TSI HOLDINGS CO., LTD.
Q1 Financial Results Briefing for the Fiscal Year Ending February 2025
July 16, 2024

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

[Company ID]

3608-QOCDE[Event Language]

JPN[Event Type]Earnings Announcement[Event Name]

Q1 Financial Results Briefing for the Fiscal Year Ending February 2025

[Fiscal Period]

FY2025 Q1[Date]

July 16, 2024

[Number of Pages]

18[Time]

10:00 – 10:46(Total: 46 minutes, Presentation: 30 minutes, Q&A: 16 minutes)[Venue]Webcast[Venue Size][Participants]

56[Number of Speakers]

5
Tsuyoshi Shimoji
Masanori Maekawa
Mitsuru Naito
Genya Oshiki
Shunsuke Hasegawa

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Chief Executive Officer
Executive General Manager, Director of
Platform Headquarters
Executive General Manager, Director of
Corporate Headquarters
Executive General Manager, Director of
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Manager of Public & Investor Relations

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Presentation
Moderator: Good morning. It’s time to start the briefing on the financial results of TSI HOLDINGS CO., LTD.,
for Q1 of the fiscal year ending February 28, 2025.
Shimoji: Good morning. Thank you very much for your continued support. We will start the financial resultsmeeting for Q1 of the fiscal year ending February 28, 2025. I would appreciate your attention.

I will start with performance highlights. Sales fell slightly short of plan. Operating profit was almost in line withthe plan due to the control of SG&A expenses.
Consolidated net sales were JPY39.29 billion. Despite a difficult start due to unseasonable weather in March,sales recovered steadily. The Company's sales were also 99.8% of the previous year's level, almost on par withthe previous year's level.
The operating profit, JPY1.01 billion, deteriorated from the previous year yet remained mostly in line with theplan. The first thing to point out is an increase in SG&A expenses, such as structural reform costs. However,the plan to complete the structural reforms is swiftly moving forward.
Net profit for the quarter is JPY540 million. Net profit was JPY1.44 billion lower than the previous year due todecreased investment-related profit and increased deferred income tax.

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Consolidated financial results. Gross profit was JPY22.03 billion, and SG&A expenses were JPY21.01 billion.
Gross profit was also down 1.2% from the previous year. Although we have mitigated some of the impact of
the surge in raw material costs by partially passing these costs onto the selling price, the increase in valuation
losses and discount sales aimed at inventory optimization have been major factors contributing to thedeterioration of the gross profit margin.

The deterioration in SG&A expenses compared to the previous year can be attributed to increased labor costs
influenced by the yen's depreciation and costs associated with structural reforms. However, the improvement
relative to our plan is due to the gradual effects of structural reforms, including the suppression of promotional
advertising expenses and the efficiency improvement of logistics.

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Next, I would like to look at net profit and impacting factors. Net profit for Q1 was JPY540 million, with a profit
margin of 1.4%. The breakdown is as follows: JPY1.1 billion in ordinary profit, including operating profit plus
non-operating profit such as dividend profit, decrease in real estate profit, and equity in losses of affiliates in
the US, and JPY0.3 billion in extraordinary profit, including gain or loss on sales of investment securities andimpairment loss. Due to tax adjustments, including the reversal of deferred tax assets, corporate taxes
amounted to JPY 870 million. As a result, net profit for the first quarter was JPY 540 million, with a profit marginof 1.4%.

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4This is the balance sheet. Cash and cash equivalents decreased by JPY4.07 billion due to increased inventories
and the purchase of treasury stock.
Although procurement control for the current season is progressing well, inventories increased by JPY1.59
billion year over year due to one-time procurement of long-term sales products and overstocking of prioryear inventories. We are making every effort to optimize inventory early.
The Company has been continuously acquiring treasury stock as part of its capital and shareholder return
policies. The balance of treasury stock decreased by JPY3.55 billion due to the cancellation of treasury stockacquired in April. The equity ratio remained high at 73.3%.

