NITORI Holdings 2019 Integrated Report

Enriching homesaround the world

2019 Integrated ReportFeb. 21, 2018 – Feb. 20, 2019

NITORI Holdings Co., Ltd.
Sapporo Head Office
1-2-39, Shinkotoni 7-jo, Kita-ku, Sapporo, Hokkaido 001-0907
Tokyo Headquarters
3-6-20, Kamiya, Kita-ku, Tokyo 115-0043
Osaka Headquarters
1-1, Kamisu-cho, Toyonaka, Osaka 561-0823

www.nitorihd.co.jp/en/Mission Statement & Vision

Achieving Our Mission Statement on the World Stage
Since our founding in 1967, NITORI has continued to grow while sharing our mission to enrich homes aroundthe world with each and every employee so that it may serve as a foundation for our business activities.
We have also set a goal to establish 3,000 stores and reach ¥3 trillion in sales by 2032 as our long-term vision
for achieving our mission statement. We will continue to evolve our unique business model of one-stopmanufacturing, dirstribution, IT and retail sales in the field of furniture and home décor to contribute to theenrichment of people’s homes, as we expand our endeavors across the globe.

Mission Statement

To provide the foundation ofprosperous home living to
the global community.
Vision 2032

3,000 stores

Net Sales ¥3 trillion

Vision 2022

1,000 stores

02

Net Sales ¥1 trillion

03

Contents

PART
Manufacturing ........................................................................... 28
Trade/Logistics .......................................................................... 30
Expanding Business ................................................................ 32

Mission Statement & Vision ................................................ 02
Contents & Editing Policy ..................................................... 04

05

PART 1

33

PART 3

Strengths and Growth Strategy .....

Foundation for Creating Value ..........

Our Value Creation Journey ................................................. 06
Value Creation Model ............................................................. 08

Special Feature | Building a Human
Resources Management Platform .................... 34

Message from the Chairman ................................ 10
Message from the President ................................. 12

Human Resources Foundation

Developing human resourcesthat contribute to society ...................................................... 36
Creating a comfortable workplace .................................... 38

Financial and Non-Financial Highlights ............................ 16

17

PART 2

1

Strengths and
Growth Strategy
The reverse approach to manufa
act
c ur
urin
ing
g an
a d didist
sttri
r butibutiiono from th
the
pers
pe
rspe
p ctivtive
e of user and bu
buye
yer—
r—N
NITO
NITO
ORI usesess ththisis str
tren
en
ngt
gth
h to cre
reat
ate
the
th
e val
alue
ue of “o
off
ffer
erin
ing
g th
the
e un
unex
expe
pect
cted
ed.”
.”
In add
ddit
itio
ion
n, the evo
olu
uti
tion
o of ouonourr ununique business mo
modedell tht at int
nteg
egra
rate
es
manu
ma
n fa
nu
act
ctur
u in
ur
ing,
g, dis
istr
trib
ibut
utio
ion, IT,T, and ret
e ai
aill sasaleles,s, is th
the
e so
ource
urce
e of NI
NITO
TORI
RI’’s
RI
grow
gr
owth
wth ren
ende
deri
ring
ng our imm
mmmen
e se vissio
ion.

Product Provision Infrastructure

Pursuing product safety measures and quality
enhancements in step with the world ............................ 40
Fair and honest partnerships ............................................... 41

Evolving NITORI ..............................................

Special Feature | Japan-China Joint
Project to Strengthen Global Business ....... 18

ESG Initiatives

Balancing economic value and environmental value ... 42
Social Action Programs

Hand-in-hand with our customers....................................... 44
Management Structure

Corporate governance ............................................................ 46

Sales–Domestic ........................................................................ 20
Sales–Overseas ........................................................................ 22
Sales–O2O/Online Sales ....................................................... 24
Product Planning/Development ......................................... 26

Company Stock Information / Company Information ... 50

Editing Policy
We have issued the 2019 Integrated Report to report on our activities that work toward achieving
NITORI’s mission and to promote communication with the society. In this report, we haveincluded special features on our current focal point, the Japan-China Joint Project to strengthen
global business, and our human resources development initiatives. In addition, we also reporton our strategy and business model based on our long-term vision, specific examples of value
creation, and our efforts to strengthen the operating foundations.
Fiscal year
February 21st to February 20th of thefollowing year

Target scope

The significanceof this report

Corporate governance,internal controls, compliance, etc.

We set as many domestic and foreign NITORIGroup companies subject to consolidated
financial statements as possible as the targetof our reporting. However, depending on
the item, the reporting target may differ.

Target period
February 21, 2018 to February 20, 2019
In this report, the fiscal year ending
February 20, 2019 is referred to as fiscal
2018 or FY2018.
The Activity Report also includes somerecent content.

04

WEB

Company Information

BookletWEB

CSR Information
Social and environmental
initiatives, and employee
engagement activities

Integrated
ReportWEB

IR Information
Strategies,
financial results
information, etc.

Disclaimer Regarding
Forward-Looking Statements
This report contains future plans, strategies
and forecasts, and forward-looking
statements regarding the businessperformance of NITORI Holdings andaffiliated companies. These statements are
not historical facts. These forward-looking
statements are based on the current
assumptions and beliefs of NITORI Holdingsin light of currently available information.
In addition, these statements contain risks
and uncertainties related to economic
trends, personal consumption, market
demand and supply, taxation systems, andother systems. Therefore, please note thatthe actual business performance of NITORI
Holdings and our group companies may
differ from our forecasts.

05

PART 1500 more stores

Strengths and Growth Strategy | Our Value Creation Journeyin

400 more stores

Discovering customers’ wishes
and offering enriched lifestyles
tailored to the times

ininNet sales(billions of yen)
Ordinary income(billions of yen)
Number of stores

10

Note: Numeric figures are fromthe financial statement
announcement

4.3
0.1

18

16

18

20

21

21

24

27

29

33

37

42

25.6 30.8 34.8 40.4
10.3 11.7 13.2 15.9 17.5 17.7 19.3 23.5
1.8 1.9 2.0 2.1
0.5 0.8 0.9 1.0 1.2 1.3 1.5 1.7

100 stores
in

73

73

36 years
82

100

QualityandFunctionality

Offering
the Unexpected

145

63.2
3.8

78.7
7.1

162

8.9

13.0

15.2

19.0

62.1 63.4

67.9

Net sales increased

10.3

B

¥

59-fold

608.1

B

Ordinary income increased

33.9
23.1

576

16

¥

47.4

¥

26.5

36-fold

Number of stores increased

75.0

0.5

B

¥

206-fold

103.0

B

Ratio of ordinany
income to net sales increased

5.2

%

11.7%

16.9

%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (Fiscal year ending in February)standards and thinking from the customers’ perspective

Establishment of a new manufacturing-distribution-IT-retailsales business model

Domestic nationwide development/
Overseas expansion

1967 NITORI Furniture Store established1979 Announced new Home Furnishings business1980 Implemented the first automated multi-level warehouse in the Japanese distribution industry
1986 Direct import of overseas products started
1987 Proposed the O.T.C.M. (One-house Total Coordination Merchandising) System
1993 Opened the first store in the main land in Ibaraki Prefecture
1994 Began operating an overseas factory

103.0

87.5

Providing enriched lifestyles to the people of the world by challenging accepted

Coordination

Growth from FY1987–FY2018

53.5

217.2
189.1

88.2

59.1

Achieved growth forconsecutive years

94.8

348.7

188 286.1
244.0

156.7

1982 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Affordability

116

130

129.4

3.5

244

32

512.9

417.2

387.6

268

217 314.2 331.0

108.7

48.9

6 years

420

608.1

458.1

331

300

200 more storesin

3 years

471 572.0

576

373

300 more stores

To bring the comfortable and enriched living of the U.S. to Japan—this was NITORI’s starting
point and it has not changed since the founding of the company. For 50 years, NITORI has
created value in enriched living by offering low-priced, coordinated products that excel inboth quality and functionality and meet the needs of the times and the customers of eachparticular country and region.

50

3 years

2 years523

Globalization and expansion of business areas

2004 Entered the E-commerce market (NITORI-net)
2007 Opened the first overseas store in Taiwan
2008 Price Cut Declaration2011 Began the DECOHOME business/Achieved the goal of opening stores in prefectures nationwide
2013 Opened the first store in the U.S.
2014 Opened the first store in China
2015 Opened Printemps Ginza Store as the first store inside a department store
2017 Opened the Ba Ria-Vung Tau factory in Vietnam
2019 Introduced the “Alibaba Cloud” image search engine for the first time in Japan

Value offered throughout the times

06“To bring America’s
enriched lifestyles to Japan.”—this was our starting point.

Pioneer of the now widely
accepted “One-room
coordinated interior design.”

Achieving lower prices for expensive
items with product developmentfrom the customer’s perspective.

Implementing price cuts evenduring recessions with affordability
that has value.

Balancing economic andenvironmental value with more
efficient manufacturing and logistics.

Pursuing higher functionality
in daily expendables extending totheir materials.

The observation tour of America in 1972, hada major influence on NITORI. There werestores that supported a luxurious every
day lifestyle, offering customer-oriented
products at overwhelming low prices thatwere in lineups unified in quality, color,and style—this was
the starting pointof NITORI.

We stopped displaying products by type,which is the conventional method, and set
up model rooms representing life scenes
for each room of the house, such as theliving/dining room, bedroom, and kid’s room.
Before any other company, we werecreating sales
floors where
customers could
experience
coordinated living
spaces.

Feather comforters once cost more than¥100,000. By reevaluating raw materials,
NITORI was able to cut the price to under¥10,000 while still maintaining its quality.
In the same way, we have contributed tolower prices for furniture, such as sofas
and beds, as wellas randsels (schoolbags).

In 2008, when oil prices skyrocketed, many
companies also resorted to raising the pricesof their products, but that is when NITORI
made its Price Cut Declaration. It was ourdesire to give back to customers precisely
because the economy was experiencing arecession. More than 5,000 items were
cut in price by 20%
on average until
2012, garnering
great support fromour customers.

NITORI is making efforts to balance
economic and environmental value by
pursuing more efficient manufacturing andlogistics with methods such as mattresscompression technology which leads tosmaller package sizes and better containerloading efficiency.

NITORI is making efforts to balance
economics and environmental value by
pursuing more efficient manufacturing andlogistics methods such as mattresscompression technology that improvescontainer loading efficiency by compressing
the packing size of
products.

07PART 1

Strengths and Growth Strategy | Value Creation Model

Creating new value forsociety with our customer-oriented
business model

Value Creation FlowSales (Stores)

Sales (E-commerce)

Creating stores that are easy to visit
and easy to shop at

Proposing more convenient ways to shop

We are making efforts to create attractive
sales floors and improve our level ofcustomer service so that customers canenjoy their shopping experience. We haveintroduced digital catalogs and 3-D
simulators so that we can make bettersuggestions for our cutomers.

Utilizing our strong foundation in human resources and network of global partner companies
within the Group, we have built every function required for a manufacturing-distributionIT-retail sales business. In order to continue creating value that “offers the unexpected,”
we will remain committed to evolving our customer-oriented businessess model.

Product Planning

Product Development

Product planning thatcreates customer satisfaction

Proposing interior coordination toenrich lifestyles

We investigate and analyze products
from the perspective of those using andpurchasing them. Our Merchandising
Department staff members travel to eachregion to study trends in addition to
conducting thorough market research,
and we are developing original products
in our pursuit of comfortable lifestyles forour customers.

Value Creation Flow
Product
Planning

Sales

Logistics

QualityandFunctionality

Affordability

We are proposing more convenient ways
to shop to better suit customers’ lifestyles,
such as the NITORI app and our service thatallows customers to pick up orders they
made online at our stores. We are promoting
digital marketing and endeavoring to create
convenient and comfortable services.

Raw Material Procurement

Manufacturing

Sourcing that expands across the globe

Building a solid production system with
our own and collaborating factories

In order to achieve low prices andadequate quality, we promote verticalmerchandising that extends all the way
back to our raw materials. We actually visit
the sites ourselves to gather information on
production localities and conduct negotiations
and contract with suppliers directly.

Product
Development

Offering theUnexpected

We develop products with unified colors,
designs, and styles from scratch, so that
our customers can easily enjoy total
coordination in line with their preferences.
We are providing society with guidance fora new lifestyle that coordinates naturally.

NITORI provides direction and management
for all manufacturing processes of the
products we manufacture, even at partner
factories. In addition, we have our own
factories where we are enhancing ourmanufacturing functions. This production
system is the cornerstone of NITORI’s
unique ability to develop products withquality and functionality.

Trade

Logistics

Building our own customs clearance system

One of the largest domestic distribution networks

Coordination

Raw
Material
Procurement

Trade

By conducting all tasks related to importing,including applications, permits, approvals,
and contracts, internally we are able tosignificantly cut costs, and at the same time
we are establishing a system that ensures
the smooth supply of products to domestic
distribution centers.

We have built our own distribution networkfrom the import of products to theirdelivery to customers. We are pioneers in
implementing the most cutting-edge
technology, such as the robot storage
system and devanning assist machine, toachieve greater work efficiency andlower costs.

Manufacturing
Foundation for creating value
Human resources
foundation

Product provisioninfrastructure

Introduction of IT
Management structure

Developing and providing low cost products with high quality and functionality that are also easy to coordinate. At
NITORI we are focusing on strengthening our product supply foundation made up of the human resources who support
unique value creation, our product quality control organization, and our partnership with suppliers, as well as our
corporate governance system.

Foundation for creating value
08

09

PART 1

Strengths and Growth Strategy | Message from the Chairman

Turning adversity into opportunity since
our inception
The fiscal 2018 marked 32 years of consecutive revenue
and profit growth for NITORI. This would not have beenpossible without our customers purchasing our products,
the shareholders, investors, and financial institutions
who provide financial support, the many people whohave cooperated with us in opening our stores, thestakeholders, and of course the Group employees andstakeholders who work so hard every day to achieve
our corporate mission statement and vision. I wish to
express my heartfelt appreciation to all of you.
I predict that the world’s economic situation will
gradually worsen. The economy is still booming in the
United States, which has the greatest influence overglobal economic trends, but housing demand, which is aleading indicator of economic health, is starting to decline,
and employment is expected to worsen by the end of
the year. In addition, interest rates have been cut. The
Japanese economy has also taken a downward turnsince last year, and I think we will enter a period of
global recession for the next three, possibly four years.
As the economy recedes and the market shrinks,
the so-called oligopoly advances. In other words,
market shrinkage is also a chance to increase our shareof the market.

