Takashimaya / 8233

COVERAGE INITIATED ON: 2012.06.21 LAST UPDATE: 2018.09.03

Shared Research Inc. has produced this report by request from the company discussed in the report. The aim is to provide an “owner’s manual” to investors. We at Shared Research Inc. make every effort to provide an accurate, objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data and findings. We will always present opinions from company management as such. Our views are ours where stated. We do not try to convince or influence, only inform. We appreciate your suggestions and feedback. Write to us at [email protected] or find us on Bloomberg.

Research Coverage Report by Shared Research Inc. Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

INDEX

How to read a Shared Research report: This report begins with the trends and outlook section, which discusses the company’s most recent earnings. First-time readers should start at the business section later in the report.

Key financial data ------3 Recent updates ------4 Highlights ------4 Trends and outlook ------5 Monthly trends ------5 Quarterly earnings results ------7 Full-year company forecasts ------21 Outlook ------35 Business ------39 Business description ------39 Strengths and weaknesses ------53 Market and value chain ------54 Strategy ------57 Financial statements ------58 Income statement ------58 Balance sheet ------60 Statement of cash flows ------61 Other information ------62 History ------62 Major shareholders ------63 Top management ------63 Employees ------64 Dividends and shareholder returns ------64 Investor relations ------64 By the way ------65 Historical performance and news ------66 Historical performance ------66 News and topics ------93 Company profile ------94

02/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Key financial data

Income statement FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Est. Operating revenue 919,000 YoY 1.2% Operating revenue (old standard) 1,042,711 976,116 877,762 869,476 858,123 870,333 904,180 912,523 929,588 923,601 949,572 965,000 YoY -0.6% -6.4% -10.1% -0.9% -1.3% 1.4% 3.9% 0.9% 1.9% -0.6% 2.8% 1.6% Sales 851,400 YoY 0.8% Sales (old standard) 994,585 926,281 827,872 819,062 805,757 815,387 845,785 851,374 865,889 860,761 886,700 897,400 YoY -1.3% -6.9% -10.6% -1.1% -1.6% 1.2% 3.7% 0.7% 1.7% -0.6% 3.0% 1.2% Gross profit 268,591 247,579 218,056 212,249 208,245 209,700 214,673 214,492 214,878 211,996 218,405 219,200 YoY -1.8% -7.8% -11.9% -2.7% -1.9% 0.7% 2.4% -0.1% 0.2% -1.3% 3.0% 0.4% GPM 27.0% 26.7% 26.3% 25.9% 25.8% 25.7% 25.4% 25.2% 24.8% 24.6% 24.6% 24.4% Operating profit 37,699 24,810 13,428 18,173 21,099 25,476 29,099 32,022 32,972 34,000 35,318 30,000 YoY 11.3% -34.2% -45.9% 35.3% 16.1% 20.7% 14.2% 10.0% 3.0% 3.1% 3.9% -15.1% OPM 3.8%2.7%1.6%2.2%2.6%3.1%3.4%3.8%3.8%3.9%4.0%3.3% Recurring profit 42,070 28,003 16,764 22,484 24,355 29,866 33,350 35,904 37,785 37,215 38,606 33,500 YoY 6.4% -33.4% -40.1% 34.1%8.3%22.6%11.7%7.7%5.2%-1.5% 3.7% -13.2% RPM 4.2%3.0%2.0%2.7%3.0%3.7%3.9%4.2%4.4%4.3%4.4%3.7% Net income 18,697 11,750 7,709 13,849 10,895 16,540 18,716 22,581 23,829 20,870 23,658 18,500 YoY -26.2% -37.2% -34.4% 79.6% -21.3% 51.8% 13.2% 20.7% 5.5% -12.4% 13.4% -21.8% Net margin 1.9% 1.3% 0.9% 1.7% 1.4% 2.0% 2.2% 2.7% 2.8% 2.4% 2.7% 2.1% Per share data Shares issued (year end; '000) 330,827 330,827 330,827 330,827 330,827 330,827 330,827 355,519 355,519 355,519 355,519 - EPS 56.735.623.442.033.050.156.766.367.959.767.7105.9 EPS (fully diluted) 54.934.522.139.130.746.651.256.159.852.659.6 - Dividend per share 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 12.0 12.0 12.0 12.0 Book value per share 872 844 871 898 916 999 1,086 1,131 1,141 1,180 1,180 - Balance sheet (JPYmn) Cash and cash equivalents 40,130 31,185 59,011 70,503 76,124 69,495 106,451 87,887 75,487 107,159 99,541 Total current assets 212,888 206,617 239,816 265,878 262,394 236,263 332,121 288,147 290,625 325,500 327,501 Tangible fixed assets 384,608 382,808 381,943 381,920 375,748 378,755 394,436 412,474 417,307 413,703 550,757 Intangible fixed assets 15,710 19,273 19,417 26,451 29,799 28,979 28,716 109,505 108,327 107,172 18,035 Investments and other assets 145,662 142,257 143,921 142,838 135,975 146,688 146,864 169,483 158,161 140,087 139,511 Total assets 758,870 750,957 785,098 817,088 803,917 790,687 902,139 979,611 974,421 986,464 1,035,807 Accounts payable 99,921 89,188 85,684 87,248 87,297 87,883 95,901 101,558 103,363 101,320 102,428 Short-term debt 16,072 38,480 24,593 14,083 39,811 19,172 47,301 37,292 17,187 9,007 50,382 Total current liabilities 302,034 313,830 302,444 304,198 322,910 294,645 335,599 336,703 325,082 319,793 370,888 Long-term debt 68,686 63,755 95,962 117,679 87,667 79,674 120,227 126,225 137,412 146,255 123,878 Tot al fixed liabilit ies 165,583 155,215 191,415 211,789 173,525 160,597 201,627 234,430 241,951 244,780 215,392 Total liabilities 467,617 469,046 493,859 515,988 496,436 455,243 537,227 571,133 567,034 564,574 586,281 Net assets 291,253 281,911 291,239 301,099 307,481 335,443 364,912 408,477 407,386 421,890 449,526 Cash flow statement (JPYmn) Cash flows from operating activities 65,480 14,686 23,428 20,645 31,921 44,141 40,582 41,018 25,638 42,266 36,870 Cash flow s from invest ing act ivit ies -45,522 -38,348 -10,508 -13,240 -16,356 -28,470 -30,389 -116,049 -16,081 -9,124 -62,286 Cash flows from financing activities -35,125 14,121 14,817 7,673 -8,210 -32,931 64,391 11,619 -19,239 -4,228 14,185 Financial ratios Total interest-bearing debt 84,758 102,235 120,555 131,762 127,478 98,846 167,528 163,517 154,599 155,262 174,260 ROA (RP-based) 5.5% 3.7% 2.2% 2.8% 3.0% 3.7% 3.9% 3.8% 3.9% 3.8% 3.8% ROE 6.5%4.1%2.7%4.7%3.6%5.2%5.4%5.9%6.0%5.1%5.6% Equity ratio 37.9% 37.1% 36.6% 36.3% 37.6% 41.7% 39.7% 40.9% 40.9% 41.8% 42.4% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods; ROA is based on recurring profit.

03/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Recent updates

Highlights

On September 3, 2018, Takashimaya Co., Ltd. released monthly store sales data for August 2018; see the monthly trends section for details.

On August 1, 2018, the company released monthly store sales data for July 2018.

On July 6, 2018, Shared Research updated the report following interviews with the company.

On July 2, 2018, the company released monthly store sales data for June 2018.

On June 25, 2018, the company announced earnings results for Q1 FY02/19; see the results section for details.

For previous releases and developments, please refer to the News and topics section.

04/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Trends and outlook

Monthly trends

All store sales Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb FY02/15 Total Takashimaya (parent) 32.3% -14.0% -8.4% -6.0% -4.4% -0.3% -0.7% -0.4% -0.1% -0.8% -0.4% 1.4% Takashimaya and regional stores 31.8% -14.3% -7.9% -5.9% -4.3% -0.3% -0.8% -0.5% -0.3% -0.9% -0.7% 0.9% Department store Takashimaya (parent) 32.3% -13.2% -7.0% -4.9% -4.4% 0.1% -0.3% -0.4% 0.7% -1.0% -1.3% 0.3% Takashimaya and regional stores 31.7% -13.5% -6.5% -4.9% -4.3% 0.0% -0.4% -0.5% 0.5% -1.1% -1.5% -0.1% Corporate 55.4% -21.1% -17.9% -15.6% 1.2% -5.3% -3.6% -1.3% -11.4% -8.7% 34.5% 20.6% Cross-media 5.4% -33.8% -36.0% -25.2% -12.8% -3.4% -11.7% 1.0% -10.7% 16.2% -13.4% -2.8% FY02/16 Total Takashimaya (parent) -23.8% 18.1% 10.0% 2.9% 6.9% 4.0% 4.9% 9.4% -1.0% 2.1% 0.0% 1.1% Takashimaya and regional stores -23.7% 17.6% 9.7% 2.6% 6.8% 3.9% 4.6% 8.9% -1.1% 1.9% 0.1% 1.1% Department store Takashimaya (parent) -23.9% 16.6% 9.7% 1.4% 7.0% 3.5% 4.4% 7.2% -1.0% 0.9% 0.7% 1.7% Takashimaya and regional stores -23.7% 16.2% 9.4% 1.2% 6.8% 3.4% 4.1% 6.8% -1.1% 0.8% 0.7% 1.6% Corporate -25.9% 34.2% 7.6% 23.2% 1.6% 8.0% 11.6% 65.9% 4.2% 23.9% -11.8% -3.5% Cross-media -16.6% 57.5% 29.3% 24.2% 14.6% 19.5% 12.4% 2.0% -8.7% 17.1% -3.7% -5.8% FY02/17 Total Takashimaya (parent) 1.6% 0.3% -1.2% -2.6% 0.1% -3.0% -4.5% -6.6% 0.9% 0.3% -0.2% -2.0% Takashimaya and regional stores 1.2% 0.3% -1.1% -2.7% 0.1% -3.3% -4.6% -6.1% 0.8% 0.2% -0.5% -1.8% Department store Takashimaya (parent) -0.8% -0.6% -1.7% -1.9% 0.7% -4.0% -4.3% -4.0% 1.3% 0.4% 0.5% -1.4% Takashimaya and regional stores -1.0% -0.5% -1.6% -2.1% 0.6% -4.2% -4.5% -3.8% 1.1% 0.3% 0.1% -1.3% Corporate 58.6% 18.4% 7.7% -14.8% -13.7% 12.6% -3.1% -35.3% 3.9% 3.7% 0.7% 0.8% Cross-media 0.2% 0.0% 2.8% 1.2% 1.1% 1.7% -16.6% -27.4% -18.0% -6.6% -27.6% -30.5% Duty-free sales Over 30% 10.0% 5.2% -1.6% 2.6% -10.9% 16.7% 11.3% 9.2% 29.8% 38.8% 33.5% Store sales (following month; up to mid-month release) 0.1% -4.1% 3.6% 0.3% -5.0% -5.0% 5.0% -1.5% -1.0% -2.9% 1.5% Duty-free sales 7.0% 5.0% 7.0% 27.6% 38.9% 25.8% 63.0% FY02/18 Total Takashimaya (parent) 3.1% 1.8% 2.5% 4.7% 0.6% 2.4% 8.7% 2.5% 6.5% 2.1% 0.5% -0.1% Takashimaya and regional stores 2.8% 1.7% 2.0% 4.4% 0.3% 2.8% 8.3% 2.2% 6.2% 2.0% 0.4% -0.3% Department store Takashimaya (parent) 2.5% 2.9% 2.4% 4.9% -0.0% 3.6% 8.7% 2.2% 3.9% 0.9% 0.5% 0.0% Takashimaya and regional stores 2.2% 2.6% 1.9% 4.6% -0.3% 3.9% 8.2% 1.9% 3.9% 0.8% 0.5% -0.3% Corporate 23.6% -2.3% 9.4% 11.7% 21.1% -10.0% 7.5% 7.5% 62.4% 15.2% -3.1% -6.4% Cross-media -26.6% -29.5% -9.2% -15.6% -4.1% -14.8% 12.9% 6.1% 14.1% 20.4% 8.3% 17.9% Duty-free sales 50.8% 37.3% 71.1% 37.6% 43.8% 54.7% 62.5% 62.2% 48.2% 26.0% 22.4% 14.6% Store sales (following month; up to mid-month release) 5.7% 1.8% 3.0% -0.1% 2.3% 9.6% 5.5% 3.3% 1.1% 2.3% -3.9% 0.0% Duty-free sales 28.5% 55.3% 20.8% 38.4% 46.1% 63.9% 69.2% 59.7% 32.4% 17.3% -4.3% 27.5% FY02/19 Total Takashimaya (parent) 2.6% 2.5% -0.4% 3.9% -3.5% Takashimaya and regional stores 2.5% 2.3% -0.5% 4.0% -3.7% Department store Takashimaya (parent) 3.0% 3.0% -0.4% 4.6% -3.5% 1.5% Takashimaya and regional stores 2.8% 2.7% -0.5% 4.6% -3.7% 0.9% Corporate -4.6% -9.8% -3.8% -10.0% -14.4% Cross-media 13.6%16.1%9.0%8.9%16.5% Duty-free sales 22.0%23.7%18.2%48.3%19.5%24.2% Store sales (following month; up to mid-month release) 0.4% -0.7% -0.3% -0.2% 1.5% Duty-free sales 20.2%28.5%54.4%20.3%28.2% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

Store sales in August 2018 rose 0.9% YoY across Takashimaya (parent) stores and 17 domestic subsidiary department stores. Sales recovered YoY increase after dropping in July, owing to continued growth in sales of luxury items and duty-free products despite the impact of typhoon primarily in the Kansai region. Duty-free sales increased 24.2% YoY. By product, sales increased YoY for women’s accessories, select apparel, and jewelry, driven by both domestic and inbound demand while sales of womenswear, menswear, and household products declined YoY. Breakdown by store: Osaka, Kyoto, Yokohama, Shinjuku, Senboku, Tamagawa, Kashiwa, and Yonago stores saw higher YoY sales. Sales floor areas of the Tachikawa and Yonago stores have decreased from the previous year.

05/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Monthly sales trends

Monthly store sales 2017 2018 FY02/18 Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Act. % of total Total (Takashimaya) 4.7% 0.6% 2.4% 8.7% 2.5% 6.5% 2.1% 0.5% -0.1% 2.6% 2.5% -0.4% 3.9% -3.5% 711,341 93.0% Takashimaya and dom. dept. store subsidiaries 4.4% 0.3% 2.8% 8.3% 2.2% 6.2% 2.0% 0.4% -0.3% 2.5% 2.3% -0.5% 4.0% -3.7% 765,037 100.0% Monthly sales by store Osaka, Sakai 9.3% 3.3% 11.9% 16.5% 9.9% 8.5% 5.2% 6.7% 1.2% 154,572 20.2% Osaka 10.7% 4.2% 13.3% 18.0% 10.4% 8.8% 5.4% 7.2% 1.3% 5.4% 10.3% 2.5% 6.5% -0.7% 4.9% 141,450 18.5% Sakai -2.6% -5.7% 1.0% 1.6% 5.3% 4.9% 2.8% 1.3% 0.7% 2.4% 4.8% -3.5% 4.9% 1.0% -3.5% 13,122 1.7% Kyoto, Rakusai 9.3% 0.3% -1.2% 9.8% 6.9% 5.6% 3.5% 4.5% 3.8% 6.4% 7.2% 2.0% 5.0% -1.4% 2.9% 88,126 11.5% Senboku -9.5% -5.3% -7.3% -3.3% -6.0% -8.9% 0.2% -8.1% -5.8% -4.1% 5.4% -0.2% 3.0% 4.4% 3.5% 16,878 2.2% Nihombashi 0.7% -1.4% -6.1% 6.3% -3.1% -1.5% -3.8% -4.1% -6.4% -0.4% -2.7% -5.9% -0.1% -11.0% -8.5% 134,241 17.5% Yokohama, Konandai, Foodmaison, Stylemaison 2.5% -0.8% 3.8% 5.1% -0.2% 4.9% -0.3% -0.9% 0.8% 139,886 18.3% Yokohama, Foodmaison, Stylemaison 3.5% -0.5% 4.1% 5.4% 0.2% 5.3% -0.2% -0.7% 1.1% 4.3% 0.2% -1.2% 4.8% -3.0% 4.0% 131,649 17.2% Konandai -11.2% -2.8% -1.1% -0.2% -6.3% -1.5% -2.1% -3.9% -3.2% -4.0% -2.5% -6.8% -2.4% -5.6% -2.8% 8,237 1.1% Shinjuku 4.0% -2.0% 6.8% 11.1% 2.2% 8.3% 3.1% 1.9% 5.0% 6.3% 4.6% 3.4% 14.4% -2.1% 2.5% 73,331 9.6% Tamagawa 5.3% -3.7% 5.7% 5.2% 0.8% 3.0% 2.0% 0.0% -0.4% 0.0% 0.7% 0.8% 4.5% 0.2% 2.4% 43,665 5.7% Tachikawa -1.3% -2.5% -3.7% -18.8% -33.8% -25.0% -25.3% -34.6% -31.0% -30.1% -29.2% -35.4% -26.7% -37.9% -24.8% 12,332 1.6% Omiya 8.7% -5.0% 2.4% 11.0% -4.4% 1.4% 0.8% -4.4% 3.9% 0.7% -2.4% 0.4% -3.8% -4.7% -3.3% 10,158 1.3% Kashiwa, Foodmaison Ootaka no Mori 11.9% 8.7% 9.6% 11.6% 5.7% 7.3% 2.7% 2.3% 2.6% 5.0% 2.5% 5.6% 9.9% 1.8% 8.1% 38,147 5.0% Takashimaya (parent; 13 stores) 4.9% -0.0% 3.6% 8.7% 2.2% 3.9% 0.9% 0.5% 0.0% 3.0% 3.0% -0.4% 4.6% -3.5% 1.5% Okayama Takashimaya 2.0% -0.4% 8.3% 9.8% 0.7% 1.5% -0.7% 0.2% -5.6% -2.5% -3.6% -3.9% 1.4% -11.3% -3.5% 18,674 2.4% Gifu Takashimaya -0.1% -0.8% 0.7% 0.2% -9.0% 3.9% 2.6% -3.5% -4.7% -1.2% -2.4% -5.0% 3.3% -9.0% -8.2% 14,663 1.9% Yonago Takashimaya -3.8% -15.8% -10.2% -7.9% -10.1% -5.2% -4.1% -1.6% -1.1% -4.8% -13.0% -5.8% 1.0% -5.6% 4.3% 4,912 0.6% Takasaki Takashimaya -0.6% -7.9% 22.6% -0.4% 8.1% 8.7% -0.2% 1.5% 1.0% 7.1% 8.6% 5.2% 13.3% 4.3% -9.4% 15,446 2.0% Takashimaya and dom. dept. store subsidiaries 4.6% -0.3% 3.9% 8.2% 1.9% 3.9% 0.8% 0.5% -0.3% 2.8% 2.7% -0.5% 4.6% -3.7% -0.9% 712,978 93.2% Corporate 11.7% 21.1% -10.0% 7.5% 7.5% 62.4% 15.2% -3.1% -6.4% -4.6% -9.8% -3.8% -10.0% 14.4% 36,293 4.7% Cross-media -15.6% -4.1% -14.8% 12.9% 6.1% 14.1% 20.4% 8.3% 17.9% 13.6% 16.1% 9.0% 8.9% 16.5% 15,765 2.1% Customer count by store Osaka, Sakai 2.9% 0.7% 5.3% 2.4% -0.7% 3.6% 3.3% 0.8% 1.2% Osaka 3.9% 1.0% 6.3% 2.5% -0.8% 4.1% 3.5% 0.9% 1.5% 0.0% 3.8% -0.8% -3.1% -8.5% Sakai -1.3% -0.9% 0.7% 2.0% -0.3% 1.4% 2.6% 0.0% -0.3% -1.0% 1.4% -1.8% -0.1% -2.1% Kyoto, Rakusai 0.4% -3.6% -1.5% -0.8% -1.9% 1.9% 0.0% 0.7% 0.2% 1.5% -1.4% 0.2% -0.1% -5.0% Senboku 0.0% -3.7% -2.1% 1.1% -1.1% 1.7% 1.0% -1.7% -1.0% -0.4% 2.2% -3.8% -2.9% -1.4% Nihombashi -3.4% -4.6% 8.1% 1.5% -0.6% 1.9% 2.2% -3.9% -0.6% 12.6% 19.9% 6.6% 12.9% 10.4% Yokohama, Konandai, Foodmaison, Stylemaison 2.7% 1.0% 3.6% -0.1% -3.2% 2.9% 0.7% -1.8% -1.6% Yokohama, Foodmaison, Stylemaison 2.5% 0.3% 3.1% 0.2% -3.2% 3.1% 0.9% -1.8% -1.4% -1.3% 0.0% -1.1% 3.4% -5.5% Konandai 3.9% 7.3% 8.8% -2.7% -3.4% 0.8% -1.1% -2.0% -2.6% -3.9% -2.7% -4.8% -2.7% -3.8% Shinjuku -4.3% -1.6% -0.8% 3.9% -3.2% 3.1% -4.2% -1.1% 0.4% 3.9% 1.7% 1.9% 9.8% 0.1% Tamagawa 0.9% -0.8% 1.6% -1.7% -3.4% 0.1% -1.1% -2.0% 0.8% 3.7% 0.1% -2.2% 3.4% -0.7% Tachikawa 1.2% -1.4% -0.9% -7.0% -16.1% 8.8% 2.4% -7.9% -3.8% 2.4% -0.7% -4.5% 3.8% -7.3% Omiya -1.3% -3.4% -0.6% 1.2% -7.7% 0.2% -3.3% -4.1% -2.8% -2.0% -4.4% 0.3% 0.2% -0.5% Kashiwa, Foodmaison Ootaka no Mori 4.9% -1.1% -0.3% -7.5% -2.4% 1.7% -1.3% -0.8% -2.2% -0.7% -0.4% 0.0% -0.1% -1.6% Takashimaya (parent; 13 stores) 1.1% -0.9% 2.1% -0.2% -2.7% 2.6% 0.3% -1.2% -0.5% 1.2% 1.7% -0.4% 2.1% -3.3% Okayama Takashimaya 8.9% 3.9% 3.4% 0.9% 3.6% 3.4% 2.1% -0.1% 2.0% -0.7% -1.0% -2.2% -0.9% -5.5% Gifu Takashimaya -4.8% -8.7% -6.2% -5.5% -12.2% -0.8% -2.7% -2.9% -3.6% -3.4% -5.4% -3.0% 0.1% -9.5% Yonago Takashimaya -6.4% -8.5% -3.5% 2.6% -9.7% -8.1% -4.6% -5.0% -2.9% -10.2% -25.5% -15.9% -17.0% -18.7% Takasaki Takashimaya -0.2% -7.6% -3.1% 7.0% 58.2% 57.0% 29.4% 27.0% 21.8% 26.8% 27.8% 20.2% 24.6% 22.9% Takashimaya and dom. dept. store subsidiaries 1.4% -0.9% 1.9% -0.1% -1.9% 3.1% 0.7% -0.8% -0.1% 1.2% 1.6% -0.4% 2.1% -3.3% By product (Takashimaya, dom. dept. store subsidiaries) Apparel 4.2% -5.5% 0.3% 3.5% -0.1% 3.8% 1.1% -2.9% -2.0% 2.6% -0.5% -6.0% 3.0% -9.1% 219,252 28.7% Menswear and goods -2.0% -4.8% -11.9% 3.3% 4.2% 4.9% 4.8% -3.4% -2.0% 3.4% -2.7% -11.8% 1.3% -10.4% 45,324 5.9% Womenswear and goods 6.0% -6.2% 1.7% 3.0% -2.2% 3.2% 0.0% -3.0% -1.0% 4.1% -0.4% -3.9% 2.9% -9.4% 139,182 18.2% Children's wear and goods 12.1% -6.3% 4.9% 4.7% 0.5% 0.4% -2.7% -6.1% -0.1% -0.8% -0.9% -3.2% 8.2% -8.3% 19,138 2.5% Other apparel 0.9% -0.6% 11.0% 7.6% 5.5% 8.4% 2.9% 4.3% -13.0% -5.5% 5.6% -9.1% 3.6% -4.4% 15,606 2.0% Personal items 7.1% 4.3% 8.4% 14.6% 4.7% 8.2% 1.6% 5.9% 9.4% 7.5% 8.0% 3.2% 8.3% -5.2% 116,708 15.3% Household goods 0.3% 0.9% -20.0% -1.9% -10.1% 32.8% -2.7% -4.6% 1.0% -13.5% -3.7% 4.3% 2.7% -7.3% 50,648 6.6% Furniture -13.1% -7.9% -41.4% -9.8% -22.5% -9.3% -8.0% 2.1% -14.9% 8.7% -0.2% 9.7% 21.4% 5.8% 9,333 1.2% Home appliances 24.6% 38.7% -76.3% -4.4% -28.7% 785.7% 54.0% -23.0% 131.3% -12.3% -3.8% 62.7% -16.8% -43.6% 4,235 0.6% Other household goods 1.9% 2.2% 2.3% 0.8% -4.8% 2.6% -3.9% -5.4% -6.1% -17.6% -4.7% -1.8% 0.4% -9.2% 37,079 4.8% Food 1.7% 0.5% 2.5% 1.6% -0.3% 1.1% 1.9% -1.0% -0.3% 0.5% 0.5% 1.8% 1.5% -0.5% 215,617 28.2% Fresh produce -1.3% -0.5% -0.4% 0.6% -1.2% 1.4% 0.0% -0.5% -0.2% -0.7% -0.9% -0.3% 0.1% -1.6% 40,255 5.3% Confectionery 2.3% 1.0% 2.4% 2.2% -2.2% 3.7% 3.3% -0.9% -5.5% 1.2% 0.8% 0.3% 1.6% -1.4% 59,164 7.7% Deli foods 1.0% -0.8% 2.6% 3.4% -1.0% 1.6% 2.5% 0.0% 1.6% 0.2% -0.8% 0.4% 0.6% -1.1% 57,121 7.5% Other foods 3.3% 1.9% 5.1% -0.2% 2.5% -1.6% 0.8% -2.7% 8.2% 0.4% 2.2% 5.9% 2.8% 1.6% 59,076 7.7% Restaurants and cafes 4.1% -1.5% 1.1% -0.2% -4.8% 1.7% -1.1% -3.4% -1.7% -0.7% 1.0% -4.3% -2.9% -6.5% 14,016 1.8% Accessories 10.2% 6.6% 12.8% 26.4% 15.6% 11.9% 7.9% 7.1% -4.1% 8.6% 6.8% 2.0% 11.3% 4.6% 131,807 17.2% Cosmetics 17.6% 17.1% 17.0% 32.6% 19.5% 19.9% 12.0% 15.1% -3.0% 8.3% 7.6% 0.2% 17.1% 7.9% 74,351 9.7% Art work and jewelry 8.3% 0.3% 14.3% 24.0% 13.6% 2.9% 1.4% -0.1% -3.4% 6.4% 8.4% 6.3% 5.7% 3.0% 40,114 5.2% Other accessories -12.8% -11.6% -5.5% 10.2% 5.2% 2.1% 9.3% -5.9% -9.9% 14.5% 0.6% 0.1% -1.2% -5.5% 17,341 2.3% Services 35.4% 44.6% 24.2% 13.9% -1.0% 2.0% -11.0% 19.2% -14.3% -1.5% 3.6% -19.9% -27.4% -31.5% 16,987 2.2% Other -4.6% -9.0% 3.9% 0.8% -6.0% -1.8% -6.9% -8.5% -11.4% 11.4% 2.3% -1.3% -3.2% -3.7% Total 4.4% 0.3% 2.8% 8.3% 2.2% 6.2% 2.0% 0.4% -0.3% 2.5% 2.3% -0.5% 4.0% -3.7% 765,037 100.0% 20% Domestic store sales (parent and domestic subsidiaries) Domestic store customer count (parent and domestic subsidiaries) 15%

10%

-5%

-10%

-15%

Source: Shared Research based on company data

06/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Quarterly earnings results

Q1 FY02/19 results (out June 25, 2018)

▷ Q1: Domestic Department Stores experienced higher sales to inbound tourists, which have been growing since Q4 FY12/17, as consumer spending has been solid. Overseas, Department Stores have also performed well, contributing to higher sales and profits in the segment. Department Stores have absorbed lower profits in other segments, leading to higher sales and profits overall. The impact of upfront department store investment was negligible in Q1, and will be concentrated in Q2 onward ▷ Domestic department Stores: Sales and operating profit up 1.4% (+1.6% for parent sales) and 25% respectively. Sales steadily increased, led by large stores. Efforts to reduce SG&A expenses succeeding  Store measures: Opened Nihombashi Takashimaya Shopping Center East building in March 2018. The numbers of customers increased YoY at the Nihombashi store. Progress seen in attracting young families  Inbound: Strong results continued. In addition to previous initiatives, the company worked on establishing a shopping environment which includes multilingual announcements at small to medium sized stores as well as expanding mobile payments  Parent gross profit margin: Even though GPM declined 0.04pp YoY due to an increase in sales to inbound tourists, gross profit was up on increased sales. Various initiatives limited the decline in GPM  Parent SG&A expenses: Cost-cutting efforts were successful in Q1. Still, the company will incur costs associated with project

and Nihombashi Shopping Center from Q2 ▷ Overseas department stores: All three locations reported higher sales and profits. Sales increased on positive momentum in the market environment in Singapore. Sales were up in Shanghai on effective use of an event sales space, and sales in Vietnam were

steady ▷ Real estate: Sales up 5.5%, profits down 5.2%. Despite higher sales, profits decreased due to increased expenses related to the opening of a new annex (planned for September) and the East building (opened in March) of the Nihombashi Takashimaya

Shopping Center ▷ Q2: Company expects Q1 conditions for department stores to persist, but will incur upfront spending. No direct damage from Osaka earthquake but store customer numbers affected slightly

07/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Earnings (bottom half of this figure shows operating profit by segment; Unit: Billion yen)

Quarterly performance FY02/17 FY02/18 FY02/19 FY02/17 FY02/18 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q21H1H1H Est.% of 1HFYFY Init. Est. Change % of FY Operating revenue 215,649 219,825 439,000 50.1% 919,000 23.9% YoY 1.9% 1.2% Operating revenue 219,318 224,003 215,469 264,811 225,480 227,500 225,914 270,678 230,626 443,321 452,980 923,601 949,572 965,000 15,428 23.9% YoY -0.0% -2.8% -2.0% 1.8% 2.8% 1.6% 4.8% 2.2% 2.3% -1.4% 2.2% -0.6% 2.8% 1.6% Sales 200,134 203,747 851,400 23.9% YoY 1.8% 0.8% Sales 203,340 207,818 200,483 249,120 209,966 211,639 210,771 254,324 214,548 411,158 421,605 860,761 886,700 897,400 10,700 23.9% YoY -0.3% -3.1% -1.7% 2.3% 3.3% 1.8% 5.1% 2.1% 2.2% -1.7% 2.5% -0.6% 3.0% 1.2% Gross profit 50,815 50,731 50,428 60,022 51,849 103,914 156,058 218,405 53,249 101,546 103,914 211,996 218,405 219,200 795 24.3% YoY -1.8% -3.2% -1.9% 1.1% 2.0% 104.8% 209.5% 263.9% 2.7% -2.5% 2.3% -1.3% 3.0% 0.4% GPM 25.0% 24.4% 25.2% 24.1% 24.7% 49.1% 74.0% 85.9% 24.8% 24.7% 24.6% 24.6% 24.6% 24.4% SG&A expenses 66,793 53,139 58,641 62,262 59,276 62,120 59,469 65,092 60,775 119,932 121,396 240,835 245,957 256,800 10,843 23.7% YoY 11.7% -14.3% -1.8% -2.8% -11.3% 16.9% 1.4% 4.5% 2.5% -1.5% 1.2% -1.9% 2.1% 4.4% SG&A ratio 32.8% 25.6% 29.2% 25.0% 28.2% 29.4% 28.2% 25.6% 28.3% 29.2% 28.8% 28.0% 27.7% 28.6% Operating profit 7,692 6,085 6,774 13,449 8,088 5,805 7,817 13,608 8,552 13,777 13,893 12,000 71.3% 34,000 35,318 30,000 -5,318 28.5% YoY 3.2% -4.5% -9.1% 15.0% 5.1% -4.6% 15.4% 1.2% 5.7% -0.3% 0.8% -13.6% 3.1% 3.9% -15.1% OPM 3.8% 2.9% 3.4% 5.4% 3.9% 2.7% 3.7% 5.4% 4.0% 3.4% 3.3% - 3.9% 4.0% 3.3% Recurring profit 8,106 6,949 7,989 14,171 8,691 6,945 8,740 14,230 9,968 15,055 15,636 14,000 71.2% 37,215 38,606 33,500 -5,106 29.8% YoY -2.9% -11.7% -9.6% 11.3% 7.2% -0.1% 9.4% 0.4% 14.7% -7.1% 3.9% -10.5% -1.5% 3.7% -13.2% RPM 4.0% 3.3% 4.0% 5.7% 4.1% 3.3% 4.1% 5.6% 4.6% 3.7% 3.7% - 4.3% 4.4% 3.7% Net income 3,563 4,914 4,748 7,645 5,154 3,858 5,465 9,181 5,845 8,477 9,012 6,300 92.8% 20,870 23,658 18,500 -5,158 31.6% YoY -43.6% 4.1% -8.9% 0.9% 44.7% -21.5% 15.1% 20.1% 13.4% -23.2% 6.3% -30.1% -12.4% 13.4% -21.8% Net margin 1.8% 2.4% 2.4% 3.1% 2.5% 1.8% 2.6% 3.6% 2.7% 2.1% 2.1% - 2.4% 2.7% 2.1% FY02/17 FY02/18 FY02/19 FY02/17 FY02/18 FY02/19 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Act.Act.Init. Est. Change % of FY Operating revenue 219,318 224,003 215,469 264,811 225,480 227,500 225,914 270,678 230,626 923,601 949,572 965,000 15,428 23.9% Department Stores 187,520 192,111 793,896 24.2% Dept Stores (old standard) 192,315 192,281 187,614 225,043 197,351 199,351 200,063 229,796 202,912 797,253 826,561 839,896 13,335 24.2% Real Estate 10,671 10,438 10,024 16,790 9,960 9,965 9,875 17,676 10,504 47,923 47,476 45,782 -1,694 22.9% Finance 3,483 3,234 3,245 3,452 3,607 3,590 3,375 3,615 3,826 13,414 14,187 14,681 494 26.1% Contract and Design 4,805 9,430 7,316 9,323 6,926 6,442 4,876 7,672 5,354 30,874 25,916 27,797 1,881 19.3% Others 8,041 8,622 7,269 10,203 7,634 8,152 7,725 11,919 8,028 34,135 35,430 36,842 1,412 21.8% YoY -0.0% -2.8% -2.0% 1.8% 2.8% 1.6% 4.8% 2.2% 2.3% -0.6% 2.8% 1.6% Department Stores 2.4% - - 1.2% Dept Stores (old standard) -0.2% -3.3% -3.5% -0.3% 2.6% 3.7% 6.6% 2.1% 2.8% -1.8% 3.7% 1.2% Real Estate 3.1% -0.9% -6.2% 55.2% -6.7% -4.5% -1.5% 5.3% 5.5% 13.1% -0.9% -3.6% Finance 5.0% 6.5% 4.8% 1.1% 3.6% 11.0% 4.0% 4.7% 6.1% 4.3% 5.8% 3.5% Contract and Design -3.5% 4.5% 115.1% 0.2% 44.1% -31.7% -33.4% -17.7% -22.7% 15.6% -16.1% 7.3% Others 0.1% -3.0% -11.2% -6.1% -5.1% -5.5% 6.3% 16.8% 5.2% -5.1% 3.8% 4.0% Operating profit 7,692 6,085 6,774 13,449 8,088 5,805 7,817 13,608 8,552 34,000 35,318 30,000 -5,318 28.5% Department Stores 3,372 1,385 2,241 5,184 2,948 1,182 3,945 5,434 3,963 12,182 13,509 10,653 -2,856 37.2% Real Estate 2,912 2,514 2,494 3,108 2,783 2,317 2,444 3,849 2,638 11,028 11,393 10,304 -1,089 25.6% Finance 1,173 1,129 1,059 1,134 1,190 1,053 1,025 1,295 1,167 4,495 4,563 4,724 161 24.7% Contract and Design -80 944 519 959 264 474 -170 639 -39 2,342 1,207 1,440 233 -2.7% Others 166 281 620 1,266 550 803 689 1,289 455 2,333 3,331 2,877 -454 28.5% Adjustments 147 -168 -158 1,795 350 -24 -116 1,104 366 1,616 1,314 YoY Department Stores 4.6% -35.3% -35.3% -15.7% -12.6% -14.7% 76.0% 4.8% 34.4% -18.7% 10.9% -21.1% Real Estate 11.2% 4.2% -10.0% 24.6% -4.4% -7.8% -2.0% 23.8% -5.2% 7.1% 3.3% -9.6% Finance 2.4% 8.8% 1.1% -1.0% 1.4% -6.7% -3.2% 14.2% -1.9% 2.7% 1.5% 3.5% Contract and Design 45.5% 1,004.3% -12.0% - -49.8% - -33.4% - 23.4% -48.5% 19.3% Others 66.0% - 216.3% 37.8% 231.3% 185.8% 11.1% 1.8% -17.3% 55.9% 42.8% -13.6% OPM 3.5% 2.7% 3.1% 5.1% 3.6% 2.6% 3.5% 5.0% 3.7% 3.7% 3.7% 3.1% -0.6pp Department Stores 1.8% 0.7% 1.2% 2.3% 1.5% 0.6% 2.0% 2.4% 2.0% 1.5% 1.6% 1.3% -0.4pp Real Estate 27.3% 24.1% 24.9% 18.5% 27.9% 23.3% 24.7% 21.8% 25.1% 23.0% 24.0% 22.5% -1.5pp Finance 33.7% 34.9% 32.6% 32.9% 33.0% 29.3% 30.4% 35.8% 30.5% 33.5% 32.2% 32.2% +0.0pp Contract and Design -1.7% 10.0% 7.1% 10.3% 3.8% 7.4% -3.5% 8.3% -0.7% 7.6% 4.7% 5.2% +0.5pp Others 3.9% 1.3% 6.4% 30.0% 11.8% 9.6% 7.4% 20.1% 10.2% 11.6% 13.1% 7.8% -5.3pp Note: Starting in FY02/19, the amount equal to the net profit from transactions with overseas subsidiaries will be posted as sales so are shown alongside figures under previous standards. The figures given for the initial forecast* and increase/decrease will be the same gross amount reported previously. Source: Shared Research, based on company data

Operating profit by segment

(JPYbn) Department Stores Real Estate Finance Contract and Design 14.Others2 13.4 13.6 14 12.6 11.7 12 11.1 1.1

10 1.4 2.8 1.3 8.7 0.9 8.6 1.1 1.1 8.1 7.8 2.2 7.5 7.5 7.5 7.7 8 1.9 6.8 6.4 2.5 3.8 1.2 1.0 6.1 1.0 1.2 6.1 5.8 1.0 5.6 5.9 5.3 1.1 5.6 1.1 3.1 1.2 6 1.6 5.1 1.1 4.7 0.7 1.1 4.2 4.3 2.2 1.0 1.0 1.1 2.4 2.6 3.5 3.3 0.8 2.6 2.8 2.9 1.1 0.9 8.5 2.8 1.1 4 1.7 0.8 7.1 2.2 7.4 0.9 0.8 0.7 2.0 0.8 2.1 2.3 2.4 6.1 2.5 5.1 1.9 2.5 5.2 5.4 1.8 1.9 2.0 2.2 2.3 2 2.1 3.9 3.2 3.5 3.4 3.9 4.0 2.9 2.5 2.7 2.2 2.1 2.1 2.2 2.9 1.2 1.7 1.4 0 1.1 0.8 1.1 1.0 1.2 -2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 Source: Shared Research based on company data Note: Effective Q1 FY02/17, subsidiary Fashion Plaza Sunroser was moved from Department Stores segment to Real Estate segment.

