Summary of Consolidated Financial Results
for the Second Quarter of the Fiscal Year Ending February 28, 2018
(Six Months Ended August 31, 2017)[Japanese GAAP]
September 29, 2017

Company name: Adastria Co., Ltd.
Listing: TSE 1st section
Stock code:
2685
URL: http://www.adastria.co.jp
Representative: Michio Fukuda, Representative Director, Chairman & CEO
Contact:
Mika Takano, General Manager of Corporate Planning Department
Tel: +81-3-5466-2010
Scheduled date of filing of Quarterly Report:
October 13, 2017
Scheduled date of payment of dividend:
October 20, 2017
Preparation of supplementary materials for quarterly financial results: Yes
Holding of quarterly financial results meeting:Yes (for investors)
Note: The original disclosure in Japanese was released on September 29, 2017 at 15:00 (GMT +9).
(All amounts are rounded down to the nearest million yen)

1. Consolidated Financial Results for the Second Quarter of the Fiscal Year Ending February 28, 2018
(March 1, 2017 – August 31, 2017)(1) Consolidated results of operations (cumulative)
Net sales

Operating profit

Million yen

Six months ended Aug. 31, 2017
Six months ended Aug. 31, 2016
Note: Comprehensive income(Percentages represent year-on-year changes)
Net income attributable
Ordinary profit
to owners of the parent%

Million yen%

Million yen%

Million yen

107,793
10.3
4,033 (49.9)
4,143 (48.5)
97,726
0.7
8,054
(1.0)
8,050
(3.3)
Six months ended Aug. 31, 2017:
2,040 million yen (down 40.7%)
Six months ended Aug. 31, 2016:
3,441 million yen (down 52.9%)
Net income per share

Diluted net income per share

Yen

Yen

Six months ended Aug. 31, 2017
Six months ended Aug. 31, 2016
Reference: EBITDA

107.09100.70Six months ended Aug. 31, 2017:
Six months ended Aug. 31, 2016:
Six months ended Aug. 31, 2017:
Six months ended Aug. 31, 2016:

EPS before goodwill amortization

%

5,037
4,848

3.9
16.6

8,601 million yen (down 27.7%)
11,903 million yen
134.76 yen (up 9.2%)
123.37 yen(*) For more details regarding definition, computational method and other matters of these indices, please refer to thesection “Explanation of Results of Operations” on page 2.
(2) Consolidated financial position
Total assets
Net assets
Equity ratio
Million yen

As of Aug. 31, 2017
As of Feb. 28, 2017
Reference: Shareholders’ equity

Million yen%

As of Aug. 31, 2017:

96,49890,38956,706 million yen

56,70656,035
As of Feb. 28, 2017:

58.8
62.0

1Q-end2Q-endDividend per share
3Q-endYear-end

Total

Yen

Yen

Yen

Yen

Yen

56,035 million yen

2. Dividends

Fiscal year ended Feb. 28, 2017
Fiscal year ending Feb. 28, 2018
Fiscal year ending Feb. 28, 2018 (forecast)
Note: Revision to the most recently announced dividend forecast: None

35.00
35.00

-

40.00

75.00

-

40.00

75.00

3. Consolidated Forecast for the Fiscal Year Ending February 28, 2018 (March 1, 2017 – February 28, 2018)
Net sales
Million yen

Operating profit%

Million yen%

Ordinary profit
Million yen%(Percentages represent year-on-year changes)
Net income attributable
Net income per
to owners of the parent
shareMillion yen%

Yen

Full year
230,500 13.2
13,500(9.5)
13,500 (10.8)
11,000(5.0)
233.84
Note: Revision to the most recently announced consolidated forecast: Yes
Reference: EBITDA
Fiscal year ending Feb. 28, 2018 (forecast): 22,800 million yen (down 1.0%)
EPS before goodwill amortization
Fiscal year ending Feb. 28, 2018 (forecast):
291.23 yen (up 1.0%)

* Notes(1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in changes inscope of consolidation): Yes
Newly added: 1 (Velvet, LLC)

Excluded: -(2) Application of special accounting methods for presenting quarterly consolidated financial statements: None
(3) Changes in accounting policies and accounting-based estimates, and restatements
1) Changes in accounting policies due to revisions in accounting standards, others: Yes
2) Changes in accounting policies other than 1) above: None
3) Changes in accounting-based estimates: None
4) Restatements: None
Note: Please refer to the section “2. Quarterly Consolidated Financial Statements and Notes, (4) Notes to Quarterly
Consolidated Financial Statements, Changes in Accounting Policies” on page 10 for further information.

