住まいの豊かさを
世界の人々に提供する。
ニトリグループは、「住まいの豊かさを世界の人々に提供する。」というロマン（大志）を社員一人ひとりが企業行動の原点として共有しています。
そして、グループの力を結集して長期ビジョンの実現に全力を尽くすことを企業活動の指針と位置づけています。
ロマンをもとに、ビジョンを達成していくことで、ニトリグループはお客様をはじめとしたステークホルダーの皆様とともに多様な豊かさを分かち合っていきたいと考えています。

DREAM
1

NITORI HOLDINGS ANNUAL REPORT 2017

NITORI HOLDINGS ANNUAL REPORT 2017

2

Vision2032
Net sales

2017 Full-scale Launch of Global Retail Chain Development.

Achieving our Mission
Statement on theWorld Stage ....

Total Stores¥3 trillion
3,000

NITORI is committed to human resource development, store creation, product development, andsystem establishment to fulfill our dream to provide prosperous home living that is influenced by
the West to Japan as well.
Since 2007, NITORI has expanded our stage to the world, and by utilizing our foundation that wehave established over the years, we have been taking on challenges and continuously evolving toachieve our vision of opening 3,000 stores around the world by 2032.

Contents

vision3

NITORI HOLDINGS ANNUAL REPORT 2017

NITORI’s Dream ……………………………… P1
NITORI's Vision / Contents ………………… P3
Chairman Interview ………………………… P5
President Interview ………………………… P9
Features
1. Store Openings in Central Tokyo …… P13
2. "N Cool" "N Warm" …………………… P15
3. "DAY Value" "&Style" ………………… P17
s History ……………………………… P19
NITORI’
Financial and Non-financial Data ………… P21
Topics for the Year …………………………… P23

System to Provide“Prosperous Living”……P24

Business Model ……………………………… P25
1. Manufacturing…………………………… P27
2. Logistics ………………………………… P28
3. Stores …………………………………… P29
4. Quality …………………………………… P30
Store Opening（Japan）……………………… P31［Editing Policy］
We published our“Annual Report 2017”thats activities to various
showcases NITORI Group’stakeholders including shareholders and investors.
Our mission is“to provide the foundation of prosperous
home living to the global community," and this Annual
Report aims to report our business activities to realize
this mission in an easy-to-understand format andpromote communication with society.
sThis Annual Report also introduces the NITORI Group’
mid-to-long term policy / strategies and businessmodels. It also features our key businesses and CSR
activities.

［Target Scope］

We set as many domestic and foreign NITORI Group
companies subject to consolidated financial
statements as possible as the target of ourreporting. However, depending on the item, thereporting target may differ.

Store Opening（Overseas） ………………… P33
The NITORI Group Businesses …………… P35

Foundation Supporting the Business……P36

NITORI Group CSR …………………………… P37
Directors and Executive Officers…………… P41
Corporate Governance ……………………… P43
Compliance …………………………………… P45

Financial Section ………………………P46

Transition of Key Management Indicators …… P47
Review and Analysis of Management
Results and Financial Situation …………… P49
Consolidated Balance Sheet ……………… P53
Consolidated Statement of Income/Consolidated Statement of Comprehensive Income… P55
Consolidated Statement of Cash Flows……P56
Company Stock Information ……………… P57
Company Information / NITORI Group List … P58［Target Period］

February 21, 2016 to February 20, 2017activity includes recent content as well.

［Disclaimer Regarding Forward-Looking Statements］
This report contains future plans, strategies andforecasts, and forward-looking statements regarding
the business performance of Nitori Holdings andaffiliated companies. These statements are nothistorical facts. These forward-looking statements are
based on the current assumptions and beliefs of Nitori
Holdings in light of currently available information. In
addition, these statements contain risks anduncertainties related to economic trends, personal
consumption, market demand and supply, taxation
systems, and other systems. Therefore, please note thatthe actual business performance of Nitori Holdings andour Group companies may differ from our forecasts.

NITORI HOLDINGS ANNUAL REPORT 2017

4

Chairman Interview

Q：What do you think are the strengths of NITORI?
I truly believe that our product power that supports“Offering the Unexpected”and personnel who commit themselves
to fulfilling our vision are our great strengths that allow us to receive support from everyone including our customers.

To provide the foundationof prosperous home living
to the global community.
Under this“Dream,”all employees shallcontinue to be united in fulfilling our“Vision.”

Akio Nitori
Representative Director & Chairperson（Chief Executive Officer）
Nitori Holdings Co., Ltd.

Q：NITORI successfully increased its income and profits for 30 consecutive years in FY2016.
Please tell us how NITORI was able to continue to grow this far.

Although our path to this growth was far from being smooth and clear sailing,
we still managed to expand our business with the support of many people.
NITORI’s foundation dates back to 1967 when we opened our first
store in Sapporo. Furthermore, in 1972 when we had only 2 stores,
we set the“First 30-year Plan”to open 100 stores and achieve¥100 billion in sales by 2002, and we have committed ourselves toachieve this vision. Since sales were less than ¥3 billion when thisplan was first created, we truly believed we had developed atremendous plan, and we were able to achieve this vision in 2003
which was only one year later than originally planned.
In addition, we have been working hard to achieve the next
great vision of 3,000 stores and ¥3 trillion in sales under thesecond 30-year plan by 2032. In 2012, we had 300 stores andachieved ¥300 billion in sales, and in FY2016, we had 471 stores
and achieved ¥512.9 billion in sales.

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NITORI HOLDINGS ANNUAL REPORT 2017

Now, looking back I recall we faced a wide variety of difficulties
that we survived since foundation. Our path to this growth was far
from smooth and clear sailing. I sincerely believe NITORI has
grown this far thanks to every single one of our stakeholders suchas customers who purchase our products, shareholders, investors
and financial institutions that support us in the financial aspect,people in the communities including land owners who provide theland for our stores, and last but not least, our employees whoshare the dream“to provide the foundation of prosperous homeliving to the global community”and who continue to work hard to
realize the dream. This is our first annual report as NITORI, and I
would like to take advantage of this opportunity to express ourappreciation to everyone.

Recently, we were able to successfully increase our income and profit for 30
consecutive years, and I think these two strengths enabled us to achieve such
results. Now, If I may talk about product power, for products, NITORI focuses on thefollowing 3 key elements of affordability, quality and performance, andcoordination. In 2004, which is the year following our 100th store opening and ¥100
billion in sales, NITORI launched TV commercials featuring the slogan,“‘Offering
the Unexpected’NITORI”. Later, the image that NITORI’s products are affordable
and high quality became well known. This“Offering the Unexpected”is supported
by our own distinctive“Manufacturing, Logistics, and Retail Sales”business model
where we conduct everything from product planning and raw material
procurement to manufacturing, logistics, and sales on our own. Since thisstructure enables us to deliver products to customers directly after manufacturing
without going through wholesalers or trading companies, we can offer products tocustomers at affordable prices. In addition, approximately 90% of the products
developed by NITORI are manufactured overseas where manufacturing costs are
inexpensive and from where we import products. In 1985, joint intervention in thecurrency market was carried out according to the Plaza Accord, and the Japaneseyen, which was once roughly ¥250 against the U.S. dollar, significantly appreciatedto around ¥120. NITORI took advantage of this occasion to promote production
consignment in Taiwan, Korea, China, Indonesia, Malaysia, and Thailand, etc. In
addition, Nitori Furniture, which is our manufacturing section, established a plantin Indonesia in 1994, and since 2004, the Hanoi plant in Vietnam has also been
operating. The Ho Chi Minh City plant of Vietnam is also scheduled to launch thisyear. As you can see, manufacturing in our plants has also been enhanced.

Furthermore, business expansion and an increase in the number of stores are also
accelerating the realization of“Offering the Unexpected”. Our store numbers
increased from10 to 30, and in 2003, the number reached 100, and we acquired
buying power which enabled us to place orders with our specifications. In 2009, the
100 stores increased to 200 stores, and as a result, our buying power doubled. If wewere to compete against others solely with prices, we would be allowing ourcompetitors to catch up with us sooner or later. However, NITORI also focuses on“quality and performance”and“coordination”. For quality and performance, asignificant improvement was made with quality inspections according to stricter
standards under the management of Special Technology Advisor Kiyoshi Sugiyama
who NITORI invited from Honda in 2004. NITORI will establish a unique NITORI
brand that cannot be imitated by others by further enhancing“coordination”whichmeans offering a full range of products that are linked by style and color to support
each usage scenario.
Another one of NITORI's strengths is our human resources. We have employees
who along with me commit their whole careers to achieve the dream“to provide thefoundation of prosperous home living to the global community.”Toshiyuki Shirai,
Representative Director and COO, who joined the company in 1979, which was the 4thyear since NITORI began hiring new university graduates is, is one such employee.
Every single employee shares this dream and has been working hard each and every
day to achieve the 30-year vision that we have created based on the dream. To enable
NITORI to continue to grow 50 or even 100 years into the future, we need to establish
an organization that manages the company along with our company philosophy. From
this long-term perspective, we will continue to place
the highest priority on investing in“people.”In NITORI,
since 1981, we take young employees with several yearsof work experience in NITORI to the United States fortraining every year. Recently, the number of training
participants reached 1,000 employees. The UnitedStates is a market that greatly inspired me during myfirst visit when I was 27, and it was that visit that caused
me to embark on management with the dream ofproviding the foundation of prosperous home living to
the Japanese people. I believe it is very important to see
and feel the U.S. market on your own when you areyoung.
Our two strengths of product power andhuman resources are life lines for NITORI. We
will continue to invest in these strengths to grow
NITORI further in the long-term perspective.

NITORI HOLDINGS ANNUAL REPORT 2017

6

Chairman Interview

Q："As the second 30-year vision," NITORI set 3,000 stores and ¥3 trillion in sales by 2032.
Please tell us your thoughts on how specifically NITORI will achieve this vision.

We will accelerate store openings overseas. In particular, the Chinese market.
I always set a magnificent figure in the“vision”which
seems a dream from the current level when the vision isset. Of the 30 years until 2032, 300 stores and ¥300 billion
in sales for the first 10 years were set as targets which is
triple the situation when the vision was set. In fact, in 2009,
the number of stores exceeded 200, and in 2012, our 300
stores successfully achieved this target. In addition, by
2022 which is only 10 years from 2012, we are aiming for
1,000 stores and ¥1 trillion in sales which we hope will lead
to 3,000 stores and achieving ¥3 trillion in sales by 2032.
The Japanese furniture market is said to be worth ¥3
trillion. Therefore, to achieve the ¥3 trillion“vision”, ofcourse, overseas market deployment will be the key. For
overseas stores, we added 3 stores in Taiwan and 3 storesin China in FY2016, and as a result, we now have 27 storesin Taiwan, 11 stores in China, and 5 stores in the U.S. as ofthe end of FY2016. Among these markets, we will prioritize
increasing our store openings in China. Needless to say,
China has 1.4 billion people, and the income level, which isan important perspective when thinking about theconsumption of furniture, is reaching the ¥1 million/year
level on average in China. In 2017, we will open 10 stores,
and we are targeting 100 stores in 2022. In 2032, we would
like to aim for 1,000 stores in the Chinese market.
In addition, the Japanese market still has room todevelop. 500 stores is our target for the Japanese market
so that one can find NITORI even in small cities with
100,000 people or less. We are also aiming for the numberof visitors to top the number for the previous year every
year. We will pursue further growth with these targets first.

■ Long-term Vision

1973-2002

2003-2032
First 30-year Vision

100 stores ¥100 billion in sales
2003

100 stores ¥100 billion in sales achieved

2009

200 stores ¥200 billion in sales achieved

2012

300 stores ¥340 billion in sales achieved

Second 30-year Vision

3,000 stores ¥3 trillion in sales
2017

500 stores ¥550 billion in sales

Transformation of the Japanese lifestyle.
Full-scale launch of global retail chain development.
2022

1,000 stores ¥1 trillion in sales

Expansion in key sectors throughout the world
to transform people’s lifestyles.
2032

3,000 stores ¥3 trillion in sales

To become a company known for promoting amore prosperous living to the global community.

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NITORI HOLDINGS ANNUAL REPORT 2017

Q：What do you think your challenges are to achieve the second 30-year vision?
Urgent challenges are the securing of human resources that drive rapid growth and investment in logistics centers.
The greatest task to realize rapid expansion in the number of stores and sales is theacquisition of human resources. When the number of stores increases from 1 to 3
stores, from 10 to 30 stores, from 100 to 300 stores, and 1,000 stores, it means thebusiness scale has tripled, and the key is whether or not the business can make abreakthrough. In addition, the quality of human resources that you need differs
depending on the business scale. Of course, we need to change the management
method itself.“Improvement”is not enough, and new innovative methods such as“reform”are necessary.
If you look at our past growth, you will see that we have changed our flagshipoperations according to the speed of our growth. During our founding, our sales weremainly from furniture. Later, we enhanced our product portfolio in the new homefurnishing field including curtains and bedding accessories. Furthermore, we expandedbusiness areas by launching a series of new businesses such as the online shopping
business, renovation business, corporate sales business, NITORI MALL business,
logistics, and DECOHOME business for small trade areas. This is also applied to ourplants. Key production items in our plants have completely changed from drawers,
shelves, and cabinets to sofas and beds. And, now, in the next 10 years or so, we will
pursue further business expansion by using overseas markets as flagship operations.
We will reinforce our management class employees who drive this rapid growth as
quickly as our business growth by scouting talented personnel from outside of the groupas one measure, and we will thoroughly train our employees in the NITORI Way. We will
also send human resources that we educated in Japan to overseas markets.
Moreover, we will carry out investment to further expand our logistic centersaccording to the increase of our sales scale. We are also planning to increase
medium-sized logistics centers which are about 1,600 m2 to 3,300 m2 in size in addition
to large scale logistics centers. We will also upgrade our distribution centers in
response to our rapidly growing online shopping business.
For stores, we will further enhance“coordination.”For me, the current completionlevel is at the 30% level. Currently, 20% or so of the entire sales floor of stores is used forpresenting“coordination.”I would like to raise that figure to 50% or so in the future.

Q：Last but not least, do you have any message for your stakeholders?
I would like our stakeholders to keep their eyes on the continuously changing NITORI.
Among our basic needs, namely food, shelter, and clothing, NITORI
focuses on home living and offers lifestyle suggestions. I believe
whether or not the number of customers continues to increase is abarometer indicating whether or not NITORI is contributing to society.
Recently, I am often told that NITORI’s products have changed.
70% of our customers are female, and within the group as well, we
have made efforts to realize a workplace where female employees
can work comfortably by enhancing various systems from thediversity perspective. Now, 40% of our staff members in productdevelopment are female, and the opinions and power of our female
employees are reflected in store and product creation more thanever, and I think that leads to changes in products and theatmosphere of our stores. I always hope that our stores are like a
stage, and I believe that we are still far from realizing ideal stores.
NITORI will continue to change. Therefore, I would like all of our
stakeholders, starting with customers, to see our changes andcontinue visiting our stores. I ask for their continuous support. Thankyou.

NITORI HOLDINGS ANNUAL REPORT 20178

President Interview

Q：Please tell us about your future managementtasks for achievement of the next vision.

Taking on new challenges
and renovating NITORI
Without clinging to past success, we will continue toreview our current way of doing things and keep offering
prosperous home living to customers.

Toshiyuki Shirai

Q：Please summarize FY2016 overall.
This year was the 30th consecutive year of growth in income and profit, and while our business is growing
steadily, we will aggressively take on new challenges without being satisfied with the current situation.
In FY2016, we recorded net sales of ¥512.9 billion and ordinary income
totaled ¥87.5 billion which means we achieved 30 consecutive years of growth
in income and profit. For store openings, in Japan, we opened 48 stores andclosed 3 stores. On the other hand, we opened 3 stores overseas in Taiwan
and China respectively, and we now have 471 stores. More than 70 million
customers made purchases in our stores. In the last 30 years, the number ofstores increased 29 times. Net sales are 50 times greater and ordinary
income is 164 times larger, and not only has our business scale expanded,
but the net sales and rate of profit of each store has also increased.
In this fiscal year, our efforts for quality and product safety were also
recognized as NITORI was given the“METI Minister’s Awards”which is thehighest honor of the“10th METI Minister’s Awards for Best Contributors to
Product Safety.”In addition, NITORI received Nikkei Research’s“Nippon
Store Awards”which is based on the results of a Nikkei Research survey
targeting 260,000 people across Japan. Our brand power as well as customer
satisfaction level are highly regarded.

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NITORI HOLDINGS ANNUAL REPORT 2017

I believe such great achievements are due to our strength fromestablishing our own“Manufacturing, Logistics and Retail Sales”businessmodel through tackling various challenges from company foundation andrecognition of our stores and products by many customers. In particular, in
2015, we broke into the Tokyo metropolitan area by opening a Ginza store socustomers could access our store easily even if they live in the Tokyo
metropolitan area or do not have cars. As a result, we were able to acquire a
new customer demographic.
However, I strongly think we must be sharply aware that large risks may
be hidden especially when times are good, and we must keep taking on new
challenges. Up until now, whenever the NITORI Group faced a wide variety ofchallenges, we improved how we did things up until then and invented new
ways. That is how we keep growing. Since I experienced this history firsthand,
I would like to lead the Group so it is united in taking on new challenges
which are not an extension of the present without being satisfied with thecurrent situation or pursuit of stability.

the company organization to
1 Rebuildsustain a global chain store system
2 Development of specialists

We are working hard on 7 managementtasks that we came up with by planningbackwards from the vision.

