,568

7,580

1,012

 Decrease in total pages* All figures other than net sales and operating income are non-consolidated data for the mail-order business(excluding the Hanpukai business)
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10Factors Behind Decrease in Sales and Increase in Income
Net Sales
Sluggish sales due to weaker consumer spending (apparel in particular)
Decrease in sales due to relative decrease in product appeal, mainly in the apparel
category
Decrease in sales as orders from Internet failed to compensate the decrease in orders
from customers receiving our catalogs
Decrease in sales as the growth in orders from smartphones were short of thedecrease in orders from PCs
Operating Income
Lower cost to sales ratio due to a decrease in bargain and clearance sales after lastyear’s inventory clearance sales
Reduction in distribution costs resulting from the start of operations at the Minokamo
Distribution Center (freightage and warehouse-related expenses)
Overall reduction in SG&A expenses

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Mail-order Business – Monthly Sales (YoY Comparison)
Mail-order Business –Monthly Sales

January to December: 93.5%
Increase in sales due to theeffect of TV commercials

Decrease in sales as the sales were higher
in 2015 due to the 60th founding
anniversary campaign and TV commercials,
and also because the versions of catalogs
issued in November 2016 was lower

103.8%

YoY
100％

95.2%
97.4%
94.9%

94.5%

93.2%

91.6%

90.3%

92.5%

91.2%

88.0%

88.1%

Decrease in sales due to shift in catalog
issuance to the previous month
1月
Jan.

2月
Feb.

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3月
Mar.

4月
Apr.

5月
May

Jun.

6月

Jul.

7月

8月
9月
Aug.
Sep.

10月
Oct.

11月
Nov.

12月
Dec.

12

Mail-order Business –Sales by Product Category (YoY Comparison)(Millions of yen)
2015
2015年度

2016
2016年度-11.6%
50,86744,9640.6%
28,469 28,648-7.5%-13.1%

15.8%

15,108 13,968

12,214

10,6155,816 6,732

11.8%
1,499 1,676

Apparel
衣料品

Fashion
服飾雑貨
accessories

Interior
インテリア
goods

Household
生活雑貨
goods

Foods
食品

Others
その他* Others: Flower sales at Senshukai Iihana Co., Ltd. and gift catalog sales, etc.
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Mail-order Business –Differences in Cost to Sales Ratio and SG&A Expenses(YoY Comparison)
Cost to Sales Ratio

SG&A Expenses

-2.6%
56.1%

2015
2015年度

55,528Decrease in share of bargain and clearance sales
Decrease in valuation losses and write-downs on
goods

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-4,70050,82853.5%

2016
2016年度(Millions of yen)

2015
2015年度

2016
2016年度Distribution costs:
Reduction in distribution costs resulting from the startof operations at the Minokamo Distribution Center(freightage and warehouse-related expenses)
SG&A expenses:
Cost reduction by reexamining each expense items 14

Mail-order Business –Internet-related Indicators
Internet Sales(Millions of yen)(including mobile sales)
Sales via catalog:

77.7%

10,817

77,4797,782

2015
2015年度80.2%

73,7835,700

 Net sales(Millions of yen)

31,234(Internet-only sales)

69,69720162016年度Amount and Share of Smartphone Sales Share of sales

72,304

2.5%

Customer uses Internet to enter
catalog product number

Internet-only sales: All Internet sales other than sales via
catalog

83,121

Ratio of Internet-based Orders

68,083

3,859

35,093

7.3%

40.3％

47.6％

2015
2015年度

2016
2016年度

Share of Website Visits by Smartphone Users(number of sessions)

56.6%
2014
2014年度

2015
2015年度Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

2016
2016年度

2015
2015年度

5.3%

61.9%
2016
2016年度15

Overview of the Bridal Business (YoY Comparison)

Net sales(Millions of yen)

2015

2016

15,281

16,818

1,537

1,301

1,301

• New facilities

Difference• Existing facilities

15,281

15,517236

Operating income(Millions of yen)

682

751

69

Guesthouses

22

23

1

Weddings (Couples)

3,974

4,362

388

Average sales per wedding(10,000 yen)

369.6

364.8

-4.8

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Main factors

 Opening of new facilities
in Osaka and Chiba

 Opened in Osaka andChiba*Decreased one by thedisposition of a facility in Oita Decrease in the numberof guests

