Enhancing Our Corporate Value

Message from the Chairman

We intend to continue building our envisioned consumer society byreturning to the concept that defined MUJI when it started out, andevolving and deepening it.
Masaaki Kanai
Chairman & Representative Director

Achieving the satisfaction and value that comesfrom being one’s true self is the concept thatdrove MUJI when it started out.
We introduced Koshin Shiitake Mushroom Pieces to the market in
1980, at around the same time MUJI itself was established. Dried
shiitake mushrooms were prized for their high nutritional value andbecause they can be rehydrated for use as a soup stock, but thegeneral perception back then was that they were too expensive. In
reality, it doesn’t matter to customers if some mushrooms are broken
or come in different sizes. However, at the time, only standard shaped
and sized shiitake were valued by the market, and non-standard
shiitake were piling up at farms. We were the first to skip the sorting
process used to standardize sizes and reject broken items, and to
start marketing those non-standard pieces as a commercial product.
Our idea of developing a product to “provide customers with thelifestyle essentials they actually need, in the form they actually want”
found acceptance among many people, and was adopted as aslogan that was printed on the package at the time of the launch.
This simple story illustrates how MUJI approaches productdevelopment. From the very beginning, our attention has been on

In offering a lineup of products essential to daily life, MUJI’s
approach encompasses the belief that people, not goods, should takeprecedence, and that the products themselves should never prevailover or get in the way of that concept. We also try not to lead people
into placing too much emphasis on product attributes such as simplicity
or being free from bleach or artificial colors. We just want to offer
straightforward and unassuming products that people can feel
comfortable with in their “me time,” when they just want to be themselves.
Since we do not embellish our products with contrived charm andvalue, their sense of seamlessness increases, and they become true
“no-brand” products. The products created in this way are naturallyeasy on the environment, and on customers’ wallets.
We genuinely take the viewpointof consumers in developing good
products based on what is true
and real in production, and passthose products along as they are,without dressing them up. That is
why developing products with adirect link to production is soessential.

people’s lifestyles as well as production sites. In addition, we have

• Selection of Materials

placed importance on MUJI’s unique marketing approach of focusing• Streamlining of Processeson the satisfaction that people experience when they embrace their• Simplification of Packaging

true selves, rather than on established standards of value.

13 MUJI REPORT 2023

Shitake mushroom pieces

Enhancing Our Corporate Value

This is a perspective that does not bow to the current form ofcommercialism or trends, which rely on attributes such as uniqueness,innovativeness, luxuriousness or a position of superiority. It is thereason that people appreciate MUJI as the only store of its kind.

We aim to continue building our envisioned
consumer society.
Economist E.F. Schumacher makes some very interesting observations
in his book Small Is Beautiful, published in 1973. He wrote that

The “Second Founding” means going back to
our roots of contributing to society and people.
Ryohin Keikaku has two missions. One is to provide daily necessities
and services with genuine quality and ethical value, at appropriate
and affordable prices. The second is to have a positive impact oneach region by operating stores that serve as community centers,
sharing concerns and values with local residents and collaboratingwith them to tackle local issues.
The “Second Founding” we set out in 2021 represents a new“Since consumption is merely a means to human well-being, the aim

commitment to realizing “a truthful and sustainable life for all” by returning

should be to obtain the maximum of well-being with the minimum

to MUJI’s origins of providing satisfaction and value. We want to helpof consumption.” I think this is something that many young people ofpeople be their true selves, and will work to evolve and deepen thattoday would agree with. If we follow his theory, people in modern society

concept. One example is IDEA PARK. This is an initiative featured on theare likely to view natural resources not as capital, but as their own

MUJI website aimed at helping consumers better understand the MUJI

income. That has made us into a civilization that thinks of everything

concept while also helping us to create better products through dialogue

in terms of monetary value, which has led to excessive consumption.

with consumers. This initiative enables people to contribute a variety of

Humans have a desire to gain superiority over others, and worrying

comments and suggestions, such as “We need children’s playgroundabout what others think in order to get ahead has created fertile

equipment in the town’s parks.” It is also extremely significant for us inground for this society that embraces excessive consumption.

terms of our efforts to serve as community centers that create “a truthful

The result is that the constant push to consume has led toand sustainable life for all” together with the local residents.

faster product obsolescence, and society has moved in a direction

We are also promoting employee-driven independent store

in which needs are never satisfied. In other words, it has produced

management to accelerate activities that lead to solving issues inlarge quantities of products with transient ownership value that iseach community. Dialogue and co-creation with stakeholders arequite divorced from their utility value. This society of excessive

essential to that effort. Going forward, we plan to increase the number

consumption has given rise to shortages of water, food and energy,of Shareholders’ Meeting events and opportunities for dialogue withand further exacerbated global warming, inequality and conflict.

customers. It is also important that all stores, employees, products

Furthermore, a digital culture that is tied to how we ourselves haveand services share our unique concept to maintain overall consistency.

essentially become domesticated1 and capital theory has given

Ryohin Keikaku endeavors to nurture employees who have the same

added impetus to the trend toward excessive consumption.

values as consumers, and places employees with a sense of ownership

The way I see it, the desired consumer society should notin leading roles in order to enhance autonomous, decentralized

depend any more than necessary on the modern excesses of goods

organizations and businesses where employees consult with eachand civilization, but should reflect a world in which people can enjoyother and support each other’s growth. We are practicing “public

life on their own terms, and in which each of us can achieve a highinterest and people-centered management” in which the activities ofcultural level. The original concept behind MUJI was to develop

individual stores rooted in their communities, and the actions of“good products” from a true consumer perspective, and to offer

individual employees and stakeholders, benefit the public interest.

them to customers just as they are, without any unnecessary

MUJI stores will continue to serve as community centers thatembellishments. Ever since MUJI was founded, we have prized ourcreate value in partnership with local businesses and residents. Weview of product development that emphasizes three perspectives:

will strive to realize “a truthful and sustainable society for all” while

selection of materials, streamlining of processes and simplificationachieving a balance among the economy, the environment andof packaging. How we see apparel is a good example. We define

culture. Ryohin Keikaku cannot do that alone. We hope you will join

apparel as clothing that helps people stay at a comfortable

us as we work to make this future a reality.

temperature, is easy to wear, looks good, and has an impact on the*feelings of the person wearing it. We have always come up withattractive designs requiring minimal materials and processing. Thatmeans simply respecting the diverse people who live for the here
and now, and providing a lineup of products that serve as the means

Services

Good
products

Promotion

for giving customers the chance to organize their own lifestyles theway they want.2 We believe that reenvisioning our consumer society is
an urgent matter, and one that Ryohin Keikaku continues to address.
1. The idea that if domestic animals can be defined as “animals that have been cut off from thewild and have undergone changes in their appearance and habits for the convenience ofGood
environment

Ideas

Good
information

humans,” then human beings themselves have also been domesticated as a result of theiradaptation to our current social and economic systems, turning themselves into domestic
animals through the loss of intrinsic human emotions and senses (i.e., their true selves).
2. The concept of rethinking and rearranging one’s current lifestyle in pursuit of an ideal state* Back to the beginning again
and again. Imagining thefuture again and again.

Activities
MUJI REPORT 2023

14

Enhancing Our Corporate ValueThe Value We Create
Structure of Our Business Activities
Based on our core value of “contributing tosociety and people,” we will work with all of
our stakeholders to solve social issues. The
participation of stakeholders with different
backgrounds and values enables us to provide
products and services “to be a part of people’s
daily necessities” and to promote activities thatenable us “to take root in local society,” which
will lead to the creation of new value.

