SENSHUKAI CO.,LTD.

(Tokyo Stock Exchange, First Section: 8165)

Fiscal 2017 Earnings Presentation
February 8, 2018

Contents

1

Consolidated Results of Operations for Fiscal 20172

Overview by Segment

3

Consolidated Earnings Outlook for Fiscal 2018

4

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2

1

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Consolidated Results of Operations for Fiscal 2017

3

Fiscal 2017 Consolidated Statement of Income (YoY Comparison)(Millions of yen)

2016

2017
% to netsales

YoY change% to net
sales

125,999

Difference

Change in% to netsales

Net sales

129,074-3,075

Cost of sales

67,08752.0%

71,437

56.7%

4,350

4.7%

Gross profit

61,98648.0%

54,561

43.3%-7,425-4.7%

SG&A expenses

60,79147.1%

58,84846.7%-1,943-0.4%

Operating profit

1,194

0.9%

-4,287-3.4%-5,481-4.3%

Ordinary profit

1,673

1.3%

-4,206-3.3%-5,879-4.6%

Profit attributable toowners of parent

1,420

1.1%

-11,090-8.8%-12,510-9.9%

Net sales decreased 2.4% year-over-year due to lower sales in the mail-order business despite higher
sales in the bridal, corporates and other businesses.
Operating loss was caused by the sales decrease and a lower cost to sales ratio.
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Fiscal 2017 Consolidated Balance Sheet (YoY Comparison)(Millions of yen)Dec. 31, 2016

Dec. 31, 2017

Difference

Assets• Current assets

52,61849,341
101,959

48,854
41,58690,441-11,518

29,29820,08849,38730,066
18,82648,892767-1,262-494• Shareholders’ equity• Accumulated other comprehensive
income58,39941,155-17,243-5,890318

6,209• Non-controlling interests

64
52,572
101,95974
41,54890,441

10-11,024-11,518• Non-current assets
Total assets-3,763-7,755

Liabilities• Current liabilities• Non-current liabilities
Total liabilities
Net assets

Total net assets
Total liabilities and net assets

Property, plant and equipment and intangible assets decreased ¥4,535 million and ¥1,439 million,
respectively, due to booking of impairment loss and other factors.
Retained earnings decreased due to booking of loss attributable owners of parent of ¥11,090 million.
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Fiscal 2017 Consolidated Statement of Cash Flows (YoY Comparison)(Millions of yen)
2016
Net cash provided by(used in) operating
activities

Net cash provided by(used in) investing
activities

2017

3,825

94

1,952

-397

Difference-1,873-10,899+5,473+2,196+4,454-491

 Purchase of property, plant andequipment:-1,165
 Purchase of shares of subsidiaries: -835
 Proceeds from sales of investment
securities:+1,754
 Proceeds from long-term loans
payable:+2,800 Repayments of long-term loans
payable:-1,656
 Payment for redemption of bonds
with subscription rights to shares: -2,000

Net cash provided by(used in) financing
activities-1,580-1,148431

Cash and cash
equivalents at end of
period

16,60017,323723

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 Loss before income taxes:
 Impairment loss: Depreciation:
 Decrease in inventories:

6

Fiscal 2017 Consolidated Sales by Business Segment (YoY Comparison)(Millions of yen)
2016年度2016-5.0%
106,606

2017年度2017

101,279

7.8%
16,81818,132

5.6%
4,576

4,833

63.5%
1,072

Mail-order
通販 business

Bridalbusiness
ブライダル

Corporates
法人 business

1,753

Others
その他* Others: Services business primarily offering insurance and credit card services, childcare business, etc.
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Fiscal 2017 Consolidated Operating Profit by Business Segment(YoY Comparison)(Millions of yen)

28.2%
751

963

2016
2016年度-27.3%
517

375

2017
2017年度-44.8%
146

80

-204

-5,707

通販 business
Mail-order

ブライダル
Bridalbusiness

法人 businessCorporates

その他
Others* Others: Services business primarily offering insurance and credit card services, childcare business, etc.
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2 Overview by Segment

