MARUI GROUP CO., LTD. MARUI IR DAY— Medium-Term Management Plan Business Strategy Briefing
June 12, 2020 Today’s Content
4:00pm- Progress and Future Initiatives in the Retailing Segment Masahisa Aoki, President and Director, MARUI CO., LTD. Miyuki Kawara, Director and Store Manager, Marui Family Mizonokuchi, MARUI CO., LTD. 4:15pm- Questions and Answers
4:35pm- Progress and Future Initiatives in the FinTech Segment Yoshinori Saito, President and Director, Epos Card Co., Ltd. Junko Tsuda, Director and General Manager, Cardholder Service Department, Epos Card Co., Ltd. 4:50pm- Questions and Answers MARUI IR DAY— Medium-Term Management Plan Business Strategy Briefing
June 12, 2020 Speaker Profile
Masahisa Aoki Miyuki Kawara Director and Senior Executive Officer, Executive Officer, MARUI GROUP CO., LTD. MARUI GROUP CO., LTD. Director and Store Manager, Marui Family President and Director, MARUI CO., LTD. Mizonokuchi, MARUI CO., LTD. [Career History] [Career History] 1992 Joined the Company 1986 Joined the Company 2015 Store Manager, Shinjuku Marui Annex, MARUI 2007 Store Manager, Kobe Marui, MARUI 2016 General Manager, Anime Business Department, 2008 General Manager, Brand Development Department, MARUI MARUI GROUP 2012 General Manager, CSR Promotion Department, MARUI 2017 Executive Officer, MARUI GROUP GROUP 2018 General Manager, New Business Development 2016 Executive Officer, MARUI GROUP Department, in charge of Anime Business, Director and General Manager, Sales Promotion Department, MARUI GROUP Epos Card 2019 Incumbent 2018 Director and Store Manager, Ueno Marui, MARUI 3 2019 Incumbent 1. Overview of Performance for the Fiscal Year Ended March 31, 2020
2. Current Status and Future Direction 1. Overview of Performance for the Fiscal Year Ended March 31, 2020 Financial Digests
• Operating income of ¥10.0 billion (YOY decrease of ¥1.4 billion), the first decrease in income in three years
• The impact of COVID-19 on income amounted to ¥(1.5) billion mainly due to store shutdowns and cancellation of discount sales in March
• A transition to shopping centers and fixed-term rental contracts progressed further and fixed-term rental contracted floor space expanded to 228,100m2
• E-commerce struggled partly due to intensifying competition and cancellation of discount sales in March; sales decreased for the first time in five years
6 Performance for FY2020
FY2019 FY2020 Change / YOY Change from Plan
ROIC (%) 3.8 3.4 -0.4 ―
Billions of yen Billions of yen % Billions of yen
Total 337.0 320.1 95 -9.9 transactions
Revenue 131.7 116.3 88 -5.9
Operating 11.4 10.0 88 -1.5 income
7 Factors Affecting FY2020 Operating Income Despite steady improvements in revenue from the transition to fixed-term rental contracts, income decreased by ¥1.4 billion due to struggling e- commerce and the impact of COVID-19 Excluding the COVID-19 impact, trended on the same level as the previous fiscal year
[YOY change] +1.4 billion -0.9 billion -¥1.4 billion ¥11.4 billion -0.1 billion -0.3 billion -1.5 billion ¥10.0 billion Consignment Improvements Effect of sales floors, in revenue E-commerce Platform COVID-19 etc. from the transition to fixed-term rental contracts, etc.
