Results Presentation for First Six Months of
Fiscal Year Ending Feb 28, 201810

J. FRONT RETAILING

thanniversary

October 11, 2017
J. Front Retailing Co., Ltd.

YAMAMOTO Ryoichi
Director, President andRepresentative Executive Officer
Create and Bring to Life “New Happiness.”Today’s Agenda

I. 1H FY2017 Results (IFRS)
II. 2H and Full FY2017 Forecast (IFRS)
III. Progress and Future Initiatives ofMedium-term Business Plan

1

1H FY2017 Results (IFRS)

2

1H FY2017 Consolidated Results (IFRS)Revenue and profit increased due to strong performance of department store, realestate and wholesale businesses mainly in urban areas
Operating profit and profit attributable to owners of parent were above Apr forecast
Interim dividend was ¥16 per share including YoY increase of ¥1 in ordinary
dividend and commemorative dividend of ¥1
First six months offiscal year
ending Feb 28, 2018

Results

ChangeYoY% change(Millions of yen, %)Vs Apr forecast
Change% change

Revenue

234,510

13,261

6.0

7,510

3.3

Gross profit

104,988

424

0.4

288

0.3

SGA

82,210

(253)

(0.3)

(1,590)(1.9)

Other operating revenue

5,686

3,993

235.8

3,286

136.9

Other operating expenses

1,784

(516)

(22.4)(516)(22.4)

Operating profit

26,680

5,186

24.1

5,680

27.0

Profit attributable toowners of parent

16,315

2,466

17.8

3,515

27.5

Gross profit

558,304

5,247

0.9

4,804

0.9

Business profit

22,778

677

3.1

1,878

9.0

(Interim) 16

2

－

－

－

Dividend per share (Yen)*YoY changes and YoY % changes have been calculated by converting figures for the previous year to IFRS-based figures.
*Interim dividend for the current year Includes commemorative dividend for the 10th anniversary of the founding of J. Front Retailing.

3

1H FY2017 Segment Information (IFRS)
Department Store Business was driven by brisk consumption of foreign tourists andJapanese affluent people
Parco Business decreased revenue partly due to rebuilding of “Shibuya Parco” anddecreased profit due to absence of gain on sales of real estate recorded in LY
Real Estate Business was positively affected by opening of Ginza Six. Credit and
Finance Business and Other also increased revenue and profit.
(Millions of yen, %)RevenueFirst six months offiscal year ending
Feb 28, 2018

Results

Department Store

132,293

Parco

Operating profit
Vs Aprforecast

YoY

Results

Change% change

Change

1,192

0.9

293

12,90445,230 (1,938)

(4.1)

(270)

6,677

Vs Aprforecast

YoY
Change% change

Change

3,698

40.2

1,544

(1,385) (17.2)

777

Real Estate

5,849

3,341

133.2

350

1,663

564

51.3

1,263

Credit and Finance

4,962

194

4.1

13

1,306

6

0.4

26

Other

65,509

8,943

15.8

6,610

2,701

961

55.2

452

*YoY changes and YoY % changes have been calculated by converting figures for the previous year to IFRS-based figures.

4

1H FY2017 Segment Information (IFRS)
1H FY2017 analysis of changes in consolidated operating profit by segment(Millions of yen)
Adjustment

Adjustment
Credit and
Finance
Other

Credit and
Finance Other
RealEstateDepartment
Store
Parco

Real
EstateParco
DepartmentStore

Up ¥5,186 mn (24.1%) YoY

LY
results¥5,680 mn (27.0%) above Apr forecast

1H FY2017
results*YoY changes and YoY % changes have been calculated by converting figures for the previous year to IFRS-based figures.

