TSI HOLDINGS CO., LTD.
Financial Results Briefing for the Fiscal Year Ended February 2021
April 13, 2021

Event Summary[Company Name]TSI HOLDINGS CO., LTD.

[Company ID]

3608-QCODE[Event Language]

JPN[Event Type]Earnings Announcement[Event Name]

Financial Results Briefing for the Fiscal Year Ended February 2021

[Fiscal Period]

FY2020 Annual[Date]

April 13, 2021

[Number of Pages]

33[Time]

10:00 – 11:00(Total: 60 minutes, Presentation: 32 minutes, Q&A: 28 minutes)[Venue]Webcast[Venue Size][Participants][Number of Speakers]

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Tsuyoshi Shimoji

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Presentation
Moderator: Good morning. Thank you very much for taking the time to join us this morning.
We will now hold a briefing session on the full-year financial results of TSI Holdings, which were announced
yesterday.
Today, I would like to begin with an overview of the previous fiscal year, centered around yesterday's
summary, followed by an explanation of the vision of Shimoji, who was newly appointed as President and CEO
on March 1. After that, we will have a question and answer session.
We have a little more than 30 minutes, and I would like Shimoji to speak first.

Shimoji: I would like to begin the presentation of our financial results for the fiscal year ending February 2021.
Thank you all very much for your help and support.
Now, I would like to begin.

First, the financial highlights for the FY2021.
Although we were unable to make up for the shortfall in operating income in the first half of the fiscal year
due to the many unpredictable events caused by the Coronavirus, we have been working on future businessreforms, as well as selling some of our assets to return to the black in terms of current net income. We haveprioritized securing strategic funds for the future.

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Financial highlights of the second half of the fiscal year.
Net sales were JPY77.8 billion, 88.2% of the previous year's level, and operating income was minus JPY1.37
billion, a minus JPY1.6 billion difference from the previous year. In the second half of the year, some of brands
have been performing well despite Coronavirus. This drove the business, and the structural reform projectand measures for professional sales contributed significantly to the improvement in earnings.
See right. This is the reason why our performance improved compared to the plan for the second half.
Sales were 102.5% of the plan, with strong sales of golf and street brands and overall strong sales of our own
EC.
In addition to ETRE TOKYO, which we acquired last time, the EC business of TACTICS in the US is progressing
very well, and operating income has increased by JPY5.96 billion from the plan. Gross profit margin improvedby 1.3% compared to the plan due to sales recovery.
Please see the table below. Operating income for the first half of the year was minus JPY10.47 billion. In thesecond half of the year, overall operating income improved as a result of the strong brand performance,
resulting in a negative operating income of JPY1.37 billion for the second half.

As a result of the significant improvement in profits from the first half to the second half of the fiscal year, theforecasted deficit of JPY17.8 billion was reduced to JPY11.8 billion, an improvement of approximately JPY6
billion.

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3This is an overview by segment.
Lifestyle changes during the Coronavirus crisis have led to significant sales growth in golf, athleisure and street
brands.
On the other hand, demand for commuter wear, brands with urban stores, and occasions has been very weak.
Brands that are doing well include PEARLY GATES, PING, and in the gold, athleisure and street market,
TACTICS, HUF, and UNDEFEATED.
In the sluggish select and occasion market, brands such as nano universe and NATURAL BEAUTY BASIC faced
a tough battle.

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4Sales by channel.
There is a clear difference between physical stores and e-commerce. This is the same for all other companies,
and we are seeing the same situation at our company as well.
Due to the closure and withdrawal of physical stores, non-department stores were in a very difficult situation,with sales of minus JPY29.28 billion and a growth rate of negative 34%.
EC business continues to be strong, especially on our own website. Net sales exceeded JPY40 billion, with apositive JPY4.34 billion and a growth rate of 12%.

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5EC sales results.
In the domestic market, we have strengthened our business, especially our own website. Overseas,
MARGARET HOWELL in the UK and HUF/TACTICS in the US performed well, with sales up 118.3% YoY to JPY6.8
billion.

The in-house EC ratio is also strong at 43. 9%.

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As for the difference from the disclosure plan, we recorded a large deficit in the first half of the fiscal year
after the declaration of the state of emergency, but as you can see in the table below, the profit related tosales recovery was approximately JPY2 billion in 1 and 2, the expenses related to SG&A cost reduction was
JPY2.6 billion in 3 and 5, and the profit related to business reform was JPY1.4 billion in 4, which had asignificant impact on the improvement of profitability.

