Medium-Term Management Plan
FY2025-2027

May. 15, 2024

H2O RETAILING CORPORATION

Topics
I. Review of Mid-term Management Plan FY2022-2024
1. Achieved of Targets
2. Review of Key Initiatives
II. Toward Achieving Long-term Business Plan 2030
1. Long-term Business Plan 2030 (Ver.1)
2. Business Environment Changes and Awareness of Issues
3. Long-term Business Plan 2030 Ver.2
4. Positioning of Mid-term Management Plan FY2025-2027
III. Mid-term Management Plan FY2025-2027
1. Policies and Key Initiatives
2. Targets
3. Investment Plan
4. Key Initiatives
i. Deepen existing businesses "domestic customers and store business"
ii. Focus on and strengthen overseas customer businesses with high growth potentialiii. Develop and deploy new revenue sources
iv. Development and utilization of Group infrastructure to sustain businessv. Strengthen initiatives for “Management Conscious of Cost of capital and Stock Price"

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2

I. Review of Mid-term Management Plan FY2022-2024-1. Achieved of Targets➢ Significantly exceeded all set indicators➢ Restructuring of the Department Store Business and turning the Supermarket Business into a second pillar of thebusiness are on the horizon, resulting in significant growth in sales and operating profit.

(Unit: 100 million yen)

Mid-term
Management
Plan
TargetSales (100 millions of yen)

FY2024
AmountOther
Shopping Center

Vs. target
4,256

Supermarket

5,300

5,771

Department
StoresMid-term Management Plan
Targets

FY2023 Results
FY20243,050

Gross sales

9,300

Operatingprofit170

Ordinary
profit140

Profit―10,739

262

279

219

+15%

+92

+139

Operating profit (100 millions of yen)―

37

Shopping Center

79

Supermarket

216

Department
Stores

18
62

ROE

2.6%

8.5%

+5.9pt135

ROIC

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3.0%

4.7%

+1.7pt▲ 20▲0

Mid-term Management Plan
Targets

FY2023 Results
FY2024Other

3

I. Review of Mid-term Management Plan FY2022-2024-2. Review of Key Initiatives
Achieved above-planned results on a consolidated total,building a solid business foundation, centered on the restructuring of existing businesses
Key Initiatives

1. Restructuring of Department
Store Business

Review• Performance far exceeded planed, including a return to over-the-counter due to the COVID-19 convergence,an active domestic upper market due to soaring asset prices, and record-high inbound sales due to tourism
promotion and a depreciating yen.

• Progress in building a foundation (corporate culture, organization, structure, IT) to evolve into a customerbased business model that continuously connects with customers through OMO→ The challenge is to realize the next growth strategy and a new business model in response to market changes.

2. Turning the Supermarket
Business into a second pillarof the business3. Challenge to a new businessmodel for future growth• Expanded to become one of the largest supermarket groups in Kansai area through business integration with
Kansai Super Market.
• Strongly promoted business reforms at Izumiya and Hankyu Oasis and achieved profit improvement results→ The “second pillar” of Supermarket Business are on the horizon, next step is to pursuit the effect ofintegrating the operations of four supermarkets.
• Ningbo Hankyu holds the position of the best store in Ningbo area, further strengthening measures by making
Ningbo Hankyu a subsidiary• Launched a food service application in the Takatsuki area as the first step in online customer service andstarted collecting customer data as the next step.
→ To materialize customer service business and customer data utilization business4. Promote IT and digitalization
as a foundation

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• IT and digital infrastructure development and enhancement is 80% completed(customer data infrastructure, new work environment, security and governance system, etc.)→ To the stage of business utilization at operating companies using the platform(application, data utilization, etc.)4II. Toward Achieving Long-term Business Plan 2030
-1. Long-term Business Plan 2030 (Ver.1)
to become a ”Communication Retailer”〈 Approach Strategies 〉

Develop direct communication with customers and deepen relationshipMarketrelatedbusinessEC②●Target●KPI in 2030

・the rich・small mass
・mass

Active customer
10 millions of people
OP ￥30-35 billion
・
・
・
・
・

●Development

New

The rich(Ningbo・
Zhejiang)

NingboHankyu・IT, digital, OMO
・Customer database・Connections with locals

Dept.
over ¥15 bn.
Supermarket over ¥10bn.
SC¥3bn.
Ningbo¥3bn.
Customer Service¥3bn.

ROE 6-7％

Customer

contents

strategy for market dominancein the Kansai region①
Existing(Kansaiarea)

Shopping
Centerinto
B2B business(High-end, Japan)

Department
Store

Super
market 0③※partnership with
Lawson, Inc
Osaka pref.

② Challenges for new market
・Success of Ningbo Hankyu business・Expand business into Ningbo andZhejiang prefecture（the rich、EC）（working together with Hankyu Main store）（1）Kansai region × Online × Service
・Service contents development
・Digital and Real stores・Networking with alliance members

Customer
Service（2）Develop B2B business
Build and utilize customer databaseplatform

Home delivery

Business model

Existing

New(Store Commerce)(Service Commerce)(Database business)

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・Rebuild Department Store Business・Make Supermarket Business as second pillar③ Challenges for new business model

contents(Food)① Rebuild existing businesses

5II. Toward Achieving Long-term Business Plan 2030
-2. Business Environment Changes and Awareness of Issues
Business Environment Changes• Price hiking and high-cost environment continues
1. Possible transition to an inflation• Significant wage increases continue
based economy• Toward a positive cycle of price hikes and wage increases

Awareness of the Issues
i. Expectations of a positive impact on consumption
ii.Creating added value that can absorb increased costsiii. Need for continuous cost efficiency• Concern regarding market contraction due to declining
population• Labor shortage and rising labor costs

2. Gradual transition to a society with a iv. Preparation and development of new business areas and models
declining population
v.Efforts to improve productivity and preparation for laborand labor savings• Technological innovation and COVID-19 effects

3. Rooting of digitally-based lifestyles
and communication

vi.Establishment of a business style that merges real and digital
vii.Business environment corresponding to new lifestyles• Asset effect →Expansion of affluent market• Inflation Effect → Continued budget-minded

4. Polarization of the consumer market

viii.Work on two polarized markets simultaneously• The depreciation of the yen and the establishment ofJapan as a tourism nation

5. Rapid expansion of inboundconsumption

ix.Strengthen mid- to long-term initiatives, viewing overseas
customer demand, which is expected to expand, as a growthmarket• High tourism potential of the Kansai area and closeness to 6. Expansion of domestic and overseas
Asia
tourism demand and advantages in• Raise awareness of Osaka through Expo/IR
the Kansai area
• Grand Green Osaka opens; opening of Naniwa-suji Line→ Improvement of Umeda's location advantage• Management with SDGs in mind
• Management with human capital in mind
• Management Conscious of Cost of Capital and Stock
Price

7. Increased demand from capital
markets and stakeholders

x. Continue SDGs initiatives with clear KPI
xi. Pursuit of synergies between corporate growth and individual
growthx.Clarification of Growth Strategy, Capital Policy, and Shareholders’
Return Policy

Status of the Company and Customers• Hankyu Main Store Ranked No. 1 in Japan in inbound sales. (FY2024)• Expansion of the scale of supermarkets through business integration• While demand for high-value products and experience value is increasing, the daily lives of consumers continue to be deeply rooted in the desire for budget-minded.
• Signs of labor shortage in both value-added personnel and operations personnel• PBR falls below 1x due to delays in Capital Strategy and other factors
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6II. Toward Achieving Long-term Business Plan 2030
-3. Long-term Business Plan 2030 Ver.2⚫ Restructure Growth-Strategy

Customers are the company's most important asset; restructuring
the business from the customer's point of view.
⚫ The Group‘s Target Business Model: to become a “ Communications Retailer"(Direct contact development with customers and continuous deepening of relations → Maximization of LTV*)

Market*Lifetime value provided to customers

Focus and strengthen

Preparing and development

Overseas
Customers
Business

2

New

4

Customer Data
Business(BtoB)●Targets (2030)
Number of Group Active Customers
10 million
Operating profit ¥35~40 bn.

