Results Presentation for First Six Months of
Fiscal Year Ending February 28, 2019

October 9, 2018
J. Front Retailing Co., Ltd.

YAMAMOTO Ryoichi
Director, President andRepresentative Executive Officer

Create and Bring to Life “New Happiness.”We would like to express our deepest sympathy andcondolences to all those who were affected by recent disasters.
We sincerely pray for the earliest recovery of affected areas.

1

Today’s Agenda

I. 1H FY2018 Results (IFRS)
II. 2H/Full FY2018 Forecast (IFRS)
III. Special Factors for FY2019 andSpecific Initiatives for Medium-term Growth2

1H FY2018 Results (IFRS)

3

Consolidated P/L (IFRS)Business profit increased driven by Department Store and Real Estate, which offset Parco andOther, and due to cost reduction
Operating profit decreased in reaction to gain on sales of shares of consolidated subsidiaries
and gain on sales of real estate recorded in previous year
Interim dividend increased ¥1 to ¥17, increased ¥2 compared to ordinary dividend excludingcommemorative dividend of ¥1 in previous year
(Millions of yen, %)First six months of
FY ending Feb 28, 2019

Results

YoY
Change% change

Vs Apr forecast
Change% change

Gross sales

547,109(11,195)(2.0)(9,891)(1.8)

Sales revenue

227,206(7,304)(3.1)(6,794)(2.9)

Gross profit

104,950

(38)

(0.0)

(1,350)

(1.3)

SGA

80,678(1,532)(1.9)(1,322)(1.6)

Business profit

24,271

1,493

6.6

(29)

(0.1)

Other operating income

1,654(4,032)(70.9)

554

50.4

Other operating expense

1,707

(77)

(4.3)

307

22.0

Operating profit

24,218(2,462)

(9.2)

218

0.9

Profit attributable toowners of parent

15,910

(405)

(2.5)

610

4.0

Dividend per share (Yen)(Interim) 17

*1

－

－

－

*Since interim dividend included commemorative dividend of ¥1 for the 10th anniversary of the founding of J. Front Retailing in the previous year,
interim dividend increased ¥2 in the current fiscal year compared to ordinary dividend in the previous year.

4B/S, CF (IFRS)
Equity attributable to owners of parent increased ¥11.8 bn to ¥407.4 bn,
ratio of equity attributable to owners of parent was 39.7%
Interest-bearing debt decreased ¥8.4 bn to ¥175.7 bn, D/E ratio was 0.43
OCF decreased ¥19.2 bn YoY due to increase in operating receivables, etc.,
free cash flows of 9.5 bn were generated<Consolidated statements of financial position><Cash flows>(Millions of yen, %)First six months offiscal year ending
Feb 28, 2019

(Millions of yen)

Results

YoYchangeFirst six months offiscal year ending
Feb 28, 2019

Total assets

1,024,953

2,605

Operating cash flows(OCF)

22,453 (19,201)

Interest-bearing debt

175,790(8,412)

Investing cash flows(ICF)(12,871)(5,098)Equity attributable toowners of parent

407,417

11,898Financial cash flows(FCF)(14,598)(5,241)39.7(率差）(RD) 1.0

Free cash flows

9,581(24,299)

Ratio of equity
attributable toowners of parent(Equity ratio)

Results

YoYchange5Segment Information (IFRS)
Department Store: Generally strong sales in 1H due to brisk spending by inbound tourists
and the affluent in spite of bad weather in latter half
Parco: Sales were strong in urban stores such as Parco-ya in new format but sluggish inrural stores and reacted to strong performance of entertainment in previous year
Real Estate: Full operation of “Ginza Six” and “Ueno FT.” Transfer of shops around Daimaru
Kobe store
Credit and Finance: Revenue increased but affected by increased cost of card renewal andstrengthening security and commission rate
(Millions of yen, %)First six months offiscal year ending
February 28, 2019

