Bridge Report（2722）July 22, 2022

https://www.bridge-salon.jp/

I.K CO., LtD（2722）

Chairman & CEO Hiroshi Iida

Company Information
MarketTokyo stock exchange Prime Market and Nagoya stock exchange Premier Market

Industry

Retail Business (Commerce)

Chairman & CEO

Hiroshi Iida

HQ Address

KDX Nagoya Station Building 5F, 3-26-8 Meieki, Nakamura-ku, Nagoya-shi, Aichi

Year-end

End of May

Homepagehttps://www.ai-kei.co.jp/en

Stock Information
Share Price

Shares Outstanding¥446
DPS (FCST)

Total market cap

8,308,000 shares
Dividend yield (FCST)¥12.00EPS (FCST)

2.7%

ROE (Act)¥3,705 million
PER (FCST)¥24.34-30.1%BPS (Act)

18.3x

Trading Unit
100 shares
PBR (Act)¥321.94

1.4x*The share price is the closing price on July 22. Each figure and number of shares outstanding (including treasury stock) were taken from the financial results
for fiscal year ended May 2022. *Market cap was calculated by multiplying the closing price on Jul. 22 by the number of outstanding shares. ROE, BPS, andPBR were taken from the financial results for the term ended May 2022. The figures were rounded.

Earnings Trend
Fiscal Year

Sales

Operating Income

Ordinary Income

Net Income

EPS

DPS

May 2019 (Act)17,614

431

437

238

31.85

12.00

May 2020 (Act)18,483

590

623

384

52.19

12.00

May 2021 (Act)20,754

705

730

321

42.60

12.00

May 2022 (Act)16,335

-360

-323

-905

-115.95

12.00

May 2023 (FCST)

16,426

511

520

186

24.34

12.00

*Unit: million yen. The estimated values are those announced by the Company.

The financial statement for fiscal year ended May 2022 and many more about I.K Co., Ltd. will be described.
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Table of Contents
Key Points
1. Company Overview
2. Fiscal Year ended May 2022 Earnings Results
3. Fiscal Year ending May 2023 Earnings Forecasts
4. Future Strategy
5. Medium-Term Business Plan “IK Way to 2024”
6. Conclusions<Reference: Regarding Corporate Governance>

Key points
Sales fell and an operating loss was posted in the fiscal year ended May 2022. Sales decreased 21.3% year on year to 16,335
million yen, due to a significant decline in the performance of TV shopping in the Direct Marketing Business, which wascaused by their marketing mistakes. Operating income dropped 1,065 million yen year on year, recording a deficit of 360
million yen. A significant drop in their highly profitable TV shopping business caused gross profit margin to decrease 5.8
points year on year to 45.3%. However, the ratio of selling, general and administrative (SG&A) expenses improved 0.2
points year on year, as a result of reduction in advertising expenses in response to the worsening of the TV shopping business.

The sales in the fiscal year ending May 2023 are expected to reach 16.4 billion yen, almost unchanged from the previous
year, however, operating income is forecasted to move into the black, standing at 500 million yen. The sales of the Sales
Marketing Business are expected to grow because of the continuing stable revenue from the co-op and mail-order shopping
business. For the Direct Marketing Business, the company reviews their marketing strategy and aims to increase sales in
Nanarobe, the business transferred from Combi Corporation, as well as in Korean cosmetics. A dividend to be paid will beunchanged at 12.00 yen per share, while the company aims at a payout ratio of 20%.



Stabilizing the TV shopping business is considered to be the key. We would like to pay attention to whether the company
can resume the virtuous cycle: “Spark a boom on TV and sell products via multiple channels.” This business model would
increase revenues if the cycle repeats smoothly. Furthermore, the company expects to see the effect of introducing new
brands from South Korea. For the co-op cosmetics, we would like to pay attention to their sales doubling plan in which
they will launch new brands in addition to cosmetics made from eggs and cosmetics for treating age spots.