7 Business
Challenges

to Achieve the Vision

In the“second 30-year plan vision”, we are aiming for 3,000 storesand ¥3 trillion in sales in 2032. Our target for 10 years from 2013 to2022 is 1,000 stores and ¥1 trillion in sales. In NITORI, instead offormulating goals by accumulating expected sales from now, we set
future goals first, and then, we think about what we should do now
to achieve the goals to clarify our current tasks and the direction weare working on. We manage our progress in monthly“Mid-to-long
Term Plan Project Meetings.”Let me explain our 7 businesschallenges we are currently working on to achieve the 2022 vision.

1. Rebuilding of the company organization tosustain a global chain store system

Representative Director & Chief Operating Officer
Nitori Holdings Co., Ltd.

2013 to 2022 10-year challenge“Globalize and Expand Business Areas”

For example, the high performance cool touch“N Cool”bedding series forspring and summer are popular not only in Japan but also China, Taiwan, andthe U.S. Therefore, we reformed the Japan-centered product development team
into a global team. As illustrated by this example, we are working to transform
into a format that can take advantage of the size of our business by establishingstandardized, simplified, and differentiated structures and systems. At the sametime, we will revolutionize our information system into a next generation
information system to improve productivity and promote business reform by useof IT. We will transform into a simple and highly efficient global organization.

2. Development of specialists
As our business becomes global and the business scale and areas expand, we need toshift from Japan-centered human resource management to global human resource
management. We will promote the scouting of industry-ready personnel and reform
our human resource development system to lead to the development of specialists
such as personnel with expertise, global personnel, and manager candidates.

3. Reorganizing the global supply chain system
We will build product supply and logistics systems with an eye on global deployment
for raw material procurement, package display, and the common use of parts.

4. Provision of a comfortable lifestyle via ourmerchandise, stores and services
While our business area is geographically expanding to urban areas, regional areas,

3 Reorganize the global supply chain system
Provide a comfortable lifestyle via our
4 merchandise, stores and services
our store standardization
5 Enhanceand revitalize existing stores
6 Create new format storesthe growth strategy
7 Rebuildof each business area

Strategy 2015 to 2017

1

Achieve profitability in overseas stores to stabilize the business before expanding business areas.

Strategy 2018 to 2020

2

Accelerate openings of overseas stores and establish a growth trajectory.

Strategy 2021 to 2022

3

Restructure the management foundation with the aim of establishing NITORI as a global chain.

and overseas in addition to a variety of sectors, we will analyze how they use our
products, stores and services in detail. Separately from purchase data recorded inpoint-of-sale（POS）data, we will collect objective data about why customers did not
make a purchase and the reasons why customers stop visiting our stores. In thisway, we will establish a system for our customers to return to our stores.

5. Enhancement of our store standardization
and revitalization of existing stores
To prevent cost increases due to increases in similar stores, we will promote low cost
operation by standardization and simplification and carry out the organization of similar
store formats and standardization of equipment, product selections, and operation.
Outstanding points which can serve as profit models will be used for other stores as
well, and we will conduct renovation and the“scrap and build”of existing stores.

6. Creation of new format stores
The NITORI Group includes DECOHOME stores, NITORI EXPRESS stores, and so on. In
particular, for DECOHOME launched in 2011 as a new format targeting small trade areas, there
are now 51 stores as of the end of FY2016. For DECOHOME, we focus on the development oforiginal products which are not available in NITORI stores as the“nearest HOME FASHIONSTORE”. We will differentiate DECOHOME from NITORI as a different brand so DECOHOME and
NITORI stores can be found even in the same shopping center in the future.

7. Rebuilding the growth strategy of each business area
Among related businesses such as the corporate sales business,renovation business, and logistic business, we will further strengthenbusinesses with high demand and potential for growth mainly in Japan.

NITORI HOLDINGS ANNUAL REPORT 201710

President Interview

Q：In this vision, how will you deploy in FY2017? Can you explain the market trend outlook,management strategies, and business performance forecast?

We will aim to increase income and profits by finding opportunities even when the market outlook is far from rosy.
We do not think we can be optimistic about market trends. However, even when theeconomy slows down, we would like to find opportunities in such an environment. For
example, customers who once purchased products in higher price ranges from othercompanies than NITORI may consider purchasing NITORI products. In addition, currency
movement is one factor that greatly impacts our business performance. Therefore, tominimize the risk from exchange rates fluctuations, we conduct forward exchange
contracts flexibly based on necessity.
Among the 7 business challenges, in FY2017 , we will focus on four items, namely,“1. Rebuilding of the company organization to sustain a global chain store system,”“2.
Development of specialists,”“4. Providing a comfortable lifestyle via our merchandise,stores, and services,”and“5. Enhancing our store standardization and revitalizing existing
stores.”In 4. in particular, thoroughly thinking about what customers were not satisfied
about and did not like from the customer perspective is a great task. By completely
investigating the cause and creating an environment where customers repeatedly comeback, we hope to expand our customer demographics in the true sense. In addition, forrevitalizing existing stores, we will invest approximately ¥8 billion in 60 stores which
comprise more than 10% of stores in Japan for renovation. We will use success cases
from among a wide variety of trials we attempted during the opening of stores in central
Tokyo.
In product development, we will enhance the coordination aspect by strengthening
highly seasonal coordination plans and rollout of the“&Style”brand which targets ahigher price range than the“DAY Value”brand. We will continue to use consistent color
schemes and styles in one brand so customers will see how they can coordinate theirhomes or rooms naturally in harmony if they purchase NITORI products. NITORI itself willtransform into a“LIFE STYLE SUGGESTION COMPANY”in addition to“Offering the11

NITORI HOLDINGS ANNUAL REPORT 2017

Unexpected”.
For store openings in Japan, in March 2017, we opened 3 stores simultaneously incentral Tokyo, namely, the Tobu Ikebukuro Store which is connected to Ikebukuro station,
the Marronnier Gate Ginza Store which was renovated and expanded from the former
Printemps Ginza Store, and the atre Meguro store in front of JR Meguro station. In June,
we will open the largest store in the central Tokyo area with an impressive 6,000 m2 floor
space. Including these 4 stores, in FY2017, we are scheduled to add 45 more stores（including 15 DECOHOME stores）.
Overseas, in addition to 10 more stores in China, the plan is to open 5 stores in
Taiwan and one store in the U.S., which means a total of 16 stores will join our overseas
contingent. In Taiwan where we made inroads in 2007, local human resources that areable to carry out PDCA are being developed. And although we still face challenges, we will
work on business expansion while solving each challenge one by one. For the U.S., we arein the phase of becoming profitable in stores. We have been working on the improvementof sales and profits, and we are confident that we will be able to lower the deficit. For
China which is the most important market for us to achieve our vision, we are working
hard to improve our recognition by participating in bridal fairs, placing car card advertisingin subways, and staging model room displays in newly constructed apartment buildings.
Since we are now able to see business models which drive store sales into the black, wewill concentrate management resources further to accelerate store openings.
As a result of all of these initiatives, for FY2017, we expect to have 532 stores by theend of the fiscal year. We forecast ¥568 billion in net sales which is a 10.7% increase
compared to the previous year, ¥100 billion ordinary income which is a 14.2% increaseyear-on-year, and a ¥68.5 billion net income attributable to owners of parent which is a
14.2% increase from the previous year.

Q：Last but not least, do you have any message to stakeholders?
We will also continue to implement initiatives in the perspectives of ESG（Environment, Social and Governance）.
I would like all stakeholders to support the ever-changing NITORI.
Here at NITORI, we conduct business under the
mission statement of“to provide the foundation ofprosperous home living to the global community.”In
our supply chain consisting of product development,
plants, logistics and stores, we are working on
environmental conservation. In addition, we arecontinuously providing support to society in culture,community, and educational activities besides
contributing to society through our business. To ourbusiness partners all around the world, we comply
with the“NITORI Group Fair Trade Declaration”andcooperate with each other as equal partners.
Moreover, the key to our growth is human resources.
We consider education as the greatest benefit
program, and we focus on human resource
development. At the same time, we also promote
diversified work styles. In this quarter, we improved thework environment by expanding the number of
employees eligible for the half-day paid leave system

to all employees and introducing a work-at-homesystem. Furthermore, we launched a regional humanresource system as well. By matching the special
skills of employees across Japan including part time
staff members with work in each division at head
offices, we are utilizing a wide variety of humanresources and abilities.
For our management system, outside directors
actively make comments in Board of Directors
meetings, etc. as in the past, and very active
discussions are being held.
We will continue to make changes to the storesand company without being satisfied with the current
situation. I would like stakeholders to visit our storesand see the changes. I would love to hear from them ifthey find something that needs improvement to makethe company better. I would like to thank them for theirunderstanding and continuous support in advance.
Thank you.

NITORI HOLDINGS ANNUAL REPORT 2017

12

01

Features｜ Store Openings in Central Tokyo

Provision of more convenience
to customers by store openings
in central Tokyo

13

Ginza Store - NITORI’s first store
opening in central Tokyo

Best proposal realized by direct
negotiations

Establishment of the“Urban Area Store Team”
comprised mainly of young female staff members

Store openings in central Tokyo andlarge city centers（current NITORIIn April 2015, NITORI opened the“Printemps Ginza Store”）
Marronnier Gate Ginza Store in Chuo-ku, Tokyo. This was the first NITORIin the Ginza area as well as the first NITORI in a department store. Until
then, NITORI only opened stores in the suburbs. We significantly changed
our store opening strategy and launched the development of urban areas
which were previously untouched areas for NITORI.
However, since“NITORI”did not exist in urban areas before, theimage of the department store and conditions of the building owner were
not agreed upon, and negotiations were difficult. While everything started
from scratch, in only 2 months
from when the store opening
decision was made to theactual opening, we created astore that completely
revolutionized the image of“NITORI.”In negotiations with the department store and building owner, we presented aconcept in line with their image and proposed products, prices, and customer
demographics. Since we directly negotiated with the department store andbuilding owner, we found out about their genuine needs, and we were able to offer
the best proposal for both sides. As a result, we were able to conclude a contract
for opening our first store in central Tokyo.
Furthermore, we also proposed new sections, product types, and productselections suitable for the trade area characteristics of central Tokyo, and we also
adopted a different presentation style from our suburban stores that feature
displays using different product types（small coordination）. Everything from sales
floor equipment to sales promotions and staff uniforms were developed by theentire company to make this new business format for NITORI a success.
In this way, our efforts to carry out reform on a wide variety of items such as
product selections, product delivery to stores, and sales promotions suitable forcustomers in central Tokyo led to the success of the“Printemps Ginza store”as
NITORI’s first store in central Tokyo.

Moreover, we needed to try new items in equipment, presentation method,store operations, etc. in store openings in central Tokyo, therefore, we
defined stores to be opened in large city centers and locations in front oftrain stations as“urban area stores”and established a management
system. In addition, we created the“Urban Area Store Team”comprised ofyoung female staff members to prepare for the store openings.
Under the concept of“sales floor featuring outstanding
presentations”, we designed sales floors that do not interfere with how the
products appear and cater to female customers in the female perspective.
These presentation-focused sales floors feature fashionable items with anawareness of coordination that have been strictly selected from among
NITORI product lineups. We worked on the creation of more attractive
stores for customers and created a system for the various given conditionsof stores in urban areas. As a result, we were able to contribute to theimprovement of customer satisfaction as well as provide an opportunity for
employees to improve their skills.

Many more customers than expected came to our "Printemps
Ginza Store", and the vastly different layout from other NITORI
stores was greatly appreciated. This gave us more confidencewith regards to our store openings in central Tokyo.
On the heels of this success, we opened the“NakameguroStore”in September 2016 and the“Shinjuku Takashimaya Times
Square Store”in December 2016. Immediately after the store
openings, many customers visited both stores, and the“Shinjuku
Takashimaya Times Square Store”went on to become one of our
top stores in sales.
Since then, we opened a series of stores in central Tokyo
such as the“Tobu Ikebukuro Store”,“Marronnier Gate Ginza
Store（sales floor increase）”, and“atre Meguro Store.”In
addition, more customers visited the stores due to improvements
in our brand image. NITORI will accelerate store openings incentral Tokyo and large city centers in the future as well.

NITORI HOLDINGS ANNUAL REPORT 2017

NITORI HOLDINGS ANNUAL REPORT 2017

14

02

Features｜“N Cool”“N Warm”

High performance products thatevolve with each season using
carefully selected raw materials

15

Cool Touch“N Cool”series
for spring and summer“N Warm”series with moisture absorbing and heat

Building a stable product supply
systemHigh performance products thatevolve with each season

NITORI sells the cool touch“N Cool”series for spring and summer as highperformance products.“Cool touch”means feeling“cool”as a large amount ofheat is dissipated from parts that are touched. We use a special fabric thatmakes you feel cool when your skin touches the fabric. Ore, which is the raw
material of cool touch products, is made into chips that are kneaded into fiberwith special processing. These fibers are then used to create the fabric.
The“N Cool”series has different grades according to the cool touch level,
namely, N Cool, N Cool Super, and N Cool W（Double）Super. The coolness andperformance respectively differ, and the“N Cool”series is available in bed pads,
blankets, pillow pads, and pillows, etc. For“N Cool”, while we keep the prices
same, we raised the level of cool touch by checking and improving the entire
process down to the raw materials so customers are able to use our“N Cool”
products more comfortably.

As the counterpart of“N Cool”for spring and summer, NITORI offers the“NWarm”series that absorbs moisture and generates heat for the autumn
and winter to complete our seasonal bedding goods for the whole year.“NWarm”absorbs moisture generated from the body during sleep and turns it
into heat. In addition to the warmth from the heat generation effect, themoisture absorption effect makes you feel nice, smooth, and comfortablewithout feeling sticky. Since“N Warm”uses acrylate materials, you can feel3 degrees Celsius warmer compared to polyester products. In addition,“NWarm”uses MOISS UP which is the most excellent moisture absorption
product in the market. The high performance“N Warm”series’moistureabsorption is more than double that of wool. For“N Warm”as well, while
the price remains same, we improved the heat retaining capability byincreasing the volume ofmoisture absorption andheat generation fibers.

“N Cool”and“N Warm”are so popular that there was a time when we were

“If we sell the same products again this year, we must reduce the price orout of stock. However, we analyzed a tremendous amount of data andestablished a system that allows us to accurately forecast the quantity ofsales in a given period of time and set a fixed amount appropriately to manage
inventory shortages and surpluses so that we may constantly provide
products. In addition, due to mass production, we have been able to secure
production lines and install new machines in sewing and fabric plants. In thisway, we established a system so we could obtain cooperation from plants.
To secure the maximum sales volume, we created a dedicated team andcontinued to carry out the PDCA cycle to build a stable product supply system.
Therefore, even if the sales volume suddenly increases, we are able to supply
products to stores.

improve the quality/performance.”Under this policy, our products evolve
each year as the entire manufacturing process down to the raw materials
is reviewed. This is made possible by NITORI's vertical merchandising
method in which we manage and operate the entire manufacturing
process on our own. In addition, our improvements are not limited toperformance. We also increase product types, colors, and patterns so
customers can enjoy coordinating our products. Furthermore, we
produced new CMs that are different from the conventional NITORI CM.
The CMs communicate appealing features of“N Cool”and“N Warm”with
one phrase. In coordination with advertising flyers and stores, the productcompetitiveness was further enhanced. As a result,“N Cool”and“NWarm”recorded significantly greater sales than the previous year anddrove sales. NITORI will continue to establish a stable product supply
system by improving the accuracy of sales and inventory plans, and we will
work on further improvement of quality and increases of product types.

NITORI HOLDINGS ANNUAL REPORT 2017

generation performance for autumn and winterNITORI HOLDINGS ANNUAL REPORT 2017

16

03

Supporting the Basics of Life with
Coordination Favored by More Customers

Features｜“DAY Value”“&Style”

CONCEPT

STYLE

COLOR

Brighten up everyday life withproducts“Offering the Unexpected.”

Simple and modern

A wide variety of color selections

Functional, basic, and casual styleusing straight lines as the basic
designAvailable in widely popular hues
and tones selected from basic“NITORI Colors”

Meeting with a wide variety of needs by proposing coordination
using basic products necessary for customer lifestyles.

Development of brands by pricerange to build customer trust

Proposing new lifestyles with basic style and more
CONCEPT

STYLE

COLOR

Make your daily life stylish.

4 styles to select from according to
your taste

Sophisticated colors

Proposing“sophisticated style”tohelp fulfill more luxurious home living

Natural modern

VintageFeminine

Traditional Japanese

Selection of grayish colors under
the theme of“sophisticated chic”

NITORI embarked on a new approach for total coordination toward promoting a more prosperous living.
We released the new“DAY Value”and“&Style”product brands.
Many chain stores have private brands which are classified by characteristics according to the respective price ranges.
“DAY Value”and“&Style”were developed as NITORI’s value price brand and quality brand based on thoroughmarket research including visits to the U.S. and Europe.
We aim to offer lifestyle items which are affordable and match the preferences of customers by unifying prices,color schemes, and styles.
Relationship Between Price and the Brand
Quantity（1）Value Price Brand（1）Value Price Brand（2）Quality

Inexpensive private brand which you canenjoy collecting casually

Brand（2）Quality Brand

Luxurious private brand that pursues thevalues of price, quality, and design（3）Competitive（3）Competitive Brand

Brand

Price

17

NITORI HOLDINGS ANNUAL REPORT 2017

Private brand to compete in the low pricemarket that pursues further inexpensivenessof the value price brandCoordination proposing“lifestyles”to customers

Promotion of reform by utilizing
strengths of the GroupIn the past, since we proposed coordination using products foreach series, items that are designed for coordination werelimited, and customers needed to purchase every item to makecoordination possible. However, in our new brands, products inthe same style and same price range are available in a wide
variety of colors and variations. Customers can enjoy
coordinating products casually according to their own tastes. If
the products are from the same brand, adding such products
little by little to your room/house will pull the whole look
together. NITORI is also working on the development of humanresources including interior coordinators to recommend
coordination to customers. NITORI's aim is to have customers
think of NITORI as a specialized store that presents staged
products in which customers can picture different lifestyles andthat has many specialists who can give advice on coordinationin addition to being a store offering coordinated products.