Six Foundations
Number of Group employees: 20,795
A corporate culture based on our founding
philosophy of practicing ESG management● Human resources that drive MUJI’s unique formof product development● An advisory board made up of industry experts●●

Social Issues
Escalating
environmental
problems

Shrinkinglabor force

Changes inlifestyles

Ruraldepopulation

Human CapitalCountries/regions where we operate: 32
Downloads of MUJI passport app: 78.53 million● Number of regional cooperation agreements: 31● Community Market events in stores●Social Capital●

MUJI design
Product planning know-how● Know-how in sourcing of materials andraw materials● Store design with consideration for theenvironment and community●

Intellectual
Capital●

Net assets: JPY 267.4 billion
Capital: JPY 6,766,250,000● Equity ratio: 58%●

Financial Capital

Manufacturingand Marketing
Capital

●Number of stores: 1,251
Distribution bases in Japan: 11● Distribution bases overseas: 22● Production partners who share MUJI’s
perspective of product development●●

Electricity consumption: 87,684 MWh
CO2 emissions: 1.23 million t-CO2● Water consumption: 144 thousand m3(Ryohin Keikaku Co., Ltd. only)●

Natural Capital

15 MUJI REPORT 2023●

Enhancing Our Corporate Value

Public Interest and People-Centered Management
The MUJI stores that Ryohin Keikaku operates are venues for activities that benefit the public interest. Our aim is to practice “public interest
and people-centered management” in which the value and profit generated by the participation of stakeholders are shared with thosestakeholders and used to fund further activities.

Participation

Returns

Stakeholders are encouraged to freely participate in
Ryohin Keikaku’s activities in various ways, such as
by making an investment, cooperating in initiatives
or purchasing products.

Co-Creation

Stakeholders participate directly in MUJI’s activities,
and we also develop new products and services
together with them.

Stakeholders receive benefits in some form,
whether it be dividends, profit, or discounts.

Enjoyment

Stakeholders benefit in various ways, including
through quality products and services, community
vitality and growth, and improvement of the environment.

Public Interest and People-Centered Management

Co-Creation

Participation

Circularsociety

Customers

Employees

Structure of Our
Business Activities

Business
Partners

Enhancementof qualityof life

To be a part of To take root
people’s daily
in localnecessities
society
Local
Communities
and Society

Economic
growth inproduction
areas

Shareholders
and Investors

Governments

Community
revitalization

Helping to Realize“a Truthful andSustainable Life
for All”

Returns

Enjoyment

Four Material Issues

See pages 17–18 for details. See page 37 onward for information on the progress of initiatives.

MUJI Concept
MUJI REPORT 2023

16

Enhancing Our Corporate Value

Ryohin Keikaku and Sustainability
A Consistent Commitment to ESG since Day One
Ryohin Keikaku’s MUJI brand has consistently served society as a whole since day one. Our core value is “to contribute to society andpeople.” This is a value that is rooted in all of our business activities.
Our commitment to the three perspectives of selection of materials, streamlining of processes, and simplification of packaging has
made us a pioneer in what the world now calls sustainability. We continue to create products with social and environmental considerations
in mind based on these three perspectives. That policy will not change, and will become even more important as we work toward a better
future society over the next 100 years.
We will achieve our ideal ESG management by implementing innovative ESG approaches for products, business activities andcommunities to create new value and contribute to society.

ESG in products
ESG in business activities
ESG in communities

We will democratize sustainability* by adopting circular design for all products andoffering them at affordable prices.
We will collaborate with stakeholders to reduce social costs and environmental burden.
At the same time, we will contribute directly to solving social issues through ourbusiness activities.
We will make a positive impact on society by leading the revitalization of local areas
through activities with local communities.

* “Democratizing sustainability” means promoting sustainability in a way that is accessible to everyone. We recognize that in the current consumer market, in general,companies strengthen ESG and sustainability initiatives in a way that makes consumers bear some of the cost. Ryohin Keikaku conducts environmental and social
initiatives that take nature into consideration, and provides products and services at affordable prices. Through MUJI, we want to reduce our environmental impact ina way that occurs seamlessly in daily life—in fact, that is MUJI’s founding philosophy. By practicing and broadly expanding this philosophy, we seek to promotesustainability in a way that is accessible to everyone.

ESG Strategy through 2030
Process for Identifying Material Issues
Ryohin Keikaku identified material issues in formulating its ESG strategy through 2030. The process involved:2) Conducting interviews with management executives and experts3) Implementing a scoring system that is unique to Ryohin Keikaku
with the help of an external organization

Stakeholders

Importance1) Identifying and understanding social issues

Ryohin Keikaku

Importance

We used the scoring system to narrow our focus to four items. These items were then approved by the Board of Directors and positioned
as our material issues. In January 2024, we reviewed some of our material issues due to changing market and business conditions.

① Build a sustainable and circular society thatcoexists with nature
Reduce the use of fossil-based raw materials and fuels
Ensure business operations based on integrity andethical judgements●
Democratize sustainability in a way that is accessible
to everyone●●② Address local challenges and revitalize regions
Revitalize regional economies and industry through store
openings and business development that highlights local
traditions and utilizes local resources●
Build local communities that are active and lively●

17 MUJI REPORT 2023

③ Practice business activities in which each andevery diverse individual plays a leading role
Maximize the value of diversity and inclusion to achieve
open innovation●
Build a self-motivated and autonomous corporate culture●Achieve high employee engagement and workplaces where
everyone can play an active role●

④ Realize governance aligned with “public interest
and people-centered management”
Generate co-creation with people and local communities
Realize governance with people in local communities
as shareholders●
Encourage co-owned management by employees●
Earn strong support from investors●●

Enhancing Our Corporate Value

ESG Management Structure
Ryohin Keikaku launched the ESG Management Committee at the start of FY2022/8 to address its material issues and further accelerate
ESG management. The chairman & representative director chairs this committee, which addresses medium- and long-term Company-wide
ESG issues. Inside directors, executive officers, managers and people in charge of related business divisions participate in the committee’smonthly meeting.

Board of Directors
ESG Management Committee(Chairperson: Chairman & Representative Director)

Administrative Support: Corporate Planning Division

Ryohin① Build a sustainableKeikaku’s
and circular societythat coexists with
Material
natureIssues② Address local
challenges andrevitalize regions③ Practice businessactivities in which
each and every
diverse individual
plays a leading role

④ Realize governancealigned with “public
interest andpeople-centered
management”

In FY2023/8, we promoted 19 Company-wide, cross-functional projects organized by theme to address our material issues. Executive
officers are responsible for each project and select project leaders. Project leaders then select project members from throughout Ryohin
Keikaku. Progress toward achieving goals for 2030 is their benchmark.
In September 2023, we established a system to make ESG the main focus of our business, with the 19 projects divided among
different divisions. Each division has formulated short-, medium- and long-term ESG targets and roadmaps based on our material issues,and is working to further incorporate ESG management into our business activities and create value unique to Ryohin Keikaku. The ESG
targets of each division are also incorporated into the individual targets of the persons responsible in each division. The divisions andadministrative support office have established a forum to regularly exchange opinions, where they discuss issues related to ESG promotion.
The progress of each division is reported to the ESG Management Committee, and discussions take place among the inside directors,
executive officers, managers and people in charge of related business divisions.

Main Themes●

Reduction of use of virgin plastics in our products and packaging. Acceleration of recycling and reuse of products ▶Page 48●

Development of new materials and new businesses that take environmental and social issues into consideration ▶Pages 47-48, 55-56●

Reduction of greenhouse gas (GHG) emissions globally and across our supply chains, looking ahead to 2030 and 2050 ▶Page 49●

 inimization of adverse impact of business activities on the environment, including in areas such as water resources, biodiversity andM
waste ▶Page 49●

Projects that improve diversity & inclusion and engagement ▶Pages 59-60●

Achieve “public interest and people-centered management” ▶Pages 57-58, 61-62●

Enhancing information and data security including personal information and ensuring compliance with various laws andregulations ▶Pages 73-74

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18

Enhancing Our Corporate Value

Message from the President

We will firmly establish the foundation for our “Second
Founding” by enhancing the value of our products.
Nobuo Domae
President & Representative Director

I would like to extend my deepest sympathies to everyone who was impacted by the 2024 Noto Earthquake. We hope for the earliest
possible return to normal life for the people in the region.

