Seiko Holdings Corporation
FY21 Consolidated Results & 8th Mid-Term Management Plan Presentation
Summary of Q&A◆◆◆

DatePlaceRespondent:::◆

Summary of Q&A :Wednesday, May 11, from 10:30 a.m.-12:00 p.m.
<Web conference>
Shinji Hattori, Chairman & Group CEO, Group CCO
Shuji Takahashi, President
Akio Naito, President of Seiko Watch Corporation
Takahiro Naito, President of Seiko Instruments Inc.
Jun Sekine, Director, President of SEIKO Solutions Inc.
Kenji Hagiwara, President of SEIKO Time Creation Inc.
Shuntaro Ishii, President of WAKO Co., Ltd.
Shimesu Takizawa, Executive Director; Kiyoko Niwasaki, ExecutiveDirector; Makoto Ichimura, Director; Tetsu Kobayashi, Director<Watches Business>
Q1. Could you break down the comparative ratio for domestic and overseas Global Brands(GB) targets in the Eighth Mid-Term Management Plan?
A1. We do not disclose separate domestic and overseas targets, but in general, we expect
the overseas ratio to be higher than that for Japan. Since the ladies’ model Lukia
accounts for a certain percentage of the product composition in Japan, the domestic
GB ratio is roughly 10 percentage points lower than the overseas GB ratio. Despite thepandemic, sales of GB products, including Grand Seiko (GS), are growing in Japan. If
this pace continues, we expect the GB ratio to be higher than the current level within
five years.
Q2. What kinds of factors contribute significantly to improving the gross profit margin? With
respect to unit price trends, in particular, do you have any plans for increases in
specific years, and if so, what are they?
A2. With respect to our product mix, mechanical watches are manufactured in-house, so
their profit margins are particularly high. The increase in the composition ratio of thoseproducts has contributed to our recent improvement in gross profit margin. With
respect to our distribution mix as well, distribution ratios are rising overseas forindependent specialist stores and directly operated boutiques, which have high profitmargins.
As for unit prices, we have not yet decided on annual price hikes, but we plan to do soin the immediate future, all the while keeping a close eye on exchange rate trends, rawmaterial prices, and other factors.
Q3. In the domestic market, isn’t the growth in e-commerce sales producing competition
with existing retail stores?
A3. The proportion of e-commerce sales has risen in almost every market as a result of thepandemic. Even luxury products are now selling through e-commerce outlets. We

expect this trend to continue long after the pandemic has abated. However, we willcontinue to strengthen our relationships with key local retailers, with whom we havelongstanding business relationships, and we will provide active sales support, including
sponsoring in-store events.
Q4. Do you foresee inbound tourism to be a factor in the FY22 forecast and the Eighth
Mid-Term Management Plan?
A4. Inbound tourism consumption accounted for 10% to 15% of domestic sales before thepandemic, which made it a significant contributing factor. Now, that consumption has
disappeared, and we cannot predict how quickly it will return. Consequently, neither
the FY22 forecast nor the Eighth Mid-Term Management Plan includes inboundtourism sales. If Japan were to reopen to international tourism (as now seems likely),
and that reignited tourist-related sales, that would boost business results above ourcurrent plan.
Q5. With regard to the Watches Business, could you please explain what, specifically, theMVP products in the Eighth Mid-Term Management Plan are?
A5. For the Watches Business alone, we consider MVP products and GB products to besynonymous. Within the Emotional Value Solutions (EVS) domain, in addition towatches, there are clocks, time systems, and the WAKO business. Each company has
calculated its MVP ratios based on its own standards. Based on those figures, wearrived at the figure of 60% for EVS as a whole.
Q6. Please explain your thoughts on profit contributions of the after-sale service businessfor watches, primarily GS. One gets the impression that after-sale service prices arereasonable compared to those of Seiko’s competitors. As the share of mechanicalwatches rises going forward, will the increase in demand for after-sale service squeeze
profits?
A6. As part of our brand’s longstanding commitment to its customers, Grand Seikoextended its warranty period from three years to five years last year. In setting aftersale service fees, we do take competitors’ prices into consideration, and we setappropriate fees that enable us to ensure optimal quality. We do not believe that anincrease in requests for maintenance or repairs would squeeze profits. On thecontrary, because of our dedication to selling sustainable products, we would like toextend our after-sale service so that we can repair even older products. We have been
receiving an increasing number of requests from customers in this regard. We would
like to make exceptional after-sale service not only a brand differentiator, but also asource of revenue.