Results Presentation for FY Ended Feb 28, 2017
Medium-term Business Plan FY 2017 - 2021

10

J. FRONT RETAILING

thanniversary

April 11, 2017
J. Front Retailing Co., Ltd.
YAMAMOTO Ryoichi
President and Representative Director

Create and Bring to Life “New Happiness.”

Ginza Six

Today’s Agenda

Ⅰ． FY2016 Results
Ⅱ． FY2017 Forecast (IFRS)
Ⅲ． Group Vision and Medium-term
Business Plan FY 2017 - 2021
1

FY2016 Results

2

FY2016 Consolidated Results
Operating profit slightly below target in spite of cost reduction due to sluggish
sales mainly in Department Store and Parco
Ordinary profit and profit met target due to higher profit of equity method entities
and gain on sales of investment securities
Increased annual dividend ¥1 YoY to ¥28 valuing shareholder return(Millions of yen, %)Fiscal year
ended
Feb 28, 2017

YoY

Vs Oct forecast

Results
Change% change

Change% change

Net sales

1,108,512(55,052)(4.7)(8,488)(0.8)

Gross profit

234,785(10,747)(4.4)(1,315)

(0.6)

SGA

190,205(7,289)

(3.7)

(895)

(0.5)

Operating profit

44,580(3,458)

(7.2)

(420)

(0.9)

Ordinary profit

44,425(3,485)

(7.3)

425

1.0

Profit attributable toparent company

26,950

637

2.4

1,450

5.7

(0.1)

－

0.3

－

1

－

－

－

6.8

ROE (%)
Dividend per share(Yen)(Annual)

28

(RD)

(RD)

3

FY2016 Segment Information
Department Store Business was significantly affected by smaller sales area of
Shinsaibashi store but tax-free sales picked up in 4Q
Parco Business was affected by temporary closing of Shibuya Parco despitesales increase of Sendai Parco Part 2
Credit Business increased sales and profit, Wholesale Business and Other
Businesses decreased sales but increased profit due to improvement of profitability(Millions of yen, %)Net sales

Fiscal year
ended
Feb 28, 2017

Operating profit
Vs
Oct forecast

YoY
Results
Change%changeYoY

Vs
Oct forecast

Change%Change change

ChangeResults

Department Store

727,994 (35,228)(4.6) (2,206)

24,592 (4,194) (14.6)

(708)

Parco

273,377(2.7) (2,723)

12,520

(62)

(0.5)

(80)

Wholesale47,291 (10,558) (18.3) (2,709)

1,529

214

16.3

179

Credit10,900

(100)

2,844

141

5.2

59

Other

97,575 (7,164)(6.8) (5,125)

2,881

74

2.7

(99)

(7,673)
445

4.3

4

FY2016 Segment Information
FY2016 analysis of changes in consolidated operating profit by segment(Millions of yen)

Department
Store(4,194)Wholesale214

Credit141

Credit Wholesale
59
179

Other
74

Parco
(62)

Adjustment Other
226
(99)

Adjustment
367

Down ¥3,458 mn (7.2%) YoY

LY
results

Parco Department
(80)
Store
(708)

¥420 mn (0.9%) below Oct forecast

FY2016
results

Oct
forecast

5

FY2016 Daimaru Matsuzakaya Department Stores
Sluggish sales to both the affluent and inbound tourists due to steep fall in stock prices
and strong yen in 1H
Recovered sales to both the affluent and inbound tourists due to recovery of stock prices
and weaker yen after US presidential election in Nov
Total sales of all stores turned positive after the effect of smaller sales area of Shinsaibashi
store for rebuilding of main building tapered off
FY2016 Daimaru Matsuzakaya Department Stores sales by store (%)
FY ended Feb 28, 2017

1Q - 3Q

4Q

Full year

Daimaru Shinsaibashi(23.6)(4.7)(18.8)

Daimaru Umeda

(2.8)

(0.8)

(2.3)