Apr
forecast

5

1H FY2017 Daimaru Matsuzakaya Department Stores“Tax-free sales” as an indicator of inbound tourists’ spending increased andexceeded ¥20 bn in 1H
Sales per customer were below LY in Mar and Apr but above LY in and after May
Sales were up 52.7% YoY, sales per customer up 6.0%, the number of customers
up 44.1% in total for 1H<Daimaru Matsuzakaya Department Stores tax-free sales and the number of customers>
Number of customers

Sales

6
*Gross sales basis

Year / Month

1H FY2017 Daimaru Matsuzakaya Department Stores
By country, sales to Chinese customers accounted for 83.2%, an overwhelming
share of total sales to inbound tourists
By product, sales of “consumables,” mainly cosmetics, almost doubled to a level
close to sales of “general products”<Tax-free sales of “general products” and “consumables”>
General products*Gross sales basis

Year / Month

Consumables

71H FY2017 Daimaru Matsuzakaya Department Stores
Purchase by Japanese affluent gaisho (out-of-store sales) customers was strong
due to a stable share price level
Credit sales of 9 flagship stores increased 1.2% YoY in total for 1H and 1.9% in
2Q alone
The number of new gaisho card accounts steadily increased to 6,433 in 1H and
expected to be 13,000 in full year
“Gold Card”
for gaisho customers

Closed website for gaisho customers“Connaissligne”

8

1H FY2017 Daimaru Matsuzakaya Department Stores
Shinsaibashi store increased sales by double digits 10.8% YoY due to strong sales to theaffluent and inbound tourists
Tokyo store increased sales for the 12th consecutive month attracting Japanese andforeign tourists and office workers
Luxury items and cosmetics drove total sales growth. Real Estate Business was
positively affected by opening of “Ginza Six” in Apr 20
1H FY2017 Daimaru Matsuzakaya Department Stores YoY % change of gross sales by store

First six months offiscal year
ending Feb 28, 2018

1Q

2Q

1H

Daimaru Shinsaibashi

7.5

14.0

10.8

Daimaru Umeda

(0.9)

2.7

1.0

Daimaru Tokyo

5.0

6.9

6.0

Daimaru Kyoto

(0.2)

3.4

1.6

Daimaru Kobe

(1.1)

(0.4)

(0.8)

Daimaru Sapporo

3.5

4.9

4.2

Matsuzakaya Nagoya

(2.3)

(0.1)

(1.2)

Matsuzakaya Ueno

(5.2)

(3.0)

(4.1)

Matsuzakaya Shizuoka

3.7

(1.4)

1.1

0.7

2.9

1.8

194.7

288.1

241.9

Total all stores
Real Estate Division*YoY % changes of store sales are on a gross sales basis.

9

1H FY2017 Daimaru Matsuzakaya Department Stores (IFRS)
Inbound tourists’ spending and purchase by Japanese affluent people werestrong. Opening of Ginza Six on Apr 20 also had a positive effect.
Costs were controlled overall in spite of increased advertising costs andoperation costs associated with opening of Ginza Six
Sold two unused real estates in Tokyo to increase asset efficiency(Millions of yen, %)First six months offiscal year ending
Feb 28, 2018

Results

Vs Apr forecast

YoY
Change% change

Change% change

Revenue

123,464

5,367

4.5

464

0.4

Gross profit

71,699

2,231

3.2

399

0.6

SGA

59,190323

0.5(1,310)(2.2)

Other revenue

2,068

1,959

－

668

47.7

Other expenses

978

(315)

(24.4)(322)(24.8)

Operating profit

13,599

4,183

44.4

2,699

24.8

Profit

9,659

2,554

35.9

2,059

27.1

Gross sales

321,597

9,835

3.2

1,597

0.5

Business profit

12,509

1,909

18.0

1,709

15.8

*YoY changes and YoY % changes have been calculated by converting figures for the previous year to IFRS-based figures.

101H FY2017 Daimaru Matsuzakaya Department Stores (IFRS)

1H FY2017 Daimaru Matsuzakaya Department Stores
analysis of operating profit by factor

Increase in gross profit
due to sales increase

Labor cost
reduction
Increasein ad cost

Decrease inprofit margin

Increasein otherrevenue
Decreasein otherexpenses

Increasein otherrevenue
Decrease
Other costin other
reduction
expenses
Labor cost
reduction
Increasein ad cost

Other cost
reduction

Up ¥4,183 mn (44.4%) YoY

LY
results(Millions of yen）

Increase in gross profit
due to sales increase

Increase inprofit margin¥2,699 mn (24.8%) above Apr forecast

1H LY2017
results*YoY changes and YoY % changes have been calculated by converting figures for the previous year to IFRS-based figures.

