Financial Information
42

Analysis of Financial Condition
and Operating Results

46

Consolidated Balance Sheets48

Consolidated Statements of Income

49

Consolidated Statements of Changes
in Net Assets

51

Consolidated Statements of Cash Flows

52 Notes to Consolidated Financial Statements

41

Analysis of Financial Condition and Operating Results

Sales

05

06

1,096,690

1,177,901

1,173,705

1,166,520

1,156,455
04

07
08（Fiscal year）

Sales by Business Segment<

Composition of sales not includingintersegment sales>

Other businesses
Wholesalebusiness
Supermarket
business

In the meantime, drastically reviewing the future

During the consolidated ﬁscal year under review

proﬁt structure and businesses of the whole Group,(ﬁscal 2008), the Japanese economy worsened

we closed Yokohama Matsuzakaya and Imabari

rapidly. The global ﬁnancial and economic crisis

Daimaru. In addition, as a result of reexamining ouroriginating in the U.S. sharply decreased imports

overall investment plan in consideration of abrupt

and also reduced business investment andchanges in business environment, we gave up ourconsumer spending since last fall.

plan to open a new store in Hamamatsu.

Department store sales fell far below the levels of

In order to thoroughly reduce costs, JFR took a big

the previous year because of intensifying

step as a control tower to review and narrow thecompetition across categories or types ofcost plans of the whole Group, while minimizing all

businesses and changes in consumer buying

orders and purchases.

behavior as well as loss of consumer conﬁdence

As our eﬀorts to improve human productivity andand tighter purse strings resulted from the weakcorporate vitality, we are working on personnel

economy.

structure reform through downsizing to a few selectWith the aim of realizing the Group s vision ofpeople and the optimal arrangement of personnel

establishing a status as a leading Japanese retail

within the Group. In September 2008, Matsuzakaya

company both in terms of quality and quantity witha d o p t e d t h e p e r s o n n e l s y s t e m b as e d o n j o b

the department store business as its core, J. Front

evaluation, which is the same as Daimaru s system.

Retailing (JFR) launched a mid- to long-term plan

Department
store
business

Frontier 21 for three terms of nine years, whilefurther reducing costs to respond to radical changes
in business environment.

<Including intersegment sales>（Unit: ¥Million）
Department store business 836,189

Sales
In spite of the measures mentioned above,

During the period under review, which marks theconsolidated sales of the department store businessﬁrst year of

we uniﬁed thefor the period under review remained far below the

Frontier 21,

Supermarket business

130,660

Wholesale business

87,139policy-making functions of the department store

level of the previous year due to an unprecedentedly

Other businesses

91,688business, including the marketing, product planningsevere consumption environment. Sales ofand sales planning, and the headquarters functions,supermarket, wholesale and other businesses also

including ﬁnance, personnel aﬀairs and public

dropped compared with the previous year and thisrelations, as well as integrating information systems

resulted in total consolidated sales of ¥196,690

that form the foundation of business operation, tomillion, a decrease of 6.9% over the previous year.

Operating Income

04

42,632

improve and develop the basis for the growth of theGroup.
28,092

41,95837,76530,971（Unit: ￥Million）

05

06

07
08
（Fiscal year）

Daimaru
Matsuzakaya Holdings
JFR＊1 The figures of Matsuzakaya
Holdings for and before fiscal 2005
are the consolidated figures of
Matsuzakaya Group before its
transition to holding company.
＊2 Sales of Daimaru for and before
fiscal 2006 include other operating
revenue.
＊3 F o r f i s c a l 2 0 0 7 , f u l l - y e a r
consolidated figures are used for
Matsuzakaya Group.

42

competitiveness and revenue base for the future.

Business overview（Unit: ￥Million）

As our eﬀorts to reorganize and integrate the

Selling, general and administrative expenses

Group s businesses into one company per section,

Selling, general and administrative expenses were

we integrated four supermarket companies, four

¥241,189 million, down 2.9% from the previous

design and construction companies and two staﬃng

year. While work-related expenses substantiallycompanies into one company each in September

increased due to the system integration between

2008 and two restaurant companies into one

Daimaru and Matsuzakaya, we reduced personnel

company in March 2009.

To ﬁnalize suchcosts by reforming the ways of working and not

reorganization and integration, we have decided toﬁlling the vacancies caused by retirement andintegrate Daimaru and Matsuzakaya in March 2010

reviewed and lowered advertising costs andto speed up decision-making and further improve

supplies costs as well.

management eﬃciency in the department store
business.
Toward future growth, we worked on the plans to

Operating income

increase the ﬂoor space of the existing storesWith a decrease of ¥21,833 million in grossincluding Daimaru Umeda and Tokyo stores andoperating proﬁt, we drastically cut selling, general

redevelop the Ginza 6-chome district. In light ofand administrative expenses. However, operating

future ﬁercer competition in Osaka area, we haveincome fell by 34.1% from the previous year todecided to acquire the facilities of Sogo

¥28,092 million, seriously aﬀected by sluggish

Shinsaibashi ﬂagship store adjacent to Daimaru

sales of the department store business.

Shinsaibashi store to strengthen storeaddition, we reviewed the price structure of all

because as an extraordinary loss, the Group

private fashion brands because the deterioration ofrecorded a loss on revaluation of investment

consumption environment late the ﬁscal year under

securities of ¥9,833 million caused by plunging

review made customers more sensitive to prices.

stock markets, a loss on business restructuring ofTo enhance sales and service capabilities, we¥5,761 million resulting from the closure ofhave developed

Yokohama Matsuzakaya and Imabari Daimaru

instructors to train sales professionals and assume

department stores and the impairment loss ofa central role in improving sales capabilities. In¥2,824 million posted by the supermarket and otherorder to identify issues to increase the levels of

businesses.

sales services, we conducted service surveys in all

who areBased on the results of these surveys, we will makeAs a result, income before income taxes andimprovements to further enhance customer

minority interests decreased by 78.7% from thesatisfaction with sales services.

previous year to ¥8,459 million and net income

To expand customer base, we standardized theamounted to ¥7,170 million, a decrease of 69.4%

card systems of Daimaru and Matsuzakaya by

from the previous year.

issuing Matsuzakaya Card in March 2008 and(Note) Year-on-year ﬁgures above and below are

November 2008 to oﬀer greater convenience tocomparison with the consolidated ﬁgures of Daimaru

customers and attract new customers. At the sameand Matsuzakaya groups in annual real terms for thetime, the integration of customer information

period from March 1, 2007 to February 29, 2008.

systems enabled us to unify the management of

13.56
04

05

06

across Japan from Sapporo to Hakata andreinforce marketing capabilities and proﬁtability

Matsuzakaya started to standardize and centralize

through the

improvement of market response

operations in Nagoya, Ueno and Shizuoka stores incapabilities,

theMarch 2008 and in all other stores in September

enhancement of sales andand theexpansion of2008 so that salespersons can devote all theircustomer base.

energy to sales activities. Daimaru examined theTo

improve market response capabilities,

eﬀects of the past store-based sales reform to build

following the creation of Marketing Planninga more highly eﬃcient and proﬁtable new

Promotion Division in March 2008, the sales policy

department store model.

sections of Daimaru and Matsuzakaya were uniﬁed

Besides the eﬀorts mentioned above, Daimaru andinto JFR in September 2008 to strengthen strategy

Matsuzakaya conducted joint sales promotions

and planning functions. Meanwhile, responsibilities

including events and catalog sales of selected

and authorities in sales activities were transferred togoods targeted at the gaisho (out-of-store sales)

stores to adapt to market characteristics, whichcustomers of both companies. In July 2008, three

diﬀer from region to region, and quickly respond to

stores in the Tokyo area jointly held Summer Foodchanges. In March 2009, the merchandise sections

Festival

related to women s accessories and children s wear

attracted many customers. In September 2008,of Daimaru and Matsuzakaya were uniﬁed into one

Matsuzakaya Ginza store was remodeled to newly

section of JFR to make the product lineup moretargetattractive and improve productivity through thenumber of customers visiting the store has

increase of transaction size. Other merchandise

increased dramatically.

sections will also be integrated successively.

In spite of these measures, consumers haveto increase our presence there andworking women in their 30s

and the（Unit: ¥）Interim 07

8.00

customer satisfaction at the lowest cost,

Cash Dividends per Share

4.50

This segment strived to improve the infrastructure to

07
08（Fiscal year）（Non-Consolidated）

6.00

As our store-based sales reform to maximize

3.50

accurately understand customer needs.

