There is no crisis that we cannot overcome.

Integrated Report 2020 C O N T E N T S

Values and Vision

Sustainability

02

Corporate Credo / Basic Mission Statement

44

Sustainability Management

04

Group Vision “Create and Bring to Life ʻNew Happiness.ʼ”47

Contribution to a Low-carbon Society

06

Top Message

50

Management of the Entire Supply Chain

51

Coexistence with Local Communities

52

Promotion of Diversity

53

Realization of Work-Life Balance

Business Model
08

J. Front Retailing Value Creation Process

10

History

14

Top Interview

20

GovernanceBusiness Portfolio Transformation

Corporate Governance

22

54

Identification of and Response to Business Risk

64

Interview with Outside Director

24〈 Special Report 〉 Response to COVID-19

66

Management

26〈 Special Report 〉 Interview 01 Evolution of Department Store

28〈 Special Report 〉 Interview 02 Evolution of Parco

Data Section
68

10-year Data (Financial/Non-financial)

Management Strategy

70

Financial/Non-financial Highlights

30

Medium-term Business Plan

72

Business Overview (Results and Outlook)

32

Innovation of Department Store Business

34

Innovation of Parco Business

74

Financial Information

36

Credit and Finance Business38

ICT Strategy

40

J. Front Retailing Group

Human Resources Strategy

4280Group Companies

Finance Strategy

82Stores (Map)84Stores (Photos)

86

Share Information

Editorial policy：

J. Front Retailing Group (the “Group”) issued this integrated report in order to provide adeeper understanding of what actions it takes to change its business portfolio for sustainablegrowth of corporate value. The report explains at the beginning the values, vision, value
creation process and business model of J. Front Retailing (the “Company”) and it contains
non-financial information including the Groupʼs involvement in society and the environment
through business activities and governance system that helps enhance corporate value in
addition to financial information based on specific management strategy. We have referredto the “International Integrated Reporting Framework” established by the International
Integrated Reporting Council (IIRC) and the “Guidance for Collaborative Value Creation”
established by the Ministry of Economy, Trade and Industry to create this report.

Timeframe：
This report mainly reviews the fiscal year 2019 (March 1, 2019 through February 29, 2020)
but it also contains the latest information available at the time of issue to the extent possible.

Scope：
J. Front Retailing Co., Ltd. and its consolidated
subsidiaries

Cautionary statement regarding
forward-looking statements：
Forward-looking statements in thisintegrated report represent our assumptions
based on information currently available tous and inherently involve potential risks,
uncertainties and other factors. Therefore,
actual results may differ materially from theresults anticipated herein due to changes invarious factors.

Environment
S ociety
Governance

Guidance forCollaborative
Value Creation

Corporate Credo
Service before Profit
Service before Profit － This phrase is passage from “Of Honor and Disgrace”
written by Xunzi, a Chinese thinker in the Zhanguo period, “Those who givepriority to service over profit will prosper.” The most important thing is toapproach things with sincerity and good faith. “Do not sell any products that are of
no benefit to customers.” “Do not rank customers.” “Honesty and loving-kindness
come first.” “An unfaithful person is useless regardless of how gifted he/she may be.”Thus Daimaru has told its employees to keep a humble attitude to serve customers.
At Matsuzakaya, the spirit of “Abjure all evil and practice all good” has beenvalued. They can be modernized as “Customer-first principle” and “Contribution tosociety.” Thinking of stakeholders thoroughly and acting accordingly will lead tobusiness growth. We believe “Creating Shared Value (CSV)” to solve social issues
through business activities is nothing less than practicing the Group’s corporate
credo simply and honestly.

02

Values and Vision

We aim at providing high quality products and services that meetthe changing times and satisfying customers beyond their
expectations.
We aim at developing the Group by contributing to society at large
as a fair and reliable corporation.

Basic Mission Statement
Integrated Report 202003

G ro u p Vis io nCreate and Bring to Life “New Happiness.”
Now is the time when lifestyles are changing speedily. To meet these changes quickly, andwhat is more, to find budding needs are J. Front Retailingʼs important missions. More womenʼssocial advancement. Changing lifestyles due to falling birthrate and aging population.
Increasing globalization and digital consumption. Various factors bring you more new ways toenjoy your life as well as triggering concerns and stresses such as you have never felt before.
Seeing both these “positive and negative” factors, we will evolve into a group that can serve
you in all aspects of life. With regard to “enjoyment,” we will not only “sell goods” but create
new events and experiences to excite you. With regard to “concerns,” we will cover “shortfall”
such as “busyness,” “uneasiness” and “hassle” and create services to clear the fog in your mind.
Our domain will expand beyond the framework of “retail.” And there should be creative ideas,or the creation of “new happiness.” Now is the time for J. Front Retailing to drastically change.
And we promise you to closely support your life in a “present progressive form” after 10 years
and even 100 years by “changing all the time.”

New employees in FY2019

New cause assumed by the GroupThe main business of the Group was the offering ofproducts and services mainly for “festive occasions” by thecore businesses including department store chains Daimaru
and Matsuzakaya and Parco to meet customer needs. With
increasingly diversified lifestyles, however, customer needs
are seen not just on festive occasions but also widely indaily life. Many restrictions including voluntary ban on04

leaving home and restrictions on travel are placed due tothe current spread of COVID-19 and people are forced tolive with concerns and frustrations such as they have neverexperienced before. This is one of symbolic things.
By relieving customers of “concerns” and “frustrations” indaily life so that they can live more conveniently and more
comfortably, we hope many customers will be able to spare
more time for festive occasions. We think that is the socialrole we will have to fill, i.e., the cause.

Values and Vision

J F R WAY
Ideas we va lu e to rea l i ze t h e Vi s i on

Create the future!

Try without fear of
failure!

We will create things that society
and consumers have never before
perceived as well as create newamazing and delightful things.

Introduce new ideas!
We will not succumb to an
inward-looking approach, butinstead will take a broader view
developed by coming into contact
with people, objects and eventsin the outside world.

We will take action without fear of
result, and we will all learn
from the challenges
we have faced.

Act foryourself!
We will think for ourselves
when taking action
without waiting to be told,
and will enthusiasticallyaccomplish our goals.

Be sensible andhonest!

We will take action as members ofsociety in a manner commensuratewith a sense of social decency,
while unwaveringly conducting
ourselves with sincerity andhonesty at all times.

Corporate Credo
Basic Mission Statement
Group Vision（JFR WAY）

Sustainability Policy

Eco Vision / Social VisionCorporate Governance Guidelines

JFR Principles of Action

M issi on Sta tem en t System

In fact, as the means of seeking enjoyment are diversified,many customers cannot gain sufficient satisfaction from a
stereotypical form of consumption as in the past.
Consumers “want new and different experiences” or “wantto enjoy with like-minded people.” Thus the focus ofconsumption is shifting to experiences. Another recent big
trend is heightened awareness of social contribution.
People “want to care more about the environment andethics” and “want to feel that their own existence ismeaningful in society.” The Group has to be able to offer
something more enjoyable and more exciting in response
to such diversification of the means of seeking enjoyment.
The Vision shows where we and the Company want to
be in the future and helps clarify the organizationʼs strategy,
direction and decision-making process. It is each and every
employee who will realize the Vision in a concrete mannerand the sum of their performance will constitute ourcorporate value.

Integrated Report 202005

Values and Vision▶Top Message

The spread of the COVID-19 infection has transformed

COVID-19 pandemic forced most of our department storesthe world. This unprecedented global shock is transforming

and PARCO stores to close from April. The Company

our social structure and significantly changing ourdecided to resume operations in stages by creating a safe

consumption structure. The business environment aroundand secure environment that reduces the risk of infection

us is extremely uncertain and severe, and it is clear that if

and taking into account conditions in each region. However,

we take the wrong measures, we will be able to risk thethere is a concern about a possible second wave ofsurvival of the Company.

infections and we cannot relax our attention.

At the same time, even in this environment, we need to

These factors are expected to have an extremely severe

face the reality that a number of companies are achieving

impact on results of operations. It may be said that this is

growth and improving profitability through innovation. In

the greatest crisis in our history. On the other hand, it isother words, the fundamental problems we face now is thealso true that there was much awareness that may lead tolack of the ability and speed to respond to rapid changes

the future of the Group from the experiences that mightin the external environment.

not have been gained without this crisis, such as

We need to be prepared to fight against the “invisible
enemies” we face today for a certain length of time. The

06

constrained environments including voluntary ban on
leaving home and restrictions on travel.

Values and Vision

In Anticipation of a New Era,
We Will Strive to Create Change.

We have encountered a number of such crises

the three-year medium-term plan starting in the following

over the long history of 300 years and 400 years

year 2021, we will maximize the synergy with thesince our founding. However, I am convinced thatconversion of Parco into a wholly owned subsidiary forsustainable management has been achieved to thediscontinuous growth. Through these initiatives, we aim topresent by returning to the Corporate Credo ofrealize true business portfolio reforms.

“Service before Profit,” which means that those who

Our role as a public entity of society is to strike agive priority to service over profit will prosper, andbalance between social value and economic value by

simply and honestly implementing our daily businesspaying close attention to our stakeholders. Improving

activities every time we faced a crisis like this.

corporate value over the long term cannot be achieved

Responding to changes in the times and society

without coexistence with society.

and constantly striving for self-innovation. We

The important thing is to make sure that we properly

believe that we could do them through theidentify risks and then strengthen our “defense” in orderunchanging values embedded in the Corporate Credo, thatto ensure the safety and security of our stakeholders. At

is, by firstly “pursuing the right path for society” as thethe same time, we must diligently prepare for an “offense”

cornerstone of our management activities. There is nobased on coexistence with COVID-19.

crisis that we cannot overcome.

By overcoming the current crisis together with our

It is not clear at present what kind of world will emerge

stakeholders in a manner that will lead to concrete results

after COVID-19. Our raison d’etre is to continue to findfor the new reality that will follow, we will do our utmost

and provide solutions while facing such changes in society.

to realize the Group Vision: “Create and Bring to Life ‘New

To this end, while leveraging the Group’s existing

Happiness.’”

strengths, we have added five elements: innovation, digital,

July 2020

global, sustainable and collaboration. In this way, we haveembarked on the formulation of a new Medium-term
Business Plan.
With regard to the new Medium-term Business Plan, we
will set the goals for 2030 that look ahead to the postCOVID-19 world quantitatively and qualitatively. Under

YOSHIMOTO Tatsuya
Director, President and Representative Executive Officer

Integrated Report 202007

Business Model ▶J. Front Retailing Value Creation Process

J. Front Retailing
Value Creation Process
Under the Corporate Credo and the Basic Mission Statement, J. Front Retailing is committed to creating affluent lifestyles with its
stakeholders to realize the Group Vision “Create and Bring to Life ʻNew Happiness.ʼ”The business activity of J. Front Retailing is to constantly seek to create rich markets that grow with local communities, which isled by department stores and Parco.
It is nothing less than to create, as a public entity of society, new values with which its various stakeholders empathize.
Circulating the Groupʼs business model and creating new values using the six capitals of J. Front Retailing effectively and efficiently
are the process to create the brand value of J. Front Retailing, which will result in the creation of new values with which society
empathizes.
Through this initiative, we strive to create both social value and economic value.

Total FY 2017 – 2020
Financial Capital investment / growth investment
capitalP.20¥145bnMulti Service Retailer

No. of the Group employees

HumancapitalBusiness model

Approx.9,800(as of Feb 29, 2020)

No. of major storesoperated by
Daimaru Matsuzakaya
Manufactured and Parco
capital

Structure

Strength(Core Businesses)(Core Competence)34(as of Feb 29, 2020)
Ginza Six
Ueno Frontier Tower
Zero Gate

Customer
assetsof 6 mn

Department
store

SC realestateCredit andﬁnanceLife solution
Entertainment

MultiplebrandsP.22

External
environment
recognition

Conveniently
located store
assets(positive risks,
negative risks)● Infections / disasters● Advanced technologies

Intellectual
capital● Progress of sharing economy

Brand value
Know-how for
store planning
Know-how forsales floor development
Know-how for store operation

P.40● Increasing importance of ESG● Shift of existing businesses

from maturity to decline● Change of suppliers

SocialrelationshipcapitalNo. of identifiable customers

Approx.6mn● Funding

Energy consumption
Naturalcapital08*Total capital investment is before application of IFRS 16.

99,478kℓ(FY2019)

Human resources
Governance

P.54

Diverse HRs

Business Model

Outcome

Customers
We will provide
genuine satisfaction
captivating customers
by offering newvalues.

Contribution toa low-carbon
society

Shareholders
AFFORDABLE AND
CLEAN ENERGY

CLIMATEACTIONGroup Vision

We will increase corporate
value over the long term
through highly profitable
and highly efficientmanagement.

P.47

Managementof the entire
supply chain

Strategy

P.04

Create andBring to Life
New Happiness.

Business partners
AFFORDABLE AND
CLEAN ENERGY

CLIMATEACTIONWe will build the relationsof trust by working hard
together and aim to growtogether.

P.50

Innovation of
Department StoreBusiness
P.32

Employees

Coexistencewith local
communities

Innovation of
ParcoBusiness

P.51

P.34

SUSTAINABLE CITIESAND COMMUNITIESPARTNERSHIPFOR THE GOALS

We will realize workplaces inwhich employeesʼ performanceand contribution are fairly
evaluated and they can realize
their exhibition of ability andgrowth and have job
satisfaction.

Communities

Credit andﬁnance2030

P.36

We will contribute tocommunity development andpromote environment-friendly
business activities as a good
corporate citizen.

Promotionof diversity
ICT
strategy

P.52

P.38

Financestrategy
P.42

GENDEREQUALITYDECENT WORK AND
ECONOMIC GROWTH
17 GOALS TO TRANSFORM OUR WORLDRealization ofwork-life
balanceP.53

NO
POVERTYZERO
HUNGERGOOD HEALTH
AND WELL-BEINGQUALITYEDUCATIONGENDEREQUALITY

CLEAN WATER
AND SANITATIONAFFORDABLE AND
CLEAN ENERGYDECENT WORK AND
ECONOMIC GROWTH

INDUSTRY, INNOVATION
AND INFRASTRUCTURE

REDUCEDINEQUALITIESSUSTAINABLE CITIESAND COMMUNITIESRESPONSIBLE
CONSUMPTION
AND PRODUCTION

CLIMATEACTIONLIFE
BELOW WATERPEACE, JUSTICEAND STRONG
INSTITUTIONSPARTNERSHIPFOR THE GOALSLIFEON LAND“Sustainable Development Goals”
agreed by the world community
to be achieved by 2030

GOOD HEALTH
AND WELL-BEING

DECENT WORK AND
ECONOMIC GROWTH

SDGs (Sustainable Development Goals)
Global goals for the period from 2016 to2030, which are included in the “2030 Agenda
for Sustainable Development” adopted at theUnited Nations summit in September 2015.

Integrated Report 202009Business Model ▶History

The History of Reform Creates Tradition.

1717

Shinsaibashisuji
Osaka store

Shimomura Hikoemon Shokei
opened a kimono fabric store“Daimonjiya” in Fushimi, Kyoto(foundation of Daimaru).

1726

1907

Opened Osaka store“Matsuya” in Shinsaibashisuji,
Osaka and began cash sales atfixed prices (present locationof Shinsaibashi store).

1737

1728
Opened Nagoya storeat Honmachi 4-chome,
Nagoya and used thename “Daimaruya” forthe first time (closed in1910).

1837

1757

Distributed to all stores the hanging
scrolls with the store creed of “Service
before Profit” on it.
Completed the construction of the new
Kyoto flagship store in Funaya-cho,Higashinotoin, Kyoto.

1743
Opened Edo store at
Odenma-cho 3-chome, Edo.

Established “Kabushiki
Goshi Kaisha Daimaru
Gofukuten” with acapital of ¥0.5 mn.

Built Kiba Villa near Han-ei
Bridge at Kiba 4-chome,
Fukagawa, Edo and set up ashrine of Han-ei Inari in one
corner of the property (stillpresent on the premises of
Daimaru Core Building).
Edo store achieved thehighest sales in Japan as akimono fabric dealer.

The Oshio Rebellion broke out.
Daimaru escaped burning at thehands of mobs due to its
reputation as a philanthropic
merchant.

Daimaru
1600

1700

Phase of founding

Matsuzakaya

1800

1900

1868

1745

1740

1805

Opened a kimono fabric andfancy goods wholesale store in
Chayamachi, Nagoya.

1736
Changed the trade to a silk andcotton kimono fabric retailer.

1611

Ito Genzaemon Sukemichi openeda kimono fabric and fancy goods
wholesale store in Honmachi,
Nagoya.
Exterior of Ueno store in 1772

10

Reorganized
Ueno store into
“Goshi Kaisha
Ito Gofukuten.”

1881

Opened a cotton wholesale
store Kamedana in
Odenmacho, Edo.

Became a kimono fabric purveyor to
the Owari Tokugawa clan.

1659

1907

Ueno store was usedas the headquarters ofimperial army during
the Ueno war.

Opened a purchasing
office in Muromachi
Nishiki-koji, Kyoto.

1768
Acquired Matsuzakaya in Ueno,
renamed it “Ito Matsuzakaya” andentered into Edo.

1875

Opened Ito Bank
(predecessor of former
Tokai Bank) in Chayamachi
Kado, Nagoya.

Acquired a kimono fabricstore Ebisuya and enteredinto Osaka.

Business ModelFirst partnership with a foreign designer

1908

1920

Newly built and opened Kobe
branch at Motomachi 4-chome,
Kobe.

Established “Kabushiki Kaisha
Daimaru Gofukuten” with acapital of ¥12 mn.

1912

1922

Opened new three-story RC/
wooden Kyoto store on
Shijo-dori Street (present
location) as a department
store.

1927

Opened the first “Dyeing
Laboratory & Hygienic Laboratory”(present Consumer End-Use
Research Institute) in thedepartment store industry in Osaka
store (present Shinsaibashi store).

1959

1928

First implemented a weekly
holiday system in thedepartment store industry.

1913

Launched private label menʼs
clothing “Trojan.”

1983

1953
Signed an exclusive
contract with
Christian Dior. Japanʼsfirst partnership witha foreign designer.

2003

1997

Achieved the highest sales in
the Japanese retail industry(consecutively from H2 1960
to H2 1968).

Kobe store (hit by the Great
Hanshin-Awaji Earthquake
in 1995) was restored andmade its grand opening.

1964

1999
Fully launchedmanagement reform[store-based sales
reform and gaisho(out-of-store sales)
reform]. (Next year, HR
reform and back-officereform were launched.)

Signed an exclusive
contract with
Givenchy.

Phase of development/maturity
1917

1910

Established “Kabushiki Kaisha Ito
Gofukuten” with a capital of¥0.5 mn. Opened a department
store in Sakaemachi, Nagoya.

2000

1924

Completed the new mainbuilding of Ueno store.

1991

Ginza store
opened1923

Department store opened

2006

Nagoya store built asouth wing andopened “MatsuzakayaMuseum.”1957

Reopened Osaka store (Nipponbashisuji)(relocated to Tenmabashi in 1966 andclosed in 2004).

Sapporo store opened.

Umeda store opened in Osaka
Terminal Building “Acty Osaka.”
Adopted a new CI and created a
new logo.

1961

Changed the company nameto “Kabushiki Kaisha
Daimaru.”

Revised and registered
the trademark.

Tokyo store opened

Designated cattleya
as a symbol flower.

1972
Nagoya store built anorth wing.

Established aholding company“Matsuzakaya
Holdings Co., Ltd.”

2003
Nagoya store built a newsouth wing and became
the largest department
store in Japan.

Nagoya store built a new south wing

Ginza store

Integrated Report 202011

Business Model ▶History

Turn Integration into Innovation.

2007
The Daimaru, Inc. and Matsuzakaya Holdings
Co., Ltd. integrated management.
Established J. Front Retailing Co., Ltd.
Phase I relocation and expansion of Daimaru
Tokyo store

2010

The Daimaru, Inc. andMatsuzakaya Co., Ltd. merged into
Daimaru Matsuzakaya Department
Stores Co. Ltd.
J. Front Design & Construction
Co., Ltd. absorbed DHJ Co., Ltd.
The Daimaru Tomonokai, Inc.
absorbed Matsuzakaya Tomonokai
Co., Ltd. to form Daimaru
Matsuzakaya Tomonokai Co., Ltd.

2012

September 2007
Established J. Front Retailing Co., Ltd.

Acquired a 33.2% stake in
Parco Co., Ltd. and converted
it into an equity method associate.
Reached a basic agreement with Shanghai Xin Nan Dong ProjectManagement Co., Ltd. and Shanghai New World Co., Ltd. toprovide technical support and cooperation in opening andoperating a new department store in Huangpu District, China.
Jointly established JFR Plaza Inc. with StylingLife Holdings Inc.
Increased a stake in Parco Co. Ltd. to 65% through TOB andconverted it into a consolidated subsidiary.
Dimplesʼ Co., Ltd. spun off Daimaru Matsuzakaya Sales
Associates Co. Ltd.
Phase II expansion of Daimaru Tokyo store

Phase of business integration
and reorganization

2009

Restaurant Peacock Co., Ltd.
absorbed Shoei Foods Co., Ltd. toform J. Front Foods Co., Ltd.
Matsuzaka Service Co., Ltd. wasrenamed JFR Service Co., Ltd.
The north wing of Daimaru
Shinsaibashi store opened.
JFR Service Co., Ltd. absorbed
Daimaru Lease & Service Co., Ltd.

October 2012
Daimaru Tokyo store reopened
with phase II expansion

Phase of building foundations

2011“Keicho Kosode” from the
Matsuzakaya Collection was
designated as a national important
cultural property.
Daimaru Umeda store reopened
with increased floor space.

FY 2014 to 2016
Medium-term
Business Plan
started2014

Became affiliated with Rakuten
R-Point Card service.
Fukuoka PARCO opened a newbuilding.
Invested in Cool Japan Fund.

March 2011
Daimaru Umeda store reopened
with increased floor space
November 2009
North wing of Daimaru
Shinsaibashi store opened

2008

Daimaru Credit Service, Inc. was renamed JFR Card Co., Ltd.
Daimaru Design & Engineering Co., Ltd., Daimaru Mokko Co., Ltd., Matsuzakaya Seiko Co.,
Ltd. and Refex Japan, Inc. merged into J. Front Design & Construction Co., Ltd.
Dimplesʼ Co., Ltd. absorbed Daimaru Sales Associates Co., Ltd.
Integrated the information systems of The Daimaru, Inc. and Matsuzakaya Co., Ltd.

12

2013

Sold all shares of Peacock Store Ltd., which
operated a supermarket business, to Aeon Co.,
Ltd.
Acquired a 70.52% stake in Forest Co., Ltd. andconverted it into a consolidated subsidiary.

Business Model2015
Increased floor space of themain building of Fukuoka
PARCO.
Acquired a 22.6% stake inSenshukai Co., Ltd. andconverted it into an equity
method associate.
Shanghai New World
Daimaru Department Store
opened.
Decided to rebuild the mainbuilding of Daimaru
Shinsaibashi store.
Decided to rebuild Shibuya
PARCO
Invested in Scrum Ventures.

FY 2017 to 2021
new Medium-term
Business Plan
startedNovember 2017
Ueno Frontier Tower opened

April 2017
Ginza Six opened

2017

Fall 2020
PARCO will open in the north wing of
Daimaru Shinsaibashi store©TAKENAKA Corporation

2020
Converted Parco Co., Ltd. into a wholly
owned subsidiary (Mar).
Halted the current Medium-term
Business Plan and began to formulate a
new Medium-term Business Plan.
A commercial complex “Nihon Seimei
Sakaemachi Building” (provisional) will
open (fall).
PARCO will open in the north wing of
Shinsaibashi store (fall).

Voluntarily applied the International
Financial Reporting Standards (IFRS).
Transferred the business of JFR Online Co.
Ltd.
“Ginza Six” opened.
Transitioned to a Company with Three
Committees (Nomination, Audit andRemuneration Committees).
Transferred shares of Forest Co., Ltd.
Ueno PARCO_ya opened.
Ueno Frontier Tower opened.
JFR Plaza Inc. was dissolved and liquidated.

Phase of dramatic growth /changing the Group structure

Create and Bring
to Life“New

2019

2021

Kinshicho PARCO opened (Mar).
SAN-A Urasoe West Coast
PARCO CITY opened (Jun).
The new main building of
Daimaru Shinsaibashi store
opened (Sep).
New Shibuya PARCO opened(Nov).
Commenced TOB to convert
Parco Co., Ltd. into a wholly
owned subsidiary (Dec).

2016
Phase III renovation and grandopening of Matsuzakaya Nagoya
store
Sendai PARCO 2 opened.

Happiness.”

New Mediumterm Business
Plan will start

2018
Accepted purchase of own
shares by Senshukai Co., Ltd.

September 2019
New main building of Daimaru
Shinsaibashi store

September 2019
New Shibuya PARCO

Integrated Report 202013

Unprecedented COVID-19 crisis“Service before Profit” – Those who
give priority to service over profit willprosper. This Corporate Credo is thecornerstone of the Group that has
survived for 300 and 400 years and I
think it fits with the current times.
Returning to this philosophy andpracticing it is CSV itself, which
produces both social value andeconomic value, and by doing so, I
think we can keep up with the trendsof ESG and SDGs. It is true that there
are many unforeseeable things amid
the COVID-19 crisis. However, I

realize that this Corporate Credo isthe basis on which we act when
thinking of what we should value themost now.
In the current situation called thefight against the invisible enemy,
what I thought first was ensuring thesafety and security of customers andworkers including those fromsuppliers and the employment of
employees and survival as a company.
Soon after the first person infectedwith COVID-19 was found in Japan in
the middle of January, we tookthorough measures to prevent
infection by placing alcohol sanitizers

in our stores and offices and allowing
workers to wear masks. In February,
we set up an emergency headquarters
in the Company, and at the sametime, I also asked each company in
the Group to set up such headquarters.
The core business of the Group hasexisted by creating commercial space,attracting customers from wide areas,
and thereby “creating close contact.”
And it just became a risk. When
March began, our department stores
had temporary holidays and reduced
business hours. In addition, wecancelled large events such as regional
product fairs, which attract many

Business Model▶Top Interview“Let Go of Past Successes andDraw out Solutions to Coexist
with COVID-19.”

Top interview
14

Business Modelcustomers. Parco also reduced
business hours and the events thatmight cause close contact werechanged, postponed or cancelled. And
in April, a state of emergency was
declared and almost all stores wereforced to close. The Group whose main
business is the operation of conveniently
located real stores has faced an
unprecedented and unforeseeable
crisis.
Therefore, we drew up three
scenarios including a “standard
scenario,” a “risk scenario” and the“worst scenario” according to how
long our stores will close affected by

the COVID-19 crisis and considered
the measures to be taken. For the
worst scenario, we assumed that thedeclared state of emergency willcontinue until August. Seeing thesituation changing every moment,
particularly in terms of funding, we
ensured cash reserves promptly by
issuing commercial paper andincreasing the commitment line limit.
In June, we could reopen storesfinally. However, as infection risk was
not eliminated completely, we could
not operate stores in the same way as
before closing. We placed thermographic
monitors and sanitizers at theentrances to prevent anyone that has
a fever or does not wear a mask fromentering the stores. In stores, workers
wear face shields and masks are
given. And also in staff canteens,lounges and locker rooms, which are
hidden from customer view, we takeevery possible measure.

Take a pinch as an opportunityof“reform”
From now on, we will coexist with
COVID-19. It is called new normal.
We have to consider what it will belike for these six months and one year

YOSHIMOTO Tatsuya

Director, President and Representative Executive Officer

Integrated Report 202015

and after three to five years. Until
when should we keep a social
distance? When will people beallowed to move globally just as
before? No one can foresee atpresent.
In the meantime, it is also true that
we found the COVID-19 crisis could
drive reforms. We were made aware
how fragile the present businessstructure that depends on real stores
is. As said before, our core businesshas existed by attracting customers
from wide areas and thereby “creatingclose contact.” If we cannot do this,we can take other approaches including
e-commerce. Actually, however, theoperation of our e-commerce is notcompletely independent of stores.
We could not move products when
our stores were closed. Furthermore,
for tens of thousands of users of ourgaisho website, normally gaisho staff
serves them as a touch point and we
did not think the website needs tohave a payment function. All oursystems are based on real stores.
Amid the COVID-19 crisis, we see
how much inconvenience it causes
to customers, which results inopportunity loss.
In order to avoid employeesʼ
infection risk from traveling, we
encouraged the employees of theentire Group mainly working in thehead offices to work from home andactively held teleconferences andconference calls without getting
together physically. In anticipation

16

that such an era will come in the near
future, we trialed them in somelocationswhilebuildingtheinfrastructure
ensuring
security.
However, we did not even imagine
we actually do them so soon. In
practice, they are working well. At
present, we cannot judge that they
help increase productivity but
problems in the operating process
were revealed. Therefore, I think wewill be able to produce robust results
earlier than expected if we work onthem seriously.
Creating the situation that “doesnot cause close contact” using digitalto survive the COVID-19 era. In thepast, it might be positioned rather as
a complement to real stores, but fromnow on, we will have to improveourselves centered on digital andusing the strength of real stores. We
cannot lose any time in responding tounprecedented dramatic changes. In
this sense, I feel even more importanceof the Group Vision “Create and Bring
to Life ʻNew Happiness.ʼ”Review of the current mediumterm plan and challenges
The Group aims to become a Multi
Service Retailer beyond the frameworkof retail and works on expanding its
business domain and transforming thebusiness models of existing businesses.
In order to expand our businessdomain, we opened a luxury mall
“Ginza Six” and a commercial complex

with office function “Ueno Frontier
Tower” in 2017 and the Real EstateBusiness grew dramatically compared
to before the current medium-termplan started. In the Credit and FinanceBusiness, the management foundation
was reinforced for medium-term
growth by actively hiring specialized
talents and they got prepared to issue“new cards,” which are a key to
growth, this fiscal year.
In order to transform the businessmodels of existing businesses, in
September last year, we opened the“main building of the Daimaru
Shinsaibashi store” as an unprecedented
hybrid department store businessmodel, and in November, we opened“new Shibuya Parco,” which can reacha wide range of customers with an
unconventional tenant mix. I see bothproduce results as expected. A
challenge in the Department StoreBusiness and the Parco Business is
how we will horizontally apply these
new business models to flagshipstores speedily.
When we formulated the current
medium-term plan, which started in2017, we expected that profit would
increase in fiscal year 2020 andbeyond partly thanks to the fullcontribution of the development
projects, which started business lastyear, after bottoming out in fiscal
year 2019. However, it is unavoidable
that the profit level will continue todecrease in fiscal year 2020 due tothe current drastic environmental
changes. In addition, the progress of
new businesses from which a certain
profit contribution is factored in isdelayed. For these reasons, it became
extremely difficult to achieve theprofit target for fiscal year 2021,
which is the final year of the mediumterm plan.
While we see visible results that leadto a better future after three years
have passed since the current mediumterm plan started, in fact, we cannot
say the progress of profit level andbusiness portfolio transformation issmooth. I think behind that are theassumptions that have changed more
greatly in “scale” and “speed” morethan expected when we formulated

Business Modelthe current medium-term plan
including lower consumer spending
than expected after consumption tax
hike, suddenly accelerated shrinkage
of womenʼs volume zone market anddeclining rural stores combined withless competitive urban flagship storesas well as the current COVID-19
pandemic risk.
On the other hand, the Group itself
has faced an “important turning
point.” It is conversion of Parco Co.,
Ltd, a consolidated subsidiary, into a“wholly owned subsidiary.” At last we
could create a system that can aim to
maximize synergy at higher speed byaddressing dynamic transformationof business structure that we could
not conduct before and drasticallyexchanging human resources throughthis conversion. I think this a big plus
factor.
Amid these significant changes inexternal and internal environments,
we have decided that it is the best torestart with a strategy that determinesa direction with a far-sighted
ambitious target and can bring out
greater strength from the Group in a
new system rather than continuing to
implement the current medium-termplan in the present framework.
I think we have to formulate a new
medium-term plan after clarifying
what we could do, what and why we
could not do.

Started to formulate a new
medium-term plan
I would like to explain the outlineof the Medium-term Business Plan,
which will start in fiscal year 2021
premised on creating a strong
business structure considering thecurrent uncertain situation, at theearnings announcement in October
this year. As we have decided togive up the current medium-termplan halfway, after looking back on
it properly, we would like to present
accurate direction and “what we will
be like in 2030,” ten years ahead,and clarify what we will aim to do
for the first three years. To this end,
we thoroughly analyzed the risks thatwill affect the Group. The five integral

elements of the new mediumterm plan will include “innovation,”“digital,” “global,” “sustainable” and“collaboration.” They are nothing
special currently but a company may
not be able to grow or even survive
unless it can do them as a matter ofcourse. For example, with respect
to “global,” as asked at our annual
shareholders meeting, you may
wonder if we will be really all rightconsidering the situation in which
inbound sales, which are an elementof global, disappeared amid global
restrictions on travel due to thecurrent COVID-19 crisis. However,
we will not be able to stop the trendof going global and it may become
obviously different from the past
concept of global in the new normal.
More active “collaboration” withoutside will be needed to promote“digital” and “innovation.” I think
we need to collaborate with outside
more dynamically. Needless to say,“sustainable” means that a company
cannot exist without producing bothsocial value and economic value.
Currently we have many discussions
concerning the new medium-term
plan. Of the main ten members
who formulate the plan, only four
including myself are from thedepartment store. The remaining
members are the ones from Parcoand mid-career employees. As nineof the ten members who formulated
the current medium-term plan werefrom the department store, I feelit has changed. Though there arestill few women and people fromoutside, there is no doubt that the
recent “conversion of Parco into
a wholly owned subsidiary” will
be a key factor in the formulation
process and implementation of the
new medium-term plan. I think weneed to consider quantitatively whatsynergy we will be able to create. For
this purpose, the department store
and Parco should evolve further.
The Real Estate Business, which is
growing steadily under the current
medium-term plan, will be integrated
into Parco, which accumulates more
know-how. It is most expectedamong synergies from the recent

conversion into a wholly owned
subsidiary. Parco was mainly thedeveloper of commercial complexes
named Parco, but going forward, it
will develop real estate in new fields
as well as a commercial field.
The greatest of what we could not
do under the current medium-termplan was the deep exploration of thegrowth strategy that aims to makeus a Multi Service Retailer, that is, go
beyond the framework of retail. As it
is obvious that we cannot grow in asustainable way if we stay within theframework of retail, our challenge iswhat we will define as the “fourthpillar” in addition to the existing pillarsof the Group including department
store, Parco and finance. To this end,
I think we need synergy with Parco
combined with external insights.
In the meantime, as management
resources are limited, we will address
structural reforms to overcome thiscrisis steadily. If we do something
new, we have to clarify what togive up. The essence of choice andconcentration is to decide what toabandon.

Coexistence with a sustainable
society
In 2018, the Company identified fivemateriality issues including “contribution toa low-carbon society,”“management of
the entire supply chain,” “coexistencewith local communities,” “promotionof diversity” and “realization of worklife balance” through the questionnaire
survey for 4,250 stakeholders anddiscussions at the Management
Meetings and the Board of Directors
meetings. We set long-term goals foreach of the five materiality issues andtake specific actions in earnest toachieve them.
With regard to “contribution toa low-carbon society,” a retailer
may not contribute greatly in termsof impact on the entire society.
However, increased GHG emissions
are one of the greatest global
problems and we cannot just sit andwait. The Groupʼs CO2 emissions aremainly from stores and approximately
90% of them are from electricity use.

