Senshukai Co., Ltd.
Fiscal 2008 Earnings Presentation
January 29, 2009

Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

Contents

1. Results of Consolidated Operations for Fiscal 2008
2. Progress on the Medium-Term Management Plan
(Fiscal 2008 – 2010)
3. Consolidated Outlook for Fiscal 2009
4. Reference Materials

21. Results of Consolidated Operations for Fiscal 2008

3

Fiscal 2008 Consolidated Results Highlights(Millions of yen)zNet Sales

zNet Sales¥158.2bn (+1.0%)

180,000

zOperating Income ¥2.4bn (-54.4%)

6,000- ¥6.2bn (

-

1,932

 Net income fell deep into the red due
to foreign exchange losses, andlosses on write-down of compound
financial instruments and otherextraordinary losses

2,000

2,034

1,796
77,091

79,074

Second halfFirst half)
120,000

 Operating income declined as higher
paper prices increased catalog
expenses, and due to a temporary
increase in SG&A expenses

4,000

5,000

*( ) represents year-on-year percentage changes

 Net sales increased slightly yearover-year despite cooling
consumption

zNet Income

5,291

156,792 158,285
150,000

zNet Income

zOperating Income

4,000

0

-6,271-510-102

90,0003,000-2,0002,413
60,0002,000-4,0003,495
79,701-5,761

1,015

79,211

30,0001,000-6,0001,398
00Fiscal 2007

Fiscal 2008

-8,000Fiscal 2007 Fiscal 2008

Fiscal 2007 Fiscal 2008

4

Consolidated Results of Operations for Fiscal 2008 (YoY Comparison)(Millions of yen)
Fiscal 2007

Comparison
to Net Sales

Fiscal 2008

Comparison
to Net Sales

Difference

YoY
Change %Net Sales

156,792-

158,285-+1,493+1.0%

Cost of Sales

80,864

51.6%

81,91251.7%+1,048+1.3%

Gross Profit

75,92848.4%

76,373

48.3%

+444

+0.6%

SG&A Expenses

70,63745.0%

73,96046.8%+3,322+4.7%

Operating Income

5,291

3.4%

2,413

1.5%

-2,878-54.4%

Ordinary Income

4,683

3.0%

-4,553-2.9%-9,236-Net Income

1,932

1.2%

-6,271-4.0%-8,204-

 Net sales rose steadily through September, then declined from October. Overall, net sales still increased 1.0% YoY.

5

Consolidated Balance Sheet for Fiscal 2008 (YoY Comparison)
Remarks(Millions of yen)Accounts

Dec. 31, 2007

Dec, 31, 2008

Difference

Current assets

48,22449,998

1,774

Inventories: promoted a policy of inventory reduction. Accounts receivable-other:sales declined from October. Cash and deposits: increased.

Fixed assets

50,19754,0603,863

Buildings: constructed a new headquarters. Investment securities: prices ofshareholdings declined. Goodwill: acquired additional stake in Dears Brain

98,422104,059

5,637

AssetsTotal assets
Liabilities

Forward exchange contracts: yen appreciation. Short-term bank loans: borrowed
operating funds. Notes and accounts payable-trade: inventory cut, factoringtransfer.

Current liabilities

41,17554,153

12,978Long-term liabilities

1,291

5,631

4,340

Total liabilities

42,46659,784

17,318

Shareholders’ equity

62,45854,830-7,627

Booked a net loss

Valuation andtranslation adjustments-6,512-10,584-4,072Net unrealized losses on available-for-sale securities, and deferred hedge losses

Minority interests

10

29

18

Total net assets

55,95544,274-11,681

Total liabilities and net
assets98,422104,059

5,637

Borrowed money for capital investment

Net Assets

6

Operating Margin Trends (YoY Comparison)

Cost of sales-0.2%

Catalog-related
expenses-0.5%

Rents and depreciation
expenses-0.7%

Other SG&A
expenses
-0.5%

3.4%
1.5%

Fiscal 2007

Fiscal 2008

 The operating margin declined due to a rise in the cost-of-sales ratio, higher catalog-related expenses due to higher
paper prices, and higher rent and depreciation expenses related to the Tokyo head office building, the newheadquarters building, and systems.
7

Net Sales by Business Segment for Fiscal 2008 (YoY Comparison)(Millions of yen)

