TSI HOLDINGS CO., LTD.
Q2 Financial Results Briefing for the Fiscal Year Ending February 2024
October 16, 2023

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

[Company ID]

3608-QCODE[Event Language]

JPN[Event Type]Earnings Announcement[Event Name]

Q2 Financial Results Briefing for the Fiscal Year Ending February 2024

[Fiscal Period]

FY2024 Q2[Date]

October 16, 2023

[Number of Pages]

21[Time]

10:00 – 10:55(Total: 55 minutes, Presentation: 28 minutes, Q&A: 27 minutes)[Venue]Webcast[Venue Size][Participants]

45[Number of Speakers]

7
Tsuyoshi Shimoji
Masanori Maekawa
Mitsuru Naito
Genya Oshiki
Hiroyuki Watanabe
Shunsuke Hasegawa
Manami Shiraishi

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President and CEO
Director, Platform Headquarters
Director, Corporate Headquarters
Director, General Manager of Business
Headquarters
Operating Officer, Deputy General Manager
of Platform Division
Investor Relations & Corporate PR AssistantManager
Investor Relations & Corporate PR

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Presentation
Moderator: Good morning. Thank you for joining us today. It's time to hold a briefing on the financial resultsof TSI HOLDINGS CO., LTD. for H1 of the fiscal year ending February 28th, 2024.
First, I would like to show you a video of the earnings presentation, and then I will begin the Q&A session.
Now, please run the video of the financial results presentation.

Shimoji: Good morning. I am pleased to report the details of our financial results for H1 of the fiscal year
ending February 2024.
Here is a summary of the financial results for H1 of the fiscal year ending February 2024. Consolidated net
sales were JPY73.27 billion, operating income was JPY530 million, and net income for H1 was JPY1.47 billion.
Sales exceeded the previous year's record but fell short of the sales goal due to the struggles of large brands
and overseas business. Operating profit also fell short of the plan as a result of inventory backlogs caused bysales plan shortfalls having a negative impact on some businesses.

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Consolidated financial results. Gross profit was JPY40.84 billion, 100.3% of the previous year's level. In termsof gross profit, our careful sales management is showing a better trend than in past years, though little bylittle.
On the other hand, costs have increased due to the weak Japanese yen, impacted by exchange rate
fluctuations and raw material price hikes, as well as an increase in remaining inventories. This led to anincrease in discounts and write-offs, which caused gross profit to deteriorate by 0.8% from the previous period.
SG&A expenses totaled JPY40.3 billion, 100.4% of the previous year's level. We withdrew unprofitable brands.
In addition, the Company carried out the consolidation and relocation of the headquarters last year to
improve cost efficiency by 0.7% over the previous year, which was already in good shape thanks to subsidies.
However, the deterioration of distribution costs due to increased inventories and the impact of utility costs,
among other factors, prevented the improvement from exceeding our expectations.

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Next, I would like to look at net profit and impacting factors. Adding non-operating profit and loss such as
dividend profit and real estate profit, ordinary profit is JPY1.6 billion.
Adding extraordinary gains and losses of JPY410 million, including gains on sales of investment securities andimpairment losses, and income tax adjustments, net income for H1 was JPY1.47 billion with a profit margin of
2%.

Next, balance sheet. First, cash and cash equivalents decreased by JPY12.4 billion from the previous period,
reflecting a JPY5.4 billion increase in inventories and repayment of loans.
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4Inventories differed from the previous period, with bulk purchases of long-term sales goods and others, which
are treated as standard items, but there was a lack of digestion of spring/summer merchandise in somebusinesses. This resulted in 127.6% from the previous year's level, or an increase of JPY6 billion over theprevious year. However, we have built a plan to dissolve these inventories and are currently in the process of
doing so. In addition, it’s getting cooler under my feet, in fall and winter selling is much easier. It is the season
that we can fully exhibit our expertise, and we will make a strong effort to sell our products during the period
from October to December.
With regard to treasury stock, the Company continues to purchase treasury stock as part of its capital policy
implementation and shareholder return policy. In addition, a new share buyback of JPY5 billion is scheduled
to begin on October 16.

