3Q of FY2023
Presentation Materials

H2O RETAILING CORPORATION

Digest of Financial Results for the Third Quarter▶ Consolidated results exceeded forecast of 3Q and cumulative operating profit exceeded fullyear forecasts.

▶ (Department Store)
Existing store sales exceeded pre-COVID-19 level due to strong domestic sales
and a recovery in inbound sales.
▶ (Supermarket)
Double-digit profit growth in 3Q, and both sales and profit increased in cumulative 3Q.
▶ (Shopping Center)
Continued to increase profit in 3Q due to strengthened sales force and cost reductionin H2OSC Development and improved occupancy rate of business hotel in Oi Development.
▶ No changes to the consolidated forecast for the full year
Considering uncertainties such as rising prices and soaring utilities costs, we expect the 4Q
results to be in line with our forecast.

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Topics

Ⅰ. Consolidated Financial Results

Ⅱ. Forecast of FY2023

Ⅲ. Direction of efforts for FY2024

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Ⅰ. Consolidated Financial Results

1．Consolidated Financial Results

2．Results by segment
3．Department store business4．Supermarket business
5. Extraordinary income and losses

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Ⅰ-1. Consolidated Financial Results▶ Sales continued to recover particularly in department store business▶ Increase in gross profit and operating profit by sales recovery despite increase in SG&A expenses including external factors likehigher utility costs
Operating profit exceeded the full-year forecast as a result of cost control efforts mainly in department stores.
▶ Extraordinary income of ¥ 3.8 bn. in 3Q due to sale of Takashimaya shares
1-3Q（billions of yen）

Amount3Q
AmountYoY

YoY

Gross sales

734.8

29.6%
167.6

273.2

22.5%
50.2

Net sales

474.9

27.9%
103.6

170.5

26.9%
36.2

Operating Profit

9.5

8.8

8.4

2.5

Ordinary Profit

11.6

9.6

8.8

2.6

8.9
3.9

(13.7)
(4.9)

3.8

1.1

0.8

(3.2)

11.0

(2.0)

8.2

3.3

Extraordinary income
Extraordinary losses
ProfitCopyright © H2O Retailing Corp. All Rights Reserved.

5Ⅰ-2. Results by segment▶ Department store : Continued sales recovery, increased sales and operating profit▶ Supermarket : Double-digit increase in operating profit in 3Q (Oct.-Dec.) due to new consolidation of Kansai Super Market andcost reductions at Izumiya and Hankyu Oasis, and operating profit also increased in 3Q cumulative▶ Shopping center : Increased profit due to strengthened sales force and cost reduction in H2O SC and improved occupancy rate ofbusiness hotel (Oi Development)
1-3Q

Gross sales(billions of yen)Amount3Q

Operating Profit

YoY

AmountYoY

Gross sales
AmountOperating Profit

YoY

AmountYoY

Department store

365.1

29.3%

7.9

6.8

144.6

12.9%

6.2

1.1

Supermarket

315.6

39.7%

4.6

0.6

109.7

43.2%

2.9

1.4

Shopping Center

27.5(20.9)%

1.7

1.3

10.0(1.9)%

0.8

0.4

Other

26.6

10.5%

(2.3)

0.3

8.9

9.6%

(0.8)

(0.5)

(2.3)

(0.3)

(0.8)

0.1

9.5

8.8

8.4

2.5

Consolidation
adjustment
Consolidated

734.8

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29.6%

273.2

22.5%

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Ⅰ-3. Department store business-Summary of results▶ Urban store sales increased due to sales of high-end items such as jewelry, watches and luxury brand.
▶ SG&A expenses increased from the previous year due to a decrease in the amount transferred to COVID-19 extraordinary
losses (¥3.3 bn. compared with the previous year) and the opening of the Hanshin Umeda Main Store.
▶ Despite an increase in utility expenses, cost increases were kept to a minimum and operating profit was higher than expected.

Hankyu Hanshin Department stores

1-3Q(billions of yen)Amount3Q
AmountYoY

YoY

Gross Sales

363.1

29.4%
82.5

Gross profit

81.8

17.932.6

3.3

Gross profit/ Gross Sales

22.52%(0.24)pt

22.65%(0.35)pt

Other operating
revenue

2.5

SG & A

76.5

Operating profit

7.8

0.1
11.3
6.8

143.8

12.9%
16.4

0.9
27.3
6.2

0.1
2.2
1.1

Sales by store

YoY

Urban stores

35%

Hankyu main store
Hanshin Umeda mainstore

33%
104%

Suburban store

7%

SG & A

YoY

decrease in amounttransferred to
extraordinary loss

3.3

Increase in rent anddepreciation（ex. Hanshin Umedamain store）

2.1

Increase in utility cost

1.1

Increase in sales relatedexpenses

2.4* Non-consolidated results shown above are reclassified on the basis before the application of "Accounting Standards for Revenue Recognition".