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Next is the sales overview by channel. First, retail store sales in Japan increased steadily to JPY780 million,
103.4% of the previous year's level, thanks to a resurgence in outbound purchasing behavior and the benefitsof increasing international visitors. On the other hand, in the e-commerce business, the market for highdemand merchandise subsided from its peak time during the previous fiscal year. The wholesale businessstruggled, too, due to a reactionary slump after the special demand during the pandemic.

In the physical store business, the impact of store closures at some department stores was offset by sales at
shopping centers and street stores.
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In the physical store sales, the YoY growth rate was 103.4%, of which shopping centers and street storesaccounted for 105.6%. Solid progress has been made by “and wander,” “STUSSY,” and “AVIREX.” “MARGARETHOWELL” and “NANO universe” also show a general recovery, depending on the area. AVIREX and Schott,pictured here, have opened their first combined store in Nagoya.
In the international business, sales were 103.2% year over year. The impact of foreign exchange rates, which
elevated the yen equivalent for accounting purposes, influenced the results. MARGARET HOWELL performed
well in local currencies compared to the previous year, but HUF and Tactics in the US continued to facechallenging conditions.

E-commerce sales results. The e-commerce sales were JPY9.26 billion, 95.7% year over year. Last year's
termination of the agency contract with UNDEFEATED and the decline in the sneaker market led to a decreasein popular items from streetwear brands, contributing to the slowdown in e-commerce sales.

Additionally, PEARLY GATES held a winter sale from January to February for the first time in a while, which
resulted in a drop in March sales. We plan to consolidate 13 sites into one by next year to address the
slowdown in EC sales. We will make every effort to achieve this integration within a year. This move is
expected to generate high anticipation, and we are preparing to activate it within the current fiscal year.

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7Here is an overview of brands. First is PEARLY GATES. Sales made to customers who are loyal to this brand arerebounding. However, the number of new customers is decreasing, which is why we could not obtain freeroaming customers in the previous fiscal year.
In addition, the wholesale channel experienced a 93.1% YoY decline due to shipping and returns expected by
the end of the last term slid to this term. However, we will optimize the amount of inventory and control

procurements in this fiscal year. We should expect to see how much effort we can devote to newly developed
products. We are determined to accomplish both goals: inventory control and new products.
Secondly, MARGARET HOWELL achieved a 106.9% increase year over year . We have been collaboratingwith MIZUNO since the fall/winter of 2017 and expanding from the spring/summer of 2024. It is also sold not
only in Japan but also in Europe. We also have a pop-up store, mainly in Tokyo, where new technical wear will
be introduced each season. The product is also doing very well in Europe and is appreciated by our customers.
The third is the NANO universe, with a YoY increase of 100.7%. Existing physical stores are recovering at
112.3%. Regarding e-commerce, we have launched new initiatives, including the debut of Apo(s)ture, a new
brand available on ZOZOTOWN. In addition, product prices have been reviewed to improve profitability. In
this context, we are seeing a solid recovery.
The fourth is NATURAL BEAUTY BASIC. Due to the impact of store closures (8 stores were reduced comparedto the same period last year) and unseasonable weather in March, sales are 92.6% year over year. Renovatedstores in Nagoya, Omiya, and Kyoto, where store interiors were changed, are performing well. We willcontinue to take various measures, such as new store openings and renovations.
Fifth, AVIREX. It’s 110.3% year over year. In addition to the strong performance of existing stores, the newstores opened in Nagoya and Ebina also performed well. In addition, inventory clearance has been greatly
improved by reviewing the product mix to match the changing climate.
Sixth, STUSSY. Sales were 119.1% year over year, with significant growth of stores in Shibuya, Harajuku, OsakaMinami, and Umeda. The demand is so great that customers stand in line in front of our stores, and although
we have reduced the number of stores, we have achieved double-digit growth for two consecutive fiscal years.
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8Next, we will report on the status of our growing brands, for which we have high expectations. Many of thebrands experienced double-digit or better growth from the previous year.
Namely, “ROYAL FLASH,” “LHP, Schott,” “Dice&Dice,” “quitan,” “SEVEN BY SEVEN,” and “and wander.” And
for women, there are “ADORE,” “LE PHIL,” “Arpege,” “CADUNE,” “hueLe Museum,” “ETRÉ TOKYO,” and“YLEVE.”We will reintroduce our pickup brands later, but first, ROYAL FLASH grew 117.9% YoY, CADUNE grew 129.5%,
and SEVEN BY SEVEN grew more than 200% YoY. There are several small but fast-growing brands, and wehave high expectations for them.