Daimaru Tokyo

2.0

2.8

2.2

Daimaru Kyoto

(4.8)

(1.5)

(3.8)

Daimaru Kobe

(3.5)

(2.0)

(3.1)

Daimaru Sapporo

(2.4)

3.4

(0.7)

Matsuzakaya Nagoya

(4.7)

0.2

(3.3)

Matsuzakaya Ueno

(1.9)

(1.2)

(1.7)

Total

(5.9)

(0.8)

(4.5)

(excl Shinsaibashi Mar - Dec)

(3.1)

0.3

(2.1)

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

6

FY2016 Daimaru Matsuzakaya Department StoresTokyo store continued growth throughout year, Sapporo store turned positive in 2H¥4.6 bn reduction of cost for ads, labor, supplies, outsourcing, etc.
Operating and ordinary profits fell short of target despite sales increase late in
the year, profit met target(millions of yen, %)Fiscal year
ended
Feb 28, 2017

Vs Oct forecast

YoY

Results
Change% change

Change% change(4.5)(1,910)(0.3)

Net sales

646,990(30,521)

Gross margin (%)

23.38(0.15)

Gross profit

151,288(8,118)

(5.1)

(412)

(0.3)

SGA

128,586(4,646)

(3.5)

86

0.1

Operating profit

22,702(3,471)(13.3)

(498)

(2.1)

Ordinary profit

21,266(3,208)(13.1)

(534)

(2.4)

Profit13,555

2,808

26.1

155

1.2

0.00

7

FY2016 Daimaru Matsuzakaya Department Stores
FY2016 Daimaru Matsuzakaya Department Stores
analysis of operating profit by factor(Millions of yen)

Decrease in
Supplies
gross profit due
cost
to salesreduction
Labor costdecrease994
reduction(7,181)725 Ad cost
Decrease
reductionin profit
589
margin(937)

Other cost
reduction
2,338

Other cost Supplies
cost
reduction
reduction
191
253

Increasein ad cost
(628)

Effect ofprofitmargin0¥498 mn (2.1%) below Oct forecast

Down ¥3,471 mn (13.3%) YoY

LY
results

Labor cost
reduction98

Decrease ingross profit due
to salesdecrease(412)

FY2016
results

Oct
forecast

8

FY2016 Consolidated Results (B/S, CF)
Equity increased ¥22.6 bn to ¥406.3 bn, equity ratio increased 1.1 points to 38.7％
Interest-bearing debt increased ¥6.8 bn to ¥187.7 bn, D/E ratio was 0.46 times
Operating cash flows decreased ¥0.5 bn YoY mainly due to increase in inventories
Investing cash outflows decreased ¥9.3 bn due to increase in proceeds fromsales of property and equipment
Financing cash outflows for repayments of long-term loans payable increased<Consolidated balance sheet>
Fiscal year ended
Feb 28, 2017

(Millions of yen)

Results

YoYchange<Cash flows>(Millions of yen)

Fiscal year ended
Feb 28, 2017

Results

YoYchange1,050,109

30,963Operating cash flows

36,239(560)

Interest-bearing debt

187,799

6,877

Investing cash flows(30,353)

9,388

Equity406,336

22,637

Financing cash flows(2,189)(1,148)

Total assets

Equity ratio (%)

38.7

(RD)

1.1
9

FY2017 Forecast (IFRS)

10Changes in Accounting Standards

Voluntary application of“International Financial Reporting Standards (IFRS)”
from fiscal year ending February 28, 2018
in lieu of current Japanese GAAP

11

Transition to IFRS (International Financial Reporting Standards)<Purposes of applying IFRS>

Effective management based on appropriate
asset evaluation
and business management emphasizing profit
for current period
Enhance accountability to domestic andoverseas investors
by improving international comparability offinancial information
12

Comparison between Japanese GAAP and IFRS
【Japanese GAAP (consolidated)】【IFRS (consolidated)】

Revenue decreases approx 60% because sales ofDepartment Store Business from purchase recordedat the time of sales (shoka shiire), tenant sales of
Parco Business, and sales of Daimaru Kogyo fromshoka shiire are presented in net amounts.