Apr
forecast

11

1H FY2017 Consolidated Results (B/S, CF) (IFRS)
Equity increased ¥13.8 bn to ¥382.4 bn, equity ratio increased 0.3 points to 37.0%
Operating cash flows increased ¥25.6 bn mainly due to sales of reserve floorarea for redevelopment of Shibuya Parco
Investing cash outflows decreased ¥3.8 bn partly due to gain on sales of sharesof subsidiaries
Financial cash flows include issue of bonds and reduction of interest-bearing debt
by redemption of commercial paper, etc.
<Consolidated balance sheet>First six months offiscal year ending
Feb 28, 2018

Total assets(Millions of yen)

<Cash flows>(Millions of yen)

YoYchangeFirst six months offiscal year ending
Feb 28, 2018

Results

YoYchange1,034,346 29,277

Operating cash flows

41,65425,687

Results

Interest-bearing debt

200,868(5,084)

Investing cash flows(7,773)3,873

Equity attributable toowners of parent

382,459

13,888Financial cash flows(9,357)(7,535)Equity ratio (%)

37.0

(率差）
(RD)

0.3

*YoY changes and YoY % changes have been calculated by converting figures for the previous year to IFRS-based figures.

122H FY2017 Forecast (IFRS)

13

Recognition of Current Business Environment
Despite concerns over geopolitical risks, the world economy is steadily recovering
Moderate recovery trend of the domestic economy continues
against a backdrop of improvement of employment and income situation
Consumers continue to economize due to anxiety about the futuresuch as increased social security burden

Polarized consumption / gap between urban and rural areas
Solid spending by the affluent ⇔ Low spending by volume zone
Increasing foreign tourists to Japan / regrowth of inbound tourists’ spending

Stronger consumption shift from products to services and experiences
Accelerated global growth of online sales ⇔ Struggling physical stores mainly in Europe and USDramatic development of IoT era
14

2H FY2017 Consolidated Financial Forecast (IFRS)Revenue will increase in Department Store Business, Real Estate Business, etc.
but will be affected by transfer of subsidiary’s business
Operating profit will increase partly due to SGA reduced by business transfer andoverhaul of investment
Profit will decrease partly due to worsening performance at equity method associates(Millions of yen, %)Second six months offiscal year ending
Feb 28, 2018

Forecast

YoY
Change% change

Vs Apr forecast
Change% change

Revenue

237,489

6,233

2.7

(4,511)(1.9)

Gross profit

107,911

(91)

(0.1)

(2,389)

(2.2)

SGA

84,889

(315)

(0.4)

(1,011)(1.2)

Other operating revenue

1,313(1,077)(45.1)

13

0.9

Other operating expenses

2,015(2,940)(59.3)

(185)

(8.4)

Operating profit

22,319

2,087

10.3

(1,181)(5.0)

Profit attributable toowners of parent

12,184(1,019)(7.7)(1,516)(11.1)

Gross sales

583,695

2,411

0.4

(10,805)(1.8)

Business profit

23,721924

4.1(1,379)(5.5)

15*YoY changes and YoY % changes have been calculated by converting figures for the previous year to IFRS-based figures.

2H FY2017 Segment Information Forecast (IFRS)In Department Store Business, revenue will increase in all flagship stores but
remain sluggish in rural/suburban stores
In Parco Business, effect of temporary closing of Shibuya Parco will come to an
end but rural stores will be carefully reviewed
In Real Estate Business, Ginza Six will fully operate and “Ueno Frontier Tower” will
open on Nov 4
In Other, revenue will decrease due to transfer of subsidiary’s business but profit
will increase partly due to withdrawal from unprofitable business(Millions of yen, %)Second six months offiscal year ending
Feb 28, 2018

Revenue
Forecast

Operating profit

YoY

Vs
Apr forecast

Change % change

ChangeForecast

YoY

Vs
Apr forecast

Change % change

ChangeDepartment Store

140,606

3,475

2.5

2,007

13,145

128

1.0

(54)

Parco

48,769

2,158

4.6

(830)

4,922

(36)

(0.7)

(677)

Real Estate

7,050

4,554

182.4

50

336

1,088

－

237

Credit and Finance

5,317

238

4.7

67

1,563

8

0.5

(4)

Other

55,240(2,778)(4.8)(5,560)2,798

1,558 125.6(232)*YoY changes and YoY % changes have been calculated by converting figures for the previous year to IFRS-based figures.

