SENSHUKAI CO.,LTD.

(Tokyo Stock Exchange, First Section: 8165)

Second Quarter of Fiscal 2016
Earnings Presentation
July 28, 2016

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Contents

1.

Consolidated Results of Operations for 2Q Fiscal 20162.

Overview by Segment

3.

2Q Fiscal 2016 Results Relative to Initial Plan

4.

Consolidated Earnings Outlook for Fiscal 2016

5.

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2

1. Consolidated Results of Operationsfor 2Q Fiscal 2016

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2Q Fiscal 2016 Consolidated Statement of Income (YoY Comparison)(Millions of yen)

2Q 2015

YoY change

2Q 2016% to netsales% to net
sales

Difference

Change in% to netsales-2,263-3.3%

Net sales

68,161

Cost of sales

36,451

53.5%

34,37752.2%-2,074-1.3%

Gross profit

31,71046.5%

31,520

47.8%

-190

1.3%

SG&A expenses

32,86448.2%

31,924

48.4%

-940

0.2%

Operating income-1,154

-1.7%

-403

-0.6%

751

1.1%

Ordinary income-1,063

-1.6%

181

0.3%

1,244

1.9%

Profit attributable toowners of parent-1,219

-1.8%

162

0.2%

1,381

2.0%

65,898Net sales decreased due to the continuing decrease in repeat customers* from the previous fiscal year
and the weak performance of apparel and fashion accessories in the mail-order business.
*Repeat customers: Customers who made purchases in the previous as well as the current fiscal years

Operating income improved despite lower sales, because of the reduction in SG&A expenses andrecovery in gross profit led by a lower cost to sales ratio.
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2Q Fiscal 2016 Consolidated Balance Sheet (Compared with End-Fiscal 2015)(Millions of yen)Dec. 31, 2015

Jun. 30, 2016

Difference

Remarks

Assets• Current assets

51,947

46,739-5,208

 Accounts receivable-other:-¥2.6bn Cash and deposits:-¥1.1bn Other (Forward exchange contracts, etc.): -¥1.8bn• Non-current assets

53,40450,932-2,472

 Property, plant and equipment: Investments and other assets:-¥0.8bn-¥1.0bn

105,352

97,672-7,680• Current liabilities

31,41028,386-3,024

 Accounts payable-trade: Current portion of bonds:
 Other (Accounts payable-other, etc.):-¥0.6bn-¥0.4bn-¥2.0bn• Non-current liabilities

20,236

20,31478

Total liabilities

51,647

48,701-2,94657,15957,349190
 Deferred gains or losses on hedges:
 Valuation difference on available-for-salesecurities:-¥3.5bn

Total assets

Liabilities

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

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-3,481-8,422-4,9412744

1753,705

48,971-4,734105,352

97,672-7,680-¥0.7bn5

2Q Fiscal 2016 Consolidated Statement of Cash Flows (YoY Comparison)(Millions of yen)

2Q 2015
Net cash provided by(used in) operating
activities

Net cash provided by(used in) investing
activities

3,141

1,519

Difference-1,622

2Q 2016 highlights
 Depreciation:+¥1.6bn Decrease in other current assets:+¥2.5bn Decrease in other current liabilities: -¥2.5bn

 Purchase of property, plant and equipment:-¥1.3bn-3,653

-617

3,036

 Proceeds from sales of property, plant andequipment:+¥0.9bn Purchase of intangible assets:

Net cash provided by(used in) financing
activities

10,844

Cash and cash
equivalents at end of
period

18,309Copyright SENSHUKAI Co.,Ltd. All Rights Reserved.

2Q 2016-2,005

13,127-12,849-¥0.4bn Repayments of long-term loans payable:-¥1.2bn Redemption of bonds:-¥0.4bn Cash dividends paid:-¥0.2bn-5,182

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Consolidated Sales by Business Segment (YoY Comparison)(Millions of yen)
15年第2Q
2Q 2015-5.6%
59,033

16年第2Q
2Q 2016

55,698

11.5%

6,685

7,451

10.3%
24.9%
2,078

2,293
364

Mail-order
通販business

Bridalbusiness
ブライダル

Corporates
法人business

454

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

54.0%

2Q 2015
15年第2Q

2Q 2016
16年第2Q

289
188
89
-4

-37

-280
-384
-1,434Mail-orderbusiness
通販

ブライダル
Bridalbusiness

法人
Corporates
business

その他
Others* “Others” represents services business primarily offering insurance and credit card services, and childcare business
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2. Overview by Segment