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Overview of the Mail-order Business (YoY Comparison)

Net sales(Millions of yen)
Operating profit(Millions of yen)
Annual number of active
customers (10,000 members)
Annual number of new
customers (10,000 members)
Average sales per order (Yen)Annual order frequency per
customer (Times)

2016

2017

106,606

101,279-5,327-240-5,707-5,467

337.9

323.7

-14.2

74.5

75.2

0.7

10,575

9,718

-857

 Lower unit price-0.01

 Decrease in the number ofcurrent customers with ahigh order frequency
 Suspension of somecatalogs and a decrease incatalog types resulting fromcombining into single
publications

2.75

2.74

Difference

Catalog circulation(10,000 volume)

7,580

4,740

-2,840

Ratio of Internet-based orders

80.2%

83.5%

3.3%

Share of smartphone sales

47.6%

54.7%

7.1%

to Internet sales

Main factors* All figures other than net sales and operating profit are non-consolidated data for the mail-order business (excluding
the Hanpukai business)

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Mail-order Business – Monthly Sales (YoY Comparison)

January to December: 95.0%
Large increase due to strong salesof New Year holiday food andother winter merchandise

107.6%

100.0%

YoY
100%

99.6%
97.8%
94.3%
91.4%

92.0% 91.6%

1月
Jan.

2月
Feb.

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3月
Mar.

4月
Apr.

93.5%

5月
May

6月
Jun.

7月
Jul.

8月
Aug.

91.8%

92.9% 92.0%

9月
Sep.

10月
Oct. 11月
Nov. 12月
Dec.

11Mail-order Business – Sales by Product Category (YoY Comparison)(Millions of yen)
2016
2016年度-7.0%

20172017年度

44,964

41,822-15.7%
28,64824,162-8.8%-12.5%

57.7%
13,968

10,615 9,682

12,223

10,616

65.3%

6,732
1,676 2,772

衣料品
Apparel

服飾雑貨
Fashionaccessories

インテリア
Interior
goods

生活雑貨
Household
goods

食品
Foods

その他
Others* Others: Flower sales at Senshukai Iihana Co., Ltd. and gift catalog sales, etc.
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12

Mail-order Business – Differences in Cost to Sales Ratio and SG&A Expenses(YoY Comparison)
Cost to Sales Ratio

SG&A Expenses(Millions of yen)
-3,2446.2%
59.7%

50,82847,58453.5%

2016年度
20162017年度
2017

Increase in share of bargain and clearance sales
Increase in valuation losses on goods and writedowns

2016年度
20162017年度2017

Decrease in printing, production and catalog mailingcosts due to the reduction in catalog circulation
Lower depreciation mainly due to impairment loss
Cost reduction by reexamining each expense items

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13

Overview of the Bridal Business (YoY Comparison)

2016

2017

Net sales(Millions of yen)

16,81818,132

1,314• New facilities

-

20

20

16,81818,112

1,294

Operating profit(Millions of yen)

751

963

212

Guesthouses

23

24

1

Weddings (Couples)

4,362

4,635

273

Average sales per wedding(10,000 yen)

364.8

368.7

3.9

• Existing facilities

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Difference

Main factors

 Opening of KOTOWA Kyoto
Nakamuraro in September

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

2016

Net sales• Contracting services

2017

4,576

Difference

4,833

257

3,354

3,518

164

• Sampling

994

1,038

44

• Novelties

195

259

64

• Others

33

17

-16

Operating profit

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517

375

Main factors-142

 Increase in orders for outsourced
logistics and call center services
as well as contract merchandise
sales (office for administrating
shareholder benefit programs,
etc.) Growth in contracts with current
clients and for one-time projects

 Lower profit margins forcontracting services andnovelties

15

Reasons for the December 15 Forecast Revision

Fa ctor1

・Sales less than planned in the mail-order business, especially Belle Maison
Actions to increase sales did not produce significant benefits

Fa ctor2

・Increase in valuation losses and other expenses caused by clarification of the inventory
management policy
Expenses increased resulting from a review of inventory assessments and other measures

Fa ctor3

R efe re nc e・Increase in business structure reform expenses, such as special retirement payments as thenumber of voluntary retirements increased
134 early retirements were well above the expected 50

・Asset impairment losses
Location

Company nameSenshukai
Co.,Ltd.

