Integrated Report 2023

Introduction

About Us

Growth Strategy

ESG

Data

MISSION

Introduction

Adastria ESG

01 Corporate Philosophy/Editorial Policy

39 ESG Dialogue

02 History of Adastria

41 Approach to Sustainability

Fashion that inspires you
Fashion that creates a vibrant community
Fashion for living your best life

06 Adastria Group in Figures
07 Multi-Brand

11 Value Creation Process

48 Create a World Without Fashion Loss

Adastria Growth Strategy

49 A Society in Which People Enjoy
Fashion in Their Own Way

14 Medium-Term Management Plan

50 Be an Organization That is Healthy
Mentally and Physically, Encouraging
Employees in Their Individuality and Ability

15 Human Capital Initiatives to Execute
Strategy

52 Revitalize the Communities
Surrounding Our Stores

16 Message From the President

53 Foster Sustainable Developmentin Production Areas

22 Growth Strategy I: Multi-Brand, MultiCategory
26 Growth Strategy II: Digital Customer
Interactions and Services

PHILOSOPHY

VALUES

31 Director Message (Sales andOverseas Business In-Charge)

54 ESG Information Data
57 Outside Director Interview
59 Corporate Governance

Adastria Data
72 Financial and Non-Financial Highlights

33 Growth Strategy III: Glocal

73 Group Companies

Be a person needed,

35 Growth Strategy IV: New Businesses

74 Corporate Overview and Stock Information

Be a company needed.

Editorial Policy

We always act with our customers in mind.
Taking on new challenges enables us to grow and evolve.

This report aims to report our business model and value creation story in an easy-tounderstand manner. We systematically introduce financial information, such as businessperformance and management strategies, as well as non-financial information such as
Environmental, Social, and Governance (ESG) as a foundation to support company growth.
Reporting Period

Reporting Organization

We value diversity and progressing as a team.

Fiscal year ended February 2023
(March 2022-February 2023)

Adastria Co., Ltd. and its
consolidated subsidiaries

Contributing to society by helping others.

Publication Date

Making everyday life an adventure.
CULTURE

44 Engage in Manufacturing That
Leads to the Future
45 Balance Environmental
Considerations With Sales Activities

20 Director Message (Finance, Risk
Management In-Charge)

Joyful options galore!

44 Initiatives for Materialities (Important Issues)

09 Value Chain

08 Multi-Category

13 The Adastria Market Environment

VISION

43 Materialities and Targets

The answer is to keep looking for answers.

ADASTRIA INTEGRATED REPORT 2023

04 Message From the Chairman

42 ESG Materialities

Introduction

About Us

October, 2023
Referenced Guidelines

International Integrated Reporting Framework, IFRS Foundation, Guidance for Integrated
Corporate Disclosure and Company-Investor Dialogue for Collaborative Value Creation,
Ministry of Economy, Trade and Industry

1Introduction

About Us

Growth Strategy

ESG

Data

Sales Target for
FYE 02/2026

Hi st o ry o f A d as t ria
Sales Forecast for
FYE 02/2024

Our Business Model Transformation Journey

¥

¥

280

Billion260 Billion

Sales forFYE 02/2023

Adastria was founded as a men’s clothing retailer. Since then, we have grown through four business model revisions¥

242.5 Billion(Change 01-04). Behind these revisions was our corporate culture of not being afraid of change and continuing tochallenge ourselves in search of answers that meet the needs of our customers at any given time. We will continue

Established Fukudaya Clothes Store Inc.

Consolidated Net SalesCHANGE 02
Introduced chain store system
Opened jeans and casual fashion store POINT

1953

1973

1982

1997

2010
2000

2005

CHANGE 01

CHANGE 03

Transitioned from men’s businesswear to men’s casual wear

Transition to OEM/ODM production
Started rolling out LOWRYS FARM store brand

2015

2020–

2023 2024

2026

CHANGE 04
Converted to vertically integrated specialty
store retailer of private label apparel (SPA)
Internalizedcompany in-houseproduct planningand production
functionsIntroduction

ADASTRIA INTEGRATED REPORT 2023

improving our corporate value through flexible management and working toward our mission of Play fashion!

niko and ... SHANGHAIOMO model store Dot ST store

1950-1999

2000-20092010–1953 10 Established Fukudaya Clothes Store Inc. in Mito,
Ibaraki Prefecture. Began retail sales of men’s
clothing.
1973 03 Opened men’s casual clothing store VEGA.
1982 09 Opened jeans and casual fashion store POINT.
Transformed POINT into chain stores in ’84.
1992 03 Started developing LOWRYS FARM. Moved into
retail sales of ladies’ casual wear.
1993 03 Changed company name to POINT INC.
1997
Started rolling out LOWRYS FARM store brand.

2000 12 Registered company’s stock in Japan
Securities Dealers Association.
2002 12 Listed company’s stock on the second
section of Tokyo Stock Exchange (TSE).
2003 03 Opened the first store in Taiwan and began
developing overseas business operations.
2004 02 Listed company’s stock on the first sectionof Tokyo Stock Exchange (TSE).
2007 10 Started e-commerce business on our own
corporate website.
2008 03 Opened the first store in Hong Kong.

2010 10 Opened the first store in mainland China.
2012 10 Started membership-based point service on
our own e-commerce business corporatewebsite.
2013 09 Moved to a holding company structure,changing name to Adastria Holdings Co.,
Ltd. as the holding company. Merged Trinity
Arts Inc. and others.
2014 11 Completely revamped our own e-commercesite and started official web store service
Dot ST.

2015 03 Merged Adastria Holdings Co., Ltd., POINT
INC., and Trinity Arts Inc. Dissolved theholding company structure.
2015 06 Changed company name to Adastria Co.,Ltd.
2015 09 Transferred control of product planning andproduction functions from subsidiaries.
2017 02 Incorporated ALICIA Co., Ltd. as a groupcompany.
2017 03 Founded ELEMENT RULE Co., Ltd.
2017 04 Founded Adastria USA, Inc.

2017 10 Founded ADASTRIA eat Creations Co., Ltd.
2018 08 Changed company name to BUZZWIT Co.,
Ltd. from ALICIA Co., Ltd.
2019 12 Registered customers of official web store
Dot ST exceeded 10 million.
2020 11 Founded ADOORLINK Co., Ltd.
2022 02 zetton Inc. joined the Corporate Group.
2022 04 Moved to the Prime Market following theTSE market classification review.
2022 05 Established Gate Win Co., Ltd.
2023 04 Opened the first store in Thailand.

2About Us

Growth Strategy

ESG

Data

ABOUT US

About Us

ADASTRIA INTEGRATED REPORT 2023

Introduction

3

Introduction

About Us

Growth Strategy

ESG

Data

M e ss ag e F ro m t h e C h airman

About Us

ADASTRIA INTEGRATED REPORT 2023

MESSAGE FROM THE CHAIRMAN

Continuing to Invest
Systems to Fulfill Our
Mission of Enriching
the World

Representative Director and Chairman

Michio Fukuda
4Introduction

About Us

Growth Strategy

ESG

Data

M e ss ag e F ro m t h e C h airman

order to meet more people. We believe it is the responsibility

Adastria celebrated our 70th anniversary in 2023.

of management to attract a diverse workforce and create

We are sincerely grateful to all customers, suppliers, andworkplaces for individuals to demonstrate their talents.

employees with whom we have had the opportunity to work.
over the years, is to always keep your promises. Our founderGreater Leadership Depth andStructures That Respond to Change

had the unfortunate experience of closing the business once

Our new president took office two years ago, and we findduring the recession following the end of the war, disrupting

ourselves making good progress in our medium-term

the lives of customers, suppliers, employees, and their families.

management plan. In addition to a well-balanced Board of

We will always keep our promises to our stakeholders. This

Directors, the executive officers and general managers

together with our employees to consider the purpose of ourtenet of the previous generation lives on in me and in Adastria.

approach their work from a management perspective,

company, and the answer remains the same: Even more thancapable of making decisions that reflect the subtleties of the

making profits, our value, first and foremost, is in creatingcompany’s circumstances. I also feel that we are building

happy and satisfied customers. Since our transformation to adepth in leadership.

vertically integrated SPA (specialty store retailer of private

The lesson of our founder, which has been a great support

The Strength of Our Company Lies in the
Sense of Ownership Among Our Employees;
Investing More in Human Resources

I share an awareness with Adastria management that welabel

apparel)system,

we

have

been

committed

toOne of Adastria’s strengths is the sense of ownership withseek to evolve beyond the framework of a traditional apparel

manufacturing and delivering products that satisfy ourwhich employees approach their work. We overcame thecompany. The idea of clothing as daily wear in Japan has only

customers beyond the purchase price. And to support the

COVID-19 pandemic, and we are making good progress within

been around for 50 years or so. There is no guarantee thatdaily abundance of our customers, we must ensure theour medium-term management plan because every employee

clothing will be in such high demand in the future as it isenrichment and happiness of our own employees. With thisfaced the challenges and asked, “What can I do now?”

today. I encourage Adastria management to focus on drawing

single-minded focus, we invest actively in digital technologies

Even through the difficulties of the pandemic, I was happy toout the strengths of each staff member to allow ourand systems to increase productivity.

see new ideas from within the company and employees taking

organization to change flexibly with changes in society. If

independent action. We engage in a number of different

employees enjoy their work, new ideas will bubble to the top.

initiatives to provide a place for employees to take on new
challenges. We reward efforts as a company and increase
incentives,

including

expanding

STAFF

BOARD

and

establishing our own health insurance program.

Investments to Build Systems
Supporting Group Transformation

The continued investment through the COVID-19 pandemic
has helped to establish a foundation for growth, and theachievement of our medium-term management plan is now insight. However, continued investment in a framework to support
business model reform will be necessary to increase corporate

In the 1970s, the company transitioned from a men’s clothingvalue over the long term. We are committed to achieving results

To trigger further change, we focus on programs tostore to a casual store. At the time, we wondered about thethat exceed the goals of our medium-term management plan,

support career development for experienced employees, thevalue of our existence. And as we studied the structure andlooking even further into the future to raise the expectations ofadvancement

the capital markets in the potential of Adastria.

bothexpertise of American chain stores with our employees, weinternational and technological talent. We received hundreds

realized the mission of the retail industry was to enrich theof applications for the mid-career positions we opened inlives of consumers. Since then, we have always workedofwomen,

andtheretentionofAbout Us

Thank You for 70 Years of Support

ADASTRIA INTEGRATED REPORT 2023

MESSAGE FROM THE CHAIRMAN

5

Introduction

About Us

Growth Strategy

ESG

Data

A d a s t ria Gro up in F ig u res
The Adastria Group manufactures and sells apparel and miscellaneous goods in the lifestyle and fashion fields. The Group

Sales by Product Division

Domestic Sales Distribution Ratio

Ladies’Stores148.3 billion

71 %MainlandChina
storesWeb

29 %Net Sales

242.5

¥

Hong
Kong

21 stores

Domestic Online Sales

62.6

billion

¥

U.S.

13

(108.9% vs.
the previous year)

9 storesJapan

1,340 stores

About Us¥

ADASTRIA INTEGRATED REPORT 2023

has more than 30 brands and has opened approximately 1,500 stores in Japan and overseas, including real and web stores.

Taiwanbillion52 stores

ROE

Apparel andSundry Goods
and Others

Men’s
¥

37.8 billion

Number of
Employees¥

Regular
Employees

Term
Employees

6,356

6,061

12,41756.3 billion

13.3%

Stores

1,509

Food &
Beverage
Business
Web
StoresNumber of Brands

133 stores

Number of Members

31* Brands with ¥100 million
or more in annual sales

74 stores

16

Approx.
and more…

million(as of May 2023)

6

Introduction

About Us

Growth Strategy

ESG

Data

M ul t i - Bran d

Overview of Major Brands

ADASTRIA INTEGRATED REPORT 2023

Customers’ tastes and lifestyles are particular and not uniform in the field of fashion, making it difficult to cover all
customers with just one brand. We have adopted a multi-brand strategy with which we are aiming to gain strong support
from a wide range of customers through multiple brands that are strongly favored by customers with specific tastes. We
share resources for material development, production and logistics, and accumulate know-how as a multi-brand platform.

Classification of Major brands by Target Markets and Age

TargetLocation

Men and women in their 20s to
40s, kids from 2 to 15

TargetMen and women aged 25 to 35

Location

Shopping centers, fashion malls,
and street-facing stores

Shopping centers

Category Men’s, women’s, kids’, sports
fashions, sundries, food andbeverage

Category Men’s and women’s fashions, interior
items, cosmetics, sundries, outdoors,
sports fashion, food and beverage

Target

Women in their 20s to 30s

Target

Women in their 30s to 40s

Location

Fashion malls, shopping
centers, road-side stores

Location

Shopping centers, fashion malls,
department stores

Category Women’s, kids’, and men’s
fashions

Category Women’s fashion, sundries,
interiors, food and beverage

About Us

CORE MARKET

M
A
T
U
R
E

Y
O
U
N
G

Adastria Co., Ltd.

ELEMENT RULE Co., Ltd.

BUZZWIT Co., Ltd.

ADOORLINK Co., Ltd.

Gate Win Co., Ltd.

* Determined by the Company’s R&D Division* ELEMENT RULE Co., Ltd., BUZZWIT Co., Ltd.,ADOORLINK Co., Ltd., and Gate Win Co., Ltd.
are group companies in Japan.

MASS MARKET

7

Introduction

About Us

Growth Strategy

ESG

Data

M ul t i - C a t eg o ry

Housing

ADASTRIA INTEGRATED REPORT 2023

In addition to apparel, we offer fashion items and services for the diverse lifestyles of each and every customer in a variety of
categories surrounding daily life. Expanding the product line to include sundries and furniture will lead to more opportunities
to open new stores, and increasing store floor space will help increase the allure of our stores. In addition, we are maximizing
the lifetime value of our customers by expanding the range of moments in their lives where our products can be used.

Food

Furniture/Interior items
Green and decorative plants/Kitchenware
House cleaning products/Bath and laundry
products

About Us

Cafe/Restaurant/Grocery

Play
BeautyStudy
Cosmetics/Lingerie/Loungewear

Outdoors/Travel/Hobbies/Workshop
Stationery/Park projects

HealthSports/Wellness

Clothing
Men’s clothing/Women’s clothing/
Kids’ clothing/Clothing accessories
Maternity wear/Formal wear

8

Introduction

About Us

Growth Strategy

ESG

Data

Va l u e C h a in

D is t ri b u ti o n

Brand Development and Planning
Brand development

Production

Logistics

Collection, Reuse
and Recycling ofUsed Clothing

Systems

Marketingand Sales

fo
rm
at
ion

Brand
Development
and Planning

By integrating the entire value
chain from design, factory production,
logistics and sales into our IT system,
we are able to utilize data and improve
operational efficiency. We are also able
to provide shopping experiences withhigh customer satisfaction, since thissystem also seamlessly connects
our e-commerce site with brickand mortar stores.

Store Information,
Trend Information,
CustomerFeedback

w
Flo

In
of

We not only reuse or
recycle all remaining
inventory, but alsocollect used clothing at
170 stores nationwide,
aiming to build a
circular economy offashion together withour customers.

We develop our own brands based on global fashion
trends, customer needs, planning proposals by in-housestaff, and collaboration with influencers. In unexplored
areas, we utilize licenses of popular domestic andforeign brands to build and maintain an optimal brandportfolio at all times.

Brand direction
We create a world outlook commensurate with thebrand, cultivate individual elements to embody thisoutlook, and direct the brand overall to ensure
consistency. This activity spans organizing concepts,
tone and manner, and manages products, price points,
sales channels, promotions, and more.

About Us

Adastria’s Value Chain

ADASTRIA INTEGRATED REPORT 2023

One strength we have is our system to carry out everything from brand development to product planning, production, logistics,
and sales within the group. We quickly incorporate store information and customer feedback in our product development andservices by integrating all the processes in an IT system, while we create differentiated high-quality products.

R&D
Trend information is collected from around the world
and deployed in a way that suits each brand. We also
secure and cultivate designer and creator talent andoptimize their placement across our brand portfolio.

Merchandising
In order to provide products at the right time, at theright price, and in the right quantity, we develop
hypotheses based on trend information and customer
feedback obtained at stores, and formulate and executeseasonal product and sales plans.

9Introduction

About Us

Growth Strategy

ESG

Data

Va l u e C h a in

DesignTransportation

Based on customer needs and fashion moods, weincorporate the brand’s world outlook into product design.
In addition to our dedicated in-house designers, we alsoutilize the knowledge of outside designers according to thedirection the brand wants to express.

We have an in-house logistics unit that serves as the
hub for transporting all products manufactured acrossmainland China, thereby reducing costs andenvironmental impact by improving container loading
rates and optimizing logistics throughout Asia.

Material procurement

Logistics for domestic stores

We have established a global network of material
manufacturers and source the right materials at the righttime, in the right quantity and at the right price for thebrand. Cost advantages are achieved by using high-quality,
high-performance materials across brands.

Our logistics subsidiary within the group delivers
products to stores in Japan daily from our seven inhouse distribution centers across the country, adjusting
to sales volume of each store. Our meticulous delivery
system minimizes losses of opportunity and inventory.

Material development

E-commerce logistics

To make our products stand out and achieve a high level of balance
between price and quality, our Materials Development Department develops
original materials in collaboration with outside material manufacturers. We
have developed a number of materials that are not only fashionable andfunctional, but also offer superior sustainability aspects in reducing
environmental impact. These materials are also sold to outside parties.

We have established an optimized shipping system for a wide variety ofmulti-brand products at our in-house distribution centers. With theintroduction of state-of-the-art material handling equipment, including
unmanned transport vehicles, we have the capacity to ship up to 34,000
items per day, and are supporting common efforts to reduce delivery
costs while enhancing customer convenience, such as in-store pickup.

Patterning

Product management

We accurately grasp the intent of product planning andincorporate the design into a pattern. In addition tosecuring and training highly skilled pattern makers, we arealso actively using technologies such as 3D CAD design,
working to improve productivity and reduce environmental
impact by reducing sample production.

More than 20,000 different products are properly
managed and stored annually, and speedy supply of
products ensures timely delivery from container arrival tostores. We manage our products in meticulous detail
based on their particular qualities, for example bystorage and delivery of sundries at dedicated centers
due to expanding business in that area.

Production control
Based on long-standing partnerships, we work closely withexternal factories to ensure optimal production of a wide
variety of multi-brand products. We are also actively
cultivating new production partner factories in order todiversify production sites for the management of costs andrisks.

Quality control
We provide high-quality and safe products through investigations
to confirm that materials, production processes, and products
conform with our quality standards. We monitor not only finishedproducts but the entire procurement and production process as
early as the product planning stages, and our CSR audit teamalso conducts checks regarding ethical standards.

Marketing and Sales
Brick-and-mortar stores
We operate approximately 1,500 brick-and-mortar stores in Japan andoverseas, maintain an optimal store network at all times by flexibly
opening and closing stores depending on market conditions. By owninga large number of brands, we can support a range of commercial
facility types, and by opening multiple stores in the same facility, we
can operate more efficiently and increase customer contact points. In
addition, customers can experience our brands and products firsthandin brick-and-mortar stores, which results in high customer loyalty.

Sales staff
Our sales staff provide a purchasing experience with a highlevel of satisfaction by demonstrating premium customer
service and proposal skills both online and offline. Morethan 30% of our e-commerce customers shop by referring
to outfit coordination photos posted by our store staff, andour stores account for over half of new registrations for our
Dot ST e-commerce and points system.

Store design
In our store design, we provide customers with newexperience value while faithfully expressing the brand’s
world outlook.

Visual merchandising
We express brand and product characteristics andcreate fresh storefronts while firmly conveying the appealof the product to customers.

ADASTRIA INTEGRATED REPORT 2023

Logistics

Public relations
Messaging is planned and carried out over traditionaland social media to convey the brand’s world outlook
and appeal to as many people as possible. In addition,
we devise POPs and content that fully convey the appealof our products in stores and over e-commerce.

About Us

Production

Official Dot ST online store
With over 16 million registered customers, Dot ST is thethird largest apparel e-commerce site in Japan. Its
immensely popular STAFF BOARD, where store staff
post outfit coordination, attracts about 1 million site
visitors per day. We are expanding the categories we
handle by selling not only our own products but also
those of other companies.

Customer service
We listen attentively to customer feedback, providing
this to each brand to help us create better products. In
addition, the introduction of chatbots has made it
possible to corresponding with customers 24 hours aday, 365 days a year, increasing customer satisfaction.

Store Information, Trend Information,
Customer Feedback
10Introduction

About Us

Growth Strategy

ESG

Data

Va l u e C re at io n P ro ces s

VA L U E C R E AT I O N P R O C E S S
HumanCapital
P.15

Shareholders
and Investors

Co-Creationof Good
Communities

Value Improvementof Human CapitalBusiness
Partners

Business Model

Manufacturing
CapitalSocialIssuesCustomers

Brand
Development
andPlanning

INPUT

Management
Resources

Social Issues
to Be Resolved
Through Business
P.43

Reduction in
Environmental
Load

External
Environment
P.13

OUTCOME

Social Value

Creating
SocialValuesMulti-brand, multi-category
Digital customer interactions
and services
GlocalNew businesses
Marketing
and
Sales

P.22

Logistics

Business
Model
Transformation
P.2

OUTPUT

Value
Generated

Providing
Sustainable

Creation of Social WealthCreation of Excitement

SocialCapitalFinancial
CapitalNaturalCapitalProduction

Growth Strategy

MATERIALITYMISSION

Main
Businesses(Value Chain)

About Us

Intellectual
CapitalADASTRIA INTEGRATED REPORT 2023

Employees

Corporate
Governance
P.59

11

Growth Strategy

ESG

Data

ADASTRIA INTEGRATED REPORT 2023

About UsG R O W T H S T R AT E G Y

Growth Strategy

Introduction

Adastria Growth Strategy

12Introduction

About Us

Growth Strategy

ESG

Data

T h e A d as t ria M arket En viro n ment

The apparel EC market in
Japan grew significantly
duringthe
COVID-19
pandemic. While the growthof the EC sales ratio slowedin 2022, the market size
continues to grow. This isdue to improvements in theoperating environment of
psychical stores comparedto the previous year andindicateschangesin
consumers’purchasing
behavior.

(Statistics Bureau, Ministry of Internal Affairs and Communications)

Overseas Markets
Will Continue toGrow in the Future
The global apparel market
has recovered rapidly and isestimated to have exceeded
pre-COVID-19 levels by2023, even with the market
decline after the pandemic.
Continued growth isexpected in the future,
particularly in the key market
of Asia where growth rates
are high and the market size
has a growing presence.

Global Apparel Market Growth Forecast(Billions of
U.S. dollars)

Net Sales (Global Business)
Net Sales (Asia, Excluding Japan)

2,000

1,500

1,000

500

0

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Source: Revenue of the apparel market worldwide
from 2014 to 2027, Statista

Domestic Apparel EC Net Sales(Billions

EC Net Sales in Domestic Apparelof yen)EC Sales Ratio

300

25

250

20

200
15
150
10
100
5

50
0

0

Source: E-Commerce Market Survey, Ministry of Economy,
Trade and Industry

Fading Barriers Surrounding
Peripheral Markets Resulting inTransition to Lifestyle Market
Barriers between apparel andperipheral markets are fading as
lifestyles change. This change
brings new possibility todomestic markets, expanding
the lifestyle market where
customers enjoy fashion in
every lifestyle area outside ofclothing. Adastria believes thatdemand for fashionableproducts is expanding for
miscellaneous goods andfurniture as well as for food,beverage, and sports.

(%)

Lifestyle Market(Domestic, Trillions of Yen)

ADASTRIA INTEGRATED REPORT 2023

Clothing expenditures per household in Japan have been gradually declining overthe long term, mainly due to declining unit prices of single articles of clothing.
Around 2016, the decline slowed and has remained mostly flat since then. The global
apparel market declined sharply in 2020 due to the spread of COVID-19. In Japan,
clothing expenditures per household remain at 80% of the pre-COVID-19 level in
2022, with no significant growth between January to March of 2023. While thedomestic market is still
recovering,
Adastria Clothing Expenditure Per Household
achieved
record-high(Yen)
140,000
sales in the fiscal year 120,000
ended February 28, 2023, 100,000
80,000surpassing those before
60,00040,000COVID-19. This growth
20,000was not solely dependent0
2016 2017 2018 2019 2020 2021 2022
on the market enviSource: Survey of Household Economy
ronment.

