Values and Vision

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Delayed full-scale reopening begins
In May of this year, COVID-19 was moved to Class

5 under the Infectious Diseases Control Law, which isequivalent to seasonal influenza. The department store

industry has been the slowest to reopen among retailers,
but it is finally on the road to a full-fledged recovery.

With the resurgence of foot traffic, we expect economic
activity to become increasingly normalized and vigorous.

sales. During the current medium-term plan period,

our first priority is to fully recover both BS and PL
from the damage caused by the COVID-19 pandemic,
and while we have been forced to narrow down ourinvestments to some extent, the Department Store

has focused on strengthening the luxury and watch

categories. We also see a further expansion of ourdigital touch points beyond our expectations.

In particular, we have been able to encourage

In addition, the move toward a higher level of wage

consumption among relatively young customers in theiris expected to ensure that consumer sentiment will

gaisho sales has increased to nearly 30%. Furthermore,increases, which has not been seen in recent years,
be positive. The Company has added a flat 10,000 yen

per month to the monthly wages for fiscal 2023, under

the name of “livelihood support subsidy.” Furthermore,

20s to 40s, and the share of these customers in our

the recent rise in stock prices will continue to boost
spending by the wealthy class as an asset effect.

Meanwhile, we are keeping a close watch on thegiven that Japan’s domestic personal financial assets,

prolonged inflationary situation. The rise in utilities

exceed 2,000 trillion yen, it could be said that theoperating profit in fiscal 2022, and we expect the same

including residual COVID-19 savings, continue tosentiment is such that any single trigger, such as theprovision of absolute asset value or irreplaceable

experience value, would certainly have a positiveeffect on consumption.

The driving force behind our recovery process isspending by the wealthy class in department store

expenses had a negative impact of 2.6 billion yen onlevel of impact in fiscal 2023. At home, in addition

to rising utilities expenses, there are also cases
where prices for the same items such as food are

repeatedly raised several times. Despite the rare andunprecedented increase in wages in recent years, it isundeniable that real wages have been slow to rise.

However, we do not overestimate the current situation.

There Is No Smooth Road
to Change.

Rather, this is an opportunity to “move up a gear for change.”
Even taking into account such uncertainties, I am

by business with an awareness of cost of capital. We

a certain extent, considering the accelerating recovery

the perspective of return on invested capital is thecertain that the reopening effect will be sustained toof domestic foot traffic and the expected demand frominbound customers from mainland China, given thatthe industry has lagged behind.

However, we try not to overestimate the current

situation. Rather, we believe that we are now at a major

Director, President and Representative Executive Officer
J. Front Retailing Co., Ltd.

point is that it is an easy-to-understand indicator of
the link between business profitability improvement
and employee efforts.

The Department Store Business has the highest

ROIC in our current business portfolio, but it is clear

Department Store has faced up to now have not been

direction we should take from a medium- to long-solved suddenly. I still hold the belief that a bright future
cannot be envisioned as an extension of the past.

Strengthen stores based on capitalprofitability
To achieve portfolio transformation, we are working

to enhance business management by adopting ROIC

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way to evolve business management. Another key

turning point and that this is an opportunity to “moveup a gear for change.” The essential challenges that the

YOSHIMOTO Tatsuya

believe that pursuing higher ROIC by business fromthat concentrating investment in this area is not theterm perspective. On the other hand, we also believethat it is not impossible to achieve a higher ROIC withthe various reform initiatives the Department Store iscurrently pursuing. We believe that even if growth byincreasing the number of stores is difficult, there isplenty of room for evolution by reforming the businessmodel. The Department Store is already able to track
BS by store, and we hope to take advantage of the13Values and Vision

Value Creation

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Value Creation
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adoption of ROIC by business to further improve
capital profitability.

perspective of the holding company.