19 MUJI REPORT 2023

Enhancing Our Corporate Value

Progress of the Medium-term Business Plan
Ryohin Keikaku operates in line with its corporate purpose, which we redefined in conjunction with the announcementof the medium-term business plan. To realize our corporate purpose, we will take a two-pronged approach to ourcore business. First, we will create and provide products and services that are essential to people’s daily lives. Second,
our stores will function as community centers that contribute to solving local issues and to local revitalization.
In advancing these objectives, we will embrace three values. The first is helping to build a sustainable andcircular society that coexists with nature from the perspective of benefitting people and society. The second value ispracticing “public interest and people-centered management” as our core management policy. We will ensure thatour business activities benefit the public interest, with people at the core. The third value is creating a positive impact
on society together with local residents and business partners, and obtaining reasonable earnings as a result.
In the medium-term business plan, we have set four goals:
1. Complete the finest and most unrivaled product lines essential to daily life and and the procurement and production
system for these products
2. Establish a community-based business model centered on independently managed stores and open new storesthroughout Japan while maintaining profitability
3. D evelop an organizational culture in which all
associates work proactively, leading to the independent
growth of each store, region and country
4. Build the business infrastructure and headquartersfunctions to support independent store management
and localization
In advancing these goals, we are addressing
the six priority issues we identified in FY2023/8. We
have reinforced our personnel structure to effectively
respond to these issues, and the foundation of ourbusiness operations is now in place.

2030 Vision
To be a part of people’s
daily necessities
To achieve this, we will

To take root in
local society

Practice independent store management
and co-owned management
Provide comfortable online services
Be a front runner of ESG management

MUJI REPORT 2023

20

Progress on Addressing the Six Priority Issues
1. Enhance product value
We have reinforced our product development team. We also expanded the lineup of daily necessities in household
goods, and worked to improve basic clothing items in apparel. However, we still have much more to do interms of enhancing the value of our products. I will talk more about this later.

2. Increase involvement in production
We are strengthening our human resources by recruiting professionals from outside the Company, and areworking to establish the organizational foundation to insource production functions, including taking overaspects of production management that were previously outsourced.

3. Enhance marketing activities for products
To reach the many different consumers who have never had the chance to try our existing lineup of products,
we launched a new communication strategy that includes digital communications and mass advertising.

4. Establish a store network and new channels
With a new store development framework in place, we increased the number of 600 tsubo (approx. 2,000 m2)
stores next to supermarkets in residential areas to 200. We began sales at convenience stores all over Japan,
and through the home delivery services of consumers’ co-operatives (co-ops).

5. Enhance operations
We enhanced human resources and infrastructure for back-office functions such as logistics, systems andproduct planning. These efforts have led to a reduction in logistics and IT costs. We also continued to makeinventory control improvements, and are working to optimize inventory levels.

6. Make ESG the core of our businessWith the goal of establishing a new industrial structure, we will work to create a business model linked toresource recycling. This includes expanding the number of products made from natural materials, promoting
collection and reuse of apparel and plastic products, and establishing a supply chain model based on local
production for local consumption.

Enhancing the Value of Our Products
We are aware that stores with large sales floor space of 600 tsubo, particularly those in Japan, are currently nottaking full advantage of that space. To “complete the finest and most unrivaled product lines essential to daily life”
and to promote them effectively, sales floor space of at least 600 tsubo is required. However, not all products havereached the level of competitiveness to make that concept successful. In apparel, we have started to move in a new
direction. In household goods, however, there arestill issues that need to be addressed.
For household goods, the product group thathas been the mainstay of MUJI to date, we haveachieved a very high level of quality in existingproduct lineups, and because of this, customers’
expectations are also high. Therefore, we need todevelop new product lineups that exceed those
expectations. We are now facing some obstacles
in our quest to create new value, but we will
overcome them whatever it takes.

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Enhancing Our Corporate Value

The Four Elements of Product Development
In enhancing the value of our products, in addition to offering long-lasting products that are useful in daily life ataffordable prices, we will work to develop the following four types of products.

(1) Products that take the environment into consideration
We develop products with consideration for their environmental impact throughout their lifecycle, including
after they are no longer used. For example, rather than worrying about subtle differences in appearance, we
focus on offering products that use 100% recyclable pure raw materials, are designed for easy disassemblyand separation after use, and will not result in unnecessary energy consumption during manufacturing andtransport. This helps to maintain and protect the environment and reduces the environmental impact of products.
By choosing MUJI products, customers can also feel they are making a contribution to maintaining andprotecting the environment. That is our approach to product development.

(2) Products that solve social issues
We take materials that are difficult to manage because of their fast and excessive growth rates—for example,
waterweeds that pose obstacles to shipping in wetlands, or rapidly growing bamboo that gradually erodes
mountain forests—and adopt them as raw materials. We then transform them into products used to store
items. In industrially underdeveloped regions, we create new employment and train human resources throughvocational education. As a result, regional development is enhanced as industry is created and wealth circulates. In
addition to making and providing quality products at low prices, we also contribute to community development
by working with reliable local managers, and reinvesting the profits generated locally back into the local economy.
We create products that can help to achieve these objectives.

(3) Products that let the individuality of the consumer shine, not the uniqueness ofthe product
Our products are designed to be useful and spotlight the individuality of the consumer, not the uniquenessof the product. Rather than emphasizing brand or product prestige, or distinctiveness and uniqueness indesign, we are committed to providing products that offer intrinsic value to each individual consumer. With
that value as part of our products, the individuality of the consumer will shine, not the uniqueness of the product.

(4) Products inspired by culture and tradition
The cultures and traditions that have evolved in each region are filled with life’s lessons. We learn from eachregion’s culture and tradition, such as the wisdom that comes from knowing the materials native to a region
inside out, and the technologies and innovations that were developed to solve inconveniences experienced
over a long history. We then adapt these ideas to modern lifestyles and society to create new products. I think
it is wonderful when we are able to introduce products like this to the world and people find them useful.

If these items can achieve the kind of product value that enables us to support the essential aspects of daily
life, then each of the stores with 600 tsubo of sales floor space will be able to contribute even more to their region.

Status of Store Openings
In Japan, we opened 75 new stores in the FY2023/8. This was basically in line with our plan. We expanded our store
network with a focus on stores next to supermarkets in residential areas, bringing the number of stores at the end of
the period to 562. To provide products essential to daily life, we need to secure a certain amount of sales floor
space. The advantage of these local residential zones is that rent is lower than in urban areas. This helps stores
maintain profitability even if sales per area are slightly lower. One challenge going forward is determining how we can

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22

contribute to daily life through our products and services and attract many local residents to our stores, as well as
improve sales per area as a result.
Outside Japan, we opened 65 stores, mostly in mainland China, Taiwan and Thailand, and the total number ofstores reached 626. In Asia in particular, many countries and regions are still in the economic growth period, andmore and more new shopping centers are being built. This business environment makes it comparatively easy toopen new stores. On the other hand, in North America and Europe, our stores until now have been very small, and
MUJI’s philosophy and product selection have not been fully communicated. We need to launch large flagship storesand promote understanding of the MUJI concept.
Even in our 600 tsubo stores around the world, there are merchandise-related issues we need to address inorder to improve sales per area. Currently, we are enhancing our product development and production system
globally. In Asia in particular, we are developing and producing new products while responding to the lifestyles,
regulations and other characteristics of each region. We are also establishing frameworks to ensure a two-way flowof goods between those regions and Japan.