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1. Company Overview
I.K Co., Ltd. is a “marketing manufacturer,” which conducts integrated business activities including product planning, manufacturing,
selling and distribution through its original promotion strategy.
The company operates the three businesses: the “Direct Marketing Business,” to sell sundries, food products, and cosmetics via TV
shopping, EC, and shops to consumers, the “Sales Marketing Business,” to sell products via various routes, including co-op stores, mailorder companies, shops, overseas channels, etc., and the “IT Solutions Business,” to offer IT solutions for developing and selling systems.
The company strives to establish a group management to make all stakeholders its fans by promoting “the increase of fans” as its
corporate philosophy.
◎Performance Trends

1-1 Corporate History
After spending his high school and college days in a “freewheeling” school environment, Mr. Hiroshi Iida (present chairman and CEO),who had a strong entrepreneurial spirit from the beginning, worked for a nonlife insurance company and went on to establish I.K Ltd. in
May 1982. While working on the sales of various products, he opened an account of Aichi CO-OP Union in April 1983 on getting favors
from people in charge of sales and started trading with occupational co-ops.
As the sales of flyers about a rechargeable cleaner, the first product, became a major hit, the horizontal expansion to other co-ops
progressed, the number of items handled also increased and the business expanded rapidly. It got listed on the JASDAQ market in
December 2001.
Due to the increase in recognition and reliability after the listing, the company began supplying products to the mail-order systems ofdepartment stores and retailers in a full-fledged manner, steadily expanding sales outlets, and achieved sales increases for 25 consecutive
terms until the fiscal year ended May 2007.
However, as the Lehman’s bankruptcy put the growth at halt, the company shifted to a “marketing manufacturer” that conducts integrated
business activities including product planning, manufacturing, sales and distribution of products on its own using a unique promotion
strategy and established “B to C channels” in addition to “B to B to C” to offer its products directly to customers, which allowed it toreturn to the growth track once again.
The company is actively putting efforts in M&A such as making Prime Direct Inc., a major company for television shopping, into awholly owned subsidiary in September 2014.
1-2 Management Philosophy
Increase of fans

What they should pursue to become a leading company in the 21st century is not the amount of sales, capitalor the number of employees. When they look ahead 100 years, they consider that making more and more
people their “fans” will lead to prosperity for the company, therefore, they set “increase of fans” as thecompany’s management philosophy with a goal of “making all people involved in I.K Co., Ltd its fans.”

1-3 Business Description(1) Segments
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In the fiscal year ending May 2022, the company changes the names of the business segments to Direct Marketing (former B-to-C)
Business, Sales Marketing (former B-to-B-to-C) Business, and IT Solutions (former Other) Business in an effort to describe the detailsof its businesses more appropriately in the course of pursuing a business model of a marketing manufacturer.

(Source: The company’s material)(Source: The company’s material)① Sales Marketing Business: Wholesale
The cosmetics, apparel goods, shoes, bags, products related to beauty and health, etc. designed and developed by the company as amanufacturer are offered to consumers through various routes, including co-op stores, mail-order companies, shops, and overseas
channels.

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https://www.bridge-salon.jp/(Major Sales Routes)
Co-op route

Co-op Sapporo, Co-op Tohoku Sun Net Business Union, Co-op deli Consumer’s Co-operative Union, Palsystem
Consumer’s Co-operative Union, Tohto Co-op, U Co-op, Tokai Co-op Business Union, Co-op Kinki Business
Union, Co-op Kobe, Co-op Chugoku Shikoku Business Union, Co-op Hokuriku Business Union, Green Co-op
Union, Co-op Kyushu Business Union, All School Co-operative Unions in Japan, Aichi Co-op Union, Japan
Consumer’s Co-operative Union, etc.

