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Integrated Report 2022

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CORPORATE IDENTITY

Introduction■ 01 Corporate Philosophy/Editorial Policy

Introduction

CONTENTS■ 02 History of Adastria

MISSION

Adastria, an Embodiment of “Play Fashion!”

Fashion that inspires you.

■ 04 Message from the Chairman■ 06 ABOUT US

Fashion for living your best life.

06 Adastria Group in Figures
07 Multi-Brand
08 Multi-Category
09 Value Chain
11 Value Creation Process
Expanding “Play Fashion!” throughSustainable Growth

VISIONPHILOSOPHY

Joyful options galore!

Be a person needed, Be a company needed.

■ 13 Megatrends and Strategic Directions

Adastria, an Embodiment of“Play Fashion!”

Fashion that creates a vibrant community.

■ 15 Message from the President■ 19 Overview of Medium-Term Management Plan

■ 26 Growth Strategy II: Digital Customer
Interactions and Services■ 30 Growth Strategy III: Glocal■ 34 Growth Strategy IV: New Businesses

VALUESCULTUREWe always act with our customers in mind.

The answer is to keep looking for answers.

Foundations Supporting Growth and “Play Fashion!”

Taking on new challenges enables us to grow and evolve.

■ 41 Message from the ESG Director■ 43 Approach to sustainability and Materialities(Important Issues)

Expanding “Play Fashion!” throughSustainable Growth■ 20 Message from the Finance Director■ 22 Growth Strategy I: Multi-Brand■ 44 Initiatives for Materialities (Important Issues)

We value diversity and progressing as a team.

FutureContributing to society by helping others.

45 Balance Environmental Considerations with
Sales Activities

Making everyday life an adventure.

47 Create a World Without Fashion Loss
48 Create A society in Which People Enjoy
Fashion in Their Own Way

49 Be an Organization that is Healthy Mentally andPhysically, Encouraging Employees in Their
Individuality and Ability

Editorial Policy

51 Revitalize Regions Where Our Stores Are
LocatedIn addition to financial information such as business performance and

01 Reporting Period

03 Reporting Organization

management strategies, this report introduces, non-financial information

Fiscal Year ending February 2022 (March 2021-February 2022)

Adastria Co., Ltd.
and consolidated subsidiaries

such as “Environment, Society and Governance (ESG)” as a foundation for
02 Guidelines used as reference

04 Issue datebusiness model and value creation story in an easy-to-understand manner.

“International Integrated Reporting Framework” by IFRS Foundation“Guidance on Integrated Disclosure and Dialogues for Value Creation”
by Ministry of Economy, Trade and Industry

October 2022

52 Foster Sustainable Development in
Production Areas

53 ESG Information Data
56 Corporate Governance
68 A Dialogue Between Our Two Outside
Directors

Adastria Data
■ 71 Financial and Non-Financial Highlights■ 72 Group Companies

01 | CORPORATE IDENTITY■ 73 Company Overview/Stock Information

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supporting the growth in a structured way. By this, we aim to report ourFoundations Supporting Growthand “Play Fashion!”

44 Engage in Manufacturing that Leads to theIntroduction

CORPORATE HISTORY

History of Adastria
After being founded as men’s clothing retailer, we have grown by reforming our business model four times(CHANGE 01-04). Behind this is our corporate culture of not being afraid of change and continuing to challenge
ourselves in search of answers that meet the needs of our customers at any given time. We will continue to aim to2020~

realize our mission of “Play fashion!” while improving our corporate value through flexible management.

230

niko and ...
SHANGHAI

Sales Target for
FY ending Feb 2026

280

billion yen

Adastria, an Embodiment of“Play Fashion!”

Sales forecast for
FY ending Feb 2023

billion yen

OMO model store
Dot ST store

Sales for FY ending Feb 2022

-2026

-2023

-2022

-2021

-2020

-2015

-2010

-2000

Expanding “Play Fashion!” throughSustainable Growth-2005

201.5 billion yen*Consolidated net sales

CHANGE 02

CHANGE 03

CHANGE 04

1953

1973

1982

1997

2010

Established Fukudaya
Clothes Store Inc.

Transition frommenswear business tomen’s casual wear

Introduction of chain store system

Transition to oem/odm production

Transformed into vertically Integrated SPA(specialty store retailer of private label apparel)

Opening of jeans and casual fashion store “POINT”

Started rolling out LOWRYS FARM store brandCompany in-house product planning and production functions

1950-1999

2000-20092010 -

1953 10 Established Fukudaya Clothes Store Inc. in Mito,
Ibaraki Prefecture, began retail sales of men’s clothing.

2000 12 Registered company’s stock in Japan
Securities Dealers Association.

2010 10 Opened the first store in mainland China.

2015 06 Changed company name to Adastria Co., Ltd.

1973 03 Opened men’s casual clothing store VEGA.

2002 12 Listed company’s stock on the second
section of Tokyo Stock Exchange (TSE).

2012 10 Started membership-based point service on our own
e-commerce business corporate website.

2015 09 Transferred control of product planning andproduction functions from subsidiaries.

2013 09 Moved to a holding company structure, changing name to
Adastria Holdings Co., Ltd. as the holding company.
Merged Trinity Arts Inc., and others.

2017 02 Incorporated ALICIA Co.,Ltd. as a group company.

2022 02 Zetton. Inc. joined the Corporate Group2017 03 Founded ELEMENT RULE Co., Ltd.

2022 04 Moved to the Prime Market following
the TSE market classification review

1982 09 Opened jeans and casual fashion store POINT.
Transformed POINT into chain stores in ’84.
1992 03 Started developing LOWRYS FARM. Moved
into retail sales of ladies’ casual wear
1997

Started rolling out LOWRYS FARM store brand.

2004 02 Listed company’s stock on the firstsection of Tokyo Stock Exchange (TSE).
2007 10 Started e-commerce business on own
corporate website.

2014 11 Completely revamped own e-commerce site and started
official web store service Dot ST.
2015 03 Merged Adastria Holdings Co., Ltd. and POINT INC.,
Trinity Arts Inc. Dissolved the holding company structure.

2008 03 Opened the first store in Hong Kong.

02 | CORPORATE HISTORY2017 04 Founded Adastria USA, Inc.
2017 10 Founded ADASTRIA eat Creations Co.,Ltd.
2018 08 Changed company name to BUZZWIT Co.,Ltd.
from ALICIA Co.,Ltd.

2020 11 Founded ADOORLINK Co., Ltd.

2022 05 Established Gate Win Co., Ltd.
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1993 03 Changed company name to POINT INC.

2003 03 Opened the first store in Taiwan.
Began developing overseas business
operations.

2022
2019 12 Registered customers of official
web store Dot ST exceeded 10 million.

Foundations Supporting Growthand “Play Fashion!”

CHANGE 01

Adastria, an Embodiment ofIntroduction

Message from the Chairman
Corporate Philosophy Based on the
Value of “Mutual Trust”

Adastria, an Embodiment of“Play Fashion!”

The value of mutual trust lies at the root of ourcorporate philosophy: “Be a person needed, Be a company
needed.” Our founder and predecessor once said that“each and every employee with their individual ideas isnecessary; no one is dispensable.” He had also statedthat “a company can exist thanks to its clients, and it
bother them a lot if the company go bankrupt.” In fact,
our previous generation has experienced bankruptcy

Expanding “Play Fashion!” throughSustainable Growth

once during the postwar recession. At that time, many
creditors said that they expected us to “get back on
our feet as soon as possible.” We also regret having
made many employees and their families go throughthese unfortunate times. These experiences have taught
us the value of mutual trust, which is reflected in ourcurrent company philosophy.

Michio Fukuda
04 | MESSAGE FROM THE CHAIRMAN

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Representative Director and Chairman

Foundations Supporting Growthand “Play Fashion!”

Develop “People Needed”
and Become“A Company Needed”

Introduction

Message from the Chairman
Our Strength Lies in Our Ever-changing Nature

Establishing a Balanced Management Structure

years. The inside directors share information, everyone works toward a common goal, andwhich at the time, was an untapped market in Mito, the city where the company was founded.

the outside directors are able to clearly perceive this and objectively decide whether to

Next came the second transformation in the 1980s, when chain stores were introduced follow-

proceed or stop. In this way, a well-balanced system has been established. The current

ing a tour of the United States. The business transitioned to OEM/ODM production during its

president, Kimura, being elected as a president last year, and him having the right ofthird transformation in the 1990s, creating store brands. As the fourth transformation, in 2010,

representation this year were judgments based on the unanimous opinion of outside

the company transitioned itself into a vertically integrated SPA (specialty store retailer of

directors, rather than my decision. From this fiscal year, the number of outside directors has

private label apparel) system that manages its planning and manufacturing by itself.

increased by one after the inclusion of newly joined members, and the number of inside and

The secret to transformation is to build a supporting structure rather than only alter the form.

outside directors is now equal. In my opinion, such an arrangement of discussions should

For example, when developing a chain of stores, we were ahead of our competitors incontinue in the future.

computerizing our operations, including POS cash registers and computerized inventory
management. This has led to the current DX (Digital Transformation). All of these choices weremade for survival in response to a changing environment. Without change, there would havebeen no growth or evolution to date. I always remind our staff that “no business model lasts

Creating Corporate Value Through Continuous Change and Growth

10 years.” Through this series of transformations, the idea that change is natural has been
instilled in our employees, and that is our strength.

In the process of transforming our business model, we discussed what is abundance for people.
Our goal is to provide products of value rather than just economical products to help make ourExpanding “Play Fashion!” throughSustainable Growth

Regarding management personnel, we have been preparing the current structure for several

1970s, when the company transitioned from the menswear business to men’s casual wear,

Adastria, an Embodiment of“Play Fashion!”

We have gone through four transformations to date. The first transformation happened in theclients richer. To achieve this, we strive to strike a balance between price and quality that will

Investing in People and Digitalization to Increase Productivity

appeal to the clients. It took us ten years to make the transition. However, today we have the value

There are several issues with Japan’s domestic environment, such as a shrinking populationand the demise of regional cities. However, in my opinion, the main issue is the decline inproductivity. Digitization is required to boost productivity, and digital investments are essentially the investments in people. Instead of using technology to replace people, we use it toboost the productivity of people. For example, in order to revitalize real stores even as the
population declines, it is necessary to organize the number of stores while increasing floor
space and changing the business conditions to create an environment where people canshareholders and investors. Additionally, we will produce more revenues and boost business value by
accelerating investment in digitaltechnology and human capital. We
will continue to change and grow,following our philosophy: “Be aperson needed, be a company
needed.”Foundations Supporting Growthand “Play Fashion!”

chain to achieve this in place and we are confident that we can live up to the expectations of ourwork comfortably. Here as well, digitization plays an important role.
Also, increasing profits through overseas expansion, such as in mainland China to revitalize
Japan will also lead to higher productivity. For this reason, people are equally important. We
think that the growth of our employees is a major factor in the success of our overseas
Ad ast ria Da ta

operations.

05 | MESSAGE FROM THE CHAIRMAN

Introduction

ABOUT US

Adastria Group in Figures
The Adastria Group manufactures and sells apparel and miscellaneous goods in the lifestyle and fashion fields. The Group has more than 40 brands and has opened approximately 1,400 stores in Japanand overseas, including real and web stores.

Number of stores

128.5 billion yen

30.8 billion yen

Adastria, an Embodiment of“Play Fashion!”

Product Division-wise Sales

1,428

Domestic sales
distribution ratio

42.1

billion yen

201.5

WEB

billion yen

USAMainland China

30 %StoresHong Kong

14 stores

70 %6 stores

Domestic

1,355 stores(Inside) WEB

TaiwanApparel andSundry goods and others

Domestic WEB sales

Men’s

9.4 %

Number of brands

57.4

billion yen(106.8% as compared to the previous year)

Number of Employees
Number of
regular employees

48
and more...

06 | ABOUT US

persons

Number ofterm employees
persons

5,530(excluding Zetton)

persons

Approximately

13.6

million persons

Ad ast ria Da ta

11,292

5,762

Number ofregistered customers

Foundations Supporting Growthand “Play Fashion!”ROE

120 stores

43 stores

Ladies’10 stores

Expanding “Play Fashion!” throughSustainable Growth

Net salesIntroduction

ABOUT US

Multi-Brand
Customers’ tastes and lifestyles are categorized specifically in the field of fashion, making it difficult to cover all customers with just one brand. We have adopted a multi-brand strategy, with which we areaiming to gain strong support from a wide range of customers through multiple brands that are strongly favored by customers with specific tastes. We share resources for material development, production
and logistics, and accumulate know-how as a multi-brand platform.

Adastria, an Embodiment of“Play Fashion!”

Overview of major brands

Classification of major brands by target markets and age
CORE
MARKET

Men and women from 20s to 40s,
kids from 2 to 15

Location

Shopping centers

Category

Men’s, women’s, kids’, sports fashions,sundries, food and beverage

TargetMen and women aged 25 to 35

Location

Shopping centers, fashion malls androad-side stores

Category

Men’s and women’s fashions, interior
items, cosmetics, sundries, outdoors,
sports fashion, food and beverage

YOUNG

MATURE

Foundations Supporting Growthand “Play Fashion!”

Adastria has been selected as the partnerof FOREVER21 re-launch in Japan

Target

Women from 30 to 40

Location

Fashion malls,
shopping centers, road-side stores

Location

Shopping centers, fashion malls,
department stores

Category

Women’s, kids’ and men’s fashions

Category

Women’s fashion, sundries, interiors,
food and beverage

07 | ABOUT US

MASSMARKET
Adastria Co., Ltd.
ELEMENT RULE Co., Ltd.
BUZZWIT Co., Ltd.
ADOORLINK Co., Ltd.
Gate Win Co., Ltd.
* Positioning by the Company’s R&D Division* ELEMENT RULE Co., Ltd., BUZZWIT Co., Ltd., ADOORLINK Co., Ltd., and Gate Win Co., Ltd.
are group companies.

A da stri a D at a

Women from 20s to 30s

TargetFOREVER 21, a casual fashion brand from Los
Angeles, USA, led the global fashion brand boomin the 2010s and has a strong brand recognitioneven in Japan. Even though the store operationsin Japan ended in 2019, they still have morethan 570 stores all over the world. Adastria has
obtained a license for the relaunch of FOREVER
21 in Japan, and will begin deployment in 2023.
We will combine FOREVER 21’s highly sensitive
fashion and diverse culture with supply chain
management and EC, which are among Adastria’s
strengths, to create new brand appeal that fits
the Japanese market.

Expanding “Play Fashion!” throughSustainable GrowthTargetIntroduction

ABOUT US

Multi-Category
In addition to apparel, we offer fashion items and services for the diverse lifestyles of each and every customer in a variety of categories surrounding daily life. We are improving the allure of our stores by
expanding store opening channels and increasing store floor space, along with maximizing the lifetime value of our customers through proposals that match with the lifestyles of each individual.

Play

Food

Cafe
Restaurant
Grocery

BeautyStudy

Cosmetics
Lingerie
Room wear

Men’s clothing
Women’s clothing
Kids’ clothing
Clothing accessories
Maternity wear
Formal wear

SportsWellness

HealthFoundations Supporting Growthand “Play Fashion!”

Outdoors
Travel
Hobbies
Workshop
Stationery
Park project

Expanding “Play Fashion!” throughSustainable Growth

Furniture
Interior items
Green/Decorative plants
Kitchenware
House cleaning products
Bath and laundry products

Adastria, an Embodiment of“Play Fashion!”

Housing

Clothing
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08 | ABOUT US

Introduction

ABOUT US

Value Chain
A strength of our company is our system to carry out everything from brand development and product planning to production, logistics and sales within the group. We quickly incorporate store informationand customer feedback in our product development and services by integrating all the processes in a system, while we create differentiated high-quality products.

Logistics

Marketing and sales

Brand development and product planningthat meets customer needs
through in-store and EC information

A production system that enables thedevelopment of high-quality products withadded value

Achieving provision of productsthat activate the market

Sales system thatseamlessly utilizes stores and
EC to increase customer satisfactionStore
information

Brick-and-Mortar Stores
Approximately 1,400 stores are in business inJapan and overseas, flexibly opening and closing
stores depending on the market conditions

DesignBrand development
Implementation of aggressive in-house branddevelopment that captures customer needs
and unexplored areas

Brand Direction

Research & Development
Speedy collection of the trend information

Merchandising
Excellent product programming and planningwith a policy of considering the right time, rightprice and right quantity

Material procurement
Achieving cost benefits by using high-quality,
high-performance materials across brands

Material development
Unique development of material that stands
out from the rest

Patterning
Excellent patterns that faithfully embody the
product planning

Production control
Collaboration system with factories that can
optimally produce a wide variety of productsof products

Transportation
Optimized logistics in all regions of Asia
through subsidiaries of Shanghai Logistics
Subsidiary

Sales staff
Providing a purchasing experience with a high levelof satisfaction by demonstrating premium customer
service and proposal skills both online and offline

Store design
Domestic logistics
Speedy delivery of products to stores throughdelivery from 6 locations in JapanEC logistics
Shipments are up to 34,000 items per day byimplementing unmanned transport vehicles

Providing customers with new experience value
while faithfully expressing the outlook of theworld for the brand

Trend
information

Visual Merchandising
Expressing the brand and product characteristics
to create fresh storefronts

PR
Product management
Speedy product supply by proper
management of more than 20,000 types of
products per year

Communicate a world outlook for the brand andappeal through a variety of customer contact points

Official WEB store “Dot ST”
Boasting more than 13.6 million registeredcustomers and 800,000 to 1 million visitors per day

Quality control

Customerfeedback

Foundations Supporting Growthand “Play Fashion!”

Actualization of brand direction that captures
the “excitement” of customers while
embodying a world outlook for the brand

Realization of product designs that meet ourcustomers’ needs after collaboration withbrand MDs

Expanding “Play Fashion!” throughSustainable Growth

Production

Adastria, an Embodiment of“Play Fashion!”

Brand development and planning

Customer service

Delivery of high-quality and safe products

Introduction of a chatbot to make correspondence withcustomers possible 24 hours a day, 365 days a year

09 | ABOUT US

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Realizing data utilization and operational efficiency by system integration through the value chain

Introduction

ABOUT US

Value Chain
VOICE

01

Brand Development/Planning

Marketing/Sales

Hisahito Yamada,
Head of Sales Headquarters,
Senior Executive Officer

02

Production

Devising a Production Planning System thatcan Handle a Huge Volume of Items

Our company is involved in the entire process from brandIn 2010, we made a “declaration of change” of our businessdevelopment to product planning, production, logistics, andmodel, and since then we have been working on shifting ourmarketing/sales. While each section has its own specialization

business from conventional purchase and sales to a “verticallyand division of labor, we share the “store origin”. On the value

integrated SPA (specialty store retailer of private label apparel)”chain, brand development and product planning are locatedthat handles product development and production within theaway from sales. However, our strength lies in the fact thatcompany. Currently, we are developing a continuous streamlined
value chain, incorporating the customers’ feedback in everythingby our employees with store experience that allows them tofrom brand development to product planning, production,

visualize the reality of stores, including displays in the stores,

logistics and marketing/sales. A multi-brand strategy that

staff operations, customer reactions, and so on. Synergy isoperates more than 40 brands that all have different targets

created by the carefully balanced combination of these internal-

and concepts requires a flexible production system that canly developed human resources and production specialists,handle such a huge number of items. Because of our in-houseincluding designers and pattern makers. Brand development

production, we have many human resources who have expertisenaturally involves a marketing-driven approach of developingin each process in our company, and we have achieved thisuntapped markets. However, brands that emerge spontaneous-

because we can have a close communication. The Products

ly from demands in stores or staff members’ will to “do something” frequently see steady growth. We believe

Planning & Sourcing Headquarters has various functions ranging from R&D to analyze trends, material

that our company culture, where everyone can openly voice their thoughts and where positive opinions aredevelopment, general items, trading, and quality control. We have covered the disadvantages of small-lot

easily incorporated, also plays a role in this spontaneous brand development.

orders by sharing materials across brands to increase cost advantage even if the brands express uniquenessin design and color, consolidating production plants of brands with similar production processes, making

know-how of the OTB (Open To Buy) management and systemization. Since we operate a multi-brandtransportation more efficient to consolidate the loading of containers, etc., to build a production system thatbusiness, we have an overwhelming amount of information on successful cases and issues, and by accumu-

makes the most of our multi-brands. We do not own hardware such as production plants and ships; however,lating our know-how, we have lowered our residual inventory ratio to below 2%. In addition, we are developing

we outsource to external companies for these. We are a high-priority trading partner that can expect stablein-house “business-minded” personnel who are good with numbers. As an apparel company, we work

operation and business continuity, leading to the fostering of partnerships and improved performance, even

together with “Fashion enthusiasts” in a well-balanced manner, while respecting each other’s opinions.

for our allied factories.

Although the OTB mechanism itself is not complicated, it takes time to fully grasp the concept, permeate it

Under the current circumstances we are speedily responding to the issues such as reviewing materials in

into every aspect of the operation, and put it into practice.

response to soaring raw material prices and diversifying production countries in consideration of country risks.

As our product categories grow, our challenge going forward is to extend our OTB management know-how

In the future, we will work on the high-priority issue “digitalization of production,” which will also include thethat we have gained so far in the apparel categories, to other categories. In order to accomplish greater

alliance factories. We already started digitization at the planning stages a few years ago using 3D samples, andgrowth while retaining efficiency, we will make use of the flexibility of our diverse staff so that they can learn

recently more and more number of business partners are proceeding with digitization even as far as thefrom one another.

production stage, including smart factories and factory automation. While actively collaborating with factories

Foundations Supporting Growthand “Play Fashion!”

Another strength of our company is the high accuracy of inventory management, which is because of our

Expanding “Play Fashion!” throughSustainable Growthbrand development and product planning are largely handled

Adastria, an Embodiment of“Play Fashion!”

Enhancing Operations ThroughCollaboration of Diverse Human Resources

VOICE

Mamoru Oya,Head of Products Planning & Sourcing Headquarters,
Senior Executive Officer

that are making such advanced efforts, we will continue to strive for the digitization and productivity improvement
continue to create further value through manufacturing that accurately meets the needs of our customers and thetimes by maximizing our strengths in our in-house production background and human resources.

10 | ABOUT US

A da stri a D at ain the entire value chain, even in the apparel industry is known for having high hurdles to automation. We will

Value Creation Process

Providing Sustainable

Introduction

OUTCOMEABOUT USMISSION

Creation of excitement
INPUT

BUSINESS MODEL

Human
capitalMulti-brand・About 4,000 STAFF BOARD participants

・Brand development and product planning knowledge

・Shipping capacity of our distribution network (34,000 items/day)

Manufacturing
・Products made with materials developed in-housecapital(3million items in total)
・In-house planning to production ratio 50%

・Number of stores(in Japan and overseas are1,428, out of which120 are Web stores)

P08

Main Business(Value Chain)
Brand development
and planning

Naturalcapital・Capital:2,660 million yen

・Net Assets:54,963 million yen

・CO2 Emissions (516,600t-CO2e)*Scope1+2+3*Pertain to domestic group companies (except ADASTRIA eat Creations and Zetton)

million in total

57.4

・Growth rate ofaverage spend
per customer *billion yen

104.9

%

*Pertain to: Adastria only・Percentage of full-time employees returning to work after childcare
leave 94.4%

Logistics

Marketing and sales

・Capital adequacy ratio: 55.1%
・Electricity consumption (78.066 million kwh)

36

・Domestic
WEB sales%%

Value improvement of human capital*As of August, 2022

Financial
capital・Number ofcustomers*

3.3

9.4

P09

Business modeltransformation

P02

・Employment rate of people with disabilities 2.65%
・Number of foreign national employees 82 persons
・Ratio of female managers 33.9%*Pertain to domestic group companies (excluding Zetton)

Creating social value
・Certified factories of partners: 30 companies
・Business patners who have agreed to the sourcing policy:
750 companies
・Donation to support disaster-stricken areas 13 million yen

Foundations Supporting Growthand “Play Fashion!”・Factories (255 located in mainland China and 35 in ASEAN)

・Operating
income ratio

billion yen ・ROE

Value improvement of human capital

Production

・Number of in-house EC registered customers exceed13.6 million
・Number of SNS followers (1.9 million STAFF BOARD followers)

201.5

・Net Sales

Multi-category

・In-house EC development and operation know-how
・Distribution centers (6 places in Japan)

Socialcapital

P07

・Specialist human resources in the fields of DX and production
・48 brands

Realization of economic value

Expanding “Play Fashion!” throughSustainable GrowthIntellectual
capital・Number of Group Employees (11,292 persons)

OUTPUT

Adastria, an Embodiment of“Play Fashion!”