● Department store businessservice capabilities

Net Income per Share（Unit: ￥）for cash purchases in

information on more than four million customers

Segment overview

07
08（Fiscal year）

45.74

Matsuzakaya M Card

06

97.18

assess objectively their sales service capabilities.

Net income

05

92.32

Daimaru and Matsuzakaya stores to quantify and

04

68.81

service trainers

7,170

the oﬀering of the private brands of JFR Group. In

income from the previous year. This is mainly

23,404

Matsuzakaya Nagoya and Ueno stores to expand¥19,634 million, a decline of ¥16,784 million in

22,560

Other expenses (income) resulted in a net loss of

Net Income（Unit: ￥Million）

21,544

women s wear brand Sofuol were introduced to

17,005

Daimaru s original men s wear brand Trojan andOther income and expenses

07

08（Fiscal year）

Daimaru
Matsuzakaya Holdings
JFR＊1 The figures of Matsuzakaya
Holdings for and before fiscal 2005
are the consolidated figures of
Matsuzakaya Group before its
transition to holding company.
＊2 Sales of Daimaru for and before
fiscal 2006 include other operating
revenue.
＊3 F o r f i s c a l 2 0 0 7 , f u l l - y e a r
consolidated figures are used for
Matsuzakaya Group.

43

Total Assets

361,749

370,364

776,616

375,513805,375（Unit: ￥Million）

increasingly kept from buying big-ticket and fashion● Other businesses

items, which are the main products of department

Though the companies including the integrated

stores, and gaisho sales were sluggish, though fooddesign and construction company and staﬃng

sales remained steady. As a result, sales in thiscompany addressed the improvement of proﬁtability

segment decreased by 7.0% to ¥836,189 million

through diﬀerentiation and characterization in theirand operating income also fell by 36.6% torespective business ﬁelds, sales in this segment¥21,616 million in spite of the eﬀorts to streamline

decreased by 15.2% to ¥91,688 million partly due

selling, general and administrative expenses.

to a signiﬁcant decline in the revenue of J. Front

209,813217,642

217,493

Design & Construction Co., Ltd. Operating income

04

05

06

07
08
（Fiscal year）● Supermarket businessalso fell by 35.6% to ¥2,558 million partly because

In September 2008, four supermarket companiesof the temporary expenses incurred by JFR Card

including Daimaru Peacock and Matsuzakaya Store

Co., Ltd. to issue Matsuzakaya Card.

were integrated into a new company named
Peacock Stores Ltd. to improve competitivenessand proﬁtability.

Net Assets

70,44664,508316,268

109,308

60,182

77,32891,803315,854（Unit: ￥Million）

04

05

06

07
08
（Fiscal year）

Financial condition

Using this opportunity of integration, the company

We worked on making eﬀective use of the assets

strengthened purchasing capabilities through theowned by the Group and reducing interest-bearing

centralization of product buying functions, as welldebt to improve the eﬃciency of assets and funds,

as developing information systems including POS

while unifying the management of the funds of theand unifying the headquarters functions, to further

Group to improve ﬁnancial strength. These eﬀorts

increase marketing capabilities and management

resulted in total assets of ¥776,616 million (aeﬃciency. In order to strengthen revenue base,decrease of ¥28,759 million compared with the end

Yokodai and Korigaoka stores were remodeled asof the previous period), whereas total liabilities were

Peacock Stores and new type small urban stores¥460,347 million (a decrease of ¥29,173 million

Exe Peacock opened. In addition, the company

compared with the end of the previous period) anddeveloped private brand products combining foodtotal net assets amounted to ¥316,268 million (ansecurity and safety

increase of ¥414 million compared with the end ofwith

aﬀordability

andthoroughly controlled products to enhance thethe previous period).

accuracy of business operation.

As a result, return on asset (ROA) was 3.6% andThough we implemented these measures, sales andshareholders equity ratio was 39.6%.

operating income in this segment decreased by
2.0% and 39.0% to ¥130,660 million and ¥1,105
million respectively due to a decline in purchaseCash ﬂows

amount per person, which was attributable to

The Group is making eﬀorts to generate stableconsumers growing awareness of the defense ofoperating cash ﬂows and secure a wide range of

their livelihoods, and the eﬀects of the rebuilding

ﬁnancing methods to ensure appropriate funds forand closure of large scale stores.

business activities, maintain liquidity and achieve asound ﬁscal condition. We raise working capital,

Daimaru
Matsuzakaya Holdings
JFR＊1 The figures of Matsuzakaya
Holdings for and before fiscal 2005
are the consolidated figures of
Matsuzakaya Group before its
transition to holding company.
＊2 Sales of Daimaru for and before
fiscal 2006 include other operating
revenue.
＊3 F o r f i s c a l 2 0 0 7 , f u l l - y e a r
consolidated figures are used for
Matsuzakaya Group.

44● Wholesale businessbusiness investment funds and investment and loan

Though Daimaru Kogyo, Ltd. opened a new market

funds needed in the future to maintain the growth ofand developed new merchandise in the existing

the Group through borrowing and the issue of bonds

businesses, it suﬀered weak sales of industrial

in addition to cash reserves and cash ﬂows frommaterials and apparel partly because of theoperating activities.

deteriorating market environment and sales in thisWe generated a cash inﬂow of ¥22,686 million fromsegment decreased by 3.8% to ¥87,139 million.

operating activities because of income before

However, its continuing eﬀorts to improve operating

income taxes and minority interests of ¥8,459

proﬁt margin and the thorough reduction of selling,million, depreciation of ¥13,257 million and income

general and administrative expenses through thetaxes paid of ¥12,934 million. Investing activities

standardization and centralization of businessresulted in a cash outﬂow of ¥11,676 million due tooperation resulted in operating income of ¥3,572

a cash outﬂow of ¥12,765 million from themillion, up 7.4%.

acquisition of ﬁxed assets including the remodelingof department stores and a cash inﬂow of ¥4,618
million from the sales of marketable securities.

Financing activities including the repayment of❷ Laws and regulations and legal revisions

loans and the payment of dividends led to a cash

The Group is subject to the laws and regulations

outﬂow of ¥13,510 million.

relating to the new opening of large-scale retailAs a result, cash and cash equivalents at the end of

stores, antitrust, consumer protection, tax systems

the consolidated ﬁscal year under review stood atand environment and recycling. In addition, a rise in¥32,307 million, a decrease of ¥2,636 million

consumption tax rate resulting from the futurecompared with the end of the previous period,

amendment to tax systems could reduce consumer

whereas the balance of interest-bearing debt

spending. Thus these laws and regulations andamounted to ¥94,677 million, a decrease oflegal revisions may lead to a restriction of business¥8,365 million compared with the end of theactivities, an increase in costs and a decline inprevious period.

sales, which could adversely aﬀect the performanceand ﬁnancial position of the Group.

Basic policy on proﬁt distribution anddividends❸ Changes in natural environment and accidents

The basic policy of JFR is to divide up proﬁts

typhoons, and unexpected accidents could damage

appropriately with a dividend payout ratio of 30% in

stores and facilities, lead to a loss of salesconsideration of its proﬁt level, future capital

opportunities and aﬀect operations. Abnormal

investment and cash ﬂow trends while maintaining

weather conditions including cold summers andand improving sound ﬁnancial position.

warm winters may also lead to a decrease in sales

We willNatural disasters, including earthquakes, ﬂoods andalso consider stock buyback from time to time toof the Group s main products including clothing andimprove capital eﬃciency and implement capital

foodstuﬀs. Thus changes in natural environment

policies in a ﬂexible manner.

and accidents could adversely aﬀect the

We intend to use retained earnings to strengthen

performance and ﬁnancial position of the Group.

marketing capabilities through store remodeling andbusiness expansion and increase ﬁnancial strength❹ Information management

in order to heighten our corporate value.

The Group has an internal system in place to strictly

For the period under review, JFR has decided to pay

manage and protect personal and conﬁdential

an annual dividend of ¥8: an interim dividend of

information held by the Group. However, leaks of¥4.50 and a term-end dividend of ¥3.50.

such information caused by unexpected accidents

Our annual dividend for the next period is expected

and incidents could damage the reputation of theto be ¥6.

Group and adversely aﬀect the performance andﬁnancial position of the Group.