Point expenses included in SGA under Japanese
GAAP are deducted from sales.

Sales (gross)

Revenue
Sales(net + sales from purchaseon a no return basis (kaitori))

Actuarial differences in goodwill andretirement benefits are not amortized.

△Point expenses
Cost of sales

Cost of sales

Gross profit

Gross profit

SGA
Point expenses
Operating profit
Non-operating
income/expenses
Financial income/loss

Gain on sales of non-current assets, loss on
disposal of non-current assets, loss on businessliquidation, miscellaneous income,miscellaneous expenses, etc.

SGA
△Amortization of goodwill△Amortization ofretirement benefit plans

Other operating
income/expenses

Share of profit /loss ofequity method entities

Operating profit

Ordinary profit

Financial income/loss

Extraordinary gain/loss

Share of profit /loss ofequity method entities

Profit attributable toparent company

Profit attributable toparent company

There is no "ordinary profit" under IFRS.

Corresponds to profit under Japanese
GAAP = Numerator of ROE

13

Comparison between Japanese GAAP and IFRS【Consolidated P/L】
Operating profit

Sales (Revenue)

Other
operatingrevenue(¥100 mn)

【Breakdown】
Department Store
Parco
Daimaru Kogyo(¥100 mn)

Amortizationof goodwill(4,463)(2,000)(156)
etc.

Derecognizationof amortization ofretirement
benefits

Other
operatingexpenses

Other

Point expenses
Sales from shoka shiire Reversal of
Tenant sales
common area
charge of
Parco tenants,
etc.

Japanese GAAPFY ended Feb 28, 2017

IFRS estimates
FY ended Feb 28, 2017*

Japanese GAAPFY ended Feb 28, 2017

IFRS estimates
FY ended Feb 28, 2017*14*IFRS figures for FY ended Feb 28, 2017 are estimates made before audit and subject to change.

Comparison between Japanese GAAP and IFRS【Consolidated B/S】
Assets (land, leasehold right, etc.) and shareholders’equity (retained earnings) decreased due torecalculation of book value of land, etc. made atmarket value at the time of transition to IFRS.
Liabilities decreased due to tax effect.
Liquidationof claims

Other

Land

Leaseholdright<Assets>
Japanese GAAPFY ended Feb 28, 2017

Tax effect,
etc.

Other

Construction inprogress

AssetsLiabilities and shareholders’ equity
IFRS
FY ended Feb 28, 2017(¥100 mn)

Allowancefor paid
leave

Liquidationof claims

Retainedearnings<Liabilities and net assets>
Japanese GAAPFY ended Feb 28, 2017

*IFRS figures for FY ended Feb 28, 2017 are estimates made before audit and subject to change.

15Comparison between Japanese GAAP and IFRS

【Department Store Business Segment】
Sales (Revenue)

Operating profit(¥100 mn)

Loss onretirement of
non-current
assetsPoint
expenses(¥100 mn)

Derecognizationof amortization ofretirement
benefits

Loss ondisposal of
non-current
assetsOther

Employee
discount, etc.

Effect of net
presentation of sales
from shoka shiire

Japanese GAAPFY ended Feb 28, 2017*2

IFRS estimates
FY ended Feb 28, 2017*1

Japanese GAAPFY ended Feb 28, 2017*2

IFRS estimates
FY ended Feb 28, 2017*1*1IFRS figures for FY ended Feb 28, 2017 are estimates made before audit and subject to change.
*2Sales and operating profit under Japanese GAAP for FY ended Feb 28, 2017 exclude Real Estate Business.