FY2019 FY2020 8 2. Current Status and Future Direction Stores Reopening Status of Stores
Reopening in stages, in line with the lifting of the Emergency Declaration
YOY change in Gov. request Response transactions 5th All Marui and Modi stores started short-time 27th Government operations March request for 65% 20th- Cancelled a sale for cardholders closure 28th Some stores closed on weekends 4th All stores closed on weekends 7th Emergency April 8th- All stores temporarily closed (only food floors 27% Declaration in 8 stores opened for short hours) *Provisional figure 14th- Shizuoka Marui reopened 20th- Hakata Marui reopened 14th-Partial lifting 20% May 21st - Namba Marui / Kobe Marui reopened 26th-Full lifting *Stores / web only Latter Cancelled a sale for cardholders *Preliminary figure half
st 102% June 1 - All stores reopened *Stores / web only *Total from 1st to 10th
*Excludes closed stores for June 11 Recent Situation The situation remains harsh for retailers with many major apparel companies going bankrupt or brands scaling down
Japan Marui
Bankrupt April 2020 740 cases Bankrupt Up to May 2020 10 cases companies YOY 115% companies (Previous fiscal year: (Retailers 130%) 13 cases/year) *Source: TOKYO SHOKO RESEARCH “Status of Corporate Bankruptcies across Japan” Foreign April 2020 2,900 people Suspended Up to May 2020 18 brands visitors YOY change 99.9% brands (44 shops) to Japan decrease *Source: Japan National Tourism Organization “Monthly Estimates of Foreign Visitors to Japan”
12 Partnership Enhancement Measures Implemented enhancement measures with our business partners in order to overcome the COVID-19 crisis Number of Specific details cases
(1) Full exemption of all rent and common service fees for our business All 2,100 partners during suspension of business tenants
(2) Elimination of minimum guaranteed sales of consignment sales 100 tenants contract business partners for 6 months
(3) Return of 1 month or 2 months security deposit to rent upon request 600 tenants (Composition *Applicable to business partners who deposit for more than 6 months ratio: 30%)
160 tenants (4) 6 months grace for payment of May-July upon request (Composition ratio: 8%)
Conducted a survey with business partners and determined the abovementioned enhancement measures on April 24 13 Purpose of Enhancement Measures From the Group’s “co-creation” perspective, further promote relations with business partners
Market deterioration due to COVID-19 continues, Worst-case scenario directly affecting the management of business partners
Effects of enhancement Achieve prosperous coexistence through co-creation and measures enhancement of relations
Business partners Marui Coexistence Ensuring revenue from Lasting continuation medium- to long-term of business perspective
14 Measures to Support Business Partners (1) Through coordination with business alliance partners, providing support in launching e-commerce for business partners that have lost sales channels due to store shutdowns Store Support in launching e-commerce Securing operating cash flows shutdowns and referring customers
Business partners that are existing tenants and event participants Decreases in Began partnership in 2017 revenue and cash D2C business partners Customer referrals via email for EPOS cardholders
15 Measures to Support Business Partners (2) Creating opportunities for e-commerce exclusive business partners to open bricks-and-mortar stores by providing operational expertise
Voices of Operational business partners know-how Business Investment partners The key to opening our first bricks-and-mortar store was store operational expertise Very attractive framework for e-commerce exclusive stores
Open Return on stores investment Store operation contracting plan FY2020 FY2021 FY2024
Marui Group No. of shops 4 shops 20 shops 80 shops No. of employees 17 90 350
16 Measures to Support Business Partners (3) Achieving unique curated sales floors with a scheme of combining “operation contracting, small-scale tenants, and curation” 3rd floor, Shinjuku Marui Men (200m2) Business partners
Tenant A Tenant D Lowering rent by opening small- 2 Curated shoes scale stores (approx. 17m and up) Tenantsales B floor ofTenant 6 E Reducing risk of continued tenants employment Tenant C Tenant F Marui
Acquisition of credit card LTV by Group employees Contract fee revenue from Scheduled to open a curated accessories sales operation contracting floor at Ueno Marui in the second half of FY2020 Expansion of product line-up 17 Measures to Support Business Partners (4) By providing rent guarantee service through EPOS card, support the opening of stores at a low cost (June 2020 onward) Ordinary Rent case guarantee Upfront payment of deposit at the opening of a store Pay guarantee fee with rent (high initial cost) (low initial cost)
Rent guarantee
6 to 12 months of rent
Deposit 1 month of rent Guarantee fee A few % A few % Rent Rent Rent Rent Rent Rent First Following month onwards First Following month onwards month month
18 Future Direction Even amid digitization, the experiential value of bricks-and-mortar is an important factor for growth Direction Value of bricks-and-mortar amid digitization
E-commerce LTV + bricks-and-mortar Acquiring new customers Value of Venue for selling and bricks-and-mortar Creating engagement store
buying goods Experience E-commerce only
[Engagement effects]
High conversion High spending Retention rate High LTV Venue for providing ratio × amount × =
experience “The customer spending amount of a customer who uses both bricks-and-mortar and online stores is more than double that of a customer who only uses online stores” 19 Examples of Tenants Introduced Introducing tenants for providing new experiential value
mercari station N organic Contract Contract Mercari’s first flagship store operation First bricks-and-mortar store operation (from June 10, Shinjuku Marui Main Building) (from June 11, Yurakucho Marui) Planning to expand to 10 locations in the future A skincare brand operated by SIROK, a consolidated subsidiary of CyberAgent
20 Examples of Tenants Introduced Introducing tenants for providing new experiential value
O'right kay me Contract Opening first store in Japan operation D2C apparel brand (from June 11, Yurakucho Marui) (from June 1, Yurakucho Marui)
Sustainable hair care brand originating in Taiwan Appointments may be made for styling consultation, etc.
