AOYAMA TRADING CO., LTD.
2015-2017 Medium-Term
Management Plan
〜CHALLENGE 2017〜

January 28, 2015

Osamu Aoyama
President and CEO

AGENDA
I. Introduction
II. Basic Policy of the Medium-Term
Management Plan “CHALLENGE 2017”
III. Key Strategies by Segment
IV. Cash Flows and Return of Profits toShareholders
V. Strategies for the Future2

〜INTRODUCTION〜
Historical Performance(Millions of yen)
180,000

156,300
160,0000
140,000
120,000

Performance of the Suits Business
167,300
5,700

172,800
9,100

168,000
11,000156,300 161,600

163,700 157,000

FY2005

FY2007

161,100 162,300
11,50013,000168,100
15,600Percentage ofwomenswear sales
11.7%

174,700
18,800181,800
21,200149,600 149,300 152,500 155,900

160,600

FY2009FY2013100,000

FY2006

FY2008Menswear-related sales

FY2010FY2011FY2012

Womenswear-related sales

In the suits business, sales have recovered to the levels prior to the Lehman crisis in FY2008,
thanks primarily to the growth in womenswear sales. Since FY2010, sales of womenswear havebeen growing 20% each year, and grew to account for 11.7% of total sales in FY2013.
Menswear sales also, after bottoming out in FY2010, have been increasing in conjunction with
the increase in store openings. Under this medium-term management plan, the Company
intends to reinforce womenswear and other peripheral product items other than suits.
3

〜INTRODUCTION〜
Market Environment (Suits)
400,000
300,000

Share of theCompany
28.8%

309,900
303,900
290,700
63,300

Suits Market by Sales Channel(Comparison of 2013 with 2008)

Size of the Suits Market

67,500289,600
70,70068,400200,000

245,000
224,800
218,300
220,600
201,400
64,00059,500 59,000
62,90060,8002008(Millions of yen)

66.1%

18.0%

8.0%

7.9%

100,000
2013

0

71.0%

2005

2007

Size of the suits market

2009

2011

2013

Sales of suits of the Company

Note: Market size is on a retail value basis.
Source: Prepared based on “White Paper on Apparel Industry,” Yano ResearchInstitute Ltd.
In the past decade, the suits market, after having peaked at ¥309,900 million in
2007, has been on a declining trend due to the mass retirement of the baby boomers
and the spread of Cool Biz. Despite these circumstances, the Company has been able
to increase its market share to 28.8% in 2013 by steadily opening new stores andrelocating existing stores, as well as due to withdrawal of our competitors and thedownsizing of businesses by mass retailers.

13.4%
6.4%

Specialty stores

9.2%
Department stores

Mass retailers

OthersNote: On a retail value basis
Source: “White Paper on Apparel Industry,” Yano Research Institute Ltd.
A view of the suits market by sales channel indicates that specialty stores havecaptured the market shares of department stores and mass retailers,
increasing its share by approximately five percentage points in the past 5 years
through proactive store openings in urban areas and shopping centers (SCs),
improvement of product quality and reinforced sales promotion.

4

〜INTRODUCTION〜
Market Environment (Womenswear)(Ten thousand
persons)

Number of Female Workers Between the Ages of 15 and 64
64.5%

2,800

65.0%

2,600

58.1%

2,400

2,448 2,460 2,463 2,457 2,434 2,434 2,431 2,423 2,454

2,484

55.0%
50.0%

2005

20.0
%

60.0%

2,200
2,000

The Companyʼs market shareof suits for job hunting women

2007

2009

Number of female workers

2011

2013

Womenʼs employment rate

Nov.
2014

Source: Estimates by the Company

The Companyʼs market shareof womenʼs formal wear
5.7%

45.0%

Source: “Labour Force Survey,” Statistics Bureau, Ministry of Internal Affairs and Communications

While the employment rate among women between the ages of 15 and 64(working-age population) had remained mostly unchanged until 2012, but itreached a record high at 64.5% in November 2014. As further increases inwomenswear sales are expected going forward thanks to the effects of
Abenomics and other factors, the Company intends to reinforce womenswear
sales as one of the key strategy items also under the medium-term
management plan.