Mail-order route

TOKAI TV Enterprise Co.,Ltd., Takashimaya Co., Ltd., Dinos Corporation Co., Ltd., Cecile Co., Ltd., Belluna
Co. Ltd., Senshukai Co., Ltd., Nissen Co., Ltd., au Commerce & Life, Inc., ABC Media Communications, JAF
Service, JALUX Inc., Shogakukan-Shueisha Productions Co., Ltd., QVC Japan, Inc., Ropping Life, Nihon
Bunka Center Co., Ltd., Zenkokutsuhan Co., Ltd., Japan Green Stamp Co., Ltd., Shaddy Co., Ltd., Yamachu
Co., Ltd., LightUp Shopping Club Inc., TV Tokyo Direct Inc., Credit Saison Co., Ltd., Japan Post Trading Service
Co., Ltd., U-CAN Inc., MBS innovation DRIVE inc., XPRICE Inc., FELISSIMO CORPORATION,
Halmek Corporation., CATALOGHOUSE Ltd., J.O.D CO,.Ltd., etc.

Store route

Variety type

Don Quijote Co., Ltd., Nagasakiya Co., Ltd., UD Retail Co., Ltd., Loft Co., Ltd., cosme
next Co., Ltd., Tokyo Dome Co., Ltd., Izumi Co., Ltd., TokyuHands Co., Ltd., etc.

Drug store typeMatsukiyoCocokara & Co., Tsuruha Holdings Co., Ltd., Create SD Co., Ltd., Ain
Pharmaciez Co., Ltd., Sundrug Co., Ltd., Sugi Holdings Co., Ltd., AEON Retail Co.,
Ltd., Daikoku Corporation, etc.

Home Center type

Komeri Co., Ltd., Cainz Co., Ltd., etc.

Home appliance type

Yamada Denki Co., Ltd., Biccamera Co., Ltd., Yodobashi Camera Co., Ltd, etc.

Overseas route

China, Taiwan, Hong Kong, Vietnam, Thailand, and Indonesia etc.

② IT Solutions Business
The subsidiary AlfaCom, Ltd. sells systems for the establishment of contact centers, such as the voice call recording system “Voistore,”the business version of LINE “LINE WORKS,” the chat system “M-Talk,” etc.
③ Direct Marketing Business: Retail
A subsidiary named Prime-Direct, Inc. offers products directly to consumers through its website and the TV shopping program, andanother subsidiary named Food Cosmetic Co., Ltd. runs directly-managed stores to sell products of Korean cosmetic brands called
SKINFOOD and OLIVE YOUNG. As of July 2022, they manage 17 directly-managed stores and 4 franchise stores, that is, a total of
21 stores mainly in train station buildings in major cities in Japan. They opened 2 stores for a new cosmetic brand from South Korea,
OLIVE YOUNG PB COSMETICS.
(2) Main Products Developed by the Company
As a marketing manufacturer, the company develops products in various genres in house.
<<Healthcare>>(Source: The company’s material)

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Bridge Report（2722）July 22, 2022

https://www.bridge-salon.jp/<<Beauty>>(Source: The company’s material)<<Entertainment >>(Source: The company’s material)

1-4 Characteristics and strengths: Business model as a marketing manufacturer
The primary point characterizing the company is a business model as a "marketing manufacturer" which conducts integrated businessactivities including planning, manufacturing, sales, and distribution of products on its own with a unique promotion strategy.
The company’s business model is composed of the following 3 functions.