21 Medium-term Goals for Creating New Stores Expand the composition of tenants that provide experiences to 60% Further accelerate the trend from goods to experiences with the impact of COVID-19 as a turning point Composition ratio
in floor area New experiential value experientialNew MEDULLA N organic D2C, etc. O'right kay me 30% 38% Experience / contents mercari station 60%
Sharing GO TODAY SHAiRE SALON
Food vendors and service providers 70% 62% 40% Conventional merchandizing
FY2019 FY2020 FY2024 22 E-commerce Current Status of the E-commerce Industry The survival of the fittest has progressed in the industry and Marui has not been able to demonstrate its uniqueness Industry trends Net sales
Major Oligopolization Company A shopping malls is progressing 300.0 bn Withdrawing from Apparel shopping malls companies Increasing the ratio of directly operated stores Growth rate is Fashion slackening due to Company B e-commerce intensified 20.0 bn Marui competition
Marui Could not Company C differentiate 0 FY2016 FY2017 FY2018 FY2019 products and services 16.3 17.3 18.3 19.3
24 Current Status of Marui Struggled despite attempts to expand scale in the fashion category and revenue decreased Meanwhile, categories except fashion (beauty, food, health, etc.) that expanded at stores also grew in e-commerce
E-commerce Current status of net sales e-commerce 20.4 bn 21.3 bn 23.0 bn 24.2 bn 21.4 bn Non-fashion 155% 1.9 2.2 1.6 1.7 2.3 YOY Non-fashion 102%
89% 21.1 21.9 19.2 87% Fashion 18.8 19.6 Fashion
FY2016 FY2017 FY2018 FY2019 FY2020 FY2020 Total of Apr. – May 2020 Fashion composition Enhanced categories (cosmetics, etc.) E-commerce 92% 92% 92% 91% 89% 108% 150% Stores 50% 45% 40% 35% 30% 25 Expansion of Categories
Quickly introduce non-fashion brands that have not opened e-commerce stores to expand the scale of sales Breakdown of 1,300 brands within stores
Enhancement categories 390 brands Sundries 170 No Foods/goods 130 Composition of non-fashion sales e-commerce Non-fashion 810 Hobby 50 980 Cosmetics 40 FY2020 FY2024 brands Restaurants 420 10% → 50% & Services Fashion 170
With Non-fashion 90 e-commerce 320 Fashion 230 brands
26 Increasing Customers Who Use Both Stores and E-commerce By enhancing coordination with stores, which are the entry points into e-commerce, increase new customers for e-commerce and customers who use both platforms
What customers used before Customers using both their first e-commerce purchase stores and e-commerce
Composition E-commerce spending amount 89% per purchase for FY2020
Customers also Average using stores 5%
1.1 times First usage was ¥26,000 ¥28,000 e-commerce 4%
*From April 2020 customer survey
27 Improving the Convenience of Customers
Improve experiential value through promoting use of apps and coordination with partners
App (Sep. 2019 onward) Video contents, etc.
