Fiscal 2021 Financial Results Explanatory Materials

SANYO SHOKAI LTD April 14, 2021 Contents

1. Fiscal 2021 Earnings Report (Consolidated)

2. Fiscal 2021 Review (Non-consolidated)

3. Fiscal 2022 Projection

4. Direction of Future Growth Strategy

5. Corporate Governance

Net sales were ¥37.93bn, almost as projected. Operating loss was ¥8.91bn, ¥410m lower than projections. Net loss was ¥4.98bn, but when excluding the extraordinary losses from provision for additional charges for voluntary retirement and from impairment on shares of subsidiaries, both of which were additionally recorded, net loss is ¥3.5bn, almost as projected on October 6, 2020. Projection Compared Previous for This This Year's to Vs (Units: ¥100m) Year1 Year Results YoY Projection Projection

Net sales 585.7 380.0 379.3 64.8% 99.8% ▲0.6

Gross profit 276.8 166.0 145.1 52.4% 87.4% ▲20.9 SG&A 300.6 251.0 234.2 77.9% 93.3% ▲16.8 expenses Operating -23.7 -85.0 -89.1 - - ▲4.1 income Ordinary -22.8 -96.0 -90.3 - - +5.6 income

Net income -15.9 -35.0 -49.8 - - ▲14.8

Projection for This Year's Previous Year1 This Year Results Vs PY Vs Projection Gross profit 47.3% 43.7% 38.3% ▲9.0pt ▲5.4pt margin

SG&A expense 51.3% 66.1% 61.8% +10.5pt ▲4.3pt ratio

Operating -4.1% -22.4% -23.5% ▲19.4pt ▲1.1pt margin

Ordinary -3.9% -25.3% -23.8% ▲19.9pt +1.5pt income margin

Net income -2.7% -9.2% -13.1% ▲10.4pt ▲3.9pt margin

Extraordinary losses totaling ¥1.48bn, consisting of ¥1.24bn of provisions for additional charges for voluntary retirement and ¥240m of impairment on shares of subsidiaries, were recorded as extraordinary losses that were not expected at the time of announcement on October 6, 2020.

Items that were not expected as of October 6, 2020

Copyright © SANYO SHOKAI LTD. All Rights Reserved. 4 Status of Achievement for Projections Announced on October 6, 2020 Under severe circumstances where the coronavirus pandemic has spread greater than expected, gross profit margin decreased due to actively holding bargain sales to prioritize the securing of net sales and eliminating inventory. As a result, although net sales almost achieved projections, gross profit was well below projections. On the other hand, despite SG&A expenses decreasing more than projections, this could not completely cover the decrease in gross profit, thereby failing slightly to achieve the projected operating income. Due to the recording of additional extraordinary losses, net income failed to achieve projections by that amount Projection for This This Year's Vs (Units: ¥100m) Year Results Projection Discrepancy Factors Net sales 380.0 379.3 ▲0.6 The impact of the coronavirus spread wider and continued longer than expected in 2H as Gross profit 166.0 145.1 ▲20.9 well (third wave of infections, declaration and extension of a state of emergency) SG&A • A state of emergency was declared in 251.0 234.2 ▲ January, the peak of the Autumn/Winter sales expenses 16.8 season, significantly reducing sales in that month Operating • Gross profit margin decreased and was below income -85.0 -89.1 ▲4.1 target due to actively holding bargain sales to secure net sales Ordinary income -96.0 -90.3 +5.6

Net income ▲ Net income excluding additional extraordinary -35.0 -49.8 14.8 loss was down ¥3.5bn • Extraordinary losses of ¥1.48bn from the provisions for additional charges for voluntary retirement/impairment on shares of subsidiaries Copyright © SANYO SHOKAI LTD. All Rights Reserved. 5 Consolidated BS

Total assets decreased ¥9.5bn to ¥52.9bn

Cash and deposits • Cash building through the securitization of real estate/securities, etc. and purchase reductions through working capital management Merchandise and finished goods • Inventory was eliminated by slightly sacrificing gross income margin in order to control purchasing and for a fresh start to the new fiscal year. Tangible fixed assets • Sale of GINZA TIMELESS 8/Hakone recreation center, etc. Investments and other assets • Sale of investment securities through elimination of cross-shareholdings Accounts payable • Reductions in purchases Loans • Agreed to refinancing of syndicated loans with each of the three megabanks Retained earnings • Net loss of ¥4.98bn and dividends of ¥270m, etc.