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Now, let's look at the impact items up to current net income.
First, look at the table below.
As shown in the extraordinary loss and the graph, we recorded a negative JPY8.64 billion as structural reform
expenses.
On the other hand, we recorded extraordinary income of JPY24.8 billion, including JPY24 billion in gain on
sales of real estate, and secured current net income of JPY3.86 billion.

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8Regarding the consolidated statements of income, the statements of income are as follows.
I hope you will check back later and thank you for your cooperation.

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9This is about the consolidated balance sheet.
Although market trends are very severe, we believe that we are maintaining a sound financial position.
In terms of assets, cash and deposits increased by JPY18.9 billion over the previous fiscal year. For the time
being, we would like to secure cash reserves and make solid investments after determining the end of theCoronavirus crisis and the balance of growth in the market. In terms of investment, we will also focus on
business investment, so we would like to come up with new measures.
In terms of inventories, we reduced inventories by JPY3.28 billion by controlling purchases. This will lead toan improvement in asset efficiency, and we will continue to curb purchasing and balance inventory reductionin this fiscal year as well.
In terms of liabilities, we repaid JPY14.67 billion in short-term loans in Q4. We continue to hold on to the
JPY35 billion special borrowing limit for the Coronavirus crisis.
In terms of indicators, we believe that we have maintained a sound financial structure despite the impact of
the Coronavirus.

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10This is a summary of the previous year.
It has been a very difficult year for us. In the midst of this crisis, I realized once again that there have been
many negative factors in the growth of apparel over the past 30 years.
This is due to the fact that we have been producing too many products, or replicating the previous year's
products, and in many other ways, we have become increasingly homogeneous over the past 10 years.
Based on this reflection, we are now rethinking what we can do to better please our customers. In addition,
all of us, including the employees, are returning to the basics, such as improving our technology and design
skills, and the importance of selling each product with care.
We would like to re-strengthen these areas to create a new and strong corporate structure that will allow us
to learn new and interesting things while collaborating with other companies.
In order to achieve this, I feel that new reforms are necessary, and I would like to strongly appeal for such
reforms.

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The following is our VISION.
In spite of these circumstances, we will continue to strive to be the happiest fashion company in the world.
We want to be a company that creates happiness for our shareholders, customers, society, and employees.

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First of all, it is necessary to change the way of thinking and the customs in the apparel industry, which haveremained unchanged for 30 years.
To this end, we have assembled a team called TSI INNOVATION PROGRAM 2024, or TIP24 for short, and are
implementing measures.

Within this broad framework, TIP24 is organized around three frameworks: innovation in creativity,
innovation in profitability, and innovation in environmental orientation.

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The timeline for doing this framework is shown in the table above.
First, in 2020, in the midst of the Coronavirus crisis, we made painful reforms under very restrictive conditions.
Next, in 2021, which is this year, we would like to make more and more investments in the future toward thelatter half of the year.

Next, as we head into next year, we would like to make a further jump up, in terms of growth and leap forward,
and expand our brand to compete globally and in the surrounding regions.
By doing so, we will strive to become the happiest fashion company in the world by working together to makea solid profit and be environmentally superior.

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To this end, we will continue to enjoy change, make change our ally, and create a new sense of ethics andvalue system.
As we continue to envision the next step, we will spare no effort in taking on specific tasks, being aware ofwhat we can do and what we cannot do.

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The third item is the consolidated earnings plan for the FY2022.
Net sales were JPY152.4 billion, 113.7% of the previous year's level and 89.6% of the year before last. SG&A
expenses: JPY79.9 billion, 52.4% of total. We took into account the fact that the effect of the Coronavirus
remains constant.

As for operating income, we have a firm estimate of JPY1.1 billion. The profit margin is 0.7%. We also plan toachieve net income of JPY1.66 billion.
Although we plan to reduce SG&A expenses by JPY10 billion compared to the FY2020, we have increased
strategic investment in digital EC by about JPY2 billion within SG&A expenses compared to the FY2020.
Excluding this effect, the SG&A ratio for the current fiscal year would be 51. 1%.

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Sales forecast first half and second half.
For the first half of the fiscal year, we have made a conservative forecast, taking into account the impact of
the Coronavirus, of 87.1% of sales compared to the previous two fiscal years, and an operating income ofnegative JPY500 million, sorry to say.