16

Overview of the Corporates Business (YoY Comparison)(Millions of yen)

2015
Net sales• Contracting services

2016

4,214

Difference

4,576

362

2,978

3,354

376

• Sampling

950

994

44

• Novelties

246

195

-51

• Others

40

33

-7

367

517

150

Operating income
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Main factors

 Increase in orders for outsourced
logistics and call center services aswell as contract merchandise sales(office for administrating
shareholder benefit programs, etc.)173. Consolidated Earnings Outlook for
Fiscal 2017

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Fiscal 2017 Consolidated Earnings Outlook (YoY Comparison)(Millions of yen)2016 (Results)

2017 (Forecasts)% to netsales% to netsales

YoY change
Difference

Change in% to netsales

Net sales

129,074

Cost of sales

67,08752.0%

73,444

54.4%

6,357

2.4%

Gross profit

61,98648.0%

61,555

45.6%

-431

-2.4%

SG&A expenses

60,79147.1%

60,205

44.6%

-586

-2.5%

Operating income

1,194

0.9%

1,350

1.0%

156

0.1%

Ordinary income

1,673

1.3%

1,650

1.2%

-23

-0.1%

Profit attributable toowners of parent

1,420

1.1%

1,000

0.7%

-420

-0.4%

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135,000

5,926

19

Fiscal 2017 Consolidated Sales Outlook by Business Segment(YoY Comparison)(Millions of yen)
2016
results
2016年度実績

5.0%
106,6062017
forecasts
2017年度予想

111,930

3.5%
16,818 17,400

-1.7%
4,576

通販
Mail-orderbusiness

ブライダル
Bridalbusiness

4,500

9.1%
1,072

法人businessCorporates

1,170

その他
OthersDecrease in opportunity loss due to improved inventory control during real demand period forInternet sales
Increase in purchase rate due to adoption of DMP (Data Management Platform)
Increase in response rate due to clarification of targeted customer segments
Increase in sales of functional food products at subsidiary Belle Neige Direct Co.,Ltd.
Increase in sales due to the inclusion of subsidiary Feel Life Inc. (former JFR Online Co. Ltd.) into
the consolidation* DMP is a platform for managing a variety of information data collected from the Internet
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Fiscal 2017 Consolidated Operating Income Outlook
by Business Segment (YoY Comparison)(Millions of yen)2016 results
2016年度実績

2017
forecasts
2017年度予想

13.2%
751

850

-39.1%
6.2%

517

315
146

30

155

-240
Mail-orderbusiness
通販

Bridalbusiness
ブライダル

Corporates
法人business

Othersその他

Negative factors
Increase in cost to sales ratio due to an increase in the share of National Brand manufacturers’
products and effects of foreign exchange rate fluctuations
Higher valuation losses and write-downs due to decreases in repeat sales

Positive factor
Decrease in catalog circulation due to review and reorganization of the catalog strategy
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Trend and Plan for Capital Expenditures and Depreciation Expenses
Capital Expenditures(Millions of yen)

Property,plant
有形固定資産and equipment

Depreciation Expenses

Intangible
無形固定資産(Millions of yen)

3,231

assets

2,921

6,300
935

2,618

2,675

2013

2014

2,703

4,227
799
3,045
884

5,365

1,723
462

3,428
2,161

2013

2014

1,958
849

1,260 1,108
2015

2016

2017 (fct.)

2015

2016

2017 (fct.)

Property, plant and equipment
2016: New facilities at Dears Brain Inc. and facilities at PLANETWORK CO., LTD.
2017: Construction of call center network and renovation of Distribution Center
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22

4. Progress in the Medium- to Long-termManagement Plan ”Innovate for Smiles
2018” (Fiscal 2017)

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Senshukai Group Targets (Fiscal 2014 to Fiscal 2018)
Medium- to Long-term Management Targets(Consolidated)

Performance by Business Segment*2017: Forecasts 2018: Targets(Millions of yen)(Billions of yen)
 Net sales

2016
results

2018
targets

Mail-order
通信販売事業business

0.5
3.9
12.8

Net sales

129,074

165,000
125.3

Operating income(% to net sales)