1. Fiscal 2021 Earnings Report (Consolidated)

2. Fiscal 2021 Review (Non-consolidated)

3. Fiscal 2022 Projection

4. Direction of Future Growth Strategy

5. Corporate Governance

Net sales were unstable throughout the year due to the coronavirus pandemic. Net sales have shown a downward trend compared to projections due to the impacts of the coronavirus being wider and longer than expected in 2H. Gross profit margin remained at a low level due to the ratio of full price stores declining as a result of actively holding bargain sales to maintain sales. Monthly change (Units: %; year-on-year net sales) Net sales Gross profit margin

4/7 5/25 Jul. 7/30 8/7 9/16 Late Nov. onwards 1/7 2/8

state of of emergency state state Liftingof the business shorten hours emergency of State Declaration of of a Declaration emergency of coronavirus the of wave Second hours shorten to restaurants requests Tokyogov’t infections of numberPeak to request lifts Tokyogov’t of emergency state of a Declaration extended

coronavirus spreads coronavirus the of Thirdwave

Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Full fiscal 64% year 56% 71% 1H/2H • For Mar.–May, net sales were 38% YoY due to the voluntary closure of stores • For Sep.–Nov., net sales were 73% YoY due to the impacts of the third wave of • For Jun.–Aug., net sales recovered to 79% YoY the coronavirus. Gross profit margin was lower than projections due to proactive ‒ Although gross profit margin declined due to expanded bargain sales to disposal of Spring/Summer inventory as well as the third wave of the coronavirus reduce Spring/Summer inventory, progress in reducing SG&A expenses directly coinciding with the November sales peak for Autumn/Winter full price exceeded expectations stores. ‒ Inventories were reduced as planned • For Dec.–Feb., the first sales of the new year were a failure due in part to voluntary closures of department stores. Net sales were 68% YoY due to the declaration of a state of emergency in January, the peak Autumn/Winter sales Copyright © SANYO SHOKAI LTD. All Rights Reserved. season 8 Summary: Business Restructuring

Business restructuring progressed more than projected

Reduction in SG&A Inventory reduction Financial reform expenses (non-consolidated) (non-consolidated) (consolidated)

Reduction in SG&A expenses Inventory reduction progressed as CF improvement progressed more than initially projected • Control cash outflow through cuts projected • End of fiscal year product to SG&A expenses as well as • Compared to the target of inventory was ¥9.0bn against the controls on purchases and orders, reducing SG&A expenses by projection of ¥10bn securitization of assets ¥4.0bn over two years by fiscal • A reduction of ¥4.1bn, which is • End of fiscal year cash position 2022 as stated in the revitalization greater than projected, from the improved ¥6.7bn from initial plan, SG&A expenses were beginning of the fiscal year figures to ¥19.6bn reduced by approximately ¥5.5bn in real terms, excluding BS streamlining extraordinary losses, during the • A reduction of ¥9.5 in total assets first fiscal year through securitization of assets • There was an additional reduction • Sale of strategic shareholdings/ of ¥1.7bn from the projection GT8 and impairment loss on announced on October 6 shares of subsidiaries Equity ratio 63.2% Debt-to-equity ratio (DER) 0.18

Both Sanyo and external EC sales rose following an increase in consumption by people staying at home, concentration of products on EC, strengthening of sales promotion measures, and other factors

Compared to the target of reducing SG&A expenses by ¥4.0bn over two years by fiscal 2022 as stated in the revitalization plan, SG&A expenses were reduced by approximately ¥5.5bn in real terms, excluding extraordinary losses. There was an additional reduction of ¥1.7bn from the projection announced on October 6

Sales expenses fell ¥3.69bn (¥2.54bn in real terms when ¥1.15bn in extraordinary losses are excluded) • Reduction in Fashion Advisor expenses accompanying the closing of stores • Reduction in real estate rents • Reduction in sale commissions associated with canceling of events

Promotional expenses ▲¥1.17bn • Reduction in advertising and sales promotion expenses after 2Q

Equipment expenses ▲¥230m

Employee personnel expenses ▲¥890m • Reduction of overtime work • Bonuses kept down

Administrative expenses ▲¥680m • Reduction in distribution expenses accompanying decline in sales • Reduction in travel expenses accompanying store closings and suspension of business trips

