MEDIUM-TERM
BUSINESS STRATEGYContents
1.

Background and Objectives

2.

Purpose of Transformation

3.

Quantitative Targets

4.

Financial Strategy & Capital Management

5.

Sustainability Management1
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Evaluation of TIP25
In April 2022, the TSI Innovation Program 2025 (TIP25) was introduced as an
updated version of the Medium-Term Business Strategy. However, the company
has fallen far short of its goals by the end of the second year of the plan.

TIP25 Target

Actual(In Billion JPY )(In Billion JPY )

172.3

155.4

EC Ratio

35%

28%

SG&A
SG&A
(SG&A
(SG&A Ratio)
Ratio)

92.8

82.9

FYE Feb 2024
Sales
Sales
(YoY %)(YoY%)(109.6%)(100.6%)(53.9%)(53.4%)

4.7

1.7

OperatingOperating Profit
Profit(Margin)(Margin)(2.8%)(1.1%)

ROE

5.3%

5.0%

Business
Investment
Repurchase ofTreasury Stock(FYE Feb 2025 Target)(2.9% in Real Term)

30

11.1

ー

9

While some businesses
underperformed, the company's
delayed response toenvironmental changes also
affected results.
The TSI Innovation Program
2027 (TIP27) is a rolling
structural reform program thatcommences in the current
fiscal year (FYE Feb 2025),
rather than an extension of its
predecessor, the TIP Innovation
Program 2025.

(FYE Feb 2025 Target)2
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Background & Purpose of the Medium-Term Business Strategy“TSI Innovation Program 2027 (TIP27)”
Purpose of TIP 27

Brief History of TSI
In 2011, TSI was established by merging Tokyo Style andSanei International. Since then, TSI has undergone
numerous mergers and integrations, and with a clear
emphasis on the autonomy of each brand, it has consistently
grown by leveraging the strength of each brand to its
advantage.

With TIP27, TSI Holdings implements structuralreforms to optimize business operations
company-wide to generate high profits andrevenue.

While the foundation of the current management is in place,efforts to unify business operations are still in progress.
As a result, it has become the norm to fall far short of targets.

Profit structure reform
across the board

Brand
A

Growth strategy led bycore brands

Consolidation

Integration

TSI Holdings Co., Ltd.

TSI Holdings Co., Ltd.

Brand
B

Brand
C

Brand
D

…

Brand
Brand
Brand
Brand
Optimal company-wide business operation…
A
B
CD

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3

Current Status of TSI Holdings
Transition of Key Management Indicators Overthe Past Five Years (Feb 2020-Feb 2024)

Company-wide challenges ingrowth with profitability

Post-pandemic sales have been gradually growing,
however, profitability is still low.
Operating
Profit(in Billion yen)
200

170.1

150

134.1

140.4

154.5

Sales

155.4

30
20

Low profitability caused

100
50

4.4

0.1

2.3

1.7

0

-1.18

50
-100
Operating Profit
Margin (%)

ROE(%)

Slow sales recovery
after the pandemic andno significant increasein sales.

FYE
Feb 2021

FYE
Feb 2022

FYE
Feb 2023

FYE
Feb 2024

2.2

4.0

1.1

3.1

5.3

-8.8

0

rapid changes in theenvironment

-10

FYE
Feb 2020

0.0

10

コロナ後の環境変化に追いつけず低収益by slow adaptation to

3.2

1.5

1.1

Apparent capital
財務上の問題、ROEも低水準
inefficiencies

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4

TIP 27: Transformation of TSI Group
Reform the Profit Structure and Invest in the Growth and Human Resources to Increase TSI’s Corporate Value.

Fulfill TSI’s Vision: “Creator of Fashion Entertainment”

Profit Structure Reform

Growth Strategy

Company-wide effort to improve profitability

Accelerate growth by investing resources

Purchase cost
reductions

Optimize
supply & demand
management

EC integration &System renewal

Retail operation
reforms

Improve efficiency
of costs including
SG&A.