Integrated Report 2020

17

Therefore, we will promote switch torenewable energy and LED lighting
and electrify our corporate fleet.
Thinking through what we can do
now and taking the lead in putting
it into specific action. I think that is
all we need to do. As such actions,
the GHG emissions reduction targets
set by the Group was approved as
science-based reduction targets by
the international “Science Based
Targets initiative (SBTi)” last year. The
SBTi updated its target validation
criteria so that the level of targets isclassified under three categories. The
Groupʼs targets were approved under
the second strictest category of “wellbelow 2℃”-aligned targets. We also
support the final report released by
the “Task Force on Climate-related
Financial Disclosures (TCFD)” that wasestablished by the Financial Stability
Board (FSB) (TCFD recommendations),
and at the same time, participatedin the “TCFD Consortium” that was
launched on May 27, 2019. Goingforward, we will engage in dialogue
with other companies and financial
institutions which support theserecommendations by participating in
the TCFD Consortium to effectively
disclose information on how weaddress the risks and opportunities ofclimate change, what initiatives we
implement to achieve the long-term
GHG emissions reduction targets,and so on.
With regard to “management of
the entire supply chain,” we cannot
do it without the understanding
and cooperation of our suppliers.
Therefore, we formulated ourPrinciples of Action and the “Principlesof Action for Suppliers” in June 2019to eliminate environmental andsocial risks in the supply chain. Each
operating company in the Groupsent these “Principles of Action for
Suppliers” to the representativesof suppliers to ensure that they
understand and comply with theGroupʼs view and rules. In October,
Daimaru Matsuzakaya Department
Stores, a main operating company,
held a “presentation on the JFR
Principles of Action for Suppliers” inTokyo and Osaka at the same time18

and as many as 652 people from 530
companies attended it. I am convincedthat both the Group and its suppliers
deepened shared thought that they
will aim to enhance corporate value
by complying with the Principles of
Action through them.
With regard to “coexistence withlocal communities,” needless to say,
it is the very core business of theGroup. We position five areas where
our stores are located as key areasand implement the “Urban Dominant
Strategy” that aims to grow with local
communities with our stores at its
core. In fiscal year 2020, the northwing of the Shinsaibashi store will
open with Parco as an anchor tenantin fall and a new commercial complex
will open in the Sakae area, Nagoya.
With regard to “promotion ofdiversity,” given further increasing
human resource exchanges driven by
the recent conversion of Parco into awholly owned subsidiary, I think wehave become a very diverse company.
Recently, we actively hire people fromoutside. We hired 69 people onlyin fiscal year 2019, which is almost
the same level as the new graduate
recruitment. It is true that theGroup mainly operating traditional
department
storesis
rapidly
becoming diverse. In addition, we
adopt a unique “Mother Recruitment”
program that aims to extensively hire
women wishing to balance childcare and work at a higher level fromoutside the Group. I think it is effective
in securing motivated talents. In fact,
however, there are still many men
in management. So we would liketo seriously consider a way to bringout employeesʼ personalities andabilities to the fullest and develop
female human resources who will be
included in a succession plan.
With regard to “realization ofwork-life balance,” it is importantthat a work style reform will be
carried out not just to remedy long
working hours but to make work
creative and productive and balance
work and life. Telework, which has
become established, will steadily
drive that. Creating a company
whose employees enrich both theirlives and works and take pride in thecompany. I think it will help people
and a company achieve true growth.

Further raise awareness ofcapital cost with ROIC
I understand our cost ofshareholdersʼ equity is in the rangeof 6 to 7% in the CAPM. I think an
ROE of at least 8%, which exceeds
the cost of shareholdersʼ equity, isthe minimal level we should aim
to achieve to enhance corporate
value. We aim to build a businessstructure that can achieve an ROE ofat least 8% on a consolidated basis
continuously by breaking down ROE
into its components to be addressedby operating units.
Operating units work to increase
ROA, which is calculated bymultiplying a companyʼs operating
profit margin by its asset turnover. As
the Department Store Business that
operated using large assets of storesgave too much importance to P/L, I
think this is the first step to change
our mindset to see return fromassets, that is, realize B/S-focusedmanagement. ROA was added as astore manager performance indicator.
So I think the business management
based on separate B/S for each store
is steadily progressing. Furthermore,from fiscal year 2020, we will adopt
an “internal capital system” that setsinternal rules including an internalinterest system, an internal tax system
and an internal dividend system, likemanaging a company, as well as
setting capital for each business andeach store to further advance B/Sbased management.
In terms of return on investment,
we use the WACC as a hurdle rate.
Our WACC is calculated at around 5%
over the medium to long term. We
also set the WACC for each businesssuch as Department Store, Parco andCredit and Finance. As the WACC isthe hurdle rate of ROIC, a positive
spread between ROIC and WACC will
help create corporate value. Though
we do not formally adopt ROIC as amanagement indicator, it is true that
ROIC is often referred to in dialogue

Business Modelwith investors. Actually, when wereleased the current medium-term
plan, an investor said that the spreadof ROIC, which was calculated
from total investment and forecast
operating profit during the period of
the medium-term plan, is not goodenough. As a matter of course, itwill be discussed in each business.
That means investment should bemade in the business that generates
greater return. As ROE can be broken
down into ROIC and leverage, it
may be said to be a KPI that aims tofundamentally enhance ROE without
relying on leverage. Based on thesematters, we consider introducing
ROIC as a KPI in the new mediumterm plan, which is being formulated.
For investment projects, the“ Investment
Project
ReviewCommittee” with the Senior Executive
General Manager of Financial
Strategy Unit as its chairperson and
the Senior General Manager ofManagement Planning Division as its
vice-chairperson discusses them. We
use the payback method for store
renovations and the NPV method fordevelopment investment. For M&A,
we use quantitative criteria including
calculating shareholder value using
the DCF method, creating risk
scenarios and confirming impact on
rating, etc. and also qualitative criteria
to make a decision comprehensively.
The results are reported to theManagement Meetings and theBoard of Directors and positioned as
one factor in management decision.
The “Revitalization Plan Review
Committee” also manages existing
businessesinthreephases.
The Committee validates thesebusinesses, examines the validityof their measures and provides
information to the Management
Meetings and the Board of Directors
in a reasonable period of time.

a Company with an Audit &Supervisory Board and made atransition to a Company with Three
Committees (Nomination, Audit andRemuneration) in fiscal year 2017. At
that time, five of 13 Directors wereindependent Outside Directors, andsince 2019, we have added one andhave six in total to further strengthen
oversight function by adding external
perspectives.
I think it is the most importantfor governance to increase thetransparency of management.
Transparency is enhanced by actively
disclosing information, and without
doing so, we cannot promote
constructive dialogue. For example,
as it is difficult to foresee the futurein the current COVID-19 crisis, many
companies with fiscal year-ends in
February and March announced
that earnings forecasts “were to be
determined.” However, we disclosed
earnings forecasts as always. It was
not easy to forecast in the situation
changing every moment but the
management of a company remains
based on a certain assumption madeconsidering the environment around
it. Therefore, we made forecasts
by analyzing information available
until the end of March and disclosed
them at our earnings announcementin early April. It is because I think
opening gambits for discussion withcapital markets are provided anddialogue is deepened by showing thestandards set by our management.
A state of emergency was declared
immediately after that and thisassumption changed. However, I feelthe dialogue conducted there wasmeaningful and highly suggestive,
which will lead to the next step.
This is really the “emergency
situation.” The succession plan was
implemented in such situation andI got a baton as the President, inwhich I feel sort of destiny. As theenvironment changed so drastically,
we need to reset our mind. Clinging
to past successes thinking easily
that everything will get back on
the track soon is just a risk. My job
may start from “letting go of past
successes.” The new era drives theacceleration of changes and I see it
as an opportunity to seek the new
way to operate the businesses of theGroup. Since it is difficult to foresee
the future, it is important to beef
up efforts to disclose information,encourage beneficial dialogue andreflect many insights thus obtainedin management activities. We would
like to draw out solutions in the
COVID-19 era, overcome this crisis
steadily with stakeholders and strive
to grow in a sustainable way andenhance corporate value over the
medium to long term.

Deepen dialogue through highly
transparent management
We have addressed governancereforms continuously since the
Corporate Governance Code waspublished in 2015. We were originally

Integrated Report 202019

Business Model▶Business Portfolio Transformation

Accelerate Business Portfolio Transformation
Cannot lose any time in business portfoliotransformation
In recognition that it is difficult to grow greatly if we cling
to the core department store field of the Group and a greater
retail field, we work to transform our business portfolio togrow as a “Multi Service Retailer” beyond the framework ofretail for “discontinuous growth,” which is not an extension of
past growth. The current COVID-19 crisis strengthened ourconviction that the Group would grow over the medium term

only by adhering to this direction. While seeing it imperative
to innovate businesses using the store assets of the department
store and Parco, which have brand power, we will strive toexpand into new fields including the real estate business, thefinance business and life solutions to enhance corporate value
through business portfolio transformation.
We think a big key to realize it is the full-scale creation ofsynergy with Parco, which became a wholly owned subsidiaryin March 2020.

Multi Service Retailer▶

Expanded needs to relieve concerns/frustrations in daily life
Rise of sharing economy

Advent of IoT era

Consumption shift from products to services/experiences

Expanded demand for HR services

Increased urbanization

Diversified payment methods Advanced financial services

Multiple retail business brands(Multi Retailer)
Strong customer assets of 6 million people
Store assets in urban areas

Shift gears by converting Parco into a wholly
owned subsidiary

understanding through human resource exchange and sharingof suppliers and contributed to the growth of the Group.
On the other hand, the environment surrounding our businessis becoming increasingly severe and changing remarkably and at
an unprecedented speed. In such changing environment, wehave decided that it is vital to flexibly respond to consumer
needs, which are changing from day to day, through deeper
alliance than ever between the two companies to further
enhance their corporate values and brand values.
In such situation, though we could pursue results to a certain
degree through alliances including the joint store development
and joint promotion as in the past, it was also true that it took

The Company acquired 27,400,000 common shares of ParcoCo., Ltd. and made it an associate accounted for using equity
method in March 2012. Subsequently, in July in the same year,
the Company entered into a capital and business allianceagreement with Parco, and at the same time, implemented atender offer for the shares of Parco. As a result, in August in thesame year, the Company owned 65,920,000 common shares of
Parco (ownership ratio: approximately 65%).
After the Company became the parent company of Parco, theCompany and Parco strived to enhance the corporate value andbrand value of the Group in a wide range ofareas over about seven years.
▶Scheme for the conversion of Parco into a wholly owned subsidiary
Specifically, the two companies have
Past
TOB
Present
achieved business synergies in many areas
J.
Front
J.
Front
Minority
including the joint development of stores in
Retailing
Retailing
shareholders“Ueno Frontier Tower,” which opened in
CashApprox.
Approx.
November 2017, and the “north wing of the
J. Front
Minority
65%
35%
100%
Retailing
shareholders
Daimaru Shinsaibashi store,” a project which is
SharesofParcostill ongoing, as well as joint promotions using
both companiesʼ customer bases in the Nagoya
Parco
Parco
area, etc. We think the two companies also
realized alliances in a wide range of areas
including the deepening of mutual20Business Modeltime for the Group to make decisions under the capital
relationship between the two companies, which restricted
implementation of strategies, because Parco was listed and hada certain degree of independence in management.
We thought that in order to move ahead with a thorough andflexible transformation of the Groupʼs business portfolio speedily
backed by rapid decision-making, it would be necessary tofurther deepen the ties between the two companies and toconcentrate management resources, and for this reason, we
decided to make Parco into a wholly owned subsidiary.
The Company commenced a tender offer on December 27,
2019, and as a result, Parco became its wholly owned subsidiary.
The Group will take this opportunity to accelerate its structuralreform in earnest by innovating its business model, moving

ahead with the Urban Dominant strategy and expanding into
new business fields to realize the Group Vision “Create and Bring
to Life ʻNew Happiness.ʼ”The Group’s business structure and strength▶

Structure
Department
store

SC realestateCredit andﬁnanceLife solution
Entertainment

Strength
Customer
assetsof 6 mn

MultiplebrandsConveniently
Diverse HRs
located store
assetsFour synergies aimed for▶

Strengthening the business base as a retail/real estatebusiness group●Further promoting the joint development of stores including large-scalecomplexes that would be difficult to handle alone●Strengthening real estate development capabilities through effective
utilization of land and building holdings●Transferring the Real Estate Business to Parco after making Parco awholly owned subsidiary. Consolidation of the Groupʼs resources andcentralization of management and development functions●Improving sales capabilities through mutual utilization of customer
data
1

Strengthening associated businesses aimed at
growth as a Multi Service Retailer●Promoting cooperation not only for store development but also in similar
associated businesses such as design and construction contracting●Expanding the service area and business fields by utilizing on a groupwide basis to the fullest extent Parcoʼs superior business know-how inareas like the entertainment business
2

Into the second stage of department store
innovation
After peaking at ¥9.7 trillion in 1991, national department
store sales have decreased to ¥5,700 billion in 2019, below¥6 trillion for three consecutive years, in spite of a recent
boost from inbound tourism, losing the market of as muchas approximately ¥4 trillion over these 18 years. We have
not just faced crises such as the collapse of the bubble
economy, the collapse of Lehman Brothers and the current
COVID-19 pandemic but also competition beyond industry
boundaries, which has become fiercer than ever with therise of new digital-native players and disruptors.
On top of them, we think our essential problems aredelays in responding to rapid changes and the obsolescenceof the business model of the core Department StoreBusiness.
With the medium-term plan, which started in fiscal year
2017, we tried to innovate the department store businessmodel in two directions. The one is a luxury mall Ginza Six,
which was created in the two blocks including the formersite of the Matsuzakaya Ginza store using the real estate
rental model with the option “not to operate a department

Improving management efficiency

3●In response to the increasing diversification of lifestyles,

working as a group to develop new businesses to improve
management efficiency●Improving management efficiency by integrating indirect
departments and operations such as investor-related
operations, financing operations and those related to generalshareholders meetings●Substantially improving efficiency by implementing system
investment as a group

Enhancing competitiveness by sharing
expertise through human resource exchange●Promoting an even greater degree of cross-operating company
human resource exchange●Providing a broad range of services to meet increasingly diverse
customer needs by sharing the expertise respectively built byboth companies
4

store” (2017). And the other is the main building of the
Daimaru Shinsaibashi store, which is a “hybrid” model
combining the merits of department stores and real estate
rental (2019). These efforts about real stores produced
results as expected. However, the environment is changing
more rapidly than expected and at an accelerated pace andfurther innovation is required. We think we can no longer
achieve success in real stores without digital. The current
COVID-19 crisis brought to light such issue and it is an
important theme of the new Medium-term Business Plan,
which is being formulated and will start in fiscal year 2021.

Change in a relationship between real and digital

▶

Past

FutureDigitalReal
Real
DigitalDigital complementing real

Real based on digital

Integrated Report 202021

Business Model▶Identification of and Response to Business Risk

Control Risk Properly
The Group defines risk as “uncertainty, which affects theorganizationʼs profit or loss in a changing environment.” Risk
has both a positive side (opportunity) and a negative side
(threat) and we think a company will grow in a sustainable
way if risks are addressed properly.
For risk management, we have formed the Risk Management
Committee as an advisory body to the President andRepresentative Executive Officer, which is chaired by the
President and Representative Executive Officer and comprises
Executive Officers and others. The committee has a secretariat
whose general manager is an officer in charge of risk
management. The secretariat shares the policies and importantmatters decided by the Risk Management Committee with

operating companies to promote risk management across theGroup. By positioning risk as the starting point of strategy andlinking risk with strategy, we promote risk management as oneof initiatives to enhance corporate value.
The Risk Management Committee identified and evaluatedrisks (uncertainty) based on an analysis of an environment andnarrowed them down to priority risks. We share risk recognition
as the “list of J. Front Retailing Group risks” including 101
items (see page 63) across the Group. Concerning extremely
important risks, which are defined as “business risks,” the Risk
Management Committee discusses and decides a policy foraddressing them and reflect them in the “Group strategies.”

Risk Management Committee“Creation of risk map”
“Determination of risks”“Creation of risk list”

Identificationof risks

External
environment
analysis

Evaluationof risks

Internal
environment
analysis

PInterview withmanagement

D

C・A

Response
to risks

Monitoring/
report“Evaluation/improvement”“Report to the Audit“Formulation of strategy”“Determination of measures”

Risk map▶

Strategy

HazardSev

Impact

e
erat
Mod

r

no

e
erat
Mod

r

no

Mi
h

Hig

e

erat

Mod

Low

Preparedness

22

Operation

ere

ere

Mi

Committee/the Board of Directors”

Finance

Sev

ImpactWe have two risk
maps including a“strategy” /“finance” risk map
and a “hazard” /“operation” riskmap.

Narrowing
down of risks

Low

e

erat

Mod

h

Hig

Likelihood

Business Model

List of the Group key risks▶

Cetegory

Impact on the Group

Infection

Occurrence: Will increase
Change: Rapidly accelerating

Affects the survival of businessactivities and work styles● Changes in consumer values
and behavior

DisasterOccurrence: Has increased for a
few years
Change: Rapidly accelerating● Damage to human life
● Suspension of business activities● Decline in store ability to

Hazardrisk

Advanced
technologies

Progress of
sharing
economyStrategyrisk

Increasing
importance of
ESG
Shift ofexisting
businesses
from maturity
to decline
Changes ofsuppliers
Financing● Changes inliquidity● Interest rate
fluctuations

Exchange● Exchange rate

Financerisk

Negative side of risk(threat)

Risk item

fluctuations

Share● Stock market

fluctuations

Impairment
asset value

Information
management

Operation
risk
Legal
restraints andrevisions● Loss of human life
● Temporary closing● Radical review of businessMeasures● Ensuring the safety of customersーand employees● Cooperation with suppliers● Securing alternate supply chain● Business model transformation● Ensuring the safety of facilities● Developing a business continuity

ー

attract customers
Critical impact on performance/finance● Occurrence of repair costthat affects the survival of business● System halt

plan, strengthening drills● Transferring important data to

cloud storage, creating backup
center

Occurrence: Has increased for a
few years
Change: Further accelerating● Creative destruction of existing

businesses by IT companies● Use of technologies in existing● Creating new experience value using

Very severe impact on retail andother existing businesses

existing businesses due todelayed use of big data

● Use of big data
● Improvement of operations● Improving productivity by introducing

Occurrence: Increasing over the
medium term
Change: Moderately accelerating

Very severe impact on retail businessOccurrence: Increasing over the
medium to long term
Change: Further accelerating

Very severe impact on corporate
value, reputation and financing
Occurrence: Has increased for a
few years
Change: Moderately accelerating

Very severe impact on theperformance of the entire Group
including retail businessOccurrence: Has increased for a
few years
Change: Rapidly accelerating

Very severe impact on retail business● Decline in competitiveness of● Expansion of areas for sharing

businesses

response to changes in
consumers● Participation in circular● Harsh look at link between ESG● Growing consumer interest in a

initiatives and increase ofbusiness profitability● Loss of customers due toobsolete business model● Lower appeal and poorer

assortment of retail stores

technologies/big data
RPA, etc.

● Creation of new demands inby emerging companies● Spread of consumption
behavior not based on buying

Occurrence: Current greatest problem
Will increase for at least ● Worse conditions for securing
one or two years
funds
Change: Rapidly accelerating(amount/cost/timing)● Entry into sharing business● Promoting the 3Rs in physical storesbusinesses

sustainable society● Positive impact on financing● Momentum of consumers

emphasizing the experiences
only physical stores can deliver● Creating new CSV● Promoting materiality issues● Strengthening information

disclosure● Developing complex type stores/

floors with new concept● Business model innovation● Opportunity to revise the● Developing a new store model insupplier policy
cooperation with existing suppliers(new development, new● Developing new good suppliers
collaboration with existing suppliers)● Efficient/effective financing● Diversifying financing methods

based on the financing policy

Very severe impact on financial stability● Developing trade areas in countries

Occurrence: W ill increase for at● Decrease in foreign tourists,
least one or two years
decline in motivation to spend
Change: Rapidly accelerating● Increase in procurement cost

● Increase in foreign tourists toJapan, brisker spending on
big-ticket items● Decrease in procurement cost

● Attracting and retaining affluent

Occurrence: W ill increase for at● Downturn in affluent consumer
least one or two years
confidence
Change: Rapidly accelerating● Decrease in profit
Severe impact on performance and● Difficult to manage pension● Brisker spending on big-ticket● Stimulating demand that meets the● Increase in profit● Better management of pension● Ensuring the appropriate level of share

Severe impact on profitability

financial condition● Changes in

Positive side of risk
(opportunity)

assets● Lower evaluation from
Occurrence: W ill increase for atstakeholders
least one or two years● Weaker brand power
Change: Rapidly accelerating● Decline in the value of assets

Very severe impact on financial condition
Occurrence: Has increased for a
few years
Change: Further accelerating

Severe impact on reliability andcorporate image
Occurrence: Remains highChange: Constant

items

assetsother than China

foreign customers● Risk hedges such as forward

exchange contracts

needs of the affluent

price (purchasing our own shares)● Reducing cross-shareholdings● Scrutinizing investment projects● Alignment between profitability

and asset value

held by the Group(recovery of investment)● Finding early a sign of impairment

and remedying it by managing inphases● Strengthening support by● Loss of social credibility● Damage compensationー● Restrictions on businessactivities
Severe impact on stable operation ● Occurrence of compliance costand credibility of existing and new ● Penalty for violation of law
businesses● Decline in credibility

In addition, we recognize risks and opportunities
associated with climate change have significant impact on
our business strategies. Therefore, the Group declared its
support for the final report released by the “Task Force on
Climate-related Financial Disclosures (TCFD)” that wasestablished by the Financial Stability Board (FSB) (TCFDーspecialized units● Strengthening the security of hardware● Developing regulations, etc.
● Employee training● Using external experts● Strengthening support by

specialized units● Strengthening employee training

and the whistleblowing systemrecommendations) in May 2019. The Group will actively
reduce energy consumption, use energy more efficiently,
introduce renewable energy, and at the same time, further
enhance information disclosure in line with the TCFD
recommendations to “contribute to a low-carbon society.”(For details, see page 48.)

Integrated Report 202023

Business Model▶

<Special Report> Response to COVID-19

How Did We Face the Spread of
the COVID-19 Infection?
When 2020 started, the unprecedented “COVID-19 pandemic” occurred as a global risk. How did we address this new risk?
Our top priorities were the safety and security of customers and workers including those from suppliers and survival as acompany. Below is a real document showing how we responded to ever-changing conditions.
*As of May 29, 2020

January 2020
Our response

March 2020
Social trends on infection

Our response

Jan 6

China: The number of patients with unknown
pneumonia increased rapidly in Wuhan and
the Ministry of Health, Labor and Welfare(MHLW) alerted.

Response to temporary school closures⃝Eased some requirements for child care leaveand shortened work hours for child care

Jan 14

World Health Organization (WHO): Confirmed
COVID-19

Jan 16

MHLW: Confirmed the first infected person in JapanJan 22

Issued an alert to JFR and each company in
the Group to prevent infection at an earlystage of infection in Japan⃝Thorough measures to prevent infection in
offices and stores (gargle, hand washing,placement of alcoholic sanitizers, permission
to wear masks)⃝Thorough compliance with the governmentʼs
policies such as “overseas travel warning” by
the Ministry of Foreign Affairs of Japan(MOFA) and “guidelines on COVID-19
consultation” by MHLW

WHO: Declared COVID-19 as a “public healthemergency of international concern”

Jan 30

Mar 1

Government of Japan: Promulgated a Cabinet Orderspecifying COVID-19 as a “designated infectious
disease” and a “quarantine infectious disease”

Feb 7

Mar 3

Each store of Daimaru Matsuzakaya Department
Stores closed temporarily (Tuesdays in Mar, four days)⃝Strengthened cleaning and sanitizing withalcohol in stores
Reduced the business hours of each Parco
store (for the time being)

Mar 4【6th】JFR emergency headquarters meeting⃝Discussed JFR business continuity measuresin case of closing offices due to infection

Mar 5

MOFA: Required a two-week waiting period forpeople entering Japan from China and the ROK
Infections spread to 8 prefectures

Mar 6

Decided to apply public medical insurance to PCR tests

Feb 17

Feb 18【1st】JFR emergency headquarters meeting⃝Discussed and confirmed basic ideas on sales
activities and communication in case a worker(including one from suppliers) is infectedFeb 20【2nd】JFR emergency headquarters meeting⃝Discussed the measures to be taken based on
the infection situation (how to deal with workin case of suspected infection, preventive
measures such as cancellation of business trips)⃝Discussed and confirmed specific sales activities andcommunication in case a worker (including one
from suppliers) is infected based on case studies

Feb 24【3rd】JFR emergency headquarters meeting⃝Confirmed the Groupʼs internal notices on
response to COVID-19 and alert based on
the 2nd headquarters meeting⃝Confirmed the review of “various meetings,”“business trips,” “trainings,” “recruiting activities”
and “work styles” to prevent infection

Mar 10Feb 26【4th】JFR emergency headquarters meeting⃝Responses to be taken by Daimaru Matsuzakaya
Department Stores and Parco based on the government
basic policies on COVID-19(1) Both companies will cancel events that draw manycustomers and other events such as regional product fairs,
which carry a high risk of infecting people with COVID-19,
for the time being(2) Department store: Close stores temporarily on a total offour Tuesdays including Mar 3, 10, 17, 24 from thestandpoint of providing a safe and secure shopping
environment to customers, ensuring the work styles andhealth of workers, and reducing the risk of infection(3) Parco: Reduce the business hours of each store from Mar 3⃝Asked each company in the Group to consider business(operations) continuity measures in case of closing offices

Mar 11【8th】JFR emergency headquarters meeting⃝A person working for a tenant in the building
where JFR Nihonbashi office is located was foundpositive for COVID-19 and held a conference call to
discuss how workers there would work thereafter⃝As a result, confirmed that workers there would
refrain from coming to work on Mar 12 (Wed)Issued CP of ¥20 bn

Mar 12

JFR Nihonbashi office closed temporarily

Mar 13Work in JFR Nihonbashi office returned
to normal from Mar 13 (Fri) onward⃝Working normally, and as instructed by an industrial doctor:(1) Measure body temperature before leaving home:
In case of 37.0℃ or above, refrain from coming towork, stay at home and consult a doctor(2) Hand wash and sanitize more thoroughly than ever(3) Ensure that stay in communal areas is limited tothe minimum necessary

Japan: The expert meetingʼs views wereannounced, stating that the next week or
two are a critical moment regarding whether
the outbreak spreads rapidly or is controlled.
Government of Japan: Determined and announced
the basic policies for the COVID-19 disease control
Government of Japan: Requested the organizers of sport and culture
events to be held in the next two weeks to cancel or postpone themFeb 2524

Mar 9【7th】JFR emergency headquarters meeting⃝Reported and confirmed the current state of atemporary staff from Dimplesʼ who was foundpositive and the communications of the company
and the client company she worked for⃝Implemented various measures such as the isolationof employees in charge of JFR consolidated
accounting to reduce their risk of infection“Earnings forecasts for the fiscal year
ending Feb 28, 2021”(1)Discussed at an officer retreat

Government of Japan: Decided the 1st phase ofmeasures to fight COVID-19 (¥15.3 bn in total)
With the spread of infection in Japan, JFR
emergency headquarters was formed⃝Formed JFR emergency headquarters as ofFeb 17 (headed by President)⃝Asked each company in the Group to form
such headquarters

Feb 28Italy: Quarantined 16 mn people in the north

Mar 8

Supported Shanghai New World Daimaru Department Store⃝Sent masks to Shanghai New World Daimaru
Department Store⃝“30,000 masks on Feb 7,” “20,000 on Feb
20,” totaling 50,000

Feb 13

Feb 27

Government: Created a program to make iteasier for workers who look after their children to
take leave following temporary school closures

Mar 2

February 2020
Feb 1

Mar 14

Mar 15Government of Japan: Asked all elementary
schools, junior high schools, senior highschools, etc. to close temporarily from Mar 2
until spring break【5th】JFR emergency headquarters meeting⃝Discussed and confirmed the draft of releaseHokkaido Governor declared a “state of emergency”
on temporary closing of department stores toprevent the spread of the COVID-19 disease

Social trends on infection

Mar 19Mar 23“Earnings forecasts for the fiscal year
ending Feb 28, 2021”(2)Discussed at Management Meeting

Mar 25【9th】JFR emergency headquarters meeting⃝Held a conference call to discuss how
workers in JFR office would work
⃝Confirmed that they would telework as
much as possible on Mar 26 (Thu) and 27(Fri) (Decided on Mar 26 to continue forthe time being from next week)

The Government Expert Meeting on the
Novel
Coronavirus
DiseaseControlannounced their views on the current
situation, stating that it is not moving toward
an explosive spread of infections and appears
to be somewhat holding steady and also
stating that the number of infectious cases is
expected to continue to grow for some time
and that we cannot let our guard down yet.
Prime Minister: Extended his previous request
for large-scale events, etc. to be canceled or
postponed for another 10 days
Government: Compiled the second batch of
emergency response measures including“continuing elementary school and juniorhigh school temporary closures,” “ban on
reselling masks” and “further expanding PCRscreening capabilities”

WHO: Declared COVID-19 a “pandemic”

Japan: Enacted the “revised Act on Special
Measures” for COVID-19

USA: Declared a “national emergency”
Spain: Declared a “state of emergency,” imposing acurfew and restricting movement nationwide
France: Decided to “close all stores except those that sellessential goods”
WHO: Said that Europe is the “epicenter” of the pandemic
Japan: Enforced the ban on reselling masks(subject to punishment)
WHO: Global confirmed COVID-19 cases
surpassed 150,000
The government expert meeting: “The situation
continues to be holding steady, but if there is anincrease in the number of infections for which thelink is not identified, an explosive spread of
infections may occur.” “Holding of large-scale
events should be cautiously decided by organizers.”
Global confirmed
surpassed 300,000.

COVID-19

casesTokyo Governor Koike said at an
emergency news conference:“The capital has entered a critical phase in
preventing an explosive spread of infection
and I ask the residents to refrain from
unnecessary outings this weekend and workfrom home as much as possible on weekdays.”

Business Model

Our response

Mar 26

Mar 30Social trends on infection

Asked workers in JFR Nihonbashi office to telework⃝Telework as much as possible“Earnings forecasts for the fiscal year
More companies had employees work fromending Feb 28, 2021”(3)Reported at the Board of Directors meeting home, many department stores closed,
Parco decided to close some stores temporarily supermarkets remained open.
(Mar 28, 29)
Close Shibuya PARCO, Ikebukuro PARCO,
PARCO_ya Ueno temporarily
Daimaru Matsuzakaya Department Stores decided
to reduce the business hours of some stores⃝Daimaru Shinsaibashi, Daimaru Umeda,
Daimaru Tokyo, Daimaru Kobe, Matsuzakaya
Ueno (Apr 1-14)

Tokyo Governor emphasized, “Now is thecritical time to decide if the spread of theinfection can be contained or not,” and asked
the residents to refrain from going out atnight.

Our response

Apr 17

Daimaru Matsuzakaya Department Stores:
Additional temporary closures
Newly decided to close Daimaru Sapporo,
Matsuzakaya Shizuoka, Kochi Daimaru temporarily⃝Daimaru Sapporo
For the time being from Apr 19 (Sun)*Open food floor on weekdays (11:00-19:00)⃝Matsuzakaya Shizuoka
For the time being from Apr 18 (Sat)*Open only food floor (10:00-18:00)⃝Kochi Daimaru
For the time being from Apr 18 (Sat) *All floors

Apr 20Studied 3 scenarios of COVID-19 impacts(2) (standard/risk/worst)

April 2020
Apr 1

Parco decided to close some stores in the
Kanto area temporarily (Apr 4, 5, 11, 12)⃝Close all floors: Ikebukuro, Shibuya,
Kichijoji, PARCO_ya Ueno
⃝Close except some floors: Shintokorozawa,
Tsudanuma, Chofu, Hibarigaoka, Urawa, Kinshicho

Apr 2

Daimaru Matsuzakaya Department Stores decided
to close some stores temporarily (Apr 4, 5)⃝Daimaru Tokyo, Matsuzakaya Ueno
Daimaru Matsuzakaya Department Stores decided
to reduce the business hours of one store
Global confirmed COVID-19 cases surpassed⃝Daimaru Kyoto (Apr 4-14)
1,000,000.
Decided to close Ginza Six temporarily (Apr 4, 5)
Final confirmation of earnings forecasts for the
fiscal year ending Feb 28, 2021 for disclosure
Issued CP of ¥10 bn (Parco issued CP of ¥12 bn)

Apr 4

Many department stores in Tokyo closed
temporarily following the request to refrainfrom going out.

Apr 5

【10th】JFR emergency headquarters meeting⃝Discussed and confirmed the responses of eachcompany in the Group following the governmentʼsdeclaration of a state of emergency⃝Discussed the closure of each company in
the Group, Shareholders Meeting, HR
policy, workers in JFR Nihonbashi office
Daimaru Matsuzakaya Department Storesdecided to close 9 stores temporarily⃝Daimaru Shinsaibashi, Umeda, Kobe,
Suma*, Ashiya, Tokyo, Matsuzakaya Ueno,
Takatsuki*, Hakata Daimaru
For the time being from Apr 8 (Wed)*Open only the food floors of Suma and Takatsuki
stores for reduced hours (10:00-18:00)
Parco decided to close some stores temporarily▷Decided to close stores in the Kanto area
and Fukuoka PARCO⃝Ikebukuro, Shibuya, PARCO_ya Ueno (all floors),
Shintokorozawa, Tsudanuma, Chofu, Hibarigaoka,
Urawa, Kichijoji, Kinshicho, Fukuoaka (except
some food floors and service shops)
For the time being from Apr 8 (Wed)⃝Nagoya PARCO (all floors)
For the time being from Apr 11 (Sat)⃝Sapporo, Sendai, Shizuoka PARCO (all floors),
Matsumoto, Hiroshima PARCO (except some floors)
For the time being from Apr 18 (Sat)Apr 8

Daimaru Matsuzakaya Department Stores:
A worker from a supplier was infected
It was found that a person from a supplier who
worked for Daimaru Shinsaibashi store was
infected with COVID-19 and the store wassanitized under the instruction of the health centerApr 10

Daimaru Matsuzakaya Department
Stores: Additional temporary closures⃝Matsuzakaya Nagoya, Toyota
For the time being from Apr 11 (Sat)*Open only food floors (10:00-18:00)
Results presentation for the fiscal year
ended Feb 29, 2020・Announced earnings forecasts for the
fiscal year ending Feb 28, 2021
Studied 3 scenarios of COVID-19 impacts(1) (standard/risk/worst)

Apr 16

Apr 28

Tokyo: Announced the list of businesses and facilities
that would be asked to close▷Duration: From 0:00 on Apr 11 to May 6▷Facilities that would be asked to close: Entertainment
facilities, fitness/play facilities, etc.
Osaka Governor: Announced the list of businesses andfacilities that would be asked to cooperate by closure▷Facilities that would be asked to cooperate byclosure: Entertainment facilities, recreation halls, etc.

Daimaru Matsuzakaya Department
Stores: Additional temporary closure⃝Daimaru Kyoto
For the time being from Apr 15 (Wed)*Open only food floors on weekdays (10:30-18:30)
Government: Extended the areas subject to measures
under the state of emergency to all prefectures▷Designated 13 prefectures as the “Prefectures
under Specific Cautions” including Hokkaido,
Ibaraki, Ishikawa, Gifu, Aichi, Kyoto in
addition to 7 prefectures designated on Apr 7▷The duration in which the emergency
situation measures shall be implemented:
From Apr 7 to May 6 (from Apr 16, forprefectures other than Saitama, Chiba, Tokyo,
Kanagawa, Osaka, Hyogo, Fukuoka)▷Areas subject to the emergency situation
measures: All prefectures

The Board of Directors resolved to increase“accumulated
cash on hand”and“credit line for financing”
Studied 3 scenarios of COVID-19 impacts (3) (standard/
risk/worst)

May 2020
May 1

Daimaru Matsuzakaya Department
Stores decided to reopen food floors⃝Daimaru Shinsaibashi, Umeda, Tokyo,
Kobe, Ashiya, Matsuzakaya Ueno, Hakata
Daimaru, Kochi Daimaru
May 7 (Thu)- *Only on weekdays 11:00-18:00
Increased commitment line (¥59.2 bn in total)

May 3

Daimaru Matsuzakaya Department Stores:
A worker from a contractor was infected
A person from a logistics contractor who worked
for Daimaru Sapporo was found infected with
COVID-19 and all floors were cleaned and sanitized
Government: Decided to extend the state of
emergency to May 31 in 47 prefectures
The government would assess the infection situation, etc.
around May 14 and lift the state of emergency before
expiration in the prefectures where the situation allows.

May 4

May 8

Kochi Daimaru and Matsuzakaya
Shizuoka decided to reopen all floors⃝Kochi Daimaru: May 11 (Mon)⃝Matsuzakaya Shizuoka: May 13 (Wed)-

May 11

Parco decided to reopen some stores⃝Sendai PARCO, Matsumoto PARCO, Shizuoka
PARCO May 14 (Thu)Government: Announced that the state of emergency
was lifted in 39 prefectures except Tokyo, Kanagawa,
Saitama, Chiba, Osaka, Hyogo, Kyoto, Hokkaido

May 14

May 15

Daimaru Matsuzakaya Department Stores decided
to reopen all floors (except Tokyo, Ueno, Sapporo)⃝Daimaru Shinsaibashi, Umeda, Kyoto,
Kobe, Suma, Ashiya, Matsuzakaya Nagoya,Toyota, Takatsuki, Hakata Daimaru
May 19 (Tue)- (only on weekdays) *Thesame operation conditions were applied to
Matsuzakaya Shizuoka and Kochi Daimaru
Parco decided to reopen some stores⃝Decided to reopen Hiroshima, Fukuoka PARCO
May 20 (Wed)-

May 18Parco decided to reopen one store⃝Decided to reopen Nagoya PARCO
May 22 (Fri)Issued CP (¥100 bn)

May 21

The government lifted the state of emergency
in 3 prefectures in the Kansai area including
Kyoto, Osaka, Hyogo of the 8 prefecturesthat remained in the state of emergency.