Creation of social wealth*Total from the fiscal year ending February 2019

Reduction in the environmental load

P13

*No clothing stock was disposed by incineration

11 | ABOUT US

Ad ast ria Da ta

EXTERNAL ENVIRONMENT

・Percentage of sustainable products 15.3%
・Reduction of shopping bags (approx.9 million bags in total)
・Store LED conversion ratio 91.7%
・Zero fashion loss

Expanding
through Sustainable GrowthIntroduction

GROWTH STRATEGY

Megatrends and Strategic Directions
The Market Environment

1（billion yen）

apparel market has always been larger. Having said that, recently

Domestic Apparel EC Sales25

EC ratioUpperglobal competition, the market has gradually shrunk; this has led
to market bipolarization with the high and low end market

Upper

2,500

Middle

2,000

Upper

growing. A recent Senken Newspaper survey shows that the

Middleeconomy market is already half of the total market (Figure 1).

20

15

MiddleThe EC apparel market became 19% of total market in Japan

1,500

with the COVID-19 pandemic. Having said that, as its share is
48% in Europe*, we can grow further (Figure 2).

EconomymarketCOVID-19 pandemic, it has quickly recovered with continued

10
1,000
5

500

growth expected (Figure 3). As the Asia-Pacific market is growing

BeforeCOVID-19

COVID-19

FutureSource: The company’s estimates are based on Yano Research Institute Ltd.’s“(2021) survey of domestic apparel markets.” Senken Newspaper etc.

0

2015

2019

2020

2021

0

Source: E-Commerce Market Survey conducted by the Ministry of
Economy, Trade and Industry

but in all aspects of their life, so market are merging into alifestyle market to reflect this. (Figure 4) In addition, with more ofa focus on climate change and resource conservation, theimportance of sustainability is rapidly growing.

Expansion of global apparel markets

Revenue in billion U.S. dollars

4

Gap between apparel and other markets
is diminishing and becoming a lifestylemarketLifestyle Market(Japan)Sportswear
Shoes

2,000
Cosmetics

2.4

1,500

26

500

Trillionyen

9Trillionyen

2

13 | GROWTH STRATEGY

Food

29.3

Trillionyen

KitchenandtablewareInterior andFurniture

1.5

Trillionyen

0.4

Trillionyen

Trillionyen

Based on our researchfrom various surveys

A da stri a D at a

Source: Statista, “Revenue of the apparel market worldwide from 2013 to 2026”

Trillionyen

Trillion
yen

Hotel

0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Outdoor

0.5

ApparelEating out

1,000

1.1

TrillionyenFoundations Supporting Growthand “Play Fashion!”* Source:
https://www.eversheds-sutherland.com/documents/sectors/consumer/evolution-of-retail-stores.pdf

3Expanding “Play Fashion!” throughSustainable Growth

EconomymarketEconomymarketEven though ,the global apparel market briefly shrunk with the

In Japan, ,people have become not only fashionable in apparel

（%）

3,000

with Japan’s aging demographics , more complex lifestyles, andrapidly at high volume, it has become important.

Accelerated growth of EC market due to
COVID-19 pandemic2

Adastria, an Embodiment of“Play Fashion!”

Compared to other countries, the Japanese mid-price range

Accelerated shrinkage of the domestic market andexpansion of the economy market due to the
COVID-19 pandemic

Introduction

GROWTH STRATEGY

Megatrends and Strategic Directions
We recognize four of the changes in the market environment and sustainability as megatrends that affect our medium to long-term corporate value.
Using these trends as a starting point, we analyze opportunities and threats, strengths and shortcomings in our business, and define the direction we will take in the medium to long term.

Opportunities■ Expanding economy
market■ Changes in Customer
interaction points■ Growth in overseas
apparel market■ Entry of global
companies■ Development of
unexplored areas■ Rise of local brands ineach country■ Corporate shakeout■ Racing cost

■ New business
Possibilities■ Decrease in
consumption■ Unique value chain■ In-house EC
membership base
■ STAFF BOARD■ Scale-up andefficiency■ New added value

Revenue and
Growth in Existing
Businesses■ Lack of in-house EC
site awarenessAccelerate Growthof In-House EC Site

■ Brands and quality■ Overseas recognition■ Materials developed
in-house■ Value Chain■ Market-tailored
strategies■ Relationships withproduction partners

Strategic Directions■ Global humanresources■ Overall environmental
response

Expand Investments
overseas

CombineSustainability with
GrowthAd ast ria Da ta

Climate Change
and Environment■ Multi-brandWeaknesses

Foundations Supporting Growthand “Play Fashion!”

Globalization■ Labor shortage■ Decrease incustomers traffic atbrick-and-mortar
stores■ Expanding EC market
Digitization■ Shrinking domestic
apparel market

Our Strengths

Expanding “Play Fashion!” throughSustainable Growth

Shrinking Domestic
MarketLow Birthrate,
Aging Population■ Increasing affinity
with the peripheral
markets

Threats

Adastria, an Embodiment of“Play Fashion!”

Megatrends

14 | GROWTH STRATEGYContinuing to Take-on
Aggressive Challenges
to Maximize Corporate Value
Representative Director and President

Osamu Kimura
15 | MESSAGE FROM THE PRESIDENT

Introduction

Message from the President
Continuous Aggressive Approach Even During the COVID-19 Pandemic

take an aggressive stance, creating new in-brands to plant seeds for the next three to fivepresident. Looking back over the past year, the impact of the COVID-19 pandemic wasyears and pursuing M&A or the like. It was especially important for us to be able to continue

significant. However, we have grown very confident as we could build our capacity to deal

planting seeds, because stopping even for a year would affect the future.

with COVID-19 at our stores, and as a result, we have also been successful in securing

However, there are still areas where I myself have fallen short, and I would like to increase

revenue.

the speed with which I take management decisions in the future. I would like to bring theMoreover, while many other companies went on the defensive during the COVID-19

team together so that we can further demonstrate the teamwork by our management team,pandemic, we took on various challenges that came with it. Without disregarding defensive

which is one of our strengths.

Adastria, an Embodiment of“Play Fashion!”With the general meeting of shareholders on May 26, 2022, I completed one year as

measures such as inventory control and store organization, the company has continued toI announced a new medium-term management plan in conjunction with the full-year
financial results of my first year in office. Based on our mission, “Play fashion!,” we haveoutlined our growth trend toward the year 2025. MVV (Mission, Vision, and Values), including“Play fashion!,” were discussed and decided by everyone in 2020. With the addition of

Expanding “Play Fashion!” throughSustainable Growth

Growth Stories That can be Shared by All the Group Employees

various companies to the group, and the number of new members increasing continuously,
remember and brings everyone together.
In the current medium-term management plan, we have also set forth “Good Community
Co-Creation Company” as our vision for the year 2025. Friends assemble, conversations
take place, information is shared, and new values are created under the banner of “Playfashion!.” In our desire to broaden this circle to include not only our employees but also ourcustomers, business partners, and the residents of the regions in which we operate, wehave incorporated the concept of “Good Community.”This is a growth story that I think all Group employees can share as we go toward 2025

Foundations Supporting Growthand “Play Fashion!”

it has become popular within the company as a slogan that is easy for all employees tobecause both were developed by everyone, with the current management team playing a
key role in expressing their ideas.

Ad ast ria Da ta

16 | MESSAGE FROM THE PRESIDENT

Introduction

Message from the President
Toward Creating a Lean Structure Capable of Generating Operating Income

officer and department head is in charge of controlling how to raise profits and control

operating margin of 8% for the fiscal year ending in February 2026. Behind this is theexpenses, and we have been developing this ability in our human resources. Moreover, wemanagement team’s belief that “we will grow the company” and “we will keep raisingwere able to confirm once again during the COVID-19 pandemic that our long-term efforts

employee salaries,” which Chairman Fukuda has been saying for many years. I believe thatto structure the production system and make digital investments are beginning to take theit is necessary to generate operating income in accordance with the plan to achieve thisform of a competitive value chain. If these strengths are properly engaged, we should be

belief.

able to achieve the target of the medium-term management plan. Our first priority is to build

For this to happen, it is necessary to firmly delegate authority to subordinates. Oncea lean structure capable of generating sufficient operating income, while steadily planting

everyone has established goals, our company’s DNA enables each department to moveseeds for the future.

Adastria, an Embodiment of“Play Fashion!”

In terms of numbers, our present medium-term management plan has a clear target of an

forward with a determination about numbers. We have built a system where each executive

Our mid-term management strategy also emphasizes “sustainable management.” We arestill studying how we can link the growth of our company with sustainability. While many

Expanding “Play Fashion!” throughSustainable Growth“Well-being Management” and Sustainability

companies have been weakened by the COVID-19 pandemic and are unable to focus on
as a leading company in the fashion industry.
“Well-being management” is another crucial aspect of our sustainability. The first step isfiguring out how to make our customers, business partners, our staff and their families
happy. Additionally, we wish to spread the word about our initiatives and engage the entire
industry. Sustainability and the SDGs are not something that can be done by one company
alone. Managers who are aware of the issues will need to work together to ensure sustainability in the future. We believe that there is a growing opportunity to think about what we
can do together while sharing our strengths and expertise as the industry undergoes aFoundations Supporting Growthand “Play Fashion!”sustainability, we are gradually defining what is sustainability that only Adastria can achieve

generational shift.

Ad ast ria Da ta

17 | MESSAGE FROM THE PRESIDENT

Introduction

Message from the President
Corporate Culture Enjoying the Changes According to the Market Environment

We have experienced four major transformations in theundergone a significant transition. As the number of affluent consumers increases, thepast, and we will likely be required to make the fifth andnumber of people who prefer economical products is also increasing. As the market

sixth transformations in the future. One of the strengths ofpolarizes, we see opportunities for expansion in the economy market, which is our forte,

the owner company is that it can change boldly, and there

while our subsidiaries are nurturing their brands to capture the upper market.

is also a corporate culture that is not afraid of the changes

We anticipate that we will need to keep changing in a market where we can use our strengththat have been nurtured within it. The current management

as a multi-brand company in all market segments.

team is rather enjoying the changes.

Adastria, an Embodiment of“Play Fashion!”

Following the COVID-19 pandemic, the market environment surrounding fashion has

The Japanese domestic market is shrinking, but its shares are still increasing. This happens
still more if you include lifestyle areas other than fashion. Once the COVID-19 pandemic
Expanding “Play Fashion!” throughSustainable Growth

subsides, we will once again shift to an aggressive stance in the Chinese market, and there is
still room for growth in our business in the United States, It is also important how to expand thefields of logistics and information systems. Till now, we have built it by ourselves, but we mustalso consider partnering with other companies in the future as an important growth field.

Aiming to Increase Long-term Corporate Value with a Well-balanced Management Team

Until now, the industry has tended to focus on raising the top line, but from now on, it willcompany that can keep up with the times without rigid principles. Chairman Fukuda has

be important to increase corporate value. We also believe that there is still potential for the

nurtured that kind of culture, and the current management team has inherited it. Therefore,

stock price to rise as corporate value increases, and we have reaffirmed the need for thein the future, we will not become a company that takes a defensive approach and does

management team to be fully aware of the capital market. For how to increase corporate

nothing. I myself am more of a marketer, and I am the type of manager who observes various

value, our first goal is to achieve the medium-term management plan in 2025, but manage-

markets and thinks about where to invest and where to hold back, and then do new things,

ment team is constantly discussing what to do in 2030. While inheriting the thoughts that

but the current management team has a very good balance between aggressive approachthe chairman has said since the days of Fukudaya Clothes Store, about how to makeand defensive approach. Each has their own specialties. Therefore, we have a lot of discus-

employees and their families, business partners, and customers happy, we will continue tosion anyway. Moreover, we are developing well-balanced human resources in the executive

take on new challenges with the aim of managing our stakeholders so that they can safely

officer class.

say, “We’ll leave it to you.”Foundations Supporting Growthand “Play Fashion!”

Adastria’s greatest strength lies in its ability to respond flexibly, and in a good way, it is a

Ad ast ria Da ta

18 | MESSAGE FROM THE PRESIDENT

Introduction

GROWTH STRATEGY

Overview of Medium-Term Management Plan
In April 2022, we formulated a medium-term management plan based on four growth strategies with two axes; broadening value offerings and expanding customer base.
We aim to achieve consolidated sales of 280 billion yen by February, 2026 by integrating sustainability and business growth.

Sales
GrowthAverage annual growthrate of 8.5%

Improvement in grossprofit margin

Improvement by
1.3%

SG&A expense
control

Improvement by 3.4%

Improvement incapital efficiency

ROE of 15% or more

Consolidated net sales

280

billion yen.

80

Including,billion yen is EC sales

Operating income ratio

8％

Extend value offerings

Ⅰ Multi-Brand, Multi-Category

Ⅱ Digital Customer Interactions and Services

Growthstrategy

Growthstrategy

Accelerate growth of
our EC site and create
a fun EC community

Ⅲ GlocalⅣ New Businesses

Growthstrategy

Growthstrategy

Develop models in Mainland
China and cultivate Southeast Asia

Foundations Supporting Growthand “Play Fashion!”

Establish food and beveragebusiness and create new appeal
A da stri a D at a

Expanding customer baseGrouping of brands
according to roles for
improved profitability
and growth

Expanding “Play Fashion!” throughSustainable Growth

Achieve sustainable management

Adastria, an Embodiment of“Play Fashion!”

Quantitative Targets (by February, 2026)

19 | GROWTH STRATEGYIntroduction

GROWTH STRATEGY

Messages from Directors
Supporting Financial Foundation and Recovering fromCOVID-19 Situation Moving Forward

at the beginning of the COVID-19 crisis, we held many remote management meetings to
discuss, and decided to secure cash in the first year, secure profits in the second year,
and increase sales and profits in the third year. We were able to secure cash early due tothe strong relationship of trust with our main banks, so we managed to secure profits
ahead of schedule in the first year without slowing down the speed of investment in new

Adastria, an Embodiment of“Play Fashion!”

Under the unprecedented situation that around 1,200 real stores in Japan were all closed

businesses. In the fiscal year ending February 2022, the second year, the businessenvironment was more severe than the initial forecast, but the profit plan was achieved.
while properly sharing the plan with the management team. We once again realized thestrength of production, operations, and sales sites.

Providing Value Leads to Profits

Expanding “Play Fashion!” throughSustainable Growth

We think this is the result of the entire company being able to move in the same direction

We believe that the operating profit ratio of 8% set forth in this medium-term
significance of our existence to society, and we have been preparing with this as thetarget even before COVID-19. It is premised on the normalization of the economic

Management Plan andenvironment, but we believe that we can reach with our current strength. We are currently

Improving Corporate Value from aworking to keep costs down, but lowering the quality will lower the value. Above all, it isLong-term Perspective
Masayuki Kindo

important to create products that customers can appreciate, and we believe thatproviding value is the way to make profits.
As for SG&A expenses, we will use strategic costs for growth, but we do not plan tolargely return the expenses that have been narrowed down due to the COVID-19 crisis.
By finely controlling them, we will reduce the SG&A expense ratio through the effect ofincreased revenue.

20 | DIRECTOR MESSAGE

A da stri a D at a

Managing Director(Finance, Risk Management In-charge)

facing headwinds such as soaring costs and weakening of the yen, so of course we areFoundations Supporting Growthand “Play Fashion!”

Achieving Medium-term

management plan is the minimum level we should aim for in order to show theIntroduction

GROWTH STRATEGY

Messages from Directors
Emphasis on Medium to Long-term Value Creation While Considering Return on Investment

we focus on agile movements such as just getting started in order to ascertain growthpolicy is to invest at a level that will allow us to achieve this. We will identify growth areas

potential in the market. On the other hand, for large upfront investments such as M&A, weand thoroughly confirm the return on investment, especially in store investments. Additional

will carefully consider whether we can expect a return that exceeds the cost of capital.

investment in digital and logistics is also required, but we believe that these can be

However, it takes time for the acquired company to truly contribute to the value of the group.

recovered by improving efficiency of our business.

In that sense, we place great importance on creating corporate value from a medium to

We live in an era where the future is uncertain, so rather than making detailed plans for new

long-term perspective, without being overly constrained by the effects of sales profits one

brands,to two years after investment.

As a general rule, shareholder returns are based on net income before amortization of goodwill, with adividend payout ratio of 30%. Over the past few years, profits have fluctuated significantly due to factors
such as the COVID-19 pandemic. But we are also considering the stability of dividends, so as a result, there
were some years that the dividend payout ratio exceeding 30%. Currently, we still need to invest in growth,Expanding “Play Fashion!” throughSustainable Growth

Stable Growth of Dividends Is Basis of Shareholder Returns

Adastria, an Embodiment of“Play Fashion!”

In terms of capital efficiency, we have long aimed for an ROE of 15% or higher, and our basic

so we would like to increase our dividends in a stable manner by improving our business performance.

In this medium-term management plan, we set clear figures for net sales and operating margin. It is nota low target, but it can be achieved with our current capabilities. In the future, we would like to increase
the trust of the market by continuously reporting on our progress.

Foundations Supporting Growthand “Play Fashion!”

Aiming to Co-create a Good Community

In addition, the slogan “Good Community Co-Creation Company”, which was the theme of themedium-term management plan, expresses our desire to be a company that creates new value
together with various stakeholders, rather than just selling products. We will strive to build strong
relationships of trust with our shareholders and investors and improve our corporate value from a
Ad ast ria Da ta

long-term perspective.

21 | DIRECTOR MESSAGE

Introduction

GROWTH STRATEGY

Growth Strategy I: Multi-Brand
Evolution of Multi-Brand Platforms
We categorize our brands into three types based on role and stage: stand-alone, growing, and profit-oriented. We then develop strategies tailored to each role and characteristic. In addition, we are constantly
to take it to the next level as a stand-alone business. This lowers the danger of passing fashion trends and becoming an out-of-date brand in the apparel industry and cultivates brands across the portfolio.

Adastria, an Embodiment of“Play Fashion!”creating in-brands, which are the starts of new brands. We are creating a multi-brand platform that will nurture those in-brands as profit-oriented or growing brands. After the brand scale expanded, we aim

Stand-Alone Brands
Aim to create 50 billion yen brands via unique growth strategies

Strategy

Profit-Oriented Brands

Expand scale by developing new markets
and categories

Strategy

Improve profitability through horizontal
development of highly profitable brand models

Foundations Supporting Growthand “Play Fashion!”

Growing Brands

Expanding “Play Fashion!” throughSustainable Growth

Strategy

New Brand Creation(22 in-brands as of February, 2022)
Ad ast ria Da ta

22 | GROWTH STRATEGYTarget markets and

CORE
MARKETage demographics for
Introduction

GROWTH STRATEGY

stand-alone brands

Growth Strategy I: Multi-Brand

YOUNG

Strategies for Stand-Alone Brands

MATUREThe stand-alone brands, each with sales exceeding 20 billion yen, have established strong brand awarenessstrategies tailored to the characteristics of their brands and runs their business independently.

MASS
MARKET

Cultivating the Mass- and Low-Price Market

Strategy

Establish Category Brands and Create Large Category Stores

Measures

Strengthen the 3Fs(Fashion x Function = Feeling)

Measures

We are collaborating with companies in various
fields, leveraging in-brands, including cafes,
furniture, outdoor, and sports

Growing In-Brands

We are using data analysis and our background in
in-house production to create mainstay productsthat serve as the face of our brands

Large-Scale Stores as a Mechanism for
Exciting Experiences

Develop New Low-Priced Lines
Expanding into the increasingly important low-priced market by leveraging
our strengths in product development

Strategy

Create Mechanisms for User Extension and Growth

Measures

Trendy kids’ and men’s lines are performing well, andwe are expanding unisex items fromthe woman’s perspective

Strategy

Expand Stylish Kids’ and Men’s Products

Essential Consumption Offering a World View
Transition Brands From Fashion to Lifestyle

Measures

Since the COVID-19 pandemic, customer interests haveshifted from fashion to an enjoyment of daily life

Integrate emotional manufacturing while leveraging
data marketing to strengthen production planning

Focusing on daily living to develop new business categories
for popular-priced daily necessities and sundries that offer
natural tastes

23 | GROWTH STRATEGY

A da stri a D at a

New Business Model Connecting Daily Living andDaily Sundries

Creating Structures to Support Fashion

Foundations Supporting Growthand “Play Fashion!”

Make stores a space for experiences; turn theniko and … stores into semi-shopping malls
housing many smaller stores

Expanding “Play Fashion!” throughSustainable Growth

Strategy

Adastria, an Embodiment of“Play Fashion!”

within their target consumer base but still have room for future growth and expansion. Each of them develops

Target markets and

CORE
MARKETage groups for
Introduction

GROWTH STRATEGY

growing brands

Growth Strategy I: Multi-Brand

MATUREYOUNG

Strategies for Growing Brands
Growing brands are a set of brands that adapt to shifting consumer tastes and fashion trends in an effort topace while incorporating new segments and categories.

Market

Theme

Brand

・Rising personal income among women ・Active seniors
・Luxury consumption

・Elura・Curensology

・Utao
・ChaosGeneration Z Market

・Korean fashion ・Digitalization ・Lower prices

・apres jour・kutir・ALAND

Lifestyle Market

・Time at home ・Wellness ・Sustainability

・LAKOLE (sundries)
・BAYFLOW (wellness)

・e/rm (loungewear)
・O0u (sustainability)

VOICE

01

Maintaining internal structure and environment to
get a grasp of demand from younger generations

Yasunori Kuroda,
Representative Director and President,
BUZZWIT Co., Ltd.

VOICE

02

Creating brands worth buying at fixed priceMina Sato,
General Manager of Chaos Department,
ELEMENT RULE Co., Ltd.

ELEMENT RULE operates the higher-priced brands in the group, targeting the middle andspecializes in promptly delivering exciting seasonal fashion at affordable prices. We

upper market. Chaos is a brand that offers “high-quality daily mature wear” to free-spirited

anticipate that more and more people, particularly youngsters, will continue to buy

and independent-minded women. Since its launch in 2018, it has become a fan favorite

apparels online. Every young worker at our organization gets the chance to getamong fashion-conscious customers. In the fiscal year ending January 2022, we were able

involved in brand development. The realistic perceptions of young employees who

to significantly expand the support from our clients with 192% year-on-year sales. In

are close to the clients and the support from seasoned employees are combined togeneral, it tends to be select stores that sell the apparel at higher price range. The main

create synergy and spur growth. For instance, when it comes to promoting brands,

merchandise sold by the select stores is bought from other sources; however, at Chaos,

we have quickly adapted novel approaches, such as TikTok, based on suggestions

more than 70% of the merchandise is entirely original. A talented director who is also afrom our younger staff. We have created a system and environment that allows themskilled designer ensures the creation of works of art that are unique to Chaos. Thisto make their ideas a reality. While we are constantly taking on new challenges, one

capability is further supported by ELEMENT RULE’s dedication to manufacturing and itsof our strengths is that we are able to utilize the Group’s common structure for back-office functions such as logistics and IT

in-house production capabilities. In terms of sales methods, the discount rate is kept below

systems. In March, 2022, we also undertook mergers and acquisitions and embarked on further discontinuous growth. Five

10% throughout the year, and standard products are sold across seasons in an effort to disrupt the apparel industry’s practice of sellingyears have passed since our establishment, and we are in need of investment and structure for the next stage of growth. We

products at a significant discount during sales and discarding them if there are any leftovers. As the employees at the stores and theintend to continue capturing market demand while leveraging the strength of the group, without slowing down.

headquarters are also big Chaos fans, they are able to be genuine in communicating the attractiveness of the brand, which has helped

Foundations Supporting Growthand “Play Fashion!”

BUZZWIT is an e-commerce company targeting the younger generation. It

Expanding “Play Fashion!” throughSustainable Growth

Matured Women andUpper Market

MASS
MARKET

Adastria, an Embodiment of“Play Fashion!”

expand into new markets. Each brand has a clear target market and theme and continues to grow at a rapid

with branding and fan following. Our EC ratio is as up to 40% as many customers purchase products after reading our staff’s online
high-quality products rather than purchasing many things at low cost. Chaos is not a brand that will appeal to the mass market, but thebrand has the potential to gain popularity amongst international customers and fashion lovers of an older age group. We want to keep
taking on new challenges and benefiting from the Adastria Group’s expertise in the ability to leverage a common infrastructure.