Business risk factors❺ Overseas operations

The Group s business risk factors that could have a

The Group is engaged in business activities abroadmaterial impact on investment decisions aremainly in the wholesale business segment. In suchdiscussed below.

overseas operations, unpredictable economic and

The forward-looking statements herein are based on

currency ﬂuctuations, political and social confusion

the Group s expectations as of February 28, 2009,

arising from terrorism, wars and civil wars andand could be aﬀected by domestic and overseas

legislative and taxation changes could adversely

economic conditions. Therefore, the Group s

aﬀect the performance and ﬁnancial position of thebusiness risk factors are not limited to them.

Group.

❶ Business environment❻ Signiﬁcant lawsuits

Economic conditions, including business,

During the consolidated ﬁscal year under review,

consumption and ﬁnancial trends, and competition

there were no lawsuits that had a material impact

with other retailers of the same and diﬀerent types

on the Group. However, if a signiﬁcant lawsuit

have a material impact on the Group s mainoccurs and judgment is taken against the Group in

department store and supermarket businessthe future, the performance and ﬁnancial position ofsegments. These business environment factors

the Group could be adversely aﬀected.

could adversely aﬀect the performance and ﬁnancial
position of the Group.

45

CONSOLIDATED BALANCE SHEETS
J. Front Retailing Co., Ltd. and Consolidated Subsidiaries
February 28, 2009 and February 29, 2008

Millions of yen

ASSETS

2009

2008

2009

¥32,858
1,093
62,137(743)
42,93910,99327,554
176,833¥37,562
1,531
74,311(784)
45,154
10,34925,400
193,525$335,937
11,175635,283(7,596)
439,004
112,391
281,7091,807,924

Property and equipment
Land (Note 5)
Buildings and structures (Notes 5, 9 and 10)
Other
Construction in progress
Total
Accumulated depreciation
Net property and equipment

334,271342,240
12,8792,362
691,753(224,579)
467,173

335,025
346,189
14,716
1,047
696,979(224,190)
472,788

3,417,554
3,499,029
131,674
24,1497,072,416(2,296,074)
4,776,332

Investments and other assets:
Investment securities (Notes 4 and 5)
Investments in unconsolidated subsidiaries and affiliates
Long-term loans
Leasehold and other deposits
Deferred tax assets (Note 12)
Other
Total investment and other assets

30,3303,701
1,089
50,04812,26335,176132,608

44,582
3,834
1,205
47,362
10,00832,068139,059

310,091
37,839
11,134
511,686
125,376359,636
1,355,771¥776,616¥805,375$7,940,047

Current assets:
Cash on hand and in banks (Note 3)
Marketable securities (Notes 3 and 4)
Notes and accounts receivable:
Less: allowance for doubtful accounts
Inventories
Deferred tax assets (Note12)
Other current assets
Total current assets

Total assets
See notes to consolidated financial statements.

46

Thousands of
U.S. dollars(Note 1)

Thousands of
U.S. dollars(Note 1)Millions of yen

LIABILITIES AND NET ASSETS

Current liabilities:
Notes and accounts payable
Short-term bank loans (Note 5)
Current portion of long-term debt (Note 5)
Income taxes payable (Note 12)
Advances received
Gift certificates
Allowance for employees' bonuses
Allowance for directors' and corporate auditors' bonuses
Reserve for sales promotion
Reserve for loss on collection of gift certificates
Reserve for loss on business restructuring (Note 10)
Other current liabilities
Total current liabilities
Long-term liabilities:
Bonds (Note 5)Long-term loans payable (Note 5)
Deferred tax liabilities (Note 12)
Deferred tax liabilities on revaluation
Reserve for retirement benefits (Note 6)
Reserve for directors' and corporate auditors'
retirement allowances
Negative goodwill
Other
Total long-term liabilities
Total liabilities

2009

2008

2009

¥79,685
42,556
14,0003,563
29,23235,275
7,735
185
354
7,317
2,679
51,644274,228¥89,956
47,968−
11,31430,31936,844
6,216
263
1,999
5,975
−
47,400278,259$814,692
435,088
143,135
36,428298,865
360,648
79,082
1,891
3,619
74,80827,390528,0032,803,681

5,000
33,121
98,072
1,492
34,422

19,00036,073
101,919
1,518
36,14351,120338,626
1,002,679
15,254351,927

51

206

521

8,086
5,871
186,118
460,347

10,502
5,896
211,260
489,520

82,67060,025
1,902,852
4,706,543

Net assets (Note 7):
Shareholders' equity:
Common stock:
Authorized: 2,000,000 thousand shares
Issued: 536,238,328 shares in 2009 and 2008
Capital surplus
Retained earnings
Less: Treasury stock, at cost, 7,507,521 shares in 2009
7,301,098 shares in 2008
Total shareholders' equity

30,000209,657
75,31030,000209,787
72,938306,717
2,143,513
769,962(5,980)308,987(5,973)306,753(61,139)
3,159,053

Valuation and translation adjustments:
Unrealized gains (losses) on available-for-sale securities
Deferred gains (losses) on hedges
Total valuation and translation adjustments
Stock acquisition rights
Minority interests
Total net assets
Total liabilities and net assets(1,161)35(1,125)130
8,276
316,268¥776,616

1,098
(29)
1,069
136
7,895
315,854¥805,375(11,870)358(11,502)
1,329
84,6133,233,494$7,940,047

See notes to consolidated financial statements.

47

CONSOLIDATED STATEMENTS OF INCOME
J. Front Retailing Co., Ltd. and Consolidated Subsidiaries
Years ended February 28, 2009 and February 29, 2008

Thousands of
U.S. dollars(Note 1)Millions of yen

Sales:Net sales
Real estate lease income
Operating expenses:
Cost of sales
Cost of real estate lease
Gross profit
Selling, general and administrative expenses
Operating income
Other income (expenses):
Interest and dividend income
Interest expenses
Net gain (loss) on sales or disposal of fixed assets
Gain on sales of investment securities
Loss on revaluation of investment securities
Loss on impairment (Note 9)
Gain on restructuring liabilities
Amortization of negative goodwill
Provision for loss on collection of gift certificates
Loss on business restructuring (Note 10)
Other, net
Income before income taxes and minority interests
Income taxes: (Note 12)
Current
Deferred
Minority interests in earnings of consolidated subsidiaries
Net income
See notes to consolidated financial statements.

48

2009

2008

2009

¥1,092,448
4,242
1,096,690¥1,013,221
3,181
1,016,402$11,169,083
43,37011,212,453

825,628
1,779
827,407269,282
241,189
28,092

763,698
1,403
765,101
251,301
211,583
39,717

8,441,141
18,1888,459,329
2,753,113
2,465,893
287,210910(1,616)(1,748)1,352(9,833)(2,824)
3,317
2,336(3,731)(5,761)(2,033)(19,634)642(1,543)
(723)
32
(362)
(2,078)2,447
1,199(4,602)−586(4,404)

9,304(16,522)(17,871)
13,823(100,532)(28,872)
33,91323,883(38,145)(58,900)(20,785)(200,736)

8,459

35,31486,484

5,812(5,275)537

15,710(1,756)
13,95359,421(53,931)5,490

751¥7,170822¥20,538

7,678$73,305

CONSOLIDATED STATEMENTS OF CHAGES IN NET ASSETS
J. Front Retailing Co., Ltd. and Consolidated Subsidiaries
Years ended February 28, 2009 and February 29, 2008

Millions of yen

Balance, February 28, 2007
Increase due to stock transfer
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Net changes of items other than shareholders'equity during the year
Balance, February 29, 2008
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Disposal of treasury stock due to stock exchange
Decrease in affiliates accounted forby the equity method
Net changes of items other than shareholders'equity during the year
Balance, February 28, 2009

Number ofshares issued

Commonstock

270,830,356
271,707,972¥20,283
9,716¥23,184
185,921682
0(6,300,000)

536,238,328

Capitalsurplus30,000209,787

Retainedearnings¥60,982(3,745)
20,538(2)(4,834)72,938(4,760)
7,170

(63)
(67)

Treasurystock, atcost¥(5,493)(5,448)135
4,834(5,973)

(364)
180
176

(38)

536,238,328¥30,000¥209,657¥75,310

Total
shareholders'equity¥98,956
195,638(3,745)
20,538(4,766)
132−306,753(4,760)
7,170
(364)
116
109
(38)

¥(5,980)¥308,987

Millions of yen
Unrealized gains Deferred(losses) on
gains
available-for-sale (losses) on
securities
hedgesBalance, February 28, 2007
Increase due to stock transfer
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Net changes of items other than shareholders'equity during the year
Balance, February 29, 2008
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Disposal of treasury stock due to stock exchange
Decrease in affiliates accounted forby the equity method
Net changes of items other than shareholders'equity during the year
Balance, February 28, 2009

Total
valuation andtranslation
adjustments

StockacquisitionrightsMinority
interests

Total net assets¥6,561¥(1)¥6,560−¥3,791¥109,308
195,638(3,745)
20,538(4,766)132−(5,462)
1,098

(28)
(29)

(5,491)
1,069

136
136

4,103
7,895

(1,251)
315,854(4,760)
7,170
(364)
116
109
(38)

(2,260)¥(1,161)65¥35(2,195)¥(1,125)

(5)
¥130

381
¥8,276(1,819)¥316,268

See notes to consolidated financial statements.