MUJI Itoku Oga Shopping Center (Akita Prefecture)

MUJI JIO World Plaza (India)

Put People at the Heart of Our Business and View
Profit as an Outcome, Not the Goal
Ryohin Keikaku’s corporate purpose, whether it be enhancing product value or revitalizing communities, will be achievedby people. Currently within the Company, we define the order of priority for everything we do in the following way:
people, business and profit. We place people at the heart of our business—people who become the most valuabledriving force behind business success, which in turn leads to profit as an outcome. First is “people.” I believe ourmost important task as a company is to enable individual employees to make full use of their abilities with a highlevel of engagement, produce results in a spontaneous and autonomous way as members of a team, and continue
to grow. Once we have assembled a team of independent individuals, our next step will be to move forward as abusiness toward common goals. Then, if we are able to effectively execute various initiatives in our business, we will
surely achieve positive financial results. This is the essence of our thinking. Conversely, we believe that the pursuit ofonly short-term, superficial financial goals and that randomly executing short-term measures without building acohesive team and developing talent will not lead to the sustainable provision of value and business growth. It is
important to have people, business and profit in place all at the same time, and in that order of priority. This is the
management approach we are pursuing.
To enable us to effectively carry out the medium-term business plan, we have been hiring people at a rapid
pace. We used to hire about 10 to 20 recent university graduates a year, but have expanded that number to 100
to 200 people a year. These new employees have grown through training and experience in the field, and are startingto fully demonstrate their abilities. At headquarters, around 30 percent of the staff have come on board in the last
two years. Welcoming so many new people may seem chaotic and confusing to long-time employees of Ryohin
Keikaku, but only by increasing diversity in this way will we be able to continue delivering value to society. I believe
this approach to be very important.

23 MUJI REPORT 2023

Enhancing Our Corporate Value

Toward a New Industrial Structure
When it comes to fulfilling our corporate purpose, our current global manufacturing retailer business model will not
be sufficient. We need to transform ourselves into a platform for localization and circulation of resources—a new
business model in which materials and resources are circulated locally. The global manufacturing retailer businessmodel is one in which the same products used around the world are centrally procured and produced at the optimal
location from the perspective of supply chain efficiency. Products are then shipped to and sold in various regions
worldwide, thereby achieving both high product quality and low prices.
We believe it is important to build a new business structure that seeks localization rather than globalization, andwhere the mission is the circulation of resources rather than being a manufacturing retailer. Of course, we will continue
to contribute to the economic development of emerging regions through production based on the global productdeveloper and retailer format that utilizes a global supply chain, primarily for apparel. In addition to this, we will promotelocal production for local consumption for food products. We will also establish a local production/local consumption
recycling and reuse business using items discarded from households as the main raw material. Instead of relying on
primary resources such as oil and plant materials, this business will use secondary resources such as discarded
items from households dispersed across different regions. Ultimately, we want all of the products we sell to becollected and reused after they are no longer needed. To make that possible, we are working to build a businessmodel based on circulating resources while co-creating with consumers and other companies. We aim to be a businessgroup that is indispensable to society, with talented human resources and a strong lineup of products. We want ourstores to be community centers that are an integral part of the local social infrastructure. This is precisely what we
aspire to achieve through our “Second Founding.” Please keep an eye on what comes next for Ryohin Keikaku as wework to create a new business model.

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Enhancing Our Corporate ValueOur Goals and How We Will Achieve Them

Second Founding

2023

2024

Financial KPIs

Results for FY2023/8

FY2024/8 Plan

Operating income

JPY 581.4 billion

JPY 640.0 billion

Operating profit

JPY 33.1 billion

JPY 48.0 billion

Number of stores

1,188

1,331

ROA (Return on Total Assets)

8.5%

10.3%

ROE (Return on Equity)

8.7%

12.6%
Actions up to 2030

Six Priority Issues

Main Points

Creation of the Foundation
for Our “Second Founding”

1. Enhance product value

2. Increase involvementin production

Strengthen product competitivenessby developing:●

Products that take the environment
into consideration●

Products that solve social issues●

Products that let the individualityof the consumer shine, not theuniqueness of the product3. Enhance marketing activities
for products

4. Establish a store networkand new channels●

5. Enhance operations

6. Make ESG the core ofour business

25 MUJI REPORT 2023

Products inspired by culture andtradition

Complete the finest and most
unrivaled product lines essential todaily life and the procurement andproduction system for these products

Establish a community-based
business model centered on
independently managed stores andopen new stores throughout Japan
while maintaining profitability

Develop an organizational culture
in which all associates work proactively,
leading to the independent growthof each store, region and country

Build the business infrastructureand headquarters functions to
support independent store
management and localization

Enhancing Our Corporate Value

2026

・
・
・

2030

FY2026/8 Target

2030 Vision

JPY 850.0 billion

We make efforts to reduce ourenvironmental burden and torespect individual human rights
through our product development,
services and actions.

JPY 75.0 billion

1,750
13% or higher

To bea part ofpeople’s daily
necessities

15% or higher
To takeroot in local
society

Build a New Industrial Structure

Platform for Localization
and Circulation of Resources
In addition to maintaining our global supply
chain model, we will also build up a businessmodel centered on a supply chain based on
local production for local consumption.

Practiceindependent store
management andco-ownedmanagement

Helping to Realize“a Truthful andSustainable Life
for All”

Providecomfortable
online services

Be a front
runner of ESG
management

MUJI REPORT 2023

26

Enhancing Our Corporate Value: Feature 1

Overseas Growth Potential

We are making clear progress in our efforts to achieve autonomous
growth globally. In mainland China, we will take new steps torespond to the uncertain economic outlook.
Satoshi Shimizu
Executive Vice President & Director
In charge of Household Merchandising Division, Mainland China, Taiwan and Hong Kong BusinessInitiatives in Line with the Medium-term
Business Plan Are Making Steady Progress
In the medium-term business plan aimed at building a solid foundation
for achieving our vision for 2030, we are selectively concentrating
resources according to the operating environment of each country
and region, with an eye on achieving autonomous growth globally.
In mainland China, medium-term business plan-related initiatives,
including our store opening strategy, are generally going well. Key
achievements have included our ability to effectively manage inventory
levels and success in rapidly developing products in response tochanging needs as consumption rebounded following the end of thezero-COVID policy. Take household goods for example, we haveprogressed beyond simply adapting products to fit local specifications
such as size to being able to develop highly original products. We
will continue to establish and expand new categories of products inareas such as fabrics, houseware, pet goods and camping gear.
We are also introducing our own IT infrastructure adapted to themainland China business. This move has already led to significant
improvements in various areas. As the next step, we plan to upgrade
systems for the future, including those related to customer relationshipmanagement (CRM) and supply chain management (SCM).
Another issue we need to address is strengthening ourcompetitiveness. In a market characterized by rapid shifts in consumer
trends, such as changes in brand preference and diversification ofpurchasing channels, we need to work harder to achieve resultsthat set us apart.
Agriculture and food-related businesses are beginning to
make inroads in Taiwan and Hong Kong as well as mainland China,
with movement toward commercialization already gaining momentum.
In Southeast Asia, we are making progress in addressing the shift

Products Developed in Mainland China Business

Cool Touch fabric series

27 MUJI REPORT 2023

Stainless steel mugs

Pet supplies series

Smartphone and gadget accessories

Enhancing Our Corporate Valueto larger-scale stores by developing product mixes that take thelocal climate and lifestyle habits into account, and by expanding
our lineup in ways such as introducing products made specificallyfor the region in certain household goods categories.

Mainland China: An Increasingly Challenging
Market Environment and Our Response
I recognize that the economic conditions in mainland China havebecome increasingly challenging recently due to China’s debt andproperty crisis. There are concerns that this could directly impact
consumer spending in mainland China, where real estate investment
has become more widespread and larger in scale.
Even under these conditions, we remain committed to realizing
our corporate purpose of contributing to the creation of “a truthful andsustainable life for all through our products, services, stores andbusiness activities; believing human society rich in heart, with balanced
relationship between human, nature and artifacts.” Therefore, we willcontinue to maintain the pace of store openings and shift to larger
stores, develop products supported by the local market, strengthen
our omnichannel strategy to make full use of store resources, andexpand the reach of marketing with a focus on strengthening CRM,
PR for events and products, and branding. We believe it is important toproduce concrete results through reform of our visual merchandising*practices, which are directly related to branding. One example is
MUJI Shinjuku Yasukuni Dori, which reopened in the fall of 2023.
The first MUJI store specializing in apparel, MUJI Shinjuku Yasukuni
Dori has given MUJI a fresh new image that has been well-received
by our customers. MUJI was created to be an ethical and universal
brand that handles mainly standard products. However, the approachof offering new brand value and new experiences while keeping thatbasic identity intact will surely be of use in future business development
in mainland China. We are also opening stores in mainland China thatutilize scrap materials and recyclable items. This approach also has
the potential to become another new business model.
* Visual merchandising is the practice of creating sales floors that attract and motivate
customers to make a purchase.