No. of downloads 320,000 1.3 times the plan Product introduction video From May 2020 – No. of visits 6.22 million 1.2 times the plan
7 times browser Online sales From Jul. 2020 Customer spending 1.2 times browser amount Data coordination Improve convenience by further upgrading UI Partnership with mercari FY2021 Net sales through apps Data coordination between 2.5 to 3 times YOY primary distribution and secondary distribution
28 Direction for the Retailing Business The Retailing Business in the Future By introducing D2C through co-creation investments, expand brands shared between stores and e-commerce, maximizing the provided value
Stores E-commerce (bricks and mortar) (digital) Fusion of Expansion of brands shared Introducing tenants that offline and between stores and e-commerce provide new experiential value online through category expansion Floor space composition 60% Non-fashion sales composition 50%
“Diverse points of contact” with customers
Marui Group’s unique “retailing model”
30 Synergies through Co-creation Investments Through the trinity of retailing, co-creation investment and FinTech, establish the Group’s unique business model Suruga-Ya FABRIC TOKYO
Co-creation investment Co-creation investment Dec. 2019 May 2019
Retailing FinTech Retailing FinTech
Opened 3 stores Apr. 2018 – Affiliated Jan. 2020 – Opened Feb. 2017 – Improving credit card card 7 stores usage through mutual Opened FY2020 – e-commerce customer referrals Pickup/ Oct. 2020 – purchasing at stores 31 For Improving the Value of Physical Stores Toward post-COVID-19, change in customers’ values will accelerate, further enhancing the value of “experiential stores” we have pursued
Pre-COVID-19 Post-COVID-19 Transition to Changes in Further shopping enhancement centers values of customers of and experiential value fixed-term Experience- Value Product rental oriented Changes in relationships Feeling provided sales- contracts with business partners at stores centric Feeling- Inspiration centric Fusion of Empathy offline and online
To the post-digital world
32 Questions and Answers (Retailing) MARUI IR DAY Medium-Term Management Plan Business Strategy Briefing
June 12, 2020 Speaker Profile
Yoshinori Saito Junko Tsuda Managing Executive Officer, MARUI GROUP CO., LTD. Executive Officer, MARUI GROUP CO., LTD. President and Director, Epos Card Co., Ltd. Director and General Manager, Cardholder Service Department, Epos Card Co., Ltd. [Career History] [Career History] 1986 Joined the Company 1995 Joined the Company 2007 Store Manager, Machida Marui, MARUI 2014 Store Manager, Nakano Marui 2008 Executive Officer, General Manager, Financial Department, 2015 Executive Officer, MARUI GROUP MARUI GROUP Director and Store Manager, Marui Family Shiki, MARUI 2011 Director and General Manager, Direct Marketing 2017 General Manager, New Business Development Department, Department, MARUI MARUI GROUP 2013 Director and General Manager, Sales Promotion 2018 Director and Store Manager, Marui Family Mizonokuchi, Department, Epos Card MARUI 2015 Managing Director, Epos Card 2019 Incumbent 2016 Incumbent 35 Today’s Contents
(1) Performance in FY2020
(2) The Impact of COVID-19
Junko Tsuda, Director, Epos Card
(3) Future Direction
(4) Status of Bad Debts and Interest Repayment
Yoshinori Saito, President and Director, Epos Card (1) Performance in FY2020 Digests
〇Operating income increased for the eighth consecutive year to ¥38.4 billion (+¥3.4 billion YOY), and ROIC was 4.6%, a YOY increase of 0.4 percentage points
〇Shopping and rent guarantee continued to grow significantly, leading performance
〇The number of cardholders was 7.20 million (+320,000), surpassing 7 million
〇Although revenue decreased due to COVID-19, the impact on operating income was +¥0.2 billion, due to a decrease in variable costs such as card issuance expenses
38 Numerical Performance for FY2020
・Operating income was ¥38.4 billion (110% YOY), ROIC was 4.6% (+0.4 percentage points YOY)
FY2018 FY2019 FY2020 YOY Change YOY YOY YOY Change from plan ROIC (%) 3.9 － 4.2 － 4.6 — +0.4 －
Invested capital (¥bn) 531.0 114 569.8 107 574.5 101 +4.7 -24.4 [108] [+55.3] [excl. liquidated receivables]
¥bn % ¥bn % ¥bn % ¥bn ¥bn Total transactions 1,972.5 114 2,310.6 117 2,678.8 116 +368.2 -77.7