49

Thousands of U.S. dollars (Note 1)

Balance, February 29, 2008
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Disposal of treasury stock due to stock exchange
Decrease in affiliates accounted forby the equity method
Net changes of items other than shareholders'equity during the year
Balance, February 28, 2009

Number ofshares issued

Commonstock

Capitalsurplus536,238,328$306,717$2,144,842

Retainedearnings$745,711(48,666)
73,305

(644)
(685)

Treasurystock, atcost$(61,067)(3,722)
1,840
1,799

(389)

536,238,328$306,717$2,143,513$769,962

Total
shareholders'equity$3,136,213(48,666)
73,305(3,722)
1,186
1,114
(389)

$(61,139)$3,159,053

Thousands of U.S. dollars (Note 1)
Unrealized gains Deferred(losses) on
gains
available-for-sale (losses) on
securities
hedgesBalance, February 29, 2008
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Disposal of treasury stock due to stock exchange
Decrease in affiliates accounted forby the equity method
Net changes of items other than shareholders'equity during the year
Balance, February 28, 2009
See notes to consolidated financial statements.

50$11,226$(296)

Total
valuation andtranslation
adjustments

StockacquisitionrightsMinority
interests$10,929$1,390$80,718

Total net assets$3,229,261(48,666)
73,305(3,722)
1,186
1,114
(389)

(23,106)$(11,870)

665
$358

(22,441)$(11,502)(51)$1,3293,895$84,613(18,597)$3,233,494

CONSOLIDATED STATEMENTS OF CASH FLOWS
J. Front Retailing Co., Ltd. and Consolidated Subsidiaries
Years ended February 28, 2009 and February 29, 2008

Millions of yen

Thousands of
U.S. dollars(Note 1)

2009

2008

2009

¥8,45913,2574,554(2,336)476
1,439(1,603)(1,645)
1,342
2,679
(910)
1,616
(122)
−
1,665
(1,352)
9,833
12,1152,214(10,264)(1,112)(1,989)(1,953)36,362899(1,641)(12,934)
22,686¥35,314
11,301
2,078(1,199)30
133(3,606)
118
5,975
−
(643)
1,543
(158)
(3,827)
4,174
(32)
362
3,854
(488)
(2,012)(3,357)(2,961)(3,021)
43,579738(1,594)(14,927)
27,796$86,484
135,538
46,560(23,883)
4,867
14,712(16,389)(16,818)
13,72027,390(9,304)
16,522(1,247)−
17,023(13,823)
100,532
123,863
22,636(104,938)(11,369)(20,335)(19,967)
371,762
9,191(16,777)(132,236)
231,939

Cash flows from investing activities:
Purchase of securities
Proceeds from sales of securities
Purchase of property and equipment
Proceeds from sale of property and equipment
Increase in long-term loans
Proceeds from collection of long-term loans
Net (increase) decrease in short-term loans
Other
Net cash provided by (used in) investing activities(1,903)
4,618(12,765)
526
(29)
148
111
(2,383)(11,676)(407)
416(16,122)
21,322
(23)
156
327
122
5,792

(19,456)
47,214(130,508)
5,378
(296)
1,513
1,135
(24,364)(119,374)

Cash flows from financing activities:
Net increase (decrease) in short-term bank loans
Proceeds from long-term bank loans
Payment of long-term bank loans
Redemption of bonds
Purchase of treasury stock
Cash dividends paid
Cash dividends paid to minority shareholders
Other
Net cash used in financing activities
Effect of exchange rate changes
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase due to stock transfer
Cash and cash equivalents at end of year (Note 3)

16,6991,500(26,563)−(357)(4,763)(111)
87(13,510)(136)(2,636)34,944−¥32,307(15,889)
8,499(14,007)(13,500)(752)(3,722)(68)132(39,309)(73)(5,794)
33,103
7,634¥34,944

170,729
15,336(271,578)−(3,650)(48,696)(1,135)889(138,125)(1,390)(26,950)
357,264−$330,304

Cash flows from operating activities:
Income before income taxes and minority interests
Depreciation
Loss on impairment
Amortization of negative goodwill
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in allowance for bonuses
Decrease in reserve for employees' retirement benefits
Increase in reserve for sales promotion
Decrease in reserve for loss on collection of gift certificates
Increase in reserve for business restructuring
Interest and dividend income
Interest expenses
Equity in earnings of affiliated companies
Gain on sales of property and equipment, net
Loss on sales or disposal of property and equipment
Gain on sale of investment securities, net
Write-down of investment securities
Increase in notes and accounts receivable
Increase in inventories
Increase in notes and accounts payable
Increase in other receivables
Increase in prepaid expenses
Other
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities

See notes to consolidated financial statements.

51

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
J. Front Retailing Co., Ltd. and Consolidated Subsidiaries
Years ended February 28, 2009 and February 29, 2008

1

BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS

On September 3, 2007, J. Front Retailing Co., Ltd. was established

Law. Some supplementary information included in the statutory

as a joint holding company through the management integration

Japanese language consolidated ﬁnancial statements, but notwhich was agreed between the Daimaru, Inc. and Matsuzakayarequired for fair presentation, is not presented in the accompanying

Holdings Co., Ltd.

consolidated ﬁnancial statements.

The accompanying consolidated ﬁnancial statements of J. Front

All ﬁgures in the consolidated ﬁnancial statements and notes are

Retailing Co., Ltd. (hereafter the Company ) and its consolidated

stated in millions of Japanese yen by discarding fractional amounts

subsidiaries have been prepared in accordance with the provisionsof less than ¥1 million as permitted by the Financial Instruments

set forth in the Japanese Financial Instruments and Exchange Law

and Exchange Law. As a result, the totals shown in theand its related accounting regulations and in conformity withconsolidated ﬁnancial statements and notes in yen do notaccounting principles generally accepted in Japan, which arenecessarily agree with the sum of the individual amounts.

diﬀerent in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards.

The translations of the Japanese yen amounts into U.S. dollars
are included solely for the convenience of readers outside Japan,

The accompanying consolidated ﬁnancial statements have beenusing the prevailing exchange rate at February 28, 2009, which

restructured and translated into English (with some expandedwas ¥97.81 to U.S. $1. Such translations should not be construed

descriptions) from the consolidated ﬁnancial statements of theas representations that the Japanese yen amounts have been,

Company, prepared in accordance with Japanese GAAP and ﬁled

could have been or could in the future be converted into U.S.

with the appropriate Local Finance Bureau of the Ministry of

dollars at this or any other rate of exchange.

Finance as required by the Financial Instruments and Exchange

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Principles of consolidation

the Company acquired control of the respective subsidiaries.

The consolidated ﬁnancial statements include the accounts of the

The diﬀerences between the cost and underlying net equity ofCompany and its 27 (38 in 2008) signiﬁcant subsidiaries (hereafterinvestments in consolidated subsidiaries (goodwill or negative

the Companies ).

goodwill) are amortized on a straight-line basis over 5 years with

Investments in 5 (6 in 2008) signiﬁcant aﬃliated companies areaccounted for by the equity method after the elimination of

the exception of minor diﬀerences, which are charged or credited
to income in the period of acquisition.

unrealized intercompany proﬁts. Investments in the remaining

All the Company s unconsolidated subsidiaries are of a limited

unconsolidated subsidiaries and aﬃliated companies are notscale in terms of total assets, net sales, proﬁt, retained earnings

accounted for by the equity method because of the immaterial

and other indicators, and taken together they do not have aeﬀect on the consolidated ﬁnancial statements. Such investments

signiﬁcant impact on the consolidated ﬁnancial statements.

are, therefore, stated at cost, adjusted for any substantial andnon-recoverable impairment in value, and income from thoseunconsolidated subsidiaries and aﬃliated companies is recognized(b) Foreign currency translation

only when the Companies receive dividends therefrom.

