Six Months Ended September 30, 2018

Financial Results andFuture Developments
MARUI GROUP CO., LTD.
November 8, 2018

Today’s Agenda

1. Overview of Performance in Six Months Ended
September 30, 2018, and Full-Year Forecasts
Hirotsugu Kato
Director and Senior Executive Officer,
General Manager, IR Department, MARUI GROUP CO., LTD.

2. Progress of Medium-Term Management Plan
Hiroshi Aoi
President and Representative Director,
Representative Executive Officer, MARUI GROUP CO., LTD.

3. Directives for the Future
Hiroshi Aoi
President and Representative Director,
Representative Executive Officer, MARUI GROUP CO., LTD.
1

1

Overview of Performance in Six Months Ended
September 30, 2018, and Full-Year Forecasts
Hirotsugu Kato
Director and Senior Executive Officer,
General Manager, IR Department, MARUI GROUP CO., LTD.

Highlights in the Six Months Ended September 30, 2018

1. EPS increases 38% year on year to reach record high of¥56.9

2. Revenue up for first time in four years and operating income
also increases
3. Higher asset efficiency pursued by liquidating ¥25.8 billion
worth of revolving payment receivables, increasing factoring
accounts receivable to ¥96.1 billion
4. Upward revision to full-year forecasts to reflect six-month
performance3

Consolidated Performance
・EPS increases 38% to ¥56.9 due to income growth and capital measures
・Revenue up for first time in four years and higher operating income forfourth consecutive year
Six months ended
EPS (yen)Sep. 30,
2017

Sep. 30,
2018

YoYchangeYoY
difference

41.1

56.9

+38

+15.8

Billions of yen

Billions of yen％

Billions of yen

1,046.8

1,206.5+15+159.6

Revenue

115.4

123.3

+7

+7.9

Gross profit

85.1

94.2

+11

+9.1

SG&A expenses

69.3

74.4

+7

+5.2

Operating income

15.9

19.8

[% of full-year target (%)]

[44]

[49]

+25
00

+3.9
00

Ordinary income

15.5

19.2

+24

+3.8

Net income

9.3

12.5

+34

+3.2

Total Group transactions

4

EPS Trends
・EPS reaches record high of ¥56.9, exceeding previous record of¥56.7 achieved during bubble period in the 90s■Six-Month EPS
Bubblecollapse

Money Lending
Business Act revision

(Yen)
60

2008
Financialcrisis

¥56.7

¥56.9

40

20

0
1H of
FY85

1H of
FY91

1H of
FY96

1H of
FY02

1H of 1H of
FY07 FY09

1H of
FY19

5

Segment Income
・Rise in corporate expenses of ¥0.7 billion due to new businessdevelopment, but 25% increase in consolidated operating income
following massively higher Retailing and FinTech segment income
Operating income
Six months ended

ROIC

Sep. 30,
2017

Sep. 30,
2018

YoYchangeYoY
difference

Sep. 30,
2018

YoY
difference

Billions of yen

Billions of yen%

Billionsof yen％％Retailing

2.8

4.7

+71

+2.0

1.6 +0.7ppt

FinTech

15.1

17.8

+17

+2.6

2.2 +0.2ppt

Eliminations/
Corporate

(2.0)

(2.7)

－

-0.7

Consolidated

15.9

19.8

+25

+3.9

－

－

1.8 +0.3ppt
6

Factors Affecting Operating Income
・Massive increase of ¥2.8 billion (18% YoY) in consolidated
operating income even when excluding extraordinary factors
Increase in operating income
excluding extraordinary factors+¥2.8 billion (+18% YoY)

Eliminations/billionRetailing+¥2.0
billion

1H of FY18+¥1.1 billion¥18.7
billion¥15.9

FinTech Corporate+¥1.5 -¥0.7 billion
billion

Extraordinary factors¥19.8
billion

Provision
for loss on Adoption ofGain oninterest sized-basedtransfer of repayment businessfactoring -¥2.5 billion
tax
accounts-¥0.6 billion
receivable+¥4.2 billion