Revenue 110.4 112 128.3 116 139.5 109 +11.2 -2.8
SG&A expenses 79.0 112 93.3 118 101.1 108 +7.8 -2.1
Operating income 31.4 111 35.0 111 38.4 110 +3.4 -0.6 39 Operating Income Excluding Extraordinary Factors
・Operating income excluding extraordinary factors was ¥39.3 billion (+¥4.2 billion YOY)
39.3 +1.0 bn Gain on transfer -1.5 bn bn of liquidated +0.2 bn accounts Liquidation -1.1 bn +0.5 bn 38.4 cost / Impact of receivable Increase in Changes in bn +4.2 bn amortization COVID-19 +3.4 bn 35.0 bn provision for loss accounting Effective increase on interest standards in income repayment
Extraordinary factors: -0.9 bn
FY2019 FY2020 40 (2) The Impact of COVID-19 Trends in Shopping Transactions
・Despite the impact of COVID-19, shopping increased to ¥2.2 trillion (116% YOY)
■Trends of past years
4.0 (¥tn) 118 120 (%) Impact of COVID-19 116 38.0 billion
110 2.0
2.2 tn 1.9 tn 100 1.2 tn
0.0 90 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 42 Impact of COVID-19 on Shopping Transactions
• Mainly due to refraining from outings and store shutdowns, 50% of decreases in April were decreases in travel & entertainment ■Status of affiliate transactions
100 Decrease (%) Total -62.0 bn 80
200
(¥bn) Travel & -62.0 bn -55.0 bn -31.0 bn entertainment [Of which, cancellations -2.5 bn] 100
Large commercial -11.0 bn facilities
0 Mar. Apr. May 43 Shopping Transactions: Future Outlook
Growth Disregarding rate Outlook for Impact for the Apr. - May recovery COVID-19 current fiscal year
Travel -78% Mid- to long- 400 bn (share 15%) -200 to term -300 bn
Entertainment -82% Short to 1 60 bn (2%) -10 to year -30 bn
Large -62% Short to 1 210 bn (8%) -30 to commercial year -80 bn facilities
E-commerce +41% 420 bn (16%) +30 to +70 bn
Shopping transactions: ¥2.1 to 2.3 tn (Impact -250 to -540 bn) 44 Status of Revolving and Installment Payments
• The use of installment payments led high growth in transactions to ¥270.0 billion (117% YOY) ■Trends in transactions
400 Installment Revolving YOY 130 (¥bn) (%)
120 300 271.3 110
200 100
90 100 80
0 70 FY2011 FY2016 FY2020 45 Recent Status of Revolving and Installment Payments
• Revolving and installment transactions decreased in line with the decrease in shopping transactions due to the impact of COVID-19 ■Trends in transactions YOY
130 Revolving and (%) installment
120
110
Linkage will continue 100
Shopping 90
80
70 FY2018 FY2019 FY2020 Apr. - May 2020 46 User Status by Age for Revolving and Installment Payments
• While the ratio of young users is high, approximately 30% is 40 years or older, with a wide range. Transaction trends have no linkage to age ■Age composition in the number of ■Trends in transactions by age customers 130 40 years old and up (%) Young (up to 39 years old) 120
31% No. of revolving and 110 installment 69% Up to 39 years old customers 910,000 100
90
80 18.3 19.3 20.3 FY2018 FY2019FY2019 FY2020 Apr. – May 2020 47 Revolving and Installment Payments: Future Outlook
Revolving and installment transactions: Impact of -30 billion to -60 billion
(Revenue structure) ■Outlook for revolving and installment balance (if the impact on transactions is -60 billion) -40.0 bn Incurred in the current 30% fiscal year 348.6 bn 350.0 bn 319.4 bn Incurred from the balance at the 70% beginning of the year (=contracted FY2019 FY2020 FY2021 recurring revenue)
Average 334.0 350.0 balance billion billion 48 *Includes liquidated accounts receivables, excludes driving license credit Outlook for New Credit Cards
• 0.2 – 0.3 million cardholders less than planned due to store shutdowns, etc. On the other hand, card issuance expenses decreased by approximately 2 billion
100 (ten thousand -3 persons) [Impact of COVID-19] 80 -0.2 million to -0.3 million
60
40 81 81 60 to 70 Card issuance expenses
20 -¥1.5 billion to -¥2.5 billion
0 19.3 20.3 21.3 FY2019 FY2020 FY2021FY2021 (outlook)( (outlook)) 49 (Reference) Breakdown of the Estimates of the Impact of COVID-19 for FY2021 *Cited from the Financial Results Briefing on May 28, 2020
FY2021 YOY change Segment FY2020 Excluding the effect of After reflecting the estimated impact of COVID-19 COVID-19
FinTech ¥38.4 billion +¥4.0 billion +¥0.5 billion to -¥0.5 billion
Excluding the impact of Optimistic scenario (A) Pessimistic scenario (D) COVID-19 (Basic recovery in Oct. 2020) (Basic recovery in Oct. 2021) (YOY change)
