TSI HOLDINGS CO., LTD.
Q1 Financial Results Briefing for the Fiscal Year Ending February 2023
July 14, 2022

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 2023

[Fiscal Period]

FY2022 Q1[Date]

July 14, 2022

[Number of Pages]

22[Time]

10:00 – 10:44(Total: 44 minutes, Presentation: 30 minutes, Q&A: 14 minutes)[Venue]Webcast[Venue Size][Participants]

76[Number of Speakers]

2
Tsuyoshi Shimoji
Jun Imaizumi

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President and CEO
Senior Executive Officer/TIP Promotion,
Department Manager and TSI TIP Promotion,
Division Manager and Division Innovation
Section Manager

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Presentation
Hasegawa: Now that we are at the appointed time, we will begin. Thank you for joining us today. My name is
Hasegawa from Public Relations/IR, and I will be your moderator today. Thank you.
I am pleased to begin the presentation of the financial results for the first quarter of the fiscal year ending
February 28, 2023, which were announced yesterday.
First, I would like to run a video of the briefing for approximately 28 minutes, after which I would like to begin
the Q&A session. So, let us get started.

Shimoji: Thank you all very much for your continued support. The TSI HOLDINGS CO., LTD. Group would now
like to present its financial results for the first quarter of the fiscal year ending February 28, 2023. Thank you.
I will now provide an overview of the Q1 financial results. First, this is an executive summary.
With the lifting of the restrictions due to the COVID-19 pandemic, the Golden Week holiday is in very good
shape for the first time in two years. Women's brands in department stores and buildings devoted to fashionrelated shops, which had been struggling, are seeing a return of customers. We are once again entering aphase of growth, led by our women's brands, which are strengthening in terms of OMO. Two factors, therevival of real stores and the significant growth of the golf business, have provided results that far exceeded
our forecasts.
As an issue, there was a challenge in growing sales in the e-commerce, or EC, business. The EC business still
faces challenges in growth potential due to the sluggish performance of large mainstay brands, in addition toinventory issues caused by lockdowns. For the second quarter, our main focus was on structural
reconstruction of underperforming brands and inventory supply.

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In addition, by reducing discount and percent-off rates, we were able to increase sales at some events, but
the top line did not rise, which is a very disappointing result for us. We are determined to make up for this.
Also, supply chain disruption occurred. Delivery was delayed in HUF brand and the wholesale business. For
TACTICS, there was a very negative impact on sales due to the fact that spring merchandise had not yet arrived.
However, business is very much in demand, and because of the strong business, the numbers, once products
were in stock, have been recovering since June.
In addition, as you know, the impact of the Shanghai lockdown from March to May was significant, and ourcore brands, NATURAL BEAUTY BASIC and NANO universe, suffered very badly in May due to delays in thedelivery of hot-selling products.
Next, we plan to relocate our headquarters in the fall. Compared to the previous year, expenses including
overhead costs have increased. We are in a situation where we will be moving from September to November
as needed, and one-time costs of relocation will be incurred sequentially starting in the first quarter of thisfiscal year. In this sense, we intend to increase our profitability and commit ourselves to securing profits.
The TIP25 Reform Promotion Department has been established to spur reforms. In addition, as the first step
to revitalize new business areas, we have entered into an alliance with Sitateru Inc., which has an extensive
supplier network. With this, we would like to enter into a new initiative by conducting a trial to connect F2C
factories and customers through our network with TSI Sewing Co., Ltd.
We will strengthen the development of internal human resources. As we aim to develop human resources
over the medium term, we have first established a preparatory office for the lab within the TIP25 Reform
Promotion Department. We will develop programs to develop digital and marketing professionals.
This was the executive summary.

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3Here are the performance highlights.
In Q1, net sales were JPY38.12 billion, operating income was JPY1.6 billion, and net income for the quarter
was JPY2.06 billion. Factors lowering profits for the current term compared to operating income of JPY2.27
billion in the Q1 of the previous term include the relocation of the headquarters, JPY300 million; thenormalization of performance bonus funds, JPY150 million; withdrawal costs of overseas subsidiaries; and thedeterioration of purchasing due to foreign exchange rates.
However, we had expected that there would be a reaction to the special demands from the COVID-19
pandemic in the golf business, and we had estimated an operating income of JPY1.41 billion for Q1.
However, operating income was JPY1.6 billion, which is 113.4% of the estimated amount, based on the newrevenue standard, and net income was more than 121% of the estimated amount.
We steadily met our operating income estimate for the quarter. In addition, we are determined to develop
more measures for a strong sales reform.