1H of FY197

Consolidated Balance Sheets・Higher asset efficiency pursued by liquidating ¥25.8 billion worth of
revolving payment receivables, increasing factoring accounts receivable to¥96.1 billion
Mar. 31, 2018

Sep. 30, 2018

YoY difference

Billions of yen

Billions of yen

Billions of yen

548.0

558.2

+10.2

Installment sales accounts receivable

402.0

409.2

+7.2

(Factoring accounts receivable)(72.8)(96.1)*1*1(+23.4)[Ratio of liquidation (%) ][11.7][14.7][+3.0 ppt]

Operating loans

146.0

149.0

+3.0

Fixed assets

243.2

245.9

+2.7

Interest-bearing debt

485.3

491.3

+6.0

[% of operating receivables (%)*2][88.6][88.0][-0.6 ppt]

Shareholders’ equity

274.4

278.2

+3.7

[Equity ratio (%)]

[31.7][31.8][+0.1 ppt]

Total assets

865.9

874.2

+8.3

Operating receivables*1 Including the ¥25.8 billion worth of revolving payment receivables liquidated in September 2018
*2 Ratio of operating receivables＝Interest-bearing debt／Operating receivables

8Cash Flows
・Increase in operating receivables and interest-bearing debt limited
through higher liquidation of receivables
YoY
differenceSix months ended
Sep. 30, 2017

Six months ended
Sep. 30, 2018

Billions of yen

Billions of yen

Billions of yen

(8.7)

0.4

+9.2

(22.7)(11.2)+11.6

Core operating cash flow

14.0

11.6

-2.4

Capital investments

(5.0)

(4.2)

+0.8

Gains on sales of fixed assets

1.3

0.6

-0.8

Gains on sales of investment securities, etc.

2.2

(2.0)

-4.2

(1.5)

(5.7)

-4.2

Increase in interest-bearing debt

27.9

5.7

-22.2

Cash dividends paid

(3.9)

(4.4)

-0.5

Purchase of treasury stock, etc.

(15.1)

(7.1)

+8.0

Net cash provided by (used in) financing activities

8.9

(5.8)

-14.7

Cash and cash equivalents at end of period

34.9

34.3

-0.6

Net cash provided by (used in)operating activities

Increase in operating receivables

Net cash provided by (used in) investing activities

9Full-Year Forecasts for FY2019
・Upward revisions to full-year forecasts, record-breaking EPS of¥114.4 (up 23% YoY) projected
FY19(Initial
forecast)

FY18

EPS (yen)

93.2

109.9

ROE (%)

7.6

ROIC (%)

FY19(Revised
forecast)

YoYchange

+4.5

+23

8.6

8.9 +0.3 ppt

－

3.3

3.6

3.6

－

－

Billions of yen

Billions of yen

Billions of yen

Billions ofyen％

2,189.4

2,500.0

2,533.0

+33.0

+16

Revenue

240.5

249.0

253.0

+4.0

+5

Gross profit

175.9

186.0

190.0

+4.0

+8

SG&A expenses

139.5

146.0

149.0

+3.0

+7

Operating income

36.4

40.0

41.0

+1.0

+13

Net income

20.9

24.0

25.0

+1.0

+20

Total Grouptransactions

114.4

Changefrom initial
forecast

Note: Figures for FY18 are after the retroactive application of the change in the accounting method forgain on bad debts recovered.

10Segment Income Forecasts for FY2019
・Upward revision to forecasts for Retailing and FinTech segments
based on six-month period, increase in corporate expenses due toadditional expenses incurred for new business development
Operating income
FY18

FY19

FY19

(Initial
forecast)

Billions ofyen

Retailing

ROIC
FY19

FY21

(Revised
forecast)

Changefrom
initialforecast

YoY
difference(Revised
forecast)

YoY
difference(Forecast)Billions ofyen

Billions ofyen

Billionsof yen

％

％

ppt

％

8.8

11.0

11.5

+0.5

+31

3.8

+1.0

5.3

FinTech

31.4

33.5

35.0

+1.5

+11

4.2

+0.3

4.1

Eliminations/
Corporate

(3.9)

