Results Presentation for First Six Months of
Fiscal Year Ending February 28, 2017

October 5, 2016
J. Front Retailing Co., Ltd.
YAMAMOTO Ryoichi
President and Representative Director

Today’s Agenda

Ⅰ． 1H FY2016 Results
Ⅱ． 2H and Full FY2016 Forecast
Ⅲ． New Group Vision and
Next Medium-term Business Plan
1

1H FY2016 Results

2

1H FY2016 Consolidated Results
Profit missed forecast due to sluggish sales mainly in department stores despite
more than planned cost reduction
YoY profit attributable to owners of parent decreased in great reaction to LY
profit growth due to reversal of deferred tax liabilities
Increased interim dividend ¥1 to ¥14 valuing shareholder return(Millions of yen, %）Fiscal year
endingFeb 28, 2017

1H
results

ChangeNet sales

539,297

Gross profit

Vs Apr forecast

YoY% change

Change% change(34,013)(5.9)(31,203)(5.5)

114,486(5,891)(4.9)(5,714)

(4.8)

SGA

95,485(3,179)(3.2)(2,915)(3.0)

Operating income

19,000(2,713)(12.5)(2,800)(12.8)

Ordinary income

17,694(5,377)(23.3)(2,306)(11.5)

Profit attributable toowners of parent

12,836(2,172)(14.5)

(564)

(4.2)

14

1

－

0

－

Dividend per share (Yen)(Interim)(中間）3

1H FY2016 Segment Information
Department Store Business was affected by smaller sales area of Shinsaibashi
store due to rebuilding of main building and rapid drop in tax-free sales
Clothing sales of Parco Business were sluggish despite strong performance of
Sendai Parco Part 2, which opened in July
Credit Business decreased profit due to increased write-off of bad debts and Other
Business was driven by strong performance of J. Front Design & Construction(Millions of yen, %)Results
six months
ended
August 31, 2016

Net sales

Results

YoYchangeOperating income

Vs Apr forecast
results
Change% change

YoYchangeVs Apr forecast
Change% change(23.6) (1,822)(16.4)

Department Store

350,786(6.1) (16,814)

(4.6)

9,278

Parco

136,523(1.9) (5,477)

(3.9)

6,358

(3.2)

(642)

(9.2)

Wholesale

22,422(29.5) (6,878)(23.5)

505(29.9)(255)(33.5)

Credit

5,268

4.0

(132)

(2.4)

1,285

(2.9)

(185)

(12.6)

Other

50,117

1.0

(683)

(1.3)

1,571

48.2

31

2.0
4

1H FY2016 Segment Information
1H FY2016 analysis of changes in consolidated operating income by segment(Millions of yen)

Department
Store(1,822)
Parco
(642)

Department
Store(2,866)
Parco
(213)

Wholesale(215)

Credit(37)

Other
511 Adjustment
108

Adjustment
72

Down ¥2,713 mn (12.5%) YoY

LY
results

Other
31

Credit(185) Wholesale(255)¥2,800 mn (12.8%) below Apr forecast

1H FY2016
results

Apr
forecast

5

1H FY2016 Daimaru Matsuzakaya Department Stores
Downturn in consumer confidence due to increasingly uncertain outlook for global
economy since global decline in share prices at beginning of the year
Strong yen stalled inbound tourists’ spending, which had been brisk until last FY
Shinsaibashi store was greatly affected by 40% decrease in sales area due torebuilding of main building and Tokyo store continues to increase sales
1H FY2016 Daimaru Matsuzakaya Department Stores sales by store (Millions of yen, %)Fiscal year
endingFeb 28, 2017
Shinsaibashi
Umeda
Tokyo
Kyoto
Kobe
SapporoNagoyaUeno
Total(excl Shinsaibashi)

YoY

1H results
Change35,21731,00036,51532,16939,422
28,901
58,17920,607311,762276,545(11,026)(818)
791(1,745)(1,448)(1,071)(3,319)(350)(20,616)(9,589)Vs Apr forecast% change(23.8)
(2.6)
2.2
(5.1)
(3.5)
(3.6)
(5.4)
(1.7)
(6.2)
(3.4)

Change(3,023)(1,070)(425)(1,871)(1,798)(1,219)(3,571)(373)(14,438)(11,415)% change

(7.9)
(3.3)
(1.1)
(5.5)
(4.4)
(4.0)
(5.8)
(1.8)
(4.4)
(4.0)

*Sales area of Daimaru Shinsaibashi store decreased approx 40% due to rebuilding of main building since Dec 31, 2015.