This shows sales trends by channel.
In the store channel, sales and earnings recovered steadily. The EC business, on which we had focused ourefforts, remained unsatisfactory in terms of growth. We will aim for further sales growth by expanding
investment through an aggressive strategy, with strong brands as our mainstay. Sales were 114.9% and116.8% of the previous period's level for department stores and commercial facilities, such as fashionbuildings and street stores, respectively, so the main women's business is in a recovery phase.
In addition, some youth brands and specialty business are underperforming. We will take thorough measures
to recover from this situation, which has been the main cause of struggling sales for the entire company.
The second column from the right in the chart shows the growth by channel, which is based on the former
profit standard. Compared to the previous period, department store growth was 114.9%, commercial facility
growth was 116.8%, EC growth was 92.2%, and growth for other domestic locations, including wholesale, wasSupportJapan
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84%. In the overseas market, we have some brands that are performing well, so I hope you can see that our
growth rate is 128.5% and that we have achieved a certain level of growth.

This is also sales trends by channel, and we reported that the women's business is recovering very well. weare working on a number of new initiatives, such as popups for the PEARLY GATES brand in retail stores. In
our overseas business, we are also working on TACTICS, which is learning content, and many other initiatives
to nurture the next generation of young people. With that being said, there is a very large customer
recognition, which is a very large influence.

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5This shows the EC sales results. In terms of EC sales, the recovery of NANO universe, the backbone of ourbusiness for young consumers, is still lagging behind. The poor performance of this brand, which has an EC
conversion rate of over 50%, was very significant overall and had a significant impact on the sales growth rateof TSI and the EC business as a whole.
In addition, Japan EC operation of Stussy, Inc. has ended, resulting in a significant reduction of JPY310 million
in sales for the Stussy business.
On the other hand, the HUF business, which we are focusing on, is performing very well, offsetting theearnings impact from the EC return of Stussy. Therefore, since that part is even, we are now very much in theprocess of redesigning the areas that need to be addressed, which are becoming very clear to us.

This shows the EC sales results.
In the current term, the Company is placing the highest priority on directing customers to its own highly
profitable website. For the 3rd site, we will reassess its role and aim for growth with a new product strategy.
For the time being, we intend to strengthen the development of services for our own members and theacquisition of new ones.
Japan EC sales were 92.1% of the previous period's total, but the In-House EC ratio was 51.9%, up 102% fromthe previous period. We have a strong acquisition number of 125.5% compared to a few years ago and theprevious year.
In the future, we will consider how to coexist with the 3rd EC site and accelerate the speed of reform to evolve
our strategy and business structure to expand recognition of the TSI brand.

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6This is an overview by brand.
The mainstay brand businesses are performing well. First, as businesses, 7 of the top 10 brands are performingat 121.8%, well above the Company-wide average of 111.4% for the previous period in terms of sales. We arein very good shape for H2 of Q2.
In the previous year, PEARLY GATES ranked second in terms of sales, but this year it ranked first. The newbalance golf business is also doing very well and expanding its scale without pause with a 700% increase overthe previous two periods.
In addition, generally, the mainstay top brands are performing well, with sales growth rates well above theCompany-wide average. NATURAL BEAUTY BASIC had a very difficult time with the supply chain situation in
March and April, with some delays in delivery, but the products have come in and are selling very effectively
in the Q2, so they are performing well.
In terms of content, the Limited Line, a new strategy for rejuvenation, is selling very effectively. We have also
seen a remarkable increase in the number of new customers we have acquired as a result of these efforts.