NITORI continues to
evolve with our eyes on
the long-term future
Akio Nitori
Representative Director & Chairperson(Chief Executive Officer)
NITORI Holdings Co., Ltd.

10

In fact, NITORI has increased our share of the market
with concentrated investment when the economic
bubble collapsed and during the Lehman Shock. Fromthat perspective, the oncoming economic recession isan opportunity for us because as the economy falls,
construction and land prices also drop. Therefore, evenif we build new stores at our own expense, they will be
profitable. We will take advantage of this opportunity toachieve further growth and an expanded market share.

Working backwards from our 2032 Vision,
what do we need to do now?
At NITORI, we are currently promoting our second 30year plan, which aims to achieve 3,000 stores and ¥3
trillion in sales by 2032, but there are several issues thatstand in the way of achieving that goal. The first isincreasing the ratio of coordinated products. In order tocompletely differentiate ourselves and stay ahead of
our competitors who are catching up in price and quality,
it is the added value in our product lineup of being able
to enjoy total
coordination in interior
decoration that gives us
the upper hand. It wasfor this reason that we
actively promoted
organizational
restructuring in fiscal
2018, and we willcontinue to accelerate
efforts with the goal ofincreasing coordinatedproducts by 10% every year.
Expanding our overseas business is also a
prerequisite. In addition to advancing our Chinese
business expansion project (see p. 18) in China’s giant
market, we have established a dedicated department todeal with M&A of overseas corporations, and we havebegun investigating target companies mainly in the
housing industry in countries in Southeast Asia as well
as China, Taiwan, and the U.S. When the recession
comes, reasonably priced properties should increase, so
we will keep a close eye on the situation as we proceed.
Investment in IT is also critical. Currently, we areinvesting several billion yen in renovating our core system,
and we plan to build a globally integrated system over the
next three to four years.

Finally, the area we must focus on most is ourhuman resources, which will become the foundation forour corporate growth. In addition to actively hiring andtraining IT personnel, we must also maintain ourefforts at promoting diversity. The number of female
employees who continue working after marriage andhaving children is steadily increasing, but if we consider
that most of NITORI’s customers are women, we must
further increase the percentage of women in the
Planning and Development divisions. In addition, we will
accelerate training of employees who are able to speak
English, Chinese, or other foreign languages combinedwith planning and management skills as we look to
global expansion.

The driving force behind growth isour aspiration to provide enriched lifestyles
My aim is to create a company where each and every
employee is able to self-actualize. A company where
you can do what you want and receive a satisfying
income. A continuously
growing company with afuture. A company where theemployees are also constantly
growing and feel that there isa possibility that they mightsomeday be able to bepresident themselves. How
can I create such a company?
This is something I think
about constantly.
As part of our employee
training at NITORI, we take all of our second-year
employees to the U.S for an observation tour. Our aim in
doing this is to give each employee something to aspire
to. When I first visited America more than 40 years ago,
I was shocked by the wealth I saw there. I was driven
by the strong desire to bring this kind of lifestyle to Japan.
This was the beginning of NITORI’s aspiration to enrichhomes around the world.
NITORI has always been working to make that
aspiration a reality, and we will continue to move
forward at full speed with an eye to what lies 10 years,
20 years, and even further into the future. I wish to thankall of our stakeholders for their continued support inour endeavors.

Seeing adversity
as opportunity
As we move onto thenext stage of growth11

PART 1

Strengths and Growth Strategy | Message from the President

Measures and Initiatives in Fiscal 2018

Implementing NITORI-widereforms oriented toward
globalization andbusiness expansion.

Launching group-wide projects
geared toward establishing a global chain
Our group has put three priority policies in place toachieve our medium- to long-term vision of establishing
1,000 stores by 2022 and 3,000 stores by 2032.
(1) Establish a Group growth trajectory and new
endevors(2) Provide a comfortable lifestyle via ourmerchandise, stores and services(3) Rebuild the company organization to sustain
a global chain store system
In order to achieve this, we launched and promoted
several group-wide projects in fiscal 2018.

Toshiyuki Shirai
Representative Director &Chief Operating Officer (COO)
NITORI Holdings Co., Ltd.

Globalization
and Business
Expansion(1)
Establish a Group
growth trajectoryand new
endevorsThree Priority
Policies to(2)

Summary of Results for Fiscal 2018

Achieved 32 consecutive years of growth,even under harsh conditions
The business environment in the furniture and interior
decorating industry continued to be harsh in fiscal 2018
due to intensifying sales competition across industries
and the rising cost of distribution.
Amid this environment, sales were strong driven by
seasonal bedding products, functional curtains and otherwindow coverings, and bedroom furniture. In terms ofselling, general and administrative expenses, increased

store openings in urban areas meant higher rents andaverage wages, and the soaring labor costs in the logistics
industry in turn meant increased shipping and delivery
expenses. Despite this, the sales ratio compared tolast fiscal year only dropped 0.8%, generally performing
as expected.
As a result, the consolidated financial results forfiscal 2018 are net sales of 608.131 billion yen (up 6.3%
year on year), operating income of 100.779 billion yen(up 7.9%), and ordinary income of 103.053 billion yen(up 8.6%) achieving 32 consecutive years of increased
sales and profits.
Net sales / Ordinary income(Billions of yen)

Net sales

Ordinary income

600

512.9 87.5
400

417.2 67.9

572.0 94.8

(Billions of yen)608.1 103.0

100
80458.1 75.0

60
40

200

20
0

0

2014
Coordinated products

12

2015

2016

2017

2018

(FY)

Provide acomfortable
lifestyle via ourmerchandise,stores andservices

Achieve our
VisionStatement(3)
Rebuild thecompanyorganization tosustain a global
chain store
system(1) Towards “establishing a Group growth trajectory andnew endevors,” we launched the Japan-China Joint
Project for strengthening global business in December
2018. We believe the success of this project will lead tooverseas business growth, and in turn, holds the key to
our Group’s medium- to long-term growth. (see p. 18)
In terms of overseas store development, we openeda store in the large-scale shopping center, Ontario Mills,
located in California in May 2018. In addition, we opened
4 stores in Taiwan and 13 stores in China, for a total of
18 new stores. As a result, we now have 31 stores in
Taiwan, 3 stores in the U.S., and 37 stores in China,
making 71 stores in total.
In addition, to cope with the increasing volume ofitems, we established Taicang DC in Jiangsu, China which
occupies the largest land area of any property in ourGroup. It not only serves as our Chinese headquarters,
but it also acts as the distribution base linking our
network of stores in Taiwan and Japan to production andprocurement factories. Within Japan, we opened Sendai
DC in Miyagi Prefecture and Goka DC in Ibaraki Prefecturein November 2018 to reduce lead-time and deal with

the increasingly large flow of products across the wide
region in addition to further improving distribution quality.
(2) “To provide a comfortable lifestyle via ourmerchandise, stores, and services,” we implemented
efforts to further improve quality and expand the productlineup of our N Cool series, which uses materials thatare cool to the touch and our N Warm series, which uses
moisture-absorbing, heat-generating materials. As a result,the number of recorded sales significantly exceeded
the number from the previous fiscal year. Moreover, ourN Click™ series, which can be easily assembled in a shorttime without using tools or screws, has received a lot of
attention as a new product in the market.
In terms of domestic store development, we
actively opened stores with low market area populations.
We gave the logo and signs of our Deco Home businessa makeover and recreated the sales floor with productdisplays and renderings that differ greatly from theconventional set up accelerating the opening of storesthat are clearly different from NITORI. As a result, thenumber of stores in Japan increased by 38 for a total of
505 stores.
On the customer service front, we promoted One
to One Marketing, which is marketing optimized for eachindividual customer’s preferences and attributes. For our
corporate customers, we opened our largest NITORI
BUSINESS Showroom on the 9th floor of the NITORI
Shibuya Koen-dori store.
(3) We established the Global Merchandising Divisionin October 2018 to “rebuild the company organization
to sustain a global chain store system.” The Division ismaking efforts to lower costs and stabilize quality byconsolidating raw materials and reduce distribution costsby making package sizes more compact and changing
packaging materials. In addition, the functions of the
Product Quality Control & Improvement Office havebeen transferred to NITORI Holdings for the greater
globalization of product development and sales
management. Reorganization is now complete as of theend of fiscal 2018, and we plan on operating under the
new organization from the beginning of fiscal 2019.
As the supervisory organization over the quality control
departments in each country and region, we are promoting
group-wide management and structural reforms.
In addition, as part of our organizational development,
we have created a Human Resource Management
Platform to train our workforce (see p. 34). This platform
provides an education environment in line with employees’
career intentions contributing to the creation of anorganization that boasts a wealth of elite employees
who can carry the responsibilities of our Group and its
diverse businesses.

13

PART 1

Strengths and Growth Strategy | Message from the President

Measures and Initiatives for Fiscal 2019

Promoting new customer development
and structural reform
We have decided upon the following five priority issues
shown in the table below, based on the three priority
policies geared toward achieving the medium- to longterm vision for the fiscal 2019. We will incorporate theseissues in specific measures in each Group company anddivision and implement them across the entire company.
Within Japan, there is a lot of room for thesustainable expansion of customers in areas where ourGroup has yet to open a sufficient number of stores:
market areas with low populations. In order to increasecustomers in these areas, we must create stores where
many customers want to visit repeatedly. That is what
“ sustainable customer expansion through the pursuitof the customer’s perspective” means. We will promote
the following measures in order to achieve that goal.
• Store network optimization: Improve customer
convenience by reexamining existing formats andsuitably positioning each store format• Fusion of online and offline: Promote an O2O strategy• Enhancement of system infrastructure:
Development of an information system to gather andanalyze customer needs and a personnel system• Product development and services in line with needs• Communication enhancement: Implement
advertising and sales promotion measures to meetdiffering needs based on region and promote One to
One Marketing to meet individual needs“ Establishing an overseas sales business profit model”
is an important management issue that determines themedium- to long-term growth of the Group. Our Taiwan

business was profitable from its sixth year in businessin fiscal 2012. As our China business is now heading
into its fifth year, a major theme will be how we will
make it profitable. In the Japan-China Joint Project forstrengthening global business mentioned earlier, we haveidentified a number of issues related to business in China,
such as store operation, human resource development,
and product supply systems, and we are working ondrafting and implementing solutions to these issues.
The measure that supports to resolving issues tois “ organizational and human resource development
reform.” Until now, our Group has implemented a transfer
system that allowed employees to experience a varietyof occupations making efforts to train a workforce thatwould be prepared to take on the “manufacturing,
distribution, IT, retail” business model. However, due torecent changes in the internal and external environments,
we now find ourselves in need of employees withexpertise in unconventional areas such as ICT or thosewith international work experience, as well as people who
possess new knowledge and technology. In addition to
the new system of education we are creating using the
Human Resources Management Platform, we plan toachieve the centralized management and visibility ofhuman resources information and use it to optimize theplacement and assignment of employees in fiscal 2019.
Our policy for fiscal 2019 is to establish themethods to revolutionize these tasks, the procedures for
systematization, and the know-how to adapt them to new
businesses, countries, and regions to aid in our future
globalization. By steadily implementing and executing
these measures, our performance goal for fiscal 2019 is
to increase profits and sales for a 33rd consecutive
year with consolidated net sales of 643 billion yen andconsolidated ordinary income of 106 billion yen.

Priority Issues for Fiscal 201914

Sustainable customer
expansion through the pursuitof the customer’s perspective

We will promote measures from the five perspectives of “store network optimization,”“fusion of online and offline,” “enhancement of system infrastructure,”“product development and services in line with needs,” and “communication enhancement.”

Business area expansion
strategy

We will cultivate and strengthen second and third business pillars to support the growth ofour domestic businesses, such as Deco Home and our corporate and renovation business.

Establishment of an overseas
sales business profit model

Launch a company-wide project to establish a profit model geared toward overseas businessexpansion and create a business strategy for global business development.

Task and system reform

Renew our core system so that it is able to adapt to expanding and changing business domains,while at the same time analyzing the various issues within our Group and promoting reformfrom the perspective of standardization, simplification, and differentiation.

Organizational and humanresource development reform

In addition to redesigning the division of duties, responsibilities, and authority as a globalizedorganization, we will make efforts to acquire and train highly specialized personnel.

For a Sustainable Society

Message to Shareholders and Investors

Strengthen management as a global
corporation that prioritizes ESG

For sustainable growth and medium- tolong-term corporate value improvement

Our Group has worked to manage in a manner thatbalances environmental and economic balance.
In terms of the environment, we established Thai
Negoro Co., Ltd. as a wholly owned subsidiary in May
2018. The company manufactures carpets made mainly
from recycled polyester derived from plastic bottles
reinforcing the creation of products that are moreenvironmentally friendly.
As for the social aspect, we will continue to focus
on improving the safety and quality of our products inorder to embody our motto of “offering the unexpected.”
We seek to be a company trusted by the people in every
country and region where we have businesses, and in
addition to making social contributions through ourbusiness, we are promoting cultural, educational, andregional development activities. In 2018, we supported
the victims of the major flooding in western Japan andthe Hokkaido Eastern Iburi earthquake by donating NITORI
mattresses and beddings.
Regarding governance, as we work to globalize ourGroup businesses, and in particular our sales business,
we aim to strengthen control over the entire Group,
including overseas business, strengthen our risk
management system, and we are working on building
and operating systems of compliance and internal
auditing. In addition to our Group’s Audit & Supervisory
Committee’s independent external directors Kazuhiko
Takeshima (former Chairman of the Japan Fair Trade
Commission), Kazuhiro Suzuki (former Superintending
Prosecutor of the Fukuoka High Public Prosecutors
Office), and Tsuneyoshi Tatsuoka (former Vice-Ministerof Economy, Trade and Industry), in May 2019, Takaharu
Ando (former Commissioner General of National Police
Agency) was reappointed to the Nomination &Compensation Committee and Sadayuki Sakakibara(former Chairman of the Japan Business Federation) was
newly appointed. With their abundance of experienceand sharp insight, they are contributing to improving thesoundness and transparency of our management.
Our Group will continue to further strengthen ourefforts from an ESG standpoint and push forward to
realize our aspiration of enriching homes around theworld carrying out our contributions to society.