(4.5)

(5.5)

-1.0

－

－

－

－

Consolidated

36.4

40.0

41.0

+1.0

+13

3.6

+0.3

4.0
11

Shareholder Returns
・Interim dividend up ¥5 per share, to ¥23, marking fourth consecutive yearof higher interim dividends
・Full-year dividend of ¥47 per share planned, which will break record forthird consecutive year
50

¥47

■Cash Dividends per Share(Planned)

(Yen)

40
30

¥33

¥28

¥19

20

¥38

¥24

(Planned)

¥20

¥22

10

¥23

¥18

0

FY09
09.3

FY12
12.3
Payout ratio

FY13
13.3

FY14
14.3

FY15
15.3

FY16
16.3

FY17
17.3

More than
30%

FY19
19.3

FY18
18.3
More than40%

Treasury Stock
Acquisitions¥15.0
billion¥35.0
billion¥20.0
billion¥15.0
billion¥7.0 billion(Planned)

EPS

¥58.9

¥70.7

¥80.2

¥93.2

¥114.4(Planned)122Progress of Medium-Term Management Plan
Hiroshi Aoi
President and Representative Director,
Representative Executive Officer, MARUI GROUP CO., LTD.

Progress of Medium-Term Management Plan

1．Transition to Shopping Centers and
Fixed-Term Rental Contracts
and Future Outlook
2．E-Commerce Operations
3．EPOS Cards
4．Service Revenues
5．tsumiki Securities Co., Ltd.

６．ESG Topics
14

Transition to Shopping Centers and Fixed-Term Rental Contracts
・Ratio of fixed-term rental contracts of 96% achieved, transition to becompleted by fiscal year-end
・Income improvements of ¥1.3 billion in 1H of FY2019 as forecast■Plan for and Increases in Ratio of Fixed-Term Rental Contracts andIncome Improvements (As of end of each fiscal year)
Ratio offixed-term
rentalcontracts
Incomeimprovement
amounts
(YoY)

62％
7%

87％

96％ 100％

20%¥1.3 ¥0.6
billion billion¥0.9 billion¥2.0 billion¥3.2 billion¥1.9 billion
Increase value throughcontract renewals

Incomeimprovements¥6.0 billion (five-year aggregate)¥7.0 billion (six-year aggregate)

FY15

FY16

FY17

FY18

1H of FY19
FY19

FY20

FY21

Note: Ratio of fixed-term rental contracts = Fixed-term rental contracted floor space ÷ Total floor spacecapable of being contracted as fixed-term rental (200,000 ㎡)

15

Future Outlook for Transition to Shopping Centers and
Fixed-Term Rental Contracts
・Additional 26,000 ㎡ to be converted after completion of initiallyplanned transition due to increase in applicable stores・Approx. 16,000 ㎡ of floor space (7% of total floor space) to beinactive at any given time due to replacement of fixed-term rental
contract tenants■Forecasts for Ratio of Fixed-Term Rental Contracts ＜Additional floor
space to beconverted＞

120+26,000 ㎡

100
80

100％

60
40

20

87％

62％

(200,000 ㎡)

231,000 m2(178,000 ㎡)(125,000 ㎡)

0
FY17
17.3

FY18
18.3

FY19
19.3

FY21
21.3

Note: Ratio of fixed-term rental contracts = Fixed-term rental contracted floor space ÷Total floor space capable of being contracted as fixed-term rental (200,000 ㎡)

16

Directives for Developing the Stores of the Future

Departure from stores focused on sales
through the transition to shopping
centers and fixed-term rental contracts

Stores of the future that cater tochanging customer needs
Shift from consumption of goods toconsumption of experiences
Move away from ownership to use

Union of online and physical venues
17

Development of Stores of the Future—Provision of Experiences and Communities

Provision of Experiences and Communities
Apple Store Shinjuku(Shinjuku Marui Main Building)lululemon(Shinjuku Marui Main Building)Free, hands-on programs in which
participants learn how to use Apple products