24 | GROWTH STRATEGY

A da stri a D at a

posts. We aim to continue to be a brand that is worth buying at a fixed price as consumption trends shift to a style of owning a few

CORE
MARKET

Target markets andage groups for

Introduction

GROWTH STRATEGY

profit-oriented brands

Growth Strategy I: Multi-Brand

MATUREYOUNG

Strategies for Profit-Oriented Brands
Profit-oriented brands are a set of brands that have a strong following and a distinct fashion identity. Theseby offering value-added products.

MASS
MARKET

Strategy01

Strategy02

Expand Offerings ofHigh Value-Added Products

Horizontal development of business models fromsuccessful, highly profitable brands to other brands

Develop high unit-price products thatleverage brand value within the scope of economy prices■ Highlight brand characteristics and deepen relationships with customers■ Average product unit price of■ Supplying the right times and right products to reduce discounting andprofitable brands increased 8%
compared with 202

missed sales■ High EC sales ratio

Expanding “Play Fashion!” throughSustainable GrowthHighly Profitable Models:
JEANASiS and HARE

（Yen）

4,400
4,200
4,000

3,800

2020.22021.22022.2

Regarding investments in stores, the company aims to increase the number of stores through examining store profitability and aggressive store openings in untapped markets, and improvement in
the ratio of facility cost to sales through store upsizing and consolidation.

■ Improve accuracy and consistent operations ofstandard store models by brand■ Close stores and make format changes based on
store profitability and marketability

02 Open Stores Actively in Untapped Markets

1,000

Profit-oriented
Growing

500
003 Expand Size and Consolidate Stores■ Create a new role for brick-and-mortar stores beyond
selling clothes

1,500Stand-alone■ Integrate brick-and-mortar with EC (Dot ST store)

04 Streamline Store Investments Further

Improve equipment
cost to sales ratio(including depreciation)■ Control fixed rents
2022.22026.2■ Standardize store interiors, review materials andconstruction methods to reduce investment costs

25 | GROWTH STRATEGY

Ad ast ria Da ta■ Growing brands, new daily-use business models,in-brands, etc.

No. of stores in Japan (excluding Zetton)（Stores）

Foundations Supporting Growthand “Play Fashion!”

Store Strategy

01 Scrap & Build

Adastria, an Embodiment of“Play Fashion!”brands increase profitability by establishing close relationships with customers who have diverse tastes andGrowth Strategy II: Digital Customer Interactions and Services

Introduction

GROWTH STRATEGY

feel that we are finally ready to go on the transformation of offensive with the use of digitaltechnology. Digitalization is also an important pillar of the strategy in the medium-term
management plan, which lays out a path for growth aimed at 2025.
We believe that Digital Transformation (DX) is a means to an end, and it is important to know
experience to deliver a lot of excitement for customers” and “realize the transformation of theway we work to create an environment where staff can work with even more excitement.”
First, in “transforming the customer experience,” we are working to further evolve our own EC
site, Dot ST.
We have been strengthening functions to make it easier for customers to shop conveniently

Adastria, an Embodiment of“Play Fashion!”what the end is. Our DX objectives are to “realize the transformation of the customer

and implementing new content such as STAFF BOARD. In the future, in addition to pursuing
convenience, we would like to expand the categories and the goods, as well as expand

Digitally Enhance
Adastria’s Identityand Achieve DX

products after purchasing them at Dot ST, or using the Dot ST space to connect with people
who have the same interests and tastes.
We are also working on the evolution of real stores. At Dot ST stores, which are OMO stores,
we are working on new ways to serve customers using digital signage. In addition, we havebegun analyzing customer movements in the store and using the data to verify customer

Expanding “Play Fashion!” throughSustainable Growthexperience value by expanding services. I think it would be interesting if we could make it aplace where we can realize a good community, such as proposing how to enjoy using

reactions to changes in VMD (virtual merchandising). We could make the sales floor more

Yuya Sakurai

appealing by using the data to enhance displays and in-store appeals. While respecting theworldview of each brand, we would like to further increase the usage of digital technology in
our stores.
In addition, OMO (online and offline integration), which we started several years ago, isgradually becoming more widespread among our customers. This is especially true for the
Dot ST store, with many customers ordering via EC and coming to pick up their orders at the

Digital Transformation Changing the Customer Experience,and Expanding the Range of Services

store. In the future, we will further strengthen services that integrate EC and stores, forexample, introducing a system that would allow customers to immediately try on and pick up
items in stores after ordering on EC.
Transforming the customer experience through the use of digital technology is important not

systems that were built with partial optimization and unable to keep pace with the evolution

only in Japan but also in our overseas operations. Until now, we have focused on IT

of our business in terms of flexibility, expandability, and development speed. Since 2016, we

infrastructure development, but we are gradually shifting our focus to business growth

made a major company-wide shift and have begun building an IT platform that will support

overseas as well. In overseas EC, in addition to Dot ST Taiwan, which is already in operation,

future business evolution. We have finally reached the prospect of developing an IT platform

we launched Dot ST Hong Kong this fiscal year. We will continue to establish our own EC

in the production and sales domains that we have been promoting for several years, and weoverseas as well.

26 | GROWTH STRATEGY

Ad ast ria Da ta

Due to past integrations and other factors, until a few years ago we had multiple business

Foundations Supporting Growthand “Play Fashion!”

Executive Officer,
Head of Digital Transformation Strategy Department.

Introduction

GROWTH STRATEGY

Growth Strategy II: Digital Customer Interactions and Services
DX to Transform the Way We Work, Enabling Data-Driven Decision Makingand Expanding the Range of Services

will hasten the creation of an environment where staff can work with a smile and excitement.

production, logistics, and sales operation, we have built an infrastructure that enables theIn parallel with the development of business systems, efforts to utilize data are in full swing.

centralized sharing of data generated by each operation. It is now possible to effortlessly

About two years ago, we constructed a “data lake” that consolidated scattered data into a

integrate data into every business process, minimizing the need for further input andsingle location. Since then, we have been striving to lay the groundwork for company-wide

confirmation and optimizing internal procedures. To optimize the complete value chain, we

data use. At the time of construction, we focused on accumulating data in an analyzable

will eventually integrate this platform with factories, inspection stations, trading companies,

form, but now we have begun to deploy BI tools such as Tableau, and are in the phase ofwholesalers, developers, and other external stakeholders. As the initial stage of external

actively utilizing data and making our operations more sophisticated.

collaboration, this year, we intend to introduce a system that connects our business withFor example, in the past, inventory allocation relied on the experience and intuition ofeach factory.

experienced staff, but we have built and put into practical use a system that that can simulate

We are also working to create an environment where employees can focus on their core

optimal allocation by utilizing data. This has led to a reduction in excess product replenishment

business by utilizing digital technology. We are proactively introducing RPA for substitutableand ordering in stores, and brands that have introduced the system have seen a 30% reduction

tasks, such as handling returns at call centers and checking operations in the Humanin the number of weeks of inventory. In addition, the workload for controlling the movement of

Resources department, to achieve operational efficiency. We intend to continue actively

products between stores has also been reduced by 70%. In the future, we aim to enable allutilizing digital tools to improve productivity. In addition, by encouraging the expansion of

employees to make data-driven decisions in their respective jobs while improving the data

self-checkout systems, which we have already begun, the improvement of store applications,

literacy.

Expanding “Play Fashion!” throughSustainable Growth

and the simplification of the closing process through data collaboration with developers, weworking for several years to rebuild our IT platform. In addition to revamping the systems for

Adastria, an Embodiment of“Play Fashion!”

To achieve the other DX objective, “transformation of the way we work,” we have been

Working toward “Aggressive DX” with Professional Human Resources in Both Fashion and Digital Fields

All for the excitement of our customers and employees, we will accelerate Adastria’s growth

Transformation Strategy Department has about 50 employees, 40% of whom originally worked

through “aggressive DX.”

in the apparel industry and 60% of whom are IT engineers and project managers hired fromoutside the company. Recently, outside professional personnel are also involved in as theirside jobs. By putting people with digital skills in close collaboration with fashion industry

Change in number of staff in Digital Transformation Strategy Department（headcount）

experts and business professionals, we seek to promote reforms that do not rely on digital

70

technology, but always have a front-line perspective. We have made it a major company policy60

to promote DX and have been actively promoting the necessary investments, creating anenvironment in which it is easy to take on challenges. When we want to move forward with a
new initiative, our corporate culture allows us to have immediate conversations with the heads
accelerate DX in the future, we would like to increase the number of engineers that share our

DX
Human
Resources

50
40
30
20
10
0

vision and are interested in our initiatives.

27 | GROWTH STRATEGY

2020.22021.22022.22026.2A da stri a D at aof sales and other departments, so decision-making is also very fast. In order to further

Aim: 70 persons

80

Foundations Supporting Growthand “Play Fashion!”

Securing digital human resources is also important in promoting DX. Currently, our Digital

Introduction

GROWTH STRATEGY

Growth Strategy II: Digital Customer Interactions and Services
Taking EC Growth to the Next Stage
Capturing the expansion of the EC market, Adastria’s own EC “Dot ST” has more than 13.6 million registered customers, making it the second largest EC in Japan owned by a fashion retailer. In addition tocontinuous functional improvements to the app, and seamless integration between e-commerce and brick and mortar stores through the opening of OMO model stores. During the first two years of thismedium-term management plan, we aim to increase the number of customers and then in the following two years, improve the number of purchases. We plan to increase the number of buying customers andthe number of purchases by 60% and 25%, respectively, compared to those of February 2022. We are also strengthening our overseas EC development.

Goal

Adastria, an Embodiment of“Play Fashion!”

the strong ties with the customers, the company is pursuing further growth through initiatives such as differentiation through “STAFF BOARD,” which is popular content where store staff post their coordinates,

80 billion yen in EC sales (FY2026/02)
Increase
Purchase No.’s

Overseas ECs

Customer Growth Phase170%

Make Dot ST a major fashion EC

Purchase Frequency Growth Phase

Expanding “Play Fashion!” throughSustainable Growth

Increase
Customer No.’s

160%

140%

vs. to FY2022/02
No. of Customers

160 %vs. to FY2022/02
No. of Purchases

125 %

130%
120%
110%
100%

Foundations Supporting Growthand “Play Fashion!”

150%

90%

F Y2 0 22/2

F Y2 0 2 3/2

F Y2 0 24/2

28 | GROWTH STRATEGYF Y2 0 25/2

F Y2 0 26/2

Ad ast ria Da ta

80%

Introduction

GROWTH STRATEGY

Growth Strategy II: Digital Customer Interactions and Services
Efforts to Increase the Number of Customers and Purchases
Specific initiatives to increase the number of customers and purchases are as follows; (1) Raising awareness through aggressive promotion, (2) Expansion of product categories, (3) Attracting customers
turning in-house staff into influencers.
In terms of category expansion, we are strengthening non-apparel categories such as household goods, and furniture, and product development aimed at new customer segments such as men and seniors,
which we haven’t attracted enough so far. Open platforms refers to a mall-type business model where, rather than stocking and selling products, other companies open stores on our e-commerce site, and it
is expanding into various fields such as consumer electronics and cosmetics. In addition, we have many popular staff that can be called influencers on Instagram (some of them have 70,000 followers). They
have achieved a strong connection with customers, and we are working on human resource development to increase the number of such staff members.

Increase Customer No.’s
1

1

Increase Purchase No.’s

2

3

4

Expand Categories

Conduct
Collaboration, M&A

Engage in Open
Platforms

Ongoing Exposure via
TV commercials

221

Evolve Relationships

300（10,000 people）

2

3

4

5

Expand Categories

Conduct
Collaboration, M&A

Engage in Open
Platforms

Evolve Relationships

Strengthen Multi-Brand x
Multi-Category

42

Lifestyle sundries
performance average annual
growth of 13%

200
100
0
2018

2019

2020

Expand categories
and propose
lifestyles by dealing
in products fromother companies

2021

Acquire Customers From
Other Companies

Engage in Open
Platforms

52

Evolve Relationships
In-house staff becoming influencers⇒Deeper connection with customers

M&A and collaboration

VOICE Continuing to be a bridge between customers and fashion

Misayo Nakahara, niko and ... Aeon Mall Miyazaki store

My life has changed significantly since becoming a mother, and occasionally I have had trouble deciding on outfits to wear. Based on these experiences, we have been posting STAFF BOARD on a daily

Foundations Supporting Growthand “Play Fashion!”

32

Increase Awareness2

Expand Men’s Wear, Etc.
Male Dot ST registeredcustomers

Scheduled Again for
Second-Half This Fiscal Year

5

Expanding “Play Fashion!” throughSustainable Growth

Increase
Awareness

Adastria, an Embodiment of“Play Fashion!”outside our company through collaboration and M&A, (4) Increasing the number of companies participating in EC through engaging in open platforms, and (5) strengthening connections with customers bybasis and the theme is a twist to make it look fashionable. We believe that, establishing a sense of self that can be communicated even through a screen, while valuing the words we receive from
customers through direct messages on Instagram, etc., means that we are building a trustworthy connection
We hope to continue to be a bridge between customers and fashion and want each and every one of our customers to enjoy fashion. I would like to keep enjoying fashion both for myself and mycustomers and continue valuing my connections with them.

On the popular “STAFF BOARD,” where store staff post outfits they put together, she has been inducted into the hall of fame for high through sales. In the “Staff of the Year 2021” awards, which
commemorate employees with strong influence on consumers, her posting and other activities were recognized and she was awarded 5th place.

29 | GROWTH STRATEGY

Ad ast ria Da ta<Misayo Nakamura’s Profile >Introduction

GROWTH STRATEGY

Messages from Directors (Growth Strategy III: Glocal)

Looking at the current apparel market, apparel consumption is slowing down as birthrate
is declining and the population is aging in Japan. The COVID-19 situation has changed
the lifestyles and consumption behaviors of the customers. Even if the coronavirus is incontrol, the changes in taste may not completely return, and as going out has decreased,

Adastria, an Embodiment of“Play Fashion!”

Key Overseas Markets After COVID-19

the money that was spent on clothes can be used for activities we do in our houses andhobbies. However, if we look overseas, there are many countries and regions where both
GDP and population are growing, so from now on, the overseas market will be the key tointerest to spend on apparel. However, the market environment and customer
preferences are completely different depending on the country and region, so we believethat a glocal strategy that changes the way we take depending on target countries will
become important.

Area-wise Market Environment

Target of Overseas Business isover 100 Billion Yen in Sales and Becoming

Competition

Mainland
China

Large

StrongTaiwanSmall

MediumHong
Kong

the Backbone that Supports the Group

Marketscale

U.S.

Features・ High purchasing power and large cities with fashion-conscious
customers
・ Easily accepting of brands with strong individuality E-commerce isdominated by malls, leaving little room for in-house development

・Accepting of multi-brand approaches
・Limited number of stores per brand

Small

MediumLarge

Strong ・E-commerce consists of online malls andFoundations Supporting Growthand “Play Fashion!”

Greater China

RegionExpanding “Play Fashion!” throughSustainable Growth

the post-COVID era. In markets where the economy is growing, consumers have high・Market is mature; however, purchasing power is highself-developed e-commerce sites

Yoshiaki Kitamura

Southeast Asia Medium Medium

30 | DIRECTOR MESSAGE

・Buying habits differ among countries
・Apparel EC rates are low, but likely to grow in the future

A da stri a D at a

Managing Director(Sales and Overseas Business in-charge)

Messages from Directors (Growth Strategy III: Glocal)
Moving from Profitable Overseas Business to Further Growth

Introduction

GROWTH STRATEGY

Expanding “Glocal” to Asian Countries

region. For example, in Taiwan, where it is difficult to open many stores of one brand due to its

the results of promoting our glocal strategy since 2019. Compared to the Japanese market, there

small area, we are adopting a multi-brand strategy. It is a strategy that makes full use of Adastria’s

is still room for growth overseas, and the market is also large, so overseas business should

strength, which has many brands, to increase the number of fans of each brand by opening many

become the backbone that supports Adastria in the future.

stores.

Looking at the profitability of the last year, there is an atmosphere within the company that says,

On the other hand, in Hong Kong, we will launch our own EC site and work on “Zero inventory EC”“From now on, we are going overseas.” We will go overseas as a global company instead of

to deliver products directly from mainland China to Hong Kong in cooperation with a logistics

having overseas business branches, and for that purpose, we would like to achieve sales of oversubsidiary recently established in mainland China.

100 billion yen within the next 10 years. In the future, we aim to have overseas sales exceed

Moreover, from this term, the ASEAN region will start to move little by little. We are trying todomestic sales.

identify the best business strategy for Philippines, which has a young average age and economic
growth momentum, and Thailand, which is mature in Southeast Asia.

Promoting “Flagship Store Dominant Strategy” in Mainland China
Competing in the World with Strengths Cultivated in Japan
Mainland China is the most important target for overseas business. I myself spend half of the year
Looking at the world, the apparel industry is still a

influence of coronavirus is large, but due to the large population and strong consumer sentiment,

growing market, but it is not easy to survive anddemand will recover again after COVID-19. In mainland China, we are promoting a “flagship store

you cannot succeed unless you seriously facedominant strategy,” in which we first establish our brand at large-scale flagship stores, then open

overseas markets. Now that the seeds of thestores in surrounding shopping centers to monetize within the area. This is showing results inbusiness that we have been working so hard on are

Shanghai, so we will expand it to other first-class cities in the future. This year, we plan to open astarting to emerge, I think the future of ourflagship store in Chengdu. If you include secondary and tertiary cities, the area is huge, so it canoverseas business is very bright. Adastria, which

be said that the expansion into mainland China has just begun.

has grown through repeated changes both in

In mainland China, a system has been established to handle product development and marketing

Japan and overseas, has many strengths andlocally, and our local staff are extremely talented. We are striving for management in which coreknow-how to compete in the global market. We will

members think for themselves and create businesses together.

make the best use of such weapons and growFoundations Supporting Growthand “Play Fashion!”

there, and have firsthand knowledge of the movements of the booming market. Currently, theExpanding “Play Fashion!” throughSustainable Growth

Outside of mainland China, we are promoting glocalization suitable to the characteristics of theWe have been working on overseas business for more than 10 years, and we are definitely seeing

Adastria, an Embodiment of“Play Fashion!”

We were able to achieve profitability in our overseas business last year and it was a very big step.

Adastria as a company that can compete globally.

Ad ast ria Da ta

31 | DIRECTOR MESSAGE

Introduction

GROWTH STRATEGY

Growth Strategy III: Glocal
Strategies for Mainland China
In our overseas operations, we are focused mostly on business in mainland China, where we first invested in large-scale flagship stores to establish our brand in line with the large-scale and highly competitive
to expand EC sales as well as the operational area in the future. For the time being, we will position this as an investment phase and place priority on growth rather than earnings. However, we will achieve
profitability within the regions where we have made some progress in opening satellite stores. Currently, we are strategically focusing on brands with clear characteristic and good local response. However,
we are also gradually expanding into new brands.

Accelerate Store Openings; Proceed With Establishing Flagship Dominant Model Strategy

Goal: Target sales of 20 billion yen in the medium term

Flagship Store Focuses on
Brand Creation

Satellite Stores Focus on
Profitability

leading shopping malls

Flagship store Satellite store

in Shanghai and Nanjing

Brick andMortar Stores*As of August, 2022

Existing
stores(Shanghai)・Establish a foundation for profitability by
improving recognition through flagshipstores and by opening shopping mall stores
・Improve efficiency of local store operations
through staff training
・Aim to generate net profits in the Shanghai
area by 2022

New
stores・Open 7 stores in 2022, including the newChengdu store; expand into new cities
every year thereafter・Test new brands in EC and “niko and …”
stores; open brick-and-mortar stores forbrands that respond wellEC

・Pursue a multi-brand strategy
・Expand global STAFF BOARD
・Expand business by opening up “Dot ST”■ After September 2022:

New scheduled store openings

Shanghai Metro City shopping Mall

32 | GROWTH STRATEGY

Ad ast ria Da ta

Chengdu Flagship StoreChengdu Damofang Store
Shanghai Metro City Store
Chongqing Longhu Times Paradise Walk StoreFoundations Supporting Growthand “Play Fashion!”

7

Opening stores in

Overall
strategy

・Focus on brands with strong individuality
and local appeal
・Develop a dominant flagship store strategy
in each city
・E-commerce sales will grow as brandrecognition at flagship stores expands

Expanding “Play Fashion!” throughSustainable Growth

Flagship Dominant Strategy

Adastria, an Embodiment of“Play Fashion!”

nature of the market. After that, we are aiming to establish a Flagship Dominant Strategy model through the opening of new stores in surrounding SCs to generate revenue within the area. The company aims

Introduction

GROWTH STRATEGY

Growth Strategy III: Glocal
Strategies for Other Regions
There are many of our brands have yet to establish stores in Taiwan. We hope to hasten the process by choosing the brands that do well in our market research. By doing this, we can open multi-brand stores
In Hong Kong, we are increasing profitability by effectively managing local staff operations and optimizing the current store network. In addition, we newly released our own e-commerce site, Dot ST, andstarted e-commerce development. In cooperation with a logistics subsidiary established in mainland China, we are building an inventory-free EC system that delivers goods from mainland China without
keeping inventory in Hong Kong.
The American company “Velvet” that we have acquired is doing well. The EC rate is also improving by sharing Adastria’s EC know-how and bolstering web marketing.,
In Southeast Asia, We are getting ready to start by taking our business to Thailand and the Philippines. Additionally, since there is not yet an oligopoly in the clothing EC market, we are hurrying to establish
EC with the intention of turning it into a mall.

Stores

Accelerate new brand store openings (studio CLIP, HARE, PAGEBOY, etc.)

Revise systems and shift to in-house production
Utilize STAFF BOARD

Hong Kong

StoresScrap-and-build, local staff management for high profitability

Dot ST launch
Establish a mechanism for inventory-free EC operations

The United Statesof America

Brick-andmortar

Southeast Asia

StoresExpand overseas business through wholesale

Build larger base of loyal customers
Strengthen digital marketing

Preparing to open niko and ... in the Philippines and Thailand.

Plans to launch with a view to converting into a mallContinuing to be a bridge between customers and fashion

Pinyu Lin, General Manager, Adastria Taiwan Co., Ltd.

Adastria Taiwan has shown steady growth since opening its first store in 2003. The brand headquarters in Japan and our local subsidiaries communicate closely with each other. Our strength lies in our operational
structure that allows us to localize product development in a fine-tuned fashion according to seasonal characteristics and customer needs. We are not simply a local subsidiary for the purpose of developing
Japanese brands in Taiwan. We reflect real market information that can only be obtained locally on our sales floors. Adastria has a culture in which we can frankly express our opinions to each other and eventhough we are far away from Japan, we can still exchange positive opinions. For example, we are ordering more late summer products and changing the timing of their arrival to match the extremely short spring
and fall seasons. Moreover, Adastria’s strength in inventory control is also utilized in Taiwan. As per the business practice of the Taiwanese apparel industry, heavy discounts are given on many items during sale
periods. However, for the past two years, Adastria Taiwan, like in Japan, has been controlling the discount rate in detail according to the sales of individual items, thus ensuring a high gross profit margin. The

Foundations Supporting Growthand “Play Fashion!”

VOICE

EC

Operate with a focus on acquired local brands

Expanding “Play Fashion!” throughSustainable Growth

TaiwanAdastria, an Embodiment of“Play Fashion!”

faster. We have also been upgrading our systems for growth and have begun utilizing STAFF BOARD.

significant increase in the ratio of EC sales from 8% to 14.7% following the COVID-19 pandemic has also contributed to the improvement in the operating margin. We are developing our own e-commerce site
“Dot ST Taiwan.” In addition to penetrating the online shopping market due to the COVID-19 pandemic, there have always been very few fashion sites in the Taiwanese e-commerce market that allowed customers
to purchase various brands at once. Thus, convenience and satisfaction have led to increased sales. The STAFF BOARD operation was also started by local employees, providing these employees with more
opportunities to play an active role. Because 80% of our employees in Taiwan are women, we would like to encourage our subordinates by having a woman as the head of the local subsidiary.
introducing new brands like this in the future. We would like to expand the Adastria brand in Taiwan by utilizing our Japanese operations and know-how, while keeping in mind the real needs of the local market.

33 | GROWTH STRATEGY

Ad ast ria Da ta

Even though the Taiwanese market is not big, it is easy to develop multi-brand products, and there is room for growth. Adastria has some attractive brands that are not yet available in Taiwan. We look forward toGrowth Strategy IV: New Businesses

Introduction

GROWTH STRATEGY

Cooperation with Zetton
Among the basic elements of food, clothing, and shelter that are essential to our lifestyle, our group was lacking in the food industry. To tackle this, we brought Zetton Corporation, a restaurant business, into
the like, making it a suitable business partner in terms of business and corporate culture based on community development. This supports our corporate goals in the business of making spaces and in goodcommunity creation. Adastria wants to generate synergy in collaboration, as we improve the draw of our brick-and-mortar stores and expand business overseas, while Zetton builds its customer base andtakes on the challenge of entering new markets. Zetton’s contribution to the medium-term management plan incorporates the same level of sales and profits as before the pandemic in the final year of theplan, which is the fiscal year ending February 2026. The time of recovery to pre-COVID-19 levels and plans for subsequent growth beyond that will be announced in the Zetton medium-term management
plan at a later date.