Our Group endeavors to voluntarily disclose necessary
and sufficient information in a timely and appropriatemanner in accordance with the Companies Act, Financial
Instruments and Exchange Act, the rules of the stock
exchange, and other applicable laws and regulations
regarding disclosure and IR. In addition, we recognizethat constructive dialogue with our shareholders isessential for our Group’s sustainable growth and to
improve our corporate value, and we will continue tomaintain a system to promote such dialogue.
In fiscal 2018, we implemented reforms geared
toward medium- to long-term growth, such as launching
projects to accelerate the development of global business,creating a system for human resource development,
and strengthening our system of governance. I believethat one day we will look back on these reforms as amajor milestone for our Group. In the fiscal 2019, we will
push forward with Group-wide reforms to achieve our
medium- to long-term vision and execute strategies toenhance growth and value.
We will continue to meet the expectations of all our
stakeholders, our shareholders, and investors. We ask
for your continued understanding and support.

Financial results briefing for fiscal 201815

PART 1

Strengths and Growth Strategy | Financial and Non-Financial Highlights

PART

Financial data
Net sales

Gross profit/Ratio of gross profit
to net sales(Billions of yen)(Billions of yen)

400

700

417.2

458.1

512.9

52.3

608.1

572.0

(%)

53.2

54.2

55.0

54.5

60.0

218.3

200

0

87.5

243.5

278.2

67.9
30.0

0

2015

2016

2018

2017

(Billions of yen)100

314.7 331.4

350

2014

Ordinary income/Ratio of ordinary
income to net sales

2015

2016

2017

2018

(Billions of yen)
100

100.7

93.3

85.7

(%)

16.7

15.9

309.4

15.0

16.3

0

2015

499.7

17.1

16.6

2014

2015

2016

2017

(%)

40.0

2016

2017

2018

2014

2015

16.6

15.4

(Billions of yen)

2016

2017

Operating income
Ratio of operating income to net sales

619.2

600

550.5

(FY)

(%)

40.0

0

2018

414.5

300

20.0

14.5

0

(FY)

2018

487.8

20.0

14.7

To pror vi
videde value to our custtomers arrou
ound the worlld, NI
NITTORI is
evol
ev
o vi
ol
ving
ng
g the
he gloobaball su
upply
pp chapp
ain built upon ou
o r uniique bus
sin
iness
mode
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del.
de
l NITOR
l.
IT
TOR
RI co
cont
cont
n in
inue
uess to carry on ouue
our cocorporatee cu
cultlttureurre of reffusing
to
o acc
c ep
eptt ththee sstta
attus quo and inn
nov
ovat
a e.
at

Total assets/Return on assets (ROA)

329.6

14.9

15.0

Evolving NITORI

0

404.7

250

0

2014

16.3

16.4

393.6

16.6
15.9

75.0

440.9

73.0

66.3
50

(Billions of yen)

500

30.0

Ordinary income
Ratio of ordinary income to net sales

Equity/Return on equity (ROE)
30.0

(%)

0

(FY)

Gross profit
Ratio of gross profit to net sales

Operating income/Ratio of
operating income to net sales

103.0

16.9

50

0

2014

(FY)

94.8

2

18.7

18.3

19.4

2014

2015

2016

18.3

2017

17.6

0

(FY)

EquityReturn on equity (ROE)

0

2018

(FY)

Total assets
Return on assets (ROA)

Non-Financial data
Number of stores

Wage revision rate

Women in management positions

(%)
600

523

373
300

420
27

346

471
37

383

43

25.0

576

21.3

71

56

Japan
Overseas

2015

428

467

12.9

12.5

505

10.4

4.0

2016

286

6.0

2017

2018

(FY)

200
171
150

8.0

145

12.8
12.3

9.1

9.8

10.5

2014

2015

2016

10.0

0

0

2010 2011 2012 2013 2014 2015 2016 2017 2018
NITORI
Keidanren Japan Business Federation
Japanese Trade Union Confederation
Major GMS

20.0

250

16.3

0

2014

(%)

300

19.1

0

16

24.1

2017

2018

(FY)

NumberRatio

17

PART 2Evolving NITORI | Special Feature |Japan-China Joint Project to Strengthen Global Business

Laying the Groundwork to
Achieve our 2032 Vision
Refining our unique business model in China
and restructuring for global expansion.

Human
Resource
Development
1. Human resource
development
standardization

Product
Development
Promotion
2. Product development
3. KPI management
4. EC

4

Priority Issues
We are working on priority
issues geared toward growthin the Chinese market with
the Japan-China
Joint Project.

Improving
Store Appeal
5. Sales floor
development
6. Store opening criteria
7. BrandingJapan

SupplySystemEstablishment

China

8. Stock excess
and shortage
9. Logistics

Fumiaki Matsumoto
Executive Officer & Vice President

Restructuring the business promotion
system in China’s giant market
The Japan-China Joint Project started in December 2018 tostrengthen our global business. The main aim of this joint
project, comprised of 50 Japanese and Chinese staff
members, is to restructure the system of business promotion
in China.
Business in China is NITORI’s main pillar in global
business development. Since we opened the Wuhan StarCity Store in Hubei Province in October 2014, NITORI has
continued to take a proactive approach in opening storesthroughout the country, and as of February 20, 2019, we
have opened 37 stores in Mainland China. In addition to thefact that the scale of China’s furniture and interior design
market is 13 trillion yen, which is four times that of Japan,
there are no other stores like NITORI offering a broad rangeof products that includes everything from furniture to interior
decorations in one place. In other words, the market is yet
undeveloped, much like the situation in Japan that allowed
NITORI to achieve rapid growth.
While there are many big opportunities like this thatawait, China is a fierce market with competitive battles

18

4

Priority
IssuesHuman Resource
Development

Product Development
Promotion

Improving Store
AttractivenessSupply System
Establishment

Establish a short-term
training program for the staff
members in stores and theMerchandising division.

With the cooperation of the
Global Merchandising
Division, we promote global
standardization andlocalization that meets theneeds of each locality.

Improve the attractiveness ofstores with product lineupsthat meet the needs of thearea both business-wise andcommunity-wise, easy-tounderstand sales floor layouts,
and impactful displays.

Implement the cutting-edge
logistics system and supply
and inventory management
system established in Japanto ensure proper store
inventory.

being fought daily. In order to survive in this competitiveenvironment where new forces are constantly emerging
and changes take place at a dizzying pace, NITORI must
develop a system that allows us to fully demonstrate thestrengths we have amassed in Japan.

local environment and market needs. This is the real reason
behind the Joint Project that our Japanese and Chinese staff
members have embarked upon.

The attraction of“offering the unexpected,” even in China

In fact, this project has a major aim that goes beyond
strengthening our business in China. That is promoting theclarification and standardization of our business know-how
with the expectation of future global business development.
In the 2032 Vision of 3,000 stores and ¥3 trillion in sales
that NITORI has set forth, we are aiming for global businessdevelopment not only in China, but throughout the entire
world. In order to do so, it is important that we are steadfast
in conveying to the staff in these new countries the businessknow-how we have cultivated in order to create and adapt
our unique “manufacturing, distribution, IT, retail” businessmodel in the markets where we are advancing. Using thisproject to organize, clarify, and standardize the knowledge
and know-how that have been handed down to us asknowledge through experience, will be a powerful weapon
as we continue to expand globally.

During these last five years of rapid expansion, there was
one issue in the China business that became very apparent.
This issue was the fact that we were not fully utilizing theunique business know-how that NITORI has amassed andrefined over many years in Japan and applying it to China.
To remedy this, the project identifies issues under specificthemes, such as product development, sales floor creation,
supply chain and inventory management, and store manager
and buyer training, etc., and works on improvement
measures. What is important in doing this, is not simply
transferring and applying the expertise acquired in Japan tothe situation in China, but using NITORI’s strengths cultivatedin Japan as a base to create the attraction of “offering theunexpected” in China with a proper understanding of thePromoting clarification andstandardization of business know-how

Progress aiming tobecome a truly global company
Remodeling our store in Qibao, Shanghai in August 2019,was one accomplishment of this project. We renovatedeverything from operations to sales floor creation, to the
product supply system, using NITORI’s know-how, andpositioned this store as the new standard in the China
business where we plan on remodeling all our storesthroughout the country.
Meanwhile, the project itself will be transplanted into
each organization as a globalization function in fiscal 2019.
“Standardization from a global perspective” and “localizationaccording to each country and region’s needs” are issues
that should be tackled as a regular part of the tasks engaged
in by the divisions responsible for the various functions ofcorporate activities. After March 2020, we will promote
efforts in various divisions, such as Human Resources, Legal,
Merchandise Planning, Store Development, and Logistics,
based on the issues and improvement measures clarified
through this project, and we will continue evolving as we
aim to become a truly global company.

19

PART 2Evolving NITORI | Sales–Domestic

505

Promoting the creation of standards
for a new operation system

Number of stores (As of February 20, 2019)

As we continue opening stores and expanding our store
network, in order to meet the expectations of customers
in the community and provide the same level of reliable
service at all of our stores, we must reexamine the operation
system that has been in place until now. Though it is goodthat the number of stores is increasing, that also meansthat stores are further diversifying in scale and businessregion, which can create issues in our existing system ofoperation. To overcome the issues that are raised as wegrow, we will make efforts to establish a new low-cost
operation system so that we can continue to “offer theStoresCreating storeswith repeat visitors
by introducing new
products and services

unexpected” just as we always have.
In February 2019, we completely refurbished the NITORI
Niiza store and positioned it as the standard for the new
operation system. Under the concept of evolutionizing thesales floors and shopping experience, we have installed
display corners coordinated in different styles and establisheda new interior design consultation corner where interior
design advisors can suggest coordinated plans ideally suited
to each customer. In addition to reorganizing our kids & baby
products, RTA, and other furniture sales floors, in terms ofservice, we introduced EC-guidance POP displays and adigital catalog to complement the product lineup, along with
3-D simulated customer service, self-service ordering
devices, and self-service cash registers to maintain the levelof service we offer while reducing costs.

Keigo Kamada
Task Improvement Section,
Store Operations Division

Using mobile devices to improve customer
service quality and work style reforms.

Sales(Domestic)

As we continue to open more stores, we have worked to establish a new
system of operation to ensure that all stores provide the same level of service.
In our Deco Home business, we are promoting a differentiation with NITORI
and expanding store development with a new logomark and design. We willcontinue to provide customers with a space that allows them to do their
shopping more conveniently and with more fun.

Mitsuyoshi Kubota

Interior design consultation corner

General Manager, Store Operations Division

Self-service cash registerTo become a trusted store in
every community in Japan
Against the backdrop of commoditization of products anduniformity of service and with the intensifying competition in
the furniture and interior design industry, only the companies
that truly have support from their customers can survive.
In order for us to survive under such circumstances, properly
conveying and providing our strengths, such as our productcapabilities, ability to suggest coordinated designs, andnational network of stores, to customers in each region isan essential prerequisite for earning customer support. In
addition to creating sales floors that make it easy forcustomers to coordinate products and purchase them, we
are working on enhancing our ability to make suggestions
to customers with measures such as holding coordination
contests within the company. By holding events such as“Fun Week” and other promotional activities for ourcustomers based on company-wide sales plans, we are also
putting efforts into creating stores people will want to visit
again and again.

20

Furthermore, at NITORI, in order to make life moreconvenient, comfortable, and enriched for all people in all
regions throughout the country, we are opening stores inareas with populations of fewer than 100,000 on the one
hand, and on the other we are opening small-format Deco
Home and NITORI EXPRESS stores mainly in urban areas.
These active efforts to open more stores resulted inadditional 38 stores in Japan during fiscal 2018 for a totalof 505 stores. We will continue to strengthen our productlineup and services in our stores and aim to increase thefrequency of customer store visits and at the same timefurther improve profitability.
Number of stores in JapanNITORIDECOHOMENITORI EXPRESS

600
400
200

39
344

51

9
62

12
78

377

396

415

0

2015

2016

2017

2018

(FY)

At NITORI, employees carry mobile devices they can
use to check inventory, product information, when thedelivery is expected, and make product orders, so thatthey may deal with customer inquiries as smoothly as
possible. As the distance employees have to move isreduced, the time customers have to wait is also
reduced, leading to improved quality of customer service.
In addition, we can track and manage employees’
overtime hours and work intervals in real time, which
we can use to bring about work-style reforms.

Self-service ordering device

Strengthening and expanding the
Deco Home business as a businessthat can co-exist with NITORIThe compact home furnishings store, Deco Home, whose
concept is “a store you can drop in on daily,” operates as aseparate, independent entity from NITORI with a large lineupof popular basic items concentrating on necessities for thehome. They also develop trendier or more seasonal items
such as interior novelty items popular with women livingon their own.
Since its inception in 2011, the number of Deco
Home stores has steadily increased and the total numberof stores in shopping centers around the country in mainly
urban areas is 78, as of February 20, 2019. Deco HomeStore Tressa Yokohama opened in March 2018, and thestores that have opened since, use the new store logomark
and design. We plan to accelerate the development of Deco
Home original products and further clarify the differenceswith the NITORI brand in our aim to establish a businessmodel that can co-exist with NITORI, even in the same
shopping malls.

Deco Home, Bell Mall Utsunomiya store

21

PART 2Evolving NITORI | Sales–Overseas

Renewing the format with thefirst store in four years, andevolving into a business format
where we can better demonstrate
our strengths

71

Number of stores (As of February 20, 2019)

StoresUsing NITORI’s
strengths tocreate stores
suited to localities

Sales(Overseas)

NITORI is currently opening stores in Taiwan, the U.S., and China. In addition
to promoting vertical merchandising in cooperation with the Global
Merchandising and other divisions, we are working on developing stores thatare suited to their localities to improve productivity and recognition of the
NITORI brand. We will continue our endeavors geared toward our aspiration
to provide people around the world with enriched lifestyles.

We have been promoting the development of our Aki-Homebrand in the U.S. since we first entered the market in 2013.
In fiscal 2018, we opened the first store in four years in
Ontario Mills, located in southern California. This shopping
mall is among the top 10 customer-attracting malls in the
major consumer area of southern California, and it is also
conveniently located next to the furniture district.
The sales floor space at Ontario Mills is approximately
1.5 times the size of existing stores. The differences fromthe conventional format include how the furniture floor islaid out, how its displays are presented, and the storefront
design emphasizing coordination. The new format wasdeveloped through market surveys conducted jointly bypeople from our headquarters and local staff members in
the U.S., who then held lengthy discussions. We were able
to utilize the strengths of our NITORI stores in Japan toprovide a unique shopping experience that surpasses
competing stores in the U.S.
Since the store opened in May 2018, the number ofvisitors remains high at about five times that of existing
stores in the U.S. The large number of people who stop to

take photos in the store while they shop and other aspectsof creating an attractive sales floor contribute to improving
the brand recognition of Aki-Home. Using this store as amodel case, we will continue to expand the number of stores
where we can demonstrate the strengths of the NITORIGroup, such as product appeal and the ability to suggest
coordinated items, to further increase our presence in the
U.S. market.