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Group company performance

Main subsidiaries FY02/17 FY02/18 FY02/19 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Act. Act. Init. Est. Change % of FY Operating revenue Takashimaya Singapore 13,264 12,009 10,942 14,530 12,233 12,610 12,149 15,515 13,258 50,745 52,507 54,038 1,531 24.5%

OLD Shanghai Takashimaya 1,748 1,467 1,469 1,649 1,779 1,617 1,748 1,858 1,928 6,333 7,002 8,007 1,005 24.1% Takashimaya Vietnam 1,019 984 1,122 1,819 4,365 4,678 313 24.0% Siam Takashimaya (Thailand) - - 3,383 3,383 - Takashimaya Singapore 4,046 4,262 - 18,118 23.5% Shanghai Takashimaya 803 854 - 3,635 23.5% Takashimaya Vietnam 351 391 - 1,578 24.8% Siam Takashimaya (Thailand) - - - 1,227 - A&S Takashimaya Duty Free - 3,307 7,000 3,693 - Toshin Development 8,882 8,849 9,795 17,055 10,010 10,176 9,876 22,250 10,433 44,581 52,312 45,391 -6,921 23.0% TDS 2,376 2,197 2,070 2,142 2,224 2,215 2,220 2,293 2,272 8,785 8,952 9,059 107 25.1% T akashimaya Credit 4,455 4,306 4,376 4,525 4,619 4,513 4,610 4,702 4,833 17,662 18,444 19,098 654 25.3% Takashimaya Space Create 5,309 10,850 8,547 9,815 7,631 6,944 6,670 8,075 6,198 34,521 29,320 31,300 1,980 19.8% YoY Takashimaya Singapore -2.9% -17.6% -16.4% -11.9% -7.8% 5.0% 11.0% 6.8% 8.4% -12.2% 3.5% 2.9%

OLD Shanghai Takashimaya -6.4% -17.7% -12.6% -130.9% 1.8% 10.2% 19.0% 12.7% 8.4% - 10.6% 14.4% Takashimaya Vietnam 140.0% 7.2% Toshin Development 3.8% 3.1% 10.8% 88.8% 12.7% 15.0% 0.8% 30.5% 4.2% 27.3% 17.3% -13.2% TDS 4.1% -10.1% -13.2% -10.0% -6.4% 0.8% 7.2% 7.0% 2.2% -7.4% 1.9% 1.2% T akashimaya Credit 1.8% 2.1% 2.8% 2.7% 3.7% 4.8% 5.3% 3.9% 4.6% 2.3% 4.4% 3.5% Takashimaya Space Create -13.0% 34.4% 37.9% -0.6% 43.7% -36.0% -22.0% -17.7% -18.8% 14.1% -15.1% 6.8% Operating profit Takashimaya Singapore 967 422 623 1,141 653 707 620 1,642 802 3,153 3,622 3,239 -383 24.8% Shanghai Takashimaya -264 -272 -218 -226 -270 -297 -276 -297 -185 -980 -1,140 -848 292 21.8% Takashimaya Vietnam -51 -90 -16 -508 -281 -264 17 6.1% Siam Takashimaya (Thailand) ---420 -420 - A&S Takashimaya Duty Free 約3億約4億 --1,309 -671 638 - Toshin Development 2,188 1,968 1,988 2,696 2,182 1,802 1,736 3,324 2,026 8,840 9,044 7,943 -1,101 25.5% TDS 756 592 545 447 617 572 569 726 638 2,340 2,484 2,339 -145 27.3% T akashimaya Credit 1,166 1,121 1,053 1,128 1,183 1,047 1,018 1,295 1,167 4,468 4,543 4,805 262 24.3% Takashimaya Space Create -91 946 531 966 272 476 -159 642 -33 2,352 1,231 1,410 179 -2.3% YoY Takashimaya Singapore 3.2% -57.9% -21.1% -15.2% -32.5% 67.7% -0.5% 43.9% 22.8% -22.6% 14.9% -10.6% Shanghai Takashimaya ------Takashimaya Vietnam ------Toshin Development 5.9% 6.1% -6.4% 37.4% -0.3% -8.4% -12.7% 23.3% -7.1% 10.4% 2.3% -12.2% TDS 28.5% -2.1% -20.7% -25.0% -18.4% -3.4% 4.4% 62.4% 3.4% -5.5% 6.2% -5.8% T akashimaya Credit 2.6% 9.1% 1.3% -0.9% 1.5% -6.6% -3.3% 14.8% -1.4% 2.9% 1.7% 5.8% Takashimaya Space Create - 49.3% 1,297.4% -10.5% - -49.7% - -33.5% - 25.7% -47.7% 14.5% OPM Takashimaya Singapore 7.3% 3.5% 5.7% 7.9% 5.3% 5.6% 5.1% 10.6% 6.0% 6.2% 6.9% 6.0% -0.9pp Shanghai Takashimaya -15.1% -18.5% -14.8% -13.7% -15.2% -18.4% -15.8% -16.0% -9.6% -15.5% -16.3% -10.6% +5.7pp Takashimaya Vietnam -5.0% -9.1% -1.4% -27.9% -6.4% -5.6% +0.8pp Siam Takashimaya (Thailand) ---12.4% A&S Takashimaya Duty Free --39.6% -9.6% +30.0pp Toshin Development 24.6% 22.2% 20.3% 15.8% 21.8% 17.7% 17.6% 14.9% 19.4% 19.8% 17.3% 17.5% +0.2pp TDS 31.8% 26.9% 26.3% 20.9% 27.7% 25.8% 25.6% 31.7% 28.1% 26.6% 27.7% 25.8% -1.9pp T akashimaya Credit 26.2% 26.0% 24.1% 24.9% 25.6% 23.2% 22.1% 27.5% 24.1% 25.3% 24.6% 25.2% +0.5pp Takashimaya Space Create -1.7% 8.7% 6.2% 9.8% 3.6% 6.9% -2.4% 8.0% -0.5% 6.8% 4.2% 4.5% +0.3pp Source: Shared Research based on company data Note: Effective Q1 FY02/17, subsidiary Fashion Plaza Sunroser was moved from Department Stores segment to Real Estate segment. Note: Starting in FY02/19, the amount equal to the net profit from transactions with overseas subsidiaries will be posted as sales so are shown alongside figures under previous standards. The figures given for the initial forecast* and increase/decrease will be the same gross amount reported previously.

Overview According to Takashimaya, consumer spending has been sluggish since spring despite the gradual growth in the domestic economy. At the group’s domestic department stores, sales have been growing steadily, not only because of robust consumer spending, but also because demand from visitors to Japan has been favorable and domestic demand has been solid. However, the company recognizes that the economic outlook requires close attention due to worsening trade friction between the US and China, concerns of an economic slowdown in Europe, and geopolitical risks in the Middle East.

Q1: Domestic performance continues to drive results in the mainstay Department Store segment; strong overseas performance also contributed to higher sales and profits. Department Stores absorbed lower profits in other segments, leading to improved sales and profits

Against this backdrop, the Takashimaya group continued to work on various initiatives aimed at strengthening sales capabilities. To maximize the appeal of its buildings and surroundings, the company advanced its urban development strategy that draws on the expertise of the Toshin Development Company, a subsidiary that manages collaborative group projects with local communities and the group’s real estate business, particularly for department stores. In addition to creating an anchor store that will draw people to the area, the combination of a department store and specialty stores, leveraging commercial development functions (a core business) covered by Toshin Development helped Takashimaya maximize the appeal of its buildings. The

09/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

company also began full-scale work on its "Group Reform Project," under which it will transition to digital technology and otherwise make radical changes in group management aimed at increasing efficiency. The company executed initiatives to improve operational efficiency, which will support its growth strategy.

Operating revenue As a result, consolidated operating revenue grew by 1.9% YoY and operating profit by 5.7% (+JPY500mn). By segment, at the domestic department store business, the parent drove earnings, as operating revenue grew by 1.5% and operating profit by 24.8% (+JPY700mn). Parent sales rose as sales (duty-free) to inbound tourists maintained double digit growth (+22% in March, +24% in April, +18% in May) and sales from alliances aimed at strengthening relationships with existing customers and securing new customers also contributed to results. We understand that of the JPY2.6bn growth in parent operating revenue, sales to inbound tourists accounted for JPY2.7bn (+21%) and sales from alliances accounted for JPY3.2bn (+35%). Since its opening in April 2017, the airport-style duty-free shop business has steadily increased its sales. Sales of JPY2.0bn in Q1 pointed to a solid start toward the full-year forecast for FY02/19 of JPY7.0bn.

Sales to inbound tourists

(JPYbn) Department stores: 56.0 (JPYbn) Department stores: 48.7 20 10% Inbound subsidary: 7.0 Inbound subsidary: 3.3 8.9% 70 63.0 14% 18 9% Department stores: 44.5 8.0% 7.6% 60 Inbound subsidary: 3.5 12% 16 7.4% 8% 52.0 1H Department stores: 37.0 48.0 14 6.2% 7% 50 Inbound subsidary: 8.0 45.0 8.8% 10% 5.7% 2H 12 6% 7.3% 5.0% 4.9% 40 34.4 8% 6.6% 6.8% 28.7 10 4.4%4.2% 4.3% 5% % of parent sales 29.9 24.7 4.2% 4.1% (right axis) 5.0% 30 6% 8 3.1% 15.0 15.3 4% 4.3% 13.7 19.2 12.6 14.0 15.6 6 2.2% 11.2 3% 20 23.3 23.3 4% 10.7 8.3 2.0% 1.3% 8.5 8.3 4 1.3% 7.2 7.2 7.1 8.0 2% 1.2% 6.0 6.9 10 9.6 14.4 15.2 2% 2 3.6 1% 4.8 2.3 2.1 0 3.5 4.4 0% 0 0% FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/18 FY02/18 FY02/19 Q1 Q1 Q1 Q1 Q1 Init. Est. Est. Est. FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 Source: Shared Research based on company data

Parent gross profit margin The parent-only gross profit margin on merchandise sales slipped 0.04pp YoY to 24.11%, but gross profit itself grew by JPY600mn YoY. The GPM is in a downtrend overall. Factors pushing it down are growth in relatively low-margin inbound and luxury sales, declines in high-margin apparel sales, and slowing growth in cosmetics sales. Factors pushing it up such as declining sales at the low-margin corporate business, company initiatives, and special factors, were not enough to offset these. That said, on the positive side, sales growth has driven growth in gross profit for five consecutive quarters.

Parent SG&A expenses Parent-only SG&A expenses of JPY41.3.0bn were down JPY100mn YoY. Under SG&A costs, personnel-related spending rose JPY100mn YoY to JPY13.5bn, advertising expenses rose JPY100mn to JPY6.7bn, general SG&A spending rose JPY100mn to JPY14.5bn, and accounting costs fell JPY500mn to JPY6.5bn. Increases in personnel spending were due to efforts to incorporate a subsidiary’s employees into the parent. Increases in general SG&A expenses were due to processing fees and distribution costs, which are linked to the fluctuation in sales. Increases in advertising expenses were due to the impact of advertising the company’s point campaign. Company forecasts were a JPY3.6bn YoY increase, but sales growth offset increases amid ongoing initiatives to cut costs. Note that from Q2, spending on the Nihombashi Takashimaya Shopping Center (new annex opening planned for September and grand opening in spring 2019) will rise, especially in Q2 ahead of the opening. The company forecasts consolidated SG&A expenses to rise by JPY10.8bn for full-year FY02/19. They rose JPY 1.5bn in Q1. We understand that this comprised upfront spending on the Nihombashi Takashimaya Shopping Center in the Real Estate business and an increase in growth oriented investments in the Finance business.

Operating profit Consolidated operating profit was JPY8.6bn, up JPY500mn YoY. By segment, operating profit was JPY4.0bn for Department Stores (+JPY1.0bn YoY), JPY2.6bn for Real Estate (-JPY100mn), and JPY1.2bn for Finance (slight decrease), while the Contract and Design

10/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

segment booked a JPY39mn operating loss, down JPY300mn YoY. Strong results in the Department Stores segment absorbed lower profits in the other segments. Each segment booked lower profits; the factors were a) Real Estate: Higher expenses due to opening a new annex (planned for September) and the East building (March 2018) of Nihombashi Takashimaya Shopping Center, b) Finance: Higher SG&A expenses, and c) Contract and Design: Reactionary downfall in profits after securing large orders in FY03/18. The company said operating profit in Contract and Design was in line with expectations.

Q2 outlook The strongly performing Department Store business looks likely to continue driving sales growth in Q2. Impacts from weather such as experienced in May are conceivable, but Takashimaya expects smooth progress on its inbound tourist and alliance strategies. The company said there was virtually no direct impact from the June 18 earthquake in northern Osaka, but customer traffic to its stores in Osaka (23% of Q1 parent sales including the Sakai store) was down by more than 10% YoY in the week after the earthquake. That said, the impact appears to be gradually easing. It is important to keep an eye on the impact on inbound tourist demand as the Osaka and Kyoto stores account for roughly 2/3 of inbound tourist sales (Q1 results), so Shared Research will be watching monthly trends.

In terms of costs, spending on the Group Reform Project and upfront investment in the Nihombashi Takashimaya Shopping Center will get into full swing from Q2. Neither of these had much impact on Q1. However, we note that the company forecasts a JPY1.7bn increase in full-year costs from the project and a lagged appearance of benefits (JPY1.3bn for the full-year). Takashimaya also expects a bump in costs in Q2 ahead of the September opening of the new annex at the Nihombashi Takashimaya Shopping Center.

Full-year changes in operating profit

40 -1.4

38 -2.2 +6.4 36 -1.2 -1.1 +0.7 34

Domestic department stores Group subsidiaries 35.3 32 34.0 34.5

30 Operating profit Sales Improvement Decrease in New business Poor performance Past-year rent Operating profit FY02/17 increase in GPM SG&A expenses at TSC at Singapore store FY02/18 (JPYbn) Source: Shared Research based on company data

Outlook from Q4 onward (as of Q3 FY02/18, for reference purposes only) From Q4 onward, the company expects the same trends as seen in Q3 to continue at both domestic and overseas department stores. It expects domestic department stores to continue to capture inbound demand, which will push down parent GPM but help to increase gross profit. If the stock market remains robust, the wealth effect is likely to continue. Another positive factor is that demand from middle-class customers is recovering after bottoming in summer 2017; the company is making progress cultivating new demand via alliances. Duty-free sales have been brisk, with instore sales reaching JPY12.6bn (+57%) in Q3 versus the 2H company forecast of JPY22bn in instore sales and JPY2.7bn from the duty-free sales subsidiary for a 14.6% YoY growth overall. Sales remained strong in December (estimated at +30% YoY) despite a high year-ago hurdle. Q3 sales were a modest JPY800mn at the duty-free subsidiary, but duty-free sales overall exceeded the company forecast and is likely to contribute toward higher gross profit.

We expect some benefit from measures to improve GPM, but think that the drop in GPM due to increased inbound demand (i.e., discount coupons apply to cosmetics, which are popular among inbound tourists) will continue through Q4 as in Q3. For SG&A expenses, we foresee an increase in personnel expenses along with sales growth, although we think expenses will be on budget overall. Of the overseas department stores, the recovery that started in Singapore in September will likely continue, while the operating loss in Vietnam will contract to less than the target JPY311mn.

Points to watch are the Nihombashi store and Bangkok store in FY02/19. The East Building of the Nihombashi store (to be occupied by specialty stores) is scheduled to open in spring 2018, followed by the new annex in fall (September or October 2018). Thereafter, remodeling of the Main Building will start, with the grand opening of the 66,000sqm Nihombashi Takashimaya Shopping Center scheduled for spring 2019. The company targets profit growth despite depreciation on both the department store and tenanted parts of the building (total investment is around JPY15bn). In Bangkok, the company plans to open Siam Takashimaya in fall 2018, in partnership with a leading local company Siam Piwat, which operates retail facilities.

In the Real Estate segment, the company expects Nihombashi Takashimaya Shopping Center to make a contribution after the disappearance of extraordinary factors in FY02/18, such as a two-month delay in the opening of a subsidiary dedicated to inbound sales at the Shinjuku store, and tenant replacement and remodeling at Nagareyama and other locations. The company expects sales and profit growth (or reduced losses) at overseas department stores assuming no changes in the external environment. In the Contract and Design segment, there is a significant order backlog buildup,

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and the project delayed from FY02/18 should also make a contribution. In the Finance segment, we expect a reduction in expenses associated with the 10th anniversary of the issue of the Gold Card recorded in FY02/18.

The company signed an agreement with Takeda Pharmaceutical Real Estate Company to acquire the land and buildings of Tokyo Takeda Building (acquisition price: JPY48.1bn) and Takeda Shin-Edobashi Building (acquisition price: JPY1.4bn), which are located near Takashimaya’s Nihombashi store. The properties are slated to be handed over to the company at end-March 2019. Takashimaya plans to bring together the headquarters, other offices, and group companies that are currently scattered around the Nihombashi area to the Tokyo Takeda Building, as the company aims to increase productivity of operations and advance management collectively as a group. We expect to see some positive effects of these efforts.

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Department stores Department stores FY02/17 FY02/18 FY02/19 FY02/17 FY02/18 FY02/19 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Act.Act.Init. Est. Change % of FY Operating revenue 187,520 192,111 - - - 793,896 24.2% Takashimaya (parent) 168,251 170,282 166,021 198,502 173,177 175,232 175,562 200,633 175,856 - 703,056 724,604 727,048 2,444 24.2% Difference 14,343 16,255 - - - 66,848 24.3% (Old standard) 192,315 192,281 187,614 225,043 197,351 199,351 200,063 229,796 202,912 - 797,253 826,561 839,896 13,335 24.2% Takashimaya (parent) 168,251 170,282 166,021 198,502 173,177 175,232 175,562 200,633 175,856 - 703,056 724,604 727,048 2,444 24.2% Difference 24,064 21,999 21,593 26,541 24,174 24,119 24,501 29,163 27,056 - 94,197 101,957 112,848 10,891 YoY 2.4% 1.2% Takashimaya (parent) 0.3% -1.7% -2.9% 0.1% 2.9% 2.9% 5.7% 1.1% 1.5% 0.3% Difference 13.3% (Old standard) -0.5% -3.6% -3.8% -0.5% 2.6% 3.7% 6.6% 2.1% 2.8% -2.1% 3.7% 1.6% Takashimaya (parent) 0.3% -1.7% -2.9% 0.1% 2.9% 2.9% 5.7% 1.1% 1.5% -1.0% 3.1% 0.3% Difference -6.1% -16.5% -10.1% -5.0% 0.5% 9.6% 13.5% 9.9% 11.9% -9.4% 8.2% 10.7% Operating profit 3,372 1,385 2,241 5,184 2,948 1,182 3,945 5,434 3,963 12,182 13,509 10,653 -2,856 37.2% Takashimaya (parent) 2,482 1,312 1,863 4,635 2,916 1,536 3,427 5,041 3,639 10,292 12,920 9,461 -3,459 38.5% Difference 890 73 378 549 32 -354 518 393 324 1,890 589 1,192 603 27.2% YoY 4.2% -35.3% -35.4% -15.4% -12.6% -14.7% 76.0% 4.8% 34.4% -18.7% 10.9% -21.1% Takashimaya (parent) 11.1% 2.3% -25.9% -5.5% 17.5% 17.1% 84.0% 8.8% 24.8% -5.9% 25.5% -26.8% Difference -11.1% -91.5% -60.4% -55.1% -96.4% - 37.0% -28.4% 912.5% -53.2% -68.8% 102.4% OPM (% of op. revenue) 1.6% 2.1% 1.3% Takashimaya (parent) 1.7% 2.1% 1.3% Difference 0.2% 2.0% 1.8% (Old standard) 1.8% 0.7% 1.2% 2.3% 1.5% 0.6% 2.0% 2.4% 2.0% 1.5% 1.6% 1.3% -0.4pp Takashimaya (parent) 1.5% 0.8% 1.1% 2.3% 1.7% 0.9% 2.0% 2.5% 2.1% 1.5% 1.8% 1.3% -0.5pp Difference 3.7% 0.3% 1.8% 2.1% 0.1% -1.5% 2.1% 1.3% 1.2% 2.0% 0.6% 1.1% +0.5pp Main subsidiaries FY02/17 FY02/18 FY02/19 FY02/17 FY02/18 FY02/19 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Act.Act.Init. Est. Change % of FY Operating revenue Takashimaya Singapore 13,264 12,009 10,942 14,530 12,233 12,610 12,149 15,515 13,258 50,745 52,507 54,038 1,531 24.5% Shanghai Takashimaya 1,748 1,467 1,469 1,649 1,779 1,617 1,748 1,858 1,928 6,333 7,002 8,007 1,005 24.1% Takashimaya Vietnam - - - - 1,019 984 - - 1,122 1,819 4,365 4,678 313 24.0% Siam Takashimaya (Thailand)------3,3833,383- YoY Takashimaya Singapore -2.9% -17.6% -16.4% -11.9% -7.8% 5.0% 11.0% 6.8% 8.4% -12.2% 3.5% Shanghai Takashimaya -6.4% -17.7% -12.6% -130.9% 1.8% 10.2% 19.0% 12.7% 8.4% - 10.6% Operating profit Takashimaya Singapore 967 422 623 1,141 653 707 620 1,642 802 3,153 3,622 3,239 -383 24.8% Shanghai Takashimaya -264 -272 -218 -226 -270 -297 -276 -297 -185 -980 -1,140 -848 292 21.8% Takashimaya Vietnam ---- -51 -90 ---16 -508 -281 -264 17 6.1% YoY Takashimaya Singapore 3.2% -57.9% -21.1% -15.2% -32.5% 67.7% -0.5% 43.9% 22.8% -22.6% 14.9% -10.6% Shanghai Takashimaya ------Takashimaya Vietnam------OPM Takashimaya Singapore 7.3% 3.5% 5.7% 7.9% 5.3% 5.6% 5.1% 10.6% 6.0% 6.2%6.9%6.0%-0.9pp Shanghai Takashimaya -15.1% -18.5% -14.8% -13.7% -15.2% -18.4% -15.8% -16.0% -9.6% -15.5% -16.3% -10.6% +5.7pp Takashimaya Vietnam -5.0% -9.1% -1.4% -27.9% -6.4% -5.6% +0.8pp Parent company performance

Parent earnings FY02/17 FY02/18 FY02/19 FY02/17 FY02/18 FY02/19 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Act.Act.Init. Est. Change % of FY Operating revenue 168,251 170,282 166,021 198,502 173,177 175,232 175,562 200,633 175,856 703,056 724,604 727,048 2,444 24.2% Sales 165,756 167,709 162,756 195,132 169,858 171,901 172,298 197,284 172,536 691,353 711,341 713,171 1,830 24.2% Difference 2,495 2,573 3,265 3,370 3,319 3,331 3,264 3,349 3,320 11,703 13,263 13,877 614 23.9% YoY 0.3% -1.7% -2.9% 0.1% 2.9% 2.9% 5.7% 1.1% 1.5% -1.0% 3.1% 0.3% Sales 0.3% -1.7% -3.4% -0.3% 2.5% 2.5% 5.9% 1.1% 1.6% -1.2% 2.9% 0.3% Difference 1.9% 0.8% 29.9% 29.6% 33.0% 29.5% -0.0% -0.6% 0.0% 15.7% 13.3% 4.6% Gross profit* 40,542 41,041 40,047 46,551 41,016 41,719 41,966 47,004 41,598 168,179 171,705 171,640 -65 24.2% GPM 24.5% 24.5% 24.6% 23.9% 24.1% 24.3% 24.4% 23.8% 24.1% 24.3% 24.1% 24.07% -0.07pp SG&A expenses 40,555 42,301 41,449 45,286 41,419 43,513 41,804 45,672 41,279 169,591 172,408 176,056 3,648 23.4% Personnel 13,283 14,472 13,968 15,434 13,419 14,670 14,031 15,702 13,548 57,157 57,822 59,719 1,897 22.7% Advertising 6,832 5,466 6,729 5,776 6,580 5,343 7,192 5,740 6,676 24,803 24,855 25,288 433 26.4% General and administrative 14,240 15,783 13,875 16,343 14,440 15,998 14,256 16,368 14,515 60,241 61,012 63,043 2,031 23.0% Other 6,198 6,580 6,878 7,732 6,979 7,501 6,376 7,503 6,539 27,388 28,359 28,006 -353 23.3% YoY -1.7% -1.8% -0.4% 0.4% 2.1% 2.9% 0.9% 0.9% -0.3% -0.8% 1.7% 2.1% Personnel -3.3% -2.1% -0.5% -0.2% 1.0% 1.4% 0.5% 1.7% 1.0% -1.5% 1.2% 3.3% Advertising -6.6% -5.4% -2.7% -6.5% -3.7% -2.3% 6.9% -0.6% 1.5% -5.3% 0.2% 1.7% General and administrative -0.0% -1.7% -6.1% -1.3% 1.4% 1.4% 2.7% 0.2% 0.5% -2.3% 1.3% 3.3% Other 4.3% 2.0% 16.8% 12.1% 12.6% 14.0% -7.3% -3.0% -6.3% 8.8% 3.5% -1.2% % of operating revenue 24.1% 24.8% 25.0% 22.8% 23.9% 24.8% 23.8% 22.8% 23.5% 24.1% 23.8% 24.2% +0.4pp Personnel 7.9%8.5%8.4%7.8%7.7%8.4%8.0%7.8%7.7% 8.1%8.0%8.2%+0.2pp Advertising 4.1%3.2%4.1%2.9%3.8%3.0%4.1%2.9%3.8% 3.5%3.4%3.5%+0.0pp General and administrative 8.5% 9.3% 8.4% 8.2% 8.3% 9.1% 8.1% 8.2% 8.3% 8.6%8.4%8.7%+0.3pp Other 3.7%3.9%4.1%3.9%4.0%4.3%3.6%3.7%3.7% 3.9%3.9%3.9%-0.1pp Operating profit 2,482 1,312 1,863 4,635 2,916 1,536 3,427 5,041 3,639 10,292 12,920 9,461 -3,459 38.5% YoY 11.1% 2.3% -25.9% -5.5% 17.5% 17.1% 84.0% 8.8% 24.8% -5.9% 25.5% -26.8% OPM 1.5%0.8%1.1%2.4%1.7%0.9%2.0%2.6%2.1% 1.5%1.8%1.3%-0.5pp Source: Shared Research based on company data

▷ Domestic department Stores: Sales and operating profit up 1.4% (+1.6% for parent sales) and 25% respectively. Sales steadily increased, led by large stores  Store measures: Opened Nihombashi Takashimaya Shopping Center East building in March 2018. The numbers of customers increased YoY at the Nihombashi store. Progress seen in attracting young families

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 Inbound: Strong results continued. In addition to previous initiatives, the company worked on establishing a shopping environment which includes multilingual announcements at small to medium sized stores as well as expanding mobile payments  Parent gross profit margin: Even though GPM declined 0.04pp YoY due to an increase in sales to inbound tourists, gross profit was up on increased sales. Various initiatives limited the decline in GPM  Parent SG&A expenses: Cost-cutting efforts were successful in Q1. Still, the company will incur costs associated with project and Nihombashi Shopping Center from Q2 ▷ Overseas department stores: All three locations reported higher sales and profits. Sales increased on positive momentum in the market environment in Singapore. Sales were up in Shanghai on effective use of an event sales space, and sales in Vietnam were steady

Domestic department store business The company plans to continue the following measures based on its long-term plan: promotion of an urban development strategy; further enrichment of product lineup and sections dedicated to distinctive products; and capturing demand from foreign tourists. It plans to develop new markets, for example by expanding the customer base to include younger customers, and to cultivate existing markets, by creating commercial facilities that maximize the lifetime value (LTV) of both new and existing customers.

Demand from inbound tourists There was a leap in inbound demand starting near the end of 2017. Both sales and number of transactions rose significantly (22% in March, 24% in April, 18% in May) as the company strove to construct a pleasant shopping environment for inbound tourists, including expanding mobile payments and using multilingual announcements in small and medium sized stores. In Q1, sales were up 21.5% YoY to JPY15.3bn, accounting for 7.18% of sales, nearly reaching the full-year target of 7.20%. Growth was solid at all of the core stores including Osaka (JPY7.6bn, +22%), Kyoto (JPY2.5bn, +64%) and Shinjuku (JPY3.4bn, +11%). It seems that the Osaka and Kyoto stores benefited from moves in FY02/18 to improve the environment for customers (more duty-free counters and assorted payment methods). In 2H, the company plans to renovate its POS system in order to improve the convenience of using assorted payment methods.

Sales to inbound tourists (JPYbn) (JPYbn) 20 10% Department stores: 56.0 8.9% Inbound subsidary: 7.0 18 9% 70 63.0 14% 8.0% 16 7.4% 7.6% 8% 60 12% Department stores: 48.7 52.0 14 7% 1H Inbound subsidary: 3.3 6.2% 50 10% 5.7% 8.8% 12 6% 5.0% 7.3% 4.9% 40 2H 34.4 8% 4.4% 4.3% 28.7 10 4.2% 4.2% 4.1% 5% 29.9 5.0% 8 4% 30 6% 3.1% 15.0 15.3 4.3% 13.7 19.2 6 12.6 3% 14.0 15.6 2.2% 11.2 10.7 20 23.3 4% 8.3 2.0% 4 1.3% 8.5 8.3 8.0 2% 1.3% 7.2 7.2 7.1 6.9 1.2% 6.0 10 9.6 14.4 15.2 2% 2 3.6 1% 4.8 2.3 2.1 0 0% 0 3.5 4.4 0% Q1 Q1 Q1 Q1 Q1 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 Est. FY02/15 FY02/16 FY02/17 FY02/18 FY02/19

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Sales by store (left: sales, right: share of sales)

(JPYbn) Shinjuku Osaka Others (JPYbn) Shinjuku Osaka Others (JPYmn) Shinjuku Osaka (JPYmn) Shinjuku Osaka 18 60 56.0 25% Duty-free total 18% Duty-free total 15.3 16 48.7 16% 50 13.5 20% 14 12.6 12.6 14% 11.2 12 40 34.4 12% 10.0 15% 29.9 10% 10 8.3 8.0 30 8 6.9 8% 7.6 24.0 10% 6.4 6 6.3 6.3 20 6% 5.3 14.0 15.1 3.4 5.0 11.7 4 2.9 3.5 8.3 5% 4% 10 2 4.9 2% 2.8 3.3 3.1 2.8 3.3 3.4 9.6 10.8 11.5 2.3 2.4 2.3 2.1 5.1 0 0 3.0 0% 0% Q1 Q1 Q1 FY02/14 FY02/16 FY02/18 Q1 Q1 Q1 FY02/14 FY02/16 FY02/18 FY02/17 FY02/18 FY02/19 FY02/17 FY02/18 FY02/19 Comparison with Japan Department Stores Association data (left: duty-free sales, right: non-duty-free sales)

(JPYbn) Japan Department Stores Association statistics (JPYbn) (JPYbn) Japan Department Stores Association statistics (JPYbn) Takashimaya (right axis) Takashimaya (right axis) 100 20 1,700 190 90 18 1,650 185 80 16 1,600 180 70 14 1,550 175 60 12 50 10 1,500 170 40 8 1,450 165 30 6 1,400 160 20 4 10 2 1,350 155 0 0 1,300 150 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 Source: Shared Research based on company data

Airport-style duty-free shop in Tokyo Earnings are improving at a subsidiary established to operate airport-style duty-free stores to capture inbound demand. A&S Takashimaya Duty Free, a joint venture with ANA Trading and Hotel Shilla (Korea), was opened at Shinjuku Takashimaya Times Square in April 2017. Management is looking for improvement in FY02/19, with sales rising to JPY7.0bn (JPY3.2bn in 1H and JPY3.8bn in 2H) and operating losses shrinking to JPY671mn. Sales were a solid JPY2.0bn in Q1, and have increased since store openings owing to synergies with the Shinjuku store. Shared Research believes that enhanced customer acquisition strategies undertaken in FY02/18 are working, just as with the inbound tourist business.

Product measures The company continued initiatives to maximize the attractiveness of its locations by strengthening its internally designed sales displays, an area of strength for department stores. In March 2018, in the Kyoto and Shinjuku stores the company opened custom-order menswear sales displays which aim to provide customized clothing to the new generation of businessmen to allow them to “enjoy individual characters.” The company strengthened its lineup of robotics and IoT products by doubling the sales space of the “Robotics Studio,” a permanent sales display for robot-related products, a first for department stores, which was opened in October 2017. The company aims to secure a new customer base by offering proposals for a new style of living in which robots and people live together in harmony.

Cosmetics (17% of FY02/18 sales) and household products (15%) continued to post strong results. The company said that luxury handbags were selling well. Inbound tourists are the main buyers of cosmetics and growth rates have inevitably started to slow following rapid growth. Roughly 40% of cosmetics sales came from inbound demand. Luxury products sales (art, jewelry, precious metals) also did well, rising 17% YoY thanks in part to the wealth effect of the robust stock market and inbound demand. Apparel meanwhile (29% of sales) slumped amid the poor weather in May, with menswear particularly poor.

Store measures The number of visitors to the Nihombashi store increased (+12.6% in March, +19.9% in April, +6.6% in May), due to the opening of the Pokemon Center Tokyo DX & Pokemon Café in the Nihombashi Takashimaya Shopping Center East building in March 2018. It appears that this project has led to an increase of young families with children, as expected. In April 2018, the company opened the new station store Eki Taka Izumigaoka Takashimaya in the concourse in front of the ticket gates in time for the completion of

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the renovations to the Izumigaoka Station on Semboku Rapid Railway. Along with the Senboku station, this new location aims to meet the lifestyle needs of local residents and those commuting to work or school.

In particular, the Osaka store, which has a high ratio of inbound tourists (sales ratio to inbound tourists:18% in FY02/18 versus 16% at Shinjuku store and 8% at Kyoto), saw sales rise 6.1% to JPY36.1bn. The Nihombashi store saw sales fall 3.2% to JPY31.5bn. Sales at the Yokohama store sales were up 1.2% (to JPY31.9bn), at the Shinjuku store up 4.8% (to JPY18.4bn), and at the Kyoto store up 5.3% (to JPY21.8bn). Falling sales at the Nihombashi store were largely due to construction work on the Nihombashi Takashimaya Shopping Center (reduced selling space) and store closures by major overseas brands (in summer 2017 and end-February 2018). The company said sales were solid excluding these factors.

Customer measures From April 2016, the company entered into an alliance with NTT docomo (gain a maximum of 3% d Points when using NTT docomo’s credit card service. From August, gain a maximum of 3% and pay with points even when using d Point Card). In October, the company expanded this service to the Ponta point service of Loyalty Marketing, Inc. This initiative appears to be leading to higher sales (JPY12.4bn in Q1, +35%) and higher numbers of young users. As a new initiative, the company became a partner company for the new AI agent service “my daiz™,” which NTT docomo launched in May 2018. The company aims to increase convenience by transmitting company sales information customized for the individual customer.

Sales by main product

Apparel Personal items Food Accessories 40% Cosmetics Art work and jewelry 20% 35% 15% 30% 25% 10% 20% 5% 15% 10% 0% 5% -5% 0% -5% -10% -10% -15% -15% Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Source: Shared Research based on company data

16/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Domestic department store sales

Domestic dept. stores FY02/17 FY02/18 FY02/19 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Act. Act. Init. Est. Change % of FY Sales 178,849 180,483 175,607 210,207 182,691 184,747 185,355 212,244 185,262 745,146 765,037 767,711 2,674 24.1% Parent 165,756 167,709 162,756 195,132 169,858 171,901 172,298 197,284 172,536 691,353 711,341 713,171 1,830 24.2% Osaka 31,083 30,674 30,884 37,311 33,998 33,462 34,577 39,413 36,066 129,952 141,450 143,187 1,737 25.2% Sakai 3,026 3,372 2,915 3,675 3,047 3,293 3,040 3,742 3,078 12,988 13,122 12,474 -648 24.7% Kyoto 20,363 20,470 20,070 23,912 20,697 21,015 21,528 24,886 21,785 84,815 88,126 89,330 1,204 24.4% Senboku 4,155 4,594 4,085 5,165 3,828 4,274 3,814 4,962 3,831 17,999 16,878 17,420 542 22.0% Tokyo (Nihombashi) 32,258 32,676 31,381 36,593 32,568 32,109 33,562 36,002 31,518 132,908 134,241 131,675 -2,566 23.9% Yokohama 31,099 31,358 30,838 36,136 31,512 31,975 32,011 36,151 31,902 129,431 131,649 133,390 1,741 23.9% Konandai 2,321 2,238 1,936 2,400 1,901 2,119 1,886 2,331 1,817 8,895 8,237 8,337 100 21.8% Shinjuku 17,267 16,864 16,495 20,217 17,550 17,256 17,641 20,884 18,397 70,843 73,331 74,552 1,221 24.7% Tamagawa 9,994 10,680 10,021 12,392 10,002 10,853 10,293 12,517 10,044 43,087 43,665 43,712 47 23.0% Tachikawa 3,347 3,691 3,373 4,178 3,312 3,586 2,477 2,957 2,268 14,589 12,332 10,021 -2,311 22.6% Omiya 2,357 2,672 2,346 2,754 2,313 2,693 2,392 2,760 2,301 10,129 10,158 10,353 195 22.2% Kashiwa 8,480 8,422 8,411 10,398 9,125 9,265 9,075 10,682 9,522 35,711 38,147 38,720 573 24.6% Okayama Takashiyama 4,471 4,307 4,422 5,115 4,628 4,428 4,591 5,027 4,475 18,315 18,674 19,085 411 23.4% Gifu Takashimaya 3,665 3,522 3,583 4,190 3,475 3,517 3,514 4,157 3,370 14,960 14,663 14,709 46 22.9% Yonago Takashimaya 1,337 1,344 1,268 1,384 1,189 1,204 1,166 1,353 1,097 5,333 4,912 4,837 -75 22.7% Takasaki Takashimaya 3,618 3,601 3,578 4,387 3,538 3,698 3,787 4,423 3,782 15,184 15,446 15,909 463 23.8% Yo Y 0.2% -1.8% -3.3% -0.4% 2.1% 2.4% 5.6% 1.0% 1.4% -1.3% 2.7% 0.3% Parent 0.3% -1.7% -3.4% -0.3% 2.5% 2.5% 5.9% 1.1% 1.6% -1.2% 2.9% 0.3% Osaka 3.0% -1.6% 0.5% 5.0% 9.4% 9.1% 12.0% 5.6% 6.1% 1.8% 8.8% 1.2% Sakai -5.5% -6.7% -7.5% -5.6% 0.7% -2.3% 4.3% 1.8% 1.0% -6.3% 1.0% -4.9% Kyoto -0.5% -1.5% -2.8% -0.6% 1.6% 2.7% 7.3% 4.1% 5.3% -1.3% 3.9% 1.4% Senboku -3.0% -3.1% -4.2% -3.0% -7.9% -7.0% -6.6% -3.9% 0.1% -3.3% -6.2% 3.2% Tokyo (Nihombashi) 3.6% 0.8% -9.7% -4.5% 1.0% -1.7% 7.0% -1.6% -3.2% -2.7% 1.0% -1.9% Yokohama -2.3% -3.1% -2.8% 0.1% 1.3% 2.0% 3.8% 0.0% 1.2% -2.0% 1.7% 1.3% Konandai 1.7% -12.4% -15.1% -15.8% -18.1% -5.3% -2.6% -2.9% -4.4% -10.8% -7.4% 1.2% Shinjuku 0.3% -0.3% 0.1% 1.9% 1.6% 2.3% 6.9% 3.3% 4.8% 0.6% 3.5% 1.7% Tamagawa 3.2% -0.6% -0.5% -0.1% 0.1% 1.6% 2.7% 1.0% 0.4% 0.4% 1.3% 0.1% Tachikawa -9.7% -7.3% -7.7% -5.3% -1.0% -2.8% -26.6% -29.2% -31.5% -7.4% -15.5% -18.7% Omiya -6.4% -1.3% -3.8% -3.9% -1.9% 0.8% 2.0% 0.2% -0.5% -3.8% 0.3% 1.9% Kashiwa -3.0% -2.4% 1.7% 3.0% 7.6% 10.0% 7.9% 2.7% 4.4% -0.0% 6.8% 1.5% Okayama Takashiyama -0.5% -3.6% -1.7% 1.1% 3.5% 2.8% 3.8% -1.7% -3.3% -1.1% 2.0% 2.2% Gifu Takashimaya -1.3% -2.7% -3.8% -1.9% -5.2% -0.1% -1.9% -0.8% -3.0% -2.4% -2.0% 0.3% Yonago Takashimaya -7.6% -8.9% -10.4% -16.4% -11.1% -10.4% -8.0% -2.2% -7.7% -11.0% -7.9% -1.5% Takasaki Takashimaya 0.1% -1.8% -0.1% 2.1% -2.2% 2.7% 5.8% 0.8% 6.9% 0.2% 1.7% 3.0% Source: Shared Research based on company data