Community yoga andrunning events

Proactive introduction of tenants
following the examples of Apple and lululemon18

Development of Stores of the Future—Sharing Economy (Goods)

Growth of the sharing economy amid rising support
from millennials and Generation Z:

DRENI(Yurakucho Marui)

Directly operated dress
rental shop focusedon e-commerce

KARITOKE(Yurakucho Marui)

Collaboratively operated
pay-by-month rental service
specializing in brand-name watches
19

Development of Stores of the Future—Sharing Economy (Spaces)

Provision of sharing economy for spaces
in addition to goods
Choku Choku…
(Soka Marui)

enicia(Shizuoka Marui)

Shared office space completewith children’s area

Shared space available
to members with fees
starting at ¥980 a month(For corporate members)

20

Development of Stores of the Future—Union of Online and Physical Venues

Development of new business models
through the union of online and physical venues
SHIBUYA BASE
(Shibuya Marui)

Sumishin Net Bank
(Marui City Yokohama)Physical venue for use by businessowners utilizing BASE to meet andinteract with customers

Physical venue of exclusively online
bank used to provide face-to-faceloan application support
21

Development of Stores of the Future—Operation Contracting

Contract-basis operation of experience-oriented storesby MARUI GROUP staff
GODZILLA Store Tokyo(Shinjuku Marui Annex)

Currently under negotiation？
World’s first official GODZILLA shop
allowing visitors to take picturesand experience the world of
GODZILLA

22

Development of Stores of the Future—Food Vendors on Entry Floors

Introduction of food vendors on entry floors
to attract customers of all ages and genders(Kobe Marui)

MARUI Marche(Soka Marui)

Differentiation from existing commercial facilities anddepartment stores to be achieved by increasing
the range of stores with food vendors on entry floors

23

E-Commerce Operations
・Growth in total e-commerce transactions from FY2016,
total transactions of ¥25.0 billion forecast in FY2019¥25.0■Total E-Commerce Transactions

billion(Billions of yen)

¥23.0

250

¥20.4
billion¥21.3

billion(Full-year
forecast)

billion

200
20

150

100

¥11.2
billion(1H performance,+7% YoY)

50

0

FY12
12.3

FY13
13.3

FY14
14.3

FY15
15.3

FY16
16.3

FY17
17.3

FY18
18.3

FY19
19.3
24

Card Shopping Transactions
・Card shopping transactions exceeding industry averages,
projected to reach ¥1,870.0 billion (up 17% YoY) in FY2019■Card Shopping Transactions and Growth Rates(Billions of yen)

(％)

2500

2000

Averageannual growth+19%¥1,870.030billion(Full-year
forecast)

Epos Card

20
1500

1000

Averageannual growth+7%

Industry
average

10¥889.0500

billion(1H performance,+16% YoY)

0

0
FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

25

FinTech Segment Operating Income
・Annual growth of ¥3.0 billion–¥4.0 billion in FinTech segment
operating income since FY2015; operating income growth of ¥4.7 billion
in FY2019■Operating Income¥35.0(Billions of yen)billion40

Annual growth of¥3.0 billion–¥4.0 billion+¥3.2+¥4.0 billion

30billion¥21.9
billion20

10(Full-year
forecast,+¥4.7 billion)

Money Lending
Business Act
revision+¥3.0+¥4.5 billion
billion¥17.8¥5.7
billionbillion(1H performance,+7% YoY)

0

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19

26

New Card Applicants・New card applicants projected to reach 800,000 in FY2019,the level targeted since FY2017■New Card Applicants(Ten thousands of people)

Opening of
Hakata Marui

Changes toapplication benefits

100

820,000(Full-year
forecast)

80

71

60

58

55

55

58

72

71

73

73

74

75

58

40

400,000(1H performance)

20500,000

700,000

Target more than

800,000

0
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19

27

Forecast for Growth in New Card Applicants
・Growth in new card applicants to be achieved through steady Internet
application, corporate partnership, and other Internet and experience fieldinitiatives advanced alongside prior physical store and goods field initiatives■Forecast for Growth in New Card Applicants (FY2019)(People)1,000,000
100

820,000
750,000
130,000

50
500,000

E-commerce+70,000

110,000

510,000

Content/
Sharing(Full-year forecast)Internet application

180,000+50,000 applicants

120,000

520,00000
FY18Internet

FY19

Goods

Collaboration
with commercial
facilities, etc.