May 25

The government lifted the state of emergency in all
prefectures. On May 25, the state of emergency was
Daimaru Matsuzakaya Department Stores lifted in Hokkaido, Tokyo, Saitama, Chiba, Kanagawa.
decided to reopen all floors (Tokyo, Ueno) The government lifted the state of emergency in all⃝All floors of Daimaru Tokyo, Matsuzakaya Ueno prefectures after an interval of 49 days. AroundMay 26 (Tue)once every three weeks, they would assess the
11:00-18:00 (except some restaurants) infection situation, etc. in each region and graduallyease requests such as refraining from going out toraise the level of social and economic activities.

May 26

Daimaru Matsuzakaya Department Storesdecided to reopen all floors (Sapporo)⃝Daimaru Sapporo May 27 (Wed)11:00-18:00 (except food floor and restaurants)
Decided to reopen Ginza Six
May 29 (Fri)- (except some stores and services)
Parco decided to reopen some stores⃝Sapporo, Ikebukuro, Shibuya, Urawa, PARCO_ya
Ueno, Kichijoji, Chofu, Kinshicho, Tsudanuma,
Shintokorozawa, Hibarigaoka Jun 1 (Mon)Daimaru Matsuzakaya decided to reopen on
other days and extend business hours
Decided to reopen on Saturdays and Sundays from May 30(Sat), extend business hours by one hour (8 hours a day)May 28

Increased borrowing by ¥30 bn

May 29

Increased commitment line (¥107.9 bn in total)→Increase to ¥300 bn in mid-Jun

Global confirmed COVID-19 cases: 1.77 mn
US deaths topped 20,000, highest globally.

Apr 12

Apr 13

Prime Minister expressed his intention to
declare a state of emergency pursuant to the
Act on Special Measures for the first time.
Government: Declared a “state of emergency”
pursuant to Paragraph 1, Article 32 of the revised Act
on Special Measures for Pandemic Influenza and New
Infectious Diseases Preparedness and Response▷The duration in which the emergency
situation measures shall be implemented:
One month from Apr 7 to May 6▷Areas subject to the emergency situation measures:
7 prefectures including Saitama, Chiba, Tokyo,
Kanagawa, Osaka, Hyogo, Fukuoka▷Overview⃝Regarding the COVID-19 disease, patientsdevelop severe diseases such as pneumonia
with considerable frequency and a situation
has emerged that could cause a serious
damage to the lives and health of the people.
⃝There are many cases in which it is difficult to
identify the routes of transmission and the rapid
increase of such cases has been confirmed andmedical systems are being stretched.
⃝It has been determined that a situation has
emerged that could have a great impact on
the daily lives of the people and thenational economy through the rapid andnationwide spread of infections.
⃝When it is deemed that the measures for thestate of emergency are no longer necessary, thestate of emergency shall be lifted expeditiously.

Four retail organizations (Japan Council of Shopping
Centers, Japan Department Store Association, Japan ChainStores Association, Japan Specialty Store Association)
submitted a request to Mr. KAJIYAMA Hiroshi, the Ministerof Economy, Trade and Industry, concerning COVID-19related emergency economic measures.
Requested to reduce fixed asset tax in case of reducing therent of tenants, to increase subsidies to be provided tolandlords under the subsidy program for sustaining
businesses, etc.

Apr 27

Decided to close Ikebukuro PARCO temporarily (Apr 6)⃝A worker of United Arrows on the 3rd floor of themain building was infected with COVID-19 (positive)and decided to close all floors for sanitization

Apr 6

Apr 7

Prime Minister said, “At this point, we donʼtneed to declare a state of emergency.”
The government announced a plan to
distribute two cloth masks to each household.

Social trends on infection

Integrated Report 202025

Business Model▶Evolution of Department Store<Special Report> Interview“Redefine
Department Storeas‘Growth Model’”
SAWADA Taro

Director and Senior Managing Executive Officer
President and Representative Director
Daimaru Matsuzakaya Department Stores

What I saw after leaving thedepartment store business
About two years have passed since
I left the management of thedepartment store business. I think it
was very meaningful that I could
contact people in the financial sector,
for example, institutional investors,
with whom I had had no contact
before, and could see the department
store business as an industry. The
current market size of department
store industry is approximately ¥5.9
trillion, but actually, its sales continue
to decrease. Everyone knows that the
department store business is not a
growth industry but has looked awayfrom the fact. The impact of26

COVID-19 was added and thevulnerability of the department store
business appeared more prominently.
As a new President, I think I should
start from this.
The reason why the department
store business is no longer a growthindustry is clear. It is because theycannot scale up. Basically, it isnecessary to increase the number ofstores to grow in the retail industry.
Needless to say, however, currently
department store chains cannot
operate many stores both in Japanand abroad. It is an idea within theframework of “what the department
store industry should be like” andstaying in the framework is like being
on a sinking ship. I think one of thereasons why the department store
business has got in such situation isseeing the store-level management
over the span of three years at
longest. They focused too much onwhether their performance wasabove or below the previous yearʼslevel, and in fact, sales havedecreased slowly over a long span oftime. As they only saw over a shortspan of time, they could not faceessential problems.
I thought we should change atsome point the situation in which thedepartment store business cannot
grow. And I think, accelerated by thecurrent COVID-19 pandemic, thephase we should confront has comesuddenly.

Business Model

Department store needs tobe redefinedRedefine department store― I
think now we are in such phase.
There are many perspectives and weneed to define what position thedepartment store business shouldtake from a non-traditional angle. It
is the same thing as innovating its
business model. It is certain that thepotential of growth will increase tosome degree, if not to infinity,
depending on how to use digital.
Depending on how we approach, we
may be able to do something thatcreates great impact such as the
opening of a new store in prime
location. I am thinking of things likethat seriously.
For example, when we want togrow the top line and profit, there
are two major things we have to do.
One is to boost sales by spending
money on promotions in the shortterm. The other is to boost sales bychanging a system, which I have tosay is an intangible asset. In order toboost sales, I think the department
store business has mainly conductedsales promotions in the short term
rather than creating a medium- tolong-term system. This approachproduced a certain results in the past
but it is doubtful whether it will reallywork in the future. We haveaddressed various reforms in
response to the changing times.
However, there is no doubt thecurrent COVID-19 pandemic brought
us to the point where we should
drastically re-examine the way
department stores are operated. I
recognize we need to change ourmindsets at an unprecedented level.
I think creating a system to makemoney is absolutely a growthstrategy. We need to consider
whether our current system will
apply to the post-COVID-19 world
and to adapt it to changes. We
cannot lose any time. In the current
situation in which there remain
concerns about a 2nd wave of
infections, we have to assume we
may be asked to restrict the businesshours and sales floor areas. In suchcase, we need to devise ways to
avoid losing significant sales evenduring shorter business hours or on
closed floors. If we continue to be
asked to avoid the “3Cs,” as a matterof course, the number of customers
will be restricted. It is clear that wewill not be able to have the same ormore sales than before only by
relying on promotions that costmuch.
We have to create a new systemthat fits the post-COVID-19
environment. I think it will lead to theinnovation of business model. I think
it is difficult to achieve discontinuous
growth unless we go into such
depth. And our focus should be on
digital. Unfortunately, we havealmost no system to make money
using digital. Digital should be placedon the center of our business as asystem, not for promotions. I think it
will become a pillar of our next
strategy.

Role as supply chain
As the saying goes, “You must
understand the past to know the
future.” We have to think about
again why department stores
attracted so many people when theyprospered. From a perspective ofwhat role we should play in the
supply chain, I think we are expected
to successfully find products andservices created by people who do
not go out into the world yet but
wait for an opportunity to publish
and to grow them by putting themon our stage like so-called incubation.
The goods and services that are very
fresh for customers and available
nowhere else will definitely motivate
customers to visit our stores. Ideally,
it is even better if they are notavailable online, either. I would liketo create a platform where there arealwaysnew
encountersandmatchings through us.
To this end, we need to watch
people who create wide perspectives
and new values. However, if we deal
only in such products and services, it

may not be profitable. So we have tostrike a balance.
For example, among a platformer,
a servicer and a manufacturer that
supports it, we must be a servicer. As
the case may be, however, I think
there is a possibility that we will
become a platformer for affluent
customers.
Furthermore, I think we have toposition the department store businessfrom a more digital perspective. In
terms of supply chain, as the casemay be, we may go farther up thestream.

To change a culture is toreform the management
The “JFR Way,” the guidelines foraction to realize the Group Vision,
says “Try without fear of failure!” Buthonestly, many are still conservative.
Therefore, I would like to change ourcorporate culture so that employees
take on challenges. They very muchexcel at performing operations
in a responsible and efficient way,
which is a valuable asset accumulated
by our predecessors. Obviously,
however, we cannot go through thecurrent situation only by doing so.
The underlying is to a little more“enjoy trying” something new. I
would like to take the lead in creatingsuch atmosphere. We cannot growwithout taking on new challenges,
and to this end, it is important toactively bring in external insights. We
will put aside the idea of doing all by
ourselves for now, and instead, focus
on external collaboration. After
drawing up a plan to implement it,
we would like to assign people who
can implement it or cooperate withsomeone outside who can implement
it to achieve concrete results.
I served as the Director of Parcoand feel that Parco has more people
who “enjoy trying” than thedepartment store. I think it is Parcoʼs
corporate culture. I would like toactively learn from it, which will leadto synergy sought by the Group.

Integrated Report 202027

Business Model ▶Evolution of Parco<Special Report> Interview“Stand on a New Stagefor the Growth of the Group”
MAKIYAMA Kozo

Director and Senior Managing Executive Officer
Representative Director, President and Executive Officer
Parco, Co., Ltd.

Expand the playing fields in
the Group
We lack speed and dynamism –Currently, the environment aroundus is more rapidly digitalized andconsumption itself is changing. Thus
our business is in a transition period
regardless of the presence of
COVID-19. We have to greatlychange our business portfolio andwe aim for discontinuous growth. As
our work style, we try to “create andbring to life ʻnew happinessʼ” as theGroup Vision says. Now it has
become more vividly clear due to the28

COVID-19 crisis that this innovative
idea was correct but lacked creativity.
In March, Parco became a wholly
owned subsidiary of J. Front Retailing.
I think the two companies have tried
to join together, particularly byexchanging people, since before
that. Now we have in place a system
where Parco can be further dedicatedto its business and conduct big
businesses and investments, which
are impossible for an operatingcompany alone, within the large
framework of J. Front Retailingsaying what we really think without
hesitation or constraints.

It is very important that our playing
fields will expand in the Group.
When the number of people
doubles, communications will spreadsynergistically starting with one-toone and create much more ideas
than double. By adding Parco to thedepartment storeʼs foundation oftrust, I think interesting ideas will be
added and produce great power. I
would like to create a businessformat, which is neither adepartment store nor Parco andnecessary for the evolution of cities,
and to become a pillar of city
planning.

Business Model

We also need to be aware that we
can just create the parts required by
the world if we think only byourselves. There are various forms ofcollaboration and currently weshould think of various things
through combination. By combining
trust and a little advanced ideas, I
feel the world ten years ahead hascome suddenly with the COVID-19
outbreak as a starting point. I am
convinced that we will be able tobecome a group that can make new
proposals to this changed world. I
think it is true that only companies
that can give rise to innovations cansurvive.

The“north wing”of the
Daimaru Shinsaibashi store
is a symbol of collaboration
Parco was formed in 1969 bychanging the business format ofTokyo Marubutsu department store,
which was located next to Seibu
department store in Ikebukuro.
Concerning the north wing of the
Daimaru Shinsaibashi store, which
will open this fall, our staff said, “In
the past, Parco stores were next todepartment stores and the Parco
store located next to a department
store performed well because it
operated very efficiently andattracted many customers. This time
the two stores are connected. We
will create such one and only
format.” It is exactly the same as thepast when Parco changed Tokyo
Marubutsu to a specialty store
building. Currently advertisement isdigitalized and has become widely
efficient. At that time, however,Parco implemented a public relations
campaign using posters. I think theidea for the north wing of theShinsaibashi store is the same. With
the idea that it is no use operating
department stores next to similar
department stores, Parco tried to“create streets” like a street in Kobe
and a street in Harajuku in buildings.
We will use such idea in the northwing of the Shinsaibashi store. We
are thinking about what to do notjust to complement the mainbuilding but to compel people tovisit Shinsaibashi by synergisticallycombining
digitalization
andsustainability in a timeless way.
What I most admired about therebuilding of the main building of
the Daimaru Shinsaibashi store wasto reproduce the world view ofVories beautifully by increasing theceiling height on the first floor. I
heard that young staff members of
Daimaru Matsuzakaya Department
Stores thought out the design tocreate Voriesʼ world on the first floor
though they had only some parts
designed by Vories. I think it isattractiveness of the Group.
Meanwhile, concerning the northwing where Parco store will open,
we proposed J. Front Retailing tocreate a new futuristic design for theexternal wall of the north wing
because the main building was
restored as a historic building. And
they agreed. I think this project willserve as a bible to pass on theseideas. In fiscal year 2020, it is very
important for the Group to tell about
the future and make the north wingof the Shinsaibashi store successful.
The situation remains difficult
due to the COVID-19 pandemic.
However, we have to operate thenorth wing so that people who live
in or love the Shinsaibashi area saythat they are carefully considered
and that it is new. They may wantsome of the contents on which Parcois ready to collaborate. I would liketo change them every day in a timely
manner and do the best we canthere. We aim to create a businessformat which people who work in
the Shinsaibashisuji arcade or love
Daimaru say enhances the appeal of
the area. We would like to create a
Parco store that 120% revitalizes thedepartment store next to it. As we
can collaborate in Shinsaibashi
better than PARCO_ya Ueno, nexttime we will be able to do evenbetter in Nagoya, and furthermore,in Tenjin and Sapporo. In fiscal year
2020, I would like to lay thegroundwork for that.

Sustainability cannot exist
without human resources
Both social/environmental activities
and economic activities are required
to improve corporate value. Social/environmental activities monetize
economic activities finally. Suchworld is necessary to put service
before profit and we cannot do it
without sustainability in mind.
When thinking of sustainability, it
is very important how to makeemployees enjoy working. I think“job
satisfaction” means that
employees enjoy working and thatthey feel they serve society.
It is obvious that systems and work
environments cannot produce “jobsatisfaction.” Each staff should be
motivated to work actively and I
think its source is corporate
philosophy. J. Front Retailing createda theme of discontinuous growth
and a vision of “Create and Bring toLife ʻNew Happiness.ʼ” Employees
understand and work styles evolve. I
think it is sustainability. The
management team will discuss
together what opportunities should
be provided concerning employeesʼ
interests so that they can do what
they want to do. And we will makethem bigger as the Groupʼs assets. It
is the point. We will offer cases inwhich employees feel it is good towork for the Group. It is the verysustainability. I tell our staff that ourvalue will decrease by half unless wecontribute to the world. When
working, we should not wantsomething in return but ask ourselves
what more we can do. The
management team is expected topromote reforms in this direction.
“Job satisfaction” will be produced
only when employees and thecompany grow and achieve results
together. I would like to reinforce
such culture.

Integrated Report 202029

Management Strategy▶Medium-term Management Plan

Terminate the Current Medium-term Plan
and Formulate a New Medium-term Plan.
Terminate the current Medium-term Business
Plan in fiscal 2020

opened the “main building of the Daimaru Shinsaibashi store”
as an unprecedented, hybrid department store business modelin September last year, and “new Shibuya PARCO,” whichenables us to reacha wide range ofcustomers
withinnovative tenantmix, in November.
However, notonly the “pandemicrisk” caused by
COVID-19, but also
Main building of Daimaru Shinsaibashi store
the slump in
consumption beyond expectations triggered by the
consumption tax hike, the sharp acceleration of the decline in
the women's clothing volume market, and the decline in thecompetitiveness of urban core stores along with the decline inrural stores. Compared with when the current medium-termplan was formulated, the assumptions have changed on alarger "scale" and at a higher "speed" than expected.
For this reason, in fiscal 2020, it is inevitable that profit
levels will decline significantly, and we will be slow to develop
new businesses, which we expected to make a certain level ofcontribution to profits. Therefore, it will be extremely difficult
for us to achieve our profit targets for fiscal 2021, the final
year of the medium-term plan.

In fiscal 2017, we launched our Medium-term Business
Plan, which ends in fiscal 2021, with the aim of becoming a
Multi Service Retailer that transcends the boundaries of theretail industry. We are working to expand our business domains
and transform ourbusiness model inexisting businesses.
For expansion ofbusiness domains,
we opened a luxury
mall “Ginza Six”
and “Ueno Frontier
Tower,” which is a Ginza Six
complex commercial building with office functions, in 2017.
Thus we were able to achieve dramatic growth in the Real
Estate Business segment compared to the period before thecurrent medium-term plan was launched.
In the Credit and Finance Business, we are strengthening
our management foundation for medium-term growth byactively investing in specialist personnel. We are now ready toissue “new cards” in this fiscal year, which will be the key to
our growth.
For changes in business model of existing businesses, we

Consolidated business profit*▶

*For FY2007 to 2016, “operating profit” under JGAAP is shown.

(¥100 mn)
600

Rebuilding of Shinsaibashi and PARCO,
reaction to explosive buying by foreign tourists

500
Lehman s
collapse

400
300
200

426
281

100
0

2007

2008

186

203

216

2009

2010

2011

309

2012

418

421

2013

2014

480

445

468

455

453

2015

2016

2017

2018

2019 (FY)

Composition of“operating profit”(before application of IFRS 16)▶

FY2016 results
0.8

14.7

31.2

FY2018 results
16.1

53.3

11.4
13.3

The current Medium-term
Business Plan

FY2021 original plan(ﬁnal year of the current medium-term plan)

Department Store

18.0
59.2

Parco
44.0

12.0

Real Estate

26.0

Credit and
Finance / Other
Unit: %

Need to rebuild structure to transform business portfolio

30

Management Strategy

Looking Back on the Current and Medium-term Business Plan▶

Major Initiatives

Results/Progress

Multi Service Retailer(expansion of business domain)● Launched childcare business・ Established JFR Kodomo Mirai, opened 1st facility● Invested in only 2 companies to develop new businesses● Developed direction for growth of JFR Card. Could not show thepath to growth of J. Front Design & Construction and DimplesʼUrban Dominant(development project)

Urban Dominant(real estate business)

Challenge● Promoted redevelopment projects
・ Opened GINZA SIX, Ueno Frontier Tower, Daimaru Shinsaibashi

and Shibuya PARCO● Expanded real estate rental business・ Renovated machiya as “Gion Machiya,” “Blue Bottle Coffee
Kyoto Cafe” and beauty & health “BINO” (Higashinotoin,● Realization of new businesses other than childcare area
● Review of structure and method of development of new

business as a group● Strengthening of HR base and investment of resources of
J. Front Design & Construction and Dimplesʼ● Spread of success factors of Daimaru Shinsaibashi and

Shibuya PARCO to flagship stores● Growth strategy of Real Estate Business after transfer to

PARCO

Growth Strategy

Okachimachi)
ICT (defense)● Formulated Group IT governance・Created IT governance definition, policy, regulations, rules● Developed system for strengthening security

ICT (offence)● Created the Group integrated customer DB (LTS-Hub)● Developed digital communication base using ICT・ Introduced department store smartphone app and gaisho SFA

Innovation of Department
Store Business● Promoted initiatives to enhance appeal of stores・ Appropriate womenʼs wear area (down 30% vs FY2016)
Total FY2017 to 2019: 7,492㎡ (down 15% vs FY2016)
・ Newly curated sales areas (Kikiyococho, michi kake)● Placed Shimonoseki Daimaru under direct management, renewed● Employment of HRs specialized in IT from outside the Groupand development of HRs in the Group● Achievement using the Group integrated customer DB (LTS-Hub)● Review of core systems● Creation of new value of existing stores (development ofnext generation merchandise/contents pursuing customer
perspectives/insights)

Daimaru Ashiya and Suma, closed Daimaru Yamashina

Innovation of PARCO
Business● Promoted change of store portfolio
・ Opened Shibuya PARCO, Ueno PARCO_ya● Expanded small commercial business by promoting

development
・ Opened ZERO GATE (Sannomiya, Kyoto, Harajuku) and

SAN-A Urasoe West Coast PARCO CITY

● Creation of new value of existing stores (reform of store

business by spreading success of Shibuya PARCO to otherstores)● Assessment of future growth potential of Retail Business(NEUVE A)● Strengthened the Group governance function
・ Transition to Company with Three Committees (Nomination,

Audit and Remuneration Committees) (FY2017)● Strengthened oversight functions (Board of Directors) and

execution function, improved accuracy of oversightStrengthening ofcorporate governanceReinforcement of Base・ Reviewed criteria for submitting agenda items to Board of Directors
・ Evaluated effectiveness of Board of Directors
・ Set management rules of Group companies
・ Changed from “single-person audit” of Company with
Audit & Supervisory Board to “organizational audit”● Review of functions of holding company and operatingcompanies after converting PARCO into wholly owned
subsidiary● Strengthening of governance function of each operatingcompany● Ensuring of diversity of management HRs● Strengthened management HR function
・ Evaluation of management HRs by third-party organization
・ Started to operate new officer remuneration system

Group finance strategy

Group organizational/HR
reform● Raised awareness about investment recovery to achieve ROE・ Introduced phase management to manage underperforming companies
・ Revitalized/withdrew from unprofitable businesses● Sophisticated business management
・ Introduced IFRS, applied new lease accounting● Enhanced communication with investors
・ IR by each business (department store, financial service, finance)● Employed specialized HRs (41 including 11 hired by “Mother
Recruitment” program)● Developed various systems based on new HR strategy (extension ofretirement age, termination of transfer at 55, revision of retirement
benefits/pension plan, time-limited support for career selection)● Identified materiality issues, formulated various policies such

ESG initiatives

as Sustainability Policy, Eco Vision and Social Vision● Set goals for 2030/2050 and prompted initiatives to achieve them
● Provided/disclosed information through ESG presentations, etc

Start the new Medium-term Business Plan in fiscal 2021
On the other hand, we have also seen an "important
turning point" in the Group itself. It is conversion of Parco, aconsolidated subsidiary, into a “wholly-owned subsidiary.”
Through this conversion, we are well prepared to build asystem that will enable us to accelerate our efforts to maximize
synergies by dynamic business structural changes and drastic
personnel exchanges, which were impossible before. We
believe this is a major positive factor for us.
Amid these major changes occurring in the external andinternal environments, we have determined that, in order torealize the true "business portfolio reform" that we areaiming for, it is best to set directions based on ambitious● Formulation of capital policy and shareholder returnmeasures to achieve ROE of 8%● Clarification of linkage between ESG initiatives and operating

revenue● Review of management of revenue forecast● Continuation/sophistication of business IR● Employment/development of HRs specialized in IT, etc● Effective posting at a group level● CSV initiatives
・ Promotion of initiatives to enhance corporate value and increase market cap● Achievement of goals through steady promotion● Strengthening of information disclosure

targets with a long-term perspective, revise the medium-termplan as an initiative that enables us to further demonstrate theGroup's strengths, and reestablish it in a new system rather
than implementing the current plan as it is within the current
framework.
For this reason, the current medium-term plan will beterminated in fiscal 2020. In fiscal 2020, we will devoteresources to solidifying the Group's foundations so that we
can aim for higher performance from a medium- to long-term
perspective, while factoring in risk to short-term performanceas much as possible.
The new medium- to long-term plan will be built aroundthe “medium-term three-year plan,” which starts in 2021 nextyear, while quantitatively setting the 2030 goals using KPIs.

Integrated Report 202031

Management Strategy▶Innovation of Department Store BusinessHybrid Department Store Model Was Born.

Innovative structure mixed with fixed-term lease
The “main building of the Daimaru Shinsaibashi store,”
which opened in September 2019, aims to build a new
department store business model that combines the ability to
attract customers and profitability.
The store concept is “Delight the World. Shinsaibashi,
Adored by the World.” It targets “all customers who actively
enjoy their lives” while further strengthening response to
wealthy and non-Japanese visitors, which are the strengths of
the Shinsaibashi store.
In terms of merchandise composition, we significantly

expanded the floor area and the number of brands of luxury
items, cosmetics, and food products on the basement floors(depachika in Japanese) and restaurants. For cosmetics, wehave built zones not only on the main floor, but also on
multiple other floors. In addition, approximately half ofdepachika products and restaurants are composed of new
brands, and many shops combine restaurants and productsales in consideration of “experience-based consumption.” Asfor other categories, we reviewed our traditional productlineup based on gender and item, and aggressively introduced
new brands.
On the other hand, the business model is completely

Direction of department store business model transformation▶

Hybrid model (e.g. Daimaru Shinsaibashi)
Shoka shiire

Fixed-term lease

Kaitori

Shoka shiire
KaitoriReal estate leasing model (e.g. Ginza Six)

Shoka shiire
Kaitori

32

Fixed-term leaseManagement Strategy

different from that of conventional department stores, and isbased on an innovative layered structure in which approximately
65% of the total area is comprised of sales floors for fixedterm leases. As a result, the number of personnel positions has
been reduced by 250 compared to before, further improving
our low-cost operation. A “hybrid business model” that iscompletely seamless from customer perspective but optimizes
the balance between traditional purchases called kaitori(purchase on a no return basis) and shoka shiire (purchaserecorded at the time of sale) and fixed-term lease was born.

Bold review of product mix
We will work to maximize gross profit through sales growthby purchasing luxury items and cosmetics, which are growth
categories, by kaitori or shoka shiire. Compared to the oldnorth wing, the floor area of cosmetics and beauty-related
products has almost doubled with 28 new brands and the areaof luxury products has increased 15% with 11 new brands. In
particular, these two categories have been greatly expanded as
strategically strengthened categories.
In the case of womenʼs apparel, which is the main issue
facing department stores, we have narrowed down both thefloor area and the number of brands to about 60% under the
fixed-term lease agreement. At the same time, we have shiftedaway from department storeʼs conventional floor composition
based on product categories such as womenʼs clothing floors
and menʼs clothing floors and have decided to actively
introduce combination-type shops that combine menʼs andwomenʼs fashion as “fashion floors.” As Ginza Six adopted thissystem and has achieved steady results, its experience andknow-how are utilized by the Shinsaibashi store.
As for food and restaurants, which are the key to our ability
to attract customers, we established a new food hall thatoffers hands-on shopping experience based on the quality that
only a department store offers. The floor area increased 83%,
with a total of 104 brands including 64 new brands. In
addition, we have dramatically strengthened our entertainment
elements, such as Pokemon Cafe, which disseminates Japanʼsculture, and Jump Shop.
With regard to the store environment, the Shinsaibashi store

combines the “tradition” of the old building before rebuilt,
which is represented by the beauty of Vories architecture, with“innovation” made by introducing the latest digital technology
to create special experiences unique to a real store.
The main building of the Shinsaibashi store uses renewableenergy for all electricity used in the building, and actively
carries out greening on the terrace on the seventh floor andthe rooftop. In addition, we are actively working to build a
low-carbon and circular society with the cooperation of ourcustomers and suppliers by centrally controlling deliveries inthe building to reduce delivery operation time and eliminate
the congestion occurring when carrying products in and out,
promoting the use of environmentally friendly packaging
materials and permanently installing garment collection boxes
through the Ecoff activity.

Expansion to other flagship stores
Looking at trends up to January 2020, we see that the totaltransaction volume grew by 15% on a year-on-year basis andcustomer traffic grew by 11.1%, driven by the categories thatwere particularly strengthened, including luxury items,
cosmetics and watches, as expected. As for the customer
group, sales to young people aged 25 to 34 years, which havebeen relatively weak, increased by 40%, and thus we
succeeded in rejuvenation.
Currently, the impact of COVID-19 has led to temporarydifficulties in both inbound tourism consumption and domestic
consumption. However, we have received a sufficient response
form the new department store business model and we intend
to accelerate the expansion of this model to other flagshipstores in the future.
In addition, the north wing, where a department store wasoperated prior to the opening of the main building, will be
converted to a real estate leasing model. Specifically, we will
introduce PARCO at the north wing and renew the exterior tomeet PARCO of the new era. At the same time, the north wing
will be connected to the main building of the Shinsaibashi
store in an integrated manner, and in expectation of
maximizing the Group synergy, commercial facilities with floor
space exceeding 80,000 m2 in total will be created.

Layers of the main building of the Daimaru Shinsaibashi store▶

(Basically, fixed-term lease excluding 1st to 3rd floors)
10F
9F
8F
7F
6F
5F
4F
3F
2F
1F
B1F
B2F

RestaurantEntertainment
Lifestyle
Shinsaibashi Terrace
FashionFashionFashionLuxury – Fashion/shoes
Luxury – Fashion/fine Jewelry
Cosmetics/fashion jewelry
Food/womenʼs accessories
Shinsaibashi Food Hall

Low-cost operation through HR structure reform

PARCO will open in the north wing in fall 2020.
©TAKENAKA Corporation

Integrated Report 202033

Management Strategy▶Innovation of Parco Business

Increase Communication Abilityof “PARCO” Brand.

Innovation initiated by new Shibuya PARCO

Aggregated about 190 unique shops

New Shibuya PARCO made its grand opening inNovember 2019. In December 2015, it was approved as
an urban renaissance district and we have proceededwith the plan as an urban redevelopment project. It wasreborn in the milestone year that marks the 50th
anniversary of the opening of Ikebukuro PARCO. Its
concept is to create a building that offers enjoyable andstimulating experience value globally beyond theframework of traditional commercial facilities by
undertaking new initiatives with up-and-coming
designers, creators, and others. We aim to create abuilding that attracts urban consumers who consume
sensibly from around the world without narrowing down
targets. Each business of Parco Co., Ltd. and eachcompany of the Parco Group promoted new challenges
and evolutions, and by injecting the know-how they
possessed, we could create a unique commercial complex.
It provides stress-free and comfortable purchasing
experiences through shops that integrate real shops anddigital services, as well as a variety of payments. By
analyzing a variety of data, including product, purchasing,and viewing data, we will support the customer service of
our sales staff and build a “digital SC platform” that will
deepen communication with customers by offering more
support to customers.

We operate approximately 190 shops that combine fiveelements including “fashion,” “art and culture,”“entertainment,” “food,” and “technology” to draw out themutual appeal of each other.
PARCO CUBE

We developed an omnichannel shop that combines offlineand online. You can read the QR code from a digital signage
tablet in a shared area or in a shop, transfer the data on yourfavorite products to your smartphone, and make a purchase.
Some of PARCO CUBEʼs shops have CUBE MIRROR, whichallows customers to view themselves from back during a trial
fitting. This is a mirrored display that allows you to check thestyling of back look that is difficult to see by displaying
images taken by the camera a few seconds late.

PARCO CUBE

34

Management Strategy

Electronic receipt service

We are also aiming to improve customer communication
through the use of data. Using the “Smart Receipt Service,”a receipt management application that delivers electronic
receipts to smartphones (Toshiba Tec Corporation), we
have begun offering electronic receipt services to the usersof the official Parco app “POCKET PARCO” at some shops.
POCKET PARCO users can check the receipts for thepurchases made through the app and aggregate themsimply by scanning the bar code at the register.
Digital art/experience-based media
We utilize XR*1 as a “hands-on media device” that sends

out ART/CULTURE/FASHION as a three-dimensional image
including an environmental presentation using digital art
that utilizes AR.
3D creative contents created by computers are displayedon smartphones as if they were present on the spot. Suchvirtual showcase is offered on the 5th floor.
* 1 XR is a generic term for VR (Virtual Reality), AR (Augmented Reality), andMR (Mixed Reality).

AR experience (AR compatible glasses were installed when opened)

Original curation for incubation

designers and brands, PARCO produces interiors andfixtures, and provides collective cash registers and common
fitting rooms to make it easier to open new shops. In
GEYSER PARCO and PORT PARCO, we opened the first
directly managed shops of tenants who previously did nothave a real shop.

As a model for reducing environmental impact
The efforts at Shibuya PARCO including:① “Creation of attractive outdoor spaces such as a rooftop
plaza and an elevated walkway;”② “Introduction of high-efficiency energy systems basedon a gas cogeneration system;” and③ Promotion of the efficient use of energy through digitalcommunication
have been highly evaluated and selected as a “Leading
Sustainable Building Project (CO2 Reduction Leader)” by
the Ministry of Land, Infrastructure, Transport and Tourism.
As part of these efforts, Shibuya PARCOʼs “present”
content, which visualizes the “comfort of the external
environment” and the “energy use status of the building,”
is disseminated through digital signage to revitalize theelevated walkway leading from the 1st floor above theground to the rooftop plaza (SPIRAL WALK) and theoutdoor plazas and to promote the effective use of energy
in the entire building.
We also created an environment that makes it easier for
people to stroll about by improving walkways around thesite and plazas on the premises and thereby expanding
space for walkers. In addition, we will contribute to therevitalization of local communities by holding a wide rangeof events linked to local communities in the outdoor
plazas, as well as events in a variety of genres including
fashion shows, music, and food events.

For the curated sales zones GEYSER PARCO and PORTPARCO designed to incubate next-generation fashion

Innovations in new Shibuya PARCO▶

1

Targeting consumption
with sensitivity

4

Its own Instagram (approx. 25,000 followers)
Utilizing tenants and individuals with strong
information dissemination capabilities

Ageless, not age or gender based
Departure from traditional assortment
focused on young people

2

Item composition
that creates needs

Fashion, eating and drinking, services,animations and games that offer new
stimulating and enjoyable experience value

3

New purchasing
experience using
technology

New omnichannel sales zone CUBE

Direct-to-customer
advertising methods

Innovations in new
Shibuya PARCO

5

Attracting tenants focused on diversity,
LGBT and sustainability, building facilities,
sales planning, etc.

6
Parco store business

Active social initiatives

Ability to attract customers andraise interest by enhancing equipment

PARCO Museum/PARCO Theater/
White Cine Quinto/event spaces/
live streaming studios, etc.

Integrated Report 202035

Management Strategy▶Credit and Finance Business

Taking Advantage of the Issuance of New Cards,
We Are Moving to a New Stage of Growth.

Important role in portfolio transformation
The payment and financial environment surrounding us
is undergoing major changes. Amid changes in the social
environment, such as the spread of sharing economy andsmartphones due to the rapid evolution of technology,
laws in the payment and finance industries, such as the
Payment Services Act and Installment Sales Act, have beenrevised at an unprecedented speed. In addition, with thepositive impact of the cashless campaign, consumer needs
are changing dramatically, and new payment players are
beginning to emerge.

Against this backdrop, we have positioned the Credit
and Finance Business as a core business with significant
growth potential, and are implementing a growth strategy
centered on payments. Leveraging our strengths, such as“large-scale stores in central Tokyo that are able to attract
customers,” “transaction volume exceeding ¥1 trillion,”and “excellent membership exceeding 6 million accounts,”
we will work to expand our financial business throughrelationships with customers that can be obtained throughthe provision of payment services. Further enhancement ofexpertise is essential for the steady promotion of suchinitiatives. For this reason, we are actively recruiting outside

Transaction volume of cards▶

（%）(Millions of yen)
700,000

44.4

600,000
500,000

38.0

50
40

35.0
31.8

30

400,000
300,000
498,778

517,039

536,478555,882

557,37720

200,000
10

100,000
0

36

2015

2016

2017

Transaction volume

40.5

2018

2019

0

Ratio of externaltransaction volume

Management Strategy

experts from the credit card industry, and are consideringbold alliances to deal with shortages of resources. We aim
to achieve operating profit of ¥5 billion as soon as possible
in order to achieve our goal of reforming our businessportfolio.

Issue new cards in fiscal 2020
We will completely renew the Daimaru Matsuzakaya
Card with a new point program that more appeals tocustomers. In addition to the Daimaru Matsuzakaya points
given when using the current Daimaru Matsuzakaya Card,
we will introduce a new point program. The new point
program will be a scheme that allows points to be given
with all credit payments and exchanged into highly versatile
points that can be used to shop economically not only at
our department stores but also in the area centered on ourstores in conjunction with the Urban Dominant strategy.
We are also considering supplementary incentive services
so that the cardholders enjoy “eating” and “becoming
beautiful,” which enriches their lives. By making thesecards more attractive, we intend to further promote theuse of cards by existing customers and to attract newcustomers including the younger generation.
In 2019, we acquired licenses for VISA and MasterCard,
creating a structure that enables us to engage in acquiring
merchants. By expanding the number of merchants so that
our credit card holders can use their cards economicallyeven outside Daimaru Matsuzakaya Department Stores,
we aim to increase the number of visitors to the Urban
Dominant areas and to mutually refer customers to eachother. In fiscal 2020, we plan to begin acquiring services
for the Group companies, primarily Daimaru Matsuzakaya
Department Stores. We are currently examining a scheme
for acquiring merchants outside the Group.
By accumulating data that can be obtained by expanding
the means of payment, the means of receipt, and merchantacquiring services, we will expand our financial service
business.