By product (dom. dept.) FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H Sales 333,263 411,758 321,539 408,207 329,317 406,015 334,376 413,436 334,456 410,583 362,361 392,680 359,332 385,814 367,438 397,599 Apparel total 101,967 130,737 105,541 137,281 107,571 135,847 107,952 135,577 106,916 134,933 113,342 120,707 107,758 113,335 105,342 113,910 Menswear 21,819 29,225 21,201 29,001 21,570 28,925 21,431 28,878 21,214 29,816 22,661 25,813 21,905 23,928 20,886 24,438 Womenswear 62,551 80,750 66,816 87,520 68,469 86,649 68,908 86,360 67,756 85,330 71,863 77,068 68,041 72,690 66,593 72,589 Children's w ear 9,829 10,524 9,640 10,728 9,448 10,223 9,382 10,078 9,450 10,091 10,277 9,383 9,929 9,191 10,035 9,103 Other apparel 7,767 10,238 7,882 10,033 8,083 10,050 8,230 10,260 8,495 9,696 8,539 8,444 7,881 7,526 7,826 7,780 Personal items 55,578 64,940 46,023 57,329 48,546 57,811 50,112 60,143 50,597 58,735 55,272 58,182 53,700 56,963 55,938 60,770 Accessories total 42,224 51,693 39,750 48,778 40,493 50,094 42,569 52,865 44,654 55,134 52,422 57,921 56,655 61,734 63,720 68,087 Cosmetics 18,058 23,198 18,082 23,169 18,507 23,471 18,821 24,170 19,923 25,680 25,153 28,064 29,308 33,142 36,165 38,186 Art work and jewelry 13,457 16,334 12,293 14,989 13,174 16,581 15,380 18,825 16,436 20,222 19,309 20,003 18,645 19,364 19,587 20,527 Other accessories 10,708 12,161 9,374 10,620 8,812 10,041 8,367 9,870 8,294 9,231 7,959 9,853 8,702 9,228 7,967 9,374 Household goods total 28,258 32,015 26,684 31,277 26,781 30,033 27,473 31,471 27,809 29,494 28,613 28,810 28,095 26,596 25,423 25,225 Furniture 6,784 7,073 6,611 6,725 6,263 6,318 6,618 6,821 6,427 6,037 6,164 5,883 5,635 5,140 4,746 4,587 Home appliances 783 1,312 818 1,105 860 1,096 1,292 1,559 1,470 1,316 1,549 932 1,778 1,139 1,382 2,853 Other household goods 20,689 23,631 19,254 23,447 19,657 22,619 19,562 23,091 19,911 22,141 20,899 21,996 20,680 20,318 19,294 17,785 Foods total 94,903 121,213 93,741 121,902 95,448 120,501 95,303 121,146 93,284 120,246 100,447 114,536 100,129 114,691 101,196 114,421 Fresh produce 19,654 26,555 17,935 24,312 18,095 24,413 18,080 24,488 17,826 23,999 19,357 21,701 18,875 21,518 18,707 21,548 Confectionery 24,613 31,122 24,235 30,911 24,213 30,574 24,182 31,078 24,223 31,966 26,568 31,678 26,825 31,763 27,295 31,869 Deli foods 20,453 27,407 24,681 33,058 24,381 32,086 24,286 32,175 23,880 31,903 25,158 31,400 25,367 31,101 25,538 31,583 Other foods 30,183 36,127 26,888 33,621 28,757 33,428 28,753 33,405 27,354 32,378 29,363 29,757 29,061 30,308 29,655 29,421 Restaurant and cafes 6,319 6,767 6,020 6,865 6,425 6,891 6,796 7,079 6,888 7,083 7,399 6,716 7,392 6,625 7,497 6,519 Services and others 4,011 4,393 3,776 4,777 4,050 4,837 4,166 5,157 4,304 4,959 4,864 5,806 5,599 5,871 8,319 8,668 Sales -2.2% -0.7% -3.5% -0.9% 2.4% -0.5% 1.5% 1.8% 0.0% -0.7% 8.3% -4.4% -0.8% -1.7% 2.3% 3.1% Apparel total -4.2% -0.9% 3.5% 5.0% 1.9% -1.0% 0.4% -0.2% -1.0% -0.5% 6.0% -10.5% -4.9% -6.1% -2.2% 0.5% Menswear -4.8% -0.4% -2.8% -0.8% 1.7% -0.3% -0.6% -0.2% -1.0% 3.2% 6.8% -13.4% -3.3% -7.3% -4.7% 2.1% Womenswear -4.5% -1.1% 6.8% 8.4% 2.5% -1.0% 0.6% -0.3% -1.7% -1.2% 6.1% -9.7% -5.3% -5.7% -2.1% -0.1% Children's w ear -0.8% -1.7% -1.9% 1.9% -2.0% -4.7% -0.7% -1.4% 0.7% 0.1% 8.8% -7.0% -3.4% -2.0% 1.1% -1.0% Other apparel -5.0% 0.2% 1.5% -2.0% 2.6% 0.2% 1.8% 2.1% 3.2% -5.5% 0.5% -12.9% -7.7% -10.9% -0.7% 3.4% Personal items -0.0% -1.4% -17.2% -11.7% 5.5% 0.8% 3.2% 4.0% 1.0% -2.3% 9.2% -0.9% -2.8% -2.1% 4.2% 6.7% Accessories total -4.9% -0.5% -5.9% -5.6% 1.9% 2.7% 5.1% 5.5% 4.9% 4.3% 17.4% 5.1% 8.1% 6.6% 12.5% 10.3% Cosmetics -2.2% 1.3% 1.7% 3.0% 5.9% 6.2% 26.3% 9.3% 16.5% 18.1% 23.4% 15.2% 1.3% 0.1% -0.1% 2.4% Art work and jewelry -5.2% 10.6% 16.7% 13.5% 6.9% 7.4% 17.5% -1.1% -3.4% -3.2% 5.1% 6.0% Other accessories -8.8% -5.2% -12.5% -12.7% -6.0% -5.5% -5.0% -1.7% -0.9% -6.5% -4.0% 6.7% 9.3% -6.3% -8.4% 1.6% Household goods total -0.4% -1.7% -5.6% -2.3% 0.4% -4.0% 2.6% 4.8% 1.2% -6.3% 2.9% -2.3% -1.8% -7.7% -9.5% -5.2% Furniture 1.1% -6.1% 5.7% 8.0% -2.9% -11.5% -4.1% -2.6% -8.6% -12.6% -15.8% -10.8% 0.2% -2.6% -4.9% -5.3% Home appliances -22.6% -0.8% 50.2% 42.2% 13.8% -15.6% 5.4% -29.2% 14.8% 22.2% -22.3% 150.5% Other household goods 0.2% -2.3% -6.9% -0.8% 2.1% -3.5% -0.5% 2.1% 1.8% -4.1% 5.0% -0.7% -1.0% -7.6% -6.7% -12.5% Foods total -0.3% 0.9% -1.2% 0.6% 1.8% -1.1% -0.2% 0.5% -2.1% -0.7% 7.7% -4.7% -0.3% 0.1% 1.1% -0.2% Fresh produce -0.4% 1.3% -8.7% -8.4% 0.9% 0.4% -0.1% 0.3% -1.4% -2.0% 8.6% -9.6% -2.5% -0.8% -0.9% 0.1% Confectionery -1.4% -0.5% -1.5% -0.7% -0.1% -1.1% -0.1% 1.6% 0.2% 2.9% 9.7% -0.9% 1.0% 0.3% 1.8% 0.3% Deli foods -1.7% -0.1% 20.7% 20.6% -1.2% -2.9% -0.4% 0.3% -1.7% -0.8% 5.4% -1.6% 0.8% -1.0% 0.7% 1.5% Other foods 1.8% 2.6% -10.9% -6.9% 7.0% -0.6% -0.0% -0.1% -4.9% -3.1% 7.3% -8.1% -1.0% 1.9% 2.0% -2.9% Restaurant and cafes -3.0% -5.0% -4.7% 1.4% 6.7% 0.4% 5.8% 2.7% 1.4% 0.1% 7.4% -5.2% -0.1% -1.4% 1.4% -1.6% Services and others -5.2% -13.0% -5.9% 8.7% 7.3% 1.3% 2.9% 6.6% 3.3% -3.8% 13.0% 17.1% 15.1% 1.1% 48.6% 47.6% Source: Shared Research based on company data

17/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Parent gross profit margin

26.5% 0.0pp

25.9% 26.0% -0.1pp 25.7%25.7% 25.6% 25.6% 25.5% 25.5% 25.3% 25.4% 25.3% -0.2pp 25.2% 25.2% 25.2% 25.0% 25.0% 25.0% 24.8% -0.3pp 24.7% 24.7% 24.6% 24.6% 24.5% 24.5%24.5% 24.3% 24.4% 24.5% 24.3% -0.4pp 24.2% 24.1%

24.0% 23.9% 23.8% -0.5pp

23.5% -0.6pp Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 Source: Shared Research based on company data

Parent SG&A expenses (left), percent of sales (right)

Personnel Advertising General and admin. Other YoY (left axis) Personnel Advertising General and admin. 3% 60 Other SG&A (right axis) 10% 28%

2% 45.7 50 43.9 44.2 43.8 45.1 45.3 9% 27% 42.7 42.2 42.7 43.1 42.3 43.5 41.9 41.5 41.2 41.6 40.6 41.4 41.4 41.8 41.3 6.2 6.9 7.7 7.5 8% 26% 1% 7.4 7.4 7.7 6.4 6.5 6.6 7.5 40 7.1 6.4 5.6 5.9 5.9 6.2 6.9 7.0 6.4 6.5 7% 25%

0% 15.5 14.216.0 16.6 16.3 16.4 30 14.415.913.8 14.615.9 14.216.114.8 14.215.813.9 14.416.014.3 14.5 6% 24% 5% 23% -1% 5.7 6.2 5.8 5.7 20 7.1 5.3 6.9 5.7 6.9 5.4 7.4 7.3 5.8 6.9 6.8 5.5 6.7 6.6 5.3 7.2 6.7 4% 22% -2% 10 13.815.314.415.214.115.014.415.913.714.814.015.513.314.514.015.413.414.714.015.713.5 3% 21% -3% 0 2% 20% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYbn) FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 Source: Shared Research based on company data

Change in the Shinjuku store’s method of booking rents The Shinjuku store previously had an operation structure in which the parent managed the department store and subsidiary Toshin Development managed tenants. Under the new integrated system that began in 2H FY02/17, Toshin Development manages the entire building. Accounting wise, the parent now posts an amount that equals the rent it pays Toshin Development as operating revenue, and at the same time books the same amount as rent under SG&A expenses (Toshin Development does the same). While this change will not have any impact at the consolidated level, both the parent and Toshin Development saw a nominal increase of about JPY1.7bn (=six months) in both operating revenue and SG&A expenses in 1H FY02/18.

Note that by consolidating property management and facility management under Toshin Development, operations can be streamlined by trimming down the double cost of cleaning and security expenses. Moreover, it will lead to a stable rise in the value of the building as Toshin Development will be in charge of managing building maintenance.

Department stores overseas At the Takashimaya department store in Singapore, sales increased YoY and exceeded forecasts along with sales initiatives celebrating the 25th anniversary of the store opening, as well as the local economy recovering from the second half of 2017. At the Shanghai Takashimaya, sales increased (but missed forecasts slightly) and operating loss narrowed as the company added a new tenant, made use of a special “Nihonkan” sales space introducing Japanese culture and selling related specialty products, and strengthened its product lineup to meet local needs. At Takashimaya Ho Chi Minh City (opened July 30, 2016), sales were rose thanks to the store’s cosmetics offering (it boasts the largest offering in the region), food products that are sold in the basement floor, which recreates the Takashimaya stores in Japan, and an increase in card members as the local economy continues to experience growth.

In October 2018, the company plans to open Siam Takashimaya in Thailand in cooperation with a major local company, but as it is entering a commercial facility as a core tenant, the company is anticipating first-year sales of JPY1.2bn and an operating loss of JPY420mn. The company expects Siam Takashimaya to turn profitable in its second year.

18/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

quality services based on enhanced communication between the department stores and tenants, and implemented initiatives including building-wide sales promotions, with the aim of developing the Takashimaya brand throughout the buildings. In addition, remodeling was conducted in Kashiwa and Nagareyama, where the store is approaching the 10-year anniversary of its opening. At Nagareyama, to match the region’s theme of being “a town where young parents want to live,” the company established a children’s zone that includes children’s goods, a nursery, and a nursing room. As it approaches its 25th anniversary, the Kashiwa Takashimaya Station Mall is strengthening its fashion lineup geared toward working customers in their 30s and 40s, and has also added a large book store floor. Going forward, it plans to continue leveraging its competitive location (directly connected to JR Kashiwa Station, signifying convenience and daily traffic) and implement incremental renovations. In Q1, sales rose due to the sale of Yokohama Kitasaiwai apartment buildings and higher rent and management fee income due to the opening of Pokemon Center Tokyo DX & Pokemon Café and the Nihombashi Takashimaya East building in March 2018. However, profits fell due to higher expenses from these openings and the new building opening at Nihombashi Takashimaya Shopping Center. We understand that roughly half of the over JPY500mn YoY increase in operating revenue was due to condominium sales. The company said that it expects more condominium sales from Q2 onward and full-year operating profit of around JPY600mn from the business.

At Toshin Development Singapore Pte. Ltd., both sales and profits rose due to local economic recovery and the reactionary increase from high vacancies the previous year.

Real Estate performance

Real Estate FY02/17 FY02/18 FY02/19 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Act. Act. Init. Est. Change % of FY Operating revenue 10,671 10,438 10,024 16,790 9,960 9,965 9,875 17,676 10,504 47,923 47,476 45,782 -1,694 22.9% YoY 9.8% 5.1% -0.4% 64.2% -6.7% -4.5% -1.5% 5.3% 5.5% 13.1% -0.9% -3.6% Operating profit 2,912 2,514 2,494 3,108 2,783 2,317 2,444 3,849 2,638 11,028 11,393 10,304 -1,089 25.6% YoY 11.7% 4.1% -9.7% 23.8% -4.4% -7.8% -2.0% 23.8% -5.2% 7.1% 3.3% -9.6% OPM 27.3% 24.1% 24.9% 18.5% 27.9% 23.3% 24.7% 21.8% 25.1% 23.0% 24.0% 22.5% -1.5pp Main subsidiaries FY02/17 FY02/18 FY02/19 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Act. Act. Init. Est. Change % of FY Operating revenue Toshin Development 8,882 8,849 9,795 17,055 10,010 10,176 9,876 22,250 10,433 44,581 52,312 45,391 -6,921 23.0% TDS 2,376 2,197 2,070 2,142 2,224 2,215 2,220 2,293 2,272 8,785 8,952 9,059 107 25.1% YoY Toshin Development 3.8% 3.1% 10.8% 88.8% 12.7% 15.0% 0.8% 30.5% 4.2% 27.3% 17.3% -13.2% TDS 4.1% -10.1% -13.2% -10.0% -6.4% 0.8% 7.2% 7.0% 2.2% -7.4% 1.9% 1.2% Operating profit Toshin Development 2,188 1,968 1,988 2,696 2,182 1,802 1,736 3,324 2,026 8,840 9,044 7,943 -1,101 25.5% TDS 756 592 545 447 617 572 569 726 638 2,340 2,484 2,339 -145 27.3% YoY Toshin Development 5.9% 6.1% -6.4% 37.4% -0.3% -8.4% -12.7% 23.3% -7.1% 10.4% 2.3% -12.2% TDS 28.5% -2.1% -20.7% -25.0% -18.4% -3.4% 4.4% 62.4% 3.4% -5.5% 6.2% -5.8% OPM Toshin Development 24.6% 22.2% 20.3% 15.8% 21.8% 17.7% 17.6% 14.9% 19.4% 19.8% 17.3% 17.5% +0.2pp TDS 31.8% 26.9% 26.3% 20.9% 27.7% 25.8% 25.6% 31.7% 28.1% 26.6% 27.7% 25.8% -1.9pp Source: Shared Research based on company data

Finance Card usage continues to increase for transactions outside the Takashimaya group Operating revenue was even YoY at the company’s main subsidiary Takashimaya Credit Co., Ltd. due to higher SG&A expenses, despite higher sales from the increase in processing fees as the external transaction volume rose and it promoted the use of revolving credit. SG&A expenses were upfront investments aimed at future sales growth.

Finance performance

Finance FY02/17 FY02/18 FY02/19 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Act. Act. Init. Est. Change* % of FY Operating revenue 3,483 3,234 3,245 3,452 3,607 3,590 3,375 3,615 3,826 13,414 14,187 14,681 494 26.1% YoY 5.0% 6.5% 4.8% 1.1% 3.6% 11.0% 4.0% 4.7% 6.1% 4.3% 5.8% 3.5% Operating profit 1,173 1,129 1,059 1,134 1,190 1,053 1,025 1,295 1,167 4,495 4,563 4,724 161 24.7% YoY 2.4% 8.8% 1.1% -1.0% 1.4% -6.7% -3.2% 14.2% -1.9% 2.7% 1.5% 3.5% OPM 33.7% 34.9% 32.6% 32.9% 33.0% 29.3% 30.4% 35.8% 30.5% 33.5% 32.2% 32.2% +0.0pp Source: Shared Research based on company data

Contract and Design The company’s main subsidiary, Takashimaya Space Create Co., Ltd., saw lower sales and profits due to the reactionary downfall from large contracts in FY02/17, despite conducting proactive initiatives to increase orders. Still, as of Q4 FY02/18, the strong

19/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

operating environment had helped to foster a steady order flow, and the company had been strengthening its sales capabilities with the aim of further increasing revenue by finding more construction opportunities at hotels and other facilities that are benefiting from demand from inbound tourists. In Q1, sales were -23% YoY, but the company said this was as expected and the business was on track to meet its full-year forecasts.

Contract and Design performance

Contract and Design FY02/17 FY02/18 FY02/19 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Act. Act. Init. Est. Change % of FY Operating revenue 4,805 9,430 7,316 9,323 6,926 6,442 4,876 7,672 5,354 30,874 25,916 27,797 1,881 19.3% Takashimaya Space Create 5,309 10,850 8,547 9,815 7,631 6,944 6,670 8,075 6,198 34,521 29,320 31,300 1,980 19.8% YoY -3.5% 4.5% 115.1% 0.2% 44.1% -31.7% -33.4% -17.7% -22.7% 15.6% -16.1% 7.3% Takashimaya Space Create -13.0% 34.4% 37.9% -0.6% 43.7% -36.0% -22.0% -17.7% -18.8% 14.1% -15.1% 6.8% Operating profit -80 944 519 959 264 474 -170 639 -39 2,342 1,207 1,440 233 -2.7% Takashimaya Space Create -91 946 531 966 272 476 -159 642 -33 2,352 1,231 1,410 179 -2.3% YoY - 45.5% 1,004.3% -12.0% - -49.8% - -33.4% - 23.4% -48.5% 19.3% Takashimaya Space Create - 49.3% 1,297.4% -10.5% - -49.7% - -33.5% - 25.7% -47.7% 14.5% OPM -1.7% 10.0% 7.1% 10.3% 3.8% 7.4% -3.5% 8.3% -0.7% 7.6% 4.7% 5.2% Takashimaya Space Create -1.7% 8.7% 6.2% 9.8% 3.6% 6.9% -2.4% 8.0% -0.5% 6.8% 4.2% 4.5% +0.3pp Source: Shared Research based on company data

Other Sales and profits in the cross-media business improved as catalog orders grew significantly. However, overall profits fell as other businesses suffered from lower profits.

Other performance

Other FY02/17 FY02/18 FY02/19 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Act. Act. Init. Est. Change* % of FY Operating revenue 8,041 8,622 7,269 10,203 7,634 8,152 7,725 11,919 8,028 34,135 35,430 36,842 1,412 21.8% YoY 0.1% -3.0% -11.2% -6.1% -5.1% -5.5% 6.3% 16.8% 5.2% -5.1% 3.8% 4.0% Operating profit 166 281 620 1,266 550 803 689 1,289 455 2,333 3,331 2,877 -454 15.8% YoY 66.0% - 216.3% 37.8% 231.3% 185.8% 11.1% 1.8% -17.3% 55.9% 42.8% -13.6% OPM 2.1% 3.3% 8.5% 12.4% 7.2% 9.9% 8.9% 10.8% 5.7% 6.8% 9.4% 7.8% -1.6pp Source: Shared Research based on company data

Exchange rate

JPY/USD JPY/CNY JPY/HKD (right axis)

120 24

100 20

80 16

60 12 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Source: Shared Research based on data from Mizuho Bank, Ltd.

For details on previous quarterly and annual results, please refer to the Historical financial statements section.

20/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Full-year company forecasts

FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init. Est. Init. Est.* Change Operating revenue 1,205,872 1,184,236 1,114,481 1,026,353 1,031,150 1,049,405 1,042,711 976,116 877,762 869,476 858,123 870,333 904,180 912,523 929,588 923,601 949,572 919,000 965,000 +15,428 Department Stores 987,164 975,370 950,042 928,182 917,828 941,692 940,086 879,440 786,987 777,478 762,827 770,089 798,079 802,956 811,648 797,253 826,561 793,896 839,896 +13,335 Real Estate 19,628 18,178 16,282 22,751 16,974 24,088 29,040 29,590 29,401 29,434 32,259 33,863 36,804 38,102 42,389 47,923 47,476 45,782 -1,694 Finance 8,268 8,967 9,424 8,822 11,017 7,986 8,738 10,346 10,916 11,689 11,514 11,655 11,911 12,385 12,865 13,414 14,187 14,681 +494 Contract and Design 43,849 37,620 35,887 26,906 34,581 33,388 25,861 20,814 15,737 17,451 17,097 19,010 20,622 24,658 26,710 30,874 25,916 27,797 +1,881 Others 146,962 144,098 102,844 44,488 45,950 42,249 38,983 35,925 34,718 33,421 34,424 35,714 36,762 34,420 35,974 34,135 35,430 36,842 +1,412 YoY 1.1% -1.8% -5.9% -7.9% 0.5% 1.8% -0.6% -6.4% -10.1% -0.9% -1.3% 1.4% 3.9% 0.9% 1.9% -0.6% 2.8% 1.6% Department Stores 1.2% -1.2% -2.6% -2.3% -1.1% 2.6% -0.2% -6.5% -10.5% -1.2% -1.9% 1.0% 3.6% 0.6% 1.1% -1.8% 3.7% 1.6% Real Estate 50.0% -7.4% -10.4% 39.7% -25.4% 41.9% 20.6% 1.9% -0.6% 0.1% 9.6% 5.0% 8.7% 3.5% 11.3% 13.1% -0.9% -3.6% Finance 4.8% 8.5% 5.1% -6.4% 24.9% -27.5% 9.4% 18.4% 5.5% 7.1% -1.5% 1.2% 2.2% 4.0% 3.9% 4.3% 5.8% 3.5% Contract and Design -3.7% -14.2% -4.6% -25.0% 28.5% -3.4% -22.5% -19.5% -24.4% 10.9% -2.0% 11.2% 8.5% 19.6% 8.3% 15.6% -16.1% 7.3% Others -2.0% -1.9% -28.6% -56.7% 3.3% -8.1% -7.7% -7.8% -3.4% -3.7% 3.0% 3.7% 2.9% -6.4% 4.5% -5.1% 3.8% 4.0% Operating profit 18,929 16,444 25,360 28,996 32,755 33,860 37,699 24,810 13,428 18,173 21,099 25,476 29,099 32,022 32,972 34,000 35,318 30,000 -5,318 Department Stores 8,807 8,499 17,709 20,628 23,201 23,342 26,903 15,121 5,098 10,728 9,909 11,880 13,962 15,519 14,975 12,182 13,509 10,653 -2,856 Real Estate 7,407 6,564 3,914 5,209 5,661 6,316 7,671 6,982 6,491 6,613 7,184 7,757 8,380 9,528 10,297 11,028 11,393 10,304 -1,089 Finance 1,692 1,458 1,665 2,611 2,362 2,084 960 1,531 1,613 2,135 3,228 3,625 4,144 4,176 4,376 4,495 4,563 4,724 +161 Contract and Design -507 -413 -439 417 522 475 955 64 -501 121 217 868 1,110 1,439 1,898 2,342 1,207 1,440 +233 Others 1,479 1,390 3,186 1,042 1,229 2,085 1,688 1,271 938 -1,280 248 1,261 1,650 1,590 1,496 2,333 3,331 - -3,331 Adjustments 50 -1,057 -674 -913 -221 -443 -480 -161 -211 -144 310 83 -150 -231 -69 1,616 1,314 - YoY -4.9% -13.1% 54.2% 14.3% 13.0% 3.4% 11.3% -34.2% -45.9% 35.3% 16.1% 20.7% 14.2% 10.0% 3.0% 3.1% 3.9% -15.1% Department Stores 8.4% -3.5% 108.4% 16.5% 12.5% 0.6% 15.3% -43.8% -66.3% 110.4% -7.6% 19.9% 17.5% 11.2% -3.5% -18.7% 10.9% -21.1% Real Estate 35.9% -11.4% -40.4% 33.1% 8.7% 11.6% 21.5% -9.0% -7.0% 1.9% 8.6% 8.0% 8.0% 13.7% 8.1% 7.1% 3.3% -9.6% Finance -23.2% -13.8% 14.2% 56.8% -9.5% -11.8% -53.9% 59.5% 5.4% 32.4% 51.2% 12.3% 14.3% 0.8% 4.8% 2.7% 1.5% 3.5% Contract and Design ----25.2%-9.0% 101.1% -93.3% - - 79.3% 300.0% 27.9% 29.6% 31.9% 23.4% -48.5% 19.3% OPM 1.6% 1.4% 2.3% 2.8% 3.2% 3.2% 3.6% 2.5% 1.5% 2.1% 2.5% 2.9% 3.2% 3.5% 3.5% 3.7%3.7%3.3% -0.5pp Department Stores 0.9% 0.9% 1.9% 2.2% 2.5% 2.5% 2.9% 1.7% 0.6% 1.4% 1.3% 1.5% 1.7%1.9%1.8%1.5%1.6%1.3% -0.3pp Real Estate 37.7% 36.1% 24.0% 22.9% 33.4% 26.2% 26.4% 23.6% 22.1% 22.5% 22.3% 22.9% 22.8% 25.0% 24.3% 23.0% 24.0% 22.5% -1.5pp Finance 20.5% 16.3% 17.7% 29.6% 21.4% 26.1% 11.0% 14.8% 14.8% 18.3% 28.0% 31.1% 34.8% 33.7% 34.0% 33.5% 32.2% 32.2% +0.0pp Contract and Design -1.2% -1.1% -1.2% 1.5% 1.5% 1.4% 3.7% 0.3% -3.2% 0.7% 1.3% 4.6% 5.4% 5.8% 7.1% 7.6% 4.7% 5.2% +0.5pp Recurring profit 20,941 17,191 26,654 32,673 36,752 39,543 42,070 28,003 16,764 22,484 24,355 29,866 33,350 35,904 37,785 37,215 38,606 33,500 -5,106 Net income attrib. to Parent shareholders -57,509 3,935 -3,609 13,946 21,192 25,319 18,697 11,750 7,709 13,849 10,895 16,540 18,716 22,581 23,829 20,870 23,658 18,500 -5,158 Total assets 894,656 841,145 798,543 771,483 765,487 782,996 758,870 750,957 785,098 817,088 803,917 790,687 902,139 979,611 974,421 986,464 1,035,807 1,065,000 +29,193 Net assets 181,683 181,676 183,275 195,407 227,255 286,829 291,253 281,911 291,239 301,099 307,481 335,443 364,912 408,477 407,386 421,890 449,526 464,000 +14,474 ROA (RP-based) 2.4% 2.0% 3.3% 4.2% 4.8% 5.1% 5.5% 3.7% 2.2% 2.8% 3.0% 3.7% 3.9% 3.8% 3.9% 3.8%3.8%3.2% -0.6pp ROE -27.9% 2.2% -2.0% 7.4% 10.0% 9.9% 6.5% 4.1% 2.7% 4.7% 3.6% 5.2% 5.4% 5.9% 6.0% 5.1% 5.6% 4.1% -1.5pp Equity ratio 20.3% 21.6% 23.0% 25.3% 29.7% 36.2% 37.9% 37.1% 36.6% 36.3% 37.6% 41.7% 39.7% 40.9% 40.9% 41.8% 42.2% 42.5% +0.3pp CF from operating act ivit ies 36,987 65,551 41,970 25,692 28,772 28,762 65,480 14,686 23,428 20,645 31,921 44,141 40,582 41,018 25,638 42,266 36,870 54,000 +17,130 CF from inve st ing act ivit ies -18,413 -6,597 -20,570 1,445 -6,865 -10,075 -45,522 -38,348 -10,508 -13,240 -16,356 -28,470 -30,389 -116,049 -16,081 -9,124 -62,286 -90,000 -27,714 CF from financing act ivit ies -26,310 -59,954 2,310 -23,305 -32,544 -15,848 -35,125 14,121 14,817 7,673 -8,210 -32,931 64,391 11,619 -19,239 -4,228 14,185 17,000 +2,815 Depreciation 17,639 19,072 17,311 15,713 12,895 12,226 14,686 15,381 15,684 16,128 17,305 18,427 18,218 19,344 19,767 19,421 19,058 20,693 +1,635 Capit al expenditures 25,079 27,417 27,805 18,428 15,253 32,713 44,078 23,431 23,542 26,994 17,718 22,133 35,391 124,511 26,093 21,929 36,486 102,540 +66,054 Interest-bearing debt 270,580 213,274 214,388 193,552 163,067 116,491 84,758 102,236 120,555 131,762 127,479 98,846 167,529 163,518 154,600 155,262 174,262 194,000 +19,738 No. of employees (year end) 15,232 14,646 12,056 11,146 10,655 10,225 9,844 9,644 9,324 8,367 7,858 7,830 7,760 7,514 7,315 7,518 7,569 7,894 +325 No. of consolidated subsidiaries 30 30 25 26 27 26 26 25 25 23 21 22 22 22 23 262728 +1 No. of equity-method affiliates10119998877777777555 - Department Stores FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init. Est. Init. Est.* Change Operating revenue 987,164 975,370 950,042 928,182 917,828 941,692 940,086 879,440 786,987 777,478 762,827 770,089 798,079 802,956 811,648 797,253 826,561 793,896 839,896 +13,335 Takashimaya (parent) 994,406 963,694 935,991 841,909 844,290 849,453 843,025 785,826 706,417 697,861 684,215 690,334 701,773 699,656 710,161 703,056 724,604 727,048 727,048 +2,444 Difference -7,242 11,676 14,051 86,273 73,538 92,239 97,061 93,614 80,570 79,617 78,612 79,755 96,306 103,300 101,487 94,197 101,957 66,848 112,848 +10,891 YoY 1.2% -1.2% -2.6% -2.3% -1.1% 2.6% -0.2% -6.5% -10.5% -1.2% -1.9% 1.0% 3.6% 0.6% 1.1% -1.8% 3.7% -4.0% Takashimaya (parent) -0.6% -3.1% -2.9% -10.1% 0.3% 0.6% -0.8% -6.8% -10.1% -1.2% -2.0% 0.9% 1.7% -0.3% 1.5% -1.0% 3.1% 0.3% Difference -70.7% -261.2% 20.3% 514.0% -14.8% 25.4% 5.2% -3.6% -13.9% -1.2% -1.3% 1.5% 20.8% 7.3% -1.8% -7.2% 8.2% -34.4% Operating profit 8,807 8,499 17,709 20,628 23,201 23,342 26,903 15,121 5,098 10,728 9,909 11,880 13,962 15,519 14,975 12,182 13,509 10,653 -2,856 Takashimaya (parent) 8,347 8,181 18,014 18,872 21,330 20,051 22,856 12,062 3,212 7,838 6,421 7,738 10,777 12,250 10,940 10,292 12,920 9,461 -3,459 Difference 460 318 -305 1,756 1,871 3,291 4,047 3,059 1,886 2,890 3,488 4,142 3,185 3,269 4,035 1,890 589 1,192 +603 YoY 8.4% -3.5% 108.4% 16.5% 12.5% 0.6% 15.3% -43.8% -66.3% 110.4% -7.6% 19.9% 17.5% 11.2% -3.5% -18.7% 10.9% -21.1% Takashimaya (parent) 3.0% -2.0% 120.2% 4.8% 13.0% -6.0% 14.0% -47.2% -73.4% 144.0% -18.1% 20.5% 39.3% 13.7% -10.7% -5.9% 25.5% -26.8% Difference 2,090.5% -30.9% -195.9% -675.7% 6.5% 75.9% 23.0% -24.4% -38.3% 53.2% 20.7% 18.8% -23.1% 2.6% 23.4% -53.2% -68.8% 102.4% OPM 0.9% 0.9% 1.9% 2.2% 2.5% 2.5% 2.9% 1.7% 0.6% 1.4% 1.3% 1.5% 1.7% 1.9% 1.8% 1.5%1.6%1.3%1.3% Takashimaya (parent) 0.8% 0.8% 1.9% 2.2% 2.5% 2.4% 2.7% 1.5% 0.5% 1.1% 0.9% 1.1% 1.5% 1.8% 1.5% 1.5%1.8%1.3% -0.5pp Difference -6.4% 2.7% -2.2% 2.0% 2.5% 3.6% 4.2% 3.3% 2.3% 3.6% 4.4% 5.2% 3.3% 3.2% 4.0% 2.0% 0.6% 1.8% 1.1%+1.2pp Department Stores FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init. Est. Init. Est.* Change Operating revenue 987,164 975,370 950,042 928,182 917,828 941,692 940,086 879,440 786,987 777,478 762,827 770,089 798,079 802,956 811,648 797,253 826,561 793,896 839,896 +13,335 Domestic department store - - 940,970 905,364 914,261 922,021 914,567 852,620 765,566 755,397 740,047 745,757 758,338 755,239 765,466 757,171 778,624 781,917 781,917 +3,293 Takashimaya Singapore 23,860 25,021 22,306 24,909 30,721 36,145 40,198 39,318 33,837 35,268 37,480 39,710 49,980 55,015 57,818 50,745 52,507 18,118 54,038 +1,531 Shanghai Takashimaya ------2025,210 6,293 7,306 6,333 7,002 3,635 8,007 +1,005 Takashimaya Vietnam ------1,819 4,365 1,578 4,678 +313 Siam Takashimaya ------1,2273,383+3,383 Takashimaya Tomonokai - - 5,262 5,926 5,161 5,152 5,054 4,938 4,720 4,596 4,454 4,413 4,411 4,402 4,348 4,416 4,737 4,789 +52 R.T. Corporation - - 9,035 8,843 9,800 9,567 9,605 9,425 8,908 9,562 9,225 9,304 9,643 9,672 9,748 10,558 10,926 11,470 +544 Food and Partners ------59232320 +88 Dear Mayuko ------1853337 +284 A&S Takashimaya Duty Free------3,3077,000 +3,693 Fashion Plaza Sunroser ------4,8894,2954,0353,4682,8902,6042,548 YoY 1.2% -1.2% -2.6% -2.3% -1.1% 2.6% -0.2% -6.5% -10.5% -1.2% -1.9% 1.0% 3.6% 0.6% 1.1% -1.8% 3.7% 1.2% 1.6% Domestic department store --- -3.8% 1.0% 0.8% -0.8% -6.8% -10.2% -1.3% -2.0% 0.8% 1.7% -0.4% 1.4% -1.1% 2.8% 0.4% 0.4% Takashimaya Singapore - 4.9% -10.9% 11.7% 23.3% 17.7% 11.2% -2.2% -13.9% 4.2% 6.3% 5.9% 25.9% 10.1% 5.1% -12.2% 3.5% 2.9% Shanghai Takashimaya ------2,479.2% 20.8% 16.1% -13.3% 10.6% 14.4% Takashimaya Vietnam ------140.0% 7.2% Takashimaya Tomonokai - - - 12.6% -12.9% -0.2% -1.9% -2.3% -4.4% -2.6% -3.1% -0.9% -0.0% -0.2% -1.2% 1.6% 7.3% 1.1% R.T. Corporation ----2.1% 10.8% -2.4% 0.4% -1.9% -5.5% 7.3% -3.5% 0.9% 3.6% 0.3% 0.8% 8.3% 3.5% 5.0% Operating profit 8,807 8,499 17,709 23,201 20,628 23,342 26,903 15,121 5,098 10,728 9,909 11,880 13,962 15,519 14,975 12,182 13,509 10,653 -2,856 Domestic department store - - 18,198 20,245 22,856 22,172 24,795 12,695 3,443 8,058 6,910 8,415 11,524 12,744 11,375 10,781 13,601 10,000 -3,601 Takashimaya Singapore 257 652 633 1,193 2,009 2,718 3,107 2,986 2,815 2,897 3,454 3,599 3,915 4,302 4,076 3,153 3,622 3,239 -383 Shanghai Takashimaya ------84 - -219 -1,528 -1,955 -1,242 -980 -1,140 -848 +292 Takashimaya Vietnam ------508 -281 -264 +17 Siam Takashimaya ------420 -420 Takashimaya Tomonokai -- -1,021 -1,027 -932 -946 -1,027 -854 -958 -923 -1,001 -974 -935 -1,024 -1,007 -996 -963 -973 -10 R.T. Corporation - - 169 74 -157 -34 211 193 278 475 423 509 555 546 708 742 597 750 +153 Food and Partners ------186 -178 -188 -10 Dear Mayuko ------262 -286 -199 +87 A&S Takashimaya Duty Free------1,309 -671 +638 Fashion Plaza Sunroser ------169-109 -75 10 -4 -26 16 YoY 8.4% -3.5% 108.4% 31.0% -11.1% 13.2% 15.3% -43.8% -66.3% 110.4% -7.6% 19.9% 17.5% 11.2% -3.5% -18.7% 10.9% -21.1% Domestic department store - - - 11.2% 12.9% -3.0% 11.8% -48.8% -72.9% 134.0% -14.2% 21.8% 36.9% 10.6% -10.7% -5.2% 26.2% -26.5% Takashimaya Singapore - 153.7% -2.9% 88.5% 68.4% 35.3% 14.3% -3.9% -5.7% 2.9% 19.2% 4.2% 8.8% 9.9% -5.3% -22.6% 14.9% -10.6% R.T. Corporation ----56.2% ----8.5% 44.0% 70.9% -10.9% 20.3% 9.0% -1.6% 29.7% 4.8% -19.5% 25.6% OPM 0.9% 0.9% 1.9% 2.5% 2.2% 2.5% 2.9% 1.7% 0.6% 1.4% 1.3% 1.5% 1.7% 1.9% 1.8% 1.5%1.6%1.3% -0.3pp Domestic department store - - 1.9% 2.2% 2.5% 2.4% 2.7% 1.5% 0.4% 1.1% 0.9% 1.1% 1.5% 1.7% 1.5% 1.4% 1.7% 1.3% -0.5pp Takashimaya Singapore 1.1%2.6%2.8%4.8%6.5%7.5%7.7%7.6%8.3%8.2%9.2% 9.1% 7.8% 7.8% 7.0% 6.2% 6.9% 17.9% +11.0pp R.T. Corporation - - 1.9% 0.8% -1.6% -0.4% 2.2% 2.0% 3.1% 5.0% 4.6% 5.5% 5.8% 5.6% 7.3% 7.0% 5.5% 6.5% +1.1pp Source: Shared Research based on company data

