Results Presentation for
Fiscal Year Ended
February 2015

April 10, 2015
J. Front Retailing Co., Ltd.
YAMAMOTO Ryoichi, President

Today’s Agenda
Ⅰ． FY2014 Results
Ⅱ． FY2015 Forecast
Ⅲ． Initiatives to Achieve FY2015 Profit Target
Ⅳ． Initiatives toward Medium-Term Growth
Ⅴ． Initiatives to Improve ROE and Promote
Corporate Governance1

FY2014
FY2014 Results
Results2

FY2014 Consolidated Results
Operating profit increased for the 5th consecutive year, marking a record highsince J. Front Retailing’s inception
Operating/ordinary profits fell below October forecast due to the unexpectedly
prolonged effect of sales tax hike
Annual dividend of ¥25 per share, up ¥3 YoY (on a post-share consolidation basis*)(Millions of yen, %)YoY

Fiscal year ended
February 2015

ResultsSales

Vs. October forecast

Change% change

Change% change

1,149,529

3,210

0.3

(11,471)(1.0)

Gross profit

243,663

(467)

(0.2)

(3,337)

(1.4)

SG&A

201,572

(741)

(0.4)

(2,428)(1.2)

Operating profit

42,091

275

0.7

(909)

(2.1)

Ordinary profit

40,404

(98)

(0.2)

(596)

(1.5)

Net profit

19,918(11,650)(36.9)

918

4.8*Common shares were consolidated in the ratio of one share for every two shares as of September 1, 2014.

FY2014 Segment Information
Department Store Business decreased sales due to the termination of the operation of Ginza
store and the reduced floor area of Ueno store but increased profits thanks to cost reduction
Parco Business increased sales and profits due to the opening of new building of
Fukuoka Parco and Nagoya Zero Gate
Other Businesses increased sales due to newly consolidated Forest but decreased profits
due to the decreased external transactions of JFR Information Center(Millions of yen, %)Sales
Fiscal year ended
February 2015

Results

YoYchangeOperating profit

Vs. October forecast
Results
Change% change

YoYchangeVs. October forecast
Change % change

Department Store

759,866(1.2)(5,534)(0.7)

23,115

0.6

(885)

(3.7)

Parco

274,2122.2(2,088)(0.8)

12,255

2.0

105

0.9

Wholesale

59,371(6.2)(2,829)

(4.5)

1,067

(5.3)

(33)

(3.0)

Credit10,381

9.9

51

0.5

3,424

7.5

14

0.4

Other

97,2989.8(1,302)

(1.3)

2,418

(18.3)

(22)

(0.9)

4

FY2014 Daimaru Matsuzakaya Department Stores
Implemented various measures to minimize sales tax hike effectImproved
Improvedstore
storeprowess
prowess
Kyoto store⇒Renovated food floor to attract more customers
Opened Tokyu Hands nearby to broaden
customer base

Sapporo store⇒Strengthened luxury including Chanel boutiqueStrengthened
Strengthenedgaisho
gaishosales
sales
Stepped up efforts to acquire new accounts
while strengthening sales promotion such as events

Strengthened
Strengthenedsales
salestotoinboundinboundtourists
tourists
With duty-free expansion, improved environment and services
to better cater to inbound tourists

5

FY2014 Daimaru Matsuzakaya Department Stores
7 flagship stores increased sales YoY but the termination of operation of Ginza
store and the reduced floor area of Ueno store greatly affected
Recovery of sales compared to forecast from sales tax hike effect slowed laterin the year
In spite of sluggish sales, operating profit exceeded ¥20 billion thanks tothorough cost management(Millions of yen, %)Fiscal year ended
February 2015*

YoY

Vs. October forecast

Results
Change% change

Change% change

Sales (all stores)

671,767(6,519)(1.0)(3,333)(0.5)

Sales (excl. Ginza/Ueno)

―

8,822

1.4

―

―

Gross profit

158,273(3,140)(1.9)(1,427)

(0.9)

SG&A

138,219(3,536)

(2.5)

(781)

(0.6)

Operating profit

20,053

395

2.0

(647)

(3.1)

Ordinary profit

18,321

313

1.7

(279)

(1.5)

Net profit

11,759

4,251

56.6

1,659

15.1

*Ginza store terminated its operation for redevelopment at the end of June 2013 and Ueno store reduced floor area
by approximately 40% for the rebuilding of south wing on March 12, 2014.