16Comparison between Japanese GAAP and IFRS

【Parco Business Segment】
Sales (Revenue)

Operating profit(¥100 mn)(¥100 mn)

Gain on sales
Loss onLoss onof non-current liquidation of disposal of
assetsbusiness
non-current
assetsOther

Reversal ofcommon area
chargeOther

Effect of net
presentationof tenantsalesJapanese GAAPFY ended Feb 28, 2017

IFRS estimates
FY ended Feb 28, 2017*

Japanese GAAPFY ended Feb 28, 2017

IFRS estimates
FY ended Feb 28, 2017*17*IFRS figures for FY ended Feb 28, 2017 are estimates made before audit and subject to change.

Awareness of Environment in FY2017
The global economy is picking up gradually but has inherent risks

Domestic employment and income situation is improving
Higher household saving rate, ongoing frugal mindset
Polarized consumption, polarization within one person
Steady consumption by the affluent ⇔ Low spending by volume zone
Number of foreign tourists to Japan continues to grow
Consumption shift from products to experiences / expansion of service consumption

Rapid growth of sharing economy
Development of IoT
18

FY2017 Consolidated Forecast (IFRS)Expect revenue to increase partly due to effect of opening of commercial facility“Ginza Six” (Apr 20)
Double-digit profit growth of Daimaru Matsuzakaya and withdrawal from unprofitablebusiness will contribute to operating profit¥2 increase in ordinary dividend per share, 7th consecutive annual dividend increase
including commemorative dividend of ¥2(Millions of yen, %)Fiscal year
endingFeb 28, 2018

YoY

1H
forecast

Change% change

Full year
forecast

YoY
Change% change

Revenue

227,000

5,325

2.4

469,000

16,0683.5

Gross profit

104,700

(147)

(0.1)

215,000

1,858

0.9

Operating profit

21,000

(529)

(2.5)

44,5002,767

6.6

Profit attributableto parent company

12,800(1,115)(8.0)

26,500

(622)

(2.3)

－

－

－

(RD)
7.0 (率差）(0.6)－(End of 1H) 16

2－

ROE (%)
Dividend per share(Yen)(Annual)32

4－*YoY changes and YoY % changes have been calculated by converting figures for the previous fiscal year to IFRS-based figures.
IFRS figures for the previous fiscal year are estimates and subject to change as a result of accounting audit.
19*Dividend per share includes commemorative dividend.

FY2017 Segment Information Forecast (IFRS)Create “Real Estate Business” as new independent segment, rename Credit Business as “Credit and Finance Business”
Sales of Department Store Business are expected to steadily increase in flagship stores but remain sluggish in suburban stores
Parco Business expects profit increase in 2H despite temporary closing of Shibuya store and absence of gain on sales of
non-current assets
Real Estate Business expects effect of opening of Ginza Six but increase in other real estate development expenses
Other expects great effect of withdrawal from unprofitable businesses including JFR Online and JFR Plaza(Millions of yen, %)Fiscal year
endingFeb 28, 2018

Revenue
YoY
1H
Full year%changeforecast
forecast

Operating profit
YoYchangeYoY
YoY
1H
Full year
forecast % change forecast % change

Department Store 132,000

0.7 270,600

0.9 11,360

22.9

24,56010.5

45,500(4.0) 95,100

1.1

5,900

(26.8)

11,500(11.7)

Real Estate

5,500

104.3

12,500141.0

400(63.6)

500

43.4

Credit and Finance

4,950

3.8

10,200

3.6

1,333

2.4

2,900

1.4

58,9004.1 119,700

4.5

2,250

29.2

5,280

76.7

Parco

Other

*YoY changes and YoY % changes have been calculated by converting figures for the previous fiscal year to IFRS-based figures. 20
IFRS figures for the previous fiscal year are estimates and subject to change as a result of accounting audit.