16

2H FY2017 Segment Information (IFRS)
2H FY2017 analysis of changes in consolidated operating profit by segment
Parco(Millions of yen)

Adjustment
Other
Real
EstateDepartment
Store

CreditandFinance

Creditand
Other
Finance
Adjustment

Department
Store

Parco

¥1,180 mn (5.0%) below Apr forecast

Up ¥2,087 mn (10.3%) YoY

LY
results

Real
Estate2H FY2017
forecast

Apr
forecast*YoY changes and YoY % changes have been calculated by converting figures for the previous year to IFRS-based figures.

17

Full FY2017 Forecast (IFRS)

18

Full FY2017 Consolidated Financial Forecast (IFRS)Revenue will increase in all business segments including Department Store andReal Estate
Operating profit forecast was revised up ¥4.5 bn vs Apr forecast
Annual dividend per share will be ¥32 including ¥2 increase in ordinary dividendand commemorative dividend of ¥2(Millions of yen, %)Full fiscal year
ending Feb 28, 2018

YoY

Vs Apr forecast
Change% change

Forecast

ChangeRevenue

472,000

19,495

4.3

3,000

0.6

Gross profit

212,900333

0.2(2,100)

(1.0)

SGA

167,100

(568)

(0.3)

(2,600)(1.5)

Other operating revenue

7,000

2,916

71.4

3,300

89.2

Other operating expenses

3,800(3,455)(47.6)(700)(15.6)

Operating profit

49,000

7,273

17.4

4,500

10.1

Profit attributable toowners of parent

28,500

1,448

5.4

2,000

7.5

1,142,000

7,658

0.7

(6,000)(0.5)

46,500

1,602

3.6

500

1.1

(Annual) 32

4

－

－

－

Gross sales
Business profit
Dividend per share (Yen)% change*YoY changes and YoY % changes have been calculated by converting figures for the previous year to IFRS-based figures.
*Annual dividend for the current year Includes commemorative dividend for the 10th anniversary of the founding of J. Front Retailing.

19

Full FY2017 Segment Information Forecast (IFRS)
Department Store Business will increase revenue and profit, driven by urban stores
where purchase by inbound tourists and the affluent is strong
Parco Business has factored in temporary closing of Shibuya Parco and sluggish sales ofrural stores despite new store openings
Real Estate Business will increase revenue and profit due to opening of Ginza Six and Ueno
Frontier Tower
Other will increase profit due to strong performance of Daimaru Kogyo and withdrawal from
unprofitable business despite effect of business transfer(Millions of yen, %)Revenue

Full fiscal year
endingFeb 28, 2018

Forecast

Department Store

272,900

4,667

Parco

94,000220

Real Estate

12,900Credit and Finance

10,280432

Other120,750

6,165

Operating profit
YoY

Vs
Apr forecast

Change % change

Change

3,826

17.2

1,490

11,600 (1,421)(10.9)

100

400

2,000

1,651

473.7

1,500

4.4

80

2,870

14

0.5

(30)

5.4

1,050

5,500

2,518

84.5

220

YoY

Vs
Apr forecast

Change % change

Change1.72,300

0.2 (1,100)

7,895 157.8

Forecast

26,050*YoY changes and YoY % changes have been calculated by converting figures for the previous year to IFRS-based figures.