Subsidiaries
Total
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(Millions of yen)

Total

● Osaka headquarters building and otheroffice locations

1,400● Logistics centers

1,681● Software and other intangible assets

1,401● Others

270

Subsidiary business sites

718
5,473
16

3 Consolidated Earnings Outlook for Fiscal 2018

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Components of the Fiscal 2018 Earnings Outlook(Millions of yen)
Improvement in Senshukai non-consolidated earnings
Efficient use of
expenses forreceiving orders
due to reduction
in media expenses +1,054
and other items+1,969Higher profit
margin due tomerchandisingreforms±0

Review of IT
systemmaintenanceexpenses

Decreases inheadcount andpersonnel+90

Lower depreciation
due to asset
impairment-153-4,2872017
Consolidated
operating profit-1,122

+179

-565

Others+3,837

Decrease in
marginal profit
due to lower
sales

+355

Cuts in repair
and maintenanceexpenses+243

Consolidated
operating profit
2018 Target¥1,600 million

Decrease ingroup earnings

Up-front investments at subsidiaries
・Upgrade of mail-order company
fulfillment
・The opening of new facilities in thebridal business

Higher fulfillment
cost ratio due tohigher delivery
fees

・Favorable yen exchange rate
・Downsized unprofitable product categories
・Lower inventory disposal losses(Decrease in clearance sales, valuation
losses on goods and write-downs

The 2018 consolidated operating profit target of ¥1.6 billion incorporates benefits from Belle Maison
inventory reductions and cuts in selling, group personnel and administrative expenses.
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Fiscal 2018 Consolidated Earnings Outlook (YoY Comparison)(Millions of yen)2017 (Results)

2018 (Forecasts)% to netsales% to netsales

YoY change
Difference

Change in% to netsales

Net sales

125,999

Cost of sales

71,43756.7%

67,09154.1%-4,346-2.6%Gross profit

54,561

43.3%

56,908

45.9%

2,347

2.6%

SG&A expenses

58,84846.7%

55,30844.6%-3,540-2.1%

Operating profit-4,287

-3.4%

1,600

1.3%

5,887

4.7%

Ordinary profit-4,206

-3.3%

1,900

1.5%

6,106

4.8%

Profit attributable toowners of parent-11,090

-8.8%

1,400

1.1%

12,4909.9%

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-1,999124,000

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Fiscal 2018 Consolidated Sales Outlook by Business Segment(YoY Comparison)(Millions of yen)
-3.1%
101,279

2017年度実績
2017 results

2018年度予想
2018 forecasts

98,1101.4%
18,132 18,390

2.0%
4,833

4,930

46.6%
1,753

通販business
Mail-order

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ブライダル
Bridalbusiness

法人 businessCorporates

2,570

その他
Others20

Fiscal 2018 Consolidated Operating Profit Outlook by Business Segment(YoY Comparison)(Millions of yen)2017 results
2017年度実績-6.5 %
963

900

2018年度予想
2018 forecasts

4.0%
375

390

80

187.5%
80

230-5,707

通販 business
Mail-order

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ブライダル
Bridalbusiness

法人 businessCorporates

その他
Others21

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
assets
無形固定資産(Millions of yen)

3,231
2,921

6,300

2,675

935

2,196
1,814
3,045
884

5,365

2,161

2014

1,723
462

1,548 1,658
495
925

1,260

1,052

733

2016

2017

2018

2015

(fct.)

2014

2015

2016

2017

2018
(fct.)