Partnerships
with service
providers+10,000
applicants+10,000
applicantsSale of goods

PhysicalstoresExperi
ences

Services28

Service Revenues
・Increased service revenues to be pursued to improve ROIC in FinTech segment
・Strong growth in revenue from rent guarantees with average annual
growth of 30% over past five years, future growth to be achieved throughcollaboration going forward■Revenue from Rent Guarantee Services¥10.0 billion
or more(Billions of yen)

(Target)100
10.0¥6.4 billion

7.575■Collaboration in Rent Guarantee Services
ABLE. INC.
・Services available at ABLE locations
since March 2018
・ABLE EPOS CARD scheduled to belaunched in December 2018

Average annual (Full-year forecast)
growth rate overpast five years

50
5.0

+30％

25
2.5
1.1

1.6

2.2

2.8

4.9

3.6

3.6

Nasic
・Services available through Nasicof Tokyu Fudosan Group since
October 2018¥2.8 billion(1H performance)0
FY13
FY14 15.3
FY15 16.3
FY16 17.3
FY17 18.3
FY18 19.3
FY19 20.3
FY20 21.3
FY21
13.3 14.3

29

tsumiki Securities Co., Ltd.
・Approx. 5,400 applications received from customers in two months since
start of service
・Ratios of applications from younger and first time investor customers
much higher than those of existing financial institutions■Applications Received by tsumiki Securities in September and October 2018
Distribution of Applicants
by Investment Experience

Distribution of Applicantsby Age50 and
above

13％

40–49

Experienced

20–29

32％

29％

No experience

60％

24％

30–39

34％

20–49
87％

Novices8％Note: “Novices” refers to customers with lessthan one year of investment experience.

(Reference) Ratio of Applicants Aged 20–49

Approx. 30% based on survey by
The Investment Trusts Association
Approx. 60% at independent fundmanagement companies(Reference) Ratio of Applicantswith No Investment Experience
Approx. 40% at independent fundmanagement companies
30

Fund Management Companies Partnered with tsumiki Securities
・Fund management companies partnered with tsumiki Securities ranked
top three among financial institutions with high ratios of customers
enjoying positive returns in ranking announced by Financial Services Agency■Breakdown of Financial Institution Customers by Returns(Announced by Financial Services Agency; based on common, comparable KPIs)
Loss of 11%–30%

Loss of 0%–10%

Breakeven

Gain of 0%–10%Gain of 11%–30%

Gain of more than 30%

98％

Commons Asset Management
Rheos Capital Works

91％

Saison Asset Management

85％

NOMURA SECURITIESSMBC Nikko Securities
Mizuho BankSBI SECURITIESMONEX% of customers (%)
Source: MARUI GROUP CO., LTD.
(Based on data from Nikkei Inc.)

-40

-20

Losses

0

20

40

60

80

100

Gains
31

Limited-Time tsumiki Securities Pop-Up Store・Deployment of tsumiki Support service to provide opportunities to experiencetsumiki Securities’ services and to address questions and concerns regarding
cumulative investments that cannot be resolved via the Internet■tsumiki Securities Pop-Up Store
Pop-up store opened on a limited-time basis (one month)in the 1F event space of Yurakucho Marui
Number of customers applying or receiving consultation(in first 10 days after opening): Approx. 140

32

tsumiki Securities—Co-Creation Initiatives with Partners
・Talk events held in event space of Yurakucho Marui at which tsumiki
Securities partners explained the benefits of cumulative investments■Talk event with Aya Maeno and other tsumiki Securities partners
meant to encourage people to conduct cumulative investments
Feedback from Customers“Securities company seminars
generally have a stiff atmosphere,
but I enjoyed today’s seminar.”“The talk today dispelled my fears
pertaining to investment.”“I am a little uneasy about handlingeverything through the Internet, so
I was happy for the chance to receive
consultation in-store.”
33