Last fiscal year was positioned as the phase to

We believe that our retail business is predicated on

spread understanding, and we held study sessions

digitalization. To make our stores stronger, we must

as well as discussions on KPIs, how to operate thethe strength of our real stores, even when promoting
refine our content, services, store environment, andhighly efficient operations. To this end, we believe that
we should be more aggressive in investing in stores
where we can expect a solid return, while assessing

the capital profitability of each store. The adoption

and briefings at each of our operating companies,

KPI tree, etc. In this fiscal 2023, we will conduct
preliminary operations at some of our department

stores and PARCO stores. We will also chart the path
toward setting and achieving the financial targets of

the next medium-term plan, centered on ROIC, withthe aim of starting full-scale operations in fiscal 2024.

is an indispensable factor in terms of productivity

In recent year s, t he r ec onstr uc tion of t he

one in the capital market, we are confident that

Human Resource Development Plan last fall, with aso it is undeniable that investment in other key stores

achieve management sophistication and increase thehave set a challenging goal of developing 1,000 digital

higher PBR.

toward this goal.

substantial cash if appropriate investments are made.

is currently around one is that we do not have alimited to bringing in human resources themselves.

the group level, it is extremely important that thealso essential to aggressively make the necessary

opportunities for collaboration with outside parties,

Therefore, I believe that we need to more clearly show

established last fall aims to fulfill just such a

now will lead to.

collaboration with startups and working to create

of ROIC has also led to a change in mindset thatemphasizes such an investment-return relationship.

Shinsaibashi store required a large amount of cash,

has been somewhat restrained. Specifically, we

believe that department stores such as the Nagoya,
Sapporo, and Kobe stores have the potential to earn

In order for ROIC management to take root atfield staff understand the importance of ROIC

management. We would like to keep in mind that weshould proceed from the same perspective as theoperating companies, rather than from the “top-down”

While the focus is on improving PBR of less than

the adoption of ROIC by business will enable us todigital specialist hired from outside as a leader. We

of GINZA SIX, which is increasing its presence as

ROIC spread for each business, which will also lead tohuman resources by 2030, and we are actively working

choice “not to operate as a department store.” Later,

However, the fundamental reason why our PBR

Utilizing diverse ideas and perspectives is notclear path to medium- to long-term growth. It is

In other words, I feel it is important to create

investments to deepen and explore for growth.

especially for young people. The CVC fund wewhat kind of future the changes we are working onrole. Young people are taking the lead in seeking

Only “people” can bring about innovation.
Therefore, both young people and outsiders are actively involved.
Turn diversity into innovation

Therefore, as we move forward with the current

medium-term plan, we have made a conscious effort

combination of existing knowledge, and only “people”

in the holding company. As we worked together incan bring about that innovation. Therefore, it isobvious that the more diverse the knowledge is,the more choices we have. In terms of diversity,

while promoting more women is a must, we place
greater emphasis on the “diversity of thinking” thatarises from people who are diverse in terms of age,background, and others.

to assign people from Parco to key posts, primarily
earnest, it became clear that there are many people

in 2021, many of the shops were due for renewal, so
a major renovation was undertaken, including tenant

replacement. Although there were some negative
views because it was right in the middle of COVID-19,
it continues to make greater-than-expected strides,

recording its highest monthly sales ever in Decemberof last year. Of particular note is that customers intheir 20s and 30s account for half of its sales. We

see potential in this fact for the future of the Group. I
feel that there is still much more that we can do as aretailer to create new customers.

To broaden the perspective of customer creation

what output will be shown from them.

a bit more, how the Group can access the Millennialcompany. However, unfortunately at Daimaru

the Group aims for medium- to long-term growth. I

I think diversity is really progressing at the holding

Matsuzakaya Department Stores and Parco, we have to
say that there is still a long way to go. We would like tomake a strong effort to promote innovation in this area.

Customer creation in the “new era”
The Department Store Business is supported byGeneration and Generation Z is a major issue as

make a conscious effort to talk with people of thesegenerations, and I find that their lifestyles and values
are clearly different from those of us, the Showa
generation, in ways that cannot be explained simply

by the demographic factor of age. Both of them aredigital natives, and Generation Z in particular is said

to be social natives, so we believe that a completely
different approach is needed.

our customers, and our challenge is how to develop new

esports business by acquiring a 50.8% stake in XENOZAs I mentioned earlier, the Department Store’sin October last year, making it a subsidiary. Esports

knowledge into the Group will be one of our major
weapons in the future.

one hand, this means that we are aging together withcustomers, especially younger customers.