20

Full FY2017 Segment Information
Full FY2017 analysis of changes in consolidated operating profit by segment
Adjustment(Millions of yen)

Adjustment

Other

Parco

Real
EstateCreditandFinance

Other

CreditandFinanceReal
EstateParco
Department
Store

Department
Store

Up ¥7,273 mn (17.4%) YoY

LY
results¥4,500 mn (10.1%) above Apr forecast

Full FY2017
forecast

Apr
forecast*YoY changes and YoY % changes have been calculated by converting figures for the previous year to IFRS-based figures.

21

FY2017 Consolidated Financial Forecast (B/S, CF) (IFRS)
Equity will be ¥390 bn and equity ratio will be 37.7%
Interest-bearing debt will decrease ¥10.9 bn YoY to ¥195 bn
Operating cash flows will increase ¥16.5 bn YoY to ¥53 bn partly due toincreased operating profit, receipt of proceeds from sales of reserve floorarea of Shibuya Parco

Free cash flow will improve from initial forecast to be positive at ¥18.5 bn<Balance sheet>(Millions of yen)

<Cash flows>(Millions of yen)

Fiscal year ending
Feb 28, 2018

Forecast

YoYchangeFiscal year ending
Feb 28, 2018

Total assets

1,035,000

29,931

Operating cash flows

Interest-bearing debt

195,000(10,952)

Investing cash flows(34,500)

Equity attributable toowners of parent

390,000

21,429Financing cash flows(20,500) (18,403)

Equity ratio (%)

37.7

Forecast

YoYchange53,000 16,592(3,905)(率差）(RD) 1.0*YoY changes and YoY % changes have been calculated by converting figures for the previous year to IFRS-based figures.

22

Progress and Future Initiatives of
FY2017 to 2021 Medium-term Business Plan

23

Toward Achievement of the Group Vision
New Group Vision “Create and Bring to Life ‘New Happiness.’”

Medium-term Business Plan, which started in FY2017,as new “starting point”
Not extension of the past
but “discontinuous growth”

Sales

Growth curve
over past 50 years

Limit of as-is extension

Growth curve overnext 50 years

Turning point to alter the course of the management

As-is extension

New Group Vision
Present

Time axis

24Period of Current Medium-term Business Plan Is“Phase of Changing the Group Structure”
FY2017-21 Medium-term Business Plan
<Phase of changing the Group structure>

FY2014-16 Medium-term Business Plan
<Phase of building foundation>

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

Achievementof Vision

FY2021“Multi Service Retailer”
beyond the framework of retailing
Expanded needs to

小売業の枠を超えた、
relieve daily
concerns/frustrations

Rise ofsharing economy

Advent of IoT era

Consumption shift
from products toservices/experiences

Increasedurbanization

Expanded demand
for staffing services
Diversified payment methods
Advanced financial services

Multiple retail business brands(Multi retailer)

Strong customer assets of
9 mn people

Store assets in urban areas

25

Urban Dominant Strategy
Big projects launched during the period of the previous Medium-term Business Plan opened or will open
They will draw new crowds to local areas and greatly contribute to revenue during the period of the current
Medium-term Plan

Ginza Six

Rebuilding of
main building of
Shinsaibashi store

Apr 20,
2017

Fall
2019

Nov 4,
2017

Fall
2019

Rebuilding ofsouth wing of
Ueno store

Rebuilding of
Shibuya Parco

26*The photos are for illustrative purpose only.

Ginza Six
On Apr 20, innovative luxury mall without any peer in the world “Ginza Six”
openedUnconventional
store environment
using art

Customer management
and customer analysis
using ICT

Brand lineup,
the majority of which
are flagship stores

Promotion drawing
attention andconscious ofbeing spread on
SNS

Symbol of “discontinuous growth” addressed by the Company
in the current Medium-term Plan

27

Store Trend of Ginza Six
Luxury items are very popular among
Japanese affluent people and inbound tourists
Fashion items are steadily creating customer loyalty
by offering limited items, etc.
Cosmetics are popular among domestic and foreign customers
because unique services and events are actively provided
Lineup of food products available only at Ginza Six is successful
and many of them are sold out･28Great Response to Media Exposure and SNS

8,200*Number of media exposures from Apr 1 to 23(TV, newspaper, magazine and website)