Business profit
Vs
Apr forecast

YoY
Results

Operating profit
Vs
Apr forecast

YoY
Results

Change% change

ChangeChange% change

Change12,489

805

6.9

719

11,865 (1,039)

(8.0)

605

Parco

5,043

(686) (12.0)

(657)

5,707

(970) (14.5)(693)

Real Estate

3,044

1,218

66.6

344

2,857

1,194

71.8

557

Credit and Finance

1,064(252) (19.2)

(100)

1,076

(230) (17.6)

(82)

Other

2,107

(162)

(7.1)

(803)

2,131

(570) (21.1)

(769)

Total

24,271

1,493

6.6

(29)

24,218 (2,462)

Department store

(9.2)

218
6

Segment Information <Analysis of Business Profit> (IFRS)
Analysis of business profit

Department
store

Parco

Real
EstateCreditandFinance

Adjustment

Adjustment

Real
EstateParco

Department
store

Other

Up ¥1,493 mn (6.6%) YoY

LY
results

Other

CreditandFinance(Millions of yen)

¥29 mn (0.1%) below Apr forecast

1H FY2018
results

Apr
7
forecast

Segment Information <Analysis of Operating Profit> (IFRS)(Millions of yen)

Analysis of operating profit
Department
store

Real
EstateParco

CreditandFinance

Other
Adjustment
Adjustment Other

Down ¥2,462 mn (9.2%) YoY

LY
results

CreditRealandEstateFinance

Department
store
Parco

¥218 mn (0.9%) above Apr forecast

1H FY2018
results

Apr
8
forecast

Daimaru Matsuzakaya Department Stores
Initiatives for Women’s Volume Zone Clothing
Response to shrinking market for women’s volume zone clothing
Reducing enlarged women’s clothing area
⇒ Creating newly curated zones, expanding growth categories
e.g. Newly curated zone in Sapporo store“KiKiYOCOCHO”
Combining cosmetics, food and drink, and accessories

Compared to LY, sales were up 72.4% in the same area and up 17.1% on the whole floor

Adopting optimal format based on market analysis of each store

9Daimaru Matsuzakaya Department Stores
Trend of Sales to Inbound Tourists
Response to inbound tourism market
Acceptance of mobile payments in all stores, expansion of cosmetics area, etc. were a success

In 1H, tax-free sales were ¥28.2 bn, up 40.4% YoY,
sales of “consumables” increased 61.3% YoY
Number of customers

Sales<Daimaru Matsuzakaya Department Stores tax-free sales and the number of customers>

10*Gross sales basis

Year / MonthDaimaru Matsuzakaya Department Stores
Spending by the Affluent
Response to affluent market
Held events with “experience values” and strengthened lineup of products with high asset values＋
Newly acquired 7,895 gaisho card accounts
Credit sales of all stores increased 2.3% YoY,
new accounts boosted sales ¥5.6 bn in 1H FY2018“Gold Card”
for gaisho customers

11Daimaru Matsuzakaya Department Stores
Trend by Store
Shinsaibashi store with brisk sales to inbound tourists and Sapporo store whose newly
curated area enhanced efficiency performed well
Kobe store increased sales 1.0% YoY in 1H excluding effect of transfer of shops around it
to Real Estate Business
Reduced total cost from original plan in spite of cost increase factors such as extra
depreciation and updating of POS systems<Daimaru Matsuzakaya Department Stores major stores gross sales % change YoY>FY ending Feb 28, 2019

1Q

2Q

1H

Daimaru Shinsaibashi

14.2

4.9

9.3

Daimaru Umeda

4.2

0.2

2.1

Daimaru Tokyo

3.3

3.0

3.1

Daimaru Kyoto

3.1

(1.7)

0.6

Daimaru Kobe*1

(1.9)

(6.9)

(4.4)

Daimaru Sapporo

5.2

3.5

4.4

Matsuzakaya Nagoya

2.1

0.8

1.4

Matsuzakaya Ueno

6.1

1.1

3.6

Matsuzakaya Shizuoka

(3.2)

(1.5)

(2.4)

Total existing stores*2

3.5

0.3

1.9

Real Estate Business

62.9

23.2

40.1

12

*1 Sales of the Daimaru Kobe store were up 3.1% in 1Q, down 1.0% in 2Q and up 1.0% in 1H excluding effect of transfer of some shops around it to the Real Estate Business.
*2 Existing stores exclude the Daimaru Urawa Parco store, which closed on July 31, 2017.