6

1H FY2016 Daimaru Matsuzakaya Department StoresTax-free sales shifted from big-ticket items to consumables (mainly cosmetics)
YoY Gaisho sales growth was negative in 1Q and Jun but turned positive in Jul
and Aug
Operating income missed plan, greatly affected by sales decrease despite cost
reduction, and profit exceeded forecast(Millions of yen, %)Fiscal year
endingFeb 28, 2017

YoY

Vs Apr forecast

1H results
Change% change

Change% change

Net sales

311,762(20,616)(6.2)(14,438)(4.4)

Gross profit

73,185(4,956)(6.3)(3,515)

(4.6)

SGA

64,467(2,399)(3.6)(2,233)(3.3)

Operating income

8,718(2,557)(22.7)(1,282)(12.8)

Ordinary income

8,175(2,626)(24.3)

(725)

(8.1)

Profit

4,843

3,041

168.7

143

3.0
7

1H FY2016 Daimaru Matsuzakaya Department Stores

1H FY2016 Daimaru Matsuzakaya Department Stores
analysis of operating income by factor(Millions of yen)Labor cost Ad cost
reduction reduction
564
566
Decrease inprofit margin(109)

Other cost
reduction
1,269

Other cost
reduction
1,515

Decrease in gross profit
due to sales decrease(3,394)

Decrease in gross profit
due to sales decrease(4,847)

Down ¥2,557 mn (22.7%) YoY

LY
results

Ad cost Labor cost
reduction reduction
Decrease in
322
396
profit margin(121)¥1,282 mn (12.8%) below Apr forecast

1H FY2016
results

Apr
forecast

8

1H FY2016 Consolidated Results (B/S and CF)
Equity increased ¥7.9 bn from end of last FY to ¥391.6 bn
Interest-bearing debt increased ¥2.7 bn from end of last FY to ¥183.6 bn
Operating cash flows decreased ¥3.1 bn YoY mainly due to decrease in trade
payablesInvesting cash outflows decreased ¥17.2 bn in reaction to acquisition of shares in
Senshukai in LY
Financing cash outflows increased ¥3.7 bn partly in reaction to issue of bonds in LY<Consolidated balance sheet>
Fiscal year ending
Feb 28, 2017

1H results

Total assets

1,023,966

Interest-bearing debt

EquityEquity ration (%)(Millions of yen)

<Cash flows>(Millions of yen)

Fiscal year ending
Feb 28, 2017

1H results

YoYchange4,820

Operating cash flows

15,970(3,174)

183,680

2,758

Investing cash flows(11,650)

17,203391,640

7,941

Financing cash flows(1,822)(3,755)YoYchange38.2 (Difference) 0.6
9

2H and Full FY2016 Forecast

10

2H FY2016 Consolidated Forecast
Revised down both sales and profit forecast because the future of the economy
remains uncertain
Sales of so-called “volume zone” women’s clothing remain sluggish and sales
per inbound tourist do not cease to fall
Expected the situation to be as severe as in 1H and carefully reviewed forecast
factoring in risks(Millions of yen, %)Fiscal year
endingFeb 28, 2017

YoY

Vs Apr forecast

2H forecast
Change% change

Change% change

Net sales

577,702(12,551)(2.1)(26,798)(4.4)

Gross profit

121,614(3,541)(2.8)(5,586)

(4.4)

SGA

95,615(3,214)(3.3)(3,385)(3.4)

Operating income

25,999

(326)

(1.2)

(2,201)(7.8)

