Results Presentation for Fiscal Year Ended February 28, 2018
J. FRONT RETAILING
10th anniversary
April 11, 2018
J. Front Retailing Co., Ltd. YAMAMOTO Ryoichi President and Representative Director
Create and Bring to Life “New Happiness.” Today’s Agenda
I. FY2017 Results (IFRS)
II. FY2018 Forecast (IFRS)
III. FY2018 Environment Recognition and Specific Measures
1 FY2017 Results (IFRS)
2 FY2017 Consolidated Results (IFRS) Business profit above plan thanks to strong department store sales, growth of Real Estate Business and cost reduction Operating profit increased by double digits partly due to addition of gain on sales of shares of consolidated subsidiaries and gain on sales of real estate With focus on shareholder return, increased annual ordinary dividend ¥5 YoY and added commemorative dividend of ¥2 (Millions of yen, %) YoY Vs Oct forecast Fiscal year ended Results February 28, 2018 Change % change Change % change Sales revenue 469,915 17,410 3.8 (2,085) (0.4)
Gross profit 212,935 368 0.2 35 0.0
SGA 166,688 (980) (0.6) (412) (0.2)
Other operating revenue 8,967 4,883 119.6 1,967 28.1
Other operating expenses 5,668 (1,587) (21.9) 1,868 49.2
Operating profit 49,546 7,819 18.7 546 1.1 Profit attributable to owners of parent 28,486 1,434 5.3 (14) (0.0) Gross sales 1,138,981 4,639 0.4 3,019 (0.3)
Business profit 46,842 1,944 4.3 342 0.7
ROE (%) 7.5 ((R率D差) ) (0.1) - ((R率D差) ) 0.0 -
Dividend per share (Yen)* ((A年n間nu)al) 35 7 - - - 3 *Commemorative dividend for the 10th anniversary of the founding of J. Front Retailing is included. FY2017 Segment Information (IFRS) Department Store Business: Renovation and stronger promotion boosted spending by inbound tourists and the affluent Parco Business: Affected by temporary closing of Shibuya Parco until 1H, sluggish sales of rural stores Real Estate Business: Revenue and profit were up thanks to opening of Ginza Six and Ueno Frontier Tower, etc. Credit and Finance Business: Revenue was up but profit edged down partly due to cost of strengthening security Other: Revenue was down, partly affected by business transfer and sales of subsidiaries, but profit was up due to improvement of profitability. (Millions of yen, %)
Sales revenue Operating profit Business profit Fiscal year Vs Vs Vs ended YoY YoY Oct forecast YoY Oct forecast Oct forecast February 28, 2018 Results % Results % Results % Change Change change Change Change change Change change Change
Department Store 274,308 6,075 2.3 1,408 26,659 4,435 20.0 609 26,453 2,203 9.1 633
Parco 91,621 (2,159) (2.3) (2,379) 11,752 (1,269) (9.7) 152 10,284 (2,513) (19.6) (114)
Real Estate 13,427 8,423 168.3 527 4,131 3,7831,085.4 2,131 3,251 2,654 443.9 251
Credit and Finance 10,176 329 3.3 (104) 2,742 (114) (4.0) (128) 2,803 (41) (1.4) (77)
Other 117,645 3,261 2.8 (2,905) 4,744 1,763 59.1 (756) 4,490 291 6.9 (586)
Total 469,915 17,410 3.8 (2,085) 49,546 7,819 18.7 546 46,842 1,944 4.3 342 4 FY2017 Segment Information (IFRS)
FY2017 analysis of changes in consolidated operating profit by segment
Credit (Millions of yen) and Real Other Finance Estate Credit Department Adjustment Adjustment Real and Other Parco Store Estate Department Finance Store Parco
Up ¥7,819 mn (18.7%) YoY ¥546 mn (1.1%) above Oct forecast
LY FY2017 Oct results results forecast 5 FY2017 Daimaru Matsuzakaya Department Stores
Sales floor renovation of flagship stores with strong sales to inbound tourists, acceptance of mobile payments and stronger promotion proved successful Annual tax-free sales grew 1.4 times to ¥47.9 bn from those amid shopping spree called “bakugai” in FY2015 Average spend per customer up 8.1% YoY, number of customers up 50.6%, and sales of “consumables” doubled from previous year
Number of customers Sales
6 *Gross sales basis Year / Month FY2017 Daimaru Matsuzakaya Department Stores
Purchase by Japanese affluent gaisho (out-of-store sales) customers was strong due to stable share price level Credit sales of 9 flagship stores increased 1.5% YoY in full year and 1.7% in 2H alone Number of new gaisho card accounts steadily increased to 13,250 in current period and customer base was expanded
“Gold Card” (Millions of yen) for gaisho customers