Yuichi Kazeharu Managing Executive Officer, General Manager, NITORI China Sales

Promoting product standarizationand transfer-based education tostrengthen our businessfoundation and venture into new
business formats
NITORI has significantly increased our stores in the Chinese
market over the last five years and our performance hasgrown steadily. Meanwhile, slower performance in existing
stores and soaring logistic expenses are some of the issues
that have emerged.
To achieve the 2032 Vision that NITORI has set forth,further growth of our China business is essential. In order todo so, we have positioned fiscal 2019 as the year we solidify
the foundation of our China business and venture into new
business formats, and our policy is to try new experiments
and endeavors based on cooperation with the Japan-China
Joint Project to strengthen global business (see p. 18).
First, we will promote transfer-based education (seep. 36) in China. Currently, approximately 70% of our

22

employees at the China Division have no experience in thesales field. We will implement relocations in order to promote
improvements from the sales field perspective. In addition,in order to expand total coordination suggestions like what
we provide in Japan, we will promote merchandisingmeasures that aim to standardize approximately 70% of
products with Japan. Furthermore, we are developing anexperimental “N Sleep Store,” which are dedicated bed
and bedding stores in major cities mainly in the Shanghai
area as a business format that offers high sales per squarefoot of the sales floor.
Number of stores in China
40

37

38

30

24
20
10

8

11

0

2015

2016

2017

2018

2019

(Target)(FY)

Further strengthening the NITORI
brand with store renovations andnew store openings
The number of customers who made purchases in fiscal
2018 in Taiwan is only about 9% of the total population, andthe average spending per customer is roughly half of what
it is in Japan. However, local recognition is increasing
every year, and in the field of furniture and interior design,
customers mention NITORI as their first or second choice*when asked to recall a store name.
Currently, in the Taiwan business, in addition topromoting the standardization of products in coordination
with the Global Merchandizing Division, we are reexamining
what products the Taiwan market truly needs, reviewing
product categories, and reducing/expanding our productline in each category. Furthermore, to raise our brand image
as a global corporation, we will promote the common usageof TV commercials with Japan.
It has been twelve years since we first entered the
Taiwanese market and the number of stores that havebeen open for several years is increasing. This is why weare gradually renovating stores, starting with flagship storesin each region where the renovations will have a big impact.
Regarding the opening of new stores, we are strengthening
our approach to shopping centers and department stores,
where we have not opened stores thus far, in addition to
expanding the number of stores while experimentally
opening small stores including dedicated home fashion storesof 495 m2 or less.
*Fiscal 2018 survey conducted in-house23

PART 2Evolving NITORI | Sales–O2O/Online Sales

Number of NITORI App Members

Strengthening the store and EC
fusion centered around the newly
established O2O Promotion Office(As of February 20, 2019)

Approx.

3.5

million people

Enhancing sales
channels to make NITORI
even more convenient
Sales(O2O Online Sales)

We are fusing stores (offline) and EC (online) and introducing One to One
Marketing based on each customer's purchasing history to focus our efforts
on providing new services. Our customer-focused business is evolving
utilizing the strength of our nationwide store and logistics networks toprovide a convenient and comfortable shopping experience to as manycustomers as possible.

Noriaki Miyairi

Steadily expanding our online
sales business using the strengthof our product capabilities andstore and logistics networks
Though stagnating personal spending continues to be anissue of concern domestically, the e-commerce market
continues to display rapid growth. Even in the field of
furniture and home décor, companies with various
backgrounds are entering the EC business and competition
is intensifying. Amid this situation, our EC site, NITORI-net
was able to steadily increase its sales in fiscal 2018 due tothe expansion of online limited products, web content
improvement, and enhanced recommendations. As a result,sales in the online business increased by 27.3% over theprevious year to 38.9 billion yen displaying growth at a pacefaster than that of the store business.
One of the greatest strengths supporting performance
growth is our products. NITORI-net offers an extensive lineup
of original products that cannot be purchased anywhere else,

24Manager, O2O Promotion Officeincluding high-performance products, such as N Warm andN Cool. In addition, one of our major advantages is our ability
to provide e-commerce customers with the same services
found in stores by utilizing our nationwide network of storesand our distribution network. When selling furniture inparticular, delivery and installation demand careful attention.
The trust we have achieved by providing high-quality in-store
service instills trust in our e-commerce customers.
Year-on-year comparison of mail order net sales
(%)
140

133.2

134.9

130

127.3

120
110

109.8

100
0

2015

2016

2017

2018

(FY)

According to a survey we conducted in 2018, more than twothirds of our customers who make in-store purchases lookup products online beforehand and more than two-thirdsof customers who make purchases from our e-commerce
website go to see the products in stores beforehand. Thismeans that many of our customers already use both
NITORI stores and the e-commerce website flexibly to suit
their needs. Considering this situation, NITORI has beenworking to create convenient and comfortable services thatare a fusion of highly integrated stores (offline) and EC (online).
For example, the NITORI app for smartphones is equippedwith the Tebura de Shopping (meaning empty-handed
shopping) function that can read barcodes on products instores and automatically create a shopping list linked to theEC site. Customers can select “order online” or “orderin-store” and can even make arrangements for delivery
without having to carry their purchases around store.
In order to further strengthen these collaborative
services between stores and our EC site, in August 2018,
we raised the status of the conventional O2O Project to
O2O Promotion Office. Since its inception, the O2O
Promotion Office has been promoting a variety of activities
such as the introduction of the One to One Marketing
System, renewing the digital catalog, establishing apurchasing analysis organization, and in fiscal 2019, we arefocusing on further strengthening the EC site functions
and improving the convenience of the NITORI app. For
example, the NITORI app is equipped with an image searchfunction, which allows users to use photos of items theyfind around town or on the internet to search for similar

Promotion to make suggestions
optimized for each individual
customer
The O2O Promotion Office will take the lead in further
enhancing our product lineup on NITORI-net, which includes
expanding the selection of products that can only bepurchased online. In addition, based on the analysis of sales
trends obtained from the EC site and customer information,
we can promote the creation of product lineups and sales
floors that more accurately meet customer needs to increase
sales and optimize inventory in brick and mortar stores.
Also, we are strengthening our advertising andpromotions to align with the digitalization of society. With
the optimal combination of online advertising, which
effectively appeals to those with specific interests, andoffline advertising, such as TV and newspaper ads that
communicate information to a wide audience, we canproducts. Also, the in-store product locator function allows
customers to search for the products they are looking forthemselves providing a more convenient and comfortable
shopping experience.
Image search function (reference image)

Takamasa Okamoto
New Service Development Group,
O2O Promotion OfficeSeamlessly linking stores and
EC to develop initiatives that improvecustomer experiences.
In recent years, customers who refer to images onsocial media and interior design sites when consideringpurchases are increasing. The image search function
on the NITORI app will search NITORI-net for the sameor similar item to what you are looking for, just by
taking a picture of the item. From there, customers
can check on the product’s store inventory or delivery
date, or simply purchase it on NITORI-net right then.
We will continue meeting our customers’ needs as
they change along with the times.

achieve more cost-effective promotions. We are also
working on further popularizing the NITORI app in order toincrease the repeat rate by making suggestions according
to each individual customer’s purchasing trends and lifestyle.
We will continue to evolve into the customer-centricbusiness NITORI aims to become by communicating the
optimal content through optimal channels at the optimal timethrough enhanced and expanded One to One Marketing
based on each individual customer’s data.
Digitalization of NITORI
membership card

Becomea membernow

25PART 2Evolving NITORI | Product Planning/Development

Developing brands withwide price ranges to offer
coherent interior coordination

10,000Items handled annually

As part of our coherent interior coordination initiative, weare placing particular emphasis on our DAY Value and &Style lines, two brands with different price ranges.
Our low-priced brand DAY Value has five styles:
simple, natural, feminine, vintage, and Japanese. The
product lineup whose design is tailored to function without
any extra features can be easily incorporated as basic
items in your lifestyle and makes it more fun to coordinate
your home.
Meanwhile, & Style is a high performance, high quality

Enhancingproduct lineup
to attract newcustomers

Strengthening kids & baby
products and electric appliancesales to attract new customers

In addition to the low-priced brand that NITORI has always excelled at, weare now working on enhancing our medium-priced brand and products forkids and babies to cultivate a new customer base. We aim to enrich people’s
lifestyles by finding frustrations and inconveniences in life and promoting
the creation of products that meet customers’ various needs.

Product
Planning/
Development

Hiromi Abiko

Meeting various lifestyle needs
with product development basedon thorough market research
In order to offer guidance toward a more luxurious andcomfortable lifestyle, NITORI focuses on “offering theunexpected” at good quality and low prices, as well ascompletely coordinated interior design resulting in a styleof living that brings harmony throughout the home.
When planning and developing products, those
responsible for doing so will explore current trends byattending and observing exhibitions held in Europe and the
U.S. and within Japan. They conduct thorough research fromall angles such as surveying competitor trends, purchasing

60

60

45

50
40

30
0

2017

26

2018

2019

(Target)(FY)

DAY Value (left) and & Style (right)

pad for babies using our functional N Cool material wasparticularly well received.
In addition, in December 2018 we promoted thedevelopment of large size electric appliances for our private
label products packaged as an “appliance set” in a lineupthat included a refrigerator/freezer and fully automatedwashing machine. This was well-received by customers as
everything required to start a new chapter in life could bepurchased at NITORI, even large appliances that once had
to be purchased at appliance retail stores.

Managing Executive Officer, Coordinated Merchandise Planning,
Global Merchandising Division and Planning Group Manager andCoordinated Product Planning Manager, Merchandising Division

behavior surveys, and home visits. This leads to thedevelopment of original products that offer guidance toward
a more luxurious lifestyle. In addition, we are also focusing
on developing sales floors that clearly and alluringly convey
the value of the coordinated products we have developed.

Machiko Taki
Chief Buyer
Kids & Babies Team
Seasonal & Development Planning
Planning Group,
Merchandising Division

Utilizing thorough market research andmy own experience to develop productsthat enrich lifestyles.
In order to develop products from the perspective of
the user and our customers who are making thepurchases, we must thoroughly examine whether eachfunction is really necessary to the product. I place greatvalue on the various inconveniences we hear aboutfrom our customers and use my own experiences offrustration, to continue working on creating productsthat make life easy and convenient for our customers.

Composition ratio of coordinated products(%)

In fiscal 2018, the number of stores carrying kids and baby
products increased from 173 stores to 384 stores. Thiswas in response to an increasing number of inquiries from
customers as a result of information regarding NITORI’s kids
and baby products spreading on social media. The stroller

brand satisfying customers who are particular about theirstyle. As the lineup is further enhanced in the future, we
can meet a variety of customer needs by expanding ourrange of mid-priced products in addition to the low-priced
range NITORI has always excelled at.

High performance productsthat continue to evolve
each season
NITORI’s functional products continue to evolve each season
with vertical merchandising that extends back to the raw
materials. For example, the spring and summer bedding
series N Cool, which feels cool to the touch as the part thattouches the skin transfers the heat to the fabric, introduced
more patterned items and color choices to enhance theline’s coordination possibilities. In addition, the affordable N
Cool Light bed pad priced at 999 yen, was developed foronline sales only.
The autumn and winter bedding N Warm series
achieves warm, smooth comfort by absorbing the moisturereleased by the body and turning it into heat with moistureabsorbing exothermal material. In addition to releasing the
N Warm Double Moist, which has an enhanced moistureretaining function over the popular N Warm Moist, we also
released the N Warm Super, which has the added functionof being warm as soon as you get into bed.
In October 2018, four products received the Good
Design Award. This was the 6th consecutive year our
products received this award. The N-CLICK™ box storage
shelf, which was released the same month, was developedin collaboration with Valinge Innovation (Headquartered in
Sweden) and took four years to develop. It uses an assembly
method that requires no screws or tools. It was highly
evaluated for being easy to assemble and the fact thatscrews are not apparent on the furniture’s surface, creating
a quality that did not exist in storage shelves before. We willcontinue to develop high performance products to resolve
the inconveniences in customers’ lives.

N Cool (top photo) and N Warm (bottom photo)27

PART 2Evolving NITORI | Manufacturing

Ba Ria–Vung Tau Mattress Factory
Floorspace

400,000

m2

NITORI STUDIO, which serves as our core floor for furnituresales. Additionally, the factory built in Ba Ria-Vung Tau,
Vietnam began operations in December 2017 and occupies afloorspace (400,000 m2) 2.5 times that of the Hanoi Factory.
In fiscal 2018, the factory increased its productivity of bed
mattresses and dining table sets to approximately 2,000 and
330 per day respectively.
Furthermore, we are promoting the establishment of
an in-house production system for products that use fabrics
such as curtains. We are building our curtain producing
factory in Ba Ria-Vung Tau. Construction is expected to becompleted in August 2020 and operations are scheduled to

begin March 2021.
Regarding carpets and rugs, we added the Thaicompany Thai Negoro to our group through an M&A in May
2018. This company develops and manufactures carpets using
recycled polyester cotton made from raw materials suchas plastic bottles. The acquisition of this company further
strengthened development and supply of environmentallyconscious products that NITORI has been seeking to expand
in recent years. In addition, as a new initiative, we havebegun testing mixed shipments with local Thai companies
to reduce costs and we have begun producing anabundant variation of carpets.

Ba Ria–Vung Tau Factory

Hanoi Factory

Establishment of a Global
Merchandising Division to pursue
further scale merits

account the unique needs and different living habits ineach country.
To that end, we have launched a Global Merchandising
Division in fiscal 2018 to oversee the planning anddevelopment of products in each country. This Division willtake the lead in working closely with the product planning anddevelopment divisions in each country, sharing information,
promoting the collective procurement of raw materials andthe standardization of parts and materials. It will also seek toimprove product development efficiency, reduce production
costs, and optimize inventory. In fiscal 2019, we are aiming
for a global merchandise standardization rate of 70%* in the
pursuit of further scale merits.

Promoting in-houseproduction andsupporting Group growth

Manufacturing

At NITORI, we have always promoted vertical merchandising going back to raw
materials, but the Global Merchandising Division, established in fiscal 2018
is taking the lead in the pursuit of further scale merits. In addition, in order tostably supply high quality products, we are promoting in-house production
along with conducting M&A to achieve a stronger production system.