5 pillars of strategic actions▶

1
3

Improvement ofbottom line ofexisting businesses

Launch ofmerchant
acquiring services

52Strengthening ofcard products

4

Review ofsystem platform

HR development/
building of organization

Provide financial services centered on payment
We will develop a variety of financial services utilizing
payment data by building relationships with customers
centered on payment. First, we will focus on financing andinsurance, which are highly compatible with the Groupʼscustomers and business models and profitable. Throughthe renewal of the Daimaru Matsuzakaya Card, we will
work to increase the number of revolving users byapproaching customers whom we have not been able toreach up to the present time, and to strengthen our credit
provision capabilities to expand our business. Regarding
insurance, we are currently focusing on direct marketingwith insurance companies and affiliated insurance agencies
to our card holders. However, we will work to expand thescope of our insurance business by developing new
insurance products and selling them to visitors to the
Urban Dominant areas and many of the Groupʼs business
partners.

Financing(revolving)

Financing

Insurance(loan)

Payment

Remittance

Investment
management

Exchange

Assetmanagement

Toward the shift to digitalIn fiscal 2020, we will introduce the JFR Card applicationin order to improve customer convenience and enhancecommunication with customers. In addition to existing
card counters, we will leverage the digital touchpoints ofapps and website to strengthen our methods of cultivating
new customers regardless of place and time. In addition to
distributing valuable information to card customers in atimely manner through apps and other means, we will
work to provide new financial services through alliances.
On the other hand, our Groupʼs strengths lie in having
brick-and-mortar touchpoints, and the Credit and FinanceBusiness we are aiming at is to integrate digital with thereal business, which provides value, centered on brick-andmortar stores operated by and customer service provided
by the Group. Through the “digital
real combinedmodel,” we will work to achieve steady growth and reform
our business portfolio.

Integrated Report 202037

Management Strategy▶ICT Strategy

Defend and Attack with ICT.

Smooth response to“telework”
For “defensive IT,” it is important to promote paperless
operations, introduce cloud-enabled PCs that enable
telework, and develop a communication environment.
From the two perspectives of realizing more flexible work
styles and promoting the shift to cloud, all the Group
companies are replacing existing PCs with cloudcompatible PCs. Today, it is essential to shift to a cloudenvironment in order to quickly and flexibly realize businessstrategies through digitalization. We have completed theconstruction of a cloud infrastructure in the Groupequipped with data linkage functions and job execution
and monitoring functions, and we will promote thetransition from legacy systems to cloud systems in both
hardware and software, such as planning all future systems

38

on a cloud basis.
As for department store operations, we completed theintroduction of smart payments for credit cards andhandsets that can be used in front of customers in order toimprove customer service and enhance credit card security.
With regard to security, we conducted vulnerability
assessments of our business systems and websites,
developed countermeasures, and strengthened security
through email training, incident training, employee
training, and other means.

Lifetime Service HUB scheme
In the area of “aggressive IT,” we are promoting the“Lifetime Service HUB scheme,” i.e., the creation of asystem that aims to become a life partner who extends
lifelong support to customers and to provide new products
and services. On the system front, we will build a systemthat has the following three functions.
1) Function of collecting, accumulating, and integrating
customer information held by each company
2) Function of analyzing and predicting customer profiles(hobbies, preferences, purchasing behavior, etc.)
3) Function to communicate more closely with customers
In fiscal 2019, we completed the development of basic
functions for the “Group integrated customer database,”
which is a tool for managing and utilizing all customer
data from the Group companies as shared assets, andincorporated the data held by department stores. In thecurrent fiscal year, we will collect data held by Parco andsupport the use of data to increase sales and drive customer
traffic at department stores and Parco. At the same time,

Management Strategy

we will develop additional functions such as the acquisitionof external data and analysis functions.
By utilizing the Lifetime Service HUB, we not only sell
products from the “productʼs perspective” but also
communicate with customers on a one-to-one basis fromthe “customerʼs perspective,” providing personalizedpurchasing experiences and services more efficiently andeffectively across our businesses and channels. The fullscale operation of the system is scheduled for 2021.
In addition, as for new customer strategy projects at
department stores, we promoted each project andintroduced systems, such as the development ofsmartphone apps at all department stores, the introductionof MA* (Marketing Automation) tools as a newcommunication tool, and the introduction of systems totransform to a new gaisho business model.

confirm the safety of websites with high risk of information
leaks and systems that maintain personal information, andmade improvements to promptly ensure the safety ofsystems and websites where problems were discovered.
We also conducted continuous surveys of the status ofcommunications related to unauthorized access to personal
computers used by employees and information leaks. In
addition to continuing these efforts this fiscal year, we will
also take measures to strengthen security, including
investigating the robustness of servers, strengthening
monitoring, and reviewing internal rules for more
appropriate information management.
In addition, employee education is an important elementof security. Continuing from the previous fiscal year, we
conducted e-learning-based education and targeted attack
email training. In the current fiscal year, we will continue
activities to raise the level of information security for
employees through education and training.
In fiscal 2019, the departments in charge of security at
JFR Information Center, a consolidated subsidiary, worked
closely with us to strengthen our security management
system and prepared countermeasures and initial actionsin the event of an accident. Specifically, we launched theJFR Group CSIRT*, and officially joined the Nippon CSIRT
Association in July. The documents developed by this JFRCSIRT were shared horizontally among the Group
companies, and a system for dealing with incidents waslaunched at each Group company. In particular, this fiscal
year we will strengthen our management system inconjunction with activities to strengthen IT governance.

* MA: Marketing Automation (a mechanism to improve operational efficiency
by automating marketing operations)

Security measures
In recent years, cyber attacks have become more
complex and sophisticated, and information security risks
are increasing. To minimize such risks, we established theGroupʼs common security policy in July 2018 and arecontinually implementing security measures based on thispolicy.
First, in order to visualize and improve the security
measures of each Group company, we conducted hearingson the security measures of the systems maintained byeach company, performed vulnerability assessments to* CSIRT: Computer Security Incident Response Team

Image of Lifetime Service HUB scheme

▶

Birth

Infancy

Schoolattendance

Employed

MarriedChildraising

Secondlife

Department store

PARCO

JFR Card

Other associatedbusinesses

CRM

CRM

CRM

CRM

Customer profile fordepartment stores

Customer profile for
Parco

Customer profile for
JFR Card

Other associatedbusinesses

Analysis/proposal by AI

Integrated customer database (DB)Integrated Report 202039

Management Strategy▶Human Resources Strategy

Enhance “Human Resource Capabilities”
and Achieve Sustainable Growth.
J. Front Retailing recognizes that each employee is the key tocreating added value that is essential for a companyʼssustainable growth, and considers this to be its mostimportant management resource. Recognizing that ouremployees are valuable assets, we aim to become a“company that develops human resources” by facing each

employee thoroughly and developing human resource capabilities.

Overview of new human resources strategy with human resource development at the core▶

The Group strategic challenge: Change of business portfolio and transformation to a new business model
Rebuilding of human resource management

Workforceplanning

Retirement
SeniorRebuilding with a focus
on HR development

Treatment
Working conditions

Evaluation
Assessment
Essential conditions Diversity & inclusion
for lasting growth ●Women and senior empowerment(social demand)●LGBT and the disabled
Rebuilding of humanresources operation baseRecruitment
Allocation

Development

Diversiﬁed work styles

Work-life management

Equal pay for equal work

Health management●Response to law revision●Effective work styles●Assistance to juggle work and life
●Response to family care

●Gap in employment classification●Pension and retirement benefits●Measures against mental illness●Measures against harassment

HR systems

HR development systems(including Talent Management System)

HR organization and structure

Renewal of organizational climate and corporate culture

Shift the personnel system from a job
performance-based system to a“humanresource capabilities”-based system
In conjunction with reforms implemented in the past, ourpersonnel system has been based on “job performance.” In
this system, job value was linked to treatment. In fiscal 2020,

40

we will shift to a system that puts greater emphasis on the“human resource capabilities” of individual employees. To thisend, we will focus on human resource development at all
times, from “recruitment” to “assignment,” “training,”“evaluation and assessment,” and “treatment and working
conditions,” and will thoroughly implement human resource
management centered on human resource development.

Management Strategy

Ultimately, we aim to reform our organizational culture andcorporate culture, which will lead to the realization of theGroup Vision.

them among the company, the management line, and theemployee, we are able to strengthen human resource
management, including assignment, training, and evaluation.

Define“human resource capabilities”

Human resource development

We define “human resource capabilities” as not only actual
results and contributions, but also comprehensive strengths
that include actions and highly specialized knowledge andskills that lead to the realization of results, job execution
capabilities that form the foundation for these activities,
energy and learning to promote reforms, and the characterand spirit that form the foundation. In particular, we define“human resource value” as the ability to perform duties andcreate new value that directly leads to results and contributions.

Based on the fundamental philosophy “Human resources
grow through work,” we are developing human resources
through: ① the assignment of work and roles; ②communication between individuals and the company; and③ the human resource development program that supports
them. Along with strategic and planned assignment androtation, we will thoroughly provide roles, tasks, and feedback
that encourage the development of human resources. In
addition, for autonomous design and development ofcareers, we accept online self-application throughout theyear, enhance in-house recruitment, and actively provide
career support through career interviews, career developmenttraining, and other means. In addition, in order to provide
opportunities for education and career development
regardless of age, we are enhancing rank-based programs,
the opportunities to work outside the Group, and career
support colleges (self-development courses).

Definition of human resource capabilities▶

Results/contribution
ActionKnowledge/skills
Innovation/creativity
Influence
Negotiation capability
Human
Intention/motivation resource value
Learning ability
Educational ability
Character, value, spirit, orientation/interests

Human resource capabilities
Comprehensively grasp human resource
capabilities through multilateral andexhaustive assessment

Recruitment of human resources
In addition to recruiting new graduates as the nextgeneration core human resources for the future, we are
actively recruiting mid-career personnel who are highly
specialized human resources ready for work. In fiscal 2019,
we recruited 69 mid-career employees (39 men and 30
women) throughout the Group, mainly strategicallystrengthened digital division, new businesses, real estatebusiness, and credit and finance business. We will continue
to strive to acquire human resources with a strong sense ofchallenge, competitiveness, innovation, and creativity inorder to form a diverse organization that creates new value.

Reflect them in assignment, training,
evaluation and treatment“Visualize”the human resource capabilities ofindividuals
In fiscal 2019, at Daimaru Matsuzakaya Department Stores,
which is the Groupʼs core operating company, the humanresources division interviewed all employees to gain a more
direct understanding of each employeeʼs human resource
capabilities. This interview gave a look back on each
employeeʼs careers and gauged their thoughts on future
careers. We also created a “human resources record” that
integrates a variety of human resources information, including
performance evaluations, multi-faceted observations(360-degree evaluation), career interviews, training data,
online self-application, job system information, aptitude
inspections, and transfer/assignment histories. By “visualizing”
each employeeʼs human resource capabilities and sharing

Linked to“sustainability management”“Promotion of diversity” and “realization of work-lifebalance,” which we have identified as ESG materiality issues,are essential elements for enhancing human resource
capabilities. We will continue to implement our humanresources strategy as part of our sustainability management.

Overall diagram of human resource development▶

Work/roleto five years
Stage

Ⅲ

Deepening the fields Consideringof expertise
experiences inother companies
and other divisions
when promoted to
Identifying the right fields upper stages

Tough assignment
Stage

Ⅱ

Stretching duties/roles Justified

transfer/assignment
based on the

Stage

Ⅰ

Experience in different fields human resources
Building a wide variety record, etc.
of capabilities

Individuals grow through work/roles● Assessment
Use of human resources data● Human resources recordⅣ

Dedicated to a high Transfer or job
degree of expertise change every three● Public recruitment● Self-application
Receipt of employee intentions

Stage

Communication

Expressing thoughts
about career

Human resource development program (OJT/Oﬀ-JT)

Career development
Interview
59 years old
Career consulting at 58

44 years old
39 years old
36 years old
33 years old
30 years old
27 years old

Sending to external companies
Sending to external schools (open/designated)

JFR Business Management School

Development of specialized
human resources

54 years old Training at 53
49 years old

Recurrent education

Career consulting at 48
Training at 43
Request-based career consulting
for 40 year olds and older

3rd year training

External seminars
Rank-based training
Correspondence courses
Training for newly appointed employees Support for qualification acquisitionRole-based training Lifting the ban on dual/outside employment
Theme-based training
JFR Womenʼs School
Division school
MentorTrainee
Official grading (when the 2nd year ends)
Regular interview with HR staff

Developmentof young
human resources

JFR Management School

JFR Leader School

Human resources to be
developed in a focused manner

JFR Entry School (two years after employed)

Designing own career

Acquiring knowledge and skills thatcan be used outside the company

Becoming a leader/
key person in transformation

Integrated Report 202041

Management Strategy▶Finance Strategy

Our Finance Policies Support Discontinuous Growth.

Capital cost-conscious management
We are pursuing finance policies centered on generating
free cash flow (FCF) and improving ROE. Our goals are to1) build a foundation that can permanently increase ourcorporate value by promoting FCF creation by eachbusiness with an emphasis on balance sheet (B/S) andachieving positive FCF, and 2) create a management
structure that can continuously achieve ROE of 8% while
maintaining a balance between business profitability andgrowth potential. In fiscal 2019, our ROE was 5.4% (down
1.4% from the previous fiscal year).
As of the end of February 2020, we have calculated thecost of shareholdersʼ equity (the expected yield of
shareholders and investors), which is a hurdle rate
corresponding to ROE, to be around 6%, and we expect it
to remain in the range of 6% to 7% in the mid- to longterm. In other words, a new Medium-term Business Plan
will be launched in fiscal 2021 but there is no change inour belief that ROE of 8% is the minimum level that mustbe achieved in order to meet the expectations of ourshareholders.
The weighted-average cost of equity (WACC) was
slightly below 4% as of the end of February 2020, and is
expected to be around 5% in the med- to long-term. We

also identify WACC of each business and set hurdle rates
when considering investment plans to promote capitalcost-conscious management.
Under the new Medium-term Business Plan, which iscurrently being formulated, we will set ROIC as one of the
key performance indicators that we should aim to achieve,
and will work to enhance management control. ROIC is anindicator that incorporates financial strength based on
ROE, which we have emphasized, and we believe that it isconsistent with our course of action. In the process of
expanding the real estate business and finance business inthe future, the degree of dependency on borrowing will
increase further, and ROIC calculated in the form ofinvested capital, including borrowings, will become moresignificant. We believe that we can smoothly move
forward, partly because Parco have already promoted
management with ROIC as a priority indicator.

Correlation between management indicators and hurdle rates▶

Management indicators

ROIC
5.5％

ROE and ROIC
Return on

ROIC invested capital > WACC Cost of shareholdersʼ equity
Return on

42

Cost of liability

Hurdle rates

Operatingliabilities

ROA
4.5％

▶

ROE shareholdersʼ equity > Cost of shareholdersʼ equity

>

ROE
8％

AssetsInterestbearing
debt

Revised
WACC
4.0％
WACC
5.0％

Cost ofParent shareholders
ʼinterest
equity6-7%
Non-controllinginterest

Management Strategy

Enhancing management by adopting store level B/S▶

ROEProfitShareholdersʼ equity

ROA(Store Manager performance indicator)
Operating profit
Total assets●Key focus of stores emphasizing gaisho sales (Rate of accounts receivable is relatively high)Accounts receivable collection ratio ⇒Prevention of delays in collection / individual assessment

Total assets turnover
Net sales
Total assets●Key focus of leased stores (Rate of inventories is relatively high)Merchandise turnover ⇒Thorough assessment with turnover / cross ratio, securing

P/L perspective
Operating margin
Operating profit
Net sales

Department store management
separate B/S for each store

basedsalable items / removing unsalable items●Key focus of the companyʼs own stores (Rate of property and equipment is relatively high)Sales per month/tsubo ⇒Selecting/implementing renovation investment projects
that highly contribute to the storeʼs ROA
Recovery of investment ⇒Judged and monitored by the Investment Project Review Committee

Associated sales
Number of new identifiable customers
Efficiency of operating expenseson

Investment Project Review Committee andRevitalization Plan Review Committee
The Investment Project Review Committee and the
Revitalization Plan Review Committee provide financial
support for management decisions on investments, business
revitalization and withdrawal.
The Investment Project Review Committee, which is chairedby the Senior Executive General Manager of the Financial
Strategy Unit and vice-chaired by the Senior General Managerof the Management Planning Division, verifies theappropriateness of the investment projects to determine
whether they meet the investment criteria and discusses
business risks. To offer more objective opinions, we have put inplace a system in which outside organizations can participate.

Flow chart of investment project examinationby the Investment Project Review Committee

ProposeQuantitative
criteria
Risk

1 OK
Present
examination
results

3 NO（Re-examine）

Risk

2 NO
Qualitative
criteria

Fund procurement
The Companyʼs basic fund procurement policy is to 1)
procure the funds required for business activities from funds
provided by operating activities and 2) procure funds forstrategic investments through the issuance of bonds andborrowings from financial institutions in consideration offinancial soundness and stability.
In light of the serious impact on the retail industry caused
by COVID-19, we are working to reduce capital investment
in fiscal 2020 to about half of the initial plan. In order tosecure financial stability and liquidity on hand, which are
our top priorities, we increased commitment lines early, andwe do not believe that this will have a significant impact on
our financing and fund procurement. Going forward, we
will continue to strive to recover our business performance
while securing sufficient cash on hand in a timely andappropriate manner.
With Parco becoming a wholly owned subsidiary, we havebegun operating a new CMS (cash management system)
including Parco from the perspective of improving efficiency
through the centralized management of the Group funds.

Classification into phases by the Revitalization
Plan Review Committee▶NormalPhase Ⅰ ●Continue to achieve operating profit

Continue to manage
performance at each company

Caution needed
Phase Ⅱ ●1st period of operating deficit (including forecast)●New business that falls far below the plan at its inception

Revitalization plan

Revitalization/withdrawal to be considered●2 consecutive periods of operating deficit (including forecast)●Concern about liabilities exceeding assets
Phase Ⅲ ●New business that is sure to fall far below the plan at

its inception for 2 consecutive periods●New business that conflicts with the criteria establishedwhen the plan was developed

Revitalization/
withdrawal plan

Revitalization Plan Review Committee

ProposingdivisionGroup Management
Meeting / Board of
Directors meeting
Quantitative
criteria

The Revitalization Plan Review Committee is chaired by
the Senior General Manager of the Budget andManagement Support Division and vice-chaired by the
Senior General Manager of the Management Planning
Division. The committee verifies business operations andexamines the appropriateness of countermeasures bymanaging in three phases: I) normal, II) caution needed,and III) revitalization and withdrawal to be considered.
Each committee provides information, to facilitate swift
management decisions at the Group Management
Meetings and the Board of Directors meetings.

Screening of underperforming businesses

Investment Project
Review Committee

Continuing focus

Product sales profit

For each operating company, the KPI is to improve ROA,
which is computed by multiplying operating margin by
total assets turnover. In fiscal 2017, our core department
store business introduced management based on separate
B/S for each store, as the efficiency of assets was not
sufficient in spite of the fact that business activities wereconducted while using large assets such as stores. As aresult, not only sales and profits (P/L perspective) but also
B/S perspective of pursuing appropriate returns from assets
has been added to store level management.
Specifically, by prioritizing each store in consideration of
its asset profitability and ability to recover investment, theGroup is implementing restraints on investment plans
aimed only at maintaining and expanding sales, as well as
drastic measures for low-profit divisions.

▶

Traditional indicators

Financial leverage
Total assets
Shareholdersʼ equity

B/S perspective

Focus indicators

MarginProfitOperating profit

Integrated Report 202043

Sustainability▶Sustainability Management

Sustainability Management
Since fiscal 2018, the J. Front Retailing Group(the “Group”) has been working to “create afoundation” for sustainability management
initiative. This is an increasingly important initiative
for the post-COVID-19 era, and we believe that wemust push forward aggressively.
The Group is committed to realizing ESG
initiatives that are unique to JFR, based on theconcept of sustainability management. We believethat the future direction of the evolution ofsustainability management is to realize ouraspirations of making the world good and doing
what is right, and to that end we must create newmarkets. That is our CSV strategy.
We will contribute to the creation of a sustainable
society by realizing sustainable growth as acompany by promoting ESG initiatives simply andhonestly.

Process for identifying 5 materiality issues

CLIMATEACTION

Contribution toa low-carbon
societySUSTAINABLE CITIESAND COMMUNITIESPARTNERSHIPFOR THE GOALSAFFORDABLE AND
CLEAN ENERGY

Coexistencewith local
communities

5
materiality

CLIMATEACTIONManagementof the entire
supply chain

issuesGOOD HEALTH
AND WELL-BEING

DECENT WORK AND
ECONOMIC GROWTHGENDEREQUALITY

Realization ofwork-life
balance

Social value

DECENT WORK AND
ECONOMIC GROWTH

Promotion ofdiversity

Economic value

J. Front Retailing Group materiality map▶

Very highContribution to a low-carbon societyManagement of theentire supply chain
Realization ofwork-life balance

Promotion of diversity
Impact on stakeholders

In 2018, we formulated a Sustainability Policy
and, based on the results of a questionnaire
survey of 4,250 stakeholders, repeated discussions
at the Management Meetings and the Board of
Directors meetings to identify five materiality
issues that the Group should address. We have set
medium- and long-term targets for eachmateriality issue and are implementing initiatives
that are linked to our business strategies.

AFFORDABLE AND
CLEAN ENERGY

Coexistence withlocal communities

High

High

Very highImpact on J. Front Retailing Group

Questionnaire survey of stakeholders (4,250 persons),
Interview with management
Recognized environmental
and social issues
Listed materiality issue
candidates

Selected 100 social issues that are
expected to have a significant impact
on the environment and society

44

Hearings on important issues
from the stakeholder's perspective

Prepared materiality map
Evaluated the Company's strengths
and impact
Selected important issues
for the Company

Selected 25 items based on the Companyʼs initiatives, ESG guidelines,
benchmark companies (organizational governance, human rights, labor
practices, environment, fair business practices, community, etc.)

Discussed andidentiﬁed

Discussed at the Management
Meetings and the Board of
Directors meetings

Sustainability

Formulating sustainability-related policies

Corporate Credo
Basic Mission Statement

Permanent

In 2018, we formulated the “Sustainability Policy” withthe aim of continuing to grow to realize a sustainable society
and create and bring to life new happiness, which is thefoundation of our approach to ESG. In addition, we haveformulated “Eco Vision” and “Social Vision” which show ourenvironmental and social concepts based on the
Sustainability Policy. These visions and the “Corporate
Governance Guidelines” are our guidelines for ESG.
In 2019, the Group formulated the JFR Principles of
Action, which set out the principles for all officers andemployees of the Group to fulfill their social responsibilities
and the JFR Principles of Action for Suppliers, which stipulatematters to be observed together with suppliers. These
principles comprise four basic policies: the JFR conduct
policy; the JFR guidelines for action for suppliers; theprocurement policy; the human rights policy; the anticorruption policy; and the occupational health and safety
policy.

Future to aim forGroup Vision（JFR WAY）

ESG philosophy

Policies onenvironment,
society andgovernance

Sustainability Policy
Eco Vision / Social VisionCorporate Governance Guidelines
JFR Principles of Action
JFR Principles of Action for Suppliers

6 policies in JFR Principles of Action and
JFR Principles of Action for Suppliers●“JFR conduct policy”●"Guidelines for action for
suppliers"● “Procurement policy”●●●“Human rights policy”"Anti-corruption policy"“Occupational health andsafety policy”

Sustainability promotion structure

Holding ESG presentations

We have established the Sustainability Committee topromote sustainability management across the Group in across-organizational manner. Along with the Risk Management
Committee and the Compliance Committee, this committee ispositioned as an advisory committee under the direct control of
the President and Representative Executive Officer and meetsonce every six months. Major activities include the formulationof annual action plans and monitoring of progress concerning
each materiality issue at each Group company. In addition,
the Board of Directors receives reports on the content of
discussions held by the Sustainability Committee and discusses
and oversees longterm objectives andprogress in addressing
ESG issues.

Since 2018, we have held annual ESG presentations for
institutional investors. We report on our medium- andlong-term sustainability targets and the progress of specificinitiatives, and hold direct dialogue with investors throughquestion and answer sessions (56 participants in 2018 and
59 in 2019).
We will continue to improve the quality of oursustainability management through dialogue with capital
markets.

2nd ESG presentation
2nd Sustainability Committee meeting

Publication of Sustainability Reports

Internal penetration of sustainability management

In February 2020, we published our first Sustainability
Report to supplement the Integrated Report and emphasize
the completeness of the Groupʼs ESG information. This reportdiscloses ESG information in detail, including our approach tosustainability, promotion system, long-term objectives related
to five materiality
issues,andtheprogressof
ourinitiatives. We willcontinue to publish
the report once a
year.

Top management explains in person the backgroundand importance of ESG initiatives at in-house training
sessions, and actively utilizes in-house magazines andwebsites to promote understanding and penetration
among employees. In September 2019, an in-house
website specializing in ESG was launched. The website
provides educational videos to help contribute to solvingsocial issues through business activities and to deepen
understanding of these issues. Using SNS, we share
information with employees of each operating company in
two directions.

Sustainability Report 2019

Integrated Report 202045

Long-term targets and major actions in fiscal 2019▶

Relevant
stakeholders

Customers

Contribution toa low-carbon
society

Suppliers
Employees
Local
communities

Long-term targets

2030
40% reduction of Scope 1 and
2 GHG emissions (vs. FY2017)

2050
Zero Scope 1 and 2 GHG
emissions2030
Management of
the entire supply
chain

Suppliers
Customers

Major actions in fiscal 2019

AFFORDABLE AND
CLEAN ENERGY

Down 11.0% in FY2019 (vs. previous year)

CLIMATEACTION

AFFORDABLE AND
CLEAN ENERGY

100% penetration of JFR
Principles of Action for Suppliers

2030● Approved by SBTi
● Support for TCFD recommendations● Rated “A-” by CDP● Actual reduction of Scope 1 and 2 GHG emissions● Switched to renewable energy● Transition of the company fleet to EVs● Introduced energy-saving equipment and high-efficiency equipment● Switched to LED lighting● Prepared to join RE100 (planned to join in Oct 2020)● Established JFR Principles of Action for Suppliers● Shared JFR Principles of Action for Suppliers (sent out andheld briefing sessions)

CLIMATEACTIONAim for 40% reduction of
Scope 3 GHG emissions● Calculated Scope 3 GHG emissions● Switched to environmentally friendly office supplies● Initiative to create a circular society “Ecoff”

2050
Coexistencewith local
communities

Local
communities
Customers● Promoted Urban Dominant strategy
SUSTAINABLE CITIESAND COMMUNITIES● Urban development centered on ESG model stores
Local communities, governments, and・ Opened the main building of the Daimaru Shinsaibashi
retailers will cooperate closely to realize
store and Shibuya PARCO
sustainable and advanced urban
PARTNERSHIPFOR THE GOALS● Expanded local production for local consumption (chisandevelopment by combining urban
chisho)development that makes use of the● Created safe and secure store environmentareaʼs assets, which is the strength of・ Disaster response BCP plan
the Group, with solutions to environmental issues.

2025
Ratio of women in
management positions: 30%

Promotion ofdiversity

GENDEREQUALITY● Promoted womenʼs empowerment
・ Ratio of women in management positions: 18.8%

DECENT WORK AND
ECONOMIC GROWTH● Promoted senior empowerment
・ Extended the retirement age to 65 in Mar 2020 (Daimaru(FY2019, consolidated)

2030
Customers
Employees

Aim for ratio of women in
management positions of 50%

2030

Aim for retirement at 70

2030

Employment ratio of the disabled: 3.0%

2030
Realization ofwork-life
balance

Employees

Acquisition of childcare leaveby male employees: 100%

2025

GOOD HEALTH
AND WELL-BEING

DECENT WORK AND
ECONOMIC GROWTH

Turnover rate due to childcare
and nursing care: 0%

Matsuzakaya Department Stores)● Initiatives for employment of the disabled・ Employment ratio of the disabled: 2.21%

As of June 2019 (within the special scope of subsidiaries
including Daimaru Matsuzakaya Department Stores)● Formulated human rights policy● Expanded work system
・ Promoted telework● Expanded work style systems and rules
・ Established a short-term childcare leave system (paid)
・ 18 male employees took childcare leave (FY2019, consolidated)
・ Ratio of return from childcare leave: 89.5% (FY 2019,

Daimaru Matsuzakaya Department Stores)

External recognition▶

Selected as the constituent of MSCI Japan Empowering
Women Index (WIN) for 3 consecutive years*

Rated“A-”in CDP climate change
research 2019

Rated“Silver”
in PRIDE
Index 2019

Selected as theconstituent of SNAM
Sustainability Index
for 9 consecutive
years

Certified as Health and Productivity
Management Organization 2020

Certified as a“Company Empowering
Persons with Disabilities”
in 2019

Selected as 2019“Semi-Nadeshiko”
Brand

Rated four stars in the 3rd Nikkei
Smart Work Management Survey

Registered in the Whistleblowing ComplianceManagement System certification (self-declarationof conformity
registration
system)*The inclusion of J. Front Retailing Co., Ltd. in any MSCI index, and the use of MSCI logos, trademarks, service marks or Index names herein do not constitute a sponsorship, endorsement, or promotion of J. Front RetailingCo., Ltd. by MSCI or any of its affiliates.The MSCI indexes are the exclusive property of MSCI. MSCI and the MSCI index names and logos are trademarks or service marks of MSCI or its affiliates.

46

Sustainability

Sustainability▶Contribution to a Low-carbon Society

Contribution to a Low-carbon Society
Background

Outline of actions

Future direction

Climate change and other environmental issues
are becoming increasingly serious in the world
today. Natural disasters, such as typhoons andheavy rains, are frequently occurring in Japan,
making it impossible for companies to overlook
their efforts to deal with climate change.

Among the five materiality issues of the Group,
we consider “contribution to a low-carbon society”
to be our top priority. In order to deal with climatechange, we are promoting company-wide
initiatives such as the formulation of action plans
for achieving medium- and long-term targets.

In addition to efforts to reduce GHG emissions,
the Group is working to increae environmentallyfriendly stores and promote circular economy.
Through these initiatives, the Group will achievesustainable growth through “contribution to a
low-carbon society” as corporate activities.

Long-term targets

Major actions in FY2019 (partially in FY2020)

2030 40% reduction of Scope 1 and 2● Approved by SBTi
● Rated “A-” in CDP climate change 2019
● Grand opening of ESG model stores● Introduced environmental management system● Obtained third-party assurance for Scope 1

GHG emissions (vs. FY2017)**Approved by SBTi
2050 Zero Scope 1 and 2 GHG emissions

and 2 energy consumption and GHG emissions

Approved by SBTi
In October 2019, our GHG emissions reduction targets
were approved as science-based reduction targets by theinternational Science Based Targets initiative (SBTi). The
targets set by the Group was approved under the second
strictest category of “well-below
2 C”-aligned targets. The Group is
actively taking measures to achieve
the GHG emissions reduction
targets approved by the SBTi.

● Switched to renewable energy, introduced

energy-saving equipment and high-efficiency
equipment, and made the transition of thecompany fleet to EVs● Prepared to join RE100 (planned to join in
Oct 2020)

the Daimaru Shinsaibashi store (the main building andsouth wing) in September, and Ikebukuro PARCO(PʼPARCO) and Chofu PARCO in October 2019.
We will continue to promote the switch to renewableenergy, mainly at the main stores of Daimaru Matsuzakaya
Department Stores and PARCO and aim to join the “RE100(Renewable Energy 100%)” initiative by the end of fiscal
2020.

Acquired third-party assurance for Scope 1 and
2 energy consumption and GHG emissions infiscal 2019

Grand opening of ESG model stores
We are promoting the creation of environmentallyconscious stores with the aim of “realizing a sustainable
society.” The main building of the Daimaru Shinsaibashi
store and Shibuya PARCO opened as ESG model stores in
September and November 2019, respectively. The mainbuilding and south wing of the Daimaru Shinsaibashi store
switched to 100% renewable energy for all power needs.
Shibuya PARCO was chosen by the Ministry of Land,
Infrastructure, Transport and Tourism as a “Leading
Sustainable Building Project (CO2 Reduction Leader).”
Going forward, we will expand the results of this initiative
to other stores.

In July 2020, we obtained an independent assurance
statement from Lloydʼs Register Quality Assurance Limited(LRQA) regarding the methods for calculating energy use
and GHG emissions in Scope 1 and 2 in fiscal 2019 and theirappropriateness, and for the firsttime, regarding the methods forcalculating GHG emissions in
Scope 3 and their appropriateness.
We will continue to use the newly
introduced
environmental
performance data management
systemtostrengthen
environmental governance.

Switch to renewable energy
Given that approximately 80% of our Scope 1 and 2
GHG emissions come from electricity use at our stores, we
believe that our efforts to reduce GHG emissions should
focus on the use of electricity. Daimaru Matsuzakaya
Department Stores switched to renewable energy at its
head office building (Koto-ku, Tokyo) in March 2019, at

FY2019 Scope 1 and 2 GHG emissions reduction
targets and the results of GHG emissions▶

FY2019TargetResultYoY

Emissions (t-CO2)

Reduction (t-CO2)% reduction

174,994
162,508(7,572)(20,058)(3.9)(11.0)

Integrated Report 202047

Sustainability▶Contribution to a Low-carbon Society

Climate Change Responses and Information
Disclosure in Line with TCFD Recommendations
The J. Front Retailing Group (the “Group”) considers climate change to be a top priority for sustainability management andrecognizes that the risks and opportunities associated with climate change have a significant impact on its business strategies.
In May 2019, we expressed our support for the final report of the Climate-related Financial Disclosure Task Force (TCFD)(TCFD Recommendations) established by the Financial Stability Board (FSB). The TCFD Recommendations recommend thatcompanies disclose information on four core elements including “governance,” “risk management,” “strategy,” and “indicatorsand targets” based on the belief that investorsʼ accurate understanding of the impact of climate-related risks and opportunities
on the financial condition of investees leads to appropriate investment decisions.
In order to achieve the mid- to long-term targets for “contribution to a low-carbon society,” which is our most importantmateriality issue, we are working to reduce energy consumption, use energy more efficiently, and introduce renewable energy.
At the same time, we are working to further enhance the disclosure of information in line with the TCFD Ｒecommendations.

Governance concerning environmental issues

Risk management

In fiscal 2019, we established the Sustainability
Committee to promote sustainability management acrossthe Group in a cross-organizational manner. The
Sustainability Committee formulates action plans for theGroupʼs environmental issues and monitors their progress.
The Board of Directors discusses and supervises the content
of these plans.
The Group Management Meeting, the highest decisionmaking body in business execution, deliberates on specificmeasures for addressing environmental issues, and thedecisions are reported to the Board of Directors. The
President and Representative Executive Officer, who chairs
the Group Management Meeting, also serves as thechairperson of the Risk Management Meeting and theSustainability Committee, both of which are advisorycommittees under his direct supervision, and assumes theultimate responsibility for strategic decision-making related
to environmental issues. Under the supervisory system of
the Board of Directors, we are strengthening governance inenvironmental management.

We believe it is important to position risks (uncertainties)
as the starting point of our strategy and to establish asystem to manage them on a company-wide basis. The Risk
Management Committee identifies and evaluates risks
based on external environmental analysis, narrows themdown to the risks that need to be preferentially addressed,
and reflects them in the Groupʼs strategies.
The Sustainability Committee conducts more detailed
examinations of the risks identified by the Risk Management
Committee regarding environmental issues, and shares theresults with operating companies. The Group Management
Meeting, the Risk Management Committee and theSustainability Committee monitor the progress, and finally,
report to the Board of Directors.

Environmental management structure▶

Board of Directors

Supervision
President andRepresentative
Executive Oﬃcer

Instruction/
report
The GroupManagement Meeting

ESG Promotion
Division

48

Report/resolution
Risk Management
Committees

Cooperation
Sustainability
Committees

Report/resolution
Instruction/
reportOperatingcompanies

Instruction/
reportStrategy
We conducted a scenario analysis to assess the risks,
opportunities and financial impact given by climate change
to the Group.
In order to conduct a scenario analysis, we assumed two
possible worlds including a below 2℃ scenario, which is
the Paris Agreementʼs goal, and a 3 C scenario in which allnational climate-related policy objectives are met withreference to existing scenarios published by the International
Energy Agency (IEA) and the Intergovernmental Panel on
Climate Change (IPCC) *.
Based on the above scenarios, we analyze the impact ofclimate change on our business, consider countermeasures,and verify the Groupʼs strategic resilience.