ESG Topics
・Member of RE100 international initiative advocating commitment to 100%
renewable power since July 2018
・First green bonds in Japan to be used 100% for renewable power issued
in October 2018
・Selected for inclusion in DJSI Asia Pacific (for second time with first being
in 2017) and DJSI World (first time)■Issuance of Green Bonds

Issuance of green bonds to be
used 100% for renewable power(First issue of green bonds by domestic retailer)

Maturity period: Five years
Issue amount: ¥10.0 billion■Inclusion in DJSI Indices

Inclusion in DJSI World in 2018
following inclusion in DJSI
Asia Pacific in 2017
DJSI Asia PacificSelected in two consecutive years
DJSI World
Only 10 retail sector companies
included, MARUI GROUP only Japaneseretail sector company selected34

3

Directives for the Future―Incorporating investor feedback―Hiroshi Aoi
President and Representative Director,
Representative Executive Officer, MARUI GROUP CO., LTD.

Directives for the Future(1) Impact of Trend in Cashless Payments
on Credit Card Business(2) Policies for Future Growth Strategies
and Corporate Value Improvement36

3. Directives for the Future(1) Impact of Trend in Cashless Payments

on Credit Card Business
A. Potential for reductions in affiliate commissions
B. Risk of credit cards being replacedby smartphone payments

37

Potential for Reductions in Affiliate Commissions■Factors Creating Concerns over Risks

1. Concerns arising over the possibility of credit card affiliate
commissions being reduced over the medium-to-longterm exacerbated by newspaper articles
Sankei Shimbun
Article on requests for the government to lower credit card fees
(published on October 19, 2018)
Nikkei
Article on upper limit for credit card fees being set around 3%
to promote cashless payments (published on October 20, 2018)⇒ Approx. 5% drop in stock prices of major credit cardcompanies after publication

2. Concern that the spread of smartphone payments mayplace downward pressure on affiliate commissions
38

Unique Earnings Structure of MARUI GROUP’s Credit Card Business・Earnings structure of EPOS Card in which affiliate commissions accountfor a smaller portion of earnings than standard credit card businesses(operated by banks)■Distribution of Earnings of Credit Card Companies (FY2018)
Affiliate commissions

Bank credit
card provider A

Revolving andinstallment payments

73％

19％

Cash
advances

8％(Standard credit card business)

Retail credit
card provider B
EPOS Card

47％
29％

32％

44％

21％

27％

Source: The Credit Consumer Monthly, September 2018

■Resources for Differences in Epos Card’s Earning Structure from Rivals

1. Large number of younger cardholders contributing to high usage ofrevolving and installment payments and cash advances
2. Specialization in issuer work, almost no acquirer work performed
39

Relationship between Parties Involved in
Credit Card Transactions and Earnings Structure

License fees
0.05％

Affiliate

International
brand
Provision of payment
infrastructure

3.2%

Acquirers

2.3%(4%–5%)
Small tomediumsized retailers

Acquisition andmanagement ofaffiliates

Interchange fees

Requests for thegovernment to lower fees

(Regulated rates)

License fees
0.05％

IssuerCard issuanceand billing

Scope of transactions for Epos Card

Scope of transactions for standard credit card companies

Source: Cashless Vision, Ministry of Economy, Trade and Industry

40

Projected Impacts of Reductions in Affiliate Commissions
・Impact on revenue from EPOS cards due to reductions in affiliate
commissions projected to be limited■Projected Impact on MARUI GROUP・EPOS card transactions at affiliates applicable to commission
reductions (restaurants, small to medium-sized retailers)

Approx. ¥200.0 billion
・Impact assuming 1% reduction in affiliate commissions
0.5% reduction (impact split between MARUI GROUP and acquirers)⇒ Amount of impact: Approx. ¥1.0 billion(¥200.0 billion × 0.5%)
41

