J. Front Retailing
Summary of Q&A session atearnings call for the first quarter (Q1) of the fiscal year ending February 29, 2024
Date and time: 15:30 – 16:15 on Wednesday, June 28, 2023

Q. I understand that the overall is in line with the plan, but I would like to know if there are any
shades in segment revenue or business profit.
A. All segments are basically performing in line with the internal plan for H1 of the fiscal year. In termsof revenue, the Shopping Center Business and the Payment and Finance Business are performing
slightly slower than planned. They are performing as planned in Q1, but we will work to improve profits,also in Q2.
Ｑ . In terms of Daimaru Matsuzakaya Department Stores’ sales excluding duty-free sales
compared to 2019 on page 6 of the document, the Umeda and Tokyo stores are still behindthe 2019 level, although their sales have recovered considerably. Parco also has yet to fully
return in terms of comparable stores. You have released figures for March, April, May, and thecurrent month June, and I want to confirm whether these numbers will continue to show atrend in which the decrease range will continue to shrink, or they will settle down to a certainextent.
What part of that has not yet been returned? Of course, I think that other stores havecovered it, so I am not worried about anything overall, and I think that overall sales will
increase even more if inbound sales return, but I would like you to explain where theunderlying trend for Japanese people has not caught up yet, and how you expect this tochange in the future, including countermeasures.
A. The terminal Umeda and Tokyo stores have improved strongly because their recovery was relatively
slow compared to other stores, but they are still a step behind the FY2019 level. We are basically notconcerned about the Tokyo store, but as the current and future measures, we will continue to expand
the categories we have been strengthening, including luxury, not only at the Tokyo store but also at
the Umeda store this fiscal year. We are basically not concerned about the Tokyo store, but as acurrent and future measure, we will continue to expand the categories we have been strengthening,including luxury, not only at the Tokyo store but also at the Umeda store this fiscal year. We would
like to continue to aim to exceed the FY2019 level by further increasing the effectiveness of thesestrategic investments.
Ｑ. In that sense, will the basic policy for terminal department stores, aside from inbound sales,
be to increase overall sales while making solid changes in the content of merchandise, rather
than to further recover the number of customers?
A. Our basic idea is as you mentioned.
Ｑ. Regarding sales trends, how do you see sales of high-end products and gaisho sales, which
I believe are doing very well, and what are your thoughts on their sustainability?
A. As I mentioned earlier, gross sales were up about 14% in Q1, but gaisho sales were up 12.2% YoY,1

or up about 5 billion in value, and cash sales from domestic customers were up 8%. Gaisho sales
continue to be strong. The basic trend itself has not changed, and we recognize that we are seeing
the visible effects of strategic investments in luxury and watches against the backdrop of a strong
affluent market, exactly as I mentioned earlier.
As for the future outlook, since we recognize that capturing the affluent market, including gaisho,will be a very significant driver in the medium to long term, we will continue to strengthen our efforts,
including the investment of resources, while continuing to make strategic investments.
Ｑ. Regarding inbound tourists, I think that the increase in the amount of money spent by each
person is having a large impact, but I would like to know what the current situation looks likeand your thoughts on the future.
A. As for the average spend per inbound tourist, on a Q1 actual basis, it is approximately 1.4 times thatof FY 2019, or a little over 80,000 yen in actual value. On the other hand, if the number of inboundtourists increases in the future, the average spend per person itself will probably decline a little.
However, considering what happened in FY2019, when the average spend per tourist from mainland
China was extremely high, it is quite difficult to predict the average spend per person, but I think thatan increase in sales due to an increase in the number of customers can be expected in the future.
Ｑ. In the breakdown of SGA for Daimaru Matsuzakaya Department Stores, the increase in“Other” is slightly larger than the sum of the breakdown shown on the right side of thedocument. I think it is a minor detail, but in what other areas SGA has increased?
(Inagami, Senior General Manager of Corporate Communications Division)
A. Basically, there are no special factors, but it includes costs proportional to sales, which I mentionedearlier, as well as expenses associated with the resumption of business and the strengthening ofbusiness, in order to aggressively promote sales in Q1, while last year there were focused antiinfection measures. In addition, taxes and dues due to the recovery of profits are included in “Other,”
and an increase in these taxes and dues is not stated.
Ｑ. While controlling SGA and other expenses, is it correct to think that you will spend a certain
amount of money to strengthen sales and marketing and also raise the top line?
(Inagami)
A. It is a fact that utilities expenses continue to soar this fiscal year, and while it is a basic premise thatwe will strive to control costs appropriately, basically as you mentioned, we hope to continue to use
expenses in order to return to a firm top line position.
Ｑ. Regarding consolidated profit as a whole, the growth of profit is quite small, in single digits,
compared to the growth of profit before tax. I think that this is mainly due to the confusion of
how to allocate tax expenses for the year in Q1. However, while you explained that profits areprogressing steadily, I have the impression that the 7% increase in profit is a bit small. I would
like to confirm whether or not this is a taxation issue.
A. In the previous year, Daimaru Matsuzakaya Department Stores decided to sell idle fixed assets, andthis has come out in the form of a reaction to the fact that tax expenses that had been set aside until
then were largely reduced due to the decision to sell them.

