Management Strategy

Management Strategy▶Medium-term Business Plan

New Medium-term Business Plan (FY2021 – FY2023)
Review of the previous Medium-term Business Plan
Some of our initiatives such as portfolio reform and businessmodel transformation in the previous Medium-term Business Plan,
which started in fiscal 2017, are steadily achieving results, but as awhole the plan is only half done and we think we need to drasticallyre-examine the process of promoting it.
Major initiatives

On the other hand, the business environment is changing evenmore rapidly than before. We feel COVID-19 has shifted up thespeed of these changes by two or three steps. It is not too muchto say that currently we are in the very situation where a delay inresponding to changes and a delay in decision-making may be
detrimental to the companyʼs survival.

Results●Entered into childcare business
Multi Service Retailer●Invested in only 2 companies to develop new businesses(expansion of business domain)●Could not show path for the growth of 3 key businesses (JFR Card, J. Front Design & Construction, Dimplesʼ)
Urban Dominant●Promoted redevelopment projects

・Opened GINZA SIX, Ueno Frontier Tower(development project)
Urban Dominant(Real Estate Business)

Growthstrategy●Expanded real estate rental business・Renovated machiya, Gion Machiya, Blue Bottle Kyoto Café, beauty & health BINO (Higashinotoin, Okachimachi, Sakae)●Formulated the Group IT governance・Created IT governance definition, policy, regulations, rules●Developed systems to strengthen security●Created the Group integrated customer DB (LTS-Hub)
ICT (offense)●Developed digital communication base using ICT・Introduced department store smartphone app, gaisho SFA●Right-sized womenʼs wear space - Decreased 10,240 m2 in total for FY2017 - FY2020 (down 21% from FY2016)
Innovation of Department Store●Main building of Daimaru Shinsaibashi opened as a hybrid modelBusiness●Placed Shimonoseki Daimaru under direct management, renewed Daimaru Ashiya/Suma, closed Daimaru Yamashina●Opened Shibuya PARCO, Ueno PARCO_ya, Kinshicho PARCO, Shinsaibashi PARCO
Innovation of Parco Business●Expanded small commercial business by promoting development
・Opened ZERO GATE (Sannomiya, Kyoto, Harajuku), SAN-A Urasoe West Coast PARCO CITYICT (defense)

Overview of FY2021 – FY2023
Medium-term Business Plan

Portfolio reform

We position this Medium-term Business Plan as the period
for achieving “full recovery” from the COVID-19 pandemic byreturning our financial figures to fiscal 2019 levels and forgetting back on track for “regrowth” from fiscal 2024 onward.
Key performance indicator targets

FY2023

Capitalprofitability

ROE

Businessgrowth

OperatingprofitFinancialhealthInterest-bearing
liabilities*1

GHG
Sustainability emissions*2

7¥40.3bn¥260.0bn
△40%

ROIC

Business profit

Net D/E

Ratio of women inmanagement positions%5¥44.0bn
0.6times
26%

When we achieve full recovery in fiscal 2023, the operating
profit share of retail businesses including the Department
Store and Parco is expected to remain more than 80%.
However, the share will be reduced to around 60% in fiscal
2030. On the other hand, we would like to increase theshare of non-retail businesses such as the Developer and
the Payment and Finance to around 40%. Through these
initiatives, we will strive to change our portfolio to a highly
resilient one.
“Operating profit”share of each segmentCapital investment plan

10.0

Other

4.5

PaymentandFinance

ROE
5.4%

¥Developer

30.0

90.0bn40%

Developer
Payment and Finance
Other60%

Department StoreSC

7.0%¥40.2 bn ¥40.3 bn

1%
6%

7.0%
4.7%

11%

9.8%
23.6%

25%

54.9%

57%

SC

14.0

FY2019

Important changes in theexternal environment
Strengths ofthe Group

Merger of digital and real (OMO)
Commercial production
capability

Polarization of income and consumption

Partners including
suppliers and creators

FY2023 Forecast*“Other” includes consolidation adjustments.