*Existing scenarios referred toPossible world

Existing scenario

Below 1.5 to
2℃ scenario“Below 2 Degree Scenario (B2DS)” (IEA, 2017)“Sustainable Development Scenario (SDS)” (IEA, 2019)“Representative Concentration Pathways (RCP2.6)”(IPCC, 2014)

3℃ scenario“Stated Policy Scenario (STEPS)” (IEA, 2019)“Representative Concentration Pathways (RCP6.0)”(IPCC, 2014)

Sustainability

Overview of the Group’s risks and opportunities and their impact on business/finance in each scenario▶

The degree of impact on business/finance isshown qualitatively by the slope of thearrows in the table in three stages.

Financial Impact

Risk/opportunity
type

Transition
risk

Risk
Physicalrisk：The impact on the Groupʼs business/finance is expected to be very large.
：The impact on the Groupʼs business/finance is expected to be slightly large.
：The impact on the Groupʼs business/finance is expected to be negligible.

Overview of the Group’s risks/opportunities

Below 1.5 to
2℃ scenario

3℃ scenario● Increase in operation costs associated with the introduction of policies to control GHG emissions,
Policysuch as carbon taxes (carbon pricing) and the strengthening of regulations
Regulation ● Increased disclosure obligations related to GHG emissions and the risk of fines due to inadequate
response

Market● Loss of growth opportunities due to a delay in response to market changes such as increased
demand for low-carbon products and services resulting from changes in consumer behavior andincreased customer awareness of environmental issues● Loss of growth opportunities due to a delay in response to increased risk of infectious diseases
caused by climate change

Acute● Loss of sales opportunities for products and services resulting from disruption of procurement and logistics
routes due to natural disasters caused by climate change● Damage to stores and offices and suspension of operations due to natural disasters caused by climate change● Loss of sales opportunities in stores due to increased risk of infectious diseases (COVID-19, etc.) caused byclimate change

Opportunity

Energy source● Reduction in operation costs due to the use of low-carbon energy sources● Reduction in costs resulting from the use of new technologies● Energy resilience by participating in the carbon market and shifting to energy diversification● Reduction in operation costs due to the introduction of the latest energy-efficient equipment● Avoidance of energy procurement risks resulting from promoting renewable energy and energy conservation

Market● Improvement of profitability by restructuring the business portfolio as a Multi Service Retailer and focusing onmarkets where growth is expected in line with changes in consumer behavior and an increase in customer
awareness concerning environmental issues● Expansion of new growth opportunities by addressing increased risk of infectious diseases caused by climatechangeFinancial impact on the Group in 2030
The Group believes that, among the estimatedfinancial impacts for 2030, the introduction of acarbon tax* and fluctuations in renewable energyderived electricity charges in Japan will be
particularly important parameters (indicators).
Therefore, for these two parameters, wequantitatively estimate the financial impact on theGroup in the below 1.5 to 2 C scenario and the
3℃ scenario.
* Taxes levied on emissions of carbon dioxide (CO2), which is themain cause of climate change

Financial impact on the Group in 2030

Importantparameter(indicator)

Carbon tax
Renewableenergy-derived
electricity rates

Blow 1.5 to 2℃
scenario

Item● Carbon tax (thousand yen/t-CO2)● Increase in costs due to carbon tax (millions of yen)

3℃ scenario

10

3.3

1,165

384

● Increase in renewable energy-derived
electricity rates (yen/kWh)

1 〜4● Increase in procurement costs of renewableenergy-derived electricity (millions of yen)

164〜658

Assumptions for 2030
● Carbon tax price in developed countries: $100/t-CO2 (below 1.5 to 2 C scenario), $33/t-CO2 (3 C scenario)● The Groupʼs GHG emissions: 116,492 t-CO2 (40% reduction vs. FY2017)● Renewable energy-derived electricity rate: Increase of 1 to 4 yen/kWh (vs. electricity rate other thanrenewable energy)● The Groupʼs usage of renewable energy-derived electricity: 164,450MWh (ratio of renewable energy: 50%)

Initiatives in response to risks and opportunities
based on climate-related scenarios
Based on these scenario analyses, we are working to
reduce Scope 1 and 2 GHG emissions from our businessactivities, as well as Scope 3 GHG emissions in our supply
chain. We are also strengthening and promoting initiatives
to contribute to local communities through the creation ofsustainable stores.

Indicators and targets
Based on the above strategies for achieving the below
1.5 to 2 C scenario, the Group has set medium- and long-term targets for reducing GHG emissions, which wereapproved by the SBTi.
Target year

Details of targets

2030

40% reduction of Scope 1, 2, and 3 GHG
emissions (vs. FY2017)**Approved by SBTi

2050

Zero Scope 1 and 2 GHG emissions

In order to achieve our mid- and long-term targets forclimate change, we will continue to work actively on acompany-wide basis by strengthening our corporate
governance functions, such as reducing energy
consumption, improving efficiency in use, and introducing
renewable energy.

Integrated Report 202049

Sustainability▶Management of the Entire Supply Chain

Management of the Entire Supply Chain
Background

Outline of actions

Future direction

With the globalization of the economy andthe diversification of stakeholdersʼ needs,
the entire supply chain is expected to deal
with environmental and human rights
issues when procuring goods and materials.
In addition, the impact of COVID-19 has
caused supply chain disruptions and theneed for the establishment of a sustainablesupply chain is increasing further.

In order to build a socially responsible
supply chain, we have added anenvironmental and social axes to our
procurement standards and strengthen
our supply chain assessment to ascertain
the status of our suppliers and conduct
education and support activities forsustainable procurement both inside andoutside the Company.

We will make efforts to disseminate the JFR
Principles of Action for Suppliers, conduct
supply chain assessments, strengthen humanrights initiatives, and reduce GHG emissions
throughout the supply chain. In addition, torealize the CSV strategy, we will select new
suppliers considering environmental andsocial issues, and develop environmentallyfriendly products.

Long-term targets

Major actions in fiscal 2019 (partially in fiscal 2020)

2030 100% penetration of JFR Principles of Action● Formulated JFR Principles of Action and JFR

for Suppliers
2030 Aim for 40% reduction of Scope 3 GHG emissions(vs. FY2017) *Approved by SBTi

Principles of Action for Suppliers● Asked suppliers to support (sent out the Principlesof Action and held briefing sessions for suppliers)

party assurance● Switched to environmentally conscious packaging materials● Ecoff project

Formulated JFR Principles of Action for
Suppliers and asked suppliers to support

Switch to environmentally conscious
packaging materials

In June 2019, the Group formulated the JFR Principles of
Action for Suppliers, which outline corporate activities thatwill lead to the creation of a sustainable society, which will
be realized in cooperation with suppliers.
These Principles of Action were sent to the representativesof our suppliers and we asked them to support our views
and rules (sent to 8,727 companies as of the end of
November 2019). In October 2019, Daimaru Matsuzakaya
Department Stores held a “JFR Principles of Action for
Suppliers briefing session” in Tokyo and Osaka at the sametime and 652 people from 530 companies participated.
We will continue
to fulfill our social
responsibilities
together with our
suppliers
andcontributetoenhancingthecorporate valuesof both parties.

In September 2019, Daimaru Matsuzakaya Department
Stores switched to shopping bags made from paper sourced
from the forests that are managed in an eco-friendly way. Also
regarding food plastic bags, which are attracting attention
concerning the marine plastic waste problem, we switched to
products made from 30% biomass (plant-based resources)
and could reduce GHG emissions by about 24% per piececompared to previous products. In June 2020, we begancharging fees for Daimaru Matsuzakaya Department Storesoriginal plastic bags and paper bags for food products.

JFR Principles of Action for Suppliers briefing session
held by Daimaru Matsuzakaya Department StoresCalculation of Scope 3 and acquisition of
third-party assurance
The Group has also set SBTi-approved long-term targets
for reducing GHG emissions from the supply chain (Scope 3)
and is working to achieve these targets.
In fiscal 2020, in addition to Scope 1 and 2, we will acquire
third-party assurance for Scope 3 to increase objectivity andtransparency and work to reduce GHG emissions across the
supply chain.

50● Calculated Scope 3 GHG emissions and acquired third-

Shopping bags made fromforest-certified paper

Plastic shopping bags madefrom 30% biomass

Sustainable project with customer participation“Ecoff”
Daimaru Matsuzakaya Department Stores implements the “Ecoff”
project to reduce environmental impact by collecting disused
clothing, bags, and shoes from customers at stores and recycling andreusing them. This project offers shopping support tickets inaccordance with the number of items collected. Therefore, manycustomers participate in this project as a circular shopping andrecycling campaign that allows customers not only to participate in
the eco-friendly activity but also to shop economically.
At present, nine of our stores nationwide have set up permanentboxes for collection and donated a substantial portion of unusedtickets to environmental protection organizations.
(Total number of collected items: 2,322,021 as of November 2019)

Sustainability

Sustainability▶Coexistence with Local Communities

Coexistence with Local Communities
Background

Outline of actions

Future direction

While the birthrate is declining and the population is aging,
the population is concentrated in urban areas. In suchsituation, increasing the attractiveness of and revitalizing
communities have become social agendas. In addition, thesituation of cities where the population is concentrated ischanging due to the impact of COVID-19. Companies are
required to make efforts to revitalize their communities.

We are working on thesustained growth of areas andstores by promoting the Urban
Dominant strategy that focuseson building the ecosystem of
the areas centered on ourflagship stores.

We will create stores to realize sustainable urban
development and revitalization and aim for the urban
development that improves all of economic value,environmental value, and social value. In addition, byadding the role of local disaster prevention infrastructure,
we will promote the development of stores that are
more closely linked to communities.

Long-term targets

Major actions in fiscal 2019 (partially in fiscal 2020)

2050 Local communities, governments, and retailers will

● Urban development centered on the opening of ESG model stores including

cooperate closely to realize sustainable and advanced
urban development by combining urban developmentthat makes use of the areaʼs assets, which is the strengthof the Group, with solutions to environmental issues.

the main building of the Daimaru Shinsaibashi store and Shibuya PARCO● Promotion of Urban Dominant strategy● Regional revitalization through Parcoʼs crowdfunding business● Regional revitalization through chisan-chisho

Urban Dominant strategy

Local production for local consumption (chisan-chisho)

The Urban Dominant strategy is a business model that aims
to make the area as a whole attractive with our stores at thecore and grow together with the area. It improves the appealof the area and contributes to local communities. The Urban
Dominant strategy has its root in the development of shops
around the Daimaru Kobe store in the Former Foreign
Settlement in Kobe. We have expanded and developed thisknow-how, which has realized the revitalization of the entire
area. Currently, we are promoting the Urban Dominant
strategy in five key areas including Shinsaibashi, Kyoto, Kobe,
Nagoya, and Ueno.
The main building of the Daimaru Shinsaibashi store andShibuya PARCO made their grand openings in September andNovember 2019, respectively. By contributing to making thearea attractive, such as by driving traffic to each area, theydraw new crowd to the areas.

The Group contributes to regional revitalization by leveraging
the strengths of its nationwide network of stores and expanding
their offering of products that are unique to each region. Hakata
Daimaru, which operates a department store business, contributes
to regional revitalization through chisan-chisho by selling andintroducing
products
from the Kyushu region
as the Kyushu Tankentai(exploration unit). Goingforward, the Group willcontinue to expand its
initiatives and leverage
the unique characteristics
of each region to evolve. Ceremony to celebrate the establishment of

Parco crowdfunding
Shizuoka MIRUI Project
In January 2020, we launched the Shizuoka MIRUI Project tohelp businesses in Shizuoka try something new and solve
problems. Shizuoka PARCO, the Matsuzakaya Shizuoka store, andShizuoka Shimbun SBS advertise and support the projects posted
on a special website forcrowdfunding BOOSTER
through their stores,
SNS, media, etc.
Crowdfunding BOOSTER
will continue to develop
collaborative projects that
contribute to regional
revitalization.

Kyushu Tankentai

Creation of safe and secure store environment
At our department stores, we organize self-defense firebrigades in preparation for earthquakes, fires, and natural
disasters and conduct disaster prevention drills and BCP* drills.
Daimaru Matsuzakaya Department Stores asks its customers towear masks, allow us to measure their body temperatures,
maintain social distance, and use alcohol sanitizer to prevent the
spread of COVID-19.
For employees, health management is thoroughly implemented
and measures are taken to prevent infection, including the use ofanti-droplet shields. In
addition, in our stores, we
strengthen air conditioning
and let fresh air inside.
* BCP: Plan for business
continuity or early recovery
in the event of a disaster

Poster on safety and security

Integrated Report 2020

51

Sustainability▶Promotion of Diversity

Promotion of Diversity
Realization of job satisfaction reform
The Group promotes “job satisfaction reform” by promoting
diversity and achieving a work-life balance. The Group's
philosophy of "job satisfaction reform" is to realize bothindividual job satisfaction and organizational productivity
improvement at the same time by comprehensively
incorporating the promotion of diversity that generates
innovation and the realization of work-life balance that
improves productivity.

Realizationof innovation

Innovation

To foster a corporate
culture in which all
employees candemonstrate theirabilities regardless System to help
individualsof gender
improve theirskills

Productivity
improvement

Productivity
improvement

Realizationof productivity
improvement

Work-life
balanceinitiatives by
Initiatives toindividuals
supportwork-life
balance

Background

Outline of actions

Future direction

With an expected decrease in labor force due to thedeclining birthrate and aging population and the importanceof promoting womenʼs empowerment recognized, thepromotion of diversity will provide an environment in which
diverse human resources can demonstrate their abilities,
thereby strengthening the competitiveness of companies.

We are working to develop support systems
tailored to each life stage, such as childcare andnursing care. We are also promoting new formsof recruitment, such as mid-career recruitment ofhighly specialized human resources and women
who are raising children (Mother Recruitment).

We will strive to create an organization where
diverse human resources can fully demonstrate
their individual abilities and generate innovation.
In addition, we will create educational
opportunities to improve the skills of employees
and support individual skill development.

Long-term targets

Major actions in fiscal 2019 (partially in fiscal 2020)

2025
2030

● Promoted womenʼs empowerment● Introduced retirement at 65 (Daimaru Matsuzakaya Department Stores)● Efforts to employ the disabled● LGBT initiatives● Formulated human rights policy

Ratio of women in management positions: 30%
Ratio of women in management positions: Aim for
50%, equal to the ratio of women to total labor force
2030 Aim for retirement at 70
2030 Employment ratio of the disabled: 3.0%

Promotion of women’s empowerment

Employment of persons with disabilities

The Group promotes the utilization of human resources
based on individual abilities, aptitudes, motivation, etc.
regardless of gender.
In addition to establishing a support system for balancing
work and childcare for women raising children, the JFR
Women's School is held to foster awareness of long-term
career development. These initiatives are intended toenhance not only job comfort but also job satisfaction for
women raising children. In 2019, in order to improve theenvironment surrounding female employees, we conductedtraining for managerial people to deepen their awarenessand understanding of gender bias.

The Group recognizes that the employment of people
with disabilities is a corporate social responsibility andpromotes the employment of people with disabilities andthe improvement of the work environment at operatingcompanies.

*Ratio of women in management positions: 16.6% (consolidated)

Introduction of retirement at 65
Daimaru Matsuzakaya Department Stores extended its
retirement age to 65 in March 2020. Other operatingcompanies are also considering the extension of themandatory retirement age to 65. We aim to increase
productivity and added value by leveraging the skills andknow-how of seniors.

52

Realization ofjob satisfaction reform

Realizationof innovation*Employment ratio of the disabled: 2.21% (Employment ratio in the special
scope of subsidiaries as of June 2019)LGBT initiatives
The Group prohibits discrimination and harassment
against sexual orientation and gender identity under the
JFR Principles of Action. Training sessions were held todeepen the understanding of management and humanresource division managers. Daimaru Matsuzakaya
Department Stores also engages in a variety of activities
including events targeting LGBT customers.

Sustainability

Sustainability▶Realization of Work-Life Balance

Realization of Work-Life Balance
Background

Outline of actions

Future direction

Due to the impact of the COVID-19 infection, theintroduction and use of telework is spreading and work
styles are being reviewed. It is also essential to create a work
environment in which all employees, including those whowork while raising children and caring for family members,
can be motivated to work.

We are strengthening the use of
telework to prevent the infection of
COVID-19. We are also expanding ourleave system, improving our work
system, and reforming our operations
processes.

We will reform individual work styles, create
systems to support them, and develop systems
to support childcare and nursing care. By doing
so, we will create an environment in which
everyone can engage in work regardless of life
stage, thereby improving labor productivity.

Long-term targets

Major actions in fiscal 2019 (partially in fiscal 2020)

2030 Ratio of men taking childcare leave: 100%

● Encouraged male participation in childcare● Efforts to prevent employees from leaving their jobs due to chilcare and nursing care
● Promoted telework

2025 Turnover rate due to childcare and nursing care: 0%● Promoted health management

Encouraging male participation in childcare
In 2019, J. Front Retailing, Daimaru Matsuzakaya
Department Stores, JFR Card, and JFR Service introduced a“short-term childcare leave system” (paid, up to two weeks)
for employees with children under the age of three. The
introduction of this system has made it easier for men to
take childcare leave.
We encourage employees to take more than two weeks
of childcare leave by combining existing childcare support
leave (four days of paid leave), spousal leave for childbirth(one day of paid leave), and regular paid leave.
*The number of men who took childcare leave: 18 (consolidated)

Efforts to prevent employees from leaving theirjobs due to childcare and nursing care
J. Front Retailing and Daimaru Matsuzakaya Department
Stores have introduced various childcare and nursing care
support systems that exceed statutory limits so that they
can balance work with childcare and nursing care andcontinue to work with satisfaction.
In 2019, Daimaru Matsuzakaya Department Stores hildcare and nursing care-related systems exceedingC
statutory limits and the number of employees who used
these systems in fiscal 2019 (Daimaru Matsuzakaya Department Stores)▶

SystemDescription

Number of users

Childcare leave

Until the last day of the month when the childenters an elementary school(at the longest until the child reaches two
years of age under law)161

Shorter workhours
for childcare

Until the last day of the month when the childenters an elementary school(for children under three years old under law)

157

Family care leave

Up to a total of one year of leave per subject
family member can be taken consecutively or
separately any number of times(Up to 93 days of leave can be taken
separately up to three times under law)3

Nursing care leave Paid (Unpaid leave is permitted by law)30

introduced full-time work once a week and flexible work sothat employees with shorter working hours for childcare
and nursing care can voluntarily expand their work
opportunities.
*Ratio of employees who returned to work after childcare leave: 89.5%(Daimaru Matsuzakaya Department Stores)

Promotion of telework
Since fiscal 2019, the Group has promoted the use of
telework to improve a work environment aimed at
improving productivity. We have created and promoted a
telework environment by introducing mobile PCs,
smartphones, and video conferencing systems. In order toprevent the spread of COVID-19, the national and local
governments requested companies to reduce the numberof workers in offices and to implement telework. And mostemployees in our administrative divisions were able toswitch to telework smoothly. At the same time, we added
video conferencing systems and made use of group chat tofacilitate smooth communication among employees.
Through telework, employees who were raising children
were able to work while their children took long-term
school leave.
We will continue to build a safe work environment for
employees from the perspective of business continuity andfurther promote the use of telework that leads to improved
labor productivity.

Promotion of health management
The Group promotes thorough implementation ofoccupational health and safety, as well as efforts to maintainand improve the health of employees. To prevent the spreadof COVID-19, we conduct daily temperature checks andother measures to thoroughly manage employee health. In
addition, Daimaru Matsuzakaya Department Storesprovides online interviews by industrial doctors and EAP(Employee Assistance Program) counseling services byexternal specialist organizations.
Integrated Report 202053

Governance▶Corporate GovernanceCorporate Governance54

As a holding company, J. Front Retailing regards thestrengthening of corporate governance as one of the mostimportant management issues in order to ensurecompliance, transparency, objectivity, and soundness of the
management of the Group as a whole and to emphasize
and thoroughly enforce accountability to stakeholders
including customers, shareholders, employees, business
partners, and local communities.
As part of these efforts, we have adopted the Company
with Three Committees (Nomination, Audit andRemuneration Committees) system to futher strengthen
corporate governance by:
1) Strengthening management oversight functions byseparating supervision and execution;2) Clarifying authorities and responsibilities in businessexecution and promoting flexible management;3) Improving the transparency and objectivity ofmanagement; and
4) Building a globally applicable governance system.

Overview of corporate governance system
We are a pure holding company, and in order to speed
up management decisions and clarify management
responsibilities, the authority for the execution of business

operations of operating subsidiaries is delegated to each
operating subsidiary except for matters that are importantto the Groupʼs management.
Our roles and responsibilities as a pure holding company
are as follows:● Establishment of a corporate governance system for theGroup as a whole;● To plan and draft the Group Vision, the Group Mediumterm Business Plan, and the Group Management Policy,
as well as their progress and performance management;● Optimal allocation of the Groupʼs management resources;● Establishment of a risk management system for theentire Group and internal audits;● Decision making on important business execution
matters related to the management of the Group; and● To advise and approve the management policies andstrategies of each operating company and to supervise
and evaluate their progress
We have also established six supervisory units (Management
Strategy Unit, Group Digital Strategy Unit, Affiliated Business
Unit, Financial Strategy Unit, Human Resources Strategy Unit,
and Administration Unit) as our management organizations.
We clarify the roles, responsibilities, and authorities of each
unit to strengthen supervisory functions and enhance theinternal control system of the Group as a whole.

Integrated Report 202055

日本版スチュワード
シップ・コード適用

Evolution of corporate governance▶

Japan ʼ s Stewardship
Code was formulated

2014

Corporate Governance
Code was adopted

2015

Corporate Governance
Code was revised

2016

Started to evaluate theBoard of Directors●Established the Corporate
Governance Guidelines●Formed the GovernanceCommittee●Started
to evaluate
managerial talents●

2017

Studied an optimalorganizational structure●Reviewed criteria for proposals
to the Board of Directors●The Board of Directors
retreat (once a year)●Started
to reducecross-shareholdings●

2018

Voluntarily applied IFRS
Reviewed criteria for proposals
to the Board of Directors●Formulated Officer Remuneration Policy●Added“matters to be
consulted” to the Board agenda●Opened the JFR Business
Management School

Initiative to strengthengroup governance● Revised the Corporate
Governance Guidelines●Response to each company
based on the policy on
exercising voting rights
regarding cross-shareholdings

●

●

●

Company with an Audit & Supervisory Board

2019
Established the Management
Advisory Board
Appointed Outside Director as the
Chairperson of the Audit Committee● Reviewed criteria for proposals to
the Board of Directors●Increased the number of Outside
Directors from 5 to 6●●

Company with Three Committees (Nomination, Audit and Remuneration Committees)

Shareholders Meeting
Governance (oversight) Function

Nomination Committee

Chairperson

Board of Directors
Remuneration Committee

ReportOversight

Execution Control Function

Risk Management Committee

Consultation
Sustainability
Committee

Accounting
Auditor

Audit Committee

Audit

ReportReportCooperation/ Cooperation/
reportreportConsultation

President and Representative
Executive Officer

Audit
Compliance Committee
Consultation

Internal Audit Division

ReportGroup Management Meeting

Audit

Audit

Instruction
Operating Management Strategy Unit Group Digital Strategy Unit Affiliated Business Unit Financial Strategy Unit Human Resources Strategy Unit Administration Unit
Units
Companies in the Group

Board of Directors①B asic roles and responsibilities of the Board of Directors

Directors who have been appointed by shareholders andhave been entrusted with the management of the Company
will fulfill the following roles and responsibilities at theBoard of Directors to realize the Group Vision based on
their fiduciary responsibilities and accountability toshareholders:● Constructive discussions on the Group Vision, the Group
Medium-term Business Plan, the Group Management
Policy, and other basic management policies, as well as
multifaceted and objective deliberations including risk
assessments to indicate the major direction of the Groupmanagement;● Appropriate decision making on the overall policy andplan related to the Group management based on the
direction described above and supervising the progressand results of such plans;● Developing an environment to support aggressive
management for discontinuous growth;● Constructing and developing an internal control system
for the entire Group and supervising the status of its

56

Cooperation/
reportElection/removal

operation;● Supervising conflicts of interest between related parties; and● Supervising the progress of management succession

planning, personnel allocation plans related to
managerial talents, and management training, all ofwhich are delegated to the Nomination Committee,
based on a summary report from the Nomination
Committee② Composition of the Board

Our Board of Directors consists of the appropriate numberof no more than fifteen members as set forth in the Articles
of Incorporation. As of May 28, 2020, the Board of Directors
had 13 members including six independent Outside
Directors. Their term of office is one year.
When nominating candidates for Director, the Board of
Directors ensures diversity by taking into account thebalance of knowledge, experience and abilities of the Board
as a whole. In addition, in the election of Outside Directors,
the Company selects those who possess a high degree of
independence in light of the independence criteria
established by the Company and are highly unlikely tocause conflicts of interest with our shareholders.

Governance

6 Outside Directors

Woman(All are independent Outside Directors)
Ratio of Outside Directors 46%

7 Inside Directors

Board Chair

President and Executive Officer

Non-executive

Executive

More than one third

Ratio of non-executive Directors 69%

Majority③ Major discussions by the Board of Directors

The Board of Directors met 15 times in fiscal 2019 tomainly discuss the following:● Checking the progress of the Medium-term Business
Plan and its issues and countermeasures;● Verifying the rationality of cross-shareholdings;● Initiatives to strengthen IT governance;● ESG initiatives;● Shareholder policy and IR activities;● Basic policy for developing an internal control system; and● Revision of criteria for proposals to the Board of Directors
accompanying the application of IFRS16

The Board of
Directors meetingsand explanations
prior to the Boardof Directors
meetings areprovided online.

transparency and objectivity, the Chairperson of the Committee
is selected from among independent Outside Directors.
The Audit Committee effectively audits whether the executionof duties by Executive Officers and Directors is in compliancewith laws, regulations, and the Articles of Incorporation, and isconducted efficiently in accordance with our Basic Mission
Statement and Group Vision. The Audit Committee also
provides necessary advice and recommendations, as well as
audits the status of the establishment and operation of internal
controls, and prepares audit reports. To ensure the reliability ofaccounting information, the Audit Committee supervises theaccounting auditor and determines the details of proposals forthe election and dismissal of accounting auditors to besubmitted to the Shareholders Meeting.
Outside Directors

Inside Directors

Committee Chair③ Remuneration Committee

The Remuneration Committee consists of three Outside
Directors, the non-executive Chairperson of the Board of
Directors, and the President and Representative Executive
Officer. To ensure transparency and objectivity, theChairperson of the Committee is selected from among
independent Outside Directors.
The Remuneration Committee determines the policy fordecisions on individual remuneration, etc. for the Directors
and Executive Officers of the Company and the officers ofsubsidiaries (directors, executive officers and auditors), andthe content of the individual remuneration of the Directors
and Executive Officers of the Company.
Outside Directors

Nomination Committee, Audit Committee andRemuneration Committee

Inside Directors

Committee Chair① Nomination Committee

The Nomination Committee consists of three Outside
Directors, the non-executive Chairperson of the Board of
Directors, and the President and Representative Executive
Officer. To ensure transparency and objectivity, theChairperson of the Committee is selected from among
independent Outside Directors.
The Nomination Committee determines the agenda for theelection and dismissal of Directors to be submitted to the
Shareholders Meeting and determines the contents of reports
to the Board of Directors with respect to the appointment
and dismissal of Executive Officers, the selection and dismissalof the chairperson and members of each statutory committee.
Outside Directors

Committee Chair

Inside Directors

Board Chair

President andExecutive Officer② Audit Committee

The Audit Committee consists of three Outside Directors
and two full-time non-executive Inside Directors who arethoroughly familiar with internal information in order tomaintain and improve the accuracy of audits. To ensure

Board Chair

President andExecutive Officer

Number of meetings in fiscal 2019 (March 2019 to February 2020)▶

Board ofDirectors

Nomination
Committee

Audit
Committee

Remuneration
Committee

Number of meetings

15

13

15

11

Attendance rate of
Inside Directors

100%

100%

100%

100%

Attendance rate of
Outside Directors

100%

100%

100%

100%

Average time
per meeting

2 hours and 1 hour and 1 hour and50 minutes
29 minutes 3 minutes 51 minutes

Executive sessions
After the conclusion of the Board of Directors meetings,
meetings are held only by Outside Directors to freely
exchange opinions and share information. The Board of
Directors discusses issues that require attention from asupervisory standpoint, such as issues at the meetings of theBoard of Directors and issues that need to be addressed inorder to improve the effectiveness of the Board of Directors(The lead director is Ms. SATO Rieko, an independent Outside
Director). At the request of the lead director, the President
and Representative Executive Officer and the Chairperson of
the Board of Directors also participate in discussions.

Integrated Report 202057

Succession planning
The selection of the President and Representative
Executive Officer is the most important strategic decisionmaking process and we have positioned the formulationand implementation of succession plans (for the next senior
management team) as matters of particular importance interms of management strategy. When selecting successor
candidates, the Nomination Committee, which is comprisedof a majority of Outside Directors, deliberates on theevaluation content of each successor candidate based oninternal data and an audit conducted by a third-party
organization. In this way, the process for selecting successor
candidates is clarified and transparency is ensured. When
deciding a successor, the Board of Directors, based onreports from the Nomination Committee, fulfills its
supervisory role with an eye to realizing the Basic Mission
Statement and the Group Vision.
Regarding the qualities required of successors, under the“Deirable qualities required of JFR managerial talent” in the
Corporate Governance Guidelines, the necessary values,
capabilities, and behavioral traits are clarified in the form of

the five qualities required of an officer:① Strategic mindset; ② Reform-orientd leadership; ③Tenacity to achieve results; ④ Organization development
strenghts; and ⑤ Human resource development strengths
The Nomination Committee shares these principles toensure that the evaluation and development indicators are
consistent and that they are neutrally trained and selected.
Regarding the dismissal of the President and Representative
Executive Officer, the Board of Directors decides the content
of reports deliberated and resolved by the Nomination
Committee, based on the set targets, expected results and theresults of initiatives (business results for each fiscal year, thestatus of execution of strategies, etc.), as well as the status ofachievements of successor candidates selected under the
succession plan resolved by the Nomination Committee. The
Nomination Committee deliberates succession plans on aplanned and ongoing basis to ensure that they take into
account changes in the environment and circumstances
surrounding the Company and the progress of its strategies.
As in the case of the President and Representative Executive
Officer, the Nomination Committee deliberates and resolves
the dismissal of other senior management team members.

Evaluation of the Board of Directors▶

Evaluation
methodBased on a preliminary questionnaire, a third-party organization conducted individual interviews with all Directors (both Inside and Outside), and basedon the report that compiled and analyzed the results of these interviews, the Board of Directors discussed. Recognizing that the framework of theBoard of Directors and the governance system has been established after improvements based on the past four evaluations, in fiscal 2019, theCompany changed its third-party organization and adopted a new perspective with an emphasis on materializing substantive issues.
In light of the roles and responsibilities of the Board of Directors, while considering the balance between new questions and regular questions todetermine continuity, evaluation and analysis are performed so that the responses can be grasped according to the position such as Inside Director,
Outside Director, and committee member.

[Evaluation items]
Evaluation
items

30 items including:● Composition and operation status of the Board of Directors;● Level of discussion materials and explanations of agenda items;● Evaluation of the importance and amount of discussion of agenda

items discussed by the Board of Directors in the past year:● Issues to be overcome in the medium to long term;● Directorʼs expected role;● Effectiveness of the activities of three Committees (Audit, Remuneration,

and Nomination); and● Desirable form of group governanceWith regard to the fifth evaluation of the Board of Directors conducted from October to November 2019, the third-party organization
reported that vigorous discussions were conducted from a diversified perspective by increasing the objectivity of its deliberations under thecurrent composition of the Board of Directors. It was also recognized that the Board of Directors needs to:
Evaluation
results andeﬀorts toaddress
issues, etc.

● Further fulfill the functions of the Audit Committee;● Strengthen the oversight of the progress of business plans; and● Further Improve the quality of its deliberations

In response, we will take the following actions to enhance the effectiveness of the Board of Directors:● Strengthening cooperation after clarifying the roles and functions of the Audit Committee (legality and appropriateness)and the Internal Audit Division (business perspective);● Verifying the consistency of business plans with profits and losses and clarifying the implementation structure and schedule;● Clarifying and deeply discussing the expected roles of each Director in discussions; and● Reflecting the results of deliberations in the execution of business (strengthening PDCA)

Officer remuneration system
In April 2017, we formulated an Officer Remuneration
Policy, which includes the introduction of a stock-based
remuneration system for officers in order to steadily
implement the Medium-term Business Plan toward realizing
the Group Vision. In April 2020, we revised the policy toreflect the promotion of sustainability management and to58

further enhance the content of the policy.
Beginning in fiscal 2020, the Company discloses theamount of each officer's remuneration (including theamount received as remuneration, etc. for an officer of amajor consolidated subsidiary, if any) in the Annual
Securities Reports regardless of whether or not his/her total
consolidated remuneration, etc. exceeds ¥100 million.

Governance

Officer remuneration system▶

1 Policies on determining remuneration for Directors and Executive Oﬃcers

Our officer remuneration system is based on the following basic policies, aiming to achieve the objectives of realizing and promoting
sustainability management (pay for purpose). Furthermore, Daimaru Matsuzakaya Department Stores, our main subsidiary, has adopted thesame basic policies.
● To contribute to the sustainable growth of the Group, the medium- to long-term improvement of corporate value, and be consistent
with our corporate culture;● A highly performance-linked remuneration system that motivates Executive Officers to complete management strategies and businessplans and achieve the target performance of the Company;● Remuneration levels that enable us to secure and retain human resources who have the “desirable managerial talent qualities” required by the Company;● To share awareness of interests with shareholders and heighten awareness of shareholder-focused management; and● Enhanced transparency and objectivity in the remuneration decision process

2 Procedures for determining remuneration for Directors and Executive Oﬃcers

In order to ensure the appropriateness of the level and amount of remuneration and the transparency of the decision-making process, theremuneration amount is decided by a deliberation and resolution of the Remuneration Committee, which consists of a majority of Outside
Directors and is chaired by an Outside Director.
The Remuneration Committee is scheduled to meet at least four times a year and revisions to the officer remuneration system will be
implemented in accordance with the period of the Medium-Term Management Plan.
[Forfeiture of remuneration] (clawback and malus)
Regarding Executive Officersʼ bonuses and stock-based remuneration, in the event that a resolution is passed by the Board of Directors

regarding the post-revision of financial results due to serious accounting errors or improprieties, in the event that there has been a serious
breach of the appointment contract, etc. between the Company and an officer, or in the event that an officer has voluntarily retired for
his/her own reasons during his/her term of office against the will of the Company, the Company may request the forfeiture of the right to
pay or grant remuneration or the refund of remuneration that has already been paid or granted to the officer.

3 Remuneration composition for Executive Oﬃcers and non-executive Directors[Basic remuneration] (monetary remuneration)

Basic remuneration is positioned as a fixed remuneration and its table is determined for each rank (position) according to the size (weight)of each officerʼs responsibilities.
[Performance share] (performance-linked stock-based remuneration)

We issue our shares in conjunction with the consolidated performance achievement rate set forth in the Medium-term Business Plan in orderto achieve sustainable growth of the Group and increase corporate value over the medium to long term. 60% of the total
performance-linked stock-based remuneration is to be issued in a single issuance at the end of the Medium-term Business Plan and theremaining 40% to be issued annually in order to promote management from the perspective of shareholders.
[Restricted stock] (non-performance-linked stock-based remuneration)

In order for non-executive Directors to strengthen our aggressive and defensive governance from a different standpoint from execution as
the representatives of shareholders and to engage in management from a mid- to long-term perspective, we have adopted a system inwhich our shares are issued in a manner that is not linked to performance and the shares are issued upon their retirement from office.
Executive Oﬃcers

Details of performance shares
Basic Remuneration
Bonuses
Performance shares (PS)Profitability

Remuneration, etc. for
Executive Officers

Short Medium
longterm toterm

KPI

Consolidated operating○
profit② Basic earnings per share ○­③ Free cash flows①

Efficiency ④ ROE

Proportion of remuneration by type for Executive Oﬃcers of each rank
【President】
Basic remuneration
38.5%

Bonuses
23.0%

Monetary remuneration
61.5%
Fixed remuneration
38.5%

PS
38.5%
Stock-based remuneration
38.5%

Performance-linked remuneration
61.5%

Bonuses
27.3%

Monetary remuneration
72.7%
Fixed remuneration
45.4%

Evaluation based on the achievement rate oftargets (absolute value)
Evaluation is weighed as 50% for each indicator.
If targets are not achieved, the amount ofstock-based remuneration is reduced by 50%(reduced by 25% if one target is not achieved).