Masanori Takeda

28Managing Director,
General Manager Global Merchandising Division &General Manager Merchandising Division“Offering the unexpected” byensuring quality and lowering
manufacturing costs

Augmenting our overseas
production system to support a
stable supply of products

At NITORI, in order to provide a stable supply of products thatare both low-priced and high quality, we promote verticalmerchandising that consistently and systematically extends
from raw material procurement to the final finished product.
When selecting suppliers of raw materials, we arethorough in our checks to verify that they satisfy various
quality, function, and cost requirements necessary to
make products that meet our customer needs. We conduct
negotiations with hundreds of manufacturers based on
actual investigative visits to their factories and plants.
In addition, we aim to improve quality control andproductivity in products produced overseas, and therefore
provide local support for factories belonging to our suppliersin areas such as process management, quality inspection,and loss rate management. Regarding product categories
that are in high demand in other countries as well as in Japan,
we are actively seeking out new production centers suited
to a global production system.

At NITORI, we are promoting in-house production in orderto ensure a stable supply of high-quality products in view ofour goal of 3,000 stores by 2032.
The Hanoi Factory in Vietnam established in
expectation of global store expansion, manufactures
kitchen cabinets, sofas, mattresses, and other products for

NITORI’s craftmanship continues to expand past the bordersof countries and regions in order to introduce better products
for our customers around the world. We must strengthen
our product development system in order to utilize this global
production system even more effectively and efficiently.
Currently at NITORI, we are planning and developing
products in line with customer needs in each of thecountries where we have stores (Japan, Taiwan, U.S. andChina), but going forward we plan to proceed with productdevelopment from a global perspective while taking into

*The ratio of products sold in common in two or more countries.

Manufacturing from a global perspective
supports NITORI’s further growth.

Noriaki Hase
Global Merchandising Division
Merchandiser Group
Home Fashion Soft Goods
Merchandiser Manager

How we will use the product development capabilities that we cultivated with our unique
NITORI business model moving forward globally is an issue for us. I believe our products thatoffer the unexpected, will receive public approval regardless of country, region, or custom.
In order to embody our aspiration of providing people around the world with enriched
lifestyles, we must organize what should be standardized and what should be differentiated,so that we can establish a framework for manufacturing suited to a truly global corporation.

NITORI STUDIO

29

PART 2Evolving NITORI | Trade/Logistics

175,000
Container volume handled annually

TEU/yearAchieving both
improved shipping
quality andreduced costs
Trade/
Logistics

At NITORI, where we import products from overseas and deliver it to stores andcustomers’ homes around the country, we are establishing our own uniqueglobal logistics system. In order to deal with the continuously increasing
volume of shipments, we have expanded our logistics bases with opening
distribution centers such as Taicang DC in China. We are also focusing on
human resource development introducing mobile training units with the aimof improving shipping quality.

Akio Igarashi

Building a one-stop shipping
system from overseas tocustomer homes across JapanAt NITORI we import approximately 90% of our raw
materials and products from overseas. The total volume
imported to Japan from 13 countries and 50 ports aroundthe world annually is equivalent to 175,000 20-footcontainers; one of the largest volumes imported to a single
company in Japan. We are able to significantly reduce costs
by undertaking all import related tasks within our Group.
This also enables smooth product supply to our distribution
centers around the country.
In addition, we have established three large scale
overseas distribution centers in Taicang, China, Ho Chi Minh,
Vietnam, and Taoyuan, Taiwan allowing us to provide therequired number of items to the required location at therequired time, resulting in optimized inventory and lowered
costs. In particular, the Taicang DC, which began operatingin October 2018, is the Group’s largest distribution center,and is located with convenient access to both port and30

Senior Executive Officer, Representative Director andPresident of Home Logistics Co., Ltd.

China

Japan

Taoyuan DC

Distribution Centers

Taiwanour supply chain from productions areas to stores andcustomer homes.

Actively implementing leading-edge
technology to achieve lower costs
and more efficient operationsof new distribution hubs in order to carry out just in timedeliveries from the customer’s perspective and reviewing
the positioning and functions of existing distribution centers.
In addition, we are working to improve on-site productivity
by introducing new technologies in order to curb soaring
logistics costs.

We have built one of Japan’s largest distribution networks
covering all 47 prefectures and 98% of the population
undertaking more than 8.1 million deliveries annually fromsmall novelty items to large furniture pieces. We introduced“AutoStore” at our East-Japan Ecommerce Fulfillment Centerin February 2016, improving the efficiency of loading andunloading inventory by approximately five times. In addition,
our delivery centers throughout the country use the latest
traffic control systems employing GPS for more efficient
product delivery.
Furthermore, we are considering the establishment

Aiming for further quality
improvementin the last mile of delivery

Trade and Distribution Centers

Taicang DC

highway. It functions as a global distribution center handling
not only domestic Chinese logistics, but overseas trade
distribution as well.
In addition, there are 11 distribution centers, 78 delivery
centers (sales offices), and 11 shipping centers covering
Japan so that we can quickly deliver our products tocustomers across the country. In November 2018, in responseto the continuously increasing shipping needs in EasternJapan, we established new distribution centers in Sendai,
Miyagi and the town of Goka in Ibaraki Prefecture in orderto maintain more efficient transportation.
We will continue to focus our efforts on optimizing

11

In recent years, we have been placing particular focus on
the “last mile”—improving the quality of the final processof delivering products to our customers. To improve theservice quality offered by the delivery team who deliver,assemble, and install products in customer homes, we havelocations

Vietnam78

locationsShipping Centers

11locations

Annual number of deliveries(x 10,000 deliveries)
1,000
800
600

550

630

750

810

400
200
0

2015

2016

2017

2018

(Year)

established two training facilities, one in the east and one
in the west, that recreate customer homes. In June 2019,
we introduced the industry’s first Mobile Training Unit, avehicle for delivery training. In the form of a training truck,we visit roughly 140 partner shipping companies to teachdelivery techniques and customer service skills, so that
we are able to bring more joy to our customers.
These initiatives are improving delivery quality
throughout the country, and at the same time, boosting
the motivation of our delivery team.

We are working on further improvement ofour delivery quality and operational efficiency.

Delivery Centers

Ho Chi Minh DC

Taicang DC

Ryohei Iwata
Manager
Safety & Environmental
Control Division
Home Logistics Co., Ltd.

In order to improve our delivery quality, it is essential that we provide our delivery team withtraining. Until now, we used our training facilities in Osaka and Kanagawa Prefectures fortraining, but there was an issue with the burden it placed on delivery partner companies
participating from faraway places. The Mobile Training Unit is a facility enabling training in
any location throughout the country. By conducting more realistic delivery training we canachieve the same high standard of service across the country.

31

PART 2Evolving NITORI | Expanding Business

PART

3

Corporate Sales Business Division andInterior Renovation Business Division38

Locations

Using NITORI’s Acquired
Strengths to Develop
New Fields of Business
ExpandingBusiness

In November 2018, we strengthened the systematic cooperation between the
Corporate Sales Business Division and the Interior Renovation Business
Division with the purpose of energizing reciprocal marketing. We believe thatcooperation between these two divisions is a big opportunity to expand businesspossibilities by strengthening proposal capabilities and expanding our customer
base. We are focusing efforts on cultivating and strengthening our second andthird core businesses to support NITORI’s medium- to long-term growth.

Nobuyuki Tomii

Corporate Sales and Interior
Renovation Businesses continue togrow in double digits every year
Our corporate business is divided into five businesscategories: offices, commercial and educational facilities,
medical and welfare facilities, accommodation facilities andliving environments, and model rooms. In recent years,
office projects have shown steady growth in addition to anincrease in orders for large-scale projects, such as hotels andcommercial facilities due to expanding inbound tourism.
This has resulted in significant year-on-year growth of morethan 20% for fiscal 2018.
In October 2018, we opened our largest BtoB showroom,
the NITORI BUSINESS Shibuya Showroom in Shibuya, Tokyo,
which tends to be a gathering place for information on thelatest trends, further strengthening our ability to receive anddisseminate information. We will continue aiming for theestablishment of the NITORI BUSINESS brand by expanding
product development and proposals that make use of theGroup’s infrastructure in our Corporate Sales Business Division.

Strengthening the synergy
between the Corporate Sales andInterior Renovation Businesses
through cooperation
We are strengthening the cooperative system in place
between NITORI Group’s Corporate Sales and Interior

32

Foundation for
Creating Value
ffort int
nto
o str
strengthenning thee huuma
m n ressourcesthat drithat
riveve valueu creaation in order to achi
atio
acchi
h ev
eve
e su
sust
sta
ainablaina
ble
e growo th.
Wee are enhan
anci
cing
g our edu
duccaticattiion
nal sysste
tem
m an
and
d cr
crea
eati
ea
ting
ti
ng betette
terr
workinng envi
virronmronmenents
ents thr
hrou
ou
o
ugh
hou
out th
the
e Gr
Gro
oup.
p. In adadd
ditiion,wee are strtriv
vin
ng to improvee ourr productt supply base and
manag
geme
m nt struccture.

General Manager, Corporate Sales Business Division & Manager,
Interior Renovation Business Division

Renovation Business Divisions. Through cooperation between
the eight Corporate Sales Business Division offices and 30
Interior Renovation Business Division offices, we are creating
an environment where each business can concentrate on
the optimum conditions for its own growth.
In addition, while we engage in BtoB projects, suchas company housing, employee dormitories, and welfare
facilities, we are aiming to capitalize on the know-how
and interior coordination skills cultivated in the Interior
Renovation Business for projects with extensive BtoC
elements, and create a new synergy through the fusion of
the two businesses.

Yuuji Okuwaki
Regional Area Manager
Corporate Sales Business Division

Expanding NITORI’s possibilities
by pioneering new businesses
Opening a showroom was a new venture for the
Corporate Sales Business Division. Despite everything
being new and having to find our way on how to deal
with customers and teach employees about the new
operation system, large numbers of people have comeout to visit our showroom since day one. We willcontinue to actively promote the NITORI BUSINESS
brand and aim for the further growth of the Corporate
Sales Business Division.

33

PART 3

Foundation for Creating Value | Special Feature |Building a Human Resources Management Platform

Creating an Organization
with a Wealth of Elites

NITORI education
NITORI’sssystem

Human Resource
Management Platformm

NITORI continues to pursue businessexpansion. We are promoting humanresource development to support
our further evolution.

An education system to cultivate
employees who cancontribute to the economy
and society
Provides a humanresource management
systemHiroyuki Nagashima
Manager, Organization Development Office and Manager,
Human Resources Development Division

The NITORI
University
Concept

Provides an online
learning system

NITORI University offers various curriculums surrounding three themes, “corecompetence,” “technology,” and “global.” We aim to cultivate employees who cancreate new value by using NITORI’s two axes of “technology” and “global” to further
enhance our unique strength in “core competence.”©Toshiaki Yano

Cultivating employees who can create
their own career paths
Based on the belief that human resources is the key tocorporate growth, NITORI University is the name we use
for the entire wide-ranging system of employee education at
NITORI, and we are making efforts to expand its educational
content. The employee core competence NITORI gives themost priority to is the ability to examine problems that havebeen discovered, and then accurately analyze and solve theproblem by making the right judgement. The HR Divisionoffers a variety of education systems to ensure that all
employees acquire the ability to examine, analyze and judge.
Of the available programs, we are focusing on transferbased education in particular, which fosters a long-term
perspective in employees and supports career advancement.
Our employees experience a variety of workplaces andoccupations through work transfers every two to three years
across the wide range of business areas in which NITORI
operates. They are able to learn a broad range of businessrelated knowledge and skills and a multifaceted perspective
while at the same time finding the field in which they canbest demonstrate their own value.

34

In addition to transfer-based education, we also offer
a variety of educational training programs that meet theneeds and careers of each individual employee. The training
programs offer basic knowledge such as chain store theory
and business skills, to the cultivation of management skills
required at executive levels.

Building a new human resource
management platform
In fiscal 2018, NITORI started building a new human resource
management platform. This platform was built with thecooperation of Workday (HR and Finance solutions vendor)
and Globis (operating Japan’s largest business school). It
promotes the unified management and visibility of personnel
information, such as work history, skills, and career
orientation, while at the same time provides an optimallearning environment in accordance with each individual
employee’s orientation and career.
As the NITORI Group’s business domains expand
globally, a variety of knowledge and skills such as
management theory and digital knowledge are becoming
increasingly important for the development of future humanresources, in addition to our in-house learning centeredaround transfer-based education. Understanding this, thenew platform provides all current employees with thelong-term opportunity to learn a variety of knowledge andskills via video with Globis’ study-all-you-want program.
Employees can choose what interests or inspires them froma menu of 200 courses in nine different fields, anytime,
anywhere. In addition, the learning data from Globis’ studyall-you-want program and personal data in the humanresources management system are linked so that the
information can be used in optimizing assignments to
Manufacturing, Logistics, retail, IT, and other divisions.

Growing alongside employees with“border-crossing curiosity”
NITORI believes the most important factor in developing
human resources is the growth of each individual employee.
The role of the HR Division is to pave the way that willencourage employee’s individual growth so that the company
also transforms and grows.
At NITORI, we provide all employees with anopportunity to submit a “Career Plan” every six months.

This is their personal aspiration. In other words, it is an
opportunity for employees to think about what kind ofvalue they can create and provide for society, as well as
what they might need or what they should study in order toachieve that goal. As the years pass, and the department
they work in changes, their interests and goals for the
future also change. We provide employees with a regular
opportunity to think about who they want to be and how
to get there.
In general, when people become members of society,they are overwhelmed with tasks and become afraid of
failure and eventually are no longer able to display theircuriosity. However, at NITORI, we believe that curiosity isan essential element to corporate growth. A mind that cancross the borders of unexplored markets or future markets
is what we call “border-crossing curiosity.” We will continue
to cultivate the soil that fertilizes border-crossing curiosity,and by nurturing as many employees as possible with bothexpertise and a broad perspective, we aim for sustainablegrowth as an organization of powerful elites.

35

PART 3

Foundation for Creating Value | Human Resources Foundation

Developing human resourcesthat contribute to society

which more than 1,000 people attend each year.
Through these seminars, participants reaffirm the
NITORI Group’s aspiration and vision and utilize them inbusiness restructuring in each department while building
their own career plans.

