2Q FY2/21 Results Briefing
October 12, 2020 16:00 - 17:00

2Q FY2/21 Results Briefing Q&A Session Summary
Q&A Session
Q1: How do you plan to tackle COVID-19 and what specific measures do you have inplace for the current fiscal year from an EC business perspective?
A1: Access to our brand website is increasing dramatically in the wake of COVID-19. In
addition to videos that showcase our product lineup, we will employ models as well as
a variety of visual presentation, live TV, and other tools to convey the Group’s widearray of brands to customers while taking steps to improve quality. Moreover, we will
put in place online measures in a bid to attract customers while leveraging various
formats including CRM-based DM advertising, display ads aimed at portable sites, andInstagrammers. Working to minimize sales opportunity loss, preparations are being
made for this year’s Christmas season. We will, for example, draw on EC inventories inthe event that items are out of stock at brick-and-mortar stores and employ a
distribution system to ensure delivery the next day or the day after next.
Q2: While narrowing the downturn in existing store fashion jewelry sales by revising
Canal 4°C rebranding measures, what revisions were actually made? Has rebranding
helped recapture those customers that had turned to other brands?
A2: To ensure that we did not detract from the 4°C brand, Canal 4°C rebranding took
place in September 2019. By focusing mainly on purchases by women primarily for
their own use, Canal produced by 4°C triggered a departure from its existing customer
base. With this, and after completing a makeover of marketing activities, existing Canal4°C store sales recovered from the latter half of April thanks to efforts aimed atincreasing the mix of products that meet strong gift-giving needs. We remain confident
that this recovery trend will continue in the second half.
Q3: With the transition from Heisei to the Reiwa era, December 23 was no longer
recognized as a public holiday. How did the Christmas 2019 peak period differ fromcorresponding holiday seasons of the past? Moreover, what are your brick-and-mortar
store as well as e-commerce plans this Christmas given the impact of COVID-19?
A3: The fact that December 23 was not recognized as a public holiday had aconsiderable impact on the industry as a whole, dampening people’s celebratory as
well as gift-giving spirits during the 2019 Christmas season. With no change in thecurrent calendar year, the hurdles are projected to remain the same. Against this1

2Q FY2/21 Results Briefing
October 12, 2020 16:00 - 17:00

backdrop, we will look mainly toward addressing anniversary gift needs, an inherent
strength, throughout the coming peak Christmas period. In addition to limited edition
Christmas products, we will put forward a rich and varied lineup that will attract theinterest of customers. We will also work quickly to address e-commerce needs while
securing an appropriate level of inventory.
Q4: What impact is the surge in gold prices having on profit margins as well as productprices?
A4: The price of gold in the first half climbed 23% compared with the corresponding
period of the previous year. In contrast, the price of platinum declined 4%. Thankslargely to successful efforts aimed at curtailing the development and manufacture ofproducts in line with the temporary closure of stores in response to the government’sdeclaration of a state of emergency, trends in procurement prices have had little affecton the gross profit margins of shelf inventory at this time. We remain confident in ourability to maintain gross profit margins this fiscal year. However, should raw material
prices continue to soar in the future, there is a strong possibility that not only thiscompany, but the industry as whole, will consider passing on the upswinging input
costs to the consumer for certain brands.
Q5: You mentioned that the Company took note of uncertainties surrounding spending
trends as a result of COVID-19 and the lingering impact of the pandemic on
consumption when putting in place full fiscal year earnings forecasts. What specificallyare your thoughts on conditions in the future?
A5: We are especially concerned about the impact on the bridal jewelry market.
Looking at recent trends, including the postponement of weddings, the impact is indeed
being felt. We anticipate this will continue into the next fiscal year. As far as current
conditions surrounding the Jewelry Business are concerned, the sluggish recovery
exhibited by stores in Tokyo, Osaka, Nagoya, and other urban locations is being offset
by store results in other areas. We believe that a positive turnaround in consumption
trends in the aforementioned Tokyo, Osaka, Nagoya, and other urban locations will
require a little more time.
Q6: What do you see as important to further increasing the top line with respect to theCompany’s strengths in 4°C brand gift fashion jewelry?
A6: Looking beyond just our products themselves, we place equal importance on2

2Q FY2/21 Results Briefing
October 12, 2020 16:00 - 17:00

creating the right image through advertising. It is vital that we remain in tune with thefeelings of our customers. Our goal is to properly convey that flutter of the heart whenpresenting a loved one with the ultimate gift and capturing that moment of joy when
opening a gift box from someone special. We initiated steps to rollout a lineup ofholiday season anniversary products across our nationwide network of department
store outlets from October 30. This includes a Christmas edition series that no othercompany can match.
Q7: From a 4°C brand perspective, you have historically focused on creating a mature
adult image while working to improve quality when implementing a rebranding strategy.
The direction of your efforts have also honed in on increasing the ratio of purchases forown use. In light of the aforementioned, are measures to enhance Christmas season
gift needs this year temporary?
A7: While attracting new customers, our Canal 4°C rebranding endeavors undertaken
in September 2019 also led to a significant loss of existing customers. Reflecting onthese results, we will take our time with efforts to enhance the value of the 4°C brand.
Moving forward, we will put forward proposals that are designed to attract newcustomers while at the same time recognizing the importance of existing customers
and especially those supporters who are looking for that special gift for eachanniversary scene.
Q8: You have identified efforts to strengthen your DX-response measures and increase
profitability as key components of your medium-term strategy. While other apparelcompanies are drastically reducing the number of stores and increasing the ratio ofe-commerce sales, how will you balance the Group’s brick-and-mortar store ande-commerce endeavors from the next fiscal year?
A8: The focus of our activities is directed toward DX support as we work to engage incustomers-driven management and promote work style reform. Rather than separating
e-commerce from brick-and-mortar stores, we recognize the need to create anenvironment in which customers can choose the most convenient means of purchasing
a product irrespective of sales channel. In addition, we have taken steps to leverage
CRM since October 2019 with the aim of building a business model that helps deepen
and foster long-lasting relationships with customers. As far as the Apparel Business isconcerned, plans are in place to open eight brick-and-mortar stores each year on acontinuous basis going forward.
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2Q FY2/21 Results Briefing
October 12, 2020 16:00 - 17:00

Q9: It would appear that efforts to reduce selling, general and administrative expenses
played a major role in boosting operating income. Is the Company overreaching in its
efforts here? Moreover, can we expect further reductions in SG&A expenses in thesecond half, and can you provide with a breakdown?
A9: The principal item was a cutback in personnel expenses of ¥470 million due mainly
to the temporary closure of stores during April and May. The amount of reduction stillcame to ¥70 million even after excluding employment adjustment subsidies.
Reductions in the percentage of rent, which is recognized as a sales-linked overhead
expense, represented the largest amount. Steps were also taken to substantially curtailtravel and transportation costs through work style reforms including the introduction of
remote meetings. From an advertising perspective, we are adopting a more selective
approach with a focus on efficacy. Rather than television commercials, the Company isconcentrating its investment in social networking and live TV. Looking ahead, we willcontinue to push forward with structural reforms and strive to improve profitability evenin the face of low growth by focusing on items where we see further room for reduction.
Q10: Has Mr. Takiguchi's focus on the management of F.D.C. Products made it easierfor compared with the previous year?
A10: By concentrating on the Jewelry Business, product development and promotion
as well as sales policies have indeed become easier. Mr. Takiguchi's current mission isto rebuild F.D.C. Products, a mainstay operating company, and improve its profitability.

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