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9Since becoming part of TSI HOLDINGS in 2019, “and wander” has continued to grow steadily. Sales havegrown sevenfold over the past six years, and the current fiscal year has been another strong one for the brand,
thanks in part to the tailwind from sales to international visitors and an increase in overseas wholesaling.

The brand has been well received in Europe, and quite a few international customers from Asia visit our stores.
The GINZA SIX store, which opened in March, has received quite positive customer reactions with its new
display and presentation. In addition, we intend to invest in expanding the business overseas.

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Continuing on, we have LE PHIL. LE PHIL opened in Azabudai Hills last November. This brand is trendy andvery well received by our customers. Total sales reached 122.1% year-on-year, with wholesale sales at 132%and EC sales at 110%, reflecting balanced growth overall. We will focus on expanding sales by opening popup stores and launching new sportswear products to attract new customers.
Next is ETRÉ TOKYO. Sales grew strongly, with a 146.6% YoY increase. Many customers visited our pop-up
shops at Tamagawa Takashimaya and Umeda Hankyu, leading to significant sales. We established multiple
contact points to attract new customers and enhance brand power. We plan to open a new store in the Osaka
area this winter and will continue to implement various measures to boost brand recognition.

I will continue to report on the progress of structural reforms in our medium-term management plan. A
comprehensive structural reform covering all aspects of operations is currently underway.
The five topics of reform are shown here. They include reducing purchase costs, optimizing supply anddemand management, reforming stores, integrating/renewing e-commerce, and streamlining SG&A costs.
Progress is nearly on track according to the plan.
The first is purchase cost reductions. We will consolidate orders and improve purchasing efficiency. We
estimate that the impact of cost reduction through a review of transaction methods and contracts with
suppliers and manufacturers will be JPY3.0 billion. In addition to consolidating orders, we are also reviewing
production sites and local settlements and reducing indirect costs. We expect cost benefits to be realized
starting with the spring/summer 2025 production.
Second, we will optimize supply and demand management and implement strategic pricing and sales. We
have been reviewing our price setting, sales promotions, and sales measures. We will optimize the SKUs andvolumes based on supply and demand forecasts. Previously, the focus was on numbers and sales, but there
were brands with an excessive number of models and volumes. We will reorganize these areas

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11comprehensively, focusing on sales concentration and increasing turnover. We expect a reduction of
approximately JPY2.5 billion through it.
Regarding the setting of retail prices, we are considering starting with brands with short product cycles andwill aim to achieve gradual effects starting with fall/winter 2024 products. At the same time, we are studying
ways to upgrade and standardize our inventory and markdown control processes.
Third, store reform. We will seek to improve the efficiency and productivity of store staffing and optimize staff
placement across all brands in all areas. In particular, we are working to create an infrastructure for realizing
shared-brand sales staff in a way that enables human resources to effectively follow up from area to area andin stores and regions lacking in sales staff.
In addition, we aim to identify roles within the sales staff to enable efficient operations and restructure theircareer paths.
We will also consolidate unprofitable stores. Instead of withdrawing from the market altogether, we would
like to integrate and open large-scale stores. The impact of this improvement is expected to be approximately
JPY1.5 billion.
Fourth, e-commerce integration and system renewal. We aim to consolidate our company's over 30 individual
e-commerce sites, each for a different brand. We plan to integrate approximately 13 sites into one this fiscal
year, and the new consolidated site will launch next fiscal year.
We aim to consolidate more e-commerce sites and overhaul the system to enhance operational cost efficiency.
This is expected to result in an improvement of approximately JPY500 million. To rebrand and integrate theindividual e-commerce sites into one of our e-commerce sites, “MIX. Tokyo,” we are currently working witheach site on issues such as the direction of their digital channels, functional design, and integration ofmembership services.
Fifth, we are streamlining SG&A costs. We will aim to manage revenues and expenses across brands. We will
review our cost and staffing structure by the positioning of our brands and the ROI of our initiatives. We
anticipate approximately JPY2.5 billion as the impact of that effort. We are reducing SG&A expenses morethan planned by strengthening cost controls across the board. As we seek to further reduce costs and improve
efficiency, we are introducing new mechanisms, including delivery, materials, and other areas that can be
integrated.
We are also moving forward with integrating material-related products, such as woven labels and corrugatedcardboard boxes. Including the effects of the improvements summarized above, we have set a minimum
target of approximately 10 billion yen for the fiscal year ending February 2027. So far, we have made good
progress, and we believe we can expect to achieve this goal.