Source ofInvestment

Invest inbrands withpotential for
growthImprovecustomertouchpoints

Venture into
new market
segments

Review/Reinforce Business Infrastructure
Review and reinforce
the supply chain

Reinforce business infrastructure
through the use of digitaltechnology

Reinforce sustainability management(Sustainability/Human
C-3
Resources/Governance)

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Profit Structure Reform

6Profit Structure Reform: Company-wide Efforts to Improve Profitability
Present

Product Design &Development

Production/Sourcing

Pricing &Supply/Demand Control

Sales

Rely on skills and ability of
individual designer

Arranged independently by
Brand

Controlled independently
by BrandThrough outlets managed
independently by Brand

Pursuit ofindividual
optimization to
make the mostof theindividual
characteristics

FutureTransition toCompany-wide
OptimalBusiness
Operation30+
EC Sites

Develop training
programs for creators

Supplier consolidation

Systematized pricing &supply-demand control

Efficient retail area &EC management

Uniform rules & system

Strategic allocation of
stores and staff

Integrated
EC Sites

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Profit Structure Reform:
Achieve Operating Profit of Over 10 Billion Yen in FYE Feb 2027
PurposeCurrent Issues

Course of Action

Completion

Purchase Cost
Reductions

Decentralized procurement iscausing high COGM.

Consolidate orders/improve purchasing
leverage
Cost reduction through revision of business
schemes/contracts with suppliers/manufacturers

Optimized
Supply &DemandManagement

Stick to the traditional way ofsetting retail prices.
Increasing loss of opportunity andvolume of dead stock.

Strategic pricing/sales promotions
Optimization of retail pricing and cost ratio.
Reassess promotional/discount sale programs

Retail Operation
ReformInefficiencies in assigning staff
specifically for each brand/store.

Increase efficiency/productivity of staffing
Optimal allocation of store staff across brands
and by area. Consolidate underperforming storesand development of large stores.

EC Integration& System
RenewalInefficiencies in systemrelated/operational costs due toan overabundance of independent
EC sites within TSI.

Improveefficiency ofcosts including
SG&A

Insufficient cost budgeting
Brands working in silos.

ImpactFYE Feb 2027
(1-year)FYE Feb 2026

Approx.
3 billionyen

FYE Feb 2027

Approx.
2.5 billionyen

FYE Feb 2026

Approx.
1.5 billionyen

FYE Feb 2025

Approx.
0.5 billionyen

FYE Feb 2026

Approx.
2.5 billionyen

EC site integration
Improve operational efficiency by integrating EC
functions/websites that exist under each brand.
Streamline the backend operations
Ensure ROI-driven expenditures

Review of brand positioning and cost/staffing
structure based on ROI of measures

TOTAL: 10 billion
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Growth Strategies

9Portfolio Prioritization
Focused investment
in leading brands

Identify the growth potential and profitability of each brand.
Qualitative & quantitative
assessment of the brands

High
Brands with57 Brands
under TSI

GrowthPotential Growth

成長性Brands to bereorganized orwithdrawn

Leading
BrandsCapital investment in brands
with higher potential ofgrowth and profitability

Reallocationof resources

Brands to increase
profitability

Low

Low

Profitability

High

Decisive action will be taken
against underperforming
brands, which may include
restructuring measures orwithdrawal from the market.

Note: Number of the brands as of March 31 2024
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Investment in Brands with Potential of Growth:
Scale up the Existing Brands

MissionWellness &LifestyleStreet & Culture

Fashion Capital

Digital Generation

Bring Joy and Style to the Sports
Offer sophisticated fashion style

Playful and Distinctive Styling

Enhance the Beauty of ourCustomers.

Pursuit of the Most Advanced
Business Styles

Leading
Brand

The Way
ForwardDevelop and venture into newmarket with sport-oriented
casual wear.
Offer a simple yet
sophisticated lifestyle that ourtarget consumers aspire to bybroadening the concept of thebrand.