(1) Powerful product development, discovery, and procurement
The company is developing, discovering and procuring attractive products by taking advantage of information gained from a wide rangeof sales channels and experiences cultivated over 30 years. The "Development Approval Conference" is held every other week, and threeteams of cosmetics, sundries and food with 7 to 8 members in each team, propose new products to officers and people in charge of sales.
In their company where challenges are valued, each team proposes an average of 10 or more items each month based on freewheelingideas, but not everything is approved.
The company has set "10 rules for development," which stipulates "emphasis on originality" and "thorough differentiation" regarding
product development, and the proposed product is strictly criticized based on them, and homework is given out sometimes. However,these processes train the staff members in charge of development and are leading to further enhancement of product development
capabilities.
(2) High marketing ability“High marketing ability” is playing a major role in developing a hit product.
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Test marketing is conducted using various sales channels to check whether candidate products actually sell well. By making innovations
in various aspects such as package, timing, target and price and conducting new promotions, the company has been creating many hit
products.
(3) Various sales channels
Rather than just proposing products to the various sales outlets mentioned above, they propose the best ways of selling and showcasing
in other sales channels together with successful stories of those channels.
They blend ideas unique to I.K co., Ltd. with the needs and feedbacks of customers and brush them up daily.
It is a major feature of the company that it provides all solutions, which fit the sales channels, to customers including product selection,
catalog and medium creation, quality control, order reception, logistics and customer service.
Solutions

OutlineCreation

Create a flyer/catalogue sized paper tailored to the project

Order reception

They have a flexible core system that can handle all order reception styles such as calls, emails, FAX andpost cards with which it performs order receiving work faster and more accurately.

Quality control

In addition to preparing for compliance, they set voluntary standards for each product category, and they
check the products to prevent complaints.

Logistics

They provide individual delivery service from their own distribution center to the end user, keeping in mind
the five keywords: sorting, setting in order, cleaning, hygiene, discipline.

Customer Service

In-house staff members provide one-stop services such as responding to inquiries about products, delivery
and exchange, and after sales services at the call center.

While many other companies in the same industry specialize in planning and marketing of products, have only stores as their sales
channels, and outsource manufacturing and distribution work to other companies, the company can execute a unique promotion strategy
that they cannot imitate as the company can respond flexibly with the system and know-how.
1-5 ROE Analysis
FY 5/15FY 5/16

FY 5/17FY 5/18

FY 5/19

FY 5/20

FY 5/21FY 5/22

ROE (%)

-3.4

4.9

25.0

29.0

9.1

14.0

10.1

-30.1

Net income margin (%)

-0.40

0.53

2.79

3.50

1.35

2.08

1.55

-5.54

Total asset turnover [times]

2.75

2.93

3.04

3.19

2.69

2.61

2.84

2.24

Leverage [times]（x）

3.07

3.18

2.95

2.60

2.51

2.59

2.29

2.43

In the fiscal year ended May 2022, ROE declined due to the drop in the net income margin caused by the company falling into the red.
For FY 5/23, it is projected that the net income margin will improve to be 1.1% after the improvement of marketing strategies for the
TV shopping business, etc.

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2. Fiscal Year ended May 2022 Earnings Results(1) Consolidated Business Results
FY 5/21

Ratio to Sales

FY 5/22

Ratio to Sales

YoY

Sales

20,754100.0%

16,335100.0%-21.3%

Gross Profit

10,643

51.1%

7,400

45.3%

-30.3%

SG&A

9,908

47.7%

7,760

47.5%

-21.7%

Operating Income

705

3.4%

-360

-

-

Ordinary Income

730

3.5%

-323

-

-

Net Income

321

1.5%

-905

-

-

*Unit: million yen. Net income is profit attributable to owners of parent.

Sales dropped, and an operating loss was posted.
Sales fell and an operating loss was posted. Sales decreased 21.3% year on year to 16,335 million yen, due to a significant decline in theperformance of TV shopping in the Direct Marketing Business, which was caused by their marketing mistakes. Operating income
dropped 1,065 million yen year on year, recording a deficit of 360 million yen. A significant drop in their highly profitable TV shopping
business caused gross profit margin to decrease 5.8 points year on year to 45.3%. However, the ratio of selling, general and administrative(SG&A) expenses improved 0.2 points year on year, as a result of reduction in advertising expenses in response to the worsening of the
TV shopping busines(Variation in Selling, General and Administrative Expenses)
FY 5/21