6

FY2015
FY2015 Forecast
Forecast

7

FY2015 Consolidated Forecast
Not optimistic in spite of an outlook that consumption will pick up with improved
employment situation and an increase in real wages
The situation including the effect of rising prices and the recovery trend of
local economy does not allow optimism
Expect operating profit to increase for the 6th consecutive year, marking arecord high since J. Front Retailing’s inception
Expect to pay annual dividend of ¥26 per share, increasing for the 5thconsecutive year
(Millions of yen, %)Fiscal year ending
February 2016

YoY
1H forecast
Change% change

Full year
forecast

YoY
Change% change

Sales

571,000

13,3752.4

1,177,000

27,471

2.4

Gross profit

120,900

1,922

1.6

248,800

5,137

2.1

SG&A

101,400

828

0.8

203,800

2,228

1.1

Operating profit

19,5001,094

5.9

45,0002,909

6.9

Ordinary profit

17,900(9)(0.1)

42,5002,096

5.2

Net profit

16,500

8,699

111.5

28,000

8,082

40.6
8

FY2015 Segment Information
Expect Department Store Business to increase sales and profits due to thegrowth of Daimaru/Matsuzakaya flagship stores and the renovation effect ofHakata Daimaru
Expect Parco Business to increase sales and profits due to the full operation of
the new building of Fukuoka Parco and its floor expansion effect
Expect Credit Business and Other Businesses to turn profits upward in 2H(Millions of yen, %)Sales
Fiscal year ending
February 2016

1H
forecast

Operating profit

Full year
YoYchange forecast

YoYchange1H
forecast

Full year
YoYchange forecast

YoYchangeDepartment Store372,600

1.1

767,200

1.0

10,00014.9

25,600

10.8

Parco

140,900

5.8

290,300

5.9

6,400

3.4

12,6002.8

Wholesale

28,5000.6

60,000

1.1

530

4.7

1,200

12.5

Credit5,300

1.3

11,0006.0

1,600(10.7)

3,450

0.8

Other

48,5000.9

101,300

4.1

1,150

(6.1)

2,700

11.8
9

Daimaru Matsuzakaya Department Stores
Sales are expected to increase at all 9 flagship stores excluding suburban storesby 0.9%
Access to Tokyo store will improve dramatically and Nagoya store will begin oneyear big renovation this spring
Expect double-digit profit growth due to an increase in gross profit resulted fromsales growth and the reduction of costs including labor costs and advertisingexpense(Millions of yen, %)Fiscal year ending
February 2016

YoY
1H forecast
Change% change

Full year
forecast

YoY
Change% changeSales329,800

4,174

1.3

677,900

6,133

0.9

Gross profit

77,900755

1.0

159,700

1,427

0.9

SG&A

68,900

(670)

(1.0)

137,200(1,019)(0.7)

Operating profit

9,000

1,426

18.8

22,500

2,447

12.2

Ordinary profit

8,100

818

11.2

20,500

2,179

11.9

Net profit

4,700

831

21.5

11,000

(759)

(6.5)
10

Initiatives
Initiatives toto Achieve
Achieve FY2015
FY2015 Profit
Profit Target
Target11

Factors behind the Sluggish Performance ofDepartment Stores

External Factor

Internal Factor

Downturn inconsumer confidence
after sales tax hikeSlow response tomarket changes

e＜ i

12

Polarization of Consumption
Gaisho (credit) sales recovered fast after sales tax hike, already turned positivein July and remained positive even in January and February 2015, when there
was a high bar because of previous year’s last-minute demand
Sales excluding gaisho (credit) sales remained negative until January 2015
after sales tax hike in April
70.0<Daimaru Matsuzakaya Department Stores YoY gaisho (credit) sales change>
10.0

(%)

Gaisho (credit) sales

68.8

60.0

5.2
0.0

50.0

Gaisho (credit) sales

0.8 2.4

1.4

3.0 2.9

0.5(1.6)(10.0)

40.0(20.0)

Sales excluding gaisho sales

30.0

4.2

Sales excluding
gaisho sales(17.6)(23.6)(30.0)

20.0

Apr May Jun Jul

Aug Sep Oct Nov Dec Jan Feb

11.0

10.0

12.5
(1.6)

0.0

0.5

5.2

4.2

Jul

Aug

Sep

0.8

2.4

1.4

3.0

2.9

Oct

Nov

Dec

Jan

Feb
13

(10.0)(17.6)(20.0)(23.6)(30.0)
Jan
2014

Feb

Mar

Apr

May

Jun

2015

Consumption Trend of Big-Ticket Items
Luxury sales remained positive since 2H in spite of price hike
Expensive imported watch sales increased steadily both in unit price andquantity and remained strong
Women’s volume clothing sales excluding luxury were sluggish, greatly
affected by a decrease in quantity<Daimaru Matsuzakaya Department Stores YoY sales change of major merchandise categories>
Jewelry/watches/fine arts