As a leading company in thestreetwear category, drive
growth in the industry by
developing new brands andexpand the scope of
distribution channels
including department stores.
Provide playgrounds where
street culture will be created.

Venture into premium market
with the brands nurtured indepartment stores andshopping centers adjacent to
the railroad stations.
Expand the collection to
include non-apparel categories
such as household goods thatalign with the brand's concept.

Create new markets andvalues with innovative
creators/technologies

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Improvement of Customer Touchpoints:
Upgrade CRM system to increase the number of potential customers and sales opportunities.
Build multi-dimensional links with customers with
our unique brands.
For future consolidation of stores and ecommerce sites, expand the customer
touchpoints that each brand has
established independently to TSI's entire
brand portfolio.

Brand
A

Brand
F

Large-scale,Multi Brand
storesIntegrated
EC Sites

Brand
B

Customers
Interactive
EventsCommunity
Building

Brand
E

Brand
C

Present new forms of entertainment
value across brands in line withcustomer preferences/scenes.
Community events that provide
experiences and new discoveries
designed to enhance brand loyalty

BrandD
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Venture into New Market:
Explore the opportunities in new market segments
taking the latest trends and TSI's core competencies into consideration.
Taste
Lifestyle & Basics

High

1

MarketIncreasing market
polarization

Trendy & Fashionable

Basicsx
High Price Point

Core Value of TSI

Expand into new market
segment with existing
brandsAbility to create innovative
fashion items
Unique brand portfolio

Price Point

TSI’s Main Market

Explore opportunities to launch
new brands, including potential M&A.

2

Low

Trendy & Fashionable
X
Mid- and/or Low-price point

1 Expand into the high-end market byoffering the value of simple andsophisticated lifestyle.
２
Enter into the mid- to low-end market
with fashionable yet affordable products
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Venture into New Market: Expand into International Market

EuropeExpand into the basic/lifestyle market
by accelerating wholesale distribution
and store openings.

North America (incl. Hawaii)

Asia

Develop and promote market
revolving around street culture

Expand into wellness/streetwear
markets of East and Southeast Asia

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Contribute to Society with an Emphasis on Fashion, Design, and Hospitality

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TIP27 Quantitative Targets
Key Goal Indicator for FYE Feb 2027
Operating Profit: 10 billion yen, ROE: 8.0%, Sales: 165 billion yen
FYE Feb 2024 (Actual)FYE Feb 2025 (Target)FYE Feb 2027 (Target)

155.4 billion

160 billion

165 billion

Operating
Profit

1.7 billion

2 billion

10 billion

Net Income

4.8 billion(2.8B※)

4 billion

7.7 billion

Operating
Profit Margin

1.1%

1.3%

6.0%~

ROE

2.9%※

4.2%

8.0%~

DOE

1.3%※

1.4%

4.0%~

Sales
TargetRevenue
(JPY)

KPI
(%)

※ Calculated based on net income on an Effective Tax Rate basis, without taking into account tax effects.
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Financial Strategy &Capital Management17

Resource Allocation Policy for the Three-Year Medium-Term Business Strategy
By optimizing profit structures and divesting inefficient assets, we can enhance profitability, strengthen cash flow,
and build a solid foundation for future growth and strategic investments.
External
Financing(Debt)

10 billion
yen

Reduction of
Nonbusiness
Assets

10 billion
yen

30 billion
Yen
Improved
OperatingCash Flow
Generatione.g.
Profit Structure
Reform,Inventory Level
Optimization

Cash
Generation

20 billion
yen

Total of50 billion
yen over3 years

12 billion
yen

Investment in Growth
Investment in new business models
Open large consolidated stores, integrate site/customer baseCreate new projects, M&A

Investments to Upgrade Infrastructure and Improve
Efficiency
Maintenance of Existing Stores
New Core System Development and Software Update
Investing in Digital Transformation in Logistics and Supply
Chain

Shareholder Return Policy

18 billion
yen

Dividend payout ratio over 30%.
Repurchase of treasury stock: Total 10 billion yen(During the period of the medium-term management plan)
Target DOE of 4.0% for FYE Feb 2027

Resource
Allocation
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Financial Strategy & Capital Management: Cash Generation
Improve cash generation by reforming profit structure and reducing inefficient assets to generate 50 billion yen over
3 years.