Property, plant and equipment: Construction of call center network in 2017, update of Kani Distribution Centermachinery and equipment and Egao no Mori Nursery School Doshin expenditures in 2018
Intangible assets: Construction of Feel Life core system in 2018
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4 Others

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Topics
Collaboration with Home Appliance and Electronics Retailer EDION- Started trial sales of Belle Maison products at the EDION Tsutaya-Kaden store in Hiroshima

Senshukai has started working with EDION, which has ranked firstamong Japan’s home appliance/electronics retailers in homerenovation product sales for six consecutive years. The aim is toincrease life style category sales and attract more new customers.
The EDION Tsutaya-Kaden store places emphasis on new ideas involving life styles. The trial sales ofBelle Maison products based on the theme of “new life style products”
started on December 26, 2017 and will end in early April 2018.

Cross-media marketing activities- Hotcott (warm cotton innerwear) and the “Torokeru” series videos generate a strong response!

Growth in the number of media posts (paper, Internet news andothers) has raised awareness of Belle Maison and its merchandiseand helped increase sales.
The “Torokeru” series video with a cat is extremely popular withmore than 35,000 views.

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Senshukai's CSR Activities in Fiscal 2017
Smile Forest donations from customers surpass ¥140 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 ¥145,061,419 as ofDecember 31, 2017. To position Senshukai as a “Women’s Smiles Company,” these funds wereused for three activities: Tohoku reconstruction support, the Pink Ribbon Campaign, andenvironmental activities.

Tohoku reconstruction support - Baby blanket donation program ends after four
years and about 30,000 blankets for new lives in Tohoku
As part of an earthquake recovery program to give smiles to mothers and their children in Tohoku,
Senshukai has donated blankets for babies in the four prefectures (Aomori, Iwate, Miyagi and
Fukushima) of the Tohoku region since 2013.
During the program’s four years, 33,591 blankets were given to maternity hospitals and organizations
that support childcare.

Pink Ribbon Campaign- More activities to support breast cancer survivors
In addition to its activities to promote breast cancer screening,
Senshukai started a program in 2015 to support breast cancer
survivors. In 2017, Senshukai held events where these survivors
could give a talk on their experiences, and created and started
selling Caring Hats that are easy to use for the cancer survivors.

Environmental activities - Green Power Class
Special events for parents and children were held in Osaka and Tokyo
These classes, which Senshukai holds at elementary schools, make children think about theimportance of renewable energy and ways to deal with problems involving energy and theenvironment. In December 2017, a class was held in Okayama. A new curriculum for events
for parents and children was created and these events were held in Osaka during the school
spring break in March and Tokyo during the summer break in August.
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Dividend Forecast and Earnings Announcements Scheduled in Fiscal 2018
Dividend Forecast
Senshukai’s policy regarding dividends is to distribute earnings to shareholders in a manner that reflects
its performance. Furthermore, the policy is to pay stable dividends that take into account the payout ratio
while reflecting the need to use retained earnings to strengthen the company’s foundation for business
operations.
Because of the consolidated and non-consolidated net losses in 2017, we plan to pay no dividend for 2017.
We plan to pay no interim dividend in 2018 and have not made a decision about the year-end dividend.
Our highest priorities are the implementation of our medium-term plan from 2018 and the growth ofshareholders’ equity from the standpoint of the stability and safety of business operations. In addition,
operations in 2018 will be significantly affected by seasonal factors.
Schedule for Earnings Announcements
 April 27, 2018 (Friday)

Announcement of financial results for the first quarter of Fiscal 2018

 July 26, 2018 (Thursday) Announcement of financial results for the second quarter of Fiscal 2018
 July 27, 2018 (Friday)

Earnings presentation for the second quarter of Fiscal 2018 (Tokyo)

 October 26, 2018 (Friday) Announcement of financial results for the third quarter of Fiscal 2018

The forward-looking statements contained in this earnings presentation are based on information that
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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26