Results Presentationfor 2Q of FY Ending February 2014

October 9, 2013
J. Front Retailing Co., Ltd.

YAMAMOTO RyoichiPresident

Today’s Agenda

Ⅰ． 1H FY2013 Results

Ⅱ． 2H and Full FY2013 Forecast
Ⅲ． Actions to Achieve FY2013 Goals

Ⅳ． Actions toward Medium-Term Growth1

1H FY2013 Results

2

1H FY2013 Consolidated Results
Sales, operating profit, ordinary profit and net profit were above initial forecast
Recorded gain on sales of shares in Peacock Stores as extraordinary profit in 1Q
Posted record 2Q sales, operating profit, ordinary profit and net profit since inception

Interim dividend of ¥5 per share, up ¥0.5

(Millions of yen)YoY

2Q of FY ending
February 2014

ActualSales
Operating profit
Ordinary profit
Net profit

558,693
17,925
16,893
20,464

Vs. initial forecast

Change% change

Change% change

101,571
8,769
5,886
16,559

22.2
95.8
53.5
424.0

8,693
2,425
3,193
464

1.6
15.6
23.3
2.3

＜FYI＞ Excluding Parco and Peacock Stores (below)

Sales
Operating profit
Ordinary profit

427,567
12,078
11,14920,798
2,476
1,267

5.1
25.8
12.8

10,067
1,7782,449

2.4
17.3
28.1

3

1H FY2013 Segment Information
Department Store Business increased sales and profits due to strong performanceof Daimaru Matsuzakaya Department Stores and Hakata Daimaru
Added Parco Business as new segment in 2H FY2012
Wholesale and Credit Businesses both increased sales and profits

Other Businesses increased profits while sales decreased due to rebound from lastyear’s big renovation project of design and construction business(Millions of yen）

Sales
2Q of FY ending
February 2014

Department StoreParcoWholesaleCredit
OtherOperating profit

ActualYoY (%)

373,864
131,26131,182
4,370
43,904

4.4－
20.6
4.3
△4.7

Actual8,685
5,846558
1,452
1,541

YoY (%)

33.9－
17.6
25.4
6.4
4

1H FY2013 Daimaru Matsuzakaya Department Stores
Big renovation to make flagship stores more competitive
・Nagoya store⇒ Phase II renovation (full renovation of food floor)
Replacement of brands, review of product mix andstrengthening of gaisho (out-of-store sales) in
response to changes in customer’s value and lifestyle(Millions of yen)YoY

1H FY2013 flagship stores
YoY sales change (%)

2Q of FY ending
February 2014

ActualChange%changeSales
Operating profit
Ordinary profit
Net profit

330,638 15,332
7,527
2,011
6,688
1,719
428
7

4.9
36.5
34.6
1.6

Shinsaibashi
Umeda
Tokyo
Kyoto
Kobe
SapporoNagoya
Ueno
Ginza

(1.0)
(4.8)
35.6
0.7
1.7
5.0
11.5
(1.6)
81.9

5

2H and Full FY2013 Forecast

6

2H FY2013 Consolidated Forecast
Almost same as initial forecast for sales and profits
Sales excluding Peacock Stores are expected to increase 2.4% YoY(Millions of yen)

2H of FY ending
February 2014Forecast

Sales
Operating profit
Ordinary profit
Net profit

601,306
24,574
23,106
8,535

2H of FY
ending February 2014

Department Store
Parco
Wholesale
CreditOther

YoY

Vs. initial forecast

Change% change

Change% change(34,328)
2,873
1,911
257

(5.4)
13.2
9.0
3.1

1,306
74(194)
(465)

0.2
0.3
(0.8)
(5.2)

Sales

Operating profit

ActualYoY (%)

Actual395,935
140,338
36,817
4,829
47,273

1.0
1.8
7.3
9.7
7.3

14,214
6,153
1,341
1,397
1,608

YoY (%)

18.6
4.3
20.0(22.0)(7.8)

7Full FY2013 Consolidated Forecast
Expecting record sales, operating profit, ordinary profit and net profit since inception
and ROE of 8.2%
Year-end dividend will increase ¥0.5 per share and annual dividend will be ¥10, up ¥1(Millions of yen)

Full FY ending
February 2014

Forecast

Sales
Operating profit
Ordinary profit
Net profit

1,160,000
42,50040,00029,000

Full FY ending
February 2014

Department Store
Parco
Wholesale
CreditOther

YoY

Vs. initial forecast

Change% change

Change% change

67,244
11,643
7,798
16,817

6.2
37.7
24.2
138.0

10,0002,500
3,00000.9
6.3
8.10.0

Sales

Operating profit

ActualYoY (%)