Expanding Apparel
EC Market

Growth Strategy

A Recovering Domestic Apparel Market

Sportswear
and Shoes
Cosmetics

2.3

1.1

Outdoor

0.5

ApparelEating Out

Food

8

27

Kitchenand
Tableware

Housing

14.830Interior
Furniture

0.4

1.5

Based on our research from various surveys

13

Introduction

About Us

Growth Strategy

ESG

Data

M e diu m - T e rm Man ag em en t P lan

FYE 02/2026

Ⅰ

Grow Customer Base

Multi-Brand, Multi-Category
Grouping of brands according toroles for improved profitability
and growth

280 billion

Including EC Sales of¥

80 billion

Operating
Profit Margin

8%

Ⅱ

Digital Customer
Interactions and Services
Accelerate growth of our EC siteand create a fun EC community

Growth Strategy

GlocalNew Businesses

Develop models in mainland China
and cultivate Southeast Asia

Establish food and beveragebusiness and create new appeal

Ⅳ

Sales Growth

SG&A Cost Control

Avg. Annual Growth

3.4%

8.5%

Improvement

Improved Gross
Profit Margin

Capital Efficiency
Improvement

1.3%

ROE

Improvement

ADASTRIA INTEGRATED REPORT 2023¥

Growth Strategy

Growth Strategy

Ⅲ

Consolidated Net Sales

Achieve Sustainable
Management

Extend Value Offerings

Growth Strategy

Numerical
Targets

Growth Strategy

In April 2022, we formulated a medium-term management
plan to respond to changes in the external environmentand continue to grow by expanding customers and thevalue we provide. We will continue to increase sales while
improving our operating margin. To do so, we will curb
rising SG&A costs, especially those in division
management, by streamlining our internalized production
and logistics structures.

15% or more*Compared with FYE 02/2022

14

Introduction

About Us

Growth Strategy

ESG

Data

Hum a n C a p i t al I n it iat ives t o Ex ec ute Stra te gy

Adastria also takes initiative in areas of human capital to execute our growth strategy.

Growth Strategy

Growth Strategy

Growth Strategy

Growth Strategy

Ⅲ

Growth Strategy

Ⅰ

Ⅱ

Ⅳ

Ⅱ

Growth Strategy

Growth Strategy

Growth Strategy

Ⅰ

Growth Strategy

Ⅲ

STAFF BOARD and the development of SNS personnel

P.29

Employment of Digital Transformation Human Resources

P.30

Investments in mechanization to address labor shortages

P.30

Reinforcement of collaborations in global business

P.34

Expanding BtoB

P.35

Career expansion support

P.50

Promotion of career advancement for women

P.50

Establishment of our own health insurance and
Health and Productivity Management

P.51

Growth Strategy

Growth Strategy

Ⅲ

Securing human resources
with digital skills
Expanding of global
foundation

Ⅳ

Ⅱ

Growth Strategy

Ⅳ

Sustainability

Expanding of global
foundation

Leveraging the talentsof veteran staff

Increasing women in
management positions
Supporting career
continuity

Growth Strategy

Ⅰ

Examples of Initiatives
ADASTRIA INTEGRATED REPORT 2023

Strategic Issues Related to Human Capital

15

Introduction

About Us

Growth Strategy

ESG

Data

M e ss ag e F ro m t h e P res id en t

Representative Director and President

Osamu Kimura

Growth Strategy

Continuing to Take on Challenges
and Embracing Change to Moveto a New Stage

ADASTRIA INTEGRATED REPORT 2023

MESSAGE FROM THE PRESIDENT

16

Introduction

About Us

Growth Strategy

ESG

Data

M e ss ag e F ro m t h e P res id en t

MESSAGE FROM THE PRESIDENT

Year One of Our Medium-Term
Management Plan; Better-ThanExpected Brand Portfolio Performance
Last year was the first of our medium-term management plan
which ends in February 2026, and we generated record-highconsolidated net sales. As president, I have an increasing
number of opportunities to talk with the capital market. I feel

this strength resulted in stable business operations andthat the concern investors had about our lofty targets when we

increased the likelihood that we will achieve our plans.

first announced our plan has changed to a sense of

Even Growth Brands such as LAKOLE, which has opened

Investments During the COVID-19
Pandemic Are Paying Off; Putting aFoundation for Growth in Place

new shops aggressively, have had a hand in driving sales

Looking at Growth Strategy II (Digital Customer Interactions

expansion. It took us about three years to get LAKOLE off theand Services), we see that, although the growth rate of the

Looking back at the four growth strategies described in the

ground, but it has become an example of how our othere-commerce sector has slowed somewhat due to the recovery

medium-term management plan in turn, we see that understrength—our ability to correct course—was put to good use.

of brick-and-mortar stores, we never stopped investing during

Growth Strategy I (Multi-Brand, Multi-Category), our brandWe are good at launching a brand, analyzing how to make it

the pandemic, and we are ready now for continued growth. To

portfolio functioned quite well, with the brands categorized

more customer-friendly in the field, and continuing to makeachieve our target of ¥80 billion in e-commerce sales, weunder Stand-Alone Brands, Growing Brands, and Profit-Oriented

improvements based on numerical feedback. This pattern

improved efficiencies further at ECDC (Ibaraki West Logistics

Brands succeeding in their respective roles. Our major strength

allows us to establish business models and invest

Center). The improvements will allow us to cope with theis in several stand-alone brands with sales of over ¥20 billion, ledaggressively, leading to the growth we see today.

expected labor shortage in the future. We also opened our

anticipation as we move toward a new stage of growth.

by GLOBAL WORK, with sales of ¥50 billion. We are confident

Growth Strategy

ADASTRIA INTEGRATED REPORT 2023

Continue to Take on Challenges
for Growth, While Enjoying theChanging Stages in Co-Creationof Good Communities.

own e-commerce site, Dot ST, and added merchandise from17

Introduction

About Us

Growth Strategy

ESG

Data

M e ss ag e F ro m t h e P res id en t

PFI system (publicly solicited installation and management).

other factors have improved in Hong Kong under the

Adastria is beginning to see growth in BtoB business as well.

COVID-19 pandemic. At the same time, our wholesale

Here, we are producing real estate projects and providing

business is performing well in the U.S., which contributed

brands to GMS. A variety of companies across all industries

significantly to sales growth.

have expressed their expectations of interesting developments

Seeking New Revenue Models
Through Synergies With Other
Companies

in working with Adastria. We feel that we are gaining credibility
as a company by accumulating experience in manufacturing
and brand building.

stage. However, we expect to see buds growing by the final

Aspiring to Co-Create Good
Communities With Our Partners

year of the current medium-term management plan. One

In the past, the fashion industry was driven by sales growth as

Growth Strategy IV (New Businesses) is still in the seedinitiative is the launch of a full-scale licensing business. We

companies competed to be the best. Times have changed,

We enhanced the scale of STAFF BOARD, where

have extensive experience in creating and nurturing original

and the next generation is beginning to embrace the idea ofindividual store staff members share their style coordinates

brands from scratch. But even so, creating large-scale

sharing resources and creating new value by connecting withand lifestyles.

brands is no easy matter. We relaunched FOREVER21 incompanies and people outside of their own organizations. By

STAFF BOARD is one of Dot ST’s greatest strengths, andJapan after a year of preparation, including research andcollaborating with companies and brands, both parties gain

the program motivates individual staff members by recognizing

contracts. We believe that by localizing in detail for Japanesepotential new customer contacts and awareness. The opening

their efforts and providing them with appropriate incentives.

customers, we can take full advantage of the high nameof Dot ST to products from other companies is another way ofrecognition of that brand. This is just the first phase, and weplanting the seeds for this kind of Good Community

intend to expand the number of brands further as we acquire

cocreation.

other companies.

In terms of Growth Strategy III (Glocal), our business planfor mainland China has been delayed by one year due tomore expertise.

Growth Strategy

multi-brand strategy is working well in Taiwan, while rent and

ADASTRIA INTEGRATED REPORT 2023

MESSAGE FROM THE PRESIDENT

We began collaborating with Yamato Transport for
logistics and delivery last year to reduce CO2 emissions and

COVID-19. However, even under difficult circumstances, we
opened new stores in Chongqing and Chengdu, and we

Food is another pillar of lifestyle. Our food subsidiary,address the shortage of human resources for drivers. We hopebelieve we will keep pace with the future economic recovery,

zetton, continues to evolve in partnership with Adastria, andto work with external partners, regardless of industry, who cantransitioning to renewed growth. In our overseas businesses

some exciting projects have emerged. These projects include

do what we cannot, who have expertise outside our own, andas a whole, Taiwan and Hong Kong have driven profits. Our

the Yamashita Park Rest House, which made use of the Park-with whom we share the aspiration to co-create value.

18

Introduction

About Us

Growth Strategy

ESG

Data

M e ss ag e F ro m t h e P res id en t

MESSAGE FROM THE PRESIDENT
learn from each other and innovate in a way that will help the
ADASTRIA INTEGRATED REPORT 2023

company move to the next stage. One challenge in terms ofhuman resources is the advancement of women. We believe it

Amplifying the value of human capital is another importantis essential to utilize the power of women for future growth,

factor in new value creation. To increase opportunities forand we set a goal of increasing the ratio of women in senior

growth, Adastria provides ways proactively for employees tomanagement to 30% and the ratio of women in management

advance their careers. One example is a system that entrusts

to 45% by 2025. However, the number of women in executive

employees with the management of subsidiaries to gain

positions has not increased sufficiently. To achieve our goals,

experience. We also encourage employees to launch in-brandwe pursue efforts to have the opinions of women reachproducts under each brand. Regardless of the size of the

management directly. These efforts include inviting women tocompany, the responsibility for using money as a company

participating in meetings where management members holdmanager is important. One soon realizes that there are many

discussions.

people working for the company outside one’s area of

ourselves time to stand still, and this attitude is now ourstrength in the wake of the COVID-19 pandemic. Our currentof others, gaining credibility as a manager. I have my own

The Current Medium-Term
Management Plan Is a Milestone
Toward Continuing BusinessTransformation

history of numerous challenges and failures. I want employees

Looking at recent store activity, we feel that customers are

inception, and we will continue to invest in the year ahead forto challenge themselves without hesitation, knowing that evenenjoying fashion in connection with momentum to leave thea fifth change. Adastria management discusses the next step

Kimura failed at half of everything he tried. I believe it is the job

house. However, we see a number of risks surrounding thein value creation constantly, always looking beyond theof the president to create an atmosphere in which it is easy tomarket. The cost of manufacturing is rising, and we need tocurrent medium-term management plan. We also believe intry and fail.

rethink our approach to sales discounts, promoting higher-

the need to communicate carefully the direction in which wevalue-added products instead. Geopolitical instability is also

are headed so that stakeholders entrust us with management

rising. We must diversify risk by avoiding the concentration ofof the company. We at Adastria will continue to challenge

production sites and store development in any single region.

ourselves for long-term growth, embracing the change to a

responsibility, and the opportunity offers a broader
perspective and a higher viewpoint. If one should happen tofall short in the challenge, they gain an appreciation of the pain

Through active mid-career recruitment, we incorporate theknowledge of people who have gained experience in fields
different from those of Adastria. After all, Adastria is amedium-term management plan is just a milestone. And while
we are confident we will achieve our goals, we must continue
to transform our company to ensure long-term growth.

Growth Strategy

Employees Who Learn From Mistakes
and From Other Cultures Are the Ones
Who Innovate

We changed our business model four times since ourstage of co-creating good communities.

company created originally by people of varied backgrounds

But even during difficult times, we have continued to invest

coming together. I believe that external and internal talent

in systems, logistics, and human resources. We never allowed

19Introduction

About Us

Growth Strategy

ESG

Data

Di r e c t o r M e s s ag e

DIRECTOR MESSAGE
ADASTRIA INTEGRATED REPORT 2023

Enhancing Product and Group
Value to Achieve Medium- andLong-Term GrowthManaging Director, Finance and Risk Management In-Charge

Growth Strategy

Masayuki Kindo

Ongoing Investments Support MediumTerm Management Plan Progress
Sales and profits for the fiscal year ended February 2023
exceeded expectations, and we made solid progress in our
medium-term management plan. Even throughout the nearly
three years of the COVID-19 pandemic, we continued to invest

suffered a negative impact on operating income ofcountry risk and scout areas to diversify production ap-

aggressively in growth businesses, DX, and the mechanization

approximately ¥1.4 billion. Fortunately, many customers

propriately and reduce manufacturing costs, looking to raiseof distribution centers in anticipation of the post-COVID-19

returned to use the site after reopening, but we will continue tothe ratio of production in ASEAN to 30% or more by the fiscal

era. Our efforts in these areas have paid off. Cost of sales

strengthen security to regain customer trust.

year ending February 2024. Taking advantage of in-housepresented a challenge due to the weak yen and high resource

production, we strive to reduce costs in various aspects,

price without making compromises and enjoyed the support of

Delivering Valuable Products by
Reducing Costs and Improving Quality

our customers. A low point in the year was the system outage

We are shifting our product manufacturing base from mainland

addressing the 2024 problem. In addition, Adastria continued

in the fourth quarter due to unauthorized system access. While

China to ASEAN to control costs and deliver valuable products

to improve the added value in products while revisiting prices,

we detected and responded to the problem quickly, we

to customers at reasonable prices. We continue to assessboosting sales by increasing purchases per customer.

prices, but we pursued a balance between product value andincluding the use of lower-cost materials without sacrificing
quality, while also improving logistics loading rates and20Introduction

About Us

Growth Strategy

ESG

Data

Di r e c t o r M e s s ag e

DIRECTOR MESSAGE
Revising prices is never an easy decision for management.

investments to areas of need, while introducing greater

2022, will allow Adastria to strengthen our presence in the

However, Adastria has always been committed to value-added

efficiencies into rent, head office costs, etc.

kids’ clothing segment, where we have been thin. And we
expect to boost sales through launches of new shops on our

production capabilities. These efforts have paid off, as

Increasing Group Value Through M&A

customers recognize the value of our products, allowing us to

We pursue M&A for medium- to long-term growth. zetton,

while keeping an eye on capital efficiency. Adastria will keep

control discount rates at the same time we revise prices. We

consolidated in February 2022, operates stores in the Kanto

an open mind to collaborations companies that havefactored a 6% wage increase into costs this fiscal year to

and Chukyo areas of Japan, but we expect that thecomplementary strengths to increase mutual value.

retain talented employees, but such investments can only

partnership with Adastria will lead to nationwide openings,

continue when performance is commensurate. Utilities andentering new markets in an efficient manner. Open andother costs are also on the rise, but we plan to allocate

Natural, which became a consolidated subsidiary in March

Creating Value Over the Medium to Long
Term Through Stable Management,
Strengthened by Teamwork
In the wake of difficulties in achieving real communications

ADASTRIA INTEGRATED REPORT 2023

Dot ST site. We continue to receive many inquiries about M&A

during the COVID-19 pandemic, we feel an urgency to create
opportunities to share information online and through othermeans. These efforts have increased our team cohesivenessnot only in fashion, but also in management, and theorganization as a whole has become better versed in thenumbers of our business. We established a minimum dividend

Growth Strategy

manufacturing, and we continue to refine our planning andfor the period covered by our medium-term management plan
to share with the capital markets the confidence we have as amanagement team in working together to reduce volatility inperformance and overcome difficult times. For us to continue
to grow, we must invest in DX, overseas operations, M&A,
etc., in addition to opening new shops. We intend to create
value over the medium to long term by expanding our scale ofbusiness, accumulating expertise, and leveraging our teamstrength to raise the efficiency of our investments.

21

Introduction

About Us

Growth Strategy

ESG

Data

G r o w t h S t rat eg y I : M u lt i- Bran d , Multi-Ca te goryStand-Alone Brands
Expansion of scaleswith unique strategies

Growing Brands

Profit-Oriented Brands

New markets andcategories

Horizontal development ofhighly profitable models

Growth Strategy

We categorize our brands into the following threegroups in our Medium-Term Management Plan
according to their roles and stages: Stand-Alone
Brands, Growing Brands, Profit-Oriented Brands.
We formulate strategies tailored to each group. We
are constantly cultivating new brands, creating a
multi-brand platform that will develop them as
profit-oriented and growing brands while aiming fortheir further success as stand-alone brands as theirscale expands. This reduces the risk of passing
fashion trends and becoming an out-of-date brandin the fashion business while nurturing brands
across our portfolio.

ADASTRIA INTEGRATED REPORT 2023

Multi-Brand Platform

BUZZWIT Co.,Ltd. and ELEMENT RULE Co.,
Ltd. are domestic subsidiaries

New Brand Creation
22

Introduction

About Us

Growth Strategy

ESG

Data

G r o w t h S t rat eg y I : M u lt i- Bran d , Multi-Ca te goryStand-Alone Brands

LAKOLE is a lifestyle brand that also handles apparel, everyday necessities, andgrocery items. Its fashionable and varied miscellaneous goods are popular among
both men and women.

Growth Strategy

GLOBAL WORK develops multiple mainstay products, differentiated by their materials and functions, that serve as the face of the brand. After product development,
GLOBAL WORK further concentrates investments in product promotion, branding
the specific products to limit sales fluctuations impacted by trends.

Growing Brands

ADASTRIA INTEGRATED REPORT 2023

Strategy and Progress by Brand

Net Sales(Billions of yen)

45
40
35
30
25
20
15
10
5
0

Net Sales and Stores(Billions of yen)

02/2001 02/2003 02/2005 02/2007 02/2009 02/2011 02/2013 02/2015 02/2017 02/2019 02/2021 02/2023

10
9
8
7
6
5
4
3
2
1
0

Net sales(Stores)

Stores

70
60
50
40
30
20
10

02/2018

02/2019

02/2020

02/2021

02/2022

02/20230

23

Introduction

About Us

Growth Strategy

ESG

Data

G r o w t h S t rat eg y I : M u lt i- Bran d , Multi-Ca te goryG R O W T H S T R AT E G Y
front lines as well. We designed STAFF BOARD to not only
demonstrate fashionable coordinates, but also provide
customers with useful information, including photos of clothes
worn by store staff members of different heights.
The Japanese apparel market itself is not a growing

Executive Officer, Executive General Manager,
GLOBAL WORK Divisionmarket. But we can continue to grow by being the provider ofSatoru Ota

desire to shop wisely and not feel like they wasted money. We

choice by customers. Customers these days have a strong
think that customers appreciate our commitment to making
products that are valuable in comparison to price, products

ADASTRIA INTEGRATED REPORT 2023

A Strong Organization and
Employees Who Work for the
Customer Are the Source of Growththat we receive more feedback about the product from thepurchase. The challenge with women’s fashion, in particular, isI joined Adastria in 2016 from another apparel company, andis what made this success possible. We made the most of our

the high volatility. A product that sold well the previous year

my role in GLOBAL WORK began in 2018. GLOBAL WORK

strengths by abandoning the assumption that good products

may sell only half as well the next year. GLOBAL WORK

itself is a brand that has been around since 1994. The brandsell because they are good products, returning to the concept

products, purchased by repeat customers every year, reduce

policy was to select main materials and products, focusing inof finding the benefits that the product has for the customer.

this risk by establishing strong relationships of trust with thedetail on selling larger quantities of a limited selection of

To this end, we reviewed communications throughout theoutstanding products. When I joined, the brand was at aroundorganization to achieve our sales strategy. When I arrived at

can be chosen every year, including Utsuku Silhouette,¥30 billion in sales, but had reached somewhat of a plateau.

GLOBAL WORK, I found very capable personnel in terms ofSarasara Relax, and Melty Knit.

When I visited the store in person to see the products that hadmerchandising, brand messaging, store promotions, andWe also developed a new business model, Smile Seed

gradually began selling, I noticed that the products weremanagement. But I felt there was an unfortunate weakness inStore. This is a model for neighborhood shopping centers

simply placed on the sales floor without any sales appeal or

cross-department connections. By changing our traditional(NSC) that we have begun to expand into new areas and to

product explanation. We reasoned that if the product wasapproach and adopting a method in which everyone works

new customers. Of course, not all new projects will goselling without any particular effort it should sell even better if

together to create a strategy, we now create compelling

according to plan. But we hope to make adjustments while

we could convince customers about the appeal and benefits ofproducts from initial concept to final delivery to the customer.

keeping a close eye on the market and our customers. We

the product. So we changed the storefront displays and theRather than thinking of roles separately—merchandising is inhave not yet developed overseas markets to a great extent,

name of the product. Sales doubled. Of course, simply

charge of the product, sales is in charge of the sales floor,

and we know these markets offer potential in the future. Wechanging sales methods is not enough. Our original

etc.—team members think from upstream to downstream,

will include these markets as we strive to achieve our goal ofcommitment to manufacturing, materials, and product strength

gaining a greater sense of responsibility and initiative. We find¥100 billion in sales for GLOBAL WORK as a whole.

Growth Strategy

that make the customer feel that they have benefited from theconsumer. We intend to nurture product lines of the type that24

Introduction

About Us

Growth Strategy

ESG

Data

G r o w t h S t rat eg y I : M u lt i- Bran d , Multi-Ca te gory

It has been six years since LAKOLE was launched as a
strategic brand aimed at linking general merchandise andapparel. While it has been a bumpy road, we are currently on
track and in the expansion phase. We initially developed
apparel that focused on functionality, such as water repellent
and stretchable products. However, prices were too high for a
product that offered little in terms of fashion. Our general

Using Our Conceptual Abilities
to Modify and Make LAKOLEan Engine for Group Growth
Executive General Manager, Second Sales Division(Growing Brands In-Charge)

Kiyohisa Inose

ADASTRIA INTEGRATED REPORT 2023

G R O W T H S T R AT E G Y

merchandise core values were not defined in terms of design
six months after the brand launched. That’s when I was put incharge of the brand and have since thoroughly focused on thecustomers’ ease of purchase.
It was difficult for us to produce goods from scratch on

believe that this display of making quick judgments and ourdifferent approach, and although nothing is finalized, I have aability to make modifications is unique to Adastria.

vision for our sales floor.

our own at that time based on the scale LAKOLE, so we

We also established a business model for stores

I see great potential for overseas expansion and would like toattempted selling purchased products at first. However, whenapproximately 330m2 in size, and are in the phase ofstart as soon as possible. Since LAKOLE is primarily a general

we saw these products on the store shelves, we strongly felt

increasing the number of stores. One strength of LAKOLE ismerchandise company, expanding our scale is essential tothat they would not resonate with our customers. I visitedthat it can accommodate a more diverse range of locations

improve profit margins. Investments are currently underway

various manufacturers after that to find a general merchandise

than fashion-centric brands. Nevertheless, I believe that weand ahead of schedule. Logistics requires a different kind of

manufacturer willing to take on production. I discussed ourwill see a ceiling on the scale of sales at around ¥25-¥30

scheme than apparel, and I believe we will grow thanks tovision and plans for LAKOLE, and persuaded them that,billion with our current stores specifications. On my end, I am

being a part of Adastria. I personally came to Adastria having

although the brand was still small at the moment, we would

developing a plan for LAKOLE to become a ¥100 billion brand.

only experience at other companies in men’s apparel. The

grow and need their cooperation. The business partners who

As such, I aim to expand categories and provide the value ofmindedness of our company enabled me to take on

believed in us and gave us a chance are the ones supporting

LAKOLE to various aspects of our customers’ lives. The

challenges in fields I had no knowledge of, such as women’s

LAKOLE today. We solidified the brand’s iconic smoky colors

grocery lineup we launched last year is part of this plan. We

apparel and general merchandise brands. It is thanks to thisand typography, and after replacing 80% of the products

sold furniture and related item at first, but temporarily

company that I have gained a wide range of experience.

within six months, we finally created our current businesswithdrew during our rebranding process, prioritizing an

I will continue to dream big and develop LAKOLE into a brandmodel. This was a difficult time for brand members, but I

affordable price range. I believe that LAKOLE can now offer athat drives growth in Adastria.