(FY) 7 FY2017 Daimaru Matsuzakaya Department Stores
Sales continued to increase for 14 months in Shinsaibashi store, for 18 months in Tokyo store, for 15 months in Sapporo store and for 12 months in all stores until February Shinsaibashi: SNS promotion for inbound tourists, expansion of mobile payments and cosmetics offering on two floors proved successful Tokyo: Jumped credit sales by strengthening sales to the affluent and steadily attracted neighbors and domestic tourists Sapporo: Met demands of the affluent and inbound tourists whose spending is rapidly increasing by expanding timepiece floor 1.5 times
Daimaru Matsuzakaya
National department stores (10 cities)
National department stores 8 Year / Month *Figures for “national department stores” and “national department stores (10 cities)” are those released by Japan Department Stores Association. FY2017 Daimaru Matsuzakaya Department Stores
Sales of luxury and jewelry, which sell well to inbound tourists and the affluent, grew strongly all year Cosmetics captured demand of domestic customers as well as inbound tourists in each store Sales of challenging women’s volume zone clothing rose in 3Q due to strong sales of winter items but sales of spring items were sluggish in 4Q due to prolonged cold weather
< Daimaru Matsuzakaya Department Stores sales by merchandise category (YoY % change) >
(%)
Cosmetics
Luxury
Jewelry
Total LFL sales
Year / Month 9 *Figures for cosmetics are those released based on department store commodity classification. Figures for luxury and jewelry are total of nine flagship stores managed internally by the Company.. FY2017 Daimaru Matsuzakaya Department Stores (IFRS)
Total LFL gross sales increased for 12 months in a row driven by spending by inbound tourists and the affluent Increased gross profit offset increased advertising and other costs associated with opening of Ginza Six and Ueno Frontier Tower Operating profit, business profit and profit increased by double digits, above October forecast
(Millions of yen, %) Fiscal year ended YoY Vs October forecast Results February 28, 2018 Change % change Change % change Sales revenue 257,451 15,269 6.3 1,951 0.8
Gross profit 148,481 6,112 4.3 781 0.5
SGA 121,917 1,674 1.4 (383) (0.3)
Other revenue 3,940 3,758 - 1,840 87.6
Other expenses 2,207 (34) (1.5) 307 16.2
Operating profit 28,297 8,231 41.0 2,697 10.5
Profit 19,248 4,319 28.9 1,548 8.7
Gross sales 673,154 26,164 4.0 3,854 0.6
Business profit 27,158 5,033 22.7 958 3.7 10 FY2017 Daimaru Matsuzakaya Department Stores (IFRS)
FY2017 Daimaru Matsuzakaya Department Stores analysis of operating profit by factor
Increase Increase Decrease in Increase in other in other (Millions of yen) profit margin in labor expenses expenses Supplies cost Increase in cost Labor cost Increase in gross profit (mainly operational reduction reduction due to increase in Increase in gross profit bonus) due to increase in cost, repair sales revenue sales revenue cost, etc. Increase in other Increase revenue including Increase Decrease in in ad cost Increase in other gain on sales of in ad cost profit margin revenue including real estate gain on sales of real estate
Up ¥8,231 mn (41.0%) YoY ¥2,697 mn (10.5%) above Oct forecast
LY LY2017 Oct results results forecast 11 FY2017 Consolidated Results (B/S, CF) (IFRS)
Equity attributable to owners of parent increased ¥26.9 bn to ¥395.5 bn, equity ratio was 38.7% Interest-bearing debt decreased ¥21.7 bn to ¥184.2 bn, D/E ratio was 0.47 OCF increased ¥23.3 bn YoY partly due to profit increase and gain on sales of reserve floor area for redevelopment of Shibuya ICF: Decreased outflow ¥8.9 bn due to revenue from asset sales while acquiring assets for redevelopment FCF: Reduced interest-bearing debt by redemption of commercial paper, etc. while issuing bonds
Fiscal year ended YoY Fiscal year ended YoY Results February 28, 2018 change February 28, 2018 Results change
Consolidated 1,022,348 17,279 Operating cash flows 57,079 23,315 total assets (OCF) Investing cash flows Interest-bearing debt 184,202 (21,750) (ICF) (19,030) 8,922