Main Strategies and Objectives

Course of Action

Improvementof Operating
CF Generation

Profit Improvement
Inventory Efficiency
Improvement

Execute profit improvement projects and improve inventory
efficiency to generate 30 billion yen in cash over three years.

Reduction ofnon-businessassetsInvestment Securities
Real Estate

Generate 10 billion yen in cash through the sale of investment
securities and real estate.

External
Financing(Borrowings)

Borrowings fromfinancial institutions

Borrow 10 billion yen to invest in growth areas according to theportfolio strategy.

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Financial Strategy & Capital Management: Resource Allocation
Make strategic investments to strengthen TSI’s business foundation and achieve exponential growth.
Categories

ActionInvest 20 billion yen over three years to expand existing brands with firm loyalties, build a new

Infrastructure
Upgrade / Efficiency
Improvements

Invest 12 billion yen over three years for assessment of existing stores (incl. potential
withdrawal of underperforming store and replace them with the new store), IT infrastructure(core system, etc.) and Digital Transformation (logistics, supply chain, etc.)

Shareholder
ReturnInvestment in
GrowthDividend
Payout Ratio
Treasury
Sharesbusiness model in the mid to low-price range including potential M&A, and customer touchpoint
improvement including stores and e-commerce.

Dividend payout ratio of 30%.
Repurchase of treasury stock (10 billion yen over 3 years) to increase
shareholder returns.
For individual investments, use an 8% ROE benchmark as the internal hurdle
rate for decision making.

ROE

DOE

Achieve ROE of 8% in FYE Feb 2027 through a combination of profit
improvement and net assets control.
Target DOE of 4.0% for FYE Feb 2027.

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Objectives of Financial Strategy & Capital Management:
Achieve PBR of 1 or Greater

To achieve a PBR greater than 1.0, generate a ROE that is higher than the cost of shareholder's equity and increase the equity spread.
We also strive to achieve a higher ROE by improving profits, returns to shareholders, and asset efficiency through reducing nonbusiness assets.
Net Income
ROE
PBR
ROE transition and current cost of capital for TSI (Range)
Margin

3.1％

0.65
9.0%

Stock Price

812 JPY

8.0%
7.0%

Estimated cost shareholder’s equity: 5.4-7.8% *1

6.0%(PER Basis / CAPM Basis)

5.0%

5.3%

(End ofFYE FEB 2024)

3.2%

3.0%

2.2%

1.9%
1.0%

1.2%

1.1%

Net Assets
per Share

0.0%

1,287.25 JPY

14.6(End Feb 2024)(As ofApril 112024)

・・・・・・

ROE※ Calculation by Financial Institutions. *2 Calculated based on net income at the effective tax rate without
considering tax effects

Enhanceshareholder
returns
Reduction ofnon-businessassetsPER

1.0%

Capital Cost Range

Financial
Leverage
Net Asset
97,422M JPY(End ofFYE Feb 2024)

3.1%

2.9%

(End ofFYE Feb 2024)

1.37

4.0%

4.0%

2.0%

(As ofApril 11 2024)

5.0％(2.9％)*2

Profitability
Improvement

Business
Growth* Excluding the impact of deferred tax assets

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Sustainability Management

22

Sustainability Management
Our Philosophy &PurposeSustainability
Long-term management
vision/strategy
Medium-TermBusiness Strategy (TIP27)

Division andBusiness Strategy

Environment

PeopleGovernance

TSI’s Materiality

Objectives&
Business
Strategies
In line with
Philosophy&
Purpose“We aim to brighten people's hearts
through fashion and share joy withsociety for a brighter future.”
TSI Group is dedicated to working with all
stakeholders to create a sustainable
society for future generations through ourbusiness activities, in line with ourmanagement philosophy.

