Summary of Q&A at FY2024 Q2 Financial Results Briefing
Q1: You explained that the growth rate of existing store sales of Gyomu Super is exceeding the target.
Please tell me the growth rate of the number of customers and sales per customer. Also, what is
the growth rate of unit prices, and can we assume that the volume growth has increased morethan the growth rate of unit prices?
A1: While unit prices of products themselves are rising under inflation, the number of customers
has been on a positive trend since last summer and then has been growing steadily. Therefore,
the half of the impact is from the number of customers, and the remaining half is from sales per
customer.
Inflation in the unit prices of shipped items has been fairly subdued, with an increase of about
4% to 5%. In the current situation, the increase in volume is driving the overall results morethan that in unit prices.
Q2: Although the yen does not seem to be appreciating, I think the profit margins are recovering evenin the weak yen environment. Do you think you will be able to control the impact of exchange
rates in the future as well?
A2: The yen has been weakening considerably for a long period of time, but I think it is unlikely thata similar or greater change will occur in the future compared to the past one or two years of yen
depreciation, so we believe that we can ride out this weak yen environment and that it is within
our control.
Q3: When will you be revising the prices of imported products in the future? Please tell me whether
you expect a significant impact on demand.
A3: Our original forecast for this fiscal year was for the exchange rate to remain between JPY140
and JPY150, so the current level of exchange rate is unexpected.
In response to it, we have raised prices of some products again this spring, and we willcontinue to revise prices for necessary items while monitoring shipment trends.
Q4: When will you open a franchise restaurant of Premium Karubi? Also, what is your response to
the number of franchise openings in the next fiscal year and beyond?
A4: Before we announced our policy on opening the franchise restaurants, we had received
requests from many companies.
Although we received a large number of applicants, we do not yet have concrete sites for newstores, so it is difficult to set a target figure at this point. We would like to open a franchise as
early as the end of this fiscal year or within the next fiscal year at the latest.
Q5: I remember that you were looking at a greater burden of logistics costs due to Japan’s 2024
problem. How it was in H1 and whether it will be heavier in H2?
A5: The steep rise in labor costs and utility costs has led to requests for the price increases not only
in logistics costs but also in warehouse operation costs.

Overall logistics costs are on a rising trend, but we are working to improve our logistics systemevery year, which has helped to mitigate the cost increase.
As for H2, we think that the costs will not exceed our budget since we expect that the priceincreasing trend will continue and have already included excessive SG&A expenses in thebudget for this fiscal year.
Q6: Have there been any changes in the willingness to open new franchise stores in Kagoshima
Prefecture? Also, is there a possibility that other indirectly managed areas other than Kagoshima
will become directly managed areas?
A6: In Kagoshima, we have already received requests to open new stores from the existing ownerand other owners. The number of stores in Kagoshima is still small compared to the population,so we believe that more stores will be opened by those other than the current owner in thefuture.
As for other indirectly managed areas, we will have to make a decision after carefully analyzing
whether the direct management will bring enough new store openings to offset the increased
cost borne by our headquarters due to the change to direct management. We are not currently
planning the change in area categories, but we would like to move it forward in consultation
with the owners if there is an area with favorable analysis results.
Q7: To achieve an operating profit margin of 10%, it is necessary to raise the ratio of private label
products (PB ratio) of the Gyomu Super business, increase profitability of factories, and grow therestaurant & delicatessen business. What are the current challenges?
A7: We believe that we will steadily increase the PB ratio by developing new products as we havedone in the past. In the restaurant & delicatessen business, our existing brands will be able tosteadily increase sales and profits.
On the other hand, in the previous fiscal year, the profitability of our factories deteriorated dueto the strong impact of inflation, but it has been improving now. The future issue for thefactories is supply and production capacity, and we would like to make investments to increase
the production capacity.
At the same time, this investment plan is being set back due to the current sharp rise inconstruction costs, and we are having a hard time making a plan to recoup the investment
while taking into account the rising construction costs.
Q8: I understand that PB procurement costs are becoming higher due to the ongoing depreciation ofthe yen. How are you offsetting the costs? How are your customers' reactions to the priceincreases?
A8: In the previous fiscal year, prices were being raised all over the world due to inflation, but thishas not been the case in the current fiscal year. In particular, in China, our main import country,
the economy is in a very bad shape, and manufacturers are aggressively lowering prices inorder not to make shipments down. There is a trend toward price reductions of products, morethan the effect of exchange rates.
Sales of some products have fallen more than expected while sales of others have increased
after price increases. As a whole, we see that both sales and shipments were turning topositive growth compared to the previous year.