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Q1 topics. We provided products that reflect our brand’s values, fostering more robust connections between
the products and our customers while promoting a mindful approach to material possessions and treating
clothes with care.
MARGARET HOWELL launched an e-commerce site that promotes used items owned by the brand staff. Used
items were listed for sale. We collect reusable items our staff members own and maintain and resell them toreduce waste. It realizes the brand's commitment to selling quality products that can be used long-term. We
received a very warm and favorable response from our customers. That time-limited e-commerce siteachieved a 75% sell-through, while it is 50% or less on the Retailor’s average. We aim to advocate for thecontinuation and expansion of this trial to make it company-wide.
Schott, the US-made leather jacket brand, began selling leather-made school bags. We hope to create
something new through collaboration with artisans in this type of manufacturing project. We also hope that
customers will experience how long the high-end leather products can withstand prolonged use.

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We will develop our business activities so that our customers, the community, and ourselves can all sharesustainable happiness together. Through our clothing, we support “MOVE WEAR,” a new clothing-type arm
robot developed by inventor Ory Yoshifuji. We have begun a project to jointly develop clothing for “MOVE
WEAR,” a clothing-type arm robot developed by OryLab to support people with ALS, an intractable disease.
This is a joint project with the NANO universe design team. In addition, the Engineering Department of TORAY
INDUSTRIES Inc. joined the project to provide materials. Also, teams of researchers from Tokyo University,
Keio University, and Waseda University participated in the project.
We believe that technology is one tool in creating a borderless society, and we are supporting and designinga new way for people who have lost the ability to move or speak to express themselves in various ways byaccessing modern technology.
Masatane Muto, an ALS patient, will perform as the DJ for an event in November 2024. We will support theevent by providing costumes.
On January 1st of this year, there was an earthquake on the Noto Peninsula, and we would like to express our
sympathy to those who were affected by the disaster. We want to express our sympathy to those genuinely
affected by the earthquake. As Urth Caffé, we offered freshly baked cookies and freshly ground coffee. We
thought it would be a comforting touch in a stressful life, and we hope they had a relaxing time with a smileon their faces, even if it was only for a short time.

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We will implement digital initiatives to improve the value of the customer experience further.
SugeKae, an AI image generator tool for the fashion EC business, has been introduced and is now in operation
within the in-house EC. Even those without image editing skills can easily change backgrounds, coordination,and photo colors, enabling low-cost and quick remaking of product images. In the future, we plan to expand
in tandem with initiatives such as batch background generation through image learning and advertisingenhancement.

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“Through the power of fashion entertainment, we will create empathy and social value around the world.”
TSI Holdings Group will continue to strengthen its communication as a creator of fashion entertainment.
We are in the early stages of implementing structural reforms under our Medium-Term Business Strategy andare progressing steadily. It will take some time to see the concrete effects of these improvements, but we areconfident that the new structural reforms will yield positive results. We appreciate your continued support
and look forward to sharing our future achievements with you."[END]______________
Document Notes
1.
2.
3.
4.

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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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