21/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Parent earnings FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init. Est. Change Operating revenue 994,406 963,694 935,991 841,909 844,290 849,453 843,025 785,826 706,417 697,861 684,215 690,334 701,773 699,656 710,161 703,056 724,604 727,048 +2,444 Sales 984,853 952,824 922,899 831,006 832,917 838,388 832,345 775,774 696,570 687,845 674,262 680,255 691,580 689,779 700,045 691,353 711,341 713,171 +1,830 Difference 9,553 10,870 13,092 10,903 11,373 11,065 10,680 10,052 9,847 10,016 9,953 10,079 10,193 9,877 10,116 11,703 13,263 13,877 +614 YoY -0.6% -3.1% -2.9% -10.1% 0.3% 0.6% -0.8% -6.8% -10.1% -1.2% -2.0% 0.9% 1.7% -0.3% 1.5% -1.0% 3.1% 0.3% Sales -0.6% -3.3% -3.1% -10.0% 0.2% 0.7% -0.7% -6.8% -10.2% -1.3% -2.0% 0.9% 1.7% -0.3% 1.5% -1.2% 2.9% 0.3% Difference 3.5% 13.8% 20.4% -16.7% 4.3% -2.7% -3.5% -5.9% -2.0% 1.7% -0.6% 1.3% 1.1% -3.1% 2.4% 15.7% 13.3% 4.6% Gross profit 268,726 260,795 253,761 228,042 228,606 229,050 225,479 207,397 182,780 177,529 172,863 172,825 173,562 172,364 171,848 168,179 171,705 171,640 -65 GPM 27.3% 27.4% 27.5% 27.4% 27.4% 27.3% 27.1% 26.7% 26.2% 25.8% 25.6% 25.4% 25.1% 25.0% 24.5% 24.3% 24.1% 24.1% -0.0pp SG&A expenses 269,932 263,484 248,839 220,073 218,649 220,064 213,303 205,387 189,415 179,706 176,394 175,167 172,977 169,991 171,023 169,591 172,408 176,056 +3,648 Personnel 100,625 95,600 90,919 80,524 79,650 80,337 79,468 77,454 70,732 63,246 61,450 61,303 58,754 59,394 58,024 57,157 57,822 59,719 +1,897 Advertising 40,824 38,355 33,187 30,721 32,794 34,761 33,545 29,245 24,255 24,691 25,279 24,151 24,968 25,355 26,182 24,803 24,855 25,288 +433 General and administrative 81,030 83,367 81,692 69,780 67,151 66,100 66,549 64,648 61,029 60,306 58,569 59,460 59,555 60,698 61,640 60,241 61,012 63,043 +2,031 Other 47,451 46,159 43,039 39,046 39,053 38,864 33,740 34,039 33,399 31,463 31,095 30,252 29,700 24,543 25,176 27,388 28,359 28,006 -353 YoY -0.6% -2.4% -5.6% -11.6% -0.6% 0.6% -3.1% -3.7% -7.8% -5.1% -1.8% -0.7% -1.3% -1.7% 0.6% -0.8% 1.7% 2.1% Personnel -2.8% -5.0% -4.9% -11.4% -1.1% 0.9% -1.1% -2.5% -8.7% -10.6% -2.8% -0.2% -4.2% 1.1% -2.3% -1.5% 1.2% 3.3% Advertising 3.9% -6.0% -13.5% -7.4% 6.7% 6.0% -3.5% -12.8% -17.1% 1.8% 2.4% -4.5% 3.4% 1.5% 3.3% -5.3% 0.2% 1.7% General and administrative 1.4% 2.9% -2.0% -14.6% -3.8% -1.6% 0.7% -2.9% -5.6% -1.2% -2.9% 1.5% 0.2% 1.9% 1.6% -2.3% 1.3% 3.3% Other -2.9% -2.7% -6.8% -9.3% 0.0% -0.5% -13.2% 0.9% -1.9% -5.8% -1.2% -2.7% -1.8% -17.4% 2.6% 8.8% 3.5% -1.2% % of operating revenue 27.1% 27.3% 26.6% 26.1% 25.9% 25.9% 25.3% 26.1% 26.8% 25.8% 25.8% 25.4% 24.6% 24.3% 24.1% 24.1% 23.8% 24.2% +0.4pp Personnel 10.1% 9.9% 9.7% 9.6% 9.4% 9.5% 9.4% 9.9% 10.0% 9.1% 9.0% 8.9% 8.4% 8.5% 8.2% 8.1% 8.0% 8.2% +0.2pp Advertising 4.1% 4.0% 3.5% 3.6% 3.9% 4.1% 4.0% 3.7% 3.4% 3.5% 3.7% 3.5% 3.6% 3.6% 3.7% 3.5%3.4%3.5% +0.0pp General and administrative 8.1% 8.7% 8.7% 8.3% 8.0% 7.8% 7.9% 8.2% 8.6% 8.6% 8.6% 8.6% 8.5% 8.7% 8.7% 8.6% 8.4% 8.7% +0.3pp Other 4.8%4.8%4.6%4.6%4.6%4.6%4.0%4.3%4.7%4.5%4.5%4.4%4.2%3.5%3.5% 3.9% 3.9% 3.9% -0.1pp Operating profit 8,347 8,181 18,014 18,872 21,330 20,051 22,856 12,062 3,212 7,838 6,421 7,738 10,777 12,250 10,940 10,292 12,920 9,461 YoY 3.0% -2.0% 120.2% 4.8% 13.0% -6.0% 14.0% -47.2% -73.4% 144.0% -18.1% 20.5% 39.3% 13.7% -10.7% -5.9% 25.5% -26.8% OPM 0.8%0.8%1.9%2.2%2.5%2.4%2.7%1.5%0.5%1.1%0.9%1.1%1.5%1.8%1.5%1.5% 1.8% 1.3% -0.5pp Domestic dept. store FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init. Est. Change Operating revenue 940,970 905,364 914,261 922,021 914,567 852,620 765,566 755,397 740,047 745,757 758,338 755,239 765,466 757,171 778,624 781,917 +3,293 Takashimaya (parent) 935,991 841,909 844,290 849,453 843,025 785,826 706,417 697,861 684,215 690,334 701,773 699,656 710,161 703,056 724,604 727,048 +2,444 Okayama Takashiyama -22,834 25,521 25,449 24,556 22,857 19,672 18,994 18,358 18,153 18,895 18,680 18,644 18,443 18,797 19,211 +414 Gifu Takashimaya -15,677 17,414 19,874 20,181 19,104 17,282 16,531 16,138 15,801 16,088 15,476 15,396 15,015 14,686 14,723 +37 Yonago Takashimaya 4,979 8,903 8,584 8,711 8,322 7,658 6,891 6,605 6,423 6,368 6,386 6,182 6,023 5,393 5,004 4,950 -54 Takasaki Takashimaya -16,041 18,453 18,534 18,482 17,175 15,305 14,507 14,915 15,099 15,194 15,244 15,240 15,261 15,530 15,985 +455 YoY --3.8% 1.0% 0.8% -0.8% -6.8% -10.2% -1.3% -2.0% 0.8% 1.7% -0.4% 1.4% -1.1% 2.8% 0.4% Takashimaya (parent) --10.1% 0.3% 0.6% -0.8% -6.8% -10.1% -1.2% -2.0% 0.9% 1.7% -0.3% 1.5% -1.0% 3.1% 0.3% Okayama Takashiyama --11.8%-0.3% -3.5% -6.9% -13.9% -3.4% -3.3% -1.1% 4.1% -1.1% -0.2% -1.1% 1.9% 2.2% Gifu Takashimaya - - 11.1% 14.1% 1.5% -5.3% -9.5% -4.3% -2.4% -2.1% 1.8% -3.8% -0.5% -2.5% -2.2% 0.3% Yonago Takashimaya -78.8%-3.6% 1.5% -4.5% -8.0% -10.0% -4.2% -2.8% -0.9% 0.3% -3.2% -2.6% -10.5% -7.2% -1.1% Takasaki Takashimaya - - 15.0% 0.4% -0.3% -7.1% -10.9% -5.2% 2.8% 1.2% 0.6% 0.3% -0.0% 0.1% 1.8% 2.9% Sales 927,867 894,160 902,511 910,560 903,509 842,194 755,358 745,021 729,746 735,332 747,812 745,039 755,041 745,146 765,037 767,711 +2,674 Takashimaya (parent) 922,899 831,006 832,917 838,388 832,345 775,774 696,570 687,845 674,262 680,255 691,580 689,779 700,045 691,353 711,341 713,171 +1,830 Four subsidiaries 4,968 63,154 69,594 72,172 71,164 66,420 58,788 57,176 55,484 55,077 56,232 55,260 54,996 53,793 53,696 54,540 +844 YoY --3.6% 0.9% 0.9% -0.8% -6.8% -10.3% -1.4% -2.1% 0.8% 1.7% -0.4% 1.3% -1.3% 2.7% 0.3% Takashimaya (parent) --10.0% 0.2% 0.7% -0.7% -6.8% -10.2% -1.3% -2.0% 0.9% 1.7% -0.3% 1.5% -1.2% 2.9% 0.3% Four subsidiaries -1,171.2% 10.2% 3.7% -1.4% -6.7% -11.5% -2.7% -3.0% -0.7% 2.1% -1.7% -0.5% -2.2% -0.2% 1.6% Gross profit 254,955 244,372 246,597 247,701 243,799 224,272 197,569 191,718 186,597 186,358 187,194 185,601 184,687 180,591 184,059 184,137 +78 Takashimaya (parent) 253,761 228,042 228,606 229,050 225,479 207,397 182,780 177,529 172,863 172,825 173,562 172,364 171,848 168,179 171,705 171,640 -65 Four subsidiaries 1,194 16,330 17,991 18,651 18,320 16,875 14,789 14,189 13,734 13,533 13,632 13,237 12,839 12,412 12,354 12,497 +143 GPM 27.48% 27.33% 27.32% 27.20% 26.98% 26.63% 26.16% 25.73% 25.57% 25.34% 25.03% 24.91% 24.46% 24.24% 24.06% 23.99% -0.07pp Takashimaya (parent) 27.50% 27.44% 27.45% 27.32% 27.09% 26.73% 26.24% 25.81% 25.64% 25.41% 25.10% 24.99% 24.55% 24.33% 24.14% 24.07% -0.07pp Four subsidiaries 24.03% 25.86% 25.85% 25.84% 25.74% 25.41% 25.16% 24.82% 24.75% 24.57% 24.24% 23.95% 23.35% 23.07% 23.01% 22.91% -0.09pp SG&A expenses 249,860 235,331 235,491 236,990 230,062 222,003 204,334 194,036 189,988 188,368 186,196 183,057 183,737 181,835 184,045 188,343 +4,298 Takashimaya (parent) 248,839 220,073 218,649 220,064 213,303 205,387 189,415 179,706 176,394 175,167 172,977 169,991 171,023 169,591 172,408 176,056 +3,648 Four subsidiaries 1,021 15,258 16,842 16,926 16,759 16,616 14,919 14,330 13,594 13,201 13,219 13,066 12,714 12,244 11,637 12,287 +650 Personnel 91,227 85,953 85,565 86,327 85,445 83,441 76,279 68,394 66,185 65,866 63,288 63,845 62,255 61,244 61,825 63,827 +2,002 Advertising 33,314 31,946 34,224 36,068 34,660 30,106 24,750 25,249 25,894 24,808 25,662 26,123 26,923 25,608 25,695 26,097 +402 General and administrative 82,191 75,693 73,823 73,040 73,456 71,545 67,088 66,195 64,351 65,077 65,221 66,271 67,212 65,592 66,311 68,421 +2,110 Other 43,126 41,736 41,876 41,553 36,500 36,908 36,217 34,197 33,557 32,615 32,024 26,817 27,346 29,389 30,212 29,998 -214 YoY --5.8% 0.1% 0.6% -2.9% -3.5% -8.0% -5.0% -2.1% -0.9% -1.2% -1.7% 0.4% -1.0% 1.2% 2.3% Takashimaya (parent) - -11.6% -0.6% 0.6% -3.1% -3.7% -7.8% -5.1% -1.8% -0.7% -1.3% -1.7% 0.6% -0.8% 1.7% 2.1% Four subsidiaries -1,394.4% 10.4% 0.5% -1.0% -0.9% -10.2% -3.9% -5.1% -2.9% 0.1% -1.2% -2.7% -3.7% -5.0% 5.6% Personnel --5.8% -0.5% 0.9% -1.0% -2.3% -8.6% -10.3% -3.2% -0.5% -3.9% 0.9% -2.5% -1.6% 0.9% 3.2% Advertising --4.1% 7.1% 5.4% -3.9% -13.1% -17.8% 2.0% 2.6% -4.2% 3.4% 1.8% 3.1% -4.9% 0.3% 1.6% General and administrative - -7.9% -2.5% -1.1% 0.6% -2.6% -6.2% -1.3% -2.8% 1.1% 0.2% 1.6% 1.4% -2.4% 1.1% 3.2% Other --3.2% 0.3% -0.8% -12.2% 1.1% -1.9% -5.6% -1.9% -2.8% -1.8% -16.3% 2.0% 7.5% 2.8% -0.7% % of operating revenue 26.6% 26.0% 25.8% 25.7% 25.2% 26.0% 26.7% 25.7% 25.7% 25.3% 24.6% 24.2% 24.0% 24.0% 23.6% 24.1% +0.5pp Takashimaya (parent) 26.6% 26.1% 25.9% 25.9% 25.3% 26.1% 26.8% 25.8% 25.8% 25.4% 24.6% 24.3% 24.1% 24.1% 23.8% 24.2% +0.4pp Four subsidiaries 20.5% 24.0% 24.1% 23.3% 23.4% 24.9% 25.2% 24.9% 24.3% 23.8% 23.4% 23.5% 23.0% 22.6% 21.5% 22.4% +0.9pp Personnel 9.7% 9.5% 9.4% 9.4% 9.3% 9.8% 10.0% 9.1% 8.9% 8.8% 8.3% 8.5% 8.1% 8.1% 7.9% 8.2% +0.2pp Advertising 3.5% 3.5% 3.7% 3.9% 3.8% 3.5% 3.2% 3.3% 3.5% 3.3% 3.4% 3.5% 3.5% 3.4% 3.3% 3.3% +0.0pp General and administrative 8.7% 8.4% 8.1% 7.9% 8.0% 8.4% 8.8% 8.8% 8.7%8.7%8.6%8.8%8.8%8.7%8.5%8.8% +0.2pp Other 4.6%4.6%4.6%4.5%4.0%4.3%4.7%4.5%4.5%4.4%4.2%3.6%3.6%3.9%3.9% 3.8% -0.0pp Operating profit 18,198 20,245 22,856 22,172 24,795 12,695 3,443 8,058 6,910 8,415 11,524 12,744 11,375 10,781 13,601 10,000 -3,601 Takashimaya (parent) 18,014 18,872 21,330 20,051 22,856 12,062 3,212 7,838 6,421 7,738 10,777 12,250 10,940 10,292 12,920 9,461 -3,459 Okayama Takashiyama - 421 599 604 464 -57 -252 -179 10 74 39 -75 -92 118 114 101 -13 Gifu Takashimaya -115-1 693 573 166 221 175 220 241 239 83 11 -91 61 -67 -128 Yonago Takashimaya 184 205 178 163 171 55 13 -38 -32 -66 19 -23 -68 -136 32 48 +16 Takasaki Takashimaya - 631 750 661 732 468 249 262 291 427 449 509 585 599 473 457 -16 YoY - 11.2% 12.9% -3.0% 11.8% -48.8% -72.9% 134.0% -14.2% 21.8% 36.9% 10.6% -10.7% -5.2% 26.2% -26.5% Takashimaya (parent) - 4.8% 13.0% -6.0% 14.0% -47.2% -73.4% 144.0% -18.1% 20.5% 39.3% 13.7% -10.7% -5.9% 25.5% -26.8% Takasaki Takashimaya - 646.2% 11.1% 39.0% -8.6% -67.4% -63.5% -4.8% 122.3% 38.4% 10.3% -33.9% -11.9% 12.4% 39.3% -20.9% OPM 1.9% 2.2% 2.5% 2.4% 2.7% 1.5% 0.4% 1.1% 0.9% 1.1% 1.5% 1.7% 1.5% 1.4% 1.7% 1.3% -0.5pp Takashimaya (parent) 1.9% 2.2% 2.5% 2.4% 2.7% 1.5% 0.5% 1.1% 0.9% 1.1% 1.5% 1.8% 1.5% 1.5% 1.8% 1.3% -0.5pp Okayama Takashiyama - 1.8% 2.3% 2.4% 1.9% -0.2% -1.3% -0.9% 0.1% 0.4% 0.2% -0.4% -0.5% 0.6% 0.6% 0.5% -0.1pp Gifu Takashimaya -0.7%-0.0% 3.5% 2.8% 0.9% 1.3% 1.1% 1.4% 1.5% 1.5% 0.5% 0.1% -0.6% 0.4% -0.5% -0.9pp Yonago Takashimaya 3.7% 2.3% 2.1% 1.9% 2.1% 0.7% 0.2% -0.6% -0.5% -1.0% 0.3% -0.4% -1.1% -2.5% 0.6% 1.0% +0.3pp Takasaki Takashimaya - 3.9% 4.1% 3.6% 4.0% 2.7% 1.6% 1.8% 2.0% 2.8% 3.0% 3.3% 3.8% 3.9% 3.0% 2.9% -0.2pp Source: Shared Research based on company data

22/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

By store (domestic dept.) FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init. Est. Change Sales -- 927,867 894,160 902,511 910,560 903,509 842,194 755,358 745,021 729,746 735,332 747,812 745,039 755,041 745,146 765,037 767,711 +2,674 Parent - - 922,899 831,006 832,917 838,388 832,345 775,774 696,570 687,845 674,262 680,255 691,580 689,779 700,045 691,353 711,341 713,171 +1,830 Osaka 163,642 154,976 172,251 163,558 162,967 142,543 139,535 124,371 107,898 114,907 117,890 119,997 120,685 122,526 127,630 129,952 141,450 143,187 +1,737 Sakai 21,023 22,794 - - - 18,779 18,393 17,756 16,589 15,883 15,618 15,386 15,171 14,243 13,860 12,988 13,122 12,474 -648 Kyoto 112,701 110,847 108,540 103,522 101,555 103,415 104,193 98,236 90,364 85,370 83,878 83,866 85,191 84,384 85,945 84,815 88,126 89,330 +1,204 Senboku 25,799 25,587 24,973 23,739 23,554 24,107 24,193 23,221 21,571 20,932 20,681 20,419 20,178 19,525 18,614 17,999 16,878 17,420 +542 Tokyo (Nihombashi) 184,681 164,943 153,946 154,604 159,028 162,584 159,081 146,473 130,795 127,092 124,242 126,124 129,901 129,843 136,631 132,908 134,241 131,675 -2,566 Yokohama 164,960 175,333 174,469 166,217 170,872 159,892 159,471 148,988 135,489 134,029 131,794 131,776 135,370 134,848 132,035 129,431 131,649 133,390 +1,741 Konandai 14,502 - - - - 13,035 13,007 12,325 11,186 11,017 10,816 10,614 10,634 10,379 9,968 8,895 8,237 8,337 +100 Shinjuku 79,875 82,675 82,690 79,540 79,908 77,947 76,840 76,107 67,835 66,088 61,678 63,701 66,081 67,902 70,441 70,843 73,331 74,552 +1,221 Tamagawa 44,680 43,786 44,241 46,329 47,663 49,137 49,719 46,754 42,301 41,781 40,515 40,936 42,468 42,434 42,908 43,087 43,665 43,712 +47 Tachikawa 32,622 31,588 31,345 29,000 28,881 28,519 27,721 24,758 21,243 19,840 17,347 18,117 17,778 16,988 15,753 14,589 12,332 10,021 -2,311 Omiya 21,355 20,852 20,364 18,346 17,351 17,234 17,302 16,066 14,106 13,779 13,128 12,666 11,722 10,907 10,528 10,129 10,158 10,353 +195 Kashiwa 42,320 44,457 43,342 41,449 41,134 41,192 42,884 40,713 37,189 37,121 36,670 36,646 36,394 35,793 35,726 35,711 38,147 38,720 +573 Okayama Takashiyama 27,829 27,339 26,271 26,503 25,382 25,318 24,431 22,727 19,536 18,852 18,223 18,014 18,760 18,549 18,517 18,315 18,674 19,085 +411 Gifu Takashimaya 20,249 19,425 18,478 18,316 17,327 19,763 20,074 18,998 17,186 16,433 16,041 15,715 16,002 15,397 15,330 14,960 14,663 14,709 +46 Yonago Takashimaya 10,746 10,751 14,026 8,870 8,537 8,664 8,277 7,616 6,847 6,577 6,396 6,341 6,363 6,158 5,993 5,333 4,912 4,837 -75 Takasaki Takashimaya 19,122 19,095 18,990 17,401 18,346 18,426 18,379 17,076 15,217 15,311 14,823 15,005 15,105 15,154 15,155 15,184 15,446 15,909 +463 Yo Y - - - -3.6% 0.9% 0.9% -0.8% -6.8% -10.3% -1.4% -2.1% 0.8% 1.7% -0.4% 1.3% -1.3% 2.7% 0.3% Parent ----10.0% 0.2% 0.7% -0.7% -6.8% -10.2% -1.3% -2.0% 0.9% 1.7% -0.3% 1.5% -1.2% 2.9% 0.3% Osaka -4.8% -5.3% -2.1% -10.9% -13.2% 6.5% 2.6% 1.8% 0.6% 1.5% 4.2% 1.8% 8.8% 1.2% -3.1% -5.0% -0.4% -1.0% Sakai 1.3% 8.4% -2.1% -3.5% -6.6% -4.3% -1.7% -1.5% -1.4% -6.1% -2.7% -6.3% 1.0% -4.9% Kyoto -0.1% -1.6% -2.1% -4.6% -1.9% 1.8% 0.8% -5.7% -8.0% -5.5% -1.7% -0.0% 1.6% -0.9% 1.8% -1.3% 3.9% 1.4% Senboku 0.1% -0.8% -2.4% -4.9% -0.8% 2.3% 0.4% -4.0% -7.1% -3.0% -1.2% -1.3% -1.2% -3.2% -4.7% -3.3% -6.2% 3.2% Tokyo (Nihombashi) -3.9% -10.7% -6.7% 0.4% 2.9% 2.2% -2.2% -7.9% -10.7% -2.8% -2.2% 1.5% 3.0% -0.0% 5.2% -2.7% 1.0% -1.9% Yokohama 2.3% -0.3% -6.6% -9.1% -1.1% -1.7% -0.0% 2.7% -0.4% -2.1% -2.0% 1.7% 1.3% -2.3% -0.5% -4.7% 2.8% 1.2% Konandai -0.7% -0.2% -5.2% -9.2% -1.5% -1.8% -1.9% 0.2% -2.4% -4.0% -10.8% -7.4% 1.2% Shinjuku 2.7% 3.5% 0.0% -3.8% 0.5% -2.5% -1.4% -1.0% -10.9% -2.6% -6.7% 3.3% 3.7% 2.8% 3.7% 0.6% 3.5% 1.7% Tamagaw a 0.2% -2.0% 1.0% 4.7% 2.9% 3.1% 1.2% -6.0% -9.5% -1.2% -3.0% 1.0% 3.7% -0.1% 1.1% 0.4% 1.3% 0.1% Tachikawa -2.3% -3.2% -0.8% -7.5% -0.4% -1.3% -2.8% -10.7% -14.2% -6.6% -12.6% 4.4% -1.9% -4.4% -7.3% -7.4% -15.5% -18.7% Omiya -0.8% -2.4% -2.3% -9.9% -5.4% -0.7% 0.4% -7.1% -12.2% -2.3% -4.7% -3.5% -7.5% -7.0% -3.5% -3.8% 0.3% 1.9% Kashiwa 9.4% 5.0% -2.5% -4.4% -0.8% 0.1% 4.1% -5.1% -8.7% -0.2% -1.2% -0.1% -0.7% -1.7% -0.2% -0.0% 6.8% 1.5% Okayama Takashiyama 4.7% -1.8% -3.9% 0.9% -4.2% -0.3% -3.5% -7.0% -14.0% -3.5% -3.3% -1.1% 4.1% -1.1% -0.2% -1.1% 2.0% 2.2% Gifu Takashimaya -3.6% -4.1% -4.9% -0.9% -5.4% 14.1% 1.6% -5.4% -9.5% -4.4% -2.4% -2.0% 1.8% -3.8% -0.4% -2.4% -2.0% 0.3% Yonago Takashimaya -0.3% 0.0% 30.5% -36.8% -3.8% 1.5% -4.5% -8.0% -10.1% -3.9% -2.8% -0.9% 0.3% -3.2% -2.7% -11.0% -7.9% -1.5% Takasaki Takashimaya - -0.1% -0.5% -8.4% 5.4% 0.4% -0.3% -7.1% -10.9% 0.6% -3.2% 1.2% 0.7% 0.3% 0.0% 0.2% 1.7% 3.0% Overseas dept. stores FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init. Est. Init. Est.* Change Operating revenue (simple sum) 23,860 25,021 24,296 26,691 33,085 38,512 42,202 41,032 35,340 35,914 37,480 39,912 55,190 61,308 65,124 58,897 63,874 24,558 70,106 +6,232 Takashimaya Singapore 23,860 25,021 22,306 24,909 30,721 36,145 40,198 39,318 33,837 35,268 37,480 39,710 49,980 55,015 57,818 50,745 52,507 18,118 54,038 +1,531 Shanghai Takashimaya ------2025,2106,2937,3066,3337,0023,635 8,007 +1,005 Takashimaya Vietnam ------1,8194,3651,5784,678+313 Siam Takashimaya ------1,2273,383+3,383 Takashimaya Enterprise Inc.--336800------Takashimaya New York Inc.--1,6541,702302------Takashimaya New York LLC----2,0622,3672,0041,7141,503646------YoY -4.9%-2.9% 9.9% 24.0% 16.4% 9.6% -2.8% -13.9% 1.6% 4.4% 6.5% 38.3% 11.1% 6.2% -9.6% 8.5% 9.8% Takashimaya Singapore - 4.9% -10.9% 11.7% 23.3% 17.7% 11.2% -2.2% -13.9% 4.2% 6.3% 5.9% 25.9% 10.1% 5.1% -12.2% 3.5% 2.9% Shanghai Takashimaya ------2,479.2% 20.8% 16.1% -13.3% 10.6% 14.4% Takashimaya Vietnam ------140.0% 7.2% Operating profit (simple sum) 257 652 655 1,272 1,529 2,422 2,864 2,655 2,499 2,693 3,454 3,380 2,387 2,347 2,834 1,665 2,201 1,707 -494 Takashimaya Singapore 257 652 633 1,193 2,009 2,718 3,107 2,986 2,815 2,897 3,454 3,599 3,915 4,302 4,076 3,153 3,622 3,239 -383 Shanghai Takashimaya ------84 - -219 -1,528 -1,955 -1,242 -980 -1,140 -848 +292 Takashimaya Vietnam ------508 -281 -264 +17 Siam Takashimaya ------420 -420 Takashimaya Enterprise Inc. - - -31 -33 -9 ------Takashimaya New York Inc. - - 53 112 -221 ------Takashimaya New York LLC-----250 -296 -243 -331 -316 -120 ------YoY - 153.7% 0.5% 94.2% 20.2% 58.4% 18.2% -7.3% -5.9% 7.8% 28.3% -2.1% -29.4% -1.7% 20.7% -41.2% 32.2% -22.4% Takashimaya Singapore - 153.7% -2.9% 88.5% 68.4% 35.3% 14.3% -3.9% -5.7% 2.9% 19.2% 4.2% 8.8% 9.9% -5.3% -22.6% 14.9% -10.6% OPM 1.1% 2.6% 2.7% 4.8% 4.6% 6.3% 6.8% 6.5% 7.1% 7.5% 9.2% 8.5% 4.3% 3.8% 4.4% 2.8%3.4%7.0%2.4%-1.0pp Takashimaya Singapore 1.1%2.6%2.8%4.8%6.5%7.5%7.7%7.6%8.3%8.2%9.2% 9.1% 7.8% 7.8% 7.0% 6.2% 6.9% 17.9% 6.0% -0.9pp Shanghai Takashimaya ------108.4% -29.3% -31.1% -17.0% -15.5% -16.3% -23.3% -10.6% +5.7pp Takashimaya Vietnam ------27.9% -6.4% -16.7% -5.6% +0.8pp Real Estate FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init. Est. Change Operating revenue 19,628 18,178 16,282 22,751 16,974 24,088 29,040 29,590 29,401 29,434 32,259 33,863 36,804 38,102 42,389 47,923 47,476 45,782 -1,694 Toshin Development 20,995 18,286 19,286 21,471 27,483 28,557 33,749 34,701 34,435 29,787 31,424 32,111 33,549 33,956 35,008 44,581 52,312 45,391 -6,921 TDS ------4,789 5,782 6,115 7,618 8,528 9,490 8,785 8,952 9,059 +107 YoY 50.0% -7.4% -10.4% 39.7% -25.4% 41.9% 20.6% 1.9% -0.6% 0.1% 9.6% 5.0% 8.7% 3.5% 11.3% 13.1% -0.9% -3.6% Toshin Development - -12.9% 5.5% 11.3% 28.0% 3.9% 18.2% 2.8% -0.8% -13.5% 5.5% 2.2% 4.5% 1.2% 3.1% 27.3% 17.3% -13.2% TDS ------20.7%5.8%24.6%11.9%11.3%-7.4% 1.9% 1.2% Operating profit 7,407 6,564 3,914 5,209 5,661 6,316 7,671 6,982 6,491 6,613 7,184 7,757 8,380 9,528 10,297 11,028 11,393 10,304 -1,089 Toshin Development 3,570 3,181 3,554 5,199 5,470 6,080 7,459 6,797 6,372 5,646 6,005 6,588 6,886 7,754 8,006 8,840 9,044 7,943 -1,101 TDS ------1,018 1,368 1,356 1,681 1,961 2,476 2,340 2,484 2,339 -145 YoY 35.9% -11.4% -40.4% 33.1% 8.7% 11.6% 21.5% -9.0% -7.0% 1.9% 8.6% 8.0% 8.0% 13.7% 8.1% 7.1% 3.3% -9.6% Toshin Development - -10.9% 11.7% 46.3% 5.2% 11.2% 22.7% -8.9% -6.3% -11.4% 6.4% 9.7% 4.5% 12.6% 3.2% 10.4% 2.3% -12.2% TDS ------34.4%-0.9% 24.0% 16.7% 26.3% -5.5% 6.2% -5.8% OPM 37.7% 36.1% 24.0% 22.9% 33.4% 26.2% 26.4% 23.6% 22.1% 22.5% 22.3% 22.9% 22.8% 25.0% 24.3% 23.0% 24.0% 22.5% -1.5pp Toshin Development 17.0% 17.4% 18.4% 24.2% 19.9% 21.3% 22.1% 19.6% 18.5% 19.0% 19.1% 20.5% 20.5% 22.8% 22.9% 19.8% 17.3% 17.5% +0.2pp TDS ------21.3%23.7%22.2%22.1%23.0%26.1%26.6%27.7%25.8% -1.9pp Finance FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init. Est. Change Operating revenue 8,268 8,967 9,424 8,822 11,017 7,986 8,738 10,346 10,916 11,689 11,514 11,655 11,911 12,385 12,865 13,414 14,187 14,681 +494 Takashimaya Credit 10,733 11,011 11,501 11,667 11,673 12,237 13,590 15,124 15,247 15,894 15,542 15,759 16,205 16,789 17,257 17,662 18,444 19,098 +654 YoY 4.8% 8.5% 5.1% -6.4% 24.9% -27.5% 9.4% 18.4% 5.5% 7.1% -1.5% 1.2% 2.2% 4.0% 3.9% 4.3% 5.8% 3.5% Takashimaya Credit - 2.6% 4.5% 1.4% 0.1% 4.8% 11.1% 11.3% 0.8% 4.2% -2.2% 1.4% 2.8% 3.6% 2.8% 2.3% 4.4% 3.5% Operating profit 1,692 1,458 1,665 2,611 2,362 2,084 960 1,531 1,613 2,135 3,228 3,625 4,144 4,176 4,376 4,495 4,563 4,724 +161 Takashimaya Credit 642 323 987 1,862 2,356 2,094 967 1,536 1,615 2,135 3,229 3,625 4,101 4,137 4,341 4,468 4,543 4,805 +262 YoY -23.2% -13.8% 14.2% 56.8% -9.5% -11.8% -53.9% 59.5% 5.4% 32.4% 51.2% 12.3% 14.3% 0.8% 4.8% 2.7% 1.5% 3.5% Takashimaya Credit - -49.7% 205.6% 88.7% 26.5% -11.1% -53.8% 58.8% 5.1% 32.2% 51.2% 12.3% 13.1% 0.9% 4.9% 2.9% 1.7% 5.8% OPM 20.5% 16.3% 17.7% 29.6% 21.4% 26.1% 11.0% 14.8% 14.8% 18.3% 28.0% 31.1% 34.8% 33.7% 34.0% 33.5% 32.2% 32.2% +0.0pp Takashimaya Credit 6.0% 2.9% 8.6% 16.0% 20.2% 17.1% 7.1% 10.2% 10.6% 13.4% 20.8% 23.0% 25.3% 24.6% 25.2% 25.3% 24.6% 25.2% +0.5pp Contract and Design FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act. Act. Act. Init. Est. Change Operating revenue 43,849 37,620 35,887 26,906 34,581 33,388 25,861 20,814 15,737 17,451 17,097 19,010 20,622 24,658 26,710 30,874 25,916 27,797 +1,881 Takashimaya Space Create 30,443 36,300 35,747 38,488 30,890 38,775 32,687 24,891 20,908 21,293 19,175 23,647 24,893 28,327 30,251 34,521 29,320 31,300 +1,980 Takashimaya Space Create Tohoku ------551773910564533800 +267 YoY -3.7% -14.2% -4.6% -25.0% 28.5% -3.4% -22.5% -19.5% -24.4% 10.9% -2.0% 11.2% 8.5% 19.6% 8.3% 15.6% -16.1% 7.3% Takashimaya Space Create - 19.2% -1.5% 7.7% -19.7% 25.5% -15.7% -23.9% -16.0% 1.8% -9.9% 23.3% 5.3% 13.8% 6.8% 14.1% -15.1% 6.8% Takashimaya Space Create Tohoku ------40.3%17.7%-38.0% -5.5% 50.1% Operating profit -507 -413 -439 417 522 475 955 64 -501 121 217 868 1,110 1,439 1,898 2,342 1,207 1,440 +233 Takashimaya Space Create -71 -207 -237 520 524 468 966 2 -523 126 217 870 1,123 1,414 1,871 2,352 1,231 1,410 +179 Takashimaya Space Create Tohoku ------1 -12 25 27 -9 -23 30 +53 YoY -227.4% -18.5% 6.3% -195.0% 25.2% -9.0% 101.1% -93.3% -882.8% -124.2% 79.3% 300.0% 27.9% 29.6% 31.9% 23.4% -48.5% 19.3% Takashimaya Space Create - 191.5% 14.5% -319.4% 0.8% -10.7% 106.4% -99.8% -26,250.0% -124.1% 72.2% 300.9% 29.1% 25.9% 32.3% 25.7% -47.7% 14.5% OPM -1.2% -1.1% -1.2% 1.5% 1.5% 1.4% 3.7% 0.3% -3.2% 0.7% 1.3% 4.6% 5.4% 5.8% 7.1% 7.6% 4.7% 5.2% +0.5pp Takashimaya Space Create -0.2% -0.6% -0.7% 1.4% 1.7% 1.2% 3.0% 0.0% -2.5% 0.6% 1.1% 3.7% 4.5% 5.0% 6.2% 6.8% 4.2% 4.5% +0.3pp Takashimaya Space Create Tohoku ------2.2% 3.2% 3.0% -1.6% -4.3% 3.8% +8.1pp Source: Shared Research based on company data

23/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Others FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init. Est. Change Operating revenue 146,962 144,098 102,844 44,488 45,950 42,249 38,983 35,925 34,718 33,421 34,424 35,714 36,762 34,420 35,974 34,135 35,430 36,842 +1,412 YoY -2.0% -1.9% -28.6% -56.7% 3.3% -8.1% -7.7% -7.8% -3.4% -3.7% 3.0% 3.7% 2.9% -6.4% 4.5% -5.1% 3.8% 4.0% Operating profit 1,479 1,390 3,186 1,042 1,229 2,085 1,688 1,271 938 -1,280 248 1,261 1,650 1,590 1,496 2,333 3,331 - YoY -66.3% -6.0% 129.2% -67.3% 17.9% 69.7% -19.0% -24.7% -26.2% -236.5% -119.4% 408.5% 30.8% -3.6% -5.9% 55.9% 42.8% OPM 1.0%1.0%3.1%2.3%2.7%4.9%4.3%3.5%2.7%-3.8% 0.7% 3.5% 4.5% 4.6% 4.2% 6.8% 9.4% - Source: Shared Research based on company data

Overview of initial forecasts (FY02/19) Forecast of operating profit decrease owing to growth-oriented spending, with return to profit growth from FY02/20 For FY02/19, the company forecasts operating revenue of JPY919bn (+1.2% YoY) and operating profit of JPY30bn (-13.2%, down JPY5.3bn).

In FY02/18, Takashimaya set as its objective “building a group management base supportive of evolution of the Machi-Zukuri (urban development) initiative.” In FY02/19, the company expects a temporary downswing in profit owing to forward spending aimed at future growth (JPY1.9bn in openings costs for the Nihombashi Takashimaya Shopping Center, Group Reform Project costs of JPY400mn, and another JPY400mn in opening costs for Siam Takashimaya (Thailand)), and anticipates further pressure from a JPY1.3bn increase in personnel costs (a nominal increase of JPY2.0bn on a non-consolidated basis as a subsidiary’s employees are incorporated into the parent). From FY02/20, however, Takashimaya sees earnings recovering and growth accelerating; it looks for operating profit to increase JPY6.0bn YoY to JPY36.0bn in FY02/20, beating the FY02/18 result.

At the Department Stores business, Takashimaya expects spending by inbound travelers and domestic consumers to remain firm, and projects an increase in sales of JPY3.3bn. It anticipates a 0.06pp decline in the GPM, but looks for gross profit to rise by nearly JPY200mn. Nonetheless, the company sees operating profit falling JPY3.6bn, due in part to a JPY4.3bn increase in SGA& expenses (on factors including a JPY1.3bn increase in opening costs for the Nihombashi Takashimaya Shopping Center and a JPY2.0bn increase in personnel costs). In the overseas department store business, Takashimaya expects higher sales at each location (total value basis), but for Singapore it projects a fall in profit in the absence of protracted rent-related gains seen in FY02/18, and in the first year of operation for Siam Takashimaya (Thailand), it expects to book losses of JPY420mn including for opening costs. In regard to group companies, Takashima forecasts a JPY2.9bn decrease in profit overall, despite a JPY640mn narrowing of operating losses in the second year of operation for a joint venture with ANA Trading and Hotel Shilla (running airport style duty-free shops).

Elsewhere, in the real estate segment, the company forecasts lower sales and profits in the absence of the previous year’s domestic condominium sales (BRANZ Yokohama). In the Finance segment, the company sees sales and profits increasing thanks to campaigns to acquire new members and promote card usage at department stores and partner stores. Finally, for the Contract and Design segment, the company forecasts growth in both sales and profits, underpinned by a steady increase in orders and measures to strengthen sales capabilities.

Previously, sales for “purchase-as-sold” consignment transaction by overseas subsidiaries were shown in gross revenue, however from FY02/19 Takashimaya will display sales from consignment transaction at net revenue, the portion that represents income to the company. Using the same accounting standard as FY02/18, guidance is for sales of JPY965bn, up 1.6% YoY.

24/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Factors contributing to operating profit

36 -0.5 35 +1.6 -0.4 34 -2.4 +0.4 -1.9 33 +0.6 32 -2.3 31 35.3 30 -0.4 29 30.0 28 27 Operating Absence Gain on Rent decrease Subsidiaries' Absence of Group-wide Opening costs Domestic Opening costs Operating profit of gain on condo disposal at Shinjuku performance past-year rent reform project at Nhombashi stores excl. at Siam store profit FY02/18 condo disposal carried forward store in Singapore S.C. Nihombashi FY02/19 (JPYbn) Source: Shared Research based on company data

Earnings (left), operating profit (right)

(JPYbn) Department Stores Operating revenue Operating profit (right axis) (JPYbn) Finance 37.7 35.3 Contract and Design 33.9 34.0 1,400 35 Real Estate 32.8 32.0 33.0 30.0 1,1941,192 1,206 1,184 Others 29.0 29.1 1,200 1,114 30 30 7.7 25.4 25.5 1,0261,031 1,049 1,043 24.8 976 5.7 6.3 930 947 25 1,000 904 913 924 919 5.2 21.1 878 869 858 870 19.9 18.9 18.2 9.5 20 16.4 3.9 10.3 11.4 800 20 7.0 8.4 11.0 13.6 13.4 15 7.8 10.3 26.9 6.6 7.2 600 7.4 6.6 23.2 23.3 10 3.2 5.5 20.6 17.7 6.5 15.1 14.0 15.5 15.0 13.5 400 10 10.7 11.9 12.2 10.7 5 9.5 8.1 8.8 8.5 9.9 5.1 200 0 0 0 -5 FY02/00 FY02/05 FY02/10 FY02/15 FY02/00 FY02/05 FY02/10 FY02/15 Source: Shared Research based on company data Note: Operating revenue (JPY919bn) in the company plan for FY02/19 refers to net revenue rather than gross revenue.

FY02/20 For FY02/20, Takashimaya targets operating profit of JPY36.0bn (+JPY6.0bn YoY; +20% YoY), surpassing the FY02/18 result of JPY35.3bn and marking a return to profit growth, with further increases in profit projected in FY02/21 onward. Factors buoying profits likely will include (1) a JPY1.2bn contribution from the Nihombashi Takashimaya Shopping Center, comprising a boost to revenue from the September 2018 opening (JPY400mn at Toshin Development) and a reduction in the temporary costs seen squeezing FY02/19 profits (JPY800mn at the parent); (2) a JPY2.4bn improvement in group companies’ earnings, including approximately JPY600mn from new businesses (such as airport-style duty free shop operator A&S Takashimaya Duty Free, and the beauty and lifestyle brand dear mayuko), about JPY500mn from the Contract and Design business, and around JPY200mn from the Finance business; (3) a JPY1.1bn contribution from overseas operations including JPY400mn from Siam Takashimaya turning profitable, and increases in profit at each overseas operation; and (4) a JPY800mn contribution from the Group Reform Project, which likely will entail JPY400mn in costs in FY02/19, but lift profit by JPY400mn in FY02/20.