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Overview of the Mail-order Business (YoY Comparison)

2Q 2015

2Q 2016

Difference

Net sales(Millions of yen)

59,03355,698-3,335

Operating income(Millions of yen)

-1,434

-280

1,154

Semi-annual number of active
customers (10,000 members)

258.4

240.7

-17.7

Semi-annual number of new
members (10,000 members)

40.2

39.4

-0.8

Average sales per order (Yen)

10,325

10,612

287

Semi-annual order frequency per
customer (Times)

2.08

2.01

-0.07

Catalog circulation(10,000 volume)

3,778

4,410

632

Major factors

 Decrease in thenumber of repeat
customers Average sales per
customer increased
due to higher unitprice

* 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 declining repeat customer numbers
Decrease in sales due to relative decline in product appeal, mainly in the apparel category

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 start of operations at the Minokamo
Distribution Center
Reduction in SG&A expenses

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

January to June: 94.4％

103.8%
YoY
100％

Increase in sales due to theeffect of TV commercials

94.9%

93.2%

95.2%

90.3%
Decrease in sales due to shift in catalog
issuance to the previous month

1月
Jan.

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2月
Feb.

3月
Mar.

4月
Apr.

5月
May

88.0%

6月
Jun.
12

Mail-order Business –Sales by Product Category (YoY Comparison)(Millions of yen)
2Q 2015
15年第2Q-9.8%

2Q 2016
16年第2Q

25,81623,2942.1%
14,894 15,208-10.6%-12.4%

8,188
6,434

5,635

7,321

14.7%
2,578 2,956

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

14.2%
1,122 1,282
Othersその他

Others: Flowers and gift catalogs, 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

-1.3%
54.1%

15年第2Q
2Q 2015(Millions of yen)

-1,95452.8%

28,725

16年第2Q
2Q 2016

2Q 2015
15年第2Q

Decrease in share of bargain and clearance sales
Decrease in valuation losses on goods

26,771

2Q 2016
16年第2Q

Distribution costs:
Reduction in distribution costs resulting from start ofoperations at the Minokamo Distribution Center
SG&A expenses:
Cost reduction by reexamining each expense items

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Internet-related Indicators(Millions of yen)Internet Sales

Ratio of Internet-based Orders(including mobile sales)
Sales via catalog:

2.4%

Customer uses Internet to enter
catalog product number

76.9%

79.3%

2Q 2015
15年第2Q

2Q 2016
16年第2QInternet-only sales: All Internet sales other than sales via
catalog

43,865
5,971

39,9004,306

38,423
3,180

Amount and Share of Smartphone Sales
 Net sales(Millions of yen)

37,89435,594

15,346

2Q 2015
15年第2Q

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17,70235,243
 Share of sales

2Q 2014
14年第2Q

2,356

2Q 2016
16年第2Q

7.6%

38.5％

46.1％

2Q 2015

2Q 201615

Overview of the Bridal Business (YoY Comparison)

Net sales(Millions of yen)
• New facilities

2Q 2015

2Q 2016

Difference

6,685

7,451

766

-

687

687

• Existing facilities

6,685

6,764

79

Operating income(Millions of yen)

89

-384

-473

Guesthouses
Weddings (Couples)
Average sales per
wedding(10,000 yen)
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21

23

2

1,722

1,934

212

377

365

-12

Major factors

 Opening of new facilities in
Nara (July 2015), Osaka(January 2016) and Chiba(March 2016)■Increase in costs for openingsof new facilities■Opened in Nara, Osaka andChiba* Decreased one by the disposition ofa facility in Oita Decrease in average sales per
wedding as a result ofheightened competition andincrease in low-cost weddings(with small number of guests)

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

Net sales• Contracting services

2Q 2015

2Q 2016

2,078

2,293

1,434

1,573

Difference

215

139

• Sampling

505

574

69

• Novelties

115

125

10

• Others

22

18

-4

188

289

101

Operating income
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Major factors

 Increase in contracting
sales of existing clientsand new contracting
services for the JFR Group Larger number of newclients and increase incontracting sales ofexisting clients173. 2Q Fiscal 2016 Results Relative toInitial Plan

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Consolidated Results Compared to Initial Plan for 2Q Fiscal 2016
(Millions of yen)

2Q 2016 (Initial plan)