180,000+1.0%
Fiscal 2007
Fiscal 2008

156,792 158,285-0.1%

132,018 131,886

150,000
120,000
90,00060,00030,000-6.9%+23.1%

13,646 12,698

11,128 13,6990Hanpukai Business

Catalog Business

Other Businesses

Consolidated

 Sales increased in the “other businesses” as Dears Brain Inc. was made a consolidated subsidiary from thesecond half.
8Trend in Sales by Product Category+1,963
61,297(Millions of yen)

63,260-1,68936,346 34,657
-993
-831

24,579 23,586+3,312

17,763 16,931-267

13,692
10,3806,424 6,157

2007 20082007 2008

2007

2008

zInterior goods

zDaily sundries

zApparel

2007

2008

zFashion accessories

2007

2008

zFoods2007

2008

zOthers

 The overall trend in sales was downward, but apparel sales increased due to the strength of Kurasu Fuku.

9

Current Situation of Catalog Business
Fiscal 2007

Fiscal 2008

Difference

zKurasu Fuku Sales(Billions of yen)

Net Sales(Millions of yen)

132,018

131,886-132

Number of active customers(10,000 members)

380

387

+7

Average sales per customer(Yen)

13,197

12,953

-244

27.0
20.0

Annual order frequency(Times)

2.85

2.90

+0.05

Catalog circulation(10,000)

9,650

9,500

-150

28.5

22.0

Fiscal 2005 Fiscal 2006 Fiscal 2007 Fiscal 2008

 Number of active customers increased by 70,000 as we acquired new members and boosted the retention rate.
 Average sales per customer declined due to an increase in online orders. Order frequency also rose.
 Continued strength of Kurasu Fuku.
Fiscal 2008 net sales of approx. 28,500 million yen. Contributed to the acquisition of new and former members.

10Current Situation of Hanpukai Business We developed 54 new products last year

 Rebuilding of the Hanpukai Business:
Growing the office vending box business(Choko Tabe BOX )As of December 31: about 21,000 boxes

Recipe books fordifferent seasonings

Approx. 65% were placed at non-Hanpukai
member offices.
▲

Maho no Hitosara

Mug Patis▲

Core ingredients for
simple sweets
making

We will start efforts to acquire new members
for our hanpukai and catalog businesses.

Three types of portable
dry fruits▲

Kajitsu no Toriko

 Ongoing decline in members

11Current Situation of Other Businesses
Net Sales(Millions of yen)

Fiscal 2007

Fiscal 2008

B-to-B Operations

6,383

6,315

-68

Storefront business(excluding outlet)

365

668

+303

Pet First Co., Ltd.

1,633

1,746

+113

Dears Brain Inc.

-

2,928

+2,928Others

2,747

2,042

-705

Total

11,128

13,699+2,571

Difference We opened five new Kurasu Fuku stores bringing the total to six.
 Increase in sales of pet business.
 We booked sales from Dears Brain Inc. from the second half.

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

51.6%

+0.1%

zSG&A Expenses (Consolidated)

70,63751.7%+3,322(Millions of yen)

73,96075,00060,00045,00030,00015,0000

Fiscal 2007

Fiscal 2008

 Hanpukai Business: Increase in cost ratio due toincrease in number of office vending boxes
 Catalog Business: Increase in production and purchasecosts and higher valuation losses

Fiscal 2007

Fiscal 2008

 Increase in printing expenses due to price increase of catalogrelated papers.
 Increase in labor costs due to increase of consolidated
subsidiaries.
 Increase in rents for Tokyo headquarters and stores.
 Increase in depreciation expenses due to new Bellne system andnew headquarters.
 Increase in sales commissions due to higher affiliate
commission and royalties

13

Other Expenses
zForeign exchange losses

In the Group’s mail-order business, we use long-term forward foreign exchange contracts for US
dollars to hedge against the risk of foreign exchange rate fluctuation when we make payment on
product imports, and we book valuation gains/losses, determined based on foreign exchange rates atthe end of the term, as a foreign exchange gain/loss at the non-operating section.
The yen strengthened sharply and unexpectedly in Fiscal 2008 relative to the start of the fiscal year.
As a result, we booked approx. 5,900 million yen of foreign exchange losses.

zLoss on write-down of compound financial instruments

We booked approx. 1,300 million yen in valuation losses for bonds that tracked indexes impacted
by the Nikkei Average’s decline and the yen’s strengthening.