Factors contributing to operating profits

(JPYbn)

+0.5 35 +1.1

+2.4

+0.8 +1.2 36.0 30

30.0

25 Operating profit Decrease in opening costs Group-wide Domestic group Overseas business Other Operating profit FY02/19 at Nihombashi SC reform project subsidiaries FY02/20

Source: Shared Research based on company data

25/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Domestic department stores

Department Stores FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init. Est. Init. Est.* Change Operating revenue 987,164 975,370 950,042 928,182 917,828 941,692 940,086 879,440 786,987 777,478 762,827 770,089 798,079 802,956 811,648 797,253 826,561 793,896 839,896 +13,335 Domestic department store - - 940,970 905,364 914,261 922,021 914,567 852,620 765,566 755,397 740,047 745,757 758,338 755,239 765,466 757,171 778,624 781,917 781,917 +3,293 Takashimaya Singapore 23,860 25,021 22,306 24,909 30,721 36,145 40,198 39,318 33,837 35,268 37,480 39,710 49,980 55,015 57,818 50,745 52,507 18,118 54,038 +1,531 Shanghai Takashimaya ------2025,210 6,293 7,306 6,333 7,002 3,635 8,007 +1,005 Takashimaya Vietnam ------1,819 4,365 1,578 4,678 +313 Siam Takashimaya ------1,2273,383+3,383 Takashimaya Tomonokai - - 5,262 5,926 5,161 5,152 5,054 4,938 4,720 4,596 4,454 4,413 4,411 4,402 4,348 4,416 4,737 4,789 +52 R.T. Corporation - - 9,035 8,843 9,800 9,567 9,605 9,425 8,908 9,562 9,225 9,304 9,643 9,672 9,748 10,558 10,926 11,470 +544 Food and Partners ------59232320 +88 Dear Mayuko ------1853337 +284 A&S Takashimaya Duty Free------3,3077,000 +3,693 Fashion Plaza Sunroser ------4,8894,2954,0353,4682,8902,6042,548 YoY 1.2% -1.2% -2.6% -2.3% -1.1% 2.6% -0.2% -6.5% -10.5% -1.2% -1.9% 1.0% 3.6% 0.6% 1.1% -1.8% 3.7% 1.2% 1.6% Domestic department store --- -3.8% 1.0% 0.8% -0.8% -6.8% -10.2% -1.3% -2.0% 0.8% 1.7% -0.4% 1.4% -1.1% 2.8% 0.4% 0.4% Takashimaya Singapore - 4.9% -10.9% 11.7% 23.3% 17.7% 11.2% -2.2% -13.9% 4.2% 6.3% 5.9% 25.9% 10.1% 5.1% -12.2% 3.5% 2.9% Shanghai Takashimaya ------2,479.2% 20.8% 16.1% -13.3% 10.6% 14.4% Takashimaya Vietnam ------140.0% 7.2% Takashimaya Tomonokai - - - 12.6% -12.9% -0.2% -1.9% -2.3% -4.4% -2.6% -3.1% -0.9% -0.0% -0.2% -1.2% 1.6% 7.3% 1.1% R.T. Corporation ----2.1% 10.8% -2.4% 0.4% -1.9% -5.5% 7.3% -3.5% 0.9% 3.6% 0.3% 0.8% 8.3% 3.5% 5.0% Operating profit 8,807 8,499 17,709 23,201 20,628 23,342 26,903 15,121 5,098 10,728 9,909 11,880 13,962 15,519 14,975 12,182 13,509 10,653 -2,856 Domestic department store - - 18,198 20,245 22,856 22,172 24,795 12,695 3,443 8,058 6,910 8,415 11,524 12,744 11,375 10,781 13,601 10,000 -3,601 Takashimaya Singapore 257 652 633 1,193 2,009 2,718 3,107 2,986 2,815 2,897 3,454 3,599 3,915 4,302 4,076 3,153 3,622 3,239 -383 Shanghai Takashimaya ------84 - -219 -1,528 -1,955 -1,242 -980 -1,140 -848 +292 Takashimaya Vietnam ------508 -281 -264 +17 Siam Takashimaya ------420 -420 Takashimaya Tomonokai -- -1,021 -1,027 -932 -946 -1,027 -854 -958 -923 -1,001 -974 -935 -1,024 -1,007 -996-963-973 -10 R.T. Corporation - - 169 74 -157 -34 211 193 278 475 423 509 555 546 708 742 597 750 +153 Food and Partners ------186 -178 -188 -10 Dear Mayuko ------262 -286 -199 +87 A&S Takashimaya Duty Free------1,309 -671 +638 Fashion Plaza Sunroser ------169-109 -75 10 -4 -26 16 YoY 8.4% -3.5% 108.4% 31.0% -11.1% 13.2% 15.3% -43.8% -66.3% 110.4% -7.6% 19.9% 17.5% 11.2% -3.5% -18.7% 10.9% -21.1% Domestic department store - - - 11.2% 12.9% -3.0% 11.8% -48.8% -72.9% 134.0% -14.2% 21.8% 36.9% 10.6% -10.7% -5.2% 26.2% -26.5% Takashimaya Singapore - 153.7% -2.9% 88.5% 68.4% 35.3% 14.3% -3.9% -5.7% 2.9% 19.2% 4.2% 8.8% 9.9% -5.3% -22.6% 14.9% -10.6% R.T. Corporation ----56.2% ----8.5% 44.0% 70.9% -10.9% 20.3% 9.0% -1.6% 29.7% 4.8% -19.5% 25.6% OPM 0.9% 0.9% 1.9% 2.5% 2.2% 2.5% 2.9% 1.7% 0.6% 1.4% 1.3% 1.5% 1.7% 1.9% 1.8% 1.5%1.6%1.3% -0.3pp Domestic department store - - 1.9% 2.2% 2.5% 2.4% 2.7% 1.5% 0.4% 1.1% 0.9% 1.1% 1.5% 1.7% 1.5% 1.4% 1.7% 1.3% -0.5pp Takashimaya Singapore 1.1%2.6%2.8%4.8%6.5%7.5%7.7%7.6%8.3%8.2%9.2% 9.1% 7.8% 7.8% 7.0% 6.2% 6.9% 17.9% +11.0pp R.T. Corporation - - 1.9% 0.8% -1.6% -0.4% 2.2% 2.0% 3.1% 5.0% 4.6% 5.5% 5.8% 5.6% 7.3% 7.0% 5.5% 6.5% +1.1pp Domestic dept. store FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init. Est. Change Operating revenue 940,970 905,364 914,261 922,021 914,567 852,620 765,566 755,397 740,047 745,757 758,338 755,239 765,466 757,171 778,624 781,917 +3,293 Takashimaya (parent) 935,991 841,909 844,290 849,453 843,025 785,826 706,417 697,861 684,215 690,334 701,773 699,656 710,161 703,056 724,604 727,048 +2,444 Okayama Takashiyama -22,834 25,521 25,449 24,556 22,857 19,672 18,994 18,358 18,153 18,895 18,680 18,644 18,443 18,797 19,211 +414 Gifu Takashimaya -15,677 17,414 19,874 20,181 19,104 17,282 16,531 16,138 15,801 16,088 15,476 15,396 15,015 14,686 14,723 +37 Yonago Takashimaya 4,979 8,903 8,584 8,711 8,322 7,658 6,891 6,605 6,423 6,368 6,386 6,182 6,023 5,393 5,004 4,950 -54 Takasaki Takashimaya -16,041 18,453 18,534 18,482 17,175 15,305 14,507 14,915 15,099 15,194 15,244 15,240 15,261 15,530 15,985 +455 YoY --3.8% 1.0% 0.8% -0.8% -6.8% -10.2% -1.3% -2.0% 0.8% 1.7% -0.4% 1.4% -1.1% 2.8% 0.4% Takashimaya (parent) --10.1% 0.3% 0.6% -0.8% -6.8% -10.1% -1.2% -2.0% 0.9% 1.7% -0.3% 1.5% -1.0% 3.1% 0.3% Okayama Takashiyama --11.8%-0.3% -3.5% -6.9% -13.9% -3.4% -3.3% -1.1% 4.1% -1.1% -0.2% -1.1% 1.9% 2.2% Gifu Takashimaya - - 11.1% 14.1% 1.5% -5.3% -9.5% -4.3% -2.4% -2.1% 1.8% -3.8% -0.5% -2.5% -2.2% 0.3% Yonago Takashimaya -78.8%-3.6% 1.5% -4.5% -8.0% -10.0% -4.2% -2.8% -0.9% 0.3% -3.2% -2.6% -10.5% -7.2% -1.1% Takasaki Takashimaya - - 15.0% 0.4% -0.3% -7.1% -10.9% -5.2% 2.8% 1.2% 0.6% 0.3% -0.0% 0.1% 1.8% 2.9% Sales 927,867 894,160 902,511 910,560 903,509 842,194 755,358 745,021 729,746 735,332 747,812 745,039 755,041 745,146 765,037 767,711 +2,674 Takashimaya (parent) 922,899 831,006 832,917 838,388 832,345 775,774 696,570 687,845 674,262 680,255 691,580 689,779 700,045 691,353 711,341 713,171 +1,830 Four subsidiaries 4,968 63,154 69,594 72,172 71,164 66,420 58,788 57,176 55,484 55,077 56,232 55,260 54,996 53,793 53,696 54,540 +844 YoY --3.6% 0.9% 0.9% -0.8% -6.8% -10.3% -1.4% -2.1% 0.8% 1.7% -0.4% 1.3% -1.3% 2.7% 0.3% Takashimaya (parent) --10.0% 0.2% 0.7% -0.7% -6.8% -10.2% -1.3% -2.0% 0.9% 1.7% -0.3% 1.5% -1.2% 2.9% 0.3% Four subsidiaries -1,171.2% 10.2% 3.7% -1.4% -6.7% -11.5% -2.7% -3.0% -0.7% 2.1% -1.7% -0.5% -2.2% -0.2% 1.6% Gross profit 254,955 244,372 246,597 247,701 243,799 224,272 197,569 191,718 186,597 186,358 187,194 185,601 184,687 180,591 184,059 184,137 +78 Takashimaya (parent) 253,761 228,042 228,606 229,050 225,479 207,397 182,780 177,529 172,863 172,825 173,562 172,364 171,848 168,179 171,705 171,640 -65 Four subsidiaries 1,194 16,330 17,991 18,651 18,320 16,875 14,789 14,189 13,734 13,533 13,632 13,237 12,839 12,412 12,354 12,497 +143 GPM 27.48% 27.33% 27.32% 27.20% 26.98% 26.63% 26.16% 25.73% 25.57% 25.34% 25.03% 24.91% 24.46% 24.24% 24.06% 23.99% -0.07pp Takashimaya (parent) 27.50% 27.44% 27.45% 27.32% 27.09% 26.73% 26.24% 25.81% 25.64% 25.41% 25.10% 24.99% 24.55% 24.33% 24.14% 24.07% -0.07pp Four subsidiaries 24.03% 25.86% 25.85% 25.84% 25.74% 25.41% 25.16% 24.82% 24.75% 24.57% 24.24% 23.95% 23.35% 23.07% 23.01% 22.91% -0.09pp SG&A expenses 249,860 235,331 235,491 236,990 230,062 222,003 204,334 194,036 189,988 188,368 186,196 183,057 183,737 181,835 184,045 188,343 +4,298 Takashimaya (parent) 248,839 220,073 218,649 220,064 213,303 205,387 189,415 179,706 176,394 175,167 172,977 169,991 171,023 169,591 172,408 176,056 +3,648 Four subsidiaries 1,021 15,258 16,842 16,926 16,759 16,616 14,919 14,330 13,594 13,201 13,219 13,066 12,714 12,244 11,637 12,287 +650 Personnel 91,227 85,953 85,565 86,327 85,445 83,441 76,279 68,394 66,185 65,866 63,288 63,845 62,255 61,244 61,825 63,827 +2,002 Advertising 33,314 31,946 34,224 36,068 34,660 30,106 24,750 25,249 25,894 24,808 25,662 26,123 26,923 25,608 25,695 26,097 +402 General and administrative 82,191 75,693 73,823 73,040 73,456 71,545 67,088 66,195 64,351 65,077 65,221 66,271 67,212 65,592 66,311 68,421 +2,110 Other 43,126 41,736 41,876 41,553 36,500 36,908 36,217 34,197 33,557 32,615 32,024 26,817 27,346 29,389 30,212 29,998 -214 YoY --5.8% 0.1% 0.6% -2.9% -3.5% -8.0% -5.0% -2.1% -0.9% -1.2% -1.7% 0.4% -1.0% 1.2% 2.3% Takashimaya (parent) - -11.6% -0.6% 0.6% -3.1% -3.7% -7.8% -5.1% -1.8% -0.7% -1.3% -1.7% 0.6% -0.8% 1.7% 2.1% Four subsidiaries -1,394.4% 10.4% 0.5% -1.0% -0.9% -10.2% -3.9% -5.1% -2.9% 0.1% -1.2% -2.7% -3.7% -5.0% 5.6% Personnel --5.8% -0.5% 0.9% -1.0% -2.3% -8.6% -10.3% -3.2% -0.5% -3.9% 0.9% -2.5% -1.6% 0.9% 3.2% Advertising --4.1% 7.1% 5.4% -3.9% -13.1% -17.8% 2.0% 2.6% -4.2% 3.4% 1.8% 3.1% -4.9% 0.3% 1.6% General and administrative - -7.9% -2.5% -1.1% 0.6% -2.6% -6.2% -1.3% -2.8% 1.1% 0.2% 1.6% 1.4% -2.4% 1.1% 3.2% Other --3.2% 0.3% -0.8% -12.2% 1.1% -1.9% -5.6% -1.9% -2.8% -1.8% -16.3% 2.0% 7.5% 2.8% -0.7% % of operating revenue 26.6% 26.0% 25.8% 25.7% 25.2% 26.0% 26.7% 25.7% 25.7% 25.3% 24.6% 24.2% 24.0% 24.0% 23.6% 24.1% +0.5pp Takashimaya (parent) 26.6% 26.1% 25.9% 25.9% 25.3% 26.1% 26.8% 25.8% 25.8% 25.4% 24.6% 24.3% 24.1% 24.1% 23.8% 24.2% +0.4pp Four subsidiaries 20.5% 24.0% 24.1% 23.3% 23.4% 24.9% 25.2% 24.9% 24.3% 23.8% 23.4% 23.5% 23.0% 22.6% 21.5% 22.4% +0.9pp Personnel 9.7% 9.5% 9.4% 9.4% 9.3% 9.8% 10.0% 9.1% 8.9% 8.8% 8.3% 8.5% 8.1% 8.1% 7.9% 8.2% +0.2pp Advertising 3.5% 3.5% 3.7% 3.9% 3.8% 3.5% 3.2% 3.3% 3.5% 3.3% 3.4% 3.5% 3.5% 3.4% 3.3% 3.3% +0.0pp General and administrative 8.7% 8.4% 8.1% 7.9% 8.0% 8.4% 8.8% 8.8% 8.7%8.7%8.6%8.8%8.8%8.7%8.5%8.8% +0.2pp Other 4.6%4.6%4.6%4.5%4.0%4.3%4.7%4.5%4.5%4.4%4.2%3.6%3.6%3.9%3.9% 3.8% -0.0pp Operating profit 18,198 20,245 22,856 22,172 24,795 12,695 3,443 8,058 6,910 8,415 11,524 12,744 11,375 10,781 13,601 10,000 -3,601 Takashimaya (parent) 18,014 18,872 21,330 20,051 22,856 12,062 3,212 7,838 6,421 7,738 10,777 12,250 10,940 10,292 12,920 9,461 -3,459 Okayama Takashiyama - 421 599 604 464 -57 -252 -179 10 74 39 -75 -92 118 114 101 -13 Gifu Takashimaya -115-1 693 573 166 221 175 220 241 239 83 11 -91 61 -67 -128 Yonago Takashimaya 184 205 178 163 171 55 13 -38 -32 -66 19 -23 -68 -136 32 48 +16 Takasaki Takashimaya - 631 750 661 732 468 249 262 291 427 449 509 585 599 473 457 -16 YoY - 11.2% 12.9% -3.0% 11.8% -48.8% -72.9% 134.0% -14.2% 21.8% 36.9% 10.6% -10.7% -5.2% 26.2% -26.5% Takashimaya (parent) - 4.8% 13.0% -6.0% 14.0% -47.2% -73.4% 144.0% -18.1% 20.5% 39.3% 13.7% -10.7% -5.9% 25.5% -26.8% Takasaki Takashimaya - 646.2% 11.1% 39.0% -8.6% -67.4% -63.5% -4.8% 122.3% 38.4% 10.3% -33.9% -11.9% 12.4% 39.3% -20.9% OPM 1.9% 2.2% 2.5% 2.4% 2.7% 1.5% 0.4% 1.1% 0.9% 1.1% 1.5% 1.7% 1.5% 1.4% 1.7% 1.3% -0.5pp Takashimaya (parent) 1.9% 2.2% 2.5% 2.4% 2.7% 1.5% 0.5% 1.1% 0.9% 1.1% 1.5% 1.8% 1.5% 1.5% 1.8% 1.3% -0.5pp Okayama Takashiyama - 1.8% 2.3% 2.4% 1.9% -0.2% -1.3% -0.9% 0.1% 0.4% 0.2% -0.4% -0.5% 0.6% 0.6% 0.5% -0.1pp Gifu Takashimaya -0.7%-0.0% 3.5% 2.8% 0.9% 1.3% 1.1% 1.4% 1.5% 1.5% 0.5% 0.1% -0.6% 0.4% -0.5% -0.9pp Yonago Takashimaya 3.7% 2.3% 2.1% 1.9% 2.1% 0.7% 0.2% -0.6% -0.5% -1.0% 0.3% -0.4% -1.1% -2.5% 0.6% 1.0% +0.3pp Takasaki Takashimaya - 3.9% 4.1% 3.6% 4.0% 2.7% 1.6% 1.8% 2.0% 2.8% 3.0% 3.3% 3.8% 3.9% 3.0% 2.9% -0.2pp Source: Shared Research based on company data Domestic department stores: aim for growth in profits from previous year’s initiatives, even as sales decline In the domestic department store business, the company forecasts FY02/19 operating revenue of JPY781.9bn (+JPY3.3bn YoY; +0.4%) and operating profit of JPY10.0bn (-JPY3.6bn, -26.5%). Takashimaya looks for sales to increase, on the assumption that inbound demand and domestic consumption will remain firm. It expects operating profit to fall sharply, though, due to opening costs for the Nihombashi Takashimaya Shopping Center, forward expenditure including costs for the Group Reform Project, and

26/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

an increase in personnel costs. Note that, however, in FY02/20 Takashimaya anticipates a return to profit growth, driven by a JPY1.2bn contribution from the Nihombashi Takashimaya Shopping Center, and a JPY800mn contribution from the Group Reform Project, as benefits start outweighing costs.

Domestic department store sales (left) and operating profit (right)

(JPYbn) Large stores Other stores (JPYbn) Operating profit OPM (right axis) Operating GPM (right axis) 1,000 30 28.26% 27.87% 30% 894 903 911 904 27.14% 26.61% 26.07% 842 25.49% 25.38% 900 28.23% 24.8 28.11% 27.53% 755 755 765 768 25 26.75% 25% 800 745 730 735 748 745 745 22.9 26.39% 25.93% 227 228 264 264 22.2 25.44% 25.37% 700 248 20.2 196 196 20 20% 223 218 211 206 202 197 600 210 210 17.0 13.6 500 15 12.7 12.7 15% 11.5 11.4 10.8 400 10.0 667 674 646 639 10 8.1 8.4 10% 300 594 569 572 6.9 532 527 519 525 537 540 553 548 200 3.4 5 2.2%2.5%2.4%2.7% 2.2% 5% 1.5% 1.5%1.7%1.5%1.4%1.7%1.3% 100 0.4%1.1%0.9%1.1% 0 0 0% FY02/05 FY02/07 FY02/09 FY02/11 FY02/13 FY02/15 FY02/17 FY02/19 FY02/05 FY02/07 FY02/09 FY02/11 FY02/13 FY02/15 FY02/17 FY02/19 FY02/23 Est Est Est. Source: Shared Research based on company data

Building a group management base supportive of the Machi-Zukuri initiative The company plans to continue the following measures from the previous year based on its medium- and long-term strategies: (1) promotion of its Machi-Zukuri (urban development) strategy; (2) product lineup: further enrichment of the lineup and sections dedicated to distinctive products, as well as enhancement of department store merchandising and sales strategies with a view to generating synergies with specialty stores; (3) increasing available shopping channels for customers and offering greater convenience: capturing new customers through various marketing initiatives undertaken via cross-industry alliances and facilitating seamless approach to consumer experience through online and physical store shopping channels; and (4) capturing demand from foreign tourists. Its aim is to provide customers with new shopping experiences and value by optimizing these efforts in line with local characteristics. Takashimaya also intends to progressively incorporate initiatives being considered under the Group Reform Project.

Machi-Zukuri (urban development) strategy In its Machi-Zukuri or urban development strategy, which has the highest priority of its various strategies, Takashimaya plans to maximize its strength in operating the shopping center business and develop various stores considering size and regional characteristics. In FY02/19, Shared Research will focus in particular on the Nihombashi store’s transformation into Nihombashi Takashimaya Shopping Center, featuring many specialty stores. The East Building (to be occupied by specialty stores; approximately 2,000sqm) opened in March 2018, and the new annex (around 17,000sqm) is scheduled to open in September. The department store section (main building; around 46,000sqm) also is undergoing refurbishment, and a grand opening for the entire 66,000sqm is slated for spring 2019. The shopping center portion also should generate a steady flow of income from leasing (most rents will be fixed).

The goal with the Nihombashi Takashimaya Shopping Center is to maximize appeal by leveraging the company’s diverse strengths—the retail know-how amassed over the past 50 years, Toshin Development’s commercial development expertise, and the combination of specialty stores’ ability to remain fresh and seasonal with department stores’ curating capabilities—in order for a single building to address customer needs in the manner of a whole shopping district. The new annexes will reach out to specialty stores catering to a new category of customer (in their 30s and 40s, including nearby office workers and families from waterfront areas in close proximity), who it hopes will also visit the department store. Previously, Takashimaya has said it expected customer traffic to increase by more than 70,000 per day amid growth in the target population, including an increase in the working population driven by development of the surrounding area. In this manner, the Nihombashi Takashimaya Shopping Center should provide the company with both real estate and retail revenues.

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Source: FY02/18 results briefing materials

Takashimaya has two key concepts for its urban development strategy: Community development: enhance convenience and increase visitors of towns where its department stores are located in cooperation with municipalities, offices, railway companies Town development: propose lifestyles and establish towns around its stores to magnify the pleasure among visitors and increase the number of customers.

Nihombashi store: The company strengthened women’s apparel from FY02/16. In October 2015 it also reopened Takashimaya Watch Maison (about 800sqm), a watch shop with the world’s largest collection of 83 luxury watch brands. In FY02/18, sales floor space declined (by about 2,000sqm to 44,000sqm) as construction proceeded. In March 2018, though, the East Building (approximately 2,000sqm) opened, including as tenants the 1,300sqm or so Pokémon Center TOKYO DX (the largest Pokémon Center to date) and a Pokémon Café.

Machi-Zukuri strategy as applied to other key stores

Source: Shared Research based on company data

Merchandising and sales strategies As part of its urban development initiative, the company plans to enhance department store merchandising and sales strategies with a view to generating synergies with specialty stores, broadening its product lineup in order to increase customers’ lifetime value. It plans to strengthen the capability of buyers (located in-store and at head office) to identify merchandise with rarity value and curate themes. The company also seeks to link e-commerce to in-store sales via integrated information management. Through the Group Reform Project, it aims to use digital technology to visualize the needs of customers (including those that do not physically frequent stores), in order to support the aforementioned strategies.

Customer strategy According to the company, 60% of sales are to card members—both Takashimaya card members (including gaisho* sales accounts) and alliance card members. In management’s view this is testament to success in both cultivating and retaining customers. Strategies for FY02/19 include: (1) inbound: striving consistently to capture more inbound demand, which accounts for 7% of sales at present; (2) alliance: strategically expanding and better organizing the customer base; and (3) Group Reform Project: improving customers’ satisfaction and creating new shopping channels.

In terms of alliance strategy, the company began working with NTT Docomo in April 2016 (allowing customers to accumulate d-points while shopping at Takashimaya) and with Ponta in October 2016 (allowing customers to accumulate Ponta points). In FY02/18, the company was successful in cultivating new customers aged in their 20s and 30s, via a range of measures including

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joint marketing campaigns directed at such loyalty scheme members. Related sales also increased by a steep JPY29.8bn, to JPY38.5bn (JPY15.8bn in 1H FY02/18 and JPY22.7bn in 2H, as compared with JPY8.7bn for full-year FY02/17). In FY02/19, Takashimaya aims to achieve related sales of JPY47.0bn over the full year, a target that looks eminently achievable, being roughly double the 2H result for FY02/18.

* A traditional sales method in Japan’s department store industry where department store sales clerks visit the homes of loyal customers or the offices of loyal companies to take their orders, like a personal shopping service.

YoY change in domestic department store sales

NTT Docomo: d POINT 780 Loyalty Marketing: Ponta point 780 -0.6 +8.5 -12.5 770 770 -16.1 +7.3

+6.1 +29.8 +3.7 760 760 -17.9 750 +14.3 765.0 767.7 750 765.0 740

740 Affluent customers Middle-class customers 745.1 730 (SR estimate) (SR estimates) Domestic Inbound Tie-up card Corporate Other Domestic 730 department holders department Domestic Inbound Out-of-store Holders of Holders of Other card Corporate Domestic store sales store sales department sales to Takashimaya tie-up holders department FY02/18 FY02/19 store sales Takashimaya card cards and cash store sales FY02/17 card holders FY02/18 (JPYbn) (JPYbn) Source: Shared Research based on company data

Foreign tourists The company aims to increase annual sales of duty-free products by JPY11.0bn YoY (JPY7.3bn at department stores and JPY3.7bn the airport-style duty-free store) to JPY63.0bn (JPY56.0bn and JPY7.0bn respectively). It expects sales to increase by JPY2.7bn at domestic department stores, and sees growth in sales to inbound travelers and alliance card members offsetting falls elsewhere.

Takashimaya is keen to capture demand from repeat customers (including individuals and wealthy customers) and to that end is in the process of analyzing and categorizing the buying habits of inbound tourists. In addition to targeting package tours, the company also has devised measures to attract individual travelers to the airport-style duty-free shop within the Shinjuku store, and it appears to have had some success.

Sales to inbound tourists

(JPYbn) Department stores: 56.0 (JPYbn) Department stores: 48.7 18 9% Inbound subsidary: 7.0 70 Inbound subsidary: 3.3 14% 8.0% 63.0 16 7.4% 7.6% 8% Department stores: 44.5 60 Inbound subsidary: 3.5 12% 52.0 14 6.2% 7% 1H Department stores: 37.0 48.0 5.7% 50 45.0 8.8% 10% 12 6% Inbound subsidary: 8.0 5.0% 2H 4.9% 7.3% 10 4.4% 4.2% 4.2% 4.3% 5% 40 34.4 6.6% 6.8% 8% 4.1% % of parent sales 28.7 29.9 24.7 8 4% (right axis) 5.0% 3.1% 15.0 30 4.3% 6% 13.7 19.2 6 12.6 3% 14.0 15.6 2.2% 11.2 10.7 20 23.3 23.3 4% 8.5 8.3 8.0 8.3 2.0% 4 1.3% 1.3% 7.2 7.2 7.1 2% 6.0 6.9 10 1.2% 14.4 15.2 2% 9.6 2 3.6 1% 4.8 2.3 2.1 0 3.5 4.4 0% 0 0% FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/18 FY02/18 FY02/19 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Init. Est. Est. Est. FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data

Airport-style duty-free shop In June 2016, the company entered the airport-style duty-free shop business, by forming A&S Takashimaya Duty Free, a joint venture with ANA Trading and Hotel Shilla (Korea). The first airport-style duty-free shop was opened on April 27, 2017, on the 11th floor of the Shinjuku store (about 2,800sqm). It will focus on providing one-stop shopping through its integration with the department store. The entire floor targets overseas tourists. The duty-free counter was relocated and expanded, and a service counter providing tourist information was added. Through these measures, the company hopes to capture even more demand from overseas customers at the Shinjuku store.

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The original sales target for the first store was JPY15.0bn, but this was lowered to JPY9.0–10.0bn when the 1H FY02/17 results were released. This target was further reduced to JPY8.0bn when the store’s opening was pushed back by roughly two months, and again lowered to JPY3.5bn 1H FY02/18 (in the end, FY02/18 sales came in at JPY3.3bn), largely due to a decrease in package tours. Initially, the company planned for a JPY700mn operating loss in FY02/18, but this was revised as of 1H to a loss of JPY1.2bn. The actual loss was greater still, at JPY1.3bn.

For FY02/19, the company expects sales of JPY7.0bn and an operating loss of JPY670mn. As sales amounted to JPY2.5bn in 2H FY02/18, there seems to be little risk that the 1H FY02/19 and 2H FY02/19 sales targets of JPY3.2bn and JPY3.8bn, respectively, will be slashed in the manner of FY02/18. At the start of FY02/18, the company expected the store to reach the breakeven point in FY02/19 and recoup its investment within eight years. Shared Research believes these goals will be met a year or so later than planned.

Airport-style duty free shop: unlike tax-free shops, duty-free shops are exempt from the payment of not only consumption tax but also customs duties, liquor tax, and tobacco tax. International visitors, and even Japanese citizens who are going abroad, may purchase duty-free goods provided they present their passport and plane ticket at the shop. After completing departure procedures, customers will be able to receive their purchased goods at a pickup counter established by the duty-free area concerned.

A&S Takashimaya Duty Free will seek to further stimulate consumer demand among international visitors to Japan, and establish facilities that enable more convenient shopping. The new joint venture is designed to fully capitalize on the respective strengths of each partner. The new venture company will be established by three companies, Takashimaya (60% stake), All Nippon Airways Trading (20%) and Hotel Shilla (20%). Takashimaya will contribute its expertise in retail curation, and its ability to procure merchandise by leveraging the creditworthiness and financial clout it has built up over many years in retail. All Nippon Airways Trading will contribute its expertise in existing airport-style duty-free shopping, and Hotel Shilla will contribute its expertise in airport-style duty free shops in overseas countries such as South Korea, and its ability to appeal to customers.

Improving margins The company forecasts a 0.07pp decline in GPM to 23.99% (a 0.06pp decrease in 1H, to 24.07%). For domestic department stores, GPM is on a declining trend due to factors such as lower sales of womenswear. If this trend were to continue, it would mean a decline of 0.3pp for the year, but in FY02/17 and FY02/18 the company implemented reforms to increase gross profit. In FY02/17, though, the slump in womenswear meant that improvement driven by products planned and managed by Takashimaya fell short of the forecast. The GPM narrowed 0.22pp to 24.24%. In FY02/18, the GPM decreased 0.18pp to 24.06%, with drains of 0.06pp and 0.05pp, respectively, from increases in duty-free sales (discount coupons apply to cosmetics, which are popular among inbound tourists) and in (low-margin) corporate demand. Nonetheless, the margin of 24.06% was 0.02pp better than planned. In FY02/19, the company aims to limit GPM contraction to 0.07pp via improvement measures aimed at boosting gross profit by some JPY1.0bn, surmounting erosion of 0.01pp and 0.02pp, respectively, caused by higher duty-free sales and Nitori taking up two floors at the Tachikawa Store. While Takashimaya has not provided details, it seems probable that management expects some of the improvement to come from the Group Reform Project. For reference, below we outline measures implemented in FY02/18 and FY02/17.

Measures outlined in initial plan for FY02/18: As in FY02/17, Takashimaya had plans to: Improve product margins (a nearly JPY600mn improvement in profits) by improving product markup ratio (standard products and high-margin products including distinctive merchandise), increasing the sales composition of kaitori (outright purchase) products, and increasing the number of its own employees in multi-brand display areas Increase cost-effectiveness by limiting special sales to major sales promotion periods and reducing the number of events by 20% (ongoing measure, so impact is cyclical) Reevaluate terms and conditions for trade based on higher sales in growth markets, and set product margin targets that encourage a win-win relationship with trading partners (about JPY1.1bn in profits; contribution reflects the impact of FY02/17 efforts over the full year and of new efforts)

FY02/17 measures: Takashimaya worked to improve product margins by increasing the sales composition of standard products and high-margin products including distinctive merchandise; increase cost-effectiveness by limiting special sales to major sales promotion periods and reduce the number of events by 20%; and, reevaluate terms and conditions for trade based on higher sales in growth market and set product margin targets that encourage a win-win relationship with trading partners.

Profit improvements of about JPY700mn were projected through increasing the proportion of products procured directly by Takashimaya centering around staple goods, JPY200mn through reevaluating special sales initiatives, and JPY1.1bn via reviewing trade conditions with about 1,500 trade

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partners. Concerning reevaluating trade conditions, the company was seeking to establish mutually beneficial relationships (such as by providing higher margins in exchange for reducing the number of sales staff), expecting to see improvements in trade conditions by lowering risks for trade partners. To ensure that fewer staff do not result in lower-quality customer experience, the company implemented measures such as shortening store opening hours and reducing staff shifts to one.

Domestic department store business GPM and OPM

(JPYbn) (JPYbn) Gross profit GPM (right axis) Operating gross profit Operating GPM (right axis) 300 28% 300 29% 27.33% 27.20% 28.23% 28.11% 27.48% 26.63% 28.49% 250 27.32% 27% 250 28.26% 27.53% 28% 26.98% 27.87% 200 25.73% 26% 200 26.75% 27% 26.16% 25.34% 27.14% 26.39% 24.91% 25.93% 150 25.57% 25% 150 26.61% 26% 25.44% 25.37% 25.03% 24.24% 26.07% 23.99% 100 24.46% 24% 100 25.49% 25.38% 25% 24.06% 50 23% 50 24%

0 22% 0 23% FY02/04 FY02/07 FY02/10 FY02/13 FY02/16 FY02/19 FY02/04 FY02/07 FY02/10 FY02/13 FY02/16 FY02/19 Est Est Source: Shared Research based on company data

SG&A Expenses The company forecasts SG&A expenses of JPY188.3bn, up JPY4.3bn YoY. It expects personnel costs and general and administrative expenses to account for most of the increase (JPY2.0bn and JPY2.1bn, respectively), and also projects a JPY400mn rise in advertising expenses. If personnel costs are stripped out, though, it appears much of the increase will be in forward spending associated with the Nihombashi Takashimaya Shopping Center (around JPY1.3bn) and Group Reform Project (about JPY400mn).

In real terms, the increase in personnel costs likely will be JPY1.3bn, as about JPY700mn will be due to the effect of incorporating into the parent some 110 employees previously farmed out to Takashimaya Service. Of the JPY1.3bn, the company expects the addition of around 160 full-time employees to account for roughly JPY700mn (switch to full-time employment for some casual and part-time workers, and for fixed-term contractors who under the Worker Dispatch Act are entitled to open-ended employment if they have worked continuously for the same employer and repeatedly renewed their contract for at least five years). Based on FY02/18 figures, the company expects bonuses to account for about JPY600mn of the increase in personnel costs.

Domestic department store business SG&A expenses

(JPYbn) Personnel Advertising General and admin. Other Personnel Advertising 250 General and admin. Other 237 250 235 235 230 12% 27% 222 SG&A expenses (right axis) 43.1 41.6 204 41.7 41.9 36.5 194 190 200 36.9 188 186 183 184 182 184 188 10% 26% 36.2 34.2 33.6 30.0 82.2 32.6 32.0 26.8 27.3 29.4 30.2 73.8 73.0 73.5 150 75.7 71.5 8% 25% 67.1 66.2 64.4 65.1 65.2 66.3 67.2 65.6 66.3 68.4 33.3 100 31.9 34.2 36.1 34.7 30.1 6% 24% 24.8 25.2 25.9 24.8 25.7 26.1 26.9 25.6 25.7 26.1

50 91.2 4% 23% 86.0 85.6 86.3 85.4 83.4 76.3 68.4 66.2 65.9 63.3 63.8 62.3 61.2 61.8 63.8 0 2% 22% FY02/04 FY02/07 FY02/10 FY02/13 FY02/16 FY02/19 FY02/04 FY02/07 FY02/10 FY02/13 FY02/16 FY02/19 Est Est Source: Shared Research based on company data

Group Reform Project In FY02/18, Takashimaya launched the Group Reform Project, designed to fundamentally reform group operations, and comprised of eight individual projects overseen by 24 subcommittees. The primary objective is to improve management efficiency via operational reforms, and to reinvest the profits thus gained into growth strategies. To that end, the company has embarked on rebuilding the systems infrastructure underpinning its business (customer and product databases, collaboration with external systems, IT systems optimization), also identifying four areas for operational reform: (a) accounting and performance management reforms: making expenditure more transparent and optimizing cost management processes; (b)

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administrative and procurement reforms: shift to paperless offices, reduction in procurement costs, etc.; (c) work-style reforms: store and office reforms; and (d) personnel and organizational reforms: pursuit of efficiency gains in system design and attendance management.

The company also has devised reform measures for the re-investment of profits into growth areas: (A) sales promotion & marketing reforms: integrated management and strengthened analysis of customer information, adoption of NPS (net promoter score, an index ranging measuring the willingness of customers to recommend a company's products or services to others) as a strategic initiative to enhance customer satisfaction, and regular updates to the company’s app with a view to boosting online sales; (B) product and merchandising reforms: using digital technology to visualize the needs of customers (including those that do not physically frequent stores), and linking e-commerce to in-store sales via integrated information management; and (C) Finance segment reform: leveraging customer analysis in order to improve services in the card and insurance businesses.

Takashimaya intends to invest JPY12.8bn in the Group Reform Project over five years, prioritizing investment in the systems renewal aspect of rebuilding systems infrastructure, and in project operating costs. In the first year, FY02/19, the company expects investment of JPY1.7bn to outweigh cost savings of JPY1.3bn. In the second year (FY02/20) and beyond, though, it anticipates that cumulative cost cuts will exceed investments, as illustrated below.

Depreciation costs for systems investment account for the largest part of the investment spending; however they are expected to decrease after reaching a peak in the fifth year, FY02/23. The significant cost savings effect seen in the first year (FY02/19) of Group Reform Project can be attributed to the diminishing burden of depreciation costs associated with previous systems investment. As the burden of depreciation costs from the past will decrease year after year, cost savings effects will likely show even greater results in FY02/20 and beyond.

Group Reform Project: costs and benefits

(JPYbn) (JPYbn) Investments Cost reductions Operating profit OPM (right axis) 9 60 6% 8.1 8 50 5% 7 4.8% 6 40 4% 5.0 3.7% 5 3.3% 4.1 30 3% 3.7 4 50.0 3 20 2% 35.3 36.0 1.7 30.0 2 1.3 10 1% 1 0 0 0% FY02/19 FY02/20 FY02/23 FY02/18 FY02/19 FY02/20 FY02/23 Est Est Est. Est Est Est. Source: Shared Research based on company data

Overseas department stores

Overseas dept. stores FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init. Est. Init. Est.* Change Operating revenue (simple sum) 23,860 25,021 24,296 26,691 33,085 38,512 42,202 41,032 35,340 35,914 37,480 39,912 55,190 61,308 65,124 58,897 63,874 24,558 70,106 +6,232 Takashimaya Singapore 23,860 25,021 22,306 24,909 30,721 36,145 40,198 39,318 33,837 35,268 37,480 39,710 49,980 55,015 57,818 50,745 52,507 18,118 54,038 +1,531 Shanghai Takashimaya ------2025,2106,2937,3066,3337,0023,635 8,007 +1,005 Takashimaya Vietnam ------1,8194,3651,5784,678+313 Siam Takashimaya ------1,2273,383+3,383 Takashimaya Enterprise Inc.--336800------Takashimaya New York Inc.--1,6541,702302------Takashimaya New York LLC----2,0622,3672,0041,7141,503646------YoY -4.9%-2.9% 9.9% 24.0% 16.4% 9.6% -2.8% -13.9% 1.6% 4.4% 6.5% 38.3% 11.1% 6.2% -9.6% 8.5% 9.8% Takashimaya Singapore - 4.9% -10.9% 11.7% 23.3% 17.7% 11.2% -2.2% -13.9% 4.2% 6.3% 5.9% 25.9% 10.1% 5.1% -12.2% 3.5% 2.9% Shanghai Takashimaya ------2,479.2% 20.8% 16.1% -13.3% 10.6% 14.4% Takashimaya Vietnam ------140.0% 7.2% Operating profit (simple sum) 257 652 655 1,272 1,529 2,422 2,864 2,655 2,499 2,693 3,454 3,380 2,387 2,347 2,834 1,665 2,201 1,707 -494 Takashimaya Singapore 257 652 633 1,193 2,009 2,718 3,107 2,986 2,815 2,897 3,454 3,599 3,915 4,302 4,076 3,153 3,622 3,239 -383 Shanghai Takashimaya ------84 - -219 -1,528 -1,955 -1,242 -980 -1,140 -848 +292 Takashimaya Vietnam ------508 -281 -264 +17 Siam Takashimaya ------420 -420 Takashimaya Enterprise Inc. - - -31 -33 -9 ------Takashimaya New York Inc. - - 53 112 -221 ------Takashimaya New York LLC-----250 -296 -243 -331 -316 -120 ------YoY - 153.7% 0.5% 94.2% 20.2% 58.4% 18.2% -7.3% -5.9% 7.8% 28.3% -2.1% -29.4% -1.7% 20.7% -41.2% 32.2% -22.4% Takashimaya Singapore - 153.7% -2.9% 88.5% 68.4% 35.3% 14.3% -3.9% -5.7% 2.9%19.2%4.2%8.8%9.9%-5.3% -22.6% 14.9% -10.6% OPM 1.1% 2.6% 2.7% 4.8% 4.6% 6.3% 6.8% 6.5% 7.1% 7.5% 9.2% 8.5% 4.3% 3.8% 4.4% 2.8%3.4%7.0%2.4%-1.0pp Takashimaya Singapore 1.1%2.6%2.8%4.8%6.5%7.5%7.7%7.6%8.3%8.2%9.2% 9.1% 7.8% 7.8% 7.0% 6.2% 6.9% 17.9% 6.0% -0.9pp Shanghai Takashimaya ------108.4% -29.3% -31.1% -17.0% -15.5% -16.3% -23.3% -10.6% +5.7pp Takashimaya Vietnam ------27.9% -6.4% -16.7% -5.6% +0.8pp Source: Shared Research based on company data

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Overseas, in order to secure a favorable position in the ASEAN region, the company is preparing to finally open Siam Takashimaya in Bangkok, Thailand, in October 2018.

