J. Front Retailing
Earnings call for the first quarter (1Q) of the fiscal year ending February 29, 2020
Q & A summary
Date and time: 15:15 – 15:45 on Friday, June 28, 2019

【Impact of IFRS 16】
Q. Though the impact of IFRS 16 was disclosed in detail at the beginning of the current period,
this time only its impact on consolidated and Daimaru Matsuzakaya Department Stores’
operating profit was disclosed. Since it is important information, I prefer it to be disclosed infigures by segment. I would like you to publish it in the materials in an easy-to-understandmanner in 2Q and beyond.
A. Impacts on consolidated performance on B/S, P/L and CF have changed from April forecast. Impact
on business profit and operating profit was ¥1.06 billion in consolidated total. And by segment, main
impacts were approximately ¥0.66 billion in the Department Store Business and approximately ¥0.4
billion in the Parco Business, and impact in the Real Estate Business was around ¥0.02 billion. In April,
we expected its impact on profit before tax to be almost zero. At this stage, such impact has increased
by approximately ¥0.1 billion in consolidated total, including approximately ¥0.06 billion in theDepartment Store Business and approximately ¥0.02 billion in the Parco Business.
Q. At the beginning of the current fiscal year, you expected its impact on business profit andprofit for the current fiscal year to be an increase of ¥3.5 billion and ¥0, respectively. However,at the recent 1Q results presentation of Parco, they explained that its impact only on Parcowould be an increase of around ¥0.4 billion in the year. How much impact will be on businessprofit, operating profit and profit of J. Front Retailing during the year?
A. Impact on business profit and operating profit will be ¥4.6 billion, ¥1.1 billion above April forecast,including an increase of around ¥0.5 billion each in the Department Store Business and the ParcoBusiness. Concerning profit before tax, we forecast zero impact in April, but at this time, we expect anincrease of around ¥0.6 billion. We do not estimate profit after tax, which is the amount after deducting
corporate tax.

【Overall business】
Q. You said that it was almost as planned. Were there any differences in profit betweensegments?
A. The Department Store Business and Daimaru Kogyo seem to have somewhat struggled in sales, etc.
The Electronic Device Department of Daimaru Kogyo has performed poorly since last year. However,I can say the overall business was in line with the plan, even including these poor results.
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Q. If 1Q results were “almost in line with the plan” as explained, profit decline rate in 2Q will behigher. Actually, given 2Q results last year, I think it will be easier for you to increase profit in 2Q.
Let me know the reasons and background for your projection of higher profit decline rate in2Q.
A. It is not because some negative factors occurred after our initial forecast. I said our performance in 1Q
was a little weak. And in 2Q, we would like to make efforts including ordinary cost reduction efforts toincrease profit as well as sales.
【Department Store Business】
Q. While sales to inbound tourists are strong, spending by Japanese consumers mainly onvolume zone items has been weak since last fall and total department store sales fell a little
short of forecast. Is it correct?
A. Department store sales in 1Q seem to be a little weak. Their growth excluding sales to inbound tourists
was negative. Gaisho sales also decreased by about one point, which I recognize is temporary. Ourbasic recognition is that spending by Japanese consumers is a little weak while sales to inboundtourists are strong.
Q. Concerning SGA of Daimaru Matsuzakaya Department Stores, “operational costs” increasedby ¥0.8 billion YoY due to increased system cost. Will it increase by the same amount quarterly
during the current period?
A. The reason for this cost increase is introduction of terminals for payment processing in front ofcustomers as explained in April. Such cost increase will occur mainly in 1H. You can understand it isas planned.
Q. The main building of the Shinsaibashi store will open in the current period. Was temporary
cost associated with it incurred in 1Q? How will it be incurred in the future?
A. Since extra depreciation of the north wing of the Shinsaibashi store has been incurred since 2Q of theprevious fiscal year, there was a YoY net increase in such cost in 1Q. There is no additional large costat present. Promotion and other costs are expected to be incurred immediately before opening.
Q. What do you think about last-minute demand before the tax hike?
A. Our important initiatives to meet last-minute demand before the tax hike include capitalizing on
demand from inbound tourists and gaisho sales. Though I said earlier that gaisho sales were a little
sluggish, we strengthened and held in May a large-scale event, which is usually held every fall, as partof measures before the tax hike and its sales far exceeded our goal. At present I do not feel there is alast-minute demand but we would like to capitalize on everything we can in 1H, including early
approach to and early receipt of orders from gaisho customers.
Q. I think Chinese authorities issued a notice to tighten the e-commerce law on June 20. You said
share of sales to inbound tourists reached a record high in 1Q. What is your outlook for the2

impact of tightened e-commerce law?
A. The implementation of the e-commerce law in January affected us, and in the short term, we need topay close attention to the impact including currency movement. In the meantime, in the medium- andlong-term, based on the basic recognition that the trade area expanded, I would like to capitalize on
demand from inbound tourists in terms of merchandise, sales service and the convenience ofpayment. Though there may be a temporary impact, my outlook on the basic trend remains
unchanged.
【Other businesses】
Q. According to your initial forecast, Daimaru Kogyo was expected to decrease profit in 1H andincrease profit in 2H. Its profit in 1Q was not so large and could you explain how it performed
against plan in 1H? Also let me know whether it will really be able to increase profit in 2H.
A. 1Q results of Daimaru Kogyo fell a little below our plan of profit decline. Its profit is expected to recoverin 2H. The company is making improvements in, for example, negotiations with clients and relations
with suppliers to achieve better performance in 2H. I would like to expect them to improve
performance.
【Next period】
Q. Concerning the new main building of the Daimaru Shinsaibashi store and Shibuya Parco, bothof which will be fully operated in the next period, and the Credit and Finance Business, I
would like you to reorganize your thoughts about the next period clear. You said previouslythat the main building of the Shinsaibashi store was expected to increase profit by ¥2 to 2.5billion. In the Credit and Finance Business, there seem to remain some cost factors partly due
to the issue of a new card. And I would like you to reorganize your thoughts about the next
period in these three areas.
A. The new main building of the Daimaru Shinsaibashi store and Shibuya Parco are scheduled to open
on September 20 this year and late November this year, respectively. In FY2020, the new mainbuilding of the Daimaru Shinsaibashi store is expected to increase profit roughly by ¥2 to 2.5 billion
compared to FY2019. On the other hand, with regard to Shibuya Parco, compensation cost for thesuspension of business was recorded as other operating revenue while it was closed. Therefore,business profit will contribute to increasing profit but operating profit will not.
The Credit and Finance Business incurs upfront costs for increased labor, etc. in order to achieve
growth in the future. A new card is expected to be issued in the next fiscal year or later. I think it willcontribute to business performance in FY2021 or later.
Now that we are at the halfway point of the five-year medium-term plan, we will thoroughly discuss
future initiatives of each business as well as the progress during this period to achieve operating profitof ¥56 billion.
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