Results Presentation for the 2nd Quarterof Fiscal Year Ending February 2015

October 8, 2014
J. Front Retailing Co., Ltd.
YAMAMOTO Ryoichi
PresidentToday’s Agenda

㸇䋮 1H FY2014 Results
㸈䋮 2H and Full FY2014 Forecast
㸉䋮 Status of Medium-term Business
Plan for FY2014-16

1

1H
1H FY2014
FY2014 Results
Results2

1H FY2014 Consolidated Results
Record operating profit and ordinary profit since J. Front Retailing’s inception
Compared to initial forecast, sales were lower but operating profit, ordinary
profit and net profit were higher
Interim dividend of ¥6 per share, up ¥1 YoY (on a pre-share consolidation basis*)(Millions of yen)YoY

2nd quarter offiscal year ending
February 2015

Results

Sales
Operating profit
Ordinary profit
Net profit

557,625
18,406
17,9097,801

Vs. initial forecast

Change% change(1,068)481
1,016(12,663)

(0.2)
2.7
6.0
(61.9)*Common shares were consolidated on a two-for-one basis as of September 1, 2014.

Change(4,375)
1,006
1,709
1,201

% change

(0.8)
5.8
10.6
18.2
3

1H FY2014 Segment Information
Department Store Business decreased sales due to the effect of closure of
Ginza store in 2013 but increased profits thanks to thorough cost management
Parco Business increased sales and profits due to store renovations and thecontribution of Zero Gate business
Other Businesses increased sales due to newly consolidated Forest but
decreased profits due to the poor performance of design and construction
business(Millions of yen)
2nd quarter offiscal year
endingFebruary 2015

Dept Store
Parco
Wholesale
Credit
Other

Sales

Operating profit
Vs. initial forecast

Results

YoY (%)

368,373
133,165
28,321
5,230
48,088

(1.5)
1.5
(9.2)
19.7
9.5

Vs. initial forecast

Change%changeResults

YoY (%)

3,673(1,035)(4,479)230(3,712)1.0(0.8)(13.7)
4.6
(7.2)

8,706
6,192
506
1,791
1,225

0.2
5.9
(9.4)
23.4
(20.5)

Change%change

706
192
(94)
101
55

8.8
3.2
(15.7)
6.0
4.8
4

1H FY2014 Daimaru Matsuzakaya Department Stores
Sales growth initiatives to maximally meet the last-minute demand before sales tax hikewere successful in March
Buoyed by increase in duty-free sales to foreign tourists and strengthening of gaisho (outof-store sales) activities in April and beyond
Fell below projections in June and July due to unstable weather but turned positive on asingle month basis in August
㪋㪇㪅㪇

(%)

㪉㪇㪈㪋

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㪈㪐㪐㪎

1H 2014 monthly sales of Daimaru Matsuzakaya Department Stores(on a same-store basis)

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5

1H FY2014 Daimaru Matsuzakaya Department Stores
Above the previous year’s level at Umeda, Tokyo, Kyoto, Kobe, Sapporo, Nagoya
and Shizuoka storesTokyo store attracted more customer traffic and turned sales positive in May andbeyondRenovation of food floor and newly opened Tokyu Hands worked well at Kyoto
store while luxury goods and food sold well at Nagoya store(Millions of yen)YoY

2nd quarter offiscal year ending
February 2015

Sales (all stores)
Sales (existing stores*)

SG&A
Operating profit
Ordinary profit
Net profit

Vs. initial forecast

Results

325,626
㵪
69,570
7,574
7,282
3,869

*Existing stores exclude Ginza store.

Change% change

Change% change(5,012)
4,541(1,911)
47
594
3,441

(1.5)
1.4
(2.7)
0.6
8.9
802.7

4,526
㵪
(330)
774
1,182
1,169

1.4
㵪
(0.5)
11.4
19.4
43.3
6

Collaboration with ParcoDeveloped two women’s wear exclusive brands “Sophila” and “Eddy Grace”
Simultaneous clearance sale and joint promotion in the
Nagoya area
Daimaru Matsuzakaya Department Stores planned and operated events at
Parco’s community complexes

7Thorough Cost Management
Major measures taken by Daimaru Matsuzakaya Department Stores

OverhaulOverhaulof
oflaborlaborcost
coststructure
structurethroughthroughHR
HRstructure
structurereformreformReduction
Reductionof
ofcostcostrelated
relatedto
tobusinessbusinessinvestment
investment
Reduction
Reductionof
ofad
adexpenses
expensesby
byoverhauling
overhaulingsales
salespromotion
promotion

Thorough cost management contributed to increase inoperating profit in spite of sales decrease8