(1) Ningbo Hankyu(after eliminations)(2) Wealthy in Asia

① Domestic Customer store ¥25 bn.

(3) Asian tourist② Overseas Customers ¥20 bn.
③ Customer Service

Deepening
1

Domestic Customers/
Store Business

Development and deployment

3

Existing(1) Department stores (domestic customers)(Domestic
customers)(Kansai area)(2) Supermarket

Customer Service Business④ Customer Data

¥3 bn.

ROE 8% over(1) Home delivery(2) Online services (food, health, etc.),
・・・● Corporate Infrastructure Development(3) Shopping Center
Strategy for market dominance in the Kansai region•

Business use of IT and digital infrastructure•

Customer data collection and utilization•

Human Resource Strategies for Synergizing
Corporate and Employee Growth

Existing

New(Store Commercial)(Service Commercial) (Data Utilization Business)

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Business
Model

7II. Toward Achieving Long-term Business Plan 2030
-4. Positioning of Mid-term Management Plan FY2025-2027¥35~40 bn.

¥32.0 bn.

Operating profit ¥26.2 bn.

• Rebuilding from COVID-19
disaster• Strengthening of businessfoundation• Deepening existing businesses• Focus on and strengthen
overseas customer business• Development of new revenue
sources• Strengthen three corporate
infrastructures- IT/digital, customer data,
human resources• Establish a new business portfolio as
a communication retailer• Establishment of second pillar ofoverseas customer business• Establish new revenue sources
through customer service andcustomer data

FY2022-2024

FY2025-2027

FY2028-2031

Operating profit ¥26.2 bn.

Operating profit ¥32 bn.

Operating profit: ¥35~40 bn.
ROE 8% overRestructure of existing businesses

Expand into new markets andnew business models

Establish a new business structure fromthe customer's point of view

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Ⅲ. Mid-term Management Plan FY2025-2027-1. Policies and Key Initiatives
PolicyKey Initiatives

Department Store Business(Domestic customers)• Maximize LTV by developing points of contact and content through digital and realcommunication utilizing customer data, centered on affluent customers (communication retailer
model)• Hankyu Main Store → Upscaling and remodeling to become a "global department store" thatserves as a destination for customers in a wide area both domestic and overseas.
• Strengthen ability to attract customers and review business structure→Hanshin Umeda Main Store Revision and Renovation and Kawanishi Hankyu Remodel• Business aimed at expanding customer contact points and developing markets by utilizing thestrengths of department stores

Supermarket Business• Making Kansai Food Market a wholly owned subsidiary to promote business integration andrealize effects at 4 supermarkets• Organization of store positions and roles of 240 supermarkets, and development of priceappealing supermarkets

Shopping Center Business• Strengthen activities to connect with local communities and continue capital investment• Hotel renovation of Oi Development

Management Efficiency andProductivity Improvement• Preparation and deployment of labor-saving and energy-saving

Focus on andstrengthen“Overseas Customer
Business"
with high growthpotential

Focus on overseas wealthy
customers(Department Stores)• Full-scale efforts to realize the cycle of customer cultivation x personal communication x
content development, reinforcement of organization and human resources, and strengthening of
the network(To triple sales of wealthy customers and 1.5 times sales of regular tourists in FY2027)

Ningbo Hankyu(Made a subsidiary)• Remodeling to strengthen response to affluent customers to establish the No.1 store in the areaiii. Development of newrevenue sources

Customer Service Business
Customer Data Business• Continue to launch and develop service business ( through online) in the Kansai area with foodand health theme.
• Startup of customer data business(Increase in human resources and development of IT infrastructure)

i.

ii.

Deepening of existing
business“Domestic Customer
and Store Business”

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9Ⅲ. Mid-term Management Plan FY2025-2027-1. Policies and Key Initiatives
Policyiv. Development and useof Group infrastructure
to support business

Key Initiatives
Continue investing in IT/DX• Implementation and utilization of the developed IT and digital infrastructure to transformand improve the business model of each business

Human resource development,
development, and investment• Relationship between a company and an employee = "co-creation partners who enhancevalue and grow together• Established three policies for human resources strategy(i) Optimizing Organizational Performance(ⅱ) Activating Employee Engagement (ⅲ) Strengthen HR infrastructure→Pursue synergies between Corporate and Employee Growth by strengthening humanresource training and development• ¥6 bn. invested in 3 years for human resource

Sustainability Managementv.

Strengthen initiatives
for "Management
Conscious of Cost of
Capital and Stock
Price"

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•
•
•
•

Concrete promotion of environmental measures to achieve KPIs
Strengthened CSR structure and promoted human rights DD, D&I, and health management
Reinforcing and further promoting the system of regional co-creation activities
Quantitative monitoring of the results of initiatives and disclosure of information to
improve the level of initiatives

Target of cost of shareholders’equity and ROE• cost of shareholders’ equity: 6.6%, ROE: FY2027 6.6% over, FY2031 8% over

Shareholder returns• In principle, the Company will pay out dividends based on a DOE of over 1.8% and will
flexibly return profits to shareholders in accordance with business performance• Dividends: Increased to ¥40 per share (started from FY2025)• Acquisition of treasury stock: Scale of ¥30 bn. in 3 years
Total payout ratio (including acquisition of treasury stock) to be approximately 60% for
cumulative period

C/F Allocation• Utilize cash generated from asset sales, etc. for M&A, etc.
Build B/S in line with the targeted business portfolio and maximize synergies

Expand the shareholder/investor
base and improve communication• Promoting Dialogue with the capital market• Enhancement of shareholder benefits and introduction of selection system• Implementation of measures to expand fan shareholders
10Ⅲ. Mid-term Management Plan FY2025-2027-2. Targets
Aiming for operating profit of ¥32 bn. and ROE 6.6% over in FY2027

FY2024
AmountFY2025
Forecast

FY2027
TargetConsolidated

FY2024
AmountFY2025
Forecast

FY2027
Target(Unit: 100 million yen)

Department
StoresBusiness

Gross sales

5,771

6,142

6,600

196

223

250

4,256

4,449

4,530

71

98

115

321

380

370

32

33

25

390

655

860

Operatingprofit▲0▲3

10Gross sales

10,739

11,625

12,360

262

265

320

OperatingprofitGross sales

Supermarket
Business

Shopping
CenterBusiness

OperatingprofitGross sales
OperatingprofitGross sales

Other

Total

OperatingprofitOperatingprofit

262

265

320

ROE

8.5%

9.6%

6.6% over

ROE(Actual*)

5.1%

5.1%

-

ROIC

4.7%

4.7%

5.9%

*Excluding extraordinary gains such as asset sales and tax effects※Operating profit by segment under the new standard (revised recording of management guidance fees paid by subsidiaries to the Company)

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11

Ⅲ. Mid-term Management Plan FY2025-2027-3. Investment plan
Continue to invest in growth, focusing on growth areas and planting seeds for the future◼ Priority of investments① Stores and business facilities
Active investment in Hankyu Main Store, focused investment in department store remodeling, remodeling of food supermarkets and resumption of store openings② IT/DX
Investments focused on business applications such as customer communication, customer data utilization, and business efficiency③ R&D
Upfront investment in labor savings and development of new revenue sources④ Renewal investment
Minimal investment in equipment, system upgrades, and repairs* Invest an amount in line with operating cash flow within a range based on EBITDA interest-bearing debt ratio of 2x for each fiscal year

◼ Investment plan: ¥95 bn. in 3 years (FY2025: approx. ¥32 billion, FY2026: ¥38 billion, FY2027: ¥25 billion)
Domestic Customers andStore Business

Hankyu Main Store remodeling, etc. ¥10.3 bn.
Hanshin Umeda Main Store revision renovation ¥2.2 bn., Kawanishi Hankyu remodeling ¥0.8 bn.
Renovation of existing supermarkets ¥7.0 bn., opening of new supermarket stores ¥1.7 bn.
SC renovation ¥2.4 bn., SC rebuilding start ¥1.2 bn., Hotel renovation in Oi Development ¥1.7 bn.
Cart POS demonstration test ¥0.05 bn.