1,194(0.9%)

5,000(3.0%)

2014

Bridal
ブライダル事業
business

0.8
4.2
15.3

1.1
4.6
16.8

Corporates
法人事業business

1.2
4.5
17.4

1,420

4,000

0
0.3
0.8
1.9

1.3
5.7
18.0

140.0
114.0

106.6

111.9

2015

2016

2017

 Operating income

Profit attributableto owners of parent

Newbusinesses
新規事業

0.1
0.4
0.7

2018

0.2
0.6
1.6
0.1
0.5
0.8
-0.2

0.2
0.3
0.9
0

2016

2017

2.6

-4.6

Return on equity

2.7%

7.0%
2014

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2015

2018

24

Mail-order Business: Implemented Key Measures for Fiscal 2016
Implementation of initiatives for medium- to long-term growth and business expansion
Make brands stronger

Expand sales channels

Opening of Kcarat and BENEBIS brand stores in
Daimaru Matsuzakaya Department Stores

Opening of stores on EC
malls (Amazon, LOHACO)

Reinforce e-commerce sales

Opening of store on
global EC platform(JD Worldwide)

Smartphone app renewal

Target the senior
age segment
Acquisition of businessof JFR Online Co. Ltd.

Fulfillment Strategy
Full operation of the
Minokamo DC

Stepped up sales
promotion on SNS
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Mail-order Business: Initiatives for Fiscal 2017
Transitioning to a business model with a powerful Internet presence
Senshukai really knows the kinds ofthings that I like!

I can always find what I’mlooking for!

Manage product category units to maintain a highly appealing
Internet sales area
Make extensive use of both products of National Brand
manufacturers and other wholesale products to achieve the best
possible sales area composition
Use integrated supervision of sales areas and inventories toincrease pct. of inventories sold and prevent shoppers fromleaving to make purchases at other companies

Improve
operations

Produce highly efficient catalogs that are carefully targeted andfocused on specific functions

One-to-one marketing that fully utilizes data on customers’
past activities and personal characteristics
Create an e-commerce site that makes it easy to shop
using a smartphone
Enhance Senshukai’s Internet retailing presence by offeringa stress-free shopping experience

Reinforce the lineups of original products and private- brandproducts in key categories in order to create a more appealing
merchandise selection

Use highly competitive brands for the rapid
expansion of sales channels
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Establish an e-commerce platform in theInternet retailing market
26

Bridal Business
Growing in Japan’s wedding market by using diverse capabilities
backed by the strengths of partners with combined annual sales ofabout ¥60 billion
Reinforcing the brand of each location to create the places in eacharea of Japan that couples choose for their weddings

Dedicated to weddings that achieve the greatest possible satisfaction
by aiming for excellence for the overall atmosphere and all services

Actions are under way to continue strengthening the capital andbusiness alliance with the Senshukai Group

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27

Corporates and New businesses
Corporates business:
Increasing Senshukai’s presence in mail-order support services by using many sales activities
Marketing support
serviceBusiness support services

Administrative
service

Exhibition

Develop andsupplymerchandiseMedia content
production
service

Fulfillment
service
Promotional
service

Consulting service
Product
development

Seminars

Catalogcreation

Orderprocessing

DeliverySenshukai
customer assets

Assisting customers by offering a complete lineup of services

New businesses: Launch more activities that create “women’s smiles”

Childcare business
Plan to open the seventh nursery school in April 2017
Goal is growth of businesses for child care and development
in order to help end the shortage of child day care andnursery school facilities in Japan and play a role in thesound develop of children
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To beopened in
April

Egao no Mori Nursery
School Katsushima(Shinagawa-ku, Tokyo)

28

Capital & Business Alliance with JFR
Stepping up efforts to capture synergies in the third year of the JFR alliance

Increase sales of brand products
sold at Daimaru Matsuzakaya
Department Stores

Make extensive use ofcollaborative sales of
Senshukai and JFR brands

Use Senshukai’s
infrastructure to improve
JFR’s efficiency
Daimaru Matsuzakaya
Online Shopping

Senshukai Minokamo Distribution Center

Seek more ways to leverage the resources of Senshukai and JFR for merchandise
sales and other activities in order to create more value
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29

5. Others

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Senshukai's CSR Activities in Fiscal 2016
Smile Forest donations from customers surpass ¥100 million
The Smile Forest project started in 2013 with the slogan “together with our customers, making
everyone smile.” With the strong support from customers, donations totaled ¥129,024,689 as ofDecember 18, 2016.
To position Senshukai as a “Women’s Smiles Company,” these funds were used for three activities:
Tohoku reconstraction support, the Pink Ribbon Campaign, and environmental activities.