The company plans to open Siam Takashimaya in Bangkok's upcoming large-scale mixed development ICONSIAM, as a joint venture with powerful local company Siam Piwat. In the department store’s first fiscal year (year after opening), the company targets total sales of JPY13.0bn, and in the five-months remaining of FY02/19 it aims for total sales of JPY3.4bn (revenue of JPY1.2bn), and an operating loss of JPY420mn. Because of the prime location and the highly profitable business scheme, Takashimaya expects the store to turn profitable in its second year after opening (FY02/19) and the following year (FY02/20). The department store will mainly target the wealthier citizens of Thailand’s capital, Bangkok; its secondary targets are members of the capital’s fast-growing middle class, residing on the west bank of the Chao Phraya River, and the estimated 19mn or so tourists expected to visit ICONSIAM annually. The store’s concept is “Fusion of the best of Thailand and Takashimaya.”

Takashimaya anticipates an upturn in earnings at the Singapore business, amid improvement in the local economy. Takashimaya Singapore plans a 25th Anniversary celebration in 2018, and looking ahead the company aims to leverage its strong customer base to use Singapore as a hub for accelerated business expansion in Asia. At Shanghai Takashimaya, the company expects to continue achieving double-digit growth in sales, as the store is distinguished from local competitors by a Japanese-style approach to department store operations that has no parallel in China. The business climate is favorable also, as there are plans to develop mixed-use (office and commercial) facilities in the adjacent area, along with a new subway station. The company sees operating losses narrowing and aims to make the store profitable at the earliest possible time via ongoing measures to improve operational efficiency.

In Vietnam, integrated management with business partner Keppel Land Ltd, a leading real estate developer from Singapore, has ensured that customer traffic and sales both are higher than planned at Saigon Centre, a mixed-use complex with Takashimaya as anchor tenant. With the aid also of Toshin Development’s expertise in developing and operating retail malls, Takashimaya sees the Vietnam business as a whole turning an operating profit in FY02/20.

Real Estate

Real Estate FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init. Est. Change Operating revenue 19,628 18,178 16,282 22,751 16,974 24,088 29,040 29,590 29,401 29,434 32,259 33,863 36,804 38,102 42,389 47,923 47,476 45,782 -1,694 Toshin Development 20,995 18,286 19,286 21,471 27,483 28,557 33,749 34,701 34,435 29,787 31,424 32,111 33,549 33,956 35,008 44,581 52,312 45,391 -6,921 TDS ------4,789 5,782 6,115 7,618 8,528 9,490 8,785 8,952 9,059 +107 YoY 50.0% -7.4% -10.4% 39.7% -25.4% 41.9% 20.6% 1.9% -0.6% 0.1% 9.6% 5.0% 8.7% 3.5% 11.3% 13.1% -0.9% -3.6% Toshin Development - -12.9% 5.5% 11.3% 28.0% 3.9% 18.2% 2.8% -0.8% -13.5% 5.5% 2.2% 4.5% 1.2% 3.1% 27.3% 17.3% -13.2% TDS ------20.7%5.8%24.6%11.9%11.3%-7.4% 1.9% 1.2% Operating profit 7,407 6,564 3,914 5,209 5,661 6,316 7,671 6,982 6,491 6,613 7,184 7,757 8,380 9,528 10,297 11,028 11,393 10,304 -1,089 Toshin Development 3,570 3,181 3,554 5,199 5,470 6,080 7,459 6,797 6,372 5,646 6,005 6,588 6,886 7,754 8,006 8,840 9,044 7,943 -1,101 TDS ------1,018 1,368 1,356 1,681 1,961 2,476 2,340 2,484 2,339 -145 YoY 35.9% -11.4% -40.4% 33.1% 8.7% 11.6% 21.5% -9.0% -7.0% 1.9% 8.6% 8.0% 8.0% 13.7% 8.1% 7.1% 3.3% -9.6% Toshin Development - -10.9% 11.7% 46.3% 5.2% 11.2% 22.7% -8.9% -6.3% -11.4% 6.4% 9.7% 4.5% 12.6% 3.2% 10.4% 2.3% -12.2% TDS ------34.4%-0.9% 24.0% 16.7% 26.3% -5.5% 6.2% -5.8% OPM 37.7% 36.1% 24.0% 22.9% 33.4% 26.2% 26.4% 23.6% 22.1% 22.5% 22.3% 22.9% 22.8% 25.0% 24.3% 23.0% 24.0% 22.5% -1.5pp Toshin Development 17.0% 17.4% 18.4% 24.2% 19.9% 21.3% 22.1% 19.6% 18.5% 19.0% 19.1% 20.5% 20.5% 22.8% 22.9% 19.8% 17.3% 17.5% +0.2pp TDS ------21.3%23.7%22.2%22.1%23.0%26.1%26.6%27.7%25.8% -1.9pp Source: Shared Research based on company data

In FY02/19, the company forecasts operating revenue to decrease by 3.6% YoY and operating profit by 9.6% (JPY1.1bn). While projecting a temporary downturn in profit in the absence of the profit boost from real estate sales in FY02/18, and in view of domestic and overseas investment projects geared toward sustaining growth, Takashima anticipates a return to growth in FY02/20 and over the medium and long term. In Japan, the company anticipates a JPY600mn increase in forward spending on the Nihombashi Takashimaya Shopping Center, however from FY02/20 it projects a JPY400mn or so boost to profit from this project. Overseas, the company intends to leverage business resources from the Singapore operation for the purpose of steadily expanding the Saigon Centre in Ho Chi Minh City in Vietnam, and developing the surrounding area. For an outline of the Machi-Zukuri initiative in Japan, please refer to the department store business section.

33/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Finance

Takashima forecasts ongoing growth in both sales and profits. It will continue working to capture new customers and promote the use of cards at partner stores. The finance segment also will ramp up marketing aimed at increasing usage of cards at both department stores and partner stores, leveraging detailed data on buying habits gleaned through the Group Reform Project. Over the medium term, the company is looking to develop Takashimaya Credit into the third pillar of operations alongside the department stores and real estate segments.

Contract and Design

Contract and Design FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init. Est. Change Operating revenue 43,849 37,620 35,887 26,906 34,581 33,388 25,861 20,814 15,737 17,451 17,097 19,010 20,622 24,658 26,710 30,874 25,916 27,797 +1,881 Takashimaya Space Create 30,443 36,300 35,747 38,488 30,890 38,775 32,687 24,891 20,908 21,293 19,175 23,647 24,893 28,327 30,251 34,521 29,320 31,300 +1,980 Takashimaya Space Create Tohoku ------551773910564533800 +267 YoY -3.7% -14.2% -4.6% -25.0% 28.5% -3.4% -22.5% -19.5% -24.4% 10.9% -2.0% 11.2% 8.5% 19.6% 8.3% 15.6% -16.1% 7.3% Takashimaya Space Create - 19.2% -1.5% 7.7% -19.7% 25.5% -15.7% -23.9% -16.0% 1.8% -9.9% 23.3% 5.3% 13.8% 6.8% 14.1% -15.1% 6.8% Takashimaya Space Create Tohoku ------40.3%17.7%-38.0% -5.5% 50.1% Operat ing profit -507 -413 -439 417 522 475 955 64 -501 121 217 868 1,110 1,439 1,898 2,342 1,207 1,440 +233 Takashimaya Space Create -71 -207 -237 520 524 468 966 2 -523 126 217 870 1,123 1,414 1,871 2,352 1,231 1,410 +179 Takashimaya Space Create Tohoku ------1 -12 25 27 -9 -23 30 +53 YoY -227.4% -18.5% 6.3% -195.0% 25.2% -9.0% 101.1% -93.3% -882.8% -124.2% 79.3% 300.0% 27.9% 29.6% 31.9% 23.4% -48.5% 19.3% Takashimaya Space Create - 191.5% 14.5% -319.4% 0.8% -10.7% 106.4% -99.8% -26,250.0% -124.1% 72.2% 300.9% 29.1% 25.9% 32.3% 25.7% -47.7% 14.5% OPM -1.2% -1.1% -1.2% 1.5% 1.5% 1.4% 3.7% 0.3% -3.2% 0.7% 1.3% 4.6% 5.4% 5.8% 7.1% 7.6% 4.7% 5.2% +0.5pp Takashimaya Space Create -0.2% -0.6% -0.7% 1.4% 1.7% 1.2% 3.0% 0.0% -2.5% 0.6% 1.1% 3.7% 4.5% 5.0% 6.2% 6.8% 4.2% 4.5% +0.3pp Takashimaya Space Create Tohoku ------2.2% 3.2% 3.0% -1.6% -4.3% 3.8% +8.1pp Source: Shared Research based on company data

Here, too, Takashima anticipates continued growth in both sales and profits. Takashimaya Space Create plans to be involved in large construction projects chiefly in metropolitan areas such as Tokyo, Osaka, and Nagoya. It also plans to continue efforts in response to construction demand leading up to the 2020 Tokyo Olympics. In addition, the company expects to win shop fit-out orders related to the Nihombashi Takashimaya Shopping Center.

34/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Outlook

Long-term plan (out April 2018)

The company announces a long-term plan on a rolling basis every year. The following is an outline of the long-term plan announced in April 2018.

Targets for FY02/23

Long-term plan FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/23 FY02/22 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act Init. Est. Change Target Vs. FY02/18 Prev. Tgt. Vs. FY02/17 Operating revenue 1,049,405 1,042,711 976,116 877,762 869,476 858,123 870,333 904,180 912,523 929,588 923,601 949,572 919,000 -30,572 1,033,000 +83,428 1,000,000 +76,399 Domestic department store 922,021 914,567 852,620 765,566 755,397 740,047 745,757 758,338 755,239 765,466 757,171 778,624 781,917 +3,293 788,000 +9,376 757,000 -171 Domestic group companies 170,312 160,148 148,703 137,882 132,494 131,363 136,580 142,411 144,770 144,974 155,663 160,551 156,194 -4,357 190,000 +29,449 191,000 +35,337 Overseas business 38,512 42,202 41,032 35,340 40,703 43,262 46,027 62,808 69,836 74,616 68,092 73,857 35,449 -38,408 112,000 +38,143 108,000 +39,908 YoY 1.8% -0.6% -6.4% -10.1% -0.9% -1.3% 1.4% 3.9% 0.9% 1.9% -0.6% 2.8% -3.2% -0.1pp 1.7% 1.6% Domestic department store 0.8% -0.8% -6.8% -10.2% -1.3% -2.0% 0.8% 1.7% -0.4% 1.4% -1.1% 2.8% 0.4% -0.0pp 0.2% -0.0% Domestic group companies 9.6% -6.0% -7.1% -7.3% -3.9% -0.9% 4.0% 4.3% 1.7% 0.1% 7.4% 3.1% -2.7% -0.1pp 3.4% 4.2% Overseas business 16.4% 9.6% -2.8% -13.9% 15.2% 6.3% 6.4% 36.5% 11.2% 6.8% -8.7% 8.5% -52.0% -0.6pp 8.7% 9.7% Operating profit 33,860 37,699 24,810 13,428 18,173 21,099 25,476 29,099 32,022 32,972 34,000 35,318 30,000 -5,318 50,000 +14,682 50,000 +16,000 Domestic department store 22,172 24,795 12,695 3,443 8,058 6,910 8,415 11,524 12,744 11,375 10,781 13,601 10,000 -3,601 17,000 +3,399 16,000 +5,219 Domestic group companies 9,737 10,531 9,975 7,703 6,537 9,344 12,440 13,815 15,397 16,712 18,084 15,929 15,891 -38 25,000 +9,071 27,000 +8,916 Overseas business 2,422 2,864 2,655 2,499 3,711 4,822 4,736 4,068 4,308 5,179 3,779 4,578 4,002 -576 8,000 +3,422 7,000 +3,221 YoY 3.4% 11.3% -34.2% -45.9% 35.3% 16.1% 20.7% 14.2% 10.0% 3.0% 3.1% 3.9% -15.1% -0.2pp 7.2% 8.0% Domestic department store -3.0% 11.8% -48.8% -72.9% 134.0% -14.2% 21.8% 36.9% 10.6% -10.7% -5.2% 26.2% -26.5% -0.5pp 4.6% 8.2% Domestic group companies 6.9% 8.2% -5.3% -22.8% -15.1% 42.9% 33.1% 11.1% 11.5% 8.5% 8.2% -11.9% -0.2% +0.1pp 9.4% 8.3% Overseas business 58.4% 18.2% -7.3% -5.9% 48.5% 29.9% -1.8% -14.1% 5.9% 20.2% -27.0% 21.1% -12.6% -0.3pp 11.8% 13.1% OPM 3.2%3.6%2.5%1.5%2.1%2.5%2.9%3.2%3.5%3.5%3.7%3.7% 3.3% -0.0pp 4.8% +1.1pp 5.0% +1.3pp Domestic department store 2.4%2.7%1.5%0.4%1.1%0.9%1.1%1.5%1.7%1.5% 1.4% 1.7% 1.3% -0.0pp 2.2% +0.4pp 2.1% +0.7pp Domestic group companies 5.7% 6.6% 6.7% 5.6% 4.9% 7.1% 9.1% 9.7% 10.6% 11.5% 11.6% 9.9% 10.2% +0.0pp 13.2% +3.2pp 14.1% +2.5pp Overseas business 6.3% 6.8% 6.5% 7.1% 9.1% 11.1% 10.3% 6.5% 6.2% 6.9% 5.5% 6.2% 11.3% +0.1pp 7.1% +0.9pp 6.5% +0.9pp ROE 9.9%6.5%4.1%2.7%4.7%3.6%5.2%5.4%5.9%6.0%5.1%5.6% 4.1% -0.0pp 7.0% +1.4pp 7.0% +1.9pp ROA (RP-based) 5.1% 5.5% 3.7% 2.2% 2.8% 3.0% 3.7% 3.9% 3.8% 3.9% 3.8% 3.8% 3.2% -0.0pp 4.6% +0.8pp 4.6% +0.8pp Equity ratio 36.2% 37.9% 37.1% 36.6% 36.3% 37.6% 41.7% 39.7% 40.9% 40.9% 41.8% 42.2% 42.5% +0.0pp 48.0% +5.8pp 48.0% +6.2pp Interest-bearing debt 155,262 174,262 194,000 +19,738 170,000 -4,262 CF from operating activities 28,762 65,480 14,686 23,428 20,645 31,921 44,141 40,582 41,018 25,638 42,266 36,870 54,000 +17,130 CF from invest ing act ivit ies -10,075 -45,522 -38,348 -10,508 -13,240 -16,356 -28,470 -30,389 -116,049 -16,081 -9,124 -62,286 -90,000 -27,714 CF from financing activities -15,848 -35,125 14,121 14,817 7,673 -8,210 -32,931 64,391 11,619 -19,239 -4,228 14,185 17,000 +2,815 CF from operating activities (5-year cml.) 190,747 190,676 163,392 161,128 153,001 156,160 134,821 160,717 178,307 183,300 193,645 186,374 199,792 +13,418 280,000 +93,626 270,000 +76,355 CF from invest ing act ivit ies (5-year cml.) -42,662 -81,587 -99,365 -111,318 -117,693 -123,974 -106,922 -98,963 -204,504 -207,345 -200,113 -233,929 -293,540 -59,611 -270,000 -36,071 -310,000 -109,887 CF from financing activities (5-year cml.) -129,341 -104,512 -92,701 -54,579 -14,362 -6,724 -4,530 45,740 42,542 15,630 19,612 66,728 19,337 -47,391 -30,000 -96,728 10,000 -9,612 Investment in growth areas (5-year cml.) 280,000 320,000 Domestic department store 60,500 82,000 Domestic group companies 60,000 163,000 Overseas business 32,000 19,000 Safe and secure systems 127,500 56,000 (JPYbn) Domestic dept. store sales (JPYbn) Domestic group companies sales (JPYbn) Overseas sales 24.8 1,000 Domestic dept. store OP (right axis) 25 300 Domestic group companies OP (right axis) 30 120 Overseas operating profit (right axis) 12 22.2 900 25.0 250 25 100 800 20 17.0 8.0 700 200 18.1 20 80 8 13.6 16.7 600 12.7 12.7 15 15.4 15.915.9 11.5 11.4 13.8 500 10.8 150 15 60 5.2 10.0 12.4 4.8 4.7 4.3 4.6 8.4 10.510.0 4.1 4.0 400 10 9.7 9.3 3.7 3.8 6.9 100 10 40 4 300 7.7 2.9 8.1 6.5 2.4 2.7 2.5 200 3.4 5 50 5 20 100 0 0 0 0 0 0 FY02/07 FY02/11 FY02/15 FY02/19 FY02/23 FY02/07 FY02/11 FY02/15 FY02/19 FY02/23 FY02/07 FY02/11 FY02/15 FY02/19 FY02/23 Est. Est. Est. Est. Est. Est. Source: Shared Research based on company data Note: The long-term plan YoY figures are five-year average growth rates.

Targets Takashimaya has set FY02/23 targets for sales at JPY1,033.0bn (+JPY8.3bn compared to FY02/18) and operating profit at JPY50.0bn (+JPY14.7bn compared to FY02/18). While anticipating contraction in the domestic market and the adverse effects of a consumption tax increase, the company aims to lead the industry in terms of profitability, efficiency, and stability, via growth underpinned by the domestic real estate and finance businesses and overseas operations. Although facing cost increases associated with legislation amendments related to equal pay for equal work and extension of the retirement age, the company nonetheless seeks to grow operating profit to JPY50.0bn via sales reforms and business structure reforms at the domestic department store business—as part of the Group Reform Project—and growth in domestic group businesses and overseas operations. Takashima also looks to achieve ongoing improvement in ROE and ROA by striking an appropriate balance between profit growth and investments.

With respect to strategic investment geared toward realization of growth strategies, Takashimaya plans to invest strategically in businesses likely to provide new sources of income, within the bounds of operating cash flow including cash from asset divestments.

35/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Group growth strategy In principle, the group growth strategy remains unchanged; it calls for the company to continue pursuing its Machi-Zukuri initiative with a view to realizing stable growth. More specifically, Takashimaya seeks to (a) draw on its collective strengths and work in tandem with local communities to develop unique commercial facilities; (b) leverage synergies with the department store business to enhance the competitiveness of all group businesses as well as furthering overseas expansion; and (c) use the Group Reform Project to improve operational efficiency and offer support for the Machi-Zukuri strategy. Shared Research believes that Takashimaya now has a more concrete and more focused image of how it can strengthen business foundations via the Group Reform Project (see section on FY02/18 results).

Outlook for each fiscal year In terms of plans for each fiscal year, (1) in FY02/19 the company anticipates an increase in spending in preparation for future growth (Nihombashi Takashimaya Shopping Center, Siam Takashimaya, Group Reform Project); (2) in FY02/20 it expects earnings to return to a growth trajectory as these investments bear fruit; and (3) in FY02/21 and beyond it aims to meet targets despite an increased consumption tax. By FY02/23, the company looks to swiftly build a business foundation sufficiently strong to withstand the consumption tax hike and labor issues accompanying legislative amendments, as well as structural problems arising as a declining birthrate leads to a shrinking population and super-aging society. At the same time, Takashimaya seeks to put earnings on a growth track via deployment of the Machi-Zukuri strategy.

36/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Long-term plan as of April 2016, April 2017 and as of April 2018 As of April 2016 FY02/21 FY02/16 FY02/17 vs. FY02/16 vs. FY02/17 vs. FY02/16 vs. FY02/17 (JPYbn) Target Act. Est. change change CAGR CAGR Operating revenue 1,080.0 929.6 953.0 150.4 127.0 3.8% 3.2% Domestic department store 822.0 765.5 775.6 56.5 46.4 1.8% 1.5% Domestic group companies 204.0 145.0 154.9 59.0 49.1 8.9% 7.1% Overseas business 118.0 74.6 74.7 43.4 43.3 12.1% 12.1% Operating profit 55.0 33.0 34.0 22.0 21.0 13.6% 12.8% Domestic department store 21.5 11.4 12.4 10.1 9.1 17.3% 14.8% Domestic group companies 25.0 16.7 16.8 8.3 8.2 10.6% 10.5% Overseas business 9.0 5.2 4.3 3.8 4.7 14.8% 20.0% ROE 8.0% + 6.0% 5.9% +2.0pp +2.1pp 7.7% 7.9% ROA (RP-based) 5.0% + 3.9% 3.9% +1.1pp +1.1pp 6.6% 6.4% Investment in growth areas 265 Domestic department store 63 Domestic group companies 142 Overseas business 60 Total investments 330 Equity ratio 46.0% 40.9% 42.5% +5.1pp +3.5pp 3.0% 2.0% As of April 2017 FY02/22 FY02/17 FY02/18 vs. FY02/17 vs. FY02/18 vs. FY02/17 vs. FY02/18 (JPYbn) Target Act. Est. change change CAGR CAGR Operating revenue 1,000.0 923.6 943.0 76.4 57.0 2.0% 1.5% Domestic department store 757.0 757.2 753.9 -0.2 3.1 -0.0% 0.1% Domestic group companies 191.0 155.7 178.4 35.3 12.6 5.2% 1.7% Overseas business 108.0 68.1 71.1 39.9 36.9 12.2% 11.0% Operating profit 50.0 34.0 35.0 16.0 15.0 10.1% 9.3% Domestic department store 16.0 10.8 11.9 5.2 4.1 10.4% 7.7% Domestic group companies 27.0 18.1 18.1 8.9 8.9 10.5% 10.4% Overseas business 7.0 3.8 4.0 3.2 3.0 16.7% 15.2% ROE 7.0% + 5.1% 5.1% +1.9pp +1.9pp 8.0% 8.2% ROA (RP-based) 4.6% + 3.8% 3.8% +0.8pp +0.8pp 4.9% 4.9% Investment in growth areas 320.0 Domestic department store 82.0 Domestic group companies 163.0 Overseas business 19.0 Safe and secure systems 56.0 Equity ratio 48.0% 41.8% 42.7% +6.2pp +5.3pp 3.5% 3.0% As of April 2018 FY02/2023 FY02/18 FY02/19 FY02/18 FY02/19 FY02/18 FY02/19 (JPYbn) Target Act. Est. change change CAGR CAGR Operating revenue 1,033.0 949.6 919.0 83.4 114.0 2.1% 3.0% Domestic department store 788.0 778.6 781.9 9.4 6.1 0.3% 0.2% Domestic group companies 190.0 160.6 156.2 29.4 33.8 4.3% 5.0% Overseas business 112.0 73.9 35.4 38.1 76.6 11.0% 33.3% Operating profit 50.0 35.3 30.0 14.7 20.0 9.1% 13.6% Domestic department store 17.0 13.6 10.0 3.4 7.0 5.7% 14.2% Domestic group companies 25.0 15.9 15.9 9.1 9.1 11.9% 12.0% Overseas business 8.0 4.6 4.0 3.4 4.0 15.0% 18.9% ROE 7.0% + 5.6% 4.1% +1.4pp +2.9pp 5.7% 14.3% ROA (RP-based) 4.5% + 3.8% 3.2% +0.7pp +1.3pp 4.3% 8.9% Investment in growth areas 280.0 Domestic department store 60.5 Domestic group companies 60.0 Overseas business 32.0 Safe and secure systems 127.5 Equity ratio 47.5% 42.2% 42.5% +5.3pp +5.0pp 3.0% 2.8% Source: Shared Research based on company data Domestic department stores

Domestic dept. store FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/23 FY02/22 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act Init. Est. Change Target Vs. FY02/18 Prev. Tgt. Vs. FY02/17 Operating revenue 922,021 914,567 852,620 765,566 755,397 740,047 745,757 758,338 755,239 765,466 757,171 778,624 781,917 +3,293 788,000 +9,376 757,000 -171 YoY 0.8% -0.8% -6.8% -10.2% -1.3% -2.0% 0.8% 1.7% -0.4% 1.4% -1.1% 2.8% 0.4% 0.2% -0.0% Sales 910,560 903,509 842,194 755,358 745,021 729,746 735,332 747,812 745,039 755,041 745,146 765,037 767,711 +2,674 YoY 0.9% -0.8% -6.8% -10.3% -1.4% -2.1% 0.8% 1.7% -0.4% 1.3% -1.3% 2.7% 0.3% Gross profit 247,701 243,799 224,272 197,569 191,718 186,597 186,358 187,194 185,601 184,687 180,591 184,059 184,137 +78 GPM 27.2% 27.0% 26.6% 26.2% 25.7% 25.6% 25.3% 25.0% 24.9% 24.5% 24.2% 24.1% 24.0% -0.1pp Operating profit 259,162 254,857 234,698 207,777 202,094 196,898 196,783 197,720 195,801 195,112 192,616 197,646 198,343 +697 OPM 28.1% 27.9% 27.5% 27.1% 26.8% 26.6% 26.4% 26.1% 25.9% 25.5% 25.4% 25.4% 25.4% -0.0pp SG&A expenses 236,990 230,062 222,003 204,334 194,036 189,988 188,368 186,196 183,057 183,737 181,835 184,045 188,343 +4,298 YoY 0.6% -2.9% -3.5% -8.0% -5.0% -2.1% -0.9% -1.2% -1.7% 0.4% -1.0% 1.2% 2.3% % of operating revenue 25.7% 25.2% 26.0% 26.7% 25.7% 25.7% 25.3% 24.6% 24.2% 24.0% 24.0% 23.6% 24.1% +0.5pp Operating profit 22,172 24,795 12,695 3,443 8,058 6,910 8,415 11,524 12,744 11,375 10,781 13,601 10,000 -3,601 17,000 +3,399 16,000 +5,219 YoY -3.0% 11.8% -48.8% -72.9% 134.0% -14.2% 21.8% 36.9% 10.6% -10.7% -5.2% 26.2% -26.5% 4.6% 8.2% OPM 2.4%2.7%1.5%0.4%1.1%0.9%1.1%1.5%1.7%1.5%1.4%1.7% 1.3% -0.5pp 2.2% +0.4pp 2.1% +0.7pp ROE 8.3%4.7%1.6%0.7%1.4%2.6%2.2%3.0%4.4%3.1%1.6%3.3% 5.1% +1.8pp ROA (RP-based) 3.7% 4.1% 2.3% 0.8% 1.7% 1.3% 1.8% 2.2% 2.0% 1.9% 1.8% 2.1% 2.6% +0.6pp Net assets to total assets ratio 37.4% 39.7% 38.4% 36.9% 35.5% 36.6% 39.9% 36.4% 37.2% 36.7% 36.3% 35.4% 35.1% -0.2pp Source: Shared Research based on company data Note: The “YoY” numbers for targets refer to five-year compound annual growth rate (CAGR).

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Domestic group companies

Domestic group companies FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/23 FY02/22 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act Init. Est. Change Target Vs. FY02/18 Prev. Tgt. Vs. FY02/17 Operating revenue 170,312 160,148 148,703 137,882 132,494 131,363 136,580 142,411 144,770 144,974 155,663 160,551 156,194 -4,357 190,000 +29,449 191,000 +35,337 Toshin Development 28,557 33,749 34,701 34,435 29,787 31,424 32,111 33,549 33,956 35,008 44,581 52,312 45,391 -6,921 Takashimaya Credit 12,237 13,590 15,124 15,247 15,894 15,542 15,759 16,205 16,789 17,257 17,662 18,444 19,098 +654 Takashimaya Space Create 38,775 32,687 24,891 20,908 21,293 19,175 23,647 24,893 28,327 30,251 34,521 29,320 31,300 +1,980 YoY 9.6% -6.0% -7.1% -7.3% -3.9% -0.9% 4.0% 4.3% 1.7% 0.1% 7.4% 3.1% -2.7% 3.4% 4.2% Toshin Development 3.9% 18.2% 2.8% -0.8% -13.5% 5.5% 2.2% 4.5% 1.2% 3.1% 27.3% 17.3% -13.2% Takashimaya Credit 4.8% 11.1% 11.3% 0.8% 4.2% -2.2% 1.4% 2.8% 3.6% 2.8% 2.3% 4.4% 3.5% Takashimaya Space Create 25.5% -15.7% -23.9% -16.0% 1.8% -9.9% 23.3% 5.3% 13.8% 6.8% 14.1% -15.1% 6.8% Operating profit 9,737 10,531 9,975 7,703 6,537 9,344 12,440 13,815 15,397 16,712 18,084 15,929 15,891 -38 25,000 +9,071 27,000 +8,916 Toshin Development 6,080 7,459 6,797 6,372 5,646 6,005 6,588 6,886 7,754 8,006 8,840 9,044 7,943 -1,101 Takashimaya Credit 2,094 967 1,536 1,615 2,135 3,229 3,625 4,101 4,137 4,341 4,468 4,543 4,805 +262 Takashimaya Space Create 468 966 2 -523 126 217 870 1,123 1,414 1,871 2,352 1,231 1,410 +179 YoY 6.9% 8.2% -5.3% -22.8% -15.1% 42.9% 33.1% 11.1% 11.5% 8.5% 8.2% -11.9% -0.2% 9.4% 8.3% Toshin Development 11.2% 22.7% -8.9% -6.3% -11.4% 6.4% 9.7% 4.5% 12.6% 3.2% 10.4% 2.3% -12.2% Takashimaya Credit -11.1% -53.8% 58.8% 5.1% 32.2% 51.2% 12.3% 13.1% 0.9% 4.9% 2.9% 1.7% 5.8% Takashimaya Space Create -10.7% 106.4% -99.8% -26,250.0% -124.1% 72.2% 300.9% 29.1% 25.9% 32.3% 25.7% -47.7% 14.5% OPM 5.7% 6.6% 6.7% 5.6% 4.9% 7.1% 9.1% 9.7% 10.6% 11.5% 11.6% 9.9% 10.2% +0.3pp 13.2% +3.2pp 14.1% +2.5pp Toshin Development 21.3% 22.1% 19.6% 18.5% 19.0% 19.1% 20.5% 20.5% 22.8% 22.9% 19.8% 17.3% 17.5% +0.2pp Takashimaya Credit 17.1% 7.1% 10.2% 10.6% 13.4% 20.8% 23.0% 25.3% 24.6% 25.2% 25.3% 24.6% 25.2% +0.5pp Takashimaya Space Create 1.2% 3.0% 0.0% -2.5% 0.6% 1.1% 3.7% 4.5% 5.0% 6.2% 6.8% 4.2% 4.5% +0.3pp Source: Shared Research based on company data

Real Estate

Real Estate FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/23 FY02/22 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act Init. Est. Change Target Vs. FY02/18 Prev. Tgt. Vs. FY02/17 Operating revenue 24,088 29,040 29,590 29,401 29,434 32,259 33,863 36,804 38,102 42,389 47,923 47,476 45,782 -1,694 Toshin Development 28,557 33,749 34,701 34,435 29,787 31,424 32,111 33,549 33,956 35,008 44,581 52,312 45,391 -6,921 TDS - - - - 4,789 5,782 6,115 7,618 8,528 9,490 8,785 8,952 9,059 +107 YoY 41.9% 20.6% 1.9% -0.6% 0.1% 9.6% 5.0% 8.7% 3.5% 11.3% 13.1% -0.9% -3.6% Toshin Development 3.9% 18.2% 2.8% -0.8% -13.5% 5.5% 2.2% 4.5% 1.2% 3.1% 27.3% 17.3% -13.2% TDS - - - - - 20.7% 5.8% 24.6% 11.9% 11.3% -7.4% 1.9% 1.2% Operating profit 6,316 7,671 6,982 6,491 6,613 7,184 7,757 8,380 9,528 10,297 11,028 11,393 10,304 -1,089 14,000 +2,607 15,000 +3,972 Toshin Development 6,080 7,459 6,797 6,372 5,646 6,005 6,588 6,886 7,754 8,006 8,840 9,044 7,943 -1,101 TDS - - - - 1,018 1,368 1,356 1,681 1,961 2,476 2,340 2,484 2,339 -145 YoY 11.6% 21.5% -9.0% -7.0% 1.9% 8.6% 8.0% 8.0% 13.7% 8.1% 7.1% 3.3% -9.6% Toshin Development 11.2% 22.7% -8.9% -6.3% -11.4% 6.4% 9.7% 4.5% 12.6% 3.2% 10.4% 2.3% -12.2% TDS - - - - - 34.4% -0.9% 24.0% 16.7% 26.3% -5.5% 6.2% -5.8% OPM 26.2% 26.4% 23.6% 22.1% 22.5% 22.3% 22.9% 22.8% 25.0% 24.3% 23.0% 24.0% 22.5% -1.5pp Toshin Development 21.3% 22.1% 19.6% 18.5% 19.0% 19.1% 20.5% 20.5% 22.8% 22.9% 19.8% 17.3% 17.5% +0.2pp TDS - - - - 21.3% 23.7% 22.2% 22.1% 23.0% 26.1% 26.6% 27.7% 25.8% -1.9pp Source: Shared Research based on company data

Finance

Finance FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/23 FY02/22 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act Init. Est. Change Target Vs. FY02/18 Prev. Tgt. Vs. FY02/17 Operating revenue 7,986 8,738 10,346 10,916 11,689 11,514 11,655 11,911 12,385 12,865 13,414 14,187 14,681 +494 Takashimaya Credit 12,237 13,590 15,124 15,247 15,894 15,542 15,759 16,205 16,789 17,257 17,662 18,444 19,098 +654 YoY -27.5% 9.4% 18.4% 5.5% 7.1% -1.5% 1.2% 2.2% 4.0% 3.9% 4.3% 5.8% 3.5% Takashimaya Credit 4.8% 11.1% 11.3% 0.8% 4.2% -2.2% 1.4% 2.8% 3.6% 2.8% 2.3% 4.4% 3.5% Operating profit 2,084 960 1,531 1,613 2,135 3,228 3,625 4,144 4,176 4,376 4,495 4,563 4,724 +161 8,000 +3,437 7,000 +2,505 Takashimaya Credit 2,094 967 1,536 1,615 2,135 3,229 3,625 4,101 4,137 4,341 4,468 4,543 4,805 +262 YoY -11.8% -53.9% 59.5% 5.4% 32.4% 51.2% 12.3% 14.3% 0.8% 4.8% 2.7% 1.5% 3.5% Takashimaya Credit -11.1% -53.8% 58.8% 5.1% 32.2% 51.2% 12.3% 13.1% 0.9% 4.9% 2.9% 1.7% 5.8% OPM 26.1% 11.0% 14.8% 14.8% 18.3% 28.0% 31.1% 34.8% 33.7% 34.0% 33.5% 32.2% 32.2% +0.0pp Takashimaya Credit 17.1% 7.1% 10.2% 10.6% 13.4% 20.8% 23.0% 25.3% 24.6% 25.2% 25.3% 24.6% 25.2% +0.5pp Source: Shared Research based on company data

Overseas

Overseas business FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/23 FY02/22 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act Init. Est. Change Target Vs. FY02/18 Prev. Tgt. Vs. FY02/17 Operating revenue 38,512 42,202 41,032 35,340 40,703 43,262 46,027 62,808 69,836 74,616 68,092 73,857 35,449 -38,408 112,000 +38,143 108,000 +39,908 Takashimaya Singapore 36,145 40,198 39,318 33,837 35,268 37,480 39,710 49,980 55,015 57,818 50,745 52,507 18,118 -34,389 Shanghai Takashimaya ------202 5,210 6,293 7,306 6,333 7,002 3,635 -3,367 Takashimaya Vietnam ------1,8194,365 1,578 -2,787 Siam Takashimaya ------1,227 +1,227 TDS - - - - 4,789 5,782 6,115 7,618 8,528 9,490 8,785 8,952 9,059 +107 YoY 16.4% 9.6% -2.8% -13.9% 15.2% 6.3% 6.4% 36.5% 11.2% 6.8% -8.7% 8.5% -52.0% 8.7% 9.7% Takashimaya Singapore 17.7% 11.2% -2.2% -13.9% 4.2% 6.3% 5.9% 25.9% 10.1% 5.1% -12.2% 3.5% -65.5% Shanghai Takashimaya ------2,479.2% 20.8% 16.1% -13.3% 10.6% -48.1% Takashimaya Vietnam ------140.0% -63.8% TDS - - - - - 20.7% 5.8% 24.6% 11.9% 11.3% -7.4% 1.9% 1.2% Operating profit 2,422 2,864 2,655 2,499 3,711 4,822 4,736 4,068 4,308 5,179 3,779 4,578 4,002 -576 8,000 +3,422 7,000 +3,221 Takashimaya Singapore 2,718 3,107 2,986 2,815 2,897 3,454 3,599 3,915 4,302 4,076 3,153 3,622 3,239 -383 Shanghai Takashimaya ---- -84 - -219 -1,528 -1,955 -1,242 -980 -1,140 -848 +292 Takashimaya Vietnam ------508 -281 -264 +17 Siam Takashimaya ------420 -420 TDS - - - - 1,018 1,368 1,356 1,681 1,961 2,476 2,340 2,484 2,339 -145 YoY 58.4% 18.2% -7.3% -5.9% 48.5% 29.9% -1.8% -14.1% 5.9% 20.2% -27.0% 21.1% -12.6% 11.8% 13.1% Takashimaya Singapore 35.3% 14.3% -3.9% -5.7% 2.9% 19.2% 4.2% 8.8% 9.9% -5.3% -22.6% 14.9% -10.6% Shanghai Takashimaya ------100.0% - 597.7% 27.9% -36.5% -21.1% 16.3% -25.6% Takashimaya Vietnam ------44.7% -6.0% TDS - - - - - 34.4% -0.9% 24.0% 16.7% 26.3% -5.5% 6.2% -5.8% OPM 6.3% 6.8% 6.5% 7.1% 9.1% 11.1% 10.3% 6.5% 6.2% 6.9% 5.5% 6.2% 11.3% +5.1pp 7.1% +0.9pp 6.5% +0.9pp Takashimaya Singapore 7.5%7.7%7.6%8.3%8.2%9.2%9.1%7.8%7.8%7.0%6.2% 6.9% 17.9% +11.0pp Shanghai Takashimaya ------108.4% -29.3% -31.1% -17.0% -15.5% -16.3% -23.3% -7.0pp Takashimaya Vietnam ------27.9% -6.4% -16.7% -10.3pp TDS - - - - 21.3% 23.7% 22.2% 22.1% 23.0% 26.1% 26.6% 27.7% 25.8% -1.9pp Source: Shared Research based on company data

38/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Business Business description

Department store model

Of the company's 18 stores, only the Wakayama store is not a large-sized department store. The government’s Census of Commerce defines a department store as a store with product lineups for apparel, food, and household items that each constitutes 10% or more and less than 70% of the total lineup, and where more than 50% of sales space is for face-to-face sales. This distinguishes it from a general merchandise store (GMS), which is defined as having 50% or less of its sales floor area assigned for face-to-face sales. Large-sized department stores are those with sales floor areas of 3,000sqm or more (6,000sqm or more in designated wards in Tokyo and government-designated major cities), while other department stores are those of less than 3,000sqm.

Hiraba and shouka: different accounting treatments. In department stores merchandise is sold at hiraba (the space designed by the company) or at boutique-type shops (unlike tenants at shopping centers [SCs], Takashimaya staff manage these shops). Hiraba sales at Takashimaya provide about 60% of total (domestic department store) sales. There are three typical transaction types—purchase-as-sold consignment sales, consignment sales, and outright purchase sales. The Japanese term for the main transaction method is shouka (purchase-as-sold), generally translated as consignment sales. Confusion can arise from the second method employed in the relationship, itaku hanbai, also translated as consignment sales. Despite common translation, the two methods have different accounting treatments. The former (purchase-as-sold) presumes that title is not transferred to a department store until actual sale, i.e., it is never booked as department store inventory; the latter “consignment sales” implies the goods become department store inventory (returnable to the manufacturer if unsold). The outright purchase method common in the US (department stores purchase inventory and assume inventory risk) is minor for the Japanese department stores (it is called kaitori, outright purchase).

For the department stores cost-of-goods-sold is always the wholesale price with the COGS ratio about 10% lower for the outright purchase transaction (= about 10% higher gross profit margin, GPM). The outright purchase sales at Takashimaya account for about 5-10% of sales, purchase-as-sold 20-25% and itaku consignment around 70%. This split tallies with the industry average.

On a typical sales floor, about 20% of the sales staff are company employees (including non-full time employees) and the remaining 80% are suppliers’ personnel, who sell all of the consignment merchandise on the sales floor they are responsible for, regardless of the supply method. By product group GPMs are the highest for men’s accessories at around 40%, followed by menswear, sporting goods, kimono, womenswear, and women’s accessories. The GPM for luxury brands is slightly above 20% and for foodstuffs just under 20%.

While other department store operators (where the bulk of sales come from the main store) tend to rely on the main store buyers for purchasing across the store network, Takashimaya with its multiple flagships has buyers at each individual store.

At a typical store, food is selling at the basement floor, cosmetics, shoes, handkerchiefs, and similar goods – at the first, apparel – at the second and higher floors, followed by household and other non-fashion items. In many cases, the top floor has restaurants and event spaces to generate a “shower effect”, i.e., to drive customers to the top floor and then shower them down to the shops selling apparel and accessories on the upper floors.

Department store sales tend to mirror GDP growth. The short-term sales trends in Takashimaya’s Department Stores segment, shown in the chart below, tend to be highly correlated with business sentiment and GDP growth. Long-term growth has been below the GDP growth rate as specialty stores and other emerging competitors took market share. In 2001 Shinjuku store sales (+2.7% YoY) and Kashiwa store sales (+9.4% YoY), both enjoying visible effects from renovations, contributed to performance. In 2003 and 2004, apparel sales were stagnant as the department store sector slumped as a whole due to economic slowdown.