Overseas Customer Business

Ningbo Hankyu remodeling ¥8.7 bn.

Development of new revenue
sources

Expansion and development of Customer service application ¥1.4 bn.

IT/DX

OMO Digitals (Department Store apps, media & commerce, MD management system, etc.) ¥3.6 bn.
Department store MD system and POS etc. ¥2.2 bn., Supermarket POS renovation ¥1.5 bn.
Establishment of next-generation network and cloud environment ¥2.1 bn.
Utilization of customer data and strengthening of contact points ¥1.0 bn.

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Increase in personnel, etc.
¥3.0 bn.

12

Ⅲ. Mid-term Management Plan FY2025-2027-4. Key Initiativesi.

Deepen existing business “Domestic Customers and Store Business"

ii.

Focus on and strengthen Overseas Customer Businesses with high growth potentialiii. Development of new revenue sources
iv. Development and use of Group infrastructure to support businessv.

Strengthen initiatives for "Management Conscious of Cost of Capital and Stock
Price"

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13

III-4-ⅰ. Department Store Business-Strategies for Key Customers and Hankyu Main Store Remodel
Expansion of overseas and domestic wealthy customers and domestic prime customers,
Maximization of lifetime value⚫ Cultivation and customerization of wealthy customers in Japan and overseas, and promotion of content development⚫ Remodel Hankyu Main Store into a “Global Department Store”-Customer StrategyMaximize LTV of key customers(Expansion of overseas and domestic wealthy customers
and domestic prime customers)-Key InitiativesRemodel Hankyu Main Storefor upscaling into a “Global Department Store”
Sales ¥400 bn. (+¥86 bn.)
Total investment: ¥12 bn. by FY2027○ Customer cultivation● Content development□ Personal Communication ■ Human resource development

Overseas wealthy
Customers¥50 bn.
(+¥33 bn.)

Wealthycustomers inJapan¥80 bn.
(+¥43 bn.)

○ Develop new wealthy customers through alliances withquality partners in China and Southeast Asia
● Develop Japan Premium Content■ Clienteling staff
Recruitment and training
in local● Develop high-grade personalized value, products andservices● Made luxury Big Maison brand in-store flagship stores□ Expand clienteling staff● Newly established 1,000㎡ hands-on VIP salon● Expand high-end jewelry & watch world● Overseas VIP Service○ Cultivate new wealthy customers through allianceswith prime
partners in Japan■Personnel Training for“Communications Retailer”
Communication skills✕
Digital utilization skills

Prime domestic
customers¥120 bn.
(+¥13 bn.)

● Personalized content created through overwhelming
accumulation and editorial value○ Newly established highly selective fashion and lifestyle editorial□ Expand staff with personal consulting services○ Newly established luxury brand stores of fashion goods andbeauty editorial□ Special incentives through loyalty programs and CRM
to enhance LTV

world○ Newly established a new personal consulting service facility

Department Store Sales ¥692 bn. (+¥97 bn.) = Domestic sales ¥550 bn. (+¥36 bn.) + Overseas ¥142 bn. (+¥62 bn.) * Amounts indicated are sales targets for FY2027 (compared to FY2024)
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14

III-4-ⅰ. Department Store Business-Customer Strategy for Communication Retailer
Develop contact points and contents and maximize lifetime value through digital andreal communication using customer data
◼ Implementation and materialization of customer strategies
Deepen relationships with customers through communication• Developing our own unique and attractive contents• Utilization of infrastructure such as new reservation system (2024) and department store applications (2025)(Target number of identified customers for FY2027: 3.3 million; target number of app customers for FY2027: 1 million)• Launch a new loyalty and CRM program exclusively for app customers
Promoting engagement sales• Gain a deeper understanding of customers by acquiring buying and behavior data and combining it with psychological data to provide personalized
proposals tailored to each individual customer.
• Developing various services and experiences in addition to proposing goods◼ Construction of customer date utilization system
Establish a system to utilize customer data to keep customers connected with the company
through various contact points, not only in the stores, and to increase customer loyalty.
• "E-Customer record"
Provide a personalized customer experience beyond the store or sales floor
by inputting customer data, such as preferences and other qualitative information
obtained during customer service, based on the customer data centralized
by the integrated customer base.
• Other systems such as Voice of the Customer (VoC) utilization systems, etc.

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15

III-4-ⅰ. Department Store Business-Store Strategy

Increase store profitability by strengthening ability to attract customers and reviewing business structure◼ Hanshin Umeda Main Store Revision and Renovation
Maximize earnings in Umeda, Osaka by strengthening customer attraction and reviewing the business structure, coexisting with Hankyu Main Store• Improve Food World on the 1st floor, which is highly favored by customers, centered on the “Food Festival Terrace Terrace”, to create a buzz andattract more customers.
• Introduce large-scale specialty stores with high customer attraction power to improve profitability and promote store-wide buying behavior• Increased profitability by converting the backyard into a sales floor and introducing several stores specializing in health and beauty services that
customers are highly attracted to• Significant reduction of in-house sales floor, Conversion to a small-staff operation model through the introduction of specialty stores, Expandedcustomer service across brands and categories• Total investment in FY2026 ¥2.5 bn.
◼ Remodeling to Kawanishi Hankyu Square
Restructure stores to target families in 30s and 40s, and shift to a business structure that will continue to earn stable profits• Combine Department Store elements with specialty stores that can attract customers and improve competitiveness in collaboration with neighboring
commercial facilities.
• Reviewed store operation model by conducting low-cost operations and attracting top-quality
specialty stores, including drastically reducing the size of in-house sales areas and eliminating events“Remodeling to Square"• Creating a place for gathering and liveliness by making a park in front of the station in collaboration
with the local government.
• Total investment in FY2026 ¥1.2 bn.

ASTE Kawanishi 1st floor plaza: Image of the renovated plaza
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16

III-4-ⅰ. Department Store Business-New Businesses
Expanding customer contact points by leveraging the strengthsof Department Store service initiatives aimed at market development
To diversify earnings, cultivate revenue sources not limited to sales margins by leveraging the resources of existing businesses
Consolidating knowledge through a new cross-functional organizational structure. Support and promote the project.