In the second half of the fiscal year, we expect the market to recover to a certain level. We are forecastingsales of 91.1% of the previous two fiscal year's level, and operating income of JPY1.6 billion in the black.
We would like to be in the black in the first half of the fiscal year, but with the current third and fourth waves,the situation is a little difficult to see. We would like to get back on track in the second half of the season, so
that's what we'll do.

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17Fourth , the future growth strategy.
This is the first of the three frameworks I mentioned earlier. Innovation in creativity.
We will consolidate people, goods, capital, and information, and invest intensively in strategic brands.
The first is the hueLe Museum, which is a collection of many brands, and we have added art to the editorialstyle of the museum to create an e-commerce media that mixes contemporary art and new brands. We havealready started in March, and we are also developing a physical store.
As for the priority brands for the current fiscal year on the right, we will reinvest in nan universe and NATURALBEAUTY BASIC as our main brands, which were sluggish last year.
In the area of people, goods, and money, we will focus most of our efforts on reassembling the company,
including our creative directors, to create a more modern and unique structure.

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Next, we will continue to transform our stores into more attractive ones. At the same time, we will strengthen
our efforts to shift our sales channels to e-commerce.
First of all, we would like to evolve our highly profitable stores, improve the attractiveness of our existing
stores, and open stores with a new sensibility, such as the hueLe Museum that I mentioned earlier.

Also, including existing stores, we will improve the attractiveness of our stores and introduce products
through digitalization, and communicate with customers and in-store staff through unified commerce.
The best part of fashion is that if you have a good location, a great store, interesting products, and sales staff
who can make fun suggestions, you probably don't need much more.
We will try to make our stores more attractive by adding digital technology, such as EC, into the mix.
For low-profit stores, we will shift sales channels to the EC. The appeal of the brand will be conveyed throughEC.
We will also cover our profitability through EC, and will make a decision including withdrawal based on the
progress of sales.
First, for low-profit stores, we will strengthen customer transfer from stores to EC. There is also the possibility
that the profitability of a low-profit store can be improved by transforming the business inside, so we willconsider whether or not to withdraw from the store while taking this into account.

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We will acquire customers in new economic zones and expand the business of D2C conglomerates.
With the aim of expanding the D2C brand, ETRE TOKYO, which was acquired in FY2021, has been profitablesince its first year and has contributed very much to the Group's performance.
Also, in terms of new ways of proposing fashion, it has been performing especially well among the group due
to JUNNA, an influencer who has a huge following among the F2 generation.
Also, I launched a brand called MECRE. We believe that influencer MAI, while being a fashion model, is also
involved in the development of people and things, and is attracting attention by proposing lifestyles for the
new generation, including cosmetics.

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We will enhance new experiences, services, and OMO mechanisms.
With the power of digital and sales staff, we will create new experiences and new points of contact withcustomers. We have two strategies: Unified commerce strategy and staff commerce strategy.
Although there are many strategies, TSI focuses on two.
In addition to the appeal of products, the appeal of people will turn customers into fans. Both strategies will
increase the opportunities for sales staff to play an active role, as well as reform the evaluation system forsales staff who have captured more fans.

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I would like to show you this video.
This is a PR video made by the digital team of nano・universe. It addresses questions such as How do we wantsales to be? Also, how do we want manufacturing to be for the next generation? How should it be created in
the factory? And finally, it is a video that brings together how an ideal supply chain should be.

This is all content that can be utilized within the resources that we have invested. Please take a look.
Thank you.
(Show a movie)

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We will talk about data management and advanced supply chain.
Address discontinuous markets. Now, how can we speed up management in a situation where these sales
floors are stopped and there is no continuity? We will continue to work on the evolution of SCM throughdigitalization.

Two of these are management DX, or real-time management, and production reform, meaning fasterproduction and logistics. In total, the need for faster management has become paramount.
With the establishment of a single company, we will unify the data management that has been carried out
separately by the operating companies and utilize it dynamically.
In order to achieve fast decision making and fast execution, the current fragile supply chain will not be able
to be reformed in time, so we will reform the supply chain to bring it to a solid state.

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The next video you will see is a presentation of a product using 3D CAD.
(showing a movie )This is a video of a men's brand called MANASTASH, an outdoor brand, and ETRE TOKYO, the D2C brand that
I mentioned earlier. This is a system that allows our pattern makers to use 3D CAD for product presentation,
patterning, as well as for exhibitions and presentations to customers.
We would like to propose products and images with new perspectives, while using many of these items andreducing sample costs.