FY2017 Consolidated Forecast (B/S, CF) (IFRS)
Equity: ¥386.9 bn after adjustment under IFRS; equity ratio: 37.4%
Interest-bearing debt: increase ¥33.8 bn to ¥221.5 bn due to new funding
Operating cash flows: decrease ¥5.2 bn YoY due to absence of redevelopmentcompensation received in the previous year
Investing cash flows: ¥9.6 bn increase in outflows mainly due to acquisition ofassets associated with redevelopment
Financing cash flows: ¥8.6 bn increase in inflows to cover shortage of FCF by
new funding<Balance sheet>
Fiscal year
endingFeb 28, 2018
Total assets
Interest-bearing debt

EquityEquity ratio (%)(Millions of yen)

Forecast

YoYchange<Cash flows>(Millions of yen)

Fiscal year
endingFeb 28, 2018

Forecast

YoYchange1,033,200－

Operating cash flows

31,000(5,239)221,500－

Investing cash flows(40,000)(9,647)

386,900－

Financing cash flows

6,200

8,389

37.4

－
21

パルコ
事業

百貨店
Group
Vision and Medium-term
事業
Business Plan FY 2017 - 2021

百貨店
事業

22

Review of Previous Medium-term Business Plan (Measures)
Results of FY2014-2016 Medium-term Business Plan
Measures

Enhancement ofcompetitiveness andprofitability as multi
retailer

Urban Dominant
Strategy for growing
with local communities
Omnichannel strategy
Strengthening ofbusiness base
Restructuring

Description

Evaluation

Expansion of new department store model⇒Volume zone remains a challenge△

Steadily acquired customers from the affluent including the new rich class○

Acquired a certain market share by better serving inbound tourists○

Rebuilding of original merchandising failed to achieve quantitative results

×

Parco Business

Expanded Fukuoka Parco, opened Sendai Parco 2 and Zero Gate○

Credit Business

Number of accounts increased but profit remained flat△

M&A

Converted Senshukai into equity method associate, equity method earnings were
negative in real terms△

Redevelopment

Started to rebuild Ginza, Ueno south wing, Shinsaibashi main building, Shibuya
Parco

○

Development
around storesOpened 2 shops around Shinsaibashi, 1 around Ueno, 2 around Kyoto○

Omnichannel

Expansion and product development of Click & Collect produced small quantitative
achievement

×

EC

Sales fell far short of expectations despite efforts to expand sales

×

FinanceStrengthened finance policy through capital policy, introduction of by-store B/S, etc.

○

Governance

Strengthened governance through assessment of Board of Directors, GovernanceCommittee meetings, etc.

○

Withdrew from 2 unprofitable companies and decided to close 1 department store
and 2 Parco stores―
23

Department
Store BusinessReview of Previous Medium-term Business Plan (in Numbers)
Results of FY2014-2016 Medium-term Business Plan
Key indicators

Results
Final year of
Medium-term Plan

(Millions of yen)

TargetFinal year of
Medium-term Plan

Vs target(announced on Apr 10, 2014)

Consolidated operating profit

44,58050,000(5,420)Consolidated operating margin

4.0%

4.2%

(0.2 points)

Consolidated ROE

6.8%

5.8%

1.0 point

Consolidated ROA

4.3%

4.8%

(0.5 points)

Operating cash flows*

117,688

130,000(12,312)

Capital investment and growth investment*

117,575

110,000

7,575

Investing cash flows*

86,366－－

Free cash flows*

31,322－－

Department Store

24,59228,500(3,908)Parco

12,52013,300(780)

Credit

2,844

4,000

(1,156)

Other excluding above

4,624

4,200

424

(Operating profit by business segment)

24*Total of 3 years from FY2014 to FY2016

Review of Previous Medium-term Business Plan
<Major causes for failure to meet target>
Lack of responsiveness to rapid changes in business environment
The Group’s business structure overly dependent on Department Store
Slow response to advanced technologies and lack of information(Millions of yen)

<Operating profit and ROE>

Operating profit

(%)

ROE

25

Toward Achievement of Group Vision
Medium-term Business Plan, which will in FY2017,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

26

Newly Developed Group Vision
Create and Bring to Life “New Happiness.”
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 concerns and stresses.
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 “concerns,” 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 framework 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.”

