TSI HOLDINGS CO., LTD.
Q1 Financial Results Briefing for the Fiscal Year Ending February 2022
July 5, 2021

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

[Company ID]

3608-QCODE[Event Language]

JPN[Event Type]Earnings Announcement[Event Name]

Q1 Financial Results Briefing for the Fiscal Year Ending February 2022

[Fiscal Period]

FY2021 Q1[Date]

July 5, 2021

[Number of Pages]

24[Time]

10:00 – 10:55(Total: 55 minutes, Presentation: 29 minutes, Q&A: 26 minutes)[Venue]Webcast[Venue Size][Participants]

68[Number of Speakers]

3
Tsuyoshi Shimoji
Hiroyuki Watanabe
Kohei Yamada

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Presentation
Yamada: Good morning. Now that it is time, I would like to start the Company's first quarter financial results
briefing.
First of all, we will present the financial results briefing from Shimoji. This will last a little over 25 minutes.
After that, we would like to take your questions. I know many people are familiar with Zoom, but this time wewould like to hold the question-and-answer session using the platform’s Q&A function.
Now, I would like to begin the presentation of the financial results briefing first from Shimoji.

Shimoji: Hello everyone. I would like to hold the financial results briefing for the first quarter of the fiscal year
ending February 2022.
Let's take a look at market trends.
At present, the outlook is still unclear. In the prolonged effects of the novel coronavirus infection, there arestill risk factors that are directly linked to business results, such as the state of emergency, store closures, andshortened hours.
In the recovery, we believe that it will not be easy, but in the future, we are expecting various measures, suchas the start of vaccinations, to be effective. Although the economy is definitely expected to recover in the
future, the pace of market recovery in the apparel industry is fairly moderate, and we expect the severe
environment to continue for the time being.
If we simply maintain a passive attitude based on existing management methods, we will face further
difficulties, so we will continue to create a stronger management foundation and take on new businesschallenges with this in mind.

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The impact of COVID-19.
In March our results were very strong, but since April, the effects of COVID-19 expanded and more than 300
of our stores, mainly in metropolitan areas, were closed. Along with that, there were many stores thatshortened business hours, so it had a great impact on us management-wise.

This makes us think about what we should be doing in this harsh environment, and where we should be aimingfor?

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In order for us to evolve and continue to change, we have been carefully and thoroughly reforming in the firstquarter to become a profitable corporate body despite a harsh management environment.
Having integrated management and completed the first phase, from March we have developed humanresources and our businesses in a manner of investment for the future, ecommerce, digital shift, and newinvestments.
In order to enhance the future happiness of our stakeholders, we will continue to take on challenges without
staying stagnant here in order to create new value.

First of all, I would like to present a general report of our financial results for the first quarter.
Here are our performance highlights.
Under severe market conditions, we have thoroughly withdrawn from our business and reduced labor andSG&A expenses. We have achieved sales of 157.8% YoY and an operating income of JPY2.27 billion throughthe accumulation of detailed actions.
In addition, the YoY profit difference was plus JPY8.71 billion, which is a significant increase in operating
income from the previous fiscal year.

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4Next is operating profit transition.
We are improving profits by streamlining the organization through structural reforms and refining
management controls. In the first quarter, we recorded the highest profit in the last 5 years.
As I mentioned earlier, operating profit is JPY2.27 billion and the profit ratio is 6.6%.
As a major factor, the Company's strong businesses such as golf, athleisure, and street casual have expanded
further. Second, we have promoted selling old products at reasonable discounts. I think that we were able tosell appropriately by reducing inventory while maintaining yield. The third is the suppression of purchasing.
While reducing SG&A expenses, we have been developing a system that allows us to sell firmly in a very
compact purchase.

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5This is the breakdown of gross profit and SG&A expenses.
Gross profit was JPY19.14 billion in the first quarter. Purchases were reduced to around 82% compared to theprevious fiscal year. First of all, we promoted the sale of products that were not available for sale in theprevious fiscal year at a fixed price. We sold at proper yield to improve the digestibility of our inventory. A
profit improvement of JPY10 billion was made compared to last year.
Next, SG&A expenses. JPY16.87 billion. We withdrew unprofitable businesses through structural reforms,
reducing fixed costs, and reviewing variable costs. Unfortunately, we have also made reductions in employee
performance bonuses, and we saw an improvement by JPY5.9 billion compared to the previous year. Until
now, the SG&A expense ratio has not been able to cut 50%, but with this measure, we have been able toimprove to 49.3%.

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Next, net income impact items.
Operating income was JPY450 million, due to foreign exchange gains, dividend income, real estate income, etcetera. Extraordinary income was JPY510 million, mainly due to gains on securities sales and business sales.
Temporary loss due to the impact of COVID-19 was minus JPY590 million. The net profit was JPY2.43 billion
with a profit margin of 7.1%

Next we will report on the business situation in the first quarter.