Equity attributable to owners of parent 395,519 26,948 Free cash flows 38,049 32,237 Return on equity Financial cash flows attributable to owners 38.7 (率(R差D) )2.0 (FCF) (31,048) (28,951) of parent (%) (ROE) 12 FY2018 Forecast (IFRS)
13 FY2018 Consolidated Financial Forecast (IFRS)
Sales revenue will increase mainly in strong Department Store Business and Real Estate Business “Business profit” will increase but operating profit will react to gain on sales of assets and gain on sales of businesses recorded in previous year Planning ¥2 increase in annual ordinary dividend per share, 8th consecutive ordinary
dividend increase (Millions of yen, %) Fiscal year ending 1H YoY Full year YoY February 28, 2019 forecast Change % change forecast Change % change Sales revenue 234,000 (510) (0.2) 485,000 15,085 3.2
Gross profit 106,300 1,312 1.2 217,900 4,965 2.3
SGA 82,000 (210) (0.3) 168,400 1,712 1.0
Other operating revenue 1,100 (4,586) (80.7) 2,300 (6,667) (74.4) Other operating expenses 1,400 (384) (21.6) 3,300 (2,368) (41.8)
Operating profit 24,000 (2,680) (10.0) 48,500 (1,046) (2.1) Profit attributable to owners of parent 15,300 (1,015) (6.2) 30,500 2,014 7.1 Gross sales 557,000 (1,304) (0.2) 1,165,000 26,019 2.3 Business profit 24,300 1,522 6.7 49,500 2,658 5.7 ROE (%) - - - 7.5 ((率RD差)) 0.0 - Dividend per share (Yen)* 17 2 35 2 14 *YoY changes and YoY % changes in dividend per share are comparisons with ordinary dividend excluding commemorative dividend of ¥2. FY2018 Segment Information Forecast (IFRS) Department Store Business: “Business profit” will decrease due to increased system cost, operating profit will decrease in reaction to gain on sales of assets Parco Business: Operating profit will decrease in reaction to reversal of impairment loss in previous fiscal year but “business profit” will increase Real Estate Business: “Business profit” will increase due to full operation of Ueno Frontier Tower but operating profit will decrease in reaction to gain on sales of real estate recorded in previous year Credit and Finance Business: Profit will decrease due to increased security cost Other: Profit will increase significantly thanks to design and construction business, etc. (Millions of yen, %)
Business profit Operating profit Fiscal year ending 1H YoY Full year YoY 1H YoY Full year YoY February 28, 2019 forecast % change forecast % change forecast % change forecast % change
Department Store 11,770 0.7 25,880 (2.2) 11,260 (12.7) 24,900 (6.6)
Parco 5,700 (0.5) 10,750 4.5 6,400 (4.2) 11,750 (0.0)
Real Estate 2,700 47.8 4,100 26.1 2,300 38.3 3,300 (20.1)
Credit and Finance 1,164 (11.6) 2,760 (1.5) 1,158 (11.4) 2,750 0.3
Other 2,910 28.2 5,830 29.8 2,900 7.3 5,800 22.2
Total 24,300 6.7 49,500 5.7 24,000 (10.0) 48,500 (2.1) 15 FY2018 Consolidated Financial Forecast (B/S, CF) (IFRS)
Equity attributable to owners of parent will increase ¥21.4 bn to ¥417 bn, equity ratio will be 39.4%
Interest-bearing debt will increase ¥8.7 bn to ¥193 bn due to new funding OCF will decrease ¥19 bn to ¥38 bn partly in reaction to gain on sales of reserve floor area for redevelopment of Shibuya in previous year
ICF: Outflow will increase ¥25.9 bn partly due to increased capital investment FCF: Inflow will increase ¥28.5 bn because deficiency in free cash flows will be covered by new funding
Fiscal year ending YoY Fiscal year ending YoY Forecast Forecast February 28, 2019 change February 28, 2019 change
Consolidated Operating cash flows total assets 1,059,000 36,652 (OCF) 38,000 (19,079)
Investing cash flows Interest-bearing debt 193,000 8,798 (ICF) (45,000) (25,970) Equity attributable to owners of parent 417,000 21,481 Free cash flows (7,000) (45,049) Return on equity Financial cash flows attributable to owners 39.4 (率差()RD) 0.7 (FCF) (2,500) 28,548 of parent (%) (ROE) 16 百貨店 事業 百貨店 FY2018 Envir事on業ment Recognition and Specific Measures パルコ 事業
17 Review of and Issues in 1st Year of Medium-term Business Plan
“Transformation of business portfolio” made steady progress due to healthy growth of Real Estate Business
(Millions of yen)
Credit and Finance Other 18% Credit and Finance Other Real Estate 12%
Real Estate Parco Parco 26% 31.2%
Department Department Store Store 53.3% 44%