(4) Number of outstanding shares (common stock)1) Number of shares outstanding at the end of the period (including treasury shares)
As of Aug. 31, 2017:
48,800,000 shares
As of Feb. 28, 2017:

48,800,000 shares

2) Number of treasury shares at the end of the period
As of Aug. 31, 2017:
1,758,695 shares

As of Feb. 28, 2017:

1,757,425 shares

3) Average number of shares outstanding during the period
Six months ended Aug. 31, 2017:
47,041,975 shares

Six months ended Aug. 31, 2016:

48,153,477 shares

Note 1: The current quarterly financial report is not subject to quarterly review procedures.
Note 2: Cautionary statement with respect to forward-looking statements
Forward-looking statements in this report are based on currently available information and certain assumptions judged to bereasonable. Actual results may differ significantly from these forecasts for a number of factors. Please refer to the section “1.
Qualitative Information on Quarterly Consolidated Financial Performance, (3) Explanation of Consolidated Forecast and Other
Forward-looking Statements” on page 4 regarding preconditions or other related matters for the forecast shown above.

Adastria Co., Ltd. (2685) Summary of 2Q Financial Results for February 2018 Fiscal Year

Contents of Attachments

1. Qualitative Information on Quarterly Consolidated Financial Performance2(1) Explanation of Results of Operations

2(2) Explanation of Financial Position

3(3) Explanation of Consolidated Forecast and Other Forward-looking Statements

4

2. Quarterly Consolidated Financial Statements and Notes

5(1) Quarterly Consolidated Balance Sheet

5(2) Quarterly Consolidated Statements of Income and Comprehensive Income7(3) Quarterly Consolidated Statement of Cash Flows

9(4) Notes to Quarterly Consolidated Financial Statements

10

Going Concern Assumption

10

Significant Changes in Shareholders’ Equity

10

Changes in Accounting Policies

10

3. Supplementary Information

11(1) Sales for Brands and Regions

11(2) Sales for Merchandise Categories

11(3) Number of Stores

12

- 1 -

Adastria Co., Ltd. (2685) Summary of 2Q Financial Results for February 2018 Fiscal Year

1. Qualitative Information on Quarterly Consolidated Financial Performance(1) Explanation of Results of Operations
Consolidated results(Million yen)First six months of FY2/17
First six months of FY2/18(Mar. 1, 2016 – Aug. 31, 2016) (Mar. 1, 2017 – Aug. 31, 2017)

YoY change(Amount)

YoY change(%)

Net sales

97,726

107,793

10,066

10.3

Operating profit

8,054

4,033

(4,021)(49.9)

Ordinary profit

8,050

4,143

(3,906)(48.5)Net income attributableto owners of the parent

4,848

5,037

188

3.9

EBITDA

11,9038,601(3,302)(27.7)EPS before goodwill
amortization (Yen)