27

Expansion of Business Domain
Beyond framework of retailing“Multi Service Retailer”
Expanded needs to relieve
daily concerns/frustrations

Rise ofsharing economy

Advent of IoT era

Consumption shift fromproducts to experiences

Expanded demand forstaffing services

Increasedurbanization

Diversified payment methods
Advanced financial services

Multiple retail brands(Multi retailer)

Strong customer assets of 9 mn people

Store assets in urban areas
28

Image of Transformation of Business Portfolio
Grow Department Store and Parco, which represent 90% of profit, but decrease
their profit share to around 70%
Increase share of Real Estate Business to 10%-plus, expect share of Credit and
Finance and new businesses to be around 20%¥100 mn (Operating profit)

Credit and Finance
New/Other 18%

パルコ
事業

Real Estate 12%
Credit & Finance / Other 13%

Parco
34%

Parco
26%

Department
Store
53%

Department
Store
44%

FY2016FY202129

Innovation of New Department Store Model
Core competence of department store
Stores in good central locations

Excellent customer assets

Biggest problem is failure to make the most of core competence as physical stores

Women’s
clothing

New categories
New areas of our own curation
Meet experiential consumption demands② Expansion of real estate rental area

RetailRealestaterentalAttractmuch
morecustomers

Createstrongcustomerbase

Maximize value of physical stores① 30% reduction of women’s
clothing area30

Innovation of New Department Store Model(Rebuilding of Main Building of Shinsaibashi Store)
Planned to open in fall 2019 as model most representing innovation of “new department store model”
Transform adjacent north wing to business model with real estate rental as its main business after
opening main building
Connect main building to north wing in 2021 and create more than 80,000 m2 hybrid commercial facility

31*The photo is for illustrative purpose only.

Gain Loyalty from Customers including the Affluent
Dedicated teamwill continue toacquire new
gaishocardholders

The Group’s
card

Enhance sales
activities according
to buying behavior

Inbound

Other company’s
card

External points

External
companies, etc.

Gain loyalty from wider range of good customers

Enhance CRM (Customer Relationship Management)
32

Enhance Business Management by Introducing Store B/S

MarginB/Sperspective・Key focus of stores emphasizing gaisho sales
Accounts receivable
collection ratio

Profit(Rate of accounts receivable is relatively high)⇒Prevention of delays in collection /individual assessment

Operating profit

ROE
ProfitShareholder’sequityROA

Net sales(Store Manager
performance indicator)

Total assets

・Key focus of “Tokyo store” as model store
Merchandise
turnover⇒Secure salable items / remove unsalable items

Sales permonth/tsubo
Return ofinvestment

P/L
perspective

OperatingmarginOperatingprofitNet sales⇒Select/implement renovation investment planthat highly contributes to the store’s ROA⇒Judge by investment plan review committee⇒Individual assessment with actual return ofinvestment

Associatedsales
Number of new
identifiable customers

Product sales
profitEfficiency ofoperating expenses

Continuing focus
33

Existing indicators

Shareholder’sequity⇒Thorough assessment with turnover /cross ratio(Rate of property and equipment is relatively high)Total assets

Total assets(Rate of inventories is relatively high)・Key focus of “Nagoya store” as model store

Operating profit

Financialleverage

Focus indicators

Total assets
turnover

Innovation of Parco Business ー Evolution of Store Brand
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 andprovide advanced tenant services
Evolve store brand by applying various new initiatives and know-how to other stores≪Creation of new Shibuya Parco≫■Create next-generation commercial space by rebuilding
Shibuya Parco■Bring together new initiatives that have never been applied
to conventional shopping complexes to provide evolved
values such as “growth space for business owners” and“new inspiration for urban consumers”

・Increase opportunities to newly connect with companies through multi-use complex
building
・Create advanced tenant services in anticipation of developments in e-commerce・Partnership on creation of Shibuya Entertainment City, expansion of soft content
・Increase Parco brand’s global presence34