◼ Sweet Moving Sales• Mobile vending trucks offer approximately 30 brands of sweets from the department
stores to customers who cannot visit department stores due to time and distance limitations• Received high support from senior care facilities and suburbs, etc., strengthening content
and expanding sales channels• Long-term goal is to develop franchises nationwide
Targets: sales volume of ¥8.0 bn, profit of ¥0.4 bn, and 200 vehicles◼ Cake delivery• Manufacturing and retail frozen cake delivery service that delivers nationwide is expanding its sales channels by developing its own
products and services.
• Target to return to profitability by the end of FY2027, with long-term goals of ¥7 bn in sales and ¥ 1.0 bn. in profit.
Other new services (retail media, dress rental, condominium concierge) to be launched

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17

III-4-ⅰ. Supermarket Business
Establish a solid business foundation through business integration and business reforms
Promote business integration of four supermarkets, reap the benefits, and strengthen competitiveness in the area
Realization of synergies among the 4 food supermarkets

Building Foundations• Expanded to become one of the largest supermarket groups in the
Kansai region through business integration with Kansai Super
Market• Strongly promote business reforms at Izumiya・Hankyu Oasis toimprove profits; merger of Izumiya and Hankyu Oasis• Business integration with Kansai Super Market starts
Operating profit(100 millions of yen)
KFM and eliminations

Made Kansai Food Market a wholly owned subsidiary• Accelerate integrated management and maximize synergies• Promote business integration and reap benefits at 4 foodsupermarkets• Organize store positions and roles of 240 supermarkets, anddevelop price-appealing supermarkets

FY2022 Dec.

FY2024 Apr.

Kansai Super Market

Izumiya Hankyu Oasis

management integration

mergerEnd of July FY2025

Kansai Food Market
making a wholly owned
subsidiary

Kansai Super Market

140
Izumiya Hankyu Oasis

100

FY2022 to 2023

123

IzumiyaIzumiya and Hankyu
Oasis

Hankyu Oasis

business reforms

112
92

•
•
60

44
39

KFM consolidated

Izumiya GMS Innovation
Integrated managementof supermarket business

58

59

14

29

Kansai Super Market

40

36(Consolidated with KSP)

39

78
31

26

(Izumiya)

15

20

▲31
FY2019ActualFY2020 Actual

FY2021 Actual

FY2022 Actual

FY2023 Actual

FY2020

FY2021

FY2022

FY2023

FY2024

20

115

105

71

83

Izumiya・Hankyu Oasis

76

56
33

0

KFM and consolidation adjustments▲ 20

FY2024 Forecast

FY2025 Forecast(Right: New standard)

FY2026 Target

FY2027 Targets(Right: New standard)※New standard = Revised recording of management guidance fees paid by subsidiaries to H2O Retailing

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18

III-4-ⅰ. Supermarket BusinessContinued to expand business reforms, such as standardization of operations and integrated management of four food supermarkets
including Kansai Super Market.
••••

IzumiyaHankyu Oasis
Qanat
H2O food Group• Kansai Super
Market4 supermarkets• Integration of Merchandise Buying / Integration of sales planning / Establishment of a logistics system linked to the efficiencyof store operations and the efficiency of center operations / Standardization of store shelf allocation / Integration of MD coresystems / Review of labor cost structure→ Significant profit improvement through reductions in store labor hours and review of work styles• Integration of sales headquarters and head office functions in Apr. 2021; merger of IZUMIYA and Hankyu Oasis in Apr.
2023; system integration in Oct. 2023
• Continue to improve competitiveness and productivity of stores• To integrate business operations, start considering the comparison and analysis of business contents, unification of productbuying and logistics, strengthening SPA, joint planning and sales promotion, joint bidding for consumption goods, sharing of
education and training systems, etc. from FY2024• Reorganized the positions and roles of 240 supermarkets and starting development with a new store format, developing priceappealing supermarkets and strengthening PB products• Integration of sales headquarters and head office functions has been completed; systems will be integrated by FY2027, and an
integrated logistics plan will be developed

Manufacturing companies : Further strengthening of functions as a group SPA supporting supermarkets• Strengthen competitiveness through joint development of original products in manufacturing and sales• Enhancing the scale and production management system as a manufacturing business through business integration• Further business expansion• Utilize central kitchen function of manufacturing to improve store productivity(Strengthen delivery of semi-processed products, out-packaged products, and baked bread)

Delivery companies: After moving to the new center, the target was not achieved, so member services, delivery system, etc. were reviewed.

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19III-4-ⅰ. Shopping Center Business-H2O Commercial Development
Establish a profitable structure by quickly exiting the former GMS
Strengthening activities to connect with local communities and implementing steady capital investment― Situation of the Company ―• Split off from Izumiya in 2020, and convert directly-operated sales areas such as apparel and housing into tenants within two years to complete theconversion to a shopping center• At the same time, promote closure of unprofitable stores to establish a profitable structure◼ Basic Policy and Business Strategy: Actively engage in activities that connect with local residents under the theme of living with flowers, music, and festivals
Tenant and real estate businessSpeciality store business

Events and events businessNew businesses

Improved occupancy rates bystrengthening tenant attraction througha cross-group leasing structure“i-closet” (directly- managed clothingsales floor) shifted from price to value
appeal, moving away from the old
GMS-type sales floor.

Improved plot occupancy rates byholding local product exhibitions andother events in collaboration with local
governments

Food truck business aims to have a totalof 300 trucks◼ Investment plan

(10 in-house and 290 by subcontractors)

Operating profit (100 millions of yen)
15.0

Investment from FY2025 to 2027 ¥5.6 bn.
• Investment for renovation ¥0.3bn
Investment for repair ¥1.0bn in each fiscal year
• ¥0.2 bn. in FY2026 and ¥1.0 bn. in FY2027 areplanned as investment for rebuilding aging storesthat have high potential to sustain as commercial
stores

10
10.0
5.0

6.2

6.9

2022

2023

5.0

4.5

4.8

2024

2025

2026

0.7

0.0
2020

2021

2030

▲ 5.0
▲ 10.0▲ 15.0

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▲ 13

20

III-4-ⅰ. Shopping Center Business- Oi Development
Established as a profitable business earning over ¥2.0 bn. through dynamic pricing and labor-saving measures
Continued to implement measures to improve competitiveness and invest in refreshment－ Business Environment －• Room rates exceeded the pre-COVID-19 level due to soaring labor costs and rising prices.
• Occupancy rates approach pre-COVID-19 levels as business, domestic tourism, and inbound demand recover－ Company‘s situation －• Operating profit reached a record high of ¥2.7 bn.(FY2024)

12,000• Shift to web-based reservations by travel agencies, etc., increasing
sales channels to various customer and increasing occupancy rates

9,000• Change from fixed price system to dynamic pricing (variable pricesystem), and room rate will exceed the pre-COVID-19 level

6,000• Integrated the front desks of the single and twin pavilions, andintroduced a self check-in machine and self cloakroom to save labor

Average Price
Occupancy Rate

Average Price and Occupancy Rates

100%

50%

3,000

0

0%

FY24

FY23

FY22

FY21

FY20

FY19

FY18

FY17

FY16

FY15

FY14

FY13

FY12

◼ Investment plan
Planned renovation, maintenance and repair of buildings and facilities in response to changes in the internal and external environment• Investment of ¥2.7 bn. from FY2025 to FY2027, repairs of exterior walls, renovation of guest rooms at single buildings, etc.
• Analyze market needs and plan for renovation of the twin pavilions in FY2028 and beyond

Copyright © H2O Retailing Corp. All Rights Reserved.

21

III-4-ⅰ. R&D-labor saving and energy saving
Promoting labor-saving and energy-saving through alliances and open innovation
Promoting initiatives to utilize digital and AI technologies to resolve labor shortages in store operations, etc.
◼ CART POS “Skip Cart ®”• Customers can make purchases without waiting in line at the cash register, and stores can reduce• the amount of time spent at the cash register.
• Demonstration test at two supermarkets from Sep. 2024, aiming to introduce the system to multiple stores.
• Investment ¥0.1 bn., in cooperation with Retail AI, Inc. and Toshiba Tec Corporation* Considering digital marketing with cart-mounted displays, etc.