200

20

(%)

Special selection of women’s
10 clothing/accessories

Jewelry/watches/fine arts

0

150

(10)

Special selection of women’s
clothing/accessories

(20)

100

Women’s clothing(excluding luxury)

(30)
(40)

Women’s clothing (excluding luxury)(50)
Apr May Jun Jul

50

Aug Sep Oct Nov Dec Jan Feb

0

(50)

Jan
2014

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan
2015

Feb

14

Consumption Trend of Inbound Tourists
Duty-free sales grew at an accelerated rate and duty-free sales share
increased to 2.3% in FY2014
Duty-free sales share was 3.2% in 2H when duty-free list was expanded
Sales drastically increased 3.7-fold YoY during the Chinese Lunar New Year
7.0

(%)

<Daimaru Matsuzakaya Department Stores duty-free sales share>

6.0

6.0

5.0
4.0
3.0
2.0

2.0

1.4

1.0

0.9

2.7

2.8

Nov

1.1

1.2

1.5

May JunJul

Aug Sep Oct

1.2

3.7
2.8

1.5

0.8

0.0
Jan
2014

Feb Mar

Apr

Dec

Jan
2015

Feb
15

Focus (1)－Overhaul of Sales Floor Composition
Globalization
Globalization
Shift
Shifttotomoremorecasualcasuallifestyles
lifestyles
Diversified
Diversifiedchoices/changing
choices/changingvalues
valuesBig fashion trend is hard to arise
Sluggish sales of medium-priced (volume) items
Shrinkage of inefficient sales space/shops

Expansion of strong sales space/introduction of new categories

16

Focus (1)－Concrete Examples for FY2015
NagoyaShrinkage of sales space including
homeware and women’s volume clothing

Expansion of women’s accessories and men’s
clothing and introduction of new categories

SapporoShrinkage of inefficient part ofwomen’s volume clothing

30% increase of women’s accessories areaand expansion of luxury
Expansion/shrinkage of sales space to meet market changes in each area

Overhaul of collaboration with major suppliers anddevelopment of new sales space17

Focus (2)－Strengthen Gaisho Sales
Expand customer base
Dedicated team mainly reached the newrich in urban areas
New accounts opened in FY2014: 12,000
New account opening target for FY2015: 14,000

Strengthen sales capabilities
・Expand sales on “the gaisho customer-only EC site,” which was
experimentally introduced at Nagoya store, into all stores・Strengthen merchandising to meet the changing needs of the wealthy
and plan more attractive events
Sales target for FY2015: ¥152 billion (up ¥7 billion)
18

Focus (3)ーStrengthen Sales to Inbound Tourists
13 million foreigners visited Japan in 2014 and more than 15 million are
expected to visit in 2015
Our duty-free sales exceeded ¥15.1 billion in FY2014 (up 136% YoY)

<Initiatives to expand sales>
Develop
Developnew
newsalessalesspace
spaceforforforeignforeignvisitors
visitorstotoJapan/improve
Japan/improveservices
servicesand
andenvironment
environment
Collaborate
Collaboratewith
withtravel
travelagents,
agents,hotels
hotelsandandtransportationtransportationhubs
hubsininJapan
Japanandandoverseas
overseas
Attract
Attractcustomers
customersfrom
fromChina
Chinausing
usingShanghai
ShanghaiNew
NewWorld
WorldDaimaru
DaimaruDepartment
DepartmentStore,
Store,
which
whichisisscheduledscheduledfor
forgrand
grandopening
openingininMay
May
19

Sales target for FY2015: ¥25 billion (up ¥10 billion)

Strengthen Original Merchandising and
Improve Profit Margin
Drastic rebuilding of original merchandising

Expand product selection

Developed “Better Zone” with higher prices/grades at Kyoto store

Expand sales space

Expanded women’s accessories space by 30% at Sapporo store

Expand sales opportunities

Omnichannel approach through online sales and events outside stores

Increase contribution to improving profit margin on a company-widebasis by increasing sales and profit margin

Set up a company-wide “Profit Margin Improvement Project” to speed up the PDCA cycle

20

Strengthen Store Prowess
Establish a new department store model
New business model combining attractive stores favored by a wide range of customers
with highly efficient business operations

