SENSHUKAI CO.,LTD. (Tokyo Stock Exchange, First Section: 8165)

Second Quarter of Fiscal 2018
Earnings Presentation

July 26, 2018

Contents

1 Consolidated Results of Operations for 2Q Fiscal 2018
2 Overview by Segment
3 Consolidated Earnings Outlook for Fiscal 2018
- Reasons for Revisions to Fiscal 2018 Forecasts and Second Half Actions -4 Others

Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

2

1Consolidated Results of Operations for 2Q Fiscal 2018

Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

3

2Q Fiscal 2018 Consolidated Statement of Income (YoY Comparison)(Millions of yen)

2Q 2017YoY change

2Q 2018% to netsales% to net
sales

Change in% to net
sales-5,987-9.5%

Net sales

63,186

Cost of sales

34,21254.1%

31,35754.8%-2,8550.7%

Gross profit

28,97345.9%

25,84245.2%-3,131-0.7%

SG&A expenses

30,22247.8%

26,981

47.2%-3,241-0.6%

Operating profit-1,248-2.0%-1,138

-2.0%

110

0.0%

Ordinary profit

-849

-1.3%

-993

-1.7%

-144

-0.4%

-6,208-9.8%-1,153

-2.0%

5,055

7.8%

Profit attributable toowners of parent

57,199Difference

Net sales decreased due to weak Belle Maison sales in the mail-order businessDespite extensive cost-cutting measures, there was an operating loss as the gross profit margin decreased
due to lower sales and a higher cost of sales ratio caused mainly by bargain sales
Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

4

2Q Fiscal 2018 Consolidated Balance Sheet(Compared with End-Fiscal 2017)(Millions of yen)Dec. 31, 2017

Jun. 30, 2018

Difference

RemarksAssets• Current assets

48,85440,782-8,071• Non-current assets

41,58640,766-819

Total assets

90,44181,549-8,891

 Cash and deposits: Accounts receivable-other: Merchandise and finished goods:-¥3.9bn-¥1.7bn-¥1.2bn Property, plant and equipment: Investments and other assets:-¥0.3bn-¥0.4bn

Liabilities Bonds with share aquisitions rights:+¥5.0bn Electronically recorded obligationsoperating:-¥1.2bn Accounts payable-trade:-¥1.6bn Other (Accounts payable-other, etc.):-¥3.6bn Bonds with share aquisitions rights:-¥5.0bn
 Long-term loans payable:-¥0.7bn• Current liabilities

30,06628,412-1,654• Non-current liabilities

18,826

12,962-5,863

Total liabilities

48,892

41,374-7,51841,15540,294-860

 Retained earnings:
 Treasury shares:

 Valuation difference on available-for-salesecurities:-¥0.1bn Deferred gains or losses on hedges: -¥0.1bn

Net assets• Shareholders’ equity• Accumulated othercomprehensive income• Non-controlling interests
Total net assets
Total liabilities and net assets
Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

318-195-51474
41,54876
40,175

1-1,373

90,44181,549-8,891+¥5.9bn-¥6.7bn5

2Q Fiscal 2018 Consolidated Statement of Cash Flows (YoY Comparison)(Millions of yen)

2Q 2017
Net cash provided by(used in) operating
activities

Net cash provided by(used in) investing
activities

2Q 2018

Difference Decrease in notes and accounts payabletrade:-¥2.7bn

1,296-761-3,322-29-4,619

731

 Decrease in accounts payable-other: -¥1.9bn(Payments for business structure reformexpenses)
 Decrease in inventories:+¥1.2bn Depreciation:+¥0.8bn Purchase of property, plant and equipment:-¥0.5bn Proceeds from sales of investment securities:+¥0.3bn Proceeds from issuance of common shares:+¥6.9bn

Net cash provided by(used in) financing
activities

-387

-493

-106

Cash and cash
equivalents at end ofperiod

16,743

13,400-3,342

Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

2Q 2018 highlights

 Purchase of treasury shares:-¥6.7bn Repayments of long-term loans payable::-¥0.6bn6

Consolidated Sales by Business Segment (YoY Comparison)(Millions of yen)
17年第2Q
2Q 2017

18年第2Q
2Q 2018-14.1%

52,14544,779

8.3%
8,201

8,880

8.5%
2,270

88.8%

2,463
569

通販business
Mail-order

ブライダル
Bridalbusiness

法人 businessCorporates

その他
Others* “Others” represents services business primarily offering insurance and credit card services, childcare business,and manufacturing and sales of cosmetics.
Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

1,075

7

Consolidated Operating Profit by Business Segment (YoY Comparison)(Millions of yen)
2Q 2017
17年第2Q