NITORI is able to work on product development where“price, quality, and design”are well-balanced for new
brands. All of this is made possible by our Group’s
strength of carrying out everything from market researchto sales on our own. By utilizing this strength, NITORI is
able to actively make suggestions to customers. NITORI
will recommend coordination that meets various needs byoffering basic home goods necessary for customers withbasic designs in a wide variety of colors and sizes. At thesame time, by offering products which customers can“buycasually”and“which can be coordinated easily,”NITORI
will suggest new lifestyles. What NITORI aims for is toenable customers to be able to coordinate rooms naturally
if they purchase home goods at NITORI. This is how NITORI
itself will transform into a“Lifestyle Suggestion Company”
in addition to“Offering the Unexpected.”
NITORI HOLDINGS ANNUAL REPORT 201718

NITORI’s History

Achievement of 30 consecutive years of growth in income and profit
Consolidated net sales for FY2016 were ¥512.9 billion and ordinary
income totaled ¥87.5 billion which means we achieved growth in income
and profit for 30 consecutive years. Since our foundation, NITORI has
constantly improved the present situation and taken on various
challenges without being tied to traditional customs in the industry. In
addition to such efforts and thanks to support from many stakeholders
including customers, we were able to achieve such results.
“To provide the foundation of prosperous home living to the global
community.”Under this mission, NITORI will continue to grow to achieve
our vision.

FY1987

Transition of the number of stores
Acceleration of expansion of the number of stores No. of Years Taken

FY201616 Stores 471 Stores

One store

100 stores

36 years

29 times

100 stores

200 stores

6 years10.3 billion 512.9 billion

200 stores

300 stores

3 years

50 times

300 stores

400 stores

3 years

500 million 87.5 billion
Ordinary Results
Income164 times
Multiplying factor
Ordinary Income Margin Results
17.1％
5.2%

400 stores

500 stores〔Plan〕2 years

Number Resultsof stores Multiplying factor
Results

Net
Sales

Multiplying factor

244
188

Net Sales（¥100 million）
Ordinary Income（¥100 million）

1

10

16

18

0.5

43
1

103
5

117
8

68.2

82.2

88.2

89.2

73
20

18

21

21

24

27

37

33

29

73

82

116

100

130

162

145

331
300

632

159
10

175
12

177
13

193
15

235
17

256
18

308
19

348
20

404

489

132
9

21

35

38

90.2

91.2

92.2

93.2

94.2

95.2

96.2

97.2

98.2

99.2

00.2

01.2

787
71
02.2

89

03.2

152

130

04.2

05.2

190

06.2

4,172

875

3,487
750

591

621

634

13.2

14.2

679

535
474

1,567
1,087

3,310

4,581

3,876

2,861

2,172

339

1,294

882

3,142

2,440

1,891

50

42

373

268
217

Number of Stores

420

471
5,129

265

231

07.2

08.2

09.2

10.2

11.2

12.2

15.2

16.2

17.2

NITORI’s Milestones
1987

By proposing and realizing“prosperous home living”over half a century, NITORI has grown.

1967“NITORI Furniture Store”established.

From 1967

Our origin is the pursuit of customer satisfaction

Establishment of
Manufacturing, Logistics
and Retail Sales

1973 1975

Direct purchase frommanufacturers started.
Passion for“low price”andthe first step for Manufacturing,
Logistics, and Retail Sales

2007

From 2007

The first overseas store“Kaohsiung Dream Mall
Store”opens in Taiwan.
Lifestyle proposal in the
global market

Advancing to overseas
markets and the central
Tokyo area

19

NITORI HOLDINGS ANNUAL REPORT 2017

2008

“Nango Store,”
Japan’s first air

1979Home Furnishing Declaration
Departure from a furniture store, fullscale operation for private brand creation

Industry-first automatedmulti-level warehouse
opened.
Realization of stablesupply and cost reductions

2010

2009

Achieved ¥200 billion in sales
Opened our 200th store

The first“Price Cut Declaration”started.
Price reductions for 1,000 items after
the collapse of Lehman brothers

1989

Switched to a holding company system. Made thelogistics division independent as Home Logistics
Co., Ltd. and inaugurated the corporate sales division.
Expansion of value creation for corporations

2011

Launched the DECOHOME
business and NITORI's firstmall operation business.
First step for new business formats

Newly established the
Kanto Distribution Center.
Own development of IT system

Listed on the Sapporo Overseas NITORI plant started operation.
Securities Exchange. Establishment of a global quality control system

1993

2013

2012

Achieved ¥300 billion in sales
Opened our 300th store

2006

Started trading work on our own
Proactive implementation of self-run

2002 2003

Opened the first store in
mainland Japan.
Advanced into mainland Japan
with the passion of employees.

Opened Aki-Home
as the first store in
the United States.
Attempt to realize
our dream in thehome of our dream

Entered the E-commerce market
Focusing on the pursuit ofcustomer satisfaction

2000

1994

1980

dome construction,
opened.
Departure from
common sense

2004

Invested in furniture manufacturer“Marumitsu Mokko”which
resulted in Marumitsu Mokko becoming an actual subsidiary company.
Expansion of overseas suppliers

Listed on theFirst Sectionof the Tokyo
Stock
Exchange.

Achieved ¥100 billion in sales
Opened our 100th store

2015

Opened the "Printemps Ginza Store" as
the first store within a department store.
Achieved ¥400 billion in sales
and opened our 400th store

2014

Opened the "Wuhan Star CityStore" in Hubei province as
the first store in China.
Venturing into a gigantic market

2016

Acceleration of store openings in the central
Tokyo area Opened the“Shinjuku Takashimaya
Times Square Store”and“Nakameguro Store.”
Full scale launch of coordination proposals
NITORI HOLDINGS ANNUAL REPORT 201720

Financial and Non-financial Data

Financial Data
Net Sales

Net Sales（100 million yen）

（％）

900

3,876

4,172

30

857

5,129

5,000

3,487

Operating Income
Ratio of Operating
Income to Net Sales（100 million yen）

6,000

4,000

Operating Income/Ratio of
Operating Income to Net Sales

Net Income Attributable to Ownersof Parent/Earnings per Share（EPS）（100 million yen）

600

730

4,581

630

615

600

20

17.6

3,000

469

663

16.3

15.9

16.7

15.9

358
325.83

300

2,000

400

10

384
350.27Net Income Attributableto Owners of Parent
Earnings per Share（EPS）
（yen）
599
600

Equity/Return on Equity（ROE）（100 million yen）

3,094
400

425.10

30.0

3,296

3,000

22.5

18.7

376.14
2,000

200

（％）

3,936

4,000

540.93414

EquityReturn on Equity（ROE）

2,091

2,470
16.8

14.9

14.7

16.6
15.0

200
1,000

7.5

1,000

0

FY2012FY2013

FY2014FY2015Gross Profit/Ratio of Gross
Profit to Net Sales（100 million yen）

3,000

0

FY2016Gross Profit
Ratio of Gross
Profit to Net Sales
（％）

2,782

90

FY2012FY2013

FY2014

2,000

2,016
52.0

53.2

54.2

60

600

30

FY2014FY2015FY2016

0

679

634

621

16.3

FY2013

FY2014FY2015FY2016

4,878

20.9
3,217

4,047

4,145

18.7

18.3

2,842

0

Total Assets
Return on Assets（ROA）

5,000

22.6

0

（％）

16.4

FY2015FY2012

0

100

20

80

15

60

40

1,000

5

20

0

0

FY2013

FY2014FY2015FY20160

Dividends per Share65

10

FY2012FY2015

82

19.4

2,000

0

FY2014

（yen）

25

45

FY2016FY2013

Dividends per Share

17.1
10

FY2012FY2014（100 million yen）

3,000

16.4

FY2013

Total Assets/
Return on Assets（ROA）

4,000

300

0

FY201220

17.8

FY2013

30

0

750

1,000

FY2012

（％）

875

900

55.2

0

Ordinary Income
Ratio of Ordinary
Income to Net Sales（100 million yen）

2,183
52.3

0

FY2016

Ordinary Income/Ratio ofOrdinary Income to Net Sales

2,435
1,926

FY2015FY2016FY201250

FY201355

FY2014FY2015FY2016

Non-financial Data
Number of Stores

Number of Stores in Japan
Number of Overseas Stores（％）（Stores）

500

471

400

300

Wage Revision Rate（Total from 2009）

300
14
286

331
19
312

373
27
346

420

43

37

428

383

NITORI
Keidanren Japan Business Federation

20

19.1

15

10

150

12

171

9

100

4.0

FY2013

FY2014FY2015NITORI HOLDINGS ANNUAL REPORT 2017

FY2016

0

2008

2009

2010

2012

2013

2014

2015

2016

0

3

FY2012

109
90

60

50

2011

124

6

2.1

FY2012

120

96

91

6.0

150

90

114

CO2 Emissions（t-CO2）

129
10.5

145
6.5

CO2 Emissions in Domestic
Logistics per Store in Japan

9.8

7.7

8.0

5

（％）

200
9.1

12.9

No. of Female Employees
in Management Positions
Ratio of Female Employees
in Management Positions

200

10.4

100

21

（people）

16.3

200

0

Japanese Trade Union Confederation
Major GMS

No. of Female Employees
in Management Positions

FY2013

FY2014FY2015FY2016030

0FY2012FY2013

FY2014FY2015FY2016NITORI HOLDINGS ANNUAL REPORT 201722

Topics for the Year

April 2016 NITORI MALL Hirakata opened
NITORI opened the largest NITORI MALL,“NITORI MALL Hirakata,”in Hirakata City,
Osaka in April 2016. Under the basic concept of“Place for everything your family needs,”
NITORI MALL Hirakata centered around 4 flagship stores exceeding 3,000 m2 in floor
space meets various needs in a variety of family life scenarios. In addition to asupermarket, drugstore, and restaurants, etc., a large selection of affordable goods areavailable in stores specializing in fashion, general merchandise and baby/children goods.

July 2016 In-store Pickup Service launched

Order online at“NITORI-Net”

Pickup your orderat a NITORI store!

In July 2016, NITORI launched a service that enables customers to pick up products
purchased from the“NITORI-Net”e-commerce website at NITORI stores. Customers
are able to select the store for picking up orders as well as the day and time on
NITORI-Net’s order page.（Some stores are not available for in-store order pickup.）
Customers can place orders 24-hours a day on NITORI-Net, and shipping is freewhen the in-store pickup service is used.
In order to improve customer convenience and satisfaction and encourage visits
to our stores, NITORI will enhance omni-channel retailing.

July 2016 “NITORI Otaru Art Base”opened
NITORI Otaru Art Base is based in 3 historical structures that formerly housed the Mitsui Bank
Otaru Branch, Takahashi Warehouse, and the Arata Trading Company located in the heart of Otaru
City, Hokkaido. In July 2016, NITORI opened the“Stained Glass Museum（Former Takahashi Warehouse）”and“Art Nouveau
Glass Museum（Former Arata Trading Company）”as the first of three museums comprising NITORI Otaru Art Base.
NITORI supports education, tourism, and cultural activities in Hokkaido mainly through our Hokkaido aid fund. We will
make the NITORI Otaru Art Base a place that can offer opportunities that many people from Japan and overseas can enjoy,
nurture a sense of appreciation, and share the excitement of amazing culture and art.

September 2016 Good Design Award 2016 received
In September 2016, NITORI’s“Karusara Bathrobe”which was jointly developed with TEIJIN Limited was awarded theGood Design Award in the A1-09 Household Goods and Daily Necessities category. In addition, the 2016 Good DesignAward was also awarded to the“robot warehouse（worker-friendly robot warehouse）”operating in the online
shopping distribution center in Kawasaki City, Kanagawa in the B2-01 Space and Interior for Business Use category.
NITORI received a Good Design Award for the 4th consecutive year. This is the first Good Design Award forHome Logistics Co., Ltd. which is NITORI's logistic subsidiary.

November 2016 Our first METI（Ministry of Economy, Trade and Industry）Minister’s Awards received

System to Provide“Prosperous Living”

In November 2016, NITORI received the“METI Minister’s Awards”which is the top award in the“10th METI Minister’s Awards forBest Contributors to Product Safety”in the Large Retailer category. The Ministry of Economy, Trade and Industry（METI）launched
the Best Contributors to Product Safety Awards program in 2007, and 2016 marked the 10th anniversary. Recently, serious accidents
2016
with products around us have received attention as social problems and the interest in product safety has been increasing.
This award was given to the NITORI Group in recognition of our 3 key efforts, namely,（1）Efforts to secure safety by united collaboration,（2）Thorough technology
evaluation and efforts for accident prevention, and（3）Efforts for the entire supply chain by management education and plant audits.
Through this award, NITORI will continue to expand its product safety measures to the world without being limited to Japan in the pursuit of realizing the prosperous home living of customers.

In December 2016 NITORI opened the Shinjuku Takashimaya Times Square StoreNITORI opened the first NITORI store in the Shinjuku area in the“Takashimaya Times Square”south building in December 2016. This is the second NITORI store in a
Takashimaya Group commercial facility following the“NITORI Takashimaya Konandai Store”in September. This NITORI Store occupies the 1st to 5th floors in the southbuilding of the very popular“Takashimaya Times Square”shopping complex and showcases different visual presentations on each floor. By taking advantage of thecharacteristics of stores with multiple floors, we set life scenarios for each floor such as living rooms, dining rooms, and bedrooms, and we exhibit coordination in each
respective scenario. At the same time, we propose total coordination of housing space through all floors. We also target the further expansion of customer demographics
mainly consisting of users of Shinjuku station which boasts the world's highest number of passengers by utilizing the station front location characteristic.

23

NITORI HOLDINGS ANNUAL REPORT 2017

NITORI HOLDINGS ANNUAL REPORT 201724

Business Model

To Provide the foundation of prosperous home living
to the global community by“Offering the Unexpected”
In order to realize“prosperous home living,”we need to set affordable prices so everyone can make a purchase without hesitation and secure high quality
and great performance at the same time. Therefore, NITORI added a logistics function to our conventional“manufacturing and retail sales”business model.
NITORI established its original“Manufacturing, Logistics and Retail Sales”SPA model where a series of processes from product planning and raw
material procurement to manufacturing, logistics, and sales are carried out in the entire group while reducing intermediate costs as much as possible.

Our manufacturing is always based on
the customer perspective
To create a better everyday life
for our customers, we develop
products by undertaking
research from the customer
perspective. Our pursuit of acomfortable life for customers
leads to product development.

Coordination proposal
Products coordinatedby color, pattern, andstyle are developed from scratch.
NITORI is able tooffer fresh newstyles with thesenatural designs.

Raw material procurement fromall over the world

All parts are managed individually in-house,from the parts manufacturing stage onwards

We do not leave raw
material procurement toothers. We collectinformation about potential
sourcing areas and then visit
the areas ourselves before
we begin procurement.

We direct andmanage manufacturing all the way
through production.
NITORI’s systemcreates products withconsistent quality.

To P27

Market Research
Product Planning

Raw Material
Procurement

Product
Development

We do everything in-house, from product planning,
manufacturing and logistics to retail sales:
We aim to have all our products satisfy“Offering the Unexpected.”

CallCenterImproving customer satisfaction
By swiftly sharing
customer feedback
with relevant departments, we are able toprovide even better
service, improve our
products, and increasecustomer satisfaction.

25

NITORI HOLDINGS ANNUAL REPORT 2017

Sales

To P29

Enjoy shopping without having toworry about prices
By streamlining
operations NITORI
creates an
enjoyable shopping experience
for all its customers.

Manufacturing

To create products "Offering the Unexpected", we emphasize the following 3 key elements:

Components of“Offering theUnexpected”

1 Affordability

Prices that make products easily obtainable.

2 Quality and Functionality

Use-appropriate quality and functionality.

3 Coordination

1）a full range of products to support each usage scenario.
2）the above are linked by style and color.

Import andLogistics To P28

QualityCheck

To P30Even our logistics is self-run

Quality responsibility for all items

We built our own
distribution network,from product importation
to delivery to customers.
Using the latest systems,
NITORI is streamlining
its operations andlowering costs.

For our customers to beable to use our productswith peace of mind, we
evaluate safety and quality
from every angle. Products
will hit the store shelves
only if they conform to ourstrict standards.

NITORI HOLDINGS ANNUAL REPORT 2017

26

01

02

Manufacturing

Logistics

Logistics network
optimizing object ﬂow

We procure raw materials around the world torealize low price and high performance products

27

Realization of“Offering the Unexpected”
with thorough cost awareness

Expansion of product items manufactured
by NITORI in the new Vietnam Plant

Japan’s largest distribution centers
and advanced distribution system

Original system realizes further
efficiency increases and cost reductions

In raw material procurement, we go back from the prices which customers areasking for, and we thoroughly check not only quality and performance but also costconditions. We independently negotiate with overseas manufacturers and procure
raw materials from around the world. We directly send the raw materials that we
procured from around the world to plants that satisfy NITORI’s quality standards andcreate products. We import approximately 90% of all our products from overseas.
The NITORI Group started operation of a plant in Indonesia in 1994, and in
2004, plants in 2 locations in Vietnam started operation. As furniture development
and manufacturing facility sites, these plants mainly manufacture“NITORI STUDIO”
products including kitchen cabinets, sofas and mattresses, etc.
In product development, NITORI has created a series of original products one
after another while constantly taking on challenges and conducting innovation.
Without being tied in existing concepts, we review all materials and parts and repeat
scientific verification from scratch.
In addition, since the reduction of costs during the import of products produced
overseas to Japan is one of our major challenges, we opened offices in Asian
countries to support logistics overseas.
These systems for securing product quality, stable production systems, andthorough cost awareness realize“Offering the Unexpected”and improve grossmargin results.