 From Fiscal 2009, we expect only a minor impact to earnings assuming no significant
strengthening of the yen.

14

Highlights From Second Half of Fiscal 2008 (1)Introduction of “Hikyaku Express CO2 Emissions
Credit” service by Senshukai and Sagawa Express
on Belle Maison Net.

 A carbon offset program in which the customer
can participate.
 The customer, Senshukai, and Sagawa Express
each pay one yen to contribute to a “6%reduction” in greenhouse gases.

Belle Maison Lifestyle Research Department
Issue of 2009 happiness forecast “TokumekikiConsumer Age”

 We issued a report, following last year’s report, on
the lifestyles of women in their 30s, and theirchanging consciousness.

15

Highlights From Second Half of Fiscal 2008 (2)Completion of original shoes designed incollaboration with Senshukai BENEBIS andTOYOTA Passo.
 To be sold in the BENEBIS spring/summer issue,
and in nationwide Toyota Corolla dealerships.
We will improve brand value through various
collaboration efforts going forward.

Rush of Kurasu Fuku store openings!
 Kurasu Fuku store sales are steadily rising, as
we opened five new stores in the Kansai regionin Fiscal 2008, expanding our store network to
six stores.

16

2. Progress on the Medium-Term Management Plan
(Fiscal 2008 – 2010)17

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

zNumber of Stores and Sales(Millions of yen)

(Millions of yen)Internet only

Via catalog(Number of stores)

Store sales

Number of stores

60

5,000

90,000100,000

72,00080,00062,317

66,34250

4,000

40,00033

31,00060,00048

3,000

28,97531,3132830

24
40,00031,00440

37,36741,00050,00020,000

4,300

2,000

3,100
1,000

2,000

20

2,500
10

0

0

0
Fiscal 2007 Fiscal 2008 Fiscal 2009 Fiscal 2010
results
results
targets
targets
Customer reads a catalog then purchases by Internet,
entering catalog number* Internet only: Customer makes purchase by putting product into
online shopping cart

Fiscal 2007 Fiscal 2008 Fiscal 2009 Fiscal 2010
results
results
targets
targets* Via catalog:* Plan to open new Kurasu Fuku stores during the year

18

SCM Promotion (Status of Each Indicator)
Fiscal 2007 Results

Degree of Improvement

Fiscal 2008 Results

Rapid delivery ratio

83.7%

78.1%

Delivery-to-order ratio

131.7%

143.3%

Import ratio

71.2%

71.4%

Direct transaction ratio

20.0%

22.7%

Inventory turnover

3.9 times

4.6 times¥17.9 billion¥15.2 billion

Inventories (catalog products)* 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 transaction: Our own SPA transactions that are not via trading companies.
* Inventories: Inventories of catalog products at the end of December The rapid delivery ratio and the delivery-to-order ratio deteriorated due to the current
period’s target of inventory reduction.
 The import ratio and the direct transaction ratio continue its trend of increase.
 We are making steady progress in reducing the value of inventories. We are
improving the inventory turnover ratio by reducing excess procurement by splitting
deliveries, and quickly implementing bargains after catalogs expire.

zInventories (Consolidated)
End-2007¥19.3bn- ¥2.8bn

End-2008¥16.4bn19

20

3. Consolidated Outlook for Fiscal 200921

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-

162,500-+4,214+2.7%

Cost of Sales

81,912

51.7%

83,13251.2%+1,220+1.5%

Gross Profit

76,37348.3%

79,36748.8%+2,994+3.9%

SG&A Expenses

73,96046.8%

76,16746.9%+2,207+3.0%

Operating Income

2,413

1.5%

3,200

2.0%

+787

+32.6%

Ordinary Income-4,553

-2.9%

3,400

2.1%

+7,953-Net Income-6,271

-4.0%

2,750

1.7%

+9,021-

 We plan to pay the dividend that we announced at the start of the fiscal year despite booking a net loss in Fiscal
2008. We also plan a dividend of ¥17 for Fiscal 2009.