3h40min*TV airtime from Apr 1 to 23

39,158*Number of posts on Instagram at 21:00 on Apr 24

件

･
29

Key Factors for Success of Ginza Six (KFS) ー (1)“Combination of different elements”
through initiatives beyond company level

JFR

Mori
Building

Four companies shared the objective ofcreating new “world-class” value

Sumitomo
Corporation

LRE

Four companies, which have different
corporate cultures, put together their
wisdom and energy“Innovative luxury mall” was born
through chemistry among four companies
30

Key Factors for Success of Ginza Six (KFS) ー (2)“Discontinuous initiative”

abandoning past successful experiences
6 luxury duplex boutiques add color to the facade
Store space design such as bold atrium
welcoming visitors with art
Floor composition beyond the framework ofdepartment store’s merchandise classification
Customer touch points centered on
smartphone application

Create special
experience/value

31

First Year Forecast of Ginza Six
Both sales and customer traffic do well toward the first year sales target of entire Ginza Six
The first year operating profit of the Company will far exceed the forecast made at the
beginning of the current period
For entire Ginza Six
・Target for first year sales: ¥60 bn
・Target for annual number of customers: 20 mn people

32

Ueno Frontier Tower(Rebuilding of South Wing of Matsuzakaya Ueno Store)
Commercial complex with Parco, cinema complex and offices above ground anddepartment store in basement
Due to open on Nov 4, 2017 with the aim of tapping new customer segments.
¥15.2 bn will be invested

12-22F

Offices

1-6F
Parco

7-10F

Cinemacomplex

BF

Department
store

33
*The photo is for illustrative purpose only.

New Concept Store “PARCO_ya”
68 shops based on marketing from every angle to cater to a little older people
than Parco’s existing target customers
Parco’s first new store opening in the 23 wards of Tokyo in 44 years since
opening of “Shibuya Parco” in 1973

Contribute to tapping the local market by offering value with new concept･*The photo is for illustrative purpose only.

34

“Shitamachi Front” Will OpenUrban Dominant Strategy in Ueno area is fully in progress under the name of“Shitamachi Front”
Create new culture and lifestyle in addition to existing appeal of the area
Contribute to revitalizing the area by providing information and holding events inconjunction with the community site “Ueno ga Suki” and adjacent “Okachimachi
Panda Hiroba”
Open on Nov 4, 2017･
35

Innovation of New Department Store Model(Rebuilding of Main Building of Shinsaibashi Store)

Scheduled to open in fall 2019 as model most representing innovation of “new department
store model”
Show never-seen-before future form in product selection, service, store environment, etc.
Create additional value unique to a physical store while taking advantage of its strengthin sales to the affluent and inbound tourists･
36*The photo is for illustrative purpose only.

Decided to Open “Parco” as Big Tenant of North Wing
Convert north wing of Shinsaibashi store into “real estate rental” business model after
completing new main building
Core tenant “Parco” will occupy B2F to 7F. Real Estate Division will operate higher floors
Promote Urban Dominant Strategy by opening a new store in Osaka that has no store in
Parco format
North wing
(Theater / event hall)

Nagahori -dori

New main building

Real Estate Division*There are some exceptions.

Connect to north wing after
rebuilding new mainbuilding (spring 2021)

Hybrid commercial complex
with more than 80,000㎡ floor area

Zero Gate

Parking

Shinsaibashi

LUMIERE
PARIS(North)White Avenue

Parking

BAG'n'NOUN

CHANEL

Daimaru
Shinsaibashi
Store(Main)(South)JOURNAL
STANDARD

Commercial
complex

Shinsaibashi 161

Daimaruinteriorbuilding
Musee Air･

Shinsaibashisuji

Parco

10F
9F
8F
7F
6F
5F
Department store
4F(Daimaru Shinsaibashi store)
3F
2F
1F
B1
B2

lucian pellat-finet

Midosuji

14F
13F
12F
11F
10F
9F
8F
7F
6F
5F
4F
3F
2F
1F
B1
B2

<Map around Shinsaibashi store>

air OSAKA
Sanrio gallery
agnes b.
ROSE BUD

acca
Nike Osaka

Deuxieme Classe

37

Innovation of Parco Business ー Rebuilding of Shibuya Parco
Scheme of “Udagawa-cho District 14/15 Category 1 Urban Redevelopment Project”
December 2015
Tokyo Metropolitan Government approved urban planning
project of special urban renaissance district→ Floor-area ratio increased(Allowable total floor area increased)

