To Achieve Management Conscious of
Cost of Capital and Stock Price

May 30, 2024

Relationship between Management Indicators and Hurdle Rates
Recognize that return on investment above hurdle rates is required to achieve management indicators
Based on the recognition that the medium- to long-term WACC and cost of shareholders’ equity will bearound 4.5% and 7.5%, respectively, consolidated ROIC target is set at 5% or more and consolidated
ROE target at 8% or more in the Medium-term Business Plan
Clarify the roles of operating companies to maximize “ROA” and the holding company (HD) to promote“finance strategy”■ Relationship between ROIC and ROE targets and hurdle rates*Cost of shareholders’ equity is calculated based on CAPM.

Operatingliabilities

ROA
4.5%
ROIC
5% or more

AssetsAdjusted
pre-tax WACC

4.0%

Interestbearing
liabilities

WACC
4-4.5%

EquityROE
8% or more

Cost ofshareholders’ equity(shareholders’equity)

7.0-7.5%

Non-controllinginterests and others■ Roles of operating companies and HD

ROE＝HD

Operatingcompanies

HD

Tax strategy

ROA

Finance strategy

Profit×Operating profit

×Net sales

×

Total assets

Operating profit

Net sales

Total assets

Equity(Tax cost optimization)(Operating profit margin)(Total asset turnover)(Financial leverage)

2

Relationship between ROIC and ROE
Set ROIC targets for each segment and strengthen the management of ROICin accordance with the allocation of management resources to non-retail businesses thatmake significant use of interest-bearing liabilities
Maximize free CF and improve ROE through improved ROIC

Business portfolio strategy＋Finance strategy and tax strategy

ROEROIC
Business profit after tax

Invested capital≧≧

ProfitEquityWACC(by business)(Shareholders’ equity)

BS management

Business portfolio management

Aggressive
investment ingrowth areas

Selective
investment inmature areas

Cost ofshareholders’equityPursueoptimalcapitalstructure

Shareholder
returnInternal
reserves

Facilitate
asset reduction

Repayment ofinterest-bearing
liabilities

D/E ratio

Free CFInterest-bearing liabilities

EquityMaximize
cash
generation

Effective investment ＋ Earning power(Shareholders’ equity)*Each business segment focuses on “maximizing ROIC by business segment”*ROIC = Business profit after tax ÷ Invested capital (interest-bearing liabilities excluding lease liabilities + shareholders' equity)3

Relationship between ROE and Stock Price Index
Recognize that ROE continuously exceeding cost of equity will lead to higher PBR and PER levels
With the recovery of business performance and stock prices, ROE and PBR exceeded 8% and 1x,
respectively, at the end of FY2023
By improving the profit level and controlling the amount of equity appropriately,
secure ROE of 8% or more and PBR of around 1.2x in FY2026, the final year of the Medium-term
Business Plan, and aim to achieve ROE of 10% or more in the long termMarket cap＝Profit×Market cap

EquityEquityProfit

PBR

ROE

PER

Stock price

FY2023Results

1.02x

8.1%

13.0x

¥1,485

FY2024
Target

1.00x

6.1%

16.5x

¥1,550or moreFY2026
Target1.20x

8.0% or more

15.0x

¥2,000or more

*Stock price for FY2023 is the closing price on February 29, 2024.

4

Achievement of Profitable Growth
Work to deepen retail and evolve the Group synergies to achieve profitable growth in the current Mediumterm Business PlanEnsure that ROE and ROIC levels continuously exceed cost of shareholders’ equity and WACC, respectively

Level above cost of shareholders’ equity:
8% or more
(10% or more in the long term)

8.1%

Cost ofLevel above WACC: shareholders’ equity(7.0-7.5%)
5% or more

ROE

5.4%

ROIC

5.2%

5.1%
WACC
(4.0-4.5%)

Profitable growth

Other and elimination
Payment and Finance
DeveloperｰSC
Department StoreBusinessprofit

FY2019FY2023

FY2026(Results)(Results)(Plan)¥45.3 bn

¥44.3 bn¥52.0 bn

Phase of recovery

Phase of change

FY2030Phase of rapid growth5Future BS and ROIC Targets by Business Segment
Control consolidated BS, targeting an equity ratio of 30-35%
Department Store, SC: Effective use of capital (equity) accumulated from the past
Developer, Payment and Finance: Significant use of interest-bearing liabilities

Aim to achieve ROIC targets by promoting key strategies and thoroughly managing investments
Consolidated BS*【Department Store】【SC】
ROIC target