FY2030 Image

Steady urban commercial areasCustomer base including
department store gaisho customers

Real estate assets
in major cities in Japan

Reclassification of 4 strengths to make maximum use of them across the Group
3 strategies
Real × Digital Strategy
Important measures
for full recovery

Management basefunction strategy

Prime Life Strategy

Management structure reform ●Cost reduction through business model reform

Developer Strategy●Narrowing down of business baseFinance strategy●Capital policy

HR strategy●Completion of the Group HR structure reform ●HR management for regrowth

IT strategy (defensive IT) ●Rebuilding of core systems

Three strategiesThe Groupʼs strengths are “commercial production
capability,” “good customer base,” “partners including
suppliers and creators” and “real estate assets in majorcities.” Considering these strengths and medium- to longterm environmental changes, we have decided to focus ourinitiatives for growth on “three key strategies” in the newMedium-term Business Plan.

Real × Digital Strategy●We will convert physical stores into places not only

for buying but also for finding attractive products andservices and enjoying high quality customer experiences.
●Using digital technologies with stores as a starting point,
we will transform our commercial model into one thatprovides new experience value beyond time and space.
●We will improve customer data analysis and the use ofdigital tools so that individual workers including sales
staff, gaisho staff and buyers will deepen relationships
with customers.
●We will diversify revenue streams into real estate,commissions earned using digital technologies, and soforth, in addition to sales.

Prime Life Strategy%Department
Store
FY2021 - FY2023
total 3-year investment 30.01.5¥80.0 bnOther*(Billions of yen)

Growth investment

10.0%

Department StoreSC
Developer
Payment and Finance*1 Lease liabilities are excluded. *2 Scope 1 and 2 emissions compared to FY201728

Evaluation

Whole picture of the Medium-term Business Plan

●We will further strengthen our proposals for consumers

who value culture and art and enjoy fulfilling andsustainable lifestyles.
●We will improve our content by utilizing the Groupʼsentertainment and art, as well as developing new
products and services that provide premium experiences
through alliances with other companies.
●We will promote the acquisition of customers beyond
department storeʼs gaisho, such as the nouveau riche inJapan and affluent people in Asia who sympathize withsuch lifestyles, for example, through alliances with othercompanies.
●By improving customer management using digitaltechnologies, we will capture diversified customer insights
and strengthen our proposal capability to maximize thelifetime value of good customers.

●Tax policy●Business management renewal●Realization of diversity and work-life balance●Strengthening of the Group IT HR system●We will increase the number of loyal customers byoffering new payment methods and will provide highvalue added financial services through life planning forcustomers.

Developer Strategy●We will maximize the value of real estate assets held by

the Group. In the redevelopment of complexes and soforth, we will right-size department stores and Parco
stores and make use of relaxed restrictions on their floorarea ratios. We will increase the share of non-commercial
use to increase profitability.
●In the development of large-scale complexes in key areas,
we will contribute to attracting crowds to the areas bymaking them more attractive in a way that respects theiruniqueness such as local histories and environments toincrease consumersʼ mind share.
●We will diversify revenue streams, for example, byacquiring and developing new real estate, forming private
funds, and engaging in asset management. In addition,
we will expand our development areas to include semiurban areas.

Management structure reform<Reduction of fixed costs>●We will reduce fixed costs by ¥10.0 billion comparedto fiscal 2019 through organizational and personnel
structure reform and cost structure reform to lower ourbreak-even point.
<Increase of management efficiency and asset efficiency>●We will narrow down the Group businesses based on thefuture and growth potential of each business and identify
idle assets and low-yield assets to increase efficiency.

Policy on alliance, M&A, and wing expansion●We will actively work on creation of new businesses andalliances with other companies and business acquisitions
that will expand our capabilities, which will contribute toincreasing the scale of and accelerating the speed of ourthree key strategies.

Integrated Report 2021

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