(FY) 18 (Target) Review of and Issues in 1st Year of Medium-term Business Plan
Major achievements
Opened big projects “Ginza Six” and “Ueno Frontier Tower”
“Real Estate Business” grew steadily
Good start as first step of “transformation of business portfolio”
Urgent issues Response to ICT and Credit and Finance Business lacks in speed
Insufficient tangible results
Recognizing need to “shift gears” 19 Recognition of Business Environment
Business environment is changing at furious speed
Gradually Advent of era Rapid progress accelerating of living 100 of IoT era population years decline
展 展 展
・・・・・・
Currently facing “big turning point” 20 Recognition of Business Environment
Increasing “uncertainty” for businesses
(+) Increasing business risk (-)
Positive risk Negative risk (Opportunity) (Threat)
Gap between companies widens
depending on risk management 21 Identification of 138 Risks
Occurrence of wars/conflicts Loss of funds due to excess investment Inadequate first response to disaster Aggravated terrorism issues Impairment due to gap between plan and result Inadequate safety management of buildings and equipment Occurrence of economic crisis / financial crisis Revision of real estate-related laws / tax systems Outbreak of plague and infection Occurrence of trade issues Changes in assessed land values or building construction costs Occurrence of traffic accidents Surge of emerging countries Entry of competing companies / changes in surrounding environment Virus infection / information leakage due to external cyber attacks Rise in consumption tax Inadequate safety management of buildings and equipment Internal information leakage Promotion of tourism-oriented country policy Soil pollution / asbestos Late report of / inadequate response to incidents Reduction of corporate tax and measures for encouraging Changes in rent Improper posting / information leakage by employees (SNS) investment Bankruptcy of landlord Loss of credibility from customer’s tweet (SNS) Promotion of business using National Strategic Special Zones Decline in rent / increase in vacancies Improper posting from the Company’s official account (SNS) Promotion of outsourcing of operation of public facilities to Non-payment of rent and bankruptcy of tenants Product defect and food poisoning private sector Success/failure of exit strategy (purchaser) Incorrect/false labeling of quality / expiration date Promotion of sharing economy Changes in employee age structure Leakage of personal/customer information Economic trends Growing labor shortage and fiercer recruitment competition Improper/unclear sales recording / charging Development of financial markets Success/failure of acquiring specialists for IT, etc. Customer’s bankruptcy/insolvency Changes in interest rate / share price / exchange rate Success/failure of working style reform Accidents and customer troubles due to inadequate/incomplete Polarized income Success/failure of response to diversity operation rules Expansion of the affluent Success/failure of operation of retirement benefit / pension system Dependence on particular customers (customer segments) Decrease in disposable income Success/failure of succession plan Improper treatment of business partners Increasingly diversified consumption pattern Increase/decrease of audit accuracy Infringement of intellectual property rights Consumption shift from goods to services/experiences Success/failure of reform of Board of Directors Unfair/illegal transactions Rise in persistence and health consciousness Success/failure of provision of remuneration and incentives Late/short delivery of goods Spread of cheap goods/services Success/failure of risk management Bankruptcy of business partners Low birthrate / longevity (declining population) Success/failure of operation of internal control system over financial Inadequate management of contractors Return to urban areas (population concentration) and reporting Cargo increase / growing labor shortage at logistics companies depopulation in rural areas Success/failure of strengthening of the Group governance Delivery time restrictions / redelivery reduction Growing population in