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On the other hand, NANO universe, which is our largest brand, deviated significantly from the estimate. We
are in the process of renewing the brands that affected the Company-wide sales growth rate and EC business,
and we will make another intensive Company-wide investment to reform the Company by revising productprices, EC strategies, and store sales systems.
The NANO business, which ranked first in the previous year, has now dropped to fourth place. During therebranding process, prices with the 3rd EC site’s clientele did not match the customer's perspective, causinga price discrepancy, and the estimate was not achieved. We will re-invest personnel, resources, and funds
over the entire company to re-start the business reform.
Among these, the NANO universe golf line, beats per minute, which debuted in the 2022 spring/summer
season, is performing well and has been well accepted by the market. We have already decided to hold popups
in five locations this fall and winter, and we are receiving very strong inquiries, which is creating a positive
response from the market, so we believe that this can be taken as a positive factor despite the current difficult
situation.

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8Next is the net income and balance sheet. These are the net income impact items.
After adding non-operating income of JPY610 million, including foreign exchange gains from foreign currency
loans and deposits, dividend income, and real estate income, ordinary income is JPY2.21 billion.
After adding extraordinary gains and losses, such as the sale of investment securities, and valuation losses
and large facility cooperation payments, and JPY150 million in adjustments of corporate tax and so on, net
income for the first quarter was JPY2.06 billion, with a profit ratio of 5.4%.

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I am pleased to report on the balance sheet.
We will aggressively invest in the four business areas segmented in our Medium-Term Management Plan. We
will invest management resources by ranking growth potential and efficiency, while naturally assessing
market trends and the effectiveness of our strategies.
We believe that our financial condition is very sound. With regard to cash and deposits, the decrease fromrepayment of long-term debt, but it is in the form of repayment of borrowings.
As for inventories, I think it would be better to look at them as purchases for new sales measures, rather thanas inventory that remains in stock. With this, we intend to increase our sales force in the Q2.
With regard to treasury stock, the Company repurchased treasury stock as part of its capital policy
implementation and shareholder return policy. This is a JPY600 million increase.
In the same vein, the equity ratio has remained high at 70.3%, but this is due to share buybacks, which weview as preparation for new capital investment.

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10This shows the consolidated earnings forecast.
The estimate was achieved in Q1. We will aim to re-expand our sales growth rate. There are no particularchanges to the consolidated earnings forecasts for H1 and full year of the fiscal year ending February 28, 2023
from those announced on April 13.
Relocation of headquarters is scheduled to take place in September of this year. Considering the headquarters
relocation costs, such as the accelerated depreciation of remaining rent, we are planning for a YoY decline
and a deficit in the H1 of the fiscal year. Basically, we would like to take the estimate we have submitted andexceed it, so that we will be able to deal with the situation and provide answers that exceed our plans.

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I will continue with an explanation of TIP25 and the initiatives in each area.

We have organized four business areas. They are wellness and lifestyle, street and culture, fashion capital,and digital native generation. We will explain each of these initiatives.

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We are creating wellness and lifestyle, an attractive community brand. Net sales are JPY11.34 billion, or
121.1% of the previous term. We are consolidating our golf business and lifestyle brands.
The new brand NBB WEEKEND, debuted as a clothing brand that combines sports and athletic wear for women.
The brand is offered for women who enjoy golf, the gym, running, and their respective sports settings. This
brand is currently only available on our EC site, and we are gaining new customers every day.
MARGARET HOWELL and “and wander” also can be settings to expand our community with customers andspread the brand.

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13This is the street and culture setting.
We are creating a platform for play rooted in the spirit of the street. There are many businesses that are notyet big businesses. Among them, UNION, in particular, currently has only one store, but there are plans toopen a second store in the near future. Collaborations with sneaker brands such as Nike and Converse, which
only UNION can achieve, have been extremely popular and have significantly increased sales to record levels.
Compared to the fiscal year ending February 28, 2022, sales will increase by approximately 612%, with salesof JPY620 million generated. A second store is scheduled to open this fall.
In addition, AVIREX is producing special collaboration items for a limited Top Gun: Maverick collaboration tocoincide with the debut of the movie, so we are receiving a flood of reservations at this stage for our fall
products. We are projecting sales of JPY13.04 billion, or 102% of the previous period.

This is also the street and culture setting.
An X Games tournament was held in April, and HUF collaborated with X Games to produce clothing and staff
uniforms. Since then, the degree of attention and results of HUF have increased very much. We also believethat we have very effectively evaluated the world view of skateboarding with HUF.
In addition, as shown on the left side, the expansion of fans of the HUF brand has been very strong, achieving
270% YoY growth in EC sales and 254% YoY growth in overall sales.

