Pan Pacific International Holdings Corporation
May 10, 2022

Overview of Q&A Session at Analysts Briefing for Q3
FY June 2022
This document provides an overview of the Q&A session at the financial results briefing
for the third-quarter results. Questions and answers have been edited for clarity.

Q1. How far have net sales, gross profit, and SG&A expenses diverged fromthe initial outlook? What efforts is the company making to achieve the full-yeartargets?
A: With regard to the progress toward the targeted operating profit of 85 billion
yen, which was announced in our budget, we have not achieved the sales target,
but have mostly achieved the projected operating profit by regaining our footing
through improvements in gross profit and controlling SG&A expenses. The
shortfall from the target has remained at the same level from Q2.
For Q3, despite the severe external environment such as the spread of COVID19 in Japan, we achieved the expected results. We are advancing various
strategic measures toward achieving the full-year targets.
Q2. Which are the specific countries that are driving the growth of theoverseas business?
A: In the Asia business, existing stores in Singapore, as well as in Hong Kong
where there is a large number of existing stores, are registering more thandouble-digit profit margins. Although performance varies from month to monthdue to the COVID-19 situation, the opening of new stores is progressing without
any significant delays. In countries such as Taiwan and Malaysia where we arenew, we are making prior investments with a view to gaining popularity.
In North America, the spread of COVID-19 had driven demand for alternatives toeating out, and we had successfully captured this demand last year. This did notshrink as much as we had expected, and our continued success in capturingmuch of the demand was one of the factors behind the strong performance ofstores in North America. On the other hand, although we had expected the returnof tourism demand in places such as Hawaii, the prolonged impact of COVID-19
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May 10, 2022

has impeded full-scale recovery.
Q3. Will the effects of PB/OEM gradually emerge going forward? Did the effectof improvements in inventory turnover ratio emerge from this quarter?
A: Our private brand (PB), “Jonetz” was rebranded in February last year, and weare moving ahead with introducing its products into stores with a focus on theDiscount Store (DS) business. In the GMS business, we are focusing on productrollout for existing PB. At the same time, we are also introducing newly developed
products, or, like in the DS business, manufacturing products together whilebringing them into stores under different labels.
Going forward, the Group will advance on the development of PB while also
expanding rollout in the GMS business. However, full-scale rollout will take placein the next financial year. As for individual products, there is ongoing collaboration
between the PB Business Strategy Headquarters and the DS and GMS
businesses.
The effect of improvements in inventory turnover ratio was brought about by the“interest expiration date” measure with changes to internal evaluation. Thismeasure has boosted the morale of employees in the stores.
Q4. Will the pricing and individual store management measures in the GMS
business continue to produce results going forward?
A: Yes. A growing percentage of stores are successfully achieving the gross profit
margin target, and the continuation of this trend will see gross profit increaseyear-on-year again in the fourth quarter.
Q5. Is COVID-19 likely to have an impact on the overseas business,particularly in Asia? Could you offer an outlook for profit margin for Asia in thenext financial year based on the assumption that the COVID-19 pandemic
under control, as well as the direction and outlook after the establishment of
new stores in the region?
A: In Hong Kong, the spread of COVID-19 has resulted in varying sales
performance from month to month. We have put in controls in areas including2

Pan Pacific International Holdings Corporation
May 10, 2022

SG&A expenses, and are advancing efforts to improve profit margin. As a result,sales did not decline significantly in comparison with Q2. For the Asia business,
we are increasing the number of new stores in Macao, Malaysia, Taiwan, andThailand. However, in the three countries other than Thailand, we are right in themidst of setting up new stores, and we are making prior investments.
In Hong Kong, we are at the stage of investing, such as by acquiring our own
company warehouses.
As the number of existing stores will increase in the next financial year, we willcontinue to improve profit margin. However, we are unable to present a specificoutlook for now. We will present the outlook during the announcement of businessresults and the mid-term corporation plan going forward. We are now making
steady progress, as projected, toward a profit margin of 8% based on the midterm results that have been announced.
Q6. It has been established that earnings and profits will not grow in thecurrent financial year due to investments in systems and finance. Were theseQ3 results achieved upon the completion of investments that should beundertaken, such as renovations?
A: Yes. We made the investments that are necessary although there were delaysin the opening of new stores overseas due to the COVID-19 pandemic. In regard
to renovations, we have assessed the effectiveness and employed measures thatare more effective. Therefore, investments are progressing as planned.
Q7. With regard to the 0.5% improvement in gross profit margin at existing
stores in the DS business, what is the breakdown between contribution from
PB and price optimization? Also, does the disposal of inventory have a great
impact on gross profit margin?
A: It is difficult to clearly break down the improvement in gross profit separately
for PB and the effect of pricing measures. PB contributes to approximately 0.4%of profits. While the disposal of inventory has an impact on profit margin, we areimplementing pricing measures in addition to inventory disposal, and the result
was an overall improvement of 0.5%.

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May 10, 2022

Q8. Can the company maintain the same level of gross profit in the fourthquarter and beyond, through the continued implementation of measures?
A: Yes. As PB sales are also presently performing well, we expect to see a similareffect.
Q9. With the soaring utility costs, I believe the company is controlling SG&A
expenses through staffing and other means. Overall, how far can we expect
to minimize SG&A expenses against the planned figures?
A: Although soaring utility costs have had an impact, we are continuing tostrengthen controls, and are progressing at the same pace as we have in the firsthalf with cost reduction of 7 billion yen.
Q10. Are labor costs during the night-time hours the main focus of controls on
SG&A expenses?
A: Although the proportion of labor costs are high, they do not necessarily form amajor part of cost control. We are successfully cutting costs in various items.
Q11. As the company is putting effort into attracting members for the majica
app in the current financial year, is it correct to say that it does not offer any
business merits in the current financial year, but will produce effects in CRM
from the next financial year and after?
A: Yes. For CRM in the current financial year, we are only implementing various
trial measures.
We will launch full-scale efforts from the next financial year by spending more on
measures to obtain results.
Q12. What is the scale of effects on CRM if the majica app were utilized as asales promotion tool? Also, will there be a decrease in app-related
expenditures in the next financial year?
A: We will announce in August the costs expended on acquiring members,investment in CRM measures, as well as the returns on the investment.

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May 10, 2022

Q13. Based on the full-year plan for operating profit, profit is expected toincrease significantly year-on-year in Q4. What is the background behind thisprojected growth in profit?
A: Looking back on the results for the previous year, we can see that we faced agreater struggle in Q4 last year than we had before, due to restrictions imposedby the COVID-19 pandemic.
In addition, we have been expanding PB/OEM in the current financial year. It isexpected to have a greater impact on business earnings and profits in the second
half, so we projected profit to grow significantly in Q4.

Q14. What is the driving force behind profit growth in the fourth quarter?

A: The greatest driving force is the domestic DS business.
Q15. The earnings and profit environment has become more severe thanbefore. How will the company control gross profit margin?
A: The purchasing trends and needs of customers have undergone majorchanges during the COVID-19 pandemic. We feel that determining whatcustomers desire is the most important factor in controlling profit margin.
In overseas stores, we are feeding back and reflecting customers’ reviews in ourproduct line-up and prices as a “Japan Brand Specialty Store.”
In the domestic DS business, we feel that the significant growth of PB and its
contribution to profit margin can be attributed to the development of products thatmeet the needs of our customers. Hence, the source of profits lies in determining
the consumption trends of customers.

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