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24This is the last framework of TIP24, and I would like to explain about innovation towards environmental
orientation.
The TSI Sustainable Project team has been established with the theme of redesigning the social value of theapparel industry.

I feel that we want to be reborn as a company that is highly needed, solving social issues starting with theSDGs.
I will explain the details later, but as mentioned in the third item, we are starting to create a new culture by
investing in the business of contemporary art.

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We would like to take on the challenge of creating a sustainable manufacturing and sales model and arecycling business for clothes.
First of all, in order to eliminate waste, we send our inventory products to our factories in Yonezawa andMiyazaki, where they are reused as new materials and products. So, we are now setting up a design team tosee if we can create new products that are also universal.
Also, for items that are judged to be better for recycling, we will separate them into accessories, fabrics, andmaterials, and reuse them. We want to bring them into a position where they can be recycled. As an outlet
for this, we have a mending business called “ReSew”, and we would like to take this to the next level andlaunch a company-wide mending and remaking business.
In addition, as part of our efforts to achieve decarbonized management, we achieved our quantitative targets
for the previous fiscal year. Therefore, we will switch to environmentally friendly materials as an item forquantitative implementation this fiscal year. The switchover will include lock spins, vinyl hooks, and so on.
we are switching to use reusable hangers ,whichare expected to be 100% completed this fiscal year.

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We hope to contribute to solving social issues through the power of design.
The first is lifestyle values. We would like to combine the diverse assets of the regions with the design andconceptual capabilities of TSI.
In the future, we plan to sign a comprehensive partnership agreement with Kamikawa Town in Hokkaido forthe creation of culture. Here, local resources are used to create, for example, campgrounds, cafes, andcomprehensive playgrounds that include other brands. We would like to work together with the local
governments in the region on a wide range of such projects.
In the area of work style value, we will try to collaborate with brands to create uniforms and uniforms byutilizing the power of fashion and TSI 's design capabilities.
Most recently, we collaborated with Nishitetsu Air Service and nexus, a nursery school operator, to produce
uniforms and clothing for their nursery workers .

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I will talk about our future financial strategy.
We will strategically invest in digital and new businesses while focusing on stabilizing management. We will
improve investment efficiency and conduct optimal capital policies.
As a medium-term policy, we will invest JPY2 billion in new businesses, JPY4 billion in reinvestment in
profitable assets, JPY5 billion in investments for the growth of existing businesses, and JPY5 billion in system
investments. Of course, we will take into account the economic and market conditions in these areas.
Secondly, I would like to improve asset efficiency and reduce fixed assets and inventory. We would like to do
this based on the idea of selling off policy investment shares, forming new alliances with companies, andshortening the inventory turnover period, which has been an issue for us. Through these measures, we want
to always sell off more enjoyable products without leaving anything behind.

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Shareholder return policy.
The Company plans to pay a dividend of JPY5 per share, taking into consideration the business results for the
fiscal year under review and the future business environment. Although we did not pay dividends in theprevious fiscal year, we will make further efforts to pay more dividends in the current fiscal year.

However, in view of the market environment, we would like to start with a dividend policy of JPY5 per share.

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Lastly, in the previous fiscal year, we posted a very large deficit. This was an opportunity for us to reconsider
our way of making and selling products, as well as how we invest in our business.
Last year, the catchphrase, s was adopted and we all worked hard on it.
Because when the store was closed and there were no customers, we realized how much we were encouraged
by our customers and how much we enjoyed doing business with them.
Everyone became more and more listless as the stores were closed and they could not be reached. From now
on, we will continue to connect with our customers more than ever, create good products, regain their trust,and evolve our business. I would also like to prove to the market and our stakeholders that TSI is a company
that can evolve, and I would like to ask for your continued support in this endeavor.
I'm looking forward to working with you. Thank you very much.
Moderator: Thank you very much for your attention.
We have omitted the sections of sales by brand as well as store openings/closings from our explanation, butof course we will accept your questions in the following question and answer session, and we have also added
these sections to the end of the presentation materials, which are posted on our website. I hope you will takea look at these materials as well, while we proceed with the question and answer session.
[END]______________
Document Notes
1.
2.
3.
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TollfreePortions of the document where the audio is unclear are marked with [Inaudible].
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This document has been translated by SCRIPTS Asia.

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