Nitori Furniture Co., Ltd. has gigantic plants in Indonesia
and Vietnam. At the beginning of operations, these plants
manufactured closets and kitchen cabinets. Since 2013,
sofas and mattresses which are completely different fromthe products that these plants originally produced havebeen added to production items. We procure raw
materials from around the world without using trading
companies, and we use just in time production to
manufacture multiple products in small lots according tocustomer needs while minimizing inventory risks.
In response to increased demand, we are building a
new plant in Ba Ria-Vung Tau, Vietnam for operation
launch in FY2017. This new plant will begin with the
production of bed mattresses. Other production items arescheduled to be
added later.

All logistic functions in Japan are carried out by Home Logistics Co., Ltd.
NITORI Group also has its own logistics sites for the purpose of quick andefficient product delivery to stores located across Japan and cost reductionsin product storage. The Kanto Distribution Center and Kansai Distribution
Center boast the largest scale in Japan and serve all 47 prefectures inJapan. These distribution centers cover 98% of the population.
Our logistics system development does not focus only the equipment
aspect. Starting with the introduction of the industry’s first automatedmulti-level warehouse in 1980, we established our own inventory control
and stable product supply system while evolving know-how in the
non-equipment aspect. The NITORI Group developed everything from theoverseas collection and transport of products for shipping to the delivery
system of small lots of products to stores in Japan. By loading products
from multiple suppliers in one container at overseas logistics sites, we aredecreasing the wasteful movement of products between sites in Japan.
Furthermore, we built a system to deliver products from the manufacturer
to customers' homes, and we also carry out container round use where
empty containers from cargo unloading during import are used for cargo
exports. Through these initiatives, NITORI has also been working on
reducing CO2 emissions.

NITORI aggressively invests in logistics to reduce logistics
costs. In 2016, NITORI introduced the automated warehousepicking system“AutoStore.”This automatic warehousesystem features high storage density and high speed productloading and unloading. This system not only increases work
efficiency but also offers a worker-friendly environment since
workers do not need move around the warehouse or lift or
carry products. These features were appreciated, and thesystem was awarded the 2016 Good Design Award.
We are scheduled to introduce“Butler,”an unmannedtransfer robot using AI, and we are also planning to build
cutting-edge large scale distribution centers in Satte, Nagoya,
and Kobe, and to start operation of a large distribution centerin Taicang, China. NITORI will build a system to optimize themovement ofobjects in the
global perspective
by increasing
efficiency further
and reducing cost.

NITORI HOLDINGS ANNUAL REPORT 2017

NITORI HOLDINGS ANNUAL REPORT 2017

28

03

04

Stores

Quality

Presence of stores makes theliving of people in the community
prosperous and convenient

29

Delivery of safe andworry-free products with
our strict quality standards

Our passion for thoroughly
communicating product allure

Proposing total coordination forcustomers to enjoy life

Establishment of a“United Collaboration
System”with business partners

Detailed management systemcorresponding to product life cycle

What NITORI focuses on the most is the“sales floor”in each store.
The sales floor is where NITORI presents products to customers.
To completely communicate the allure of products to customers,
we carefully consider how the products look and are arranged.
Since NITORI would like customers throughout Japan to enjoy
shopping, we have been working on the creation of flexible storesthat can meet various location conditions.
For sales floors, we repeatedly test different elements of how
the entire sales floor looks, how the sales floor is located, and thewidth of the aisles, etc. to create even better sales floors. Ourfindings are then used in all stores. We work on the creation of"easy-to-see" and "easy-to-buy" sales floors for customers as wellas the promotion of standardization of stores so we can reduce
costs by saving on the amount of work.
In addition, we offer a variety of different product lineups
depending on the store so product lineups match regional
characteristics and customers can decorate their homes/rooms
according to their lifestyle. NITORI also displays model rooms thatare entirely coordinated by NITORI. We believe our greatest
strength is being able to propose different lifestyles across Japan.

What NITORI considers customers are most in need of to enjoy
comfortable home living is total coordination, and we believe
various furniture, fabrics and livingware must be in harmony inthe entire home to feel pleasant and comfortable. All NITORI
products are created for beautiful unification in terms of colorand design. Customers are able to select products from a wide
selections of colors, patterns, and materials according to theirlifestyles and coordinate their rooms/home easily.
In addition, in order to improve the ability of employees topropose coordination, NITORI holds internal“Coordination
Contests.”Our stores are respectively rooted in each
community. We are promoting enhancement of the proposal of
coordination that is possible only by such stores. NITORI offers aplace where customers can enjoy shopping not only with our
products but also with
our total coordination
ability including
proposals.

NITORI has been working on the enhancement of quality over many years while
overseeing everything from product development to manufacturing and sales. To
further pursue quality, we established the Quality Control Management Division in
2006, and by using the quality control methods of automobile manufacturers,
NITORI has made many improvements and conducted reform.
In product safety, product liability and seller’s responsibility cannot be
separated, must not be separated, and must not be left to others. This is ourpolicy, and under this policy, NITORI established the“United Collaboration
System”without business partners. For business partner plants that manufacture
our products, we strictly check whether or not the plants are able to meet
NITORI’s quality level based on our“Quality Manual.”Even after the start ofmanufacturing for NITORI, we do not leave quality control up to the plants.
Through various measures including a study group session called“Open House”
in an improvement model plant, we provide guidance on production technology
and plant management with the aim of continually fulfilling product safety.
Furthermore, during the selection of products to be sold, in addition to
general strength tests, NITORI carries out performance verification, structural
technology evaluations by disassembling products, and durability evaluations withdurability testers in“technology evaluation meetings”by taking the utilization
environment and situation into consideration.

We focus not only on product quality but also quality in the manufacturing process andlogistics, and service quality in stores and delivery. We promote cross-sectoral quality
improvement while carrying out the PDCA cycle in 5 steps of development,
manufacturing, logistics, retail sales, and after-sales service in addition to products.
NITORI is promoting reform with the aim of achieving even higher levels.
In the logistics phase, based on our belief that a drastic change of logistics is a
short cut to“optimal quality and low price,”we established an unprecedented“self-run
logistics”system and conduct inspections during logistics. In after-sales service, weinvestigate the cause of defects/malfunctions thoroughly with actual products while
also implementing thorough after-sales service. In addition, we also share informationcollected from customers at our call center（NITORI customer service center）with
relevant departments. Furthermore, our membership card with warranty program
enables us to manage the purchasehistory of customers. The
Manufacturing
membership cards can be used forDevelopment NITORI’s Logistics
warranty purposes in case a productcrossdefect occurs. At the same time,-functional PDCA
effective management of cardholder
After
Retail-salespurchase histories helps us create
Sales
Servicebetter products.

NITORI HOLDINGS ANNUAL REPORT 2017

NITORI HOLDINGS ANNUAL REPORT 201730

Store Opening（Japan）｜NITORI/DECOHOME/Online Shopping

NITORI
Aggressive store openings in“large city centers”and“small trade areas”for the convenience of all customers

Stores that match ourcustomers’lifestyles
NITORI has launched various types of stores to ensure our customers canfreely coordinate their living space and enjoy prosperous home living.

Hokkaido Area
20 stores

By 2032:

3,000

No. of Stores as of the End of FY2016

471Stores

Since the opening of the“NITORI Printemps Ginza Store”in 2015（current Marronnier Gate
Ginza Store）, we have developed new locations such as department stores in central Tokyo like
Shinjuku and Ikebukuro. Our new sales floors propose lifestyles by featuring strictly selectedfashionable items among NITORI product lineups with an awareness of coordination. In
addition, NITORI is promoting store openings in regional“small trade areas”so our customers
can shop more conveniently in nearby locations. NITORI will continue to make improvements
and conduct reform every single day so even customers who are not entirely familiar withNITORI can enjoy the fun of total coordination that can only be experienced in NITORI.

StoresDECOHOME
Achieved 50 store openings. Differentiation fromNITORI as a new format by developing original products

Japan 428 Overseas 43

Tohoku Area
29 stores
Hokuriku/Koshinetsu Area
31 stores

Chubu/Tokai Area
49 stores
Chugoku/Shikoku Area
42 stores

Kinki Area
78 stores

Kanto Area
133 stores

2015
DECOHOME Asakusa
ROX3G Store2015 DECOHOME Ikebukuro
Sunshine City Store（Closed down）
2016 Ikebukuro Sunshine CityStore（Sales floor increase）
地域Store・国別2017 Tobu Ikebukuro

Shinjuku東北Times Square
29
Store
店舗数

DECOHOME Sasazuka
Ekimae Store
Nakameguro

MeguroStore Openings
in Central Tokyo（）

Store openings around theTokyo Yamanote train line

NITORI HOLDINGS ANNUAL REPORT 2017

2016
前期末比
Ueno Marui
Store
(+1)

Kinshicho

2016 Olinas
Kinshicho Store(+1)
関東
133 (+24)
Ginza
2016
国内計428北陸・甲信越 Shibuya
31 (+1)
DECOHOME
2015
Shibuya（＋51Printemps）
Tokyu
Toyoko49
Store (+2)
中部・東海
Ginza Store（Closed down）
近畿
Shimbashi
78
(+12)
Ebisu
2017 Marronnier
Gate Ginza Store
中国・四国 42 (+2)（Sales floor
九州・沖縄 46Shinagawa(+2)
increase）

Sasazuka

2016
Nakameguro
Store

Asakusa OshiageTokyo2016 Shinjuku

20
Takashimaya（2017年2月期末） 北海道

Kyushu/Okinawa Area
2016
46 stores

31

Ueno

Ikebukuro

2015
Oshiage
Ekimae
Store

台湾
2017
atre
米国
Meguro
Store
中国

27
5
11

(+3)
2010

海外計43
（＋6）
Venus Fort

Venus Fort Store(+3)

We open“DECOHOME”stores in shopping malls as the“nearest HOME FASHION STORE”.“DECOHOME”stores
offer daily essentials that customers need to purchase frequently by adding certain elements such as a wide varietyof colors. NITORI aims to position DECOHOME as a store where customers can drop by everyday with new store
design and store operation in addition to an original
product lineup. In 2017, we opened the 50th store. We
will continue to promote original product development
further and differentiate DECOHOME from NITORI as adifferent brand so DECOHOME and NITORI stores can befound even in the same shopping center in the future.

Achieved 50
store openings
51

Transition in the
Number of Stores
39

Number of Stores

29
17

3

4

’11.2

’12.2

8
’13.2

’14.2

’15.2

’16.2

’17.2

Online Shopping
As the core of our omni-channel strategy,offering online shopping with the same enjoyment as shopping in stores
Responding to various kinds of needs such as“Before visiting the store, I like to research
products on the website first,”“I cannot visit the store very often,”and“I like to make mydecision at home after checking the store during the day,”etc. has allowed our online
business to drastically grow. NITORI focuses on the enhancement of functions of our online
shopping website so customers can enjoy online shopping just as they enjoy shopping at
our stores. In our website, you can check furniture coordination and search store
inventories. In July 2016, NITORI launched a free service that enables customers to pick up
products purchased from our“NITORI-Net”website at NITORI stores for added customer
convenience. Furthermore, our online shopping website offers products found only online
such as colors not available in stores and furniture with custom order sizes. As the core of
the NITORI Group’s omni-channel strategy, NITORI takes advantage of the strength ofactual stores to offer a place where customers can enjoy shopping more conveniently.

Online Ordering In-Store Pickup Service
From order to in-store pickup:
Minimum 4 days

When the store
does not havethe productFrom order to in-store pickup:
Minimum 2 days
When the store has stock

Customers canpick up the productfrom the store

NITORI HOLDINGS ANNUAL REPORT 201732

Store Opening（Overseas）

Aiming to fulfill the bringing of more
prosperous living to the global community
by establishing a world-class NITORI brandIn the future, the furniture and home fashion global market is expected to expand mainly in Asia. In this background, the NITORI Group will accelerate overseas
store openings, and even after the stores are opened, we will offer product selections suited to the lifestyle of each location while continuously reforming the stores.
For global business deployment, we will develop products which will only be available in respective countries while promoting the development of products that canbe used globally. Through these measures, we will establish a world-class NITORI brand and offer more prosperous living to the global community.
U.S.A.

China

China

TaiwanChina

Acceleration of store openings with an eye on the less competitive inland area of China as well

11 Stores

In October 2014, NITORI opened the Wuhan Star City Store as the first store in China. We open stores in China under the“NITORI”brand, and we are accelerating store
openings mainly in shopping malls which have seen a significant rise in numbers. As of February 2017, we have 11 stores in China.
While China, which is known as the world’s factory, has an abundance of human resources and suppliers that we can work with, few stores offer everything fromfurniture, interior goods and general merchandise, and the“home fashion”business format which NITORI is strong far from mature. The truth is we have received
requests from many commercial facilities, and in addition to our affordable price settings even for China, our focus on displays proposing total interior coordination andefforts to increase our brand recognition from participation in bridal fairs and car-card advertising have resulted in a shift into the black in some stores.
We plan to open a large scale distribution center in Taicang City to deliver products across China. The plan for this distribution center is to not only be a supply
base for China but also a logistics site connecting production/procurement plants across Asia and Japan. For China, we will concentrate management resources as thenext growth pillar and aggressively open stores.

TaiwanTo increase stores by intensive store openings that incorporate the small store size and urban store strategy of Japan

27 Stores
Change in Ratio of Stores between
Domestic and Overseas（Planned）
Domestic

91%

FY2022

9%74%（Planned）

33

U.S.A.

Overseas

FY2016（Actual）

FY2032

U.S.A.

（Planned）

33%

0

20

5 Stores

26%
67%

40

60

80

NITORI HOLDINGS ANNUAL REPORT 2017

Taiwan（％）
100

In May 2007, in response to overtures from Kaohsiung City, we opened the“Kaohsiung Dream Mall Store”（currently closed down）as the first NITORI store in Taiwan as well as
NITORI’s first overseas store. We also focused on original product development and procurement suited to customers in Taiwan and regional characteristics. As an overseas
company, NITORI lagged behind but as we opened stores in major cities including Taipei, our brand recognition increased, and NITORI’s allure of“low price and high quality”
made inroads among local customers. The number of stores in Taiwan reached 27 as of February 2017, and store operations in Taiwan have turned positive in a single year.
Meanwhile, the population of Taiwan is concentrated in major cities, and we need to promote store openings in various formats including the small size store and urban
store strategies. We believe our store opening plan in Taiwan will be a model format for Southeast Asian and other countries with similar geographical conditions. In addition, we
will target an expansion of the sales volume by actively working on the development of products with local specifications and promoting the allure of hit products in Japan suchas“N Cool.”

Aiming for the establishment of a system to survive fierce competition
Approximately 40 years ago, Chairman Nitori visited chain stores in the U.S. where he was amazed and impressed to find much lower prices, greater
selection, and higher quality furniture and interior goods than in Japan. Since the launch of our first store under the brand name of AKi-HOME in
October 2013 in the country that can be called our birthplace, NITORI has been opening stores intensively in Los Angeles and increasing our presence.
While communicating the allure of our products which are“affordable and high quality”as in Japan, we also focus on product development andprocurement unique to the U.S. in consideration of the differences in physical stature and culture. Furthermore, we promote store creation according
to local needs including product selections based on the high frequency of redecoration and floor layouts mainly consisting of highly cost competitive
furniture, and together with expanding the furniture sales floor space, we are working on the establishment of a profitability model.
The U.S. is the world largest consumption location and the world's most competitive market. We believe that success in this market will lead tothe establishment of a world class business model. Thus, we will promote the establishment of a structure towards evolving into a genuine global
company by developing business while repeatedly experimenting through trial and error.
NITORI HOLDINGS ANNUAL REPORT 201734

The NITORI Group Businesses

Positioning ourselves as a true“LIFE STYLE SUGGESTION COMPANY,”
utilizing a wide range of business fields
The NITORI Group has developed a range of businesses so customers can style their homes
the way they like and enjoy a prosperous life.
In order to deliver a true luxurious lifestyle for all people in a variety of ways,
we endeavor to expand our range for the future too.

Mall

Home Logistics

Home goods, fashion and food services:a shopping center designed from the customer point of view

External logistics business by use of NITORI's
extensive Japan-wide logistics network

Any good-quality product that enhances people’s lives can bebought conveniently with“one-stop shopping”: this is NITORI’s
idea of a shopping center that is designed from a customer/user-centric perspective. The“Power Center,”a type of shopping
center that anchors fast-growing stores from each retail model isvery common in the U.S., but inJapan, it is rare, especially GMC or
realtor-operated shopping centers.
Making a contribution to enhancing
people’s lives in the areas where
they live by promoting“NITORI
MALL”is NITORI’s new“DREAM”.
NITORI MALL Hirakata

Home Logistics conducts a direct sales logistics businessof delivering large size items to non-NITORI customers byusing delivery networks covering 98% of the population ofJapan. Since delivering items under consignment of othercustomers besides NITORI can lead to improving theloading efficiency of trucks andincreasing the frequency ofdeliveries to regions where Home
Logistics does not often venturein the delivery of NITORI products, the satisfaction level of
NITORI customers is improved.
NITORI’s logistics network

Renovation BusinessBusiness to Other Businesses

Handling everything from goods to construction work

Penetrating the B2B market, by making effective
use of our product development capability

NITORI has launched an interior renovation business for homes,
stores, and other facilities. This business is focused on providing acomplete overhaul of any space. This total renovation service, with afocus on our proprietary products such as integrated kitchen systems
and restroom sink units, is a holistic service from the initial proposal
right through to construction work for system-baths, toilets, and otherindoor renovations. The service is not simply about replacing existing
units, but rather about offering added
value through a total coordination
service using NITORI’s furniture andhome ware to fully complement
renovations. NITORI’s business model ofdoing everything in-house gives rise to
our new way of doing business.