Daimaru Matsuzakaya Department Stores
P/L (IFRS)
7 existing stores increased gross sales due to strong spending by inboundtourists and the affluent
Business profit increased YoY in spite of reaction to gain on sales of real estate
recorded in previous year
Operating profit, business profit and profit were above April forecast(Millions yen, %)First six months offiscal year ending
Feb 28, 2019

YoY
Results

ChangeVs April forecast% change

Change% change

Gross sales

328,487

6,890

2.1

(2,813)(0.8)

Sales revenue

128,769

5,305

4.3

(231)

(0.2)

Gross profit

74,110

2,411

3.4

(590)

(0.8)

SGA

59,452262

0.4(1,748)(2.9)

Business profit

14,657

2,148

17.2

1,157

8.6

Other operating income

383(1,685)(81.5)

383－

Other operating expense

1,343

365

37.3

443

49.2

Operating profit

13,697

98

0.7

1,097

8.7

Profit

9,808

149

1.5

1,008

11.5

13

Daimaru Matsuzakaya Department Stores
Analysis of Operating Profit (IFRS)
Increase in grossprofit due toincrease insales revenue

Decreasein rent
Decrease inpackaging andIncrease indelivery costdepreciation

Analysis of operating profit

Decrease inlabor cost

Decreasein ad cost
Decrease inprofit margin(Millions of yen)
Increase inoperational
cost

Increase in
otheroperatingincomeIncrease inother cost

Decrease in otheroperating income
Increase in
otheroperatingexpenseIncrease in
otheroperatingexpenseDecrease inother SGAUp ¥98 mn (0.7%) YoY
LY
results

Decrease inoperational
cost

Decrease inpackaging anddelivery cost

Decrease indepreciation

Increasein rent

Decrease in grossprofit due todecrease in
Decrease insales revenue
labor cost

Increasein ad cost Decrease inprofit margin¥1,097 mn (8.7%) above Apr forecast
1H FY2018
results

Apr
forecast

14

2H/Full FY2018 Forecast (IFRS)

15

2H FY2018 Business Environment Recognition
Sales to inbound tourists decreased because of temporary closure of KIX
due to typhoon but show signs of recovery day by day
Economy of Hokkaido area is somewhat uncertain due to effect of earthquake
Increasing upward pressure on costagainst backdrop of increase in resource price and labor shortage
Short-term
perspective

Reduction of non-essential cost
Thorough assessment ofcost effectivenessMedium- tolong-term
perspective

Steady investment
for future growth

Promoting initiatives to achieve goals while balancing management

16

2H Consolidated P/L Forecast (IFRS)Gross sales, sales revenue, business profit and operating profit will increase
Other operating income will decrease mainly in reaction to gain on sales of realestate (¥1.6 bn) recorded in previous year
Profit will increase by double digits partly due to improving performance at equity
method associates. Year-end dividend is planned to be ¥18 per share.
Second six months offiscal year ending
February 28, 2019

(Millions of yen, %)Forecast

YoY
Change% change

Vs April forecast% change
ChangeGross sales

602,890

22,213

3.8(5,110)(0.8)

Sales revenue

247,793

12,3895.3(3,207)(1.3)

Gross profit

111,649

3,703

3.4

49

0.0

SGA

86,421

1,944

2.3

21

0.0

Business profit

25,228

1,759

7.5

28

0.1

Other operating income

1,045(2,235)(68.1)(155)(12.9)

Other operating expense

1,992(1,891)(48.7)

92

4.8

Operating profit

24,281

1,415

6.2

(219)