Source: Estimates by the Company

While the Company currently
maintains around 20% shareof the job hunting suits
market, its share in the formal
wear market is still around 6%.
The Company will aim for amarket share comparable tothat of its menʼs formal wear.
5

〜INTRODUCTION〜
Market Environment (Other than Suits)
100%
80%
60%

Historical Composition of Sales by Item in the Suits Business

0.0%
13.1%

3.4%
5.3%
6.6%
7.1%
8.0%
9.3% 10.8% 11.7%
12.3% 11.9% 11.4% 11.3%
11.5% 11.8% 11.6%
11.4%

0%

%

30.4% 28.2% 26.3% 25.8%
27.5% 27.5% 27.9%
27.1% 26.6%

Source: Estimates by the Company

40%
20%

The Companyʼs market shareof dress shirts
10.6

53.5% 53.0% 53.1% 52.8% 50.5% 49.4% 47.8% 47.0%

46.8%

The Companyʼs market shareof business shoes

8.2

3.0%

FY2005
Points returned,
alteration charge

3.1%

3.4%

FY2007
Suits, formal wear

3.5%

3.6%

3.6%

FY2009Shirts, western-style apparel,

3.2%

3.5%

FY2011
Jackets, slacks, coats

3.5%

FY2013
Womenswear

casual wear, shoes, etc.

While the demand for suits has declined due to factors including a low birth rate andan aging population and the widespread acceptance of casual wear at the workplace,
the Company intends to raise the general level of business wear sales throughincreasing sales and market share of peripheral product items other than suits such as
dress shirts and business shoes, in addition to womenswear.

%

Source: Estimates by the Company

The Companyʼs market share of
peripheral product items iscurrently around 10%. The
Company intends to expand sales
going forward by launching
functional products, reinforcing
sales promotions and improving
the sales floor area.

6

〜INTRODUCTION〜
Strengths of Aoyama Trading Co., Ltd.
z No.1 in suits sales
worldwidez Japanʼs largest store
networkSales
capabilities
Store
development
capabilities

Merchandiseprocurement
capabilities

Customer

Adherence

base

to quality

z Data on over 20
million member
customers
z Sales promotion strategies
based on customer analysis

z Purchase volume
that overwhelms ourcompetitors and low
purchasing costs byleveraging the
economy of scalez Commitment tohigh-quality
productionz Strict quality control
system7

AGENDA
I. Introduction
II. Basic Policy of the Medium-Term
Management Plan “CHALLENGE 2017”
III. Key Strategies by Segment
IV. Cash Flows and Return of Profits toShareholders
V. Strategies for the Future8

From the First 50 Years to the Next 50 Years
New Corporate Philosophy

Aiming to further contribute to society through retail and services
to consumers based on sustainable growth
New Management Vision
Expansion of “strengths” in the core business ̶ No.1 approval rate among business persons
Proactive expansion of business domains

̶ Building a “stable business portfolio”

Management that engages stakeholders

̶ Implementation of “improvements forsustainable growth”

Aoyama Trading Co., Ltd. celebrated the 50th anniversary of its founding in May 2014, and has set off
on a new path towards the next 50 years. For the past 50 years we had been endeavoring to enhance
our corporate value under the slogan of “offering better products at lower prices and contributing tosociety through the selling of clothing.” For the next 50 years, we will devote ourselves to enhancing
our corporate value in a sustainable manner and aim to further contribute to society.
The new medium-term management plan represents the Companyʼs resolve towards the next 50 years.
Officers and employees of Aoyama Trading Co., Ltd. will concentrate their strengths to meet any and all
challenges that the plan may entail.
9

〜CHALLENGE 2017〜
Our Future Vision

Expansion of “strengths” in the corebusiness

Solidifying the No.1 approval rate among
business persons• Store openings with a focus on investment efficiency• Enhancing the profitability of existing stores by reinforcing items other than suits, including shoes and shirts• Expanding sales of womenswear, e-commerce (EC) and corporate uniforms, including new business development

Proactive expansion of business domains

Building a “stable business portfolio”• Expanding sales of American Eagle Outfitters business• Expanding sales of overseas business and franchise (FC) business• Expanding business domains through M&As

Management that engages stakeholders

Implementation of “improvements forsustainable growth”• Enhancing governance structure• Rebuilding personnel strategy including human resources development• Expanding CSR activities
Record profit
Consolidated
operatingincome¥27,000
millionTargeting a total return ratio of
130% (During the medium-term
management plan period)

