Pan Pacific International Holdings Corporation
August 17, 2021

Overview of Q&A Session at Analysts Briefing for FY2021
This document provides an overview of the Q&A session at the analysts briefing for thefull-year results. Questions and answers have been edited for clarity.

Q1. (Presentation p.21) Regarding the full-year forecast for the Discount StoreBusiness, could you tell us if the 3.1% growth in sales for existing stores will beachieved through actual capabilities or through the renovation effect or throughthe efforts of the Million Star in the field? Please explain in relation to the current
measures.
A: On the basis of actual capabilities, we believe that the introduction of PB andstrengthening of development efforts will boost the numbers. With regard toMillion Star, we will continue to put the emphasis on strengthening pricecompetitiveness against competitors, with stores playing a central role. As for therenovation effect, we have set up various test stores, including “Meat Donki,” asa part of the hypothesis verification process. We will speedily roll out and expand
the ones that produce results, and we believe that the numerical results will follow.
Of these, we are also seeing results in some single-item products and categories,
so we will also quickly and successively roll out these products to other stores,
which will contribute to pushing up the numbers.
Q2. Does the 3% growth mean that you are feeling solid response to the current
situation?
A: Yes, that is right. While we are still not necessarily optimistic, we aim to firmly
achieve this figure in the current fiscal year.
Q3. You spoke about increasing capital expenditure. In which area do you plan
to increase investment, and what results do you expect that to produce? Inaddition, is it related to the plans for SG&A expenses?
A: We have reflected on how little capital investment we have made in theprevious fiscal year. However, we will firmly implement the plans and utilize theknowledge that we have accumulated over the past year. I would like to makeparticular note that information systems and DX are now ready for full-scale
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August 17, 2021

launch.
As for SG&A expenses, the situation has become somewhat complicated due tothe consolidation of Gelson’s. Gelson’s figures are expected to be as follows at
the budget stage: a little less than 80 billion yen in sales, and about 34 billion yen
in SG&A expenses including the amortization of goodwill. If these are excluded,
sales growth will be 106.1% and the growth rate for SG&A expenses will be106.7%, so they are broadly linked.
Q4. Is it right to say that the efforts and initiatives made over the past year haveproduced their results respectively?
A: I generally think that would be a correct understanding of the situation.
However, concerning the initiatives for the Discount Store Business, I havespoken about improvements in the field, and this is something that we have tocontinue implementing.
On the other hand, I think this is a separate issue from the question of whether
or not we have successfully responded to the essential changes in customers.
In that sense, “digital” does not mean doing anything completely eccentric andout of the ordinary. Rather, we recognize that it is important to compensate for
Donki’s inadequacies, based on what customers consider normal and take for
granted during this COVID-19 pandemic. With regard to store renovations andPB expansion, we have achieved a certain degree of results and will continue
boosting efforts in these areas.
Q5. A fall in operating income is predicted for the first half of FY2022. Could
you tell us the background behind this forecast?
A: This forecast takes into consideration factors such as the impact of restrictions
on human traffic and the reactionary demand for alternatives to eating out,
brought about by the ongoing state of emergency declared by the government.
SG&A expenses, too, will be impacted by the significant cost controls put in placelast year in response to the reduction in opening hours and control of SG&Aexpenses.
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Q6. For the first half of FY2022, there are no forecasts for increases in profit
for Don Quijote, while UNY is expected to see a decline in profit. Would it beright to say that operating profit will be on a par with the two years ago?
A: Yes.
Q7. (Earnings forecast for the FY 2022) The forecast for operating profit is anincrease of 3.31 billion yen for the domestic business, an increase of 950 million
yen for the overseas business, and a decrease of 580 million yen for otherbusinesses. What is the outlook on increases or decreases in profit in the mainareas of business in Japan and abroad?
A: We expect a profit increase for the Discount Store Business, and a slightdecrease for the GMS Business. Overseas, we expect profits to increase in both
North America and Asia.
Q8. (Earnings forecast for the FY 2022) What is the full-year profit increase
margin for Gelson’s, and is goodwill included?
A: For the full-year, we believe that Gelson’s profit contribution margin will range
from 700 million yen to 1 billion yen, including goodwill.
Q9. (Earnings forecast for the FY 2022) This means that of the increase inprofits overseas of 950 million yen, 700 million yen will come from Gelson’s. Is
goodwill included for the full-year in the waterfall chart shown on page 21 of thepresentation?
A: The waterfall chart shows the difference from the previous fiscal year, so
Gelson’s contribution would be flat on this chart. When the goodwill for theprevious fiscal year is captured, profit contribution for the full year will be flat as aresult.
Q10. In the past two to three months, the COVID-19 situation is becoming
increasingly fluid. Against this backdrop, what discussions were held withregard to topics such as the extraordinary loss of 16.7 billion yen that wasrecorded, how operating profit is generated, and the direction of guidance?
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August 17, 2021