Launch of Global Planning and ProductDevelopment System

in mainland China, but also globally. Ryohin Keikaku has always
done virtually all of its planning and product development in Japan.
That made it difficult to create plans and products that were tailored
to regional characteristics in our overseas business. In line with the
Ryohin Keikaku Group’s strategy of co-creation with communities,
we will conduct overseas planning and product development andoffer services that are tailored to regional characteristics.
Ryohin Keikaku’s overseas operations have traditionally been
limited to supplying and managing products that were plannedand developed in Japan. Our new approach will enable us to firstdevelop some products in each overseas region, and then sell thebest ones in other areas. In the future, we will establish productplanning, development, production and logistics bases in East
Asia, Southeast Asia and Europe. Representatives from Japan andthese other major areas will consult with each other and work
together to increase productivity and efficiency. We are alsoplanning to promote global procurement and logistics aimed atstabilizing trading expenses from FY2025/8.
After that, we plan to handle all operations independently ineach region from the R&D stage, not just product planning.

Developing Talent Globally Is a Priority
Up until now, we have managed operations in mainland China
through the support of and information provided by the headquarters
in Japan, but because mainland China covers a vast area, there arelogistical challenges involved in getting information to the frontlinesof each site in a timely manner. Securing and developing talentlocally is an urgent priority in order to further accelerate and localize
management. With that in mind, we are focusing on developing or
recruiting highly motivated executives, and are already beginning to
see results. Currently, we are also recruiting and developing people
at the general manager and section manager levels to cultivate
employees with strong leadership awareness and a commitment
to a high level of service. We want to provide opportunities for themto experience success through on-the-job training.
There is still a wide range of issues that we need to resolve,
but I believe that by making improvements, our overseas businesscan grow further and become an essential part of the daily lives ofcustomers around the world.

We launched a new development and production system in
September 2023 with the goal of expanding sales not just

Product Development System (through 2019)

Europe
Japan
East
Asia
Southeast
Asia

Product Development System (from 2024)

North
AmericaDevelopment baseDevelopment baseProducts

Products

Europe
East
Asia

Japan

North
AmericaSoutheast
Asia

MUJI REPORT 2023

28

Enhancing Our Corporate Value: Feature 2

Changes in Our People and Stores

To achieve our two missions, we are implementing store reforms
centered on people, starting with increasing the ownershipmindset among store staff.
Takuo Nagahara
Executive Officer
In charge of Sales and Marketing Group (Japan)

Making Steady Progress with Store Reforms
We want MUJI stores to evolve into local community centers throughthe “Second Founding.” We are placing top priority on attracting
more customers to our stores and making them feel glad that theycame to shop at MUJI. We have been carrying out store reforms
to achieve that goal.
We are making good progress toward the achievement of the“Second Founding” through these reforms. It is important for eachstore staff member to think and act on their own, with the needs ofthe customer in front of them in mind. In the past, the focus of ourstores was on faithfully following instructions from headquarters andhitting numerical targets, but that has gradually changed. Even if
they receive instructions from headquarters, staff are now able togive priority to their own ideas and put them into action if they thinkthat course is right for that store, based on their store’s circumstances
and the characteristics of local customers. A culture of looking at
instructions from headquarters as guidelines and actively incorporating

29 MUJI REPORT 2023

their own ideas is spreading—in other words, independent store
management by staff who have a sense of ownership is becominga reality, little by little.
This transition is necessary at all stores, of course, but is a
crucial point for suburban stores in particular. In contrast to urban
areas, MUJI’s brand recognition in suburban areas is not as high.
As such, it is essential to design suburban stores in a way thatmakes it easy for people who are unfamiliar with MUJI to come inand physically examine products. In that sense as well, store staff
will play the leading role, and stores will need to offer a productselection and personalized service suited to the customers in thearea. We can already see these changes happening in stores, so
I am confident that our reforms are heading in the right direction.

Transformation of Staff Mindset Is Producing Results
The above changes in the way store staff work are one indicationthat Ryohin Keikaku’s order of priority of “people, business andEnhancing Our Corporate Value

profit” is understood and taking root on the frontlines. If we put too
much emphasis on financial results and neglect to develop people
and maintain motivation, the focus of staff will no longer be on thecustomer. For example, they may not notice that customers feelinconvenienced by products being out of stock, or by long lines atthe cash registers. To avoid such a situation, it is very important tothink of people first, assign the right staff to stores, and provide
high-quality service to customers.
Localization of stores as local community centers will only bepossible if the capabilities of store staff are put to full use. We aretaking steps to ensure that this mindset, in which store staff havea sense of ownership and do what they think is right based on thecharacteristics of local customers, takes root on the frontlines. We areusing monthly meetings, which bring together store managers
throughout Japan, as opportunities to cultivate that mindset throughongoing discussions. In the beginning, there was some confusion
about the sweeping changes in the organizational culture and way ofworking, and this contributed to poor results in the Company-wide
engagement survey conducted in December 2022. To address that,
executives first reflected on their actions, and conducted a thoroughcritique of their own leadership. They also engaged in in-depth
discussions on how to create better work environments for on-site
staff. The results of the discussions were passed on to managers andstore managers at the store manager meetings and other gatherings,
and those people in turn conveyed the results to on-site staff. Thisapproach led to extensive discussion throughout the Company, andhelped identify problems in how headquarters operates and theissues facing stores. We are also constantly working to change theawareness of store managers. They are gradually becoming awarethat they must take the initiative in changing the mindsets of their staff.
As we proceed with the “Second Founding,” one positive
outcome that I have started to see is that during MUJI Week* in
October 2023, the focus was on the goal of delivering the best
possible shopping experience to customers, rather than on performancetargets. As our stores and online store are visited by many different
types of customers, we tried a trial-and-error approach at stores,
with the most significant metric being whether the best shopping
experience was delivered to each and every customer. The result wasa dramatic change in the actions taken by stores to address
problems and inconveniences as seen from the viewpoint ofcustomers, such as cash register congestion and productstockouts. A review based on that perspective was conducted
after MUJI Week ended. I was very pleased about that.
* A period of exclusive discounts and promotions for MUJI members

Our Immediate Challenge Is Securing the Right People
With store reforms and the transformation of store staff mindsets
producing results, a challenge will be securing human resources. Since
we have 70 to 80 new stores opening each year, we are hiring new
university graduates year-round, and are also aggressively pursuingpeople in mid-career. We are also focusing on internal recruitmentof part-time and temporary employees, and on creating work
environments that will make them want to stay with MUJI as
permanent, full-time employees. With that in mind, we will work toquickly adapt to changes and promote flexibility in optimizing work
environments. For example, we are transferring authority for hourly
wage management and recruiting activities to store managers, aswell as making personnel system reforms such as improvements
in compensation and benefits.