Ordinary income

26,3051,466

5.9(1,695)(6.1)

Profit attributable toowners of parent

12,663

1,358

12.0

(1,937)(13.3)
11

2H FY2016 Segment Information
In Department Store Business, effect of rebuilding of main building of Shinsaibashi
store will end in December but sales forecast was carefully reviewed
Forecast of Parco Business factors in effect of temporary closure of Shibuya
Parco and closure of Chiba Parco
Wholesale Business is expected to recover and Credit Business will increase
profit because temporary factors in 1H will disappear(Millions of yen, %)Fiscal year
endingFeb 28, 2017

Net sales
2H
forecast

YoY% change

Operating income

Vs Apr forecast
Change% change

Vs Apr forecast

YoY
2H
forecast % change

Change% change

Department Store

379,413(2.6) (17,087)(4.3)

16,021(3.7)(2,379)(12.9)

Parco

139,576(1.7)(3,724)

(2.6)

6,241

3.8

41

0.7

Wholesale

27,5776.0(2,123)

(7.1)

844

42.2

204

31.8

Credit

5,731

6.3

131

2.3

1,499

8.7

(31)

(2.0)

Other

52,582

(4.6)

(618)

(1.2)

1,408

(19.4)(352)(20.2)
12

2H FY2016 Segment Information
2H FY2016 analysis of changes in consolidated operating income by segment(Millions of yen)

Department
Other
Store
Wholesale Credit(337) Adjustment
(623)
250
119
Parco
32
231

Adjustment
313

Down ¥326 mn (1.2%) YoY

LY
results

Other
(352)

Department
Credit Wholesale
store
Parco
(31)
204
(2,379)41¥2,201 mn (7.8%) below Apr forecast

2H FY2016
forecast

Apr
forecast

13

2H FY2016 Daimaru Matsuzakaya Department Stores
Revised down 2H sales forecast of all stores ¥14.3 bn because the future of theeconomy remains uncertain
Revised down SGA forecast ¥1.8 bn from Apr forecast through more thoroughcost management
Operating income will decrease 2.8% YoY and profit will decrease 4.3% YoY(Millions of yen, %)Fiscal year
endingFeb 28,2017

YoY

Vs Apr forecast

2H forecast
Change% change

Change% change

Net sales

337,137(7,995)(2.3)(14,363)(4.1)

Gross profit

78,514(2,750)(3.4)(3,886)

(4.7)

SGA

64,032(2,333)(3.5)(1,868)(2.8)

Operating income

14,481

(417)

(2.8)

(2,019)(12.2)

Ordinary income

13,624

(49)

(0.4)

(1,976)(12.7)

Profit

8,556

(389)

(4.3)

(1,244)(12.7)
14

2H 2016 Daimaru Matsuzakaya Department Stores
Effect of significant decrease in sales area due to rebuilding of main building of
Shinsaibashi store will end at end of December
Sales drop attributable to increase in lease area for big tenants in Nagoya store
will end at end of October
While strengthening promotion measures, carefully developed sales planreflecting economic environments of individual stores
2H FY2016 Daimaru Matsuzakaya Department Stores sales forecast by store (Millions of yen, %)Fiscal year
endingFeb 28, 2017
Shinsaibashi
Umeda
Tokyo
Kyoto
Kobe
SapporoNagoyaUeno
Total(excl Shinsaibashi)

2H forecast

37,30233,31938,76434,99043,50732,34864,83020,572
337,137
299,834

Vs Apr forecast

YoY
Change(7,527)(74)
1,320(1,095)
(681)
(389)
1,494
(47)
(7,995)(469)% change(16.8)
(0.2)
3.5
(3.0)
(1.5)
(1.2)
2.4
(0.2)
(2.3)
(0.2)

Change(3,458)(641)(696)(2,120)(1,943)(1,682)(2,030)(478)(14,363)(10,906)% change

(8.5)
(1.9)
(1.8)
(5.7)
(4.3)
(4.9)
(3.0)
(2.3)
(4.1)
(3.5)

15

*Sales area of Daimaru Shinsaibashi store decreased approx 40% due to rebuilding of main building since Dec 31, 2015.