Ratio to sales

FY 5/22

Ratio to sales

YoY

Labor cost

1,500

7.2%

1,489

9.1%

-0.7%

Advertising cost

4,306

20.8%

3,203

19.6%

-25.6%

Packing and freight expenses

1,744

8.4%

1,422

8.7%

-18.5%

Others

2,356

11.4%

1,645

10.1%

-30.2%

Total SGA

9,908

47.7%

7,760

47.5%

-21.7%*Unit: million yen.
Since the response of major products to TV shopping was not good, the company decreased broadcast slots, so advertising cost decreased
considerably by 25.6% year on year. Labor cost was unchanged, but the ratio of labor cost to sales rose 1.9 points due to the drop in sales.
The company is striving to reduce packing and freight expenses, but due to the drop in sales, the ratio of packing and freight expenses
to sales increased 0.3 point.
◎Quarterly Earnings

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https://www.bridge-salon.jp/(2) Trend of each segment
FY 5/21

Ratio to Sales

FY 5/22

Ratio to Sales

YoY

Sales
Direct Marketing Business

8,467

40.8%

5,184

31.7%

-38.8%

Sales Marketing Business

11,885

57.3%

10,69965.5%-10.0%

402

1.9%

450

2.8%

+12.1%

20,754100.0%

16,335100.0%-21.3%

Direct Marketing Business

298

3.5%

-805

-

-

Sales Marketing Business

324

2.7%

395

3.7%

21.9%

IT Solution Business

52

13.0%

29

6.6%

-43.0%

Adjustments

30

-

20

-

-

Total

705

3.4%

-360

-

-

IT Solution Business
Total
Operating income*Unit: million yen. Composition ratio of operating income is operating income margin.

① Direct Marketing Business
Sales dropped, and an operating loss was posted.
The company failed to predict when their flagship product “Speed Heat Thermal Vest” would pass its peak, due to the marketing mistakes
in the TV shopping business, which created a blank period of their top-selling product, and caused a decrease in sales efficiency, causing
both sales and profit to decline significantly. The sales of the entire Direct Marketing Business dropped 3,282 million yen to 5,184 millionyen.
As gross profit margin decreased 6.8 points year on year, the total operating income of the Direct Marketing Business dropped 114
million yen year on year to negative 805 million yen.
② Sales Marketing Business
Sales declined but profit increased.
The demand from housebound consumers in the same period of the previous year subsided, and the number of the food media decreased,so sales declined slightly year on year. The total sales of the Sales Marketing Business decreased 1,185 million yen year on year to9

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10,699 million yen. As the ratio of PB declined, but the ratio of SG&A expenses fell, operating income rose 71 million yen to 395 million
yen, hitting a record high.
③ IT Solutions Business
Sales grew, but profit dropped.
The company increased the number of staff members by 7 to strengthen sales activities, augmenting labor costs and decreasing operating
income.
(3) Financial condition and cash flow
◎Main BSEnd of May 2021 End of May 2022
Current Assets

End of May
2021

End of May
2022

6,230

6,553 Current Liabilities

2,614

3,519

Cash

800

1,075

1,007

893

Receivables

2,800

2,612

570

1,492

Inventories

1,947

2,420 Noncurrent liabilities

1,055

1,353

Noncurrent Assets

996

825

737

1,044

Tangible Assets

361

197 Total Liabilities

3,669

4,873

Intangible Assets

157

208 Net Assets

3,557

2,504

Investment, Others

476

419

Retained Earnings

2,400

1,401

7,226

7,378 Total Liabilities and Net
Assets

7,226

7,378

Balance of Debts

1,308

2,536

Capital adequacy ratio

49.0%

33.5%

Total Assets*Unit: million yen.