ROIC target

Liabilities

Liabilities

Totalassets
Netassets

Totalassets
Netassets
5.0% or more

Mid- to long term

5.0% or more

<Key strategies in the current mid-term plan>・Deepen retail and evolve the Group synergies
・ Optimize the amount of equity and strengthenshareholder return

10.5%

Mid- tolong-term

6-7%

Liabilities

Total
assets<Key strategy>
Expand and deepen
highly engaged
customer base

【Developer】

Net
assetsTotal
assetsLiabilities

Netassets

FY2026

4.0%

Mid- tolong-term

5-6%<Key strategy>
Large-scale renovation of
key stores by strengthening
IP content and luxury items【Payment and Finance】
ROIC target

ROIC target
FY2026FY2026FY2026

4.3%

Mid- tolong-term

4-5%<Key strategy>
Embody pipelines
in 7 key cities

ROIC target

Totalassets

Liabilities

Net assets

FY2026

3.4%

Mid- tolong-term

3-5%<Key strategy>
Integrate customers
by unifying cards*Mid- to long-term target: Control equity and interest-bearing liabilities, targeting an equity ratio of around 30-35% and a D/E ratio (excluding lease liabilities) of 1x or lessPlan for the end of FY2026: Ratio of equity of around 30-35%, interest-bearing liabilities (excluding lease liabilities) of ¥285.0 bn, D/E ratio (excluding lease liabilities) of0.75x or less6

Cash Allocation (Cumulative Total for FY2024-2026)
Focus allocation on deepening retail and growth investment for the future of the Group in the current medium-term plan
H1: Aggressive investment to generate results as soon as possible in Department Store and SC
H2: Investment in large-scale development in Developer
Clarify the vision of future growth by utilizing the growth investment quota of ¥50.0 billion<Investment plan by segment>
Cash inflow

Cash outflow(Billions of yen)

Growth investment

Cumulative
investment
for 3 years
from FY2024 to FY2026

50.0

Business
evolution andmaintenanceOperatingcash flows

Department
Store

Other

¥125.0 bn

7.5¥220.0 bn

40.0SC¥175.0 bn 18.5
Developer

59.0<Annual investment plan>・Strengthening content
・M&A

Growthinvestment-¥50.0 bn

65.0

62.0
48.0

Sale of assets, etc.

40.0

¥5.0 bn＋
Cash on hand andborrowing capacity(Billions of yen)
80.0

・Consolidated payout
ratio of 40% or more・Share buyback

Shareholder
return¥45.0 bn-0.0
2024

2025

2026

7Shareholder Return
Increase payout ratio to 40% or more in FY2024 (previously 30% or more)
Achieve sustainable profit growth to continuously increase dividends
Also implement share buybacks while monitoring stock prices and balance sheet conditions,with an eye toward improving TSR（％）(¥100 million)
300

200

Total
dividends
配当総額

175.7

Sharebuyback
自己株式取得250

Totalpayout ratio
総還元性向

160

Share buyback¥10.0 billion

Payoutratio
配当性向

200
120

Share buyback¥5.0 billion

150

100

Continuous
dividend increases

86.1

80

59.0
45.3

41.8

5045.639.022.5

57.1

44.3

33.0

27.1

32.1

33.5
43.5

18.4

40% or more 40

31.6

26.9
000809

10Dividend per share (Yen)
1株当たり配当（円）1112131415161718192021222324250809

1011121314151617181920212223248778

9112527283535362729313640*FY2014: Amount adjusted after reverse stock split (2 shares → 1 share)
FY2024: Figure announced in April 2024

FY2017: Includes commemorative dividend of ¥2 per share
FY2025 and FY2026: To be determined

26(FY)8

Execution and Monitoring System
The executive team formulates and discloses plans based on current situation analysis, andimplements initiatives conscious of cost of capital and stock price through dialogue with investors, etc.*
The Board of Directors approves the execution plans, monitors the status of initiatives, and verifies the results*Starting from the current medium-term plan, the remuneration system for directors of HD and major
operating companies adopts ROIC and TSR as performance evaluation indicators, in addition toconventional profit and ROE, to enhance the effectiveness of the system.

Results
monitoring andverification

Implementationof initiatives

Disclosure

Executiveteam

Board ofDirectors

Current situation
analysis〇ーPlan formulation〇ーPlan approvalー〇Disclosure〇ー

Implementation ofinitiatives〇ー

Results
monitoring andverificationー〇Currentsituation
analysis

Planformulation

Plan approval〇 indicates a body that takes the initiative.

9