Improve management
efficiency to a ROE of 7%
10

〜CHALLENGE 2017〜
Plan by Segment(Millions of yen, %)FY2014 forecast

Segment

Net sales

OperatingincomeOperatingincomemarginBusiness Wear Business

178,900

17,90024,000Casual Wear Business

Increase over
3 years

FY2017 plan
Net sales

OperatingincomeOperatingincomemarginNet sales

Operatingincome10.0%

207,000

23,00011.1%

28,100

5,100

－

－

32,000

－

－

8,000

－

13,300100

0.7%

24,000

1,100

4.6%

10,7001,000

Credit Card Business

3,700

700

18.9%

4,000

800

20.0%

300

100

Printing and MediaBusiness

11,300100

0.4%

15,000

500

3.3%

3,700

400

Sundry Sales Business

15,200400

2.7%

13,500200

1.5%(1,700)(200)

Others

3,400

200

3.9%

22,900

1,400

6.1%

19,5001,200

Consolidation adjustment(3,600)(800)－(6,400)－－(2,800)800

Consolidated
total

222,200

18,6008.4%

280,000

27,0009.6%

57,8008,400(Womenswear)

ROE

5.1%

7.0%

1.9
11

〜CHALLENGE 2017〜

Targeted Performance (Consolidated Net Sales)
Targeted performance: FY2017 consolidated net sales of ¥280,000 million
300,000

250,000¥222,100
million¥222,200
million¥230,000
million¥250,000
million¥280,000
million

OthersSundry Sales
Business
Printing andMedia Business

200,000

Credit Card
Business

150,000

100,000(Millions of yen)

Casual Wear
Business
FY2013 (actual)

FY2014 (forecast)

FY2015 (plan)

FY2016 (plan)

FY2017 (plan)

Business Wear
Business･In the business wear business, womenswear will be positioned as a key strategy inorder to raise the percentage of womenswear sales from 13% to 15%.
･The percentage of sales from businesses other than business wear will be raised from
20% to 26% by expanding sales mainly of American Eagle Outfitters business andrestaurant business.

12

〜CHALLENGE 2017〜

Targeted Performance (Consolidated Operating Income)Targeted performance: FY2017 consolidated operating income of ¥27,000 million (record high)30,00025,000Record high¥27,000
million¥22,500
million¥18,600
million

20,000¥20,000
million(Millions of yen)

OthersSundry Sales
Business¥23,000
millionPrinting andMedia Business
Credit Card
Business
Casual Wear
Business

15,000FY2013 (actual)

FY2014 (forecast)

FY2015 (plan)

FY2016 (plan)

FY2017 (plan)

Business Wear
Business･The percentage of operating income from businesses other than business wear to total
operating income will be raised from 8% to 15%. Contribution to profits will be limited
due to anticipatory expenses required for the expansion of business domains.
･Yen to dollar exchange rates are assumed in the range of ¥120 to ¥130 per dollar at thetime of purchasing. An improvement in operating income margin of 1.2% will be
13targeted by revising sales prices, improving manufacturing costs and reducing expenses.

AGENDA
I. Introduction
II. Basic Policy of the Medium-Term
Management Plan “CHALLENGE 2017”
III. Key Strategies by Segment
IV. Cash Flows and Return of Profits toShareholders
V. Strategies for the Future

14

〜CHALLENGE 2017〜

Business Wear Business (Policy)
No.1 share of menʼs suits in Japan
Reinforce womenswear

Expand share of peripheral product items

Expand EC and promote omni-channel
strategy• Target ¥32,000 million (30%increase)
1. Reinforce womenʼs formal wear
2. Develop functional products
3. Expand and improve sales floor
areas• Expand share of peripheral productitems
1. Develop new businesses
2. Develop functional products for
dress shirts and shoes and reinforce
sales promotion• Target ¥4,000 million (300%increase)
1. Expand EC sales in conjunction with
the increase in smartphone users
2. Promote omni-channel strategy
together with brick-and-mortar
storesNo. 1 approval rate among business persons