Growth Strategy

and price, resulting in the immediate revision of our branding25

Introduction

About Us

Growth Strategy

ESG

Data

G r o w t h S t rat eg y I I : D ig it al C u s t ome r Inte ra c tions a nd Se rvic e s

Our own e-commerce site, Dot ST, has captured the e-commerce market with more than 16 million members. It is one of thelargest privately-owned fashion retailer e-commerce businesses in Japan. Dot ST leverages ties with its customers, creating a

improvements to the app, and seamlessly integrating e-commerce and physical stores through the opening of OMO stores.

(%)

Purchase Customer
Growth Phase

170

Purchase Frequency
Growth Phase160

Expand the scaleof our EC business, aiming for¥150

vs. FYE 02/2022
Purchase Customer

160%

140

80 billion

in net sales by FYE 02/2026
Increase Number of Customers

130

Growth Strategy

through popular STAFF BOARD content, in which store staff post coordinating fashion items, continuously making functional

ADASTRIA INTEGRATED REPORT 2023

strong customer base, and pursues further growth through various initiatives. These initiatives include differentiating our business

Increase Number of Purchases

120

vs. FYE 02/2022
Purchase Frequency

110

125%

100

Overseas ECs

90

Make Dot STa Major Fashion EC

80

FYE 02/2022

FYE 02/2023

FYE 02/2024

FYE 02/2025

FYE 02/2026

26

Introduction

About Us

Growth Strategy

ESG

Data

G r o w t h S t rat eg y I I : D ig it al C u s t ome r Inte ra c tions a nd Se rvic e sEntertainment Community
Executive Officer, Executive General Manager, Marketing Division

Junichi Tanaka

analysis tools specific to social media, and expanded training.
It is important that all three of these pillars are in place andfunctioning. Even if we raise the reward for participation, we
cannot provide training without proper analysis, and wecannot communicate effectively with customers without

Growth Strategy

E-Commerce as a People-Centric

ADASTRIA INTEGRATED REPORT 2023

G R O W T H S T R AT E G Y

proper training. Our company has roughly 8 million followers
I have been in charge of e-commerce for 10 years, and the role

through our e-commerce site, Dot ST. STAFF BOARD is a toolacross social media, consisting of more than 5 millionof e-commerce has continued to change in dramatic ways.

for staff members to communicate to the customer, and will

followers of our brands and 3 million followers of our staff

Today, e-commerce is more than just a place to buy goods. It’s

become increasingly a center of our strategy, as we seek tomembers. Within three months of launching this policy, themore than a channel to sell goods. E-commerce offers us theincorporate human resources into media and content.

number of staff member followers increased to 840,000.

potential to improve communications and provide services even

As one specific initiative, we created a mechanism to

These direct connections between staff and customers

after the sale of an article of clothing. E-commerce is a

support staff members in their communications withthrough social networking and other means are about more thanmarketing tool to understand customers better through thecustomers to make the most of our people, who are, after all,increasing e-commerce sales. These connections also increase

data. Our goal in this context is to transform from e-commerce

the most important content we have. For example, we provide

the number of brand fans and traffic at brick-and-mortar stores.

into an exciting entertainment community. Adastria is unique insupport for staff involved in STAFF BOARD through a revised

Many customers come to our physical stores after seeingthat we are open to other companies to sell their products

incentive program based on social media followers, new data

e-commerce and social media sites. These customers do not27

Introduction

About Us

Growth Strategy

ESG

Data

G r o w t h S t rat eg y I I : D ig it al C u s t ome r Inte ra c tions a nd Se rvic e s

G R O W T H S T R AT E G Y

Rewardnecessarily have to buy products online for our e-commerce
program to be successful. Once again, our digital strategy is
to increase the number of customer interactions, ande-commerce and social media serve as tools for this purpose.
Adastria owns solid points of customer interactions in the form

Support for
Staff

of brick-and-mortar stores, and it is important to extend thesepoints of contact through e-commerce while enhancing thequality of interaction at the same time. We believe that weshould optimize this strategy across the company as a whole,
not limited to e-commerce or CVR.
So how do we define Dot ST if it’s not just a place topurchase goods? In my opinion, Dot ST is a place forinteractions: people-to-people, people-to-products and

Seminars by
Hall-of-Fame Staff

December 2022

Social Media
Analysis Tools
Number of people withtools installed on theirpersonal devices: 1,500

Analysis
Tools

Training

One-on-one online
training conducted by
a 10-person team: 150
participants

Growth Strategy

Revised Incentive
Program

ADASTRIA INTEGRATED REPORT 2023

Revised March 2023

services, and people-to-brands. And the most important thingis that we offer fun and excitement. At the same time, if staff
members participating in STAFF BOARD do not enjoy

much followers depend on staff opinions, etc. And as a result,overload; finding what they want becomes too difficult. On thethemselves, they won’t create positive content enjoyable forbusiness numbers increase. Our challenge in the future will beother hand, helping customers find what they want immediately

customers. STAFF BOARD members must participate throughhow to scale without disrupting these strong communities.

may sacrifice the pleasure of shopping, of chance encounters.

motivation beyond a job and paycheck. At present, Adastria

In terms of data utilization, we have already seen someWe will try to strike a balance, personalizing the experience instores and e-commerce account for about 70% of member

successes in product development based on feedback throughthe most enjoyable way possible. When we consider

sales. This high figure represents the fact that staff ande-commerce. Examples include the Utsuku Silhouette Pants. As

e-commerce as media and community, we see a future of manycustomers enjoy building connections. Having fun is part of thea next step, we want to improve the accuracy of personalization

other functions and services. And we will give shape to these

Adastria corporate culture. Many staff members are motivatedin the Dot ST app. As the number of brands and merchandise

ideas over time, aiming to engage in a digital strategy uniquely

by customer feedback about how useful staff content is, how

increases, customers become stressed due to information

Adastria for creating Good Communities.

28

Introduction

About Us

Growth Strategy

ESG

Data

G r o w t h S t rat eg y I I : D ig it al C u s t ome r Inte ra c tions a nd Se rvic e s

G R O W T H S T R AT E G Y
One of the strengths of the Adastria in-house e-commerce site Dot ST is its
STAFF BOARD content, where store staff post coordination suggestions.
More than 4,000 staff members nationwide post photos and videos of theircoordinated outfits every day. As members of our in-house e-commerce site
often register at our in-person stores, we have built a loyal membershiporganization through the customer service provided by our staff.

Conveying Our Passion

Growth Strategy

to Our Customers

ADASTRIA INTEGRATED REPORT 2023

Our EC Strengths

Promotion Director,
PAGEBOY Sales Division

HinechiAs the promotion director of PAGEBOY, I post information

the brand. If a staff member is reluctant to post on SNS as

our brand. We are able to connect with customers all overthrough my personal Instagram, WEAR, Youtube, TikTok,part of their job, it becomes obvious in their posts. I believe

Japan through the Internet that we would not be able toand STAFF BOARD. I feel that communicating through one’sthat when staff members wear what they like and enjoy

meet in our actual stores. Even now that many customers

own words and emotions on a personal account is morethemselves in their own way, it attracts customers andcan watch our InstaLive, our customer service experience in

effective in increasing customer engagement and creating

appeals to the brand, regardless of the brand’s policy. I

stores has been a great help. We highly value the feelings

deeper connections than posting on an official brandoriginally joined PAGEBOY as a part-time employee. Underand comments of each customer. Adastria is a company

account. I am also involved in internal staff development andthe kind guidance of senior staff members, I learned the joythat listens to the front-line and gives them the freedom tourge staff members to post what they really like on theirof interacting with customers. I began to send out messages

try what they want to do. I expect that we will continue tosocial networking sites. Customers today are more likely tothrough blogs and other means with the sole desire to meetdevelop staff who can have fun while building a community

make decisions based on the person posting rather than on

as many customers as possible and convey the appeal ofwith our customers.

29

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About Us

Growth Strategy

ESG

Data

Progress on Our Strategy to Open In-House EC Platforms

Foundation for Growth in the Digital Sector

As one measure for EC growth, Adastria is advancing a mall-type business byhandling outside merchandise as a way of opening our platform. The participationof leading companies in each category leads to the acquisition of new customers
and mutual customer transfers. In addition, popular staff members have begun tosell collaborative products and staff from other companies have begun tocontribute to the STAFF BOARD.

Mechanization of Ibaraki West EC Logistics Center

Growth Strategy

Adastria mechanized the Ibaraki West EC Logistics Center to ensure shipping
capacity (up to 34,000 shipments/day) to meet our target of ¥80 billion in EC
sales. Optimization of the cargo structure has reduced annual logistics costs
by approximately ¥200 million. Floor efficiency also improved floor space for
EC from approximately 14,876m2 to 19,835m2. We introduced robots to copewith future labor shortages.

Securing Digital Human Resources
Adastria aims to secure70-90 domestic digitaltransformation personnel
and 50-100 overseas
engineers in the fiscal
year ending February
2026 to advance EC
expansion and businessdigitalization.

ADASTRIA INTEGRATED REPORT 2023

G r o w t h S t rat eg y I I : D ig it al C u s t ome r Inte ra c tions a nd Se rvic e s

Targets
Domestic
DigitalTransformation
Human Resources(Units: Employees)

70~90

Overseas
Engineers

50~100

52
47
42
33

02/2020 02/2021 02/2022 02/2023

02/202630

Introduction

About Us

Growth Strategy

ESG

Data

Di r e c t o r M e s s ag e

DIRECTOR MESSAGE
Characteristics of Each Area
to Create Beloved Brands
Managing Director,
Sales and Overseas Business In-Charge

ADASTRIA INTEGRATED REPORT 2023

Resonating With thein a proactive stance that has led to growth. Advancements
in remote work have also been a tailwind, and the close
cooperation between the Japanese brand divisions and local

Growth Strategy

Yoshiaki Kitamura

subsidiaries has accelerated our store of expertise inoverseas markets. The U.S. market continues to do well,especially in the wholesale business. Although businesses in
the U.S. market grow chiefly through trade shows, we feelOverseas Net Profit for a Second
Consecutive Year

our brands are gaining recognition for design sense and
COVID-19. As a result, we consider it a great achievement toproduct quality. In April 2023, Adastria opened our first nikopost profits in our overseas business for a secondand ... shop in Thailand. ASEAN is a market with a growing

The macroeconomic environment in Japan recovered

consecutive year. Our local staff in Taiwan and Hong Kong

population, young consumers, and a growing demand forthroughout the fiscal year ended February 2023, and demand

are doing a great job, and we have systems in place tofashion. And price acceptance is high enough for Japanese

for clothing to wear outside the home breathed fresh life into

generate ongoing profits through autonomous operations. In

apparel. We will continue to identify the needs of customers

the apparel industry as a whole. To that point, however, we

Taiwan, in particular, fashion tastes are close to those of

to ensure our brands will be loved in every region where we

continued to invest in our overseas operations, despite theJapan. A multi-brand strategy has proven effective there, anddo business.

fact that many companies had suspended projects due toour local subsidiary continues to propose new brand stores

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Data

Di r e c t o r M e s s ag e

ADASTRIA INTEGRATED REPORT 2023

DIRECTOR MESSAGE
Continuing to Refine Operations in
the Chinese Market
Now operating 13 shops, our market areas in mainland China
have expanded to Shanghai, Chengdu, and Chongqing. In
Shanghai, we aim to create a flagship store dominant model
under which we establish brands at flagships and build
revenues through satellite shops. We plan to continue to open
drive traffic to our e-commerce site by building brandrecognition through flagship shops, which attract numerous
customers niko and ..., which we are expanding currently inmainland China, is a lifestyle brand. We believe this brand willappeal to local customers while strengthening cooperationsuch as Taiwan and Hong Kong, we have built our own

also attract consumer interest in the Chinese market. While thewith external partners through collaborative products with

online shops and point systems, seeing rapid online sales

product categories are broad and time-consuming, they fit ourJapanese IP (anime characters, etc.) popular in mainland China.

growth, particularly in Taiwan. While certain areas ofstrategy of increasing brand awareness in a given area as webusiness in mainland China have encountered delays

was difficult in Shanghai due to the lockdowns and theInvesting in Logistics and Systems to
Support Growthcontinuation of the Zero-COVID policy. At the same time, ourIn mainland China, we are not only opening new shops, but

overseas business, and we will continue to invest in futuresatellite shops and shops in Chengdu and Chongqing opened

also investing in logistics and IT systems. We use the SES

growth. Adastria has spent significant time engaging

during the pandemic, so we have yet to determine the full

Logistics system to manufacture and stockpile products inseriously with overseas business. And through our

extent of their potential. This year will be a period to assess

mainland China for direct shipping to various countries. This

experiences, we have earned proficiencies leading to

profitability under a normalized economy, as well as optimize

system offers greater accuracy in inventory management andprofitability in certain markets. Our Taiwanese subsidiary will

shop openings and operations. Mainland China is enormous,

reduces missed sales. The online mall market is verycelebrate its 20th anniversary this year. In addition, wewith Chengdu being a four-hour flight from Shanghai. Each

important in mainland China. Here, we are working tobelieve there is still room to leverage our expertise for growthcity has a different climate and preferences, so we must adapt

increase sales channels through a system to manage

in new countries. I encourage you to look forward toto each region. We intend to create shops and products thatinventory centrally for posting on online malls. In other areas,

accelerated growth in Adastria’s overseas businesses.

can create a brand worldview in a large-format shop. Last year

Growth Strategy

more shops in other leading cities in the future. We plan tocompared to our medium-term management plan due to
COVID-19, we see our current plan as a waypoint for the32

Introduction

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Growth Strategy

ESG

Data

G r o w t h S t rat eg y I I I : Glo cal

G R O W T H S T R AT E G YContinuing to Take on
Challenges and Adapt to
the Post-COVID-19 Worldpursuing lower prices with suppliers and contractors in order

Velvet, LLC CEO

to reduce expenses. We have invested in an employee well-

Henry Hirschowitz

being program that includes free mental health support,
flexible work arrangements when needed, and paid time off.
We face a unique challenge now that we are foreign owned.
We have not been eligible for as much State and Federal
financial assistance as before. This means we need a moreaggressive growth strategy.

ADASTRIA INTEGRATED REPORT 2023

the dependence on any one supplier or region. We are

increase in online shopping with the end of the pandemics,
brands need to be adjusted to adapt to the new normal. Supply
Chain disruptions: With shortages and delays, we need to find
new ways to manage supply chains and control inventory.
Sustainability pressures: Consumers are becoming more

Growth Strategy

Post-pandemic consumer behavior, to maintain theinterested in the environment, so we will need better sustainable
practices. Labor shortages: We will need to focus more on
We have a strong set of principles, such as honesty, integrity,

sustainable materials, we minimize waste and maximize

retaining employees, especially in key departments such as

loyalty, teamwork, and a commitment to excellence. These

workers conditions in the production process. Our brand has

sample sewing, pattern makers, e-commerce, and design.

are our family values. We strive to create a sense of

stayed ahead of the curve attracting customers looking forcommunity and belonging amongst our employees. We havenew and exciting things.

Economic uncertainty: Increased interest rates will create
a need for more conservative approach to seasonal orders.

achieved high quality and our wholesale return rate has

We have adopted some strategies to recover from the

We believe in the products and the niche created across threeconsistently been below 1.5% for more than 20 years, which

pandemic, such as accelerating digital transformation,

divisions–wholesale, retail, and online. Despite challenges, we

is way below industry standard in the USA. In addition, we

embracing remote work and focusing on customer

have strong teamwork and partner relationships which will

have a good reputation for sustainability. As we use a lot ofexperience. We have diversified our supply chains to reduce

help us overcome them.

33

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About Us

Growth Strategy

ESG

Data

G r o w t h S t rat eg y I I I : Glo calOverseas, we aim to achieve growth through strategies tailored to the characteristics of each area.

Initiatives for the Current Fiscal Year

MainlandChina

In order to align ourselves with the characteristics of this large and highly competitive market, we
aim to establish a Flagship Dominant Strategy model, in which we first invest in a large flagshipstore to establish the brand, and then work with neighboring stores to generate profits in thearea. We aim to both expand e-commerce sales and operating areas going forward.

TaiwanTaiwan, like Japan, is a market suited to a multi-brand strategy, and we plan to accelerate store
openings by selecting brands that have not yet opened stores in Taiwan and that have yieldedfavorable responses in market surveys. We have also been upgrading our systems for growthand have begun utilizing STAFF BOARD.

Hong Kong

In Hong Kong, we are increasing profitability by effectively managing local staff operations andoptimizing the current store network. In addition, we newly launched our own e-commerce site,
Dot ST, and started e-commerce development. In cooperation with a logistics subsidiaryestablished in mainland China, we are building an inventory-free e-commerce system thatdelivers goods from mainland China without keeping inventory in Hong Kong.

U.S.

American company Velvet, LLC., acquired by Adastria, has been performing well. Velvet’s
engagement has boosted our product appeal, and our sharing of e-commerce expertise andenhancing of web marketing has increased the e-commerce rate.

• Sustain growth in wholesale businessand acquire large customers

In Southeast Asia, we are preparing to open stores first in Thailand and then in the Philippines.
Additionally, since there is not yet an oligopoly in the clothing e-commerce market, we are
hurrying to establish e-commerce with the intention of establishing a mall presence.

• Open first niko and ... store in April in
ThailandSoutheast Asia

• Continue entering first-tier and nearly
first-tier cities• Expand e-commerce sales channels• Plan to open 22 new stores• Continue to scrap and build

ADASTRIA INTEGRATED REPORT 2023

Strategy

Growth Strategy

Greater China

Region• Expand number of in-house e-commerce
brands• Expand direct management business• Prepare to open stores in the Philippines

34

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ESG

Data

G r o w t h S t rat eg y I V: N ew Bu s in esse s

Residential IP Licensing Business

Rebranding GMS Clothing Departments

Within the housing business, we have launched licensing sales of new detached houses

In collaboration with Izumi Co., Ltd., an operator of general merchandise stores (GMS),

produced by our brand niko and ..., in cooperation with Lib Service Corporation.

we have taken turnkey responsibility for space production, brand development, andproduct wholesaling, creating the new SHUCA brand for clothing spaces in GMS stores.

Growth Strategy

At Adastria, we are leveraging the strengths of our value chain, including planning, production, and store developmentin our BtoB business, which we are proactively expanding. We have established a new Corporate Sales Department
under the direct supervision of directors to create new businesses in collaboration with each department, using this asa new career path for highly experienced employees.

ADASTRIA INTEGRATED REPORT 2023

Expanding BtoB

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Data

G r o w t h S t rat eg y I V: N ew Bu s in esse s

G R O W T H S T R AT E G Y
fashionability of Adastria’s fashion business. The divisionconsists of two organizations: Creator’s Room and Adastria
Lifestyle Creation (ALC). The Creator’s Room is staffed bydesigners and brand directors who plan, design, andsupervise according to the requirements of each brand.
More than 100 designers, including employees and contract
workers, are on staff at any given time. Adastria’s strength isthat the large number of brands allows us to place designers

Maximizing the Power of Fashion
to Create New Businesses
Executive Officer,
Executive General Manager, R&D Division

Chiaki Kobayashi

within the company optimally. Different designers have

ADASTRIA INTEGRATED REPORT 2023

The R&D Division, which I oversee, is responsible for thewith a brand. Or, if a designer is reassigned after a few years,
they can stay inside the company and continue to develop
their career. In the past, Adastria did not have in-house
designers. When we established our own production system,
we decided to bring design and direction in-house. This has

solved through the power of fashion. Adastria’s strengths inand communicating to each brand. We create proposals on

been our organizational structure for about eight years.

this business are our expertise in making products andhow to make the best use of original materials developed by

ALC provides design production and direction related toservices attractive to customers and our ability to make andproduction departments in the design of excellent apparel.

household and novelty goods for outside companies upon

promote any product—from rubber erasers to suits. We

We are also responsible for IP management to encourage therequest. ALC also coordinates brand collaborations withreceive numerous inquiries, including requests for corporate

use of textiles throughout the company. The R&D Division

outside companies, serving as a bridge to departments

uniforms and novelty items. A recent example is niko and ...

also plays a role in giving advice on brand direction from a

across our company. In this way, we remain true to the brand

EDIT HOUSE, a detached house produced by niko and... .

brand portfolio-wide perspective. To grow Adastria’s brandimage while creating new and interesting ways to connect

The project was covered widely in the media. We take on theportfolio in the future, we must expand the scale of eachbrands and external partners. The concept behind ALC is tochallenge of creating new businesses by leveraging brand IP

brand, striving to produce several ¥50 billion brands. The

provide Adastria design and manufacturing capabilities towith Adastria’s manufacturing capabilities, capable ofsignificance of the R&D Division is that we offer a variety ofoutside companies, working together to solve businessproducing everything from furniture to sundries.

options in terms of human resources, partner companies, andissues. At first glance, fashion and business may seem to

The R&D Division also plays the role of laboratory,

have little in common. But we believe many issues can becollecting fashion trend information from around the world

Growth Strategy

different sensibilities, which may not always be compatible

business models.

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ESG

Data

G r o w t h S t rat eg y I V: N ew Bu s in esse s

G R O W T H S T R AT E G Y

General Manager, Corporate Sales Department

Hisashi Matsui

inside Izumi, a general merchandiser (GMS). Many GMS
companies struggle to attract grocery shoppers to the appareldepartments, usually located on the upper floors. This trend isparticularly true for customers in their 30s and 40s who are
relatively young and tend to not purchase clothing at thesefacilities. Due to the large number of SKUs and the division oflabor between merchandising and sales, GMS find it
challenging to build expertise in apparel product development and sales methods. We believe that Adastria, with ourbrand management expertise and a value chain cultivated

ADASTRIA INTEGRATED REPORT 2023

Pioneering the Possibilities of
BtoB by Leveraging the Strengthsof Experienced Employees

GMS issues.
Adastria has always had the strong desire to elevate thefashion market as a whole, rather than simply seeking profits
for ourselves. Our current medium-term management plan
includes the idea of being a company that co-creates goodI began my career working in the old Fukudaya stores, so I

talents of veteran staff who have extensive experience incompanies. Our BtoB initiative embodies this idea as wehave a great deal of experience in apparel. I have served asapparel. As part of our Next Career Project, we create

strive to make customers happy in markets and regions westore manager, area manager, and part of the launch team ofsystems that allow staff to continue to contribute their abilities

have not addressed historically. Many in the Corporate Sales

the LOWRY’S FARM brand. Eventually, I was put in charge ofat Adastria throughout their lives.

Department have extensive experience in apparel sales andthe branch system, which provides field support in each area,

We launch these businesses from scratch, so our firstmerchandising, but are experiencing BtoB for the first time.

and now I develop BtoB businesses in the Corporate Sales

order of business is to approach companies and build

Once they experience how our expertise is useful to anddepartment. The Corporate Sales Department has two

relationships. Then, we look for areas in which Adastria canappreciated by our clients, these professionals gain an

missions. One is to create BtoB business models, a new typeoffer our strengths, such as employee uniforms or interior

incredible sense of reward and motivation for the nextof business under our medium-term management plan. We

design production. The companies we approached so far

challenge. Our clients have many uncovered needs for value-

offer Adastria’s capabilities to external parties, whichhave shown interest in our project, and we believe Adastria

added fashion solutions. We desire to continue working with abecomes a new source of revenue. The second mission is towill be able to create something of great excitement. One ofvariety of companies, expanding the circle of Play fashion!

create new career advancement stages by leveraging thethe projects brought to us was a multi-brand display area

*SPA: Specialty store retailer of private label apparelGrowth Strategy

through multiple brands and SPA*, is the best partner to solve

37Adastria ESG

Growth Strategy

ESG

Data

ADASTRIA INTEGRATED REPORT 2023

ESG

About UsE S GIntroduction

38

Introduction

E S G D ialo g u e

About Us

Growth Strategy

ESG

Data

Pursuing Sustainability Management
Through Exciting Initiatives

HIROMI HORIE
TAIKI FUKUDA
Director Taiki Fukuda

ability to make course corrections. I am always amazed at the

ADASTRIA INTEGRATED REPORT 2023

Outside Director Hiromi Horie

decisions, and corrects course as they learn.