(0.9)

Profit attributable toowners of parent

14,589

2,418

19.9

(611)

(4.0)

17

2H Segment Information Forecast (IFRS)
Department Store: Revenue will increase but profit will decrease due to new POS-related
cost and extra depreciation of “north wing”
Parco: Both revenue and profit will increase due to effect of renovation of urban stores, fulloperation of Parco_ya and opening of Zero Gate
Real Estate: Business profit will increase partly due to full operation of Ueno FT but operating
profit will react to gain on sales of real estate recorded in previous year
Credit and Finance: Revenue will increase but profit will decrease due to increase in cost of
strengthening human resources for the future(Millions of yen, %)Second six months offiscal year ending
February 28, 2019

Operating profit

Business profit
Vs
Apr forecast

YoY
Forecast

Change % change Change

Forecast

YoY

Vs
Apr forecast

Change % change

ChangeDepartment Store

14,360

(244)

(1.7)

250

13,584

(171)

(1.2)

(56)

Parco

4,956

401

8.8

(94)

5,092

18

0.3

(258)

Real Estate

1,555

562

56.6

155

1,302

(1,166) (47.2)

302

Credit and Finance

1,265

(221)

(14.9)

(331)

1,273

(162)

(11.3)

(319)

Other

3,122

902

40.6

202

3,108

1,066

52.2

208

Total

25,228

1,759

7.5

28

24,281

1,415

6.2

(219)
18

2H Daimaru Matsuzakaya Department Stores P/L (IFRS)“Department Store”: Revenue will increase boosted by spending by the affluent and inboundtourists but profit will decrease due to system cost, etc.
“Real Estate”: Full operation of Ueno FT and transfer of shops around Daimaru Kobe store
will help increase revenue and profit
Total Daimaru Matsuzakaya Department Stores: SGA will increase but below Apr forecast
and business profit will increase(Millions of yen, %)Second six monthsof fiscal year
endingFebruary 28, 2019

Forecast

Gross sales

353,955

2.9

0.7

Sales revenue

130,497

3.1

Gross profit

76,413

SGA

Department Store

Real Estate
YoY(%)

Vs Apr
Forecast
(%)

8,636

12.5

(3.0)

362,512

3.1

0.6

(0.9)

8,612

13.7

(2.1)

139,030

3.8

(1.0)

2.2

0.0

2,656

26.1

2.2

78,8892.7(0.0)

63,626

3.1

(0.4)

1,100

(1.1)

(8.3)

64,5472.9(0.7)

Business profit

12,786

(2.1)

2.3

1,555

56.6

11.1

14,342

2.1

3.2

Operating profit

12,101

(1.0)

0.0

1,301

(47.3)

30.1

13,402(8.8)

2.3

Profit

8,459

6.3

(1.6)

532

(67.4)

166.1

8,991

(6.2)

2.2

YoY
(%)

Vs Apr
Forecast(%)

Daimaru Matsuzakaya Department Stores
Total

Forecast

Forecast

YoY(%)

Vs Apr
Forecast(%)

19

2H Daimaru Matsuzakaya Department Stores
Forecast by Store
Increased forecast of many urban stores that will strengthen events such as Nagoya
store with strong sales to the affluent
Decreased forecast of Sapporo store considering effect of Hokkaido Earthquake,carefully reviewed forecast of rural/suburban stores
Extra depreciation of “north wing” of Shinsaibashi store, system improvement cost,packaging/delivery cost, etc. will be added<Daimaru Matsuzakaya Department Stores major stores gross sales % change YoY>
Fiscal year ending
February 28, 2019

1H

2H

Full year

Daimaru Shinsaibashi

9.3

3.7

6.3

Daimaru Umeda

2.1

3.6

2.9

Daimaru Tokyo

3.1

5.8

4.5

Daimaru Kyoto

0.6

2.5

1.6

Daimaru Kobe*

(4.4)

(5.0)

(4.7)