ActualYoY (%)

769,800
271,600
68,0009,200
91,177

2.6
97.0
13.0
7.1
1.2

22,90012,000
1,900
2,850
3,150

23.9
103.5
19.3
(3.4)
(1.4)

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Actions to Achieve FY2013 Goals

9Luxury Item Sales Trends
Luxury items are in great demand
Daimaru Matsuzakaya Department Stores increased sales of luxury brands
11.4% YoY and fine arts/jewelry/precious metals 36.9% YoY in 1H FY2013
80.0(%)

Daimaru Matsuzakaya Department Stores

70.0Luxury item sales trends since FY2011 (YoY % change)

60.0

Fine arts/jewelry/precious metals
50.0

Fine selection of women’s wear andaccessories (luxury brands)

40.0
30.0
20.0
10.00.0(10.0)※Fine arts/jewelry/precious metals are a department store commodity description (same-store basis).
※Fine selection of women’s wear and accessories is an in-house management unit (total of 10 stores).

(20.0)

3
2011

45678

9 10 11 12 1 2 3
2012456789 10 11 12 1 22013

3456

78(Month)10

Background of Great Demand for Luxury Items
Consumer behavior has been changing little by little
since the great earthquake in March 2011

“Consumers want to improve the quality of their current lives”“Consumers are willing to pay for what has intrinsic value”

Increasing demand for what has great asset value and what can be passed
down to children and grandchildren
11Strengthening Product Mix in Response to
Changes in the Wealthy
Umeda store＜2011＞
・Expanded luxury and timepiece sections
on the occasion of expansion of floor space

Tokyo store＜2012＞
・Introduced luxury brands new to the store
Nagoya store＜2012＞・Strengthened already strong luxury zone
in quality and quantity
Kobe store＜2013＞
・Moved Hermes boutique from the 2nd floor of the mainbuilding to 1.5 times larger space on the 1st floor
12Strengthening Gaisho Activities
Aiming to acquire 10,000 new gaisho accounts during FY2013

Acquired 4,100 gaisho accounts in 1H 2013

Changed gaisho cards to credit cards (September)【Purposes】

・To improve convenience for customers
・To drastically improve screening skills

Adding the new rich in their 40s and 50s as new gaisho customers13Phase II Expansion of Tokyo Store
Expanded and made its grand opening on October 5, 2012 (46,000㎡/1.4 times larger)
Approach to wide range of customers
with concept of “department store with assortment of ‘current’ Tokyo”

Sales for Sep 2012 to Aug 2013: ¥65.7 billion (up 34.6% YoY / up ¥1.7 billion vs. goal)＜Points to increase profitability＞
Comparatively low-margin expanded parts
attract customer traffic and help boost sales inhigh-margin pre-existing parts
Efficient operation without adding headcountin spite of 40% increase of floor space

Operating profit exceeds expectation14Renovation of Nagoya StoreMarch – June 2013 (Phase II)
Renovation of food floors (grand opening on June 19)
Created Nagoya’s number-one food zone “Gochiso Paradise”

Food sales increased 11.7% YoY in 1H FY2013
Food floors attracted customer traffic and helped boost
sales of women’s accessories and other floors renovated last year

アラ5015Nagoya Store ー Other Factors behind Good Performance
Wider range of customers
Newly introduced Pokemon Center attracted
much more customers with childrenChildren’s wear sales increased 19.6% YoYOverwhelming strength
in the wealthy
Sales of big-ticket goods greatly increased

Luxury brands: Up 12.7% YoYFine arts/jewelry/precious metals:
Up 54.9% YoY

For 1H FY2013, sales increased 11.5% YoY without an increase of floor space16

Survival in Competition from Keihanshin Area
Increasing competition in Keihanshin area

Daimaru Kyoto【Nov 2012】 Larger Umeda Hankyu opened↓【Apr 2013】 Grand Front Osaka opened
Grand Front Osaka
Hankyu Umeda Main StoreDaimaru Kobe↓
【Jun 2013】 Abeno Harukas partially opened

Daimaru UmedaDaimaru Shinsaibashi

Abeno Harukas

Little impact on Kobe and Kyoto stores
Impact on total sales of Shinsaibashi andUmeda stores within expectations

Replacement of brands and stronger sales promotions will turnsales of Shinsaibashi and Umeda stores upward

17Original Merchandising
Achievements in 1H FY2013
Introduced new goods, curated goods by season
and increased goods all of which were purchased
by Daimaru Matsuzakaya Department Stores