22

Fiscal 2009: Factors Behind Profit TurnaroundzReduction in administrative expenses

Elimination of administrative expenses that temporarily increased in Fiscal 2008.
Rents:
Real-estate acquisition tax:
Others:- ¥130 million Consumables:- ¥120 million- ¥70 million Improvement from business reorganization: - ¥ 130 million- ¥290 million
Total: - ¥740 million

zReduction of catalog costs

Due to a further online shift and more efficient catalog distribution.

Catalog circulation

Fiscal 2008: 95 million Æ Fiscal 2009: 87.5 million

Reduce printing and catalog-related expenses by approx. 850 million yen
through a reduction of 7.5 million issues.
zLower exchange risk

We do not expect valuation losses, unless the yen sharply appreciates, as we have reduced forward
foreign exchange contract values by canceling some contracts.
We do not plan to make long-term forward foreign exchange contracts in the future.

23

Projected Net Sales by Business Segment for Fiscal 2009 (YoY Comparison)+2.7%(Millions of yen)

180,000

Fiscal 2008

158,285 162,500

Fiscal 2009 Forecast-0.9%

131,886 130,720

150,000
120,000
90,00060,00030,000+39.4%-0.1%

12,698 12,680

13,69919,1000Hanpukai Business

Catalog Business

Other Businesses

Consolidated

 We expect roughly flat sales in the hanpukai and catalog businesses, and an increase in sales in the “other businesses”
due to a contribution from Dears Brain Inc.
24

Direction of Future Growth
Senshukai group to dateSenshukai group

Senshukai group in the futureSenshukai group

Other businesses

Mail-order businessfusing paper catalog
and Internet

Mail-order businesscentered on Internet(with paper catalogs
playing acomplementary role)

Other businesses

New Internet
businesses

Resource shift

Senshukai ≒ Belle Maison

Belle Maison
Senshukai =++ Other businesses
New Internet businessesz We will move more swiftly and boldly to the Internet business than we initially planned when we formulated our Medium-Term
Management Plan, in order to change our business structure in the face of a rapidly deteriorating market environment.
9 Specifically, we will quickly launch a dedicated Internet business separate from Belle Maison, and boldly shift management
resources to the business from existing businesses.
9 At the same time, we will further Belle Maison’s Internet shift to make it an Internet-centric business.

25

26

4. Reference Materials

27Reference 1: Internet-related Indicators
zInternet Sales (including mobile sales)

zNumber of Internet Members(Billions of yen)

80

62.3

40
20
0

45.5
36.9

25.2

30.3

31.3

600
29.0

Via catalog

11.7

16.7

2004

2005

25.4

31.0

37.3

Internet only

200

303

389

542

606

467

2006

2007

2008

0
2006

2007

2008

(Fiscal year)

2004

2005

(Fiscal year)(Billions of yen)

16
12.6

13.1

13.7

11.0

8
9.7

Via catalog

10.8

11.1

10.8

4
0

400

28.8

zMobile Sales

12(10,000 members)

66.3

55.7

60

800

Internet only

1.3

1.8

2.0

2.9

2005

2006

2007

2008

(Fiscal year)

28Reference 2: Capital Expenditures/Depreciation Expenses
Capital Expenditures

Depreciation Expenses(Millions of yen)

(Millions of yen)

4,000

3,506

3000

3,401
3,211

3,000
1,382

614

637

Intangible
assets

2500

2000

2,138

2,179

2,000

1500

744

2,604

1,564

2,597

2,763

2,123

1,000

Property andequipment

2,140
1,806

1,620

1000

1,724

1,393

500

615
0

0
Fiscal
2005

Fiscal
2006

Fiscal
2007

Fiscal
2008

Fiscal2009
Forecast

Fiscal
2005

Fiscal
2006

Fiscal
2007

Fiscal
2008

Fiscal2009
Forecast

29

Scheduled Earnings Announcements in Fiscal 2009z April 24 (Friday)

Earnings for first quarter of fiscal 2009z July 30 (Thursday)z July 31 (Friday)

Earnings for second quarter of fiscal 2009
Presentation for earnings
for second quarter of fiscal 2009 (Tokyo)

z October 23 (Friday)

Earnings for third quarter of fiscal 2009

 The forward-looking statements contained in this earnings presentation are based on
information that was available when this presentation was drafted. Therefore the actual
results and operating performance could be significantly different to the forecasts due tothe effects of various factors in the future.

30