○
○
○
○

Note: KPI stands for Key Performance Indicator.
Note: Short-term targets are the initial forecasts for the relevant fiscal year as
announced in the Consolidated Financial Results each April (IFRS basis).

Calculation method of performance-linked factor
Performance target achievement

Performance-linked factor

150% or more

2.0

50% or more but less than 150%

(Actual results

Less than 50%

0Target – 0.5)

2

Image of changes in performance-linked factor
Factor
2.0【Executive Oﬃcers excluding President】
Basic remuneration
45.4%

­

Methods of use

PS
27.3%

1.0

Stock-based remuneration
27.3%

0

Performance-linked remuneration
54.6%

Note: The above figure represents the case of a bonus for a standard
ranking where the performance achievement rate for stock-based
remuneration was 100%.
Note: The remuneration composition for Directors and Executive Officers at
Daimaru Matsuzakaya Department Stores is the same as that shownfor “Executive Officers excluding President” in the figure above.

0%

50%

100%

150%

Performancetargetachievement

Note: When performance target achievement is less than 50%,
performance-linked factor is 0 (0%), and when performance target
achievement is 150% or more, performance-linked factor is 2.0 (200%).

Non-executive Directors
Basic remuneration
Remuneration, etc. forNon-executive Directors
Restricted stock

Integrated Report 202059

Basic capital policy
We believe that increasing free cash flow and improving
ROE will lead to sustainable growth and the enhancementof corporate value over the medium to long term. To
achieve this, we will promote a capital policy that balances
the “implementation of strategic investments,” the“enhancement of shareholder returns,” and the “expansionof shareholdersʼ equity” that takes into account risk
preparedness. In addition, our basic policy is to procure
funds through interest-bearing debt by taking into accountthe ability to generate free cash flow and the balance ofinterest-bearing debt. We aim to create an optimal capitaland debt structure that takes into account funding
efficiency and the cost of capital. In order to improve free
cash flow and ROE, it is important to implement a “businessstrategy” to increase sales with profitability and a “financial
strategy (including capital policy)” to increase return on
invested capital. At the same time, we believe it is important
to maximize operating profit and continuously improve theoperating margin by intensively allocating management
resources to strengthening core businesses, expanding
business domains, and aggressively developing new
businesses.

Shareholder return policy

Cross-shareholdings② Verification of rationality of holding

The Board of Directors verifies each issue on an annual
basis from both qualitative and quantitative perspectives.
Qualitative verification involves business strategies such as
maintaining smooth and good business relationships andensuring supply chains with client companies and business
partners. Quantitative examinations involve factors such aswhether the return on shareholdings, including relatedtransaction profits and dividends, exceeds the cost ofcapital.

Qualitative
verification

Quantitative
verification

Comprehensive
judgment

To be reduced

Our basic policy is to appropriately return profits toshareholders with a consolidated dividend payout ratio of
30% or more, while maintaining and improving a soundfinancial structure and taking into consideration the level ofprofits, future capital investment, trends in free cash flow,
and other factors, with a view to ensuring stable dividends.
In addition, we will consider acquiring treasury stock fromtime to time with the aim of improving capital efficiency
and implementing a flexible capital policy.

through the examination of the rationality of holding, it isdeemed indispensable for the implementation of theGroupʼs business strategy and will contribute to theenhancement of corporate value over the medium to longterm. For example, in promoting the Urban Dominant
strategy, which is our priority strategy, if requested by local
authorities or companies, we may hold such shares after
thoroughly examining the appropriateness of holding
within the execution of operations from the viewpoint of“coexistence with local communities,” which is one of our
ESG materiality issues. As for such shares already held, if
we judge that there is no rationality of holding them, we
will negotiate with relevant client companies and business
partners and reduce them as appropriate after obtaining
agreement on the method and period of sale.

① Holding policy

In principle, the Group will not newly acquire shares forthe purpose of cross-shareholdings (listed shares held for
purposes other than pure investment excluding shares ofsubsidiaries and associates). However, this is not the case if,

Changes in the number of issues of cross-shareholdings▶(listed shares excluding deemed holdings)(¥100 mn)
150

(No. of issues)

64

Value on the consolidated statementof financial position (market value)
Number of issues held

60

41
119

50

99

40

26

112
86

60

2015

2016

2017

2018

30
20

40
0

60
50

48

100

70

2019

10
0

Rational

Continue to holdNot rational③ Exercising voting rights

When exercising voting rights related to crossshareholdings, we judge whether they contribute to thesustainable growth and the medium- to long-term
enhancement of the corporate value of the company
whose shares we hold and whether they contribute to theGroupʼs sustainable growth and medium- to long-term
enhancement of corporate value. In particular, we formulate
guidelines for making decisions on the exercise of voting
rights for proposals that we believe are of high importancein strengthening corporate governance, such as proposals
related to the corporate governance system (election of
officers), shareholder returns (appropriation of surplus),
and proposals that affect shareholder value (introduction ofanti-takeover measures) and respond in accordance withthese guidelines throughout the Group. When exercising avoting right, if necessary, we engage in dialogue withcompanies whose shares we hold.

GovernanceImprovement of Shareholders Meetings

Disclosure and IR activities

For the purpose of constructive dialogue withshareholders, we send out the Notice of Convocation of
Shareholders Meeting early (at least three weeks before thedate of the Shareholders Meeting) and post the details of
the Notice of Convocation on the websites of financial
instruments exchanges and our website at the earliest
practicable time before the Notice of Convocation is sent toensure sufficient time for shareholders to consider exercising
their voting rights. The Notice of Convocation of the 13th
Shareholders Meeting was disclosed on the websites of thefinancial instruments exchanges and our website before
the Notice of Convocation was sent out in writing and fourweeks prior to the date of the Shareholders Meeting. In
addition, in consideration of the convenience of exercising
voting rights for shareholders including institutional
investors in Japan and overseas, we have introduced an
online system for exercising voting rights and utilize anelectronic voting platform for exercising voting rights.
Furthermore, we have prepared an English translation of
the Notice of Convocation so that foreign shareholders canproperly exercise their voting rights and disclose it on our
website and the electronic voting platform.
At the 13th Shareholders Meeting, we encouraged
shareholders more strongly than before to exercise theirvoting rights over the Internet in order to minimize the riskof the spread of COVID-19 by visiting the meeting venue.
For shareholders unable to attend the meeting, ourpresentations on “progress and results” and “issues to beaddressed” at the Shareholders Meeting were webcast live.

Based on our Basic Mission Statement that we aim atdeveloping the Group by contributing to society at large asa fair and reliable corporation, we promote IR activities withthe aim of enhancing management transparency andhelping our stakeholders including shareholders andinvestors better understand the Company by disclosing
important information about the Company in an accurate,
plain, fair, timely, and appropriate manner in order tomaintain and develop relationships of trust with them. We
disclose important company information to which theTimely Disclosure Rules apply through the TDnet (Timely
Disclosure network) provided by the Tokyo Stock Exchange,
and also post it on our website as soon as possible. Even if
the Timely Disclosure Rules do not apply, we endeavor to
publish information that is deemed to help stakeholders
better understand the Company on our website, throughthe publication of Integrated Reports and other means.
Depending on the nature of the information disclosed, we
disclose information in a timely and appropriate manner byutilizing TDnet, EDINET, Sustainability Reports, our website,and other media. To ensure the fairness of information
disclosure, we prepare and disclose English translations of
the Notices of Convocation of Shareholders Meeting,Integrated Reports, timely disclosure information, financial
results information, Sustainability Reports, and our website.
We publish videos, materials, and Q&A summary texts forfinancial results presentations and ESG presentations, andQ&A summary texts for financial results conference calls assoon as possible on our website in Japanese and English.
We work to enhance communication by holding various
briefings and meetings, responding to day-to-day inquiries
from shareholders and investors as well as providing timely
disclosure and other information through our website andother media. Opinions and requests from shareholders andinvestors are widely shared among the Company andrelevant companies in the Group and used as a reference
for corporate management to increase corporate value.

Live stream on a smartphone

Major dialogue activities with investors in fiscal 2019

▶

Item

Remarks

Financial results presentation for institutional investors andanalysts (financial results and management briefings)

Twice

Webcast in both Japanese and English on our website. The summary of the
Q&A session on the same day was also posted in both Japanese and English

Financial results conference call for institutional investors andanalysts (Q1 and Q3)

Twice

The summary of the Q&A session on the same day was posted in both Japaneseand English on our website

Business strategy presentation for institutional investors andanalystsOnce

ESG presentation for institutional investors and analysts

Once

Webcast in both Japanese and English on our website. The summary of the
Q&A session on the same day was also posted in both Japanese and English

Store tours for institutional investors and analysts

Twice

Tours of the new main building of the Daimaru Shinsaibashi store and new
Shibuya PARCO

Overseas IR

3 times/39
companies

Once each in Europe, North America, and Asia

Conferences organized by securities companies(in Japan and overseas)

5 times/42
companies

4 times in Japan and once overseas

Individual meetings for institutional investors

149 times

Mainly visits to and from us and also conference calls

Briefings for individual investors

11 times

3 times in Tokyo, 4 times in Osaka, and once each in Yokohama, Nagoya, Nara,and Fukuoka

Integrated Report 2020

61

Risk management and complianceof the Group. The Committee, which is chaired by the
President and Representative Executive Officer, formulates
policies for dealing with material incompliance cases andworks closely with the divisions in charge of the promotionof compliance to establish a foundation for the compliancesystem (including the formulation of promotion systems
and promotion plans) and continuously supervise theoperation of the systems to promote compliance with laws
and corporate ethics.

① Risk management

We have established the Risk Management Committee
within the execution structure to manage and respond to
strategic risks from a company-wide perspective. The Risk
Management Committee makes risk-oriented management
decisions with the aim of securing growth opportunities.
The Committee, which is chaired by the President andRepresentative Executive Officer and comprised of the
Senior Executive General Managers of the supervisory units
and the presidents of major operating companies, assesses
various risks, instructs the divisions in charge to takecountermeasures and implement them, and manages theirprogress, utilizing the wide-ranging and specialized
knowledge of the members selected from the supervisory
units. Changes in the business environment are unavoidable
uncertainties for companies, and we consider these
uncertainties, in other words, “risk” to be an “opportunity”
in positive terms and a “threat” in negative terms. We
promote initiatives from the perspective of not only “riskhedging” but also “risk taking” to realize growth. The mostimportant risks for the Group are reflected in the Mediumterm Business Plan as “business risks” and prioritized. In
fiscal 2020, we identified 101 risks related to the Group,and particularly, we respond to COVID-19, which spreads
worldwide, as our highest priority because it is an extremely
significant risk that could affect the Groupʼs business
continuity and business activities after the pandemic comesto an end.

Details of deliberations by the two committees arereported to the Audit Committee on a regular and timely
basis.

JFR Group Compliance Hotline
We have a whistleblowing system that enables all officers
and employees of the Group and all other workers in theGroup (including part-time workers and temporary staff
from suppliers) to notify the Compliance Committee
directly and ask them to correct any compliance-related
problems. The whistleblowing contacts are in place not
only within the Company but also outside the Company (acorporate lawyer). The whistleblowing system strictly
prohibits any disadvantageous treatment of whistleblowers
as well as protects their confidentiality under the Groupʼsinternal company rules.
The JFR Group Compliance Hotline was registered in
March 2020 under the Consumer Affairs Agency's“Whistleblowing Compliance Management System
certification (self-conformity
registration system)” (WCMS
certification).

② Compliance

We have established the Compliance Committee(including a corporate lawyer as a member) in order toappropriately deal with the compliance management issues

Risk management and compliance structure▶

Board of Directors

Audit Committee

President and Representative
Executive Officer

Internal Audit Division

Instruction
and report
Risk Management Committee

Compliance Committee

Divisions in charge of
Divisions in charge of
execution control
the Group compliance
Cooperation

JFR Group
Compliance Hotline
Contact:
In-house/corporate lawyer

Whistleblowing
and answer

Workers including those from suppliers

62

The Group companies

Instruction
and report

Instruction
and report

Audit

Governance

List of the Group risks for fiscal 2020
Outbreak of wars, conflicts, and terrorism triggered by political and militaryconfrontations and religious issues in the world

Success or failure of information disclosure to institutional investors, ESG ratingcompanies, business partners, customers, etc.

Prolonged US-China trade war

Success or failure of governance reforms

Tensions in Asia, including Japan-ROK relations

Success or failure of succession plan

Government-led development of rules for big data and promotion of their use in businessSuccess or failure of group governance

National demand for securing employment opportunities for 70 year olds or older
and strengthening mid-career recruitment

Success or failure of the establishment of internal controls under the Companies Act

Nation-led promotion of policies for a tourism-oriented country

Success or failure of the establishment of J-SOX system accompanying strategic,organizational and system changes, etc.

Signs of the collapse of the asset bubble in Japan and other major countries in the world

Success or failure of risk management process operation

Large-scale economic and financial crisis caused by global political turmoil and its repercussions on Japan

Success or failure of effective IR/SR activities

Slowdown in the domestic economy

Success or failure of effective public relations activities

Changes in the inbound market triggered by the depreciation of the currency,
economic stagnation, and legislation in the home country

Success or failure of cash and deposits and interest-bearing debt management

Continued expansion of income polarization
Rise of new wealthy classes such as the new-rich
Sluggish growth in disposable income of workers
Acceleration of low birthrate, aging population, and prolonged lifespan (population decline)
Return to city centers (concentrated population) and depopulation of rural areas
Increase in single-person households (elderly and younger people)
Increase in dual-income households and single-parent households
Consumption shift from goods to services/experiences
Expanding use of subscription services
Expanding use of smartphones, which drives online shopping
Sign of consumers reviewing brick-and-mortar stores
Continued expansion of convenience consumption with an emphasis on accessibility
Sign of rising premium consumption to pay for their favorite value in dual-income households
Diversification of payment means due to the development of cashless payment
Advanced big data analysis and marketing using AI
Improvement of organizational productivity with RPA
Development of circular economy
Development of the sharing economy
Expanding secondary distribution business opportunities to respond to the reuse market
Emergence of new store formats through practical application of 5G and evolution of VR/AR/MR
Improvement of customer orientation and success or failure of response to market changes
Success or failure of penetration of the Mission Statement and Vision
Success or failure of business portfolio restructuring
Success or failure of commercialization of new businesses
Maturity of existing businesses
Disappearance of existing business partners
Concentration on specific markets
Success or failure of strategic investment based on investment criteria
Delays in deciding to revive or withdraw from unprofitable businesses
Growing momentum for industry restructuring across industries and businesses
Success or failure of overseas strategies in anticipation of shrinking domestic market
Success or failure in responding to a hostile takeover
Success or failure in responding to diversifying employment patterns and recruitment
Success or failure in responding to an increase in minimum wage levels andpersonnel acquisition costs

Success or failure of the management of rating fluctuations and financing
Changes in financial account balance
Exchange rate fluctuations
Changes in stock price sentiment
Success or failure of optimal capital structure considerations
Success or failure of preparation of financial statements that are free from fraud and error
Success or failure of timely disclosure of financial statements
Impairment of assets (including goodwill)
Success or failure of compliance with tax reform and new accounting standards
Delays in the implementation of the business continuity plan
Delays in initial response to disasters and accidents
Inadequate public relations in the event of an emergency
Inadequacies in safety management of buildings and facilities
Collapse and destruction of store facilities due to disasters
Shutdown of social infrastructure due to disasters and extreme weather
Leakage of harmful substances (CFCs, PCBs, etc.) and soil contamination and generation of asbestos
Accidents such as fires and electric leaks, and equipment failures
Epidemics and outbreaks of infectious diseases
Occurrence of injuries and accidents (caused/suffered) at stores
Food poisoning and other health hazards at stores
Cyber attacks from outside and system failures
Dependence on specific vendors and machines, centralization of system bases
Malicious or careless internal leakage of personal information
Inadequate physical and mental health management of employees
Inadequate management of working hours
Inadequate working environment for foreign workers
Inadequate responses to equal pay for equal work
Improper contracting, outsourcing, and worker dispatching
Failure to operate the retirement benefit and pension systems
Transactions with anti-social forces, transactions in violation of the Anti-Monopoly Act, Subcontract Act, etc.
Illegal or unlawful acts by officers and employees
Leakage of confidential and insider information
Delays in responding to new laws and regulations and inadequacies in reporting and licensing
Infringement of intellectual property rights (caused/suffered)
Violations of consumer-related laws such as incorrect or false labeling

Success or failure in acquiring and developing human resources with expertise such as IT

Inadequacies in the compliance system such as the dilution of ethics

Solid corporate culture

Deficiencies in product procurement cost management

Aging employees

Deficiencies in product and service quality control management such as compliance with the PL Act

Success or failure of management to address environmental issues (CO2 reduction, waste plastic, etc.)

Deficiencies in logistics service quality control management

Success or failure of management to address social issues (human rights issues, work-life balance, etc.)

Deficiencies in contract storage and renewal operations

Success or failure in responding to global ESG demands

Bankruptcy of business partners

Integrated Report 202063Governance▶Interview with Outside Director
primitive questions from Outside
Directors seriously. Outside Directors
are explained well prior to the Boardof Directors meetings and issues
presented by Outside Directors are
duly fed back to the Board of Directors
meetings and the meetings start fromthem. When I told some othercompanies about this system, theysaid it was very helpful.
What impressed me in the past
Board of Directors meetings was thediscussion about the Medium-term
Business Plan. The medium-term planthat started in 2017 had two major
strategies. I think the Urban Dominant
strategy as the first one works well. I
think it worked well because it was
implemented by expanding theirfamiliar fields, mainly the department
store business, in each area. However,
the other Multi Service Retailer is toenter into new fields beyond theframework of retail. Its direction is
not wrong but I cannot say they haveachieved it.

SATO Rieko Interview with Outside Director
Apr 1984

Biography

Maybe it does not work because
their idea is based on the conventional
way of the industry. For example, inthe current COVID-19 era, moving

Registered as attorney at law

Aug 1989 Shearman & Sterling LLP

products is a bottleneck finally.

Jul 1998

Partner of Ishii Law Office (present)

Jun 2004

External Audit & Supervisory Board Member of Ajinomoto Co., Inc.

Products cannot reach customers

Jun 2015

Outside Director of The Dai-ichi Life Insurance Company, Limited

unless moved. How will they resolve

Oct 2016

Outside Director of Dai-ichi Life Holdings, Inc. (Audit & Supervisory Committee Member) (present)

it? If they sell online to customers

May 2018 Outside Director of J. Front Retailing Co., Ltd. (present)

who are difficult to visit physicalMay 2019 Director of Daimaru Matsuzakaya Department Stores Co. Ltd. (present)
Jun 2020

stores, sales staff can explain and sellOutside Director (Audit & Supervisory Board Member) of NTT Data Corporation (present)
Outside Audit & Supervisory Board Member of Mitsubishi Corporation (present)

online. And ultimately, it may begood if they can measure customers
and customers can try on clothes
online. If they all step back from theSincere efforts for governanceDue to the COVID-19 pandemic,

64

involved. What no one expected

department store and think with suchactually occurred. In this sense, we

idea, they will be able to find various

face a very difficult situation.

needs and provide products andalmost all companies suffer a decrease

I think the Companyʼs governancein sales and profits. I think few

is quite good in general. I feel it hascompanies will be able to achieve a

more

V-shaped recovery in this situation.

including the Board of Directors

And how outside directors will bemeetings to engage with Outside

involved is an important governanceDirectors

otherWith regard to the speed ofchallenge. Many companies identified

companies. Not only a system is in

execution, I feel companies witha pandemic as risk but they did notplace but also people concerned

legacy are alike. I think the past

think it would occur when they are

address it sincerely and answer evensuccesses

opportunities

compared

and

to

time

services that please customers.

Let go of past successes andbe flexible

or

successful

businessGovernancemodels cause a delay and hamper.
Concerning the problem of thephysical stores without something tothings, we can find what is not stillcompeteenough and what to do.

in

e-commerce.

Only

speed of execution, for example,

physical stores are not strength. They

For example, when considering

seeing the process of the meeting

become strength only by operating

M&A, we should start with a familiar

when the department store tries

e-commerce.

one, not a large one. If they aim tosomething, they seem to spend much

They do not want to take a risk andbecome a Multi Service Retailer, theyeffort carefully preparing detailed andlack flexible thinking. It may be

can make a difference by startingeasy-to-understandmaterials

amendingItandbecause they have long succeeded aswith considering customer needs. I

certainly

a department store. When I was athink it will be better to invest small

important. However, I think it will bechild, the department store that I

amount firstly, and then acquire

better if the Company has a culture

visited with my parents was like aknow-how or grow it big. I think thethat encourages specific challenges“dreamland” that carries everything

first step should be alliance andand actions. In some cases, they doincluding toys and clothes and has

investment. The Company cannot

not seem to take action even after

restaurants and an amusement park

become a manufacturer, but if they

thinking well.

on the top. However, the times havefind a D-to-C business, they will get

them.

is

For example, one of the problems

greatly changed. Due to these pastan idea like a manufacturer byis the ageing of good customers

successes, I feel their intentions toinvesting in it. By returning to theincluding gaisho customers of theprovide products and services acrossstarting point of the Company thatdepartment store. Therefore, I think it

the board remain strong. They should

started with kimono fabric, foundwill be good to more widely takerecognize that customer values arevarious things and developed as aorders online. However, they close

more increasingly changing than they

department store, I think they can

their ears to me saying they alreadythink. Past successes impede flexible

provide various products and services.

do similar things. Outside Directors

thinking. I think it is a major factor.

Concerning the new Medium-term
Businesshave obviously different perspectives
from people of the department store.
And in fact, it is sometimes frustrating

Seeing execution
broader perspective

from

a

Plan,

which

is

being

formulated, I expect the business thatmakes good use of e-commerce andphysical stores. We may have tothat there is a gap in discussions andthat it is not understood. Needless to

I think Outside Directors also have a

expect the impact of the COVID-19

say, we discuss to enhance corporaterole as a coach. The present Outsidecrisis will continue for about twovalue, not to blame them. I would like

Directors are from various fields andyears and we have to expect that thethem to just accept such perspective.

selected in a very balanced manner.

main consumption channel will be

I think they can try various ways

Through an objective perspective, I

e-commerce. Conveniently locatedonline, and if it does not work, they

can see what is not enough and what

physical stores will not perform well

can try another. When I told them to

is too much. When I tell them they

unless e-commerce is improved. I

try anyway, they listed the reasons

had better do something, sometimes

think the idea of “Multi Service

why they will not try. They think it isthey follow my advice promptly andRetailer” is excellent. So I hope they

not a department store unless itother times they do not do so even if

will think flexibly outside of theprovides all possible services or that a

I tell them repeatedly. I think it is the

traditional

business

category

department store must provide all

greatest problem.

department

store,

starting

possible services. They say they think

It is important to stand back to seeof customers hard. It may have beenthings. As I have no experience ofgood in the past. But if it takes time,

management and do not know how

it is not good now. Now it is lighter,

execution is conducted actually, I

shorter and changing quickly. So-

consciously take a step or a half step

called“disruptors”

jumpback to see things from a broader

without thinking of past constraints.

perspective. I try not to step into

It is obvious that they cannot defeat

execution too much but to see both

disruptors if they compete with them

what is not enough and what is good

only with tradition. Tradition andas objectively as possible. If seeing

conveniently located physical stores

only within execution, it is highly

are certainly their strength. However,likely to become short-sighted. So

they cannot take advantage ofwhen taking a step back to see

lightlyofwithconsidering what customers need.

Integrated Report 2020

65

Management

Governance▶Management(as of May 28, 2020)

Directors

YAMAMOTO Ryoichi

TSUTSUMI Hiroyuki

MURATA Soichi

ISHII Yasuo

Number of the Companyʼs shares held: 89,412

Number of the Companyʼs shares held: 17,298
Number of other shares as stock-based remuneration not yet granted：11,710

Number of the Companyʼs shares held: 15,810

Outside Director
Number of the Companyʼs shares held: 3,600
Number of other shares as stock-based remuneration not yet granted：3,866

Chairperson of Board of Directors
Nomination Committee Member
Remuneration Committee Member

Audit Committee Member

Audit Committee Member

Chairperson of Nomination Committee
Remuneration Committee Member

Apr 1973 Joined The Daimaru, Inc.
May 2003 President and COO and General Manager ofDepartment Store Operations of Group Headquartersof the same company
Sep 2007 Director and in charge of Sales Reform and Out-ofStore Sales Reform of J. Front Retailing Co., Ltd.
Executive General Manager of Department StoreOperations Headquarters and Executive General
Manager of Planning Office for New Umeda Store of
Head Office of The Daimaru, Inc.
Director of Matsuzakaya Co., Ltd.
Mar 2008 Executive General Manager of Sales Headquarters of
Head Office of The Daimaru, Inc.
Mar 2010 President and Representative Director of Daimaru
Matsuzakaya Department Stores Co. Ltd.
Sep 2012 President and Representative Director of the same
company and President and Representative Director of
Daimaru Matsuzakaya Sales Associates Co. Ltd.
Apr 2013 President and Representative Director of J. Front
Retailing Co., Ltd.
May 2017 Director, President and Representative Executive Officerof the same company
May 2020 Director and Chairperson of Board of Directors of thesame company (present)

Apr 1980 Joined The Daimaru, Inc.
Mar 1993 General Manager of Accounting Division of Hong Kong
Daimaru Limited
Mar 2001 General Manager of Finance Headquarters of The
Daimaru, Inc.
Sep 2007 General Manager of Finance Division of Administration
Unit of J. Front Retailing Co., Ltd.
Mar 2010 General Manager of Finance Division of Administration
Unit of Daimaru Matsuzakaya Department Stores Co.
Ltd.
May 2013 Executive Officer and Senior General Manager ofFinance Division of Administration Unit of J. Front
Retailing Co., Ltd.
Mar 2016 Senior General Manager of Finance and Accounting of
Financial Strategy Unit of the same company
May 2017 Director of the same company (present)
Audit & Supervisory Member of Daimaru Matsuzakaya
Department Stores Co. Ltd. (present)

Apr 1980 Joined The Daimaru, Inc.
Mar 2000 Senior Manager of Menʼs Wear & Accessory Division of
Osaka Umeda Store of the same company
Sep 2002 Senior Manager of Business Planning Department of
Business Planning & CS Promotion Division of Osaka
Umeda Store of the same company
Jan 2005 Deputy General Manager of Osaka Umeda Store of thesame company
Jan 2006 Deputy General Manager of Osaka Umeda Store andGeneral Manager of Planning Office for New Umeda
Store of Head Office of the same company
Jan 2010 Executive Store Manager of Osaka Umeda of the same
company
May 2010 Corporate Officer and Executive Store Manager of
Daimaru Osaka Umeda of Daimaru Matsuzakaya
Department Stores Co. Ltd.
Apr 2013 Corporate Executive Officer, Executive General
Manager of Sales & Marketing Headquarters andSenior General Manager of Merchandising Strategy
Promotion Unit of the same company
May 2013 Director and Corporate Executive Officer of the same
company
May 2017 Managing Executive Officer, Senior Executive General
Manager of Administration Unit and in charge ofCompliance of J. Front Retailing Co., Ltd.
May 2019 Director of the same company (present)【Reasons for appointment】He has long-standing overseas work experience and possesses
insight based on his abundant experience in the field of global corporate management
outside the retail industry, such as special familiarity with business development in overseas
countries and the Company expects him to reflect them in the management of the Group.

Apr 1970
Jun 2000
Jan 2001
Mar 2003
Jun 2003
Jun 2004
Apr 2005
Jun 2008
Jun 2011
Jun 2013
May 2015

May 2017
May 2018
May 2020

66

Joined Yamanouchi Pharmaceutical Co., Ltd.
Director of the Board and Director of Ethical Products
Marketing Department of Sales & Marketing Division of
the same company
Director of the Board of the same company and
Chairman of Yamanouchi Europe B. V.
Director of the Board of Yamanouchi PharmaceuticalCo., Ltd. and Chairman of Yamanouchi U.K. Limited
and Chairman of Yamanouchi Europe B. V.
Managing Director of the Board of Yamanouchi
Pharmaceutical Co., Ltd.
Senior Corporate Executive of the same company
Senior Corporate Executive of Astellas Pharma Inc. andChairman & CEO of Astellas Pharma Europe Ltd.
Executive Vice President and Representative Director of
Astellas Pharma Inc.
Vice Deputy Chairman and Representative Director of
the same company
Retired from the office of Vice Deputy Chairman and
Representative Director of the same company
Outside Audit & Supervisory Board Member of J. Front
Retailing Co., Ltd.
Audit & Supervisory Board Member of Daimaru
Matsuzakaya Department Stores Co. Ltd.
Outside Director of J. Front Retailing Co., Ltd. (present)
Director of Daimaru Matsuzakaya Department Stores
Co. Ltd. (present)
Director of Parco Co., Ltd. (present)

NISHIKAWA Koichiro

UCHIDA Akira

SATO Rieko

SEKI Tadayuki

Outside Director
Number of the Companyʼs shares held: 1,800
Number of other shares as stock-based remuneration not yet granted：3,866

Outside Director
Number of the Companyʼs shares held: 1,500

Outside Director
Number of the Companyʼs shares held: 800
Number of other shares as stock-based remuneration not yet granted：1,933

Outside Director

Chairperson of Audit Committee

Chairperson of Remuneration Committee
Nomination Committee Member

Audit Committee Member

Audit Committee Member【Reasons for appointment】He has useful insight even with respect to financial
matters from his practical experience in business alliances, M&A, businessreforms, and his involvement in numerous important international negotiations
and the Company expects him to reflect them in the management of the Group.

【Reasons for appointment】He has broad experience and knowledge as the person
responsible for management planning, IR and finance and accounting divisions. In addition, hepossesses a high level of expertise in the fields of corporate governance and ESG management
and the Company expects him to reflect them in the management of the Group.

Apr 1970 Joined Hitachi, Ltd.
Aug 1995 Vice President of Hitachi America, Ltd.
Jun 2001 Managing Officer and General Manager of Global
Business Development Division of Hitachi, Ltd.
Apr 2003 Manager of Business Development Division of the same
company
Jun 2003 Executive Officer and Manager of Business
Development Division of the same company
Jan 2006 Vice President and Executive Officer in charge ofBusiness Development of the same company
Apr 2007 Senior Vice President and Executive Officer in charge ofBusiness Development of the same company
Apr 2010 Senior Vice President and Executive Officer of Hitachi
Cable, Ltd.
Apr 2012 Senior Advisor of Hitachi Research InstituteMar 2014 Outside Director of Kyowa Hakko Kirin Co., Ltd.
May 2015 Outside Audit & Supervisory Board Member of J. Front
Retailing Co., Ltd.
Audit & Supervisory Board Member of Daimaru
Matsuzakaya Department Stores Co. Ltd.
May 2017 Outside Director of J. Front Retailing Co., Ltd. (present)
May 2018 Director of Daimaru Matsuzakaya Department Stores
Co. Ltd.

Apr 1975
Jun 1996
Jun 2000【Reasons for appointment】She has abundant experience as an outside
director and outside audit & supervisory board member at other companies, inaddition to having made a career in handling many cases with in-depth andspecialized knowledge as an attorney at law specializing in corporate legal affairs
and the Company expects her to reflect them in the management of the Group.

【Reasons for appointment】He was involved in international business management
and risk management at a general trading company for many years, and as CFO, he hasboth abundant experience and highly specialized knowledge in relation to finance andaccounting. He also has wide-ranging insights derived from roles as Outside Directorand Audit & Supervisory Board Member at multiple companies, including Parco Co.,
Ltd. and the Company expects him to reflect them in the management of the Group.

Joined Toray Industries, Inc.
Executive Vice President of Toray Industries (America), Inc.
General Manager on Special Assignment of Corporate
Strategic Planning Division 1, General Manager on
Special Assignment of Corporate Communications
Department of Toray Industries, Inc.
Jun 2004 Counsellor of Corporate Strategic Planning Division
and Counsellor of Investor Relations Department of thesame company
Jun 2005 Member of the Board, General Manager of Financeand Controllerʼs Division of the same company
President of Toray Holding (USA), Inc.
Jun 2009 Senior Vice President (Member of the Board), General Manager
of Finance and Controllerʼs Division of Toray Industries, Inc.
President of Toray Holding (USA), Inc.
Jun 2012 Senior Vice President (Member of the Board) in chargeof CSR; General Manager of General Administrationand Legal Division, Investor Relations Department,
Corporate Communications Department andAdvertising Department; and General Manager ofTokyo Head Office of Toray Industries, Inc.
Jun 2016 Adviser of the same company
Mar 2019 Retired from the office of Adviser of the same company
May 2019 Outside Director of J. Front Retailing Co., Ltd. (present)
Jun 2019 Outside Director of Yokogawa Electric Corporation (present)
May 2020 Director of Daimaru Matsuzakaya Department Stores Co. Ltd.
(present)*The numbers of the Companyʼs shares held by Directors are as of February 29, 2020.

Apr 1984
Aug 1989
Jul 1998
Jun 2004

Registered as attorney at law
Shearman & Sterling LLP
Partner of Ishii Law Office (present)
External Audit & Supervisory Board Member of
Ajinomoto Co., Inc.
Jun 2012 Outside Corporate Auditor of NTT Data Corporation
Jun 2015 Outside Director of The Dai-ichi Life Insurance
Company, Limited
Oct 2016 Outside Director of Dai-ichi Life Holdings, Inc. (Audit &Supervisory Committee Member) (present)
May 2018 Outside Director of J. Front Retailing Co., Ltd. (present)
May 2019 Director of Daimaru Matsuzakaya Department Stores
Co. Ltd. (present)
Jun 2020 Outside Director of NTT Data Corporation (Audit andSupervisory Committee member) (present)
Outside Audit & Supervisory Board Member of
Mitsubishi Corporation (present)

Apr 1973
Jun 1998

Joined Itochu Corporation
General Manager of Finance Division of Itochu
International Inc. (Stationed in New York)Jun 2004 Executive Officer and CFO of Food Company of Itochu Corporation
Apr 2007 Managing Executive Officer and General Manager ofFinance Division of the same company
Jun 2009 Representative Director, Managing Director, Chief Officer for Finance,
Accounting, Risk Management and CFO of the same company
Apr 2010 Representative Director and Senior Managing Executive
Officer of the same company
May 2011 Representative Director, Senior Managing Executive
Officer and CFO of the same company
Apr 2013 Representative Director, Executive Vice President and
CFO of the same company
Apr 2014 Representative Director, Executive Vice President, Executive
Advisory Officer, CFO and CAO of the same company
Apr 2015 Adviser of the same company
May 2016 External Director of Parco Co., Ltd.
Jun 2016 Outside Director of Nippon Valqua Industries, Ltd.
(present Valqua, Ltd.) (present)
Apr 2017 Advisory Member of Itochu Corporation (present)
Jun 2017 Outside Director of JSR Corporation (present)
Jul 2017 Outside Statutory Auditor of Asahi Mutual Life Insurance
Company (present)
May 2020 Outside Director of J. Front Retailing Co., Ltd. (present)Governance

Executive Officers
YOSHIMOTO Tatsuya
President and Representative Executive Officer

SAWADA TaroYAGO Natsunosuke

YOSHIMOTO Tatsuya

SAWADA Taro

Outside Director

Number of the Companyʼs shares held: 61,065

Number of the Companyʼs shares held: 17,747

Nomination Committee Member
Remuneration Committee Member

President and Representative Executive Officer
Nomination Committee Member
Remuneration Committee Member

Senior Managing Executive Officer【Reasons for appointment】He has been involved in top-level company
management for many years and he has abundant experience in strengthening
financial bases and in compliance management as well as highly specialized
knowledge of internal control and corporate governance. Accordingly, theCompany expects him to reflect them in the management of the Group.

Apr 1979 Joined The Daimaru, Inc.
Mar 2000 Senior Manager of Preparatory Office for Opening
Sapporo Store of Planning Office for Sapporo Store of
Head Office of the same company
Jan 2008 General Manager of Tokyo Store of the same company
May 2008 Corporate Officer and General Manager of Tokyo Storeof the same company
Jan 2010 Corporate Officer, General Manager of Sales Planning
Promotion Division and General Manager of Marketing
Planning Promotion Division of Department Stores
Coordination Division of J. Front Retailing Co., Ltd.
Mar 2010 Corporate Officer and Senior General Manager ofManagement Planning Division of Daimaru
Matsuzakaya Department Stores Co. Ltd.
May 2012 Director and Corporate Officer of the same company
Apr 2013 President and Representative Director of the same
company and President and Representative Director of
Daimaru Matsuzakaya Sales Associates Co. Ltd.
May 2013 Director of J. Front Retailing Co., Ltd.
May 2017 Representative Managing Executive Officer of the same
company
May 2020 President and Representative Executive Officer of thesame company (present)

Apr 1983
Jun 2004

Representative Managing Executive Officer
President and Representative Director of Daimaru
Matsuzakaya Department Stores Co. Ltd.
President and Representative Director of Daimaru
Matsuzakaya Sales Associates Co. Ltd.