2H
2H andand FullFull FY2014
FY2014 Forecast
Forecast9

2H and Full FY2014 Consolidated Forecast
Consumer spending will be slowly recovering but partially weak, greatly affectedby the weather
The situation including the effect of rising prices and the trend of local economy
does not allow optimism
Record operating profit and ordinary profit since J. Front Retailing’s inception
as initially projected
Expect ROE of 5.1% and year-end dividend of ¥12 per share after shareconsolidation*(Millions of yen)

Fiscal year
endingFebruary
2015

Sales
SG&A
Operating profit

Ordinary profit

Net profit

YoY

YoY

2H
forecast

Change%change603,374
103,427
24,59323,09011,19815,749
2,208
702
(519)
94

2.7
2.2
2.9
(2.2)
0.8

Vs. initial forecast

Full year
forecast

Change%changeChange%change1,161,000
204,000
43,00041,00019,00014,681
1,687
1,184
498
(12,568)

1.3
0.8
2.8
1.2
(39.8)(11,000)(2,600)
0
0
0

(0.9)
(1.3)
㵪
㵪
㵪

*Common shares were consolidated on a two-for-one basis as of September 1, 2014.

10

Full FY2014 Segment Information
Department Store Business carefully reviewed sales but keeps initial
operating profit forecast unchanged
Parco Business raised operating profit forecast by scrutinizing cost
Wholesale Business is expected to be severe in light of trend in 1H but
Other Businesses will cover the deficits(Millions of yen)

Fiscal year
endingFebruary 2015

Dept store
Parco
Wholesale
Credit
Other

Sales

Operating profit
Vs. initial forecast

Full year
forecast

YoY (%)

765,400
276,300
62,20010,33098,600

(0.5)
3.0
(1.7)
9.4
11.3

Change%change(1,200)(1,000)(5,000)230(5,500)

(0.2)
(0.4)
(7.4)
2.3
(5.3)

Full year
YoY (%)
forecast
24,00012,150
1,100
3,410
2,440

4.4
1.1
(2.4)
7.0
(17.6)

Vs. initial forecast
Change%change

0
100
(100)
40
60

㵪
0.8
(8.3)
1.2
2.5
11

Daimaru Matsuzakaya Department Stores
Carefully reconsidered the last-minute demand that started in late last year andthe effect of closure of the south wing of Ueno store
More thorough cost management as well as sales growth initiatives to increase sales and profits

䋼Major profit growth initiatives䋾
Strengthen gaisho activities such as developing new gaisho card accounts and planning new events

Improve environment and conduct promotion to strengthen initiatives for inbound tourists
Expand customer base through a tie-up with Rakuten R Point Card
Offer strategic products to strengthen original merchandising business(Millions of yen)

Fiscal year
endingFebruary
2015
Sales
SG&A
Operating profit

Ordinary profit

Net profit

YoY

YoY

2H
forecast

Change%change349,473
69,42913,125
11,317
6,230

1,826
(844)
995
(2)
(849)

0.5
(1.2)
8.2
(0.0)
(12.0)

Vs. initial forecast

Full year
forecast

Change%changeChange%change675,100
139,000
20,70018,60010,100(3,186)(2,755)
1,042
592
2,592

(0.5)
(1.9)
5.3
3.3
34.5

0
(1,300)
100
100
300

㵪
(0.9)
0.5
0.5
3.1
12

Parco BusinessOpen Fukuoka Parco New Building and Nagoya Zero Gate in 2H
to accelerate growth
Fukuoka Parco New Building
䊶Open: Thu, Nov 13
䊶Building size:
6 floors and 2 basements
䊶Total floor area:
approx 14,000 䋛

Nagoya Zero Gate
䊶Open: Fri, Oct 10
䊶Building size: 3 floors
䊶Total floor area:
approx 7,500 䋛
13

Status
Statusof
ofMedium-term
Medium-termBusinessBusinessPlan
Planfor
forFY2014
FY2014--2016
2016

14

Positioning of FY2014 - 2016
FY2014 - 2016

FY2017 -Phase of enhancing profitability
and constructing a foundation

Phase of dramatic growth

Drastically
Drasticallyenhanceenhancecompetitivenesscompetitivenessand
andprofitability
profitabilityas
asaamultifaceted
multifacetedretailer
retailerDevelop
Developaabusinessbusinessmodel
modelforforgrowth
growthalong
alongwithwithlocal
localcommunity
community(urbandominant
strategy)(urban dominant strategy)

PromotePromoteomnichannelomnichannelretailing
retailing

Actively pursue M&A and business alliance with external companies
15

Initiatives as a Multifaceted Retailer

Steadily expand business wing
as a multifaceted retailer

16

Deep Cultivation of New Department Store Model
Create unconventional department stores that attract a wide
range of customers and establish high-efficient management
Adapt to market changes
Define the positioning of each store