Innovation of Parco Business ー Evolution of Store Brand
Apply initiatives of creating new Shibuya Parco to urban stores to evolve store brandShibuya Zero Gate

Ikebukuro Parco
Main

Nagoya Parco

Ｐ’

West

East

Nagoya Zero Gate

Fukuoka Parco
Expansion

Sendai Parco
Main

２

New south wing of
Ueno Matsuzakaya

Shizuoka ParcoSouthHarajuku
Zero Gate
Shinsaibashi
Zero Gate

New Parco

New

Midi

Dotonbori
Zero Gate

Hiroshima Parco
Main

New

Sapporo Parco

Hiroshima
Zero Gate 1

In front of
Kinshicho Sta

Hiroshima
Zero Gate 2

Sapporo Zero Gate

Spread of essence of new Shibuya Parco＝ Evolution of store brand

SR6

Main

Urban lifestyle
proposal

Wider major urban areas

Fashion/culture/entertainment
complex

National andglobal tradeareas

New Shibuya ParcoWest Coast Plan,
Urasoe, Okinawa

Kyoto
Zero Gate
Sannomiya
Zero Gate

35*Names of planned projects are provisional.

Innovation of Parco Business ー Production of Commercial Real Estate
Cultivate urban areas with growth potential by developing Parco, Zero Gate and new
categories
Expand scope of business by providing the Group companies’ solutions to commercial
complex businesses and tenants
Existing Parco store
Existing Zero Gate store
Scheduled to open in FY2017
Announced project under development*Shibuya Parco Part 1 / Part 3 closed temporarily in Aug 2016.
*Chiba Parco closed in Nov 2016.
*Otsu Parco will close in Aug 2017.

Kyoto

Kyoto Zero Gate (provisional)

Ueno
New south wing of Mastuzakaya Ueno
Scheduled to open in fall 2017

Scheduled to open in FY2017

Kinshicho

Kobe

In front of Kinshicho Sta

Sannomiya Zero Gate
(provisional)

Scheduled to open in 2H 2018

Opening date TBD

Harajuku

Okinawa

Harajuku Zero Gate (provisional)
Scheduled to open in winter 2017

Urasoe West Coast Plan
Scheduled to open in summer 2019

Shibuya
New Shibuya Parco
Scheduled to open in fall 201936

Innovation of Parco Business ー Expansion of Soft Content
Better meet experiential consumption demands by increasing live entertainment
bases such as theaters
Evolve and create soft content while providing content globally
Provide new consumption experiences using Parco’s unique incubation function

37

Expansion into New Business Domain
Provision of values mainly through retailing (sale of goods)

In the past・・・

The Group has customer assets of more than 9 mn people
Daimaru
MatsuzakayaParcomn people

mn people

Senshukai

406 188 337
mn peopleetc.

In the future・・・
Services that relieve daily concerns/frustrations

38

New Domain and Direction of Business Expansion

Childcarebusiness

Servicesforseniors

Educationbusiness

Credit andfinancebusiness

Existing
domainStaffing
servicebusinessNewdevelopment
through VC

Real estatebusiness
Design &construction
business

New business domainbeyond framework of retailing

Consider M&A and allianceBusiness expansion
using existing resources

39

Urban Dominant Strategy
Big projects launched under previous Medium-term Plan will be completed and newcommercial facilities will open
Draw new crowds to the areas and greatly contribute to revenue under current Medium-term
Plan
Ginza Six
Rebuilding ofAprFallsouth wing of
2017
2017
Ueno store

Rebuilding of mainbuilding of
Shinsaibashi store

Fall
2019

Fall
2019

Rebuilding of
Shibuya Parco

40*The photos are for illustrative purpose only.