123.37134.76

11.38

9.2

Consolidated net sales in the first half (March 1-August 31, 2017) increased 10.3% year-on-year to 107,793
million yen, operating profit decreased 49.9% to 4,033 million yen, ordinary profit decreased 48.5% to 4,143
million yen, and net income attributable to owners of the parent increased 3.9% to 5,037 million yen.
Earnings before interest, taxes, depreciation and amortization (EBITDA) decreased 27.7% to 8,601 million yen
and earnings per share (EPS) before goodwill amortization rose 9.2% to 134.76 yen. (*)
One reason for the 10.3% increase in first half sales was the 4.4% increase in non-consolidated sales in Japan.
The transfer in the first quarter of PAGEBOY and other apparel brand operations to consolidated subsidiary
ALICIA and inclusion of the sales of U.S.-based Velvet, LLC from the second quarter (this company was
acquired in the first quarter) also contributed to the sales growth.
In Japan, the brands niko and…, STUDIO CLIP and BAYFLOW performed well in the first half. (Please refer tothe section “3. Supplementary Information, (1) Sales for Brands and Regions” for further information. )The number of stores in Japan increased by 113 because of the inclusion of the operations of ALICIA. Overseas,
the acquisition of Velvet, LLC added nine stores. In addition, we opened 79 stores (including seven overseas) andclosed 28 stores (including nine overseas), resulting in a total network of 1,524 stores (including 115 overseas) at
the end of August 2017. (Please refer to the section “3. Supplementary Information, (3) Number of Stores” forfurther information.)
The gross profit margin decreased 2.1 percentage points from one year earlier to 55.8% because priority wasplaced on reducing inventories.
The ratio of selling, general and administrative (SG&A) expenses to sales increased 2.4 percentage points to
52.0%. This was attributable mainly to increased advertising expenditures for major brands, IT system
investments and expenses for relocating the Tokyo head office. As a result, the operating margin decreased 4.5
percentage points to 3.7%.
There was a gain on sales of investment securities of 4,373 million yen as extraordinary income and an
extraordinary loss of 151 million yen for the impairment o f store assets.
(*) Since the fiscal year that ended in February 2014, the amortization of goodwill, which is not a cash expense,
has created a large gap between changes in cash flows and changes in operating profit and all subsequentlevels of earnings. Furthermore, comparisons with foreign companies are difficult because of differences inaccounting standards of individual countries for recording goodwill amortization. As a result, we disclose
EBITDA and EPS before goodwill amortization as reference fina ncial indicators.

- 2 -Adastria Co., Ltd. (2685) Summary of 2Q Financial Results for February 2018 Fiscal Year

EBITDA
Operating profit + Depreciation + Amortization of goodwill (SG&A expenses)
EPS before goodwill amortization(Net income attributable to owners of the parent + Amortization of goodwill (SG&A expenses andextraordinary losses) + Impairment losses (goodwill)) / Average number of shares outstanding during theperiod(2) Explanation of Financial Position
1) Balance sheet position
Total assets increased 6,109 million yen from as of February 28, 2017 to 96,498 million yen as of August 31,
2017. This was mainly due to increases in notes and accounts receivable-trade of 2,001 million yen, inventories
of 1,714 million yen, goodwill of 3,139 million yen, lease and guarantee deposits of 1,861 million yen and other(deferred tax assets, etc.) of 2,066 million yen, while there was a decrease in investment securities of 5,040
million yen.
Liabilities increased 5,438 million yen to 39,792 million yen. This was mainly due to increases of 4,393 million
yen in notes and accounts payable-trade and 510 million yen in short-term loans payable, while there was adecrease in income taxes payable of 712 million yen.
Net assets increased 671 million yen to 56,706 million yen. This was mainly due to an increase of 3,671 million
yen in retained earnings, while there was a decrease of 3,077 million yen in valuation difference on
available-for-sale securities.
2) Cash flow position
Cash and cash equivalents (hereinafter “net cash”) as of August 31, 2017 amounted to 18,727 million yen, or
1,979 million yen less than as of February 28, 2017.
A summary of cash flows from each activity during the first half of the current fiscal year is as follows:
Cash flows from operating activities
Net cash provided by operating activities totaled 5,588 million yen (compared with 2,834 million yen provided in
the same period of the previous fiscal year). The main positive factors include net income before income taxes of
8,391 million yen, depreciation of 3,353 million yen, and increase in notes and accounts payable-trade of 2,140
million yen. Main negative factors include gain on sales of investment securities of 4,373 million yen and income
taxes paid of 4,246 million yen.
Cash flows from investing activities
Net cash used in investing activities totaled 4,589 million yen (compared with 3,688 million yen used in the same
period of the previous fiscal year). This was mainly due to the payments of 4,366 million yen for the purchase ofproperty, plant and equipment, 3,906 million yen for the purchase of shares of subsidiaries resulting in change inscope of consolidation, and 1,589 million yen for lease and guarantee deposits, while there was proceeds of 5,082
million yen from sales of investment securities.
Cash flows from financing activities
Net cash used in financing activities totaled 2,971 million yen (compared with 2,234 million yen used in thesame period of the previous fiscal year). This was mainly due to cash dividends paid of 1,903 million yen andrepayments of long-term loans payable of 725 million yen.