Plan and implement store strategy in each region
Specified priority stores
Tokyo

Kobe

SapporoNagoya17

Points to Be Addressed at Priority Stores
Nagoya䊶Overhaul
䊶Overhaulthe
therolesrolesofofnorth
northandandsouthsouthwings
wings
䊶ReviewHR
structuretoestablish
high-efficientmanagement
䊶Review HR structure to establish high-efficient management

Tokyo䊶Increasing䊶Increasingpopulation
populationaroundaroundthe
thestore
store
䊶More
people
will
use
Tokyo
stationafter
theopening䊶More people will use Tokyo station after the openingofofUeno
UenoTokyo
TokyoLine
Line
䊶Beef
up
effortstodevelopnewgaishocustomers䊶Beef up efforts to develop new gaisho customers

Sapporo䊶Introduce
䊶Introducenew
newbrands
brandstotocater
catertotothe
thewealthy
wealthymarket
marketandexpandsales
floorsand expand sales floors
䊶Beefup
efforts
䊶Beef up effortstotodevelop
developnew
newgaishogaishocustomers
customers

Kobe

䊶Extensively
䊶Extensivelyrenovaterenovatemen’s
men’sfurnishings
furnishingsand
andtimepiece
timepiecefloors
floors
totobetter
serve
the
nouveauriche
better serve the nouveau riche
䊶Promote䊶Promotethe
thescrap-and-build
scrap-and-buildofofnearby
nearbyshops
shops
18

Strengthening of Original Merchandising Business
Drastic rebuilding of original merchandising business䋼Points to be addressed䋾EnhanceEnhanceproductproductplanning,planning,inventory
inventorycontrol
controlandsales
capabilities
and sales capabilities

Renew
Renewproductproductmanagement
managementsystemsystemExpandExpandthe
theofferingofferingofofgoods
goodspurchased
purchasedwithout
withoutreturns
returnsanddeveloporiginal
products
and develop original products
ExpandExpandthetheshareshareofofhigh-margin
high-margin“strategic“strategicproducts”
products”“Women’s“Women’sshoes
shoesfloors”
floors”forforthethewealthy
wealthy
Develop
Develop“general“generalmerchandise
merchandisefloors”
floors”
forforeignvisitorstoJapan
for foreign visitors to Japan

Original merchandising businesssales target for FY2016: ¥54 billion 19

Strengthening of Gaisho Activities
Up 2.8% YoY in 2H FY2014 due to stronger promotion before sales tax hike and theeffect of development of new card accounts
Gaisho sales recovered faster and faster every month and drove the entire sales ofdepartment stores
㪎㪇㪅㪇

(%)

㪍㪏㪅㪏

Credit sales㪍㪇㪅㪇Same-store sales

㪌㪇㪅㪇
㪋㪇㪅㪇

1H FY2014 same-store sales and credit sales(YoY change)

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㪉㪇㪅㪇
㪈㪇㪅㪇

㪇㪅㪌

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20

Strengthening of Gaisho Activities
Expansion of customer base
䊶Converted gaisho card to “credit card” to strengthen the development of new accounts

䇼Purposes of conversion to credit card䇽䊶To improve customer convenience䊶To drastically improve screening capabilities
䊶To systematically acquire new customers
Developed more new accounts than expectedin 1H FY2014

Sales of ¥4.3 bn due to active new accounts

㸢 Revised up annual target to
12,000 accounts

Strengthening of sales capabilities
䊶Strengthen relations with luxury brands to secure products and hold new events
䊶Offer a wide range of values including products and services that meet thechanging needs of the wealthy21

Better Service to Foreign Tourists to Japan
Duty-free sales up 42% YoY in 1H FY2014 (on a same-store basis)“Cosmetics” and “food” became duty free in October 2014

Improve
Improvestore
storeenvironment
environment

Increase and expand duty-free counters, increase interpreters
and install free Wi-Fi

Strengthen
Strengthensales
salespromotion
promotion

Promote to foreign travel agencies and participate in foreign
travel expos

Strengthen
Strengthencompany
companyorganization
organization

Create a position in charge of Inbound Business Promotion inmerchandise divisionDuty-free sales target for FY2016: ¥20 billion

22

Urban Dominant Strategy
Expand the know-how to “develop shops in the surroundings ofdepartment stores” and gather the total power of the Group
Virtual(E-commerce site)

Real㵪The Group’s assets in areas having physical stores including department stores as their cores㵪
the entire Group including Parco, Zero Gate, SLH and Daimaru COM Development
as well as Daimaru and Matsuzakaya

Alliance with external companies and organizations
23

Ginza 6-chome Redevelopment
Create world-class quality commercial facilities at Ginza 6-chome
Develop a large-scale complex with retail facilities, offices, cultural
facilities and a tourism hub
Set up the Retail Facility Planning Office in September and began
recruiting tenants for the retail facilities
Rooftop garden