2Q 2016 (Results)% to netsales% to net
sales

Relative to initial plan
Difference

Changein % to net
sales-6,902-9.5%

Net sales

72,800

Cost of sales

37,90352.1%

34,37752.2%-3,5260.1%

Gross profit

34,89647.9%

31,52047.8%-3,376-0.1%

SG&A expenses

34,79647.8%

31,92448.4%-2,872

0.6%

Operating income

100

0.1%

-403

-0.6%

-503

-0.7%

Ordinary income

650

0.9%

181

0.3%

-469

-0.6%

Profit attributable toowners of parent

450

0.6%

162

0.2%

-288

-0.4%

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65,89819

Consolidated Sales by Business Segment (Compared with Initial Plan)(Millions of yen)
16年第2Q当初
2Q 2016

2Q 2016
16年第2Q実績
results

initial plan

-11.0%
62,60555,698

-3.0%
7,679

7,451

10.3%
2,079

2,293

4.0%
437

Mail-order
通販business

Bridalbusiness
ブライダル

Corporates
法人business

454

Othersその他* “Others” represents services business primarily offering insurance and credit card services, and childcare business
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Consolidated Operating Income by Business Segment(Compared with Initial Plan)(Millions of yen)
2Q 2016
16年第2Q当初

2Q 2016
16年第2Q実績

initial plan

results

37.6%
289
210

202

-33

-280

-37

-279
-384

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, and childcare business
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4. Consolidated Earnings Outlook for
Fiscal 2016

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Fiscal 2016 Consolidated Earnings Outlook (YoY Comparison)(Millions of yen)2015 (Results)

2016 (Forecasts)% to netsales% to netsales

YoY change
Difference

Change in% to net
sales

-621

-0.5%

Net sales

134,321

Cost of sales

73,442

54.7%

70,11452.4%-3,328-2.3%

Gross profit

60,87945.3%

63,585

47.6%

2,706

2.3%

SG&A expenses

64,31647.9%

62,28546.6%-2,031-1.3%

Operating income-3,437

-2.6%

1,300

1.0%

4,737

3.6%

Ordinary income-2,540

-1.9%

1,750

1.3%

4,290

3.2%

Profit attributable toowners of parent-5,307

-4.0%

750

0.6%

6,057

4.6%

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133,700

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Fiscal 2016 Consolidated Sales Outlook by Business Segment(YoY Comparison)(Millions of yen)
15年実績
2015

-2.5%

results

16年予想
2016
forecasts

113,976 111,156

11.6%
15,281

17,058

4.3%
4,214

28.2%

4,397
848

Mail-order
通販business

Bridalbusiness
ブライダル

法人 businessCorporates

1,087

その他
OthersAdditional marketing measures (coupons, points and web initiatives)
Expand sales channels: Open stores on domestic and foreign EC malls (amazon, etc.)
Strengthen Internet-only products; add listings advertising
Expand the range of national brand (NB) products
Sales growth resulting from full-scale start of Dears Brain’s new facilities andconsolidation of PLANETWORK* “Others” represents services business primarily offering insurance and credit card services, and childcare business
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Fiscal 2016 Consolidated Operating Income Outlook
by Business Segment (YoY Comparison)(Millions of yen)
2015
15年実績

5.7%
682

721

results

2016
16年予想
forecasts

18.8%
367

436

10.3%
97

23

107

-4,597Mail-order
通販 business

Bridalbusiness
ブライダル

Corporates
法人 business

Others
その他

Lower cost to sales ratio due to a decrease in bargain and clearance sales because of the 2015 cut inslow-moving inventories
Reduction in distribution costs resulting from start of operations at the Minokamo Distribution Center
Profit improvements due to the reduction in SG&A expenses* “Others” represents services business primarily offering insurance and credit card services, and childcare business
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5. Others

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Topics
Alliance Activities with JFR-Opened five Kcarat stores in Daimaru-Matsuzakaya Department Stores

Plan to open nine Benebis stores in Daimaru-Matsuzakaya Department Stores startingfrom the end of AugustSenshukai and J.FRONT RETAILING Co., Ltd. (JFR) have restructured Kcarat, Senshukai’s original ladies fashion brand. Sales
were launched at Daimaru-Matsuzakaya Department Stores and through Senshukai catalogs and the EC websites of the twocompanies starting from spring this year. Plans also call for building an “Omni Fashion Brand*” from scratch andstrengthening it by leveraging the strengths of the two companies. Going forward, efforts will focus on strengthening thebrand and increasing sales by going beyond company stores and websites and opening roadside stores, stores incommercial facilities and third-party EC websites.
In addition, starting from the end of August, our shoe brand Benebis will be available in nine Daimaru Department Stores.
Omni Fashion Brand: It is concept in which all operations from product planning and production to sales promotion, marketing andmanagement of customer data is done jointly by the two companies to create a multi-tiered brand to meet thediversifying customer needs and purchasing styles.