Q9: Could you explain the impact of the yen's depreciation on the profitability of Premium Karubi?
Please explain whether the profitability is on an improving trend due to product modifications, oron a worsening trend.
A9: Imported meat accounts for the majority of raw material and costs, so it is strongly affected byforeign exchange rates. As a result, it was quite hard to mitigate the impact of the weak yen
only by cost saving at each restaurant. Therefore, we have overcome this inflation by revising
our menu, raising prices for all items on the menu, and introducing a new price plan. Currently,
both sales and profits have exceeded those of the previous fiscal year.
Q10: It appears that the sales trends of listed yakiniku restaurants have slowed down since April.
Have there been any changes in existing store sales at Premium Karubi?
A10: All of our 21 Premium Karubi restaurants are doing well. We are receiving very positive
feedback from our customers with many of our restaurants achieving record sales, so we will
be able to turn a profit for this fiscal year as a whole.
Q11: You said that logistics costs in Q1 were 1.8% of sales. Please tell me about those in Q2.
A11: The logistics cost ratio decreased approximately 0.1 point in Q2. Although logistics costs arerising, we have managed to maintain this level by increasing sales and improving our logistics.
Q12: How much of imported private label products are composed of China?
A12: When China's share was at its lowest, it dropped to approximately 50%, but now it is around60%. In countries other than China, prices have been rising, and shipments have inevitably
been weak. In the meantime, as mentioned in A8, China has been setting aggressive prices,
so shipments have been very strong.
Q13: Why does it seem that foreign exchange gains are small in Q2 despite the weak yen phase?
Q2 was expected to see non-operating income of approximately JPY1 billion arising from thediscrepancy between the cost, which is processed at the average market rate during the period,
and the settlement rate, including foreign exchange contracts.
A13: Our original plan was to use forward exchange contracts to cover about 30% of the total
settlement amount for imported items.
We had assumed dollar-yen exchange rate of JPY140 to JPY150 for the current fiscal year,
so we had been holding off on new contracts because the yen has weakened since thisspring.
When the rate exceeded JPY155, it was difficult to decide whether this was a temporary
situation or would continue for a while, and we put new contracts on hold, which resulted insmall foreign exchange gains.
Q14: I would like to know your initiatives at directly operated Gyomu Super stores.
A14: The Yokohama Izumi store is a fairly large directly operated store that opened in Kanto in
October 2023, where we are conducting various tests. For example, some freezing
showcases have been fitted with lids to measure the energy-saving effect.

It is generally believed that sales of products in the showcases with lids would drop, but thesales at the Yokohama Izumi store were the same as other stores even with lids. Therefore,
we judge that sales will probably not decline even if lids are installed.
We are currently examining the relationship between the energy-saving effect and theincreased initial cost by installing lids.
In addition, we are introducing an automated ordering system to stores while continuing to
examine any problems with this system at the directly operated store.
The Yokohama Izumi store has also tested self-checkout registers.
The introduction of the registers has not progressed sufficiently in the industry due toproblems, such as scanning omissions and machine stoppages since customers have to scanand pay at this register. If we succeed in solving these problems, it will be possible tocomplete the checkout process without a cashier, which will lead to labor-saving in the future.
However, currently, an employee has to take action to resume the register operation that has
been halted due to a customer's operational mistake. We are discussing with our cash register
manufacturer to determine if it is feasible to introduce the system into the Gyomu Superstores.
Q15: I assume that both sales and profits have been strong through H1 compared to the Company's
forecast for the full year. Are there any particular reasons why you have left the full year forecast
unchanged?
A15: Sales and profits were quite strong, but the current exchange rates are just now beginning toreduce the profit margin, so we will continue to raise prices. However, if we are not able totake sufficient action, the profit margin will inevitably decline from H1.
In addition, we decide on product prices based on customer response and shipment results. Ifshipments slow down significantly by the price increase, we will need to readjust the prices.
Therefore, we have left the original forecast unchanged.
Q16: When do you expect the PB ratio to exceed the previous fiscal year's level?
A16: Private label products themselves have been doing well, and we are continuing to strengthen
sales of the products as in the past. The key point is how long the current strong performanceof national brand (NB) products will continue.
In fact, the shipment volume of NB products has increased considerably because customers
flowing in from other stores and new customers were increasing, which can be seen fromsurveys of store managers.
NB products continue to sell well by capturing great demand from other companies’ stores,and we expect that it will take about the whole of this fiscal year for this trend to run its course.
That’s why we think that the PB ratio will continue to be relatively low during this fiscal year.
Q17: I believe that a rise in the NB ratio reduces profitability because NB products have lower
margins. Are there any changes in the NB profitability along with the price increases for NB
products?
A17: The source of income for NB products is basically royalties, so raising prices of NB products
increases the royalty income, which is a plus.
However, since NB products have lower margins, for example, shifts in demand from PB toNB will lead to lower overall profitability.