All monetary assets and liabilities denominated in foreign

In accordance with the accounting standards for consolidation,

currencies are translated into Japanese yen at the exchange rate at

the Company s subsidiaries include companies over which

the balance sheet date, and translation gains and losses aresubstantial control is exerted through either majority ownership ofcharged to income.

voting stock and/or by other means. Also, the Company s aﬃliatedcompanies include companies over which the Company has theability to exercise signiﬁcant inﬂuence.
All signiﬁcant intercompany transactions and unrealized proﬁts
among the Group have been eliminated in consolidation.
In the elimination of investments in subsidiaries, the assets andliabilities of the subsidiaries, including the portion attributable tominority shareholders, are evaluated using the fair value at the time

52(c) Cash and cash equivalents
In preparing the consolidated statements of cash ﬂows, cash andcash equivalents include cash on hand, readily available deposits
and short-term highly liquid investments with maturities notexceeding three months at the time of acquisition.

(d) Securities(g) Inventories

No trading securities and held-to-maturity securities are held by theInventories are stated at cost determined principally by the retailCompanies. Equity securities issued by subsidiaries and aﬃliatedinventory method.

companies which are not consolidated or accounted for by theequity method are stated at moving-average cost. Available-for-salesecurities with fair market value are stated at fair market value. Net(h) Property and equipment

unrealized gains or losses on these securities are reported, net of

Property and equipment are stated at cost. Depreciation of

applicable income taxes, as a separate component of net assets inbuildings and structures is computed mainly by the straight-line

the balance sheets. Realized gains and losses on sale of suchmethod and other properties are depreciated using thesecurities are computed using the moving-average cost method.

declining-balance method over the estimated useful lives of the

Available-for-sale securities with no available fair market value areassets as prescribed by the Corporate Tax Law. Maintenance andstated at moving average cost.

repairs, including minor renewals and improvements, are charged toincome as incurred. The range of useful lives is principally 3 to 50(e) Derivatives and hedging transactions

years for buildings and structures and 2 to 20 years for otherproperties.

Derivative ﬁnancial instruments are stated at fair value andCertain subsidiaries had used the declining-balance method inchanges in the fair value are charged to income unless thedepreciating building attachments and structures, but eﬀective thederivative ﬁnancial instruments are used for hedging purposes.

year ended February 28, 2009, they changed their depreciation

If derivative ﬁnancial instruments are used as hedges and meetmethod to the straight-line method. The eﬀect of this change wascertain hedging criteria, the Companies defer recognition of gains

to increase operating income and income before income taxes andor losses resulting from changes in the fair value of derivativeminority interests by ¥1,295 million ($13,240 thousand), comparedﬁnancial instruments until the related losses or gains on the hedged

with the previous method.

items are recognized.

In addition, pursuant to an amendment to the Corporate Tax Law,

In cases where forward foreign exchange contracts are used as

the salvage value (5% of the acquisition costs) of the assets fully

hedges and meet certain hedging criteria, hedged items are statedd e p r e c i a t e d b a s e d o n t h e C o r p o r a t e Ta x L a w b e f o re t h eusing the forward foreign exchange contract rates.

amendment is depreciated equally over ﬁve years starting from theyear ended February 28, 2009. The eﬀect of this change was toAlso, if interest rate swap contracts are used as hedges and meetdecrease operating income and income before income taxes andcertain hedging criteria, the net amount to be paid or received

minority interests by ¥736 million ($7,525 thousand), compared

under the interest rate swap contract is added to or deducted fromwith the previous method.

the interest on the assets or liabilities for which the swap contract
was executed.
The Companies use forward foreign currency contracts and(i) Impairment of ﬁxed assetsinterest rate swaps as derivative ﬁnancial instruments only for the

The Companies review their ﬁxed assets for impairment wheneverpurpose of mitigating future risks of ﬂuctuation of foreign currency

events or changes in circumstances indicate the carrying amountexchange and increases in the interest rate.

of an asset or asset group may not be recoverable. An impairment

The related hedged items are trade receivables, trade payables,
loans payables, and interest on foreign currency bonds.

loss would be recognized if the carrying amount of an asset or
asset group exceeds the sum of the undiscounted future cash ﬂows
expected to result from the continued use and eventual disposition(f) Allowance for doubtful accountsof the asset or asset group. The impairment loss would bemeasured as the amount by which the carrying amount of the asset

Allowance for doubtful accounts is provided principally for amounts

exceeds its recoverable amount, which is the higher of thesuﬃcient to cover possible losses on collection. It consists of the

discounted cash ﬂows from the continued use and eventual

estimated uncollectible amount with respect to speciﬁc items anddisposition of the asset or the net selling price at disposition.

possible losses on collection calculated by applying a percentage
based on collection experience to the remaining items.

53

(j) Software
Software purchased or internally developed for internal use is(q) Allowance for directors and corporate auditors
retirement beneﬁts

amortized using the straight-line method over its estimated useful life

An allowance for directors and corporate auditors retirement(ﬁve years).

beneﬁts is provided by certain consolidated subsidiaries based on
the internal rules for the estimated amount which would be payable
if all oﬃcers were to retire at the balance sheet date.

(k) Reserve for Sales Promotion
Reserve for sales promotion is provided for the estimated future

The payments are subject to an approval of the shareholders
meeting.

costs on the issuance of point card certiﬁcates and other gift
certiﬁcates based on the historical experience rate of usage.

(r) Leases
Under the current Japanese accounting standards for leases,(l) Allowance for employees bonuses

ﬁnance leases that deem to transfer ownership of the leased

An allowance for employees bonuses is provided for the estimatedproperty to the lessee are to be capitalized, while other ﬁnanceamounts which is attributable to the ﬁscal year.

leases are permitted to be accounted for as operating leasetransactions if certain as if capitalized information is disclosed in
the notes to the lessee s ﬁnancial statements. All other leases are(m) Allowance for directors and corporate auditors
bonuses
An allowance for directors and corporate auditors bonuses isaccounted for as operating leases.

provided for the estimated amounts which is attributable to the(s) Income taxes

ﬁscal year.

Income taxes consist of national and local income taxes.
The Companies recognize the tax eﬀects of temporary
diﬀerences between the ﬁnancial statement s carrying amounts and(n) Reserve for loss on collection of gift certiﬁcates

the tax basis of assets and liabilities. The provision for income

Reserve for loss on collection of gift certiﬁcates is provided fortaxes is computed based on the income before income taxes andestimated future loss to be incurred when gift certiﬁcates wereminority interests included in the statements of income of each ofcollected after derecognition of the related liability based on the

the Companies. The assets and liabilities approach is used tohistorical experience.

recognize deferred tax assets and liabilities for the expected future
tax consequences of temporary diﬀerences.

(o) Reserve for loss on business restructuring
Reserve for loss on business restructuring is provided for estimated(t) Per share information

loss on restructuring aﬃliated companies.

Net income per share is based on the weighted average number ofshares of common stock outstanding during each year and diluted
net income per share reﬂects the potential dilution that could occur(p) Reserve for retirement beneﬁts
Reserve for retirement beneﬁts is provided based on the projected
beneﬁt obligations and plan assets at the balance sheet date.
The unrecognized prior service cost obligations are recognized
as expenses and recorded in equal amounts mainly 10 ‒ 12 years

if it were converted into common stock.
Cash dividends per share represent interim dividends resolved by
the Board of Directors in each year and year-end dividends
resolved by the Board of Directors subsequent to the end of theﬁscal year.

from their recognition, which are less than the average remaining
service years of the employees. Actuarial gains or losses incurred54

during the year are amortized by using the straight-line method over(u) Reclassiﬁcationa certain period of time (mainly 10 ‒ 12 years), which are less than

Certain prior year amounts have been reclassiﬁed to conform to thethe average remaining service years of the employees,

current year presentation. These changes had no impact oncommencing from the following ﬁscal year after they are incurred.

previously reported results of operations.