2H FY2016 Daimaru Matsuzakaya Department Stores

Initiatives on affluent consumer market
Gaisho sales increased in Jul and Aug

FY2016 YoY credit sales changes (%)

Annual new account acquisition target: 14,600
Strengthen strategic efforts to “acquire
more customers in Tokyo area”

Initiatives on inbound tourist market
Retain repeat customers
Improve convenience by expanding
adoption of payment services
Consider cross-border EC to promote
repeat purchaseExclusive Card

16

Overhaul of Department Store Sales Floor Configuration

Balanced mix of “retail” and “real estate rental revenue”
Department stores
Attract
morecustomers＋
RetailRealestaterentalStreamline
HR structure

Medium-term 30% decrease in women’s volume zone clothing sales area
Introduce new categories
Create new areas of our own curation
Strengthen initiatives to meet experiential consumption demands
Expand real estate lease space
17

Develop newer business model beyond framework of department stores

Low Cost Operation
Radical overhaul of operation frames with focus on
creation of paperless systems using ICT
Sales
Order
ArrivalStorage

Back office

Sales

Settlement

Payment
Collection

Performance
Management

Closing

Tax

HR
Admin

Promote operation process reform using ICT

Promote shared services by integrating three companies in the Group
Integrated three companies via absorption-type merger

JFR Office Support

JFR Service
JFR Consulting

Streamline organization and improve productivity

Medium-term radical change in HR structure18

2H FY2016 Daimaru Matsuzakaya Department Stores

2H FY2016 Daimaru Matsuzakaya Department Stores
analysis of operating income by factor(Millions of yen)

Decrease inprofit margin(888)
Decrease in grossprofit due to sales
decrease(1,862)

Packaging/delivery
reduction
269

Labor cost Ad cost
reduction reduction
63
651

Packaging/delivery
reduction
201

Other cost
reduction
1,350

Other cost
reduction
983

Down ¥417 mn (2.8%) YoY

LY
results

Decrease inprofit margin(519)

Ad cost Labor cost
reduction reduction579
105

Decrease in grossprofit due to sales
decrease(3,367)¥2,019 mn (12.2%) below Apr forecast

2H FY2016
forecast

Apr
forecast

19

FY2016 Consolidated Forecast
Net sales will decrease 4.0% YoY to ¥1,117 bn, ¥58 bn below Apr forecast
Operating income, ordinary income and profit attributable to owners of parent
will decrease 6.3%, 8.2% and 3.1% YoY, respectively
Plan to pay annual dividend of ¥28 per share, up ¥1 YoY, marking 6thconsecutive year of increase(Millions of yen, %)Fiscal year
endingFeb 28, 2017

YoY

Full year
forecast

ChangeVs Apr forecast% change

Change% change

Net sales

1,117,000(46,564)(4.0)(58,000)(4.9)

Gross profit

236,100(9,432)(3.8)(11,300)

(4.6)

SGA

191,100(6,394)(3.2)(6,300)(3.2)

Operating income

45,000(3,038)(6.3)(5,000)(10.0)

Ordinary income

44,000(3,910)(8.2)(4,000)(8.3)

Profit attributable toowners of parent

25,500

(813)

(3.1)

(2,500)

(8.9)

28

1

－

0

Dividend per share (Yen)－ 20

FY2016 Consolidated Forecast (B/S and CF）
Equity will increase ¥16.9 bn from end of last FY to ¥400.6 bn
Interest-bearing debt will increase ¥14 bn from end of last FY to ¥195 bn
Operating cash flows will decrease ¥0.7 bn due to profit decrease
Investing cash outflows will increase ¥3.2 bn due to increase in acquisitionof fixed assets
Financing cash inflows will increase ¥6 bn due to increase in loans<Balance sheet>(Millions of yen)

Fiscal year ending
Feb 28, 2017

Year-end
forecast

Total assets

1,046,700

27,554

195,000
400,600

Interest-bearing assets

EquityEquity ratio (%)