Showroom

We keep expanding our B2B business with these five main business areas as pillars.
● Office Business ● Commercial / Educational Business● Nursing / Medical Facility Business● Hotels and Living Conditions Business ● Model Home Business
Recently more and more corporate clients have been looking to lower
the cost of installations in their offices and facilities. We are developing
products that meet such needs for corporate clients, utilizing the SPA
know-how which NITORI has acquired throughits home furniture sales business. The
corporate sales business market has been
expanding rapidly over the past few years, andwe are aiming at further growth in this market.
Example of NITORI products in use: Office

NITORI PUBLICNITORI FACILITY

As an advertising company, NITORI PUBLIC has developed a wide range of businesses
that extend beyond the boundary of the NITORI Group

From creating spaces for stores to insurance

NITORI PUBLIC is an integrated advertising agency which provides a variety ofservices, including strategic communication planning, advertising and sales
promotion. We currently conduct marketing work forseveral clients, including a real estate company and a
travel agency. We have recently also been putting
efforts into developing novelty goods. Through learning
more from dealings with a wide range of different
enterprises, NITORI PUBLIC aims to play a role inenhancing the value of the entire NITORI Group.

Foundation
Supporting
the Business

NITORI FACILITY handles maintenance duties in order to keep the stores andoffices of the NITORI Group in an optimal condition, and pursues the goal of
creating an ideal space where our customers can feel comfortable, while reducing
the maintenance cost at the same time. Furthermore, as an insurance agency
dealing with both life insurance and liability insurance, we support our customers
and employees to design their future in a way that is both satisfactory and reliable.
In-store insurance shop:“NITORI no hoken +Life salon”(at NITORI Minami-suna store)

Examples of novelty goods

35

NITORI HOLDINGS ANNUAL REPORT 2017

NITORI HOLDINGS ANNUAL REPORT 2017

36

NITORI Group CSR
Basic
Basic
Philosophy
Philosophy

Shaping a brighter future, together with society

The existence of NITORI makes daily life in the community convenient and enriched.
We believe this is the meaning of our existence and our social responsibility as a corporation. NITORI
will continue to work on initiatives toward an "indispensable existence" while cherishing ourpartnerships with the many people who support us.
Use of ISO26000 Guidance on Social Responsibility
Activities as a Community Member for Growth of the Community

Working with
the Community
Regional Support Activities
Cultural Support Activities
Endowed Courses at University
Activities Supporting Sports
NITORI International Scholarship Foundation
NITORI Culture Foundation
Main Donation and Support Activities

Consumer Related Challenges

Working with Customers
Product Safety/Quality Control
Awards for Product Safety
Fair and Honest Trade

Working with Suppliers
Nitori Holdings

CSR
Basic Attitude

Organizational Governance/Human Rights/Labor Practices

Fair and Honest Trade
Guidance to Plants/Open House
Logistics Partnership

Environment

Working with Employees

Environmental Activities

Human Resource Development
Occupational Health and Safety
Organizational Governance
Promoting Diversity

Initiatives in Product Development
Initiatives in Store Operations and Offices
Initiatives in Logistics
EV Charger

The NITORI Group aims to provide products and services suitable forthe consumer life styles of various countries and regions under theGroup's corporate philosophy of "To provide the foundation ofprosperous home living to the global community." In recent years,
people have been seeking "less expensive and better quality" items
more than ever before, and the needs of society for an expansion offurniture and interior related products have been increasing due tochanges in life style. In response, NITORI has brought together thetechnology and know-how of all of our group companies, and we willcontribute to society through realizing communities where everyone
not only in Japan but also around the world can enjoy genuine
prosperous home living without hesitation. Besides thoroughcompliance, NITORI will work on the development of local
communities as a good corporate citizen by striving for broad
communication with communities and continuously making ourcorporate group grow through human resource development.

Fair Trade Practices
Fair and Honest Trade● Logistics Partnership●

Guidance to Plants/Open HouseAs well as improving quality by using jigs for individual processes or implementing tool management,
we provide guidance in order to establish traceability systems through techniques such as
visualization（Kanban method）and modular production（zero intermediate stock）. Together with
suppliers, we simultaneously provide one-on-one human resource development to entry-level
employees and focus on the development of quality control specialists（overseas/Japan）.
We also organize visits to plants operated by our best suppliers in an effort to improve skills
across manufacturing workplaces as a whole. We are committed to expanding initiatives suchas these in the future and we are planning to provide guidance in plant management as well.

Logistics PartnershipHome Logistics Co., Ltd. has begun holding a“Management Policy Meeting for
Suppliers,”starting in FY2015 to explain anticipated future management and partnershipdevelopments. NITORI has adopted a proactive approach towards working together with
suppliers to implement training related to furniture handling and delivery, and to jointly
organize initiatives aimed at achieving further enhancement in service quality.

Environment

Environmental Activities●

Initiatives in product development“METI Minister’s Awards”recipient as an outstanding

contributor to product safety

We inaugurated the Quality Control Management Division in 2005, and we continuously carry out various
efforts such as securing safety by united collaboration with our suppliers（under consignment for
manufacturing）, completely evaluating technology, implementing measures for accident prevention, andproviding management education in production sites. In recognition of such efforts, NITORI was awarded
the“METI（Ministry of Economy, Trade and Industry）
Minister’s Awards”in the“10th METI Minister’s Awards forBest Contributors to Product Safety”in the Large Retailer
Category. NITORI will continue to work on delivering safe andworry-free products by incorporating new technology daily todeliver products that truly satisfy“Offering the Unexpected”.
Awards for Product Safety
2008（2nd Awards） Silver Prize Winner: Large Retailer Category
2011（5th Awards） Director-General for Commerce, Distribution and Industrial Safety Policy Award : Large Retailer Category
2013（7th Awards） Director-General for Commerce, Distribution and Industrial Safety Policy Award : Large Retailer Category
2014（8th Awards） Director-General for Commerce, Distribution and Industrial Safety Policy Award : Manufacturer and Importer Category●

Initiatives in logistics

Initiatives in logistics

The NITORI Group carries out environmental activities in each
respective phase of manufacturing, logistics and retail sales.
● Efficiency of transportation by compressing the packing size of the product● Eco-friendly product development ● Simplification of product packaging● Efficient use of wood and paint
Mainly through these measures, NITORI is contributing to asignificant reduction of CO2 emissions.

●〈Compression packaged〉（t-CO2）120

28 ㎝ 28 ㎝

97 ㎝

Other Initiatives
Energy saving at stores and head offices
In FY2013, we started to introduce the use of LED ceiling lights to newly-opened
stores. As for existing stores, we are also changing their lighting sequentially. As
of FY2016, approximately 250 stores introduced LED ceiling lights. In addition to
LED lights, other energy saving facilities, such as a heat pump type air conditioner,
demand control system（which suppresses electric power consumption）andBEMS（Building Energy Management System）, have also been introduced.
● Use of eco-friendly packing material（Use of reusable packing materials for furniture product transportation between bases）● Introduction of TV/WEB meetings● Installation of fluorescent lights with highly reflective backing plates in ourlarge scale logistics facilities● Initiatives for a paperless environment（"Introduction of paperless records", "Installation of projectors in meeting rooms"）
●

129

124

109

90
197 ㎝

EV charger

Reduction of CO2 emissions by making transportation more efficient
We promote efficiency in product transportation and work on
reduction of CO2 emissions by shortening travel distance. Although
we used to deliver ordered goods to customers via an in-house
distribution center, we are now working on creating a new mechanism that enables us to deliver goods directly from the manufacturer
to the customer and eliminating relay points. As a result of theseactions, CO2 emissions from our stores are decreasing.
CO2 emissions per store from domestic transportation*The illustration is forreference purposes only.

●

0

FY2012FY2013

FY2014● Container Round Use
In cooperation with many ofour business partners, NITORI
applied the round use
approach to 2,000 containers
in 2014 and was able to reduce
CO2 emissions by approximately 130 tons.

CO2 emissions

96

90

FY2015FY2016[Container Round Use]
Cargo
Importer
Empty
Cargo

Port Facility

Approximately 90% of NITORI products are planned and developed on our own (private brand), andthey are produced overseas and imported into Japan. We set original quality standards and work on
improvement and reform of quality every single day. Before launching new products, we conduct
in-house quality testing. If any problems are found, we demand improvement from the
manufacturing plant, and we repeat this process until the product passes our standards. In addition,
when a defect is discovered in a product, we investigate the cause thoroughly in the company,
formulate improvement measures, and provide improvement guidance to the plants. NITORI
believes, in order to realize genuinely prosperous living of customers, we must create products atlower prices than anywhere else while maintaining proper quality, and we who are the closest to thecustomers must take responsibility for our products until the products are no longer used.

Initiatives in store operations and offices

16 ㎝

Awards for product safety

Quality control throughout product life cycles●

Initiatives in product development to reduce the environmental impact

Working with Customers●

1. All NITORI Group company employees shall not accept offers todine with any suppliers without permission from executives even if
they pay half of the cost.
2. All NITORI Group company employees shall not accept any gifts
including souvenirs and commemorative gifts from any suppliers.
3. All NITORI Group company employees shall not accompany any
suppliers to entertainment facilities, etc. or accept introductions toentertainment facilities, etc.
4. All NITORI Group company employees shall not accept offers todine with any suppliers personally or sightsee at tourists sites at
the invitation of any suppliers.
5. All NITORI Group shall establish a "true partnership" where any
unfair, dishonest and unclear trade with any suppliers is completely eliminated.

Guidance to Plants/Open House

We believe that eliminating injustice, unfairness, or opaquenessand building trust with our partners will lead to a sustainablebusiness, as we strive to establish a“true partnership.”Consumer Related Challenges
Product safety/Quality control●

Fair Trade Practices/Partnership with Suppliers

103 ㎝

●

“NITORI Group Fair Trade Declaration”

Working with Suppliers

Exporter

Installing electric vehicle
charging facilities
To support eco activates bycustomers who come to shop
at NITORI, we installed 558
electric vehicle charging
facilities in 208 NITORI storesnationwide.

2016（10th Awards） Minister of Economy, Trade and Industry Award : Large Retailer Category

37

NITORI HOLDINGS ANNUAL REPORT 2017

NITORI HOLDINGS ANNUAL REPORT 2017

38

NITORI Group CSR
Activities as a Community Member for Growth of the Community

Organizational Governance/Human Rights/Labor Practices

Working with Employees●

Human Resource Development●

Working with the Community

Occupational Health and Safety●

Organizational Governance●

Promoting Diversity

Human Resource Development
NITORI's human resource development program fosters genuine specialists who contribute to the community[Education is the greatest form of welfare]
Knowledge-based education
Transfer-based education
Self-development
Education system to develop
the intellectual
capability of management

Development of a wide variety of
talented human resources
through experience in different divisions

System for improving what needs to be
improved and growing strengths

This is an educational system whereby employees
learn about a range of different principles throughtraining. The educational system is open to everyone from entry-level to executive level employees
and not only does it improve the knowledge of
employees but it also offers an opportunity for
employees to find work challenging and rewarding.

To develop "specialists" of Manufacturing, Logistics and Retail Sales where things must becomprehensively considered to create new value,
in NITORI, employees are transferred every two to
three years so that they gain more hands-on
experience.

NITORI offers many learning opportunities for
employees to improve inadequate skills andknowledge necessary for self achievement. We
also provide financial support for course fees insubjects that are difficult to study within thecompany.

Wide variety of training and systems for the developmentof human resources that support our global deployment
Overseas seminars
Every year, around 1,000 people take part in our seminars in America. The main goal is tounderline our dream and vision by getting employees to experience“the foundation ofprosperous home living”we aspire towards. In addition, employees have the opportunity to
see how people in the U.S. live and to visit the chain stores that make those lifestyles possible.

Occupational Health and Safety
Acknowledgment in the 2017 Certified Health and Productivity Management
Organization Recognition Program（White 500）
On April 1, 2016, we issued a“Health Management Declaration”with the goalof promoting good health for our employees and their families. Driven by
NITORI Group’s dream of providing“the foundation of prosperous homeliving,”we have been committed to creating pleasant working environments,
offering a better work-life balance, and keeping all of our employees in good
health, both physically and mentally. In February 2017, NITORI was selected as
one of the 235 organizations recognized under the 2017 Certified Health andProductivity Management Organization Recognition Program（White 500）.

Organization that brings out the maximum power of individuals

Seminar in Europe/Vietnam Plant training ● Training for employees at every level
Position-specific training（store manager training）● Optional training ● Internal qualification systems● E-learning ● NITORI Color Coordination School（NCCS）● NITORI World Circle（NWC） ● Language classes● External correspondence courses● One-off payment system for educational qualifications ● Education mileage system● Global trainee system（Selection system）●●●

We established the Hokkaido Aid Fund in 2005 to provide support for arange of activities aimed at revitalizing the region mainly in Hokkaido.
● Ishikari Marugoto Festa 2016 "NITORI Ishikari Fireworks Event"● Corporate version hometown tax to Yubari City in Hokkaido, etc.

As a part of our social contribution activities, to contribute to the further growth of tourism in
Hokkaido, we established the“NITORI Otaru Art Base”which is housed in four historicalstructures in the heart of Otaru City. We will promote the greatness of the amazing culture
and art of Hokkaido to the world from here.

Endowed courses at universities, providing lectures outside of the company
upon request from other companies/organizations

Activities Supporting Sports/
NITORI Ladies Golf Tournament & NITORI Women’s Running TeamTo communicate the basic principles of logistics and service centered on chain
store management to young people who will lead the next generation, NITORI
holds endowed courses featuring those who work on the front lines at companies
as lecturers. In addition, in response to requests from various companies/organizations, NITORI proactively provides lecturers outside of the company.

We organize a ladies golf tournament with the goal of giving an added boost to sports in Hokkaido. In addition,
we promote marathon running as a sport that keeps people mentally and physically fit as part of a fulfilling
lifestyle. We have been working on athlete development, particularly marathon runners, via the NITORI
Women’s Ladies Track & Field Club in an effort to contribute to local communities and society as a whole.

[Universities Where
NITORI's Endowed
Courses Were Provided]● Hokkai-Gakuen University
From 2005 to 2010
● Waseda University From2010 to 2014
● University of Tokyo From2015 to 2019（scheduled）

NITORI International Scholarship Foundation

Organizational Governance

Other Main Training and Self-development Support System

Regional Support Activities ● Cultural Support Activities ● Endowed Courses at University ● Activities Supporting Sports
NITORI International Scholarship Foundation ● NITORI Culture Foundation ● Main Donation and Support Activities
Regional support activities
Cultural Support Activities "NITORI Otaru Art Base"●NITORI's organization structure has only three levels, namely, the management layer（top）,
managers, and staff members. Therefore, improvement ideas from workplaces can easily
reach top management, and directions of the company and instructions from the top are alsoeasily shared. Every single employee shares the purpose of the company and maximizes theirabilities in their work share in the company. In addition, individual employees fulfill theirpotential which cannot be achieved alone
Company structure（3 levels）
as part of the organization. NITORI believes
Top management
continuously carrying out these systems is
Managers (Specialists)"organizational governance".

To return the favor to Asian countries that support us in product supply and our business activities, weestablished the "NITORI International Scholarship Foundation" in March 2005. The foundation provides
scholarships to students who study in Japan not only from Asia but also from around the world. Down
the road, the foundation will expand its support to students who study at universities in their homecountries overseas for even more global perspective activities. The foundation provided scholarships
which do not need to be paid back to 1,080 students（40 countries and regions）as of August 2017.

NITORI Culture Foundation

NITORI established the "NITORI Culture Foundation" to provide support for the growth andinheritance of "culture", "art" and "tradition," and to build a bridge to the formation of new culture in
April 2011. The foundation provides grants to activities with a high public profile and public interest
that can be expected to contribute to the community. We provided grants to 88 organizations in fiscal
year 2016. In regards to tree planting, as the "Furusato Hokkaido 10-Million-Tree Planting Project",
we planted more than 3.3 million trees over the course of 10 years from 2007.

Staff*For details on corporate governance, refer to P43.

Promoting Diversity
Establishing a Diversity Promotion Committee

Enhancement of various systems for a wide variety of working options

In fiscal year 2013, we established a Diversity Promotion Committee in conjunction between labor and management, with the goal of
creating a more pleasant working environment. Committee members play a central consulting role and submit recommendations
to the company to enable employees to choose from a wide range of working options in line with changes in their environment
which includes major life events such as getting married, having and raising children and caring for family members.