Tohoku reconstruction support – Activities in the 5th year:
Two family photo studio events were held in Miyagi and Iwate prefectures
As part of an earthquake recovery program to give smiles to mothers and their children in
Tohoku, Senshukai has donated more than 29,000 blankets for babies in the four prefectures of
the Tohoku region.
The Senshukai family photo studio event, which uses a professional photographer, was held in
June in Ishinomaki, Miyagi prefecture, which we have supported since the March 2011 disaster,and in Otsuchi, Iwate prefecture in November.

Pink Ribbon Campaign－Now in its 9th year and with about 80% customer awarenessAll brassieres sold by Senshukai help fund this campaign, which includes the distribution of freebreast cancer screening coupons. A program to support breast cancer survivors started in 2015.
A 2016 survey showed that 79.9% of Senshukai’s customers are aware of this activity. (2,500
coupons were distributed in 2016.)

Environmental activities－13th Green Power Class was a special event with parents and children
These classes, which Senshukai holds at elementary schools, make children think about
the importance of renewable energy and ways to deal with problems involving energy andthe environment.
In September, a special class for parents and children was held with the assistance of
Shibuya University.
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31

Dividend Forecast and Earnings Announcements Scheduled in Fiscal 2017
Dividend Forecast
Senshukai’s policy regarding dividends is to appropriately return profits to shareholders thatreflects its business performance by maintaining stable dividends that take into account apayout ratio while at the same time strengthening the business foundation with retained
earnings.
Based on this policy and in light of Fiscal 2016 consolidated results, Senshukai plans to pay a
year-end dividend of 4 yen per share, which has been initially planned, and together with aninterim dividend of 4 yen, this will result in a total annual dividend of 8 yen per share.
For Fiscal 2017, Senshukai plans an annual dividend of 8 yen per share (4 yen each at interim
and year-end), based on the earnings forecast and to maintain stable dividends.

Schedule for Earnings Announcements

April 28, 2017 (Friday)

Announcement of financial results for the first quarter of Fiscal 2017

July 27, 2017 (Thursday) Announcement of financial results for the second quarter of Fiscal 2017

July 28, 2017 (Friday)

October 27, 2017 (Friday) Announcement of financial results for the third quarter of Fiscal 2017

Earnings presentation for the second quarter of Fiscal 2017 (Tokyo)

The forward-looking statements contained in this earnings presentation are based on informationthat was available at the time of the release of this presentation. Actual results could differ
significantly from these projections due to a variety of factors.
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32

6. Reference: About Senshukai

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Corporate Profile
Women's Smiles Company

To become the “one and only” choice
for women
Senshukai wants to remain a company, that is the “one and only”
choice for women. We accomplish this by offering original and oneof-a-kind products that women want along with safe, convenient
and thorough services that customers can use with confidence.
Gender Composition of Customers

Age Composition of Customers
Under 20s

Annual active customers

3.38 million

Over 50s

23.7％

9.5％

Pct. of women customers

92%

40s

35.4％

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30s

31.4％

34

Business Profile
As a “Women's Smiles Company,” Senshukai provides awide range of merchandise and services that cover avariety of activities and stages of women's lives.

Mail-order
Business

Senshukai’s core business• E-commerce• Catalog• Hanpukai

BridalBusiness

House wedding business• 23 wedding halls inJapan

Corporates
Business

Others(New
Businesses)

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A variety of services tosupport the operationsof client companies

Childcare businessInsurance service
Credit card service

35Consolidated Net Sales and Operating Income (Recent Five Years)
Net Sales
145,750(Millions of yen)

141,552 142,526

Operating Income(Millions of yen)

4,019
134,3213,088

129,074
2,109

1,194

-3,437
2012

2013

2014

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2015

2016

2012

2013

2014

2015

2016

36