America / Southeast Asia Success/failure of fair disclosure / ESG information disclosure Late delivery / misdelivery / loss or damage of goods Increase in single-person households (aged/young people) Success/failure of sustainability policy Product liability Increase in double-income / single-parent households Success/failure of social contribution activities Inadequate quality control (PB goods, buildings, etc.) Escalation of and increasing interest in environmental issues / Success/failure of waste reduction and promotion of recycling Less precisely planned order poverty issues Leakage of hazardous materials (CFC, PCB, etc.) Delay/failure of development Growing shortage of energy resources Success/failure of global warming prevention activities Rise in production costs Evolution of AI (artificial intelligence) / robots Misstatements in financial statements Late response to technical innovation Expansion of EC business Impairment of assets (including goodwill) Late response to equal pay / equal work Evolution of payment/order-related technologies Success/failure of business revitalization / withdrawal based on Lack/failure of human resource development plan Expansion of use of big data revitalization/withdrawal criteria Fraud / illegal act of board members / employees Fiercer competition in attracting inbound tourists Application of new accounting standards (lease standards) Inadequate response to human rights issues Fiercer competition from outside the industry Success/failure of response to tax system revision Inadequate health management / mental health management Fiercer competition in customer retention Success/failure of timely disclosure Improper contracting / outsourcing / worker dispatching Fiercer competition in maximizing user experience Success/failure of management of cash and deposits / interest- Inadequate staffing Success/failure of analysis/rebuilding of business portfolio bearing debt Legal violation Success/failure of development and progress management of Success/failure of funding Transactions with antisocial forces mid- to long-term plan Rating changes Inadequate regulations/rules Success/failure of management of companies acquired through Success/failure of strategic investment based on investment criteria Lack of notification/license M&A Success/failure of examination of business portfolio and optimal Leakage of confidential information / insider information Success/failure of penetration of mission statement / vision capital structure Occurrence of litigation/lawsuit Success/failure of brand strategy Exchange rate fluctuations Lack of consciousness of prevention of incidents/accidents and Success/failure of hostile takeover defense measures Inadequate business continuity plan for disaster recovery compliance Success/failure of innovation Disaster-stricken store facilities / business partners Opportunity loss due to prolonged examination period Transportation infrastructure suspended by disaster Pressure of unreasonable expectations from inside/outside the company 22 Delay in decision-making due to lack of adherence to withdrawal criteria Six Priority Risks for FY2018
Identified 15 business risk items of the Company and defined 6 priority items for current fiscal year (highlighted in bold letters)
1) Risks associated with rising consumption tax, post-Olympic recession 2) Risks associated with changes in customers, particularly, low birthrate and longevity 3) Risks associated with maturing of existing businesses 4) Risks associated with human resources / HR structure 5) Risks associated with competition from new entrants 6) Risks associated with consumption shift from products to services/experiences 7) Risks associated with advanced technologies 8) Risks associated with return to urban areas and shrinkage of rural/suburban areas 9) Risks associated with polarized income 10) Risks associated with expansion of foreigners 11) Risks associated with increasing importance of CSR 12) Risks associated with progress of sharing economy 13) Risks associated with conversion of business partners 14) Risks associated with misconduct 15) Risks associated with disasters, etc.