◼ E-shelf tag system• Elimination of paper shelf tag replacement work reduces operational time and the risk of mislabeling• Demonstration test to begin in fall 2024, aiming to expand to all food supermarkets.
• Improved effectiveness of sales planning by improving the accuracy of chain operations◼ Generative AI
Identified applicable operations and began trial implementation, such as utilization for meeting records and event planning and design
H2O KU Carbon Neutral Design contributes to energy conservation• Air conditioning energy management business utilizing the "Smart Air Conditioning" theory, human resource development throughattendance at the reskilling program• Combination of methods to achieve large energy savings by installing AI Smart Air Conditioning System and methods to achieve savings
with little investment, such as manual operational improvements and modification of existing facilities.
• Expand consulting business to Department , Supermarket, and Shopping Centers to reduce energy costs with a target of ¥0.7 bn. per year by
2030* Expand business to commercial stores outside the group
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22

III-4. Key Initiativesi.

Deepen existing business “Domestic Customers and Store Business"

ii.

Focus on and strengthen Overseas Customer Businesses with high growth potentialiii. Development of new revenue sources
iv. Development and use of Group infrastructure to support businessv.

Strengthen initiatives for "Management Conscious of Cost of Capital and Stock
Price"

Copyright © H2O Retailing Corp. All Rights Reserved.

23

III-4-ⅱ. Focus on and strengthen overseas customer businesses

with high growth potential⚫ Strengthening of the organization, human resources, and network to realize a cycle ofcustomer cultivation, personal communication, and content development.
⚫ Targets: FY2027 Sales of wealthy 3x (¥17.0 bn. → ¥50.0 bn.) and Sales of regular tourists (¥63.0 bn. → ¥92.0 bn.)

Customer cultivation••

Develop and strengthen the network ofprime alliance partners with wealthy
customer baseCreating a base of contact with wealthy
customers

LuxuryCar ClubAffluent
Golf clubs

LuxuryRestaurant

Real estatecompanies

Travel companies
Airlines

Financial institutions

personal communication(lifetime value improvement)••

LuxuryShopping
Mall

Department Stores

LuxuryHotel

Brand(Head Office)Overseas customers(VIP memberships)

Increasing structure and human resources
Digital communication tools
Hotel

Area

Restaurant

Content development(goods, services, experiences)

Real estate
Golf courses•••

High added value of Japan premium
Kansai Local Rare Value
Strengthen network

Japan IP
Aesthetic salons
Beauty salons×
Traditional crafts

Copyright © H2O Retailing Corp. All Rights Reserved.

×

Fashion.
Lifestyle
Food
Art

Medical institutions

24

III-4-ⅱ. Focus on and strengthen Overseas Customer Business
Strengthening initiatives in the areas of customer cultivation x personal communication x content development

Customer cultivation

Personal communication(lifetime value improvement)

Content development(goods, services,
experiences)

Copyright © H2O Retailing Corp. All Rights Reserved.

• Target: Overseas VIP memberships 3x in FY2027 (20,000 → 60,000)• Developing prime alliance partners with wealthy customer base
(Financial institutions, luxury car clubs, travel agencies, airlines, etc.)• Develop new department stores and high-end shopping malls holding VIP membershiporganizations and establish a system for reciprocal customer transfers• Enclose VIP customers through introducing them from existing overseas VIP customers and incooperation with Ningbo Hankyu.
• Creating a base of contact with wealthy customers• Significantly increase the number of staff attending to overseas VIP customers(Human resources training, development, and recruitment)• Development of personal communication tools with Southeast Asian customers(Digital VIP Cards, Major SNS Linkages in each country, Concierge systems)• Develop special branded products, attractive regional products, and original products utilizing
Japan IP• Development of experiential content in collaboration with local communities(Kyoto, Osaka, Nara, Senshu area, Awaji Island, Seto Inland Sea area, Kanazawa, Maniwa)• Service development in collaboration with local Kansai restaurants, nearby hotels, real estate,
medical institutions, etc.

25III-4-ⅱ. Focus and Strengthen Overseas Customer Business-Ningbo Hankyu
Ningbo Hankyu became a subsidiary and fully utilized as a business base for overseas customers.
－ Status of Ningbo Hankyu －• Opened in April 2021, the store is off to a much more favorable start than expected,
and is securing its position as the No.1 store in the Ningbo area.
• Luxury brands on the 1st floor performed well with approximately 70% share of total store sales• Local fashion and accessories fell short than expected,
but cosmetics, restaurant, and food were strong• Consumption, especially among upper class, is currently slowing down
due to the sluggish Chinese economy since 2H of FY2024◼ Making Ningbo Hankyu a Subsidiary• Becoming a subsidiary from July 2024, with positive effects expected from FY2027 forward due to goodwill and current consumption
conditions.
• Remodeling to strengthen response to affluent customers to establish the No.1 store in the area
(to accommodate the completion of the nearby large facility in 2026)
Expansion of luxury brands, jewelry, and mode fashion, upgrading of restaurants, establishment of VIP lounges, etc.
• Investment FY2025 to 2027: 430 million yuan
◼ Future Development in China• High expectations from the Chinese affluent for the brand value of the Hankyu Main Store, which is highly recognized in Zhejiang
Province, based on the attractiveness of the Japanese product lineup and services, and Japanese content.
• The world's affluent population is growing, especially in China, and there is potential for growth in the future.
→ Considering business development adapting the department store's brand and content to the needs of Ningbo Hankyu's affluent andprime customers

Copyright © H2O Retailing Corp. All Rights Reserved.

26

III-4. Content of key effortsi.

Deepen existing business “Domestic Customers and Store Business"

ii.

Focus on and strengthen Overseas Customer Businesses with high growth potentialiii. Development of new revenue sources
iv. Development and use of Group infrastructure to support businessv.

Strengthen initiatives for "Management Conscious of Cost of Capital and Stock
Price"

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27

III-4-ⅲ. Customer Service Business and Customer Data Business
Frequent contact with consumers and collection of data through food and health-themed apps
Continue to launch and develop customer service business
Develop and deploy online-based services that are closely connected to the lives of many people in the Kansai area using these
services frequently◼ Food service app “Machi-Uma”• Test service started in Takatsuki area in May 2023
• Seamlessly connect various experiences such as quickly and conveniently searching for restaurants, viewing and enjoying information,and earning points for visiting restaurants.
• Achieved target with 500 franchised stores and 60,000 registered members (Takatsuki City population of about 350,000)
May 2023

Target for 2030
Food service app
Number of franchised stores・Testing in Takatsuki area ・ App improvements and enhancements ・ Expansionof coverage area

30,000registered members
3,000,000
Operating profit¥0.8 bn.

◼ Health management services• Planning health management services based on prevention and improvement of lifestyle-related diseases in health care
• Aiming to launch services in 2025

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28

III-4-ⅲ. Customer Service Business and Customer Data Business
Aiming to develop business using customer data as a new revenue sources
Launch of Customer Data Business
Develop a business that leverages the multifaceted and active customer data obtained from the app, including browsing,search, and actions.
① Centralized management and utilizing of all data, including various data obtained from food and health services and buying data at
existing stores.
② Multiply customer data from external partner companies to increase understanding of individual customers③ Develop data-driven consulting, marketing, and promotion business both internally and externally

Copyright © H2O Retailing Corp. All Rights Reserved.

29

III-4. Content of key effortsi.

Deepen existing business “Domestic Customers and Store Business"

ii.

Focus on and strengthen Overseas Customer Businesses with high growth potentialiii. Development of new revenue sources
iv. Development and use of Group infrastructure to support businessv.

Strengthen initiatives for "Management Conscious of Cost of Capital and Stock
Price"

Copyright © H2O Retailing Corp. All Rights Reserved.