Sales expenses: FA expenses, rent expenses for real estate, sales commissions, outsourcing fees (sales-related), etc. Equipment expenses: Sales floor construction expenses, lease fees, repair costs, etc. Employee personnel expenses: Salaries, statutory welfare benefits, etc. Administrative expenses: Depreciation (management and system-related), outsourcing fees (management and system-related), distribution expenses, water and utility expenses, travel expenses, miscellaneous expenses, etc. Copyright © SANYO SHOKAI LTD. All Rights Reserved. 11 Fiscal 2021 Overall Summary

Overall summary Under severe conditions where the impacts of the coronavirus being wider and longer than expected in 2H and after, net sales were achieved almost as projected. However, gross profit margin decreased significantly due in part to the holding of numerous bargain sales to secure net sales and consume inventory, leading to a major decline in gross profit. This was covered through further reducing SG&A expenses, and although achievement of operating income failed slightly compared to projections, net income successfully achieved projections, excluding the additional recording of extraordinary losses.

On the other hand, various business restructuring measures were steadily implemented and thus progressed according to or exceeding projections. Accordingly, we were able to strengthen our foundation in order to achieve profitability this fiscal year.

1. Fiscal 2021 Earnings Report (Consolidated)

2. Fiscal 2021 Review (Non-consolidated)

3. Fiscal 2022 Projection

4. Direction of Future Growth Strategy

5. Corporate Governance

Basic policy

Complete business restructuring in line with the revitalization plan

Recover basic profitability and achieve a surplus

Achieving profitability with net sales of ¥44.0bn, operating income of ¥100m, and positive net income

Jan–Dec 2019 Fiscal 2021 Fiscal 2022

Results Results Projection (Vs 2019/Difference) YoY/Difference Financial Financial Figures (Units: (Units: ¥ Net sales 585.7 379.3 440.0 75.1% 116.0% Gross profit 276.8 145.1 215.0 77.7% 148.1% 10 SG&A expenses m) 0 300.6 234.2 214.0 71.2% 91.3% Operating income -23.7 -89.1 1.0 - - Ordinary income -22.8 -90.3 0.5 - - Net income -15.9 -49.8 0 - -

Major Major Financial Gross profit margin 47.3% 38.3% 48.9% +1.6pt +10.6pt Indicators SG&A expense ratio 51.3% 61.8% 48.6% ▲2.7pt ▲13.2pt Operating margin -4.1% -23.5% 0.2% +4.3pt +23.7pt Ordinary income margin -3.9% -23.8% 0.1% +4.0pt +23.9pt Net income margin -2.7% -13.1% 0% +2.7pt +13.1pt

The effect of each measure for achieving projections is shown as a chart

(Units: ¥100m)

1.0

-23.7 31.7

-89.1 46.7

97.6

23.2 11.5 11.5

54.9 34.2

1 2019/ Decline in Decline in Reductions in Recorded Fiscal 2021 Recorded Increase in Improved gross Reductions in Fiscal 2022 1-12 gross profit gross profit SG&A extraordinary loss Operating extraordinary1 gross profit profit margin SG&A Operating from decreased margin expenses for SG&A expenses income loss for PY from increased expenses income Jan.–Dec. 2019 1 operating income sales sales

1. Out of the extraordinary losses due to temporary closings due to the coronavirus pandemic in the previous fiscal year, amounts which are SG&A expenses in nature

Net sales is projected to be 75% compared to fiscal 2019, based on the assumption that the impact of the coronavirus pandemic will continue until at least June Revised Scenario 1 of the implementation goal announced on October 6, 2020

Net Sales (Units: ¥100m, 12-month comparison)

Jan.–Dec. 2019 Fiscal 2021 Fiscal 2022 results results projection Vs 2019 Comments 585.7 Total net sales 75%

Promote the organizing of sales fronts Department and achieving high efficiency stores 68% Ratio of department store net sales 440.0 declined from 63% to 57% 367.7 379.3 Directly Impacted by selling of GINZA 59% TIMELESS 8/withdrawing from managed stores unprofitable stores 245.3 EC ratio rose from 12% to 17%. EC & mail Gross profit improved ¥900m compared 204.1 110% to Fiscal 2021 by strengthening full order price sales 51.1 Expand by strengthening sales channel. 36.6 Opened 11 new stores by Fiscal 2021 23.4 Outlets 126% Plan to open 5 new stores in Fiscal 2022 68.9 81.7 76.1 39.7 Other1 65% 31.6 50.1 41.6 16.7 16.4 22.1 5.0 27.0 Subsidiaries 30% RUBY GROUPe net sales declined

Aim to improve gross margin 1.6pt compared to 2019 through reduction in procurement cost ratio, fundamental improvements to sell-through rate at manufacturers recommended full price and total sell-through rate, inventory control, etc.