Risk of Credit Cards Being Replaced by Smartphone Payments■Factors Creating Concern over Risks(1) Possibility of spread of smartphone payments in Japantaking similar form as in China(2) Established belief that the entry of IT companies into
payment and financial services businesses will disrupt
traditional financial services businesses

42Difference between Payment Interface and Payment Method
・Payment method of credit cards linked to the payment interface of
payment applications, accounting for approximately 60% of all
payments through payment applications■Payment Landscape in China
Credit card payments

Credit card

Debit card

Smartphone payments

Payment app Payment app Payment app

Approx. 60% of
payments via
smartphones madeusing credit cards

Credit card

Debit card

e-money
chargeSource: Chinese bank representative

CreditDebit

Account

In-store
payment
interface

Method ofpayment
through app
43Demand for Distinctive Credit Function of Credit Cards
・Ongoing demand for credit cards centered on large-sum payments
due to credit function (payment at later date) not provided byother payment options■Functions and Average Transaction
Amounts by Payment Option
Prepaid cards

Paymentfunction(Prepayment)

Approx. ¥1,200
Debit cards

Approx. ¥2,700(Payment at later date)

Approx. ¥4,200

Points and discounts

51

42

Paymentfunction(On-the-spot payment)

Credit cards■Factors Considered When
Selecting Payment Option

Payment＋ Creditfunctionfunction

Size of transaction

37

Speed of payment processing

34

Risk of overuse

31

Fees and other costs

29

Security and othersafety matters
Accessibility of
payment histories

23
9Make payments
in place of cash

Delay datesof payment

Source: Payment Trend Survey, Infcurion Group, Inc., 2017

60

40

20

Articles needing to be
carried around (cash/cards)
0 （％）

Source: Bank of Japan, 201844

Market Trends by Payment Option■Market Scale by Payment Method(Based on consumer spending excluding housing loans)
Large sum

Credit cards
Approx. 10 million
payment terminals

Cash
Approx.
¥40 trillion

Approx.
¥60 trillion

Increased use ofcredit cards throughcontactless payment
via smartphones
Transaction volume

Up 120% YoY(April–September 2018)

Large-scale stores

Small stores(Chain stores)

Area in whichsmartphone
payments may
replace other options
going forward

Cash
Approx.
¥90 trillion

EPOS Pay
Launched in November 2018

Prepaid cards/e-money
Approx. 1 million payment terminals

Approx. ¥10 trillion

Small sum(Less than ¥5,000)

Source: MARUI GROUP CO., LTD. (Based on National Accounts of Japan, Cabinet Office; materials from Japan Consumer
Credit Association; General Survey of Payment Methods, Bank of Japan; General Survey of Electronic Payment Methods
45
2017–2018, CardWave Co., Ltd.; and other materials)

EPOS Pay Initiatives
・Launch of EPOS Pay QR code payment service tied to EPOS cards
・Promotion of use for small-sum payments by forming contracts withstores lacking credit card processing terminals
EPOS Card Affiliate

Smartphone

Read
QR codeNo need for terminal(Just display QR code)

EPOS Card

Data linkage

Payment via EPOS card
(Points may be used)

Service launched in Nakano area of Tokyoin November 201846

Emergence of New Payment Methods
・Potential for EPOS Pay to achieve transaction volumes of up to ¥2.4
trillion by capturing a share of the ¥90.0 trillion smartphone payment
market that is of a similar level to EPOS card’s share of the credit card
payment market■Market Scale by Payment Method(Based on consumer spending excluding housing loans)
Large sumCashApprox.
¥40 trillion

Credit cards
Approx.
¥60 trillion

Small stores

Potential EPOS Paytransaction volume¥2.4 trillion(Calculated assuming same
2.7% share as in the credit
card services market)

EPOS card
Transaction volume¥1.6 trillion
Share 2.7%

Large-scale stores★

(Chain stores)

Cash
Smartphone payments
Approx.
Prepaid cards/e-money¥90 trillion
Approx. ¥10 trillion
Small sum(Less than ¥5,000)