PayablesST Interest Bearing
Liabilities

LT Interest Bearing
Liabilities

Due to the increase in inventory assets, total assets rose 151 million yen from the end of the previous term to 7,378 million yen. Due tothe augmentation of short and long-term interest-bearing liabilities, etc., total liabilities grew 1,204 million yen from the end of theprevious term to 4,873 million yen. Due to the decline in retained earnings, etc., net assets decreased 1,052 million yen from the end of
the previous term to 2,504 million yen. Equity ratio decreased 15.5 points from the end of the previous term to 33.5%.
◎Cash Flow
FY 5/21FY 5/22

Increase/ Decrease

Operating cash flow

636

-769

-1,406

Investing cash flow

-220

-319

-98

Free cash flow

415

-1,089-1,505

Financing cash flow

-258

1,135

+1,394

Cash and equivalent

967

1,075

+108

*Unit: million yen.

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Free cash flow dropped, because net profit fell into the red.
Financing cash flow grew considerably, due to the increase in short-term interest-bearing liabilities. The cash position increased.

3. Fiscal Year ending May 2023 Earnings Forecasts(1) Full-year earnings forecast
FY 5/22
Sales

Ratio to sales

FY 5/23(Forecast)

Ratio to sales

YoY

16,335100.0%

16,426100.0%+0.6%

Operating Income

-360

-

511

3.1%

-

Ordinary Income

-323

-

520

3.2%

-

Net Income

-905

-

186

1.1%

-

*Unit: million yen. The estimated values are those announced by the company.

It is forecast that sales will decrease, and an operating loss will be posted.
The sales in the fiscal year ending May 2023 are expected to reach 16.4 billion yen, almost unchanged from the previous year, however,operating income is forecasted to move into the black, standing at 500 million yen. The sales of the Sales Marketing Business are
expected to grow because of the continuing stable revenue from the co-op and mail-order shopping business. For the Direct Marketing
Business, the company reviews their marketing strategy and aims to increase sales in Nanarobe, the business transferred from Combi
Corporation, as well as in Korean cosmetics. A dividend to be paid will be unchanged at 12.00 yen per share, while the company aims
at a payout ratio of 20%.
(2) Trend of each segment*Sales forecast for each segment
FY 5/22

Ratio to Sales

FY 5/23 (FCST)

Ratio to Sales

YoY

Direct Marketing Business

5,184

31.7%

4,717

28.7%

-9.0%

Sales Marketing Business

10,69965.5%

11,188

68.1%

4.6%

450

2.8%

520

3.2%

15.3%

16,335100.0%

16,426100.0%

0.6%

IT Solutions Business
Total*Unit: million yen.

(Monthly sales for each segment)

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4. Future Strategy(1) Direct Marketing Business
The company will increase the sales of their subscription products, and strengthen sales promotion of Korean cosmetic products. For the
TV shopping business, the company will continue test marketing with the aim of stabilizing their business.
① To increase sales of subscription products, and stabilize the TV shopping business
For the E-commerce, the company aims to maximize profit while creating synergy with the television business, as a tool for receiving
orders through the TV shopping business. They strive to carry out unique E-commerce promotions to expand sales of Nanarobe, whosebusiness was transferred from Combi Corporation.
For the TV shopping business, the company continues test marketing for 16 items per year, with the aim of stabilizing the business.
② To strengthen the sales promotion of Korean cosmetic products
In the SHOP business, the company continues to strengthen the sales promotion of Korean brands.
In addition to serving as the general distributor for SKINFOOD and OLIVE YOUNG PB in Japan, the company started selling KAHI,
hince, and ma:nyo brands. They also strive to expand sales at stores while the flow of people is on a gradual upward trend.
In Japan, the import amount of cosmetic products from South Korea is on an upward trend every year, and such upward trend is expected
to continue.
Furthermore, according to the Cosmetic Importers Association of Japan, the import amount of cosmetic products (excluding toothpastes
and soaps) from January through March in 2022 rose 23.7% year on year to 17.5 billion yen for South Korea, and increased 11.3% year
on year to 17.08 billion yen for France. The
amount for South Korea exceeded that for France for the first time to become the largest.
This is not a temporary boom, but it indicates that Korean brand cosmetics have been firmly rooting in Japan.
The company continues to invite popular brands in South Korea, such as hince and ma:nyo, for which the company signed contracts,
and strengthen domestic sales as their general distributor in Japan.