Daimaru Sapporo

4.4

3.6

4.0

Matsuzakaya Nagoya

1.4

4.6

3.1

Matsuzakaya Ueno

3.6

7.8

5.7

Matsuzakaya Shizuoka

(2.4)

4.3

1.0

1.4

2.9

2.2

Total all stores*The Kobe store excluding effect of transfer of shops around it: Up 1.0% in 1H, up 1.8% in 2H, and up 1.4% in full year

20

Full Year Consolidated P/L Forecast (IFRS)
Planning to increase gross sales and sales revenue but downward revised from Apr forecast
Downward revised forecast of SGA to offset decrease in gross profit due to sales decrease
mentioned above
Apr forecast of business profit, operating profit and profit attributable to owners of parent
remains unchanged(Millions of yen, %)Full fiscal year
ending Feb 28, 2019

Forecast

YoY
Change% change

Vs April forecast
Change% change

Gross sales

1,150,000

11,0191.0(15,000)(1.3)

Sales revenue

475,000

5,085

1.1

(10,000)(2.1)

Gross profit

216,600

3,665

1.7

(1,300)

(0.6)

SGA

167,100

412

0.2(1,300)(0.8)

Business profit

49,500

3,253

7.0

－

－

Other operating income

2,700(6,267)(69.9)

400

17.4

Other operating expense

3,700(1,968)(34.7)

400

12.1

Operating profit

48,500(1,046)

(2.1)

－

－

Profit attributable toowners of parent

30,500

2,014

7.1

－

－

－

－

－

－

Dividend per share (Yen)(Annual) 35**Since annual dividend included commemorative dividend of ¥2 for the 10th anniversary of the founding of J. Front Retailing in the previous year,
annual dividend will increase ¥2 in the current fiscal year compared to ordinary dividend in the previous year.

21Full Year B/S and CF Forecast (IFRS)
Equity attributable to owners of parent will increase ¥21.4 bn to ¥417 bn, ratio of
equity attributable to owners of parent will be 39.7%
Interest-bearing debt will increase ¥6.7 bn to ¥191 bn, D/E ratio will be 0.46
OCF will decrease ¥2.2 bn YoY, free cash flows will be negative at ¥1.5 bn<Consolidated statements of financial position>(Millions of yen, %)<Cash flows>(Millions of yen)

Fiscal year ending
February 28, 2019

Forecast

YoYchangeFiscal year ending
February 28, 2019

Forecast

YoYchangeTotal assets

1,050,000

27,652

Operating cash flows(OCF)

35,000(22,079)

Interest-bearing debt

191,000

6,798

Investing cash flows(ICF)(36,500) (17,470)

Equity attributable toowners of parent

417,000

21,481

Financial cash flows
(FCF)

39.7

(率差）
(RD) 1.0

Free cash flows

Ratio of equity
attributable toowners of parent(Equity ratio)(5,000)26,048(1,500) (39,548)
22

Full Year Segment Information Forecast (IFRS)
Upward revised forecast of operating profit of Department Store Business and Real
Estate Business ¥0.5 bn and ¥0.8 bn, respectively
Downward revised forecast of operating profit of Parco Business and Credit and
Finance Business ¥0.9 bn and ¥0.4 bn, respectively
Apr forecast of consolidated total business profit and operating profit remains
unchanged(Millions of yen, %)Business profit

Operating profit

Full fiscal year
endingFebruary 28, 2019

Forecast

Department Store

26,850

561

2.1

970

25,450(1,209)

(4.5)

550

Parco

10,000

(284)

(2.8)

(750)

10,800

(952)

(8.1)

(950)

Real Estate

4,600

1,780

63.1

500

4,160

29

0.7

860

Credit and Finance

2,330(473) (16.9)

(430)

2,350

(392)

(14.3)

(400)

Other

5,230

740

16.5

(600)

5,240

496

10.4

(560)

Total

49,500

3,253

7.0

－

48,500(1,046)

(2.1)