Adastria, an Embodiment of“Play Fashion!”our group in February 2022. Zetton produces stores that become urban community spaces and the company has taken on the challenge of a new business model in the form of park revitalization projects and

In February 2022, we converted restaurant company Zetton into a consolidated subsidiary
Expanding “Play Fashion!” throughSustainable Growth

Aiming to create a “more enjoyable place” transcending
the boundaries between apparel, food and beverage■ Improve the appeal of brick-and-mortar stores(increase frequency of visits and length of stay)■ Hawaiian business in Mainland China

Foundations Supporting Growthand “Play Fashion!”■ Expand products sold through our website■ Expand fashion needs by creating opportunities■ Improve operational efficiency of our food and beverage businesses.

■ Promote to “Dot ST” registered customer base
■ Take on the challenge to enter new countries■ Improving profitability by expanding park revitalization projects■ Strengthen financial base
Ad ast ria Da ta■ Improve efficiency of back-office operations

34 | GROWTH STRATEGYIntroduction

GROWTH STRATEGY

Growth Strategy IV: New Businesses
Osamu Kimura, President of Adastria, and Shinsuke Suzuki, President of Zetton,
will share their thoughts on how they came to join forces as partners, theAdastria, an Embodiment of“Play Fashion!”changing lifestyles of their customers and the future of the fashion and foodindustry in a dialogue format.

We Want to Create Good Communities. For This Reason,
the Growth of “Food” is Important.

Kimura: Adastria has now welcomed Zetton to the Group in order to further expand the area of‘food’.
Expanding “Play Fashion!” throughSustainable Growth

Suzuki: After opening the first “ZETTON” store in Nagoya, Zetton has created a variety of stores,
including French restaurants, Hawaiian cafes, standing bars, and soba izakayas. In addition to ourexisting bridal business and outdoor business, we have recently taken up the challenge of park
revitalization projects based on a sustainability strategy. Since our founding, we have created acommunity space in the city and relationships between people through our store development,
based on the philosophy that “Building stores is building people. Building stores is building towns.”
Kimura: I feel that Zetton’s philosophy is very similar to Adastria’s corporate philosophy. Under the
mission “Play fashion!”, Adastria is developing business not only in apparel but also in all aspects
moments for further growth, we have considered it important to expand in the field of ‘food’.
Suzuki: Just as everyone at Adastria says that they want to be told that Adastria used to be an

Representative Director andPresident of Adastria Co., Ltd.

Osamu Kimura

apparel company, we also want to be told that Zetton started as a food and beverage company. I
believe that each of us is essential to help each other grow to the next stage of our development.

Representative Director andPresident of Zetton. Inc.

Shinsuke Suzuki

Foundations Supporting Growthand “Play Fashion!”of lifestyle. In order to create ‘good communities’ where people gather and share enriching

Adastria x Zetton Talks about the Changing Times and Business
Ad ast ria Da ta

35 | GROWTH STRATEGYIntroduction

GROWTH STRATEGY

Growth Strategy IV: New Businesses
Our Lives Have Changed Significantly.
Two Companies See the Needs of the Future.

COVID crisis.
Suzuki: In the food and beverage industry, use is increasing in private scenes such as family
and friends rather than business scenes such as entertaining and banquets. Our stores wereoriginally used by women for birthday celebrations and anniversaries with loved ones, so wewere able to recover relatively quickly after repeated business suspensions and shortened
opening hours.

Adastria has customers all over the country, so I think we can support Zetton in expanding
its business across the country by using our registered customer base. It may be a goodidea to sell Zetton food and drink menus on the Adastria Group’s web store “Dot ST”. We
would very much like to combine our respective strengths.

that was close to people’s lifestyles. I predict that society will never fully return to normal
with convenient delivery services, the desire to gather at a restaurant for a good meal will

We Aim for Growth While Making the Best Use of
Our Know-How From Overseas Successes.

not disappear.
Suzuki: I agree with you. While sales in the food and beverage industry will undoubtedly
recover in the future, we expect that the way we spend our money - with whom, where andwhat we eat - will change dramatically.

Kimura: I think we can create great synergy in overseas development. Zetton has a variety ofbusinesses including the flagship Hawaiian restaurant “Aloha Table” in Honolulu, Hawaii, so
combining the brands of the two companies would expand the potential for overseas
expansion. We would also like to consider expanding in China, where we are focusing our

Suzuki: Aloha Table in Hawaii was established in 2009, and we started opening stores inJapan at the same time as it became popular locally. Bringing a brand created by our

Suzuki: In recent years, Zetton has been involved in park revitalization projects. One

company in the United States to Japan is a rare success in the Japanese restaurant industry.

example is Kasai Rinkai Park in Tokyo. An old cafe was converted into a new cafe with a

Now that we are part of the same group as Adastria, we would like to make use of thiskids’ space and new barbecue facilities were built, transforming it into a park that is

expertise while promoting new international developments.

crowded with people on weekdays and holidays. Park revitalization projects not only
contribute to urban development through the use of local cultural resources, but also offer

Kimura: Adastria is a company that has changed without fear of new challenges and failure.

benefits in terms of profitability and expandability. We believe we can utilize Adastria’s

I have high hopes about this change of becoming group with Zetton.

Foundations Supporting Growthand “Play Fashion!”

efforts.

Adastria and Zetton. How to Make the Most of Each Type of Content.

Expanding “Play Fashion!” throughSustainable Growth

Kimura: So we were able to recover quickly because we were already developing a businessafter the end of COVID crisis. But previous needs will also never be reduced to zero. Even

Adastria, an Embodiment of“Play Fashion!”

Kimura: Consumer lifestyles and values have changed dramatically in the wake of thestrengths in these businesses. For example, if Adastria’s outdoor goods could be rented orpurchased at parks and barbecue areas, it would be a very good customer contact point.

Suzuki: In the 27 years since its foundation, Zetton has also continued to change, with aabout how we can change in the future together with Adastria.

Kanto and Chukyo areas.

36 | GROWTH STRATEGY

Ad ast ria Da ta

clear understanding of what people want from the times. I am also very excited to think
Kimura: Zetton stores have a strong brand, but at the moment openings are limited to theIntroduction

GROWTH STRATEGY

Growth Strategy IV: New Businesses
Other New Businesses
In the new business field, in order to respond to the diversification of customer lifestyles and changes in consumer behavior, in addition to expanding and monetizing the line-up of new businesses such as
new sales organization dedicated to BtoB business has been established, with the aim of establishing a new business model that provides external companies with the value chain functions (our strength),such as product planning, production and store development. As part of this, at the end of the February 2023 term, we will rebrand the GMS clothing store in collaboration with Izumi Co., Ltd. and start alicensing business for FOREVER21’s relaunch in Japan. We are also engaged in initiatives to find the seeds of new businesses before they bloom. In the previous fiscal year, we made equity investments in
two startups in the fields of AR and micro-mobility. We also held a contest for employee business ideas.

Aggressive “B-to-B business” growth

New business exploration initiatives

Established Corporate Sales Department directly under a director to create new businesses in collaboration with

Services■ Insource business from other companies ■ Licensing business■ Space production (produce condominiums, detached houses, stores etc.)

Sales of Goods■ External sales of apparel and sundries ■ Uniform business■ Commodity goods (HAKUTORIKO), other wholesale, etc.

2
Case

01

Startup investment/collaboration

Luup

Pretia Technologies, Inc.

■ Expand listings of products and services from other companies on “Dot ST”

Commercial Facilities■ Sell products to GMS, conduct store management on consignment■ Expand franchises for commercial facilities (including utilization of existing brands)(Direct sales/FC)

Overseas

2
Case

02

Project A (in-house business contest)
Foundations Supporting Growthand “Play Fashion!”Open up EC platform■ External sales of materials developed in-house on Mainland China■ Handle logistics operations for other companies through a new logistics company
in Shanghai
Final selection meeting(Q&A session)

Designed uniforms
for Kanto Railways

Launched Shiroka home electricity
handling services

First expansion of Love, Bonito
into Japan37 | GROWTH STRATEGY

Decisions to commercialize idea

Examples of new business development

Ad ast ria Da ta

Designed high-rise apartments
for students

Expanding “Play Fashion!” throughSustainable Growtheach department. Will also be used as a new career path for employees

Adastria, an Embodiment of“Play Fashion!”

the food and beverage business, the Group will expand new possibilities in fashion by developing BtoB businesses and work to commercialize new business models that transcend business categories. A

Introduction

GROWTH STRATEGY

Growth Strategy IV: New Businesses
Strengthening the Foundation to Support Growth Strategy
To achieve our growth strategy, we aim for further evolution in every area that supports brands. In terms of production, we are responding to the head winds of soaring costs by expanding materials developed
preparation for our expansion of e-commerce. For human resources, we have established our own health insurance association, and we are adopting a job-based HR system in stages. We are also expanding
career paths for staff. Risk management is increasingly important, and we are improving the level of our operations in this respect. The digital sector is also strengthening its infrastructure and data analysis
while promoting in-house production. Also, the use of data is proving effective not only in EC, but also in the early ordering of orders to cover rising costs.

Results to date
■ Established in-house production system■ Multi-category system

Logistics

Expand materials developed in-house

Arrange for raw materials in advance,
consolidate sewing factories

Increase ASEAN production ratio■ Established our own logistics system

Mechanize domestic
distribution centers

Consolidate Shanghai area,
overseas assortment delivery

Sell products from other companies

Human resources■Established our own health insurance■Selected as Nadeshiko brand

Adopt new personnel system(shift to a job-based system)

Reform work styles; expand
career path options

Improve operational efficiency

Risk management■BCP operations■Crisis management committee

Improve the level of crisis
management committee operations

Continue to improve BCP

Conduct periodic drills

Expand the scope ofdata analysis usage

Expand Dot ST globally

In-house production of systems
and applications

Administrative department DX

Streamline store operations

Obtain external security certifications

DigitalDefenseoriented IT■ Developed infrastructure for data utilization■ EC cloud computing

In-house production of domestic logistics reduces costs
and optimizes inventories

Masatake Hayashi,
Senior Executive Officer, Head of Logistics Division

In order to build a logistics system optimized for the market and business environment, the Group’s entire domestic logistics operations are now being carried out in-house by the wholly-owned
subsidiary Adastria Logistics Co., Ltd. As a company with a large number of fashion brands in the economy price range, our in-house control of logistics functions gives us a cost advantage and enables

Foundations Supporting Growthand “Play Fashion!”

VOICE

Offensiveoriented IT

Expanding “Play Fashion!” throughSustainable Growth

Production

Further advancements FY2023/02 ~ FY2026/02

Adastria, an Embodiment of“Play Fashion!”

in-house, arranging for raw materials early, and diversifying production to areas in ASEAN. Regarding logistics, we have been mechanizing domestic distribution centers and streamlining overseas logistics in

us to respond flexibly and quickly to the characteristics and circumstances of each brand, supporting the implementation of our medium-term management plans and brand-specific growth strategies.
In the delivery of products to stores, a system is in place whereby products are dispatched daily as they are sold, achieving total optimization by eliminating unnecessary stock in stores and maintaining
a low level of residual stock ratio for the industry. The current focus is on digitally-enabled logistics efficiency and value chain visualization. AGVs (unmanned guided vehicles) have been introduced for
EC logistics, and IT tools for analyzing workload and time in each process in the warehouse are being used to refine work plans in the warehouse. We are also working with the trade team to improveand improve logistics, such as expanding product categories, opening EC, and expanding overseas countries, thereby contributing to the further development of our business.

38 | GROWTH STRATEGY

Ad ast ria Da ta

control of cargo before it enters the distribution center, for example by combining cargo into a single container when it leaves mainland China and shipping it directly to ports in the Kansai region. These
initiatives also lead to improved working conditions for staff and partner companies, helping to achieve our goal of sustainable logistics. Going forward, we will keep pace with the Group’s growth strategy

Introduction

GROWTH STRATEGY

Growth Strategy IV: New Businesses
M&A Strategy
Adastria will proactively make use of M&A for long-term growth. In particular, in Growth Strategies 1 and 2, we are working to improve our systems through the review processs to reduce risks and hiring of
M&A lies in the capability to identify the brand power of the target companies and diversified corporate culture that allows group companies to demonstrate their capabilities. In the past, the company has
made several M&As that have contributed to the business over the medium to long term, and in future M&As, the company aims to increase long-term corporate value beyond short-term profitability.

Make active use of M&A for long-term growth
Review process

Ⅰ Multi-Brand, Multi-Category

PriorityHigh

TargetDomestic apparel, furniture andcosmetics manufacturer

Risk

Low

Objective

Redirect our inventory management andproduction expertise
Assume “revitalization” and “blank area capture
models” in anticipation of industry restructuring

Case
Study

Return on investment

Growthstrategy

・ALICIA (2016)
・BABYLONE (2012)
・studio CLIP (2009)
Growth as a popular brand
・NATURAL NINE (2013)
Establish foundation for
in-house production system

Ⅲ GlocalⅡ Digital Customer Interactions and Services

PriorityHigh

TargetE-commerce site management companies,
system development companies

Risk

EC site -> low, Systems -> medium

Objective
PolicyGrowthstrategy

Priority

MediumRisk

High

TargetFood and beverage, food retail, start-ups

Risk

High

Objective Acquire expertise in non-apparel areas

39 | GROWTH STRATEGY

PolicyCase
StudyCompanies that have originality
and expertise in non-apparelbusinesses as well as affinity
with our businesses
Zetton (2022)

Ad ast ria Da ta

Consider joint ventures with local partners on a case-by-case basis

OPEN AND NATURAL(2022)Ⅳ New Businesses

MediumPolicyCase
StudyAcquire functions and customers to
expand our own e-commerceEC management companies that complement
our businesses and systems companies witha proven track record in the retail domain

Priority

Objective Speed growth of overseas businesses

Risk analysis

Foundations Supporting Growthand “Play Fashion!”

PolicyGrowthstrategy

Business plan validity

Expanding “Play Fashion!” throughSustainable Growth

Growthstrategy

Fit with investment objectives andgrowth strategy

Adastria, an Embodiment of“Play Fashion!”dedicated personnel or the like in order to address elements for growth, such as category expansion and EC customer acquisition, through M&A. Beyond financing or cash flows, we believe our strength inFoundations Supporting
Growth andIntroduction

GROWTH STRATEGY

Messages from Directors“Be a person needed, Be a company needed.” is the corporate philosophy of ourcompany. In order to continue “being a company needed” for all our stakeholders

Adastria, an Embodiment of“Play Fashion!”

Tackling Social Issues as a “Company Needed”

including our customers, employees, and society, “sustainable management” that aims
to resolve social issues through business activities is essential. The apparel industry is
and as a leading company in this industry, our biggest challenge is responding toclimate change. The effects of climate change are becoming more serious each year,with store closures, distribution suspended due to torrential rains, soaring raw material
prices, etc. Further, human rights violation in the supply chain is also a risk inbusiness. We are trying to implement our corporate philosophy by tackling theseissues seriously.

Our company also has a sustainability policy of “Taking the Excitement of Fashion Into
the Future.” We put it in simple words because we wanted young employees to

Seriously tackling social issues Connecting
the Excitement of Fashion to the Future

perceive it as their own, and our customers to sympathize with it and work together on
this idea. Based on this sustainability policy, we have established three materialities“Protect the Environment,” “Encourage People to Shine” and “Grow Together With
Communities,” and have incorporated various initiatives into our business activities.

Foundations Supporting Growthand “Play Fashion!”

The Desire of “Taking the Excitement of Fashion Into the Future.”

Expanding “Play Fashion!” throughSustainable Growth

said to have the second highest environmental impact after the petroleum industry,Specifically, we are carrying out wide range of activities from the familiar activities
such as switching to LED lighting in stores and reducing the usage of shopping bags,

Director (Sustainability, Governance in-charge)

till the implementation of zero incineration of clothing inventory and the Group
Sourcing Policy and the Group Sourcing Guidelines exchanges with business partners
on the standards such as respecting human rights and considering the environment.

41 | DIRECTOR MESSAGE

A da stri a D at a

Taiki Fukuda

Introduction

GROWTH STRATEGY

Messages from Directors
Review of Sustainability Goals

Initiatives for Corporate Governancesystem that enables quick decision making under the leadership of founder. Our quick

Environment,” we have established two new KPI, “Switch to sustainable raw materials anddecision making in response to social conditions, customer values and needs is the reason

processing for at least half of all products by 2030” and “Achieve carbon neutrality by

why we have been able to evolve and survive.

2050,” and strengthened quantitative verification, such as calculation of greenhouse gas

In addition, from this term, along with the number of inside and outside directors being theemissions up to Scope 3, including the supply chain. As for the initiative to “Encouragesame, three new members with different careers and knowledge have joined from outside.

People to Shine,” we have added the policy to “Foster Employee Well-Being” and we aim

We expect that the presence of diverse directors will enhance checks and balances,

to become a White 500 Certified Health & Productivity Management Outstanding Company

making it easier to step on the accelerator to achieve the goals of the Medium-Termwith the Ministry of Economy, Trade, and Industry. Along with other goals, we will show

Management Plan. In the future, we will consider increasing the ratio of women on theour progress in our integrated report and on our website

Board of Directors and incorporating the perspectives of foreign nationals as our businessaccelerates overseas.

Balancing Corporate Growth and Consumer Prosperity

Expanding “Play Fashion!” throughSustainable Growth

One of our company’s strengths in corporate governance is that we have established ain line with the rapidly changing social conditions. As a part of our activities to “Protect theAdastria, an Embodiment of“Play Fashion!”

In formulating this Medium-Term Management Plan, we reviewed our sustainability goals

At present, the definition of the values and prosperity of workers and consumers is certain
to change. We are now required to respond to such changes while pursuing growth as a
fashion!” is having employees feel excited about their work, which is linked to theprosperity of consumers and in turn - leads to our gains. We will continue to contribute to
the realization of “being a company needed” while being on the same level as ourshareholders and investors, and the improvement of long-term corporate value.

Foundations Supporting Growthand “Play Fashion!”company. The form of our Sustainable Management according to the mission of “PlayAd ast ria Da ta

42 | DIRECTOR MESSAGE

Introduction

ADASTRIA ESG

Approach to sustainability and Materialities (Important Issues)
Sustainability Policy

Adastria, an Embodiment of“Play Fashion!”

Taking the Excitement of Fashion Into the Future
Taking the Excitement of Fashion Into the Future.
Fashion has the power to make every day a positive one.
We strive to ensure that fashion will excite us all for years to come.
Let’s have fun and begin where we can, for the sake of the environment,
humankind, and our communities.

Materialities and Targets
Society faces many challenges, such as climate change and demographic change, that we must face in order to continue our business. We haveanalyzed these issues in terms of both their importance to society and their relevance to our business, and established materialities (important issues).
Based on these materialities, we have revised the Group policies and targets for key themes as follows.

Materialities

Encourage People
to Shine

We coexist with local communities
and create new value together.

KPIs

Engage in manufacturing that leads tothe future

Switch to sustainable raw materials andprocessing

Switch to sustainable raw materials and processing forat least half of all products by 2030

Balance environmental considerations withsales activities

Engage in reduction and absorption of
CO2 emissions

Achieve carbon neutrality by 2050

Create a world without fashion loss

Eliminate incineration of clothing inventory

Achieve zero incineration of clothing inventory

Create a society in which people enjoy fashionin their own way

Suggest fashion for the enjoyment ofeach individual—

Create diverse and rewarding
work environments

Raise the number of women in senior management positions
to 30% and the ratio of women in management positions
to 45% or more by 2025

Foster employee well-being

Become a White 500 Certified Health & Productivity
Management Outstanding Company

Revitalize regions where our stores arelocatedConnect with communities through fashion—

Foster sustainable development inproduction areas

Realize fair and ethical procurement

Advance partnership certifications for production plants
by 2023

Be an organization that is healthy mentallyand physically, encouraging employees intheir individuality and ability

43 | ADASTRIA ESG

Ad ast ria Da ta

Grow Together with
Communities

We create an environment in whichcustomers, employees, andstakeholders feel excitement
every day.

Group policy

Foundations Supporting Growthand “Play Fashion!”Protect
the Environment

We reduce the environmental impactof our business andmake the world of fashion
sustainable

Our vision

Materiality (Key Issues)
formulation process

Expanding “Play Fashion!” throughSustainable Growth

Having fun is the best way to keep moving forward.

Introduction

ADASTRIA ESG

Initiatives for Materialities (Important Issues)
Engage in manufacturing that leads to the future
As part of our efforts to reduce the environmental impact of our business, we review the materials and processing methods behind our products to ensure sustainable manufacturing.
environmental impact and preventing pollution. With the cooperation of our suppliers, we continue to give due consideration to the environment throughout our supply chain.

Actively use materials withlow environmental impact

CottonPolyester・Cotton with reduced use of water,
pesticides, and chemical fertilizers

・Recycled materials from resources(reprocessed from PET bottles, fibers, etc.)

・Cotton with consideration for soil
conservation and ecosystem

・Materials that reduce carbon dioxide
emissions in manufacturing processes
Materials mentioned above are used atleast 30%

・Cotton produced under good working
conditions for the producers 100% use thecotton mentioned above

15.3%
Sustainable
A Mark
(3.51%)
Cellulose(2.22%)
Sustainable A mark(0.32%)

Other marks

Polyester(1.51%)

Cellulose(0.28%)
Cotton(8.04%)Polyester(0.01%)
Cotton(0.99%)

1.6%
2021.22022.2*Target: All products of domestic group companies

Developing sustainable raw material

miulisse

UDR[z]TOPICS Product-specific visualization of environmental impact cost
Display of environmental impact cost
CO2 emissions

Reduction effect equivalent
to 16 cedar trees

Water consumption

Reduction effect equivalent to
two PET bottles

44 | ADASTRIA ESG

Global warming
Production with
reducedgreenhouse gas
emissions

Resource depletion
We carry out
production thatmakes the mosteffective use ofresources

Water shortage
Efforts areneeded to reducewater
consumption

Water pollution
We are producing
without muchwater pollution

A da stri a D at a

“O0u” developed by ADOORLINK is a lifestyle brand that incorporates sustainable materials
and processing methods into all of its products. In addition to disclosing the amount of CO2
emissions and water consumption for each product based on material information, the brandalso indicates the degree of impact on environmental issues with a 3-level mark. By adopting
this easy-to-understand labeling method, we aim to enable everyone to experiencesustainability without any strain and to create a better future together with our customers, one
step at a time.

Foundations Supporting Growthand “Play Fashion!”

We are also developing original materials using environmentally friendly raw materials and processing methods. We have developed our own materials such as“miulisse,” which focuses on comfort and luxury, and “UDR(z),” a jointly developed material using CLEANSE® an antibacterial and antiviral textile technology ofKurabo Industries Ltd., as well as environmentally friendly materials such as organic cotton and recycled polyester. In addition, we are also developing innovative
materials such as “Refallco,” that uses recycled short staple fiber fall out during the cotton combing process. By using these materials across brands, we areable to offer our products at affordable prices.

Expanding “Play Fashion!” throughSustainable Growth

We have established our own sustainability
definition and criteria for frequently usedmaterials, and products that meet thesecriteria are sold with an original mark on the
product tag. Currently, only about 15% of our
products bear this mark, but we are actively
introducing materials and processes withless environmental impact with the aim ofswitching to environmentally and sociallyconscious raw materials and processing for
more than half of all products by 2030.

Sustainable Mark Product Ratios

Material-wise sustainability mark and definition (partial)

Adastria, an Embodiment of“Play Fashion!”