- 3 -Adastria Co., Ltd. (2685) Summary of 2Q Financial Results for February 2018 Fiscal Year(3) Explanation of Consolidated Forecast and Other Forward-looking Statements
The Company has revised the full year forecasts for the fiscal year ending February 28, 2018 that wereannounced on April 4, 2017, based on the results of operations in the first half of the cu rrent fiscal year.
For more information about this revision, please see the September 29, 2017 press release concerning thisrevision (Japanese version only).

- 4 -Adastria Co., Ltd. (2685) Summary of 2Q Financial Results for February 2018 Fiscal Year

2. Quarterly Consolidated Financial Statements and Notes(1) Quarterly Consolidated Balance Sheet(Million yen)
Second quarter of FY2/18(As of Aug. 31, 2017)

FY2/17(As of Feb. 28, 2017)
AssetsCurrent assets
Cash and deposits

20,734

18,774

Notes and accounts receivable-trade

7,860

9,862

Inventories

16,351

18,066

Other

3,285

3,282

Allowance for doubtful accounts

(53)

(127)

48,17849,858Store interior equipment, net

6,491

7,758

Other, net

3,952

4,293

Total property, plant and equipment

10,444

12,052

Goodwill

3,309

6,449

Other

2,242

3,127

Total intangible assets

5,552

9,576

Investment securities

7,677

2,637

Lease and guarantee deposits

17,237

19,099

Other

1,523

3,589

Allowance for doubtful accounts

(225)

(315)

Total investments and other assets

26,21325,011

42,21046,64090,38996,498Notes and accounts payable-trade

6,361

10,755

Electronically recorded obligations-operating

8,919

8,737

Short-term loans payable

2,027

2,538

Accounts payable-other

8,941

9,243

Income taxes payable

4,470

3,757

Provision for bonuses

2,195

2,424

453

705

Total current assets
Non-current assets
Property, plant and equipment

Intangible assets

Investments and other assets

Total non-current assets
Total assets
Liabilities
Current liabilities

Other provision
Other

295

564

33,66538,727

Provision

241

266

Other

447

797

Total current liabilities
Non-current liabilities

Total non-current liabilities
Total liabilities

- 5 -

688

1,064

34,35339,792

Adastria Co., Ltd. (2685) Summary of 2Q Financial Results for February 2018 Fiscal Year

(Million yen)
Second quarter of FY2/18(As of Aug. 31, 2017)

FY2/17(As of Feb. 28, 2017)
Net assets
Shareholders’ equity
Capital stock

2,660

2,660

Capital surplus

7,227

7,227

Retained earnings

47,41351,085

Treasury shares(4,645)(4,649)Total shareholders’ equity

52,65456,323

Accumulated other comprehensive income
Valuation difference on available-for-sale securities

3,190

112

Deferred gains or losses on hedges

(19)

(29)

Foreign currency translation adjustment

209

300

Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets

- 6 -

3,380

383

56,03556,706

90,38996,498Adastria Co., Ltd. (2685) Summary of 2Q Financial Results for February 2018 Fiscal Year

(2) Quarterly Consolidated Statements of Income and Comprehensive Income
Quarterly Consolidated Statement of Income(For the Six-month Period)First six months of FY2/17(Mar. 1, 2016 – Aug. 31, 2016)(Million yen)First six months of FY2/18(Mar. 1, 2017 – Aug. 31, 2017)

Net sales

97,726

107,793

Cost of sales

41,18047,693Gross profit

56,54560,099Selling, general and administrative expenses

48,491

56,066

Operating profit

8,054

4,033

69

45

Non-operating income
Dividend income
House rent income

57

55

Other

103

171

Total non-operating income

230

272

10

10

Non-operating expenses
Interest expenses
Share of loss of entities accounted for using equity
methodForeign exchange losses

-

39

117

17

Loss on valuation of derivatives

42

18

Cost of lease revenue

47

48

Other

16

26

Total non-operating expenses

233

161

8,050

4,143

Ordinary profit
Extraordinary income
Gain on sales of non-current assets-

25

Gain on sales of investment securities

-

4,373

Gain on liquidation of subsidiaries and associates

78-

Total extraordinary income

78

4,398

Impairment loss

24

151

Loss on disaster

82-

Loss on liquidation of subsidiaries and associates

10-

Extraordinary losses

Total extraordinary losses

117

151

Net income before income taxes

8,011

8,391

Income taxes-current

2,918

3,323

Income taxes-deferred

244

29

Total income taxes

3,162

3,353

Net income

4,848

5,037

Net income attributable to owners of the parent

4,848

5,037

- 7 -

Adastria Co., Ltd. (2685) Summary of 2Q Financial Results for February 2018 Fiscal Year