－

YoY

Vs Aprforecast

Change % change

ChangeForecast

YoY

Vs Aprforecast

Change % change

Change

23

パルコ
事業

百貨店
事業

百貨店
事業

Special Factors for FY2019 andInitiatives for Medium-term Growth24Assumptions to Formulate Current
Medium-term Business Plan
Medium-term Business Plan started in FY2017
Applied IFRS (International Financial Reporting Standards)
which is different from JGAAP in concept of operating profit↓
Operating profit greatly changes depending onother operating income / other operating expense

Five-year plan instead of past three-year plan↓
Path to goal is uncertain because it has no milestone

Problem with sharing image with investors
in process to growth we aim for25

Special Factors to Be Considered in FY2019
Contribution of opening of main building of Shinsaibashi store
and Shibuya Parco to profit will be small in first year
North wing of Daimaru Shinsaibashi Store will be temporarilyclosed for renovation when main building opens
Consumption tax hike in Oct 2019 will negatively affect sales ofDepartment Store and Parco for some months
Upfront expenditure/investment for full-scale growth ofCredit and Finance Business

26

Future Progress of Medium-term Business Plan
Aiming to increase “business profit” in FY2019 but slowly
Growth will be accelerated in 2020 when main building of Shinsaibashi store andShibuya Parco will be fully operated and 2021 when north wing will be fully operated<“Business profit” growth curve forecast>(¥0.1 bn)

27
(Forecast)

Initiatives for Growth Strategy

I. Urban Dominant Strategy
II. ICT Strategy
III. Credit and Finance Business Strategy

28

Urban Dominant Strategy“Ginza Six” and “Ueno Frontier Tower” opened in 2017 and perform well
“Main building of Daimaru Shinsaibashi store” and “New Shibuya Parco” will open in fall 2019
“Real estate rental area” will be expanded mainly in urban areas e.g. around flagship stores
GINZA SIX
上野フロンティアタワー
OpenedApr 2017

OpenedNov 2017

渋谷パルコ建替え

心斎橋店本館建替え
Fall 2019(planned)

Fall 2019(planned)

29*The photos are for illustrative purpose only.

Rebuilding of Main Building of
Daimaru Shinsaibashi Store
Planned to open in fall 2019 as model most representing innovation of “new department store model”
Adjacent north wing will be transformed to business model with real estate rental as its main
business after opening of main building
Main building will be connected to north wing in 2021 to create more than 80,000 m2 hybridcommercial facility･
30*The photo is for illustrative purpose only.

Layer Structure of New Main Building of
Shinsaibashi Store
Sales floor layers are “hybrid structure” not seen in traditional department stores

4F-10FNew main building
Daimaru Shinsaibashi store

1F-3F

B1F/2F

Fixed-term lease

Purchase on
no returnbasis (kaitori)or purchaserecorded
when sold(shoka shiire)
Fixed-term lease･

Realizing innovative and highly profitable new department store model31

Change of Business Model of “North Wing” ofShinsaibashi StoreBusiness model of north wing of Shinsaibashi store will be changed to “real estate rental”
after completion of new main building
Core tenant “Parco” will occupy B2F to 7F. Real Estate Division will operate higher floors
Greater synergy will be created in the Group through joint development of Daimaru
Matsuzakaya Department Stores and Parco<Map around Shinsaibashi store>

North wing
(Theater / event hall)

Nagahori -dori
New main building

Real estate rental model

Parco

Shinsaibashi

Hybrid commercial complex
with more than 80,000 ㎡ floor area

LUMIERE
PARIS(North)White Avenue

Parking

Connecting to north wing after
rebuilding new main building(planned for spring 2021)

Zero Gate

Parking

BAG'n'NOUN

Daimaru
Shinsaibashi
Store(Main)

Shinsaibashisuji*There are some exceptions.