Quantitative projection: Improve gross margin 1.6pt compared to 2019

Qualitative policy Specific measures • Gross margin improved approximately 3pt due to a 2.0pt improvement of procurement cost margin compared to Reductions in procurement 2019 cost margin • Outlet gross margin improved due to an introduction of outlet-only products

Fundamental improvements • Improvements to sell-through through controls on purchases to sell-through rate at ‒ Fiscal 2020 ¥28.5bn; Fiscal 2021 ¥16.9bn; Fiscal 2022 ¥15.6bn manufacturers recommended • Aim to improve sell-through rate from 44% to 53% by reducing product numbers and concentrating merchandising full price and total sell-through /strengthening full price sales/controlling bargain sales, etc. rate

• End of fiscal 2021 inventory (non-consolidated) decreased ¥4.1bn from the beginning of fiscal 2021 to ¥9.0bn Inventory control • End of fiscal 2022 inventory (non-consolidated) is projected to be ¥6.0bn through improvement in inventory turnover ratio by reducing merchandising cycles, developing a QR system, and other measures

• For unprofitable businesses, thoroughly reduce costs through restructuring, such as aggregating stores, fundamentally reducing SG&A expenses, etc. Decide whether or not to continue these businesses during fiscal 2022 Low-cost management of ‒ LOVELESS: Number of stores from 15 to 8; SG&A expenses from ¥2.0bn to ¥1.1bn; operating loss from unprofitable businesses ▲¥1.1bn to ▲300m (compared to 2019) ‒ CAST: Number of stores from 29 to 13; SG&A expenses from ¥540m to ¥340m; operating loss from ▲¥410m to break even (compared to 2019)

In fiscal 2021, a ¥5.5bn reduction, excluding extraordinary losses of ¥1.15bn, was achieved in real terms compared to the goal of a reduction of ¥4.0bn over two years. Aim for a further reduction of ¥3.2bn in fiscal 2022

Past results vs fiscal 2022 projections (Units: ¥100m, 12-month comparison) Jan.–Dec. 2019 Fiscal 2021 Fiscal 2022 results results projection Vs 2019 Measures 300.6 SG&A expenses ▲86.6

Withdrew from unprofitable 245.7 stores in fiscal 2021. 11.51 Sales expenses ▲33.3 143.3 Optimization of FA staff, 214.0 reduction in real estate rents

Promotional ▲ Make promotions more efficient 106.3 expenses 14.7 110.0 25.2 Equipment ▲ Carefully assess investments 2.1 such as sales floor construction 10.5 13.6 expenses 8.2 Employee 55.6 10.5 Optimization of staff through 46.7 8.4 personnel ▲22.8 voluntary retirement, streamline 32.8 expenses organization, reduce overtime Administrative 55.4 ▲5.1 Make logistics operations, etc. 48.6 50.3 expenses more efficient 10.6 10.8 Other ▲ RUBY GROUPe SG&A 2.0 8.6 expenses declined 1. Extraordinary losses Sales expenses: FA expenses, rent expenses for real estate, sales commissions, outsourcing fees (sales-related), etc. Equipment expenses: Sales floor construction expenses, lease fees, repair costs, etc. Employee personnel Copyrightexpenses: Salaries, © SANYO statutory SHOKAI welfare LTD.benefits, All etc. Rights Reserved. 19 Administrative expenses: Depreciation (management and system-related), outsourcing fees (management and system-related), distribution expenses, water and utility expenses, travel expenses, miscellaneous expenses, etc. Channel Strategy

Continue to promote channel controls centered on full price stores. For directly managed stores, plan to open directly managed stores/outlet stores of core brands under the policy of strengthening and expansion. Improve EC gross margin/gross profit by strengthening full price sales

Implement organizing of sales fronts in fiscal 2021 Department stores • Completed withdrawal from 160 shops by fiscal 2021 compared to a Policy of strengthening withdrawal plan of approx. 140 unprofitable shops selection and enhancing Pursue improvement of sales per square foot for remaining shops efficiency