Our Group Sourcing Guidelines define the Group Sourcing Policy and the matters with which we expect our suppliers to comply. These guidelines also state the necessity of reducing

Introduction

ADASTRIA ESG

Initiatives for Materialities (Important Issues)
Balance environmental considerations with sales activities
To make our businesses sustainable, we must consider the environment in the process of delivering products and services to our customers. Our goal is to achieve well-balanced
activities on the environment.
Ratio of Stores Converted to LED Lighting

Achieve carbon neutrality by 2050

Establish governance structure for climate change

91.7%Stores with LED lighting
Stores with mix of LED andnon-LED lighting
Stores without LED lighting*Target: Domestic group stores

Solar Power Generation Panels (Ibaraki Nishi Distribution Center)

Scope-wise CO2 emissions

Manage risk in climate change
In order to understand and assess the impact of climate change on our business, weregularly analyze scenarios and identify climate change risks and opportunities throughan internal task force led by the department in charge of sustainability. The identified
significant risks and opportunities are reported to the director in charge of crisis
management, and specific risk countermeasures are implemented in cooperation
between the task force and the relevant departments. In addition, to address physicalrisks arising from natural disasters, the Crisis Management Committee, chaired by the
director in charge of crisis management, has established a system to implement business
continuity management, including BCP.

Scope

Fiscal year ending
February 2022

Scope 1 (direct emissions)

Ratio

Remarks--

Scope 2(indirect emissions associated with energy use)

34,791

6.7%

Scope 3(indirect emissions from the value chain)

481,808

93.3%

Scope 1+2+3

516,600

100.0%

Not
applicable*Scope of coverage: Domestic group companies (excluding ADASTRIA eat Creations and Zetton)

45 | ADASTRIA ESG

A da stri a D at a

Adastria Group TCFD Report

Amount of emission[t-CO2]

Foundations Supporting Growthand “Play Fashion!”

We have positioned our response to climate change as one of our important issues interms of sustainability, and our director in charge of sustainability regularly reports to theBoard of Directors on the status of our efforts. The Board of Directors consists of 10
directors, including 5 outside directors, and is chaired by the Representative Director andChairman, and deliberates and resolves important matters as the highest management
decision-making body for the entire group. In the fiscal year ending February 2022, theBoard reported on the Company’s new sustainability policy and decided to aim to achievecarbon neutrality by 2050.

3.2%

5.1%

Expanding “Play Fashion!” throughSustainable Growth

As a key sustainability issue, we support the goals of the Paris Agreement and aim toachieve carbon neutrality by 2050. Climate change is not only an urgent issue common to
all countries, but also one of the most important risks to our business, such as soaring raw
material prices and supply chain disruptions caused by large-scale natural disasters. We
are starting with what we can do, such as switching to LED lighting, which emits less CO2,
for store lighting, and installing solar power generation systems at some of our logistics
centers.

Adastria, an Embodiment of“Play Fashion!”

operations that give equal consideration to business and the environment, and we are working on what we can do one by one while understanding the impact of our businessIntroduction

ADASTRIA ESG

Initiatives for Materialities (Important Issues)
Reduce shopping bags
(10,000)

REBAG Number of shopping bags reduced
PROJECT

Chiemi Tagami,
LEPSIM Hills Walk Tokushige Store

VOICE

500

About 60% of customers use
their own shopping bags

4,326,403
400

One of our store goals is to “Reduce the use of disposable
2,771,203300

shopping bags”, and we are working to promote customers
to use their own shopping bags. We share with our staff the
purpose and benefits of the REBAG PROJECT from the 3200

Adastria, an Embodiment of“Play Fashion!”perspectives of customers, stores, and the environment,
and encourage each individual to think for themselves and100

297,879 377,173
157,792 245,885

take action on an ongoing basis.

636,978

Currently, nearly 60% of our customers use their own bags at our stores. We are incredibly happy
to see that many of our customers sympathize with our activities and enjoy the style of carrying
their own bags as fashion. We would like to continue our efforts to contribute to the sustainability

20
22
.2

20
21
.2

20
20
.2

20
19
.2

20
18
.2

20
17
.2

20
16
.2

0

Switch to environmentally friendly materialsof local communities and society.

Examples of environmentally friendly secondary materials

Straws made fromsugar cane And
recycled PET resin cup(BAYFLOW cafe)

OPP bags using green nano

TOPICS Elimination of bundling of purchase invoices at the official web store
In order to conserve resources and prevent leakage of information such as customers’ order details, we have discontinued
including the statement (delivery note) sent with purchases made through the official WEB store, starting from July 13, 2022.
Customers who need it can check the contents of the statement of delivery on the My Page of the WEB store. By utilizing DX,
we are reviewing resource consumption wherever possible.

Notice of discontinuation of packaging purchase statement

Shopping bags madefrom FSC-certified paper(GLOBAL WORK)Foundations Supporting Growthand “Play Fashion!”

In addition to the products themselves, we are gradually switching to environmentally friendly materials for many ofthe materials used when delivering products, such as hanging tags, shoe boxes, wrapping paper, and shoppingbags. In particular, OPP bags (used at the time of delivery to maintain product quality) made of “Green Nano,” amaterial that emits less CO2 when incinerated, are used widely across our brands. Currently, they are mainly used forsome general miscellaneous products, but we hope to expand our efforts in the future.

Expanding “Play Fashion!” throughSustainable Growth

As one of our resource-saving actions, we
are working on the REBAG PROJECT topromote the use of My Bag. This activity,
which awards membership points for
declining shopping bags, began in thefiscal year ended February, 2016, and has
so far reduced the number of shoppingbags by approximately 9 million. In
particular, since July 2020, when plasticbags were made chargeable, manycustomers have participated, and theactivity has expanded to the point whereapproximately 17% of customers now use
their own bags. Through this initiative, we
hope to co-create a “sustainable shoppingstyle with our customers.”

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46 | ADASTRIA ESG

Introduction

ADASTRIA ESG

Initiatives for Materialities (Important Issues)
Create a world without fashion loss
Fashion loss (clothing disposal) is an important issue to address, as it leads to CO₂ emissions from excessive resource consumption and incineration. We have made it our policy toEfforts to eliminate fashion loss②

Improve ordering accuracy by utilizing order data frompre-orders on the official web store Dot ST③

Re-sell end-of-sale products at affordable prices at “OFFSTORE” developed by ADOORLINK④

Develop “FROMSTOCK,” an upcycle brand that revives
inventory by dyeing it black⑤

Re-sell products outside of Japan in collaboration withpartners⑥

Utilize inventory as relief supplies in the event of a disaster

34.3%
Reuse

An example of re-dyeing inventory by FROMSTOCK

65.7%
Utilization in
new businesses

Reuse
Utilization in new businesses

OFF STORE Aeon Town Mito Minami Store

Weight (t)35

Number of units (10,000)

WeightNumber of units

91,455

10

31.5

5

30
25
20

29,418 27,072

15

17,135 14,200

10

1,125
5

0.3

5.7

4.7

9.8

9.0

1

47 | ADASTRIA ESG

20
22
.2

20
21
.2

20
20
.2

20
19
.2

20
18
.2

0

GLOBAL WORK LaLaport TOKYO-BAY store

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The 3R (reuse/recycle/repair) rate for clothing in Japan is estimated to be less than 30%,
and most of the clothing is disposed of as combustible waste without being recycled afteruse. In order to improve this situation together with our customers, we are implementing the“Play Cycle!” program, in which customers’ unwanted clothing is collected for recycling andreuse. The collected clothing is recycled into raw materials for clothing such as ‘recycled
polyester’ and ‘recycled down’ through our business partners, and is also reused and soldat ‘OFF STORE’, which is operated by ADOORLINK Co., Ltd. Aiming to create an environment in which customers can easily take their clothing for recycling anytime, anywhere, thecompany plans to expand the number of stores that regularly collect clothing from thecurrent 112 stores to about 200 stores by the fiscal year ending February 2023.

Collection Result in “Play Cycle!”

20
17
.2

Apparel Collection and Recycling: Play Cycle!

Foundations Supporting Growthand “Play Fashion!”

Thoroughly implement procurement planning and inventory
management under the policy of “right time, right price, rightquantity”

After

Expanding “Play Fashion!” throughSustainable Growth①

BeforeUsage of products whose sales period has ended

Adastria, an Embodiment of“Play Fashion!”

eliminate clothing incineration, and we pursue a variety of initiatives to prevent burning and disposal. In addition to our goal of making products in the correct amount to avoid overpro-

duction, we also strive to find new ways to use and recycle products that are no longer sold. These efforts will lead to the proper use of resources and the reduction of CO₂ emissions.

Introduction

ADASTRIA ESG

Initiatives for Materialities (Important Issues)
Create a society in which people enjoy fashion in their own way
As customer needs become increasingly diverse, we develop products and services in multiple categories and under multiple brands to satisfy as many tastes as possible. We use
people to enjoy differences in age, appearance, and personality. In this way, we strive to empower people.

Engage in inclusive fashion project “Play fashion! for ALL”

We are engaged in social awareness activities and provision of services so that everyone can enjoy
fashion while letting their individuality shine through.
In addition to supporting the activities of the coming out photo project i.e. “OUT IN JAPAN”, we aretaking efforts for expanding awareness about the brands, that develop genderless fashion, throughexhibits at “TOKYO RAINBOW PRIDE” and “KYUSYU RAINBOW PRIDE”, one of the largest LGBTQ
festivals in Japan, promoting understanding of LBGTQ, and conducting social awareness activities.
We are also focusing on in-brand development that takes advantage of each customer’s individuality,
such as differences in gender, age, and body shape, so that customers can shine in their own way
through fashion.

Through the inclusive fashion project “Play fashion! for ALL” which aims to include all people regardless of
disability, age, or gender without isolating them, we are working to create a society where all people canenjoy fashion more. In the first phase of the project, 3 employees of Adastria General Support, a special
subsidiary, participated in planning, creating, merchandising, and selling clothes that meet the needs ofeach customer using inclusive design methods. Taking full advantage of our company’s multi-brand andbusiness scale, we are introducing our products through SNS and other means to customers under thetheme of “fashion that is easy to wear and enjoyable for all”. Currently, we are expanding the scope of ouractivities by collaborating across industries with companies that share a common vision, while creatingproducts and conducting seminars. If we can create a society where people can freely choose the clothes
they want to wear, each individual will have more choices to make their everyday life “more enjoyable” andwill have a more positive outlook. We would like to create a new standard by incorporating the common
sense into fashion that “not everyone is the same”.

OUT IN JAPAN, photo exhibition in 21st Century Museum ofContemporary Art, Kanazawa

Example of commercialization: Special casual “corduroy shirt with sleeve patches” for wheelchair users

TOPICS Promoting understanding within the company through unique training videos

Training videos to deepen
understanding of diversity
48 | ADASTRIA ESG

Ad ast ria Da ta

We are expanding and improving our internal systems so that same-sex partners can receive fair benefits such as marriage leaveand childcare/nursing care leave. In addition to explaining basic knowledge and internal systems in in-house training sessions,from 2021, we have created our own training videos to promote understanding of LGBTQ and other sexual minorities, which areviewed by all employees to help promote understanding of diversity among customers and employees. In customer service as
well, this has led to the development of skills to make proposals that are tailored to each of our diverse customers.

Foundations Supporting Growthand “Play Fashion!”TOKYO RAINBOW PARADE (2018)

Expanding “Play Fashion!” throughSustainable Growth

Engage in initiatives to promote understanding of diversity

Adastria, an Embodiment of“Play Fashion!”

customer service as a means to offer products that match customer needs. In addition, we offer designs and looks that are not restricted by gender, providing fashion that allows

Introduction

ADASTRIA ESG

Initiatives for Materialities (Important Issues)
Be an organization that is healthy mentally and physically, encouraging employees in their individuality and ability
One of our corporate identity values is respect for diversity. We respect and recognize diversity regardless of age, gender, nationality, disability, sexual orientation, etc. We haveallow employees to fully express their talents. We believe that each and every employee will be able to leverage their unique strengths, and this will lead to active discussion andinnovation with new perspectives, and to the mid- to long-term growth of the company. We implement work-style reforms, improve internal systems, provide human resources
development, and employ persons with disabilities to ensure customers, employees, and others find greater levels of job satisfaction and health both physically and mentally.

Employ people with disabilities

We consider the promotion of active participation of female employees, who account for approximately 80% of our workforce, as apriority issue in diversity management, and have established specific targets and roadmaps based on the commitment of top
management to promote the initiatives. By taking advantage of the characteristics of our large number of female employees, we hope
to incorporate flexible and diverse perspectives into our decision-making process, which will lead to development of diversified needs
and products, and improvement of service quality, thereby promoting the company’s medium- to long-term growth and new innovations.
Currently, the ratio of women in management positions still exceeds the target of 30% set by the Cabinet Office, but from 2019, under
the promotion system of a cross-departmental project team including the director in charge, we are working to support the careeradvancement of women with the specific goal that “raise the ratio of women in management positions to 45% or more and the ratio of
women in senior management positions to 30% or more by 2025”.
* Senior management = equivalent to department manager or above

The Adastria Group has 222 employees with disabilities, who are active
in a wide range of business activities. Adastria General Support, a special
subsidiary, understands the characteristics of each employee withdisabilities and provides detailed support so that each can fully
demonstrate their abilities, through close cooperation with support
organizations and the assignment of a support staff member to help themsettle into their jobs. By introducing flexible work system and providing
support for physical condition management and mental health care, weare promoting initiatives to enable employees to work vigorously whilefeeling a sense of fulfillment and satisfaction.
These efforts to promote and stabilize the employment of people withdisabilities have been highly evaluated, and in 2021, we were awarded
the “Monisu Certification” as an excellent small and medium-sized
employer employing people with disabilities.

Change in percentage of female managers

（%）

50

Management

Senior Management

Government target
40

35%

20
10
0

13 %
February
2016

33%
16 %
February
2022

30 %

30

%
of
women in management
positions

Employment rate ofpeople with disabilities inthe domestic group (asof June 2022)

Average ratio of
women in management
positions in Japanesecompanies as of
2022:

2.65 %

10%

approx.
Target by
February 2026

*Target: Domestic groupcompanies

Leadership lecture by a female executive

Foundations Supporting Growthand “Play Fashion!”

30

45 %

Expanding “Play Fashion!” throughSustainable Growth

Promote women’s active participation

Adastria, an Embodiment of“Play Fashion!”incorporated organizational diversification into our management strategies, and we pursue initiatives to create an environment and structures that support employee careers andInitiatives and systems for promoting the active participation of women
Hold “A DIVERSITY MEETING” with the aim of creating a corporate culture and workplace environment where diverse human resource can play an active role
Establish a mentoring system for newly appointed female managers to support their career development and follow up on their experience and skills

Develop and expand personnel systems to accommodate diverse life stages
Launch the Adastria Health Insurance Society, and expand and provide insurance services and welfare services tailored to the characteristics of a large number of female employees

49 | ADASTRIA ESG

Photo: Work Area, Takashi Kanno

Ad ast ria Da ta

Continuously participate in Women’s Empowerment in Fashion (WEF)

Introduction

ADASTRIA ESG

Initiatives for Materialities (Important Issues)
Promote health management

Promote various workstyles

The Adastria Wellness Committee, a health promotion committee formed by employees selected
through internal recruitment, has been launched to promote wellbeing. We will pick up the real voicesof employees and their ever-changing needs, and make proposals to reflect them in health promotion
and insurance projects that are in line with the actual situation. We also plan and execute wellness
events, etc., while fostering a climate and environment in which employees themselves can improvetheir health literacy and engage in activities to maintain and promote their health.

In addition to promoting flexible work styles
that are not restricted by time or place, thecompany has also developed a personnel
system to help employees to choose diverse
careers and work styles that suit theirlifestyles. Besides promoting the use of annual
paid leave in order to achieve a work-lifebalance through enabling employees to takeannual paid leave on a half-day basis, we arealso working to improve the appropriatenessof working hours by reviewing the allocationof work and improving work efficiency, andby identifying and visualizing overtime
hours.

Health Management Promotion System

Reform work styles of employees
working in stores

Employees
Disseminate
measures

Human
Resources
Department

Use health insurance
services

Provide healthinsurance services

Hygiene committee
Adastria
HealthInsurance
Society

HealthManagement
Promotion
OfficeCollabo Healthpersons

2,274

2,618

persons

persons

Career-track positions

Region-specificpositions*Target:Full-time salaried employees of domestic groupcompanies (excluding executive officers)

Personnel system that supports flexible work styles
Selective job classification system (selection of career-track positions
and region-specific positions, and Employment at stores)
Return-to-work (re-employment after employee’s resignation)
Possible to take half-day paid leave
System that allows employees to have side jobs
Flextime system * Applicable to certain employees
Telework system * Applicable to certain employees

POINT

01

Flexiblebusiness
hours system

POINT

POINT

Introduction of
store-specificholidays

Shortening ofbusiness hours
according tocustomer traffic

02

03

Mutual Support for Working Hours Project

50 | ADASTRIA ESG

A da stri a D at a

Industrial
physicianand nurse

Summarize
voice

In collaboration with Shin-Shizuoka Cenova,
we have launched the “Mutual Support for
Working Hours Project” to review thebusiness hours of commercial facilities fromthe perspective of both tenants anddevelopers, with the aim of realizing
sustainable working styles for store staff
working in commercial facilities. Through the
project, we are proposing sustainable work
styles to the industry as a whole andpromoting our own work style reforms to
improve the attractiveness of our sales staff
and to help solve labor shortages.

59

Employment at stores(employment limited to the store where
the employee works)

Foundations Supporting Growthand “Play Fashion!”

Health Promotion
Manager

Breakdown of the number of employees in selective positions

Expanding “Play Fashion!” throughSustainable Growth

Set a health promotion committee “Adastria Wellness Committee”

Adastria, an Embodiment of“Play Fashion!”

Since our founding, we have upheld the corporate philosophy of “Be a person needed, Be a company needed”. By promoting health management, we aim to further improve the environment in which employees
can work comfortably and safely, and contribute to the wellbeing of not only our employees but also their families, customers, shareholders, business partners, and society as a whole through our business.
Given the fact that we have a higher percentage of younger generation and female employees than other companies, and that we have employees working in diverse forms of employment throughout Japan, we
launched the Adastria Health Insurance Society in November 2021 to provide insurance business and benefit services tailored to employee characteristics, and announced
our Health Management Declaration. In order to become a “White 500 Certified Health & Productivity Management Outstanding Company,” we will continue to provide our
Adastria Healthmission “Play fashion!” by fostering a health-oriented corporate culture, creating a safe and secure work environment, and by being physically and mentally healthy,
Management Declarationenergetic, and happy in our own workplaces.

Introduction

ADASTRIA ESG

Initiatives for Materialities (Important Issues)
Revitalize Regions Where Our Stores Are LocatedAs we open stores in various regions in Japan and overseas, our relationship with the local community is very important to us. We want to continue to be a company that is rooted
employment in each region, solve local problems together with the power of fashion, and create new value for the future.

Contribute to Mito, where the company was founded

In accordance with our branch system our stores in Japan are divided into 6 regions, and store
operations and sales activities are conducted tailored to each region, taking into account its
needs and characteristics. We are also working to build communities through fashion by holding
various community-based events under the themes of community revitalization, sustainability,and next-generation development. We also take advantage of our nationwide presence to deliver
new value to the regions, where our stores are located, by selling products in collaboration withlocal companies and developing localized products.

We are contributing through fashion in various fields such asart, sports, and culture so that we can continue to growtogether with the area where our company was founded. We
are involved in contribution activities through fashion such asproviding support to the Mito Chamber Orchestra, serving as
an official sponsor of the Ibaraki Robots, a professional
basketball team belonging to “B.LEAGUE”, providing travel
clothes to top team of the professional soccer club “MitoHollyHock”, designing T-shirts for the “Mitokomon Manyu
Marathon” as a participation prize, and so on.

Track record of local events

25 Facilities
17 Prefectures
Event location*Results for the fiscal year
ending February, 2021

Ibaraki Robots

ADASTRIA BAZAAR! 2022

TOPICS Nationwide caravan of clothing collection events co-hosted with developers in the areas where the stores are located51 | ADASTRIA ESG

Ad ast ria Da ta

In conjunction with an awareness event on the “SDGs” held at AEON Mall, each branch conducted a caravan of
our clothing collection activity “Play Cycle!”, at 18 Aeon Mall locations throughout Japan. We offered local
customers the option of not throwing away their unwanted clothing, and collected, recycled, and reused
approximately 9 tons of clothing through the event. The company also held upcycling workshops and exhibited
its own products made from sustainable materials, providing an opportunity for people to experiencesustainable fashion while having fun.

Foundations Supporting Growthand “Play Fashion!”

To express our gratitude to Mito, the place where our company
was founded, which has supported and encouraged our
growth, we held the “ADASTRIA BAZAAR! 2022” for the firsttime at the Adastria Mito Arena, the home arena of theprofessional basketball team “Ibaraki Robots”. In addition to a
family garage sale and a talk show by Ibaraki Robots players,
1,850 local customers enjoyed a variety of contents over the 2days, including the collecting and recycling clothing program“Play Cycle!” and a cafe store.

Expanding “Play Fashion!” throughSustainable Growth

Engage in sales activities rooted in local communities

Adastria, an Embodiment of“Play Fashion!”in each region and that connects with customers and local residents through fashion. Though each region faces different challenges, we hope to contribute to the creation ofIntroduction

ADASTRIA ESG

Initiatives for Materialities (Important Issues)
Foster Sustainable Development in Production Areas
We manufacture products in various regions around the world, supplied through an extensive supply chain, from procurement of raw materials to sewing and trading. Good partnerbetter products and services in the future, we established rules for fair and ethical transactions. We conduct our procurement activities in accordance with these rules.

Set Group Sourcing Policy and Guidelines

Expanding “Play Fashion!” throughSustainable Growth

We have established a Group Sourcing Policy that aims to ensure fair and ethical transactions in order to produce products based on good
partnerships with our suppliers, while developing together with them. In consideration of human rights, and social and environmental risks, wehave also established Group Sourcing Guidelines that clearly state our respect for human rights, specifications for the improvement of working
environment, environmental considerations, and anti-corruption policies, and we work together with our suppliers on procurement activities inaccordance with these guidelines.
We translate our sourcing policy and guidelines into English and Chinese, which are commonly used in production areas, and disseminate themto the public. We also ask our suppliers to understand our thinking and policies and sign our guidelines through explanatory meetings.

Group Sourcing Guidelines

Group Sourcing Policy

Monitor factories and promote partnership certification
Number of factories monitored*

Items pointed out in factory monitoring and status of response (FY2022/02)

Under consideration for improvement 1 caseNumber of factories monitored
Fiscal year ending
February 20179

Fiscal year ending
February 201820

Fiscal year ending
February 201926

Fiscal year ending
February 2020

40

Fiscal year ending
February 2021

13

Fiscal year ending
February 2022

10

Inadequate B productmanagement, inadequate
measures against
contamination(insects),
inadequate inspection ofmeters, etc.

Labor 17 cases

Total

118

* Downward trend in fiscal year ending February 2021, andFebruary 2022 due to the impact of the COVID-19* This includes follow-up monitoring (reaudits)

52 | ADASTRIA ESG

67
cases

Overtime work, inadequate
records of workers’ accident
compensation, inadequate
applications for overtime
work, inadequate attendance
management, late paymentof wages, inadequate
records of labor union
meetings, etc.

Safety 32 cases
Environment 3 cases
Incomplete water andelectricity
consumption statistics

Inadequate inspection
records of first-aid kit andfire extinguishers,
inadequate workmen’s
accident compensation
regulations, inadequate
MSDS etc.

Ad ast ria Da ta

Total

Already improved 66 cases

Others 15 cases

Foundations Supporting Growthand “Play Fashion!”

We ask our suppliers to complete a questionnaire basedon our sourcing guidelines. Based on the results of thequestionnaire, our CSR procurement staff visits thefactories directly to check the production environment.
In the unlikely event that there is an issue that needs tobe improved, we ask our business partners to work on
improvement through direct and continuous communication with us. New suppliers are also asked tocomplete a questionnaire to ensure that there are no
risks in terms of human rights, society, or the environment
before starting the business with them.
As a result of factory monitoring, we certify suppliers as
partnership factories who meet our Products Sourcing
Department guidelines and with whom we have a better
relationship in terms of product quality, frequency ofdefective products, and social and environmental
conditions. Currently, we have 30 certified partnershipfactories, and we are promoting this initiative so that we
can increase the number of certified partnershipfactories by 2023.