(Source: The company’s material)

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https://www.bridge-salon.jp/(2) Sales Marketing BusinessIn the Sales Marketing Business, the company aims to secure stable revenues as a group-wide revenue base.
In the previous fiscal year, the company headed for the stable growth in the co-op and mail-order businesses going forward.
① Stable growth of the co-op and mail order shopping business
The company strives to create synergy with the TV shopping business, and they will increase sales of mainly the top-selling products in
TV shopping to co-op and retail stores, to boost sales and profit of PB products.
In the co-op market, the company will increase sales of their PB (private brand) products of cosmetics made from eggs and cosmetics
for treating age spots, to boost profit growth.
In addition, the company will start working on expanding distribution routes for Nanarobe.
② Rebuilding the Store Business
Even though the company was significantly impacted by the Covid-19 pandemic, a flow of people is on a gradual upward trend, and thecompany continues to deal in more Korean cosmetics, like in the SHOP business.
The company will switch from direct wholesale to retail stores to wholesale through wholesale stores, to boost sales efficiency as wellas to expand distribution routes.
As the restriction on going out has been eased, this business is considered to have more room to grow.
(3) IT Solutions Business
The company will absorb Communication Bridge, Inc. in April 2022, and expand its business as a profitable Japanese general distributorof the growing chat system “M-talk.”① New growth strategies for IT Solutions● To commence business operation in the new structure after the merger with Communication Bridge, Inc.
● To receive project orders without fail and commence the operation● To start developing new services as up-front investment② M-Talk
M-Talk is the only chat system that covers the specification for contact center operations.
The company utilizes not only websites, but also LINE, etc. as its interfaces in an integrated manner. They aim to achieve the hybrid
operation of contact centers through the fusion of people and AI based on the linkage of the Chatbot, and through the operation utilizing
not only texts but also documents and stamps, as well as the linkage of various systems.
(4) Organizational Reform
Planning to transition to be a holding company structure in December 2022. → Transformation into the IK Group with higher
competitiveness.
The company aims to execute M&A strategies, strengthen the business portfolio management, enhance their governance structure, andstrengthen the human resources development.
(5) Engines that drive growth in the Direct Marketing Business and the Sales Marketing Business① To repeat the virtuous cycle: ‘‘To spark a boom on TV, and sell products via multiple channels”
・Never fail to carry out test marketing for 4 items for each quarter, or allow a blank period for top-selling products・Start test marketing of subscription products

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https://www.bridge-salon.jp/(Source: The company’s material)② To strengthen sales activities for Korean cosmetic brands
・Strengthen sales activities with the aim of achieving the integration of the online and the offline
・Add PB brands of SKINFOOD and OLIVE YOUNG, and concentrate on selling products of hince and ma:nyo, for which the company
signed contracts, as well as KAHI.

(Source: The company’s material)

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https://www.bridge-salon.jp/③To strengthen marketing to expand the co-op cosmetic products
In the cosmetic product area, sales of skincare products have been growing in the co-op market, therefore, the company continues tostrengthen its sales promotion activities. They will also work on expanding sales of cosmetics made from eggs and medicated products
for treating age spots, and developing a new co-op cosmetic brand that follows these products.

(Source: The company’s material)

5. Medium-Term Business Plan “IK Way to 2024”(1) Overall numerical goals(Source: The company’s material)

CCC: If the Direct Marketing Business takes a greater share, the company will be able to collect cash more quickly. So, the company
will increase the scale of the Direct Marketing Business.

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https://www.bridge-salon.jp/(2) Initiatives for the environment(Source: The company’s material)(3) Initiatives for human resources and work styles
The company follows its basic policies to increase the ratio of female employees in the executive officer position and above to 25% orhigher, and achieve the average age of directors in the 40s, both by 2025, in order to build a composition of executives that is wellbalanced and filled with vitality. In addition, the company will actively promote transitions of full-time employees to professional humanresources.