E S G

speed with which the company tries new ideas, makes

What specific actions has the company taken to
What is your assessment of the activities carried out

Adastria, as was assessing the current situation, setting

achieve sustainability goals?

in fiscal 2022?

specific goals, and establishing clear steps toward dealing

Fukuda: In March 2023, we established the Sustainability

Fukuda: Fiscal year ended February 2022 was a year ofwith the materialities. I also think announcing their

Committee to strengthen governance and expand the group-

significant progress in our sustainability efforts. On thecommitment to these goals to society reflected well on thewide sustainability implementation structure. Every twoenvironmental front, in particular, we calculated CO 2

company. When the larger companies show a positive

weeks, top management from all related divisions, including

emissions throughout the entire supply chain included Scope

attitude toward sustainability, the fashion industry andsales, production, logistics, and administration, report on

3 in our domestic fashion business, supporting our goal ofsociety as a whole move in a positive direction.

progress toward sustainability targets and discuss solutions.

carbon neutrality by 2050. We also believe our company took

Fukuda: Yes, that’s right. The fashion industry is facing anThis committee, which serves as an advisory body to thea major step forward in addressing environmental issues by

increasing number of environmental challenges. As a leading

Board of Directors, has put us in a position to pursue ESG

endorsing the TCFD and disclosing information based oncompany, we continue to engage in sustainable management,

policies with vigor.

TCFD recommendations.

disclosing what we have accomplished and what we have not

Horie: Establishing a committee that supports management

Horie: Society demands sustainability, and sustainability is a

yet achieved.

in engaging in business with an awareness of ESG policies

topic increasingly covered by the media. As long as Adastria

Horie: Yes, Adastria is honest to what they have not achieved.

should be a plus for ESG management at Adastria.

continues to do business, the company will need to face thisThe company admits failures in management meetings and is

Fukuda: 2023 will be a phase of implementing steps toward

issue. Defining materialities was an enormous step forquick to make decisions. One of Adastria’s strengths is its

our goal. For example, our goal to switch at least half of all

39

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ESG

Data

Horie: As expressed in the corporate philosophy, Adastria has

Fukuda: Perhaps our strength is our ability to practicevalued people even before the term human capital became

sustainability that involves all of our stakeholders.

commonplace. No matter how admirable the plans and goals

Horie: Our Rebag Project encourages customers to enjoyof a company may be, it is the people who are responsible forusing their own bags as a fashion statement and work

the success of those plans and goals. From my experience, I

together to reduce the number of shopping bags in use. Thisbelieve everything else is meaningless unless we care for andis one example of an activity that relies on the involvement ofmotivate the people who do the actual work.

customers. Any disagreements between a company’s public

Fukuda: Ms. Horie also boosts the morale of those instatements and efforts on the ground are called out

attendance at board meetings. She adds opinions from a

immediately in this era of social media. Another Adastria

fresh perspective, which makes the discussion livelier andstrength is that the company takes concrete action to provecreates a naturally positive atmosphere.

that it means what it says.

Horie: I feel that the freedom to speak up and the acceptance

Fukuda: By working on sustainability in exciting ways, we

products to environmentally and socially conscious raw

of diverse opinions is what makes Adastria unique. A culture

make our customers happy and raise awareness ofmaterials and processing by 2030 is an issue directly related tothat respects one’s presence and opinions provides

sustainability in society. This is the type of cycle we aspire tobusiness value. The key to achieving this goal will be

motivation and encourages organizational diversity, which

create.

sustainable materials, which the Production Division isleads to growth.

Horie: Yes, that’s right. The mission Play fashion! is exciting

developing in-house, and the use of these materials acrossFukuda: I agree that the environment encourages andin all aspects. I hope that the company keeps the Playproducts of multiple brands. These materials will help us offer

accepts diverse opinions. One issue, however, is that our

fashion! spirit as it pursues sustainability management.

high-value-added products at affordable prices, enhancing

sustainability materiality of women in management positions

Fukuda: The Play fashion! spirit. That’s good! The Latin

profitability and contributing to CO2 reductions at the samehas remained unchanged. We continue to dialogue with top

phrase, per aspera adastra (overcome difficulties and attaintime. As of February 2023, about 15% of our products havemanagement in each department to create an environment inglory), is the origin of our company name. And we will

been awarded the Sustainable Mark, so we are still about 35%

which women play an even more active role.

continue to produce results by bringing Adastria’s

short of the target. The Sustainability Committee constantly
tracks and discusses the numbers to close this gap.

ADASTRIA INTEGRATED REPORT 2023

About UsE S GIntroduction

youthfulness, ability to break through, and willingness to

What is unique to Adastria’s sustainability

make course corrections to bear.

management?
What are your thoughts on human capital

Fukuda: We want to continue pursuing sustainability

management?

management through exciting initiatives. We value

Fukuda: The Adastria corporate philosophy is Be a Person

sensibilities that reflect cool, fun, interesting, and uplifting. At

Needed, Be a Company Needed. We strive to create spaces

the same time, we want to create an environment of carbon

where all stakeholders can be fulfilled and happy, served byneutrality, sustainable production, and employees being

our approximately 5,000 employees who work energeticallythemelves. That’s the path I hope to see us walk.

along their own career paths. In 2022, we were selected as a

Horie: Many may feel that environmental issues, SDGs, andNadeshiko Brand FY2021 for the first time, and last year, we

ESG policies are important, but not immediately relevant towere recognized as a CertifiedHealth and Productivity

themselves. Implementing sustainability management at

Management Organization. We are seeing the results of our

Adastria consistently should lead to a deeper understanding

efforts over the past few years.

of sustainability in society as a whole.

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ESG

Data

A p pro ach t o Su s t ain ab ilit y

Sus t aina bilit y P olic y

Fashion has the power to make every day a positive one.
We strive to ensure that fashion will excite us all for years to come.
Let’s have fun and begin where we can, for the sake of the environment,
humankind, and our communities.
Having fun is the best way to keep moving forward.

Endorsement of the United Nations Global
Compact (UNGC)

Sustainability Committee
The Adastria Group Sustainability Policy calls for Taking theterm goals, as well as manages progress on identified

We endorse the United Nations Global Compact

Excitement of Fashion Into the Future. In accordance withmaterialities. Additionally, the committee reports to and(UNGC), the world’s largest sustainability initiative, inthis policy, we consider sustainability initiatives to be anadvises the Board of Directors and the Executive

which the United Nations and private companies andimportant management issue. Through our businessCommittee, strengthening the group implementation

organizations work together to build a healthy global

activities, we will take on the challenge of solving global

systems and enhancing corporate value.

society. We will act in compliance with UNGC’s 10

issues and help bring about a sustainable society andprinciples in the four areas of human rights, labor,

economic growth. As part of these efforts, the Adastria

environment, and anti-corruption, working to resolveGroup established a new Sustainability Committee onsocial issues through our business activities.

E S G

ADASTRIA INTEGRATED REPORT 2023

Taking the Excitement ofFashion Into the Future

March 1, 2023, aiming to further strengthen our pursuit ofstrategies in non-financial areas within the Board of
Directors. The committee will faithfully respond to the trustand expectations of stakeholders by focusing on identifying
materialities related to the medium-term management planand fundamental business policies, as well as on
appropriately disclosing information. The Sustainability
Committee sets sustainability policies, medium- to long-41

Introduction

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Growth Strategy

ESG

Data

E S G M at erialit ies

Mapping for Co-Creating Good Community

Priority Materialities
Actions against climatechange/global warming

HIGH

Respecting
human rights

Ethical consumption
Food safety
and security

Water risk

Interest/Importance to Stakeholders

Stable food supply
and demand

Education andhuman resource development

Fashion loss
Circular economy

Disposal andrecycling

Internal and external engagement

Conservation of water resources

Healthy lifespans

Cultivating andprocessing sustainable
raw materials

ESG evaluation

Marine plastic waste

Information security

CSR procurement

Animal welfare
Corporate governance

Creating an ethicalworking environment
Environment
HumankindCommunities
Food and beverage
Governance

LOW

Diversity andwork-style reform

World and Japan demographics

E S GMarketingresponsibility

ADASTRIA INTEGRATED REPORT 2023

Biodiversity

Food loss
Poverty and disparity
Anti-corruption

Overnutrition

Impact on the Adastria Group

HIGH

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ESG

Data

M a t e rialit ies an d T arg et sSociety faces many challenges, such as climate change and demographic change, that we must face in order to continue our business.
We have analyzed these issues in terms of both their importance to society and their relevance to our business, and establishedmaterialities (important issues). Based on these materialities, we have revised the Group policies and targets for key themes as follows.

Materialities and Initiative Progress

Encourage
People to Shine

Grow Together
with Communities

Create anenvironment
where customers,
employees, andothers lookforward to eachnew day

Create new value
in collaboration
with communities

Group Policy

TargetEngage in manufacturingthat leads to the future

Switch to sustainable raw materials
Switch to sustainable raw
and processing for at least half ofmaterials and processing
all products by 2030

Balance environmental
considerations with sales
activities

Reduce and absorb CO2
emissions

Achieve carbon neutrality by 2050

Create a world without
fashion loss

Zero clothing incineration

Eliminate incineration of clothing
inventory

A society in which people
enjoy fashion in their own
way

Suggest fashion for theenjoyment of eachindividual—

Create diverse andrewarding work
environments

Ensure 30% of senior management
positions are filled by women by2025, and raise the ratio of womenin management positions to 45%
or moreFoster employee wellbeing

Become a White 500 CertifiedHealth & Productivity Management
Outstanding Company

Revitalize thecommunities surrounding
our stores

Connect with
communities throughfashion—Foster sustainable
development inproduction areas

Fair and ethicalprocurement

Advance partnership certifications
for production plants by 2023

Be an organization that is
healthy mentally andphysically, encouraging
employees in theirindividuality and ability

Progress
Level

Major Progress/Achievements★★

• Promoted our original sustainability mark, reaching
111% use versus the previous year
• Encouraged the development of proprietary
sustainable materials in in-house production
departments (seven types as of February 28, 2023)★★★

• Identified Scope 1, 2, and 3 emissions on aconsolidated Group basis• Disclosed framework in line with TCFD
recommendations, financial impact assessment★★★

• Maintaining zero incineration of leftover clothing
inventory• Permanent collection activities at stores expanded toapproximately 170 stores, with 32 tons collected★★

• Ratio of female senior managers: 17.7%• Ratio of female managers: 33.8%• Female leadership candidates participated inmanagement meetings★★★

• Issued the Health Management Declaration forinternal and external stakeholders• Become a Certified Health & Productivity
Management Outstanding Company★★

• 30 partnership certified factories

ADASTRIA INTEGRATED REPORT 2023

Protect
the Environment

Reduce theenvironmental
impact of ourbusiness andmake the world of
fashionsustainable

VisionE S GMaterialities

Materialities (Important Issues) Formulation Process

43Introduction

About Us

Growth Strategy

ESG

Data

I n i t i a t iv es f o r M at erialit ies

Engage in Manufacturing That Leads to the Future

Material Sustainable Marks

Sustainable Marks Granted*Target: All products by domestic Group companies

We have established our own sustainability definition and criteria for key
materials we handle. For frequently used materials, products that meetthese criteria are sold with an original mark on the product tag. As of
fiscal year ended February 2022, we have reached 15.1% of products
bearing this mark overall. We will continue to actively introduce materials
and processes with less environmental impact with the aim of switchingto environmentally and socially conscious raw materials and processing
for more than half of all products by 2030.

(Marks)11,550,578
10,339,014
Cellulose
Polyester

CottonA MarkOther Adastria-developed materials

1,047,965

Nylon
4,961

3,101,107

Somecottons

1,503,515
1,020,636

Cellulose
1,109,885

Polyester

5,191,545

Cotton1,062,983

A Mark5,439,881

2,374,982

FYE 02/2021

VOICE

Wool
32,132

ADASTRIA INTEGRATED REPORT 2023

Introduction of Materials With Low Environmental Impact

E S GProtect
the Environment

To engage in manufacturing that leads to the future is an essential concept for us when devising products. We are committed to pursuingsustainability in our manufacturing, paying particular attention to the materials and processing methods of our products. Our Group Sourcing
Policy and Guidelines state the necessity of reducing environmental impact and preventing pollution. We are committed to balancing sustainablebusiness growth and reduction of environmental impact over the medium to long term by taking a bird’s eye view of the entire supply chain.

FYE 02/2022

Adastria’s Unique Strengths and Future in Materials Development

The launch of the Materials Development Department inApril 2021 created two benefits. The first benefit is that
it lubricates processes within the company, shortening
the distance between production, marketing, branding,and sales departments and strengthening theircooperation. This has enabled us to directly absorb
market needs and develop products in a timely andspeedy manner. This second benefit comes from its
qualities as a group of specialized professionals. Ourcolleagues in the Material Development Department
have a wealth of specialized knowledge. This collectionof experts in their respective fields has allowed us tounderstand what needs to be changed and what needs
to be done to release products that embody the fashionrequired today while maintaining the individuality ofeach brand, and to implement improvements. We
believe that cost and sustainability will be essential
elements in the selection of materials for our businessin the future. Given this belief, we will build a robust
supply chain by decentralizing and diversifying raw
material production sites and production plants so that
we can provide customers with reasonably priced,
socially and environmentally friendly products in astable manner while using high-quality materials, while
comprehensively taking factors such as quality,
quantity, and price into consideration.

Naoki Nakamura,

General Manager, Materials Development
Department, Production Division

44

Introduction

About Us

Growth Strategy

ESG

Data

I n i t i a t iv es f o r M at erialit ies

Balance Environmental Considerations With Sales Activities

We support the goals of the Paris Agreement andaim to achieve carbon neutrality by 2050. Global
warming is not only a global issue, but also oneof the most important risks to our business, giventhat it threatens soaring raw material prices andsupply chain disruptions caused by large-scale
natural disasters. In addition to taking actions

CO2 Emissions by Scope (t-CO2)
such as introducing LED lighting and installing
solar power generation systems, we will
incorporate greenhouse gas emission reductionplans and measures into our management plans
based on our understanding of emissions
throughout our own and other supply chains.

CO2 emissions in ourown business(Scope 1 and Scope 2)(t-CO 2)

Adastria Scope 1
and Scope 2

FYE 02/2021

Category

Carbon Pricing System

Timeline

Medium Term

Financial
ImpactIncreased indirect expenses

Possibility

HighImpact on
Business

The rising cost of fossil fuel procurement may cause increased expenses in production, logistics, store operations, etc.
If a carbon tax were to be imposed on our current store operation Scope 1 and 2 emissions, the total financial impact
of store emissions would be 27.19t-CO 2 x $120/t=$3,263,040, or a potential cost increase impact of between ¥300
million and ¥400 million.
¥300 million to ¥400 million (annual)

4°C

Adastria Scope 1
and Scope 2

42,41534,791

Transition Risks

2°C

ADASTRIA INTEGRATED REPORT 2023

Achieve Carbon Neutrality by 2050

CO2 emissions outsideof our own business(Scope 3)

FYE 02/2022

E S G

Protect
the Environment

We believe that understanding the risks and opportunities that could affect our business activities, such as the occurrence of extreme weather events
attributed to climate change or the disruption of supply chains due to natural disasters, and implementing countermeasures accordingly will enhance
the resilience of our management base. At the same time, we will promote sustainable management that balances business growth and environmental
considerations by recognizing the impact of climate change on our business and appropriately disclosing information to our stakeholders.

(t-CO 2)

Adastria
Scope 3

Adastria
Scope 3538,705

481,811

Assumes no carbon tax will be introduced* Calculation assumptions: $120/ t-CO 2 (Estimated from the IEA World Energy Outlook2021) as of 2030

FYE 02/2021

Physical Risks
Category

Flooding

Timeline

Short Term

Financial
ImpactDecreased sales due to store closures

Possibility

HighImpact on
Business

Unavoidable store closures due to flooding and other inundation risks caused by climate change may reduce sales.
Three stores in Fukuyama, Tottori, and Hiratsuka experienced shortened operating hours due to heavy rainfall in fiscal
year ending February 2021. According to flood hazard maps for the areas, flooding is expected to occur around thesestores at between 0.5 and 3 meters. In the case that the areas flood, they will be forced to close for up to a total of
67.6 days, which could have an impact of ¥27 million on sales. The flooding frequency in Japan is expected toquadruple if climate change progresses, which could cause an impact of ¥108 million.

2°C¥59 million

4°C¥108 million*Calculation assumptions: We used data from actual stores flooded in FY2021 to estimate values based on hazard maps and the
Flood Con-trol Economic Survey Manual, published by the Ministry of Land, Infrastructure, Transport and Tourism.

Percentage of Stores inJapan With LED Lighting
The use of LED lighting fixtures
has reduced CO2 emissions fromlighting fixtures by approximately
57% per year (compared toconventional non-LED lighting
fixtures).

FYE 02/2022

Stores with mix of
LED & non-LED
lighting

8%Stores without
LED lighting

2%Stores with
LED lighting

90%

45

Introduction

About Us

Growth Strategy

ESG

Data

I n i t i a t iv es f o r M at erialit ies
Balance Environmental Considerations and Sales Activities

We are working to disclose information in accordance with theframework of the Task Force on Climate-related Financial
Disclosures (TCFD).
Visit our website for more details

Governance
The officer in charge of sustainability regularly reports to
the Board of Directors on the impact of climate change
and the status of our efforts. The Board of Directors,
chaired by the representative director, deliberates andresolves important matters as the highest management
decision-making body of the corporate group. We
established a new Sustainability Committee in March
2023, aiming to further strengthen our pursuit ofstrategies in non-financial areas within the Board of
Directors. The Sustainability Committee setssustainability policy and medium- to long-term goals, aswell as manages progress on identified materialities.
Additionally, the committee regularly reports to andadvises the Board of Directors and the Executive
Committee, strengthening the group implementation
systems and enhancing corporate value.

Strategy
Sustainable business growth requires medium- to longterm strategies aimed at minimizing the financial impact
on future business through preventing, mitigating,appropriately managing, and responding to businessrisks related to climate change. To this end, we haveanalyzed the risks and opportunities for our merchandise

Risk Management
In order to understand and assess the impact ofclimate change on our business, we regularly conduct
scenario analyses and identify climate change risks
and opportunities through an internal task force led by
the department in charge of sustainability. Afterreporting the identified significant risks andopportunities to the director in charge of crisis
management, the task force and the relevant
department work together to implement specific risk
countermeasures.

sales business, which accounts for approximately 90%
of our sales. The analysis extended through the year
2050 and incorporated both the 2°C scenario and the
4°C scenario. Beginning in the fiscal year ended February
2023, we expand target businesses and domains, as wellas raise the level of our risk and opportunity analysis.

Indicators and Targets
The Adastria Group aims to achieve carbon neutrality
by the year 2050, and we have established CO 2
emissions in our supply chain as an indicator of ourefforts, and are managing progress toward carbon
neutrality.

To address the Japaneselogistics industry’s 2024
problem, we havedeclared our commitment
to the White Logistics
movement in Japan,
introduced a truck
dispatch management
system, improved theHiroshi Keya, Senior Managing Executive Officer,
YAMATO TRANSPORT CO., LTD.
efficiency of transportationand delivery, and reduced the number of containers used. Ourperception is that the world is now entering a phase in which society
as a whole, and not just our company, is taking on this kind of initiative.
By signing a logistics partnership agreement with YAMATO
TRANSPORT CO., LTD., we expect to further improve the efficiency oftransportation and delivery, encouraging joint delivery and logistics
involving the entire fashion industry. At the same time, we would like tobuild a sustainable supply chain platform that not only visualizes
greenhouse gas emissions by improving delivery efficiency, but also
reduces greenhouse gas emissions.

Product
Procurement
Manufacturing
planningof fabrics,
andDesignmaterials, andproduction
prototyping secondary materials

Marine and airtransportation

Domestic Store/e-commerce
distributionomni-channel
centers
distribution

ADASTRIA INTEGRATED REPORT 2023

Signed a Logistics Partnership Agreement
With YAMATO TRANSPORT CO., LTD. for a
Sustainable Supply Chain

E S G

On the Financial Impact of Climate Change

Customers

Visualizing and linking information on
inventories, transportation, orders, and sales

Production Planning

Transportation Planning

Delivery Planning46

Introduction

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Growth Strategy

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Data

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Balance Environmental Considerations and Sales Activities

Developing Laundry Nets to Prevent Marine Plastic Spillage

The REBAG PROJECT is designed to create a shoppingstyle where customer use of their own shopping bags is
a foregone conclusion. Since its launch in 2014, theinitiative has reduced the number of shopping bags
used by about 14 million over nine years. We have also
switched to environmentally friendly components usedin product delivery, including tags, shoe boxes, andshopping bags for the products we sell. Part of ourefforts here include operating BAYFLOW stores in theinterest of lower environmental impact by introducing
hangers made of FSC materials* and using sample
goods and scrap wood as fixtures.

Number of Shopping Bags Reduced* FSC materials: Wood from forests meeting forest management standards andcertified by the Forest Stewardship Council (FSC)(Bags)

5,004,791

2023.2

4,326,403

2022.22,771,203

2020.2636,9782019.2

377,1732018.2297,8792017.2245,8852016.2

157,792

Hanger made of
FSC materials(BAYFLOW)*Spillage mitigation effects versus instances where no laundry net is used

E S G

2021.2

Reduced5 millionbags!

In recent years, textile waste from clothing and other items has become
one of the causes of marine pollution. As an apparel company, we
recognize the importance of addressing this issue. One way we areworking to resolve this through our businesses is the FIBER HOLD BAG,a laundry net that can reduce textile waste
spillage by 80%*. FIBER HOLD BAG is madeof a fabric with a finer mesh (0.05 mm) thannormal nets, allowing it to trap minuscule sizesof textile waste and keep it from spilling out.
This is a unique product to Adastria that not
only helps prevent clothing deterioration fromfriction but also is more environmentallyfriendly during laundry.

ADASTRIA INTEGRATED REPORT 2023

Reducing Environmental Impact at Stores

Reducing Environmental Impact at the Head Office
Adastria has been engaged in the Office Optimization
Project since 2019. This project, launched before the
COVID-19 pandemic, aims to optimize office use andcreate an optimized, lean office environment. As partof our work-style reforms, we have been encouraging
remote work, and our head office has successfully
reduced CO2 emissions from electricity and air

TOPIC

conditioning use by 34.8% (equivalent to 221 t-CO2)
and copy paper use by 63.1% (equivalent to 22 t-CO2)
compared to FY2019. In addition, wooden cutlery andpaper plates are used in the A Café cafeteria in thehead office to raise employees’ awareness ofsustainability in their daily work.

CO2 emissions from electricity andair conditioning use at the Shibuya
Hikarie head office(t-CO 2)634
413

FYE 02/2019 FYE 02/2022

Down 34.8%
equivalent to
221 t-CO2

CO2 emissions from copy
paper use at the Shibuya
Hikarie head office(t-CO 2)

35
13

Down 63.1%
equivalent to
22 t-CO2FYE 02/2019 FYE 02/2022

Introducing Sustainable Seafood at zetton to Contribute to Biodiversity
Group company zetton inc. operates a restaurant business,handling sustainable seafood at some of its restaurants.
A portion of zetton’s menu items feature seafood certified ashaving been harvested using production methods andfisheries that take into consideration marine resources,
ecosystems, and the environment so that humans cancontinue to eat marine products well into the future.
With the cooperation of our suppliers, we obtained MSC*1/
ASC*2 CoC (chain of custody) certification for our Kasai Rinkai
Park restaurant in December 2019, with the aim of offering
dishes featuring marine products certified by the MSC and
ASC international standards.