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7Ⅰ-3. Department store business-Factors of Profit Increase/Decrease▶Profit increased by ¥10.1 bn. compared to the previous year on a real basis, excluding the decrease in transfer of SG&A
expenses to the COVID-19 extraordinary loss.
Factors of Increase/Decrease in Operating Profit (YoY)(billions of yen)
3Q of FY2022

3Q of FY 2022
(real basis)1.0(2.4)

YoY(real basis)
10.1

3Q of FY 2023

7.8

Decline ingross margin(0.9)
Margin 22.52%
YOY (0.24)pt

Sales increase

18.9

Rent
Depreciation(2.1)

Utility cost
(1.1)

Increase inSG & A(4.8)
Sales related expenses 2.4
Renovation and repair fee 0.8

Decrease in amounttransferred toextraordinary loss

(3.3)

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8Ⅰ-3. Department store business-Sales of each category▶ Increased sales in all categories▶ Foods, whose share had increased during the COVID-19 outbreak, returned to the pre-COVID-19 level of share.
▶ Sales of general merchandise, which includes watches and jewelry, and Accessories, bags and others, which include luxury
brands, grew significantly and expanded their share.
Change in product mix
Sales of each category(billions of yen)100

AmountClothing
Accessories, bags andothers
Householdmerchandise
Foods

YoY

Share

Other

1.1pt

Generalmerchandise(2.6)pt

Foods

1.9pt

Accessories, bags
and others(0.4)pt

Clothing

YoY

83.1

26%

22.1%

(0.4)pt

76.8

42%

20.4%

1.9pt

9.624%

2.6%(0.1)pt

7550

109.5

18%29.1%(2.6)pt

Restaurants & cafes

8.5

97%

2.3%

0.8pt

General merchandise

73.4

36%

19.5%

1.1pt

Service1.4

35%

0.4%

0.0pt

Other

13.9

12%

3.7%(0.6)pt

Total

376.2

29%

100.0%-Copyright © H2O Retailing Corp. All Rights Reserved.

0.1pt

250

3Q of FY2022

3Q of FY2023
9Ⅰ-3. Department store business-Existing store sales (versus pre-COVID-19)▶ Existing store sales in 3Q were 102% of FY2019 (104% domestic, 86% inbound), exceeding pre-COVID-19 level.
▶ Domestic sales generally exceeded pre-COVID-19 levels throughout the period.
▶ Inbound sales recovered throughout the period.
After the relaxation of entry restrictions in October, the number of foreign customers grew significantly, exceeding 90% of thepre-COVID-19 level in November and December.
Existing store sales versus FY2019(Excluding Hanshin Umeda Main Store, Kobe, Takatsuki and Sanda Hankyu)
120%

Domestic sales in FY2023
100%

80%

Domestic sales in FY2022

60%

Inbound sales in FY2023
40%

Inbound sales in FY2022

20%0%

Apr.

MayJun.

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Jul.

Aug.

Sep.

Oct.

Nov.

Dec.

Jan.

Feb.

Mar.

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Ⅰ-3. Department store business-Inbound sales trends▶ Pre-COVID-19, FY2019 inbound sales were about ¥40 bn., of which China accounted for about 80% share.
▶ In 3Q after relaxation of entry restrictions, South Korea, Hong Kong, and Taiwan exceeded pre-COVID-19 levels, while China
only recovered by about 50%.
▶ After April 2023, sales exceeded pre-COVID-19 levels due to full-blown recovery to pre-COVID-19 in China and other factors.
Inbound sales of all stores (billions of yen)

5040

othercountries
3020

China10Apr.-Dec.

0FY19Inbound
share

FY20

FY19FY21

FY20

FY22

FY21・・・

FY233Q of FY23
cumulative

FY223Q

China

76%

78%

87%

93%

68％

45%

Othercountries

24%

22%

13%

7%

32％

55%

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[Inbound sales]
Versus FY19 (16)%China (49)%Other countries 78%

11Ⅰ-4. Supermarket business-Summary of results▶ Supermarket : Sales and profit increased due to new consolidation of Kansai Super Market (PL consolidated from January2022) .
▶ Existing store sales, which struggled in 1Q and 2Q due to downturn after the previous year’s demand increase, were on arecovery trend in 3Q, remaining at the same level as the previous year.
▶ In 3Q, integration of business operations between Izumiya and Hankyu Oasis and chain operations reform started. Profit
increased as a result of efforts to control labor costs, including those of part-time workers, through standardization andimprovement of work efficiency.
▶ Food manufacturing companies increased profit due to recovery in sales of prepared foods and bakery products and cost
reductions.
1-3Q(billions of yen)

Gross
Sales

3Q
Operating
Profit

YoY

Gross
Sales

YoY

Operating
Profit

YoY

YoY

307.1

41.8%

4.6

0.7

106.7

45.8%

2.8

1.5

Izumiya,Hankyu Oasis,
Qanat

209.4

(3.3)%

2.6(1.3)

72.9(0.3)%

1.90.6

Kansai Super Market

97.7

2.0

33.7

Food
Manufacturing

17.0Supermarketー※[(1.7)%](0.3)%

2.00.0[0.7]

0.28.9ー[1.9 %](1.6)%

0.90.20.9[0.8]0.1※ Compared to the company's previous year's results. Previous year's results are not included in the consolidated figures and are for reference only.