Fiscal 2021: Focus on profitability of stores and open new stores • Withdrew from 18 stores compared to the withdrawal plan of approx. 10 unprofitable stores • New store openings: Paul Stuart Aoyama, BLUE/BLACK LABEL Directly managed stores CRESTBRIDGE Harajuku, LOVELESS NEWoMan Yokohama Policy of strengthening Fiscal 2022: Actively open directly managed stores/outlet stores of and expansion core brands • MACKINTOSH LONDON Flagship Store, MACKINTOSH PHILOSOPHY GREY LABEL, SANYO ESSENTIALS, opened four stores at PREMIUM OUTLETS

Fiscal 2021 showed stable growth with net sales at 116% YoY EC • Sales composition ratio 23% Policy of strengthening Thoroughly strengthen full price sales in fiscal 2022 and expanding full • Complete coordination between full price physical stores and EC sites price sales for brands • Clearly separate full price stores from outlet stores for SANYO iStore

Maintain working capital management and cash flow management

For cash inflow fluctuations due to net sales trends, maintain a Working balance by controlling cash outflow capital • Purchase/inventory control management • Thorough implementation of the above management

Consider further securitization of assets as necessary Cash flow management

1. Fiscal 2021 Earnings Report (Consolidated)

2. Fiscal 2021 Review (Non-consolidated)

3. Fiscal 2022 Projection

4. Direction of Future Growth Strategy

5. Corporate Governance

Start formulating growth strategy during this fiscal year, the final fiscal year of the revitalization plan. The basic guideline is ¥52bn in net sales and 10% operating margin in fiscal 2025 Net sales ¥52bn Gross profit margin 55% SG&A expense ratio 45% Fiscal 2025 goal Operating profit margin 10% Dividend payout ratio 20-50%

Improve KPIs by continuing the structural reform measures implemented in the revitalization plan (organic growth)

• Consider medium- to long-term value enhancement measures based on “fan base” • Rebuild branding - incorporate into specific plans Redefine brand value ‒ Obtained Paul Stuart domestic trademark rights and will promote unique Growth business strategies strategies • Strengthen CRM base, review data management Strengthen digital marketing currently • Promote OMO, transition to customer-centered marketing under • Renew EC platform in order to achieve multibrand strategy Rebuild EC platform • Strengthen branding + establish a system of mutual support with physical stores consideration Strengthen opening of directly • Promote opening of directly managed stores of core brands, support company- wide cross-functional management managed stores • Flexibly decide opening and withdrawal of stores focusing on its profitability Copyright © SANYO SHOKAI LTD. All Rights Reserved. 23 Contents

1. Fiscal 2021 Earnings Report (Consolidated)

2. Fiscal 2021 Review (Non-consolidated)

3. Fiscal 2022 Projection

4. Direction of Future Growth Strategy

5. Corporate Governance

Strengthened independence and objectivity of the Board of Directors with outside directors consisting of two- thirds of the members, including the chairperson Further increase the proportion of performance-linked compensation in compensation for officers in order to strengthen management from the same perspective as shareholders

Our basic concept on corporate governance • Established Company Credo, Corporate Principles, CSR Basic Policy, and Corporate Code of Conduct, etc. as the behavioral rules for all employees • Achieve the returning of profits to shareholders as well as social responsibilities through enhancing business results and corporate value based on the above ‒ To this end, strive to enhance management efficiency, swiftness, and transparency Current composition of the Board of Directors • Utilized the knowledge and advice of outside Directors/Corporate Auditors, to establish the independence and objectivity of the functions of the Board of Directors ‒ Ratio of outside Directors 66.7% ‒ Chairperson of the Board of Directors is an outside Director ‒ Promote diversity through appointment of female officers, etc. • Established a voluntary Nomination and Remuneration Committee by 2018. The chairperson is an outside Director

Change of compensation structure of officers: increase the proportion of performance-linked compensation • The proportion of performance-linked officer compensation for Representative Directors is planned to expand from 25% to 30%. Raise the ratio of share-based compensation plan with transfer restrictions (RS) from 5% to 15%

Fiscal 2020 70% 30% 5% Basic compensation Fixed Reduction in compensation basic compensation 1 Fiscal 2021 75% 20% 5% Bonus Variable RS compensation Fiscal 2022 (plan) 70% 15% 15% 1. Not paid Copyright © SANYO SHOKAI LTD. All Rights Reserved. 25 Disclaimer

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26 Inquiries regarding this material General Manager Corporate Management Headquarters Hiroaki Terada TEL: 03-6380-5421