In addition, we are actively promoting mid-career

gaisho sales, which represent spending by affluent

strategy, finance, and legal affairs. I expect that thecustomers in their 20s to 40s who are relatively young

percentage of mid-career hires at the holding company

were not fully incorporated into the Group, and it was

been made, and we are looking forward to seeinga luxury mall. GINZA SIX opened in 2017 with theconvinced that incorporating and integrating thisfrom those from the Department Store. We aredifferent from that of the Department Store. Parcobut in the first year after that, its human resources

operating companies. Five investments have alreadyAn even stronger indication of this is the movement

regular customers of relatively older age groups. On thehiring from outside, particularly in management

became a wholly owned subsidiary in March 2020,

synergies through innovation, involving employees ofpoints, and the real store space.

with various ideas and perspectives that are different

I think one of the key points is to include people

who have grown up in the culture of Parco, which is

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almost a stand-alone organization.

Innovation is essential to survive in these highly

uncertain times. Innovation is created from theimportant is the content, the digitalization of touch

improvement. For this reason, we launched the Digital

will reach up to 50% in the near future. It is true that
it is becoming more and more difficult to hire digital

human resources. Needless to say, digital technology

customers, are growing as the share of purchases by

as the Department Store’s customers is expanding
after the COVID-19 pandemic. This means that robust
purchases continue, centered on content such as

luxury items and contemporary art. I feel that what is

As part of these efforts, we decided to enter theCo., Ltd., which operates the esports team SCARZ,

is characterized by a high level of interest among
the younger generation, especially those in theirteens to 30s, including Generation Z. It has a highaffinity with businesses utilizing digital technologies,

such as metaverse and NFT, and various businessdevelopments are expected. While steadily realizing

the real-world effect of attracting customers, such as

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Values and Vision

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Data

Value Creation
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holding events at the Group’s facilities, we believe thatcompany’s strategic promotion (Tokyo, Sapporo,by the local community.

the acceleration of strategy execution.

Daimaru or Matsuzakaya department stores or PARCO

has potential is the Kyushu Tankentai (literally Kyushu

feature and strength is that we own real estate inThis project aims to revitalize the entire region by

expanding our business to the digital side will lead to

We will acquire leading content and make our realcommercial facilities stronger. In order to cultivate
new markets, the enhancement of content is thecornerstone. I am convinced that esports will be an
important part of this process.

As another important factor, in terms of organizing

customers, I think it is essential to devise an approachthat takes into account the changing times. Today’s

consumer behavior is characterized by the presenceof a narrow and deep market, against a backdropof diversified values and fragmented customer
preferences. I believe that key words such as infatuationand fervor also represent such a situation. In otherwords, we are in an era where the connection between
like-minded people is emphasized, which is truly the eraof community, and we are also considering utilizing theinformation obtained from the interaction of like-mindedpeople there in commerce. We are already making

preparations, including investment in companies withsuch management capabilities and know-how, and hopeto link this to the creation of new customers.

“Community” as a growth driver
As of March 1 this year, the Developer Business that

had been handled by Parco was split off from Parco andstarted anew as an independent company called J. Front

City Development. At the same time, the CRE Strategy
Unit was newly established in the holding company
to optimize the Developer Business from the Group’s

perspective and maximize value creation. And I was
appointed as the head of this unit concurrently.

Seven cities designated as key areas for the new

Nagoya, Osaka, Kyoto, Kobe, and Hakata) are home tostores. In other words, we believe that our uniquemajor cities that can be developed, including the areas
surrounding our stores. Projects are already underway
in the Sakae area in Nagoya and the Shinsaibashi area

in Osaka, both of which are scheduled for completionin 2026. Furthermore, in the Tenjin area in Fukuoka,

the Tenjin Big Bang has finally begun to move forward,

and we have started to study the possibility of moving

One example of a unique local initiative that I feelby 112 cities in the Kyushu and Okinawa areas.