30

III-4-ⅳ. IT/DX Investment
Implementation and utilization of the developed IT and digital infrastructure to transform andimprove the business model of each business
FY2022-2024
Building a foundation for IT

FY2025-2027

FY2028-2031

Refining businessusing the foundation

Further advances
incorporating new technologies

Customer
contact points

Infrastructure for advancement
and efficiency

Realizing a OMO style
Expansion of digital contact points
using the client ID

Advances throughthe use of new technologies

Employee contact
points• Group customer data-base• Multi-cloud infrastructure• Development and launch of security team, etc.

Promoting efficient work styles
through digitalization

Promote further advancement and efficiency

Development of data infrastructure

In-house data development and expansion

Data utilization• Maintenance of in-house data supporting digital contact points• Advanced data analysis and utilization of AI• Insight-based business process innovation• Spreading data-driven decision-making

Data• Renovation of data infrastructure• Data aggregation and centralized management

Building a customer data-base

Gathering Customer Insights

Building a sales data-base

Maintenance of forms and dashboards to achieve KPIs

Utilization in new businesses and BtoB

IT infrastructuredevelopment

Data center downsizing and multi-cloud infrastructure construction

Effective use of multi-cloud infrastructure

Response to INS line outages

Construction of next-generation network and renewal of in-store network

Infrastructure

Smartphone and PC distribution

Cost
Employee
GovernanceFurther downsizing data center

Establishment of the Security Governance Team

Increase ratio of in-house production (recruitment and training)
Launch of in-house development

Investment ¥24.3 bn.
Copyright © H2O Retailing Corp. All Rights Reserved.

Investment ¥25.9 bn.
31

III-4-ⅳ. IT/DX Investment
By FY2024, the IT infrastructure has progressed to 80%. Implementation and utilization in business operations will be promoted accordingly.
Theme

Benefits

Department Store Business
Establishing a OMO style
Customer expansion and content development
Promoting understanding of customers
Clarify the roles and DX of stores

•
•
•
•
•

Supermarket Business
Strengthening digital contacts
Efficiency of store operations
Business integration with Kansai Super Market
Efficiency of sales headquarters operations• Utilize apps to provide information, link to litta and S-Points to promote usage and expand customer data.
• Improve the accuracy of target marketing by analyzing and grasping customer preferences and needs• Expanding and establishing the renewed MD core system in 2023 to promote operational efficiency andcommonality in preparation for business integration with Kansai Super Market.
• Cost reduction and operation improvement through the expansion of handheld terminals and automatedordering categories using smartphones• Build a high-level master and incorporate external data, etc. to improve management and operational
efficiency and for analysis.
• Automatically link data necessary for business operations in the shortest possible time by utilizing data
infrastructure

App provides OMO services, tailored content for customers, loyalty programs, etc.
Propose products and services tailored to customers both online and offline through CRM
Gathering data through in-store customer service by means of E-Customer record
Collect and analyze customer data at multiple points of contact to visualize customer psychology.
Expanding the quality and quantity of data and improving the freshness of data by continuing to utilize
customer data

In the area of data collection and utilization, we will enhance the sophistication of business operations, customer experience and contact points,●●and management decision-making, and promote the use of AI to search for new insights and improve the efficiency of analytical operations(data quality assurance, data model reconstruction, data governance development, human resource development, etc.)

Strengthen management functions and improve back-office efficiency of the entire group to support business and increase operational efficiency

Reinforced infrastructure, including network and security measures for store digitization, distribution of standard PCs and promotion of zero-trust
Copyright © H2O Retailing Corp. All Rights Reserved.

32

III-4-ⅳ. Human resource development and investment
Aiming for a relationship between a company and an employee= “co-creation partners who enhance value and grow together”◆ Formulate a group-wide human resource strategy to support the realization of the Vision and Long-Term Business
Plan2030 from the human resource and organizational perspectives●● Based on this strategy, implement a variety of human resource measures in a group-wide united manner.
Organizational
performance
optimization

Employees
engagement
revitalization

HR infrastructure
strengthening• Training and recruiting of human resources for business development for overseas affluent customers• Training and recruiting of human resources for IT and new businesses• Shift of human resources between and outside of group companies in line with efficiency improvements inexisting businesses
•
•
•
•
•

Measures to improve engagement in both work (job satisfaction) and life (comfort of work)
Introduce measures that emphasize dialogue to get to know the company and its employees
Development and group application of various systems that enable independent career options for employee
Development of group-wide education menu and system
Various systems that enable diverse employees to work and play an active role, and initiatives to promote theGroup's health management*Promote in combination with Diversity & Inclusion and other sustainability management initiatives• Develop and utilize a cross-group human resources data platform (talent management)• Implement measures to promote intra-group information sharing and communication• Compliance, Expansion of anti-harassment measures◼ Investment in human capital of ¥6.0 bn. over 3 years(human resources development of ¥4.3 bn, human resources recruitment of ¥0.3 bn, personnel infrastructure development of ¥1.4
bn.)
Copyright © H2O Retailing Corp. All Rights Reserved.

33

III-4-ⅳ. Sustainability Management
Strengthening the foundation of Sustainability Management and promoting activities unique to the Group
Aiming to further promote co-creation activities in areas and enhance sustainability management

Review of FY2022-2024

Plan of FY2025-2027• In Apr. 2021, we established the Sustainability Management
Promotion Committee, which includes experts, and dedicateddepartments in each business to rapidly establish thefoundation for sustainability management.

• Promoting specific environmental actions to achieve KPIs

• Establishment of Sustainability Management Policy andMateriality• Formulation and disclosure of human rights policy and CSR
procurement policy• Full-scale operation of area co-creation activities(Senri Central Park, Osaka Forest Circulation Project, Promoting ofFood Loss Zero Area Project in Kawanishi)
Model areas: Kawanishi and Toyono, Senri, and Kawachi Nagano areas
Comprehensive co-operarion agreement: Osaka pref., Kobe, Kawanishi, andTakarazuka in Hyogo pref.

• Climate change, disclosure in line with TCFD
• Set KPIs related to environmental action and diversity

Copyright © H2O Retailing Corp. All Rights Reserved.

• Strengthening CSR promotion system and promoting fullscale initiatives integrated with human resource strategies(human rights due diligence, diversity and inclusion, healthmanagement)• Strengthen and further promote the system of area cocreation activities and commercialize from the promotion ofsustainability management.
• Dialogue with the area and enhanced communication to thearea• Actively disclose information to quantitatively understand theresults of initiatives and improve the level of initiatives• Joined CGF* Japan Sustainability Local Group to promote
problem solving through partnership building*CGF=The Consumer Goods Forum34

III-4-ⅳ. Sustainability Management
Concrete promotion of environmental measures to achieve KPIThe GHG
emission
Reduction• Promote energy conservation through the use of LEDs and the introduction of AI Smart Air Conditioning, andsystematic energy re-generation in each project
20% reduction compared to 2019 by 2026, 2030 target: 30% reduction compared to 2019

Strengthened CSR promotion system and promoted full-scale human rights DD, D&I, and health management initiatives in line with humanresource strategy

Human rights
Due Diligence• Identifying Supply Chain Risks (Risk Map)
• Inform employees, request cooperation from business partners, and produce and utilize videos

Diversity&
Inclusion• Promote initiatives for women's activities and create a comfortable work environment• Actively accept and promote foreign workers in anticipation of system changes (Supermarket Business)• Maintain and improve the employment ratio of persons with disabilities (2.84% in FY2024)(Group companies will secure at least 2.7% of employees with disabilities by FY2027 as required by law)
• Considering LGBTQ-responsive initiatives

Healthmanagement• Ensure 100% health check-up rate
(Establish a support system that provides an environment conducive to receiving medical check-up and a period
during which medical check-up are available)• Expanded coverage of medical examinations for contract and part-time employees beyond what is legally required.
• Strengthen efforts to support women's life cycle and health(expand health check-up and other items that lead to the early detection of cervical cancer, breast cancer, etc.)