Income and expenditure of
Udagawa-cho District 14/15 Category 1 Urban Redevelopment Project
Proceeds from disposal ofreserve floor area
Approx ¥46.4 bn

Total floor area for the project

Entitled
floor area
Floor area to be given
to right holders before
the project according totheir rights

Reservefloor area

Project cost,land maintenance cost,
construction cost,etc.

Floor area otherthan entitledfloor area

August 2016
Execution of urban development project was approved

Compensation cost
Suspension of business,relocation cost, etc.

Office cost, etc.

Office area
*Concluded transfer
agreement concerning
office floor with
Hulic Co., Ltd.

Store area
*Parco will acquire

May 2017
Started construction and concluded transfer agreement
concerning office floor

Expenditure

Income38

Innovation of Parco Business ー Rebuilding of Shibuya Parco
Create next-generation commercial space by rebuilding “Shibuya Parco,” origin of Parco’s
uniqueness
Increase opportunities to connect with companies through multi-use complex building
and provide advanced tenant services
Evolve store brand by applying various new initiatives and know-how to other stores
Schedule
2015 Jun

2016

Submitted a proposal to the Tokyo Metropolitan Government for urban planning

Dec

The Tokyo Metropolitan Government approved the proposal

Mar“Shibuya Project” was formed as part of organizational changes

Apr

Announced the temporary closing of Shibuya Parco Part 1/3

Aug

The Tokyo Metropolitan Government approved the execution of the project
Shibuya Parco Part 1/3 temporarily closed for rebuilding

Nov

Right conversion plan was approved

2017

May

Started construction and concluded a transfer agreement concerning the office floor

2019

Fall

Open the new complex (scheduled)

Overview
2

Land area

Approx. 5,380m

Total floor area

Approx. 63,830m

Building size

18 floors above ground, 3 basement floors

Investment amount2

Approx. ¥21.4 billion

39

Innovation of Parco Business ー Production of Commercial Real Estate

Cultivate urban areas with growth potential by developing Parco, Zero Gateand new formats
Decided to open a store in north wing of Daimaru Shinsaibashi store
8 development projects are in progress
Actively promote far-sighted scrap and build policy
Strengthen initiatives to enhance profitability
Existing Parco store
Existing Zero Gate store
Scheduled to open in FY2017

Ueno

Announced project under development*Otsu Parco closed at the end of Aug 2017.

PARCO-ya

Scheduled to open on Nov 4, 2017

Kyoto

Kyoto Zero Gate (provisional)

Scheduled to open in 2H FY2017

Osaka
Kobe
Decided to newly construct

Kinshicho

In front of Kinshicho Sta

Scheduled to open in spring 2019

In north wing of
Daimaru Shinsaibashi

Scheduled to open in spring 2021

Sannomiya Zero Gate (provisional)
Scheduled to open in fall 2018

Okinawa

Urasoe West Coast Plan

Shibuya

New Shibuya Parco

Scheduled to open in fall 2019

Harajuku

Harajuku Zero Gate (provisional)
Scheduled to open in spring 2018

Scheduled to open in summer 201940

ICT Strategy ー Renovation of Business Operations
Sales

Order
ArrivalStorage

Back office

Sales

Settlement

Payment
Collection

Performance
management

Closing

Promote operation process reform using ICTAutomation/streamlining ofadministrative processing

Introduction of
new GW/WF

Paperless
Introduction ofadvanced core system

Tax

HR
Admin

Expansion ofscope of theGroup’s sharedservices

Radical reform of the Group’s operations

Introduction of RPA

Develop operation system into platform
Modularize operation functions

Implement “working style reform” by radical overhaul of operation frames centered on paperless processing