Promoting initiatives to address growth strategy, finance strategy and ESG issues toward transformation of business portfolio 23 Growth Strategy
I. Multi Service Retailer Strategy
II. Urban Dominant Strategy
III. ICT Strategy toward Era of IoT
24 Growth Strategy (1) - Multi Service Retailer Strategy
Strength of the Group Holding good customer assets through several retail brands
Now Contact with customers mainly in “retail” such as real stores, only a small part of customer’s life
Future Need to create “systems” to strengthen 25 lifelong engagement with customers Growth Strategy (1) - Multi Service Retailer Strategy
~ “Era of living 100 years” ~ Providing new products and services to relieve customers’ “frustrations” and “concerns” on various occasions and milestones for their entire lives beginning from birth
School Getting Child Second Birth Infancy Marriage age job raising life
Accumulation of stereotyped Accumulation of information non-stereotyped information Use of ICT
New customer base to strengthen lifelong engagement with customers “Lifetime Service Hub”
26 Creating value further beyond customers’ expectations Growth Strategy (1) - Multi Service Retailer Strategy
Accelerating initiatives of 3 priority associated businesses Design and construction business Credit and Finance Business Staffing business J. Front Design & JFR Card Dimples’ Construction
Reshuffled top management of each of 3 companies + Doubling as Executive Officer of J. Front Retailing
Strengthening business execution system to generate tangible results early
Appointed top management of JFR Card from outside the Group
Growth of existing card business+Clarification of direction of finance area
Developing specific business model through various trials 27 Growth Strategy (2) - Urban Dominant Strategy
Opening of “Ginza Six” and “Ueno Frontier Tower” in 2017 drew new crowds to local areas Accelerating preparation to open “main building of Daimaru Shinsaibashi store” and “new Shibuya Parco” in fall 2019 Expanding “real estate GreInNtaZlA a SreIXa” mainly in urban areas e上.g野. aフroロuンndテ flィaアgsタhワip ーstores
Opened Opened Apr 2017 Nov 2017
心斎橋店本館建替え 渋谷パルコ建替え
Fall 2019 Fall 2019 (planned) (planned)
28
*The photo is for illustrative purpose only. Growth Strategy (2) - Urban Dominant Strategy
Daimaru Shinsaibashi store rebuilding of main building / transformation of business model of north wing
Planning to open in fall 2019 as model most representing innovation of “new department store model” Transforming adjacent north wing to business model with real estate rental as its main business after opening main building Connecting main building to north wing in 2021 and create more than 80,000 m2 hybrid commercial facility
・
29 *The photo is for illustrative purpose only. Growth Strategy (2) - Urban Dominant Strategy
Converting business model of north wing of Shinsaibashi store into “real estate rental” after completing new main building Core tenant “Parco” will occupy B2F to 7F. Real Estate Division will operate higher floors Creating greater synergy in the Group through joint development of Daimaru Matsuzakaya Department Stores and Parco
North wing
14F (Theater / event hall) Nagahori -dori 13F
12F New main building lucian pellat-finet 11F Real Estate Division 10F 10F Parking Zero Gate 9F 9F Shinsaibashi 8F 8F 7F 7F 6F 6F 5F 5F (North) LUMIERE Department store PARIS 4F 4F JOURNAL M (Daimaru Shinsaibashi store) S STANDARD h 3F 3F i d i
Parco n o s 2F 2F White Avenue s a u i j
Daimaru b
1F 1F i
*There are some exceptions. Shinsaibashi a Commercial B1 B1 s
Store h complex i B2 B2 Parking (Main) s
BAG'n'NOUN u j i
CHANEL Connecting to north wing after (South) Shinsaibashi 161 Daimaru air OSAKA interior rebuilding new main building building Sanrio gallery Musee Air agnes b. (planned for spring 2021) acca ROSE BUD ・ Nike Osaka
Hybrid commercial complex Deuxieme Classe 30 with more than 80,000㎡ floor area Solution to Structural Issues of Existing Department Stores
Correcting composition of sales floor area occupied by excessive women’s clothing