38.3<Cash flows>(Millions of yen)

Fiscal year ending Year-end
forecast
Feb 28, 2017

YoY change

Operating cash flows

36,000(799)

14,078Investing cash flows(43,000)(3,259)16,901

Financing cash flows

5,000

6,041

YoY change(Difference)

0.7
21

New Group Vision and
Next Medium-term Business Plan

22

Diversified Lifestyles
Forms of families are changing due to falling birthrate and aging populationand more and more women are participating in society
Rapidly urbanized in some areas and increasingly depopulated
in others※総務省「家計調査」より
Amid greater diversification of lifestyles, needs related to anxiety anddissatisfaction in daily life have been revealed
Diversified
consumers/needs> Childcare bysingle parent> Single/unmarried/married late
> Single elderly> Smart workers> Telework

・・・

Diversified lifestyles> DINKS/DEWKS

Pursuit ofconvenience
Daily anxiety/dissatisfaction
Lack ofconnection

Lifestyles
believed to
be standard

Increasing needs for:

Want services available
anytime, anywhere

Want to leave all
troublesome things
to someone

・・・

Want a portion
for one person

Difficult to balance
work and family

・・・

Want help forchildcare/nursing care

Anxious about
their old age

・・・

Lonely without family

Cannot findmarriage partner

・・・

Stressfree

Relax

Clanning

23

Diversified Enjoyment
Increasingly stratified consumers based on values and further polarized income
Consumption trends shift from “goods” to “experience,” from “possession” to“sharing”
Keywords for values demanded in enjoyment are changing to “uplifting feeling,”“fulfillment” and “social contribution”
Diversified enjoyment

Increasing demand
for uplifting feeling
Fulfillment bystereotypicalforms of consumptionMore options toachieve fulfillment

Want totally newexperience

Want to enjoy with

Want only
accurate information

Want something no one

like-minded people

else has in the world

Want to make efforts/
study at any age

・・・

Want to be environmentallyand ethically conscious

Want to feelsocially meaningful

・・・

Diversified “values” demanded in enjoyment
Thrill, Fun

・・・

Aim to become
the person he/shewants to beHigher awareness ofsocial contribution

Uplifting feeling・・・

Fulfillment
VitalitySocial contribution
Eco, Ethical24

Business Domain with Two Focuses
Set up business domain with two focuses on “diversified lifestyles” and“diversified enjoyment”
See both positive and negative factors and contribute to realizing spirituallyrich lifestyles
Change existing domain and try to expand into new unconventional domain
Low cost operation
Security/trust
Diversified lifestyles

11More convenient/more comfortable services
to eliminate
anxiety/dissatisfaction in

3
3

New age lifestyles
using digital (IoT)

daily life

Leverage strengths

Regional
ICTdevelopment
Customerbase

Hospitality22More enjoyable/
more exciting

new experiential
consumption

Existing
business domain

Diversified enjoyment

25

Newly Developed Group Vision
Create and Bring “New Happiness” to Your Life
J. Front Retailing
Now is the time when lifestyles are changing speedily.
To meet these changes quickly, and what is more, to find budding needs are
Ｊ. Front Retailing’s important missions.
More women’s social advancement. Changing lifestyles due to falling birthrate and aging population.
Expansion of globalization and digital consumption.
Various factors bring you more new ways to enjoy your life as well as triggering anxiety and stress.
Seeing both these “positive and negative” factors,
we will evolve into a group that can serve you in all aspects of life.
With regard to “enjoyment,” we will not only “sell goods”
but create new events and experiences to excite you.
With regard to “anxiety,” we will cover “shortfall” such as “busyness,” “uneasiness” and “hassle”
and create services to clear the fog in your mind.
Our domain will expand beyond the boundaries of “retailing.”
And there should be creative ideas, or the creation of “new happiness.”
Now is the time for J. Front Retailing to greatly change.
And we promise you to closely support your life in a “present progressive form”
after 10 years and even 100 years by “changing all the time.”