䋼Offices䋾 7F-12F/13F (partial)

䋼Retail䋾 B2F-6F/13F (partial)

OperateOperateall
allsalessalesfloors
floorsofof
approxapprox46,000
46,000䋛
䋛with
with
other
retailspace
holdersother retail space holders
䋼Cultural facilities䋾 B3F

䋼Tourism hub䋾 1F

Cross section from B1F to rooftop (subject to changes)

Scheduled to open in Nov 201624

Rebuilding of South Wing of Ueno Store
Draw new crowds to the area by rebuilding the south wing of Ueno Store
Also redevelop the area around the store and propose functions desiredby the new area
Build a business model that ensures contribution with local community torevitalizing the area and mutual growth with local community
䇼Total floor area䇽 Approx 42,000 䋛
䇼Construction䇽
B1F: Food floor of Daimaru
Matsuzakaya Department Stores
1F-6F: Parco
7F-10F: Cinema complex
12F-22F: Offices

䇼Total project cost䇽 Approx ¥20 billion
including cost of renovation-related work of themain building of Matsuzakaya Ueno store

Scheduled to open in fall 201725

Initiatives of Daimaru Kyoto Store
Newly opened Tokyu Hands near the store (Jun) to attract new customers
First exterior renovation in a half century to serve as a landmark of the
Karasuma area in harmony with the streetscape (Oct)Complement products and services the area lacks to enhance theappeal of the whole Karasuma area
(Shops operated by Kyoto store)

A.P.C.
Emporio Armani
Daimaru Relaxing Garden Kyoto

Daimaru
Kyoto

Shijo-dori
Takakura-doriHouse of
Jill Stuart

Higashinotoin-doriKarasuma-dori

Tokyu Hands

Louis Vuitton
Store

Bottega Veneta
Joseph The Store

26

Initiatives of Nagoya Store
Overhaul the roles of north and south wings and consider introducing new categories
Expand the Group’s assets including the opening of Nagoya Zero Gate and the newbuilding of Nagoya Parco
Create the Sakae area that attract a wide range of customers and grow along withlocal community(North)Hisaya-odori

Otsu-dori

Isemachi-doriMatsuzakaya
Nagoya(Main)(South)NagoyaZero Gate

NagoyaParco(West)(East)

Yabacho-dori(South)Wakamiya-odori

27

Omnichannel Retailing
Beef up efforts to create J. Front Retailing’s own omnichannel model
䌅䌃
OFF
LINE

Blog

Seamless accessto and from customers

ON
LINE

䌓䌎䌓

Email

Create a position in charge of Department Store
Omnichannel Retailing Promotion
Increase organizational power to further accelerate these initiatives
28

Omnichannel Retailing
Click & Collect䊶Increase the number of suppliers to 10 in 2H FY2014
䊶Expand delivery and payment options
䊶Expand offerings to include other clothing and generalmerchandise

Art auction
䊶Expand lineup to include crafts as well as paintings
䊶Increase physical stores that hold auctions linked
to the website

29

Overseas BusinessShanghai
ShanghaiNew
NewWorld
WorldDaimaru
DaimaruDepartment
DepartmentStore
Store
Support and cooperate to create
China’s best upscale department store
Scheduled to open in 2015
Accumulate know-how to create andoperate stores abroad to use it for
future overseas business

PLAZA
PLAZA TOKYOTOKYO
7 shops in FY2014
16 shops in FY2016
Expand into ASEAN metropolitan areas30

Financial Targets
Targets for FY2016, last year of the plan

Consolidated operating profit ¥50 billion
5.8䋦
ROE
㪎㪅㪇

㪍㪇㪃㪇㪇㪇

(Millions of yen)¥OP㪌㪇㪃㪇㪇㪇

*㪋㪇㪃㪇㪇㪇

50

on
billi

5.8%
E
RO

(%)

㪍㪅㪇
㪌㪅㪇
㪋㪅㪇

㪊㪇㪃㪇㪇㪇
㪊㪅㪇*㪉㪇㪃㪇㪇㪇

㪉㪅㪇㪈㪇㪃㪇㪇㪇㪈㪅㪇㪇㪇㪅㪇㪝㪰㪉㪇㪇㪐

㪝㪰㪉㪇㪈㪇

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Consolidated operating profit㪝㪰㪉㪇㪈㪊

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(Forecast)䌒䌏䌅*ROE for FY2011 and FY2013 is shown in real terms excluding special factors.

㪝㪰㪉㪇㪈㪍
(Forecast)31

Website

http://www.j-front-retailing.com
http://www.facebook.com/J.FrontRetailing

Forward-looking statements in this document represent our assumptions based on information currently available to us and inherently involve potential
risks, uncertainties and other factors. Therefore, actual results may differ materially from the results anticipated herein due to changes in various factors.

32