Quarterly Consolidated Statement of Comprehensive Income(For the Six-month Period)First six months of FY2/17(Mar. 1, 2016 – Aug. 31, 2016)(Million yen)First six months of FY2/18(Mar. 1, 2017 – Aug. 31, 2017)

Net income

4,848

5,037

Other comprehensive income
Valuation difference on available-for-salesecurities
Deferred gains or losses on hedges(1,140)(3,077)159(10)Foreign currency translation adjustment

(426)

91

(1,407)(2,996)

3,441

2,040

3,441

2,040

-

-

Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners of
the parent
Comprehensive income attributable tonon-controlling interests- 8 -Adastria Co., Ltd. (2685) Summary of 2Q Financial Results for February 2018 Fiscal Year

(3) Quarterly Consolidated Statement of Cash FlowsFirst six months of FY2/17(Mar. 1, 2016 – Aug. 31, 2016)(Million yen)First six months of FY2/18(Mar. 1, 2017 – Aug. 31, 2017)

Net income before income taxes

8,011

8,391

Depreciation

2,859

3,353

Cash flows from operating activities

Impairment loss
Amortization of goodwill

24

151

1,092

1,301

Increase (decrease) in allowance for doubtful accounts

1059

Increase (decrease) in provision for bonuses
Share of (profit) loss of entities accounted for using
equity method
Loss (gain) on sales of non-current assets

(14)

139

-

39

-

(25)

-

(4,373)

(67)

-

82

-

(1,257)(889)(1,830)(523)

Increase (decrease) in notes and accounts payable-trade

(357)

2,140

Increase (decrease) in accounts payable-other

(570)

383

Loss (gain) on sales of investment securities
Loss (gain) on liquidation of subsidiaries and associates
Loss on disaster
Decrease (increase) in notes and accounts
receivable-trade
Decrease (increase) in inventories(1,495)(148)

Other, net

320

(201)

Subtotal

6,808

9,798

70

46

Increase (decrease) in accrued consumption taxes

Interest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities

(10)

(10)

(4,033)(4,246)

2,834

5,588

(2,743)(4,366)

Cash flows from investing activities
Purchase of property, plant and equipment-

105

Purchase of intangible assets(451)(1,417)Purchase of investment securities

(671)

(57)

-

5,082

(428)

(1,589)

620

538

-

(3,906)-

1,023

Proceeds from sales of property, plant and equipment

Proceeds from sales of investment securities
Payments for lease and guarantee deposits
Proceeds from collection of lease and guarantee deposits
Purchase of shares of subsidiaries resulting in change inscope of consolidation
Proceeds from acquisition of business

(13)

(2)

(3,688)(4,589)

Increase (decrease) in short-term loans payable

-

(231)

Repayments of long-term loans payable

-

(725)

(2,167)(1,903)

Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities

Cash dividends paid
Purchase of treasury shares

(13)

(3)

Other, net

(52)

(107)

(2,234)(2,971)

Net cash provided by (used in) financing activities

(163)

(6)

Net increase (decrease) in cash and cash equivalents(3,250)(1,979)Cash and cash equivalents at beginning of period

19,452

20,706

Cash and cash equivalents at end of period

16,201

18,727

Effect of exchange rate change on cash and cash equivalents- 9 -Adastria Co., Ltd. (2685) Summary of 2Q Financial Results for February 2018 Fiscal Year

(4) Notes to Quarterly Consolidated Financial Statements
Going Concern Assumption
Not applicable.
Significant Changes in Shareholders’ Equity
Not applicable.
Changes in Accounting Policies
The Company has adopted the “Implementation Guidance on Recoverability of Deferred Tax Assets”(Accounting Standards Board of Japan (ASBJ) Statement No. 26, March 28, 2016) from the first quarter of thecurrent fiscal year and partially revised its accounting method for determining the recoverability of deferred tax
assets.
The Company has applied this implementation guidance in accordance with the transitional accounting
treatments set forth in Paragraph 49 (4) of this implementation guidance. Accordingly, the diffe rences between
deferred tax assets and deferred tax liabilities determined by applying the applicable provisions of Paragraph 49(3), Items 1 through 3 of the implementation guidance at the beginning of the first quarter of the current fiscal
year and deferred tax assets and deferred tax liabilities at the end of the previous fiscal year are added to retained
earnings at the beginning of the first quarter of the current fiscal year.
The effect of this matter on the quarterly consolidated financial statement s at the beginning of the first quarter ofthe current fiscal year is insignificant.