Under NITORI University, a unique education system, the Group has focused on expanding
its employee training system and supporting independent learning with the aim ofdeveloping genuine specialists who contribute to the company and society.

NITORI’s transfer-based education
provides the opportunity to gain a variety ofexperience that supports career advancement
In order to support our manufacturing, distribution, IT, retail businessmodel, specialists who can think comprehensively and create new value
are essential.
At NITORI, we move (transfer) employees between departments
every two to three years so that they can amass real-life experience while
being trained as specialists.

Global training
In light of globalization and the expansion of our businessareas, we are making efforts to train and strengthen ourhuman resources who are able to see things from a
global perspective and take an active role.
In addition, for employees at the management level,
we hold diversity management training required of thosein supervisory positions in order to achieve common
goals alongside their subordinates who have a variety ofdifferent nationalities, genders, ages, and backgrounds.

Advertising
Businessplanning

IT

NITORI
Onlinesales

Global human resource development

Operating stores
Tradingcompanies

Education
Manufacturers

Diversity management training

Self-development support systems
responsibilities of the growth of their subordinates, andwhile growing along with their subordinates, unify theirorganization as one.

Position-specific training
Starting with the onboarding program we implement for
new employees, we hold training sessions for employees
at every level.
Primary initiatives
Onboarding programThis training program, held regularly, is designed toingrain NITORI’s philosophy for the younger generationand help them acquire fundamental business knowledge.
By conducting group work and having employees engage
in resolving a variety of issues, participants learn skills,
behavior and perspective required of new employees.

LectureGroup work

Seminars in the United States
We hold seminars in the United States where the distribution
industry is advancing, and many companies are pursuingtrailblazing policies and measures. After receiving theoreticalthinking training, participants tour the local community
and the chain stores that support it. The training results areannounced on site.
The curriculum is prepared for each training stage,
from the introductory course in which all second-year
employees participate, to the selective advanced courses,

We have a Global Training System to train employees to beable to work globally in an effort to achieve NITORI’s future
vision. Under this system, employees apply and those whoare selected are dispatched to one of our overseas Group
companies for a year, to receive training to become our
future core human resources.

We have a range of educational support systems tohelp employees further their careers in line with theirindividual aspirations.
Primary systems
E-learning (Globis’ study-all-you-want)
From fiscal 2019 we are introducing Globis’ study-all-youwant program (long term plan) and making it available toall employees. The program consists of video content
that enables easy access to the knowledge required toachieve the careers employees aspire to.
NITORI Color Coordination School (NCCS)
NCCS is a course that teaches knowledge in interior
coordination essential to NITORI’s business. Employees
can study at four different levels in line with their skills.
Levels range from the beginner course, where students
learn the basics of interior design and sizing up spaces
and colors to the expert course, which consists of talks
from selected speakers and field work.

Group discussion

Vision leader training
We hold selective training sessions to cultivate managers(store managers, etc.). Participants learn the skills andway of thinking required for management tasks. We
are aiming to develop human resources who can take

36

Declaration of determination

NWC National Competition

Logistics

Global mindset training

Main training and systems that support
career advancement

NITORI World Circle (NWC)
NWC activities encourage employees to use statistical
tools and work with their colleagues to solve problems
and challenges in the workplace through teamwork.
Activities are open to anyone who wishes to participate.
Teams that are selected from around the country go on
to give a presentation to the management team. The best
ideas are then tested and refined before they get rolled
out throughout the company.

Training before going overseas

Training while overseas

Overseas Group company initiatives
The NITORI Group has established the same educationand training systems as Japan at its overseas bases.
We conduct overseas training such as U.S. seminars
for outstanding employees. We also conduct training at ourJapan headquarters and share the company’s values andbusiness approach.

Training in Japan

Observation tour

Presentation of results

Winning
coordination
design37

PART 3

Foundation for Creating Value | Human Resources Foundation

Creating a comfortable workplace

Health management & diversity
Health management promotion

We are promoting diversity and health management to create a workplace where diverse
human resources can exercise their capabilities and work with enthusiasm.

An environment where individuals can play
an active role will be the force behindcompany growth and changing society
In order for the NITORI Group to bring enriched lifestyles to people aroundthe world and become a company that makes widespread contributions
to society, creating an environment that respects diversity and whereindividuals can demonstrate their best capabilities is essential. We believethat each and every employee proactively endeavoring to achieve theirgoals in good physical and mental health is the driving force behind
corporate growth, which leads to changes in society. In order to achieve
our Vision 2032, we will continue to further strengthen our efforts, suchas considering the establishment of specialized organizations, so that ouremployees can continue to work with peace of mind.

Improved
productivity(Established April 1, 2016)
Work-life
balance

Healthmanagement& diversity

The three pillars for creatinga pleasant work environment

Introducing a work-at-home system andsatellite offices to promote teleworking

System enhanced to support the balancingof childcare, nursing care, illness and work

From October 2016, we introduced awork-at-home system geared toward
employees who work shorter hours to
improve work productivity. In 2018, we
opened satellite offices using our bases
located throughout the country. Many
employees who have used the teleworksystem reported that it improved
their productivity.

NITORI is enhancing its support systems so that employees
can choose their workstyle according to the events in their lives.
Primary support systems

In order to promote RPA (Robotics Process Automation),the Information System Improvement Office leads regularinternal briefings. The entire company is working towards
improving operational efficiency using technology, such as
explaining to employees what RPA can achieve, showing
practical examples and holding demonstrations.

Swap body container utilization
From March 2019, we began using swap body containers inrelay transportation. By using swap body containers, we can
improve transport efficiency, reduce the burden on drivers,
improve work style, and promote active roles for women.

A system that subsidizes daycare services used on Sundays
and national holidays
When there is no paid leave remaining for childbirth or childcare,special paid leave can be given according to years of service
A system of shorter working hours used for the purpose ofnursing care or childcare
Special paid leave for personal injury or illness used wheninjured or ill or for the nursing care preparatory period of up
to 120 days of accumulated expired annual paid leave

We believe that employee health is a crucial management
resource for the NITORI Group. We will work with ourlabor union and health insurance society to help all of
our employees and their families stay healthy so that we
can achieve our Group mission and vision and ensure that
all employees fulfill their potential.

Primary initiatives
Improve self-management and awarenessof health
We have implemented the following initiatives withthe purpose of grasping your own health condition
from checkup results, adopting appropriate lifestyle
habits, and being able to grasp your own stress level
and learning how to cope with it.
Operation of the personal health website “My Health Web”
Holding health education programs at various internal training
sessions geared toward new employees, female employees,
executives, how to quit smoking, mental illness prevention, etc.
Creating and distributing a book of self-care measures,“NITORI Supplements for your Heart”

Published booklet to disseminateawareness of the current system
We have summarized the contents of thesystem in a booklet to help promote system
usage and reduce concerns and burdens whenusing it. The booklet is revised every year anddistributed to all employees in all bases.

Women in management positions
Ratio

Number500

Health promotion campaign implementation
Held annually as a team competition to improve employee
communication across generations and lifestyle habits.

300

100

12.8

12.3
10.5

9.8

9.1

200

Walking campaign
NITORI physical condition improvement contest

145

171

(%)
15
10

250

200

286
5
0

0

2014

2015

2016

2017

2018

(FY)

NEWS
Obtained Kurumin certification
NITORI’s earnest efforts to support
employees’ childbirth and childcare wererecognized with its receipt in March2018 of Kurumin certification*, as acompany that supports child rearing.
*A system whereby the Director of the Prefectural Labour
Bureau certifies companies that are taking specificmeasures as companies that support child rearing underan action plan based on the Act on Advancement of
Measures to Support Raising Next-Generation Children.

BookletSeminar promoting women

400

Introduction of work interval system
We have introduced a system that provides an interval ofat least 10 hours from the end of a workday until the next
workday begins, which contributes to the maintenance of
employees’ mental and physical health and ensures they
have personal time.

Promoting women
At NITORI, we have positioned bolstering diversity as one of
our pivotal management strategies, and we are promoting
initiatives so that diverse human resources can feel motivatedand empowered in their roles. Among those, we are focusing
on encouraging women’s active roles, expanding systems
that allow women to demonstrate their individual powerand holding career support seminars.
We plan to continue implementing various initiatives
with the goal of creating a workplace where women canfeel invigorated in their work.

Health Management Declaration

Work-life balance

RPA utilization

38

At the NITORI Group, as our company grows, we provide our
employees and their families with comprehensive support
for their health so that every employee can engage inwork in both good physical and mental health, and full ofdynamism, dreams, and aspirations. In 2016 we establisheda Health Management Declaration and are proactively
deploying the Collabo-health movement along with the
NITORI health insurance society and labor union.

Improved productivity

Working at home

Recruitment of diverse human resources
At NITORI, diverse human resources actively participate
regardless of nationality, age, or gender. With the aim ofachieving our 3,000 stores by 2032 Vision, we have actively
been hiring foreign nationals. We have also implemented a“Job Return System” rehiring employees who have left forreasons such as marriage, raising children, caring for theelderly, changing occupations, or studying abroad, as wetake steps to ensure we have outstanding human resources.

Accredited for the 3rd consecutive year CertifiedHealth and Productivity Management
Organization Recognition Program (White 500)
The NITORI Group was accredited for the
3rd consecutive year since 2017, in theCertified Health and Productivity
Management Organization Program*(White 500) by the Ministry of Economy,
Trade and Industry and Nippon Kenko Kaigi.
*Based on the Certified Health and Productivity Management Organization
Program, which rewards corporations that practice exceptionally good healthmanagement with health promotion initiatives and initiatives adapted to local
health issues.

39PART 3

Foundation for Creating Value | Product Provision Infrastructure

Pursuing product safety measures and quality
enhancements in step with the world
In product safety, product liability and seller’s responsibility cannot be separated, must not
be separated nor left to others. This is our policy under which NITORI delivers products thatcan be used with assurance and at a lower price, thanks to the United Collaboration Systemwith our business partners.

*As winners of the Minister of Economy, Trade and Industry award cannot apply for theaward the following year, our award in 2018 was the second consecutive award win
after 2016.

New plantAward ceremonyAwards received
Quality Control Headquarters in Japan
Determines rules related to quality for the entire Group.
Supervises, takes corrective action, and educates.

Production sites(outside Japan)

2008

2011

2013

2014

2016

2018

Silver Prize
Winner:Large Retailer
Category

Director-General
for Commerce,
Distribution andIndustrial Safety
Policy Award:
Large Retailer
Category

Director-General
for Commerce,
Distribution andIndustrial Safety
Policy Award:
Large Retailer
Category

Director-General
for Commerce,
Distribution andIndustrial Safety
Policy Award:
Manufacturer andImporter Category

Minister of
Economy,Trade andIndustry Award:
Large Retailer
Category

Minister of
Economy,Trade andIndustry Award:
Large Retailer
Category

Sales outlets(worldwide)

Received this award
two consecutive times

Fair and honest partnerships

Quality assurance flow

1 survey

NITORI Received the Minister of Economy,
Trade and Industry Award for the Second Consecutive Year*
This award program seeks to entrench a product safety culture in companies
and create a safe and secure society. NITORI’s various product safety andquality improvement initiatives have been highly rated.

Globalization of quality assurance system
NITORI has been building a global quality assurance system
across the Group since fiscal 2018. The center of activities
for this effort is the Quality Control Headquarters in Japan,
which is responsible for decisions, audits, and education on
related rules and regulations. Actual work including technicalevaluation and inspection is conducted by the quality
department of the country or region in charge of production
and sales. This makes for an even more efficient and stricter
quality assurance system.

NEWS

Quality

2 standards

Development
technology

3 evaluation
meetings

Pre-shipment
inspection/

4 Incoming

inspection

Quality

5 improvement
meetings

Continuous

6 plant audits

NITORI not only conducts fair, honest, and transparent trade with suppliers, it provides technicalguidance and management policy briefings, and strives to create new value together.

Logistics partnerships
1 New plant survey

4 Pre-shipment inspection/Incoming inspection

We conduct new plant surveys of new suppliers before
starting business with them. We audit and evaluate 13 items
including the quality assurance system and the onsite partsand process management systems from an ISO perspective.

Pre-shipment inspections are
conducted at overseas plants.
Random inspections prevent
defective products from leaving ourplants. In addition, distribution
centers in Japan conduct incoming
inspections when they receive new
products and perform strict checksof product appearance and display.

2 Quality standards
To comply with laws, prevent
accidents and the reoccurrenceof defective and non-conforming
products, as well as to establish
a baseline for quality, we haveestablished quality standards
based on Japanese Industrial
Standards (JIS).

Pre-shipment inspection

5 Quality improvement meetings

Quality control

At Quality Improvement Meetings, we analyze damaged
and defective products, determine their cause andcountermeasures, and ask suppliers to make production plant
improvements. In addition, we check the effectiveness of the
improvement measures and turn the PDCA cycle.

3 Development technology evaluation meetings
Development Technology
Evaluation Meetings are held toprevent product-related quality
problems (accidents, defects, andrisk due to misuse). We evaluate
products based on the Failure,
Mode, Effect, Analysis (FMEA)
method with the aim of preventing
problems before they occur.

6 Continuous plant audits

Development technology
evaluation meeting in
Vietnam

We conduct Continuous Plant Audits with the goal of reducing
defective and non-conforming products. We check whether
the supplier’s quality assurance system meets NITORI’s
requirements based on the Sangen Principle of visiting theactual site, observing the actual part, product or item,
determining the actual situation, and then proposing
improvements as necessary.

Since fiscal 2015, Home Logistics Co., Ltd., which supports
NITORI Group’s logistics, began holding a Management
Policy Meeting for Suppliers to explain anticipated future
management and partnership developments. NITORI is
working together with partner logistics companies toimplement training related to furniture handling and delivery,
and to jointly organize initiatives to further enhance service
quality.
In addition, in recent years, we have been actively
promoting measures such as the installation of rest facilities
for staff members involved in delivery work, as well as theintroduction of materials handling equipment* and tools thatcan be used by all workers, regardless of age or gender.
We are working together with partner companies to alleviate
issues in the logistics industry such as the shortage ofworkers and to address issues related to changes in society,such as the aging population and the promotion of women’s
active participation in the workforce.

Guidance on plant management/
Open HouseNITORI actively works with suppliers, even at their
manufacturing plants, to build strong collaborative systems
to create better products together.
At trainings for managers of suppliers, we explain theimportance of fulfilling their social responsibilities including
the work environment and share NITORI’s ideas andpolicies through various meetings in order to create aculture of product safety.
We also hold study group sessions called Open Housefor suppliers at their plants, which serve as models for
improvement, and work to improve the technology of theentire manufacturing site.