MAKIYAMA Kozo

Apr 1977
Jun 2002
Apr 2004

Joined Ebara Corporation
Executive Officer of the same company
Senior Executive Officer and Group Executive of Precision
Machinery Group of the same company, Representative Director
and Chairman of Ebara Precision Machinery Europe GmbH,
Representative Director and Chairman of Ebara Technologies
Inc. and Chairman of Ebara Precision Machinery Shanghai Inc.
Jun 2004 Director of Ebara Corporation
Apr 2005 Director of the same company and Chairman of Ebara
Precision Machinery Taiwan Inc.
Jun 2005 Director of Ebara Corporation, President of Precision Machinery
Company and General Manager of Fujisawa Operation
Apr 2006 Director and Managing Executive Officer of Ebara Corporation
President of Precision Machinery Company
Apr 2007 President and Representative Director of Ebara Corporation
May 2007 President and Representative Director and General Manager ofInternal Control Promotion Department of the same company
Jul 2009 President and Representative Director and General Manager
of Internal Control Department of the same company
Apr 2013 Chairman and Director of the same company
Oct 2017 Representative Director of The Ebara Hatakeyama
Memorial Foundation (present)
Mar 2019 Retired from the office of Chairman and Director of
Ebara Corporation
Jun 2019 Outside Director of Subaru Corporation (present)
May 2020 Outside Director of J. Front Retailing Co., Ltd. (present)

Mar 2010
Jan 2011
May 2011
May 2012
Sep 2015
Jul 2016
Mar 2017
May 2017
May 2018

Mar 2019
May 2020

Joined The Daimaru, Inc.
Department Manager of Sales Promotion Departmentof Sales Planning & CS Promotion Division of KobeStore of the same company
Division Manager of Management Planning Division of
Daimaru Matsuzakaya Department Stores Co. Ltd.
Executive Store Manager of Daimaru Kobe of the same company
Corporate Officer of the same company
Executive Store Manager of Daimaru Osaka
Shinsaibashi of the same company
Executive Store Manager of Daimaru Osaka Shinsaibashi
and Executive General Manager of Shinsaibashi New
Store Planning Office of the same company
Executive General Manager of Management Planning
Unit of the same company
Executive General Manager of Management Planning
Unit and Executive General Manager of FutureStandard Laboratory of the same company
Director and Managing Executive Officer of the same company
Director and Managing Executive Officer, Senior Executive
General Manager of Management Strategy Unit and in
charge of Risk Management of J. Front Retailing Co., Ltd.
Director of Daimaru Matsuzakaya Department Stores Co. Ltd.
Director of Parco Co., Ltd.
Senior General Manager of New Business Division of J.
Front Co., Ltd.
Director and Senior Managing Executive Officer of thesame company (present)
President and Representative Director of Daimaru
Matsuzakaya Department Stores Co. Ltd. (present)
President and Representative Director of Daimaru
Matsuzakaya Sales Associates Co. Ltd. (present)

Senior Managing Executive Officer
Representative Director, President andExecutive Officer of Parco Co., Ltd.

WAKABAYASHI Hayato
Managing Executive Officer
Senior Executive General Manager of Financial
Strategy Unit
Director of Parco Co., Ltd.

HIRANO Hidekazu
Managing Executive Officer
Senior Executive General Manager of Management
Strategy Unit and in charge of Risk Management
Director of Daimaru Matsuzakaya Department
Stores Co. Ltd.

YUNOKI Kazuyo
Managing Executive Officer
Senior Executive General Manager of Affiliated Business Unit

ARISAWA Hisashi
Managing Executive Officer
Senior Executive General Manager of
Human Resources Unit and Administration
Unit and in charge of Compliance

IMAZU Takahiro
Executive Officer
Senior General Manager of Management Planning
Division, Group Communications Division, and New
Business Division of Management Strategy Unit

NAKAYAMA Takashi

MAKIYAMA Kozo

WAKABAYASHI Hayato

Number of the Companyʼs shares held: 20,700

Number of the Companyʼs shares held: 9,647

Senior Managing Executive Officer

Managing Executive Officer

Apr 1981 Joined Parco Co., Ltd.
Mar 2004 Executive Officer and Executive General Manager ofStore Operation Division of the same company
Mar 2007 Managing Executive Officer and Executive General
Manager of Store Management Division of the same
company
Mar 2008 Senior Executive Officer, Senior Executive General
Manager of Store Operation Headquarters andExecutive General Manager of Store Management
Division of the same company
May 2008 Director and Senior Executive Officer of the same
company
Mar 2009 Supervisor of Store Operation Division of the same
company
Mar 2010 In charge of Store Management of the same company
Mar 2011 In charge of Business Management of the same
company
May 2011 Director, President and Representative Executive Officerof the same company
May 2013 Director of J. Front Retailing Co., Ltd. (present)
May 2017 Managing Executive Officer of the same company
May 2020 Senior Managing Executive Officer of same company(present)
Representative Director, President and Executive Officer
of Parco Co., Ltd. (present)

Apr 1985
Apr 1998
Apr 2007
Feb 2009
Jul 2013
May 2015
Sep 2015
Mar 2016
May 2016
Mar 2017
May 2017
May 2018
May 2020

Joined Matsushita Electric Industrial Co., Ltd. (present
Panasonic Corporation)
President of Panasonic Financial Center Malaysia Co.,Ltd.
Director and Chief Executive Officer of Matsushita
Electric (China) Finance Limited
Finance Planning Team Leader (Manager) of
Headquarters Finance & IR Group of Panasonic
Corporation
General Manager of Finance & IR Group of Corporate
Strategy Division and Finance Planning Team Leader(Director) of Panasonic Corporation
Joined J. Front Retailing Co., Ltd.
In charge of Finance Policy of Administration Unit of
the same company
Executive Officer and in charge of Financial Strategy
and Policy of Administration Unit of the same company
Senior Executive General Manager of Financial Strategy
Unit (present) and in charge of Finance Policy of thesame company
Director of the same company (present)
In charge of Financing and Finance Policy of the same
company
Managing Executive Officer (present) of the same
company
Senior General Manager of Financing and Finance
Policy Division of the same company
Director of Parco Co., Ltd. (present)

Executive Officer
Senior Executive General Manager of Group Digital Strategy
Unit and Senior General Manager of Digital Promotion Division

IWATA Yoshimi
Executive Officer
Senior General Manager of Budget and Management
Support Division of Financial Strategy Unit

NINOBE Mamoru
Executive Officer
President and Representative Director of JFR Card Co., Ltd.

KONDO Yasuhiko
Executive Officer
President and Representative Director of J. Front Design & Construction Co., Ltd.

ONO Keiichi
Executive Officer
President and Representative Director of Dimplesʼ Co., Ltd.

Integrated Report 2020

67

Data Section▶10-year Data (Financial/Non-financial)

10-year Data (Financial/Non-financial)

JGAAP

Millions of yen (except where otherwise indicated)

FY2010FY2011FY2012FY2013Financial data

Net sales / Gross sales

950,102

941,415

1,092,756

ー

ー

ー

ー

Gross profit

229,588

226,646

245,615

244,130

SGA

209,265

205,052

214,757

202,313

ー

ー

ー

ー

Operating profit

20,323

21,59430,857

41,816

Ordinary profit / Profit before tax

21,092

22,941

32,20240,502

Profit / Profit attributable to owners of parent

8,862

18,804

12,18331,568

Total assets

775,029

767,543

1,009,165

998,730

Equity / Equity attributable to owners of parent

318,033

332,917341,318

370,173

Interest-bearing liabilities

108,658

106,025

213,085

187,950

Cash flows from operating activities

21,27024,36526,02537,532

Cash flows from investing activities(8,432)(26,781)(73,977)(8,858)Cash flows from financing activities(23,128)(6,872)58,275(32,027)

Capital expenditures

20,02019,246

19,03852,758Depreciation (including cost)

13,61013,347

16,482

17,698− / Revenue

Business profit

1,146,319

Per share information [Yen]*1

Earnings per share (EPS) / Basic earnings per share

33.53

71.15

46.11

119.55

1,203.24

1,259.60

1,292.36

1,402.53

14.00

16.00

18.00

22.00

Ratio of gross profit to net sales / Ratio of gross profit to revenue

24.16

24.08

22.48

21.30

Ratio of SGA to net sales / Ratio of SGA to revenue

22.0

21.8

19.7

17.6

Ratio of operating profit to net sales / Ratio of operating profit to revenue

2.1

2.3

2.8

3.6

Return on equity (ROE) / Return on equity attributable to owners of parent (ROE)

2.8

5.8

3.6

8.9

Return on assets (ROA) / Return on assets (ROA)

2.6

2.8

3.5

4.2

Return on investment (ROI) / Return on investment (ROI)

4.9

5.3

6.5

7.3

Equity ratio / Ratio of equity attributable to owners of parent

41.0

43.4

33.8

37.1

Dividend payout ratio

41.8

22.5

39.0

18.4

Number of employees (consolidated) [People]

14,307

13,413

14,838

11,561

Ratio of female employees (consolidated) [％]

ー

ー

ー

ー

Ratio of female employees in management positions (consolidated) [％]*2

ー

ー

ー

ー

Employee turnover rate (consolidated) [％]*3

ー

ー

ー

ー

Post-retirement re-employment rate (consolidated) [％]

ー

ー

ー

ー

549,739

573,323569,137

543,785

Book value per share (BPS) / Equity attributable to owners of parent per share
Dividends per share
Financial indicators [%]Non-financial indicators

Department store sales floor area (directly managed stores) [㎡]

*1
*2
*3

68

*4

Parco sales floor area [㎡]454,000

443,000

442,600

442,600

Customer traffic (Daimaru Matsuzakaya) [1,000 people]

224,242

236,876

246,764

237,647

Average spend per customer (Daimaru Matsuzakaya) [Yen]

3,842

3,797

3,838

4,107

Number of cards issued by Daimaru Matsuzakaya [1,000 cards]

4,056

4,365

4,580

4,659

Number of holders of cards issued by Parco [1,000 people]

1,618

1,612

1,614

1,643

GHG (CO2) emissions (consolidated) [t-CO2【] Scope 1, 2】*4

ー

ー

ー

ー

GHG (CO2) emissions (consolidated) [t-CO2【] Scope 3】*5

ー

ー

ー

ー

Energy consumption (consolidated) crude oil equivalent [kl]【Scope 1, 2】*4

ー

ー

ー

ー

Packaging material consumption (Daimaru Matsuzakaya) [t]*6

2,574

2,627

2,669

2,978

Waste disposal (Daimaru Matsuzakaya) [t]*7

10,803

11,004

10,797

10,456

Food waste disposal (Daimaru Matsuzakaya) [t]*8

2,517

2,327

2,109

1,955

The Companyʼs common shares were consolidated at the ratio of one share for every two shares as of September 1, 2014.
Per share information has been calculated as if this consolidation of shares was conducted at the beginning of FY2007.
Manager and above positions
Number of retired employees during the year / Number of employees at the beginning of the year 100 (%)
The number of retired employees above excludes employees who retired because of retirement age, transfer and becoming officers.
Received third-party assurance from Lloydʼs Register Quality Assurance Limited (LRQA).

Data SectionIFRS
FY2014FY2015FY2016FY2016FY2017FY2018FY20191,149,529

1,163,564

1,108,512

1,134,342

1,138,981

1,125,153

1,133,654

ーーー

452,505

469,915459,840

480,621

243,739

245,532

234,785

212,567

212,935

212,396

206,953

201,572

197,494

190,205

167,668

166,688

166,882

161,590

ーーー

44,89846,84245,51445,36342,16748,03844,58041,72749,54640,89140,28640,48047,91044,42542,60848,271

42,126

37,161

19,96726,313

26,95027,052

28,48627,35821,251

1,018,495

1,019,146

1,050,109

1,005,069

1,022,348

1,029,573

1,240,308

375,886

383,699406,336

368,571395,519

412,700

387,188

168,458

180,922

187,799

205,952

184,202174,378478,773

44,65036,79936,23933,76457,07934,87073,358(16,272)(39,741)(30,353)(27,952)(19,030)(26,836)(49,559)(27,587)(1,041)(2,189)(2,097)(31,048)(21,274)(14,829)

24,277

37,11044,99944,99927,021

39,873

48,636

17,963

18,345

17,18917,284

18,683

19,90750,95375.66

100.42103.04103.43108.92104.5581.19

1,424.28

1,467.05

1,553.60

1,409.20

1,511.91

1,576.68

1,479.07

25.00

27.00

28.00

28.00

35.00

35.00

36.00

21.20

21.10

21.18

46.98

45.31

46.19

43.06

17.5

17.0

17.2

37.1

35.5

36.3

33.6

3.7

4.1

4.0

9.2

10.5

8.9

8.4

5.4

6.9

6.8

7.6

7.5

6.8

5.4

4.2

4.7

4.3

4.2

4.9

4.0

3.2

7.3

8.6

7.7

7.6

8.4

7.2

4.5

36.9

37.6

38.7

36.7

38.7

40.1

31.2

33.1

26.9

27.2

27.1

32.1

33.5

44.3

11,14911,023

10,732

ー

10,42910,276

9,844

ー

ー

ー

ー

57.2

56.8

57.0

11.1

10.4

12.2

ー

14.3

14.7

16.6

ー

ー

ー

ー

3.6

3.3

3.9

ー

ー

ー

ー

55.3

73.1

91.6

529,460

498,460

498,460

ー

495,331495,331

489,023

451,000

456,000

409,000ー

389,000

401,000

435,800

220,411

207,512

197,250ー

200,966

202,066

194,879

4,215

4,414

4,420

ー

4,676

4,841

4,979

4,595

4,217

4,062

ー

4,029

3,939

4,017

1,754

1,885

1,990

ー

2,031

2,018

1,939

ー

ー

ー

ー

194,154

182,566

162,508

ー

ー

ー

ー

3,075,130

3,123,238

3,782,555

ー

ー

ー

ー

101,143

99,761

99,478

2,682

2,553

2,412

ー

2,370

2,236

2,030

9,205

8,198

8,256

ー

7,669

7,264

7,112

1,718

1,527

1,826

ー

2,081

1,835

1,752

*5
FY2019 data received third-party assurance from Lloydʼs Register Quality Assurance Limited (LRQA).
*IFRS 16 has been applied since FY2019.
*6-8 Total of Daimaru Matsuzakaya, Hakata Daimaru, Shimonoseki Daimaru, and Kochi Daimaru*6
Packaging material consumption is the weights of wrapping paper, shopping bags, paper bags, plastic bags for food products, etc. (ton).
*7
Waste disposal is the weights after subtracting the weights of waste recycled from the total weights of waste generated including general waste, raw garbage and industrial waste (ton).
*8
Food waste disposal is included in waste disposal.
*9
Daimaru Matsuzakaya: Daimaru Matsuzakaya Department Stores
Integrated Report 2020

69

Data Section▶Financial/Non-financial Highlights

Financial/Non-financial Highlights
ROE

Consolidated business profit / IFRS operating profit

▶

10

▶

(Millions of yen)
60,000(%)

Business profit*
IFRS operating profit

9
8

6.9

7

6.8

7.5

48,03850,00044,5806.8

45,514

5

45,36340,89140,000

5.4

649,546
46,84240,28630,0004

20,000

3
2

10,000

1
0

2015

2016

2017

2018

2019

0

(FY)

EPS

2015

2017

▶

(Yen)
120

(Millions of yen)
60,000100.42103.04108.92

Capital expenditures
Depreciation(including the amount included in cost)

104.5550,00044,99981.19
80

40,00060

30,00040

20,00020

10,000

0

2018

2019

(FY)

Capital expenditures/Depreciation (including the amount included in cost)

▶

100

2016

2015

2016

2017

2018

2019

Interest-bearing liabilities and D/E ratio▶

(Millions of yen)
500,000(People)12,0001.5

478,773
1.24

D/E ratio

400,000

1.2

300,000

0.9

27,021
18,3452015

17,1892016

18,6832017

19,907

2018

2019

(FY)

Consolidated number of employees▶

Interest-bearing liabilities

50,95339,873

37,1100(FY)48,636

11,023

10,732

10,42910,27620172018

10,000

9,844

8,000
6,000
200,000

180,922

187,799

0.47

0.46

184,202 174,378

0.6
4,000

0.47

100,000

0

2015

2016

2017

0.42

2018

0.3

2019

(FY)

0

2,000
0

2015

2016

2019

(FY)

*The inventory valuation method has been changed to the specific identification method since fiscal year 2015.
*The Company has applied the International Financial Reporting Standards (IFRS) since fiscal year 2017. The amounts for fiscal year 2016 and before
are under JGAAP.
*The Company has applied IFRS 16 since FY2019. Accordingly, operating leases are recognized as right-of-use assets and lease liabilities, which caused
significant changes in capital expenditures, depreciation and interest-bearing liabilities.
70

Data Section

Daimaru Matsuzakaya Department Stores existing store sales (YoY % change)▶

3(Millions of yen)
70,000

(%)

3.0
1.6

2

Daimaru Matsuzakaya
Department Stores tax-free sales
Share60,0000.9

1Daimaru Matsuzakaya Department Stores tax-free sales and share

▶

(%)
10

9.4

8.9

8

7.3

50,0000

640,0005.0-158,89030,000-260.1384

47,90220,000-3

33,860-3.3

29,4152

10,000

-4

-4.5

-5

2015

2016

0
2017

2018

2019

2015

(FY)

Ratio of female employees in management positions (consolidated)

▶

19

4.6

2016

16.6

16

14.3

15
14

100,000

12.2

13
12

10.4

11

0
(FY)

194,154
182,566
162,508*Data have been compiled
and disclosed on aconsolidated basis since
FY2017.
They have received an
independent assurance
statement from LloydʼsRegister Quality Assurance
Limited（LRQA）.

150,000

14.7

2019

【Scope 1 and 2】
GHG emissions (consolidated)

18
17

2018

▶

(t-CO2)200,000(%)

2017

50,000

10
9

2015

2016

2017

2018

2019

Year-end number of issues of cross-shareholdings▶

(No of issues)
80
70

0

(FY)

2015

2016

64

2018

2019

Number of Directors/Outside Directors and ratio of Outside Directors
Company with Three Committees(People)
15

(%)
50

60
12

41

40

9

45

40

38.4
38.4

26

30

46.2

No of Directors
Of which no of Outside Directors
Ratio of Outside Directors

48

50

(FY)

▶

Company with Audit & Supervisory Board

60

2017

6

35

20
3

28.6

10
0

0
2015

2016

2017

2018

2019

(FY)

7

2

2015

30

28.6
7

2

13 5

13

2016

2017

2018

5

13

6

2019

25
(FY)

*The main building of the Shinsaibashi store temporarily closed for rebuilding on December 30, 2015 and reopened on September 20, 2019 (rental area increased).
*The Urawa store closed on July 31, 2017.
*The portions transferred to the Real Estate Business of real estate lease revenue, which had been included in store sales, for both current and previous years
have been deducted since fiscal year 2017.
*The Yamashina store closed on March 31, 2019.

Integrated Report 202071

Data Section▶Business Overview At a Glance

Business Overview (FY2019)
Percentage of
total revenue

At a Glance

Revenue (Millions of yen)
274,308

275,441 263,748

Operating proﬁt (Millions of yen)
26,659Percentage of total
operating proﬁt

24,194

Department

17,625Store
Business

54.8%
Percentage of
total revenue

FY2017（IFRS）FY2018（IFRS）FY2019（IFRS）

Revenue (Millions of yen)
112,21291,621FY2017（IFRS）FY2018（IFRS）FY2019（IFRS）

Operating proﬁt (Millions of yen)
11,752

10,823

43.7%
Percentage of total
operating proﬁt

89,969

Parco

5,445

Business

23.2%
Percentage of
total revenue

FY2017（IFRS）FY2018（IFRS）FY2019（IFRS）

Revenue (Millions of yen)
16,995FY2017（IFRS）FY2019（IFRS）

Operating proﬁt (Millions of yen)

17,793

6,725

13,427

Real Estate

FY2018（IFRS）

4,131

26.9%
Percentage of total
operating proﬁt

4,664

Business

3.5%
Percentage of
total revenue

FY2017（IFRS）FY2018（IFRS）FY2019（IFRS）

Revenue (Millions of yen)
10,573

10,176FY2017（IFRS）FY2018（IFRS）FY2019（IFRS）

Operating proﬁt (Millions of yen)
2,742

10,71916.7%
Percentage of total
operating proﬁt

2,360

Credit and

1,908

FinanceBusiness

1.4%
Percentage of
total revenue

FY2017（IFRS）FY2018（IFRS）FY2019（IFRS）

Revenue (Millions of yen)
117,845

123,275

FY2017（IFRS）FY2018（IFRS）FY2019（IFRS）

Operating proﬁt (Millions of yen)
4,261

4,224

104,250

4.7%
Percentage of total
operating proﬁt

3,204

Other

17.1%

FY2017（IFRS）FY2018（IFRS）FY2019（IFRS）●The percentage of total revenue represents the ratio of revenue to externalcustomers after eliminating intersegment transactions.
●Revenue and operating profit include intersegment transactions.
nce
ere
Ref

FY2017（IFRS）FY2018（IFRS）FY2019（IFRS）

8.0%●Calculation of percentage of total operating profit of “Other” segment

includes adjustments.

New lease accounting standards (IFRS 16)● The Group recognized right-of-use assets and lease liabilities on the effective date of IFRS 16 for leases previously classified as operating leases in accordance with
IAS 17. Lease liabilities are measured at the present value of the total outstanding lease payments discounted using the borrowerʼs additional borrowing interest
rate at the start date of application. Right-of-use assets are measured retrospectively as if IFRS 16 had been applied from the inception date of the lease.
● As a result, assets and liabilities increased by ¥210.6 billion and ¥225.2 billion, respectively, and equity decreased by ¥14.5 billion in the consolidated statementof financial position at the beginning of fiscal 2019. In the consolidated statement of profit or loss for fiscal 2019, operating profit increased by approximately¥4.6 billion compared with the previous accounting standard (prior to the adoption of IFRS 16), but the impact on profit was immaterial.

72

Data Section

Overview of Fiscal 2019
Department Store Business-------------------------------------------------------------------------------------From June to July, the peak season of the first half of the fiscal year, temperatures
remained low for a long time, and sales of summer items, mainly apparel, at both fulland discounted prices were sluggish. In August, the typhoon landing in western Japan
forced the three stores in Kansai to close temporarily, and the impact of the rapid
progress of the cheap yuan resulted in a temporary downshift in duty free sales, which
forced a difficult struggle.
In September, in addition to the grand opening of the main building of the Daimaru
Shinsaibashi store, consumption surged ahead of the consumption tax hike, which led
to a sales increase of more than 30% primarily for high-end products. In October, we
saw a reactionary decline in double digits. Subsequently, the rate of decline began toshrink every month. However, due to record-breaking warmth, the winter sales were
extremely sluggish, and the pace of improvement slowed drastically.
Furthermore, from late January onward, due to the spread of the COVID-19 infection,
not only inbound consumption slowed down sharply but also more and more people
avoided going out in Japan. This resulted in a sharp decline in the number of customers
visiting our stores both from Japan and overseas, which caused unprecedented damage
to sales.
As a consequence, gross sales decreased by 3.8% on a year-on-year basis but
business profit increased by 5.2% partly due to a substantial decrease in retirement
benefit expenses. Operating profit decreased by 27.2% partly due to one-time expenses
associated with personnel system reforms and the recording of a loss on retirement of
the north wing of the Shinsaibashi store.

Parco Business---------------------------------------------------------------------------------------------------------------------------------------New openings including the opening of Kinshicho PARCO in March, the grandopening of Shibuya PARCO in November, and the sale of reserve floor area related to
Shibuya PARCO (¥21.7 billion) resulted in an increase in gross sales of 11.5% comparedwith the previous fiscal year. Sale of reserve floor area was carried at the same cost.

Despite the positive impact of the opening of these new stores, business profit
declined 1.6% due to sluggish sales at some rural stores and sluggish sales at Neuve A,
which operates accessories shops. Meanwhile, operating profit nearly doubled (up98.7%) due to an increase in compensation income related to Shibuya PARCO and areactionary increase from the previous year, when losses on the closure of Utsunomiya
PARCO and Kumamoto PARCO were recorded.

Real Estate Business-----------------------------------------------------------------------------------------------------------------Sales of Ginza Six and Ueno Frontier Tower were firm, and the transfer of many
department stores to the Real Estate Business also contributed to a 4.0% year-on-yearincrease in gross sales. On the other hand, operating profit declined 13.8% due tohigher depreciation and property taxes resulting from the transfer of the north wing of
the Daimaru Shinsaibashi store to the Real Estate Business after the opening of the mainbuilding in September. However, operating profit significantly increased 44.2% due tothe posting of a gain on sale of real estate.

Credit and Finance Business-----------------------------------------------------------------------------------Gross sales increased 2.4% year on year, due in part to higher external merchant fee.
However, business profit decreased 18.7% year on year and operating profit decreased
19.1% year on year, mainly due to higher personnel expenses associated withorganizational reforms, such as the hiring of specialist personnel for future growth, andhigher facility expenses associated with the relocation of the Tokyo office.

Other-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------J. Front Design & Construction, which increased sales significantly due to the interior
construction work of the main building of the Daimaru Shinsaibashi store, which
opened in September, covered the sluggish performance of businesses such as Daimaru
Kogyo. As a result, gross sales increased 9.6%, business profit increased 36.7% andoperating profit increased 34.0%.

Outlook for Fiscal 2020
Due to the spread of the COVID-19 infection, the outlook for fiscal 2020 is extremely
uncertain. In particular, our department stores were hit hard by both inbound anddomestic consumption. Sales in February were down 20% from the previous year, whilesales in March were down 40% and in April most department stores and Parco stores
were forced to shut down due to the declaration of a state of urgency. In late May, sales
resumed gradually, and both department stores and Parco finally improved to a decreaseof 20%-plus in June, but the outlook remains uncertain. For this reason, in the forecast
for FY2020 at the announcement of the results for the first quarter of the fiscal year
ending February 28, 2021, we forecast a decrease of ¥364 billion in consolidated grosssales for the risks of COVID-19. For consolidated totals, we expect to avoid business loss
and operating loss in the second half of the fiscal year by thoroughly reducing costs,
mainly in the Department Store Business.
Fixed costs of ¥11.2 billion (¥3.9 billion for cost of sales and ¥7.3 billion for selling,
general and administrative expenses) arising from the suspension of operations will bereclassified to other operating expenses. In addition, as a result of deteriorating businessperformance, impairment loss of ¥11.5 billion was recorded in the Department StoreBusiness, Parco, Neuve A, etc. as of the first quarter of the fiscal year under review.
(Millions of yen, %)FY endingFeb 28, 2021

H1
Forecast

H2

Full year

YoY
YoY
YoY
Forecast
Forecast% change% change% change

Revenue

140,000(38.0)

192,000(24.7)

332,000(30.9)

Department
Store Business

70,000(47.0)

112,500(14.6)

182,500(30.8)

Parco Business

28,650(34.4)

39,950(41.7)

68,600(38.9)

6,500(26.3)

10,10012.6

16,600

(6.7)

4,360

(16.1)

5,390

(2.3)

9,750

(9.0)

Other

45,200(19.5)

46,600(30.6)

91,800(25.5)

Adjustments(14,710)-(22,540)-(37,250)-

Operating profit(30,000)-

0-(30,000)-

Department
Store Business(25,800)-

1,400(80.1)(24,400)-

Parco Business(5,300)

-

(800)

-

(6,100)-1,000(82.5)

(300)

-

700

(89.6)

Real EstateBusiness
Credit and
Finance Business

Real EstateBusiness
Credit and
Finance Business80(92.7)

70(91.5)

150(92.1)

Other

420(79.1)

540(79.9)

960(79.6)

Adjustments

(400)

-

(910)

-

(1,310)-*Forecasts as of June 29, 2020

Department Store Business---------------------------------------------------------------------------------------We believe this will be most influenced by COVID-19 in the Group. As of June,business was resumed at almost all stores. In view of the current travel restrictions,however, we anticipate that the inbound demand will be almost nil, and we assume thatgross sales will only recover to approximately 70% of the previous yearʼs level in thesecond quarter alone and to approximately 80% in the second half. On the other hand,
we expect to post both business profit and operating profit in the second half of the
fiscal year as a result of additional cost-cutting measures, including significant reductions
in capital expenditures and reductions in controllable costs.

Parco Business--------------------------------------------------------------------------------------------------------------------------------------Shibuya PARCO, which opened in November last year, made a full contribution, andParco will open in the north wing of the Daimaru Shinsaibashi store this fall. However,
the impact of COVID-19 has resulted in a certain degree of relaxation of the rent
conditions for real estate, which is income from tenants, and in the second half of the
fiscal year, we expect the number of seats to be 50% in the entertainment business. In
addition, as real estate related to the north wing of the Shinsaibashi store is scheduled
to be transferred to Parco in the second half of the fiscal year, expenses such as theregistration and license tax related to the asset will increase, and this segment expects
to continue to record a loss in the second half of the fiscal year.

Real Estate Business-----------------------------------------------------------------------------------------------------------------The north wing of the Daimaru Shinsaibashi store is scheduled to open in the fall of
this year with PARCO as the core tenant. However, due to the burden of expenses
incurred until the north wing starts operations and we expect a decline in percentage
rents on existing real estate rental properties due to COVID-19, so we expect both sales
and profits to decline.

Credit and Finance Business-----------------------------------------------------------------------------------In the current fiscal year, we will issue the “Daimaru Matsuzakaya Card,” which willrevamp our point program and design, and we will be finally ready to prepare for mediumterm growth. However, the impact of COVID-19 will inevitably lead to a decline intransaction volume, particularly at department stores. And there will be an increase in costs
associated with the issuance of new cards. So we expect both sales and profits to decline.

Other------------------------------------------------------------------------------------------------------------------------------------------------------------------------------In addition to a reduction in reaction to a special demand for the renovation of themain building of the Shinsaibashi store in J. Front Design & Construction, which
operates the design and construction business, last year, COVID-19 is likely to affect the
supply chain of the design and construction business and wholesale business, which willlead to a delay in delivery. In addition, greatly affected by a decrease in needs in thestaffing business due to the shutdown of commercial facilities, we expect both sales andprofits to decline.

Integrated Report 202073

Data Section▶Financial Information

Analysis of Financial Condition
and Operating Results
In the fiscal year under review, the Japanese economy rose andfell. For various reasons, including stagnant exports andproduction and a decline in capital investments and domestic
demand due to the impact of the slowdown in overseas
economies, natural disasters, and other developments, theJapanese economyʼs recovery trend leveled off, and uncertainty
regarding various aspects of the Japanese economy, such as
corporate production, capital investments, and spending, rapidly
increased near the end of the fiscal year. Although theemployment and income environments were firm, personal
spending was not only lackluster due to continued weak spending
as a result of the consumption tax hike but also further
deteriorated toward the end of the fiscal year as both inboundand domestic spending fell because of the novel coronavirus(COVID-19).
Amid this environment, the J. Front Retailing Group(hereinafter the “Group” ) worked to implement the following five
strategies to generate growth and reinforce its foundation as partof its efforts in the third year of the “ FY2017–FY2021
Medium-term Business Plan ” to realize the Group Vision andtransform its business portfolio.
In regard to the “Multi Service Retailer strategy,” we not only
worked to expand our existing business fields by concluding alicensing agreement with VISA and MasterCard in July for our
Credit and Finance Business and moving forward with creating anenvironment to conduct the Group ʼ s acquiring (merchantcontract) business but also updated our existing cards byoverhauling various card features, such as the point program (anew point program is expected to be introduced in the fall of2020) and ancillary services. As for efforts to expand new
business fields, we moved forward with efforts to gain anunderstanding of the clothing rental business and an examinationof entering that market as the value of “ sharing, not owning,items and services” spreads and we respond to those risks.
Turning to the “Urban Dominant Strategy,” following Ginza Six
and Ueno Frontier Tower, we completed two massive area
redevelopment projects ̶ the main building of the Daimaru
Shinsaibashi store in September and Shibuya PARCO in
November. In addition, we worked to develop the surrounding
areas of core stores, such as opening two Bino stores, commercial
facilities based on the concept of beauty and health, in Kyoto andthe Ueno area. We also worked to improve the appeal of cities
through various efforts, including promotions and area

Revenuerevitalization events jointly held by department stores and Parco in
the Ueno, Nagoya, and Kobe areas and collaborating with local
universities to support the next generation and develop local
areas.
As for the “ ICT (Internet, Communication, and Technology)
Strategy which looks toward the IoT era,” we made integrated
use of customer data as a shared Group asset and worked tobuild an integrated database, a foundation for promoting theLifetime Service Hub scheme, the goal of which is to maximize thelifetime value of customers (*). At the same time, we strove tobuild a cloud environment that makes it possible to manage
security at the various Group companies and quickly and flexibly
respond to the introduction of digital technology called for in thebusiness strategy. (* By providing products and services according
to the life stage of each and every customer, we strengthen
lifetime relationships with customers and maximize the customer
value.)
Turning to “innovating existing businesses,” for the Department
Store Business, we not only introduced into the main building of
the Daimaru Shinsaibashi store a new department store businessmodel that balances growth and profitability through novel floor
compositions for department stores but also moved forward with
developing new sales areas that match changes in the market atvarious stores. We also steadily promoted structural reforms atrural and suburban stores, such as Shimonoseki Daimaru and the
Daimaru Ashiya store. Parco celebrated its fiftieth anniversary, andwe opened the new Shibuya PARCO, a next-generationcommercial facility that embodies the new appeal of the Parcobrand, and this included expanding experience-based content,
re-proposing fashion, and creating futuristic sales areas that makeuse of ICT. In addition, we made steady progress in developing
various types of stores, including opening Kinshicho PARCO,
SAN-A Urasoe West Coast PARCO CITY, and Kawasaki ZEROGATE.
As for “ESG initiatives,” we moved forward with company-wide
efforts to resolve five materiality issues, such as “contribution to a
low-carbon society. ” At the main building of the Daimaru
Shinsaibashi store, our flagship store for promoting ESG, weswitched to renewable energy sources for the whole interior, andat Daimaru Matsuzakaya Department Stores, we held our first
explanatory meeting for suppliers regarding the “JFR Principles of
Action for Suppliers,” which were established in 2019, in order topromote cooperation in ESG activities. Because of these efforts,
there has been an increase in ESG related certifications andevaluations by independent parties, including a climate change
survey. (ESG: environment, society, and governance)

Operating profit

74

27,358(Fiscal year)(Millions of yen)

40,286

ʼ19(Millions of yen)
40,891

ʼ18

480,621459,840(Millions of yen)

Profit attributable toowners of parent

ʼ18

ʼ19 (Fiscal year)ʼ18

21,251

Operating overview

ʼ19 (Fiscal year)

Data Section

Proﬁt before tax / proﬁt attributable to ownersof parent
Profit before tax was ¥37,161 million, down 11.8% year on
year.
Profit attributable to owners of parent was ¥21,251 million,
down 22.3% year on year.

Analysis of ﬁnancial position
Total assets as of February 29, 2020 was ¥1,240,308 million,up ¥210,735 million compared with February 28, 2019. This was
mainly attributable to an increase in right-of-use assets due to theapplication of IFRS 16 “ Leases. ” Total liabilities was ¥840,627
million, an increase of ¥279,540 million. Interest-bearing debt
was ¥478,773 million, up ¥304,395 million. This was mainly
attributable to an increase in lease liabilities due to the applicationof IFRS 16 “Leases.”
Total equity was ¥399,681 million, a decrease of ¥68,804
million compared with February 28, 2019. This was mainly
attributable to a decrease in capital surplus and non-controllinginterests due to an additional acquisition of shares of Parco.