138.0%
312-26.1%

222131164

40.4%
7-1,610

2Q 2018
18年第2Q

10-1,626

通販 business
Mail-order

ブライダルBridalbusiness

法人 businessCorporates

その他
Others* “Others” represents services business primarily offering insurance and credit card services, childcare business,and manufacturing and sales of cosmetics.
Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

8

2

Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

Overview by Segment

9Overview of the Mail-order Business (YoY Comparison)

2Q 2017

2Q 2018

Difference

Net sales(Millions of yen)
Operating profit(Millions of yen)Semi-annual number of activecustomers (10,000 members)
Semi-annual number of newmembers (10,000 members)

52,14544,779-7,366-1,610-1,626

-16

224.4

184.6

-39.8

37.5

35.7

-1.8

Average sales per order (Yen)

10,036

9,514-522

Semi-annual order frequency percustomer (Times)

2.09

1.92

-0.17

Catalog circulation(10,000 volumes)

3,056

2,247-809

Ratio of Internet-based orders

82.4%

85.1%

2.7%

Share of smartphone sales

53.6%

58.9%

5.3%

to Internet sales

Main factors

 Decrease in the numberof current customers

 Decrease in the numberof current customers
with high average sales
per order* All figures other than net sales and operating profit are non-consolidated data for the mail-order business (excludingthe Hanpukai business)
Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

10Mail-order Business – First Half Monthly Sales (YoY Comparison)
Mail-order Business –Monthly Sales

January to June: 85.9%
YoY
100％

92.8%
90.5%
87.6%
86.1%

85.3%

Caused by moving up sales
promotion measures to April

1月
Jan.

Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

2月
Feb.

3月
Mar.

4月
Apr.

75.1%
5月
May

6月
Jun.

11

Mail-order Business – Sales by Product Category (YoY Comparison)(Millions of yen)
2Q 2017
17年第2Q

2Q 2018
18年第2Q-13.3%

20,772-23.6%

18,017

13,390-13.3%

10,231-21.9%

6,701

5,105 4,427

5,236

35.7%

4,018

5,452-34.5%

2,157 1,413
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: Flowers and gift catalog sales, etc.

Apparel: Reduction in number of outerwear styles brought down sales
Interior goods: Sluggish sales of furniture, storage products and fabrics
Foods: Increase in sales at subsidiaries Feel Life Inc. and Belle Neige Direct Co.,Ltd.
Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

Othersその他

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

SG&A Expenses
1.2%-3,760

56.2%

57.4%

17年第2Q
2Q 2017

18年第2Q
2Q 2018

Increase in share of bargain and clearance sales

Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

24,911

21,151

17年第2Q
2Q 2017

18年第2Q
2Q 2018

Decrease in number of catalogs and pages: -1,302
Lower personnel expenses due to decrease inemployees : -991
Lower depreciation due to asset impairment: -336
Cost reduction by reexamining each expense items:
13-1,131

Overview of the Bridal Business (YoY Comparison)

2Q 2017

2Q 2018

Difference

Net sales(Millions of yen)

8,201

8,880

679

Operating profit(Millions of yen)

131

312

181

Guesthouses

23

23

0

2,123

2,239

116

366

374

8

Weddings (Couples)

Average sales per wedding(10,000 yen)

Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

Main factors
 Strong sales overall atexisting facilities

14

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

Net sales• Contracting services

2Q 2017

2Q 2018

Difference

2,270

2,463

193

1,572

1,697

125

 Increases in outsourced
logistics and call center
services and in shipments
and orders at current clients
 Catalog circulation service
sales decreased but higher
sales to current clients foroutbound call center services• Sampling

547

635

88

• Novelties

142

119

-23

• Others

7114

Operating profit

222

164-58

Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

Main factors

15

Consolidated Earnings Outlook for Fiscal 2018

3- Reasons for Revisions to Fiscal 2018 Forecasts andSecond Half Actions -Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

16

Fiscal 2018 Consolidated Earnings Outlook (YoY Comparison)(Millions of yen)2017 (Results)

2018 (Forecasts)% to netsales% to net
sales

Difference-5.6%

125,999

Cost of sales

71,43756.7%

64,87754.5%-6,560-2.2%

Gross profit

54,561

43.3%

54,122

45.5%

-439

2.2%

SG&A expenses

58,84846.7%

53,82245.2%-5,026-1.5%

Operating profit-4,287

-3.4%

300

0.3%

4,587

3.7%

Ordinary profit-4,206

-3.3%

400

0.3%

4,606

3.6%

-11,090

-8.8%

200

0.2%

11,290

9.0%

Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

-6,999Change in %to net sales

Net sales

Profit attributable toowners of parent

119,000

YoYchange
対前年

17Fiscal 2018 Consolidated Sales Outlook by Business Segment(YoY Comparison)(Millions of yen)
17年実績
2017
results