10F
9F
8F
7F
6F
Department store
5F(Daimaru Shinsaibashi store) 4F
3F
2F
1F
B1
B2

lucian pellat-finet

Midosuji

14F
13F
12F
11F
10F
9F
8F
7F
6F
5F
4F
3F
2F
1F
B1
B2

Commercial
complex

CHANEL
Daimaruinteriorbuilding
Musee Air
Shinsaibash(South)Shinsaibashi 161
air OSAKA
agnes b.
ROSE BUD

acca
Nike Osaka

32

Rebuilding of Shibuya Parco
Scheme of “Udagawa-cho District 14/15 Category 1 Urban Redevelopment Project”
Income and expenditure of
Udagawa-cho District 14/15 Category 1 Urban Redevelopment ProjectDecember 2015
Tokyo Metropolitan Government approved urban planning
project of special urban renaissance district→ Floor-area ratio increased(Allowable total floor area increased)

Proceeds from disposal ofreserve floor area
Approx ¥46.4 bn

Total floor area for the project

Entitled
floor area

Floor area to be given
to right holders before
the project according totheir rights

Reservefloor area

Project cost,land maintenance cost,
construction cost,etc.

Floor area otherthan entitledfloor area

August 2016

Compensation cost
Suspension of business,relocation cost, etc.

Execution of urban development project was approved

Office area
*Concluded transfer
agreement concerning
office floor with
Hulic Co., Ltd.

Store area
*Parco will acquire

Office cost, etc.
May 2017
Started construction and concluded transfer agreement
concerning office floor

Expenditure

Income33

“Next-generation Commercial Space”
New Shibuya Parco
Re-proposal of fashion and sales floors of the future combining luxury mode andstreet culture
Expanding experience-based contents by expanding “Parco Theater”
and at other multiple entertainment locations of the company
Evolving “Parco brand” by providing information globally≪Creation of new Shibuya Parco≫■Creating next-generation commercial space by rebuilding
Shibuya Parco■Bringing together new initiatives that have never been
applied to conventional shopping complexes to provide
evolved values such as “growth space for businessowners” and “new inspiration for urban consumers”
・Increasing opportunities to newly connect with companies throughmulti-use complex building
・Creating advanced tenant services in anticipation of developments
in e-commerce・Partnership on creation of Shibuya Entertainment City, expansion ofsoft content
・Increasing Parco brand’s global presence

34

ICT Strategy“Lifetime Service Hub” (LTS-HUB) is

To create system to strengthen lifetime
engagement with customers

35Customer Assets Held by the Group<Strength of the Group>

Good customer assets of more than 6 million people
Department
Store
Business

Parco
Business

Held by each company

The Group does notcentralize information

Foundation to bring out true value of “information” has not been developed
Integrating/centralizing good customer database of the Group36

Concept of “Lifetime Service Hub”
～ “Era of 100-year life expectancy” ～Providing new products and services to relieve customers’ “frustrations” and “concerns”
on various occasions and milestones for their entire lives beginning from birth
Birth

Infancy

Department StoreDB

Schoolage

Employed

Parco
DB

Child
raisingMarriage

Secondlife

Other companies
DB

Integrated customer database
Accumulation of
fixed information

Use of ICT

Accumulation of
unfixed information

37

Future Steps toward LTS-HUB Concept
2H FY2018
Prior release of “mobile app” at Daimaru Tokyo store
Starting to develop foundation of integrated data base

Daimaru
FY2019 and beyond
Starting to use chat across the Group
Accumulating multifaceted data

Matsuzakaya

Parco
Sophisticating / enhancing quality of database

Adding demonstration test of AI analysis

Expanding opportunities to provide optimal products/services
Launching new businesses

38Credit and Finance Business Strategy
Developed “100-day plan” after appointing
new President of JFR Card in March 2018
Clarified directions of business strategy in two aspects

Payment

Finance39Credit and Finance Business Strategy
Strength of the Group’s transaction volume of more than ¥1 trillion and good customer assets
Customers
Client companies
Companies in the Group
Employees (the Group / clients)