*1 MSC: Marine Stewardship Council. An international body certifying thatmarine products are caught in sustainable fisheries through third-party
assessment*2 ASC: Aquaculture Stewardship Council. An international body certifying
compliance with responsible aquaculture product requirements

47

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Create a World Without Fashion Loss

Play Cycle! Collections

Based on the policy of right time, right price, rightquantity, we work to reduce fashion loss byimproving the balance of supply and demandthrough precise procurement planning andinventory management. In fiscal year ended
February 2022, 59.5% of products that werediscontinued were utilized in new businesses, and40.5% were reused. In addition, for products thatare difficult to sell in stores, we have started a
project called A GARAGE to resell them to
employees, contributing to enhanced employee
benefits. In this way, we will accelerate our circularbusiness by seeking new ways of utilizing goods
and staying mindful of how we can act without
being bound by existing business frameworks.

Since 2017, we have been engaged in our Play Cycle!
environmental activity to collect customers’ unwanted
clothing for reuse and recycling. Collected clothing is
recycled into raw materials for clothing such as polyesteror down by partners, or reused and sold via OFF STORE.
In 2022, we increased the number of stores withpermanent collection to approximately 170, reaching acumulative total collection of 93 tons. In addition, wehold eco-events in collaboration with our local partners
and lectures on
fashion loss atneighboring schools,
demonstrating how
we treasure ourrelationship with
communities throughSchool lecture conducted byPlay Cycle!
GLOBAL WORK Toin Branch

Thoroughly implement procurement planning and1 inventory management under the policy of right time, rightprice, right quantity

2

Improve ordering accuracy by utilizing order data frompre-orders on the official web store Dot ST
Resell end-of-sale products at affordable prices throughUtilization in
subsidiaries

59.5%

3 the ADOORLINK-operated OFF STORE

Operate FROMSTOCK, an upcycle brand that revives

4 inventory by dyeing it black

Resell products outside of Japan in collaboration with

5 partners

Reuse

40.5%

6 Utilize inventory as relief supplies in the event of a disaster

New Businesses Reutilizing Inventory
OFF STOREFROMSTOCKThis brand, under the concept ofsearch, find, and experience, aims
to build an apparel circular
economy together with customers.
In addition to offering end-of-saleitems at affordable prices, thestore also offers upcycling
workshops and garment alteration
services. This is a new kind ofcustomer-participatory businessso that everyone can enjoy circular
fashion.

This upcycling brand creates newvalue by taking leftover warehousestock clothing and dyeing it black.
The black dyeing process iscarried out at Daisen, a leading
Japanese dye works featuring
environmentally friendly facilities.
Products with scratches or stains
can be transformed into productswith originality by using blackdyeing techniques. Through thisupcycling business, we offer
customers new value and new
ways to enjoy fashion.

Upcycling workshop

ADASTRIA INTEGRATED REPORT 2023

Reducing Fashion Loss Through Circular Business

E S GProtect
the Environment

Fashion loss (clothing disposal) is one of the issues that the fashion industry needs to solve, as it leads to increased CO2 emissions due toexcessive consumption and incineration. We have made it our policy to eliminate clothing incineration, and we pursue a variety of projects toprevent burning and disposal. In addition to our goal of using more precise demand forecasting to make products in the correct amount toavoid overproduction, we also strive to find new ways to use and recycle products that are discontinued, thereby realizing a circular economy.

Play Cycle! Collections
Weight (tons)

BEFORE

Number of Items (10,000)

AFTER

Examples of re-dyeing inventory by FROMSTOCK

17,135
1,125
0.3

14,2005.7

4.7

02/2017

02/2018

02/2019

29,41827,0729.8

9.0

02/2020

02/202191,45597,41331.5

32.5

02/2022

02/202348

Introduction

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Growth Strategy

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Data

I n i t i a t iv es f o r M at erialit ies

A Society in Which People Enjoy Fashion in Their Own Way

Inclusive Fashion Projects

To deepen understanding of LGBTQ+ andother minorities, we will engage in social
awareness activities and expand recognitionof genderless fashion. To date, we haverevised our internal regulations, including
adding language to the definition of spouseto recognize same-sex partners in order toensure fair application of benefits under oursystem. As of 2022, we show an original
training video to employees at all stores inJapan and fly rainbow flags in stores as partof celebrating Adastria Pride Month, working
to promote understanding of minorities. In
recognition of these efforts, we wereawarded the highest rating of Gold in the
PRIDE Index* for the fourth consecutive year.
We will continue to lead the fashion industry
as an ally in the LGBTQ+ community.

Through the inclusive fashion project
Play fashion! for ALL which aims toinclude all people regardless of
disability, age, or gender, we areworking to help people’s individuality
to shine through fashion. In fiscal year
ended February 2022, under thetheme of greater enjoyment for all,regardless of disability, influencers
with disabilities and care workers
were invited to our events. In addition
to exchanging opinions on problems
and concerns with the aim of applying
them to future product development
and services, the participants
experienced the joys of fashion incollaboration with six brands. We willcontinue to create fashion that values
the perspectives and ideas of people
from various walks of life.

* The PRIDE Index is Japan’s first index to evaluate efforts to
support sexual minorities in the workplace, created by thevoluntary organization work with Pride in 2016.

TOPIC

Our diversity training video (Japanese only)

ADASTRIA INTEGRATED REPORT 2023

Being an LGBTQ+ AllyE S G

Encourage
People to Shine

We provide products and services based on a multi-brand, multi-category approach to meet the needs of our many customers. Not only
will we provide well-tailored customer service, but we will also respect differences in age, gender, body shape, and preferences, as wellas contribute to the realization of a society where everyone can enjoy their own unique lifestyle through fashion.

Hosting Open Tours to Support and Cultivate the Next Generation

With the aim of nurturing the next generation of leaders in the fashionindustry, we offer company programs that provide hands-on
experience in product planning and other aspects of the industry. In
fiscal year ended February 2022, 13 high school students living in the
Kanto region participated in this program. The program consists of
two sessions, designed to offer an experience similar to the actual
work we do. About 20 of our employees, including designers, patternmakers and merchandisers, served as advisors, helping theparticipants to produce clothing based on ideals they devised. Other
activities included lectures on our sustainable products, group workon the latest trends, and training through store visits. Participants
offered comments like, “I am one step closer to my dream,” and “Myvision for the future has become clearer.”

49

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I n i t i a t iv es f o r M at erialit ies

Diversifying the Organization Through Supporting Activities for Women

Building New Career Opportunities With Carikaku

As women account for approximately 75% of ourregular employee base, we see careeradvancement for women as a priority issue indiversity management. Since approximately 80% of
our apparel products are designed for women, we
believe that providing better products and services
that reflect women’s dynamic perspectives anddiverse opinions is directly linked to high financial
performance and customer satisfaction. We haveset specific goals and are continuously engaged ininitiatives under a cross-department project teamincluding a director in charge of this overall topic.
Our goals are to increase the ratio of female
managers to 45% or more and the ratio of womenin senior management positions (general manager
and above) to 30% by 2025. Since the fiscal year
ended February 2023, the company has begun
holding roundtable discussions between female
employees and management, newly engaging
women in management meetings previously
composed solely of men. These have led tocultivating female candidates for executive positions
and more active discussions, as well as a change inmanagement awareness.

In September 2022, we launched a career growth
support project called Carikaku, which creates
opportunities for employees working in our stores
to autonomously explore future career possibilities
and take on challenges. This project is the result offeedback from our store employees who want to be
more actively involved in certain interest areas whilestill working at their store, who want to develop
careers that make the most of their own
personalities and strengths, and who want to take afurther step forward in fields related to sales. Five
major roles have been established as new career
steps, including for regional promotion, where staff
plan and carry out regional revitalization events andcorporate collaboration rooted in the community,
and as an SSC* certified instructor, who is
responsible for improving store customer service
skills as a sales specialist. Our employees, who arealways attentive to customers’ voices and needs,
as well as specific regional characteristics, are thedriving force behind Adastria’s growth. We support
our employees to create their own careers and toensure they remain excited about their jobs
throughout their working lives.

Change in Percentage of Female Managers
(%)

34

45
35

34
30

Management
SeniorManagement
Government
target

30

18
10

13

February February February February
2010
2015
2023
2026
(Present) Targetof%
women inmanagement
positionsAverage ratioof women in
management
positions inJapanesecompanies asof 2023:

10%

A management meeting

Regional
Promotion
Planning and carryingout regional
revitalization eventsand corporate
collaboration
Regional Social
Media Marketing

Product
Proposal

Improving overallmarketing skills
using social media

Planning andcommercializing
limited-edition
products

Store Managers
and Staff

SSC
Certified Instructor
Improving overallcustomer service
skills at stores

Development
LeaderStrengthening
collaboration among
company stores incommercial facilities
and with sales
representatives

E S G

Encourage
People to Shine

In order to realize our growth strategy and vision for 2025 and continue to be an indispensable company for society, it is essential to have aunique and diverse organization that can collaborate with all stakeholders, create business models that are not bound by conventionalframeworks, and create new customer experience value. We believe that the physical and mental health and well-being of all people, including
our customers as well as our employees, will support the growth of our organization over the medium to long term. Through strategic healthmanagement, we are working to realize the well-being of our employees, creating an environment in which they can demonstrate theirindividuality and abilities and enjoy greater job satisfaction, enhanced internal systems, and career support.

ADASTRIA INTEGRATED REPORT 2023

Be an Organization That is Healthy Mentally and Physically, Encouraging Employees in Their Individuality and Ability

Assignments to various positions
based on the strengths andcharacteristics of each individual* SSC is an abbreviation for Service Skill Certification.
This is Adastria’s unique skill certification system for all
staff working in stores to improve customer satisfaction
and sales abilities, as well as staff motivation and sales
staff rank.

Agus Career, an Employment Transition Support Office Specializing in Apparel
Adastria General Support, our special
subsidiary, has launched Agus Career in
Hakata, Fukuoka, a new employmenttransition support office specializing inapparel that utilizes the subsidiary’s expertisein the employment of people with disabilities.

For people with disabilities seeking
employment, we support them in acquiring
the knowledge and skills necessary for jobs
related to apparel, and provide attentive
guidance along the path to employment byworking with them at their own pace.

We support job seekers through handson training and mock interviews, as well as
support for retention after employment, anddo our best to help fulfill their wish to work inapparel-related jobs and reach a way ofworking that suits their individual conditions.

Agus Career50

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Data

I n i t i a t iv es f o r M at erialit ies
Be an Organization That is Healthy Mentally and Physically, Encouraging Employees in Their Individuality and Ability

We aim to contribute to the well-being of society as a whole through our business, promoting health management under the slogan Play fashion! Play wellness! Our collaborative healthcarewith the Adastria Health Insurance Association enables us to provide insurance and welfare services tailored to the characteristics of the company, specifically its nationwide workforce with ahigh percentage of young people and women and diverse employment formats, to foster a health-conscious culture and create a safe and secure work environment. In order for each andevery one of us to fulfill the philosophy to Be a Person Needed, Be a Company Needed, our goal is to ensure that all of us can stay healthy and happy ourselves, both physically and mentally,
and work with vigor and continue to provide Play fashion! as described in our mission.

In recognition of its promotion of collaborative
healthcare with the Adastria Health Insurance
Association and its strategic and specificinitiatives, Adastria has been recognized as a
Certified Health & Productivity Management
Outstanding Organization for 2023 (large
corporation category) by the Ministry of
Economy, Trade and Industry and the Nippon
Kenko Kaigi (Japan Health Council), its firstsuch certification. In fiscal year ended February2022, we issued the Health Management
Declaration and set up the Health Management
Promotion Office, a department dedicated topromoting health management in the AdastriaGroup. The Adastria Wellness Committee, ahealth promotion committee for the benefit of
employees, has been studying specificmeasures and mechanisms, and enhances
health promotion, insurance, and welfare
projects tailored to our corporatecharacteristics. The committee will continue tofoster a health-conscious corporate culture in a
way unique to Adastria and that encourages
employees to enjoy maintaining and improving
their own healththrough healthliteracy and skills
that lead tostronger mental
and physicalfitness.

Major Initiatives, Achievements, and Results After
Issuance of the Health Management Declaration
Major Initiatives• Increasing health checkup rate from before in-house
health insurance: around 40% to 85.7%(Review of medical facilities for convenience neareach store and promoting checkup appointments)• Enhancing screening options for gynecological cancers

Achievements and Results
Optional
gynecological cancer
screening rate
All ages• Recommending for secondary medical checkups by
full-time industrial physicians and public health nurses• Conducting interviews with industrial physicians andpublic health nurses for persons deemed high-risk or
high-stress in medical checkups

20s

30s and above

66.2% 59.1% 80.1%

Health checkup rate

Around40%

85.7%• Strengthening collaboration with industrial physicians,
public health nurses, and human resources departments

Stress check rate

• Revitalizing health committee activity

86.4%

Plogging at Mito (where Adastria was founded), an
Adastria Wellness Committee activity

E S G

Earned First Certification as a Health & Productivity
Management Outstanding Organization for 2023

ADASTRIA INTEGRATED REPORT 2023

Fostering Employee Well-Being* Scope of data: Adastria Group companies
in Japan, excluding zetton inc.

VOICE Health Management that Reflects Employee Characteristics and Feedback
One of the priority tasks of the Health Management
Promotion Office is to create a working
environment that is friendly to women. Many
women struggle with specific health issues andsymptoms, including issues surrounding
menstruation as well as endometriosis. These cangreatly affect their work performance andefficiency, especially in the fashion industry, where

many people stand for long periods during theirwork. First, in order to create an environment tomaximize the potential of our female employees,
who account for 70% of our regular employees,
we are helping to provide accurate information
about gynecological diseases and how to handle
health concerns, enhancing gynecological cancer
options in health checkups, and recommendingthat they undergo gynecological cancer screening.
As we tackle issues like encouragement towardachieving a 100% health checkup rate andpreventing illnesses and mental health issues, wewill support our employees to enjoy fashion andlife, contributing to a richer lifestyle for all
stakeholders through our business.

Mutsumi Sekigawa,General Manager, Health Management
Promotion Office51

Introduction

About Us

Growth Strategy

ESG

Data

I n i t i a t iv es f o r M at erialit ies

Revitalize the Communities Surrounding Our Stores

Leveraging Fashion to Revitalize Regions

We respect the unique culture of each country andregion, and by developing localized products
tailored to the lifestyles of our customers, as well
as by providing events and services in collaboration
with local companies and other organizations, weare engaged in strong community-building while
increasing our visibility in the Asian market. Amongthem, niko and ..., which operates 28 stores outside
Japan, will open its first store in Thailand’s capitalof Bangkok in April 2023. This is part of a uniqueexperiment to generate fondness among locals,
including the creation of a community space where
local creators, companies, university students, andothers can freely interact to create newcollaborations.

In addition to sponsoring the Ibaraki Robots and theMito Hollyhock, both professional sports teams basedin Mito, Ibaraki Prefecture, we contribute to regional
revitalization through ongoing support of Art Tower
Mito and the Mito Chamber Orchestra. We were thetitle sponsor of the Dot ST B.LEAGUE ALL-STAR
GAME2023 IN MITO, held in January 2023 at theAdastria Mito Arena, part of our hard work to help
Mito’s sports culture flourish. It is estimated that the
sporting event had a total non-financial value ofapproximately ¥1 billion, including approximately ¥880
million in social value and ¥120 million in economic
ripple effects*.
*Source: EY Survey B.LEAGUE ALL-STAR GAME 2023 IN MITO calculated
to approximately ¥880 million in social value for the city of Mito

＠B.LEAGUEADASTRIA INTEGRATED REPORT 2023

Engaging in Community-Rooted Sales Activities

E S G

Grow Together
with Communities

Building good relationships with our communities is an important part of our mission. In accordance with our medium-term management plan,
we are expanding our business to various communities, both in Japan and overseas. We will strengthen engagement with locals throughfashion while respecting their culture and customs as well as complying with local laws and regulations. With the power of fashion, we will
create new value through businesses that give back to the community, including via job creation.

＠B.LEAGUE

Initiatives Resolving Social Issues in Shibuya Ward
Since we have our corporate headquarters in Tokyo’s
Shibuya Ward, in 2018, we concluded a Shibuya
Social Action Partner Agreement (S-SAP) with theward. We entered into this agreement to contributeto more attractive urban development and to theevolution of Shibuya Ward. FOREVER21 incorporates
Shibuya Font* in some of its products, which is
official public data from Shibuya Ward created incollaboration between artists with disabilities who live
and work in Shibuya as well as students who study
in Shibuya. In March 2023, we also sponsored the
Buddy Walk Tokyo 2023 for all charity event in theward’s Yoyogi Park, organized by the NPO SUPLIFE
and supported by Shibuya Ward to promote
understanding, acceptance, and social equality forpeople with Down syndrome. For the purpose ofrealizing a place where all people, regardless of
disabilities, can play an active role and of creating
opportunities for people to connect with each other,
LOWRYS FARM, which collaborates with artists withdisabilities, and the Play fashion! for ALL project
engaged in a collaboration to hold a coloring eventon the theme of disability and art, exhibiting clothingwith inclusive designs.

FOREVER21 Shibuya Font collaboration T-shirts* Shibuya Font is a font and pattern provided as public data,
authorized by Shibuya Ward and created as part of the Shibuya
Souvenir Development Project, with the cooperation of students at
the Kuwasawa Design School and support offices for people withdisabilities in Shibuya Ward. https://www.shibuyafont.jp/

At the BuddyWalkTokyo 2023 for all

52

Introduction

About Us

Growth Strategy

ESG

Data

I n i t i a t iv es f o r M at erialit ies

Group Sourcing Policy and Group Sourcing Guidelines
In partnership with our suppliers, wehave established the Group Sourcing
Policy, targeting fair and ethical businessdealings unique to Adastria, and theGroup Sourcing Guidelines, which clearlystate our expectations in the areas ofhuman rights, social, environmental, andgovernance. With these, we have gained
the understanding of our suppliers that
we expect them to be in compliance withcertain areas.
Group Sourcing PolicyGroup Sourcing Guidelines

Contributing to Local Human Resource Development Through aCentralized Production Management System
We have implemented a new factory management
system to centralize product ordering for ourfactories and production control data. Until now,
progression along each supply chain and the statusof each factory were managed separately, but thisnew system offers digital order and production
management operations and centralized
management and system integration fromproduction planning to purchase accounting along
the value chain. With these upgrades, we can not
only improve work efficiency both for internal andexternal stakeholders, but we can also help prevent
human error and strengthen governance.
Particularly in working with local staff in China andFactories Monitored*

Factory Monitoring and Partnership Certification
Suppliers are asked to cooperate in compliance surveys based on oursourcing guidelines. Based on the results, our CSR procurement staff
conduct factory monitoring to directly check the production
environment. If any issues are identified for improvement, we ask the
supplier in question to make improvements based on direct andongoing interactions, leading to stronger engagements. We have asystem in place to certify suppliers working with our production
departments as partner factories, based on a comprehensive scrutinyof their systems for producing high-quality products, frequency of
product defects, and social, environmental, and governance conditions.
Going forward, we will continue to expand both the number of partnercertified factories and the number of factories monitored.

ASEAN countries, our main production areas, itwould take quite some time to check information
before we introduced this system. The new system
has also contributed to human resource
development, as seen in the improved digital skills
among local staff.
Production
planning
Factory
management
systemNew
systembenefits

Order

Production

Inspection Logistics Stocking

Central data management
Digital operations

E S G

Grow Together
with Communities

We manufacture products in various regions around the world, with a complex and diverse supply chain of raw material procurement, sewing,
and transportation processes. We recognize that it is our corporate responsibility to work together to strengthen partnerships with our
suppliers, focusing on the sustainable development of production areas and the stable supply of high-quality products, so that we cancontinue to carry out best business practices alongside our suppliers. In order to continue to provide our customers with even better products
and services going forward, we will not only comply with the laws and regulations of each country and region, but also engage in monitoringand procurement activities that enable us to conduct fair and ethical transactions.

ADASTRIA INTEGRATED REPORT 2023

Foster Sustainable Development in Production areas(1) Higher efficiency(2) Stronger governance(3) Data visualization

Number and Breakdown of Factory Monitoring Findings (FYE 02/2022)
Factories Monitored

Other

FYE 02/2017

9

FYE 02/2018

20

FYE 02/2019

26

FYE 02/2020

40

FYE 02/2021

13

FYE 02/2022

10

49 cases

FYE 02/2023

27

Total

145

Overwork, inappropriate
labor contracts, etc.

20 cases

Environmental Pollution

Non-compliance with
anti-corruption, laws
and regulations, etc.

7 cases
Excess environmental
impact or insufficient
prevention of pollution, etc.

Labor Management

27 factories
Of which, 20 wereremotely auditedLabor Environment

66 cases
Inadequate
safety/hygiene in thelabor environment, etc.

* Downward trend during the fiscal years ended February
2021 and February 2022 was due to the impact of COVID-19* Includes follow-up monitoring (re-audits)

53

Introduction

About Us

Growth Strategy

ESG

Data

E S G In f o rm at io n D at a
Results

Category

FYE 02/2021

FYE 02/2022

Environmental Data

FYE 02/2023
Adastria Group Consolidated (2)2(1,000 kWh)-

78,066

Scope 1 (direct emissions)

-

-

880

3

Scope 2 (indirect emissions from energy use)-

34,791

41,5354(1)Scope 3 (indirect emissions from the value chain)-

481,808

538,705

Category 1 Purchased goods and services-

406,528455,227

Category 2 Capital goods-

23,73729,981Category 3 Fuel- and energy-related activities not included in Scope 1 and 2

-

5,433

6,993

Category 4 Upstream transportation and distribution

-

5,991

5,428

Category 5 Waste generated in operations

-

665

1,153

Category 6 Business travel

-

450

909

-

3,704

2,200

Environmental

Category 7 Employee commuting

5(t-CO2)Category 8 Upstream leased assets

-

-

-

Category 9 Downstream transportation and distribution

-

645

515

Category 10 Processing of sold products

-

-

-

Category 11 Use of sold products

-

-

-

Category 12 End-of-life treatment of sold products-

34,65536,299Category 13 Downstream leased assets

-

-

-

Category 14 Franchises

-

-

-

Category 15 Investments

-

-

-

-

516,600

581,120

Female14,27913,986

Male

3,150

3,009

3,876

Total

17,42916,995

18,954

Female

183

191

199

Male

359

373

389

Total

542

564

588

Female

38

37

40

Male

175

183

186

213

220

226

26

22

23

Male

73

82

82

Total

99

104

105

Female

151

154

159

Male

194

190

203

Total

345

344

362

Female

281

296

320

Male

173

170

174

Total

454

466

494

Scope 1 + 2 + 3

Employee Data
6

Adastria Group Domestic Consolidated

Number of employees (domestic group consolidated, including temporary employees)

Number of managers(excluding officers)

Number of senior managers

SocialTotal
796,743

Number of full-time employees by rank*

ADASTRIA INTEGRATED REPORT 2023

Stores, offices, and distribution centers electricity consumption

E S G

1

Number of general managers
and equivalent

Number of department
managers and equivalent

Number of unit managers andequivalent

Female(Employees)(Note) Scope of data: Domestic group consolidated results excluding zetton inc. are used for some results (*) as the unification of the Group data aggregation system is in progress after the consolidation of zetton inc. as a subsidiary in February 2022.
(1) Emission factors under section 4 were taken from the Ministry of the Environment emission intensity database and IDEAv2.
(2) Environmental data covers the domestic group while zetton inc. includes some overseas activities.