Clarify
Clarifymarket
marketandandcustomers
customersinineacheacharea
area
Implement
Implementregionally
regionallytailoredtailoredstore
storestrategy
strategyand
andstrengthen
strengthencompetitivenesscompetitivenessPositioned
Positionedfour
fourstoresstoresasaspriority
prioritystoresstoresandandgreatly
greatlyincrease
increaseprofits
profits

NagoyaTokyo

SapporoKobe

21

Priority Store (1) Matsuzakaya Nagoya
Overhaul the positioning of 3 buildings to attract morecustomers and improve floor efficiency
One-year big renovation of 30% of total
sales floor area
Spring 2015
Rearrange women’s shoes/bags on 2nd basement floor
directly connected to the subway station passage
Nagoya’s largest selection of large-size young/middleaged women’s clothing
Create “Good Age Salon” for active seniors

Fall 2015 and beyond
Introduce new categories that can attract many customers
Consider expanding and rearranging men’s clothing zone

Drastic reform of earnings structure
including HR structure22

Priority Store (2) Daimaru Tokyo
Sustainable growth by making maximum use of improved accessHokuriku Shinkansen and Ueno Tokyo
Line opened (March)
High-rise office building will be completed
nearby (scheduled for fall 2015)
Much room to incorporate demand frominbound tourists

Strengthen
Strengthenmen’s
men’sclothing
clothingand
andaccessories,
accessories,
which
are
the
strengthofthewhich are the strength of thestore
store
ExpandExpandwomen’s
women’saccessories
accessoriesarea
area
Reconstruct
Reconstructwomen’s
women’sclothing
clothingarea
area
onmiddlefloorson middle floors
23Improve Management Efficiency
Further
Furtherimprove
improvehuman
humanproductivity
productivityby
bystreamlining
streamliningdepartment
departmentstore
storeHQ,
HQ,etc.
etc.
ReduceReduceadvertising
advertisingexpense
expenseby
byreviewing
reviewingloyalty
loyaltypoint
pointpolicy
policyRationalize
Rationalizereal
realestate
estateReformReformlogistics
logistics

Step up efforts to improve efficiency and profitability
24

Initiatives
Initiatives toward
toward Medium-Term
Medium-Term Growth
Growth25

Positioning of FY2014 - 2016
FY2014 - 2016

FY2017 -Phase of enhancing profitability
and constructing a foundation

Phase of dramatic growth

Drastically
Drasticallyenhanceenhancecompetitivenesscompetitivenessand
andprofitability
profitabilityas
asaamultifaceted
multifacetedretailer
retailerDevelop
Developaabusinessbusinessmodel
modelforforgrowth
growthalong
alongwithwithcommunity
community(urbandominant
strategy)(urban dominant strategy)

PromotePromoteomnichannelomnichannelretailing
retailing26

Multifaceted Retailer
Strengthen the Group’s businesses, mainly Department Store Business and Parco BusinessMaximize synergy as a group

The Group will create a “Synergy Committee”
Actively consider M&A

27

Urban Dominant Strategy
Gather the total power of the Group with local department stores as a core
― Activation and effective use of real estate ―(the entire Group including Daimaru, Matsuzakaya, Parco, Zero Gate, SLH, Daimaru COM Development)

Alliance with external companies/organizations
28

Ginza 6-chome Redevelopment
Kicked into gear to create world-class quality commercial facilities at Ginza 6-chome
Set up the Retail Facility Planning Office in September 2014 and formed
a “property management company” in February 2015
Develop a large-scale complex with retail facilities, offices, cultural facilities
and a tourism hub
Rooftop garden<Offices> 7-12F/13F (partial)<Retail> B2-6F/13F (partial)

OperateOperateall
allsalessalesfloors
floorsofof
approxapprox46,000
46,000㎡
㎡with
with
other
retailspace
holdersother retail space holders<Cultural facilities> B3F<Tourism hub> 1F

Cross section from B1F to rooftop (subject to changes)

Scheduled to open in November 201629

Rebuilding of South Wing of Ueno Store
Draw new crowds to the area by rebuilding the south wing of Ueno Store
Redevelop the area around the store at the same time to propose
functions desired by the new area
Build a business model that ensures contribution with local community
to revitalizing the area and mutual growth with local community【Total floor area】 Approx 42,000 ㎡【Construction】
B1F: Food floor of Daimaru
Matsuzakaya Department Stores
1-6F: Parco
7-10F: Cinema complex
12-22F: Offices【Total project cost】 Approx ¥20 billion
including cost of renovation-related work of themain building of Matsuzakaya Ueno store