15

〜CHALLENGE 2017〜

Business Wear Business (Measures)
Concrete measures for the sales plan
Capturing foreign
tourists (Sales,
currently at approx.
¥1,000 million, will
be expanded 3-foldover 3 years)
Sales decline of
1% (approx.
¥4,500 million
over 3 years) is
assumed due tothe decrease in
the working
population(male)

Recovery fromthe sales
decline resulting
from thebacklash to thelast-minutedemand aheadof theconsumption
tax hike in
FY2014(4,500)¥178,900
million

FY2014
Net sales

174,400(4,000)11,000

2,000
3,000

Effects of store openings inexisting businesses
A total of 72 stores will be
opened over 3 years.
･48 Yofuku-no-Aoyama
stores･12 NB stores･12 TSC stores
Effects of relocations andrenovations

Lost market
share due tostore openings
by competitors

Approx.
¥28,000 million
4,000

3,000
Reinforce
EC segment
13,500Develop new
businesses(Details to beannounced in atimely manner)[Measures to reinforce
existing stores]
1. Measures to reinforce
womenswear(MD, expand sales floorarea, etc.)
2. Reinforce corporate
uniforms segment
3. Launch new MD
4. Reinforce customer
management and expand
product selection, etc.

¥207,000
million

FY2017
Net sales
16

〜CHALLENGE 2017〜
Business Wear Business(Store Opening Strategy)

1. Store opening format to dateMar. 31, 2007

Percentage

Mar. 31, 2015
forecast

Percentage

Change in no.
of stores

Change inpercentage

649

90.3%

698

81.4%

+49

(8.9)%

39

5.4%

73

8.5%

+34

+3.1%

31
719

4.3%
100.0%

87
858

10.1%
100.0%

+56
+139

+5.8%
－

Suburban roadsidestoresStores near train
stations
Stores in SCs
Total

Types of stores in store openings

100%

Stores in SCs

50%

Stores near train stations
Suburban roadside stores

0%
FY1994

FY2004FY2012FY2013

FY2014

2. Store opening plan for next 3 years by store type
Suburban roadside stores
Stores near train stations
Stores in SCs

Yofuku-no-Aoyama
24
12
12

NEXT BLUE

－
－
12

TSC

－
－
12

Total

24
12
36
17

〜CHALLENGE 2017〜
Casual Wear Business1. Growth strategy of “American Eagle Outfitters”

Growth has been mostly in accordance with strategic plan up to FY2014. We plan to continue
with our store development mainly in the regional areas. We will aim for net sales of ¥21,000
million and operating income of ¥1,000 million in FY2017 as the goals of Phase 3.
(Millions of yen)

25,000Medium-Term Management Plan of Eagle Retailing Corporation

20,00015,00010,000
5,000
0

9,700

14,00060

400

FY2013

FY2014FY20158 stores18 stores

6,100

Phase 1Raise brandawareness based onflagship urban store
strategy.

28 stores
Phase 2Raise brand awareness and expand
regional customer base throughstore openings in major regional SCs
and TV commercials

18,000700
FY201638 stores

1,500

21,0001,000

FY2017
Phase 3

1,000

Net sales(left axis)

500
0

48 stores

Operatingincome(rightaxis)

Increase EC sales by raisingbrand awareness nationwide,
thereby expanding sales andprofits.

2. Second pillar of casual wear businessWe will consider building the second pillar of casual wear business through possible M&As.

18

〜CHALLENGE 2017〜

Credit Card Business and Printing and Media Business
Credit Card Business

Printing and Media Business• The mainstay commercial printing businesshas been exposed to the pressure of soaring
material prices of ink and paper on its profits
recently. However, sales and profits have
improved thanks to the synergistic effects
generated through the use of proprietarily
developed cross-media sales promotion tool.
Positioned as the linchpin of the Groupʼs
media strategies, the external sales ratio will
be raised from the current 70% to 75%.

• As customer information managed by credit
card companies tend to be more up-to-date
than regular membership information, we willcontinue to utilize the credit card business to
support the Groupʼs sales promotion.