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12Ⅰ-4. Supermarket business-Existing store sales▶ In 1Q and 2Q, demand for eating at home was particularly strong in the previous year, in Kansai region due to the expansion ofCOVID-19 infection. This made existing stores to struggle in 1Q and 2Q in reaction, resulting in a year-on-year decline in existingstores sales in the cumulative 3Q.
▶ In 3Q (Oct.-Dec.), existing store sales remained on a par with the previous year
Number of customers decreased due to the easing of the impact of COVID-19, and sales unit price increased due to price hikes.

1-3Q

Existing
store sales

Number ofcustomers

3Q

Sales
unit price

Existing
store sales

Number ofcustomers

Sales
unit price

Izumiya(3.2)%(4.5)%

1.3%

0.5%(2.7)%

3.3%

Hankyu Oasis(6.7)%(5.4)%(1.4)%(2.0)%(4.1)%

2.2%

Kansai Super Market(1.7)%(2.4)%

0.7%

1.9%(0.9)%

2.8%

Total

(3.7)%(4.0)%

0.3%

0.2%(2.5)%

2.7%

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13Ⅰ-5. Extraordinary income and losses▶ Recorded ¥3.8 bn. gain on sale of Takashimaya shares in 3Q

Major items

AmountMajor contents(billions of yen)
Extraordinary
incomeExtraordinarylosses

Gain on sales of non-current
assets

5.0 former head officeGain on sales of investment
securities

3.8 Takashimaya

Loss on store closings and others

1.4 Development

Loss on retirement of noncurrent assets

1.1 stores

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H2O Shopping CenterHankyu Hanshin Department

14Ⅱ. Forecast of FY2023▶ Operating profit exceeded the full-year forecast on a consolidated basis, although there are differences by business segment.
▶ Due to following uncertainties, the full-year forecast announced in November remains unchanged.
Unpredictable impact of COVID-19 infection and rising raw material costs and utility costs are factors reducing profit.
Department store : Sales in January continued to exceed expectations and sales trend is steady.
Supermarket : Plan to realize profit improvement by thorough chain operations at Izumiya and Hankyu Oasis(Proceed as planned with measures to reduce SG&A expenses, centered on personnel expenses)

1H(billions of yen)AmountFY2023

2H
YoY

Forecast

YoY

Forecast

YoY

Gross sales

461.5

34.1%
117.5

518.5

16.8%
74.4

980.0

24.3%
191.9

Net sales

304.4

28.4%

335.6

19.2%

640.0

23.4%

Operating profit

1.1

6.3

7.9

2.0

9.0

8.3

Ordinary profit

2.8

7.0

7.2

0.6

10.0

7.7

Profit

2.8

(5.3)

8.2

6.4

11.0

1.1

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Ⅲ. Direction of efforts for FY2024
FY2023

FY2024⚫ New approach to expand the number of customers at Hanshin Umeda Main store (Subscription, mobile ordering)⚫ Strengthen approach for the wealthy market(Establish an all-in-one system from content development to customer service)⚫ Promote energy conservation at Hankyu Main Store(Improve efficiency of air conditioning, etc., which consume large amounts of energy)⚫ Hankyu Main Store opens “GREEN AGE” in April
Based on the concept of "Living in harmony with nature”

Department
storebusiness⚫ Fall of FY2024
Completed Kobe Hankyu andTakatsuki Hankyu remodeling⚫ Thorough chain operations

Supermarket
business

New business
Others➡ Steadily improve profits by modifying and increasing the precision of chain operation reforms⚫ Establish joint venture with Mandai Co., Ltd. in February 2023
(starting with procurement of products from overseas)⚫ Merger of Izumiya and Hankyu Oasis in April
Promotion of organizational and system integration⚫ Hankyu Kitchen Yell Kansai, a home delivery company, starting operationof a new center in June.

⚫ Starting a revitalization project for the redevelopment of Senri Central Park in March.

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⚫ Launching an application service related to food as the customer service
business in the spring of FY2024
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The information contained in this material reflects judgments made by H2O Retailing at the time ofpreparing this material, and no guarantees are provided concerning the accuracy of the information.
The information is also subject to change without prior notice.
H2O and the information providers assume no responsibility for any damage arising from the use of theinformation.
Also, H2O holds the copyright on this material, and accordingly, any duplication, reprinting or similar act
beyond the scope of personal use or any other use permitted by the Copyright Law is prohibited without theprior consent of H2O.

H2O RETAILING CORPORATION