Ginza 6-chome Redevelopment
On Apr 20, innovative luxury mall unlike any other in the world “Ginza Six” will open
Total retail area of “Ginza Six” is 47,000m2, 1st year sales target is ¥60 bn
・Rooftop garden
・Offices: 7-12F/13F (partial)
・Retail: B2-6F/13F (partial)
・Tourism base: 1F
・Cultural facility: B3F
Total numberof stores

Flagshipstores241

122

brandsbrands41

Rebuilding Project for South Wing of Ueno Store
Commercial complex with Parco, cinema complex and offices above ground anddepartment store in basement
Invest ¥15.2 bn and plan to open it in fall 2017 with the aim of tapping newcustomer segments

13-22F

Offices

1-6F

Parco

7-11F

Cinemacomplex

BF
Department
store･*The photo is for illustrative purpose only.

42Points of Urban Dominant Strategy

Development of
the Group’s
properties e.g.
by rebuilding
storesAttract more customers to “areas”

Real estatedevelopment+

Expansion ofreal estate floorarea managed
by the Group“around”
department
storesPartnershipwith local

communities

Return/spread to existing stores

Cooperation
with Parco

Growth of existing stores

43

Promotion of Urban Dominant Strategy
Focus areas for promotion of
Urban Dominant Strategy

lucian pellat-finet
Shinsaibashi
Zero Gate

Parking

LUMIERE
PARIS(North)White Avenue

Parking

BAG'n'NOUN

Daimaru
Shinsaibashi
Store(Main)

CHANEL

Shinsaibashis

Kobe
Kyoto

Nagahori -dori

Midosuji

Shinsaibashi
Ueno
Nagoya<Example> Map around Shinsaibashi store(South)JOURNAL
STANDARD

Commercial
complex

Shinsaibashi 161

Daimaruinteriorbuilding
Musee Air

air OSAKA
Sanrio gallery
agnes b.
ROSE BUD

acca
Nike Osaka

Deuxieme Classe

Already started to plan more than 20 projects
Accelerate materialization of Urban Dominant Strategy
Grow Real Estate Business as new pillar of the Group44

ICT Strategy toward IoT Era
Enhance responsiveness to lifestyles in “IoT era” in which everything connects to Internet
Strengthening of customer touch points
using applications

Radical strengthening of e-commerce
Use of Senshukai’s know-how and fulfillment<Image>Renovation of website with attractive content
Expansion of sales by centralizing store ande-commerce stocks of private brands

Issue ofpoint
coupons

Buyinginformation

Cashlesspayment

Real-timecommunication

Behavior
information＋
Acquire advanced information and use expertise by sending HRs to venture capitals
45
Materialize new services by promoting “open innovation” initiatives

Renovation of Business Operations
Radical overhaul of operation frames centered on paperless solutions using ICT
Sales

Order
ArrivalStorage

Back office

Sales

Settlement

Payment
Collection

Performance
Management

Closing

Tax

HR
Admin

Promote operation process reform using ICTAutomation/streamlining ofadministrative processing

Introduction of
new GW/WF

Paperless
Introduction ofadvanced coresystemExpansion ofscope of theGroup’s sharedservices

Radical reform of the Group’s operations

Introduction of
RPA

Develop operation system into platform
Modularize operation functions

46

FY2021 Quantitative Management Objectives (IFRS)<Financial strategy structure diagram>¥56 bnOperating profit
FCF＞(Up ¥14.2 bn from FY2016)

0

Operating margin

ROE
Operatingmargin10％8%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%47

Strategic Investment for Growth and Shareholder return<Use of total cash flows for FY2017 to 2021>
Investing cash flows

Capitalinvestment¥200 bn
Growthinvestment

Operating cash flows¥260 bn or more
Free cash flows

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

48

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.

49Changes in Form of Corporate Governance
Decide to transition to company with three committees by resolution of ordinary
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 management decision-making by separating “oversight” from “execution”<Company with three committees>50

Achieve Vision, and Create New Corporate Group
Steer management to greatly change the Group’s course of businessA

P
Tradition

C×

Innovation

D

Strengthening of corporate governanceDialogue with stakeholders

Discontinuous
growthAchieve Group Vision
Try to create new corporate group51

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.