*Materials handling equipment: Machinery used to enhance the efficiency
of logistics operations.

Supplier factory open house

Mobile Training Unit exterior (left) and interior (right)

40

41

PART 3

Foundation for Creating Value | ESG Initiatives

Balancing economic value
and environmental value

Initiatives in manufacturing
NITORI actively promotes the development of productsthat minimize the use of natural wood, the development of
products that use recycled polyester cotton, and the reuseof scrap materials that are produced in the manufacturing
stage, thereby reducing the environmental impact of the
manufacturing process.

We are simultaneously working to raise economic and environmental value by constantly
raising productivity and pursuing greater efficiency.

NEWSThe existence of NITORI makes daily life in the community convenient and enriched. We believe this is the meaningof our existence and our social responsibility as a corporation. In addition, fulfilling this responsibility contributes toachieving a sustainable society. In order to continue growing as an essential entity, NITORI seeks to improve
productivity and more efficient manufacturing, and aims to balance financial and environmental values.

NITORI offers furniture and interior decor products necessary
for people’s everyday lives and it therefore pursues productdevelopment by leveraging new technologies to respond topeople’s changing and increasing environmental awarenesswith its products. In addition, product development isconducted in line with NITORI’s own original standards tocreate products that will please both our customers andalso be eco-friendly.
Primary initiatives
Product development contributing toless home electricity consumption
Among our bedding items, the summer N Cool and winter
N Warm use materials that feel cool to the touch insummer and warm to the touch in winter. By providing
these types of products, we are contributing to reducing
the usage rate of air conditioning and heating systems.

Product development—The ECONATURE™ Curtain
In May 2018, we launched the premium lace curtain
ECONATURE™ as part of our product line that is highperformance, low cost and also enviornmetally friendly.
Leveraging the product development capabilities of NITORI
and the technologies of TEIJIN FRONTIER CO., LTD., wecreated a curtain that enables sunlight to pass through it
while cutting heat and ultraviolet light and blocking vision
into the room.
Compared to conventional insulated curtains heatresistance effectiveness rate of 12%, the ECONATURE™
curtain achieves a heat-resistance performance of 25% or
more*. As the product’s high heat-resistance function
contributes to less use of air conditioning, it is also anenvironmentally friendly product.
ECONATURE™ curtain’s insulation performance20
10

25% or more
12%0

ECONATURE™ curtain
Conventional voile
Thermal insulation experiment (60°C infrared lamp testing method)
This is not a guaranteed value.
*From an inspection conducted by the Japan Textile
Products Quality and Technology Center
Crosssectionalview

Strong coolingfabric that touches
the skin

Crosssectionalview

Comfortable moistureabsorption/
desorption cotton
Pile fabricCross-sectional view of N Cool and N Warm

At NITORI, we are expanding environmentally friendly
product development. Thai Negoro Co., Ltd., whichbecame a wholly owned subsidiary in May 2018, recycles
plastic bottles to manufacture carpets. The entire processof the plastic bottle recycling process, recycled fiber
manufacturing process, base fabric and carpet backing
process, sewing, and product inspection process are all
conducted at the factory. Increasing the usage rate ofrecycled fibers will result in a reduction in CO2 emissions
and energy consumption.

Plastic bottles

Absorption/
desorption
heat-generating
threadHeat storing cotton +hollow cotton
Backing fabric

Plastic pellets

CarpetCarpetmanufacturing
process

Empty

HarborPackages

ExporterMore efficient product transportation routes
Although we used to deliver ordered goods to customers
via an in-house distribution center, we are now delivering
goods directly from the manufacturer to the customer
by eliminating relay points. As a result of streamlining the
product transportation route, the volume of domestic
per store CO2 emissions related to distribution is on a
downward trend.
CO2 emissions per store in domestic distribution(t-CO2)120

Initiatives in logistics

100

At NITORI, we are using our manufacturing, distribution, IT,retail business model to promote cooperation amongst the
product development sections, trade sections, and logistics
divisions and implement NITORI-wide measures to reduce
the environmental impact of the distribution process.
In fiscal 2018, we were able to achieve an annual
reduction of 674t of CO2 gas in the Logistics Division. We arefurther reducing CO2 emissions by increasing the efficiency ofcontainer transportation and expanding container round use.
Cargo volume per truck ............... up 1.9 % year on year
Number of trucks ................... -5,416 trucks year on year
Annual CO2 emissions volume ......... -674t year on year

Primary initiatives
Improving container transportation efficiency
We are working to improve the efficiency of containertransportation by improving compression technology inproduct packaging and expanding the product composition
ratio of assembled furniture. As a result, though the annual
volume of imported containers has increased every year,
the volume of products loaded on the containers has also
increased, and in fiscal 2018, our CO2 emissions volume
was reduced by 550t.

109

96

80

90

90

88

2016

2017

2018

60
40
20
0

2014

2015

(FY)

Reviewing product packaging to reduce waste
Foam polystyrene has excellent shock absorption andelasticity making it the optimal material for packaging andcushioning furniture, but it is incinerated after it is used.
At NITORI, by switching from polystyrene to molded
recycled paper products (pulp mode), which have a low
environmental impact as packing and cushioning material
for our furniture products mainly, we were able to reduce
our annual usage volume of polystyrene by 34t. In addition,
this has also reduced the time required to collect garbage
after delivery, improving delivery efficiency, which also
leads to reduced CO2 emissions.

Compression of
packing size
ECONATURE™ curtain cuts heat, ultraviolet rays,and visibility while allowing sunlight to pass

103cm

197cm

28cm
28cm

42

Packages

Importer

NEWS

(%)
30

Container round use

Manufacturing carpets using recycled fibers

Pursuing improved productivity andefficient manufacturing to continue being an essential entity

Initiatives in product development

Expanding container round use
After packages are unloaded from imported containers,
the empty container is filled with export items in a process
called container round use, which eliminates the wasteof returning an empty container, which cut down on CO2emissions by 117t in fiscal 2018.

97cm

Compression
packing of bed
mattresses

Conventional polystyrene
cushioning material

New recyclable cushioning
material using pulp materials

43

PART 3

Foundation for Creating Value | Social Action Programs

Hand-in-hand with our customers

Grand opening of OTARU ART BASE in Otaru City, Hokkaido

The existence of NITORI makes daily life in the community convenient and enriched.
We believe this is the meaning of our being and our social responsibility as a corporation.
NITORI will continue to work on initiatives toward becoming an indispensable presence while cherishing ourpartnerships with the many people who support us.

In September 2017, we established the OTARU ART BASE
which is composed of four historical structures in the heartof Otaru City, Hokkaido. Here, the early architecture of themid 19th to early 20th centuries is preserved, managed,
and researched, and works of art and artifacts owned by
NITORI are displayed.
In November 2018, we held the grand opening of theLouis C. Tiffany Stained Glass Gallery on the first floor of
the NITORI Museum of Art. NITORI will continue to holdvarious events, including exhibitions and summer festivals,
disseminate this wonderful culture and art to the world, andcontribute to the further development of local industries, aswell as tourism.

Contributing to Hokkaido

Helping to develop the next generation

NITORI was founded in 1967, in Hokkaido, Japan, where
it has its headquarters. In 2005, NITORI established the
Hokkaido Aid Fund to contribute to the development of thearea where it has conducted business for many years.
In collaboration with the NITORI Culture Foundation
established in 2011, it supports a wide range of activities
aimed at revitalizing Hokkaido.
In fiscal 2016, NITORI began to assist in thedevelopment of Yubari City with the first corporate versionof the hometown tax. The local creativity support tax system
activities that have takenplace over the last three
years have become themodel for other initiatives,and its remarkableachievement was recognizedwith an award from the
Minister of State in January
Company version hometown tax
2019. We are continuing
Ministerial award ceremony
this support in fiscal 2019.
(January 2019)

To 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 at universities featuring those who work on the front
lines at companies as lecturers. In addition, in response torequests from various companies/organizations, NITORI
proactively provides lecturers outside of the company.

Support for disaster-stricken areas

Overseas education support

NITORI provides emergency relief supplies at the requestof local municipalities when natural disasters such as
earthquakes and heavy rainfall strike in various locations.
Most of NITORI’s products are essential for everyday life.
We have a strong desire to quickly deliver whatever disasterstricken customers need. Maintaining store operation, evenwhen it is difficult, and restarting operation as soon as
possible, are the most important ways to support thestricken areas.

Since 2013, NITORI has been operating Tokujinkai to support
education in China. Tokujinkai help conduct education
projects in poor areas with the goal of supporting poorfamilies, as well as the schoolwork of orphaned children andchildren of single parent families.

Most recent major disaster assistance
July 2017
Assistance for damage caused by heavy rainfall innorthern Kyushu
July 2018
Assistance for damage caused by heavy rainfall inwestern Japan
September 2018
Assistance for earthquake in eastern Iburi, Hokkaido

Former Mitsui Bank Otaru Branch

Endowed course at Tokyo University

Universities where NITORI’s endowed courses
were provided
Hokkai-Gakuen University: From 2005 to 2010
Waseda University: From 2010 to 2014
University of Tokyo: From 2015 to 2019 (scheduled)

Establishment of Tokujinen(free student dormitories)
Jiangxi Province: Gongqingcheng Tokujinen (Headquarters),
Fenyi county Tokujinen, Shanggao county Tokujinen
Anhui Province: Feidong county Tokujinen

In addition, we have conducted educational support
activities for 10 years since 2008 for the St. Vincent Free
Elementary School.

Children living in Tokujinen

44Children of the St. Vincent Free
Elementary School

Stained Glass Museum(former Takahashi Warehouse)

NITORI Museum of Art (Former
Hokkaido Takushoku Bank, Otaru
Branch)Louis C. Tiffany Stained Glass Gallery(NITORI Museum of Art, 1st floor)

NITORI International Scholarship Foundation

NITORI Ladies Golf Tournament

Since the foundation was established in 2005, NITORI has
provided scholarships to students who study in Japan not
only from Asia, where it has many business bases, but also
from around the world, and to Japanese college and highschool students, as well as
local college students
overseas. The foundation
provided scholarships which
do not need to be paid backto more than 5,339 college
students (40 countries andExchange event China enrollment
certificate conferment ceremony
regions) as of July 2019.

NITORI is also focused on holding
sporting events with the aim ofrevitalizing local communities andpromoting sports.
In August 2019, the 10th
NITORI Ladies Golf Tournament
was held over a four-day period.
The tournament site in Otaru City,
Hokkaido was crowded with over
10,000 spectators.

NITORI Culture Foundation

Most recent major sponsorships(donations, advertising sponsorships)[FY2018] Donations

NITORI established the NITORI Culture Foundation toprovide support for the growth and inheritance of culture,art and tradition, and to build a bridge to the formation of
new culture in April 2011. The foundation provides grants
for 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 2017. Of these,
grants were provided to the
Furusato Hokkaido 10-MillionTree Planting Project for theplanting of about four million
trees over the course of 11
Yuni planting festival (April 2018)
years from 2007.

Presentation of winner’s
trophy (August 2018)[As of August 2019]

Donations
Yubari City Corporate
version of hometown tax, etc.
New Japan Philharmonic
Sapporo Medical University
NPO SALASUSU
Donated lectures and researchVietnam Festival in Sapporo
department donations
Keidanren Nature
Sponsorships
Conservation Fund
Tokyu Bunkamura
Sapporo Cultural Arts
Sponsorships
Theater hitaru
27th YOSAKOI SORAN
Prince Ice World and others
FESTIVAL
Tokyu Bunkamura
Sapporo Cultural Arts
Theater hitaru and others

45

PART 3

Foundation for Creating Value | Management Structure

Corporate governanceCorporate governance system overview

NITORI seeks to sustain growth and raise the corporate value of the entire Group throughstronger corporate governance, compliance, and risk management.

Basic approach
NITORI Holdings Co., Ltd. (“the Company”) places toppriority on sustainable growth and the medium- to longterm improvement of corporate value in its management.
The Company believes that enhancing its corporate
governance system is necessary for achieving these goals.
To enhance corporate governance, the Company aims
to build 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 manner.
Meanwhile, the Company will develop an internal system
to establish its corporate social responsibility and corporate
ethics.

Content

Organization design format

Company with an audit and supervisory committee

Number of directors(number of outside directors included)

11 (5)

Term of directors

1 year

System to adopt an executive officer

EstablishedEstablishment of discretionary committees

Nomination and remuneration committees

Executive compensation system

1. Basic compensation, 2. Short-term incentive compensation,
3. Medium-term performance linked to stock compensation

Audit corporation

Deloitte Touche Tohmatsu Limited

Corporate governance system
Shareholders’ Meeting
Election/Dismissal

Akio Nitori

Toshiyuki Shirai

Fumihiro Sudo

Fumiaki Matsumoto

Takao Kubo

Kazuhiko Takeshima

Representative
Director &Chairperson (Chief
Executive Officer)

Representative
Director &Chief Operating
Officer (COO)

Director &Vice President

Director &Vice President

Director (Audit andSupervisory
Committee member(full-time))

Director (Audit andSupervisory
Committee member)
Independent
Outside Director

Reports, Proposals
Instructions, Reports
Risk Management Division
Risk Management Committee
Reports, Proposals

Electing, Monitoring

Collaboration

Representative Directors
Reports, Proposals

Instructions,
Reports
Audit and Supervisory
Committee OfficeInstructions, Reports

Collaboration

Deliberation DivisionInternal Board of Directors

Risk Control Conference

Internal Control Division
Reports, Proposals
Operation Audit

Reports, Proposals

Collaboration
Auditing in
the Internal
Control
SystemCollaboration

Each division and Group company in Japan and abroad

Outside directors and independent executives
The Company has appointed all outside directors as independent executives as stipulated by the Tokyo Stock Exchange andhas notified said stock exchange of these appointments.
Reason for appointment

Sadayuki Sakakibara

Kazuhiko Takeshima

Mr. Takeshima has held prominent positions, including Chairman of the Japan Fair Trade Commission, and has a wealth of experience andextensive 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. Although he has no direct corporate management
experience, he will be able to continue to properly fulfill his duties as an outside director based on the above-mentioned experience andknowledge. Number of years served as an outside director: 6; Number of years served as a director who is an Audit and Supervisory Committee
member: 3 (as of the conclusion of the 47th Ordinary General Meeting of Shareholders).