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Ｑ. So, in the previous year, what was allowed for so-called accounting purposes but disallowed
for tax purposes was covered under expenses for tax purposes because of the sale of theassets?
A. That’s right.
Ｑ. The growth of stores with large inbound sales at Parco, especially Shibuya PARCO andShinsaibashi PARCO, is quite high, and I think this is due to the popularity of luxury and popculture. I would like to know how much inbound sales are pushing up the sales, if possible.
A. Parco’s overall inbound transaction volume was approximately 4.3 billion yen in Q1 of this fiscal year,
as shown in the results by store in the supplementary information to financial results. The stores withthe highest inbound transaction volume were Shibuya and Shinsaibashi, with more than 2.0 billion
yen and 1.0 billion yen, respectively. In terms of sales share of inbound transaction volume, Shibuya
PARCO and Shinsaibashi PARCO showed extremely high growth, at 27% and 18%, respectively.
For Q1 of the previous fiscal year, it was 0.5 billion yen, which means it was about 6.0 billion yen
for the entire year, but it has been growing significantly since the second half of the previous fiscalyear. The upper floors of Shibuya PARCO are so crowded with foreign visitors during the daytime on
weekdays that it seems as if the store were not in Japan. Parco's specialty areas, such as anime andculture, have gained popularity.
Ｑ. Then, regarding Parco, do inbound sales of 4.3 billion yen in this Q1 exceed the pre-COVID19 level?
A. Shibuya PARCO opened in November 2019 and Shinsaibashi PARCO in November 2020.
Comparisons are difficult to make, but the annual inbound transaction volume in FY2019 was 6.7
billion yen, so I think they are growing significantly, partly due to the full operation of these two stores.
Ｑ. Based on the figures disclosed in the first half of June, are the asset effects, etc. from therecent rise in stock prices already materialized in sales, or even if they have not, can we expect
some effects that were not anticipated at the beginning of the fiscal year if the current stock
market conditions continue?
A. It is difficult to recognize the positive impact of high stock prices on consumption in numerical terms,
but we recognize that it has a positive impact on or props up consumption. It is difficult to say whether
there has been any positive effect on sales in the past month or two, but we would like to carefully
monitor the positive impact in the future.
Ｑ. I would like to reconfirm the comparison with the plan in the Department Store and Developer
Businesses. The Department Store Business appears to be possibly short, given theseasonality of past Q1 and Q2. At the very least, they do not appear to be above the plan, butin your company's past pattern, SGA was always lower than planned, and profits were often
slightly higher. Is SGA for the Department Store Business or the Daimaru Matsuzakayabusiness almost in line with the plan this time? I would also like to know if the operating profit
level is really in line with the plan or if it is a little short of the plan.
Also, in the Developer Business, the H1 business profit plan of 1.3 billion yen has already3