(Reducing women’s clothing area 30% during current Medium-term Business Plan)
New categories Women’s New areas of our own curation clothing Meeting service/experience consumption demands
Introducing brands that Developing/operating new meet service/experience Expanding real estate areas of our own curation consumption demands rental area
Planning to reduce 10% mainly in Umeda, Sapporo and Nagoya stores in FY2018 31 (compared to FY2016) Growth Strategy (2) - Urban Dominant Strategy
Rebuilding of Shibuya Parco Creating next-generation commercial space by rebuilding “Shibuya Parco,” origin of Parco’s uniqueness Increasing opportunities to connect with companies through multi-use complex building and providing advanced tenant services Evolving store brand by applying various new initiatives and know-how to other stores
≪Creation of new Shibuya Parco≫
■Creating next-generation commercial space by rebuilding Shibuya Parco
■Bringing together new initiatives that have never been applied to conventional shopping complexes to provide evolved values such as “growth space for business owners” and “new inspiration for urban consumers”
・Increasing opportunities to newly connect with companies through multi-use complex building
・Creating advanced tenant services in anticipation of developments in e-commerce
・Partnership on creation of Shibuya Entertainment City, expansion of soft content 32 ・Increasing Parco brand’s global presence Growth Strategy (2) - Urban Dominant Strategy
Scheme of “Udagawa-cho District 14/15 Category 1 Urban Redevelopment Project”
December 2015 Income and expenditure of Udagawa-cho District 14/15 Category 1 Urban Redevelopment Project Tokyo Metropolitan Government approved urban planning Proceeds from disposal of project of special urban renaissance district reserve floor area → Floor-area ratio increased Approx ¥46.4 bn (Allowable total floor area increased) Total floor area for the project
Project cost, Office area Entitled Reserve land maintenance cost, construction cost, floor area floor area *Concluded transfer etc. agreement concerning office floor with Floor area to be given Floor area other Hulic Co., Ltd. to right holders before than entitled the project according to floor area their rights Compensation cost Suspension of business, August 2016 relocation cost, etc. Store area Execution of urban development project was approved *Parco will acquire Office cost, etc. May 2017 Started construction and concluded transfer agreement concerning office floor Expenditure Income 33 Growth Strategy (2) - Urban Dominant Strategy
Further expanding real estate rental area in urban areas with growth potential as a group
Real Estate Business Parco Business
・Mar 2018 Nanzenji area, Kyoto ・March 2018 Tokyo “Blue Bottle Coffee” “Harajuku Zero Gate”
・Spring 2018 Karasuma area, Kyoto ・2018 Kyoto (next to Kyoto Zero Gate) Full opening of “Kyoto Zero Gate”
・Summer 2018 Okachimachi area, Tokyo ・Fall 2018 Kobe “Sannomiya Zero Gate”
・Summer 2018 Kyoto area
Considering another 5 projects around flagship stores during current fiscal year 34 Growth Strategy (2) - Urban Dominant Strategy
Example of initiative to revitalize area in cooperation with local community - “Shitamachi Front” Urban Dominant Strategy in Ueno area is fully in progress under the name of “Shitamachi Front” Creating new culture and lifestyle in addition to existing appeal of the area Contributing to revitalizing the area by providing information and holding events in conjunction with the community site “Ueno ga Suki” and adjacent “Okachimachi Panda Hiroba”
Opened on November 4, 2017
Okachimachi ・ Panda Hiroba
35 Growth Strategy (3) - ICT Strategy toward Era of IoT
Rebuilding “department store digital strategy” by actively incorporating knowledge from outside the Group “Provision of new customer experience” and “sophistication of sales measures”
Store Mobile app, settlement of payment before customers, etc.
Gaisho Inbound New SFA, Mobile payment, sales activity using use of SNS, etc. ICT, etc.