Transactions +430.0 bn -250.0 bn to -540.0 bn
Revenue +10.0 bn -10.0 bn to -17.5 bn
SG&A expenses +6.0 bn -6.5 bn to -13.0 bn
Operating income +4.0 bn -3.5 bn to -4.5 bn [YOY change] [+0.5 bn] [-0.5 bn] to 50 Status of Refund Points from Cashless Payments
■Status of refund point measures ■Status of EPOS cards Increase 64% of settlement amount is credit cards ･Transactions subject ¥147.0 bn effect to refunds +7.0 bn 0.5 tn Refund points awarded ¥7.0 bn (+0.5%) (7%) Credit cards The number of usage increased mainly in small- amount payments Electronic money 2.0 tn
51 (3) Future Direction Maximizing Share of Household Finances: Looking Back on FY2020
Image of customer household finances
Cash payments Bank transfers
E-commerce Rent Food Rent ¥ bn Transactions 353.7 Transactions ¥332.6 bn (118%) Beauty, fashion (128%)
Smartphone Communications, payments Leisure, learning utilities, etc. Recurring payments
¥58.0 bn Congratulatory and Transactions Transactions ¥249.3 bn (211%) other gifts Savings, investment (111%)
53 Comparison of EPOS Card Spending with General Spending in Japan
• General household finances have a high ratio of fixed payments through bank transfers, at around 60%, but EPOS cards have the opposite structure
Bank transfers
Cash payments
77% 59% 41%
23%
General spending in Japan EPOS card
54 (Estimated by the Company based on Family Income and Expenditure Survey, Statistics Bureau of Japan) Recent Trends in Transactions
• While rent, recurring payments, and e-commerce remained on a stable trend, other transactions decreased significantly ■Monthly trends in transactions Impact of COVID-19 140 (%) 129 E-commerce 121 120 117 Rent Recurring payments
100
80
65 Other 60 transactions Apr. Jul. 2019 Oct. Jan. Apr. 2019 2019 2020 2020 55 Maximizing Share of Household Finances: Future Direction
• Achieve both stable revenue and business growth by promoting the strategy of maximizing share of household finances Over 4.0 trillion
2.5 trillion
E-commerce 20% - 1 trillion Cash payments
E-commerce 14% 30% - 12% 23% 20% Bank transfers 5 years ago FY2020 3 years later 56 Status of Rent Guarantee
• Sales has steadily increased due to the contribution of strategic partners, despite not achieving plans mainly due to the impact of COVID-19 ■Revenue trends ■Status of strategic partners 12.0120 150 3 major (¥bn) (%) companies
10.0100 No. of 31% 34% 8.3 New YOY new 8.080 100 customers cards 180,000 80,000 6.5
6.060
Revenue 4.040 50
2.2 2.020 Sumitomo NATIONAL ABLE Forestry STUDENTS 0 0 INFORMATION 15.3 16.3 17.3 18.3 19.3 20.3 Residential FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 CENTER (NASIC) 57 New Initiative for Rent Guarantee
• Introduced rent guarantee for incoming tenants in coordination with Marui, expanding the business with new initiatives Fixed-term rental contracts Incoming Rent guarantee tenants contracts
Until now From now
Deposit Guarantee fee (6 – 12 months of rent) (1 month of rent)
Deposit received (B/S) Revenue
Initial burden on tenants Heavy Light Start with Marui stores, and gradually expand the initiative to partner commercial facilities nationwide, after accumulating know-how 58 Future Outlook for Rent Guarantee
• Taking the change in the environment due to COVID-19 as an opportunity, aim for revenue of ¥20.0 billion or higher in five years 25.0250 (¥bn) Selection of guarantee companies Over 20.0 Advancement in real estate tech 20.0200 Tenant rent guarantee
15.0150
10.0 -
10.0100
5.050
0 FY201616.3 FY201717.3 FY201818.3 FY201919.3 FY202020.3 FY202121.3 FY202222.3 FY202323.3 FY202424.3 FY202525.3 Transactions Over 141.7 171.0 207.5 260.7 332.6 (¥bn) 900.0 59 Initiative with Co-Creation Investment
• Promote co-creation through investments involving synergies with the core business, with the aim of expanding membership and improving LTV
■Anime business: trends in new cards 20.0 (ten 15 thousand Co-creation persons) investment
10.0
Retailing FinTech 1.5
0.0 FY201717.3 FY201818.3 FY201919.3 FY202020.3
Ratio of the young 62% High LTV Usage ratio 94% 60 Advance Example of Co-Creation through Investment Involving Synergies with the Core Business
■ A-too Inc. (Suruga-Ya) ■Global Trust Networks Co., Ltd.