<Sales Plan of Aoyama Capital Co., Ltd.><Sales Plan of ASCON Co., Ltd.>(Millions of yen)

FY2014FY2015FY2016FY2017

Change over

FY2014

3 years

FY2015FY2016(Millions of yen)
FY2017

Change over
3 years

Fee income

1,200

1,300

1,400

1,400

200

Printing net sales

9,000

9,800

10,60011,5002,500Interest on loans

2,100

2,200

2,200

2,200

100

Publishing net sales

200

200

300

300

100

Others

400

400

400

400

0

Sales support and others

2,100

2,400

2,800

3,200

1,100

Total

3,700

3,900

4,000

4,000

300

Total

11,30012,40013,70015,0003,700

19

〜CHALLENGE 2017〜
Other Businesses

Restaurant Business• Business continues to expand firmly andsales have nearly doubled in the past 2
years.
• Store opening policy will be overhauled.
Instead of utilizing the Yofuku-no-Aoyama
premises, growth of the restaurant businesswill be promoted independently through thedevelopment of new properties.
• Sales growth of approx. ¥10,000 million istargeted over next 3 years through proactive
store openings and business diversificationby leveraging our know-how.

Reuse
Business

Overseas
Business

New
Businesses• The reusebusiness, as asublease business,
will continue torelocate existing
stores including
Yofuku-no-Aoyama
and open stores invacant premises.

• We will gradually
expand our stores in
China starting fromthe Shanghai area.
Planning
approximately 5 store
openings a year.
• Additionally, withthe start of full-scale
operations of theIndonesia Plant, weare planning to sellbusiness wear in the
ASEAN region.

• We will launch new
businesses byleveraging ourstrengths, such as
store development
capabilities, andcustomer data while
nurturing the nextgeneration pillar of
earnings through theacquisition ofcompanies (M&As)
that align with our
corporate philosophy.

<Sales Plan of Other Businesses>
FY2014
Restaurant Business
Reuse Business

FY2015FY2016(Millions of yen)

FY2017

Change over 3 years

2,900

4,200

7,800

13,000+10,100

500

800

1,100

1,600

+1,100Overseas Business

0

0

0

3,000

+3,000

New Businesses*2

0

100

1,000

5,300

+5,300

3,400

5,100

9,900

22,900+19,500*1

Total

Notes:

1. Although the overseas business is currently not included in the scope of consolidation, it is scheduled for consolidation in FY2017.
2. New Businesses in FY2017 include sales of approx. ¥3,000 million arising from M&As.

20

〜CHALLENGE 2017〜

Management that Engages Stakeholders
We will engage all stakeholders
while squarely facing all of themin order to further enhance ourCustomers

corporate value.
Enhancing thegovernancestructure,
appropriate
disclosure of
information andreinforcing returnof profits toshareholders

Enhancing customer
convenience through EC anddevelopment of new
businesses and developing
products centering on
customer satisfaction

Shareholders

Production basemeasures and solid
cooperative
relationships that
support quality

Employees

AoyamaBuilding a
comfortable andmotivating
workplace

TradingGroup

BusinessLocal

partners

Community

Expanding CSR
activities and creating
stores rooted in thecommunity

21

〜CHALLENGE 2017〜

Management that Engages Stakeholders
ThemesSpecific policies• Appoint multiple outside directors

Enhancing the governancestructure• Ensure transparency of the management team, election of directors,
decision on remuneration, etc.
• Improve internal controls and risk management system• Expand disclosure items

Appropriate disclosure of
information

Personnel strategy• Improve investor relations (IR) intended for overseas investors (Expand
overseas IR, improve our English website, etc.)• Increase contact with investors through participation in IR seminars
and other means• Develop a system where employees find fulfillment in their work by
rebuilding career paths and other means• Foster female managers and employees for overseas assignments• Participate in projects that benefit the regional economy

Expansion of CSR activities• Activities that contribute to the enhancement of Japanese culture• Efforts toward the preservation of the natural environment

22

AGENDA
I. Introduction
II. Basic Policy of the Medium-Term
Management Plan “CHALLENGE 2017”
III. Key Strategies by Segment
IV. Cash Flows and Return of Profits toShareholders
V. Strategies for the Future

23

〜CHALLENGE 2017〜

Cash Flows and Return of Profits to Shareholders
Liquidity on
hand as ofMar. 31, 2015