Products and Selection to Support Appealing Stores
Periodic store renovations are important in terms of raising the valueof stores. In autumn 2023, we carried out major renovations at MUJI
Ginza, MUJI Grand Front Osaka, and MUJI Shinjuku Yasukuni
Dori—flagship stores in their respective areas. While these stores
carry a full lineup of apparel, household goods and food products, we
introduced some new innovations to deepen their specialization, withthe themes of “food” at Ginza, “spatial design” at Grand Front Osakaand “apparel” at Shinjuku Yasukuni Dori. We have received a lot of
feedback from customers, who say they discovered new items at thosestores that they never knew about before. This is a good example ofbeing useful to customers by identifying the characteristics and rolesof each store, and developing strategies in line with these aspects.
Incorporating feedback from customers in product improvement
is another important role of stores. Comments from customers about
products and services are aggregated at the customer support center.
Based on that information, relevant divisions meet regularly to analyze
the comments and make improvements as part of the Customer
Comment Project. We also have an internal app called MUJI noMori, which is a tool employees can use to share things they noticeat their stores, such as customer buying patterns. This makes it
possible for all staff members, including part-time and temporary
employees, to get information from stores throughout Japan in atimely manner. The information gathered about customer needs
and opinions is reflected in new product development and service
improvements. Using these systems and tools to look at the issues
facing customers and the local area, and helping to solve them isalso an important role played by stores and their staff members.

MUJI REPORT 2023

30

Enhancing Our Corporate Value: Feature 3

An IT Strategy Aimed at Realizing Comfortable
Online Services

Tatsuya Kubota

Takahiro Miyazawa

Executive Officer
In charge of IT Services Division

Executive Officer
In charge of EC & Digital Service Division, Open Communications
Division and Circular Business Division

Ryohin Keikaku is leveraging information technology (IT) to implement business process reforms and upgrade digital services across theCompany to support product development with integrity and the management of stores that also serve as community centers. Our
overarching goal is to provide “comfortable online services.”“Comfortable online services” describes a state in which technology and services are seamlessly and imperceptibly integrated into
daily life, like the air we breathe, and do not impact the natural flow of customers or employees. By properly utilizing technology as a tool,
we can provide a high level of convenience and functionality to support a stress-free shopping experience, and also draw an emotional
response such as warmth and a sense of touch by directly connecting people with each other.
Ryohin Keikaku is overhauling its core systems and working to strengthening its organizational structure. This will involve building up
the necessary IT infrastructure and promoting in-house development as much as possible. We are steadily implementing business process
reforms across the Company in support of independent store management and autonomous decentralization, as we strive to become atechnology-driven company.

Promotional Structure
In carrying out Company-wide business process reforms using IT, we will enhance our IT infrastructure and strengthen our organizational
structure. Our goal is to promote collaboration in working to improve online services for customers. In the IT Services Division, we are implementing
internal IT infrastructure upgrades such as revamping merchandising systems1 and point-of-sale (POS) systems,2 and developing store networks,
starting with overhauling our core systems. We are also working on improving information security and the governance framework.
On the other hand, the EC3 & Digital Service Division is responsible for providing and enhancing services for customers online. Specifically,
the division is developing a user interface4 (UI) that lets customers directly experience the concept of “comfortable online services.” We will
create a user experience5 (UX) suited to the post-digital era utilizing the MUJI passport app, and share engaging content through various
owned media channels as we pursue digital communication that combines functionality and emotional aspects.
1. Merchandising system: A system for managing general store operations, including merchandise control, numerical control and sales slip management
2. POS system: A system for managing sales data and product information at the point of sale
3. Short for e-commerce
4. User interface: This refers to all aspects of the interaction between users and devices (or in this case, those related to products and services), including the visual elements used inlayouts, fonts, and the usability of menus and buttons
5. User experience: This refers to the experience that users have with products and services, including elements such as feeling of enjoyment, sense of beauty, or ease of use incomparison with a competitors’ offering
For more details on information security ▶Page 72 (Risk Management and Compliance)

Realization of“comfortable online
services”

31 MUJI REPORT 2023

IT Services Division

Maintenance and development ofinternal IT infrastructure

Collaboration

EC & Digital Service Division

Design of digital communication
with customers

Enhancing Our Corporate Value

Implementing Employee Work Reforms
Overhauling Core Systems
Our core systems have undergone various improvements up to now, but in FY2022/8 we reached the stage where we realized the difficulties
in realizing the digital utilization that we envision, or being able to continue supporting that vision in the future. The fundamental problem was
our reliance on vendors6 for systems and related work. We did not fully take into account non-functional requirements7 in areas such as
scalability and operation/maintenance. This has led to our systems becoming more complex, which has resulted in slower development
speed, reduced cost efficiency and difficulty in responding to failures.
Therefore, we launched a project to overhaul our core systems, and are undertaking fundamental reform of our operating systems. We
will upgrade existing systems, as business efficiency will still be important during the period in which we are preparing to get the new coresystems up and running. As the overhaul of core systems is positioned as a Company-wide business reform and to be undertaken basedon a medium- to long-term perspective, the process will entail a thorough visualization of business processes to identify fundamental issues,
followed by the creation of a detailed description of what our business operations should look like. In FY2023/8, we closely observed
various business sites, and conducted numerous interviews with employees. From this, we were able to visualize current business processes
and begin the process of identifying issues and rethinking business requirements. Specifically, we reached the stage of rethinking business
requirements in areas such as merchandise budgeting and product planning, product information and master data management, productordering and results management, and purchasing management. In FY2024/8, we are shifting to the system construction phase in order toachieve our desired business framework. We will create a business platform for inventory control, order management, store sales planningand order acceptance.
In addition, we are also expanding recruitment of IT talent to promote in-house system development. It is essential to establish anorganization where IT engineers can grow as professionals. As such, we will define the required skill set for engineers and conduct performance
evaluations. We will also hold in-house technology sharing meetings to support skill development, promote the hiring of technical advisors,and formulate development guidelines.
6. Venders: Refers to business parts involved in software sales and system development
7. Non-functional requirements: Requirements that are not directly related to system functions such as availability, performance, scalability, operability, maintainability, portability and security

Roadmap
Visualization of business processes

Until FY2022

Identification of issues

Until FY2023

Rethinking of business requirements

Renewal of core systems

System replacement

Improvement of existing systems
Strengthening of IT recruitment and skill development

Measures for Promoting Store Operating Efficiency
Ryohin Keikaku employs a one-stop business model as a manufacturing retailer. It involves developing and manufacturing products andservices, and delivering them directly to customers. Because of this, boosting the efficiency of store operations accounts for a large part of theCompany-wide business reforms, so there is an urgent need to revise some of the backstage operations.
While we are improving our existing systems, we are making IT-driven store operational reforms,
and assigning priority to tasks related to acceptance of customer orders,8 which plays a large role instore operations, including identifying issues in our current business processes. Our goal is to enableself-ordering by customers and to shift order confirmation and acceptance contacts online. In FY2023/8,
we started introducing self-checkout registers and rapidly accelerated efforts to update the register
POS system. A total of 977 self-checkout registers with the new POS system specifications were
installed in 194 stores. We plan to further expand rollout of the new POS system at manned registers
as well. With the new POS system, we can check and utilize POS data in real time, and will be able
to make significant progress in simplifying inventory and order management. By also making register
operation improvements, we expect self-checkout register operations by customers will becomesmoother, which will help reduce congestion at the registers. In addition, consolidating customer service
operations other than checkout at the service counter enables store staff to focus on communication
with customers, and helps to create stores that are also community centers. Going forward, we will
work to maintain the POS system infrastructure to support a store opening pace of 70 to 80 storesper year in Japan, and will pursue sales system efficiency and optimization of store IT expenses tocontribute to independent store management.
8. Customer orders categorized into holds, back-orders, and reservations of products that are not in the store