Sales increased 4.9% YoY
Sales margin increased 0.1 points YoY

Initiatives
Newly opened an independently curated
accessories select shop “Woop Woop!”(Mar) Daimaru Shinsaibashi/Umeda/Sapporo(Sep) Ikebukuro Parco/Fukuoka Parco(Oct) Matsuzakaya Nagoya
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Improvement of Productivity and Efficiency
Group-wide review and reduction of operation costs
and organization/HR structure reform

Total headcount of the Group

11,600 people ・ Decreased 3,220 people comparedto the end of February 2013(excl. decrease of 150 people of Peacock Stores)

Daimaru Matsuzakaya
Department Stores

3,160 people ・ Decreased 327 people comparedto the end of February 2013

The Group’s total headcount forecast for the end of FY2013: 11,500 people
・ Decreasing 110 people compared to the end of August 2013
19

The Group’s Involvement with Society
Mission statements of J. Front Retailing’s predecessors Daimaru and Matsuzakaya“Service before profit” (Daimaru)“In doing good to others, we do good to ourselves” (Matsuzakaya)

Based on time-honored mission statements,
we address 7 subjects in accordance with ISO 26000

Growing into a fair and reliable company forming an essential part of society

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Active Use and Appointment of Women
Women-friendly working environment thatenables them to continue to work after childbirth・Childbirth-related system・・・Leave before and after childbirth, maternity
protection leave and spouse childbirth leave
・Childcare-related system・・・Childcare leave, reduced working hours systemfor childcare, childcare support leave andsick/injured child care leave
Assigning and promoting the right person to the right job
regardless of gender and age
・Among 15 stores directly managed by Daimaru Matsuzakaya Department Stores,
4 stores have female store managers, among whom 3 are corporate officers“Pink Ribbon Campaign 2013” (October 2 - 31)☆Now underway at all 19 Daimaru/Matsuzakaya stores in Japan☆
21

Actions toward Medium-Term Growth22

Toward Medium-Term Growth
For FY2013, achieving record profits since inception
Achieving operating profit of ¥50,000 million
in the next medium-term plan (FY2014-2016)

Developing growth strategy to achieve ROE of 8%(Millions of yen)

60,000Change in consolidated operating profit¥50,000 million

50,00040,000¥42,500 million¥39,700 million ※30,00020,00010,000
0FY2007

FY2008FY2009※The figure is on a disclosure basis.

FY2010FY2011FY2012FY2013

FY2016ForecastTarget23

Medium-Term Growth Direction of the Group
Attention to increasing potential of “cities”

Population is declining nationwide
Population of senior people and child-rearing
generation is remarkably increasing in “cities”
Functions required for “cities” aresophisticated, diversified and complicatedBusiness opportunities are coming
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The Group with Advantage in “Cities”
Management resources of core Department Store Businessand Parco Business are concentrated in “cities”
Strengthening the response to “city” needs
by full use of management resources
Daimaru/Matsuzakaya store locations

Parco store locations25

Expansion of Views on “Cities”＜Current focused measures＞

Seeking “what is expected of department stores”
Expansion of target customers / expansion of width of product mix / expansion of price range＜Medium-term task after expanding views＞

Seeking “what is expected of ‘cities’”
Involving department stores, Parco and other companies of the Groupand organizations outside the Group+

Transforming into an “omni-channel” retailer
moving seamlessly between physical stores and online ones

26

Medium-Term Growth Strategy with Focus on “Cities”

Active response to city needs

Contribution to city development

Creation of business model to profit from city development

27

Rebuilding of South Wing of Matsuzakaya Ueno StoreRebuilding the south wing of Matsuzakaya Ueno store
into a commercial and office skyscraper complex【Total floor area】
Approx. 42,000㎡【Construction】
B1F: Food floor of Daimaru Matsuzakaya
Department Stores

1F- 6F: Parco
7F-10F: Cinema complex

12F-22F: Offices【Total project cost】
Approx. ¥20 billion(including cost of renovation-related work of themain building of Matsuzakaya Ueno store)

Scheduled to open in fall 201728

Ginza 6-chome Redevelopment Project
Development of combined 2 blocks of Ginza 6-chome district
including Matsuzakaya Ginza store： 【Land area】 9,080㎡ (approx. 65% owned by Daimaru Matsuzakaya Department Stores)【Total floor area of building】 147,600㎡【Construction】 13 floors above ground and 6 below
Store: 6 floors above ground and 2 below
Schedule ： Started demolition in July 2013 and scheduled for completion in 2017
Size

Developing a new commercial complex
worthy of “world-renowned Ginza” to lead in providing information

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Website

http://www.j-front-retailing.comhttp://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.

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