15,07854

Introduction

About Us

Growth Strategy

ESG

Data

E S G In f o rm at io n D at a
Results

Category

FYE 02/2021

FYE 02/2022

Employee Data

Adastria Group Domestic Consolidated

187

100

Male

15

10

38

Total

202

110

266

193

245

159

66

83

111

Total

259

328

270

Female

9

9

5

Male

22

13

11

Female
9

10

11

12

Number of mid-career hires

Male

Number of new management appointments*

Average years of employment of full-time employees

Total

31

22

16

Female

6.1

6.6

7.0
8.8

Male

8.3

8.8

Total

6.6

7.2

7.5

Female

345

383

434

Male

Number of full-time employees that left the company

Total

Social13

Number of foreign employees*

14

Employment rate of persons with disabilities (as of June 1, 2023)

15

Hours of overtime worked per month

16
17
18

Employee average
Full-time employee average
Employee average
Full-time employee average

Average number of days of annual paid leave taken(Years)(Employees)(%)
Full-time employee average

Percentage of employees taking annual paid leave(Employees)

Employee average(Hours)(%)(Days)

Number of employees who took the leave (Employees)

Maternity leave taken by full-time employees

Acquisition rate(%)

Number of employees who took the leave (Employees)
Female19

Full-time employees taking childcare leave and returning towork after taking childcare leave

21

142

488

576

94

82

79

2.38

2.65

2.55

4.3

5.6

8.0

2.1

2.6

3.5

69.3

59.7

60.7

64.2

59.4

57.1

10.9

10.3

10.6

9.2

7.6

7.5

245

200

207

99.6

99.0

100.0

228

216

210

100.0

99.5

98.6

Return rate

(%)

91.0

94.4

95.1

2

5

9

(%)

3.39

7.81

15.30

Acquisition rate

(%)

100.0

100.0

100.0

(Days)

53.5

93.0

31.0

Number of employees who took the leave (Employees)

17

11

8

28.8

17.2

14.8

Average number of days of nursing care leave taken
Male employees taking spouse maternity leave*

105

(%)

Return rate
20

93
438

Acquisition rate

Number of employees who took the leave (Employees)
Male

228

Acquisition rate(%)

ADASTRIA INTEGRATED REPORT 2023

Number of new graduate hires

FemaleE S G

8

FYE 02/2023(Note) Scope of data: Domestic group consolidated results excluding zetton inc. are used for some results (*) as the unification of the Group data aggregation system is in progress after the consolidation of zetton inc. as a subsidiary in February 2022.

55

Introduction

About Us

Growth Strategy

ESG

Data

E S G In f o rm at io n D at a
Results

Category

FYE 02/2021

FYE 02/2022

Female Employee Data
Percentage of female officers (Adastria non-consolidated)

Social24

Percentage of female employees by rank*

75.1

75.2

72.6

Percentage of female officers

23.1

23.1

21.4

Percentage of female directors

11.1

11.1

10.0

Percentage of female managers (excluding officers)

33.8

33.9

33.8

Percentage of female senior managers

17.8

16.8

17.7

26.3

21.2

21.9

Percentage of female department managers and equivalent

43.8

44.8

43.9

Percentage of female unit managers and equivalent

61.9

63.5

64.8

Percentage of female general managers and equivalent

(%)

25

Percentage of female new graduate hires

92.6

90.9

85.7

26

Percentage of female mid-career hires

74.5

74.7

58.9

Female

0

0

0

Male

5

5

5

Total

5

5

5

Female11

1
4Governance Data

Adastria Group Domestic Consolidated

Inside27

Directors (Adastria non-consolidated)(1)

OutsideInsideGovernance28

Number of members of the Audit and Supervisory Board(2)(Adastria non-consolidated)
Outside29

Number of executive officers(3) (Adastria non-consolidated)

Male

3

3

Total

4

4

5

Female

0

0

0
1

Male

(Directors)

1

1

Total

1

1

1

Female

2

2

2
1

Male

1

1

Total

3

3

3

Female

0

0

0

Male

7

9

9

Total

7

9

9

30

Number of reports to the internal reporting desk

(Cases)

115

146

111

31

Number of comments and suggestions from suppliers’ questionnaires*(Cases)

43

44

54

ADASTRIA INTEGRATED REPORT 2023

23

Adastria Group Domestic Consolidated

Percentage of female full-time employees

E S G

22

FYE 02/2023(Note) Scope of data: Domestic group consolidated results excluding zetton inc. are used for some results (*) as the unification of the Group data aggregation system is in progress after the consolidation of zetton inc. as a subsidiary in February 2022.
(1)-(3) Number of officers listed are as of May 25, 2023.

56

Introduction

About Us

Growth Strategy

ESG

Data

O ut s id e D i rect o r I n t erview

Developing a Culture of Taking on
Challenges and Emphasizing a Balance
Between Freedom and Discipline

KOICHI MIZUTOMEADASTRIA INTEGRATED REPORT 2023

Koichi Mizutome

MISATO OKADA(Interviewer)
General Manager, Internal Audit Department

Misato Okada

Governance Structure and Board EffectivenessOkada: How would you rate Adastria’s governance structureburdensome rules required of large global companies. In the

Board of Directors and Corporate Atmosphereand Board of Director effectiveness?

process of rapid growth, I think the company needs to

Okada: Director Mizutome, one year has passed since you

Mizutome: Adastria is helmed by the founding owner,

establish and hold a minimum line, while fostering an

were appointed to be an Adastria outside director. How do

Chairman Fukuda, who is recognized internally and externallyenvironment where staff can work in a relaxed manner.

you feel about the atmosphere of the company?

as an outstanding leader. In general, owner-led companies

Okada: Thank you. Certainly, the Adastria-style of freedom is

Mizutome: Board meetings are very active, and we exchange

are at risk of becoming one-person operations. Chairman

important. Can you comment on internal controls and risk

views in a straightforward manner. While I’m not always on-

Fukuda understands this risk and is conscious of listening tomanagement systems?

site with the company, I think the head office where we are

the opinions of outside directors when making decisions. I

Mizutome: There was recently an unauthorized access totalking now has a vibrant atmosphere. The Adastria mission,

feel that the governance structure is very well balanced.

internal systems, but Adastria got the system back up andPlay fashion!, has become an integral part of the company.

Okada: As the head of internal audit, I believe governance atrunning quickly, filing a detailed report of the incident. At theIt’s clear that staff members bring their own ideas to work

subsidiaries and overseas operations could become an issue

same time, there is room for improvement in identifying

and enjoy what they do.

during expansion. What is your opinion?

inherent risks and evaluating risk levels, organizing response

Okada: What is the role of the Board of Directors?

Mizutome: Many companies have a difficult time in understanding

measures according to the size of the risk, and sharing theseMizutome: I think the role that the Board of Directors should

the management situation at subsidiaries and overseas fromfactors internally. Management systems need to be hardened

be different for each company. For the company I run, I’m thethe head office. Since these are areas we look to for future

for times when the risk is not apparent.

only internal director. Our other seven directors are outside

growth, we don’t feel the need to bind ourselves with theE S GOutside Director

directors. The primary function of this type of board is to57

Growth Strategy

ESG

Data

monitor the proper execution of business and compliance.

Mizutome: The current Adastria Board of Directors is madeOn the other hand, Adastria’s Board of Directors is composed

up of people with diverse experience, including managersof half internal directors and half outside directors. Importantand academics. We conduct discussions from multiple

business operations are discussed at Board meetings. As aperspectives. However, we have further to go in terms ofresult, the Board functions as a decision-making body, withdiversity. All internal directors are male, and their ages are

specific opinions contributed from internal and externalsimilar. I think the opinions we hear from Director Horie, who

perspectives.

is a woman, are fresh and instructive. Board discussions will

Okada: The Adastria culture is one of taking on new challenges

only become more active as the range of genders and ages

with a sense of speed, and the Board of Directors hears many

expands.

new business ideas and initiatives. Do you think there are

Okada: What in your experience have you remained conscious

sufficient discussions of these matters at Board meetings?

of when promoting women to higher positions or management?

Mizutome: We believe that no decision should be madeMizutome: It takes time to develop internal directors. It might

staff and the capital markets. The domestic market will

without a full discussion first. In fact, during my first year as

be most effective to bring in more women as outside directors

contract inevitably. The responsibility of the Board of Directors

an outside director, there were numerous cases in which we

while developing women inside the company for management

is to craft a strategy to push the envelope as a company,

had to make the go or no-go decision. The Board discussed

positions. Or the company could hire specialists from outside

intending to grow 10 or 20 times the current size in the longeach case and established specific conditions and lines to be

who could become internal directors later. These are stop-gap

run, including growth in overseas markets. The first step for afollowed. These deeper discussions allow for control over themeasures, though. At some point, the company must set

company to grow in overseas markets is to create a single

business, and the deci-sion-making process incorporates the

expectations for talented female employees, appointing themwinning strategy. For niko and ... to become a business thatknowledge of each director. In certain cases, we may haveto higher positions, even if it might be difficult at first.

thrives overseas, the company must be prepared to develop
the brand into a global brand and involve outstanding local

decided to stop a project, but we consider those cases to be

The Adastria Business Strategy and Potential

talent overseas.

Okada: Director Mizutome, as someone with extensive

Okada: What is your message to stakeholders about the

The Board of Directors and Corporate Diversity

experience as a manager, would you offer some suggestions

long-term potential of Adastria?

Okada: What is your view on diversity in the Board of Directors

regarding the Adastria business strategy?

Mizutome: The Adastria appeal lies in its balance of freedom

and the rest of the company?

Mizutome: Play fashion! is a mission that offers a high degreeand discipline. I see great potential in company staff whoof freedom, even covering the general lifestyle domain. Let’s

pursue what they love and take on challenges, as well as the

say that Adastria successfully grows its business while taking

environment that encourages these staff to achieve theiradvantage of that freedom and identifies where the company

dreams. Adastria fulfills its responsibilities as a large

can add more value than other companies. In that case, I

corporation while continuing to take on challenges andthink staff will work with confidence and a sense of security.

maintain a somewhat mischievous attitude. I encourage all

Outsiders will be able to sense this confidence and security as

stakeholders to value the uniqueness of Adastria.

acceptable losses.

ADASTRIA INTEGRATED REPORT 2023

About UsE S GIntroduction

well. Adastria needs to bring the long-term picture into focus
gradually, and management must communicate this picture to58

Introduction

About Us

Growth Strategy

ESG

Data

Co r p o rat e Go v ern an ce
Basic Philosophy

Major Organizations and Their Roles

Board ofDirectors

The Board of Directors consists of ten directors, including five outside
directors. The board, chaired by the representative director, deliberates andresolves important matters as the highest management decision-making
body of the Group. The four members of the Audit and Supervisory Board,
including three outside members, attend Board of Directors meetings froman independent standpoint, having established a system to audit the status
of director performance in the duties of care and loyalty related to the execution of their duties.

Audit andSupervisory
Board

The Audit and Supervisory Board consists of four members, one of whom isa full-time member and three of whom are outside members. The membersof the Audit and Supervisory Board attend Board of Directors meetings,
Corporate Governance Committee meetings, Executive Council meetings,
and other important meetings, as well as inspect important approval
documents. In doing so, they gain an understanding of the state ofmanagement in a timely manner and to conduct audits of the legality of theexecution of business by directors. In addition, members of the Audit andSupervisory Board offer proposals as necessary from an independent
standpoint and based on their wealth of experience and insight.

Corporate
GovernanceCommittee

The Corporate Governance Committee acts as an advisory body to the Boardof Directors and deliberates on various matters related to the Group
corporate governance and the establishment of internal control systems. The
committee submits or reports results to the Board of Directors, with the aimof achieving appropriate and transparent corporate governance.

Nomination andCompensation
Advisory
Committee

The Nomination and Compensation Advisory Committee acts as an advisory
body to the Board of Directors and aims to improve the fairness, appropriateness,and transparency in the selection and dismissal of directors, representative
directors, and executive directors, as well as in the policies and procedures forfostering successors of representative directors and the remuneration of
directors. The committee deliberates on these matters and reports the results
to the Board of Directors.

Compliance
Committee

The Compliance Committee acts as an advisory body to the Board of
Directors and aims to deliberate, draft, and pursue important policies toensure compliance, which is a Group policy. The committee deliberates on
various compliance-related topics and submits or reports the results of its
deliberations to the Board of Directors.

Executive
Council

The Executive Council aims to make decisions on important matters otherthan those to be resolved by the Board of Directors and to share information
on business execution in a timely manner. The council deliberates anddecides on matters delegated by the Board of Directors, important mattersrelated to management, and matters related to the execution of importantbusiness operations.

Adastria pursues the mission of Play fashion!, endeavoring to enrich lives and create happinessthrough fashion. We strive for excellent corporate governance that fosters quick decisionmaking to flexibly respond to the needs of our customers and changes in the environment, as
well as to contribute to the enrichment of lives and diverse values around the world.

Overview of Corporate Governance System
The company established a Board of Directors and an Audit and Supervisory Board,
therefore classifying as a company with an Audit and Supervisory Board.

General Meeting of Shareholders

Accounting
AuditorAccounting
Audit

Collaborate

Appoint/Dismiss

Audit andSupervisory Board
Audit and Supervisory Board
Members 4(Including 3 Outside Members)

Au d i t

Appoint/Dismiss

Audit

Board of Directors

AdviseDirectors 10(Including 5
Outside Directors)

Au d i t
Select/Dismiss/Monitor

Representative
Director
Collaborate

Corporate Governance Committee
Nomination and Compensation Advisory Committee
Compliance Committee

Executive Agency

Collaborate

Disclosure Committee

E S G

Appoint/Dismiss

ADASTRIA INTEGRATED REPORT 2023

Guided by our corporate philosophy that says, Be a person needed, Be a company needed,

Instr uc t

Internal Audit
Department

Crisis Management Committee
Re p or t

Executive Council

Information Security Committee
Sustainability Committee

Au d i t

Business Divisions

59

Introduction

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Growth Strategy

ESG

Data

Co r p o rat e Go v ern an ce
Changes in Corporate Governance
2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2008 Established the Management Advisory Committee
2013 Transitioned to a holding company structure2015 Dissolved the holding company structure2015 Launched Corporate Governance Code application
2016 Formulated the Corporate Governance Guidelines

Directors

2006 Reduced term of office for directors from two years to one
2007 Appointed one outside director

2016 Increased outside directors to four members

2013 Increased outside directors to three members

2022 Increased outside
directors to five members

Board of Director
Effectiveness
Compensation
Evaluation

NominationE S GMembers of the Audit
and Supervisory Board

2016 Appointed a female director

ADASTRIA INTEGRATED REPORT 2023

Systems and Policies

2001-2012

2001 Appointed three outside members of the Audit and Supervisory Board
2003 Appointed four outside members of the Audit and Supervisory Board
2004 Appointed three outside members of the Audit and Supervisory Board
2018 Appointed a female member of the Audit and Supervisory Board

2005 Established the Nomination and Compensation Committee(currently Nomination and Compensation Advisory Committee)

2019 Began formulation of succession planning2020 Established policies and procedures for succession planningand the selection and dismissal of representative directors

2005 Established the Nomination and Compensation Committee(currently Nomination and Compensation Advisory Committee)

2016 Introduced performance-linked stock compensation2017 Launched analysis and evaluation
2020 Outsourced operations to external organizations

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Data

Co r p o rat e Go v ern an ce
Composition of Directors and Members of the Audit andSupervisory Board (As of May 25, 2023)

Board of Directors Diversity
Our Approach to Board Diversity

Ratio of Internal and Outside Directors

The company appointed five internal directors, five outside directors, one internal member ofthe Audit and Supervisory Board (full-time), and three outside members of the Audit andSupervisory Board. Of the 14 directors and members of the Audit and Supervisory Board, one
director and two members of the Audit and Supervisory Board are female.
The company believes that we have appointed a diverse pool of directors with differing
backgrounds of expertise and experience. Members include persons who are familiar with andhave a deep understanding of our businesses, persons who have international experience,such as extensive experience in global companies and overseas operations, and persons who
have a wealth of insight as corporate managers. Directors range from their 30s to 70s.
We appointed individuals who have sufficient knowledge of finance, accounting, and legal
affairs, including two members of the Audit and Supervisory board with experience in financial
institutions, one certified public accountant, and one attorney.
Accordingly, we believe that the Board of Directors as a whole is balanced andappropriately diverse. We will continue to strive to ensure and improve diversity, including
diversity in terms of gender and internationality.

InsideInside55Directors

10

50%

50%

Outside3
75%

Membersof the Audit
and Supervisory
Board

1
25%

4

Gender Ratio
Female1Female2

Directors

10%

10

Male

50%

9

4

Male

2
50%

E S G

90%

Membersof the Audit
and Supervisory
Board

ADASTRIA INTEGRATED REPORT 2023

OutsideSkills Matrix for Directors and Members of the Audit and Supervisory Board
Knowledge, Experience, Skills, etc., Possessed by Directors and Members of the Audit and Supervisory Board
Corporate
Management

Product
SCM

GlobalBusiness

●

●

●

●

●
●

●

●

●

●

●
●

MichioFukuda●Osamu

Kimura●Masayuki

K i n d o●

Yoshiaki

Kitamura●T a i k i

Fukuda●SatoshiAkutsuHiromiH o r i e

KoichiMizutome

Tatsuhiro

Matsuoka

Kazuo

Nishiyama

InsideTsuyoshiMatsuda●Kazuhiko

Ebihara●Outside

YoshikoHayamaKyoko

M o g i

InsideDirectors

OutsideMembers of the
Audit andSupervisory Board

Sales
Marketing●●

IT and Digital
Transformation

Legal Affairs
Risk Management

●
●

●

●

●

●

●

●

●

●

Finance andAccounting Banking

ESG

●

●

●

●

●

●

●

●
●

●

●

●

●

●
●

●

* The list above indicates the areas in which we expect company directors and members of the Audit and Supervisory Board to offer particular expertise. This list is not exhaustive of all expertise possessed by company directors and members of the Audit andSupervisory Board.
* Matters related to personnel and human resources are included in corporate management.
* SCM refers to supply chain management.

61

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Growth Strategy

ESG

Data

Co r p o rat e Go v ern an ce

Effectiveness Assessment Process1

Conduct self-assessment through anonymous questionnaires(web-based)
Target

Questions
TopicsAll directors and members of the Audit and Supervisory
Board(1) Board of Directors composition and operation(2) Management strategies and business strategies(3) Corporate ethics and management of risks and crisis(4) Performance monitoring and management evaluation(5) Dialogue with stakeholders

Our Board of Directors consists of an appropriately balanced and diverse membership andfosters a culture of vigorous discussion among members, including independent outside
directors. As such, we were evaluated to have ensured sufficient effectiveness in decisionmaking and supervision of business execution by the Board of Directors. Among the issues
addressed in the previous fiscal year, our score improved for our system establishment thatencourages dialogue with shareholders and the sharing of opinions.

For Issues and Countermeasures
In the fiscal year ending February 2023, we have newly identified issues related to diversity as
well as officer nomination and compensation. In response, we will continue to improve theeffectiveness of the board in the fiscal year ending February 2024, with particularconsideration given to these issues.

Appointment of Directors and Members of the Audit andSupervisory Board
Appointment Policy for Directors and Members of the Audit andSupervisory Board

ADASTRIA INTEGRATED REPORT 2023

The company conducts a self-assessment of the effectiveness of the Board of Directors to
identify current issues and improve the function of the Board. This self-assessment isconducted by means of anonymous questionnaires for all directors and members of the Audit
and Supervisory Board. After receiving responses from all participants, the Board of Directors
analyzes and evaluates the results.
Since fiscal year ended February 2020, the company has outsourced the review of thequestionnaire questions and the tabulation and analysis of results to an external organization.
This method ensures objectivity and transparency of evaluation results and allows thecompany to utilize information from other companies and knowledge from outside sources.

Fiscal Year Ending February 2023 Evaluation Results

E S G

Board of Director Effectiveness Evaluation• The company shall appoint a diverse pool of directors with differing backgrounds ofexpertise and experience, including persons who are familiar with and have deep
knowledge of company businesses, persons who have international experience, such as
extensive experience in global companies and overseas operations, and persons who havea wealth of insight as corporate managers.
• By appointing a multiple number of outside directors, the company strengthens its
supervisory function and accomplishes management transparency by incorporating the
viewpoints of people outside the company who are independent of management.

2Compile and analyze survey results through external organizations

3

Discuss analysis results of the Corporate Governance Committee
and Board of Directors• The company shall appoint outside directors who have no material interest in the Groupand who are capable of maintaining their independence.
• The company shall appoint members of the Audit and Supervisory Board who are
qualified, independent, and capable of fulfilling their terms of office.

Nomination Procedure for Directors and Members of the Audit
and Supervisory Board• The representative director shall submit a list of candidates for director. The Nomination
and Compensation Advisory Committee shall deliberate on the list, after which the Boardof Directors shall make decisions on candidates.

4

Implement improvement measures for identified issues• The Board of Directors shall make decisions on candidates for members of the Audit andSupervisory Board after the representative director submits a list of candidates and the
Audit and Supervisory Board gives its approval.

62

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Growth Strategy

ESG

Data

Co r p o rat e Go v ern an ce
Officer Compensation
Basic Policy

Procedures for Determining Compensation

The company Board of Directors follows the following policies when determining director
compensation.

The procedures for determining director compensation are as follows.

• Compensation for members of the Audit and Supervisory Board shall be determined upon
consultation with Audit and Supervisory Board in accordance with the division of duties
and other factors and shall be determined by within a scope approved at a general
meeting of shareholders.

• Compensation packages shall be designed to secure outstanding management personnel
and contribute to sustainable development.
• Compensation levels shall be appropriate in light of other companies in the same industry,other companies of the same size in other industries, and economic and social conditions.

Officer Compensation System Overview
Subject of Payment

Basic
Compensation
Bonus(PerformanceLinked
Compensation)

PerformanceLinked Stock
Compensation*

Monetary
compensation

Stockcompensation

Details

Outside Directors
Directors
Members of(Excluding Outside andthe Audit andDirectors)
Supervisory Board

Fixed compensation based on role andresponsibilities●●

Performance-linked compensationthat is primarily linked to short-term
performance and serves as an incentive
for corporate value creation●-

Performance-linked compensation thatis linked to short-, medium-, and longterm business performance and serves
as an incentive for corporate value
creation●-

Payment Method

Evaluation Indicators-• Fixed amount paid monthly• Payment amounts are determined within 0 to 200% of the base amount
depending on position and performance level• Net sales• Lump-sum payment in certain months each year

• Operating profit• The number of stock points to be delivered is determined within 0 to
200% of the base number of stocks depending on position andperformance level• Year-on-year net sales• Points are calculated on the last day of February of the fiscal year
subject to evaluation and awarded at a certain time in the same year
• In principle, shares equivalent to a certain percentage of accumulated
points are delivered when a director retires. Shares equivalent to any
remaining points are converted into cash within the trust and theconversion price is paid.

E S GCompensation
Type

ADASTRIA INTEGRATED REPORT 2023

• Compensation for directors shall be determined by the Board of Directors after deliberationby the voluntary Nomination and Compensation Advisory Committee. Such compensation
shall be determined within the scope approved at a general meeting of shareholders.

• Compensation packages shall be linked to short-, medium-, and long-term businessperformance and shall be commensurate with the creation of corporate value.

• Year-on-year net sales• Level of achievement oftarget operating profit
margin• Company TSR and Tokyo
Stock Price Index• (TOPIX) growth rate results* Contents were partially revised at the 73rd Ordinary General Meeting of Shareholders on May 25, 2023.

Officer Compensation (Fiscal Year Ended February 2023)
Total Amount of Compensation by Type
Officer Classification

Number of Eligible Officers

Total Amount of Compensation

Basic Compensation

Performance-Linked
Stock Compensation

Bonus

Directors (Excluding Outside Directors)

5¥429 million¥222 million¥95 million¥175 million

Members of the Audit and Supervisory Board(Excluding Outside Members)

1¥21 million¥21 million--

Outside Officers

11¥83 million¥83 million--* Figures reflect amount paid based on the system before the revision.