been achieved in Q1. Is it correct to view this to be in line with the plan rather than above it?
A. I would like you to understand that the Department Store Business is performing almost in line withthe plan in terms of profits. Basically, we would like to continue our aggressive structure, including
strategic investments, in the current fiscal year and the next fiscal year and beyond. On the otherhand, we hope to continue to reduce or control controllable expenses in Q2 and beyond, so please
understand that progress in Q1 was almost as planned.
In the Developer Business, J. Front Design & Construction is a major driver in terms of revenue
and business profit, as described. Combined with a reaction to COVID-19, the company has beenable to secure orders ahead for large-scale projects such as hotels and for renovation work for luxury
brands. In addition, despite the impact of soaring material prices and other factors, the fact that theeffects of so-called profit margin control are firmly being produced is the main driving factor in Q1.
In terms of comparison to the plan, the Developer Business has been slightly above the plan, but
unlike retail, there will inevitably be pluses or minuses every quarter. Throughout H1 and the fiscal
year, we will continue to make efforts to ensure that the Developer segment will exceed the plan.
Ｑ. In the SC Business and the Developer Business, the wording “sale of assets held” has been
mentioned, but since you have been strengthening your review considerably since thebeginning of this fiscal year, is it correct to assume that something like this will continue tocome out, if not every quarter, rather than a one-time event? Or should we assume that it justhappens to be in this Q1?
In the Developer Business, I think you said at the full year financial results presentation thatgain on sale of assets held was 3.0 billion yen, and that it is not often that you see such a large
amount of gain in one place. Is it correct to think that this does not mean that this is adispersed gain, but rather that 3.0 billion yen, which appears to be factored into H2 in thecompany's plan, is a story that will come out in Q3 or Q4 of H2 and has absolutely nothing todo with this quarter?
A. As shown on slide 9, the SC Business has approximately 0.8 billion yen in other operating income,of which just over 0.6 billion yen is gain on sale of assets held by the company. It includes the impactof selling a part of Fukuoka PARCO's trust beneficiary rights to J. Front City Development, which wasjust under 0.4 billion yen. It also includes about 0.2 billion yen from the sale of the store portion of
Tsudanuma PARCO, which has already ceased operations. Especially for Fukuoka PARCO, ofcourse, Parco currently owns its land and building, but the transfer was made with the intention ofmoving forward with the Fukuoka project as a unified group, including the newly established company
J. Front City Development. So, I would like to ask you to regard the transfer as a one-time event.
Regarding the Developer Business, as I mentioned in the explanation on page 11 of the document,
we sold the owner's interest in a special purpose company involved in the development of theShinsaibashi project, which is a joint investment. Therefore, please consider this separate from theannual plan of recording a sale of 3.0 billion yen in H2.
In terms of a medium- to long-term strategy, in the Developer Business, in addition to holding assets
and earning rental income from them, we are planning to diversify revenue by replacing and selling
assets and other means. We would like to clearly indicate in our plans for FY2024 and beyondwhether there will be a gain on sale of 3.0 billion yen each year.

4Ｑ. Regarding Parco, there is a comparison with FY2019 on page 10 of the slide, and I would like
you to highlight the stores, which have already been renovated or are in the process of beingrenovated. If the renovation has been completed, the numbers should go up, and I would like
you to explain a little bit about whether it is producing results, or whether the large negative
figures are due to the construction work if the renovation is currently underway.
A. In this Q1, renovations are underway in Ikebukuro and Nagoya. On the other hand, we have beenproceeding with renovations since the previous fiscal years, so I don't think the renovations will havea negative impact. I think the biggest challenge is how the effects of investments in Nagoya andIkebukuro in the previous fiscal years and this fiscal year will lead to the recovery and improvementof operating revenue in the future.
We are working on store renovations throughout the fiscal year at each store, but this fiscal year
we focus on Ikebukuro and Nagoya, although we also renovate Shibuya and Shinsaibashi, so wehope to see the effects of our investments also from Q2 onwards. H1 will be a major term forrenovations, and we would like to make sure that it leads to a solid improvement in revenue from H2onwards.
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