As initiatives to promote diversified working options, the NITORI Group introduced and implemented a wide variety of systems.
● Reduced-hours system ●“Job return”system ● Promotion of employee type changes● Half-day paid leave system ● Work from home system ● Financial assistance for
daycare costs on Sundays and National Holidays ● Nursing care system enhancement

Global recruitment
We actively recruit human resources from a
global perspective, in line with our vision ofachieving 3,000 stores by 2032.
Our goal is to create pleasant workplaces
where all employees can share in our
mission statement and vision statement.
39

No. of non-Japanese nationality employees（Employees）

280

300

181

200
100
0

No. of Paid Holidays Given and Used
（Day）

20
15
10

97

5
0

FY2015NITORI HOLDINGS ANNUAL REPORT 2017

FY2016FY2017（Forecast）

No. of Paid Holidays Given

Employees taking childbirth and childcare support leave

No. of Paid Holidays Used

15.4

16.6

17.4

7.9

9.1

9.7

FY2014FY2015FY2016（Employees）

120
80
40
0

109
64

FY201476

FY2015Main Donations and Support Activities
Support Activities in Disaster-Stricken Areas● ¥1.8 billion monetary donations (including the donation of goods including bedding) to help those affected by the East Japan Earthquake● ¥200 million monetary donations to help those affected by the Sumatra Earthquake（Indonesia）● ¥100 million monetary donations to help those affected by the Niigata-Chuetsu Earthquake in Japan● ¥100 million monetary donations to help those affected by the Great Sichuan Earthquake（China）● Donation of bedding to help those affected by the Hiroshima Landslides● Donation of bedding to help those affected by the Kumamoto Earthquake● ¥10 million monetary donations to the Tokai University Aso Campus which was damaged by the Kumamoto Earthquake● Monetary donations to help those affected by the large scale fire in Itoigawa City
● Donation of commodities to help those affected by the heavy rainfall in northern Kyushu（Asakura City, Hita City）

Other Donations and Support Activities● Support for international students who study in Japan from around the world（NITORI International Scholarship Foundation）● Support for free-of-charge charity elementary school（SVCC）in Vietnam● Huizhou Education Fund ● Establishment of an education fund in Shanghai● Endowed courses at universities（Hokkai-Gakuen University/Waseda University/University of Tokyo）● Monetary donation to the International University of Health and Welfare● Monetary donations to Yubari City and Otaru City ● NITORI Hokkaido Aid Fund
● Support for growth and inheritance of culture, art and tradition（NITORI Culture Foundation）● Monetary donation to Japan Alliance for Humanitarian Demining Support（JAHDS）● Monetary donation to a fund to support U.S. veterans who claim they were affected in the Operation Tomodachi mission

FY2016NITORI HOLDINGS ANNUAL REPORT 201740

Directors and Executive Officers（As of May 11, 2017）⑤ Masanori Takeda
⑥

⑦

⑤

②

①

⑪

⑧

③

④

⑨

⑩

Managing Director
General Manager of Merchandising Division
Biography
Mar. 2004
Feb. 2008
Oct. 2012
Sep. 2013
May 2014
Oct. 2015
May 2016
May 2017⑥ Muneto Tamagami

Managing Director
General Manager of General Planning Office and Manager of Public Relations Division
Biography
Aug. 2007
Aug. 2010
July 2014① Akio Nitori② Toshiyuki Shirai

Biography

Biography

Mar. 1972
May 1978Feb. 2003

Founded the Company, Senior Managing Director
Representative Director and President of the Company
Director of P.T. MARUMITSU INDONESIA（currently P.T.
NITORI FURNITURE INDONESIA) (current position）
Director of Marumitsu Co., Ltd.（currently Nitori Furniture Co., Ltd.）（current position）
Oct. 2003 Director of MARUMITSU-VIETNAM EPE（currently NITORIFURNITURE VIETNAM EPE）（current position）
Nov. 2009 Representative Director and Chairperson of Nitori Public Co., Ltd.
Mar. 2010 Representative Director and President of Deco Home Co., Ltd.（current position）
May 2010 Chairperson of DECOHOME CHINA Co., Ltd.（current position）
Aug. 2010 Representative Director and President of Nitori Co., Ltd.
Representative Director and President of Home Logistics Co., Ltd.
Aug. 2011 Representative Director and President of Nitori Facility Co., Ltd.
May 2012 Director and Chairperson of Nitori USA, Inc.
June 2013 Representative Director, Chairperson and President of Nitori Public Co., Ltd.
May 2014 Representative Director and Chairperson of Nitori Co., Ltd.（current position）
Representative Director and Chairperson of Home Logistics Co., Ltd.
Representative Director and Chairperson of Nitori Facility Co., Ltd.（current position）
Mar. 2015 Representative Director and Chairperson of Nitori Public Co., Ltd.
May 2015 Director and Senior Advisor of Home Logistics Co., Ltd.（current position）
Feb. 2016 Representative Director and Chairperson（CEO）of the Company（current position）
May 2016 Outside Director of KOHNAN SHOJI CO., LTD.（current position）
June 2016 Chairperson of NITORI（CHINA）HOLDING Co., Ltd.
Mar. 2017 Director and Senior Advisor of Nitori Public Co., Ltd.（current position）

Apr. 1979
May 2001
May 2004
May 2008
May 2010
Aug. 2010③ Masanori Ikeda④ Fumihiro Sudo

Representative Director and Chairperson
Chief Executive Officer（CEO）

Senior Managing Director
Officer in Charge of China Sales Operations

Dec. 2010
May 2012
May 2014

Mar. 2015
May 2015
Feb. 2016
Mar. 2017

Biography

Apr. 1979
May 2001
May 2004
May 2010
Aug. 2010
May 2014

Mar. 1979
Sep. 2000
Apr. 2001
May 2005
May 2008
May 2010

NITORI HOLDINGS ANNUAL REPORT 2017

Joined the Company
Director of the Company
Managing Director of the Company
Senior Managing Director of the Company
Director and Senior Managing Executive Officer of the Company
Director of Nitori Co., Ltd.
Director of Home Logistics Co., Ltd.
Director and General Manager of Merchandising Division of Nitori Co., Ltd.
Director of Nitori USA, Inc.
Representative Director and Executive Vice President of the Company
Representative Director and President of Nitori Co., Ltd.（current position）
Representative Director and President of Home Logistics Co., Ltd.
Representative Director and President of Nitori Facility Co., Ltd.（current position）
Representative Director and President of Nitori Public Co., Ltd.
Representative Director and Chairperson of Home Logistics
Co., Ltd.（current position）
Representative Director and Chief Operating Officer（COO）of
the Company（current position）
Representative Director and Chairperson of Nitori Public Co.,
Ltd.（current position）
Chairperson of NITORI（CHINA）HOLDING Co., Ltd.（current
position）

Senior Managing Director
General Manager of Store Development Division

Biography
Joined the Company
Director of the Company
Managing Director of the Company
Managing Executive Officer of the Company
General Manager of Store Operations Division of Nitori Co., Ltd.
Senior Managing Director of the Company（current position）
Senior Managing Director and General Manager ofMerchandising Division of Nitori Co., Ltd.
Oct. 2015 Senior Managing Director and Officer in Charge of China
Sales Operations of the Company（current position）
June 2016 President of NITORI（CHINA）HOLDING Co., Ltd.（current position）

41

Representative Director and President
Chief Operating Officer（COO）

May 2014

Joined SHIMACHU CO., LTD.
Representative Director of KANSAI SHIMACHU CO., LTD.
Joined the Company
Executive Officer of the Company
Managing Director of the Company
Managing Executive Officer and General Manager of Store
Development Division of the Company
Senior Managing Director and General Manager of Store
Development Division of the Company（current position）

May 2015
May 2016
May 2017

Joined the Company
Manager of Recruitment Division of the Company
Merchandising Manager of Soft Goods Department of
Merchandising Division of Nitori Co., Ltd.
Merchandising Manager of Furniture Department of
Merchandising Division of Nitori Co., Ltd.
Executive Officer of the Company
Merchandising Manager of Furniture Department of
Merchandising Division of Nitori Co., Ltd.
Executive Officer of the Company
General Manager of Merchandising Division of Nitori Co., Ltd.
Senior Executive Officer of the Company
General Manager of Merchandising Division of Nitori Co., Ltd.
Managing Director of the Company（current position）
General Manager of Merchandising Division of Nitori Co., Ltd.（current position）⑦ Takaharu Ando
Director*Independent Outside Director
Biography

Joined the Company
Manager of Recruitment Division of the Company
General Manager of General Planning Office and Manager of
Public Relations Division of the Company
Executive Officer and General Manager of General Planning
Office and Manager of Public Relations Division of the Company
Senior Executive Officer and General Manager of General Planning
Office and Manager of Public Relations Division of the Company
Managing Director and General Manager of General Planning
Office and Manager of Public Relations Division of theCompany（current position）

Apr. 1972
Sep. 1994
Aug. 1999
Aug. 2004

Joined National Police Agency
Chief of Gunma Prefectural Police Headquarters
Director of Public Security Department of Metropolitan Police Department
Director General of Commissioner-General’s Secretariat of
National Police Agency
Aug. 2007 Deputy Commissioner General of National Police Agency
June 2009 Commissioner General of National Police Agency
Oct. 2011 Retired from National Police Agency
May 2013 Outside Director of the Company（current position）
June 2014 Outside Director of Toyoko Inn Co., Ltd.（current position）
June 2016 External Director of AMUSE INC.（current position）⑧ Takao Kubo

⑨ Kazuhiko Takeshima

Biography

Biography（Full time）
Director（Audit and Supervisory Committee Member）

Dec. 1977
Feb. 1989
May 1993
May 2001
Apr. 2003
May 2004
Aug. 2010
May 2016

Joined the Company
General Manager of Management Policy Office of the Company
Full-time Auditor of the Company
Director and General Manager of Management Planning Office of
the Companys Office of the
Director and General Manager of President’Company
Full-time Auditor of the Company
Auditor of NITORI Co., Ltd.（current position）
Auditor of Home Logistics Co., Ltd.（current position）
Director（Audit and Supervisory Committee member）of theCompany（current position）⑩ Kazuhiro Suzuki

Director（Audit and Supervisory Committee Member）*Independent Outside Director
Biography
Apr. 1976
Jan. 2009
June2010
Aug. 2011
June2012
Jan. 2014
May 2014
June2014
May 2015
June2015
May 2016

Director（Audit and Supervisory Committee Member）*Independent Outside Director

Apr. 1965
July 1994
May 1995
July 1997
Jan. 1998
Jan. 2001
July 2002
Sep. 2012
May 2013
June2013
May 2016

Joined the Ministry of Finance
Deputy Director-General for Policy Coordination in thes Secretariat of the Ministry of Finance
Minster’Director General of Economic Planning Agency（present Cabinet Office）
Commissioner of National Tax Agency
Head of Domestic Affairs Office of Cabinet Secretariat
Assistant Chief Cabinet Secretary
Chairman of Japan Fair Trade Commission
Retired as Chairman of Japan Fair Trade Commission
Director (Outside Director) of the Company
Outside Auditor of Japan Airport Terminal Co., Ltd.（current position）
Outside Director (Audit and Supervisory Committee member) of the Company（current position）⑪ Tsuneyoshi Tatsuoka

Director（Audit and Supervisory Committee Member）*Independent Outside Director
Biography

Appointed a public prosecutor
Director of the Criminal Affairs Department of Supreme Public Prosecutors Office
Chief Prosecutor of Tokyo District Public Prosecutors Office
Superintending Prosecutor of Hiroshima High Public Prosecutors Office
Superintendent Prosecutor of Fukuoka High Public Prosecutors Office
Retired from Fukuoka High Public Prosecutors Office
Registered as an attorney（Daiichi Tokyo Bar Association）
Chief Director of Japan International Training Cooperation
Organization（current position）
Auditor（Outside Auditor）of the Company
Outside Auditor of Saitama Resona Bank, Limited（current position）
Outside Director（Audit and Supervisory Committee member）of the Company（current
position）

Apr. 1980

Joined the Ministry of International Trade and Industry

July 2008

Deputy Director-General in the Manufacturing Industries
Bureau of the Ministry of Economy, Trade and Industry
Director-General for Policy Planning and Coordination at the Ministry of Economy, Trade and Industry
Councilor of Cabinet Secretariat
Deputy Vice-Minister of Economy, Trade and Industry
Vice-Minister of Economy, Trade and Industry
Retired from the Ministry of Economy, Trade and Industry
Outside Director（Audit and Supervisory Committee member）of the Company（current position）
Outside Director of Asahi Kasei Corporation.（current position）（present Ministry of Economy, Trade and Industry）
July 2006 Deputy Director-General in the Minister’s Secretariat of the Ministry of Economy, Trade and Industry

July 2009
Jan. 2010
Aug. 2011
June2013
July 2015
May 2016
June2016

NITORI HOLDINGS ANNUAL REPORT 201742

Corporate Governance

Basic Policy

Criteria for Judging Independence

NITORI Holdings Co., Ltd.（“the Company”）places toppriority on sustainable growth and the medium- to long-term
improvement of corporate value in its management. The
Company considers enhancing its corporate governancesystem necessary for achieving these goals.
To enhance corporate governance, the Company aims tobuild an organizational structure to respond promptly to any
changes in the business environment, practice fair andtransparent management as a listed company, and disclose
accurate information to all stakeholders in a timely fashion.

Meanwhile, the Company will develop an internal system toestablish its corporate social responsibility and corporate
ethics.
This basic policy describes the Company’s framework forcorporate governance.
To maintain effective corporate governance in the context ofthe changing social demands and circumstances surrounding
the Company, the Board of Directors will review this basic
policy from time to time and will revise the policy whennecessary. Any revision will be communicated promptly.

The Company shall designate as independent directors those outside directors who do not fall under any of
the following items:
1. A person that has been an executive director, executive officer,
manager, or other employee（hereinafter collectively referred to as“executive”）at the Company or its subsidiary in the past ten years.
2. A person, or an executive of a judicial person, that holds 10% or moreof the Company’s total voting rights directly or indirectly.
3. A person, or an executive of an entity, for which the Company or its subsidiaryis a major business partner（Note 1）and a person, or an executive of an entity,that is a major business partner of the Company or its subsidiary（Note 2）.
4. A financial auditor for the Company or its subsidiary, or an employee
etc. of the financial auditor.

Overview of the Governance System
the effective monitoring of appropriate decision making andoperation execution. The Company’s policy for electing
appropriate independent outside directors is that a third or
more of the directors will be independent outside directors.
The Company appoints 3 independent outside directors as
members of the Audit and Supervisory Committee. The
committee consists of 4 members to enhance its auditing
and monitoring functions.

The Company has an audit and supervisory committee tomonitor the Board of Directors’performance of duties aswell as expedite and streamline decision-making. In addition
to the audit and supervisory committee and the board of
directors, the Company also has a financial auditor.
The Company believes that including independent outside
directors who have extensive experience and insight will
stimulate the Board of Directors’discussions and will ensure

5. A consultant, an attorney, a certified public accountant, a certified public tax
accountant, etc. who receives money and property benefits worth more than 10
million yen annually other than executive compensation from the Company or
its subsidiary（if the entity receiving property is an organization, such as acorporation and an association, a person belonging to the organization）.
6. A person, or an executive of an entity, that receives donations or grants
exceeding a total of 10 million yen annually from the Company or its subsidiary.

The following 4 outside directors satisfy the Criteria for Judging
Independence for Outside Directors set forth by the Company andall requirements of independent executives stipulated by the

Shareholders ’Meeting
Election/Dismissal

Election/Dismissal

Election/Dismissal

Name

Risk Management Division
Risk Management Committee
Reports,
Proposals

Electing,
Monitoring

Collaboration

Reports,
Proposals

Instructions,
Reports

Deliberation Division

Risk Control Conference
Reports,
Proposals

Instructions,
Reports

Representative Directors

Senior Managing Directors’Meeting, etc.

Auditing in the
Collaboration Internal Regulation
SystemOperation Audit

Each division and Group company in Japan and abroad

NITORI HOLDINGS ANNUAL REPORT 2017

Accounting
Audit

Audit and Supervisory Collaboration
Committee Office

Corporate Risk Control Division
Reports,
Proposals

Collaboration

Collaboration（ audit corporation）
Financial Auditor

Nominating and （）
Compensation Committee optional advisory organ
43

Auditing, Monitoring
Board of Directors
Audit and Supervisory Committee
Directors who are Audit and Supervisory Committee Members
Reports,
Proposals

8. A person whose spouse or a relative within the second degree ofkinship falls under any of items 1. to 7. If the spouse or the relative isan executive, the executive shall be limited to the one who executes
important operations（Note 3）.
9. A person that does not fall under items 1. to 8. but is at risk ofgenerating constant conflicts of interest with the ordinary shareholders.
Note 1: A business partner to which the Company or its subsidiaries paid anamount equivalent to 22 % or more of the annual consolidated sales ofthe business partner in the most recent fiscal year.
Note 2: A business partner that paid an amount equivalent to 2 or more of theCompany’s annual consolidated sales to the Company or its subsidiaryin the most recent fiscal year, or a business partner that gave a loanequivalent to 2% or more of the Company’s consolidated total assets to
the Company or its subsidiary at the end of the most recent fiscal year.
Note 3: An executive who executes important operations, such as directors（excluding outside directors）, executive officers, managers, anddepartment heads.

Appointment Status of Outside Directors

Organization chart for corporate governanceInstructions,
Reports

7. A person that falls under any of items 2. to 6. in the past 3 years.

stock market. Therefore, we judged that there is no possibility thatconflict of interest may occur with general shareholders, and we
appointed these directors as independent executives.
Reason for Appointment

Takaharu Ando

Mr. Ando has held prominent positions, including Commissioner General of the National
Police Agency, and has a wealth of experience and extensive knowledge. Based on his
professional experience and knowledge, Mr. Ando has been monitoring the Company’s
overall management and has been giving appropriate advice as an Outside Director.

Kazuhiko Takeshima

Mr. Takeshima has held prominent positions, including Chairman of the Japan Fair Trade
Commission, and has a wealth of experience and extensive knowledge. Based on his professional
experience and knowledge, Mr. Takeshima has been monitoring the Company’s overallmanagement appropriately and has been giving appropriate advice as an Outside Director.

