FY2/24 1H Results Briefing
October 6, 2023 16:30-17:30

FY2/24 1H Results Briefing Q&A Session Summary
Q1. What is the content of the reform measures for bridal jewelry, and the outlook forearnings?
The structural reform for the bridal jewelry business is moving forward, with an emphasis on thebottom line. We expect to complete store closures by the end of FY2/25, which we anticipate will
provide a boost to earnings of around ¥100 million annually.
The stores are being reorganized into three formats. These are the consolidation of nearby
stores, integration with fashion jewelry in department stores, and the establishment of flagshipstores in major metropolitan areas.
This is not a withdrawal from the bridal jewelry business, but rather a strategic initiative toenhance our brand power and restore competitiveness through structural reforms.
Q2. What are your thoughts on this year’s Christmas sales season, including looking back onlast year? What measures are you taking to capture demand, especially product or sales
measures?
The restrictions implemented in the wake of the pandemic have been lifted, and demand frommen for gifts is recovering. We see these as positive factors for the Company. The calendar
schedule is not bad either.
In terms of products and sales promotions, we will focus primarily on providing value throughe-commerce. For products, we will expand the range of coordinated items, and conduct pre-ordersales for collections. To provide interactive experience-style value, we are adding functionality to
try on items virtually using augmented reality, along with engraving and message services. We
plan to pursue various initiatives to enhance our website to make it more appealing.
Registered store customer data has now reached one million customers, so we plan to utilize
this data for attribute matching and conveying a sense of special treatment. We are also hopefulthat the positive image on social networking services from the “Nameless Jewelry Shop” event
held in September will attract more customers.
Q3. What was the final number of customers at the Nameless Jewelry Shop and thesubsequent response?
We had 5,500 visitors to the Nameless Jewelry Shop, 84% of whom were women. The type ofpeople who came to the store were highly discerning. We received 2,200 responses to our survey,
and 2,600 posts on SNS. We also had 170 instances of media exposure.
The effect was as expected, with brand value conveyed through the experience of trying on
items. A total of 83% of respondents said that their image of 4°C had changed favorably, andmessages posted on SNS and other services by influential customers boosted our image amongconsumers.
Going forward, we plan to give shape to the idea of “brand value conveyed through interactive
experience,” and implement strategic experience-based measures. We will start building a baseof fans who will constitute the core of the influencer base, and continuously pursue efforts topositively shape public opinion.

Q4. It seems that there is room for upside in full-year operating income in the ApparelBusiness. Is there some sort of risk in the second half?
The business environment is now fully in the post-covid era, so the expectation of increased
consumption is a positive factor. Among the negative factors, however, is that wages have not
kept pace with rising prices. There is also a possibility that consumption will contract due to adesire to economize. The apparel manufacturer business is also affected by foreign exchange rates.
PALETTE records a large proportion of its sales in December, so like in the jewelry business,
December sales will significantly impact the final numbers. Store openings scheduled for the firsthalf of the fiscal year have been shifted to the second half, so openings will be concentrated in
the second half with nine new stores. However, the first half of the year was positive, so we wantto meet expectations in the second half as well.
Q5. What is your assessment of efforts to expand the number of female customers, one of thepriority measures for the Jewelry Business? Also, how do you view the recovery ofbusiness from male customers?
Sales to female customers were up 3% year on year, and we noted that business from malecustomers also increased during the first half. We want to win empathy and support from thewomen who wear the brand, in order to enhance our brand value and ensure that it endures intothe future.
In the second half, we plan to increase the number of new products and collections. For sales
promotion measures, we want to pursue the type of value that can be provided through interactiveexperience.
Since the proportion of male customers is high during the Christmas sales season in December,
we expect the growth of male customers in the first half of the year to be a factor that will lead toan increase in the total number of customers overall.
Q6. Were the products exhibited at the Nameless Jewelry Shop also sold in 4℃ stores? Also,based on the response to the Nameless Jewelry Shop, do you plan to make use of thisexhibition method in your stores?
Thirty percent of the products exhibited were new additions. The products and the projectgenerated an extremely strong response, so we will proactively consider expanding them to storesin the future. [Note: We stated during the briefing that 70% of products were new. This has beencorrected.]
Regarding the theme of “conveying brand value through interactive experience,” we willproactively consider what we can do in the future in terms of products, services, and customer
service at our stores.
Q7. What is the status of price revisions, and future plans?
We have managed to maintain profitability in both the Jewelry and Apparel businesses by passing
on higher costs with price increases. In the Jewelry Business, we have raised prices four times in
the last two years, including this most recent increase. We will carefully consider future pricerevisions.
In the Apparel Business, PALETTE has previously raised prices twice. In the first half, sales
at existing stores cleared the level of the previous year, but the number of customers was down,with the unit price per item increasing to balance out the total. Considering that our priority is on2

the number of customers, we would like to maintain current prices in the future.
Q8. Regarding the e-commerce business for jewelry, the results have been extremely positive
this period. What is the outlook for the full fiscal year, and the basis for your forecast?
E-commerce sales were up 19% year-on-year in the first half. Even on average over the last six
years, growth has been in the double digits. Profitability is extremely high at 25% in terms of theoperating margin, so this is a sales channel that will play a driving role in improving the bottom
line going forward.
We think the reasons for the strong performance are changes in purchasing trends, and therecent recovery in gift demand from men. The underlying reasons are convenience and sustained
progress with digital measures to provide value through interactive experience.
We plan to incorporate specific measures for OMO (Offline Merge Online) strategies in thenext medium-term management plan as a core strategy for improving brand value.
Q9. Please give us an overview of the direct-to-consumer (D2C) brand that will be releasedin November, as far as you can explain at this stage.
The D2C brand is scheduled to debut in November. The basic idea is to enhance brand value in
response to greater diversity. The brand name “Kakera” means “loose, unpolished gemstones.”
We hope to develop the brand to serve as a sort of amulet that resonates with young womeninterested in trendy casual.
Q10. What were the first half results for PALETTE?
Net sales in the first half amounted to ¥6.7 billion, with an operating profit margin of 4.9%. Thisis up from sales of ¥6.1 billion and an operating profit margin of 4.7% in the same period of theprevious year.
Q11. Does PALETTE have any plan to open stores in the Kanto region in the second half ofthe year?
Of the nine scheduled store openings, one will be in the Kanto region. There are a total of five
stores in the Kanto area. From next year onwards, we would like to concentrate store openings inKanto.
END3