Self-checkout register
MUJI REPORT 2023

32

Providing “Comfortable Online Services” to Customers
Ryohin Keikaku aims to provide an experience that brings customers closer to MUJI,
and to each other, and leads to creativity that emerges through online interactions.
Making it easier for customers to obtain information about MUJI’s products, services
and activities helps to create excitement in their daily life and promotes better
identification with the MUJI concept. In addition, it leads to an online shopping
experience that is convenient and emotionally fulfilling.
We updated the look of our online store homepage in FY2023/8. In addition,
we added a furniture simulation tool and assembly instruction videos, expandedfeature pages, and greatly increased notifications and event information from stores.
We also posted more snapshots taken by store staff. These are just a few of theways we have worked to better provide information about our products and services.
As a result, the number of visitors to our online store and traffic to product pages
has increased, and the conversion rate is growing steadily.
Our in-store pickup service allows customers to pick up merchandise theyorder online at the nearest MUJI store. This convenient service allows them to saveon shipping costs as well as enjoy shopping, and the usage rate is increasing every
year. We have expanded the type of products covered by this service from appareland household goods to larger products such as beds and shelving, and even tofood products such as curry and confectioneries—giving customers more options
and improving convenience.
To boost our brand recognition and attract more customers, we are also
focusing on posting information on social media. We are working to make MUJI’s
products and activities feel more familiar. This includes providing information on
activities with communities and local governments and profiles of MUJI storesoverseas, as well as information about all product categories—apparel, household
goods and food. One of our social media initiatives is recognizing creators who
actively communicate information about MUJI on Instagram, X (formerly Twitter) andother platforms as ambassadors. As part of that effort, we are strengthening cocreative communication, such as having them try pre-launch products. The socks9

Usage Rate of In-Store Pickup Serviceof Products Ordered Online(%)

Usage rate (Number of orders)

Usage rate (Amount)

40

31.4
30

23.2
20

15.4

10

0

18.0
10.2

5.4
2021/9 to2021/122022/1 to
2022/122023/1 to
2023/12

Note: The current version of the in-store pickup service has been in
operation since September 2021.

that we launched in November 2023 are a unique product that we designed incollaboration with ambassadors. As part of our staff ambassador initiative, we arealso boosting support for ambitious employees who post MUJI-related content onsocial media. As these examples illustrate, the information put out not just by
Ryohin Keikaku, but also by customers and employees is an important part of ourdigital communication that helps promote the concept of “comfortable online
services” with a high level of convenience as well as emotional aspects.
9. Product name: Right-angle, loose-top socks that are easy to write a name on and stain resistant (kids),
right-angle, loose-top, combinable wool blend socks, etc.

1) Build interest
Recognition and interest

Our own social
media information

Digital advertising

33 MUJI REPORT 2023

2) Build empathy

SearchSearch advertising/Natural inflow (SEO)Store visits/Purchases

Visits to and purchasesfrom physical stores andonline (e-commerce)3) Build trust
Share

Social media publicity bycustomers and creators

Repeat purchases/
Becoming a fan

Review
posting

Personal
recommendation

Enhancing Our Corporate Value

Initiatives Using the MUJI passport App
Ryohin Keikaku’s MUJI passport app started out as a simple membership card,
but we have since improved its convenience by adding a series of new functions,
including access to the online store and content from the owned media platform“From MUJI.” We plan to use various kinds of data to make functional improvementsthat will enable us to deliver the right information to customers at the right time.
Specifically, we will support communication and services tailored to each individual
customer digitally—for example, by sending information about coordination
options to customers who have purchased clothing, or informing customers
about events and sales at the store they follow. We will also consider incentives
and ways to generate excitement so that even more people can experience theconvenience of the app. By doing so, we will increase downloads and enhance
its functionality as a tool for use in daily life.

Number of MUJI passport App Downloads
and Active Members(Millions)

Downloads

35
30

25
20
15
10
5
0

2020/2

2020/82021/82022/82023/8Notes: Ryohin Keikaku Co., Ltd. only

How We Use Customer Feedback

Number of Product Reviews

We analyze product reviews from online purchases and look at the comments andinquiries. We use this feedback to help in product development and resale, makespecification improvements and enhance information provision. Our goal is to raise
the level of customer satisfaction. For product reviews in particular, we have adopted
measures including a program initiated in September 2022 that awards 100 miles
for each review,10 and added prompts to the purchase completion screen. The

200,000

number of reviews has expanded as a result. The results of the analysis areshared with related departments, including the customer support center andmerchandising divisions, and by using them to make improvements based on a
consumer perspective, we are working to ensure that customers will want tocontinue using the MUJI online store.

Active members

168,624

150,000
100,000
50,000049,915
2018/9 to
2019/8*38,92037,85333,065

2019/9 to2020/8*2021/82022/82023/8* The Company changed its fiscal year end to August 31 as of the fiscal
year ended August 31, 2020. The same aggregation period is also
used for years prior to that.

10. MUJI Mile service: A service in which customers earn miles by making purchases from MUJI, checking inat stores, and so on. By accumulating miles, members can receive gifts such as MUJI Shopping Points
that they can use for purchases, with one point equal to one yen.

Using Online Resources to Help Build a Circular Society
Ryohin Keikaku aims to build a circular business model from an ESG perspective. To achieve that, it is important to step up online communications
that encourage reuse and recycling. We are establishing the infrastructure to realize a circular business model so that customers can more easily
participate in the recycling and reuse of items, and are working to create online frameworks with the MUJI passport app as the focal point.
Our monthly furniture subscription-type rental service and the Mottainai Market11 for selling used furniture are services available throughour online store, and they are being used by more and more customers every year. There is still potential to expand such services—services
that are closely related to societal trends and issues—and we will continue to proactively work to find ways to do so. Through these services
and other measures, we seek to give customers a better sense of how reuse and recycling contribute to a virtuous cycle for the environmentand society. By doing so, we will evolve toward online communication that helps support the creation of a circular society.
11. Service also available at some stores (see page 48 for details)

Special Feature

MUJI Products Now Available on ZOZOTOWN
After we signed a sales consignment agreement with online fashion retailer ZOZO, Inc., sales of
MUJI products on that company’s e-commerce site ZOZOTOWN began in September 2023. By
offering products on ZOZOTOWN, a popular site with young people, we can create more opportunities
to inform those consumers about MUJI’s products, services and activities. On ZOZOTOWN, we areoffering approximately 500 clothing items, including womenswear, menswear, children’s clothing,shoes and bags, plus about 900 household goods including storage items and kitchen utensils, aswell as cosmetics. Core products include MUJI Labo goods, loungewear, and backpacks in the apparel category, and cosmetics andskin care products and interior fragrance oils in household goods. Through our online presence, as well as through our stores acrossJapan, we will leverage the strengths of external shopping outlets to develop new customers and increase awareness of MUJI’s products,
services and activities among all consumers.
MUJI REPORT 2023

34

Enhancing Our Corporate Value: Feature 4

Strengthening Our Earning Power

Guided by our corporate purpose, we are working to achievebusiness growth from a medium- to long-term perspective andenhance our corporate value together with stakeholders.
Kenta Horiguchi
Executive Officer
In charge of Corporate Planning Office, Finance Division and Business Administration Division

How We View Corporate Value
Ryohin Keikaku’s corporate purpose includes the element of contributing

Progress of the Medium-term Business Plan andRecent Performanceto the creation of “a truthful and sustainable life for all through our products,

Results for FY2023/8

services, stores and business activities.” To achieve that, we have defined
two missions: “To provide daily necessities and services with genuine quality
and ethical value, at appropriate and affordable prices” and “To have apositive impact on each region by operating stores that serve as community
centers, sharing concerns and values with local residents and collaboratingwith them to tackle local issues.” Based on our corporate purpose, we
practice “public interest and people-centered management” to realize thetwo missions. In our day-to-day business activities, we put people first,
and try to balance our profit growth as a company with contribution to the
public interest. The result of this approach is that we have built a strong
earnings structure, properly pay taxes, and consistently deliver appropriate
shareholder returns without falling into short-term thinking. By creating a
positive impact on society with our stakeholders, we want to enhance ourlong-term corporate value.