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35

III-4-ⅳ. Sustainability Management
Regional co-creation activities: Strengthen and further promote the system for activities in Kawanishi and Takarazuka
In the area surrounding Kisera Kawanishi, achieve zero food waste in stores, events, and homes, and build momentum among consumers.
• Challenge Days" is an initiative to increase greenery in the community and think about resource recycling by composting food scraps withcomposting bags.
→ In FY2024, the project will expand to Takarazuka City, and furthermore, in collaboration with the Hanshin Umeda Main Store, hold tours wherevisitors can learn about and experience greenery in the urban area.
• Good! Neighbor! Meetings!" was a "Salvage Party," an opportunity to interact with people
in the community by bringing food that is about to expire and improvising recipes to cook with.

Commercialization from the promotion of sustainability management: Senri Central Park Management
Promoting “Deepening Local Community Bonds” as one of the important issues for sustainability management through the Park Business• Joint venture by participating companies* in addition to our company to promote new activities and park revitalization by leveraging the strengths ofeach company.
*Lawson Inc., Nomura Co., Ltd., Operation Factory Inc., Urban Research Co., Ltd., Stylem Takisada-Osaka Co., Ltd.

• Highly evaluated by governments and companies for achievements in diverse activities based
not on hardware but on software (people and networks)• Leveraging our know-how and the strengths of our group, create mechanisms for proactive
participation by community players using the Senri Central Park as a model, and develop
the role of implementing these mechanisms into a business on consignment

Copyright © H2O Retailing Corp. All Rights Reserved.

36

III-4. Content of key effortsi.

Deepen existing business “Domestic Customers and Store Business"

ii.

Focus on and strengthen Overseas Customer Businesses with high growth potentialiii. Development of new revenue sources
iv. Development and use of Group infrastructure to support businessv.

Strengthen initiatives for "Management Conscious of Cost of Capital and Stock
Price"

Copyright © H2O Retailing Corp. All Rights Reserved.

37

III-4-ⅴ. Strengthen initiatives for “Management Conscious of Costof Capital and Stock Price” –Analysis of Current Status and Direction of Initiatives
Current issues(PBR is below 1.0x)⚫

PBR continues to be below 1.0x despite an improving trend, due to
PER which are lower than sector levels.

⚫

ROE (8.5% ) > Cost of shareholders’ equity (6.6%)
ROIC (4.7%) > WACC (4.0%) *FY2024•

ROE is above cost of shareholders’ capital, but below in actual, andfurther ROE improvement is needed in the future.

•

Aim to secure stable ROIC above WACC by promoting the utilizationof non-business assets with low profitability, which has been an issue
for the company.

Direction of Initiatives(PBR to remain 1.0x over)⚫

Gain market credibility by formulating growth strategies, enhancing
shareholder returns, and strengthening IR communications.
(ⅰ) Clarify growth strategy
PER(ⅱ) Enhancing shareholder returns(ⅲ) Expand the shareholder/investor base and improve IR
communication⚫

Practices management conscious of cost of capital
ROE(ⅳ) Control of total assets and equity(ⅴ) Concentrated Investment in high-growth/high-profit
businesses

Current
PBR

0.85 X= ROE 8.5%* × PER10 X* Actual ROE excluding extraordinary gains from asset sales and other special gains and tax effects: 5.1%.

Copyright © H2O Retailing Corp. All Rights Reserved.

FuturePBR

1.2 X over

= ROE 8% over × PER 15 times over(ⅳ) Control of total assets and equity(ⅴ) Concentrated investment in highgrowth/high-profit businesses(ⅰ) Clarify growth strategy(ⅱ) Enhancing shareholder returns(ⅲ) Expand the shareholder/investor
base and improve communication

38

III-4-ⅴ. Strengthen initiatives for “Management Conscious of Costof Capital and Stock Price” –ROE and cost of shareholders’ equity
ROE recovered due to improved profitability, but actual ROE in FY2024 was still lower than shareholders' equity.

◼ Cost of shareholders’ equity◼ Assumptions for calculating cost of shareholders’ equity

Extraordinary
gains and losses
Tax effect

Cost ofshareholders’equity

6.6%

8.5%

Risk
Free rate

βMarket Risk
Premium

0.75%

0.98

6.0%

Cost ofshareholders’ equity

5.1%
6.6%
FY 2024
ROE

FY 2024
Actual ROE*

WACC=4.0% (D/E ratio 0.73, cost of shareholders’ equity 6.6%, cost of debt 0.54%)*Excluding extraordinary gains such as asset sales and tax effects

Copyright © H2O Retailing Corp. All Rights Reserved.

39

III-4-ⅴ. Strengthen initiatives for “Management Conscious of Costof Capital and Stock Price” –Enhancing Corporate Value and Equity Value
Aim to achieve and sustain PBR of 1.0x as soon as possible by executing business strategies andaggressively promoting capital and financial strategies that will be fully implemented in FY2025.
KPI

FY2025-2027

FY2024

ROE

Over 6.6% (FY27)

5.1% (actual)

ROIC

5.9% (FY27)

4.7%

EBITDA-InterestBearing-Debt-Ratio

2.0 X

2.3 X

Total payout ratio

Approximately 60%

22%¥40 per share¥28 per share

Dividends

Business Strategy

Capital/financial strategy(ⅴ) Concentrated investment in high-growth/high-profit
businesses
ROEPER(ⅱ) Enhancing shareholder returns
Active return of surplus shareholders’ capital

Deepen existing businesses and strengthen response to high-net-worth customers••

Making Hankyu Main Store a "Global Department Store"
Focus on and strengthen overseas customer businesses with highgrowth potential

PER(ⅰ) Clarify growth strategy
Develop and deploy new sources of revenue by utilizing the“customer base”.
•
•

•
•

PER

Dividends per share increased to ¥40 (¥28 in FY2024)
Plan to acquire treasury stock on the scale of ¥30 bn. in FY2025-2027(over ¥50 bn. including KFM wholly owned subsidiary)(ⅳ) Control of total assets and shareholders’ equity
Improvement of return on capital
•
•
•

ROE

Controlling WACC by leveraging interest-bearing debt
Sale of low-profit assets such as policy stock holdings
Restructuring of B/S in line with the targeted business portfolio bymaking KFM a wholly owned subsidiary and Ningbo Hankyu asubsidiary

Continue to launch and develop customer service business(Food and Health)
Launch of customer data utilization business(ⅲ) Expand the shareholder/investor base and improve communication

ROE

PER

(Strengthening IR communications)
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40

III-4-ⅴ. Strengthen initiatives for “Management Conscious of Costof Capital and Stock Price” –Shareholder Returns Plan for FY2025-2027
In principle, the Company will pay out dividends based on a DOE of over 1.8% and will flexibly
return profits to shareholders in accordance with business performance.
••

Dividends: Increased to ¥40 per share (started from FY2025)
Acquisition of treasury stock: Scale of ¥30 bn. in 3 years
Total payout ratio (including acquisition of treasury stock) to be approximately 60% for cumulative period.

(100 millions of yen)

Shareholder Returns/Changes in profit

300

260
Dividends payout
219

Acquisition of treasury stock
Profit
164
141

150

143

146

116

Acquisition of treasury shares

99¥30 bn. scale
93

22

35

19
27

37

46

49

FY2017(32%)

FY2018
(34%)

49

49

40

31

31

29

FY 2022(31%)

FY 2023(76%)

FY 2024(22%)

0(Total payout ratio)

FY2015(23%)

FY2016(51%)

Copyright © H2O Retailing Corp. All Rights Reserved.