Next is the sales overview by channel. Cumulative sales are on a growing trend. Obviously, some channels are
winning some are not, and we will strive to secure earnings by finding a balance between offense and defense.
As for the circumstance surrounding retail stores in Japan, we see a flux of visitors in towns, and we can expect
abundant customer traffics. In addition, the recovery of inbound sales has led to a significant leap in sales,
particularly in street fashion brands. However, we have closed 41 unprofitable stores since the previous year.
Even under these circumstances, the result was 103.4% compared to the previous period.
In the domestic e-commerce business, there was an impact from the withdrawal of brands. Despite theimprovement in profitability due to the impact of restrained discounting in other companies' e-commercebusinesses, sales remained at 93.5% of the previous year's level.
In addition, overseas wholesale and Europe were strong, but the sales had some slump. I am under the
impression that this may be a result of a reactionary trend to sales during the anniversary year of our US brand,
HUF, as well as a drop in consumer demand due to rapid inflation. However, overall, I think consumption isrising. In the skateboarding segment, other activities are on revival while shopping centers are also making acomeback, so the decline in some of these particular segments has been intense, contributing to the factor ofmarking 93.6% compared to the previous year.

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5E-commerce sales results. E-commerce sales in H1 were JPY18.45 billion, 93.4% of the previous year's level,
and ended weak partly due to the withdrawal of three brands: BOSCH, SUNSPEL, and UNDEFEATED.
There was a decline in consumer confidence due to higher commodity prices. Customer traffic shifted to retailstores and the retail sales grew, on the other hand, we were unable to thoroughly prepare inventories of highturnover products, and we fell short of offering new content. We were unable to increase our e-commerce
sales as a result, which I think is a point of reflection.
Moving forward, we will keep in mind that the entire company will be cross-functional. First of all, we will
begin to build a mall that will offer coordination proposals that transcend brand boundaries and consolidate
the women's category on our own e-commerce site MIX.Tokyo. We will take action to maximize the growthof e-commerce sales by acquiring new customers and adding measures to ensure that no sales are left undone.

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6Eight of the top 10 sales brands in exceeded the previous year's sales.
However, the mainstay brand PEARLY GATES was the major negative factor, at 94.9% of the total comparedto the previous quarter. As for HUF, sales in the US were sluggish at 86.8%, a significant downfall.
First, regarding the two brands, the negative performance of PEARLY GATES does not mean the demand forgolf has declined, rather, the demand has settled after the peak. We believe that we can further improve thesales floor design and methods of developing business.
Domestic demand for the HUF brand remains extremely high, and the growth rate of our two main street
brands, HUF and STUSSY, has been tremendous. Therefore, we are planning on coupling these two brands.
MARGARET HOWELL's sales are recovering. AVIREX and STUSSY continued their strong performance from theprevious year with double-digit growth.
In the new brand and women's apparel category, LE PHIL is doing very well, and we are preparing to open a
new store. ADORE is producing hit merchandise and the brand's products are gaining customers' favor,
reviving once again as a strong brand.
In the street fashion category, BAIT and BEAVER, although still small in size, have been very popular for theircasual feel and are making great strides.

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TIP25 and the initiatives of each division will be discussed.

In the wellness & lifestyle category, we will create an attractive community. Net sales were JPY23.67 billion,or 104.2% of the previous year's total. As a percentage of sales, it accounts for 32.8% of the Company's total
sales.
First, we ware built a new press room in the basement of our headquarters, which will house a collection of
popular golf brands. We would like to use the power of digital technology to create a new communication
tool here.
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In the lifestyle category, our brand SEVEN BY SEVEN was participated at the Tokyo Collection at the Rakuten
Fashion Week TOKYO. The response has been so positive that we would like to continue the program in aneven more aggressive manner.
Furthermore, we opened a Shinjuku Isetan store in August, and a roadside store in Yoyogi (Yahata) in October.
Customers have responded well, and we have high expectations that we will be able to grow well.