3

CASH AND CASH EQUIVALENTS

Cash and cash equivalents in the statements of cash ﬂows at February 28, 2009 and February 29, 2008 consisted of the following:

Millions of yen
2009

Cash on hand and in banks
Time deposits with maturities exceeding three months
Short-term investments
Cash and cash equivalents

4¥32,858(568)
16¥32,307

Thousands of
U.S. dollars
2009

2008

$335,937(5,807)164$330,304¥37,562(2,635)
16¥34,944

SECURITIESMarketable securities classiﬁed as available-for-sale securities at February 28, 2009 and February 29, 2008 are as follows:
Thousands of U.S. dollars

Millions of yen
February 28, 2009
Acquisition
cost

Securities whose carrying
value exceeds their acquisition cost:
Equity securities
Debt securities
Subtotal
Securities whose acquisition costexceeds their carrying value:
Equity securities
Debt securities
Subtotal
Total

Carrying
value

Acquisition
Unrealized
cost
gains (losses)

Carrying
value

Unrealized
gains (losses)¥2,417872
3,290¥4,420878
5,299¥2,0026
2,009$24,711
8,915
33,637$45,1908,977
54,176$20,468
61
20,54021,093
1,812
22,905¥26,195

17,127
1,715
18,842¥24,142(3,966)(96)(4,063)¥(2,053)

215,653
18,526234,179$267,815

175,105
17,534
192,639$246,825(40,548)(980)(41,540)$(20,990)

Millions of yen
February 29, 2008
Acquisition
cost

Securities whose carrying
value exceeds their acquisition cost:
Equity securities
Debt securities
Subtotal
Securities whose acquisition costexceeds their carrying value:
Equity securities
Debt securities
Subtotal
Total

Carrying
value

Unrealized
gains (losses)¥7,152
2,631
9,784¥13,774
2,648
16,423¥6,621
17
6,638

27,066361
27,428¥37,212

22,177360
22,538¥38,961(4,888)(0)(4,889)¥1,74955

The Companies review available-for-sale securities with fair value

losses recognized for available-for-sale securities whose fair value

for impairment when the fair value declined more than 30% fromis available for the years ended February 28, 2009 and February

the acquisition cost. When the cost is not considered to be29, 2008 amounted to ￥9,833 million ($100,532 thousand) andrecoverable, impairment loss would be recognized. Impairment￥362 million, respectively.

Available-for-sale securities whose fair value is not available at February 28, 2009 and February 29, 2008 are as follows:
Thousands of
U.S. dollars

Millions of yen
2009

Unlisted equity securities
Other
Total

2008

¥3,172
4,108¥7,281¥3,184
3,967¥7,151

2009$32,430
42,000$74,440

Proceeds from sales of available-for-sale securities and gross realized gains on these sales for the year ended February 28, 2009 was￥4,618 million ($47,214 thousand) and ￥1,352 million ($13,823 thousand), respectively.
The carrying values of debt securities and other securities by contractual maturities for securities classiﬁed as available-for-sale at February
28, 2009 are as follows:
Millions of yen
2009
Due in 1 year Due after 1 year Due after 5 years
or less
through 5 years through 10 years

Debt securities:
Government and municipal bonds
Other
Other securities:
Investment trust
Total

Due after
10 years

¥280
796

¥100
1,416

−
−

−
−

16
¥1,093−¥1,517−−−−

Thousands of U.S. dollars
2009
Due in 1 year Due after 1 year Due after 5 years
or less
through 5 years through 10 years

Debt securities:
Government and municipal bonds
Other
Other securities:
Investment trust
Total

56

Due after
10 years$2,8638,138$1,022
14,477

−
−

−
−

164
$11,175−$15,510

−
−

−
−

5

SHORT-TERM BANK LOANS AND LONG-TERM DEBT

Short-term bank loans at February 28, 2009 and February 29, 2008 consisted of notes to banks and bank overdrafts. The annual weighted
average interest rate applicable to the short-term bank loans was 0.93%. Long-term debt at February 28, 2009 and February 29, 2008
consisted of the following:

Millions of yen

Unsecured 0.76% straight bonds due 2009
Unsecured 0.74% straight bonds due 2009
Unsecured 1.01% straight bonds due 2009
Unsecured 1.10% straight bonds due 2009
Unsecured 1.07% straight bonds due 2011
Unsecured 1.06% straight bonds due 2011
Loans from banks and others due serially to 2021
Total
Less: Current portion of long-term debt

2009

¥6,000
3,000
3,000
2,000
3,000
2,000
37,49456,494
18,373¥38,1212008

Thousands of
U.S. dollars
2009¥6,000
3,000
3,000
2,000
3,000
2,000
62,55781,557
26,484¥55,073$61,343
30,67230,672
20,44830,672
20,448383,335
577,589
187,844$389,745

Millions of yen

Thousands of
U.S. dollars

Annual maturities of long-term debt including bonds at February 28, 2009 are as follows:

Years ending February 28 or 29

2010
2011
2012
2013
2014 and thereafter
Total¥18,373
10,956
11,6348,390
7,141¥56,494$187,844
112,013
118,945
85,77973,009$577,589

The carrying amounts of assets pledged as collateral for short-term loans of ￥2,886 million ($29,506 thousand) and the long-term loans of￥11,685 million ($119,466 thousand) at February 28, 2009 were as follows:

Millions of yen

Land
Buildings and structures
Investment securities
Total¥12,608
15,429521¥28,560

Thousands of
U.S. dollars$128,903
157,7455,327$291,995

As is customary in Japan, the Companies maintain substantial deposit balances with banks with which they have borrowings. Such deposit
balances are not legally or contractually restricted as to withdrawal.

57

6

RESERVE FOR RETIREMENT BENEFITSThe Companies have deﬁned beneﬁt pension plans, i.e., corporate

employees. Such payments are not included in retirement beneﬁt

pension plans, tax qualiﬁed pension plans, lump-sum retirement

obligations actuarially computed in accordance with the accounting

plans and deﬁned contribution pension plans. In certain cases,

standard for retirement beneﬁts. Certain consolidated subsidiaries

additional severance payments may be granted to the eligible

have established retirement beneﬁt trusts.

The following table sets forth the funded and accrued status of the plans, and the amounts recognized in the consolidated balance sheets at
February 28, 2009 and February 29, 2008 for the Companies retirement beneﬁt plans:
Thousands of
U.S. dollars

Millions of yen

Retirement benefit obligation
Plan assets at fair value
Retirement benefit trusts
Unfunded retirement benefit obligation
Unrecognized prior service cost
Unrecognized actuarial differences
Prepaid pension costReserve for retirement benefits

2009¥84,230(35,720)(8,095)40,414
3,428(19,589)
24,253
10,168¥34,4222008¥92,686(50,471)(14,530)
27,683
3,007(2,791)
27,8998,244¥36,1432009$861,159(365,198)(82,762)
413,189
35,048(200,276)
247,960
103,957$351,927

The component of net retirement beneﬁt costs for the years ended February 28, 2009 and February 29, 2008 are as follows:
Thousands of
U.S. dollars

Millions of yen

Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Recognized actuarial differences
Net retirement benefit cost
Contribution to defined contribution plan
Total

2009

¥2,961
1,798(1,206)
(552)
294
3,295
283
¥3,5792008¥2,602
1,506
(928)
(501)
(824)
1,855
147
¥2,003

2009$30,273
18,383(12,330)(5,644)
3,006
33,688
2,893$36,591

Assumptions used in the calculation of the above information were as follows:

Interperiod allocation method of estimated retirement benefits
Discount rate
Expected return on plan assets
Amortization of unrecognized prior service costs
Amortization of unrecognized actuarial differences

58

2009

Straight-line
2.0%
1.0%-2.0%
Mainly 10-12 years
10-12 year

2008

Straight-line
2.0%
1.0%-2.0%
Mainly 10-13 year
10-13 years

7

NET ASSETS

Japanese companies are subject to the Corporate Law of Japan (the Corporate Law ). The signiﬁcant provisions in the Corporate Law thataﬀect ﬁnancial and accounting matters are summarized below:(a) Dividends(c) Treasury stock and treasury stock acquisition rights

Under the Corporate Law, companies can pay dividends at any

The Corporate Law also provides for companies to purchasetime during the ﬁscal year in addition to the year-end dividend upontreasury stock and dispose of such treasury stock by resolution ofresolution at the shareholders meeting. For companies that meetthe Board of Directors. The amount of treasury stock purchased

certain criteria such as; (1) having the Board of Directors, (2)cannot exceed the amount available for distribution to thehaving independent auditors, (3) having the Board of Corporateshareholders which is determined by speciﬁc formula.