Enhancing appeal of card products
Promoting cashless payment

Use of payment data

Payment

FinanceFinance service for
B2B and B2C

40

Credit and Finance Business Strategy
Upfront investment is essential to speed up initiatives for growth

Acquiring highly professional HRs well versed in payment/finance businesses
Actively investing in platform using latest technologies

Profit will decrease in the short term due to upfront expenditure
Profit will turn upward in FY2020

Changing business so that we can aim for dramatic profit growth41
as “core business of the Group” in the medium termFinance Strategy ー FY2021 Quantitative Management Objectives<Finance strategy structure diagram>

Operating profit
FCF＞(Up ¥14.2 bn from FY2016)

0

Operating margin

ROE
Operatingmargin10％8%¥5.6 bn

Equity ratio

40％

Consolidated ROE

10%
8.0%
or moreReason behind ROE target of 8%
FY2021
ROE target

8.0%
or moreShareholders’ equity
cost recognized by
the Company＞ 6 - 7%42

Finance Strategy - Creation of Cash Flows and Strategic Investment<Use of total cash flows for FY2017 to 2021>
Investing cash flows

Capitalinvestment¥200 bn
Growthinvestment

Operating cash flows¥260 bn or more
Free cash flows

Shareholder
return¥60 bn or more
Expansion ofequityImplementing capital policy well balanced among strategic investment,
improvement of shareholder return and expansion of equity
Realizing management structure that can achieve 8% ROE continuously

43

Finance Strategy - Annual Forecast of Capital Investment
Investing ¥2.7 bn in M&A for growth out of aggregate investment of ¥200 bn for 5 years
Investment is expected to peak in FY2019, and after that, free cash flows will turnsignificantly positive
Properly judging investments based on WACC of each business as quantitative criteria<Forecast of capital investment and share by business segment>(Millions of yen)
Other

M&A

Capital investment
Growth investment

Daimaru
Matsuzakaya(excluding
Real Estate)¥200 bn(Total for 5 years)
Parco
Business

Real EstateBusiness(FY)

44

Finance Strategy – Shareholder Return Policy
Continuing shareholder return based on profit allocation according to performance andtargeting dividend payout ratio of at least 30%
Increasing ordinary dividend ¥2 YoY in FY ending February 28, 2019, marking 8thconsecutive dividend increase
Purchasing own shares as appropriate in consideration of strategic investment, financial
condition, etc. as a whole(Yen)<Annual dividend per share (Yen)>

Commemorative
dividend
Ordinary dividend

45*Annual dividend per share is shown on a post-share consolidation basis.

Finance Strategy –Progress of B/S-focused Management
Optimizing capital of each business company based on its optimal capital structure
Controlling “double leverage” as important rating indicator to enhance capitalefficiency(%)<Shares and capital (net assets) of associates>(¥0.1 bn)
SharesNet assets

Feb 2014

Feb 2015

Feb 2016

Feb 2017

Feb 2018

Feb 2019 forecast

46

ESG Initiatives

Started full-scale initiatives
to create sustainable society
under long-term quantitative goals

Contribution
to a lowcarbon
society
Coexistencewith local
communities

5 materiality
issuesRealizationof work-lifebalance

Managementof the entire
supply chain

Specific actions
with clear timeline

Promotionof diversity“ESG briefing” on details
on Nov 30 (Fri)47

Integration of Management Strategy and Risk (Uncertainty)

Uncertainty is “opportunity” and “threat”

Combination ofdifferent elements

RisktakingRisk
hedging×

Culture of taking
on challenges

Management strategy
Governance

Building strong business foundation with tenacity to create results

Developing into “Multi Service Retailer” beyond framework of retailing48

Website

http://www.j-front-retailing.com
http://www.facebook.com/J.FrontRetailing

Create and Bring to Life
“New Happiness.”

Forward-looking statements in this document represent our assumptions based on information currently available to us and inherently involve potential
risks, uncertainties and other factors. Therefore, actual results may differ materially from the results anticipated herein due to changes in various factors.