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14This is the fashion capital section.
We will continue to develop women's fashion that constantly responds to trends and changes. EC sales havealso been strong, in line with the recovery of retail stores. The six brands operated by Arpege are doing very
well. This business continues to be operated by OMO. As a result, sales at the EC site are increasing, which inturn increases sales at retail stores, and the two are sending each other customers in a very positive way. We
are continuing to grow steadily by promoting mutual sending of customers.
First, Arpege story is in good shape, with sales at 284% of the previous period. This business unit has sales of
JPY8.14 billion, or 124% of the previous period, and this is component ratio.

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15This is also fashion capital.
Our brand, LE PHIL, which was developed by Sanei-International Co., Ltd., has grown very effectively. In thethree years since its debut, the scale of sales has increased approximately tenfold. We are developing aluxurious brand for adult women who seek a higher level of satisfaction. We will expand sales mainly throughEC.
In addition, there are currently two physical stores, and sales are expanding due to increased recognition, aswith EC.

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16This business entity is constantly trying new things as content to capture the digital native generation, thenext generation which continues to expand.
Sales are projected at JPY3.88 billion, and 104.9% of the previous period. ETRÉ TOKYO is attracting new EC
customers, and we are planning to create a home line to commemorate our fifth anniversary starting thisfiscal year. With the debut of this line, we hope to send new customers again.
The hueLe Museum art Labo is a collaboration of art and fashion that opened at GINZA SIX for a limited time
only.
With ROSE BUD, we also continue to create new connections with the brand through its FASHION DANCENIGHT dance event, for which ROSE BUD provides costumes and support.

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17This is also the digital native generation setting.
As I mentioned earlier, we have entered into a capital and business alliance agreement with Sitateru Inc. Whileboth companies are promoting an F2C trial, which is digitalization, we will build Japan production and a
network that meets the needs of the new era.
This will promote a flexible production system that allows TSI Sewing to take the initiative in business creation.
This will allow us to conduct an F2C trial with Sitateru and transmit and permeate best practices to Sitateru
partner factories, with the Yonezawa factory as the base, so that information management andcommunication with factories in the garment production workflow using Sitateru’s cloud will be digitalized.
We hope to expand into new businesses with linkage that will allow quicker creation of 3D samples and theirproduction at the request of our customers.

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These are examples of the TSI Group's most recent efforts for SDGs.
First, we are providing humanitarian assistance to Ukraine. A portion of the proceeds from brand businesses
is donated to the Japanese Red Cross and participating projects.
Second, we have started a business partnership with the town of Kamikawa in Hokkaido, Japan. The gifting isdone by a specialized mending unit remaking residents' garments into bags or other items that are relevant
to customers.
Third, under the theme of Think Golf, PEARLY GATES makes extensive use of recyclable fibers. In addition,
their team are planning to hold an exhibition this coming August to highlight new ways to create and approach
new recycling for SDGs-themed products.
Fourth, the TSUNAGU project is driving brands as a whole while the brand HUMAN WOMAN is building a formof upcycling from clothing to clothing.
Fifth, although the Together with Earth event has already ended, we held our first collaborative campaign
with World Co., Ltd at Daimaru and Matsuzakaya stores nationwide. We are launching products made using
sustainable materials and are also holding a campaign to accept medical products.
We believe it was a great achievement for us to work together with other companies, and we are very pleased
with the results. We would like to continue to develop these initiatives on a grand scale not only with ourcompany and our brands, but also with various other companies.

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We will push forward with "creating empathy and social value around the world through the power of fashionentertainment” as our purpose.
In Q1, we achieved our estimates, but we are still very disappointed that our top line has not yet improved interms of sales. There is room for improvement in this area, so I would like to make Company-wide efforts toimprove this area, make new investments, create products that will please our customers, and deliver smiles
to everyone, including those on the store floor. We will continue to work even harder in Q2.
Thank you for your cooperation.
Hasegawa: Thank you. Today's financial results presentation materials and video are available on our website.
______________
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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