Adastria, an Embodiment of“Play Fashion!”ships with suppliers and the sustainable development of the production regions allows us to supply high-quality products to our customers in a stable manner. To provide evenIntroduction

ADASTRIA ESGESG Information Data
Actuals

Item
Fiscal year ending February 2020

Fiscal year ending February 2021

Fiscal year ending February 2022

Data on the environment
Electricity consumption in stores, offices, and logistics centers

-

-

2

Scope 1 (direct emissions)

-

-

-

3

Scope 2 (indirect emissions associated with energy use)--

34,791

4

Scope 3 (indirect emissions from the value chain)--

481,808

Category 1 Purchased goods and services--

406,528

Category 2 Capital goods--

23,737

Category 3 Fuel and energy related activities not included in Scope 1 and 2

-

-

5,433

Category 4 Transportation and distribution (upstream)

-

-

5,991

Category 5 Waste generated from operations

-

-

665

-

-

450

Category 7 Employee commuting

-

-

3,704

Category 8 Leased assets (upstream)

-

-

-

Category 9 Transportation and distribution (downstream)

-

-

645

Category 10 Processing of sold products

-

-

-

Category 11 Use of sold products

-

-

-

Category 12 Disposal of sold products--

34,655

Category 13 Leased assets (downstream)

-

-

-

Category 14 Franchises

-

-

-

Category 15 Investments

-

-

-

-

-

516,600

Women

14,923

14,27913,986

Men

3,380

3,150

3,009

Total

18,303

17,42916,995

Women

180

183

191

Men

364

359

373

Total

544

542

564

Women

33

38

37

Men

178

175

183

211

213

220

21

26

22

Men

76

73

82

Total

97

99

104

Women

147

151

154

Men

186

194

190

Total

333

345

344

Women

268

281

296

Men

187

173

170

Total

455

454

466

‘000 kWht-CO₂Category 6 Business trip

Scope１+２+３

Data related to employees
6

Number of employees(Domestic group companies including term employees, excluding Zetton)

Society

Number of senior managers

Total
7

Number of regular employees by hierarchy

Number of department
managers or its equivalent
Number of section
managers or its equivalent
Number of unit managers
or its equivalent

Women

Headcount

53 | ADASTRIA ESG

Ad ast ria Da ta

Note:
Aggregation scope: Data on the environment are based on domestic group companies (excluding ADASTRIA eat Creations and Zetton). Society and governance data based on domestic group companies (excluding Zetton) with calculation standards are listed.
Emission factor in 4: Quoted from the Ministry of the Environment‘s Emissions Intensity Database and IDEAv2

Foundations Supporting Growthand “Play Fashion!”

Number of managers(* excluding executives)

Expanding “Play Fashion!” throughSustainable Growth578,066
Adastria, an Embodiment of“Play Fashion!”

Environment1

Introduction

ADASTRIA ESGESG Information Data
Actuals

Item

Fiscal year ending February 2020 Fiscal year ending February 2021

Fiscal year ending February 2022

Data on employees
Number of new graduate hires

257

187

Men

30

15

10

Total

287

202

110

219

193

245

76

66

83

Total

295

259

328

Women

13

9

9

Men

10

22

13

Women
9

10

11

Society

Number of newly appointed managers

Total

23

31

22

Women

5.6

6.1

6.6
8.8

Men

Average years of service of regular employees

7.8

8.3

6.1

6.6

7.2

Women

465

345

383

124

93

105

589

438

488

108

94

82

2.53

2.38

2.65

7.1

4.3

5.6

3.6

2.1

2.6

71.5

69.3

59.7

Total
13

Number of foreign employees

14

Rate of employment of people with disabilities

15

Overtime working hours per month

16

Average number of days of annual paid leave taken*

18

Status of maternity leave taken by regular employees

Average of regular employees
Average of employees
Average of regular employees

Status of childcare leave taken by regular employees/
Status of regular employees who return to work
after childcare leave

Average of employees
Average of regular employees

Men*Those who availed for
1 month or more

20

Average number of days of nursing care leave taken

21

Status of spouse maternity leave taken by male employees

%
Days

64.6

64.2

59.4

10.8

10.9

10.3

10.0

9.2

7.6

Headcount

193

245

200

Average of employees

%

99.5

99.6

99.0

Number of employees
who availed the leave
Acquisition rate

Headcount

197

228

216

%

99.0

100.0

99.5

%

94.3

91.0

94.4

1

2

5

%

1.64

3.39

7.81

Average of employees
Average of regular employees

Women

Hours

Return rate
Number of employees
who availed the leave
Acquisition rate

Headcount
%

100.0

100.0

100.0

Days

0

53.5

93.0

Number of employees
who availed the leave

Headcount

19

17

11

Acquisition rate

%

31.1

28.8

17.2

Return rate

Foundations Supporting Growthand “Play Fashion!”

19

Headcount%

Percentage of annual paid leave taken*

17

Years

Total
Men

Number of regular employee turnoverHeadcount

Expanding “Play Fashion!” throughSustainable Growth

12

Men

Number of mid-career hires

100

Women

Adastria, an Embodiment of“Play Fashion!”

8

Note:
Aggregation scope: Data on the environment are based on domestic group companies (excluding ADASTRIA eat Creations and Zetton). Society and governance data based on domestic group companies (excluding Zetton) with calculation standards are listed.
In the fiscal years ending February 2021 and 2022, the rate and average number of days of annual paid leave taken decreased due to the temporary closures and the granting of special leave to employees to prevent infectious diseases

Ad ast ria Da ta

54 | ADASTRIA ESG

Introduction

ADASTRIA ESGESG Information Data
Actuals

Item

Fiscal year ending February 2020 Fiscal year ending February 2021

Fiscal year ending February 2022

22

Percentage of women among regular employee

23

Percentage of women executives (separatly)

24

Percentage of women by rank

74.8

75.1

75.2

Percentage of women executives

23.1

23.1

23.1

Percentage of female directors

11.1

11.1

11.1

Percentage of women managers (*excluding executives)

33.1

33.8

33.9

Percentage of women in Senior managers

15.6

17.8

16.8

21.6

26.3

21.2

Percentage of women as section manager or its equivalent

44.1

43.8

44.8

Percentage of women as unit manager or its equivalent

58.9

61.9

63.5

Percentage of women as department head or its equivalent%

25

Percentage of women among new graduate hires

89.5

92.6

90.9

26

Percentage of women among mid-career hires

74.2

74.5

74.7

Women

0

0

0

Men

5

5

5

Total

5

5

5

Women

1

1

1

Men

3

3

3

Total

4

4

4

Women

0

0

0

1
1

1

Total

1
1

Women

2

2

2

Men

1

1

1

Total

3

3

3

Women

0

0

0

Men

7

7

9

Total

7

7

9

Adastria, an Embodiment of“Play Fashion!”

Society

Data on women

Data on governance27

Number of directors (separately)

GovernanceOutsideInside28

Number of auditors (separately)
OutsideNumber of executive officers (separately)

Headcount130

Number of reports to the internal reporting desk

Cases

144

115

146

31

Number of opinions and suggestions in business partner surveys

Cases

-

43

44

Note:
Aggregation scope: Data on the environment are based on domestic group companies (excluding ADASTRIA eat Creations and Zetton). Society and governance data based on domestic group companies (excluding Zetton) with calculation standards are listed.

Foundations Supporting Growthand “Play Fashion!”

29

Men

Expanding “Play Fashion!” throughSustainable Growth

InsideAd ast ria Da ta

55 | ADASTRIA ESG

Introduction

ADASTRIA ESG

Corporate Governance
Basic Philosophy

Main Corporate Governance Bodies and Their Roles

Guided by our corporate philosophy that says, “Be a person needed, Be a company needed.” weas to contribute to the enrichment of lives and diverse values around the world, we strive for

As an advisory body to the Board of Directors, the committee deliberates on
the following matters and reports the results to the Board of Directors:
Appointment and dismissal of directors, representative directors andexecutive directors of the Company, policies and procedures for training of
successors for representative directors, improving the fairness, appropriateness and transparency of compensation for directors.

Compliance
Committee

As an advisory body to the Board of Directors, in order to deliberate, draft
and promote important policies to ensure thorough compliance, which is thebasic policy of the Group, the committee discusses on various themes
related to compliance, and the results are submitted for discussion orreported to the Board of Directors.

Executive Meeting

It deliberates and decides on important matters of management andbusiness execution delegated by the Board of Directors, so that important
issues other than those that are to be resolved by the Board of Directors are
decided upon, as well as prompt sharing of information related to suchbusiness execution takes place.

We has adopted a Company with Audit and Supervisory Board structure, and has established aboard of directors and an Audit and Supervisory Board.

General meeting of shareholders
Appoint/Dismiss

Accounting
AuditorAccounting
Audit

Appoint/Dismiss

Audit &
Collaborate Supervisory Board Audit
4 Audit andSupervisory Board Members,
including 3
outside statutory auditors

Audit

Appoint/Dismiss

Board ofDirectors

Corporate GovernanceCommittee

Advise5 outside directors out of
10 directors

Audit

Nomination andCompensation Advisory Committee
Compliance Committee

Select/Dismiss/Monitor

Executive
AgencyCollaborate

Representative
Director

Collaborate

Internal
Audit Department

Audit

Instruct

Disclosure Committee

ReportExecutive
Meeting

Crisis Management Committee
Information Security Committee

Each department

56 | ADASTRIA ESG

Ad ast ria Da ta

Nomination andCompensation Advisory
Committee

Overview of Corporate Governance System

Foundations Supporting Growthand “Play Fashion!”

Corporate governanceCommittee

As an advisory body to the Board of Directors, with the aim of realizing
appropriate and transparent corporate governance, it deliberates on various
matters related to the corporate governance and the construction of internal
control systems of the Group, and the results are submitted for discussion orreported to the Board of Directors.

excellence in corporate governance that fosters quick decision-making.

Expanding “Play Fashion!” throughSustainable Growth

Audit &
Supervisory Board

The Audit and Supervisory Board consists of four members, one of whom isa standing statutory auditor and three of whom are outside statutory
auditors. The members of the Audit and Supervisory Board attend board of
director meetings, Corporate Governance Committee meetings, executive
meetings, and other important meetings to gain an understanding of thestate of management in a timely manner and to conduct audits of the legalityof the execution of business by directors. In addition, members of the Audit
and Supervisory Board offer proposals as necessary from an independent
standpoint and based on their wealth of experience and insight.

fashion. To respond flexibly to the needs of our customers and changes in the environment, as well

Adastria, an Embodiment of“Play Fashion!”

Board of Directors

The board of directors consists of ten directors, including five outside
directors. The board, chaired by the Representative Director and Chairman,
deliberates and resolves important matters as the highest management
decision-making body of the corporate group. The four members of the Audit
and Supervisory Board, including three outside members, attend board of
director meetings from an independent standpoint, having established asystem to audit the status of director performance in the duties of care andloyalty related to the execution of their duties.

pursue the mission of Play fashion!, endeavoring to enrich lives and create happiness throughIntroduction

ADASTRIA ESG

Corporate Governance
Changes in Corporate Governance

Structure and Policies

2014

2015

2016

2017

2018

2019

2020

2021

2022

● 2022
Increased thenumber of outside
directors to 5

Expanding “Play Fashion!” throughSustainable Growth

2013

Adastria, an Embodiment of“Play Fashion!”

2001〜2012●2008 Established Management Advisory Committee●2013 Shifted to a holding company structure●2015 Dissolved holding company structure●2015 Commenced application of the Corporate Governance Code●2016 Established corporate governance guidelines

Directors●2006 Shortened the tenure of directors from 2 years to1 year
●2007 Appointed 1 outside director●2013 Increased the number of outside directors to 3

●2016 Increased the number of outside directors to 4●2016 A female director was appointed●2004 Appointed 3 outside statutory auditors●2018 Appointed a female auditor●2005 Established Nomination and Compensation Committee (currently the Nomination and Compensation Advisory Committee)●2019 Started Development of a succession planning● 2020Managed Policies and procedures for the appointment
and dismissal of representative directors
and succession planning●2005 Established Nomination and Compensation Committee (currently the Nomination and Compensation Advisory Committee)●2016 Introduced performance-linked stock compensation●2017 Started Analysis and evaluation●2020
Outsourced business operations to external organizations
Ad ast ria Da ta

Assessment of
the effectiveness of Remuneration
the Board of Directors●2003 Appointed 4 outside statutory auditors

Foundations Supporting Growthand “Play Fashion!”

Nomination

Auditors●2001 Appointed 3 outside statutory auditors

57 | ADASTRIA ESG

Introduction

ADASTRIA ESG

Corporate GovernanceDiversity of the Board of Directors
Composition of Directors and Auditors (As of May 26, 2022)

We have appointed 5 inside directors, 5 outside directors, 1 inside standing auditor, and 3 outside

Inside/outside ratio

statutory auditors. In addition, of the 14 directors and auditors, we have appointed one female director

Outside 550%

and one female auditor.
The Board of Directors shall be composed of diverse directors with different backgrounds, in terms of

10

specialized knowledge and experience. For instance, there are persons who have thorough knowledge
and expertise in each of the company’s businesses, persons who have international experience such

Auditors

4

Inside 550%

as extensive experience in global companies and overseas business, and persons who have abundantdiscernment as corporate managers. The directors are from different generations, ranging from those

Outside 3
75%

Directors

Inside 1
25%

Gender ratio

in their 40s to the 70s.
We have appointed two auditors from financial institutions, one certified public accountant, and one
This way, we believe that the Board of Directors as a whole maintains an appropriate balance anddiversity, and we will work to improve diversity, including gender and internationality.

Women 125%

Directors

10

Auditors

4

Men 9
90%

Directors and Auditors Skill Matrix

Men 3
75%

Knowledge, experience, skils, etc., possessed by directors and auditors

Directors

Outside●Osamu Kimura●

Masayuki Kindo●

Yoshiaki Kitamura●

Taiki Fukuda●

Outside

IT/DX

Legal
Risk management●

Corporate financeAccounting banking
finance

ESG

●

●

●

●

●

●

●

Satoshi Akutsu

●

●

●

●

Hiromi Horie

●

●

●

●

●

●

●

●

●

Koichi Mizutome

Kazuo Nishiyama

Auditors

Global●●Tatsuhiro Matsuoka

InsideProduct SCM

●

●

●
●

●

●

Tsuyoshi Matsuda●

Kazuhiko Ebihara●●

Wataru Maekawa

●

●

●

Ad ast ria Da ta●(Note1) The list above indicates the areas in which we expect the Company’s directors and auditors to offer particular expertise. This list is not meant to represent all expertise possessed by the Company’s directors and auditors.
(Note2) Matters related to “personnel and human resources” is included in “corporate management”.
(Note3) “SCM” stands for “Supply Chain Management”.

●●●

Yoshiko Hayama

58 | ADASTRIA ESG●●

Foundations Supporting Growthand “Play Fashion!”

InsideMichio Fukuda

Sales marketing

Expanding “Play Fashion!” throughSustainable Growth

Women 110%

lawyer, who have ample knowledge of finance, accounting, and legal affairs.

Corporate
management

Adastria, an Embodiment of“Play Fashion!”

Views on Diversity in the Board of Directors

Introduction

ADASTRIA ESG

Corporate Governance
Assessment of the Effectiveness of the Board of Directors

Evaluation Results for the Fiscal Year Ending February 2022

We conduct a self-assessment of the effectiveness of the board of directors to identify current issues
anonymous questionnaires for directors and auditors. After receiving responses from all participants,
the board of directors analyzes and evaluates the results.
Beginning in the fiscal year ended February 2020, we have outsourced the review of the questionnairequestions and the aggregation and analysis of results to an external organization. This method
ensures objectivity and transparency of evaluation results and allows us to utilize information fromother companies and knowledge from outside sources.

Process of Assessment of the Effectiveness1

TargetAll directors and auditors

Question
items(1) Composition and operation of the Board of Directors(2) Management and business strategy(3) Corporate ethics and risk/crisis management(4) Performance monitoring and evaluation of the management team(5) Dialogue with shareholders, etc.

Aggregate and analyze survey results by an external organization

3

Discuss the results of analysis in the Corporate Governance Committee
and the Board of Directors meeting

Implement reform measures for selected issues

・Deliberations based on the cost of capital and management indicators
・Content and volume of board meeting materials, in addition to prior distribution and explanations
・System to encourage dialogue with shareholders and the sharing of opinions

Selection of Directors and Auditors
Selection Policy of Directors and Auditors■ The Company shall appoint a diverse pool of directors with differing backgrounds of expertise andexperience, including persons who are familiar with and have deep knowledge of the Company’sbusinesses, persons who have international experience, such as extensive experience in global
companies and overseas operations, and persons who have a wealth of insight as corporate managers.
■ By appointing a multiple number of outside directors, the Company strengthens its supervisory
function and accomplishes management transparency by incorporating the viewpoints of people
outside the Company who are independent of management.
■ The Company shall appoint outside directors who have no material interest in the Group and who arecapable of maintaining their independence.
■ The Company shall appoint members of the Audit and Supervisory Board who are qualified,
independent, and capable of fulfilling their terms of office.

Procedure for Nominating Candidates as Directors and Auditors■ The representative director shall submit a list of candidates for directors. The Nomination andCompensation Advisory Committee shall deliberate on the list, after which the board of directors
shall make decisions on candidates.
■ The Board of Directors shall make decisions on candidates for members of the Audit andSupervisory Board after the representative director submits a list of candidates and the Audit andSupervisory Board gives its approval.

59 | ADASTRIA ESG

A da stri a D at a4

In the fiscal year ending February 2022, we identified the following three issues as challenges. We willconsider and address these issues during the fiscal year ending February 2023 including means for
conducting effective online discussions in the wake of the COVID-19 pandemic.

Foundations Supporting Growthand “Play Fashion!”2

Selected Issues and the Response

Expanding “Play Fashion!” throughSustainable Growth

Implement self-evaluation by anonymous questionnaire (WEB)The composition of the Board of Directors is appropriately balanced and diverse, and we have cultivated a
corporate culture that enables frank discussions by the members, including independent outside directors.
For this situation in mind, we evaluated that the effectiveness of decision-making and supervision ofbusiness execution by the board of directors had been sufficiently secured continuously. The “confirmation
and analysis of the progress of the Medium-Term Management Plan,” an issue in the previous fiscal year,
saw an improvement in the score due to deeper internal discussions on growth strategies.

Adastria, an Embodiment of“Play Fashion!”and attempt for improving the function of the board. This self-assessment is conducted by means ofIntroduction

ADASTRIA ESG

Corporate Governance
Assessment of the Effectiveness of the Board of Directors
Procedures for Determination of the Compensation

The Company’s board of directors follows the policies and procedures below when determining
remuneration.The Company’s board of directors follows the policies and procedures below when
determining remuneration.

■ Directors’ compensation shall be determined by the Board of Directors after deliberation havebeen conducted by the Nomination and Compensation Advisory Committee, which is a voluntarycommittee, and within the amount that is determined by a resolution of the General Meeting of
Shareholders.
■ Compensation for auditors shall be determined through discussions among Audit & Supervisory
Board Members according to the division of duties, etc., and within the amount that is determinedby a resolution of the General Meeting of Shareholders.

■ Compensation packages shall be linked to short-, medium-, and long-term business performanceand shall be commensurate with the creation of corporate value.
■ Compensation packages shall be designed to secure outstanding management personnel andcontribute to sustainable development.
■ Compensation levels shall be appropriate in light of other companies in the same industry, othercompanies of the same size in other industries, and economic and social conditions.

Expanding “Play Fashion!” throughSustainable Growth

Overview of Executive Compensation System
Payment made to
Directors(excluding outside
directors)

Outsidedirectors
and auditors

Fixed compensation according torole and responsibility●●

・ Fixed amount is paid each monthCompensation that is mainly linked
to short-term performance andmotivate to achieve corporate
value creation●-

・ The payment amount is determined within the range of 0% to 200% of the base amountaccording to the position and performance achievement rate
・ Lump-sum payment in a certain month every year

・ Sales・ Sales compared withthe previous year
・ Operating profit-

・ The number of points of stocks to be granted is determined within the range of 0% to 200% of
the standard number of shares, according to the position and performance achievement rate
・ Points are calculated as of the end of February of the fiscal year as per the performanceassessment of that concerned year, and are granted at a certain time in the same year.
・ After one year from the start of evaluation each fiscal year, shares equivalent to a certain
percentage of the number of points are issued, and stocks worth the remaining points areconverted into money within the trust, and the money so converted is paid. We have set a sales
restriction period for 2 years from the time such shares are issued.

・ Sales compared withthe previous year
・ Operating profit
・ Operating income ratio

Classification

Basic remuneration
Bonus(Performance-linked
compensation)

Stockcompensation

Compensation that is linked toshort-, medium-, and long-term
performance and motivate toachieve corporate value creation●

Payment method

Evaluation metrics-

Foundations Supporting Growthand “Play Fashion!”

Performance-linked
stock compensation

Monetary
compensation

Description

Executive Compensation (Fiscal Year Ending February 2022)
Executive category

Number of executives covered

Total amount of compensation, etc.

Total amount of compensation by type, etc.
Basic remuneration

Bonus

Performance-linked stock compensation

5

388 million yen

209 million yen

66 million yen

112 million yen

Auditors (excluding outside statutory auditors)

1

21 million yen

21 million yen--

Outside directors and auditors

7

74 million yen

74 million yen--

A da stri a D at a

Directors (excluding outside directors)

60 | ADASTRIA ESG

Adastria, an Embodiment of“Play Fashion!”

Basic Policy

Introduction

ADASTRIA ESG

Corporate GovernanceDirectors (as of May 26 2022)

Osamu Kimura

Masayuki Kindo

Yoshiaki Kitamura

Taiki Fukuda

Representative Director and PresidentManaging Director

Managing Director

Director

Apr. 1991 Joined The Sanwa Bank, Limited (currently,
MUFG Bank, Ltd.)
Jul. 2006 Joined POINT INC. (currently, the Company)
General Manager of President’s Office
Mar. 2008 Executive Officer, General Manager of
President’s Office, POINT INC.
Jun. 2010 Executive Officer, Executive General Manager
of New Business Division, POINT INC.
Mar. 2012 Executive Officer, General Manager of Strategy
Promotion Department, POINT INC.
Nov. 2012 Managing Executive Officer, General Manager
of Strategy Promotion Department andMiscellaneous Goods Business Department,
POINT INC.
Sep. 2013 General Manager of Finance Department,
Adastria Holdings Co., Ltd. (currently, theCompany)
Mar. 2015 Senior Executive Officer, Executive General
Manager of Business Promotion Division,
Adastria Holdings Co., Ltd.
Mar. 2016 Senior Executive Officer, Chief of Sales
Headquarters of the Company
Mar. 2018 Senior Executive Officer, Chief of Sales
Headquarters and Executive General Manager
Overseas Assistance Division of the Company
Director, Adastria Asia Co, Ltd. (to present)
Diretcor, POINT(Shanghai) Co., Ltd. (currently,
niko and ... (Shanghai) Co., Ltd ) (to present)
Representative Director and President, POINT
TW INC. (currently, Adastria Taiwan Co., Ltd. (topresent)
Director of Adastria Korea Co.,Ltd.
May 2018 Director of the Company
Aug. 2019 Director, Adastria (Shanghai) Co., Ltd. (to present)
May 2021 Managing Director of the Company (to present)

Apr. 1999 Joined FIVE FOXes Co., LTD.
Feb. 2007 Joined DROP INC. (currently, the Company)
Sep. 2010 General Manager of studio CLIP Department,
TRINITY ARTS INC. (currently, the Company)
Mar. 2012 General Manager of niko and ... Department,
TRINITY ARTS INC.
Mar. 2013 Executive Officer, Executive General Manager
of Sales Division, TRINITY ARTS INC.
May 2014 Director, General Manager of Sales Division,
TRINITY ARTS INC.
Mar. 2015 Executive Officer, Executive General Manager
of Sales Division #2, Adastria Holdings Co.,
Ltd. (currently, the Company)
Apr. 2016 Representative Director, Adastria Korea Co.,
Ltd.
Mar. 2018 Senior Executive Officer, Chief of Sales
Headquarters of the Company
Director, Adastria Asia Co., Ltd. (to present)
Director, POINT (Shanghai) Co., Ltd. (currently,
niko and ... (Shanghai) Co., Ltd.) (to present)
Director, POINT TW INC. (currently, Adastria
Taiwan Co., Ltd.) (to present)
May 2019 Director of the Company
Aug. 2019 Director, Adastria (Shanghai) Co., Ltd. (topresent)
May 2021 Managing Director of the Company (to present)
Feb. 2022 Director, SES GLOBAL LOGISTICS(SHANGHAI) Co., LTD. (to present)
Chairman of Management Board, Velvet, LLC(to present)

Mar. 2004 Joined IMS Co., Ltd.
Apr. 2005 Joined POINT INC. (currently, the Company)
Mar. 2014 Executive General Manager of International
business Division, Adastria Holdings Co., Ltd.
(currently, the Company)
May 2014 Representative Director and President, Adastria
Asia Co., Ltd.
Mar. 2016 Executive General manager of Communication
Design Division of the Company
Mar. 2017 Executive General Manager of Corporate
Planning Division of the Company
May 2017 Director, Executive General Manager ofCorporate Planning Division of the Company
Mar. 2018 Director of the Company (to present)
Chairman of Management Board of Velvet, LLC
May 2018 Director, Adastria General Support Co., Ltd. (topresent)
May 2019 Director, Adastria Logistics Co., Ltd
Nov. 2021 Representative Director, ADOORLINK Co., Ltd.
(to present)
Feb. 2022 Member of Management Board, Velvet, LLC (topresent)

Biography

Reason for appointment

Biography

Biography

Reason for appointment

Reason for appointment

Biography

Reason for appointment

In addition to having gained extensive experience andmany achievements in the ﬁeld of sales and store
development, Osamu Kimura has worked as theRepresentative Director of group companies in the past,
We shall utilize his abundant experience and variedachievements accumulated thus far, and thereby receive
his contribution to improving the corporate value of theCompany.