Auditors, and (4) the term of services of the directors is prescribedas one year rather than two years of normal term by its articles ofUnder the Corporate Law, stock acquisition rights, which wereincorporation, the Board of Directors may declare dividends (except

previously presented as a liability, are now presented as a separate

for dividends in kind) at any time during the ﬁscal year if thecomponent of net assets.

company has prescribed so in its articles of incorporation.
Semiannual interim dividends may also be paid once a year upon

The Corporate Law also provides that companies can purchaseresolution by the Board of Directors if the articles of incorporation

both treasury stock acquisition rights and treasury stock. Suchof the company so stipulate. The Corporate Law provides certain

treasury stock acquisition rights are presented as a separate

limitations on the amounts available for dividends or the purchasecomponent of net assets or deducted directly from stockof treasury stock. The limitation is deﬁned as the amount available

acquisition rights.

for distribution to the shareholders, but the amount of net assets
after dividends must be maintained at no less than ¥3 million.

At the Board of Directors

meeting held on April 14, 2009,

distribution of cash dividends amounting to ¥1,851 million(b) Increases/decreases and transfer of common stock,reserve and surplus
The Corporate Law requires that an amount of equal to 10% of($18,924 thousand) was resolved. This distribution has not been
accrued in the consolidated ﬁnancial statements as of February
28, 2009 and is recognized in the period in which they wereresolved.

dividends must be appropriated as a legal reserve (a component ofretained earnings) or as additional paid-in capital (a component of
capital surplus) depending on the equity account charged upon thepayment of such dividends until the total of aggregate amount oflegal reserve and additional paid-in capital equals 25% of thecommon stock. Under the Corporate Law, the total amount ofadditional paid-in capital and legal reserve may be reversed without
limitation. The Corporate Law also provides that common stock,legal reserve, additional paid-in capital, other capital surplus andretained earnings can be transferred among the accounts undercertain conditions upon resolution of the shareholders.

59

8

STOCK OPTIONSThe stock options outstanding as of February 28, 2009 are as follows:

Stock option

1st
2nd

3 rd

4 th

5 th
6 th

Number ofoptions granted

Date of grant

Exercise Period

140,000 common shares

May 23, 2002

Sep. 3, 2007 to
May 23, 2012

161,000 common shares

May 22, 2003

Sep. 3, 2007 to
May 22, 2013

308,000 common shares

May 27, 2004

Sep. 3, 2007 to
May 27, 2014

336,000 common shares

May 26, 2005

Sep. 3, 2007 to
May 26, 2015

63,000 common shares

May 25, 2006

300,000 common shares

May 25, 2006

Sep. 3, 2007 toJul. 14, 2026
Jul. 15, 2008 toJul. 14, 2012

1st

2nd

3rd

4th

140,000

161,000

308,000

336,000

63,000300,000

140,000

161,000
42,000308,000

336,000

63,0007,000

300,000

140,000

119,000

308,000

336,000

56,000300,000

Persons granted
12 directors
4 corporate auditors
6 employees
7 directors
4 corporate auditors
16 executive officers
1 employee
7 directors
4 corporate auditors
14 executive officers
1 employee
7 directors
4 corporate auditors
12 executive officers
1 employee
8 directors
5 corporate auditors
135 employees

The stock option activity is as follows:

Vested:February 28, 2007-outstanding
Exercised
Forfeited
February 29, 2008-outstanding
Exercised
Forfeited
February 28, 2009-outstanding

5th

6th

Price information is as follows:
Yen
Year ended February 28, 2009

Exercise price
Average stock price at time of exercise
Fair value at date of grant

1st

2nd
¥404
−
＊

¥317
634
＊

3rd

4th

¥699
−
＊

5th
¥691
−
＊

6th
¥794
−
279

¥1
661
833

U.S. dollar
Year ended February 28, 2009

Exercise price
Average stock price at time of exercise
Fair value at date of grant

1st
$4.13
−
＊

2nd
$3.24
6.48
＊

3rd
$7.15
−
＊

4th
$7.06
−
＊

5th
$0.01
6.76
8.52

＊Fair value at date of grant is not disclosed since these options were granted before the enforcement of the Corporate Law.
No stock options were exercised during the year ended February 29, 2008.

60

6th
$8.12
−
2.85

9

LOSS ON IMPAIRMENTThe Companies recognized impairment losses on ﬁxed assets including buildings and other assets in stores for the years ended February 28,
2009 and February 29, 2008 as follows:
The Companies identify groups of assets principally on a store or warehouse basis which is the smallest identiﬁable group of assets
generating cash inﬂows.
Thousands of
U.S. dollars

Millions of yen
2009

Buildings and other¥2,8242008¥2,078

2009$28,872

The carrying values of these assets were reduced to the recoverable amounts. The recoverable amounts of stores are measured based on thevalue of use and written-down to nil since no future cash inﬂows are expected.

10 LOSS ON BUSINESS RESTRUCTURING
After the management integration, the Companies have been proceeding business restructuring in order to improve management eﬃciency
throughout the organization. Pursuant to the management s strategic plan, the Companies have recognized loss on business restructuring forthe year ended February 28, 2009 as follows:
Millions of yen

Provision for loss on business restructuring
Impairment loss on buildings and other properties
Other
Total

Yokohama
Matsuzakaya

Imabari
Daimaru

J. Front
Retailing¥2,680397
9¥3,087¥1,2391,331−¥2,570

¥104
−
−
¥104

Total

¥4,0231,728
9¥5,761Thousands of U.S. dollars

Provision for loss on business restructuring
Impairment loss on buildings and other properties
Other
Total

Yokohama
Matsuzakaya

Imabari
Daimaru

J. Front
Retailing$27,400
4,059
92$31,561$12,667
13,608−$26,275$1,063−−$1,063

Total$41,130
17,66792$58,90061

11 LEASES
a. Finance leases
The companies lease machinery and equipment and other assets.
Information regarding ﬁnance leases other than those which deem to transfer ownership of the leased assets to the lessee is as follows:(As a lessee)
Pro forma information of leased assets such as acquisition cost, accumulated depreciation, accumulated impairment loss, obligations underﬁnance leases, depreciation expense and other information of ﬁnance leases as if capitalized basis for the years ended February 28, 2009
and February 29, 2008 was as follows:
Thousands of
U.S. dollars

Millions of yen

Property and equipment (Machinery, equipment, vehicles and other)
Acquisition cost
Accumulated depreciation
Accumulated impairment loss
Net leased assets

2009

2008

2009

¥14,6316,588
364¥7,677¥15,927
8,218
178¥7,529$149,586
67,355
3,722$78,489

Obligations under ﬁnance leases:
Thousands of
U.S. dollars

Millions of yen

Due within one year
Due after one year
Total
Impairment loss on leased assets

2009¥2,568
5,393¥7,9612008¥2,5005,189¥7,690

¥283

¥160

2009

$26,255
55,138$81,392$2,893

Total lease payments and other information:
Thousands of
U.S. dollars

Millions of yen

Total lease payments
Reversal of allowance for impairment loss on leased assets
Depreciation expense
Impairment loss
Adjustment to allowance for impairment loss on leased assets

2009¥2,711
117
2,594
240
−

2008

¥2,322
4
2,318
109
42

2009

$27,717
1,196
26,521
2,454−

Depreciation expense, which is not reﬂected in the accompanying consolidated statements of income, is computed by the straight-line
method over the lease periods.

62

(As a lessor)
Pro forma information of leased assets such as acquisition cost, accumulated depreciation, receivables under ﬁnance leases, depreciation
expense and other information of ﬁnance leases for the years ended February 28, 2009 and February 29, 2008 was as follows:
Thousands of
U.S. dollars

Millions of yen

Property and equipment (Machinery, equipment, vehicles and other)
Acquisition cost
Accumulated depreciation
Net leased assets

2009

2008

¥1,284761¥522¥1,352
649
¥703

2009
$13,127
7,780$5,337

Commitment received under ﬁnance leases:
Thousands of
U.S. dollars

Millions of yen

Due within one year
Due after one year
Total

2009

¥161
361
¥522

2008

¥187
515
¥703

2009

$1,646
3,691$5,337

Lease income and depreciation expense:
Thousands of
U.S. dollars

Millions of yen

Lease income
Depreciation expense

2009

¥186
186

2008

¥188
188

2009

$1,901
1,901

b. Operating leases
Future minimum lease payments under non-cancellable leases subsequent to February 28, 2009 are summarized as follows:

Millions of yen

As a lessee:
Within one year
After one year
Total
As a lessor:
Within one year
After one year
Total

Thousands of
U.S. dollars¥3,48225,602¥29,084$35,600
261,752$297,352¥827
947¥1,775$8,455
9,682$18,14763

12 INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes which in the aggregate, resulted innormal eﬀective statutory tax rates of approximately 40.6% for the years ended February 28, 2009 and February 29, 2008. The tax eﬀects
of signiﬁcant temporary diﬀerences and tax loss carryforwards which resulted in deferred tax assets and liabilities as of February 28, 2009
and February 29, 2008 are as follows:

Millions of yen

Deferred tax assets:
Reserve for retirement benefits
Securities under retirement benefit trusts
Loss on evaluation recognized upon merger of consolidated subsidiaries
Allowance for bonuses
Tax loss carryforwards
Reserve for loss on collection of gift certificates
Loss on impairment
Reserve for loss on business restructuring
Allowance for doubtful accounts
Unrealized profits on fixed assets
Payables related to an amendment to the retirement benefit plan
Inventories
Accrued enterprise tax
Reserve for sales promotion
Other
Gross deferred tax assets
Less: Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Adjustments of book values by fair value method
Deferred gains
Returned shares of retirement benefit trusts
Unrealized gains on available-for-sale securities
OthersTotal deferred tax liabilities
Net of deferred tax assets

Thousands of
U.S. dollars

2009

2008

2009

¥9,769
4,780
4,516
3,165
2,980
2,979
2,849
1,087
1,026
804
783
480
380
143
5,564
41,312(10,297)¥31,015¥11,233
4,606
4,516
3,441
1,269
2,148
2,849
−
890
867
1,217
470
1,051
811
5,719
41,092(11,347)¥29,745$99,877
48,87046,17132,35930,46730,457
29,128
11,113
10,490
8,220
8,005
4,907
3,885
1,462
56,886422,370(105,276)$317,094¥(96,014)(6,585)(3,179)−(52)(105,831)¥(74,816)¥(97,610)(6,813)(6,156)(700)(25)(111,306)¥(81,561)$(981,638)(67,324)(32,502)−(532)(1,082,006)$(764,912)

These deferred tax assets and liabilities are recorded under the following captions of the accompanying consolidated balance sheets:

Millions of yen

Current assets
Investments and other assets
Long-term liabilities

2009¥10,993
12,263(98,072)2008¥10,349
10,008(101,919)

Thousands of
U.S. dollars

13 DERIVATIVE TRANSACTIONSThere was no derivative transaction that is required to disclose its
fair value as of February 28, 2009 and February 29, 2008, since

64

2009

$112,391
125,376(1,002,679)

all derivatives are accounted for under hedge accounting.

14 CONTINGENT LIABILITIESThe Companies had the following contingent liabilities at February 28, 2009:

Millions of yen

Guarantees on employees’ home mortgage loans
Guarantees on bank loans and lease arrangements for a subsidiary
Total

Thousands of
U.S. dollars

¥82
24
¥106

$838
245
$1,08415 PER SHARE INFORMATION
The ﬁnancial data for the computation of basic net income per share for the years ended February 28, 2009 and February 29, 2008 is asfollows:

Millions of yen

Thousandsof shares

Net income

Weighted
average shares

Yen

DollarEPS

For the year ended February 28, 2009:
Basic EPS
Net income available to common shareholders¥7,170528,667¥13.56

For the year ended February 29, 2008:
Basic EPS
Net income available to common shareholders¥20,538

449,037¥45.74$0.14

Net assets per share at February 28, 2009 and February 29, 2008 were calculated as follows:

Millions of yen

Thousandsof shares

Net assets

Common sharesat end of fiscal year

For the year ended February 28, 2009:
Total net assets
Amounts not attributable to common shares:−Stock subscription rights−Minority interests
Net assets attributable to common shares
Outstanding number of common shares issued¥316,268
8,407
(130)
(8,276)¥307,861

For the year ended February 29, 2008:
Total net assets
Amounts not attributable to common shares:−Stock subscription rights−Minority interests
Net assets attributable to common shares
Outstanding number of common shares issued¥315,854
8,031
(136)
(7,895)¥307,823

528,730

528,937

Yen

Dollar

Net assets per shares¥582.27$5.95¥581.9765

16 SEGMENT INFORMATION(a) Business segment information
The Companies operate in the four business segments consisting

real estate leasing, interior construction contract, manufacturingof Department store,

and sales of furniture, credit business, etc.

Super market,

Wholesale and Other.

Other segment includes various business including mail order,
Business segment information for the years ended February 28, 2009 and February 29, 2008 was as follows:
Millions of yen

Year ended February 28, 2009
I. Sales and operating income
Sales1) Sales to outside customers
2) Intersegment sales
Total
Operating expenses
Operating income
II. Assets, depreciation, impairment loss
and capital expenditure
AssetsDepreciation
Loss on impairment
Capital expenditure

Department
store

Super
marketWholesale

Other

Eliminationor corporate

Consolidated¥834,097
2,091
836,189
814,572¥21,616¥125,833
4,826
130,660
129,555¥1,105¥79,554
7,584
87,13983,567¥3,572¥57,204
34,48391,68889,129¥2,558¥−(48,987)(48,987)(48,226)¥(760)¥1,096,690−
1,096,690
1,068,597¥28,092¥679,624
12,225
3,413
10,140¥44,033
916
964
1,314

¥28,707102−
37¥140,828
273
190
1,532

¥(116,578)
(260)
(14)
(208)

¥776,616
13,257
4,554
12,817

Eliminationor corporate

Consolidated

Millions of yen

Year ended February 29, 2008
I. Sales and operating income
Sales1) Sales to outside customers
2) Intersegment sales
Total
Operating expenses
Operating income
II. Assets, depreciation, impairment loss
and capital expenditure
AssetsDepreciation
Loss on impairment
Capital expenditure66

Department
store

Super
marketWholesale

Other¥754,195
1,625
755,820
724,479¥31,341¥114,908
4,825
119,733
117,848¥1,884¥82,733
7,888
90,62287,295¥3,327¥64,565
32,86697,431
93,797¥3,634¥−(47,205)(47,205)(46,736)¥(469)¥1,016,402−
1,016,402
976,684¥39,717¥728,833
10,047−
15,438¥43,791
832
1,939
1,275

¥29,732
159−
115¥98,549
473
179
376

¥(95,531)
(211)
(41)
(688)

¥805,375
11,301
2,078
16,517

Thousands of U.S. dollars

Year ended February 28, 2009
I. Sales and operating income
Sales1) Sales to outside customers
2) Intersegment sales
Total
Operating expenses
Operating income
II. Assets, depreciation, impairment loss
and capital expenditure
AssetsDepreciation
Loss on impairment
Capital expenditure

Department
store

Super
marketWholesale

Other$8,527,727
21,2768,549,116
8,328,106$221,000$1,286,504
49,341
1,335,855
1,324,558$11,297$813,352
77,538890,901
854,381$36,520$6,948,410
124,987
34,894
103,670$450,189
9,365
9,856
13,434$293,498
1,043
−
378

Eliminationor corporate

Consolidated$584,848
352,551
937,409911,246$26,153$−(500,838)(500,838)(493,058)$(7,770)$11,212,453−
11,212,453
10,925,233$287,210$1,439,812
2,791
1,943
15,663$(1,191,882)(2,658)(143)(2,127)$7,940,047
135,538
46,560131,040

Notes:(1) As discussed in the note 2(h), certain subsidiaries changed the depreciation method from the declining-balance method to thestraight-line method eﬀective the year ended February 28, 2009. The eﬀect of this change was to decrease operating expenses ofDepartment store,
Super market,
Wholesale and Other by ¥1,200 million ($12,269 thousand), ¥30 million ($307
thousand), ¥15 million ($153 thousand) and ¥50 million ($511 thousand), respectively, and accordingly, operating income
increased by the same amount.
(2) As discussed in the note 2(h), pursuant to the amendment to the Corporate Tax Law, the salvage value of the assets which were
fully depreciated based on the Corporate Tax Law before the amendment is depreciated equally over ﬁve years starting from theyear ended February 28, 2009. The eﬀect of this change was to increase operating expenses of Department store,Supermarket, Wholesale and Other by ¥667 million ($6,819 thousand), ¥54 million ($552 thousand), ¥4 million ($41 thousand)and ¥10 million ($102 thousand), respectively, and accordingly, operating income decreased by the same amount.

(b) Geographic segment information
Geographic segment information is not disclosed, due to sales and total assets of overseas subsidiaries not being material compared toconsolidated sales and consolidated total assets, respectively.

(c) Information for overseas sales
Information for overseas sales is not disclosed, due to overseas sales not being material compared to consolidated sales.

17 RELATED PARTIES
There were no signiﬁcant transactions and balances with related parties as of and for the years ended February 28, 2009 and February 29,
2008.

67