- 10 -

Adastria Co., Ltd. (2685) Summary of 2Q Financial Results for February 2018 Fiscal Year

3. Supplementary Information(1) Sales for Brands and Regions
Brand / region

First six months of FY2/18
Sales (million yen)

YoY change (%)

Composition (%)

GLOBAL WORK

18,828

17.5

2.5

niko and ...

13,609

12.6

17.0

STUDIO CLIP

12,404

11.5

12.7

LOWRYS FARM

11,150

10.4

(6.9)

LEPSIM

7,444

6.9

(3.8)

JEANASIS

5,970

5.5

(1.1)

RAGEBLUE

4,099

3.8

(5.1)

BAYFLOW

3,777

3.5

60.9

Others

19,23017.8

1.0

96,514

89.5

4.4

5,057

4.7

-

101,572

94.2

9.8

2,982

2.8

(8.2)

China

895

0.8

0.9

Taiwan

806

0.8

7.0

South Korea

421

0.4

17.4

USA (Note 3)

1,114

1.0

-

6,220

5.8

18.5

Total (Adastria)
ALICIA CO., LTD.
Total (Japan)
Hong Kong

Total (Overseas)
Total (Group)

Notes:

107,793
100.0
1. The number of stores is categorized by using brand operating divisions and geographic regions.

10.3

2. The above figures are sales to external customers and do not include internal sales between consolidated
subsidiaries.
3. The USA figures include the second quarter sales of Velvet, LLC, a consolidated subsidiary acquired at the end of
the first quarter.

(2) Sales for Merchandise Categories
Category

First six months of FY2/18
Sales (million yen)

Composition (%)

YoY change (%)

Men’s apparel (bottoms, tops)

14,742

13.7

5.3

Lady’s apparel (bottoms, tops)

71,65866.5

10.8

Others21,39219.8

12.2

Notes:

Total
107,793
100.0
1. The others category includes additions to the provision for point card certificates and other ite ms.
2. The above figures are sales to external customers and do not include internal sales between consolidated
subsidiaries.

- 11 -

10.3

Adastria Co., Ltd. (2685) Summary of 2Q Financial Results for February 2018 Fiscal Year

(3) Number of Stores
Number of stores
Brand / region

As of Feb. 28,
2017First six months of FY2/18
Increase(Note 3)As of Aug. 31,
2017

Increase/decrease

ClosedOpenedGLOBAL WORK

192

-

10

(2)

8

200

niko and ...

129

-

7

(2)

5

134

STUDIO CLIP

182

-

10

-

10

192

LOWRYS FARM

152

-

5

(1)

4

156

LEPSIM

134

-

9

(3)

6

140

JEANASIS

80

-

3

(1)

2

82

RAGEBLUE

58

-

1

-

1

59

BAYFLOW

32

-

5

-

5

37

Others

284

-

21

(7)

14

298

1,243

-

71

(16)

55

1,298

-

113

1

(3)

111

111

1,243

113

72

(19)

166

1,409

Hong Kong

25

-

-

(1)

(1)

24

China

45

-

6

(8)

(2)

43

Taiwan

29

-

-

-

-

29

South Korea

9

-

1

-

1

10

USA

-

9

-

-

9

9

108

9

7

(9)

7

115

Total (Group)
1,351
122
79
(28)
173
1. The number of stores is categorized by using brand operating divisions and geographic regions.

1,524

Total (Adastria)
ALICIA CO., LTD.
Total (Japan)

Total (Overseas)
Notes:

2. The number of stores includes e-commerce websites of other companies and e-commerce websites of Adastria.
3. “Increase” represents the increase in the number of stores resulting from the transfer of the operations of
ALICIA and the consolidation of Velvet, LLC in the United States.

This financial report is solely a translation of the Company’s Kessan Tanshin (including attachments) in Japanese, which
has been prepared in accordance with accounting principles and practices generally accepted in Japan, for theconvenience of readers who prefer an English translation.

- 12 -