Overhauling department store e-commerce
E-commerce focused on gift, beauty and food instead of existing “full category” 36 Growth Strategy (3) - ICT Strategy toward Era of IoT
Radical overhaul of operation frames centered on paperless solutions using ICT
Sales Back office
Order Payment Performance HR Arrival Sales Settlement Closing Tax Collection management Storage Admin
Promote operation process reform using ICT Expansion of scope of the Automation/streamlining of Paperless Group’s shared administrative processing Introduction of services advanced core system Introduction of new GW/WF Radical reform of the Group’s operations Introduction of RPA
Realizing BYOD (Bring Your Own Device)
Promoting improvement of environment for telework
Full-scale “working style reform” through operation reform using ICT 37 Finance Strategy ー FY2021 Quantitative Management Objectives
0 Operating margin ROE 10%
Operating margin 8 Equity ratio 10 % 40 Consolidated ROE % % 8.0% or higher
Reason behind ROE target of 8% Shareholders’ equity FY2021 cost recognized by ROE target the Company 8.0% > 6 - 7% or higher 38 Finance Strategy - Creation of Cash Flows and Strategic Investment
Realizing management structure that can achieve 8% ROE continuously 39 Finance Strategy - Annual Forecast of Capital Investment
Investing ¥2.7 bn in M&A for growth out of aggregate investment of ¥200 bn for 5 years Investment is expected to peak in FY2019 when new main building of Shinsaibashi store and new Shibuya Parco will open Free cash flows will turn significantly positive after passing investment peak in FY2020 and beyond
(Millions of yen)
Other
M&A
Daimaru Capital investment Matsuzakaya (excluding Growth investment Real Estate) ¥200 bn
(Total for 5 years) Parco Business Real Estate Business
40 (FY) Finance Strategy – Shareholder Return Policy Continuing shareholder return based on profit allocation according to performance and targeting dividend payout ratio of at least 30% Increasing ordinary dividend ¥2 YoY in FY ending Feb 28, 2019, marking 8th consecutive dividend increase Purchasing own shares as appropriate in consideration of strategic investment, financial condition, etc. as a whole
(Yen)
Commemorative dividend Ordinary dividend
41 *Annual dividend per share is shown on a post-share consolidation basis. ESG Initiatives
GPIF (Government Pension Investment Fund) announced selection of 3 ESG indices in July 2017
・FTSE Blossom Japan Index ・MSCI Japan ESG Select Leaders Index ・MSCI Japan Empowering Women Index
As financial information is not enough to assess sustainability and growth potential of companies, non-financial information and ESG information are becoming more important
Great change in capital market trends
Recognizing as strong message to companies as issuing entities 42 ESG Initiatives
The Company has actively taken the initiative in corporate governance reform since 2015
Reform of Board of Directors
Reform of executive Succession planning G remuneration system Changes in form of corporate governance E S Enhancing and strengthening initiatives and information disclosure concerning “E” and “S” in current fiscal year
Created “ESG Promotion Division” as dedicated unit in March
43 ESG Initiatives
Currently identifying materiality (important tasks) of the Company
Interviewing stakeholders y
h i g h M a t
Summarizing/analyzing results e r i a l i t y
f
Discussion by management o r
(Management / Board of Directors meetings) s t a k e h o l
Identifying materiality d e r s H i g
Disclosing information using various tools, etc. h High Very high Materiality for the Company
Promoting strategy incorporating ESG 44 Steady Implementation of Corporate Mission = CSV (Creating Shared Value)
Implementing corporate mission “Service before Profit”
Tradition ×Innovation Combination of Challenging different elements culture
Risk Risk taking ×hedging
Governance
Social value + Economic value
Realizing the Group Vision “Create and Bring to Life ‘New Happiness.’”
Developing into “Multi Service Retailer” beyond framework of retailing 45 Website http://www.j-front-retailing.com http://www.facebook.com/J.FrontRetailing
Create and Bring to Life “New Happiness.”
Forward-looking statements in this document represent our assumptions based on information currently available to us and inherently involve potential risks, uncertainties and other factors. Therefore, actual results may differ materially from the results anticipated herein due to changes in various factors.