Scheduled to open in fall 201730

Future Urban DominanceIn addition to the “Shinsaibashi area” now under consideration, the “Nagoya area” is newly targeted
Shinsaibashi
Shinsaibashiarea
area

NagoyaNagoyaarea
area

Crysta Nagahori (Daimaru COM Development)(North)Hisaya-odori

Daimaru
Shinsaibashi(Main)

Shinsaibashisuji(Daimaru COM Development)

MidosujiWhite Avenue(Daimaru COM Development)

NagoyaZero Gate

Otsu-dori

Commercial complex(North)Isemachi-dori

Shinsaibashi
Zero Gate

Matsuzakaya
Nagoya(Main)

Open in spring 2015
(South)(South)(Under development)

Dotonbori
Zero Gate

NagoyaParco(West)(East)

Yabacho-dori(South)Nagoya Parco
midi

Wakamiya-odori

31*

denotes the stores operated by Daimaru Shinsaibashi store.

Omnichannel Retailing
Step up efforts to create J. Front Retailing’s own omnichannel model

ＥＣ

OFF
LINE

Blog

ON
LINE

ＳＮＳ

Email
Seamless accessto and from customers<Future efforts>

Further increase the number of brands and items for Click & Collect
Strengthen initiatives focused on department store’s strong gift items
Start providing SNS from store staff like Parco’s Pocket Parco32

Overseas BusinessShanghai
ShanghaiNew
NewWorld
WorldDaimaru
DaimaruDepartment
DepartmentStore
Store
Support and cooperate to create
China’s best upscale department store
Scheduled for grand opening in May 2015

Accumulate know-how to create andoperate stores abroad to use it for
future overseas business

PLAZA
PLAZA TOKYOTOKYO
Operate 7 shops in FY2014
Plan to open 3 or more shops in FY2015
Expand into ASEAN metropolitan areas
33

Initiatives
Initiatives toto Improve
Improve ROE
ROE andandPromotePromote Corporate
Corporate Governance
Governance34

Sustainable Growth toward ROE of ８%
Need to reach ROE of 5.8% in FY2016 as a milestone to achieve
ROE of 8% in the medium termWith top priority on profit growth, continue to improve ROE while
investing toward growth
Operating profit(Millions of yen)

ROE

(%)

10.0

90,000<Operating profit and ROE>
80,000

9.0

8.9

8.0

70,0007.2

7.0

60,000

6.0

5.8

50,000

8.0

5.8
5.0

5.3
40,0004.0
3.6

30,00020,000

2.3

2.6

3.0

2.8

2.0

10,000

1.0
0.0

0
(FY)

2008

2009

2010

2011

2012

2013

2014

2015
2016 2017 and beyond(forecast) (forecast)

35

Shareholder Return and Improvement of Capital Efficiency
Continuous dividend increase targeting a dividend payout ratio of at least 30%
and accompanied by steady profit growth
Active shareholder return with an eye on growth investment, the balance of
cash flows, etc.
Consider purchasing treasury stock as appropriate to further improve capitalefficiency<Net profit and ROE>
Net profit(Millions of yen)

<Dividend (*) and DOE>
Annual dividend per share

ROE
(%)

10.0 30

35,00030,000

8.0
7.2 7.0

25,0005.0

5.3

15,00010,000

2.3

2.6

1.8

25

1.6

1.4
1.4

20

1.4

1.3
1.2

3.0
2.0

5,000

1.2

1.2

15

1.0
0.8

10

0.6
0.4

5

1.0
0.0

0
2008
FY

2009

2010

2011

2012

2013

2014

2015
(forecast)

2.0
1.8

1.6

4.0

3.6

2.8

1.8

6.0

5.8

(%)

(Yen)

9.0

8.9

20,000

DOE

0.2
0

2008
FY

2009

2010

2011

2012

2013

2014

2015
(forecast)

36*Annual dividend per share is shown on a post-share consolidation basis.

0.0Promote Corporate GovernanceInitiatives to enhance corporate governance pick up
speed and accelerate
February 2014
Japan’s Stewardship Codewas establishedMarch 2015
The draft of Corporate
Governance Code waspublished

Promote proactive efforts to have constructive dialogues withinvestors toward increasing corporate value

March 2015
Created a new position of
Corporate Governance
Promotion in Management
Strategy Unit of JFR

37

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.

38