39/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Sales growth vs. GDP growth

6% Real GDP Sales growth 4% 2% 0% -2% -4% -6% -8% -10% -12% 2001 2003 2005 2007 2009 2011 2013 2015 Source: Shared Research based on company and Cabinet Office data

For details of the real estate business model, please see the discussion on Toshin Development.

Business segments

Parent sales are reported in three business segments: department store (93.0% of total sales in FY02/17); corporate (4.7%); and cross-media (2.3%). Corporate includes sales of products for corporate sales promotions and company uniforms. Cross-media carries out the company’s mail order and online business (e-commerce).

Earnings by segment (consolidated)

FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act. Act. Act. Operating revenue 1,205,872 1,184,236 1,114,481 1,026,353 1,031,150 1,049,405 1,042,711 976,116 877,762 869,476 858,123 870,333 904,180 912,523 929,588 923,601 949,572 Department Stores 987,164 975,370 950,042 928,182 917,828 941,692 940,086 879,440 786,987 777,478 762,827 770,089 798,079 802,956 811,648 797,253 826,561 Real Estate 19,628 18,178 16,282 22,751 16,974 24,088 29,040 29,590 29,401 29,434 32,259 33,863 36,804 38,102 42,389 47,923 47,476 Finance 8,268 8,967 9,424 8,822 11,017 7,986 8,738 10,346 10,916 11,689 11,514 11,655 11,911 12,385 12,865 13,414 14,187 Contract and Design 43,849 37,620 35,887 26,906 34,581 33,388 25,861 20,814 15,737 17,451 17,097 19,010 20,622 24,658 26,710 30,874 25,916 Others 146,962 144,098 102,844 44,488 45,950 42,249 38,983 35,925 34,718 33,421 34,424 35,714 36,762 34,420 35,974 34,135 35,430 YoY 1.1% -1.8% -5.9% -7.9% 0.5% 1.8% -0.6% -6.4% -10.1% -0.9% -1.3% 1.4% 3.9% 0.9% 1.9% -0.6% 2.8% Department Stores 1.2% -1.2% -2.6% -2.3% -1.1% 2.6% -0.2% -6.5% -10.5% -1.2% -1.9% 1.0% 3.6% 0.6% 1.1% -1.8% 3.7% Real Estate 50.0% -7.4% -10.4% 39.7% -25.4% 41.9% 20.6% 1.9% -0.6% 0.1% 9.6% 5.0% 8.7% 3.5% 11.3% 13.1% -0.9% Finance 4.8% 8.5% 5.1% -6.4% 24.9% -27.5% 9.4% 18.4% 5.5% 7.1% -1.5% 1.2% 2.2% 4.0% 3.9% 4.3% 5.8% Contract and Design -3.7% -14.2% -4.6% -25.0% 28.5% -3.4% -22.5% -19.5% -24.4% 10.9% -2.0% 11.2% 8.5% 19.6% 8.3% 15.6% -16.1% Others -2.0% -1.9% -28.6% -56.7% 3.3% -8.1% -7.7% -7.8% -3.4% -3.7% 3.0% 3.7% 2.9% -6.4% 4.5% -5.1% 3.8% Operating profit 18,929 16,444 25,360 28,996 32,755 33,860 37,699 24,810 13,428 18,173 21,099 25,476 29,099 32,022 32,972 34,000 35,318 Department Stores 8,807 8,499 17,709 20,628 23,201 23,342 26,903 15,121 5,098 10,728 9,909 11,880 13,962 15,519 14,975 12,182 13,509 Real Estate 7,407 6,564 3,914 5,209 5,661 6,316 7,671 6,982 6,491 6,613 7,184 7,757 8,380 9,528 10,297 11,028 11,393 Finance 1,692 1,458 1,665 2,611 2,362 2,084 960 1,531 1,613 2,135 3,228 3,625 4,144 4,176 4,376 4,495 4,563 Contract and Design -507 -413 -439 417 522 475 955 64 -501 121 217 868 1,110 1,439 1,898 2,342 1,207 Others 1,479 1,390 3,186 1,042 1,229 2,085 1,688 1,271 938 -1,280 248 1,261 1,650 1,590 1,496 2,333 3,331 Adjustments 50 -1,057 -674 -913 -221 -443 -480 -161 -211 -144 310 83 -150 -231 -69 1,616 1,314 YoY -4.9% -13.1% 54.2% 14.3% 13.0% 3.4% 11.3% -34.2% -45.9% 35.3% 16.1% 20.7% 14.2% 10.0% 3.0% 3.1% 3.9% Department Stores 8.4% -3.5% 108.4% 16.5% 12.5% 0.6% 15.3% -43.8% -66.3% 110.4% -7.6% 19.9% 17.5% 11.2% -3.5% -18.7% 10.9% Real Estate 35.9% -11.4% -40.4% 33.1% 8.7% 11.6% 21.5% -9.0% -7.0% 1.9% 8.6% 8.0% 8.0% 13.7% 8.1% 7.1% 3.3% Finance -23.2% -13.8% 14.2% 56.8% -9.5% -11.8% -53.9% 59.5% 5.4% 32.4% 51.2% 12.3% 14.3% 0.8% 4.8% 2.7% 1.5% Contract and Design ----25.2%-9.0% 101.1% -93.3% - - 79.3% 300.0% 27.9% 29.6% 31.9% 23.4% -48.5% OPM 1.6% 1.4% 2.3% 2.8% 3.2% 3.2% 3.6% 2.5% 1.5% 2.1% 2.5% 2.9% 3.2% 3.5% 3.5% 3.7%3.7% Department Stores 0.9% 0.9% 1.9% 2.2% 2.5% 2.5% 2.9% 1.7% 0.6% 1.4% 1.3% 1.5% 1.7% 1.9% 1.8% 1.5%1.6% Real Estate 37.7% 36.1% 24.0% 22.9% 33.4% 26.2% 26.4% 23.6% 22.1% 22.5% 22.3% 22.9% 22.8% 25.0% 24.3% 23.0% 24.0% Finance 20.5% 16.3% 17.7% 29.6% 21.4% 26.1% 11.0% 14.8% 14.8% 18.3% 28.0% 31.1% 34.8% 33.7% 34.0% 33.5% 32.2% Contract and Design -1.2% -1.1% -1.2% 1.5% 1.5% 1.4% 3.7% 0.3% -3.2% 0.7% 1.3% 4.6% 5.4% 5.8% 7.1% 7.6% 4.7% Recurring profit 20,941 17,191 26,654 32,673 36,752 39,543 42,070 28,003 16,764 22,484 24,355 29,866 33,350 35,904 37,785 37,215 38,606 Net income attrib. to Parent shareholders -57,509 3,935 -3,609 13,946 21,192 25,319 18,697 11,750 7,709 13,849 10,895 16,540 18,716 22,581 23,829 20,870 23,658 Total assets 894,656 841,145 798,543 771,483 765,487 782,996 758,870 750,957 785,098 817,088 803,917 790,687 902,139 979,611 974,421 986,464 1,035,807 Net assets 181,683 181,676 183,275 195,407 227,255 286,829 291,253 281,911 291,239 301,099 307,481 335,443 364,912 408,477 407,386 421,890 449,526 ROA (RP-based) 2.4% 2.0% 3.3% 4.2% 4.8% 5.1% 5.5% 3.7% 2.2% 2.8% 3.0% 3.7% 3.9% 3.8% 3.9% 3.8%3.8% ROE -27.9% 2.2% -2.0% 7.4%10.0%9.9%6.5%4.1%2.7%4.7%3.6%5.2%5.4%5.9%6.0%5.1%5.6% Equity ratio 20.3% 21.6% 23.0% 25.3% 29.7% 36.2% 37.9% 37.1% 36.6% 36.3% 37.6% 41.7% 39.7% 40.9% 40.9% 41.8% 42.2% CF from operating act ivit ies 36,987 65,551 41,970 25,692 28,772 28,762 65,480 14,686 23,428 20,645 31,921 44,141 40,582 41,018 25,638 42,266 36,870 CF from investing act ivit ies -18,413 -6,597 -20,570 1,445 -6,865 -10,075 -45,522 -38,348 -10,508 -13,240 -16,356 -28,470 -30,389 -116,049 -16,081 -9,124 -62,286 CF from financing act ivit ies -26,310 -59,954 2,310 -23,305 -32,544 -15,848 -35,125 14,121 14,817 7,673 -8,210 -32,931 64,391 11,619 -19,239 -4,228 14,185 Depreciation 17,639 19,072 17,311 15,713 12,895 12,226 14,686 15,381 15,684 16,128 17,305 18,427 18,218 19,344 19,767 19,421 19,058 Capit al expenditures 25,079 27,417 27,805 18,428 15,253 32,713 44,078 23,431 23,542 26,994 17,718 22,133 35,391 124,511 26,093 21,929 36,486 Interest-bearing debt 270,580 213,274 214,388 193,552 163,067 116,491 84,758 102,236 120,555 131,762 127,479 98,846 167,529 163,518 154,600 155,262 174,262 No. of employees (year end) 15,232 14,646 12,056 11,146 10,655 10,225 9,844 9,644 9,324 8,367 7,858 7,830 7,760 7,514 7,315 7,518 7,569 No. of consolidated subsidiaries 30 30 25 26 27 26 26 25 25 23 21 22 22 22 23 26 27 No. of equity-method affiliates1011999887777777755 Source: Shared Research based on company data Note: Net income refers to net income attributable to parent company shareholders.

Department Stores: Includes 14 parent stores, four subsidiary stores and Takashimaya Singapore.

Real Estate: Mostly comprises Toshin Development, managing shopping centers. Revenues accrue from fixed rental charges and sales-linked revenues. A characteristic of the company’s shopping centers is a high percentage (more than 90%) of fixed rental income in segment sales. Only 10% comes from sales-linked fees.

40/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Contract and Design: Mainly subsidiary Takashimaya Space Create. It undertakes each stage of the production process for commercial facilities and multipurpose facilities, from basic concept development through to design, planning and post-opening operations. The company started a renovation business from FY02/13. In September 2001, the head office of the Takashimaya Contract and Design segment was integrated with Takashimaya Kosakusho, another subsidiary.

Finance: This segment is the operations of Takashimaya Credit, which carries out operations required for its credit card business. It collaborates with Credit Saison, to which it outsources processing and other operations. Card commissions from Takashimaya stores provide a little less than 30% of segment sales, card commissions from other stores 30%, annual fees 20%, and cashing (interest) fees 20%. More than 60% of the company’s department store sales are made using the in-house credit card.

Others: This segment includes the cross-media business (mail order and online operations). In FY02/13, the company made SELECT SQUARE, an operator of a fashion mall-type online mail order website, a subsidiary.

Department store segment

Department Stores FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act. Act. Act. Operating revenue 987,164 975,370 950,042 928,182 917,828 941,692 940,086 879,440 786,987 777,478 762,827 770,089 798,079 802,956 811,648 797,253 826,561 Takashimaya (parent) 994,406 963,694 935,991 841,909 844,290 849,453 843,025 785,826 706,417 697,861 684,215 690,334 701,773 699,656 710,161 703,056 724,604 Difference -7,242 11,676 14,051 86,273 73,538 92,239 97,061 93,614 80,570 79,617 78,612 79,755 96,306 103,300 101,487 94,197 101,957 YoY 1.2% -1.2% -2.6% -2.3% -1.1% 2.6% -0.2% -6.5% -10.5% -1.2% -1.9% 1.0% 3.6% 0.6% 1.1% -1.8% 3.7% Takashimaya (parent) -0.6% -3.1% -2.9% -10.1% 0.3% 0.6% -0.8% -6.8% -10.1% -1.2% -2.0% 0.9% 1.7% -0.3% 1.5% -1.0% 3.1% Difference -70.7% -261.2% 20.3% 514.0% -14.8% 25.4% 5.2% -3.6% -13.9% -1.2% -1.3% 1.5% 20.8% 7.3% -1.8% -7.2% 8.2% Operating profit 8,807 8,499 17,709 20,628 23,201 23,342 26,903 15,121 5,098 10,728 9,909 11,880 13,962 15,519 14,975 12,182 13,509 Takashimaya (parent) 8,347 8,181 18,014 18,872 21,330 20,051 22,856 12,062 3,212 7,838 6,421 7,738 10,777 12,250 10,940 10,292 12,920 Difference 460 318 -305 1,756 1,871 3,291 4,047 3,059 1,886 2,890 3,488 4,142 3,185 3,269 4,035 1,890 589 YoY 8.4% -3.5% 108.4% 16.5% 12.5% 0.6% 15.3% -43.8% -66.3% 110.4% -7.6% 19.9% 17.5% 11.2% -3.5% -18.7% 10.9% Takashimaya (parent) 3.0% -2.0% 120.2% 4.8% 13.0% -6.0% 14.0% -47.2% -73.4% 144.0% -18.1% 20.5% 39.3% 13.7% -10.7% -5.9% 25.5% Difference 2,090.5% -30.9% -195.9% -675.7% 6.5% 75.9% 23.0% -24.4% -38.3% 53.2% 20.7% 18.8% -23.1% 2.6% 23.4% -53.2% -68.8% OPM 0.9% 0.9% 1.9% 2.2% 2.5% 2.5% 2.9% 1.7% 0.6% 1.4% 1.3% 1.5% 1.7% 1.9% 1.8% 1.5%1.6% Takashimaya (parent) 0.8% 0.8% 1.9% 2.2% 2.5% 2.4% 2.7% 1.5% 0.5% 1.1% 0.9% 1.1% 1.5% 1.8% 1.5% 1.5%1.8% Difference -6.4% 2.7% -2.2% 2.0% 2.5% 3.6% 4.2% 3.3% 2.3% 3.6% 4.4% 5.2% 3.3% 3.2% 4.0% 2.0% 0.6% Department Stores FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act. Act. Act. Operating revenue 987,164 975,370 950,042 928,182 917,828 941,692 940,086 879,440 786,987 777,478 762,827 770,089 798,079 802,956 811,648 797,253 826,561 Domestic department store - - 940,970 905,364 914,261 922,021 914,567 852,620 765,566 755,397 740,047 745,757 758,338 755,239 765,466 757,171 778,624 Takashimaya Singapore 23,860 25,021 22,306 24,909 30,721 36,145 40,198 39,318 33,837 35,268 37,480 39,710 49,980 55,015 57,818 50,745 52,507 Shanghai Takashimaya ------2025,210 6,293 7,306 6,333 7,002 Takashimaya Vietnam ------1,819 4,365 Siam Takashimaya ------Takashimaya Tomonokai - - 5,262 5,926 5,161 5,152 5,054 4,938 4,720 4,596 4,454 4,413 4,411 4,402 4,348 4,416 4,737 R.T. Corporation - - 9,035 8,843 9,800 9,567 9,605 9,425 8,908 9,562 9,225 9,304 9,643 9,672 9,748 10,558 10,926 Food and Partners ------59232 Dear Mayuko ------1853 A&S Takashimaya Duty Free------3,307 Fashion Plaza Sunroser ------4,8894,2954,0353,4682,8902,6042,548 YoY 1.2% -1.2% -2.6% -2.3% -1.1% 2.6% -0.2% -6.5% -10.5% -1.2% -1.9% 1.0% 3.6% 0.6% 1.1% -1.8% 3.7% Domestic department store --- -3.8% 1.0% 0.8% -0.8% -6.8% -10.2% -1.3% -2.0% 0.8% 1.7% -0.4% 1.4% -1.1% 2.8% Takashimaya Singapore - 4.9% -10.9% 11.7% 23.3% 17.7% 11.2% -2.2% -13.9% 4.2% 6.3% 5.9% 25.9% 10.1% 5.1% -12.2% 3.5% Shanghai Takashimaya ------2,479.2% 20.8% 16.1% -13.3% 10.6% Takashimaya Vietnam ------140.0% Takashimaya Tomonokai - - - 12.6% -12.9% -0.2% -1.9% -2.3% -4.4% -2.6% -3.1% -0.9% -0.0% -0.2% -1.2% 1.6% 7.3% R.T. Corporation - - - -2.1% 10.8% -2.4% 0.4% -1.9% -5.5% 7.3% -3.5% 0.9% 3.6% 0.3% 0.8% 8.3% 3.5% Operating profit 8,807 8,499 17,709 23,201 20,628 23,342 26,903 15,121 5,098 10,728 9,909 11,880 13,962 15,519 14,975 12,182 13,509 Domestic department store - - 18,198 20,245 22,856 22,172 24,795 12,695 3,443 8,058 6,910 8,415 11,524 12,744 11,375 10,781 13,601 Takashimaya Singapore 257 652 633 1,193 2,009 2,718 3,107 2,986 2,815 2,897 3,454 3,599 3,915 4,302 4,076 3,153 3,622 Shanghai Takashimaya ------84 - -219 -1,528 -1,955 -1,242 -980 -1,140 Takashimaya Vietnam ------508 -281 Siam Takashimaya ------Takashimaya Tomonokai -- -1,021 -1,027 -932 -946 -1,027 -854 -958 -923 -1,001 -974 -935 -1,024 -1,007-996-963 R.T. Corporation - - 169 74 -157 -34 211 193 278 475 423 509 555 546 708 742 597 Food and Partners ------186 -178 Dear Mayuko ------262 -286 A&S Takashimaya Duty Free------1,309 Fashion Plaza Sunroser ------169-109 -75 10 -4 -26 16 YoY 8.4% -3.5% 108.4% 31.0% -11.1% 13.2% 15.3% -43.8% -66.3% 110.4% -7.6% 19.9% 17.5% 11.2% -3.5% -18.7% 10.9% Domestic department store - - - 11.2% 12.9% -3.0% 11.8% -48.8% -72.9% 134.0% -14.2% 21.8% 36.9% 10.6% -10.7% -5.2% 26.2% Takashimaya Singapore - 153.7% -2.9% 88.5% 68.4% 35.3% 14.3% -3.9% -5.7% 2.9% 19.2% 4.2% 8.8% 9.9% -5.3% -22.6% 14.9% R.T. Corporation --- -56.2% ----8.5% 44.0% 70.9% -10.9% 20.3% 9.0% -1.6% 29.7% 4.8% -19.5% OPM 0.9% 0.9% 1.9% 2.5% 2.2% 2.5% 2.9% 1.7% 0.6% 1.4% 1.3% 1.5% 1.7% 1.9% 1.8% 1.5%1.6% Domestic department store - -1.9%2.2%2.5%2.4%2.7%1.5%0.4%1.1%0.9%1.1% 1.5% 1.7% 1.5% 1.4% 1.7% Takashimaya Singapore 1.1%2.6%2.8%4.8%6.5%7.5%7.7%7.6%8.3%8.2%9.2% 9.1% 7.8% 7.8% 7.0% 6.2% 6.9% R.T. Corporation - - 1.9% 0.8% -1.6% -0.4% 2.2% 2.0% 3.1% 5.0% 4.6% 5.5% 5.8% 5.6% 7.3% 7.0% 5.5%

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Parent earnings FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act. Act. Act. Operating revenue 994,406 963,694 935,991 841,909 844,290 849,453 843,025 785,826 706,417 697,861 684,215 690,334 701,773 699,656 710,161 703,056 724,604 Sales 984,853 952,824 922,899 831,006 832,917 838,388 832,345 775,774 696,570 687,845 674,262 680,255 691,580 689,779 700,045 691,353 711,341 Difference 9,553 10,870 13,092 10,903 11,373 11,065 10,680 10,052 9,847 10,016 9,953 10,079 10,193 9,877 10,116 11,703 13,263 YoY -0.6% -3.1% -2.9% -10.1% 0.3% 0.6% -0.8% -6.8% -10.1% -1.2% -2.0% 0.9% 1.7% -0.3% 1.5% -1.0% 3.1% Sales -0.6% -3.3% -3.1% -10.0% 0.2% 0.7% -0.7% -6.8% -10.2% -1.3% -2.0% 0.9% 1.7% -0.3% 1.5% -1.2% 2.9% Difference 3.5% 13.8% 20.4% -16.7% 4.3% -2.7% -3.5% -5.9% -2.0% 1.7% -0.6% 1.3% 1.1% -3.1% 2.4% 15.7% 13.3% Gross profit 268,726 260,795 253,761 228,042 228,606 229,050 225,479 207,397 182,780 177,529 172,863 172,825 173,562 172,364 171,848 168,179 171,705 GPM 27.3% 27.4% 27.5% 27.4% 27.4% 27.3% 27.1% 26.7% 26.2% 25.8% 25.6% 25.4% 25.1% 25.0% 24.5% 24.3% 24.1% SG&A expenses 269,932 263,484 248,839 220,073 218,649 220,064 213,303 205,387 189,415 179,706 176,394 175,167 172,977 169,991 171,023 169,591 172,408 Personnel 100,625 95,600 90,919 80,524 79,650 80,337 79,468 77,454 70,732 63,246 61,450 61,303 58,754 59,394 58,024 57,157 57,822 Advertising 40,824 38,355 33,187 30,721 32,794 34,761 33,545 29,245 24,255 24,691 25,279 24,151 24,968 25,355 26,182 24,803 24,855 General and administrative 81,030 83,367 81,692 69,780 67,151 66,100 66,549 64,648 61,029 60,306 58,569 59,460 59,555 60,698 61,640 60,241 61,012 Other 47,451 46,159 43,039 39,046 39,053 38,864 33,740 34,039 33,399 31,463 31,095 30,252 29,700 24,543 25,176 27,388 28,359 YoY -0.6% -2.4% -5.6% -11.6% -0.6% 0.6% -3.1% -3.7% -7.8% -5.1% -1.8% -0.7% -1.3% -1.7% 0.6% -0.8% 1.7% Personnel -2.8% -5.0% -4.9% -11.4% -1.1% 0.9% -1.1% -2.5% -8.7% -10.6% -2.8% -0.2% -4.2% 1.1% -2.3% -1.5% 1.2% Advertising 3.9% -6.0% -13.5% -7.4% 6.7% 6.0% -3.5% -12.8% -17.1% 1.8% 2.4% -4.5% 3.4% 1.5% 3.3% -5.3% 0.2% General and administrative 1.4% 2.9% -2.0% -14.6% -3.8% -1.6% 0.7% -2.9% -5.6% -1.2% -2.9% 1.5% 0.2% 1.9% 1.6% -2.3% 1.3% Other -2.9% -2.7% -6.8% -9.3% 0.0% -0.5% -13.2% 0.9% -1.9% -5.8% -1.2% -2.7% -1.8% -17.4% 2.6% 8.8% 3.5% % of operating revenue 27.1% 27.3% 26.6% 26.1% 25.9% 25.9% 25.3% 26.1% 26.8% 25.8% 25.8% 25.4% 24.6% 24.3% 24.1% 24.1% 23.8% Personnel 10.1% 9.9% 9.7% 9.6% 9.4% 9.5% 9.4% 9.9% 10.0% 9.1% 9.0% 8.9% 8.4% 8.5% 8.2% 8.1% 8.0% Advertising 4.1% 4.0% 3.5% 3.6% 3.9% 4.1% 4.0% 3.7% 3.4% 3.5% 3.7% 3.5% 3.6% 3.6% 3.7% 3.5%3.4% General and administrative 8.1% 8.7% 8.7% 8.3% 8.0% 7.8% 7.9% 8.2% 8.6% 8.6% 8.6% 8.6% 8.5% 8.7% 8.7% 8.6% 8.4% Other 4.8%4.8%4.6%4.6%4.6%4.6%4.0%4.3%4.7%4.5%4.5%4.4%4.2%3.5%3.5% 3.9% 3.9% Operating profit 8,347 8,181 18,014 18,872 21,330 20,051 22,856 12,062 3,212 7,838 6,421 7,738 10,777 12,250 10,940 10,292 12,920 YoY 3.0% -2.0% 120.2% 4.8% 13.0% -6.0% 14.0% -47.2% -73.4% 144.0% -18.1% 20.5% 39.3% 13.7% -10.7% -5.9% 25.5% OPM 0.8%0.8%1.9%2.2%2.5%2.4%2.7%1.5%0.5%1.1%0.9%1.1%1.5%1.8%1.5%1.5% 1.8% Note: Figures may differ from company materials due to differences in rounding methods. Source: Shared Research based on company data

Store network Domestically the company has 17 stores within its Department Stores segment—13 parent stores (eight stores in the Kanto region; five stores in the Kansai region) and four stores owned by subsidiaries. It holds a 100% equity position in each of its subsidiaries of Gifu Takashimaya, Yonago Takashimaya, and Takasaki Takashimaya, and a 66.6% equity position in Okayama Takashimaya. Equity method affiliates are JR Nagoya Takashimaya (equity position 33.4%) and Iyotetsu Takashimaya (33.6%).

Prior to the Second World War, the company had only three stores (in Kyoto, Osaka, and Nihombashi) but it became Japan’s largest department store chain in the post-war period. In 1989, it became the world’s first department store operator to achieve sales in excess of JPY1tn. Takashimaya now has 18 domestic stores, each with its own characteristics, customer needs, and product lineups. While the domestic operating environment is tough, management wants to maintain the existing stores, considering their contributions to local economies.

The company is advancing into overseas markets with Takashimaya Singapore (100% equity), Shanghai Takashimaya (100%), and Takashimaya Ho Chi Minh City (22.7%). Takashimaya Singapore is located on Orchard Road, Singapore’s largest commercial area, and in addition to being a shopping center with 130 specialty stores it is one of the area’s landmarks.

Main domestic stores Nihombashi store The Nihombashi store first opened in Kyobashi in 1900. The store moved to Nihombashi upon the 1933 completion of the current main building by Nippon Life Insurance that also occupied the building. From 1952 to 1965, a series of building extensions and renovations were done, and in 1963 Nippon Life Insurance vacated the building. In 2009, the building became the first department store to be designated as one of Japan’s Important Cultural Properties. It is the most important of Takashimaya’s stores, and most representative of its retail strategy, with a large percentage of affluent customers. For that reason, investment in services is high, and in comparison with other large stores the OPM is low. Also, as an example of its special status, the Nihombashi store uses its special wrapping paper with a picture of the store itself, in addition to the rose motif paper used by the other stores. The Nihombashi store accounted for the bulk of Takashimaya’s JPY36.5bn in corporate sales in FY02/18, margins on which are low. This, too, is a factor behind the store’s low OPM.

Nihombashi store Nihombashi Store FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init . Est . Sales 154,604 159,028 162,584 159,081 146,473 130,795 127,092 124,242 126,124 129,901 129,843 136,631 132,908 134,241 131,675 YoY 0.4% 2.9% 2.2% -2.2% -7.9% -10.7% -2.8% -2.2% 1.5% 3.0% -0.0% 5.2% -2.7% 1.0% -1.9% Floor space (sqm) 50,499 50,499 50,481 50,481 50,390 50,555 50,508 50,508 50,508 50,508 48,616 49,234 48,852 49,144 - Sales / sqm 3.06 3.15 3.22 3.15 2.91 2.59 2.52 2.46 2.50 2.57 2.67 2.78 2.72 2.73 - YoY -1.6% 2.9% 2.3% -2.2% -7.8% -11.0% -2.7% -2.2% 1.5% 3.0% 3.8% 3.9% -2.0% 0.4% - Note: Figures may differ from company materials due to differences in rounding methods. Source: Shared Research based on company data

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Yokohama store The Yokohama store was initially a joint venture with Sagami Railway and opened in the Sotetsu Joinus Building, a train station building owned by Sagami Railway. It is currently the Takashimaya Group’s number one store in terms of sales and profits. At one point it was Japan’s largest department store in terms of sales floor area.

In FY02/13, the company spent JPY4.4bn renovating its Yokohama store. Despite its strength to attract customers, the old store had a large number of small stairs and uneven floor levels, making it hard for people in wheelchairs, customers using baby buggies, and seniors. The renovation is aimed at making the store barrier-free and improving overall layout.

Yokohama store Yokohama Store FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init . Est . Sales 166,217 170,872 159,892 159,471 148,988 135,489 134,029 131,794 131,776 135,370 134,848 132,035 129,431 131,649 133,390 YoY -4.7% 2.8% -6.4% -0.3% -6.6% -9.1% -1.1% -1.7% -0.0% 2.7% -0.4% -2.1% -2.0% 1.7% 1.3% Floor space (sqm) 69,617 69,508 54,223 54,223 53,467 56,073 56,073 55,699 55,699 55,699 55,955 56,548 56,318 56,529 - Sales / sqm 2.39 2.46 2.95 2.94 2.79 2.42 2.39 2.37 2.37 2.43 2.41 2.33 2.30 2.33 - YoY -4.6% 3.0% 20.0% -0.3% -5.3% -13.3% -1.1% -1.0% -0.0% 2.7% -0.8% -3.1% -1.6% 1.3% - Note: FY02/03–FY02/06 includes Konandai Store sales. Source: Shared Research based on company data

Osaka store Of all Takashimaya’s stores, the Osaka store had the highest sales and operating profit in FY02/18. The Osaka store, registered as the company’s head office, is linked to the Namba Station of the Nankai Electric Railway (OSE1: 9044) and was originally known as Nankai Takashimaya. The Nankai Building that the Takashimaya store occupies is owned by Nankai Electric Railway. Expansion and renovation were completed in March 2011.

The goal of the renovation was to create a pleasant shopping space where items are easy to see and buy. An entrance that leads directly to the Namba Station platform has been newly built on the third floor, while part of the sales floor on the first-level basement previously used by Mitsubishi Tokyo UFJ Bank has been moved to the second floor. The main building and the TE annex have become more integrated and it is easier for customers to move between the Nankai Namba Station and the adjacent commercial facilities of Namba City and Namba Parks. In FY02/13, the company strengthened its womenswear and women’s accessories lineups to combat the reopening of the renovated Hankyu Umeda, the main competitor. Osaka Store FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init . Est . Sales 163,558 162,967 142,543 139,535 124,371 107,898 114,907 117,890 119,997 120,685 122,526 127,630 129,952 141,450 143,187 YoY -5.0% -0.4% -12.5% -2.1% -10.9% -13.2% 6.5% 2.6% 1.8% 0.6% 1.5% 4.2% 1.8% 8.8% 1.2% Duty-free sales 2,1004,90011,70015,10024,000 YoY 133%139%29%59% % of total sales 2%4%9%12%17% Floor space (sqm) 90,854 90,869 68,931 66,834 65,804 64,070 72,869 72,978 72,712 68,401 64,041 64,041 64,041 63,997 - Sales / sqm 1.80 1.79 2.07 2.09 1.89 1.68 1.58 1.62 1.65 1.76 1.91 1.99 2.03 2.21 - YoY -2.0% -0.4% 15.3% 1.0% -9.5% -10.9% -6.4% 2.4% 2.2% 6.9% 8.4% 4.2% 1.8% 8.9% - Note: Includes Wakayama Store sales, FY02/04–FY02/06 includes Sakai Store sales. Source: Shared Research based on company data

Kyoto store The Kyoto store is the birthplace of Takashimaya and its first regional store. In October 1950, the store moved from the location of the first ever Takashimaya store, in Karasuma Takatsuji, to its current site in Kawaramachi Shijo. Part of the current building is owned by the Hankyu Hanshin Toho Group. Kyoto Store FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init . Est . Sales 103,522 101,555 103,415 104,193 98,236 90,364 85,370 83,878 83,866 85,191 84,384 85,945 84,815 88,126 89,330 YoY -4.6% -1.9% 1.8% 0.8% -5.7% -8.0% -5.5% -1.7% -0.0% 1.6% -0.9% 1.8% -1.3% 3.9% 1.4% Duty-free sales 4,2007,100 YoY 69% % of total sales 5%8% Floor space (sqm) 68,231 67,904 68,316 68,316 68,316 68,314 67,985 60,527 60,184 60,184 59,740 60,005 60,028 60,098 - Sales / sqm 1.52 1.50 1.51 1.53 1.44 1.32 1.26 1.39 1.39 1.42 1.41 1.43 1.41 1.47 - YoY -4.6% -1.4% 1.2% 0.8% -5.7% -8.0% -5.1% 10.4% 0.6% 1.6% -0.2% 1.4% -1.4% 3.8% - Note: Includes Rakusai Store figures. Source: Shared Research based on company data

Shinjuku store The Shinjuku store is at Shinjuku Station (a major Tokyo railway station) South Exit. It was completed in 1996 as part of the redevelopment of the freight marshaling yard of the former Japan National Railway. The store suffered substantial losses through

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2006 under the burden of annual rental payments. When the original lease expired in 2007, the company acquired some of the underlying properties leading to a substantial rent reduction. Takashimaya then embarked on a JPY10.0bn overhaul.

Shinjuku store: synergies with JR Shinjuku Miraina Tower, opened in spring 2016, and another large commercial facility, scheduled to open at end August 2019 The south side of Shinjuku station is the entrance to Takashimaya’s Shinjuku department store, whose sales accounted for 9.6% of its total domestic department store sales in FY02/18. A large commercial facility, JR Shinjuku Miraina Tower, which includes office space and the commercial “NEWoMan” facility, opened in March 2016 alongside the remodeled Shinjuku Bus Terminal. The JR Shinjuku Miraina Tower has a total floor space of 111,000sqm, with 77,200sqm for offices and 9,400sqm for shops. In a bid to attract building users, estimated at 50,000 people a day, Takashimaya remodeled the entrance of the Shinjuku store and strengthened its sections for career women in FY02/16. It also reinforced the food floor, such as takeout lunch shops and specialty food stores, while it completed a remodeling of the restaurant area through use of expertise gained from Toshin Development. In FY02/17, major furniture and household goods company Nitori opened a new store providing coordination proposals in the South Building of Takashimaya Times Square in Shinjuku.

The Shinjuku store lost potential customers because construction lowered visibility and access from the station, but this was solved by the opening of Miraina Tower. Synergies with retailer LUMINE Co., Ltd., in the new building warrant attention. The company also plans to strengthen the Shinjuku store by obtaining new customers, making it second in sales after the Yokohama store. In addition, in the direction of Yoyogi Station, Mitsubishi Jisho is proceeding with its Shinjuku South Side Project, involving the redevelopment of a large commercial facility (total floor space of about 44,100sqm). Construction work started in June 2017 and is scheduled for completion by the end of August 2019. The existing deck will be extended, allowing pedestrian traffic to pass from this facility through the Shinjuku store to Shinjuku Station. The company expects this also to generate a synergistic effect. It is also second in duty-free sales after the Osaka store.

Duty-free sales at the Shinjuku store (JPY11.5bn in FY02/18) are second only to the Osaka store (JPY24.0bn). An airport-style duty-free shop was opened at Takashimaya Times Square in April 2017, targeting sales of JPY3.3bn for the first fiscal year in operation, and JPY7.0bn in FY02/19.

A large-scale redevelopment project on the south side of JR Shinjuku Station: The railroad station serves 4.3mn people on a daily basis, with a tenth of these passengers using the south exit, according to the Tokyo National Road Office. Takashimaya stated that, after completion of JR Shinjuku Miraina Tower construction on the south side of the train station in the spring of 2016, visitors to the area may increase by 50,000: 20,000 people using the 9,400sqm commercial facilities inside the 111,000sqm building, 5,000 workers in the 77,200sqm office area, and 25,000 passengers of highway buses that depart from the terminal located near the train station.

Shinjuku Store FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init . Est . Sales 79,540 79,908 77,947 76,840 76,107 67,835 66,088 61,678 63,701 66,081 67,902 70,441 70,843 73,331 74,552 YoY -3.8% 0.5% -2.5% -1.4% -1.0% -10.9% -2.6% -6.7% 3.3% 3.7% 2.8% 3.7% 0.6% 3.5% 1.7% Duty-free sales 3,0005,1009,60010,80011,500 YoY 70%88%13%6% % of total sales 5%8%14%15%16% Floor space (sqm) 54,694 53,960 53,946 53,946 53,908 53,882 53,882 53,727 53,727 53,727 53,727 53,727 53,727 53,907 - Sales / sqm 1.45 1.48 1.44 1.42 1.41 1.26 1.23 1.15 1.19 1.23 1.26 1.31 1.32 1.36 - YoY -3.8% 1.8% -2.4% -1.4% -0.9% -10.8% -2.6% -6.4% 3.3% 3.7% 2.8% 3.7% 0.6% 3.2% - Source: Shared Research based on company data

Tamagawa store The Tamagawa store opened in 1969 and it is the core tenant of the Tamagawa Takashimaya SC. The store was the first successful full-scale suburban department store in Japan and continues to be the company’s flagship in the Jonan area (that includes Tokyo wards of Setagaya, Meguro, and Ota). The store also is able to capture demand from affluent customers in the nearby Denenchofu area. In November 2003, in conjunction with the extension of the shopping center’s South Building, the store was renovated to expand the food and select apparel floors and thus increase its drawing power. In 2015, a large commercial facility was opened on the opposite side of Futako-Tamagawa Station, and the company is working on a mutual urban development strategy. Tamagawa Store FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init . Est . Sales 46,329 47,663 49,137 49,719 46,754 42,301 41,781 40,515 40,936 42,468 42,434 42,908 43,087 43,665 43,712 YoY 4.7% 2.9% 3.1% 1.2% -6.0% -9.5% -1.2% -3.0% 1.0% 3.7% -0.1% 1.1% 0.4% 1.3% 0.1% Floor space (sqm) 24,012 24,012 24,012 24,012 24,012 24,012 24,012 24,007 24,007 24,056 24,085 24,080 24,050 24,113 - Sales / sqm 1.93 1.98 2.05 2.07 1.95 1.76 1.74 1.69 1.71 1.77 1.76 1.78 1.79 1.81 - YoY 0.8% 2.9% 3.1% 1.2% -6.0% -9.5% -1.2% -3.0% 1.0% 3.5% -0.2% 1.1% 0.5% 1.1% - Source: Shared Research based on company data

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Tachikawa store The Tachikawa store is another store in the Tokyo area. It was originally located in front of the North exit of the JR Tachikawa Station, but was moved to the Faret Tachikawa building within an urban redevelopment area. Subsequently competition with Isetan Tachikawa (opened by Isetan near Takashimaya’s original location) pushed the store’s sales to second place after its rival. The sales floor area shrank in February 2011 when Otsuka Kagu, a furniture retailer, took the seventh floor and a part of the eighth floor of the building, in April when a Uniqlo store opened on the sixth floor, and in November when Nitori also took up occupancy. Also in the same area, the company’s Toshin Development subsidiary opened Wakaba Keyaki Mall in 2006, a development on the former site of the company’s Wakaba Tachikawa distribution center. Tachikawa Store FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init . Est . Sales 29,000 28,881 28,519 27,721 24,758 21,243 19,840 17,347 18,117 17,778 16,988 15,753 14,589 12,332 10,021 YoY -7.5% -0.4% -1.3% -2.8% -10.7% -14.2% -6.6% -12.6% 4.4% -1.9% -4.4% -7.3% -7.4% -15.5% -18.7% Floor space (sqm) 25,120 25,120 25,160 25,160 25,160 25,160 20,295 16,738 16,738 16,732 16,732 16,732 16,732 8,156 - Sales / sqm 1.15 1.15 1.13 1.10 0.98 0.84 0.98 1.04 1.08 1.06 1.02 0.94 0.87 1.51 - YoY 3.8% -0.4% -1.4% -2.8% -10.7% -14.2% 15.8%6.0%4.4%-1.8% -4.4% -7.3% -7.4% 73.4% - Source: Shared Research based on company data

Kashiwa store The Kashiwa store opened in 1973 in Kashiwa, Chiba Prefecture. In 1992, the store reopened in the Kashiwa Station Mall and has been developed as a railway station department store in a building owned by Tobu Railway (TSE1: 9001). A new 12-story building was opened in October 2008. The company renovated its foods section in FY02/12, and renovated the select apparel floors in FY02/13.

Kashiwa Store FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init . Est . Sales 18,346 17,351 17,234 17,302 16,066 14,106 13,779 13,128 12,666 11,722 10,907 10,528 10,129 10,158 10,353 YoY -9.9% -5.4% -0.7% 0.4% -7.1% -12.2% -2.3% -4.7% -3.5% -7.5% -7.0% -3.5% -3.8% 0.3% 1.9% Floor space (sqm) 26,856 26,844 29,619 29,517 29,517 29,517 29,517 29,207 29,207 29,207 29,207 29,207 29,207 29,207 - Sales / sqm 0.68 0.65 0.58 0.59 0.54 0.48 0.47 0.45 0.43 0.40 0.37 0.36 0.35 0.35 - YoY -9.9% -5.4% -10.0% 0.7% -7.1% -12.2% -2.3% -3.7% -3.5% -7.5% -7.0% -3.5% -3.8% 0.3% - Source: Shared Research based on company data

Senboku store The Senboku store in Sakai city, another Takashimaya store in Osaka Prefecture, opened in 1974 in the Panjo Shopping Center in front of Senboku Newtown Station (managed by Panjo Co., Ltd., a subsidiary of Osaka Prefectural Urban Development Co., Ltd.). It is linked to the shopping center’s 100-plus specialty stores. Senboku Store FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init . Est . Sales 23,739 23,554 24,107 24,193 23,221 21,571 20,932 20,681 20,419 20,178 19,525 18,614 17,999 16,878 17,420 YoY -4.9% -0.8% 2.3% 0.4% -4.0% -7.1% -3.0% -1.2% -1.3% -1.2% -3.2% -4.7% -3.3% -6.2% 3.2% Floor space (sqm) 21,349 21,349 21,349 21,349 21,349 21,349 21,253 20,811 20,811 20,781 20,781 20,781 20,781 17,107 - Sales / sqm 1.11 1.10 1.13 1.13 1.09 1.01 0.98 0.99 0.98 0.97 0.94 0.90 0.87 0.99 - YoY -4.9% -0.8% 2.3% 0.4% -4.0% -7.1% -2.5% 0.9% -1.3% -1.0% -3.2% -4.7% -3.3% 13.9% - Source: Shared Research based on company data

JR Nagoya Takashimaya in Nagoya, Aichi Prefecture JR Nagoya Takashimaya in Nagoya, Aichi Prefecture, opened in March 2000 as a joint venture with Central Japan Railway Company (TSE1: 9022). The company has an equity position of 33.4% in the store and so it is an equity method affiliate. Sales are substantial at around JPY110.0bn a year. It has a sales floor area of 56,246sqm, but this is set to increase to approximately 87,000sqm with the opening of additional floor space in the Nagoya Station Building in 2017. This would put it on a par with the Matsuzakaya Nagoya store, now Japan’s largest by sales floor area.