Basic earnings
per share

Annual dividends
per share

Total assets(Millions of yen)

36.00

1,029,573

ʼ19 (Fiscal year)

The Companyʼs basic policy is to return profits appropriately inaccordance with a targeted consolidated dividend payout ratio of
30% or more while striving to provide a stable dividend, with theaim of maintaining and enhancing the Companyʼs sound financial
standing while keeping profit levels, future capital investment,
free cash flow trends and other such factors in consideration.
With respect to internal reserves, the Company intends toenhance corporate value by using them for such purposes asinvesting in store refurbishments and business expansions tostrengthen sales, as well as strengthening the Companyʼs financial
standing.
The Company has decided to pay an annual dividend of ¥36
per share in the current fiscal year, comprising an interim dividendof ¥18 per share and a year-end dividend of ¥18 per share.
Given unprecedented challenging operating environment,
business outlook and financial position due to the impact of the
spread of COVID-19, the forecast for the interim dividend is ¥9
per share, a decrease of ¥9 from the previous fiscal year, from thestandpoint of ensuring stable operations, and the forecast for the
year-end dividend is ¥18 per share, the same as in the previous
fiscal year, from the standpoint of providing stable dividends toshareholders. Accordingly, the forecast for annual dividends is¥27 per share (¥36 for the previous fiscal year).

35.00

ʼ18

Basic policy on proﬁt distribution and dividends

（yen）

ʼ18

ʼ19 (Fiscal year)

ʼ18

81.19

104.55（yen）

We will continue to implement appropriate profit distribution
and capital investment considering profit levels, cash flow trends
and other such factors.

ʼ19 (Fiscal year)

Total equity(Millions of yen)ʼ18399,681

Spending continued to be weak as a result of the consumption
tax hike, and Japan faced natural disasters, a warm winter, andthe spread of COVID-19. However, revenue was ¥480,621
million, up 4.5% year on year, for various reasons, including saleof reserve floor space in the Shibuya redevelopment project.
Operating profit was ¥40,286 million, down 1.5% year on
year.

The Group aims to secure adequate funds for our businessactivities, maintain liquidity, and maintain a sound financial
position, and to achieve stable operating cash flows.
We strive to generate cash flow and secure a wide range offinancing methods. In addition to cash on hand and cash
provided by operating activities, the Group also issues bonds andborrows money from financial institutions to fund the working
capital, capital expenditures and investments required to maintain
the Group's growth.
Cash flow positions in the current fiscal year and the factors forthese were as follows.
Net cash provided by operating activities was ¥73,358 million.
In comparison with the previous fiscal year, cash provided
increased by ¥38,488 million, largely reflecting an adjustment ofdepreciation and amortization expense due to an increase in theright-of-use asset and a decrease in inventories.
Net cash used in investing activities was ¥49,559 million. In
comparison with the previous fiscal year, cash used increased by¥22,723 million, largely reflecting an increase in purchase ofinvestment securities.
Net cash used in financing activities was ¥14,829 million. In
comparison with the previous fiscal year, cash used decreased by¥6,445 million, largely reflecting issuance of bonds and otherfinancing activities, despite payment for an additional acquisitionof shares of Parco and recording of repayments of lease liabilities.

468,485

Revenue / Operating proﬁt

Cash ﬂow

1,240,308

As for reforming personnel affairs, with the goal of becoming ahuman resources development company that aims to generate
sustainable growth, we moved forward with reforms to thepersonnel system that draws out creation and challenges andpromoted efforts to recruit specialized human resources and topush back the retirement age at the various group companies to
65 from the perspective of making use of seniors in order toestablish human resources management centered on “ humanresource capabilities” that creates new value.
As for the Group ʼ s fiscal strategy, we not only worked to
improve asset efficiency by promoting B/S-oriented management
and administration to build a management system that boasts
high capital efficiency but also steadily adopted new leaseaccounting standards that are based on the International Financial
Reporting Standards (IFRS). Furthermore, we held the firstbusiness strategy briefing to expand opportunities for dialogue
with investors.
As for the Groupʼs administrative systems innovation, we strove
to strengthen information security and increase businessefficiency by not only promoting the automation of operations,primarily in the Group back-office operations, through the greateruse of robotic process automation (RPA) but also introducing
business tools to raise productivity.

ʼ19(Fiscal year)

Integrated Report 202075

Data Section▶Financial Information

Consolidated Statement of Financial Position
J. Front Retailing Co., Ltd. and its consolidated subsidiaries
As of March 1, 2018, February 28, 2019 and February 29, 2020

Millions of yen

AssetsCurrent assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Other current assets
Assets held for sale
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Goodwill
Investment property
Intangible assets
Investments accounted for using equity method
Other financial assets
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets
Liabilities and equity
Liabilities
Current liabilities
Bonds and borrowings
Trade and other payables
Lease liabilities
Other financial liabilities
Income taxes payable
Provisions
Other current liabilities
Total current liabilities
Non-current liabilities
Bonds and borrowings
Lease liabilities
Other financial liabilities
Retirement benefit liabilities
Provisions
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
EquityShare capital
Capital surplus
Treasury shares
Other components of equity
Retained earnings
Total equity attributable to owners of parent
Non-controlling interests
Total equity
Total liabilities and equity

76

2018

2019

2020

38,883
125,649
4,067
33,755
6,076
6,732
215,164

25,659132,943
7,324
38,3497,004

34,633
144,244
5,095
19,1695,281−−

211,281

208,424

458,877

471,238−−523
195,608
3,588
16,425100,016
7,286
24,857807,183
1,022,348

523
197,162
4,489
17,61696,2258,280
22,754
818,291
1,029,573

473,167
179,632523
219,354
5,662
37,43991,3799,988
14,734
1,031,883
1,240,308

46,230141,343

31,320138,938

108,400
144,020
29,49330,1994,349
999
56,427
373,889−−

30,8119,202
202
64,561
292,351

32,252
8,174
1,851
62,490275,028

137,972

143,058−−

34,24029,9094,595
61,161
11,231
279,109571,460

38,48629,003
5,176
60,4559,880
286,059
561,087

149,876
191,003
41,087
20,175
4,909
58,829855
466,737
840,627

31,974
211,864(15,244)
15,772
151,151
395,519
55,368450,887
1,022,348

31,974
212,210(15,090)
14,745
168,861
412,700
55,784
468,485
1,029,573

31,974
189,340(14,974)
11,641
169,206
387,188
12,493399,6811,240,308

Data Section

Consolidated Statement of Proﬁt or Loss and Consolidated Statement of Comprehensive Income
J. Front Retailing Co., Ltd. and its consolidated subsidiaries
Consolidated financial years ended February 28, 2019 and February 29, 2020

Millions of yen

Consolidated Statement of Profit or Loss

2019

2020

Revenue
Cost of sales
Gross profit

459,840(247,443)
212,396

480,621(273,667)
206,953

Selling, general and administrative expenses
Other operating income
Other operating expenses
Operating profit(166,882)
3,237(7,860)40,891(161,590)
8,663(13,740)
40,286

Finance income
Finance costs
Share of profit (loss) of investments accounted for using equity method
Profit before tax

1,104(1,170)1,301
42,126

1,091(5,862)
1,644
37,161

Income tax expense
Profit(12,950)
29,176(13,767)
23,393

Profit attributable to:
Owners of parent
Non-controlling interests
Profit27,358
1,817
29,176

21,251
2,141
23,393

Earnings per share
Basic earnings per share (Yen)
Diluted earnings per share (Yen)

104.55104.52

81.19
81.17

Consolidated Statement of Comprehensive Income

2019

2020

Profit29,17623,393

Other comprehensive income
Items that will not be reclassified to profit or loss
Financial assets measured at fair value through other comprehensive income
Remeasurements of investments benefit plans
Share of other comprehensive income of investments accounted for using equity method
Total items that will not be reclassified to profit or loss

(471)
(1,220)33(1,657)(2,318)256(37)(2,099)Items that may be reclassified to profit or loss
Cash flow hedges
Exchange differences on translation of foreign operations
Share of other comprehensive income of investments accounted for using equity method
Total items that may be reclassified to profit or loss
Other comprehensive income, net of tax
Comprehensive income

58
(71)
2
(10)
(1,668)27,507024
1
26(2,073)
21,320Comprehensive income attributable to:
Owners of parent
Non-controlling interests
Comprehensive income

25,631
1,875
27,507

19,2592,060
21,320Integrated Report 2020

77

Data Section▶Financial Information

Consolidated Statement of Changes in Equity
J. Front Retailing Co., Ltd. and its consolidated subsidiaries
Consolidated financial years ended February 28, 2019 and February 29, 2020

Millions of yen
Equity attributable to owners of parent

SharecapitalBalance at March 1, 2018
ProfitOther comprehensive income
Total comprehensive income
Purchase of treasury shares
Disposal of treasury shares
Dividends
Changes in ownership interest in subsidiaries
Share-based remuneration transactions
Transfer from other components of equity to retained earnings
Other
Total transactions with owners
Balance at February 28, 2019
Effect of accounting changes
Restated balance
ProfitOther comprehensive income
Total comprehensive income
Purchase of treasury shares
Disposal of treasury shares
Dividends
Changes in ownership interest in subsidiaries
Share-based remuneration transactions
Transfer from other components of equity to retained earnings
Other
Total transactions with owners
Balance at February 29, 2020

31,974
−
−
−
−
−
−
−
−
−
−
−

CapitalsurplusTreasuryshares211,864(15,244)

−
−
−
−

−
−
−

(0)

(8)
0

1
343

162

−
−
−

Other components of equity
Exchange
Financial assets
differences on
measured at fair
Cash flowtranslation ofvalue through otherhedgesforeign operations
comprehensive income
(43)

(15)

15,831

(70)
(70)

60
60

(530)
(530)

(49)
(49)
(5)

(466)
14,834

−
−
−
−
−
−
−

−
−
−
−

−
−
−
−
−
−
−

−
−
−
−
−
−

(466)

−

31,974345
212,210154(15,090)

29
29
(83)

31,974

212,210(15,090)

(83)

(5)

14,83424
24

1
1(2,237)(2,237)

(0)

84

−
−
−
−
−
−
−
−
−
−
−
−

31,974

−
−
−
−
−

−
−
−
−

(0)

(7)
0

(23,106)
236

122(22,870)
189,340

115(14,974)

−
−
−

−
−
−
−
−

−
−
−
−

(6)
−
−
−

(6)
(65)

−
−
−
−
−
−
−
−

(0)
(3)

−
−
−
−
−
−

(970)
−

(885)
11,710Equity attributable to owners of parent
Other components of equity
Remeasurements of definedTotalbenefit plans

Balance at March 1, 2018
ProfitOther comprehensive income
Total comprehensive income
Purchase of treasury shares
Disposal of treasury shares
Dividends
Changes in ownership interest in subsidiaries
Share-based remuneration transactions
Transfer from other components of equity to retained earnings
Other
Total transactions with owners
Balance at February 28, 2019
Effect of accounting changes
Restated balance
ProfitOther comprehensive income
Total comprehensive income
Purchase of treasury shares
Disposal of treasury shares
Dividends
Changes in ownership interest in subsidiaries
Share-based remuneration transactions
Transfer from other components of equity to retained earnings
Other
Total transactions with owners
Balance at February 29, 2020

78

−
−

(1,186)(1,186)

−
−
−
−
−

1,186

−

1,186

−
−
−
−

219
219

−
−
−
−
−

15,772−(1,727)(1,727)

−
−
−
−
−

719
(19)
699
14,745−

14,745−(1,992)(1,992)
−
−
−

77

−

Retainedearnings
151,639
27,358−27,358−−(9,417)

−
−

(719)

−

(10,136)
168,861(12,675)
156,185
21,251−

21,251−−(9,419)−−(219)(1,189)

1,189

(219)

(1,111)
11,641(8,230)169,206−−−−

Noncontrollinginterests

Total
396,006
27,358(1,727)25,631(8)
0(9,417)
1
505
−

(19)
(8,937)412,700(12,675)
400,025
21,251(1,992)
19,259(7)
0(9,419)(23,028)359−−(32,096)
387,188

55,368
1,817
58
1,875

−
−

(942)
(516)

−
−
−

(1,459)55,784(1,914)53,869
2,141
(80)
2,060

−
−

(972)
(42,465)−−−(43,437)
12,493

Total

451,374
29,176(1,668)27,507(8)
0(10,359)
(515)
505

−

(19)
(10,396)
468,485(14,590)453,895
23,393(2,073)
21,320(7)
0(10,392)(65,494)359−−(75,534)
399,681

Data Section

Consolidated Statement of Cash Flows
J. Front Retailing Co., Ltd. and its consolidated subsidiaries
Consolidated financial years ended February 28, 2019 and February 29, 2020

Millions of yen

Cash flows from operating activities
Profit before tax
Depreciation and amortization
Impairment losses
Finance income
Finance costs
Share of loss (profit) of investments accounted for using equity method
Loss (gain) on sale of fixed assets
Loss on disposal of fixed assets
Decrease (increase) in inventories
Decrease (increase) in trade and other receivables
Increase (decrease) in trade and other payables
Increase (decrease) in retirement benefit liability
Decrease (increase) in retirement benefit asset
Other
SubtotalInterest received
Dividends received
Interest paid
Income taxes paid
Income taxes refund
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchase of investment property
Proceeds from sale of marketable property
Purchase of investment securities
Proceeds from sale of marketable securities
Other
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net increase (decrease) in short-term borrowings
Net increase (decrease) in commercial papers
Proceeds from long-term borrowings
Repayments of long-term borrowings
Proceeds from issuance of bonds
Repayments of lease liabilities
Purchase of treasury shares
Dividends paid
Dividends paid to non–controlling interests
Purchase of shares of subsidiaries not resulting in change in scope of consolidation
Other
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of period

2019

2020

42,126
19,9072,514(1,104)
1,170(1,301)(23)
1,641(4,594)(7,500)(2,087)
(905)
1,334
(462)
50,71498
330(1,063)(17,662)
2,453
34,87037,161
50,953
2,496(1,091)
5,862(1,644)(2,832)
3,576
20,173(6,899)(4,071)(8,828)776
364
95,995111
275(5,894)(19,783)
2,654
73,358(28,954)
9(4,250)32(1,040)8,826(1,459)(26,836)(33,073)930(2,759)3,257(19,574)
4,558(2,898)(49,559)(9,849)(1,000)20,350(19,360)

53,4804,000
10,300(13,800)
29,864(29,241)(10)(9,396)(972)(59,042)(10)(14,829)8,970
25,6594
34,633−−(9)(9,389)(942)−(1,073)(21,274)(13,240)
38,88316
25,659Integrated Report 2020

79

J. Front Retailing Group▶Group Companies

Group Companies
Department Store Business / Real Estate Business
Daimaru Matsuzakaya Department Stores Co. Ltd.
Location: 18-11, Kiba 2-chome, Koto-ku, Tokyo 135-0042
Capital: ¥10,000 million Investment ratio: 100%
http://www.daimaru-matsuzakaya.com

Daimaru Osaka Shinsaibashi Store

Daimaru Suma Store

Location: 7-1, Shinsaibashisuji 1-chome, Chuo-ku, Osaka 542-8501
Phone: +81-6-6271-1231 Opened (Present location): November 1726

Location: 2-4, Nakaochiai 2-chome, Suma-ku, Kobe, Hyogo 654-0154
Phone: +81-78-791-3111 Opened: March 1980

Daimaru Osaka Umeda Store

Daimaru Ashiya Store

Location: 1-1, Umeda 3-chome, Kita-ku, Osaka 530-8202
Phone: +81-6-6343-1231 Opened: April 1983

Location: 1-31, Funato-cho, Ashiya, Hyogo 659-0093
Phone: +81-797-34-2111 Opened: October 1980

Daimaru Tokyo Store

Daimaru Shimonoseki Store

Location: 9-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-6701
Phone: +81-3-3212-8011 Opened: October 1954

Location: 4-10, Takezaki-cho 4-chome, Shimonoseki, Yamaguchi 750-0025
Phone: +81-83-232-1111*The Shimonoseki Daimaru, Inc. was merged into Daimaru Matsuzakaya Department
Stores Co. Ltd. and renamed Daimaru Shimonoseki Store on March 1, 2020.

Daimaru Kyoto Store
Location: 79, Tachiuri Nishimachi, Shijo-dori Takakura Nishi-iru, Shimogyo-ku,
Kyoto 600-8511
Phone: +81-75-211-8111 Opened (Present location): October 1912

Daimaru Kobe Store
Location: 40, Akashimachi, Chuo-ku, Kobe, Hyogo 650-0037
Phone: +81-78-331-8121 Opened (Present location): April 1927

Daimaru Sapporo Store
Location: 7, Nishi 4-chome, Kita 5-jo, Chuo-ku, Sapporo, Hokkaido 060-0005
Phone: +81-11-828-1111 Opened: March 2003

Matsuzakaya Nagoya Store
Location: 16-1, Sakae 3-chome, Naka-ku, Nagoya, Aichi 460-8430
Phone: +81-52-251-1111 Opened: March 1910

Matsuzakaya Ueno Store
Location: 29-5, Ueno 3-chome, Taito-ku, Tokyo 110-8503
Phone: +81-3-3832-1111 Opened: April 1768

The Hakata Daimaru, Inc.

Location: 4-1, Tenjin 1-chome, Chuo-ku, Fukuoka 810-8717
Phone: +81-92-712-8181 Capital: ¥3,037 million Investment ratio: 69.9%
http://www.daimaru.co.jp/fukuoka/index.html

Matsuzakaya Shizuoka Store
Location: 10-2, Miyuki-cho, Aoi-ku, Shizuoka 420-8560
Phone: +81-54-254-1111 Opened: November 1932

Matsuzakaya Takatsuki Store
Location: 2-1, Konyamachi, Takatsuki, Osaka 569-8522
Phone: +81-72-682-1111 Opened: November 1979

Matsuzakaya Toyota Store
Location: 85-1, Nishimachi 6-chome, Toyota, Aichi 471-8560
Phone: +81-565-37-1111 Opened: October 2001

Real Estate Division
Location: 18-11, Kiba 2-chome, Koto-ku, Tokyo 135-0042
Phone: +81-3-6860-1141

Corporate Sales Division
Location: 6th Fl., Kuromon Annex, Matsuzakaya Ueno Store, 18-6,
Ueno 3-chome, Taito-ku, Tokyo 110-0005
Phone: +81-3-5846-1431

Kochi Daimaru Co., Ltd.

Location: 6-1, Obiyamachi 1-chome, Kochi 780-8566
Phone: +81-88-822-5111 Capital: ¥300 million Investment ratio: 100%
http://www.kochi-daimaru.co.jp/

Parco Business
Parco Co., Ltd. (Shopping complex business)

Location: Shibuya First Place Bldg., 8-16, Shinsen-cho, Shibuya-ku, Tokyo 150-0045
Phone: +81-3-3477-5710 Capital: ¥34,367 million Investment ratio: 100％

Parco (Singapore) Pte Ltd (Shopping complex business)

Location: 10 Anson Road #09-05/06 International Plaza Singapore 079903
Phone: +65-6595-9100 Capital: S$4.5 million Investment ratio: 100％

Neuve A Co., Ltd. (Retail business)

Location: Shibuya First Place Bldg., 8-16, Shinsen-cho, Shibuya-ku, Tokyo 150-0045
Phone: +81-3-5428-2600 Capital: ¥490 million Investment ratio: 100％80

Parco Space Systems Co., Ltd.

(Space engineering and management business)

Location: Shibuya First Place Bldg., 8-16, Shinsen-cho, Shibuya-ku,
Tokyo 150-0045
Phone: +81-3-5459-6811 Capital: ¥490 million Investment ratio: 100％

Parco Digital Marketing Co., Ltd.

(Internet-related business)

Location: Shibuya First Place Bldg., 8-16, Shinsen-cho, Shibuya-ku,
Tokyo 150-0045
Phone: +81-3-3477-8910 Capital: ¥10 million Investment ratio: 100％

J. Front Retailing Group

Credit and Finance Business
JFR Card Co., Ltd.

Location: 2-1, Konyamachi, Takatsuki, Osaka 569-8522
Phone: +81-72-686-0108
Location: 9th Fl., Nihon Seimei Nihonbashi Bldg., 13-12, Nihonbashi 2-chome, Chuo-ku, Tokyo 103-0027
Phone: +81-3-3548-8841
Capital: ¥100 million Investment ratio: 100％
http://www.jfr-card.co.jp/

Other
Daimaru Kogyo, Ltd. (Wholesale business)

Location: Yushutsu Seni Kaikan, 4-9, Bingomachi 3-chome, Chuo-ku,
Osaka 541-0051
Phone: +81-6-6205-1000 Capital: ¥1,800 million Investment ratio: 100％
http://www.daimarukogyo.co.jp/

Daimaru Kogyo International Trading (Shanghai) Co., Ltd. (Wholesale business)

Location: 6th Fl., Heng Seng Bank Tower, 1000 Lujiazui Ring Rd.,
Pudong New Area, Shanghai, China
Phone: +86-21-6841-3588 Capital: U.S.$2 million Investment ratio: 100％

Daimaru Kogyo (Thailand) Co., Ltd. (Wholesale business)
Location: Unit 1902, 19th Fl., Sathorn Square Office Building,
98 North Sathorn, Kwaeng Silom, Khet Bangrak,
Bangkok 10500, Thailand
Phone: +66-2163-2903
Capital: THB202 million Investment ratio: 100％

Taiwan Daimaru Kogyo, Ltd. (Wholesale business)
Location: Room 709, No. 142, Sec. 3, Ming Chuan East Road,
Taipei 10542, Taiwan, R.O.C.
Phone: +886-2-2718-7215
Capital: NT$60 million Investment ratio: 100％

J. Front Design & Construction Co., Ltd.
(Design and construction contracting)Location: 16th & 17th Fls., Harumi Island Triton Square Office Tower W Bldg.,
8-8, Harumi 1-chome, Chuo-ku, Tokyo 104-0053
Phone: +81-3-6890-6710
Location: 2nd Fl., Nomura Fudosan Osaka Bldg., 8-15, Azuchimachi 1-chome,
Chuo-ku, Osaka 541-0052
Phone: +81-6-4705-6200
Capital: ¥100 million Investment ratio: 100％
http://www.jfdc.co.jp/

Dimples’Co., Ltd. (Staffing service)

Location: 22nd Fl., Osaka Ekimae 4th Bldg., 11-4, Umeda 1-chome, Kita-ku,
Osaka 530-0001
Phone: +81-6-6344-0312 Capital: ¥90 million Investment ratio: 100%
http://www.dimples.co.jp/

Consumer Product End-Use Research Institute Co., Ltd.
(Merchandise test and quality control)

Location: 20th & 21st Fls., Edobori Center Bldg., 1-1,
Edobori 2-chome, Nishi-ku, Osaka 550-0002
Phone: +81-6-6445-4670
Location: 2nd Fl., Matsuzakaya Kuromon Annex, 18-6,
Ueno 3-chome, Taito-ku, Tokyo 110-0005
Phone: +81-3-6695-6780
Location: 10th Fl., Matsuzakaya Park Place, 2-36, Sakae 5-chome,
Naka-ku, Nagoya, Aichi 460-0008
Phone: +81-52-261-2030
Capital: ¥100 million Investment ratio: 100％
http://www.shoukaken.jp/

Angel Park Co., Ltd. (Parking)Location: 16-10, Sakae 3-chome, Naka-ku, Nagoya, Aichi 460-0008
Phone:+81-52-261-5746 Capital: ¥400 million Investment ratio: 50.2％
http://www.angelpark.co.jp/

JFR Service Co. Ltd.

(Commissioned back-office service / leasing / parking management)

Location: 2-1, Konyamachi, Takatsuki, Osaka 569-8522
Phone: +81-72-681-7245 Capital: ¥100 million Investment ratio: 100％

JFR Information Center Co., Ltd. (Information service)

Location: 3-24, Osaka 1-chome, Tennoji-ku, Osaka 543-0062
Phone: +81-6-6775-3700 Capital: ¥10 million Investment ratio: 100％
http://www.jfr-ic.jp/

Daimaru Matsuzakaya Sales Associates Co. Ltd.
(Commissioned sales and store operations)

Location: 2-1, Konyamachi, Takatsuki, Osaka 569-8522
Phone:+81-72-684-8145 Capital: ¥90 million Investment ratio: 100％

Daimaru Matsuzakaya Tomonokai Co., Ltd.
(Specified prepaid transaction service）

Location: 2-1, Konyamachi, Takatsuki, Osaka 569-8522
Phone: +81-72-684-8101 Capital: ¥100 million Investment ratio: 100％
http://www.dmtomonokai.co.jp/

J. Front Foods Co., Ltd. (Restaurant)

Location: 101, Louis Chatelet Nakanoshima, 3-92, Nakanoshima 5-chome,
Kita-ku, Osaka 530-0005
Phone: +81-6-7220-0290 Capital: ¥100 million Investment ratio: 100%
http://www.j-frontfoods.co.jp/

Integrated Report 2020

81

J. Front Retailing Group▶Stores (Map)

Sapporo PARCO

Daimaru, Matsuzakaya and PARCO
Cover Major Big Cities across Japan

Daimaru
SapporoSapporo ZERO GATE

J. Front Retailing Group operates stores in major cities across Japan, from Sapporo, Hokkaido
in the north to Hakata, Kyushu in the south.
The Department Store Business operates 16 “Daimaru” and “Matsuzakaya” stores.
The PARCO Business operates 17 “PARCO” shopping complexes.
We also operate “GINZA SIX” and 10 “ZERO GATE” stores in a new business format
which develops urban-style low- to medium-rise shopping complexes.
The Group will make the best use of the well-balanced network of store assets
in major cities throughout Japan and accelerate new store opening anddevelopment strategies for further growth.
● Daimaru● Matsuzakaya● PARCO● ZERO GATE

Sendai PARCO(As of June 30, 2020)

Matsumoto PARCO

Shizuoka PARCO

Matsuzakaya Nagoya
Hiroshima ZERO GATE
Hiroshima ZERO GATE 2

Kanto area
NagoyaZERO GATE

Kansai area
Fukuoka PARCO

Nagoya PARCO
Matsuzakaya
ToyotaMatsuzakaya
Shizuoka

Hiroshima PARCO

Hakata Daimaru
Fukuoka Tenjin

Kochi Daimaru
Daimaru Shimonoseki

Okinawa SAN-A Urasoe West Coast PARCO CITY

82

J. Front Retailing GroupGINZA SIX (Opened in April 2017)

Kanto area
Urawa PARCO
Shintokorozawa
PARCO
Hibarigaoka PARCO

Ikebukuro PARCO
Matsuzakaya Ueno
Ueno Frontier Tower Tsudanuma
PARCO
PARCO_ya
Kinshicho PARCO

Kichijoji PARCO

Daimaru Tokyo
GINZA SIX
Pedi Shiodome

Chofu PARCO

Shibuya PARCO

HarajukuZERO GATE
KawasakiZERO GATE

ShibuyaZERO GATE

Ueno Frontier Tower / PARCO_ya (Opened in November 2017)

Kansai area

Daimaru Kyoto
Kyoto ZERO GATE

Shibuya PARCO (Opened in November 2019)

Matsuzakaya
Takatsuki
SannomiyaZERO GATE

Daimaru Osaka Umeda
Daimaru Ashiya

Shinsaibashi
ZERO GATE

Daimaru Kobe
Daimaru Suma

Dotonbori ZERO GATE

Daimaru Osaka Shinsaibashi
PARCO will open in the north wing in fall 2020

Main building of Daimau Osaka Shinsaibashi (Opened in September 2019)

Integrated Report 202083

J. Front Retailing Group▶Stores (Photos)

Daimaru and Matsuzakaya Stores

Daimaru Osaka Shinsaibashi (Floor space: 46,490㎡)

Daimaru Osaka Umeda (Floor space: 64,000㎡)

Daimaru Suma (Floor space: 13,076㎡)

Daimaru Shimonoseki (Floor space: 23,912㎡)

Daimaru Ashiya (Floor space: 3,395㎡)

Kochi Daimaru (Floor space: 16,068㎡)

Daimaru Kyoto (Floor space: 50,830㎡)

Daimaru Kobe (Floor space: 50,656㎡)
Hakata Daimaru Fukuoka Tenjin(Floor space: 44,192㎡)

Daimaru Tokyo (Floor space: 46,000㎡)

Daimaru Sapporo (Floor space: 45,000㎡)

Matsuzakaya Nagoya (Floor space: 86,758㎡)

Matsuzakaya Takatsuki (Floor space: 17,387㎡)

Matsuzakaya Toyota (Floor space: 18,220㎡)

Matsuzakaya Ueno (Floor space: 21,759㎡)

Matsuzakaya Shizuoka (Floor space: 25,452㎡)

GINZA SIX (Floor space: 47,000㎡)

Overseas Office and Company
Paris Representative Office

21 rue Auber, 75009 Paris, France
Phone : +33-1-4574-2151

As of June 30, 2020

84

Daimaru Matsuzakaya Department Stores (Shanghai) Consulting Co., Ltd.
Huaxin Haixin Building 13F Rm-15A1, 666 Fuzhou Rd, Shanghai 200001, China
Phone : +86-21-6248-1538

J. Front Retailing GroupPARCO Stores
PARCO urban complexes

Sapporo PARCO

3-3, Minami 1-jo Nishi, Chuo-ku,
Sapporo, Hokkaido
B2F-8F
Opened: August 24, 1975

Kichijoji PARCO

1-5-1, Kichijojihoncho, Musashino, Tokyo
B2F-8F
Opened: September 21, 1980

Shizuoka PARCO

6-7, Koyamachi, Aoi-ku, Shizuoka
B1F-8F
Opened: March 15, 2007

Sendai PARCO

1-2-3, Chuo, Aoba-ku, Sendai, Miyagi
Main Building: B1F-9F
Opened: August 23, 2008
Sendai PARCO 2: 1F-9F
3-7-5, Chuo, Aoba-ku, Sendai, Miyagi
Opened: July 1, 2016

Urawa PARCO

11-1, Higashitakasago-cho,
Urawa-ku, Saitama
B1F-7F
Opened: October 10, 2007

Ikebukuro PARCO

Kinshicho PARCO

Nagoya PARCO

Hiroshima PARCO

Fukuoka PARCO

Shintokorozawa PARCO

Hibarigaoka PARCO

Matsumoto PARCO

Shibuya ZERO GATE

Harajuku ZERO GATE

Nagoya ZERO GATE

3-29-1, Sakae, Naka-ku, Nagoya,
Aichi
West Building: B1F-11F
East Building: B1F-8F
Opened: June 29, 1989
South Building: B1F-10F
Opened: November 6, 1998
PARCO midi: 1F-3F
Opened: March 27, 2015

4-27-14, Kotobashi, Sumida-ku, Tokyo
B1F-7F
Opened: March 16, 2019

10-1, Hondori, Naka-ku, Hiroshima
Main Building: B1F-10F
Opened: April 9, 1994
New Building: B1F-9F
Opened: September 21, 2001

3-24-6, Ueno, Taito-ku, Tokyo
1F-6F
Opened: November 4, 2017

Chofu PARCO

Shibuya PARCO

15-1, Udagawa-cho, Shibuya-ku, Tokyo
B1F-10F
Opened: August 8, 1973
Reopened: November 22, 2019

PARCO_ya

1-28-2, Minami-Ikebukuro,
Toshima-ku, Tokyo
Main Building: B2F-8F
Opened: November 23, 1969
PʼPARCO: B2F-8F
Opened: March 10, 1994

1-38-1, Kojima-cho, Chofu, Tokyo
B1F-10F
Opened: May 25, 1989

2-11-1, Tenjin, Chuo-ku, Fukuoka
Main Building: B1F-8F
Opened: March 19, 2010
New Building: B2F-6F
Opened: November 13, 2014

PARCO community complexes

Tsudanuma PARCO

2-18-1, Maebaranishi, Funabashi, Chiba
Building A: B1F-6F
Building B: B1F-6F
Opened: July 1, 1977

1-2-1, Midori-cho, Tokorozawa, Saitama
PARCO: B1F-5F
Letʼs: B1F-4F
Opened: June 23,1983

1-1-1, Hibarigaoka, Nishitokyo, Tokyo
B1F-5F
Opened: October 8, 1993

1-10-30, Chuo, Matsumoto, Nagano
B1F-6F
Opened: August 23, 1984

ZERO GATE
Sapporo ZERO GATE

3-15-1, Minami 2-jo Nishi, Chuo-ku, Sapporo, Hokkaido 16-9, Udagawa-cho, Shibuya-ku, Tokyo 4-31-12, Jingumae, Shibuya-ku, Tokyo 3-28-11, Sakae, Nagoya, Aichi
1F-3F
B2F, 1F-4F
B1F-4F
1F-4F
Opened: October 10, 2014
Opened: February 26, 2016
Opened: April 16, 2011
Opened: March 17, 2018

Shinsaibashi ZERO GATE

Dotonbori ZERO GATE

1-9-1, Shinsaibashisuji, Chuo-ku, Osaka 1-8-22, Dotonbori, Chuo-ku, Osaka
B2F-4F
1F-3F
Opened: April 13, 2013
Opened: April 20, 2013

Hiroshima ZERO GATE

Kyoto ZERO GATE
83-1, Tachiuri Nakanocho, Shijo-dori
Takakura Higashi-iru, Shimogyo-ku, Kyoto
B2F-7F
Opened: November 4, 2017

Hiroshima ZERO GATE 2 Sannomiya ZERO GATE

2-7, Shintenchi, Naka-ku, Hiroshima 9-4, Hondori, Naka-ku, Hiroshima
1F-3F
1F-3F
Opened: October 10, 2013
Opened: September 10, 2016

2-11-3, Sannomiya-cho Chuo-ku, Kobe, Hyogo
1F-4F
Opened: September 14, 2018

Kawasaki ZERO GATE
1-1 Ogawa-cho, Kawasaki-ku, Kawasaki, Kanagawa
1F-2F
Opened: August 8, 2019

Other stores

Overseas Japanese restaurant zone

Pedi Shiodome

SAN-A Urasoe West Coast PARCO CITY

itadakimasu by PARCO

1-9-1, Higashishinbashi, Minato-ku, Tokyo
B2F-B1F, 2F
Opened: February 16, 2005

3-1-1, Irijima, Urasoe, Okinawa
Commercial floors: 1F-3F
Opened: June 27, 2019

100AM Mall 100 Tras Street, Singapore 079027
Opened: December 1, 2016

Integrated Report 202085

J. Front Retailing Group▶Share Information

Share Information
Status of shares (as of February 29, 2020)

Number of shares authorized：1,000,000,000 shares
Number of shares issued：270,565,764 shares
Stock code：3086

Stock exchange listings：Tokyo and Nagoya
Transfer agent：Mitsubishi UFJ Trust and Banking Corporation
Number of shareholders：122,552

Major shareholders

Number of shares held (1,000 shares)

Shareholding ratio (%)

1

The Master Trust Bank of Japan, Ltd. (Trust Account)

23,620

8.94

2Japan Trustee Services Bank, Ltd. (Trust Account)

16,598

6.28

3

Nippon Life Insurance Company

9,828

3.72

4

J. Front Retailing Kyoei Supplier Shareholding Association

6,319

2.39

5

The Dai-ichi Mutual Life Insurance Company

5,732

2.17

6

Japan Trustee Services Bank, Ltd. (Trust Account 5)

4,779

1.81

7

Japan Trustee Services Bank, Ltd. (Trust Account 9)

4,444

1.68

8

MUFG Bank, Ltd.

4,373

1.65

9

JP Morgan Chase Bank 385151

4,158

1.57

3,472

1.31

10 State Street Bank West Client - Treaty 505234*Shareholding ratio is calculated by deducting treasury stock (6,592,000 shares). The said treasury stock does not include the Company's shares held by the BIP Trust.

Distribution by shareholder type■

Number of shareholders (People) Number of shares (1,000 shares)

Ratio (%)

Government and local public entities

−

−

−

Financial institutions

76

107,070

39.57■ Financial instruments firms

42

12,975

4.80■ Other companies

858

16,694

6.17■ Foreign companies■ Individuals and others

609

56,801

20.99

120,966

70,430

26.03

1

6,592

■ Treasury stock

Distribution by shareholder type

2.44
As of February 29, 2020

Treasury stock

6,592,000 shares
2.44%
Individuals and others
70,430,000 shares
26.03%

Foreign companies

56,801,000 shares
20.99%

Corporate profile

Financial institutions
107,070,000 shares
39.57%
Financial instruments firms
12,975,000 shares
4.80%
Other companies
16,694,000 shares
6.17%

Company name
： J. Front Retailing Co., Ltd.
： 10-1, Ginza 6-chome, Chuo-ku, Tokyo
Main store： Nihonbashi 1-chome Mitsui Building, 4-1, Nihonbashi 1-chome, Chuo-ku, Tokyo
Office： September 3, 2007
Established： ¥31,974 million
CapitalThe Group's business lines ： Department store operation; retail; restaurants; wholesale; import and export; design, supervision and contractingof construction works; direct marketing; credit cards; labor dispatch service; merchandise inspection andconsulting; and others
Number of employees (consolidated)： 6,579 (as of February 29, 2020)
Note: In addition to the above, there are 1,739 dedicated employees and 1,526 fixed-term employees on average during fiscal year 2019.

ＵＲＬ

86

： https://www.j-front-retailing.com/english/