In addition to having gained knowledge in ﬁnance andaccounting based on his experience in a ﬁnancial institution,
Masayuki Kindo has extensive experience and many
achievements in the Companyʼs corporate strategy, ﬁnanceand sales. We shall utilize his abundant experience andvaried achievements accumulated thus far and thereby
receive his contribution to improving the corporate value of
the Company.

Yoshiaki Kitamura has gained extensive experience andmany achievements in the ﬁeld of sales, including driving
the growth of our core brands. We shall utilize hisabundant
experienceandvariedachievements
accumulated thus far and thereby receive his contribution
to improving the corporate value of the Company.

In addition to having extensive experience and many
achievements in Japan and overseas, Taiki Fukuda has t
served as the Representative Director and President of an
overseas subsidiary of the Company in the past. We shall
utilize his abundant experience and varied achievements
accumulated thus far and thereby receive his contribution
to improving the corporate value of the Company.

Attendance at Board of Directors meetings(Fiscal year ending February 2022)

Attendance at Board of Directors meetings(Fiscal year ending February 2022)

Attendance at Board of Directors meetings(Fiscal year ending February 2022)

Attendance at Board of Directors meetings(Fiscal year ending February 2022)

Attendance at Board of Directors meetings(Fiscal year ending February 2022)

16/17

17/17

17/17

17/17

61 | ADASTRIA ESG

17/17

Ad ast ria Da ta

Since he assumed the position of Representative Directorof the Company in 1993, Michio Fukuda has
demonstrated leadership in promoting the growth andexpansion of the Companyʼs business. We shall utilize hisrich experience accumulated thus far, and thereby receive
his contribution to improving the corporate value of theCompany.

Foundations Supporting Growthand “Play Fashion!”

Reason for appointment

Biography
Sep. 2011 Representative Director and President, TRINITYARTS INC. (currently, the Company)
Apr. 2013 Director, FRIENDS Co., Ltd.
Sep. 2013 Director, Adastria Holdings Co., Ltd. (currently,
the Company)
Director, Adastria Asia Co., Ltd.
Feb. 2014 Director, N9&PG Co., Ltd. (currently, Adastria
Logistics Co., Ltd.)May 2015 Director and Senior Executive Officer , Adastria
Holdings Co., Ltd. (currently, the Company)
Jun. 2016 Managing Director of the Company
Nov. 2016 Director and Vice President, Peoples Inc.
Director and Vice President, ALICIA Co., Ltd.
(currently, BUZZWIT Co., Ltd.)Mar. 2017 Director and Vice President, ELEMENT RULE
Co., Ltd. (to present)
Oct. 2017 Representative Director and President,
ADASTRIA eat Creations Co., Ltd. (to present)
Mar 2018 Director and Vice President of the Company
May 2019 Director, NATURAL NINE TRADING(SHANGHAI) LTD. (to present)
Feb. 2020 Director, BUZZWIT Co., Ltd.
May 2021 Director and President of the Company
May 2022 Director, Zetton. Inc. (to present)
Representative Director and President of theCompany (to present)

Expanding “Play Fashion!” throughSustainable Growth

May 1971 Joined Fukudaya Clothes Store Inc. (currently, theCompany) Director, Fukudaya Clothes Store Inc.
Jun. 1982 Senior Managing Director, Fukudaya Clothes
Store Inc.
Apr. 1991 Representative Director and President, Bears
Factory Limited (currently, Adastria Logistics
Co., Ltd.)Mar. 1993 Representative Director and President, POINT
INC. (currently, the Company)
Dec. 2002 Representative Director and Chairman, POINT
TW INC. (currently, Adastria Taiwan Co., Ltd.)May 2004 Representative Director and Chairman, POINT
INC. (currently, the Company)
May 2010 Representative Director, Chairman andPresident, POINT INC.
Sep. 2013 Representative Director and Chairman, Adastria
Holdings Co., Ltd. (currently, the Company)
May 2015 Representative Director and Chairman, Chief
Executive Officer (CEO), Adastria Holdings Co.,Ltd.
May 2018 Representative Director, Chairman andPresident of the Company
Apr. 2021 Director and Chairman, BUZZWIT Co., Ltd. (topresent)
Director and Chairman, ELEMENT RULE Co.,
Ltd. (to present)
May 2021 Representative Director and Chairman of theCompany (to present)

Adastria, an Embodiment of“Play Fashion!”

Michio Fukuda
Representative Director and Chairman

Introduction

ADASTRIA ESG

Corporate Governance

Hiromi Horie

Koichi Mizutome

Tatsuhiro Matsuoka

Kazuo Nishiyama

Director

Director

Director

Director

Director

May 1998 Ph.D. in Business Administration, University ofCalifornia, Berkeley
Dec. 1998 Assistant Professor, Faculty of Commerce andManagement of Hitotsubashi University
Apr. 1999 Assistant Professor, Graduate School ofInternational Corporate Strategy of
Hitotsubashi University
Jun. 2002 Associate Professor, Graduate School ofInternational Corporate Strategy of
Hitotsubashi University (The Japanese title for
Associate Professor was changed from Jokyoju
to Junkyoju in 2007)
Mar. 2010 Outside Director, OTSUKA KAGU, LTD.
(currently, YAMADA DENKI CO., LTD.)
Apr. 2010 Visiting Professor, Collaborative Research
Sector of National Institute of Informatics,
Research Organization of Information and
Systems
Professor, Graduate School of International
Corporate Strategy (currently, Business
Administration) of Hitotsubashi University (topresent)
Sep. 2013 Outside Director, Adastria Holdings Co., Ltd.
(currently, the Company) (to present)
Jun. 2017 Outside Director, Nojima Corporation

Apr. 1981 Joined Nara Machinery Co., Ltd.
May 1988 Joined Levi Strauss Japan KK
Dec. 1999 Marketing Senior Manager, Levi Strauss Japan
KK
Mar. 2005 Executive General Manager of Public Affairs
Division, Starbucks Coffee Japan, Ltd.
Dec. 2006 Executive General Manager of Marketing
Division, Starbucks Coffee Japan, Ltd.
Aug. 2010 Marketing Officer, Starbucks Coffee Japan, Ltd.
May 2016 Outside Director of the Company (to present)
Mar. 2017 Representative Director, Haruka Co., Ltd. (topresent)
Mar. 2021 Outside Director, Kanro Inc. (to present)

Apr. 1991 Joined Dentsu Inc. (currently, Dentsu GroupInc.)
Feb. 1996 Joined Andersen Consulting (currently,
Accenture PLC)
Apr. 2000 Joined Roland Berger Strategy Consultants(Japan Office)Jan. 2005 Representative Director, Roland Berger
Strategy Consultants (Japan Office)Oct. 2009 Managing Director, Enterprise Turnaround
Initiative Corporation of Japan (currently,
Regional Economy Vitalization Corporation ofJapan)
Dec. 2010 Director and Executive Vice President, Japan
Airlines Co., Ltd.
Jun. 2013 Senior Managing Executive Officer, World, Co.,
Ltd.
Feb. 2015 Representative Director and President, Akindo
Sushiro Co., Ltd.
Mar. 2015 Representative Director, President and CEO,Sushiro Global Holdings Co., Ltd. (currently,
FOOD & LIFE COMPANIES LTD.) (to present)
Oct. 2015 Representative Director, Sushiro Creative
Dining Ltd. (currently, FOOD & LIFEINNOVATIONS LTD.) (to present)
Oct. 2019 Director and Chairman, Akindo Sushiro Co.,
Ltd. (to present)
Apr. 2021 Director and Chairman, Kyotaru Co., Ltd. (topresent)
May 2022 Outside Director of the Company (to present)

Apr. 1998 Joined Nippon Advanced Technology Co., Ltd.
(currently, Mitsubishi Electric Software
Corporation)
Apr. 2001 Joined Arthur Andersen, LLP. (currently, PwC
Consulting LLC)
Aug. 2002 Transferred to KPMG Consulting Co., Ltd.
(currently, PwC Consulting LLC)
Oct. 2008 Joined SIGMAXYZ Inc. (currently, SIGMAXYZ
Holdings Inc.)
Nov. 2014 Information, Communications and media
industry Managing Director, SIGMAXYZ Inc.
Apr. 2015 Digital Force Managing Director, SIGMAXYZ
Inc.
Apr. 2017 Research Adviser, Artificial Intelligence
Research Center, National Institute ofAdvanced Industrial Science and Technology(AIST) (to present)
Apr. 2019 Senior Executive Officer, Head of Digital Sherpa
and Chief Information Security Officer (CISO),SIGMAXYZ Inc.
Apr. 2020 Senior Executive Officer, Head of Industry
Sherpa and Chief Information Security Officer(CISO), SIGMAXYZ Inc.
Oct. 2021 Senior Executive Officer, SIGMAXYZ Inc.
May 2022 Outside Director of the Company (to present)

Jul. 2003 Joined Sony Corporation (currently, Sony
Group Corporation)
Apr. 2007 General Manager, Business Strategy Office,Chemical and Energy Department, Sony
Corporation
Apr. 2012 General Manager, Corporate Planning andPromotion Department, Sony Corporation
Feb. 2014 Head of SRE Business Preparation Office, Sony
Corporation
Apr. 2014 President and Chief Executive Officer(Representative Director), Sony Real Estate
Corporation (currently, SRE Holdings
Corporation) (to present)
Mar. 2018 Director, Management Sherpa Solution Co., Ltd.
Oct. 2018 President and Chief Executive Officer(Representative Director), SRE AI Partners
Corporation (to present)
Dec. 2021 Director, SRE Asset Management Ltd. (topresent)
May 2022 Outside Director of the Company (to present)

Biography

Biography

Reason for appointment

In our opinion, Hiromi Horie is suitable for the position
noted above due to her record of achievements as the headof public relations and marketing departments of major
companies (in the retail and restaurant industries), as well as
her ability to apply her experience to the management of theCompany.

In our opinion, Koichi Mizutome is suitable for the position
noted above due to his experience in corporate reform at
global consulting ﬁrms, as well as his wealth of experienceand insight cultivated as a manager at major companies(retail businesses), which we believe will be beneﬁcial in the
management of the Company.

Attendance at Board of Directors meetings(Fiscal year ending February 2022)

Attendance at Board of Directors meetings(Fiscal year ending February 2022)

Attendance at Board of Directors meetings(Fiscal year ending February 2022)

17/17

17/17

—

Reason for appointment
In our opinion, Tatsuhiro Matsuoka is suitable for the
position noted above due to his record of achievements as
general manager of services and information security
divisions at major companies (IT consulting), in the IT anddigital ﬁelds, which we believe will be beneﬁcial in the
management of the Company.

Attendance at Board of Directors meetings(Fiscal year ending February 2022)—* Among the directors, Satoshi Akutsu, Hiromi Horie, Koichi Mizutome, Tatsuhiro Matsuoka, and Kazuo Nishiyama are outside directors as stipulated in Article 2, item 15 of the Companies Act.

62 | ADASTRIA ESG

Reason for appointment
In our opinion, Kazuo Nishiyama is suitable for the position
noted above due to his experience and insight cultivated asa manager at major companies (IT, real estate), which we
believe will be beneﬁcial in the management of theCompany.

Attendance at Board of Directors meetings(Fiscal year ending February 2022)—

Ad ast ria Da ta

In our opinion, Satoshi Akutsu is suitable for the position
noted above due to his record of achievements as amarketing expert, as well as his ability to provide usefuladvice, etc., regarding our overall marketing business andapplications to the management of the Company from theperspective of business development strategies.

Biography

Foundations Supporting Growthand “Play Fashion!”

Reason for appointment

Biography

Expanding “Play Fashion!” throughSustainable Growth

Reason for appointment

Biography

Adastria, an Embodiment of“Play Fashion!”

Satoshi Akutsu

Introduction

ADASTRIA ESG

Corporate Governance
Auditors (as of May 26 2022)

Kazuhiko Ebihara

Yoshiko Hayama

Wataru Maekawa

Standing Statutory Auditor

Auditor

Auditor

AuditorJul. 1983 Joined The Boston Consulting Group Co., Ltd.
(currently, The Boston Consulting Group K.K.)
Jun. 1986 Joined Goldman, Sachs ＆ Co. (currently, The
Goldman Sachs Group, Inc.)
Oct. 1988 Joined Goldman Sachs (Japan) Corp. (currently,
Goldman Sachs Japan Co. Ltd.)
Sept. 2002 Joined J.P. Morgan Securities Asia Pte. Ltd.
Dec. 2006 Director, Synergy Inc.
Jun. 2007 Part-Time Lecturer, Graduate School ofFinance, Accounting and Law, Waseda
University
Dec. 2013 Instructor/Curriculum Coordinator, Japan
Vietnam EPA Program (Sponsored by Ministryof Foreign Affairs), ARC Academy (Vietnam)
May 2016 Outside Auditor of the Company (to present)

Apr. 1983 Joined The Fuji Bank, Limited (currently, Mizuho
Bank, Ltd.)
Oct. 1990 Joined Tohmatsu & Co. (currently, Deloitte
Touche Tohmatsu LLC)
Mar. 1994 Registered as a Certified Public Accountant
Jan. 2007 Joined Ernst & Young ShinNihon (currently,
Ernst & Young ShinNihon LLC)
Jan. 2015 Representative, Yoshiko Hayama Certified
Public Accountant Office (to present)
Jun. 2015 Outside Audit & Supervisory Board Member of
COCO’S JAPAN CO., LTD.
May 2016 Outside Director, SUGI HOLDINGS CO., LTD.
(to present)
Aug. 2016 Research Specialist, The Japanese Institute ofCertified Public Accountants (to present)
Jun. 2017 Outside Director, COCO’S JAPAN CO., LTD.
May 2018 Outside Auditor of the Company (to present)
Mar. 2020 Outside Director (Audit and Supervisory
Committee Member), DYNAC HOLDINGSCORPORATION
Jun. 2020 Independent Director, Zensho Holdings Co., Ltd.
(to present)

May 1980 Registered as a Lawyer (Dai-Ichi Tokyo Bar
Association）
Sep. 1990 Jointly Established Tokyo Urban Law OfficeJan. 1998 Established Maekawa Law Firm, Director
May 2003 External Statutory Auditor, POINT INC.
(currently, the Company)
Apr. 2004 Vice Chairman, Dai-Ichi Tokyo Bar Association
Mar. 2015 Outside Director, Keiyo Gas Co., Ltd. (topresent)
Apr. 2020 Established Maekawa & Ito Law Firm, Director(to present)
May 2022 Outside Auditor of the Company (to present)

Biography

Reason for appointment

Biography

Biography

Reason for appointment

Reason for appointment

In our opinion, Tsuyoshi Matsuda is suitable for the position
noted above due to that he possesses a wealth ofexperience and specialized knowledge having worked as
General Manager of Accounting Department of theCompany, as well as Director and Managing ExecutiveOﬃcer in charge of Accounting and Finance Departments.

In our opinion, Kazuhiko Ebihara is suitable for the position
noted above due to that he has abundant experience andprofessional knowledge in companies that conduct
investment banking business.

In our opinion, Yoshiko Hayama is suitable for the position
noted above due to that her professional expertise as acertiﬁed public accountant and abundant experience andinsight in auditing at audit ﬁrms will be beneﬁcial to the
management of the Company.

In our opinion, Wataru Maekawa is suitable for the position
noted above due to that his professional expertise andabundant experience and insight in corporate law as an
attorney at law will be beneﬁcial to the management of theCompany.

Attendance at Board of Directors meetings(Fiscal year ending February 2022)

Attendance at Board of Directors meetings(Fiscal year ending February 2022)

Attendance at Board of Directors meetings(Fiscal year ending February 2022)

Attendance at Board of Directors meetings(Fiscal year ending February 2022)

17/17

14/14

17/17
Attendance at Audit & Supervisory Board meetings(Fiscal Year Ending February2022)
14/14

17/17

–

Attendance at Audit & Supervisory Board meetings(Fiscal Year Ending February2022)
14/14

Attendance at Audit & Supervisory Board meetings(Fiscal Year Ending February2022)–*Kazuhiko Ebihara, Yoshiko Hayama, and Wataru Maekawa are outside statutory auditors as stipulated in Article 2, Item 16 of the Companies Act.

63 | ADASTRIA ESG

Ad ast ria Da ta

Attendance at Audit & Supervisory Board meetings(Fiscal Year Ending February2022)

Foundations Supporting Growthand “Play Fashion!”

Reason for appointment

Biography

Expanding “Play Fashion!” throughSustainable Growth

Apr. 1976 Joined The Mitsubishi Bank, Limited (currently,
MUFG Bank, Ltd.)
Jan. 2006 Joined POINT INC. (currently, the Company)
Adviser, POINT INC.
Mar. 2006 Executive Officer, Executive General Manager
of Administration Division and General Manager
Accounting Department, POINT INC.
May 2008 Director, Executive Officer, Executive General
Manager of Administration Division, POINT INC.
May 2010 Director, Managing Executive Officer, Executive
General Manager of Administration Division,
POINT INC.
Jun. 2013 Corporate Auditor, NATURAL NINE HOLDINGS
CO., LTD. (currently, Adastria Logistics Co., Ltd.)Mar. 2015 Adviser to the Chairman’s Office, Adastria
Holdings Co., Ltd. (currently, the Company)
May 2016 Standing Statutory Auditor of the Company (topresent)

Adastria, an Embodiment of“Play Fashion!”

Tsuyoshi Matsuda

Introduction

ADASTRIA ESG

Corporate GovernanceCompliance
Our Main Initiatives Outside the Company

Guided by our corporate philosophy that says, “Be a person needed, Be a company needed.”, we willdevelop fair, impartial and transparent business, for the fulfilment of our social responsibilities. In
addition, as a member of society, all employees will always exercise self-restraint and act with highethical standards.

① Compliance with Group Sourcing Policy/Group Sourcing Guidelines

Main Initiatives Aimed Inside the Company② Questionnaire for business partners① Group’s Code of Ethic② Harassment prevention training
As an initiative to prevent harassment, in addition to prohibition of harassment being clearly statedin the employment regulations, we conduct harassment prevention training for all employees every
year. We have set a curriculum for each manager/non-manager to handle harassment cases, andtraining is given for providing an appropriate response.

Number of internal reporting (whistle-blowing) cases andtheir breakdown (fiscal year ending Feb 2022)

1 % Attendance,

Non-complianceStore operation andworkplace environment(2 Cases) company sales rules, etc.

3%

10 %

(5 Cases)(14 Cases)

7%(10 Cases)

Labor related
shifts,overtime, andother work practices

Others79

Number of%internal reporting(whistle-blowing) (115 Cases)

146
cases

Details

Number ofcompanies(Number ofrepresentatives)

Product suppliers/
Production factories(domestic)(904 persons)Product suppliers/
Production factories(overseas)(164 persons)

Sales promotion(advertising,media publications)(74persons)

System-related

Repair work623

companies

164

companies

64

companies

64

companies(64 persons)34

companies(34 persons)
29

Placement/
Temporary staffing(29 persons)

Others(delivery, supplies)(45 persons)

Totalcompanies

45

companies

1,023
companies(1,314 persons)

Number ofOpinions/
responses suggestions

387

cases

82

36

cases

7

cases

cases

48

—

cases

44

1

cases

cases

cases

34

—

cases

27

—

45

—

cases

667

cases

44

cases

③ Hotline for business partners
In order to conduct fair, impartial and transparent transactions in a purchasing relationship, we haveestablished a “Business Partner Hotline”. In the event of a breach of contract or ethics, abuse of
superior bargaining position by the Group, or violation of laws and regulations, we have a system inplace that allows business partners to make inquiries anonymously, if necessary. If by any chance, we
receive an inquiry from a business partner, we have a system in place to ensure that the informationis shared with the officer in charge and that we can respond suitably and swiftly.

64 | ADASTRIA ESG

Ad ast ria Da ta

Including verbal andbehavioral harassment ofsuperiors andco-workers

COVID-19
related, etc.

Business Partner Questionnaire Results(Fiscal Year Ending February 2022)

Foundations Supporting Growthand “Play Fashion!”③ Anonymous whistle-blowing system (Whistle Line)For the purpose of maintaining good business
relationships with business partners in apurchasing relationship, a questionnaire isconducted once a year, with our domestic andoverseas business partners. We ascertain thestatus of compliance with the Subcontract Act
and various other laws and regulations, andwhether or not there are any inappropriate
acts by our employees, and maintenance offair business relationships is ensured.
On receiving an opinion, prompt investigationis conducted to ascertain the facts, and byformulating recurrence prevention measuresand conducting in-house training, we work tostrengthen compliance.
In the fiscal year ending February 2022 we
distributed questionnaires to 1,023 companies(1,314 persons) and received 667 valid
responses. We received 44 opinions andsuggestions, and in addition to responding toeach case, we also formulated measures toprevent recurrence, and conduct in-housetraining.

Expanding “Play Fashion!” throughSustainable Growth

All employees of our company, as members of society, shall always exercise self-restraint and act
with high ethical standards. Towards achieving this, we have established the Group Code of Ethics,
which includes anti-corruption, respect for human rights, and fair and transparent transactions. Every
year, we circulate this within the company, and it is confirmed and signed by all employees. In thefiscal year ending February 2022, the response rate was 97.8% in Japan and 100% overseas.
We conduct compliance training for all domestic group employees too, and strive to prevent
accidents and frauds.

For any acts that violate compliance, suchas dishonesty and violations of laws andrules, or if there are any indications of thesame, we have established a whistleblowing
program that allows employees to reportsuch acts, by consulting with an internal
contact point or external lawyers. This
program can be used anonymously by all
employees, both in Japan and overseas, its
contents are kept confidential and we takegreat care to ensure that whistleblowers do
not suffer disadvantageous treatment as aresult of reporting.
There were 146 such consultations in thefiscal year ending February 2022, there wereno cases of serious misconduct, etc. andappropriate response and actions are being
taken for each of these cases.

In order to continue with the product production based on good partnership and continue to growtogether with our business partners, we strive for fair and ethical transactions while fulfilling our social
responsibilities. Towards achieving this, we have established the “Group Sourcing Policy” and “Group
Sourcing Guidelines”, thereby promoting CSR procurement.
For details, please refer to “Foster sustainable development in production areas” on page 52.

Adastria, an Embodiment of“Play Fashion!”

Basic Philosophy

Introduction

ADASTRIA ESG

Corporate GovernanceRisk Management
We are promoting activities that prevent and minimize the occurrence of risks in execution of daily business
operations.
In addition to creating and updating the “Crisis Management Manual” that sums up the need for proper
execution of duties, measures to prevent accidents and emergency response. We also make regularannouncements regarding the above measures.
Adversities to business execution such as fraud, violations of laws and regulations, product quality defects,
incidents, accidents, disasters, etc. are collected as a “crisis management report” by the Legal and General
Affairs Department, which are the supervisory departments for such incidents. They coordinate with theconcerned departments, and follow the case up till it’s concluded. We take appropriate measures not only
towards the incidents that arise, but also take toward preventing recurrence. We transmit information andconduct awareness-creation activities.
For an overview and response to individual projects, report is submitted to the Executive Meeting on a weekly
basis, while important matters are reported to the Board of Directors.

standards, and an awareness campaign is being undertaken. In the event of a risk that may havea significant impact on the continuity and faith on each company in the Group, the Company shallreport to the director in charge of crisis management, who is selected from among the directors,
and he shall take appropriate action.

Risk Management
As our response to large-scale natural disasters, etc., and the risks associated with daily businessexecution, the following measures are taken.

Business Continuity Plan (BCP) and preparation for large-scale disasters
For earthquakes, fires, volcanic eruptions, wind and flood damage from typhoons, infectious
diseases, etc., or any other large-scale natural disasters that are expected to affect the survival ofeach company in the Group, we are putting in place preventive measures at our group companies, by
establishing a Crisis Management Committee for the purpose of conducting effective crisis
management.
The Crisis Management Committee shall accurately grasp the impact of anticipated large-scaledisasters and the status of the Group’s facilities and business activities, and is responsible forrecommending necessary measures.