A: Customer psychology has undergone changes during the COVID-19
pandemic. As the GDP statistics published the other day also revealed, thepremise is that consumption is on the decline. Regarding the overseas market,
we have been paying attention to how people’s behavior changes after a certain
proportion of the population has been vaccinated.
Under these circumstances, there are parts of the guidance that we could not
make any decisions on until the very last minute. The conclusion was that it isbetter to adopt a conservative stance with regard to the COVID-19 pandemic. In
view of that, while the extraordinary loss was processed mainly through theinbound stores, we decided to process the portion that was postponed because
real estate values could not be changed, during the previous fiscal year.
Operating profit figures have remained as they are.
Q11. Inventory levels were increasing as of the end of the previous fiscal year
(FY2021). What is your view for the inventory level and for the valuation loss ofabout 11 billion yen in FY2021?
A: We are not particularly worried about inventory.
With regard to valuation loss, I believe we made the right assessment ofimpairment for FY2020.
While there is a certain level of valuation loss for FY2021, it is not such a major
loss. There are no items such as those for FY2020, so the loss is being processedin line with the principles.
Regarding this increase in inventory, if we incorporate contributions from theconsolidation of Gelson’s, the newly established stores in Asia and the increasein sales in the North America business, sales increase will be a little over 8 billion
yen.
The business format conversion to UDR, combined with renovation to new GMS
stores, have resulted in an increase of 5 billion yen.
Consequently, Don Quijote’s inventory had fallen by a little more than 1 billion
yen. There is no sense that inventory has increased.
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August 17, 2021

As for the inventory reserve for the end of the fiscal year, no special compensation
was made as in the previous fiscal year. Reserves were allocated in line withaccounting principles.
Q12. With regard to the breakdown for the business results forecast, is UDR
expected to generate a profit loss?
A: There will be a decrease in the number of stores converted to UDR, so thatthe cost for newly established stores will be reduced. Hence, it is expected togenerate a profit increase.
Q13. Despite the uncertainty in the outlook due to the COVID-19 situation thisfiscal year, there are plans to invest proactively. Will it be possible to achieve
100 billion yen during President Yoshida’s term in office?
A: I think that depends on what we do with regard to priorities. Even in the difficult
current situation, I think an important point is how COVID-19 has changed theway consumers behave. Investing in that now would be the main focus of themanagement.
During the next announcement of the interim results, we will offer an indication ofwhat we will do in the next three years.
Q14. Did sales increase by 10% after renovations for the 100 day project? Didgross profit also increase? What is the degree of progress for rolling out going
forward?
A: The months of April to June after the renovations were the period of special
demand for hygiene products last year. As such, it was difficult to tell the changes
from the previous year during this period. Overall, it is decreasing compared withthe previous year, but these stores have achieved strong sales year-on-year, andhave registered a 10-point improvement if we were to look at the relative
difference in comparison with neighboring stores.
As for profit margin, we have not reached the final verification of the effect on
profits, including inventory disposal and renewal. Hence, this information has not5

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been included.
Concerning the roll out, some standard product groups that are successful havealready been rolled out to all stores. Depending on the product category, somehave been rolled out to 80% to 90% of the stores. On the other hand, there arealso some that have not yet been rolled out at all.

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