63

Introduction

About Us

Growth Strategy

ESG

Data

Co r p o rat e Go v ern an ce

Osamu Kimura

Masayuki Kindo

Yoshiaki Kitamura

Taiki Fukuda

Representative Director and PresidentManaging Director

Managing Director

Director

Biography

Biography

Biography

Biography

Biography

May 1971 Joined Fukudaya Clothing Store Co.
(currently, Adastria Co., Ltd.) Director,
Fukudaya Clothes Store Inc.
Jun. 1982 Senior Managing Director, Fukudaya Clothes
Store Inc.
Apr. 1991 Representative Director and President, Bears
Factory Limited (currently, Adastria Logistics
Co., Ltd.)Mar. 1993 Representative Director and President,
POINT INC. (currently, Adastria Co., Ltd.)
Dec. 2002 Representative Director and Chairman,
POINT TW INC. (currently, Adastria Taiwan
Co., Ltd.)May 2004 Representative Director and Chairman,
POINT INC. (currently, Adastria Co., Ltd.)May 2010 Representative Director, Chairman andPresident, POINT INC.
Sep. 2013 Representative Director and Chairman,
Adastria Holdings Co., Ltd. (currently,
Adastria Co., Ltd.)May 2015 Representative Director and Chairman, Chief
Executive Officer (CEO), Adastria Holdings
Co., Ltd.
May 2018 Representative Director, Chairman andPresident, Adastria Co., Ltd.
Apr. 2021 Director and Chairman, BUZZWIT Co., Ltd.
Director and Chairman, ELEMENT RULE
Co., Ltd. (to present)
May 2021 Representative Director and Chairman,
Adastria Co. Ltd. (to present)

Sep. 2011 Representative Director and President,
TRINITY ARTS INC. (currently, Adastria
Co., Ltd.)
Apr. 2013 Director, FRIENDS Co., Ltd.
Sep. 2013 Director, Adastria Holdings Co., Ltd.
(currently, Adastria Co., Ltd.)
Director, Adastria Asia Co., Ltd.
Feb. 2014 Director, N9&PG Co., Ltd. (currently,
Adastria Logistics Co., Ltd.)May 2015 Director and Senior Executive Officer,
Adastria Holdings Co., Ltd. (currently,
Adastria Co., Ltd.)
Jun. 2016 Managing Director, Adastria Co., Ltd.
Nov. 2016 Director and Vice President, Peoples Inc.
Director and Vice President, ALICIA Co., Ltd.
(currently, BUZZWIT Co., Ltd.)
Director and Vice President, ELEMENTRULE Co., Ltd. (to present)
Oct. 2017 Representative Director and President,
ADASTRIA eat Creations Co., Ltd.
Mar. 2018 Director and Vice President, Adastria Co., Ltd.
May 2019 D i r e c t o r , N A T U R A L N I N E T R A D I N G(SHANGHAI) LTD. (to present)
Feb. 2020 Director, BUZZWIT Co., Ltd.
May 2021 Director and President, Adastria Co., Ltd.
May 2022 Director, zetton Inc. (to present)
Representative Director and President,
Adastria Co., Ltd. (to present)

Apr. 1991 Joined The Sanwa Bank, Limited (currently,
MUFG Bank, Ltd.)
Jul. 2006 Joined POINT INC. (currently, Adastria Co.,
Ltd.) General Manager of President’s Office
Mar. 2008 Executive Officer, General Manager of
President’s Office, POINT INC.
Jun. 2010 Executive Officer, Executive General Manager
of New Business Division, POINT INC.
Mar. 2012 Executive Officer, General Manager ofStrategy Promotion Department, POINT INC.
Nov. 2012 Managing Executive Officer, General Manager ofStrategy Promotion Department and Miscellaneous
Goods Business Department, POINT INC.
Sep. 2013 General Manager of Finance Department, Adastria
Holdings Co., Ltd. (currently, Adastria Co., Ltd.)Mar. 2015 Senior Executive Officer, Executive General Manager ofBusiness Promotion Division, Adastria Holdings Co., Ltd.
Mar. 2016 Senior Executive Officer, Chief of Sales
Headquarters, Adastria Co., Ltd.
Mar. 2018 Senior Executive Officer, Chief of Sales
Headquarters and Executive General Manager
Overseas Assistance Division, Adastria Co., Ltd.
Director, Adastria Asia Co, Ltd. (to present)
Director, POINT(Shanghai) Co., Ltd. (currently,
niko and … (Shanghai) Co., Ltd. ) (to present)
Representative Director and President, POINT TW
INC. (currently, Adastria Taiwan Co., Ltd. (to present)
Representative Director and President, POINT TW
INC. (currently, Adastria Taiwan Co., Ltd. (to present)
Director of Adastria Korea Co., Ltd.
May 2018 Director, Adastria Co., Ltd.
Aug. 2019 Director, Adastria (Shanghai) Co., Ltd. (to present)
May 2021 Managing Director, Adastria Co., Ltd. (to present)
Jan. 2023 Director, Adastria (Thailand) Co., Ltd. (to present)
Mar. 2023 Chairman of the Board of Directors, BUZZWIT
Co., Ltd. (to present)

Apr. 1999 Joined FIVE FOXes Co., LTD.
Feb. 2007 Joined DROP INC. (currently, Adastria Co., Ltd.)
Sep. 2010 General Manager of studio CLIP Department,
TRINITY ARTS INC. (currently, Adastria Co., Ltd.)Mar. 2012 General Manager of niko and ... Department,
TRINITY ARTS INC.
Mar. 2013 Executive Officer, Executive General Manager
of Sales Division, TRINITY ARTS INC.
May 2014 Director, General Manager of Sales Division,
TRINITY ARTS INC.
Mar. 2015 Executive Officer, Executive General Manager
of Sales Division #2, Adastria Holdings Co.,
Ltd. (currently, Adastria Co., Ltd.)
Apr. 2016 Representative Director, Adastria Korea Co.,
Ltd.
Mar. 2018 Senior Executive Officer, Chief of Sales
Headquarters,Adastria Co., Ltd.
Director, Adastria Asia Co., Ltd. (to present)
Director, POINT (Shanghai) Co., Ltd.
(Currently, niko and ... (Shanghai) Co., Ltd.)(to present)
Director, POINT TW INC. (currently, Adastria
Taiwan Co., Ltd.) (to present)
Director, Adastria Co., Ltd.
Aug. 2019 Director, Adastria (Shanghai) Co., Ltd. (topresent)
May 2021 Managing Director, Adastria Co., Ltd. (topresent)
Feb. 2022 Director, SES GLOBAL LOGISTICS (SHANGHAI)
Co., LTD. (to present)
Chairman of Management Board, Velvet,
LLC (to present)
Jan. 2023 Director, Adastria (Thailand) Co., Ltd. (topresent)

Mar. 2004 Joined IMS Co., Ltd.
Apr. 2005 Joined POINT INC. (currently, Adastria Co., Ltd.)Mar. 2014 Executive General Manager of International
business Division, Adastria Holdings Co.,
Ltd. (currently, Adastria Co., Ltd.)May 2014 Representative Director and President,
Adastria Asia Co., Ltd.
Mar. 2016 Executive General manager of Communication
Design Division, Adastria Co., Ltd.
Mar. 2017 Executive General Manager of Corporate
Planning Division, Adastria Co., Ltd.
May 2017 Director, Executive General Manager ofCorporate Planning Division, Adastria Co., Ltd.
Mar. 2018 Division, Adastria Co., Ltd. (to present)
Chairman of Management Board of Velvet, LLC
May 2018 Director, Adastria General Support Co., Ltd.
(to present)
May 2019 Director, Adastria Logistics Co., Ltd
Nov. 2021 Representative Director, ADOORLINK Co.,
Ltd. (to present)
Feb. 2022 Member of Management Board, Velvet, LLC(to present)

Reason for Appointment

Reason for Appointment

Reason for Appointment

Reason for Appointment

Reason for Appointment

Since he assumed the position of Representative
Director of the company in 1993, Michio Fukuda has
demonstrated leadership in promoting the growth andexpansion of the company’s business. We shall utilize
his rich experience accumulated thus far, and thereby
receive his contribution to improving the corporate valueof the Company.

In addition to having gained extensive experience and many
achievements in the field of sales and store development, Osamu
Kimura was appointed Director and President of the Company in
May 2021 and Representative Director and President in May
2022. We shall utilize his abundant experience and variedachievements accumulated thus far, and thereby receive his
contribution to improving the corporate value of the company.

In addition to having gained knowledge in finance andaccounting based on his experience in a financial institution,
Masayuki Kindo has extensive experience and many
achievements in the company’s corporate strategy, finance,and sales. We shall utilize his abundant experience and variedachievements accumulated thus far and thereby receive his
contribution to improving the corporate value of the company.

Yoshiaki Kitamura has gained extensive experience andmany achievements in the field of sales, including
driving the growth of our core brands. We shall utilize
his abundant experience and varied achievements
accumulated thus far and thereby receive his
contribution to improving the corporate value of thecompany.

In addition to having extensive experience and many
achievements in Japan and overseas, Taiki Fukuda hasserved as the Representative Director and President of an
overseas subsidiary of the company in the past. We shall
utilize his abundant experience and varied achievements
accumulated thus far and thereby receive his contribution
to improving the corporate value of the company.

Attendance at Board of Directors Meetings(Fiscal Year Ended February 2023)

Attendance at Board of Directors Meetings(Fiscal Year Ended February 2023)

Attendance at Board of Directors Meetings(Fiscal Year Ended February 2023)

Attendance at Board of Directors Meetings(Fiscal Year Ended February 2023)

Attendance at Board of Directors Meetings(Fiscal Year Ended February 2023)

14/15

15/15

15/15

15/15

15/15

E S G

Michio Fukuda
Representative Director and Chairman

ADASTRIA INTEGRATED REPORT 2023

Directors (As of May 25, 2023)

64

Introduction

About Us

Growth Strategy

ESG

Data

Co r p o rat e Go v ern an ce

Hiromi Horie

Koichi Mizutome

Tatsuhiro Matsuoka

Kazuo Nishiyama

Director

Director

Director

Director

Director

Biography

Biography

Biography

Biography

Biography

May 1998 Ph.D. in Business Administration, Universityof California, Berkeley
Dec. 1998 Assistant Professor, Faculty of Commerceand Management of Hitotsubashi University
Apr. 1999 Assistant Professor, Graduate School ofInternational Corporate Strategy of
Hitotsubashi University
Jun. 2002 Associate Professor, Graduate School ofInternational Corporate Strategy of
Hitotsubashi University (The Japanese title
for Associate Professor was changed fromJokyoju to Junkyoju in 2007)
Mar. 2010 Outside Director, OTSUKA KAGU, LTD.
(currently, YAMADA DENKI CO., LTD.)
Apr. 2010 Visiting Professor, Collaborative Research
Sector of National Institute of Informatics,
Research Organization of Information and
Systems Professor, Graduate School ofInternational Corporate Strategy (currently,
Business Administration) of Hitotsubashi
University (to present)
Sep. 2013 Outside Director, Adastria Holdings Co., Ltd.
(currently, Adastria Asia Co., Ltd.) (topresent)
Jun. 2017 Outside Director, Nojima Corporation
Jun. 2022 Outside Director, Yakult Honsha Co., Ltd.

Apr. 1981 Joined Nara Machinery Co., Ltd.
May 1988 Joined Levi Strauss Japan KK
Dec. 1999 Marketing Senior Manager, Levi Strauss
Japan KK
Mar. 2005 Executive General Manager of Public Affairs
Division, Starbucks Coffee Japan, Ltd.
Dec. 2006 Executive General Manager of Marketing
Division, Starbucks Coffee Japan, Ltd.
Aug. 2010 Marketing Officer, Starbucks Coffee Japan,Ltd.
May 2016 Outside Director, Adastria Co., Ltd. (to present)
Mar. 2017 Representative Director, Haruka Co., Ltd. (topresent)
Mar. 2021 Outside Director, Kanro Inc. (to present)

Apr. 1991 Joined Dentsu Inc. (currently, Dentsu GroupInc.)
Feb. 1996 Joined Andersen Consulting (currently,
Accenture PLC)
Apr. 2000 Joined Roland Berger Strategy Consultants(Japan Office)Jan. 2005 Representative Director, Roland Berger
Strategy Consultants (Japan Office)Oct. 2009 Managing Director, Enterprise Turnaround
Initiative Corporation of Japan (currently,
Regional Economy Vitalization Corporationof Japan)
Dec. 2010 Director and Executive Vice President, Japan
Airlines Co., Ltd.
Jun. 2013 Senior Managing Executive Officer, World
Co., Ltd.
Feb. 2015 Representative Director and President,
Akindo Sushiro Co., Ltd.
Mar. 2015 Representative Director, President and CEO,Sushiro Global Holdings Co., Ltd. (currently,
FOOD & LIFE COMPANIES LTD.) (to present)
Oct. 2015 Representative Director, Sushiro Creative
Dining Ltd. (currently, FOOD & LIFEINNOVATIONS LTD.) (to present)
Oct. 2019 Director and Chairman, Akindo Sushiro Co.,
Ltd. (to present)
Apr. 2021 Director and Chairman, Kyotaru Co., Ltd. (topresent)
May 2022 Outside Director, Adastria Co., Ltd. (topresent) Reason for appointment

Apr. 1998 Joined Nippon Advanced Technology Co.,
Ltd. (currently, Mitsubishi Electric Software
Corporation)
Apr. 2001 Joined Arthur Andersen, LLP. (currently,
PwC Consulting LLC)
Aug. 2002 Transferred to KPMG Consulting Co., Ltd.
(currently, PwC Consulting LLC)
Oct. 2008 Joined SIGMAXYZ Inc. (currently, SIGMAXYZ
Holdings Inc.)
Nov. 2014 Information, Communications and media
industry Managing Director, SIGMAXYZ Inc.
Apr. 2015 Digital Force Managing Director, SIGMAXYZ
Inc.
Apr. 2017 Research Adviser, Artificial Intelligence
Research Center, National Institute ofAdvanced Industrial Science and Technology(AIST) (to present)
Apr. 2019 Senior Executive Officer, Head of Digital
Sherpa and Chief Information Security
Officer (CISO), SIGMAXYZ Inc.
Apr. 2020 Senior Executive Officer, Head of Industry
Sherpa and Chief Information Security
Officer (CISO), SIGMAXYZ Inc.
Oct. 2021 Senior Executive Officer, SIGMAXYZ Inc.
May 2022 Outside Director, Adastria Co., Ltd. (to present)
Oct. 2022 Managing Executive Officer, Rise, Rise
Consulting Group, Inc. (to present)

Jul. 2003

Reason for Appointment

Reason for Appointment

Reason for Appointment

Reason for Appointment

Reason for Appointment

In our opinion, Satoshi Akutsu is suitable for the position
noted above due to his record of achievements as amarketing expert, as well as his ability to provide usefuladvice, etc., regarding our overall marketing business andapplications to the management of the company from theperspective of business development strategies.

In our opinion, Hiromi Horie is suitable for the position
noted above due to her record of achievements as thehead of public relations and marketing departments ofmajor companies (in the retail and restaurant industries),
as well as her ability to apply her experience to the
management of the company.

In our opinion, Koichi Mizutome is suitable for the
position noted above due to his experience in corporate
reform at global consulting firms, as well as his wealthof experience and insight cultivated as a manager atmajor companies (retail businesses), which we believe
will be beneficial in the management of the company.

In our opinion, Tatsuhiro Matsuoka is suitable for the
position noted above due to his record of achievements
as general manager of services and information security
divisions at major companies (IT consulting), in the IT
and digital fields, which we believe will be beneficial in
the management of the company.

In our opinion, Kazuo Nishiyama is suitable for the
position noted above due to his experience and insightcultivated as a manager at major companies (IT, realestate), which we believe will be beneficial in the
management of the company.

Attendance at Board of Directors Meetings(Fiscal Year Ended February 2023)

Attendance at Board of Directors Meetings(Fiscal Year Ended February 2023)

Attendance at Board of Directors Meetings(Fiscal Year Ended February 2023)

Attendance at Board of Directors Meetings(Fiscal Year Ended February 2023)

Attendance at Board of Directors Meetings(Fiscal Year Ended February 2023)

15/15

15/15

10/11

11/11

11/11

Joined Sony Corporation (currently, Sony
Group Corporation)
Apr. 2007 General Manager, Business Strategy Office,Chemical and Energy Department, Sony
Corporation
Apr. 2012 General Manager, Corporate Planning andPromotion Department, Sony Corporation
Feb. 2014 Head of SRE Business Preparation Office,Sony Corporation
Apr. 2014 President and Chief Executive Officer(Representative Director), Sony Real Estate
Corporation (currently, SRE Holdings
Corporation) (to present)
Oct. 2018 President and Chief Executive Officer(Representative Director), SRE AI Partners
Corporation (to present)(currently Representative Director andPresident CEO) (to present)
May 2022 Outside Director, Adastria Co., Ltd. (to present)

E S G

Satoshi Akutsu

ADASTRIA INTEGRATED REPORT 2023

Directors (As of May 25, 2023)* Directors Koichi Mizutome, Tatsuhiro Matsuoka, and Kazuyoshi Nishiyama were elected at the 72nd Ordinary General Meeting of Shareholders held on May 26, 2022; therefore, the number of meetings of the Board of Directors after their election was 11.

65Introduction

About Us

Growth Strategy

ESG

Data

Co r p o rat e Go v ern an ce

Tsuyoshi Matsuda

Kazuhiko Ebihara

Yoshiko Hayama

Kyoko Mogi

Standing Statutory Auditor

Auditor

Auditor

Auditor

Biography

Biography

Biography

Apr. 1976 Joined Mitsubishi Bank, Limited (currently,
MUFG Bank, Ltd.)
Jan. 2006 Joined POINT INC. (currently, Adastria Co.,
Ltd.) Adviser, POINT INC.
Mar. 2006 Executive Officer, Executive General
Manager of Administration Division andGeneral Manager Accounting Department,
POINT INC.
May 2008 Director, Executive Officer, Executive
General Manager of Administration Division,
POINT INC.
May 2010 Director, Managing Executive Officer,
Executive General Manager of Administration
Division, POINT INC.
Jun. 2013 C o r p o r a t e A u d i t o r , N A T U R A L N I N E
HOLDINGS CO., LTD. (currently, Adastria
Logistics Co., Ltd.)Mar. 2015 Adviser to the Chairman’s Office, Adastria
Holdings Co., Ltd. (currently, Adastria Co.,Ltd.)
May 2016 Standing Statutory Auditor, Adastria Co.,
Ltd. (to present)

Jul. 1983

Joined Boston Consulting Group Co., Ltd.
(currently, Boston Consulting Group K.K.)
Jun. 1986 Joined Goldman, Sachs & Co. (currently, theGoldman Sachs Group, Inc.)
Oct. 1988 Joined Goldman Sachs (Japan) Corp.
(currently, Goldman Sachs Japan Co. Ltd.)
Sep. 2002 Joined J.P. Morgan Securities Asia Pte. Ltd.
Dec. 2006 Director, Synergy Inc.
Jun .2007 Part-Time Lecturer, Graduate School ofFinance, Accounting and Law, Waseda
University
Dec. 2013 Instructor/Curriculum Coordinator, Japan
Vietnam EPA Program (Sponsored by Ministryof Foreign Affairs), ARC Academy (Vietnam)
May 2016 Outside Auditor, Adastria Co., Ltd. (topresent)

Apr. 1983 Joined Tohmatsu & Co. (currently, Deloitte
Touche Tohmatsu LLC)
Oct. 1990 Joined Deloitte Touche Tohmatsu (currently
Deloitte Touche Tohmatsu LLC)
Mar. 1994 Registered as a Certified Public Accountant
Jan. 2007 Joined Ernst & Young ShinNihon (currently,
Ernst & Young ShinNihon LLC)
Jan. 2015 Representative, Yoshiko Hayama Certified
Public Accountant Office (to present)
Jun. 2015 Outside Audit & Supervisory Board Memberof COCO’S JAPAN CO., LTD.
May 2016 Outside Director, SUGI HOLDINGS CO.,LTD. (to present)
Aug. 2016 Research Specialist, Japanese Institute ofCertified Public Accountants (to present)
Jun. 2017 Outside Director, COCO’S JAPAN CO., LTD.
May 2018 Outside Auditor, Adastria Co., Ltd. (to present)
Mar. 2020 Outside Director (Audit and Supervisory
Committee Member), DYNAC HOLDINGSCORPORATION
Jun. 2020 Independent Director, Zensho Holdings Co.,
Ltd. (to present)
May 2023 Outside Corporate Auditor, Bellsystem24
Holdings, Inc. (to present)

Jan. 2011 Registered as a lawyer (Dai-Ichi Tokyo Bar
Association)
Jan. 2011 Joined Tokyo Sanno Law Office
Sep. 2015 Joined Hayabusa Asuka Law Offices
May 2018 Joined southgate (to present)
Feb. 2021 Seconded to Gleiss Lutz (Germany)
Dec. 2022 Admitted to the State Bar of California
May 2023 Outside Corporate Auditor, Adastria Co.,
Ltd. (to present)

Reason for Appointment

Reason for Appointment

Reason for Appointment

Reason for Appointment

In our opinion, Tsuyoshi Matsuda is suitable for the
position noted above due to that he possesses a wealthof experience and specialized knowledge having worked
as General Manager of Accounting Department of thecompany, as well as Director and Managing Executive
Officer in charge of Accounting and Finance Departments.

In our opinion, Kazuhiko Ebihara is suitable for the
position noted above due to that he has abundant
experience and professional knowledge in companies
that conduct investment banking business.

In our opinion, Yoshiko Hayama is suitable for the
position noted above due to that her professional
expertise as a certified public accountant and abundant
experience and insight in auditing at audit firms will bebeneficial to the management of the company.

In our opinion, Wataru Maekawa is suitable for the
position noted above due to that her professional
expertise and abundant experience and insight incorporate law as an attorney at law will be beneficial tothe management of the company.

Attendance at Board of Directors Meetings(Fiscal Year Ended February 2023)

Attendance at Board of Directors Meetings(Fiscal Year Ended February 2023)

Attendance at Board of Directors Meetings(Fiscal Year Ended February 2023)

Attendance at Board of Directors Meetings(Fiscal Year Ended February 2023)

15/15

15/15

15/15

—

Attendance at Audit & Supervisory Board
Meetings (Fiscal Year Ended February 2023)

Attendance at Audit & Supervisory Board
Meetings (Fiscal Year Ended February 2023)

Attendance at Audit & Supervisory Board
Meetings (Fiscal Year Ended February 2023)

Attendance at Audit & Supervisory Board
Meetings (Fiscal Year Ended February 2023)

15/15

15/15

15/15

—

E S G

Biography

ADASTRIA INTEGRATED REPORT 2023

Auditors (As of May 25, 2023)* Kyoko Mogi was elected at the 73rd Ordinary General Meeting of Shareholders on May 25, 2023, and therefore did not attend any Board of Directors meetings or Board of Auditors meetings for the fiscal year ended February 28, 2023.

66

Introduction

About Us

Growth Strategy

ESG

Data

Co r p o rat e Go v ern an ce

Key External Initiatives

Under our corporate philosophy of Be a Person Needed, Be a Company Needed, theAdastria Group is committed to fulfilling our social responsibilities by conducting fair,equitable, and transparent business. All employees will conduct themselves with selfdiscipline and high ethical standards at all times as members of society.

(1) Compliance With Group Procurement Policy and Group Procurement Guidelines

Key Internal Initiatives(1) Group Code of Ethics

Foster sustainable development in production areas

Adastria established the Group Code of Ethics to address anti-corruption, respect for humanrights, and fair and transparent business dealings. This code ensures that our employees, as
members of society, behave with self-discipline and high ethical standards at all times.
Every year, we reconfirm this code, requiring employees to read and sign to signal theirunderstanding. The response rate for the fiscal year ending February 2023 was 98.3% inJapan and 100% overseas.
We also conduct compliance training for Group employees in Japan to prevent incidents
or improprieties.
(2) Harassment Prevention Training

We provide harassment prevention training on an annual basis and clearly state theprohibition of harassment in our work rules and regulations as part of our efforts to prevent
harassment. We establish curriculum and train management and non-management personnel
to ensure appropriate responses to any incidents of harassment.
(3) Anonymous Whistle-Blowing System (Whistle Line)In the event of acts or indications of acts
violating compliance or other violations ofpropriety, laws, or rules, employees haveaccess to an internal whistle-blowing
system to report said acts. Employees
may also contact a designated externallawyer, if preferred. This program may be
used anonymously by any employee―both in Japan and overseas. The detailsof reports are kept confidential and wegive full consideration to ensure persons
making reports are not treated unfairly.
The whistle-blowing system received
108 consultations in the fiscal year
ended February 2023. Among these, nocases were deemed to be serious
misconduct and each case was handledappropriately.

We established the Group Procurement Policy and the Group Procurement Guidelines togrow together with our suppliers and continue to produce products in good partnership. We
pursue CSR procurement with these policies that aim to conduct fair and ethical transactions
while fulfilling our social responsibilities. For more details, see Fostering Sustainable
Development in Production Areas on P53.