41

Changes in Form of Corporate Governance
Decide to transition to company with three committees by resolution of Annual
Shareholders Meeting in May 2017
Form three statutory committees including “Nomination Committee,” “Audit Committee”
and “Remuneration Committee” to increase transparency and objectivity in management
Further expedite the management decision-making by separating “oversight” from “execution”<Company with three committees>

42

Review of Executive Remuneration<Basic policy for executive remuneration>

Remuneration
composition
Basic : Bonus : PS
1 : 0.6 : 0.6

Incentive

Shareholding

Short-term: Bonus
Mid-to-long term: StockContinuous shareholding
for 3 years*Incentives are not provided to Non-executive Directors (Inside/Outside).

【Introduction of stock-based remuneration system】
Executive Officers of the Company andmajor business companies of the Group

Non-executive Directors

System linked toconsolidated
performanceachievement rate

Predetermined numberof shares are issued

43

Steadily implement and promote the Medium-term Plan by sharing interests with shareholders

Review of Services to Beneficial Shareholders
Revised the Article “Exercise of Voting Right by Proxy” of the Articles ofIncorporation at the 10th Annual Shareholders Meeting(Exercise of Voting Right by Proxy)
Article 18
A Shareholder may designate another Shareholder with voting rights to exercise thedesignating Shareholder’s voting right.
Notwithstanding the first paragraph of this article, an institutional investor that owns sharesin the name of a trust bank, etc. and does not own shares in their own name may attend a
Shareholders Meeting and exercise voting rights as a proxy.
Each such Shareholder or proxy shall submit a document evidencing their proxy power tothe Company at each Shareholders Meeting.

A beneficial shareholder can attend a Shareholders Meetingand exercise voting rights as a proxy.
Allow global institutional investors to attend
Shareholders Meetings with high legal stability

44

FY2021 Quantitative Management Objectives (IFRS)<Financial strategy structure diagram>

Operating profit
FCF＞(Up ¥14.2 bn from FY2016)

0

Operating margin

ROE
Operatingmargin10％8%¥5.6 bn

Equity ratio

40％

Consolidated ROE

10%
8.0%

or higher
Reason behind ROE target of 8%
FY2021
ROE target

8.0%

or higher

Shareholders’ equity
cost recognized by
the Company＞ 6 – 7%45

Strategic Investment for Growth and Shareholder Return<Use of total cash flows for FY2017 to 2021>
Investing cash flows¥200 bn

Operating cash flows¥260 bn or more
Free cash flow

Capitalinvestment
Growthinvestment

Shareholder
return¥60 bn or more
Expansion ofequityImplement capital policy well balanced among strategic investment,
improvement of shareholder return and expansion of equity
Realize the management structure that can achieve 8% ROE continuously 46

Shareholder Return Policy
Continued shareholder return based on profit allocation according to performance andtargeting dividend payout ratio of at least 30%
Increase ordinary dividend ¥2 YoY and pay commemorative dividend of ¥2 in FY ending
Feb 28, 2018, marking 7th consecutive dividend increase
Purchase own shares as appropriate in consideration of strategic investment, financial
condition, etc. as a whole(Yen)<Annual dividend per share (Yen)>

Commemorative
dividend
Ordinary dividend2017 (forecast)*Annual dividend per share is shown on a post-share consolidation basis.

47

Response to Great Changes in the Times<Challenges to become what a department store ought to be (some examples)>Existence value of physical stores amid the rise of online shopping
Review of floor composition overly dependent on women’s clothing
Optimization of customer composition,a large share of which is taken up by old generations

Slow response to ICT

Department stores are facing the “greatest turning point” everUrgent need to transform business model and portfolio
Need to “combine different elements” by highly taking
advantage of diversity inside/outside the Group

48

Mid-to-Long Term Enhancement of Corporate Value through Dialogue

Steering of the management addressing both positive and negative risks

A

P

Positive risk

Negative risk

C

D

Strengthening of corporate governanceDialogue with stakeholders

Discontinuous
growthAchieve the Group Vision
Challenge to create a new corporate group49

Website

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

Create and Bring to Life
“New Happiness.”

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.