Adastria Group’s crisis management system

Our group companies will sever all ties with antisocial forces that threaten the order and safety of citizens’
lives. Not to mention that we do not have business relationships with these powers and organizations,even their unreasonable demands will be met with a resolute attitude and rejected.
In addition, in the event of an unreasonable demand by anti-social forces, etc., the Legal and General Affairs
Department will respond appropriately as a response control department by cooperating with external

Information Security

Subject items
to be discussed
and report

Crisis Management
Committee<Main items for discussion>Committee
Chairman

Director in charge ofcrisis managemen

Committee
memberDirector
Executive Officer
General Manager, etc.

Instructappropriately protecting information assets held in the course of business.
Therefore, with the aim of ensuring compliance with information security as part of our code of conduct, wehave established “Information Security Policy”, and have disclosed the same.
By maintaining an advanced information security management system, and complying with this policy andprivacy policy, we continuously provide peace of mind to everyone including our customers.
An Information Security Committee has been established, to ensure information security, and to protect information
assets, The committee, chaired by a director, decides on information security controls, assesses the information
security situation, establishes related regulations and systems, deliberates on other important matters related to
information security, and as per the requirements submits either proposals or reports to the Board of Directors.

Information Security
Policy65 | ADASTRIA ESG

Privacy Policy

Ad ast ria Da ta

Each division, department andgroup company

・ Collection and analysis of information on large-scale natural
disasters, evaluation of readiness for preventions andmeasures to be taken in case of an occurrence・ Formulation and periodic review of BCP
・ Matters concerning BCP and disaster response division
training
・ Other important matters related to crisis management incase of large-scale disasters

We would like to be an organization that is always trusted by various stakeholders including customers, byFoundations Supporting Growthand “Play Fashion!”

specialized organizations such as the police, the Center for the Elimination of Violence, and corporate lawyers.

Representative Directors andExecutive Meeting

ReportBasic Approach for Eliminating Anti-Social Forces andthe State of Management There of

Expanding “Play Fashion!” throughSustainable Growth

Measures taken to mitigate the risks in execution of operations

the department or committee that has jurisdiction is fixed. We have established regulations andAdastria, an Embodiment of“Play Fashion!”With regard to risks related to quality, product safety, information security, health and safety, etc.,

Introduction

ADASTRIA ESG

Corporate GovernanceBusiness Risks and Countermeasures
Among the risk factors related to the business of our company group, the main risks that may have a significant impact on the decisions of investors and their countermeasures are as follows.

CASE

01

02

CASE

03

CASE

CASE

05

CASE

06

Establishment of a system to promptly provide the market with products that meet
consumer preferences
Improvement of in-house EC functions and customer experience through services that
integrate WEB and stores

Shrinking domestic apparel market due to declining birthrate, aging population anddeclining future population

Diversification of the regions where we operate by developing overseas markets (EastAsia, North America), and developing a new mature brand, creating new businesses in
the lifestyle field, expansion of customer base and enhancement of customer lifetime
value within Japan.

Geographical andPolitical Risks in
Regions ofOperations

Failure in business development and monetization due to inability to propose productsthat conform to the needs of the local customers and inability to acquire humanresources proficient in business management in overseas businesses
Deterioration of business results due to unexpected changes in laws and regulations,disorder due to political and economic factors, social turmoil due to factors liketerrorism, disputes, natural disasters, etc. in the regions of operation
Obstacles to product purchases and sales due to political situations, economic
environment and natural disasters, etc. in countries where the products are produced(mainland China and other Asian countries)

Decentralization of production areas, and development of markets in the high growth
regions of East Asia
Accumulation of business management know-how by strengthening functions of local
corporations and localizing human resources

Fluctuating Exchange
Rates and Rising
Costs

Fluctuation in the exchange rate (mainly depreciation of the yen), soaring prices ofcotton and other raw materials for apparels
Soaring product import costs due to rising global energy prices
Rising product costs due to increasing labor costs in countries of production

Appropriate use of exchange contracts
Prompt ordering of products and raw materials based on data analysis
Decentralization of production to ASEAN countries

Insufficient response to intense regulations on environmental impact and changes in
consumer preferences
Decreased need for clothing due to the effects of global warming
Soaring raw material prices due to climate change

Formulation of Sustainability Goals
Improving the sustainability of the entire value chain including procuring environmentfriendly raw materials, reducing the environmental impact of the production processes,
compression of waste inventory by optimization of the inventory
Modifying the behavior of the entire market and raising environmental awarenessthrough collaboration with other companies in the industry and developing brands that
propose sustainable fashion, etc.

Damage to stores due to unexpected natural disasters such as large-scale
earthquakes, tsunamis, typhoons, volcanic eruptions, etc., and large-scale black outs
and power shortages or the long-term stagnation of sales activities due to suchdisasters.

Formulation of BCP (Business Continuity Planning) for the continuation of businessand quick recovery in anticipation of such disasters as large-scale earthquakes,
outbreak of infectious diseases, etc.

Declining Domestic
MarketEnvironmental Issues

Natural Disasters andAccidents

Foundations Supporting Growthand “Play Fashion!”

04

Temporary closure of the commercial stores where our brand set stores or a decreasein the number of customers due to the spread of COVID-19 and the emergence of new
infectious diseases, resulting in sluggish business performance
Changes in customer lifestyles and preferences, such as advancement of remote work
due to the spread of infectious diseases

Spread of Infectious
Diseases

Expanding “Play Fashion!” throughSustainable Growth

Risks Related to Business Environment

CASE

Countermeasures

Adastria, an Embodiment of“Play Fashion!”

Risks

A da stri a D at a

66 | ADASTRIA ESG

Introduction

ADASTRIA ESG

Corporate Governance
Risks

Providing products that meet the needs of the customers by collecting information
related to customer preferences through the store or the company EC site, and promptly
reflecting it in product development
Improving accuracy of demand forecasting by promoting advance order sales on EC sites
Improving the speed and accuracy of new brand development

Stagnation in product supply due to production delay by the outsourced company,
bankruptcy of suppliers, disruption of product transportation routes, etc.
Damage to the reputation of our company due to violation of the human rights of theemployees and environmental pollution by outsourced companies

Distribution of production locations to other ASEAN countries in addition to mainland China
Contracting appropriate insurance in preparation of disruption of product supply routes,
information management in transportation processes, securing multiple means oftransportation and selection of alternate routes
Promotion of responsible procurement activities that put society and environment into
consideration in accordance with the Group Sourcing Policy

Loss of sales and trust of customers due to serious failures in the group’s systemcaused by information system malfunctions, cyberattacks, etc., and leakage of
personal information due to unauthorized access, etc.

Implementing security risk diagnosis by a third-party organization and formulating andexecuting the necessary counter plans

Deterioration of business, financial conditions and management results due to sudden
withdrawal of management ranks
Restrictions on store operations and rising labor related costs due to decline in thedomestic working population and rise in the global wages

Ensuring an appropriate balance of the Board of Directors with realization of acomposition with expertise and experiences of diverse backgrounds and separationof management and execution by introducing an executive officer system
Introduction of performance-linked and stock-based compensation for directors, aswell as stock delivery incentive plan for executive officers to secure capablemanagement personnel
Development of management personnel through programs such as senior
management training
Development of a personnel system that enables employees to select from various
careers and working styles that suit their lifestyles, and promotes health management

Success or Failure of
Large Investments andCorporate Acquisition

Inability to generate expected earnings or synergies through investments in external
companies for the purpose of developing overseas business, acquiring new brands
and customers, acquiring related technologies, etc. in order to achieve long-term
growth, prolonged investment recovery period and failure to recover investment due tofailure of capital investment and system investment necessary for business growth toperform the expected functions

Investing within the scope of maintaining financial soundness, formulation of review
process for investment decisions, and holding discussions at board meetings
including outside directors
Setting up third-party PMO for large scale system investments

Uncertainty of New
Business

Failure to develop business or acquire profits due to lower-than-expected customer
needs toward new businesses, higher than expected costs required to enter or
operate new businesses and intensification of competition in that business. In addition
to this, incurring expenses or losses due to withdrawal or downsizing of businesses

Accumulation of know-how in new areas by collaboration with other companies andutilization of lifestyle proposal capabilities fostered in the apparel area in new
businesses

Risks Related toApparel Business

CASE

Risks Related toSupply Chain

02

03

CASE

04

CASE

01

CASE

02

CASE

03

Risks Related toInformation System andPersonal Information

Risks Related to
Human Resources

67 | ADASTRIA ESG

A da stri a D at a

Due to the characteristics of casual clothing retail market, where trends andpreferences tend to change significantly in a short period and there is fierce
competition between domestic and foreign competitors, product planning fails andbrand value becomes obsolete

CASE

Foundations Supporting Growthand “Play Fashion!”

Risks Related to Management Strategy

Optimizing store network with careful investigation of the situation in each region
through a branch system closely tied to each area along with the continuous opening
and closing of stores
Choosing advantageous store locations that capitalize on the company’s economy ofscale and brand power

Expanding “Play Fashion!” throughSustainable Growth

Risks Related to Business Operations

01

Failure to collect security deposits and deposits at the time of leasing store properties
due to bankruptcy of developers, etc.
Losses due to deterioration in profitability of fixed assets (stores, etc.) and decline inmarket prices of owned assets
Others include changes in the commercial environment surrounding shopping centers
for clothing in which we set up stores

Risks Related to
Store Management

Adastria, an Embodiment of“Play Fashion!”

CASE

Countermeasures

A Dialogue Between Our Two Outside Directors

Introduction

ADASTRIA ESG

Adastria considers improvements in corporate governance to be one of the key
management issues, so we are working to strengthen our governance system byappointing multiple outside directors and outside statutory auditors andconsultative body to the Board of Directors. In this connection, we arepresenting here the contents of the discussions between our 2 outside directors
on matters such as our Company’s governance system and management issues.

How Would You evaluate the Governance andManagement of Our Company?

in diversity in the Board of Directors, we feel that our discussions have become more positive

Outside Director

Satoshi Akutsu

and invigorated. In some cases, not just the directors, but even the executive officers are
involved in discussions, and their attitude of openly accepting opinions from outside is highly
appreciated.

Outside Director

Hiromi Horie

Horie: We have seen that it is a two-way dialogue rather than a one-sided presentation. For
example, new proposals are on the table for deliberation from an early stage when there is stillroom for consideration which enables us to have fruitful discussions, rather than when it is in

Expanding “Play Fashion!” throughSustainable Growth

Akutsu: Our Company has always had an open corporate culture, and with the recent increase

Adastria, an Embodiment of“Play Fashion!”establishing the Nomination and Compensation Advisory Committee, aan advanced state to effect any changes. Even though at times there were tough feedback, by
taking on challenges and open to constant revision, we could find the best solution, and in the

What are Your Thoughts on Human Resource Development and Diversity at Our Company?
Horie: It is not limited to Adastria, but when it comes to nurturing women in Japan, we often see

Akutsu: Years ago, there was a tendency to expect women managers to be like that of theirthat importance is given to setting up programs that provide study opportunities for women to

traditional male counterparts, but now we can see a fundamental change to this approach, in the

become managers. I have long believed that human resource development is to find talented

way the management team has come to accept the women managers’ style for displaying theirpeople and develop them into leaders, rather than just preparing persons into management

leaderships. From the beginning, our company has had high psychological safety, with a culturethat allows the people who join the company mid-career to be effective as leaders right away.

topic with the chairman and president Kimura. I was impressed by the speed in which my

Essential groundwork has been done to pave the way to be a leader in one’s own style without

suggestion was implemented, as the next time we met, I was told, “by having women participate

being caught up in the image of a conventional manager. In the future, I would like the Company

in the management meetings, we were able to have animated discussions.” One of the great things

to focus on increasing the pool of global talent.

about our company is that, once convinced about the validity of a proposal, it is put into action.

68 | ADASTRIA ESG

Ad ast ria Da ta

positions. It’s the same with women too. I once had an opportunity to have a discussion on thisFoundations Supporting Growthand “Play Fashion!”process improve our managerial capabilities.

A Dialogue Between Our Two Outside Directors

Introduction

ADASTRIA ESG

This Being Your First Year Under the New Management Structure, How Would You evaluate It?
into great potential and bring out the best in others

systematically discussed and prepared the management structure. Mr. Kimura, our new

In that respect, President Kimura is not only highly

president, has been involved in the management as the right-hand man of Chairman Fukuda.

knowledgeable and vastly experienced, but is also

It is a long-awaited appointment as president, and rest assured, the company is in goodable to bring out the real strength of his employees

hands. The system of in-house directors that supports this is being well nurtured.

while working in close cooperation, and we feel that

Horie: In the future, it will be important for managers to team up with their colleagues and get

the team is functionally sound.

Adastria, an Embodiment of“Play Fashion!”

Akutsu: Over the years, the Nomination and Compensation Advisory Committee has

things done, rather than figuring out the solution alone. In this age of high uncertainty, there
is a limit to how much one can do, even if one possesses excellent individual skills. The

Based on the Assessment of the Board of Directors’ Effectiveness, What are Your Thoughts on Future Management Issues?
diversity and globalization in management too become increasingly important. Also, in dialogue

shows that discussion grounded on thewith shareholders, I would like the management to play a central role in properly conveying thecapital costs and management indicators,

Company’s growth strategies to our overseas investors with an easy-to-understandetc., are listed as the next challenges. Whilecommunication.

there is room for improvement, overall, I feel

Horie: When talking about globalization, I feel that the fact that Managing Director Kitamurathat the quality of management has improved

has been posted overseas, and is driving the business forward while experiencing thesignificantly over the past few years.

overseas market firsthand, is not only an asset for the individual but also for the company.

In our Company, as many of our outside

Cultural difference is not a theory to be learned with books, but by diving in and experiencing.

directors

management

Excellent young core human resources experience customs and values different from their

executives, requirements are highly relevant

own at an early stage, so they have an attitude to accept positively the things that are

and severe. This has given us a well-orga-

ultimately different. I am convinced that having a broad perspective is the first step toward true

nized

plan,

globalization. In the past few years, the attitude of the Board of Directors in seeing the data

making the source of corporate value of thefrom a management perspective, and their awareness regarding profit creation in order toCompany very clear. In order to keep growing,

generate returns to stakeholders have become very strong. Seeing these, I feel that the quality

the next challenge is to become a globalof management has been consistently improving. Our strength is to keep moving forward

company from Japan. While expanding into

through trial & error. We will continue to contribute to the sustainable growth of our company.

areexperienced

medium-term

management

A da stri a D at acountries and regions with different cultures,Foundations Supporting Growthand “Play Fashion!”

Akutsu: The effectiveness assessment result

Expanding “Play Fashion!” throughSustainable Growth

person who will take over the role of president from Chairman Fukuda, should be able to tap

69 | ADASTRIA ESG

Adastria DataIntroduction

ADASTRIA DATA

Financial and Non-Financial Highlights
10-Year Financial and Non-Financial Highlights

February, 2015

February, 2016

February, 2017

February, 2018

February, 2019

February, 2020

February, 2021

February, 2022

121,670

153,273

184,588

200,038

203,686

222,787

222,664

222,376

183,870

201,582

Operating profit(million yen)

9,717

5,762

5,981

16,004

14,916

5,005

7,190

12,885766

6,564

Ordinary profit(million yen)

9,951

6,027

6,452

16,185

15,126

5,428

7,345

12,843

2,981

8,166

Net income attributable to owners of the parent company(million yen)

5,508

-4,731

503

9,122

11,575

863

3,890

6,363

-693

4,917

Earnings before interest, taxes, depreciation, and amortization (EBITDA)(million yen)

14,477

13,861

15,732

24,612

23,02815,141

15,317

20,357

7,766

13,302

Net asset value(million yen)

38,59844,786

46,23353,28256,03551,03052,95957,04150,701

54,963

Total assets(million yen)

63,41078,841

83,74290,454

90,38991,123

91,26397,924

95,44997,957

Cash flow from operating activities(million yen)

11,565

4,606

12,112

22,054

11,947

10,685

9,904

20,85011,933

3,504

Cash flow from investing activities(million yen)

-10,184-6,831-10,421-4,551-4,323-7,404-8,686-6,645-7,366-7,780Cash flow from financing activities(million yen)

-8,430-9,503-2,524-5,683-6,309-4,629-1,890-6,439-6,840-3,251

Net asset per share(Yen)

1,775.28

1,844.17

952.02

1,106.45

1,191.16

1,084.84

1,125.29

1,210.55

1,122.71

1,192.62

Earning per share (EPS)(Yen)

241.15-206.4210.37

188.31

242.49

18.36

82.67

135.08-14.88108.72Equity ratio

(%)

60.9

56.8

55.2

58.9

62.0

56.0

58.0

58.3

53.1

55.1

Return on equity (ROE)

(%)

13.8

-11.3

1.1

18.3

21.2

1.6

7.5

11.6

-1.3

9.4

Return on assets (ROA)

(%)

8.7

-6.7

0.6

10.5

12.8

1.0

4.3

6.7

-0.7

5.1

Price earnings ratio (PER)(times)

14.2

−

141.9

15.5

12.0

126.7

23.5

13.0

−

17.1

Dividend payout ratio

(%)

49.7

−

361.5

34.5

30.9

272.3

60.5

37.0

−

51.0

Total shareholder return (TSR)

(%)

−

−

−

−

−

81.7

70.3

65.3

75.1

66.8

(unit)

February, 2013

February, 2014

February, 2015

February, 2016

February, 2017

February, 2018

February, 2019

February, 2020

February, 2021

February, 2022

(unit)

Consolidated non-financial data
Number of stores at the end of term(stores)

899

1,213

1,356

1,324

1,351

1,501

1,427

1,392

1,400

1,428

Stores sales floor space (monthly average)（m2）

163,674

221,620251,062

268,704

272,182

302,131304,529

287,616

296,210299,676

Number of full-time salaried employees(headcount)

3,045

4,546

4,852

4,760

4,914

5,677

5,665

5,715

5,701

5,762

Average number of temporary employees(headcount)

3,908

5,334

5,839

5,997

6,163

6,564

6,363

6,167

5,085

5,530

71 | ADASTRIA DATA

A da stri a D at a

(excluding Zetton)* “Partial Amendments to Accounting Standards for Tax Effect Accounting” (Accounting Standards Board of Japan No. 28, February 16, 2018) have been applied since the beginning of the fiscal year ending February, 2020,
Management indicators, etc. for the fiscal year ending February, 2019 are those after applying the relevant accounting standards, etc., retroactively.

Foundations Supporting Growthand “Play Fashion!”

February, 2014

(million yen)

Expanding “Play Fashion!” throughSustainable Growth

February, 2013

Sales

Adastria, an Embodiment of“Play Fashion!”

Consolidated financial dataIntroduction

ADASTRIA DATAGroup Companies

ELEMENT RULE Co., Ltd.

NameBUZZWIT Co., Ltd.

Name

ADOORLINK Co., Ltd.

Head officeaddress

19F Shin-Aoyama Bldg. West, 1-1-1 Minami-Aoyama,
Minato-ku, Tokyo

Head officeaddress

7F Daiba Frontier Bldg., 2-3-2, Daiba, Minato-ku, Tokyo

Head officeaddress

5F Miyamasuzaka Place Shibuya, 2-16-5 Shibuya,
Shibuya-ku, Tokyo

Establishment

March 1, 2017

Establishment

November 21, 2016

Establishment

November 2, 2020

Businesses

Planning, manufacture and sales of apparel, sundries, etc.

Businesses

Planning, manufacture and sales of apparel, sundries, etc.

Businesses

Planning, manufacture and sales of apparel, sundries, etc.

Adastria, an Embodiment of“Play Fashion!”

Name

Resale business of discarded stock, sample merchandise,

Gate Win Co., Ltd.

Name

ADASTRIA eat Creations Co., Ltd.

Name

Zetton. Inc.

Shibuya Hikarie 2-21-1, Shibuya-ku, Tokyo

Head officeaddress

19F Shin-Aoyama Bldg. West, 1-1-1 Minami-Aoyama,
Minato-ku, Tokyo

Head officeaddress

9F VORT-Shibuya-briller Bldg,Jinantyo1-20-5,Shibuya-ku,
Tokyo

Establishment

May 2022

Establishment

October 31, 2017

Establishment

October 26, 1995

Businesses

licensed business for domestic casual wear market

Businesses

Management and development of food service operations

Businesses

Management ,development and consulting of restaurants,

Head officeaddress

Expanding “Play Fashion!” throughSustainable Growth

Name

etc.

Name

Adastria Logistics Co., Ltd.

Name

・Adastria Asia Co., Ltd.
Adastria General Support Co., Ltd.

・Adastria (Shanghai) Co., Ltd.
・niko and ... (Shanghai) Co.,Ltd.

Head officeaddress

1-15 (Gate A) Chuo Kogyo Danchi, Ibaraki-machi,
Higashiibaraki-gun, Ibaraki

Head officeaddress

5F Shibuya Minami Tokyu Bldg., 3-12-18 Shibuya,
Shibuya-ku, Tokyo

Establishment

June 1988

Establishment

December 19, 2013

Businesses

Logistics operations for group companies

Businesses

Comprehensive services for group companies

・Adastria Taiwan Co., Ltd.

Foundations Supporting Growthand “Play Fashion!”

Other Group companies
・OPEN AND NATURAL Inc.

・NATURAL NINE TRADING(SHANGHAI) LTD.
・SES GLOBAL LOGISTICS (SHANGHAI) Co., LTD.
・Adastria USA, Inc.

72 | ADASTRIA DATA

A da stri a D at a・Velvet, LLC

Introduction

ADASTRIA DATA

Company Overview/Stock Information
Company Overview

Shares Status (as of February 28, 2022)

Adastria Co., Ltd.

Head office address

27F Shibuya Hikarie, 2-21-Head office address 1 Shibuya, Shibuya-ku, Tokyo

Contact Number

03-5466-2010 (Representative)

Establishment

October 22, 1953

Capital2,660 Million Yen

Businesses

Planning, manufacture and sales of apparel, sundries, etc.

Primary banking partner

MUFG Bank, JOYO Bank

Total number of authorized shares 150,000,000 shares
Total number of issued shares
48,800,000 shares (including 3,146,881 treasury shares)
Number of shareholders
51,386 persons
Major shareholders (top 10)
Number of shares owned(thousand shares)

Shareholders

Mizuho Bank, Sumitomo Mitsui Banking Corporation

Equity shares (%)

Fukuzo Co., Ltd.

17,13237.5

The Master Trust Bank of Japan, Ltd .(trust account)

3,280

7.2

Yusaku Maezawa

3,117

6.8

Toyoshima Co., Ltd.

2,000

4.4

Custody Bank of Japan, Ltd. (trust account)

1,681

3.7

1,050

2.3

5,762 full-time Group employees (excluding Zetton)

Michio Fukuda

Number of stores

Domestic: 1,355 stores/Overseas: 73 stores

Adastria Employee Stock Holdings

635

1.4

Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.

412

0.9

Hitomi Fukuda

400

0.9

STATE STREET BANK WEST CLIENT - TREATY
505234312

0.7* Shareholding ratios are calculated excluding treasury shares (3,146,881 shares).

Separate owners’ shares allocation status

Stock prices and yield (month)

Number of shareholders(persons)

Owner(Yen/point)

3,000

Yield
(1,000 shares, right-hand scale)Closing price(Yen, left-hand scale)

TOPIX(left-hand scale)

2,500(1000 shares)

25,00020,000Foreigner
Individual/Others

Equity shares (%)

231

3,742

7.7

50,80918,458

37.8

18

5,934

12.1

Business firm/Other businesses

301

19,677

40.3

Financial services provider

27

986

2.0

51,38648,800100.0* Individuals and others include treasury shares.

15,0001,500
10,000External Evaluation

1,000
5,000

500

0

0
2018/032018/092019/03

2019/09

2020/032020/092021/032021/09

MSCI

FTSE

DX Certification(in March 2022)(Brand selectionin April 2022)(certified in January
2022)

NADESHIKO
BRAND 2021

Prime Index
Gold 2021

D&I Award
2021

Foundations Supporting Growthand “Play Fashion!”

Financial institutions

Total amount

2,000

Number of shares owned(thousand shares)

Expanding “Play Fashion!” throughSustainable Growth

Employees

Adastria, an Embodiment of“Play Fashion!”

Name

MonisuCertification

A da stri a D at a

73 | ADASTRIA DATA