Number of Internal Reports and Details (FYE 02/2023)
Compliance Violations
Attendance, Company
Sales Policies, etc.

2%
(2)

1

% Other(1) COVID-19Related etc.

6%(7)Store Management
and Workplace
Environment

12

%
(13)
Work-Related
Shifts, Overtime,
Other Work-Style

Number ofInternal Reports

79%

108
Speech and Behavior ofSuperiors or Co-Workers
Including Harassment(85)(2) Business Partner Questionnaire

We conduct an annual questionnaire ofour business partners in Japan andoverseas with whom we have purchasing
relationships as one means to maintainpositive business relationships withbusiness partners. These questionnaires
confirm whether we are engaging in fairbusiness practices by ascertaining
compliance with various laws andregulations, including the Subcontract
Act, and whether any inappropriate
actions have been taken by our
employees.
When we receive questionnaire
feedback, we promptly investigate,confirm the details, formulate measures
to prevent recurrence, and conduct
internal training to strengthen
compliance.

Business Partner Questionnaire Results (FYE 02/2023)
Details

No. of Companies No. ofComments(No. of Directors Responses
andin Charge)
Suggestions

Product suppliers andproduction plants (Japan)

919(1,190)668

36

Product suppliers andproduction plants (overseas)

186
(192)

74

1

Sales promotion (advertisingand media publications)

117
(145)

77

10

Systems-related

102
(113)

69

1

Repair and maintenance work

54
(63)

47

—

Employee recruitment,
temporary staffing

38
(41)

29

—

Other (deliveries, supplies, etc.)

256
(303)

152

6

Total

1,672
(2,047)

1,116

54

E S G

Basic Philosophy

ADASTRIA INTEGRATED REPORT 2023

ComplianceDuring the fiscal year ended February 2023, the survey was distributed to 1,672
companies (2,047 persons) and received 1,116 valid responses. We also received 54
comments and suggestions, and we are responding to each case, formulating measures toprevent recurrence, and conducting internal training.
(3) Supplier Hotline

We established a Supplier Hotline to ensure fair, equitable, and transparent transactions in ourpurchasing relationships. Through this mechanism, suppliers may make anonymous inquiries, if
necessary, to address cases of abuse (power structure), or violations of laws, contract terms, or
ethics by members of the Group. In the event we receive an inquiry from a business partner, we
communicate the information with the director in charge. This system assures an appropriate andprompt response.

67Introduction

About Us

Growth Strategy

ESG

Data

Co r p o rat e Go v ern an ce
Risk Management

We take the following initiatives to respond to large-scale natural disasters and other risks
in the course of our daily business operations.
Business Continuity Plan (BCP) and Large-Scale Disaster Preparedness

We established the Crisis Management Committee to ensure effective crisis management
by preparing preventive and response measures in advance at each of our Group
companies against large-scale natural disasters that have, or are expected to have, aserious impact on the survival of said companies. Such disasters include earthquakes, fires,volcanic eruptions, typhoons, windstorms, floods, infectious diseases, and other disasters.
The Crisis Management Committee is tasked with accurately assessing the impact ofpotential large-scale disasters and the status of Group facilities and business activities, aswell as deliberating on necessary counter-measures.
Adastria Group Crisis Management System

Matters such as fraud, violation of laws and rules, product quality defects, incidents,
accidents, and disasters that occur in the course of business operations are reported to theLegal and General Affairs Department. This department is in charge of crisis management
reports and follows up on these reports in cooperation with the relevant departments until
each case is dealt with. We also go beyond appropriately responding to incidents that
occur to take measures to prevent recurrence, as well as disseminate information andconduct educational activities within the Company.
Summaries of individual cases and responses are reported to the Executive Council ona weekly basis, and important cases are reported to the Board of Directors.

Philosophy and Systems for Dealing With Anti-Social Forces
Each Group company rejects any relationships with anti-social forces that may threatensocial order and safety. The Group rejects any and all business relationships with suchforces or groups, and we take a firm stance against and reject any unreasonable demands.
In the event of an unreasonable demand by an anti-social force, the Legal and General
Affairs Department, as the department in charge of responding to such demands, shallcoordinate with the police, the National Center for Removal of Criminal Organizations, legal
counsel, and other outside specialized organizations to provide an appropriate response.

Information Security

Representative Directorand Executive Council
Key Discussion Items

Discuss/Report

Crisis Management Committee
Chairperson

Director in Charge of
Crisis Management

Members

Directors
Executive Officers
General Managers, etc.

ReportAdastria promotes activities to prevent and reduce the occurrence of risks in our daily
business operations. We formulate, update, and regularly disseminate the Crisis
Management Manual, which outlines appropriate business operations, accident prevention,and emergency responses.
ADASTRIA INTEGRATED REPORT 2023

Risks Management

Responding to Business Execution Risks

E S G

Adastria established departments and committees with jurisdiction over quality, productsafety, information security, health and safety, and other risks. We also develop rules andstandards to promote awareness of these risks. The company will report to a selected
director in charge of crisis management and take action in the event that a risk has, or is
expected to have, a significant impact on the survival and credibility of Group companies.

Instruct

Each Division, Department,
and Group Company• Collection and analysis of information onlarge-scale natural disasters and evaluation of
the preparedness of prevention and response
measures in the event of an outbreak• Formulation and periodic review of BCP• Matters related to BCP and disaster response
division training• Other important matters related to crisis
management in anticipation of large-scaledisasters

We commit to being a trustworthy organization to our customers and other stakeholders byappropriately protecting the information assets we hold in the course of our business.
As such, we established and disclosed our Information Security Policy with the aim ofintegrating compliance with information security into our code of conduct.
We will comply with this policy and the Privacy Policy as we maintain an advanced
information security management system. At the same time, we will cooperate with external
third-party organizations to further strengthen our security and monitoring systems andprovide ongoing peace of mind to our customers and other stakeholders.
We have also established an Information Security Committee to ensure information
security and protect information assets. This committee is chaired by a director anddeliberates on matters of in-formation security management measures, the assessment of
information security status, the development of related rules and systems, and otherimportant matters related to information security. The committee will then submit proposals
or reports to the Board of Directors as necessary.
Information Security Policy

Privacy Policy

68Introduction

About Us

Growth Strategy

ESG

Data

Co r p o rat e Go v ern an ce
Business Risks, Other Risks, and Response Measures
Ri s k s

Pandemic

CASE 02• A contraction in the domestic apparel market due to declining birthrates, aging population,and future population declines• Deliver an enjoyable shopping experience to customers through enhanced in-house
e-commerce functions and store-web integration• Diversify countries of operation by developing overseas markets (East Asia and North
America); diversify businesses in Japan by developing new brands for mature generations
and creating new businesses in the lifestyle field; expand customer base and increase
lifetime value for customers• Failure to develop and monetize businesses overseas due to inability to offer products thatmeet local customer needs, inability to acquire personnel skilled in business operations, etc.

CASE 03

Geographic andPolitical Risks

CASE 04

Exchange Rate
Fluctuations and Cost
Increases• Weakening business performance due to unforeseen changes in laws and regulations,disruptive political economic factors, or social turmoil caused by terrorism, conflict, natural
disasters, etc., in the countries where we do business• Interruptions in product procurement and sales due to political situations, the economic
environment, natural disasters, etc., in the countries (mainland China and other Asian
countries) where the products we handle are manufactured• Fluctuations in foreign exchange rates (mainly weakening of the yen), price hikes in cottonand other raw materials used in apparel• Soaring commodity import costs due to rising global energy prices• Rising cost of goods due to higher labor costs in commodity-producing countries• Diversify production sites and develop markets in East Asia regions offering high growthpotential• Accumulate business operation expertise and recruit employees by strengthening thefunctions of local subsidiaries and localizing human resources

E S G

Risks Related to Business Environment

A Contracting
Domestic Market• Changes in customer lifestyles and preferences, including the popularization of remote work
due to the spread of infectious diseases• Establish systems to promptly provide products to the market that meet consumer
preferences
ADASTRIA INTEGRATED REPORT 2023

CASE 01• The spread of COVID-19 or a pandemic caused by a new infectious disease could force theclosures of commercial facilities where we operate stores under brands owned by Adastria.
Customer traffic could decline, production logistics could stagnate, and businessperformance could experience a resulting downturn

Response Measures• Make appropriate use of forward exchange contracts• Order goods and raw materials in advance based on data analysis• Decentralize production to ASEAN countries• Take advantage of volume discounts by placing bulk orders across multiple brands• Reduce brokerage margins by dealing directly with factories• Operate stores and logistics centers to create environmental value, including the
procurement of power derived from renewable energy sources

CASE 05

Environmental Issues• Insufficient response to tighter environmental impact regulations and changing consumer
preferences• Decreased need for clothing due to global warming• Rising raw materials prices due to climate change• Increased expenses if carbon tax is enforced on fossil fuel procurements

CASE 06

Natural Disasters andAccidents• Natural disasters such as earthquakes, tsunamis, typhoons, volcanic eruptions, and otherunexpected natural disasters that result in large-scale power outages, flooding, or otherdamage to stores; prolonged stagnation of production, distribution, and sales activities due
to said disasters• Establish sustainability targets• Improve sustainability throughout the value chain, including the procurement ofenvironmentally friendly raw materials, reduction of environmental impact in production
processes, and reduction of waste inventory via inventory optimization• Increase the number of partner-certified factories that meet sustainability goals• Change behaviors and raise environmental awareness in the market as a whole throughcollaborations with other companies in the industry to develop brands that support
sustainable fashion• Formalize business continuity plans (BCP) to recover quickly from major earthquakes, otherdisasters, outbreaks of infectious diseases, or other events• Analyze the impact on store operations in areas that experienced heavy rain damage in thepast and estimate the financial impact of store closures due to flooding69

Introduction

About Us

Growth Strategy

ESG

Data

Co r p o rat e Go v ern an ce
Business Risks, Other Risks, and Response Measures

Management Strategy Risks

Risks Related to StoreOperations
CASE 02

Apparel Business
Risks• Impairment losses due to deterioration in profitability of fixed assets (stores, etc.) or decline
in market value of assets held
• Changes in the commercial environment surrounding fashion buildings where stores are located• Failure in product planning, etc., or obsolescence of brand value due to the characteristicsof the casual apparel retail market, where competition (foreign and domestic) is fierce, andtrends and tastes tend to change quickly and dramatically• Operate a localized store system to optimize our store network, conducting detailed surveys
in each region and engaging in ongoing store relocations• Achieve an advantageous store location mix by leveraging the Group’s economies of scale
and brand strength• Provide products that meet customer needs by collecting information on customer
preferences through stores and the Company’s e-commerce site; incorporate thisinformation promptly into product development• Improve the accuracy of demand forecasting by encouraging pre-order sales on the
e-commerce site
• Improve new brand development speed and accuracy

CASE 03

Supply Chain Risks• Stagnation of product supply due to production delays among companies to which theCompany consigns product manufacturing, supplier bankruptcy, or interruption of producttransportation routes, etc.
• Damage to our reputation due to employee human rights violations or environmental
pollution at outsourced companies• Rising logistics costs due to energy price fluctuations and labor shortages

CASE 04

Information Systems andPersonal Information Risks• Loss of sales and customer confidence due to serious failures in Group systems caused byinformation system malfunctions, cyberattacks, or other causes, or a leakage of personal
information due to unauthorized access or other causes• Diversify production sites to ASEAN countries and other regions in addition to mainland China• Obtain appropriate insurance coverage in case of supply route breakdowns, exercise
information management across the transportation process, secure multiple means oftransportation, and select alternative routes• Encourage socially and environmentally responsible procurement activities in accordancewith the Group’s procurement policy

ADASTRIA INTEGRATED REPORT 2023

CASE 01

Response Measures• Curb logistics costs through in-store pickup and streamlined delivery for e-commerce sales• Conduct third-party security risk assessments; formulate and implement necessary response plans• Install the latest security software and maintain information management rules

E S G

Risks Related to Business Operations

Ri s k s• Failure to recover security deposits and guarantee money deposited for retail properties due
to bankruptcy of developers, etc.

• Establish a Board of Directors that represents a diverse range of directors with different
backgrounds, expertise, and experience to ensure an appropriate balance while adopting an
executive officer system to separate business management and execution

CASE 01

Human Resources
Risks• Deterioration in business, financial condition, and results of operations due to the sudden
departure of senior management• Adopt a performance-linked stock compensation plan for directors and a stock ownershipplan for executive officers to recruit and retain capable management personnel• Restrictions on store operations and higher labor-related costs due to a shrinking workforce
in Japan and rising wages worldwide• Develop management personnel through training for senior management, etc.
• Develop a personnel system that allows employees to choose diverse careers and work
styles that suit their lifestyles; engage in health management• Engage in initiatives to achieve employee well-being through the Adastria Wellness
Committee, a health promotion committee consisting mainly of employees

CASE 02

Success or Failure of Major
Investments and Acquisitions
CASE 03

New Business
Uncertainties
CASE 04

ESG Compliance
Success or Failure• Extended payback period or failure to recover investment due to investments in or
acquisition of outside companies for overseas business expansion, the development of new
brands, the acquisition of related technologies, etc., toward long-term growth that do not
generate expected revenues or synergies, or capital and system investments necessary for
growth not functioning as expected• Failure to develop business or generate business revenue due to low-er-than-expectedcustomer demand, higher-than-expected costs to enter or operate, or increased competition• Expenses or losses resulting from the withdrawal or downsizing of new businesses• Risk of losing corporate value in the capital markets and impairment of sustainability due toreputational risk if ESG-related social issues are not identified, specified, and adequately
managed within the risk management framework• Conduct investments within the scope of financial soundness; formulate a review process
for investment decisions; hold discussions at board of director meetings (including outside
directors)• Establish a third-party PMO for large system investments• Accumulate expertise in new areas through collaborations; leverage lifestyle proposal
capabilities cultivated in the apparel industry in new businesses• Establish a Sustainability Committee, formulate a sustainability policy, and set medium- tolong-term sustainability targets; manage the progress of materialities; report to/advise theBoard of Directors and/or Executive Committee

70Growth Strategy

ESG

Data

ADASTRIA INTEGRATED REPORT 2023

About Us

Data

Introduction

D ATA

Adastria Data

71

Introduction

About Us

Growth Strategy

ESG

Data

Fi na n c ial an d N o n - F in an cial Hig hlights
10-Year Financial and Non-Financial Highlights

February2015

February
2016

February2017

February2018

February
2019

February
2020

February2021

February2022

February2023

Net sales(Million yen)

153,273

184,588

200,038

203,686

222,787

222,664

222,376

183,870

201,582

242,552

Operating profit(Million yen)

5,762

5,981

16,004

14,916

5,005

7,190

12,885766

6,564

11,515

Ordinary profit(Million yen)

6,027

6,452

16,185

15,126

5,428

7,345

12,843

2,981

8,166

12,026

Net income attributable to owners of the parent(Million yen)

-4,731

503

9,122

11,575

863

3,890

6,363

-693

4,917

7,540

Earnings before interest, taxes, depreciation, and amortization (EBITDA)(Million yen)

13,861

15,732

24,612

23,02815,141

15,317

20,357

7,766

13,302

19,964

Net asset value(Million yen)

44,786

46,23353,28256,03551,03052,95957,04150,701

54,96360,762

Total assets(Million yen)

78,841

83,74290,454

90,38991,123

91,26397,924

95,44997,957111,392

Cash flow from operating activities(Million yen)

4,606

12,112

22,054

11,928

10,685

9,904

20,85011,9333,504

13,460Cash flow from investing activities(Million yen)

-6,831-10,421-4,551-4,323-7,404-8,686-6,645-7,366-7,780-9,963

Cash flow from financing activities(Million yen)

-9,503-2,524-5,683-6,309-4,629-1,890-6,439-6,840-3,251-4,398

Net asset per share(Yen)

1,844.17

952.02

1,106.45

1,191.16

1,084.84

1,125.29

1,210.55

1,122.71

1,192.62

1,309.96

Earnings per share (EPS)(Yen)-206.4210.37

188.31

242.49

18.36

82.67

135.08-14.88108.72

166.37

Equity ratio

(%)

56.8

55.2

58.9

62.0

56.0

58.0

58.3

53.1

55.1

53.3

Return on equity (ROE)

(%)

-11.3

1.1

18.3

21.2

1.6

7.5

11.6

-1.3

9.4

13.3

Return on assets (ROA)

(%)

-6.7

0.6

10.5

12.8

1.0

4.3

6.7

-0.7

5.1

7.2

Price earnings ratio (PER)(Times)

—

141.9

15.5

12.0

126.7

23.5

13.0

—

17.1

13.0

Dividend payout ratio

(%)

—

361.5

34.5

30.9

272.3

60.5

37.0

—

50.6

36.1

Total shareholder return (5-year TSR)

(%)

—

—

—

—

—

85.7

79.5

91.8

81.4

104.1

Total shareholder return (1-year TSR)

(%)

71.0

128.3

203.4

101.9

81.7

85.7

92.6

116.3

87.8

131.2

February2014

February2015

February
2016

February2017

February2018

February
2019

February
2020

February2021

February2022

February
2023

Data

February
2014

ADASTRIA INTEGRATED REPORT 2023

Consolidated Financial Data

Consolidated Non-Financial Data

Number of stores at end of term
Stores sales floor area (monthly average)(Stores)
(m2)

1,213

1,356

1,324

1,351

1,501

1,427

1,392

1,400

1,428

1,509

221,620251,062

268,704

272,182

302,131304,529

287,616

296,210299,676

330,150

Number of full-time employees(People)

4,546

4,852

4,760

4,914

5,677

5,665

5,715

5,701

5,762

6,356

Average number of temporary employees(People)

5,334

5,839

5,997

6,163

6,564

6,363

6,167

5,085

5,530

6,061

* The Company has applied standards such as the Partial Amendments to Accounting Standard for Tax Effect Accounting (ASBJ Statement No. 28, February 16, 2018) since the beginning of the fiscal year ending February 2020. Key management indicators for the fiscal year
ending February 2019 are indicators after retroactive application of such accounting standards.
* The Company has applied standards such as the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020) since the beginning of the fiscal year ending February 2023. Key management indicators for the fiscal year ending February 2023 areindicators after the application of these accounting standards.

72

Introduction

About Us

Growth Strategy

ESG

Data

ELEMENT RULE Co., Ltd.

NameBUZZWIT Co., Ltd.

Name

ADOORLINK Co., Ltd.

Head Office
Address

19F Shin-Aoyama Bldg. West, 1-1-1
Minami-Aoyama, Minato-ku, Tokyo

Head Office
Address

7F Daiba Frontier Bldg., 2-3-2 Daiba,
Minato-ku, Tokyo

Head Office
Address

5F Miyamasuzaka Place Shibuya, 2-16-5
Shibuya, Shibuya-ku, Tokyo

Establishment

March 1, 2017

Establishment

November 21, 2016

Establishment

November 2, 2020

Businesses

Planning, manufacturing and sales ofapparel, sundries, etc.

Businesses

Planning, manufacturing and sales ofapparel, sundries, etc.

Businesses

Planning, manufacturing and sales ofapparel, sundries, etc.

Name

Gate Win Co., Ltd

Name

ADASTRIA eat Creations Co., Ltd.

Name

zetton inc.

Head Office
Address

Shibuya Hikarie, 2-21-1 Shibuya,
Shibuya-ku, Tokyo

Head Office
Address

19F Shin-Aoyama Bldg. West, 1-1-1
Minami-Aoyama, Minato-ku, Tokyo

Head Office
Address

9F VORT-Shibuya-briller Bldg., 1-20-5Jinnan, Shibuya-ku, Tokyo

Establishment

May 2022

Establishment

October 31, 2017

Establishment

October 26, 1995

Businesses

License business for domestic casual
wear market

Businesses

Management and development of foodservice operations

Businesses

Management, development andconsulting of restaurants, etc.

Data

Name

ADASTRIA INTEGRATED REPORT 2023

G r o u p C o m p an ies

Other Group Companies
Adastria Asia Co., Ltd.

Name

Adastria Logistics Co., Ltd.

Name

Adastria General Support Co., Ltd.

Head Office
Address

1-15 (Gate A) Chuo Kogyo Danchi,
Ibaraki-machi, Higashiibaraki-gun, Ibaraki

Head Office
Address

Shibuya Hikarie, 2-21-1 Shibuya,
Shibuya-ku, Tokyo

Establishment

June 1988

Establishment

December 19, 2013

Businesses

Logistics operations for group companies

Businesses

Comprehensive services for groupcompanies

Adastria (Shanghai) Co., Ltd.
niko and ... (Shanghai) Co., Ltd.
Adastria Taiwan Co., Ltd.
Adastria (Thailand) Co., Ltd.
Adastria USA, Inc.
Velvet, LLC
ZETTON, INC.
NATURAL NINE TRADING (SHANGHAI) LTD.
SES GLOBAL LOGISTICS (SHANGHAI) Co., LTD.

73

Introduction

About Us

Growth Strategy

ESG

Data

Co r p o ra t e O v erview an d St o ck I nf orma tion

Corporate Overview

Status of Shares (As of February 28, 2023)

Head Office Address

27F, Shibuya Hikarie, 2-21-1 Shibuya, Shibuya-ku,

150,000,000 shares

Tokyo, Japan

Total Number of Issued Shares 48,800,000 shares (including 3,147,779 treasury shares)
Number of Shareholders
52,917

Contact Number

03-5466-2010 (Representative)

Major Shareholders (Top 10)

Establishment

October 22, 1953

Capital¥2,660 Million

Businesses

Planning, manufacturing and sales of apparel, sundries, etc.

Primary Banking Partners

MUFG BankJOYO Bank

Mizuho Bank

Sumitomo Mitsui Banking Corporation
Number of Employees

6,356 full-time group employees

Number of Stores

Domestic: 1,340 Overseas: 95 Restaurants: 74(Yen/Point)

TOPIX(Left-Hand Scale)

Equity Shares (%)
37.5
8.8
4.4
3.2
2.3
1.5
1.4
1.1
1.0
1.0

*Ratios were calculated excluding 3,147,779 shares of treasury stock

Stock Price and Yield (Monthly)
Closing Price(Yen, Left-Hand Scale)No. of Shares Owned(Thousands of Shares)
Fukuzo Co., Ltd.
17,132The Master Trust Bank of Japan, Ltd. (Trust Account)
3,998
Toyoshima Co., Ltd.
2,000
Custody Bank of Japan, Ltd. (Trust Account)
1,467
Michio Fukuda
1,059
J.P. MORGAN SECURITIES PLC FOR AND ON BEHALF
688
OF ITS CLIENTS JPMSP RE CLIENT ASSETS-SETT ACCT
Adastria Employee Shareholding Association
657
SMBC Nikko Securities Inc.
506
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
443
Morgan Stanley MUFG Securities Co., Ltd.
440
Shareholders

ADASTRIA INTEGRATED REPORT 2023

Adastria Co., Ltd.

Data

Total Number of Shares
Authorized to Be Issued

Name

Distribution of Shares by Shareholder
Yield(1,000 Shares, Right-Hand Scale)

3,000(1,000 Shares)
16,00014,0002,500

12,0002,000

10,000Shareholder

No. of Shareholders

Foreign nationals
Individuals and others
Financial institutions
Business firms and othercorporations
Financial services providers
Total amount269
52,28715

No. of Shares Owned(Thousands of Shares)
5,898
15,0286,131

Equity Shares (%)
12.1
30.8
12.6

317

19,62740.2

2952,917

2,114
48,8004.3
100.0*Treasury stock is included in the calculation of Individuals and others

1,500

8,000

External Evaluations

6,000

1,000

4,000
500

2,000

0

0
2019/03

2019/09

2020/032020/092021/032021/092022/032022/09

MSCI

FTSE

(As of April
2023)(Since April
2022)

DX
NADESHIKO
Certification
BRAND
2021
(Certified in
January 2022)

PRIDE
INDEX
GOLD
AWARD
2022

D&I
Award
2022

MonisuCertification

2023 Health &Productivity
Management
Outstanding Organization(Large Corporate Sector)

74