Pan Pacific International Holdings Corporation
May 11, 2021

Overview of Q&A Session at Analysts Briefing for Q3 FY June 2021.
(July 2020 – March 2021)
This document provides an overview of the Q&A session at the analysts briefing for thethird quarter results. Questions and answers have been edited for clarity.
Q1. Please explain in detail about President Yoshida's explanation that "It wasnecessary to reject the past, but, before we knew it, we were imitating the past."

A: In terms of ordinary challenges, we are making steady efforts at each store,such as by responding to the demand for hygiene products from COVID-19.
However, management believes that the changes over the last year are theones that we have never experienced before, therefore, our efforts are
insufficient. One of the biggest changes are our customers. Customers'
behavior is now premised on collecting information, primarily from theirsmartphones. So, based on that premise and from management's viewpoint of"Isn't there more that we can do?", we came up with 200 hypotheses.
In addition, we have been reminded that we cannot underestimate ourcompetitors. For example, there are many drugstores that are responding tochanges in a way we should have been addressing such as opening 24 hours
a day, starting to handle fresh foods, etc.
With the changes of our customers and the competitive environment, we will
shift to being more aggressive. We think that there are large business
opportunities under such circumstances.
Q2. Overseas Business: How do you think the newly opened store in Malaysia hasdone over the last three months? Also, has the acquisition of Gelson's revealeda strategic path for the U.S.?

A: Firstly, regarding the store in Malaysia, although it has just opened and thecountry is currently battling COVID-19, our business model has resonated withthe local customers, and we have the same impression regarding the store in
Taiwan which we also recently opened.
However, it is necessary to adapt to the fact that Malaysia being largely aMuslim country. There were some minor issues such as delay in store opening,but in any case, we will strive to understand local customers better using ourexperience with this store.
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As for Gelson's, its PMI are about to begin, so we would like to ask for yourpatience until the year-end financial results. However, looking at the numbers,
we consider the acquisition of such company is necessary for doing businessin the U.S. going forward, because we think the expansion of our businesswould be difficult without acquiring high-level local talent, for various areas
such as MD, sales, labor, etc.
Q3. Is it correct to understand that the PPIH Group acquired the talent, knowhow,pipelines, etc. for operating in the U.S.?

A: In terms of talent, yes, we have acquired it. In terms of the stores, although wehaven't decided how to proceed in California with respect to a business format,
we think it is significant that we have obtained 27 locations (Gelson's stores)
with the customer bases we should be targeting.
Q4. The guidance was not mentioned earlier, but what is the progress of operating
profit in Q3? In the first half, operating profit exceeded the forecast by approx.
9.3 billion yen, and the full-year earnings forecast has been revised upward by
3.0 billion yen. I think SG&A expenses of approx. 3.3 billion yen were deferred tothe second half as the background of the forecast revision above. Could you
confirm those numbers?

A: At the previous briefing, we explained that approx. 3.3 billion yen in SG&A
expenses will be deferred to the second half. In Q3, approx. 1.0 billion yen outof those expenses has been deferred to Q4. We will use them in line with thebudget. The full-year earnings forecast has not been changed partly due to theimpacts of COVID-19, and the current situation is within our expectations.
Q5. In February, you shared with us some internal changes such as Don Quijote'sreorganization, MD, pricing, etc. You said that there were some impacts, but they
aren’t necessarily visible in the numbers, which leaves the impression that theimprovement were only at the suburban stores. I understand that there would besome difficulties with a state of emergency declared once again, but how havethe impacts you mentioned in February changed so far?

A: I have been addressing that the results will be shown around July. It is aprecondition that a certain amount of time is necessary for the measures to2

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permeate throughout our stores.
On top of that, regarding what was said in February (about the impacts oforganizational changes and MD that we are recognizing), we can say that it isprogressing very smoothly, even though we have not yet announced a specificschedule.
For example, in the case of PB, we have decided on a policy of collaboratingwith marketing, but the actual release will be done in the future.
While we are steadily preparing our medium-to-long term policies, we are also
beginning to grasp near-term impacts at the store level.
As for the state of emergency, we will adapt to changes and will respond to theneeds of our customers in a level-headed manner.
Q6. Last time, there was a figure showing the spot ratio has been decreased, as anillustration of changes in the product mix. Is the spot ratio improvement
progressing gradually?