Investment : December 2019 Investment : April 2018
Retailing : Opening locations at Marui stores (3 Retailing : Opening a store at Namba Marui stores) Opening a store on marui web channel FinTech : Affiliated card (6,000 cardholders per FinTech : Rent guarantee for foreigners year) Credit cards for foreigners (3,000 Introducing EPOS Easy Payment cardholders per year)
61 (4) Status of Bad Debts and Interest Repayment Long-term Trends in Ratio of Bad Debt Write-offs • Soundness of our receivables improved despite significant changes in the environment, and the ratio of write-offs trended around 1%, the lowest level in the industry ■Trends in ratio of bad debt write-offs 2008 financial crisis 5.0 (%) Total loan amount limit enforced 235 The Great East Japan Earthquake 220 4.0 Beginning of bank loan 205 restrictions 190 Ratio of bad 3.0 debt write-offs 175 160 Voluntary 145 2.0 bankruptcy across Japan 130 YOY 115 1.0 (%) 100
85
0.0 70 06.3 07.3 08.3 09.3 10.3 11.3 12.3 13.3 14.3 15.3 16.3 17.3 18.3 19.3 20.3 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 63 Comparison with Other Companies • While the ratio of young cardholders is high compared to other companies, both the ratio of bad debt-related expenses against revenue and ratio of bad debt write-offs are low
Company Company A B
Young (up to 39 years old) cardholder ratio 50% 23% 40-50%
Ratio of bad debt-related expenses against revenue 12% 16% 18%
Ratio of bad debt write-offs 1.9% 2.6% 1.9%
*Estimated by the Company based on each 64 company’s latest financial results Co-Creation of Creditability • Managing the risk of bad debt drawing on the unique credit expertise based on “co-creation of creditability,” our DNA since founding
■Comparison of maximum spending Other limit with other companies companies Granted based on income, years of employment, assets, etc. Upon Gold joining
EPOS ¥500,000 ¥1,500,000
Company ¥2,000,000 ¥5,000,000 A
Maximum Maximum limit spending Fixed (Set at a Company EPOS small ¥1,000,000 ¥2,000,000 B amount)
Upon 65 joining Status of Number of Users and Number of Bad Debts • There are no major differences by age in the number of users and number of bad debts, and the ratio of bad debt write-offs among young users is lower than the overall ratio ■FY2020: Number of users and number of bad debts
Young users (up to 39 years old) 9,000 12,000 No. of million million 2.10 2.60 42% bad debts 58% No. of users 45% 55% 21,000 4.70 million
(Ratio of bad debt write-offs)
Young users 40 years old Overall (up to 39 years and higher old) 1.9% 1.7% 2.2% 66 Status of Bad Debts Leading Indicator
• The number of customers with automatic bank debits blocked has decreased in line with the transaction amount. Past due receivables subsequently decrease, and becomes a declining factor for bad debts
■Movements in receivables ■Recent trends
• Customers with automatic bank debits blocked trend as a 2H Apr. – leading indicator of delinquent customers FY2020 May Customers with automatic bank debits blocked Shopping transactions 116% 84% Delinquent customers
Impact 1 month later 1 month later Number of customers with blocked accounts 109% 91%
3 months Impact 3 months later later Amount of past 106% due receivables
Impact on past due receivables 3 months later
67 Future Outlook for Bad Debts
• In light of the decrease in transactions and the increase in arrears, the impact of COVID-19 on bad debt-related expenses is estimated at roughly +2.0 billion at maximum
■Outlook for balance of past due receivables
[Impact on bad debt- related expenses] ±0.0 billion – +2.0 billion Decrease in Increase in arrears transactions
Initial plan After the impact of COVID-19 68 Status of Interest Repayment
• As the amount of debt collection involving attorneys, which is a leading indicator, exceeded that of the previous year, implemented a ¥1.5 billion increase of provisions at year-end ■Trends in the amount of interest repayment and collection by attorney YOY 16.0160 120 (¥bn) (%) Collection by attorney YOY 14.0140 100 12120.0 80 10.0100 Amount of interest repayment 8.080 60
6.060 40 4.040
2.0 20 20
0 0 16.3 17.3 18.3 19.3 20.3 FY2016 FY2017 FY2018 FY2019 FY2020 4.4 billion End of Sep.: 2.9 billion Amount of provision End of Mar.: 1.5 billion
Balance of provision 5.0 billion 4.7 billion 69 Questions and Answers (FinTech)