Q18: Could you comment on the status of your e-commerce site and your plans for expansion?
A18: Our EC site is currently available only in Tokyo and Kanagawa. Although the number ofmembers is increasing steadily each month, it has not yet had an impact on overall sales andprofits.
The biggest factor is that purchasing by case is not user-friendly for the general public. In fact,
the Gyomu Super stores have 10% to 20% of the customers as business operators who run
restaurants. However, the majority of customers on this EC site are business operators whorun various businesses on their own, so the customer base is different from that of brick-andmortar stores.
They purchase online for convenience, not price, rather than buying at a physical store.
Therefore, we do not expect a rapid expansion.
Q19: Are there any initiatives of other domestic and international food supermarkets that you arepaying attention to?
A19: I have the impression that other supermarket operators have recently been making
considerable efforts to reduce the number of workers and to develop discount-typebusinesses. In the past three years, we have also seen an increase in the number of imported
products in particular at other supermarkets. Looking at what other companies are doing, weare seeing if there is anything we can do in their initiatives.
On the other hand, I do not see any significant changes in overseas supermarkets. Comparedto the changes over the past 10 years, the changes over the past one to two years seem to bevery small. The only truly new effort is unmanned supermarkets.
Q20: What trends are you noticing in PB products?
A20: There are not any significant changes overall, but for example, an Acai boom is now
resurgent, and we have received a number of inquiries about it. Although we could not predict
the boom, the trend for only one product seems to have a small impact.
Q21: I get the impression that desserts are strong at your stores. What is the background here?
A21: Desserts are basically the easiest for consumers to pick up, which is easily reflected in sales.
On the other hand, desserts rarely become long-selling products perhaps because people gettired of them, which is a worry for us. Although we have a diverse lineup of desserts, the sales
growth seems to be slower than in other categories because people tend to refrain frombuying desserts when trying to save money.
Q22: What are the challenges for accelerating the opening of the Gyomu Super stores in the 23
wards of Tokyo and central Tokyo areas, and how are they resolved?
A22: If we open new stores in the center of Tokyo, we will inevitably have to pay higher rent andper-square meter prices, so we have no choice but to open a compact store. A compact store
has limited sales floor space and a small stockroom, making it difficult to maintain a sufficient
stock of products even when there is demand for them.

As of now, we have some small stores in Tokyo and Kanagawa, and although they cangenerate enough sales and capture further demand, their stockroom and sales floor are too
small to hold the enough inventory, which is a detriment to sales growth.
Therefore, if we proceed with small store development going forward, the most important
issue is to improve the efficiency of the sales floor area through various means, such asincreasing frequency of deliveries and partially changing to piece picking from current
distribution in cardboard boxes.
Q23: In the consumption environment, do you expect the trend towards saving to continue in thefuture?
A23: In my personal opinion, it will continue for quite a while longer. This is because although wage
increases have been implemented, the real wage has not risen across Japan. While mainly
major companies announced wage increases, small- and medium-sized enterprises, which
account for the majority of Japanese companies, probably find it difficult to raise wages asmuch as major companies.
In addition, until real wages remain positive for some time, consumers will continue to save inthe long term.
Q24: How does the increase in construction costs compare to your assumptions? Has this affectedyour plans for opening new stores and store areas?
A24: We do not have a strong impact on the store openings themselves although there have been
delays in planning at some stores. This is because our business has few new construction
projects to begin with, and there is a relatively small impact on projects that utilize existingbuildings.
However, overall construction costs are now more than double what they were three years
ago. The problem now is not about the Gyomu Super business, but rather about factories andwarehouses.
Q25: Japanese food is attracting more and more attention overseas, and what kind of your initiatives
are you imagining?
A25: We are considering exporting ingredients and food products that are the source of Japanesefood.
While it is easy for non-Japanese to pick up sweets that can be eaten immediately after
opening the package, On the other hand, we heard that items that require cooking are hard forforeign people to buy them because people do not know about the dish itself or what thecorrect flavor is.
We would like to locally offer products such as seasonings that can be used to determine thetaste of Japanese food to a certain extent with a single item. I think such products will beeasily welcomed by people overseas.
Q26: Where would you focus your business if you had more time?
A26: I currently spend the majority of my time on the Gyomu Super business. In particular, I devoteconsiderable time to product development work, which is the core of us, including checking
imported PB products and developing products produced by domestic plants. In addition, webelieve that there is still room for improvement in the Group's factories, so we would like tovisit the sites and take various measures.