In FY2023/8, operating revenue was JPY 581.4 billion and operating profit
was JPY 33.1 billion. Although operating profit increased, the operating profit
ratio was 5.7%, a 0.9 percentage point drop from the previous year. In thefirst half of the period, the rapid weakening of the yen and continued high raw
material prices significantly eroded the operating profit ratio in our domestic
business, and the impact of COVID-19 substantially reduced profit in mainland
China. In response to the conditions in the first half, we implemented priceadjustments in our domestic business in January and February of 2023,
resulting in improved performance in the second half. To limit the impact of
exchange rate fluctuations, which were the cause of profit deterioration, we
accelerated the timing of exchange contracts and increased the hedge ratio.
Outlook for FY2024/8
In FY2024/8, we expect to reach record highs in operating revenue (JPY
640.0 billion) and operating profit (JPY 48.0 billion), with significant growth inProgress of the Medium-term
Business Plan

2021/8Results(Billion JPY)

2022/8Results

2023/8Results

2024/8Planannounced
in July 2021

Recently announced
plan

2025/82026/8Plan

Plan

If the exchange rate at
the time of the July 2021
announcement is appliedAchievement
rate/Variance

Achievement
rate/Variance

453.6

496.1

581.4

700.0

640.0

91%

616.0

88%

750.0

850.0

Domestic business

296.9

308.1

342.8

450.0

378.5

84%

378.5

84%

–

–

Overseas business

156.6

188.0

238.5

250.0

261.5

105%

237.5

96%

–

–

42.4

32.7

33.1

75.0

48.0

64%

44.6

59%

61.0

75.0

Operating profit ratio

9.4%

6.6%

5.7%

10.7%

7.5%

(3.2%)

7.2%(3.5%)

8.1%

8.8%

ROA (Return on total assets)
ROE (Return on equity)

12.3%
17.3%

9.4%
10.8%

8.5%
8.7%

15.0%
15.0%

10.3%
12.6%

(4.7%)(2.4%)

–
–

–
–

12.1%
13.8%

13.6%
15.4%

Operating income

Operating profit

35 MUJI REPORT 2023

Enhancing Our Corporate Value

both revenue and profit in the domestic business and increased earnings in all

the end of the previous fiscal year. By enhancing our organizationaloverseas subsegments.

capabilities, we have been able manage inventory more precisely, andAfter reviewing the plan for FY2024/8, we announced the adoption of ainventory turnover also continues to improve.

three-year rolling business plan, starting from the current fiscal year. Regarding
future earnings forecasts, we will continue to provide information on thethree-year rolling business plan and update it on an annual basis as part ofefforts to communicate changes in the business environment to stakeholders.
In the current plan, we will accelerate the pace of growth both in Japan and in
the overseas business, centered on mainland China and Southeast Asia. We
are projecting operating revenue of JPY 850.0 billion, operating profit of JPY
75.0 billion, and an operating profit ratio of 8.8% in FY2026/8.
Progress of the Medium-term Business Plan
In the medium-term business plan that began in FY2022/8 and announced in

Investment Strategy and Allocation of Funds
In FY2023/8, we invested JPY 26.3 billion. This mainly consisted of JPY 19.3
billion in store investments related to store openings in Japan and mainland
China, and JPY 6.7 billion in IT investments. For FY2024/8, we are planning toinvest a total of JPY 36.6 billion, including store investments of JPY 24.7 billion
and IT investments of JPY 10.0 billion, primarily to improve the efficiency ofstore operations. In the current fiscal year, we will continue to open new storesin Japan and mainland China, while more firmly establishing our presence inSoutheast Asia, which has excellent growth potential. We consider this the
preparation phase for accelerating store openings in the next fiscal year.

July 2021, we set the targets of operating revenue of JPY 700.0 billion andCurrently, the Ryohin Keikaku Group is in the business growth phase.

operating profit of JPY 75.0 billion for FY204/8, the final year of the plan.

As such, we are aggressively making growth investments funded by cash

However, we have revised the forecast in light of the most recent results. If theflow generated in our core business. Our investment targets are mainly

exchange rate at the time the medium-term business plan was formulated in

new store openings and IT investments. We are making IT investments for2021 is applied in the plan for the current period, operating revenue would be

operational improvements as we pursue business expansion by opening new

JPY 616.0 billion and operating profit would be JPY 44.6 billion, representing

stores. For shareholder returns, we will make long-term, stable profit distributions,achievement rates of 88% and 59%, respectively, well below the targets.

taking balance sheet stability into consideration. With respect to dividends,

The main factor in this underperformance was that sales per store did

we decide on the appropriate level of dividends each fiscal year, targeting a

not reach projections in the domestic business or the mainland China

consolidated payout ratio of 30%. In FY2024/8, we are projecting annual

business. In response, we will focus on enhancing the value of our products.

dividends per share of JPY 40, for a dividend payout ratio of 32%, as weWith respect to the medium-term business plan, many issues still

improve profitability with operating revenue generated through new store

remain in terms of performance. We take that seriously, but are making
steady progress in areas such as expanding and enhancing our businessover the medium to long term based on our corporate purpose. For store
openings, we achieved a net increase of 69 stores in Japan in FY2023/8. We
intend to open more stores with a focus on 600 tsubo stores, and areplanning a net increase of 64 stores in FY2024/8, as we continue to expand
our store network. We are also aggressively opening new stores outside

openings and the recovery of the operating gross profit margin.

Allocation of Investments■ Store investments ■ Software investments ■ Other investments(Billion JPY)

40

36.6

30

26.3
18.9

20

Japan. We are planning a net increase of 58 stores in East Asia, including
mainland China, and 25 stores in Southeast Asia and Oceania—areas where10

we are looking to accelerate the pace of store openings in the next fiscal year0and beyond. In Europe, we plan to close four unprofitable stores, and will
work to improve the earnings base.

Maintaining a Strong Financial Structure
We are focusing on maintaining a strong financial structure and maximizing
cash flow through our core businesses. We will make investments in store
openings with an eye on business expansion in Japan and overseas, and IT
investments to raise the level of our operations. Investments will be fundedwithin the scope of cash flow. In addition, we will work to provide stableshareholder returns after securing sufficient liquidity on hand. Our goal is tomaintain liquidity on hand equivalent to 2 to 3 months of sales. As for liquidity
on hand at August 31, 2023, we held cash and deposits of JPY 115.0 billion,
including borrowings of approximately JPY 50.0 billion. Even using our expected
operating revenue of JPY 640.0 billion in the FY2024/8 as the standard, liquidity
on hand exceeded two months of sales, so we believe it is at an appropriate level
Total assets as of August 31, 2023 were JPY 453.7 billion, an increaseof JPY 54.3 billion from a year earlier. This was mainly because property, plantand equipment increased JPY 23.0 billion to JPY 160.3 billion due tobusiness expansion associated with new store openings, and cash anddeposits increased JPY 24.8 billion to JPY 115.0 billion. Inventories stood at
JPY 133.2 billion. Despite a significant increase in the number of stores, wewere able to limit the increase in inventories to JPY 3.7 billion compared with

0.4

17.6

6.7
0.1

8.8

7.8

9.6

9.6

2021/82022/8(Billion JPY)

24.7

19.3

2024/8 (Plan)

2023/82021/8

1.8

10.0

0.2

2022/82023/8Cash flows from operating activities

61.4

23.3

56.5

Cash flows from investing activities(13.5)(16.6)(22.1)Cash flows from financing activities(15.1)(58.6)(11.2)

Further Strengthening Profitability
Store openings are generally proceeding as planned, and we are also
expanding store floor space. I think there is room to grow sales further bytaking advantage of the greater floor space. In order to improve asset
efficiency and capital efficiency, we use ROA (based on ordinary profit) andROE as key indicators, and have set targets of 15% for each of them. ROA
will be the key indicator for inventory and investments in store opening as we
continue to expand our business. For both ROA and ROE, we are notpursuing short-term improvements, but aim to maintain them at levels above
the cost of capital (in a sustainable way) over the long term by improving the
profitability of our core business.
As I mentioned at the beginning, the Ryohin Keikaku Group practices
management that incorporates the views of a wide range of stakeholders,
including investors, based on “public interest and people-centered
management.” We will continue to connect that policy to sustainableimprovement of our corporate value through proactive disclosure andenhancement of communication with stakeholders.
MUJI REPORT 2023

36