UNITED ARROWS LTD. Earnings Announcement Q&A
for the Nine-Month Period Ended December 31, 2023
UNITED ARROWS LTD. (the “Company”) held an earnings announcement
presentation at which the press, analysts, and institutional investors were inattendance. The principal questions received and answers given during each session
are presented below. Certain details have been added or amended to lead to a further
understanding of the UNITED ARROWS Group’s performance and activities.
Q. Could you share with us the status of progress in the initial plan (the one announcedat the beginning of the fiscal year).
A. Until the first half of the fiscal year, sales and gross margin were almost at the level ofthe plan, but profits exceeded the plan due to restraints on SGA expenses. In 3Q,
there were large shortfalls in the plan for sales and gross profit, and although SGA
expenses were controlled, profits failed to reach the initial plan, leading to the failure
to reach the plan for the 9-month period.
Q. What is the background to sharp rises in advertising expenses and personnel
expenses in terms of SGA expenses in 3Q?
A. The cost increase in 3Q was mainly caused by UA LTD. The increase in personnel
expenses was primarily due to a rise in the number of personnel and a salary increase
associated with employee promotion. The higher advertising expenses resulted fromcompany-wide measures for Christmas, Black Friday and others, and online shopping
advertising. Although an increase in personnel expenses will continue to 4Q, thegrowth is not expected to be as high as in 3Q since special bonuses were included in
4Q of the previous fiscal year. As for advertising expenses, no major measures areincorporated in 4Q at this moment.
Q. Gross margin for the second half of the fiscal year is planned to increase year on year
by 0.5 percentage points. What is the probability of achieving this?
A. Inventory has decreased satisfactorily by the end of December, which has held down
the possibility that the discount price sales trend in January will give a major negative
influence on gross margin. Notwithstanding the fact that the hurdle for achievingthat is high, we expect to spring items in February and March catch up.

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Q. Was the negative impact from UA Club included in the earnings forecast?
A. In the earnings forecast, the said impact is included as a factor that decreases
operating income by about ¥600 million. Up to December, there has been a total
negative impact of ¥1,000 million or so, which is broken down to approx. ¥600 million
in gross profit and approx. ¥400 million in SGA expenses. This tendency has caused adifference of approx. ¥400 million, compared with our assumption.
Q. Do we understand that the shortfall in profits by UA Club will completely move toprofit-increasing factors for the next fiscal year?
A. This approx. ¥1,000 million was incurred temporarily, associated with the transition of
the membership system. For the next fiscal year, we assume that ¥700 to 1,000 million
or so out of that amount will become a profit-increasing factor.
Q. Will any negative impact from the transition to UA Club continue to show up down theroad?
A. The portion of additionally granted points generated by the transition of systems has
been mostly used by 3Q. This problem is expected to be solved by the end of thisfiscal year although some points will be used during 4Q.
Q. Could you share with us upcoming market-specific measures.
A. In the Trend-conscious Market centered on UNITED ARROWS and BEAUTY&YOUTH,
gross margin has improved due to a rise in the ratio of regular-price sales. As we arecertain that we could have grown our sales further with more inventory, we are thinkingof placing additional orders in the future, as appropriate. The Basic Trend-conscious
Market centered on green label and the New Basic Trend-conscious Market of COEN
are ones sensitive to price ranges. In recognition of the necessity for operation
combined with appropriate price reduction measures, we will adjust after the springand summer, thereby aiming at sales growth.
Q. What will be the price ranges of spring and summer merchandise?
A. There will be variations depending on brands. However, as a whole, our policy is tomaintain the levels of the previous fiscal year.

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Q. What is the background to the development and the characteristics of UNITED
ARROWS BEAUTY?
A. Although we have developed and expanded original cosmetics in the past, only ourstores sold them, and we were unable to appeal to broad channels. This time around,
we put our brand name on them and expand sales through the likes of Rakuten Ichibaand Amazon by leveraging brand recognition. The products jointly developed withstrong partners, and we intend to appeal to broader users by setting them in relatively
affordable price ranges.
Q. Could you share with us the plan for opening stores in the next fiscal year and after.
A. With a plan for opening stores for both new and existing brands, store openings areexpected to outnumber the current fiscal year.
Q. What is the status of progress in the medium-term management plan? What feedback
are you receiving?
A. Efforts for the three years of the medium-term management plan have progressed asplanned in general. The UA CREATIVITY Strategy has delivered results in human capitaland the re-strengthening of existing brands. In the UA MULTI Strategy, store opening
in mainland China after the next fiscal year has also come into sight. In the UA DIGITAL
Strategy, the establishment of supply chain management is progressing. Quantitative
effects will start showing up from the next fiscal year to the fiscal year after next.

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