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7This is operating income, revenue structure by segment.
Strong brands such as golf, athleisure, and street-casual drove profits. On the other hand, the demand foroccasions, commuter clothes, and urban brands are still in a harsh environment.
Looking at the performance of golf, street-casual, and athleisure, sales increased to JPY13.86 billion andoperating income of JPY2.04 billion. In addition, other occasion select and sluggish brands have actual salesof JPY12.62 billion and an operating income of minus JPY360 million.
As you can see from this, strong businesses are the key to earnings in Company-wide profits.

We will explain operating income and strong businesses.
Brands with uniqueness and high customer engagement are doing very well. All 3 brands have experienced
significant sales growth compared to the year before last, driving the Company's performance. The brands
that are very strong are “PEARLY GATES”, “HU”F and “UNDEFEATED”, businesses related to athleisure, streetcasual and outdoors, so please take a look at the number graphs.

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We will explain new initiatives in other domains.
We want to create new brands, merge music, art, and culture, and avoid stagnation by continuing to create
new customer value.
“MARGARET HOWELL” held exhibitions in Tokyo's Daikanyama and Kyoto for the 50th anniversary of its
establishment. It’s the 50th year the brand has been supported by its customers, and more than 3,000
customers enjoyed it.
In addition, “hueLe Museum” has created TV advertisements as a new business development, and “ROSE BUD”
debuted a new brand, “mag.by c”.

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We will now report on the business situation by channel.
Here are sales trends by channel.
The composition ratio of sales for department stores was 9.6% and commercial non-department stores was
41.8%, shrinking compared to last year and year before last, while the ecommerce channels and businesses
other than apparel have been firm. On the other hand, in the overseas business, sales in the US and Europe
compensated for the withdrawal and shifted to the phase of regrowth.
First of all, please take a look at the sales of department stores, at JPY6 billion in the fiscal year ended February
2020. At this stage, it is JPY3.3 billion for the fiscal year ending February 2022. Besides department stores,
sales reached JPY22.5 billion in 2020 and JPY14.3 billion in the fiscal year ending February 2022, andecommerce sales have grown to JPY9.4 billion in the fiscal year ending February 2022, compared to JPY7.95
billion in the year before last.
In addition, we are growing very effectively both overseas and in domestic others. Overseas, the profit margin
has increased significantly, although sales is about same level as last year at JPY2.1 billion. Overall sales havefallen, but you can see that the content has improved significantly, the earnings structure has improved, andcontributed increasing this operating income.

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10Next is ecommerce.
In particular, ecommerce is moving in a good direction, because we focused on in-house ecommerce. Sales
are at 205.9% compared to the year before last. Overseas ecommerce was strong, and the US’s “TACTICS”
and Europe’s “MARGARET HOWELL” are responding well to the forecasted end of COVID-19. In the firstquarter, the first ecommerce sales exceeded JPY10 billion, so we would like to take this as an opportunity forthings to take a positive turn.

I would like to explain about the benefits and improvements from digitalizing the work of shop staff.
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First of all, we are strengthening staff coordination content. With 311% of posts compared to the previous
quarter, we have expanded our content and are able to greatly strengthen our future sales base.
Also, we expanded our online customer service. The conversion rate of customers via online customer service
is about 30 times or more compared to regular ecommerce, so it has grown to be carry some weight. For“MARGARET HOWELL” and other brands that have a particularly high customer rates, it has grown to accountfor about 15% of our ecommerce sales.

Continuing with new experiences, I would like to first introduce nano universe’s style of DX efforts.
First of all, we score the ability of sales staff and are trying to encourage more activity among the sales staff.
In addition, we are strengthening customer engagement and directing customers from ecommerce to stores.
This mean that when customers make a reservation for a fitting at a store, sales staff can prepare for the
products according to their customers preference at the store, and then sell the set. It is a service that can
provide fun and enjoyment to the store visit by encouraging customers to see more than just what they werelooking for.

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I will talk about our environmentally friendly initiatives.
I will first report on the problem solving through fashion and technology.
We propose ethical manufacturing using digital technology. The brand “FLOML” will collaborate with a farmon Ishigaki island to propose natural plant dyes for dyeing. First, we make a design and wear it as white for a
few years, and then dye it again. At that time, we will create 3D graphic data, re-proposing the dye, and thenactually dye the product according to the customer’s request and handing it back over. This way, the productis further reused.
Next is the challenge of curbing global warming. “SONY” and “PEARLY GATES” collaborated to create awearable thermo device, which is compatible with “REON POCKET2”. Since this was released on July 1, I would
like everyone to buy it and experience temperature control so you can comfortably spend time both outside
and inside. By suppressing the usage of energy for air conditioning, we hope to fight global warming.

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Next, the creator’s responsibility. Reborn what is thrown away. We are make good choices for the future
global environment.
Reusing discarded ingredients for fashion. This uses discarded foods to create a natural dye, and the products
are dyed and made.
In addition, in addressing environmental issues and improving soil and water quality, “NATURAL BEAUTYBASIC” has switched 30% of its 100% cotton products to organic cotton.