FY2019(229%)FY2020(▲38%)FY 2021(▲16%)FY2025

FY2026FY202741

III-4-ⅴ. Strengthen initiatives for “Management Conscious of Costof Capital and Stock Price” –Cash Flow Allocation (FY2025-2027)
Cash Flow Allocation
Cash-inCash-out¥217 bn.

¥217 bn.

⚫
Investment
for Growth✓¥60 bn.

Operating profit

Focus investment on growth of highly profitable businesses, deepen existing businesses andestablish new business area.
✓¥86 bn.
Existing
investment

Active investment in Hankyu Main Store, remodeling of Ningbo Hankyu, resumption of supermarket
store openings.
Application development for customer service business, development of Business Infrastructure⚫

Strengthening business foundations⚫

Utilize cash generated from asset sales, etc. for M&A, etc.
Build B/S in line with the targeted business portfolio and maximize synergies.

¥35 bn.
Total Acquisitionof treasury stockOver ¥50 bn.
Depreciation andgoodwill
amortization¥86 bn.

¥20 bn.

¥30 bn.
Scale

Investments
for M&A✓✓¥39 bn.
⚫
Shareholder
Returns¥44 bn.

Made Kansai Food Market a wholly owned subsidiary (¥22 bn.)
Made Ningbo Hankyu a subsidiary (¥16.5 bn.)

Based on stable dividends, aimed at enhancing corporate value and capital efficiency
by acquiring treasury stock✓✓

Dividends of ¥40 per share,
Acquisition of treasury stock ¥30 bn.
Total payout ratio (including acquisition of treasury stock) to be approximately 60% for cumulative period.

Structural Reform ¥2 bn.

Asset sales, etc.

¥45 bn.

Cash and deposits¥75 bn.
*Including cash anddeposits in Ningbo Hankyu

Tax¥37 bn.
Reduction of
liability¥46 bn.

⚫ Secure financial soundness with a target EBITDA interest-bearing debt ratio of 2x.

Cash and deposits¥29 bn.

Aggressive capital and financial strategy to generate cash, and aim to exceed 1x PBR as soon as possible by strengthening business investment andreturns to shareholders
Copyright © H2O Retailing Corp. All Rights Reserved.

42

III-4-ⅴ. Strengthen initiatives for “Management Conscious of Costof Capital and Stock Price” –Balance Sheet Changes
End of FY2021
Total assets ¥630 bn.

End of FY2024
Total assets ¥710 bn.
【Current assets】¥180 bn.

【Current assets】¥140 bn.

【Liabilities】【Liabilities】¥420 bn.
•¥400 bn.

End of FY2027
Total assets ¥670 bn.

【Current assets】¥150 bn.

Interest-bearing
debt•¥170 bn.
•【Non-current
assets】

Interest-bearing
debt【Non-current
assets】¥170 bn.

¥490 bn.

•【Net assets】¥230 bn.

Sale of policy
stock holdings,
sale of land, etc.
¥40 bn.

•¥520 bn.

Property, plant andequipment¥290 bn.
•

Intangible assets・
Investments and otherassets¥240 bn.

【Net assets】¥290 bn.

Change non-current
assets•Kansai Food
Market made awholly owned
subsidiary±0••

Ningbo Hankyu
Made asubsidiary¥32.5 bn.
Sale of policy
stock holdings,
sale of land, etc.
¥45 bn.

•Property, plant andequipmentInterest-bearing
debt¥130 bn.

【Non-current
assets】¥530 bn.
Change in noncurrent assets•
Kansai Super
Marketmanagement
integration¥40 bn.

【Liabilities】¥390 bn.

Secure financial
soundness with a target
EBITDA interestbearing debt ratio of 2x¥320 bn.
(+¥30 bn.)•

Intangible assets・
Investments and otherassets¥200 bn.
(▲ ¥40 bn.)

【Net assets】¥280 bn.
(▲ ¥10 bn.)

Control throughdividends andacquisitionof treasury stock•¥30 bn. in treasury
stock(Consider retirement)

Profit ▲¥24.8 bn.
ROE▲10.5%

Profit ¥21.9 bn.
ROE 8.5 % (actual ROE5.1 %)ROE over 6.6%

To maintain B/S at an appropriate size while aggressively investing in high-growth, highly profitable businesses, promote asset efficiency byselling low-profit assets, etc., which will lead to ROE improvement along with an improved profit level
Copyright © H2O Retailing Corp. All Rights Reserved.

43

III-4-ⅴ. Strengthen initiatives for “Management Conscious of Cost of Capitaland Stock Price” –Expand the shareholder/investor base and improve communication
Engaging in more active communication with capital markets and reflecting this communication in
management to enhance corporate value.
To expand the investor base, improve the convenience of shareholder benefits and implement measures toincrease the number of fan shareholders.
◼ Promoting Dialogue with the capital market• Disclosure of financial and capital strategies of high interest by investors• Continuous information provision and enhanced interactive communicationby the president and executive officers.

◼ Enhancement of shareholder benefits and introduction of selection system• Under consideration of the following✓ Enhanced shareholder benefits at supermarkets, etc. (e.g., point redemption)✓ Improve convenience of department store shareholder benefits (e.g., apps)✓ Distribution of rice and other goods◼ Implementation of measures to expand fan shareholders• Holding briefings for individual shareholders and holding fan meetings, tours, and hands-on events using stores• Enhancement of information provision, including upgrading of the website for individual investors

Copyright © H2O Retailing Corp. All Rights Reserved.

44

Targets
Aiming for operating profit of ¥32.0 bn. in FY2027 and of ¥35.0-40.0 bn. in FY2031(Billions of yen)

50.0

Customer Service
Customer Data
¥3.0 bn.

Other/adjustment
Customer Servce/Customer Data

NingboShopping Center

Ningho40.0

Shopping Center
Supermarket

32.0

Department Store

30.0

Consolidated

26.2

26.2

Supermarket

26.5

Domestic customers/
Store¥25.0 bn.
+
Overseas Customer¥20.0 bn.

20.4
20.0
Department
Store

11.4

11.1
10.0

0.7
0.0

▲ 4.4
Other, Consolidation
Adjustments▲ 10.0
FY19

FY20

FY21

FY22

FY23

Old standard
Copyright © H2O Retailing Corp. All Rights Reserved.

FY24

FY24

FY25
Forecast

FY27
TargetFY31
TargetNew standard (revised consulting fee paid by subsidiaries to H2O Retailing)45

Targets
Aiming for ROE 6.6% over in Mar. in FY2027 and ROE 8% over in Mar. in FY2031

9.6%

10.0%
ROE

9.4%

8.5%

ROIC
8.0%
Actual ROE
6.0%

5.6%

5.6%

6.6%

6.7%
5.6%

5.4%

5.1%

5.1%

5.9%

4.2%

4.0%

4.7%
4.0%

4.7%

4.7%

2024/32025/35.0%※For actual ROE
Including asset sales
Extraordinary gains
and tax effects
excluding

4.0%
3.5%
2.1%

2.0%
0.8%

1.5%

2.0%

0.0%
0.1%
-0.8%

-2.0%

-4.0%

-5.0%

-6.0%

2016/32017/3Copyright © H2O Retailing Corp. All Rights Reserved.

2018/3

2019/32020/32021/32022/32023/32027/32031/346

The information contained in this material reflects judgments made by H2O Retailing Corporation at thetime of preparing this material, and no guarantees are provided concerning the accuracy of the information.
The information is also subject to change without prior notice. The Company and the information providers
assume no responsibility for any damage arising from the use of the information. This document is to be
used solely as a reference and in cases where any differences occur between English version and theoriginal Japanese version, the Japanese version shall prevail. Also, the Company holds the copyright on thismaterial, 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 the prior consent of H2O Retailing
Corporation.

H2O RETAILING CORPORATION