Kazuhiro Suzuki

Mr. Suzuki is a legal professional who has held prominent positions, including Superintendent
Prosecutor of the Fukuoka High Public Prosecutors Office. He has made use of his extensive experienceand expertise by sharing his opinions about the Company’s management as an Outside Director.

Tsuneyoshi Tatsuoka

Mr. Tatsuoka has assumed many prominent positions, including Vice-Minister of Economy, Trade andIndustry. He makes the most of his wealth of experience and professional insight to strengthen the
Company’s corporate governance and compliance systems as an Outside Director appropriately.

NITORI HOLDINGS ANNUAL REPORT 201744

ComplianceInternal Regulation System Outline
The Company has adopted the basic policies below on internal
regulation systems in relation to the development of a system for thefollowing execution of the duties of the directors and employees of theCompany and the Group companies: risk management and compliancesystems to help with the execution of the duties, a system for ensuring
effective auditing so that the NITORI Group will implement its corporate

philosophy and corporate governance basic policy for the directors andemployees to perform their duties properly and effectively.
In principle, the basic policies on internal control systems apply to allof the Group’s entities. The purpose of the basic policies is for theGroup as a whole to enhance its enterprise value and to achieve
management transparency and efficiency.

Basic Policies on Internal Regulation Systems（“System to ensure appropriate operations”）
http://www.nitorihd.co.jp/ir/governance/pdf/System.pdf

Specific Initiatives for the System to Ensure Appropriate Operations
1.Initiatives for compliance
In order to enhance the internal regulation system of our Group, the Company aims to increase
compliance awareness by implementing compliance training according to the business format androles of each company. In overseas subsidiaries, in particular, we carry out joint meetings (NITORI
Global Legal Conference) separately from compliance training to share information on risks thatare unique to overseas countries and legal changes.
In addition, according to stipulations in the“NITORI Group Whistleblower System Regulations”,
the Company established contact points inside and outside of the Company for whistle blowing. We
conduct surveys and feature the whistleblower system in company newsletters periodically toincrease the recognition of the system among employees. Consequently, now, problems can bedetected early and implementation of improvement measures have had an effect.
2.Initiatives for the appropriate and efficient execution of duties
The Company holds weekly Senior Managing Directors’Meetings for prior deliberation so agile
decision making can be made in Board of Directors meetings. In Board of Directors meetings, during thedeliberation of agenda items and reporting on the execution of duties, lively discussions and opinion
exchanges with Outside Directors are carried out. In addition, for execution of certain important duties,
the authority over decision making is delegated to Representative Directors. We believe that thesemeasures assure the appropriateness and efficiency of decision making and effectiveness of monitoring.
For reporting of important items including sales performance and financial situation of each Group
company, the Company sets sales targets to be achieved by each respective company first, and thecompanies need to conduct periodical reporting to the Board of Directors meetings of the Company. This
enables us to monitor the appropriateness of duties executed by the directors of subsidiaries.

3.Initiatives for risk management for losses
To minimize losses or disadvantages that our Group suffers, the Company formulated
risk management regulations and a Business Continuity Plan（BCP）and established arisk management system initiated by the“Risk Management Committee.”According to
the Business Continuity Plan（BCP）, we carry out various training along with monthly“Risk Control Conferences”that review risks and implement countermeasures against
new challenges to strengthen our Group’s risk management system.
4.Initiatives to secure the effectiveness of auditing by
the Audit and Supervisory Committee
The Audit and Supervisory Committee of the Company holds Audit and Supervisory
Committee meetings periodically or extraordinarily to exchange auditing information. In
addition, full-time Audit and Supervisory Committee Members attend important
meetings such as the Board of Directors meetings, Senior Executive Directors’Meetings
and Challenge Progress Meetings, etc. For the compliance and establishment situationof internal regulations, the committee conducts audits by utilizing the internal regulation
system. This is illustrated by periodical audit results sharing with the Corporate Risk
Control Division. In addition, dedicated personnel are assigned to the job of assisting
audit work based on instructions of the Audit and Supervisory Committee to secure theeffectiveness of audits. Moreover, we ensure that the Audit and Supervisory Committee
has an opportunity to have periodical meetings with Representative Directors andfinancial auditors so they can exchange opinions necessary for auditing.

Financial Section

Status of Internal Audits and Audits by the Audit and Supervisory Committee
In the Company,（11）full-time staff members of the Corporate Risk Control Division carry out audits
based on the annual audit plan to check that the duties of each division are conducted appropriately andefficiently according to laws and regulations, articles of incorporation, and internal regulations. Important
items are reported to the Board of Directors, Audit and Supervisory Committee, and financial auditors.
The Audit and Supervisory Committee of the Company holds Audit and Supervisory Committee meetings
periodically or extraordinarily to exchange auditing information. In addition, full-time Audit and Supervisory
Committee members attend important meetings such as the Board of Directors meetings, Senior Executive
Directors’Meetings and Challenge Progress Meetings, etc. For the compliance and establishment situation
45

NITORI HOLDINGS ANNUAL REPORT 2017of the internal regulation, the committee conducts audits by utilizing the internal regulation system. This is
illustrated by periodical audit results sharing with the Corporate Risk Control Division.
Furthermore, the Company ensures that Directors who are Audit and Supervisory Committee Members
have an opportunity to have periodical meetings with Representative Directors and financial auditors so theycan exchange opinions necessary for auditing.
Takao Kubo（Director who is a full-time Audit and Supervisory Committee Member）has extended yearsof work experience in the management planning area and an appreciable amount of knowledge in financeand accounting.
NITORI HOLDINGS ANNUAL REPORT 201746

Consolidated Financial Information（Transition of Key Management Indicators）

Millions of Yen

Thousands of
U.S. Dollars

Millions of Yen

Gains and Losses

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2017

Net sales￥217,229￥244,053￥286,186￥314,291￥331,016￥348,789￥387,605￥417,285￥458,140￥512,958＄4,544,281

Gross profit

107,136

125,973

154,275

172,483

183,938

192,616

201,656

218,337

243,543

278,274

2,465,223

Selling, general and administrative expenses

81,041

92,876

107,818

119,818

125,987

131,066

138,583

152,029

170,503

192,497

1,705,329

Operating income

26,09533,09646,456

52,66557,951

61,55063,073

66,30773,03985,776759,893

Ordinary income

26,56833,96947,43053,594

59,151

62,19563,47467,92975,00787,563775,725

Net income attributable to owners of parent

15,464

18,353

23,83830,82233,54835,811

38,42541,45046,96959,999531,531

Net cash provided by operating activities

19,11425,18942,75734,65343,90841,98946,15452,92357,34377,930690,381（21,096）（20,656）（27,444）（26,684）（22,925）（21,937）（32,376）（43,023）（35,899）（42,047）（372,498）

Net cash provided by（used in）financing activities

2,403（2,602）（15,511）（3,577）（16,099）（22,047）（10,540）（6,654）（9,943）（6,414）（56,826）

Cash and cash equivalents at end of the year

8,381

10,318

9,968

14,035

18,41016,816

21,17925,71336,794

66,035585,004

Depreciation and amortization

4,055

5,026

6,308

7,762

8,456

8,227

8,850

8,921

9,398

10,40692,194￥ 22,741￥ 18,721￥ 27,398￥ 26,818￥ 22,348￥ 25,708￥ 30,083￥ 45,033￥ 26,605￥ 42,828＄ 379,416

Total assets￥179,614￥196,607￥218,386￥246,187￥267,153￥284,290￥321,703￥404,793￥414,541￥487,814＄4,321,529

Net assets

98,958114,378

134,164

146,038

174,949

209,764

247,898

310,531

330,968

394,778

3,497,327￥ 98,958￥114,378￥134,025￥145,766￥174,527￥209,125￥247,099￥309,413￥329,695￥393,693＄3,487,715

Ratio of gross profit to net sales（%）

49.3

51.6

53.9

54.9

55.6

55.2

52.0

52.3

53.2

54.2

54.2

Ratio of SG&A expenses to net sales（%）

37.3

38.1

37.7

38.1

38.1

37.6

35.8

36.4

37.2

37.5

37.5

Ratio of operating income to net sales（%）

12.0

13.6

16.2

16.8

17.5

17.6

16.3

15.9

15.9

16.7

16.7

（%）
Return on equity（ROE）

16.9

17.2

19.2

22.0

20.9

18.7

16.8

14.9

14.7

16.6

16.6

Equity ratio（%）

55.1

58.2

61.4

59.2

65.3

73.6

76.8

76.4

79.5

80.7

80.7

（%）
Return on assets（ROA）

15.8

18.1

22.9

23.1

23.0

22.6

20.9

18.7

18.3

19.4

19.4

（%）
Dividend payout ratio（Consolidated）

8.1

10.6

12.0

11.8

13.1

13.8

14.3

14.6

15.3

15.2

15.2

（times）
Price earnings ratio（PER）

18.3

15.9

16.6

13.6

11.2

10.6

13.3

20.2

19.4

22.7

22.7

（JPY, USD）
Earnings per share（EPS）

136.20160.70208.52274.44305.95325.83350.27376.14425.10540.93＄4.79

Net assets per share（JPY, USD）

870.87

999.791,178.34

1,329.34

1,591.64

1,906.91

2,248.80

2,806.99

2,981.27

3,530.51＄31.28

11

17

25

32.5

40

45

50

55

65

82

＄0.73

56,833,428

57,221,748

57,221,748

57,221,748

57,221,748

57,221,748

57,221,748

114,443,496

114,443,496

114,443,496

114,443,496

4,970

5,100

6,910

7,460

6,850

6,890

9,340

7,600

8,260

12,250＄108.52

282,462

291,830

395,402426,874

391,968

394,257

534,451

869,770

945,3031,401,933＄12,419,408

No. of stores in Japan（stores）

162

182

212

237

258

286

312

346

383

428

428

No. of stores overseas（stores）

1

4

5

7

10

14

19

27

37

43

43

Net increase（stores）

18

23

31

27

24

32

31

42

47

51

51

818,955

918,096

1,048,152

1,185,134

1,275,121

1,390,711

1,478,205

1,568,596

1,678,835

1,806,666

1,806,666

7,786

9,013

10,836

12,504

14,35815,272

16,88419,092

20,75922,111

22,111

Net cash used in investing activities

Capital expenditures
Financial Data

EquityKey Management Indicators

Per share Information

Dividend per share（JPY, USD）
Other Data

No. of shares issued at fiscal year end（shares）
Stock price at fiscal year end（JPY, USD）
Aggregate market price（million JPY, thousand USD）

Total sales floor area（m2）No. of employees（employees）（Notes）
1．The Company conducted a 2:1 stock split of common shares as of February 21, 2014. However, for our purposes here, calculation is made under the assumptionthat the stock split was conducted at the beginning of FY2007.

47

NITORI HOLDINGS ANNUAL REPORT 2017

2．US dollar conversion is calculated at 1 dollar = 112.88 yen.
3．The number of total employees includes the average number of temporary employees.（1 day 8 hour conversion）

NITORI HOLDINGS ANNUAL REPORT 201748

Review and Analysis of Management Results and Financial Situation

Business Environment
In FY2016, while personal consumption in Japan remained at astandstill, the employment and income environment continued to
improve, and the economy headed towards recovery. However,the unclear outlook continued due to uncertainties over the
global economy such as Brexit, U.S. Presidential election, and（3）Logistics

We introduced Japan's first“robot warehouse”featuring high storage density in the pursuit of a“worker
friendly workplace”in the“Online Shopping Distribution Center”operated by Home Logistics Co., Ltd.
（Kawasaki City, Kanagawa）. This robot warehouse was selected for the 2016 Good Design Award in theSpace and Interior for Business Use category. Furthermore, due to the increase of stores in the Kinki areaand expansion of the online shopping business, we consolidated logistics sites in Osaka Prefecture into
the logistic center in Ibaraki City, Osaka and opened the“Western Japan Online Shopping Distribution
Center”in the facility to further strengthen product supply sites and optimize and stabilize logistics.

（4）Store openings（Hirakata City, Osaka）in April
For store openings in Japan, NITORI opened“NITORI MALL Hirakata”
2016. It is the largest NITORI MALL in the Group thus far. In addition, we increased the pace of store
openings in central Tokyo and in department stores such as Shinjuku, Ikebukuro, and Nakameguro.
We also continue to open stores in the suburbs including the AEON Nayoro Store in Hokkaido, site of
the foundation of NITORI. Due to these store openings, we are acquiring new customer
demographics, and as a result, in FY2016, we added 24 stores in the Kanto area（26 store openings,
2 stores closed down）, 12 stores in the Kinki Area, and 9 stores in other areas of Japan（10 store
openings, 1 store closed down）. In total, we added 45 stores to increase the number of stores inJapan to 428. For overseas store openings, we opened 3 stores in Taiwan and China respectively.
Overseas, we now have 27 stores in Taiwan, 5 stores in the U.S., and 11 stores in China for a total of
43 stores. The total number of stores in Japan and overseas as of the end of FY2016 is 471.

economic trends in emerging countries of Asia including China.
In the furniture and interior products industry, due tointensified sales competition beyond business formats andincrease of logistics costs, etc., the difficult management
environment continued.

Management Results
Sales of Furniture and Interior Products
The NITORI Group adopted a new product strategy to create new
brands with different target price ranges. We launched“DAY
Value”as a brand for casually collecting necessary goods for life
at a low price, and we started to offer curtains and bedding under
the same brand. The roll out of another brand, the quality anddesign focused“&Style”is scheduled for the autumn of 2017,
and we will promote the proposing of coordination that can meetvarious needs. Furthermore, the seasonal coordination product“Cafe Time,”
series using different types of products of“SEA,”

and“WINTER HOLIDAY”also recorded strong sales. NITORI willcontinue vertical merchandising activity, and we will conduct
product development in the perspective of overall optimizationsuch as using the same raw materials in multiple products,
development of original parts, and reduction of package sizes.
Thus, we will pursue cost reductions and further enhancement of
product power. NITORI also launched an“in-store pickup
service”that improves convenience as customers can receive
products ordered from our e-commerce website in stores.

（5）Other initiatives

For our CSR initiatives, to contribute to the further growth of tourism in Hokkaido, we established the“NITORI Otaru Art Base”which is housed in historical structures in the heart of Otaru City, and we（1）Product development（2）Quality

49

opened the“Stained Glass Museum（Former Takahashi Warehouse）”and“Art Nouveau Glass Museum
For the cool touch“N Cool”series for spring and summer and the moisture absorbing andheat generating“N Warm”series for autumn and winter which are very popular highperformance products, we established a stable product and supply system, enhanced
performance by improving raw materials, and increased product types. In addition, since theeffects of sales promotion through various media including TV and magazines also had apositive contribution, sales significantly exceeded the previous year. For furniture, we
increased the variety of our original“N Sleep”bed mattress series where we pursued the
comfort of feeling as if you were softly wrapped up and durability which drove sales.
Moreover, the bed frames and sofas under the“NITORI STUDIO”brand where you can choose
the color, size, and design from a wide range of selections continues to grow sales steadily.

NITORI was awarded the“METI（Ministry of Economy, Trade and Industry）Minister’s Awards”
which is the top award in“10th METI Minister’s Awards for Best Contributors to Product Safety”inrecognition of our Group’s efforts for“product safety”such as securing safety by united
collaboration with our business partners, thorough measures for accident prevention, and provisionof technical guidance to our business partners for continually fulfilling product safety. This is our
5th award in the METI Minister’s Awards for Best Contributors to Product Safety and our first“METI Minister’s Awards for Best Contributors to Product Safety”in the Large Retailer category.

NITORI HOLDINGS ANNUAL REPORT 2017

（Former Arata Trading Company）.”In addition, as part of the support for recovery from the“2016Kumamoto Earthquake,”NITORI donated blankets and mattresses to disaster-stricken areas. We also
implemented same-day delivery and resumed store operations quickly and established a product supply
system rapidly to support local residents as they attempt to return to normal life as quickly as possible.
As a result of the above initiatives, the furniture and interior goods sales business achieved ¥501.591 billion in net
sales（11.7% increase from compared to previous year）in FY2016.

OthersSales of other businesses including revenue from the real estate leasing and advertising business amounted to¥11.367 billion（27.9% increase year-on-year）in FY2016.
As a result of all of the above, our Group（the Company
and consolidated subsidiaries）achieved ¥512.958 billion
in net sales（12.0% year-on-year increase）, ¥85.776 billion（17.4% year-on-year increase）, ¥87.563 billion in ordinary

income（16.7% year-on-year increase）, ¥59.999 billion in
net income attributable to owners of parent（27.7%
year-on-year increase）in FY2016, and we achieved 30
consecutive years of growth in income and profit.

NITORI HOLDINGS ANNUAL REPORT 201750

Review and Analysis of Management Results and Financial Situation

Next Year’s Outlook（2）Cash flow frominvestment activities

As an outlook for the future, due to uncertainties over the global
economy such as policy trends of the new U.S. Administration, impact
from the UK’s exit from the EU, and economic trends of emerging
countries in Asia including China, the prospects for the global economy
are estimated to continue to remain uncertain. In the furniture andinterior products industry as well, mainly due to more fierce sales
competition beyond business categories and hikes in logistics costs,
the tough management environment is expected to continue.
Under this management environment, for establishing a full-scale

global chain, our Group will reform the organization, structure, andsystems as well as make full use of the strengths of our original“Manufacturing, Logistics and Retail Sales”business model to offer
products, stores, and services in the customer perspective.
As a forecast for consolidated results for the next fiscal year, weestimate ¥568 billion in net sales, ¥99 billion in operating income, ¥100
billion in ordinary income, and ¥68.5 billion in net income attributableto owners of parent.

¥34.966 billion purchase of property, plant and equipment（increase of ¥6.945
billion in payments compared to the previous year）and a ¥4.155 billion
purchase of intangible assets（increase of ¥2.498 billion in payments comparedto the previous year）.