47

3. Directives for the Future(2) Policies for Future Growth Strategies
and Corporate Value Improvement48

Future Growth Strategies■Accelerated Development of New Businesses
・New businesses envisioned by MARUI GROUP
Integration
StoresSocial issues
to be addressed
Creditcards

×Internet

Collaboration
with start-up
companies

Commercializationof resolutions forsocial issues

・Establishment of dedicated organization and commencement offull-fledged initiatives in April 2017, acceleration of co-creation
with start-up companies going forward・■Promotion of Digitization
・Digitization of EPOS cards centered on smartphone application to
be achieved by FY2021
49

Progress of New Businesses
・Steady growth investments aimed at developing new businesses,¥4.8 billion earmarked for such investments in FY2019■Investments in FY2019

・tsumiki Securities¥1.8 billion

・Investments in venturecompanies and venture
capital firms¥3.0 billion

Total of¥4.8 billion■New Business Projects

・Internal projects for developing new businesses as part of
future growth strategies＜Themes＞
Sharing, share houses, lifestyle applications, and foodcategory new business development
50

Acceleration of New Business Development
・New business competitions open to all employees to be commenced
based on corporate culture encouraging voluntary participation
・Development of new businesses to be accelerated through co-creation
with investee venture companies and other partners■New Business Development Initiatives
Co-creation withstart-up companies
Examine the potential for accelerator
programs with investee venture companies

New business competitions
Solicit new business ideas
from all employees

Establishment of New Business Development Department
Investment in and collaboration
with venture companies and venture capital firms
Cultivation of corporate culture encouraging voluntary participation
FY16

FY17

1H of
FY19

51

Policies for Digitization of EPOS Cards
・Expansion of FinTech business through digitization of MARUI GROUP’s
existing payment and financial functions amid trend of other companies
investing in the introduction of payment services with the goal ofparticipating in the financial services field
FinTechbusinesses of ＝
IT companies
Profit+Past
IT (digital)

Going forward
×

Online sales,social media

Future×

Payment
Introduction of
payment services tocollect data

Finance
Participation in
financial services field－

FinTechbusiness of ＝ Payment + Finance ×
MARUI GROUP
Profit+Existing payment andfinancial services

Digitization
Expansion of services
by utilizing data－52

Digitization of EPOS Cards

Transition from physical card to digital app

Physical

Digital(Divided user experience)(Smoothly integrated digital experience)

Only able to collect data

Data collection + Utilization via AI

Time lags

Optimal timing (real time)Standardized notifications

Notifications and recommendations
customized for individual customers
53

Policies for Corporate Value Improvement (Prior)・Transformation of business structure from prior flow-based businesses tostock-based business focused on credit cards and fixed-term rental
contract stores to forge longer-lasting relationships with customers

Past

Present

Off-balance
sheet assets

Off-balance
sheet assets

based
E-commerce Fixed-term rental

E-commerce

Consignment
agreements

Flowbased

Credit cards

On-balance
sheet assets

contract stores

Omni-channel
retailing Credit cards

On-balance
sheet assets

Improvement of LTV

Stockbased

Flowbasedtsumiki Securities
Rent guarantees Stock-54

Policies for Corporate Value Improvement (Going Forward)・Enhancement of model combining stock-based business and off-balance
sheet assets, pursuit of improved corporate value through management
emphasizing lifetime value (LTV) and ROIC

Present

FutureHeightening of ROIC

Off-balance
sheet assets

Off-balance
sheet assets

Flowbasedtsumiki Securities
Rent guarantees StockFixed-term rental
E-commerce contract stores

Omni-channel
retailing

Credit cards

On-balance
sheet assets

based

tsumiki Securities

Flowbased

Rent guarantees
Fixed-term rental
contract storesE-commerce

Stockbased

Credit cards
Omni-channel (Liquidation ofreceivables)
retailing

Improvement of LTV

Newbusinesses

On-balance
sheet assets
55

Forward-looking statements contained in this presentation are based on information available at the time of preparation andon assumptions that have been deemed to be rational. Actual performance may differ greatly due to a variety of factors.
Any inquiries may be directed to the IR Department (Tel: 03-5343-0075).