(Source: The company’s material)

6. Conclusions
Stabilizing the TV shopping business is considered to be the key. We would like to pay attention to whether the company can resume
the virtuous cycle: “Spark a boom on TV and sell products via multiple channels.” This business model would increase revenues if thecycle repeats smoothly. Furthermore, the company expects to see the effect of introducing new brands from South Korea. For the co-op
cosmetics, we would like to pay attention to their sales doubling plan in which they will launch new brands in addition to cosmetics
made from eggs and cosmetics for treating age spots.

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https://www.bridge-salon.jp/<Reference: Regarding Corporate Governance>◎ Organization type, and the composition of directors and auditors
Organization typeCompany with audit and supervisory committee
Directors

7 directors, including 3 outside ones

◎ Corporate Governance Report
Last updated: June 21, 202<Basic Policy>
While corporate governance is expected to function effectively, the company strives to become a reliable firm by improving its
management foundation, maintaining high ethics and increasing the transparency of the management further in order to fulfil the social
mission and responsibility as a listed company.
Also, the company considers the establishment of a management structure that can respond to the changes in the business environment
fast and accurately as one of the important business challenges, and it is making efforts in information sharing from many sides byholding a regular meeting of Board of Directors (once/month), an extraordinary meeting of Board of Directors (as per the need), an inhouse officers meeting (once/week) with regular directors (including directors serving as audit and supervisory committee members)
and executive officers, and a top meeting (once/week) composed of people from team mangers post or above.
<Reasons for Non-compliance with the Principles of the Corporate Governance Code (Excerpts)>
Principles
Reasons for not implementing the principles
Supplementary Principle1-2．(4) Electronic The company does not use an online voting platform or provide English
exercise of voting rights, English translation translation of convocation notices for ordinary general meetings of shareholders,of convocation notices
but it will take the shareholders’ convenience into account based on thecomposition of shareholders such as institutional investors and foreign
investors, and discuss them as necessary.
The company has its medium-term plan, and it makes efforts to allow shared
Supplementary Principle 4-1．
(2)Explanation of a medium-term
recognition with shareholders and investors through medium-term vision. The
management plan
medium-term profit plan is not disclosed, but the company will consider
disclosing it in future.
<Disclosure Based on the Principles of the Corporate Governance Code (Excerpts)>
Principles
Disclosure contents
Principle 1-4 So-called Strategically-held The company owns strategically held shares in order to maintain and strengthen
Sharesa continuous, stable and good business relation with its clients. However, it willconduct tests regularly from a medium-to-long term perspective based on
returns, risks, etc., and it will recommend the sale of shares in case there is nolonger necessity. Regarding the concerned shares, the board of directors verifies
the holding purpose, reasonability and the status of dividend income, compares
the acquisition price and current price, and checks the need for holding theshares every year.
Furthermore, since the company makes its decision regarding the exercise of
voting rights by comprehensively considering strengthening and maintenance ofbusiness relation, circumstances of the company concerned, etc., it does not haveexternal standards.
Principle 5-1 Policy to have Constructive In the company, the management team/general affairs group are designated as
Dialogue with Shareholders
the IR department, and they respond to the requests for dialogue by theshareholders within reasonable range in order to contribute to sustainablegrowth of the company and improvement of corporate value over medium-tolong term.
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https://www.bridge-salon.jp/

The company’s chairman holds the financial results briefing twice a year for
shareholders and institutional investors. Further, the company upload videos andhandouts of the briefing on its website for shareholders and investors who are notable to attend the briefing.
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information only. The information included in this report was taken from sources considered reliable by our company. Our company will notguarantee the accuracy, integrity, or appropriateness of information or opinions in this report. Our company will not assume any responsibility for
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