（3）Cash flow fromfinancial activities

Financial Situation Analysis

Decreased funds due to financial activities in FY2016 totaled ¥6.414 billion（decrease of ¥3.528 billion in payments compared to the previous year）. This ismainly due to ¥7.753 billion cash dividends paid（increase of ¥1.243 billion in
payments）and ¥3.036 billion proceeds from the exercise of stock options（increase of ¥1.888 billion in income compared to the previous year）.

Business Risk, etc.

Assets, Liabilities and Net Assets
For current assets, due to increases of ¥28.233 billion in cash anddeposits, ¥6.841 billion in forward exchange contracts, ¥3.227 billion innotes and accounts receivable - trade, and ¥3.441 billion ofmerchandise and finished goods, ¥40.193 billion increase from the endof previous year was recorded. In terms of non-current assets, partly
due to the acquisition of land and buildings, we had a ¥23.23 billion
increase in property, plant and equipment. In addition, investments andother assets increased by ¥7.326 billion. As a result, there was a ¥33.08
billion increase compared to the end of the previous year. Consequently,
total assets as of the end of FY2016 amounted to a ¥73.273 billion
increase and recorded ¥487.814 billion.

Decreased funds due to investment activities in FY2016 totaled ¥42.047 billion（Increase of ¥6.148 billion in payments year-on-year）. This is mainly due to aWith regard to current liabilities, accounts payable - otherincreased by ¥3.095 billion and current liabilities - other rose by ¥2.935
billion. Partly due to these factors, current liabilities increased by ¥8.127
billion. For non-current liabilities, partly owing to the increase ofnon-current liabilities - other by ¥1.129 billion, non-current liabilities
posted a rise of ¥1.336 billion. As a result, a ¥9.463 billion increase wasrecorded in liabilities as of the end of FY2016 and totaled ¥93.035 billion.
In respect to net assets, retained earnings increased by ¥52.249
billion and unrealized gain（loss）from hedging instruments rose by¥6.204 billion. Consequently, net assets posted a rise of ¥63.809 billion
and totaled ¥394.778 billion.

The main factors believed to have the possibility of
impacting our Group’s business and others include theitems listed below. While being aware of the possibility thatsuch risks may occur, the Company shall make every effort

to avoid such risks and work on responding if such risks
should occur. Forward-looking statements are according
to management decisions and forecasts of the Company
based on available information as of the end of FY2016.

（1）Import rate of our Group is high and exceeds 80%.

（4）For customer information protection, we established an

Therefore, currency exchange fluctuations may havea negative impact on our operating performance.
（2）Most of the products that our Group sells are imported

Cash Flow Situation
In FY2016, in terms of cash and cash equivalents（hereinafter,“funds”）, a ¥77.93 billion increase in cash flow from operating
activities, a ¥42.047 billion decrease in cash flow from investing
activities such as new store openings and enhancement ofequipment, and a ¥6.414 billion decrease in cash flow from

（1）Cash flow frombusiness activities

51

financing activities were reported. As a result, cash and cash
equivalents recorded a ¥29.24 billion increase compared to theprevious year and amounted to ¥66.035 billion.
Each FY2016 cash flow situation and respective factors are
as follows.

Increased funds due to sales activities in FY2016 totaled ¥77.93 billion（Increase of ¥20.586 billion inincome year-on-year）. This is mainly due to ¥87.822 billion income before income taxes（¥13.202
billion increase in income compared to the previous year）, ¥29.311 billion income taxes paid（¥2.618
billion increase in payments compared to the previous year）and increase in accrued consumption
taxes by ¥2.447 billion（¥4.811 billion decrease in payments compared to the previous year）.

NITORI HOLDINGS ANNUAL REPORT 2017from Asian countries including China. For this reason,
our operating results may be affected by the politicalclimate, economic environment, and natural disasters,
etc. of Asian countries such as China.
（3）Management personnel including Representative

Directors Akio Nitori and Toshiyuki Shirai areplaying important roles in the areas that theysupervise. In the event that these Officers are notable to carry out their duties, the operating
performance of our Group may be greatly affected.

internal management system and strictly handle
customer information. However, in the event that
customer information is leaked outside of the Company
due to crime, etc., a decrease in net sales may occur due
to payment of costs to compensate for damage toindividual customers and damage to our social standing,and a negative impact may be placed on the operating
performance and financial situation of the Group.
（5）Our Group has stores in all 47 prefectures of Japan

as well as in Taiwan, the U.S. and China. In the eventthat stores, equipment and inventories in our
distribution centers and human resources, etc. aredamaged by natural disasters, sales activities may
be affected, and a negative impact may be placed on
our operating performance and financial situation.

In addition, factors that may impact our operating performance are not limited to the above.

NITORI HOLDINGS ANNUAL REPORT 201752

Consolidated Balance Sheet

As at February 20, 2017

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Forward exchange contracts
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation
Buildings and structures, net
Machinery, equipment and vehicles
Accumulated depreciation
Machinery, equipment and vehicles, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Land
Leased assets
Accumulated depreciation
Leased assets, net
Construction in progress
Total property, plant and equipment
Intangible assets
Leasehold right
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Guarantee deposits
Lease deposits
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets

53

NITORI HOLDINGS ANNUAL REPORT 2017

Millions of Yen

2016¥ 42,327
15,25843,079
90
2,247
2,602
8,160
16,231（8）
129,9892017¥ 70,560
18,486
46,520
92
2,354
1,001
15,002
16,174（9）
170,182

Thousands of
U.S. Dollars

Millions of Yen

2017＄ 625,097

163,771
412,122816
20,858
8,868
132,904
143,288（87）
1,507,639

157,371（69,146）
88,225
8,622（5,106）
3,515
12,122（7,697）
4,424
115,504
3,868（1,152）
2,715
10,477
224,863

180,661（76,898）
103,763
9,653（5,754）
3,899
13,890（8,511）
5,379
126,923
3,728（1,214）2,514
5,615
248,0941,600,477（681,243）
919,233
85,523（50,980）
34,543123,059（75,400）
47,659
1,124,407
33,033（10,761）
22,27149,745
2,197,861

7,664
3,545
11,209

8,771
4,961
13,73277,70543,949121,6552,763
540
15,362
18,079
2,821
8,921
（9）
48,478284,551¥414,541

3,531
856
15,72020,515
2,952
12,239（9）55,804
317,631¥487,814

31,282
7,583
139,263
181,743
26,155
108,431（87）
494,372
2,813,889$4,321,529

Liabilities
Current liabilities
Notes and accounts payable - trade
Short-term loans payable
Lease obligations
Accounts payable - other
Income taxes payable
Deferred tax liabilities
Provision for bonuses
Provision for point card certificates
Provision for special benefits to shareholders
Asset retirement obligations
Other
Total current liabilities
Non-current liabilities
Long-term loans payable
Lease obligations
Deferred tax liabilities
Provision for directors' retirement benefits
Net defined benefit liability
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders' equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders' equity
Accumulated other comprehensive income
Unrealized holding gain（loss）on securities
Unrealized gain（loss）from hedging instruments
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Subscription rights to shares
Non-controlling interests
Total net assets
Total liabilities and net assets

Thousands of
U.S. Dollars

2016

2017

2017

¥ 15,356
1,504
188
16,195
14,929¥ 16,001
625
187
19,291
15,630
564
3,751
1,301
214
44
18,11275,724$ 141,757
5,536
1,662
170,901
138,473
4,996
33,234
11,531
1,895
397
160,455
670,844

ー

3,024
1,031
191
ー

15,176
67,597
625
2,518
1
228
2,279
3,902
6,418
15,974
83,572

ー

ー

2,330
3
228
2,634
4,565
7,548
17,31093,035

20,64530
2,028
23,33740,44866,867
153,357
824,201

13,37014,411
308,854（13,392）
323,244

13,37016,306361,103（10,188）
380,592

118,451
144,459
3,199,007（90,263）
3,371,654

289
4,165
2,301
（305）
6,450
1,174
98
330,968¥414,541

884
10,3692,243（396）
13,100940
144394,778¥487,814

7,831
91,866
19,872（3,510）116,060
8,334
1,277
3,497,327$4,321,529*US dollar conversion is calculated at 1 dollar = 112.88 yen.

NITORI HOLDINGS ANNUAL REPORT 201754

Consolidated Statement of Income
For the year ended February 20, 2017

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income
Foreign exchange gains
Vending machine income
Gain on sales of goods
Construction revenue from tenants
Facility use revenue
Other
Total non-operating income
Non-operating expenses
Interest expenses
Other
Total non-operating expenses
Ordinary income
Special gains
Gain on sales of non-current assets
Subsidy income
Penalty income
Gain on reversal of subscription rights to shares
Other
Total special gains
Special losses
Loss on sales and disposal of non-current assets
Loss on reduction of non-current assets
Penalty for the scrap and build of outlets
Impairment loss
Special retirement expenses
Cancellation penalty
Loss on valuation of investment securities
Other
Total special losses
Income before income taxes
Income taxes – current
Income taxes – deferred
Income taxes
Net income
Net income attributable to non-controlling interests
Net income attributable to owners of parent

Consolidated Statement of Comprehensive Income

55

Millions of Yen

Thousands of
U.S. Dollars

For the year ended February 20, 2017

2016

2017

2017

¥458,140
214,597
243,543
170,503
73,039¥512,958
234,684
278,274
192,497
85,776$4,544,281
2,079,058
2,465,223
1,705,329
759,893

450
31
681
227
282
21
351
2,046

433
34
102
246
300
147
174
425
1,865

3,844
304
911
2,184
2,660
1,305
1,549
3,767
16,52876
278
75,00759
19
78
87,563524
172
696
775,725

9
643

645
80
52
7
16
801

5,717
708
466
69
141
7,104

73

651

148
10
54
190
61
4
543
87,822
28,565（787）
27,77760,04445¥ 59,999

1,312
97
485
1,683
543
43
4,816
778,014253,057（6,977）246,080
531,934403$ 531,531

ー

ー

10
10
673
57
431
35
488

ー

11

ー

35
1,060
74,61927,514
103
27,61847,00132¥ 46,969

ーMillions of YenーThousands of
U.S. Dollars

For the year ended February 20, 2017

2016

2017

2017

Net income
Other comprehensive income
Unrealized holding gain（loss）on securities
Unrealized gain（loss）from hedging instruments
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests¥47,001¥60,044$531,934（296）（20,930）（1,044）（271）（22,542）¥24,458

594
6,204
（57）
（91）
6,649
¥66,694

5,264
54,967（512）（807）
58,911$590,846¥24,426
32¥66,64945$590,442
403

NITORI HOLDINGS ANNUAL REPORT 2017

Consolidated Statement of Cash Flows
Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Impairment loss
Increase（decrease）in allowance for doubtful accounts
Increase（decrease）in provision for bonuses
Increase（decrease）in net defined benefit liability
Increase（decrease）in provision for point card certificatesInterest and dividend income
Interest expenses
Loss（gain）on sales and disposal of non-current assets
Loss on reduction of non-current assets
Penalty for the scrap and build of outlets
Subsidy income
Loss（gain）on valuation of investment securities
Decrease（increase）in notes and accounts receivable - trade
Decrease（increase）in inventories
Increase（decrease）in notes and accounts payable - trade
Increase（decrease）in accrued consumption taxes
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Payment of penalty for the scrap and build of outlets
Income taxes paid
Income taxes refund
Net cash provided by operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Proceeds from sales of intangible assets
Proceeds from government subsidy
Payments for guarantee deposits
Proceeds from collection of guarantee deposits
Payments for lease deposits
Proceeds from collection of lease deposits
Proceeds from guarantee deposits received
Proceeds from lease deposits received
Purchase of long-term prepaid expenses
Purchase of short-term and long-term investment securities
Proceeds from sales of short-term and long-term investment securities
Payments of loans receivable
Proceeds from collection of loans receivable
Other payments
Net cash used in investing activities
Cash flows from financing activities
Repayments of long-term loans payable
Repayments of lease obligations
Purchase of treasury stock
Cash dividends paid
Proceeds from exercise of stock options
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year

Millions of Yen

Thousands of
U.S. Dollars

2016

2017

2017

¥74,619
10,799
488
3
662
356
1
（482）
76
48
431
35
（643）

¥87,822
12,312
10
1
733
266
270
（468）
59
（571）

$778,014
109,074
97
12
6,493
2,364
2,396
（4,148）524（5,066）78,411
492
（79）
（17）
（26,692）
5,228
57,343148（80）
61（1,816）（3,742）
1,409
2,447
470
99,334
465
（56）
（15）
（29,311）7,512
77,930

1,312
（708）
543
（16,090）（33,152）
12,485
21,681
4,171
880,004
4,127
（500）
（139）
（259,665）
66,554690,381（10,848）（6,581）（58,307）（28,021）（34,966）（309,766）（1,656）ー（4,155）（36,809）

ー
（40）

（23）
（35,899）43

17（1,191）18（26）（42,047）155（10,554）167（232）（372,498）（4,392）（188）（ 1）（6,509）（1,504）（188）（ 4）（7,753）（13,331）（1,668）（40）（68,687）（9,943）（419）（6,414）（227）（56,826）（2,014）ー（2,138）（1,157）（1,020）（2,363）（1,307）

5,870
8

431
（30）
108
（1,101）
356
549
595
（464）
（1,677）

1,148

11,08025,713¥36,794

ー

7,361
1,708

395
291
（1,678）128（2,856）
56
387
1,145
（2,103）ー

3,036

29,24036,794¥66,035

ー

65,21615,135

3,507
2,580（14,868）
1,141（25,305）497
3,431
10,145（18,633）
ー

26,900259,043
325,961$585,004*US dollar conversion is calculated at 1 dollar = 112.88 yen.

NITORI HOLDINGS ANNUAL REPORT 2017

56

Company Stock Information

会社情報（As of February 20, 2017）（2017年2月28日現在）

Outline of Shares

Major Shareholders

Total number of authorized shares: 288,000,000
Total number of issued shares: 114,443,496
Number of shareholders: 15,808 people
Listing market: First Section of the Tokyo Stock Exchange
and the Sapporo Securities Exchange
Securities code: 9843
Fiscal year: February 21st of every year to February
20th of the following year
Ordinary General Meeting of Shareholders: May
Administrator of shareholder registry: Sumitomo Mitsui Trust
Bank, Limited（As of February 20, 2017）of the Number
Number of Ratioof
Ownership
Ownership Shares againstof
of Shares
the Total Number（1,000 shares）
of Issued Shares（%）

Name

社名

株式会社ニトリホールディングス

代表者

代表取締役会長
代表取締役社長

住所【東京本部】〒115-0043 東京都北区神谷三丁目6番20号 Tel（03）6741-1235【札幌本社】〒001-0907 札幌市北区新琴似七条一丁目2番39号 Tel（011）330-6200

創業

1967（昭和42）年12月

設立

1972（昭和47）年3月

連結売上高

512,958百万円

似鳥 昭雄
白井 俊之

NITORI Trading, Ltd.

20,719

18.10

Japan Trustee Services
Bank, Ltd.（Trust account）

5,419

4.74

The Master Trust Bank ofJapan, Ltd.（Trust account）

4,532

3.96

連結経常利益87,563百万円

NITORI International
Scholarship Foundation

4,000

3.50

資本金

13,370百万円

Distribution of share by type of shareholder

North Pacific Bank,Ltd.

3,860

3.37

連結従業員数

10,169人（外、平均臨時雇用者11,942人）

Financial institutions

Akio Nitori

3,409

2.98

Momoyo Nitori

3,078

2.69

Nitori Holdings Co., Ltd.

2,680

2.34

33.76%

Nippon Life Insurance Company

2,056

1.80

Financial
institutions

National Mutual Insurance
Federation of Agricultural Cooperatives

2,007

1.75

1.50%

Individual
shareholders（including
treasury stock）

Foreigncorporations,etc.

14.32%

Other
corporations in Japan

23.21%

ニトリグループ一覧（2017年2月28日現在）［輸入代行会社］
似鳥（中国）采購有限公司
似鳥（太倉）商貿物流有限公司
恵州似鳥物流有限公司

商社・企画開発・物流機能

27.22%NITORI TRADING VIETNAM COMPANY LIMITEDNITORI（MALAYSIA）SDN.BHD.
NITORI TRADING THAILAND CO.,LTD.
NITORI INDIA PRIVATE LIMITED

Stock Price and Turnover［物流会社］
株式会社 ホームロジスティクス

Stock price（yen）
18,000

広告・宣伝機能16,000［広告代理店］

メーカー機能14,000

ホーム・デコ
HOME DECO

12,000株式会社 ニトリパブリック

株式会社
ニトリ
ホールディングス［ファシリティマネジメント］［保険代理事業］［持株会社］

株式会社 ニトリファシリティ

10,000

施設管理機能［店舗運営会社］

8,000
6,000
4,000

販売機能

2,000
0

Turnover［海外販売会社］（Thousand shares）

12,000
9,000
6,000
3,000
2014/357

2014/6

2014/92014/122015/3NITORI HOLDINGS ANNUAL REPORT 20172015/6

2015/92015/122016/3

2016/6

2016/92016/122017/32017/60株式会社 ニトリ
・ホームファニシングストア
・ホームファッションストア
・ニトリモール・デコホーム・通販事業
・リフォーム事業
・法人事業 など

宜得利家居股份有限公司［カーテン製造会社］
株式会社 ホーム・デコ

NITORI USA, INC.

ニトリ中国販売（NCH）［海外製造会社］

PT. NITORI FURNITURE INDONESIANITORI FURNITURE VIETNAM EPE

NITORI HOLDINGS ANNUAL REPORT 201758