ROE 7%Net income＋
Depreciation
Cash on hand+
Borrowing ofoutside funds
Cash on hand+
Depreciationz Reinforcement of return of profits toshareholders
Targeting a total return ratio of 130%
during the medium-term plan period• Steady dividend per share¥100• Targeted payout ratio
approx.70%• Acquisition of own shares (treasury
stock)z Investments for expansion of businessdomains:¥20,000 million over 3 years
z Strategic investments for reinforcementof core business:¥30,000 million over 3 yearsz Reserves on hand:Mar. 31, 2015 Mar. 31, 2016 Mar. 31, 2017 Mar. 31, 2018

¥20,000 millionz Decrease in cash due to seasonal
factors:¥20,000 million

Investments will be made towards the growth of core and non-core businesses while
maintaining a stable financial base. An amount greater than net income will be returned
to shareholders (targeting a total return ratio of 130%) to improve the ROE.
24

AGENDA
I. Introduction
II. Basic Policy of the Medium-Term
Management Plan “CHALLENGE 2017”
III. Key Strategies by Segment
IV. Cash Flows and Return of Profits toShareholders
V. Strategies for the Future

25

〜CHALLENGE 2017〜
Strategies for the Future[Framework of the Strategies for the
Future]1. Stable growth of core business andreinforcement of profit-generating
structure
2. Expansion of business domains
through overseas and new businesses

Steady growth of corebusiness and fostering of
the second pillar

Reinforcement of profitgenerating structure fromcore business and businessdiversification

Steady growth of corebusiness and expansion ofbusiness domains(FY, Millionsof yen, %)2012
actual2013
actual2014
forecast

Net sales

212,400

222,100

222,200

280,000

Operatingincome21,20022,50018,60027,000Operatingincomemargin

10.0

10.2

8.4

9.6

ROE

5.3

5.4

5.1

7.0

2015

－

2017
plan

2018

－ Our future
visionWe will aim for a 10%
ROE in the future.

26

[Reference]
Annual Plans by Segment(Millions of yen)Segment
Business Wear
Business(Womenswear)
Casual Wear
Business
Credit Card
Business
Printing andMedia Business
Sundry Sales
Business
OthersConsolidation
adjustment
Consolidated
total

FY2014 forecast

FY2015 plan

Net

Operating

Net

sales

incomesales

YOY

FY2016 plan

Operatingincome

Net

YOY

sales

178,900

17,900182,100

101.8%

18,800105.0% 193,200

24,000―26,000108.3%――

13,300100

17,000127.8%

500

3,700

700

3,900

105.4%

11,300100

12,40015,200

400

3,400

YOY

FY2017 plan

Operatingincome

Net

YOY

sales

106.1%

20,600109.6% 207,000

29,000111.5%――

500.0%

21,000123.5%

800

700

100.0%

4,000

102.6%

109.7%

200

200.0%

13,70014,800

97.4%

300

75.0%

200

5,100

150.0%

0(3,600)(800)(5,300)147.2%―

222,200

18,600230,000

103.5%

20,500YOY

OperatingincomeYOY

107.1%

23,000111.7%

32,000110.3%――

160.0%

24,000114.3%

1,100

137.5%

800

114.3%

4,000

100.0%

800

100.0%

110.5%

300

150.0%

15,000109.5%

500

166.7%

14,00094.6%

300

100.0%

13,500

96.4%

200

66.7%

0.0%

9,900

194.1%(300)―

22,900231.3%

1,400

―

―

(5,800)109.4%――(6,400)110.3%――

110.2% 250,000

108.7%

22,500109.8% 280,000

112.0%

27,000120.0%

27

[Reference]
Business Wear Business (Store Format)
Yofuku-no-Aoyama
Suburban roadside stores

Yofuku-no-Aoyama
Flagship stores near train stations

Yofuku-no-Aoyama
Small stores near train stations

Yofuku-no-Aoyama
Stores in SCs

TSC (THE SUIT COMPANY)Stores near train stations

The view inside a TSC store

TSC
Stores in SCs

TSC
Small stores near train stations

UL (Universal Language)Stores in fashion malls

The view inside a UL store
in a department store

Blu e Grigio (BG)

NEXT BLUE (NB)28

This presentation material contains forward-looking statements which are based on the
Companyʼs assumptions, predictions and plans regarding the future as of January 28, 2015.
Actual results may differ significantly from those anticipated in these forward-looking
statements due to various risks and uncertainties related to the world economy, competitor
situation and changes in exchange rates.

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