Street & culture. We will create a platform for play rooted in the spirit of the street. Net sales were JPY25.65
billion, 100.2% of the previous year's level. The sales composition is 35.6% of the total sales.
HUF held its first NFT event. The design was originated in the US and conducted in Japan as a trial. It was
designed by HUF ambassador REMIO, and live painting was done with main guests from the US. We would
also like to inform you that a very large number of our customers who participated in the event owned NFT
cards and have participated in this new endeavor.
In addition, although it still has only a small number of stores, “Forget-me-nots” is performing well with a
171% increase over the previous quarter. The brand is also always involved in events and social contributions,
including sustainable and material development. In particular, this brand often collaborates with Nike, butlast year they also developed materials and held an exhibition in cooperation with Tama Art University.
In addition, we are providing free store space to female artists to support them in holding art exhibitions, andwe are communicating and collaborating with them for everyone's enjoyment.

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Fashion capital. We will provide services that actively respond to the changing times. Net sales were JPY17.02
billion, 103.9% of the previous year's level. Sales accounted for 23.6% of total sales.
First, Arpege is a new business model whose strength lies in information dissemination and experiential valueand has opened in Shinjuku Marui. In addition to selling, we have created a studio with an assortment of
Arpege brands, which serves as a live-streaming and event space. It is not only a sales floor, but also acommercial facility that serves as a base for information dissemination.
For the human woman brand we developed the product in collaboration with Urth Caffé, a café we operate
in-house. The products are sold at human woman stores and the café, and are very SDGs and ecological aware
products. We sold these and donated a portion of the proceeds to environmental protection projects.

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10Next is another digital generation brand. First, we will create content that will capture the ever-expanding
next generation. Net sales were JPY5.74 billion, 96.3% of the previous year's level. The sales composition is
8%.
First, let me introduce the hueLe Museum. It started as a pop-up event and now, grew to be a regularstorefront at GINZA SIX. Extremely positive feedback slowly came in. We have high expectations that the newstore will be ready in the next fiscal year.
At the 2023 FW exhibition, for the first time, we invited customers who support the hueLe Museum to cometo our store and visit us. We created a museum space with clothes that would allow visitors to enter the worldof art and experience fashion, flowers, and art within this concept. We were very pleased with the turnout
and hope to launch more of these events in the future.
As for JILL by JILL STUART, the brand celebrated its 15th anniversary. We brought back some of the fan favorite
products to launch the COME BACK PROJECT as a token of appreciation.
In addition, bags and accessories are also very popular and have been transitioning, and we intend to continue
to develop JILL by JILL STUART, which is rich in appeal, while incorporating new digital transmissions, for abrand that will be loved for a long time to come.

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11Next, I would like to discuss our efforts regarding the SDGs.
Our greenhouse gas emission reduction targets have received SBT certification. It was certified by the SBT
Initiative as a scientifically based goal as defined by the Paris Agreement.
We will continue to work toward a sustainable society with the purpose that is: to create global empathy andsocial value through the power of fashion entertainment. And, in line with the TCFD framework, we willfurther enhance the time of information disclosure and take action.

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Progress in sustainable innovation. We have been introducing this organic cotton development project forsome time.
Organic cotton is grown from soil or seeds, the cotton flowers bloom, and the yarn is completed. We are now
going to do the braiding. We are pleased to report that we are in the process of commercializing the productunder our brand. When the product is finished, we will also work on this kind of video and present it to you
to tell its story.
Arpege story also utilizes environmentally friendly recycled materials.
And, we are educating our employees about quality, quality, trouble, and various information exhibitions.
Among other things, we are expanding the exhibition on sustainable manufacturing for all employees,
including those in charge of the SDGs, are taking action to deepen each employee's knowledge.

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13This is an initiative to create a sustainable community with the town of Kamikawa, Hokkaido. Since the signingof the comprehensive regional agreement in October 2021, we have been implementing ongoing initiatives.
We continue to work together on new projects such as the Ishikari River Cleanup Operation, the Taisetsu
Ikimono Zukan project, and the corporate version of the hometown tax.
We will also continue to introduce the SDGs on our website. We would like to expand this nationwide, so thatwe, our employees, and the local community can enjoy ourselves, create new products, and build new
relationships.
The SDGs website was newly established this July. We will be disclosing more and more information therethat we are unable to introduce here, so we hope you will take a look.

