Earnings presentation for FY2015

Q&A
Q1
Did you follow established procedures when deciding to withdraw from and dispose ofMISUZU Co., Ltd.? What led to the decision and what are your reasons for transferring
your interest in the company?
A1
There was no clear-cut withdrawal procedure. Our decision to undertake an M&A withMISUZU Co., Ltd. was originally based on expectations of Group growth through thedevelopment of MISUZU’s apparel SPA business and our existing jewelry SPA
business.
However, in light of the recent deterioration in apparel market conditions, and thelimited nature of our measures, we felt that the future of MISUZU and its employees
would be better served if the company underwent a reorganization with another group.
On this basis, we decided to withdraw from the business.
Q2
What was the amount of operating loss attributable to MISUZU Co., Ltd. in the fiscal
year ended February 29, 2016?
A2
In the fiscal year ended February 29, 2016, MISUZU Co., Ltd. incurred an operating
loss of ¥86.8 million on sales of ¥487.0 million.
Q3
Looking at your forecasts for the jewelry business in the fiscal year ending February 28,
2017, the year-on-year increase in operating income is projected at 5.1% despite an
anticipated year-on-year increase of 6.8% in net sales. What is your outlook for grossprofit as well as selling, general and administrative expenses? Why do you expect thatthe rate of operating income growth will fall below the rate of net sales growth?
A3
We have adopted a conservative approach toward our forecasts. In the fiscal year ending
February 28, 2017, we plan to integrate 4°C bridal products with 4°C BRIDAL
merchandising. Our goals are to promote increased efficiency and to lift the level of our1

Earnings presentation for FY2015

service by consolidating the management function. In pushing forward this initiative,
we anticipate undertaking various steps including the replacement of products. As aresult, sales are forecast to climb 6.8% year on year. On this basis, we estimate the grossmargin will decline 0.2 of a percentage point while the ratio of overhead expenses willremain roughly the same at 52.5%. Meanwhile, we have set aside an investment amountof ¥100 million in a bid to enhance the 4°C brand value. In specific terms, this willentail advertising aimed at further honing the 4°C brand. In addition to this expenditure,
we are expecting an increase in overhead expenses attributable to the opening of newstores and renovations. Taking each of these factors into consideration, the operating
income margin is projected to fall slightly below the level recorded in the fiscal year
ended February 29, 2016.
Q4
Turning to the Company’s monthly data for F.D.C. Products sales by item in March
2016, sales at existing jewelry stores declined 3.4% year on year. Is this a temporary
occurrence or does it reflect the impact of changes in the company’s operating
environment? In addition, could you tell us your thoughts on the current status of eachbrand and in particular engagement and marriage ring trends in the bridal jewelrybusiness?
A4
Existing store sales in the F.D.C. Products jewelry business declined 2.5% year on year
in March 2016. This decline narrows to 0.7% if we include the EC business. While 4°C
BRIDAL existing store sales fell 14.3% year on year, 4°C jewelry existing store sales,
which mainly comprise the department store channel, climbed 0.9% year on year.
Accounting for each of these factors, total 4°C jewelry existing store sales were down
4.1% year on year. Meanwhile, canal 4°C existing store sales grew 2.3% year on year.
We believe that weak results in March 2016 compared with the corresponding month ofthe previous year reflects the rush in demand in March 2015 in the lead-up to changes inretail prices in anticipation of the upswing in diamond prices in April 2015. This rush indemand had a particularly strong impact on 4°C BRIDAL sales. Entering April, 4°C
BRIDAL and 4°C jewelry sales climbed 5.2% and 4.5%, respectively, year on year foran aggregate 4°C jewelry sales upswing of 4.4%. While canal 4°C sales and sales at all
stores have improved 4.5% and 5.6%, respectively, results have recovered to 6.6% if weinclude EC sales. Sales are forecast to increase a little further in the second half of April.
We anticipate trends during April will come in according to plans. Based on the2Earnings presentation for FY2015

aforementioned, we believe that weak sales in March were a temporary phenomenon.
Despite a year-on-year downturn of 1.6%, all in all, 4°C bridal jewelry sales fared welland surpassed plans. Looking at the breakdown of engagement and marriage rings in the4°C jewelry business, there was little discrepancy in results. Engagement ring sales
declined 3% year on year and marriage ring sales contracted 1% year on year. In the4°C BRIDAL business, engagement and marriage ring sales fell 22% and 10%,respectively, year on year. canal 4°C engagement ring sales grew 2.6% while marriage
ring sales dropped 14.4% year on year.
Q5
What are your reasons for reducing jewelry prices from May 2016?
A5
The Company revised its retail product prices in line with movements in the coasts ofbare metals and raw materials. As a guide, we consider revising the retail prices of ourproducts when the costs of bare metals shifts by more than 10%. While we expect that
our competitors will act in much the same way, their actions are not a factor in ourdecision to revise product prices. As a company, we place the utmost importance on
maintaining the integrity of our pricing. When it comes to the revision of product prices,
our stance is to address changes in our external environment in a genuine and sincere
manner.

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