▶ Senshukai merchandise is sold at Daimaru dept. store
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▶ Senshukai merchandise is sold at Daimaru dept. store

27

Topics
Collaboration with Watabe Wedding Corporation andOther Initiatives- Established a joint venture in Hong Kong to manage wedding
dresses and album manufacturing businesses
Watabe Wedding entered into a capital and business alliance withDears Brain Inc. in July 2015. In March 2016, Watabe Wedding
established W&D Products, Ltd. a Wan Chai, Hong Kong-based joint
venture with Dears Brain.
The core business of the company will be the management of
production plants (Shanghai and Vietnam) for wedding dresses,
tuxedos, photo albums and other items and marketing them todomestic and overseas OEM customers.

▶ Factory in Shanghai

In addition, a project for mutual customer referrals in order to evolve
into a company that can create a variety of wedding styles is being
promoted. The goal is to tap group synergy in order to enhancebusiness efficiency and create new value.

Childcare Business▶ Factory in Vietnam- Opened two nurseries in April and one more is to be opened in Shinagawa next April
Wanting to contribute to the solution of the problem of children waiting for admission to nursery schools, SenshukaiChild Care Co.,Ltd. operates six nursery schools, including the two licensed nursery schools opened in Chiba andTokyo in 2016. Plans call for opening a licensed nursery school in Shinagawa-ku, Tokyo in Next April. Named Egao No
Mori Nursery School Katsushima, it will be the seventh licensed nursery school for the company.
The company will focus on child care support services that bring smiles not only to nursery school children but to all
including parents, our childcare workers, neighbors and everyone involved in child rearing.

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28

Senshukai's CSR Activities in 2Q Fiscal 2016
Post-quake Reconstruction Support
A campaign to invite contributions for disaster relief charity fund in responseto the April 2016 Kumamoto Earthquake was conducted through Senshukai’s
Belle Maison Net from April 22 through June 20.
Contributions received from customers totaled 14,303,361 yen, of which
12,303,361 yen was donated to “2016 Kumamoto Earthquake Disaster Relief
Fund” set up by the Japanese Red Cross Society. And 2,000,000 yen was
donated to Non-Governmental Organization JEN’s “Kumamoto Earthquake
Urgent Disaster Relief Fund.”In addition, employees of the Senshukai Group companies donated5,000,000 yen to the “2016 Kumamoto Earthquake Disaster Relief Fund” set
up by the Japanese Red Cross Society. A total of about 2,100 items of relief
supplies such as Alpha Rice, water, Senshukai’s innerwear, shorts, socks andother items were delivered to the disaster hit area.

▶ Delivery of relief supplies

Held Akaya Forest Castanet Workshop
at Egao no Mori Nursery School Ino
In June, three to five- year old nursery school toddlers of the Senshukai
Group’s Egao no Mori Nursery School Ino and their parents (total 70)
enjoyed a day painting castanets made from the trees of the Akaya Forest.
The event aimed at raising the awareness of the Akaya Forest (Minakami-cho,Gunma) preservation project launched by The Nature Conservation Societyof Japan (supported by Egao no Mori Green Fund) and Senshukai.
A workshop was held after a picture-story show and film show on protectionof wildlife in Akaya Forest. It turned out to be an event where children got afeel for the importance of protecting forests.
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▶ Workshop

29

Dividend Forecast and Earnings Announcements Scheduled in Fiscal 2016
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 a payout
ratio while at the same time strengthening the business foundation with retained earnings.
Regarding dividends in Fiscal 2016, Senshukai currently maintains its forecast announced on
February 4, 2016, and plans to pay a total annual dividend of 8 yen per share including interim
and year-end dividends of 4 yen per share each.

Schedule for Earnings Announcements
 October 28, 2016 (Friday)

Announcement of financial results for the third quarter of Fiscal 2016

 February 2, 2017 (Thursday) Announcement of financial results for Fiscal 2016
 February 3, 2017 (Friday)

Earnings presentation for Fiscal 2016 (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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30