More information will be available on the
Sustainability Website soon.

Socialhttps://sustainability.tsi-holdings.com/
Move the cursor over the chart to go to the linked page.

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Activities (as of FYE Feb 2024)
TSI’s greenhouse gas emissions
reduction targets have beencertified by Science Based
Targets (SBT).
Global Environment
Conclusion of capital andbusiness alliance with Syncom
Agritech

TSI has joined forces with
SynCom Agritech, a company
that cultivates organic cottonwith consideration for theenvironment and humanrights.

PeopleImprove the “Employee Net
Promoter Score (eNPS)”
Conducted once-a-year
employee satisfaction survey
to assess the level ofsatisfaction of each employee
and reflect it in management
measures.
From 2023, the survey has
been expanded to entire
employees under TSI Group.

Scored “B” (third tier from the top) in
climate change category.

SocialGovernanceEfforts to foster the next
generation involvedin the fashion industry

Development ofvarious policies

To foster the next generation of
fashion experts, we have launched
an initiative with Bunka Fashion
College such as classes with our
employees as lecturers andsupport dressmaking by donating
leftover fabrics.

Sustainability Policy
Addition of Materiality
Governance Policy
Establishment of
Sustainability Committee
Environmental Policy
Human Rights Policy
Social Policies
Code of Conduct for
Business Partners

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TSI’s Materiality and Course of Action
Key Areas

Materiality

Purpose/KPIKey Initiative

GlobalEnvironment

Energy Resources
Raw Materials
Waste
Water Resources
Biodiversity

Set CO2 Emission Reduction Targets
through FYE Feb 2030 Click here fornumerical target
Promotion of Sustainable Fashion
Paper Waste Reduction

Innovation of Raw Materials
Innovation of SCM Platform
Innovation of Engagement
Start charging for shopping bags.
Click here for details

PeopleDiversity
Health & Safety
Employee Well-being
Fair Labor

Promotion of career advancement, regardlessof gender
Employment rate of persons with disabilities(at least 0.1 above the legally mandated rate.
Improve employee satisfaction

Launch Diversity Promotion Project
Click here for quantitative details.
eNPS Improvement Projects
Click here to see the scoresSocialCollaboration with
Local Communities
Foster the Next
Generation
Community Services

Promotion of engagement with local
communities
Continued efforts to foster the next generation
Expand social work to those in need of social
care

Expand joint project with Town of Kamikawa,
Hokkaido
Lectures on design and sales knowledge atfashion institutes
Extended support to child care facilities etc.

Governance

Develop and maintain an open and transparent business
operations system.
Establish and consistently improve policies to increase corporate
value.

TSI Group Code of Conduct / Supplier Code of
Conduct
Supply Chain Due Diligence(Environment/Human Rights)
Risk Management ( Implementation of ERM)

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Our Purpose/Aim

We create empathy and social value across the world
through the power of fashion entertainment.

Creator of Fashion Entertainment

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Vision: Where TSI is headed

Dance

Ability toCreateInnovative
Fashion

Education

FamilyDiverse andCutting-Edge
Brand Portfolio
Collection
Brand

Fishing

Hospitality
Hike

SocialContribution

Bike

Golf

Pet

A creator of fashionentertainment that brings
color to the streets andenergy and passion topeople, with fashion as
the driving force.

Well-being
Healthcare

Snow

Excitement
Skate

Fun
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This document comprises of forward-looking
statements, including forecasts, outlooks, targets,and plans pertaining to the Company, its
subsidiaries, and affiliates. The statements are
based on the information available to the Company
as of the date of this document and certain
reasonable assumptions made by the Company.

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