A: That is correct. Stores dislike "selling at a loss", but in this 100-day project, weset a budget of 30 million yen to increase the turnover rate. To break this down,
20 million yen is budgeted for renovations, and 10 million yen is budgeted forincreasing the turnover rate (i.e. selling at a loss). Taking such drastic
measures also made it easier to introduce PB, and stores were able to design
their inventories as they wanted, with a higher degree of freedom.
In this experiment, we learned that reducing NB and increasing spot/PB is notthat difficult. However, vacating the existing inventory needs to beimplemented first, and that’s why we had them experience challenges such as
selling at a loss.
For your information, we have traditionally increased the turnover rate bysending non-moving inventory to the new stores, and that acted as an escaperoute. However, as the total number of stores increases, naturally the newstores proportion of the total will be smaller, making us impossible to do thesame way in the future. In that context, we are proceeding in a way that stores
can fully understand.

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May 11, 2021

Q7. Regarding Asia, which seems to be performing well, what is the development
structure for opening new stores? Also, please explain about the store opening
plans for the next fiscal year.

A: There are no changes to the 2024 target opening 76 stores.
We plan to open approximately 15 stores in the next fiscal year in Macau,
Malaysia, Singapore, Hong Kong, and Thailand. The situation in each country
will differ due to the impacts of COVID-19, but at the moment we intend toproceed as planned.
We will update in a timely manner about the plan, in case of any changes.
Q8. For the 100-day project, as you dispose of non-moving inventory and approach
the ideal to some extent, how will the SKU change compared to the past, andwhat are the impacts for the sales and gross profit?
Also, please provide some supplementary information on issues related to thehorizontal expansion to other stores.

A: At this stage, I would like to refrain from commenting about this since we arein the experimenting phase in six stores and about to come to conclusions
about what the SKU form should be.
As for the overall numbers, we have put a significant amount of effort into theexperiments at the six stores, and we have produced some results. For thatreason, there is the possibility that the results could be misleading, so we will
provide further explanation on the year-end financial results announcement.
In terms of issues with horizontal expansion, the PB sales target of 180 billion
to 300 billion yen for instance, we cannot tell whether or not we will be able toachieve that right away just from the results of six stores, considering thefactors such as our current development, marketing, and stores situation.
That being said, we are talking internally about changing the evaluation axis.
The standard inventory that is created based on regional characteristics, etc.,
would be the “compulsory” element and the handling of spot products would
be the “free” element. In the former, MD takes responsibility for P/L, while thelatter falls under the evaluation axis for Million Star. Although that has been ourconventional approach, but, at some point, we somehow began to implement
both along the store axis only. Although this is an issue to ameliorate, webelieve we have identified the first step for resolving it in the case of MD.
In addition, when it comes to narrowing down SKUs and switching from NB
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May 11, 2021

products to PB products, there are times each store not being able to makesuch bold decisions. But through the experiment in six stores, we came torealize that sales do not actually change or increase even if we switch from NB
to PB, and narrowing down SKUs does not inconvenience the customer. We
are going to gradually roll out those successful initiatives.
On the other hand, product replacement should be done sensitively because
it has to be done according to customer needs. Rather than simply cutting
SKUs by 30%, we need to do a product-by-product review, and that remains
as an issue of horizontal expansion.
Q9. I think that this will be explained in the year-end financial results, but, at thispoint, is there any additional information on payments, finance, EC, ormarketing?

A: We will explain that in more detail at the year-end financial results
announcement, but, in terms of finance, we are considering an app-based
platform. UCS is also in the process of making its final decision by June as theinternal deadline.
In addition, even though DX isn't yet possible, the number of app members issteadily increasing. In the future, we intend to address customer changes
through digital solutions.
Q10. I understand that the full-year plan will not be revised considering the progressby Q3. Is it correct that Don Quijote is underperforming while other businesses
are outperforming their plans, and that total progress is in line withexpectations?

A: That is correct. Don Quijote performed relatively well during April to June in theprevious year, due to the special demand. However, this year, there is nospecial demand like there was last year, so now is the time for us to dig in ourheels. Under such circumstances, we are taking a variety of measures andbeing conservative about Don Quijote's numbers.
We think all of the other businesses are on track to meet their targets.

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May 11, 2021

Q11. (To CFO Shimizu) Is there anything noteworthy or any point that can be
improved regarding PPIH's financial structure?

A: In terms of finance in general, it is true that the amount of borrowing is sizable,
but considering the abundance in cash we have accumulated and the highprofitability, I don't think that there are any issues at this point.
Nevertheless, in order to realize high growth in line with Passion 2030
(medium-to-long term management plan), we need to think flexibly about how
to respond to any issues that possibly emerge. Additionally, we intend to makethe necessary preparations, taking into account the risk of possible profit
volatility.

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