-8.4%

18年予想
2018
forecasts

101,279

92,7393.2%
18,132 18,708

5.3%
4,833

5,087

40.6%1,753

Mail-order
通販business

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, childcare business,and manufacturing and sales of cosmetics.
Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

2,464

18

Fiscal 2018 Consolidated Operating Profit Outlook by Business Segment(YoY Comparison)(Millions of yen)
17年実績
18年予想
2017 results 2018
forecasts

-1.2%

963

951

-10.4%

131.3%
375

336

185

80
-1,174-5,707

通販
Mail-orderbusiness

ブライダル
Bridalbusiness

法人businessCorporates

その他
Others* “Others” represents services business primarily offering insurance and credit card services, childcare business,and manufacturing and sales of cosmetics.
Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

19Fiscal 2018 Consolidated Earnings Outlook (Compared with Initial Plan)(Millions of yen)

Initial 2018 Plan

Revised 2018 Plan

% to netsales% to net
sales

Difference

Change in% to net
sales-5,000-4.0%

Net sales

124,000

Cost of sales

67,09154.1%

64,87754.5%-2,2140.4%

Gross profit

56,90845.9%

54,12245.5%-2,786-0.4%

SG&A expenses

55,30844.6%

53,82245.2%-1,486

0.6%

Operating profit

1,600

1.3%

300

0.3%

-1,300-1.0%

Ordinary profit

1,900

1.4%

400

0.3%

-1,500-1.1%

Profit attributable toowners of parent

1,400

1.1%

200

0.2%

-1,200-0.9%

Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

119,000

YoY change

20

Reasons for Revisions to Fiscal 2018 Forecasts and Second Half Actions
Net Sales
Higher orders from smartphones, but not enough to offset decrease in orders using
catalogs and PCs
Smaller number of catalogs and pages due to review of catalog distribution to use
catalogs more efficiently (decrease in “sales area”), but this change reduced sales morethan expected
Decrease in total number of Internet customer visits
Operating Profit
Lower gross profit margin resulting from the sales decrease
Higher cost to sales ratio due to an increase in bargain and inventory clearance sales
Second Half Actions to Increase Sales
Increase marketing activities and procurement for Hotcott (warm cotton innerwear) and theTorokeru series
Use additional marketing measures (direct mail every month to increase sales, largefurniture free-shipping campaigns, and more sales promotions on SNS and other steps)
Increase presence in malls operated by other companies

Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

21

4 Others

Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

22

Senshukai's CSR Activities in 2Q Fiscal 2018
The Smile Forest project is supported by donations from customers- Making as many mothers and children as possible happy The Hahatoko Fund was established in July as part of the Smile Forest project
Creating more smiles for as many mothers and children as possible is the central objective of thenew Hahatoko Fund. To accomplish this, the fund supports activities for solving social issues inJapan involving mothers and their children.
The Three themes of the Hahatoko Fund
Theme 1 Encourage more women to become mothers

The Ashinaga Foundation (https://www.ashinaga.org/) is used
to make contributions for supporting orphans and their parents.
Theme 2 Support for mothers and children
Assistance for raising children and various associated activities.
Theme 3 Support for children affected by natural disasters
Assistance for raising children affected by natural disasters

Support for victims of flooding in western Japan
Following the heavy rain and flooding in July 2018 in western Japan, Belle Maison Net started acampaign to collect donations for disaster response activities. Donations from the company as well asfrom customers were given to the Japan Red Cross to help victims of this disaster.
There were also donations of clothing and other items. On July 13, the city of Soja in Okayama
received 3,055 items including women’s underwear, blankets, baby and children’s clothing andunderwear, and other items. On July 19, midwives associations in Hiroshima and Okayama prefectures
received 300 each of post-birth underwear, nursing apparel, baby apparel and four folds gauze
blanket. Also, 100 towels were given to the Disaster Volunteer Center in Hiroshima’s Aki-ku.
Senshukai will continue to assist these disaster victims by providing its products to locations that havea framework in place to receive and distribute these items.
In addition, all Senshukai Group companies are accepting disaster aid donations from theiremployees.

Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

23

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 thatreflects its performance. Furthermore, the policy is to pay stable dividends that take into account thepayout ratio while reflecting the need to use retained earnings to strengthen the company’s
foundation for business operations.
In the 2017 earnings announcement dated February 8, 2018, Senshukai stated there is no plan to
pay a dividend for the first half of 2018 and no decision has been made about the year-end
dividend.

Schedule for Earnings Announcements
 October 26, 2018 (Friday)

Announcement of financial results for the third quarter of Fiscal 2018

 February 7, 2019 (Thursday) Announcement of financial results for Fiscal 2018
 February 8, 2019 (Friday)

Earnings presentation for Fiscal 2018 (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.

Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

24