Executive officers

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 experience and expertise by sharing his opinions about the Company’s management as an Outside
Auditor. Although he has no direct corporate management experience, he will be able to continue to properly fulfill his duties as an outside
director based on the above-mentioned reasons. Number of years served as an outside director: 3; Number of years served as a director who is
an Audit and Supervisory Committee member: 3 (as of the conclusion of the 47th Ordinary General Meeting of Shareholders).

Hidetoshi Kobayashi, Tadashi Kudo, Soichi Oda, Kazuyoshi Tayano, Naoshi Takei, Shunichi Osawa,
Eri Ablet, Hiroki Murabayashi, Manabu Nakamura, Ken Ueda, Hiroshi Nagai, Kazuyuki Hashimoto,
Isao Arai, Tsuyoshi Okamura, Kunihiko Takahashi, Yoshihisa Sato, Junichi Yoshima, Fumiki Takeda,
Nobuyuki Tomii

Tsuneyoshi Tatsuoka

Mr. Tatsuoka has assumed many prominent positions, including Vice-Minister of Economy, Trade and Industry. He makes the most of his wealthof experience and professional insight to strengthen the Company’s corporate governance and compliance systems as an Outside Director
appropriately. Although he has no direct corporate management experience, he will be able to continue to properly fulfill his duties as an outside
director based on the above-mentioned reasons. Number of years served as an outside director: 3; Number of years served as a director who is
an Audit and Supervisory Committee member: 3 (as of the conclusion of the 47th Ordinary General Meeting of Shareholders).

Kazuhiro Suzuki

Tsuneyoshi Tatsuoka

Managing Director

Director

Director

Independent
Outside Director

Independent
Outside Director

Director (Audit andSupervisory
Committee member)

Director (Audit andSupervisory
Committee member)

Independent
Outside Director

Independent
Outside Director

Executive Officers

46

Accounting
Audit

Directors who are Audit and Supervisory Committee Members

Mr. Sakakibara was involved in the management of Toray Industries for many years and has held prominent positions including Chairman of theJapan Business Federation. With his abundant experience and considerable insight, we believe his proper supervision and beneficial advice
regarding the overall management of the Company will contribute to further strengthening our corporate governance. In addition, he meets all thecriteria set forth by the Company for determining independent outside directors and he meets all the requirements established by the stock
exchange for independent officers. We have determined that there is no risk of conflict of interest with general shareholders, and we havedesignated him as an independent officer.

Sadayuki Sakakibara

Akio Igarashi

Collaboration

Audit and Supervisory Committee

Takaharu Ando

Takaharu Ando

Yuichi Kazeharu
Mitsuru Ohki
Hiromi AbikoElection/Dismissal

Mr. Ando has held prominent positions, including Commissioner General of the National Police Agency, and has a wealth of experience andextensive 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. Although he has no direct corporate management experience, he will be able tocontinue to properly fulfill his duties as an outside director based on the above-mentioned experience and knowledge. Number of years served as
an outside director: 6 (as of the conclusion of the 47th Ordinary General Meeting of Shareholders).

Masanori Takeda

Seniorexecutive
officer

Auditing, Monitoring

Board of Directors

NameManaging
executive
officers

Election/Dismissal

Financial Auditor (audit corporation)

Directors who are Audit
and Supervisory
Committee Members

Nominating and Compensation Committee(optional advisory organ)

Board of Directors
Directors

Primary Items

47

PART 3

Foundation for Creating Value | Management Structure

Board of Directors

Nominating and Compensation Committee

Performance-based stock compensation plan

For constructive, frank, and efficient discussion at Board of
Director meetings, the Company sets the number of
directors at 15 or less. For an effective monitoring system,a third or more of the directors shall be independent outside
directors. The Company has 11 directors, of whom five are
independent outside directors. The Company aims to develop
and strengthen the Board of Directors’ function of monitoring
and checking management and the execution of business.
In addition, the Board of Directors delegates theauthority to make decisions regarding the execution ofbusiness, excluding important investment projects, to therepresentative director in order to focus on discussions
regarding management direction and business strategies
strengthening the auditing function of the Board of Directors.
The Company established an Internal Board of Officers
to discuss important items related to the execution ofbusiness in advance of discussion at board meetings. The
Company has introduced an executive officer system forprompt decision-making and business execution to respondpromptly and appropriately to changes in the businessenvironment.

The Company has established a Nominating andCompensation Committee as an optional advisory organ for
the Board of Directors. The committee ensures objectivity
and transparency when the Board of Directors determines
policies and procedures related to the nomination of director
candidates and compensation, and also further improves
the corporate governance system.
The Company stipulates that the majority of theNominating and Compensation Committee members shallbe independent outside directors. The committee consistsof five members, three independent outside directors andtwo representative directors.

The Company has introduced a performance-based stockcompensation plan to provide an incentive to directors who
are responsible for the execution of duties to sustainably
improve the Company’s corporate value and to further
promote the sharing of profits with shareholders.
Compensation for executive directors consists ofperformance-based compensation, in which the amount
paid fluctuates based on a fixed basic compensation andCompany performance. In addition, performance-based
compensation is composed of bonuses (short-term incentive)
linked to performance for each fiscal year, and stock-based
compensation (medium- and long-term incentive) that
establishes numerical targets in advance for Company
performance during the target period every two fiscal years
and pays for the Company’s common stock after theapplicable period, depending on the achievement of said
numerical targets.
In addition, the composition of directors’ compensation,
the evaluation of the appropriateness of the performancebased compensation plan’s design, the establishment oftargets, and the evaluation of performance are reported tothe board of directors after being discussed at the Nomination
and Compensation Committee and then decided.
From the viewpoint of sharing profits with shareholders
over the medium- to long-term, these directors (including
directors who retire after receiving shares granted basedon this plan) will continue to hold shares that have been
granted for a certain period of time based on this planpursuant to shareholding guidelines established by theCompany’s Board of Directors, and will have restrictions
imposed on their transfer for three years after delivery insaid shareholding guidelines.

Audit and Supervisory Committee
The Company sets the number of Audit and Supervisory
Committee members at five or less. The Audit andSupervisory Committee monitors management from a fairand independent perspective in accordance with the audit
policy and audit plan for the current period.
The Audit and Supervisory Committee currently has
four directors, of whom three are independent outside
directors. The three outside directors audit and monitor the
execution of business by the directors by participating in
Board of Directors meetings and using the internal control
system. The director who is a full-time Audit and Supervisory
Committee member audits and monitors the execution ofbusiness by the directors by attending in Board of Directors
and Internal Board of Officers meetings, reading documents
regarding important decisions, reporting on the Internal
Audit Division, and interviewing the relevant people. The
Audit and Supervisory Committee cooperates with thefinancial auditor, communicating about the financial auditor’s
audit policy, audit plans and audit reports as needed.
The Company has established an Audit and Supervisory
Committee Office as a department to assist the Audit andSupervisory Committee.

Risk Management Committee
To minimize losses or disadvantages that our Group suffers,
the Company formulated risk management regulations anda Business Continuity Plan (BCP) and established a risk
management system initiated by the Risk Management
Committee. In accordance with the BCP, the Company
carries out various training along with monthly Risk Control
Conferences that review risks and implement
countermeasures against new challenges to strengthen
the Group’s risk management system.

Internal control systems
In order to implement the NITORI Group’s corporate
philosophy and basic policies on corporate governance, as
well as appropriately and efficiently execute its corporate
duties, the Company has established “basic policies oninternal control systems” related to the development of asystem for the following execution of duties by the directors
and employees of the Company and Group companies: risk
management and compliance systems to help with theexecution of said duties, and a system for ensuring effective
auditing.
In principle, the basic policies on internal control
systems apply to all of the Group’s entities. The purpose of
the basic policies is for the Group as a whole to enhance its
enterprise value and to achieve management transparency
and efficiency.

Outline of the performance-based compensation plan

First year
Secondyear

Target period based on this plan

Granting of shares
Third year
Fourth year
Fifth year

Transfer restriction period(Provisions in the Shareholding Guidelines)

Board of Directors’ effectivenessevaluation results overview
The Company Board of Directors evaluates the performanceof the Board of Directors based on the policy of basic
corporate governance. In this fiscal year, we confirmed thestatus of improvements and progress of the issues identified
in the effectiveness evaluation conducted in the previous
fiscal year. As in the previous fiscal year, the Board of
Directors Secretariat established evaluation categories in
the form of a questionnaire with items for evaluating theeffectiveness of the Board of Directors. Questionnaires andindividual interviews were conducted for all directors, anddiscussions were held at the Board of Directors regarding
the analysis results and each issue.
An analysis conducted by the Company’s Board of
Directors confirmed that the Board of Directors is wellbalanced with people of diverse knowledge and experience,and has free and lively discussions among all attending
directors including outside directors occurs, and that thefrequency of meetings is reasonable, and the Board’s
proceedings are properly managed. The effectiveness of
the Board’s decision-making and its oversight of directors’
execution of their duties was judged as properly maintainedin line with the corporate governance basic policy.
On the other hand, as a result of verifying the statusof improvements and progress of issues that were clarified
by the effectiveness evaluation of the previous fiscal year,
it was judged that although steady improvements havebeen made in enhancing discussions that contribute to theimprovement of medium- to long-term corporate value andfurther reinforcement of the corporate governance system,
there are still issues to be resolved regarding further
strengthening the Board of Director’s monitoring functionand enhancing the provision necessary information in orderto deepen the Board’s discussions.
Based on each of the issues recognized by the Boardof Directors’ effectiveness evaluation and the candid opinionof each director who freely responded to the questionnaire,
the Company’s Board of Directors has continued its efforts
from the fiscal year before last and has tried to improve thefollowing issues on a priority basis.
1 Further evolution of the Board of Director’s monitoring
function
1-1 Strengthen supervisory functions related toimportant management matters
1-2 Strengthen collaboration to further enhance thefunctions of the Board of Directors and eachmeeting body
1-3 Promote delegation of authority concerningbusiness Execution
2 Enhancing the provision of information necessary to
deepen discussions at the Board of Directors
The Company will continue to discuss how to raise
corporate value as well as how to enhance the effectivenessand improve the evaluation of the Board of Directors toachieve the NITORI Group’s vision.

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49

Company Stock Information / Company Information

Company Stock Information (As of February 20, 2019)
Outline of SharesCompany Information (As of February 20, 2019)

Major Shareholders

Total number of authorized shares: 288,000,000
Total number of issued shares: 114,443,496
Number of shareholders: 25,162 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, 2019)
Ratio to the
Numberof shares total number
of issued
owned(thousands) shares (%)

Name

1.86%

Individual
shareholders

13.34%

Akio Nitori, Representative Director & Chairperson (Chief Executive Officer)
Toshiyuki Shirai, Representative Director & Chief Operating Officer

Address

Sapporo Head Office: 1-2-39 Shinkotoni 7-jo, Kita-ku, Sapporo, Hokkaido 001-0907; Tel: +81-11-330-6200
Tokyo Headquarters: 3-6-20, Kamiya, Kita-ku, Tokyo 115-0043; Tel: +81-3-6741-1235

Establishment

Established December 1967

The Master Trust Bank of Japan, Ltd.
(Trust account)

4,794

4.27

Incorporated

March 1972

Japan Trustee Services Bank, Ltd.
(Trust account)

4,509

4.02

Revenues(Consolidated)¥ 608,131 million

NITORI International ScholarshipFoundation

4,000

3.56

Ordinary Income(Consolidated)¥103,053 million

North Pacific Bank, Ltd.

3,860

3.44

Capital Stock¥13,370 million

Securities
companies

JP Morgan Chase Bank 380055

3,663

3.26

Number of Employees(Consolidated)

Full-time: 12,668 Part-time: 14,838

0.93%

Akio Nitori

3,409

3.04

Foreigncorporations,etc.

Momoyo Nitori

3,078

2.74

Nippon Life Insurance Company

2,056

1.83

National Mutual Insurance Federationof Agricultural Cooperatives

2,007

1.79

Financial
Institutions

23.69%

Representative

18.52

34.64%
Other corporationsin Japan

NITORI Holdings Co., Ltd.

20,799NITORI Trading, Ltd.

Distribution of share by type of shareholder
Treasury stock

Company Name

25.54%NITORI Group List (As of February 20, 2019)
Curtain Manufacturing Factory
HOME DECO CO., LTD.

Trading, Planning &Development,
and Logistics Functions

Notes: 1. The numbers presented in “Number of shares held” above arecalculated based on the list of shareholders.
2. The Company’s 2,125,128 shares of treasury stock are excluded
from the above list of major shareholders.
3. Calculations of equity positions exclude holdings of treasury stock.
4. The number of shares owned by Japan Trustee Services Bank,
Ltd. and The Master Trust Bank of Japan, Ltd. are shares held insecurities investment trusts and retirement benefit trusts.

Import Agent Companies
NITORI (CHINA) CO., LTD.
NITORI (Taicang) Trading & Logistics Co., Ltd.
NITORI (Vietnam) Trading Co., Ltd.
NITORI (MALAYSIA) SDN. BHD.
Nitori Trading (Thailand) Co., Ltd.
NITORI India Private Ltd.
Logistics Company
Home Logistics Co., Ltd.

Advertising andPublicity Functions

Stock Price and Turnover
Stock price (yen)Manufacturing
Functions

20,00018,000

Nitori Holdings
Co., Ltd.

16,000[Holding Company]

Facility Management
Insurance Agent Business
Nitori Facility Co., Ltd.

14,000

Facility Management
Functions

12,00010,0008,000
Turnover(Thousandshares)

6,000

Sales Activities

Advertising Agency
Nitori Public Co., Ltd.

Store Management Companies
Nitori Co., Ltd.
• HOME FURNISHING STORE• HOME FASHION STORE• NITORI MALL
• DECOHOME• Online Shopping Business• Renovation Business• Corporate Sales Business, etc.

12,000
9,000
6,000
3,000
2016/350

2016/6

2016/92016/122017/32017/62017/92017/122018/3

2018/62018/92018/12 2019/2

0Overseas Manufacturing Companies
NITORI FURNITURE VIETNAM EPE
NITORI FURNITURE Ba Ria-Vung Tau Co., Ltd.

Overseas Sales Companies
NITORI Taiwan Co., Ltd.
NITORI (CHINA) HOLDINGS Co., Ltd.
Deco Home China Co., Ltd.
NITORI (SHANGHAI) HOME FURNISHING CO., LTD.
NITORI (SHANGHAI) HOME FURNISHINGS SALES Co., Ltd.
NITORI USA, Inc.

51