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Next, I would like to discuss the full-year forecast. The full-year operating profit plan and net profit plan remainunchanged at this stage.
As for improvement measures, the select business category of the UENO SHOKAI business, which is a strong
business, is performing well, supported by inbound sales. We will also invest intensively in advertising, store
openings, and pop-ups for strong businesses such as street brands HUF and STUSSY, and men-friendly brands
AVIREX and Schott.
Second, we will expand sales by strengthening our e-commerce business. We will consolidate as much as
possible the e-commerce business types that we have been doing individually and concentrate on attracting
new customers and expanding our new sales network.
The third improvement measure, we would like to carefully control our inventory for the fall and winter andsell all of our products carefully by holding events and special events.
The fourth improvement measure is to control SG&A expenses. We will visualize and coordinate how humanresources are moving in the right place at the right time in their roles more than ever. In this way, we willcontrol SG&A expenses, including personnel and store management costs.
Through these efforts, we are determined to achieve our full-year operating profit target of JPY4.7 billion andnet profit target of JPY3.5 billion.

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Let me now discuss shareholder returns. An additional JPY5 billion in share repurchases will be made as partof a capital policy aimed at enhancing shareholder returns and improving capital efficiency.

It is about management with an awareness of the cost of capital and stock price.
To understand the current situation, a breakdown of PBR and a comparison with other companies in the same
industry are shown in the table. The Company's level of variation is below average for PBR and ROE. Obviously,
the issue here is ROE, and we will focus on measures to raise ROE.

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Current situation two. Due to the low ROE compared to our company's perceived cost of equity capital level,
the P/B ratio has remained below 1x. As shown in the comparison in the previous section of the table, whichshows the current situation, ROE is 8% in the textile products industry, and the P/B ratio is generally 1x.
We intend to achieve a P/B ratio of 1x by controlling the current cost of shareholders' equity, achieving ROE
that exceeds the cost of shareholders' equity, and increasing the equity spread.

Current situation three. We aim to improve ROE by increasing profitability, enhancing shareholder returns,
and improving asset efficiency through the reduction of non-business assets.
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17Based on the above, we have established indicators that we should aim for in the future. We are considering
measures to achieve the indicators in terms of business, financial capital, and non-financial information, andwill disclose information on specific measures in April 2024.

Through the power of fashion entertainment, we will create empathy and social value around the world. We
are committed to this mission as a fashion entertainment creation company, TSI HOLDINGS. We exist becauseof our customers, who guarantee our employment. We will not lose sight of this and will ensure every unit of
the Company, storefronts, and e-commerce engage in the support framework.

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The coming fall and winter months of October, November, and December are our best months. With theautumn winds blowing, we are determined to make a thorough company-wide sales effort. We will also
consider and execute numerous events and pop-ups.
In addition, we are preparing to create new market needs by developing new brands while downsizing andwithdrawing from old brands. First of all, if we are asked what we want to do, we are a fashion company, andwe want to develop new brands that will create the next generation and build interesting brands that canspread their wings around the world.
As a company capable of developing exciting and interesting brands, we are also committed to training thenext generation of creators. We have already begun to work on developing new sensitivities. We will invest
in talented creators and strive to create enjoyable products as an entertainment company that communicatesthe best creations.
We are constantly customizing and remodeling the sales floor to create a new and more enjoyable experiencefor customers and staff alike. I hope you will take another look at those areas and enjoy them.
Our game depends on how well we can create a brand with great value 5 or 10 years from now, a brand thatcan create fans who will love it for years to come. We would like to make a firm commitment to this and lookforward to working with you in the future.
Thank you.

[END]______________
Document Notes
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TollfreePortions of the document where the audio is unclear are marked with [Inaudible].
Portions of the document where the audio is obscured by technical difficulty are marked with [TD].
Speaker speech is classified based on whether it [Q] asks a question to the Company, [A] provides ananswer from the Company, or [M] neither asks nor answers a question.
This document has been translated by SCRIPTS Asia.

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