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We aim to reduce CO2 emissions throughout the supply chain.
First, reduce plastic by reusing hangers. This is an idea that will start full-scale operation from this fiscal year,
and by constantly reusing 5 million hangers for delivery, we will drastically reduce disposal.
In addition, we will reduce CO2 emissions by streamlining materials. By narrowing down the number ofcardboard box models used in delivery to less than half and centrally managing the cardboard made by each
operating company, we are working to reduce costs, reduce space, and reduce the environmental burden
during production by consolidating.

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We will report on the balance sheet and future investment strategies.
Our financial position remains in a healthy state. We will revitalize investments for DX infrastructure and newareas of business development. We will make effective use of our funds.
With regard to cash and deposits, we have secured JPY30 billion to JPY35 billion in appropriate cash on handdue to the pandemic without any problem, and we would like to implement investments while assessing
market growth.
With regard to inventories, we were able to significantly reduce inventories based on purchase curtailing andprioritizing old product digestion. With regard to inventories, they were at 69.2% compared to the previous
fiscal year and improved JPY8.3 billion in value YoY.
With regard to loans, we have maintained a short-term line of credit of JPY15 billion as unused balance, so we
believe that there is sufficient leeway for future investments.
We have a capital adequacy ratio of 67%, and we will make strategic use of it in the future.

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Next is our investment strategy from here on.
We will strengthen SCM and CRM through digital investments. Our idea is to increase profitability to deal withdiscontinuous markets. We would like to think of centralizing our inventory, direct store sending, and CRM
integration as our 3 major pillars.
When it comes to inventory centralization, we started a system to unify inventory data that was separated bychannel.
With regard to direct delivery from stores, we will also reduce logistics costs by simplifying logistics in linewith the centralized inventory, and by sending them from factories and shipping destinations directly to stores.
We're going to transfer that to digital management.
We will start integrating CRM, but we will consider the acquisition of members and increasing customer
engagement by utilizing the scale of the entire Group as a strategy, and we will further improve lifetime value.

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We will rethink our global strategy. We will revise our global strategy and try it again.
With regard to overseas sales, sales in the last 3 years have been growing steadily due to the effects of M&A.
In the fiscal year ended February 2020, the Company's total was JPY8.5 billion. This will be JPY9.9 billion in thefiscal year ending February 2022, and we expect it to grow very effectively. In addition, the profit structure
has become very promising, so the Group as a whole is increasing its contribution.
Looking at the right side, “HUF”, which was acquired, is rebuilding well. This is also expected to be profitable
this fiscal year. We will put out our utmost efforts.
With regard to “TACTICS”, EC is expanding very much, and we are currently working with the US to think about
how to develop this brand itself in Japan.
Next, in the golf segment, which is performing well, we would like to expand into Hawaii and wholesale in the
United States.
In addition, in the EU, we are considering the re-growth of “MARGARET HOWELL” and expansion including
wholesale and cross-border ecommerce in Europe of “and Wander”, which is a subsidiary under our own
brand.
In addition, as for our business in China, we would like to change the functions of subsidiaries, and focus onecommerce and procurement. In addition, as we should rethink strategy in ASEAN owing to withdrawal of
TSI-ASIA .

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I would like to report on our full-year forecasts.
The state of emergency was prolonged and has had a very big impact. Under these developments, sales
recovered more slowly than expected. Though we planed the sales down would 87.1% compared to year
before last, The resuls were 80.8%. However, we got off to a good start in the first quarter as a result of bettergross profit and reduced SG&A expenses. For this reason, we expect to achieve operating profit in line withthe disclosure budget.
First of all, although the top line is lower, we will recover toward the second half of the fiscal year, so we will
aim to achieve our full-year operating income budget.

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19This is the forecast for the first half of the fiscal year.
The second quarter is mainly about the discount season and the off-season period. Therefore, since it will betime to try to spit out profits by all means, it is amid a deficit budget. In order to change the current situationthat has continued for many years, we are moving to a situation where we will reduce sales whilestrengthening profitable sales and reduce discount rates.
However, there are still some things that are likely to take more time. After all, we are preparing to shift thecurrent business and creating a flow of it. As in the first quarter, we will continue to carefully manage, and we
expect to achieve this with an operating profit budget of minus JPY500 million in the first half.
Of course, we hope you understand that we will take the greatest action to achieve a surplus.

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Now, I will talk about Our WILL.
We will continue to improve the soundness of our business through precise management controlling. We willrealize business evolution through supply chain reforms, digital store development, new services, and newcontent development.
In addition, we will continue to speed up our activities to create new businesses without staying in this market
environment.

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21Based on this, we aim to be the happiest fashion company in the world.
Anyway, since there are products and it is our business with people, we will carefully make products one byone, create shops, nurture people, and operate businesses that can become the most beloved brands andcompanies, so please keep supporting us in the future.
Thank you very much.
[END]______________
Document Notes
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