26

Toward Achievement of Group Vision
Next Medium-term Business Plan, which will start in next FY,
as new “starting point”

Sales

Not extension of the past but“discontinuous growth”

Limits of as-is extension
Growth curve forpast 50 years

Growth curve fornext 50 years

Turning point to steer management

As-is extension

New Group Vision
Present

Time axis

27

Next Medium-term Business Plan
“Five-year plan” for FY2017 to 2021
<Why five years?>⇒Ongoing large-scale development projects will be in full operation in 2021

Achieve “8% ROE” during next Medium-term Plan
<Why 8%?>⇒Recognize the Company’s shareholder’s equity cost to be 6.5% to 7.0%
and aim to achieve ROE above that level28

From Foundation Building Phase to Dramatic Growth Phase
FY2014 to 2016 as “foundation building phase”
Steadily improved profit levels of businesses in the Group
Launched large-scale projects for future growth
Strengthened business management by adopting B/S perspective
Strengthened corporate governance structure・・・

Steadily strengthened management foundation

Possibility to achieve 8% ROE during time frame ofnext Medium-term Plan has come into sight29

Outline of Next Medium-term Plan
“Innovation of existing businesses”
for growth as multifaceted retailer“Expansion of business domain”
including M&A beyond framework of retailing“Expansion of real estate business”
through expansion of real estate management area
“Full-scale ICT strategy” that adapts to IoT age

・・・・・・・“Recombination of business portfolio”
including reshuffle of businesses
30Ginza 6-chome Redevelopment
Approx 240 tenants in 46,000㎡ retail area as core of redevelopment
Approx 115-meter wide façade along world-famous fashion street Chuo-doriInvest approx ¥7 bn in interior work, etc and plan to open in Apr 2017

31
*The photo is for illustrative purpose only.

Development Projects in Ueno/Shinsaibashi/Shibuya
Rebuilding of south wing of Ueno store
・High-rise complex with Parco, cinema complex and offices
・Invest ¥21.3 bn, plan to open in fall 2017

Rebuilding of main building of
Shinsaibashi store
・New main building with 30% larger / 40,000㎡ sales area
・Invest ¥3.8 bn, plan to open in fall 2019

Rebuilding of Shibuya Parco・Started Udagawa-cho 14/15 Development Project
including Shibuya Parco・Acquired approval for construction from Tokyo
Metropolitan Government in Aug 2016
*The photos are for illustrative purpose only.

･
32

Shareholder Return and Improvement of Capital Efficiency
Basic policy is to appropriately return profit targeting dividend payout ratio ofat least 30%
Consider share buyback as appropriate to improve capital efficiency and flexibly
implement capital policy
Repurchased ¥5 bn in FY2015 and plan to increase annual dividend in FY2016
for six consecutive years<Profit attributable to owners of parent and ROE>

<Dividend* and DOE>

Profit attributable to owners of parent(Millions of yen)

FY

(%)

(%) (Yen)FY(forecast)*Annual dividend per share is shown on a post-share consolidation basis.

33

Changes in Form of Corporate GovernanceTransition to“company with three committees”
It is essential to improve management foundation and strengthen governancestructure in order to become what the Company should beTransit from company with audit & supervisory board to company with threecommittees subject to resolution of next year’s annual shareholders meeting

・More clearly separate oversight from execution in the Board of Directors⇒Speedier decision-making in execution
・Establish three statutory committees including nomination, remuneration
and audit committees⇒Increase tension, transparency and objectivity in management
34

Strengthen Structure to Achieve Group Vision
Basic Mission Statement

JFR WAY
Capital injection

Management
strategy

Businessmodel

Organization
HR

Corporate governanceGreater importance in dialogue withshareholders, investors and other stakeholders

Creation of added value / resultsGroup Vision35

Website

http://www.j-front-retailing.com
http://www.facebook.com/J.FrontRetailing

Forward-looking statements in this document represent our assumptions based on information currently available to us and inherently involve potential
risks, uncertainties and other factors. Therefore, actual results may differ materially from the results anticipated herein due to changes in various factors.

36