In addition, Parco and CAMPFIRE, Inc. jointly operate

expedition team), which was started at Hakata Daimaru.

the crowdfunding BOOSTER, and Daimaru, Matsuzakaya,

having our department store employees visit cities

to create an evolved regional revitalization system

in Kyushu and Okinawa and, in cooperation with thelocal governments, uncover attractive people, tangible

and PARCO stores collaborate with the local communities
together with local craftsmen and companies.

Unearth and polish local gemstones. In addition to thegoods, intangible goods, and even culture in those cities

expansion of high-quality global content, such efforts

the public through us. As of July 2023, we have beensales in the future.

that are not yet widely known, and introduce them toforward with a large-scale development project. Also formay lead to a global strategy that includes inboundother key areas, we plan to show concrete pipelines in

As we are in the middle of the supply chain,

as one direction for our portfolio transformation with awe will do our part for sustainability.

due course. We hope that you will look forward to thisnew growth driver.

In order to expand the Developer Business, we will

work on non-commercial businesses such as hotels,
Developer Business, but the significance for us to

Creating shared value is the practice ofour corporate credo

our own way while leveraging our strengths to balancecommerce. However, we believe that we can provide

I am reminded once again that our corporate credo,

certain that the direction we should take is to a little

offices, and residences to diversify earnings as theoperate the Developer Business lies in our strength in

In addition, when we think about what we can do insustainability for both society and our corporation, I feel
more strengthen our efforts toward a circular economy.

unique value to society by creating a “new type of retail”“Service before Profit,” or “Abjure All Evils and Practiceand Parco, rather than limiting ourselves to existing

today. Those who give priority to service over profit will

AnotherADdress has been strongly favored bybelieve that our ability to do so is what makes the Group

simple expressions of what it means to contribute todisposable. We are developing a business model thatthat combines the strengths of the Department StoreAll Good,” is an idea that truly fits the times we live inretailers such as the Department Store and Parco. I

prosper. Do no evil, but do good. I believe that they are

unique.

society.

commitment to coexistence with local communities,

our unique value to society, which in turn leads tostores. Rather than viewing the stores in the community

Shared Value) itself.

community, and link them to various actions from thethat we are in the middle, connecting our suppliers to

In this way, our major value of existence is ourbased on our nationwide department stores and PARCO
as “dots,” we view them as “areas” involving theperspective of creating and providing the value soughtContributing to society means continuing to provide

economic value. We recognize that this is CSV (Creating

Launched in March 2021 as a subscription business,customers based on the belief that clothes are notgoes beyond fashion rentals, partnering with a 3PL
company, a delivery company, a cleaning company,

and a recycling company that are promoting their own
sustainable initiatives.

In addition, the ECOFF program to collect customers’

A bird’s-eye view of our supply chain reminds us

unwanted clothing and accessories has been gaining

consumers. In other words, we are able to reach out

in 2016, and in fiscal 2022, 367 tons were collected, withto each of our suppliers and customers in a variety ofways, and I think it is fair to say that we exist to playrecognition from customers every year since its launcha record number of participants.

Customers’ awareness and values have clearly

this role in society.

changed, and I feel that they are becoming more andgreenhouse gas emissions toward a decarbonizedespecially strong among the younger generation.

We recognize that one of the ways to reduce

society is to address Scope 3, which is indirect

more conscious of sustainability. This tendency is
We have been in existence for 300 or 400 years

emissions other than Scope 1 and Scope 2. Scope 3

because we have been able to quickly identify andour suppliers. More than 80% of our Scope 3 emissions

However, discontinuous thinking is indispensable for

initiatives cannot be realized without the cooperation of
are from Daimaru Matsuzakaya Department Stores,

but by informing our suppliers of our efforts toward

a decarbonized society through briefing sessions, wedemonstrate our resolve and ask for their cooperation in
making their emissions visible.

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certified as an information dissemination ambassador

respond to the changes of the times and our customers.
rapid changes like now. Therefore, we are prepared thatthe road to change will not be smooth. We will continue
to create indispensable value for society by carefully
assessing what we can do and what only we can do.

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