45/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Overview of domestic department stores

By store (domestic dept.) FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act. Act. Act. Init. Est. Sales -- 927,867 894,160 902,511 910,560 903,509 842,194 755,358 745,021 729,746 735,332 747,812 745,039 755,041 745,146 765,037 767,711 Takashimaya (parent) - - 922,899 831,006 832,917 838,388 832,345 775,774 696,570 687,845 674,262 680,255 691,580 689,779 700,045 691,353 711,341 713,171 Osaka 163,642 154,976 172,251 163,558 162,967 142,543 139,535 124,371 107,898 114,907 117,890 119,997 120,685 122,526 127,630 129,952 141,450 143,187 Sakai 21,023 22,794 - - - 18,779 18,393 17,756 16,589 15,883 15,618 15,386 15,171 14,243 13,860 12,988 13,122 12,474 Kyoto 112,701 110,847 108,540 103,522 101,555 103,415 104,193 98,236 90,364 85,370 83,878 83,866 85,191 84,384 85,945 84,815 88,126 89,330 Senboku 25,799 25,587 24,973 23,739 23,554 24,107 24,193 23,221 21,571 20,932 20,681 20,419 20,178 19,525 18,614 17,999 16,878 17,420 Tokyo (Nihombashi) 184,681 164,943 153,946 154,604 159,028 162,584 159,081 146,473 130,795 127,092 124,242 126,124 129,901 129,843 136,631 132,908 134,241 131,675 Yokohama 164,960 175,333 174,469 166,217 170,872 159,892 159,471 148,988 135,489 134,029 131,794 131,776 135,370 134,848 132,035 129,431 131,649 133,390 Konandai 14,502 - - - - 13,035 13,007 12,325 11,186 11,017 10,816 10,614 10,634 10,379 9,968 8,895 8,237 8,337 Shinjuku 79,875 82,675 82,690 79,540 79,908 77,947 76,840 76,107 67,835 66,088 61,678 63,701 66,081 67,902 70,441 70,843 73,331 74,552 Tamagawa 44,680 43,786 44,241 46,329 47,663 49,137 49,719 46,754 42,301 41,781 40,515 40,936 42,468 42,434 42,908 43,087 43,665 43,712 Tachikawa 32,622 31,588 31,345 29,000 28,881 28,519 27,721 24,758 21,243 19,840 17,347 18,117 17,778 16,988 15,753 14,589 12,332 10,021 Omiya 21,355 20,852 20,364 18,346 17,351 17,234 17,302 16,066 14,106 13,779 13,128 12,666 11,722 10,907 10,528 10,129 10,158 10,353 Kashiwa 42,320 44,457 43,342 41,449 41,134 41,192 42,884 40,713 37,189 37,121 36,670 36,646 36,394 35,793 35,726 35,711 38,147 38,720 Okayama Takashiyama 27,829 27,339 26,271 26,503 25,382 25,318 24,431 22,727 19,536 18,852 18,223 18,014 18,760 18,549 18,517 18,315 18,674 19,085 Gifu Takashimaya 20,249 19,425 18,478 18,316 17,327 19,763 20,074 18,998 17,186 16,433 16,041 15,715 16,002 15,397 15,330 14,960 14,663 14,709 Yonago Takashimaya 10,746 10,751 14,026 8,870 8,537 8,664 8,277 7,616 6,847 6,577 6,396 6,341 6,363 6,158 5,993 5,333 4,912 4,837 Takasaki Takashimaya 19,122 19,095 18,990 17,401 18,346 18,426 18,379 17,076 15,217 15,311 14,823 15,005 15,105 15,154 15,155 15,184 15,446 15,909 YoY ----3.6% 0.9% 0.9% -0.8% -6.8% -10.3% -1.4% -2.1% 0.8% 1.7% -0.4% 1.3% -1.3% 2.7% 0.3% Takashimaya (parent) ----10.0% 0.2% 0.7% -0.7% -6.8% -10.2% -1.3% -2.0% 0.9% 1.7% -0.3% 1.5% -1.2% 2.9% 0.3% Osaka -4.8% -5.3% -2.1% -10.9% -13.2% 6.5% 2.6% 1.8% 0.6% 1.5% 4.2% 1.8% 8.8% 1.2% -3.1% -5.0% -0.4% -1.0% Sakai 1.3% 8.4% -2.1% -3.5% -6.6% -4.3% -1.7% -1.5% -1.4% -6.1% -2.7% -6.3% 1.0% -4.9% Kyoto -0.1% -1.6% -2.1% -4.6% -1.9% 1.8% 0.8% -5.7% -8.0% -5.5% -1.7% -0.0% 1.6% -0.9% 1.8% -1.3% 3.9% 1.4% Senboku 0.1% -0.8% -2.4% -4.9% -0.8% 2.3% 0.4% -4.0% -7.1% -3.0% -1.2% -1.3% -1.2% -3.2% -4.7% -3.3% -6.2% 3.2% Tokyo (Nihombashi) -3.9% -10.7% -6.7% 0.4% 2.9% 2.2% -2.2% -7.9% -10.7% -2.8% -2.2% 1.5% 3.0% -0.0% 5.2% -2.7% 1.0% -1.9% Yokohama 2.3% -0.3% -6.6% -9.1% -1.1% -1.7% -0.0% 2.7% -0.4% -2.1% -2.0% 1.7% 1.3% -2.3% -0.5% -4.7% 2.8% 1.2% Konandai -0.7% -0.2% -5.2% -9.2% -1.5% -1.8% -1.9% 0.2% -2.4% -4.0% -10.8% -7.4% 1.2% Shinjuku 2.7% 3.5% 0.0% -3.8% 0.5% -2.5% -1.4% -1.0% -10.9% -2.6% -6.7% 3.3% 3.7% 2.8% 3.7% 0.6% 3.5% 1.7% Tamagawa 0.2% -2.0% 1.0% 4.7% 2.9% 3.1% 1.2% -6.0% -9.5% -1.2% -3.0% 1.0% 3.7% -0.1% 1.1% 0.4% 1.3% 0.1% Tachikawa -2.3% -3.2% -0.8% -7.5% -0.4% -1.3% -2.8% -10.7% -14.2% -6.6% -12.6% 4.4% -1.9% -4.4% -7.3% -7.4% -15.5% -18.7% Omiya -0.8% -2.4% -2.3% -9.9% -5.4% -0.7% 0.4% -7.1% -12.2% -2.3% -4.7% -3.5% -7.5% -7.0% -3.5% -3.8% 0.3% 1.9% Kashiwa 9.4% 5.0% -2.5% -4.4% -0.8% 0.1% 4.1% -5.1% -8.7% -0.2% -1.2% -0.1% -0.7% -1.7% -0.2% -0.0% 6.8% 1.5% Okayama Takashiyama 4.7% -1.8% -3.9% 0.9% -4.2% -0.3% -3.5% -7.0% -14.0% -3.5% -3.3% -1.1% 4.1% -1.1% -0.2% -1.1% 2.0% 2.2% Gifu Takashimaya -3.6% -4.1% -4.9% -0.9% -5.4% 14.1% 1.6% -5.4% -9.5% -4.4% -2.4% -2.0% 1.8% -3.8% -0.4% -2.4% -2.0% 0.3% Yonago Takashimaya -0.3% 0.0% 30.5% -36.8% -3.8% 1.5% -4.5% -8.0% -10.1% -3.9% -2.8% -0.9% 0.3% -3.2% -2.7% -11.0% -7.9% -1.5% Takasaki Takashimaya - -0.1% -0.5% -8.4% 5.4% 0.4% -0.3% -7.1% -10.9% 0.6% -3.2% 1.2% 0.7% 0.3% 0.0% 0.2% 1.7% 3.0% By product (domestic dept.) FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act. Act. Act. Init. Est. Sales -- 927,867 894,160 902,511 910,560 903,509 842,194 755,358 745,021 729,746 735,332 747,812 745,039 755,041 745,146 765,037 767,711 Apparel total - - 342,904 319,143 316,184 315,462 306,450 279,040 238,387 232,704 242,822 243,418 243,529 241,849 234,049 221,093 219,252 - Menswear - - - - - 68,526 66,586 60,561 52,280 51,044 50,202 50,495 50,309 51,030 48,474 45,833 45,324 - Womenswear - - - - - 198,496 192,009 173,739 147,091 143,301 154,336 155,118 155,268 153,086 148,931 140,731 139,182 - Children's wear - - - - - 25,239 24,982 23,488 20,616 20,353 20,368 19,671 19,460 19,541 19,660 19,120 19,138 - Other apparel - - - - - 23,200 22,871 21,251 18,398 18,005 17,915 18,133 18,490 18,191 16,983 15,407 15,606 - Personal items - - 154,100 154,697 157,036 157,323 153,949 137,353 121,427 120,518 103,352 106,357 110,255 109,332 113,454 110,663 116,708 - Accessories total - - 114,572 114,933 117,082 118,103 117,446 108,980 96,369 93,917 88,528 90,587 95,434 99,788 110,343 118,389 131,807 - Cosmetics - - - - - 42,461 43,860 43,579 41,365 41,256 41,251 41,978 42,991 45,603 53,217 62,450 74,351 - Art work and jewelry - - - - - 38,076 37,536 33,714 30,428 29,791 27,282 29,755 34,205 36,658 39,312 38,009 40,114 - Other accessories - - - - - 37,565 36,049 31,686 24,574 22,869 19,994 18,853 18,237 17,525 17,812 17,930 17,341 - Household goods total - - 76,005 69,174 70,571 70,871 72,059 65,996 60,954 60,273 57,961 56,814 58,944 57,303 57,423 54,691 50,648 - Furniture - - - - - 18,394 18,235 16,551 13,767 13,857 13,336 12,581 13,439 12,464 12,047 10,775 9,333 - Home appliances - - - - - 3,718 3,495 2,735 2,336 2,095 1,923 1,956 2,851 2,786 2,481 2,917 4,235 - Other household goods - - - - - 48,759 50,329 46,710 44,850 44,320 42,701 42,276 42,653 42,052 42,895 40,998 37,079 - Foods total - - 213,430 210,314 216,066 222,404 227,489 226,408 215,303 216,116 215,643 215,949 216,449 213,530 214,983 214,820 215,617 - Fresh produce - - - - - 47,090 49,122 47,511 45,965 46,209 42,247 42,508 42,568 41,825 41,058 40,393 40,255 - Confectionery - - - - - 56,051 58,962 58,370 56,254 55,735 55,146 54,787 55,260 56,189 58,246 58,588 59,164 - Deli foods - - - - - 58,982 57,933 52,631 48,248 47,860 57,739 56,467 56,461 55,783 56,558 56,468 57,121 - Other foods - - - - - 60,280 61,471 67,894 64,835 66,310 60,509 62,185 62,158 59,732 59,120 59,369 59,076 - Restaurant and cafes - - 15,519 14,837 14,472 15,140 15,163 14,398 13,635 13,086 12,885 13,316 13,875 13,971 14,115 14,017 14,016 - Services and others - - 11,335 11,060 11,097 11,254 10,949 10,016 9,280 8,404 8,553 8,887 9,323 9,263 10,670 11,470 16,987 - Sales - - - -3.6% 0.9% 0.9% -0.8% -6.8% -10.3% -1.4% -2.1% 0.8% 1.7% -0.4% 1.3% -1.3% 2.7% 0.3% Apparel total --- -6.9% -0.9% -0.2% -2.9% -8.9% -14.6% -2.4% 4.3% 0.2% 0.0% -0.7% -3.2% -5.5% -0.8% - Menswear ------2.8% -9.0% -13.7% -2.4% -1.6% 0.6% -0.4% 1.4% -5.0% -5.4% -1.1% - Womenswear ------3.3% -9.5% -15.3% -2.6% 7.7% 0.5% 0.1% -1.4% -2.7% -5.5% -1.1% - Children's wear ------1.0% -6.0% -12.2% -1.3% 0.1% -3.4% -1.1% 0.4% 0.6% -2.7% 0.1% - Other apparel ------1.4% -7.1% -13.4% -2.1% -0.5% 1.2% 2.0% -1.6% -6.6% -9.3% 1.3% - Personal items - - - 0.4% 1.5% 0.2% -2.1% -10.8% -11.6% -0.7% -14.2% 2.9% 3.7% -0.8% 3.8% -2.5% 5.5% - Accessories total - - - 0.3% 1.9% 0.9% -0.6% -7.2% -11.6% -2.5% -5.7% 2.3% 5.4% 4.6% 10.6% 7.3% 11.3% - Cosmetics -- 3.3% -0.6% -5.1% -0.3% -0.0% 1.8% 2.4% 6.1% 16.7% 17.3% 19.1% - ---- Art work and jewelry -- -1.4% -10.2% -9.7% -2.1% -8.4% 9.1% 15.0% 7.2% 7.2% -3.3% 5.5% - Other accessories ------4.0% -12.1% -22.4% -6.9% -12.6% -5.7% -3.3% -3.9% 1.6% 0.7% -3.3% - Household goods total --- -9.0% 2.0% 0.4% 1.7% -8.4% -7.6% -1.1% -3.8% -2.0% 3.7% -2.8% 0.2% -4.8% -7.4% - Furniture -- -0.9% -9.2% -16.8% 0.7% -3.8% -5.7% 6.8% -7.3% -3.3% -10.6% -13.4% - - --- Home appliances -- -6.0% -21.7% -14.6% -10.3% -8.2% 1.7% 45.8% -2.3% -10.9% 17.6% 45.2% - Other household goods ------3.2%-7.2% -4.0% -1.2% -3.7% -1.0% 0.9% -1.4% 2.0% -4.4% -9.6% - Foods total - - - -1.5% 2.7% 2.9% 2.3% -0.5% -4.9% 0.4% -0.2% 0.1% 0.2% -1.3% 0.7% -0.1% 0.4% - Fresh produce ------4.3%-3.3% -3.3% 0.5% -8.6% 0.6% 0.1% -1.7% -1.8% -1.6% -0.3% - Confectionery ------5.2%-1.0% -3.6% -0.9% -1.1% -0.7% 0.9% 1.7% 3.7% 0.6% 1.0% - Deli foods ------1.8% -9.2% -8.3% -0.8% 20.6% -2.2% -0.0% -1.2% 1.4% -0.2% 1.2% - Other foods ------2.0% 10.4% -4.5% 2.3% -8.7% 2.8% -0.0% -3.9% -1.0% 0.4% -0.5% - Restaurant and cafes ----4.4% -2.5% 4.6% 0.2% -5.0% -5.3% -4.0% -1.5% 3.3% 4.2% 0.7% 1.0% -0.7% -0.0% - Services and others - - - -2.4% 0.3% 1.4% -2.7% -8.5% -7.3% -9.4% 1.8% 3.9% 4.9% -0.6% 15.2% 7.5% 48.1% - Source: Shared Research based on company data

46/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Domestic department store performance

Domestic dept. store FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act. Act. Act. Init. Est. Operating revenue 940,970 905,364 914,261 922,021 914,567 852,620 765,566 755,397 740,047 745,757 758,338 755,239 765,466 757,171 778,624 781,917 Takashimaya (parent) 935,991 841,909 844,290 849,453 843,025 785,826 706,417 697,861 684,215 690,334 701,773 699,656 710,161 703,056 724,604 727,048 Okayama Takashiyama - 22,834 25,521 25,449 24,556 22,857 19,672 18,994 18,358 18,153 18,895 18,680 18,644 18,443 18,797 19,211 Gifu Takashimaya -15,677 17,414 19,874 20,181 19,104 17,282 16,531 16,138 15,801 16,088 15,476 15,396 15,015 14,686 14,723 Yonago Takashimaya 4,979 8,903 8,584 8,711 8,322 7,658 6,891 6,605 6,423 6,368 6,386 6,182 6,023 5,393 5,004 4,950 Takasaki Takashimaya -16,041 18,453 18,534 18,482 17,175 15,305 14,507 14,915 15,099 15,194 15,244 15,240 15,261 15,530 15,985 YoY --3.8% 1.0% 0.8% -0.8% -6.8% -10.2% -1.3% -2.0% 0.8% 1.7% -0.4% 1.4% -1.1% 2.8% 0.4% Takashimaya (parent) --10.1% 0.3% 0.6% -0.8% -6.8% -10.1% -1.2% -2.0% 0.9% 1.7% -0.3% 1.5% -1.0% 3.1% 0.3% Okayama Takashiyama - - 11.8% -0.3% -3.5% -6.9% -13.9% -3.4% -3.3% -1.1% 4.1% -1.1% -0.2% -1.1% 1.9% 2.2% Gifu Takashimaya - - 11.1% 14.1% 1.5% -5.3% -9.5% -4.3% -2.4% -2.1% 1.8% -3.8% -0.5% -2.5% -2.2% 0.3% Yonago Takashimaya -78.8%-3.6% 1.5% -4.5% -8.0% -10.0% -4.2% -2.8% -0.9% 0.3% -3.2% -2.6% -10.5% -7.2% -1.1% Takasaki Takashimaya - - 15.0% 0.4% -0.3% -7.1% -10.9% -5.2% 2.8% 1.2% 0.6% 0.3% -0.0% 0.1% 1.8% 2.9% Sales 927,867 894,160 902,511 910,560 903,509 842,194 755,358 745,021 729,746 735,332 747,812 745,039 755,041 745,146 765,037 767,711 Takashimaya (parent) 922,899 831,006 832,917 838,388 832,345 775,774 696,570 687,845 674,262 680,255 691,580 689,779 700,045 691,353 711,341 713,171 Four subsidiaries 4,968 63,154 69,594 72,172 71,164 66,420 58,788 57,176 55,484 55,077 56,232 55,260 54,996 53,793 53,696 54,540 YoY --3.6% 0.9% 0.9% -0.8% -6.8% -10.3% -1.4% -2.1% 0.8% 1.7% -0.4% 1.3% -1.3% 2.7% 0.3% Takashimaya (parent) --10.0% 0.2% 0.7% -0.7% -6.8% -10.2% -1.3% -2.0% 0.9% 1.7% -0.3% 1.5% -1.2% 2.9% 0.3% Four subsidiaries -1,171.2% 10.2% 3.7% -1.4% -6.7% -11.5% -2.7% -3.0% -0.7% 2.1% -1.7% -0.5% -2.2% -0.2% 1.6% Gross profit 254,955 244,372 246,597 247,701 243,799 224,272 197,569 191,718 186,597 186,358 187,194 185,601 184,687 180,591 184,059 184,137 Takashimaya (parent) 253,761 228,042 228,606 229,050 225,479 207,397 182,780 177,529 172,863 172,825 173,562 172,364 171,848 168,179 171,705 171,640 Four subsidiaries 1,194 16,330 17,991 18,651 18,320 16,875 14,789 14,189 13,734 13,533 13,632 13,237 12,839 12,412 12,354 12,497 GPM 27.48% 27.33% 27.32% 27.20% 26.98% 26.63% 26.16% 25.73% 25.57% 25.34% 25.03% 24.91% 24.46% 24.24% 24.06% 23.99% Takashimaya (parent) 27.50% 27.44% 27.45% 27.32% 27.09% 26.73% 26.24% 25.81% 25.64% 25.41% 25.10% 24.99% 24.55% 24.33% 24.14% 24.07% Four subsidiaries 24.03% 25.86% 25.85% 25.84% 25.74% 25.41% 25.16% 24.82% 24.75% 24.57% 24.24% 23.95% 23.35% 23.07% 23.01% 22.91% SG&A expenses 249,860 235,331 235,491 236,990 230,062 222,003 204,334 194,036 189,988 188,368 186,196 183,057 183,737 181,835 184,045 188,343 Takashimaya (parent) 248,839 220,073 218,649 220,064 213,303 205,387 189,415 179,706 176,394 175,167 172,977 169,991 171,023 169,591 172,408 176,056 Four subsidiaries 1,021 15,258 16,842 16,926 16,759 16,616 14,919 14,330 13,594 13,201 13,219 13,066 12,714 12,244 11,637 12,287 Personnel 91,227 85,953 85,565 86,327 85,445 83,441 76,279 68,394 66,185 65,866 63,288 63,845 62,255 61,244 61,825 63,827 Advertising 33,314 31,946 34,224 36,068 34,660 30,106 24,750 25,249 25,894 24,808 25,662 26,123 26,923 25,608 25,695 26,097 General and administrative 82,191 75,693 73,823 73,040 73,456 71,545 67,088 66,195 64,351 65,077 65,221 66,271 67,212 65,592 66,311 68,421 Other 43,126 41,736 41,876 41,553 36,500 36,908 36,217 34,197 33,557 32,615 32,024 26,817 27,346 29,389 30,212 29,998 YoY --5.8% 0.1% 0.6% -2.9% -3.5% -8.0% -5.0% -2.1% -0.9% -1.2% -1.7% 0.4% -1.0% 1.2% 2.3% Takashimaya (parent) - -11.6% -0.6% 0.6% -3.1% -3.7% -7.8% -5.1% -1.8% -0.7% -1.3% -1.7% 0.6% -0.8% 1.7% 2.1% Four subsidiaries - 1,394.4% 10.4% 0.5% -1.0% -0.9% -10.2% -3.9% -5.1% -2.9% 0.1% -1.2% -2.7% -3.7% -5.0% 5.6% Personnel - -5.8% -0.5% 0.9% -1.0% -2.3% -8.6% -10.3% -3.2% -0.5% -3.9% 0.9% -2.5% -1.6% 0.9% 3.2% Advertising - -4.1% 7.1% 5.4% -3.9% -13.1% -17.8% 2.0% 2.6% -4.2% 3.4% 1.8% 3.1% -4.9% 0.3% 1.6% General and administrative - -7.9% -2.5% -1.1% 0.6% -2.6% -6.2% -1.3% -2.8% 1.1% 0.2% 1.6% 1.4% -2.4% 1.1% 3.2% Other - -3.2% 0.3% -0.8% -12.2% 1.1% -1.9% -5.6% -1.9% -2.8% -1.8% -16.3% 2.0% 7.5% 2.8% -0.7% % of operating revenue 26.6% 26.0% 25.8% 25.7% 25.2% 26.0% 26.7% 25.7% 25.7% 25.3% 24.6% 24.2% 24.0% 24.0% 23.6% 24.1% Takashimaya (parent) 26.6% 26.1% 25.9% 25.9% 25.3% 26.1% 26.8% 25.8% 25.8% 25.4% 24.6% 24.3% 24.1% 24.1% 23.8% 24.2% Four subsidiaries 20.5% 24.0% 24.1% 23.3% 23.4% 24.9% 25.2% 24.9% 24.3% 23.8% 23.4% 23.5% 23.0% 22.6% 21.5% 22.4% Personnel 9.7% 9.5% 9.4% 9.4% 9.3% 9.8% 10.0% 9.1% 8.9% 8.8% 8.3% 8.5% 8.1% 8.1% 7.9% 8.2% Advertising 3.5% 3.5% 3.7% 3.9% 3.8% 3.5% 3.2% 3.3% 3.5% 3.3% 3.4% 3.5% 3.5% 3.4% 3.3% 3.3% General and administrative 8.7% 8.4% 8.1% 7.9% 8.0% 8.4% 8.8% 8.8% 8.7% 8.7% 8.6% 8.8% 8.8% 8.7% 8.5% 8.8% Other 4.6% 4.6% 4.6% 4.5% 4.0% 4.3% 4.7% 4.5% 4.5% 4.4% 4.2% 3.6% 3.6% 3.9% 3.9% 3.8% Operating profit 18,198 20,245 22,856 22,172 24,795 12,695 3,443 8,058 6,910 8,415 11,524 12,744 11,375 10,781 13,601 10,000 Takashimaya (parent) 18,014 18,872 21,330 20,051 22,856 12,062 3,212 7,838 6,421 7,738 10,777 12,250 10,940 10,292 12,920 9,461 Okayama Takashiyama - 421 599 604 464 -57 -252 -179 10 74 39 -75 -92 118 114 101 Gifu Takashimaya -115-1 693 573 166 221 175 220 241 239 83 11 -91 61 -67 Yonago Takashimaya 184 205 178 163 171 55 13 -38 -32 -66 19 -23 -68 -136 32 48 Takasaki Takashimaya - 631 750 661 732 468 249 262 291 427 449 509 585 599 473 457 YoY - 11.2% 12.9% -3.0% 11.8% -48.8% -72.9% 134.0% -14.2% 21.8% 36.9% 10.6% -10.7% -5.2% 26.2% -26.5% Takashimaya (parent) -4.8%13.0%-6.0% 14.0% -47.2% -73.4% 144.0% -18.1% 20.5% 39.3% 13.7% -10.7% -5.9% 25.5% -26.8% Takasaki Takashimaya - 646.2% 11.1% 39.0% -8.6% -67.4% -63.5% -4.8% 122.3% 38.4% 10.3% -33.9% -11.9% 12.4% 39.3% -20.9% OPM 1.9% 2.2% 2.5% 2.4% 2.7% 1.5% 0.4% 1.1% 0.9% 1.1% 1.5% 1.7% 1.5% 1.4% 1.7% 1.3% Takashimaya (parent) 1.9% 2.2% 2.5% 2.4% 2.7% 1.5% 0.5% 1.1% 0.9% 1.1% 1.5% 1.8% 1.5% 1.5% 1.8% 1.3% Okayama Takashiyama - 1.8% 2.3% 2.4% 1.9% -0.2% -1.3% -0.9% 0.1% 0.4% 0.2% -0.4% -0.5% 0.6% 0.6% 0.5% Gifu Takashimaya -0.7%-0.0% 3.5% 2.8% 0.9% 1.3% 1.1% 1.4% 1.5% 1.5% 0.5% 0.1% -0.6% 0.4% -0.5% Yonago Takashimaya 3.7% 2.3% 2.1% 1.9% 2.1% 0.7% 0.2% -0.6% -0.5% -1.0% 0.3% -0.4% -1.1% -2.5% 0.6% 1.0% Takasaki Takashimaya - 3.9% 4.1% 3.6% 4.0% 2.7% 1.6% 1.8% 2.0% 2.8% 3.0% 3.3% 3.8% 3.9% 3.0% 2.9% Source: Shared Research based on company data

Main subsidiaries Takashimaya Singapore (100% owned) Established in 1993, Takashimaya Singapore was probably the most successful Japanese-affiliated department store outside of Japan in 2012. Initially the subsidiary struggled under a heavy capex burden, working to build the customer base from zero. The store initially targeted Japanese residents of Singapore and foreign tourists. The Asian currency crisis of 1997 dealt this strategy a major blow. By streamlining the business (the number of staff was cut from 650 to 370) and switching to catering to Singaporeans, Takashimaya Singapore made money in 1998. By 2007 it had recouped accumulated losses. Tourists account for roughly 20% of total sales.

Singapore According to the company, Takashimaya Singapore’s department store and shopping center have a strong customer base among wealthy people in Singapore and nearby countries. The company also plans to further increase sales in cooperation with TDS by launching a new store in the ASEAN region (the fourth one after the stores in Singapore, Vietnam, and Thailand).

Shanghai Takashimaya Shanghai Takashimaya plans to strengthen its customer base in the Shanghai area as the core of its China operations, and aims to turn the store profitable as early as possible by expanding independently managed floor space and the lineup of high-quality

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products. The entire area is likely to be vitalized by the opening of a new shopping center on neighboring land and the opening of a new subway in 2018–2019.

Saigon Centre in Vietnam In Vietnam, Takashimaya participates in a large-scale multi-purpose development project with Keppel Land Ltd., a top-class real estate developer in Asia, contributing its own expertise in Singapore. The Saigon Centre facility opened as a one-stop shopping center in July 2016, with Takashimaya as the anchor tenant (floor area: about 181,800sqm, commercial floor area: 55,500sqm, Takashimaya Ho Chi Minh City: 15,000sqm).

Takashimaya takes part in three kinds of businesses: the opening of a department store by Takashimaya Singapore Co., Ltd.; capital participation by Toshin Development in real estate business; and operation of commercial facilities by Toshin Development Singapore Pte. Ltd. (a joint shopping center management venture with Keppel Land’s subsidiary). By integrating the department store, commercial facilities, and real estate operations, Takashimaya aims for early profits including returns from investments, dividends, and equity-method gains.

Siam Takashimaya plan in Bangkok The company plans to open Siam Takashimaya (about 36,000sqm) as a core tenant of ICONSIAM, a biggest-class real estate development project by private companies in Thailand. (The complex is under construction on the western bank of Chao Phraya River, Bangkok, and is scheduled to be completed in 2017.) Siam Takashimaya will be a joint venture with the ICONSIAM operator ICONSIAM Co., Ltd., with Takashimaya Singapore set to own 51%. Takashimaya plans to make the most of the management resources and expertise of Takashimaya Singapore and other group companies, as well as its name value in the ASEAN region.

The company hopes to open the store in October 2018 (in October 2017, the opening date was pushed back from spring to fall 2018). This store has highly profitable business scheme, and the company aims for the store to turn a profit in its second year of operation.

ICONSIAM and ICONSIAM Co., Ltd. ICONSIAM will cover 80,000sqm of land, with total floor space of 750,000sqm. The complex will feature a shopping mall, two high-end residential towers, and a variety of attractions. ICONSIAM Co., Ltd. is a joint venture company, established with investment from major Thai company Siam Piwat Co., Ltd. (operating large commercial facilities in central Bangkok), major conglomerate Charoen Pokphand Group, and Magnolia Quality Development Corporation Limited (developer of high-end residential property). According to the company, this partnership with leading local real estate developers may provide it with future opportunities to expand its business in Bangkok.

Siam Takashimaya (tentative) new store outline ICONSIAM Co., Ltd. outline Joint venture name Siam Takashimaya (Thailand) Company Limited Name ICONSIA M Company Limit ed Capital THB1.2bn (approx. JPY3.6bn) Stake Siam Piwat Co., Ltd.: 51%; CP Group: 24.5%, Magnolia: 24.5% Stake Takayashimaya Singapore Ltd: 51%; ICONSIAM Co., Ltd: 49% Established 2011 Rentable space Approx. 36,000sqm (1 floor below ground, 7 above ground) Details Retail; real estate development Merchandise Full product lineup from luxury goods to food CEO Chadatip Chutrakul Source: Shared Research based on company data

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Overseas department store performance

Overseas dept. stores FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init. Est. Init. Est.* Change Operating revenue (simple sum) 23,860 25,021 24,296 26,691 33,085 38,512 42,202 41,032 35,340 35,914 37,480 39,912 55,190 61,308 65,124 58,897 63,874 24,558 70,106 +6,232 Takashimaya Singapore 23,860 25,021 22,306 24,909 30,721 36,145 40,198 39,318 33,837 35,268 37,480 39,710 49,980 55,015 57,818 50,745 52,507 18,118 54,038 +1,531 Shanghai Takashimaya ------2025,2106,2937,3066,3337,0023,635 8,007 +1,005 Takashimaya Vietnam ------1,8194,3651,5784,678+313 Siam Takashimaya ------1,2273,383+3,383 Takashimaya Enterprise Inc.--336800------Takashimaya New York Inc.--1,6541,702302------Takashimaya New York LLC----2,0622,3672,0041,7141,503646------YoY -4.9%-2.9% 9.9% 24.0% 16.4% 9.6% -2.8% -13.9% 1.6% 4.4% 6.5% 38.3% 11.1% 6.2% -9.6% 8.5% 9.8% Takashimaya Singapore - 4.9% -10.9% 11.7% 23.3% 17.7% 11.2% -2.2% -13.9% 4.2% 6.3% 5.9% 25.9% 10.1% 5.1% -12.2% 3.5% 2.9% Shanghai Takashimaya ------2,479.2% 20.8% 16.1% -13.3% 10.6% 14.4% Takashimaya Vietnam ------140.0% 7.2% Operating profit (simple sum) 257 652 655 1,272 1,529 2,422 2,864 2,655 2,499 2,693 3,454 3,380 2,387 2,347 2,834 1,665 2,201 1,707 -494 Takashimaya Singapore 257 652 633 1,193 2,009 2,718 3,107 2,986 2,815 2,897 3,454 3,599 3,915 4,302 4,076 3,153 3,622 3,239 -383 Shanghai Takashimaya ------84 - -219 -1,528 -1,955 -1,242 -980 -1,140 -848 +292 Takashimaya Vietnam ------508 -281 -264 +17 Siam Takashimaya ------420 -420 Takashimaya Enterprise Inc. - - -31 -33 -9 ------Takashimaya New York Inc. - - 53 112 -221 ------Takashimaya New York LLC-----250 -296 -243 -331 -316 -120 ------YoY - 153.7% 0.5% 94.2% 20.2% 58.4% 18.2% -7.3% -5.9% 7.8% 28.3% -2.1% -29.4% -1.7% 20.7% -41.2% 32.2% -22.4% Takashimaya Singapore - 153.7% -2.9% 88.5% 68.4% 35.3% 14.3% -3.9% -5.7% 2.9% 19.2% 4.2% 8.8% 9.9% -5.3% -22.6% 14.9% -10.6% OPM 1.1% 2.6% 2.7% 4.8% 4.6% 6.3% 6.8% 6.5% 7.1% 7.5% 9.2% 8.5% 4.3% 3.8% 4.4% 2.8%3.4%7.0%2.4%-1.0pp Takashimaya Singapore 1.1%2.6%2.8%4.8%6.5%7.5%7.7%7.6%8.3%8.2%9.2% 9.1% 7.8% 7.8% 7.0% 6.2% 6.9% 17.9% 6.0% -0.9pp Shanghai Takashimaya ------108.4% -29.3% -31.1% -17.0% -15.5% -16.3% -23.3% -10.6% +5.7pp Takashimaya Vietnam ------27.9% -6.4% -16.7% -5.6% +0.8pp Source: Shared Research based on company data

Toshin Development (100% owned) Toshin Development was established in 1963 for the development of the first real suburban-type shopping center (SC) in Japan. During the period of high economic growth, Tamagawa Takashimaya SC opened as a pioneering retailer and subsequently has continued to innovate and grow, maintaining its position as one of Japan’s leading suburban shopping facilities. Over the years former executives of the Takashimaya parent company were appointed to lead Toshin Development (with some exceptions), and the company remained an integral part of the Takashimaya Group. In February 2012, former Takashimaya Managing Director Toshiaki Seki was appointed as the president of Toshin Development. Toshin Development is characterized by a high OPM (around 20%) and a high percentage of fixed real estate revenue (earnings stability).

SC business is underpinned by real estate leasing and retailing. SC business requires real estate management expertise (to maximize the function of infrastructure and systems from a long-term perspective) and retail knowledge (to grasp location characteristics and changing consumption behaviors to promote flexible operations). Toshin Development tackles land and building development with a broader concept of urban development, and its business model encompasses attracting prime tenants, managing properties and tenants, and receiving rental revenues. Toshin Development performs extensive market surveys to enable consumer needs-oriented merchandising and higher profitability. Its comprehensive capability in SC management has made possible the growth of Toshin Development’s SC portfolio.

Besides Tamagawa Takashimaya SC, Toshin Development manages sites that include Kashiwa Takashimaya SM, Nagareyama Otakanomori SC, and Shinjuku Takashimaya Times Square. Of these, the only property it fully owns is Tamagawa SC. Toshin Development’s main properties are listed below.

Toshin Development Singapore, with planned participation in the Saigon Centre project, operates Takashimaya Singapore SC. Helped by strong consumption in Singapore and synergy with the Takashimaya Singapore department store, Toshin Development Singapore is enjoying solid rental revenue. Facility Location Sales Floor Area Tenants Parking Opening Tamagawa Takashimaya SC Setagaya, Tokyo 83,600sqm Tamagawa Takashimaya store + 340 specialty shops 2,000 Nov-69 Kashiwa Takashimaya Station Mall Kashiwa, Chiba 50,595sqm Kashiwa Takashimaya store + 185 specialty shops 1,500 Apr-92 Shinjuku Takashimaya Times Square Shibuya, Tokyo 29,950sqm 8 specialty shops + 33 restaurants/cafes Oct-96 Nagareyama Otaka-no-Mori SC Nagareyama, Chiba 41,120sqm 135 specialty shops 1,900 Mar-07 Wakaba Keyaki Mall Tachikawa, Tokyo 6,947sqm Open mall centered on grocery stores 300 Mar-06 Tachikawa Garden Tables Tachikawa, Tokyo 1,661sqm 11 specialty shops + 2 relaxation salons Mar-05 Konandai Grass Court Konan, Yokohama 997sqm 3 restaurants/cafes + hair salon Nov-05 Takashimaya Higashi Bekkan Naniwa, Osaka 4,170sqm Bridal salon + café May/Oct-05 Namba Parks Naniwa, Osaka 4,300sqm 28 specialty shops Apr-07 Namba Dining Maison Chuo, Osaka 7,400sqm 35 restaurants/cafes Mar-10 Hakata Riverain/Eeny Meeny Miny Mo Hakata, Fukuoka 25,919sqm Brand shops, etc. Mar-99 Singapore Takashimaya SC Orchard Road, Singapore 57,400sqm Singapore Takashimaya store + 130 specialty shops 1,100 Oct-93 Source: Shared Research based on company data

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Real Estate FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act. Act. Act. Init. Est. Operating revenue 19,628 18,178 16,282 22,751 16,974 24,088 29,040 29,590 29,401 29,434 32,259 33,863 36,804 38,102 42,389 47,923 47,476 45,782 Toshin Development 20,995 18,286 19,286 21,471 27,483 28,557 33,749 34,701 34,435 29,787 31,424 32,111 33,549 33,956 35,008 44,581 52,312 45,391 TDS ------4,789 5,782 6,115 7,618 8,528 9,490 8,785 8,952 9,059 YoY 50.0% -7.4% -10.4% 39.7% -25.4% 41.9% 20.6% 1.9% -0.6% 0.1% 9.6% 5.0% 8.7% 3.5% 11.3% 13.1% -0.9% -3.6% Toshin Development - -12.9% 5.5% 11.3% 28.0% 3.9% 18.2% 2.8% -0.8% -13.5% 5.5% 2.2% 4.5% 1.2% 3.1% 27.3% 17.3% -13.2% TDS ------20.7% 5.8% 24.6% 11.9% 11.3% -7.4% 1.9% 1.2% Operating profit 7,407 6,564 3,914 5,209 5,661 6,316 7,671 6,982 6,491 6,613 7,184 7,757 8,380 9,528 10,297 11,028 11,393 10,304 Toshin Development 3,570 3,181 3,554 5,199 5,470 6,080 7,459 6,797 6,372 5,646 6,005 6,588 6,886 7,754 8,006 8,840 9,044 7,943 TDS ------1,018 1,368 1,356 1,681 1,961 2,476 2,340 2,484 2,339 YoY 35.9% -11.4% -40.4% 33.1% 8.7% 11.6% 21.5% -9.0% -7.0% 1.9% 8.6% 8.0% 8.0% 13.7% 8.1% 7.1% 3.3% -9.6% Toshin Development - -10.9% 11.7% 46.3% 5.2% 11.2% 22.7% -8.9% -6.3% -11.4% 6.4% 9.7% 4.5% 12.6% 3.2% 10.4% 2.3% -12.2% TDS ------34.4%-0.9% 24.0% 16.7% 26.3% -5.5% 6.2% -5.8% OPM 37.7% 36.1% 24.0% 22.9% 33.4% 26.2% 26.4% 23.6% 22.1% 22.5% 22.3% 22.9% 22.8% 25.0% 24.3% 23.0% 24.0% 22.5% Toshin Development 17.0% 17.4% 18.4% 24.2% 19.9% 21.3% 22.1% 19.6% 18.5% 19.0% 19.1% 20.5% 20.5% 22.8% 22.9% 19.8% 17.3% 17.5% TDS ------21.3% 23.7% 22.2% 22.1% 23.0% 26.1% 26.6% 27.7% 25.8% Source: Shared Research based on company data

Other major subsidiaries Takashimaya Space Create Co Ltd (100% owned) belongs to the Contract and Design segment, undertaking interior work and renovations for the company and its consolidated subsidiaries (20% of total orders) and for third parties (boutique-type shop and hotel operators, 80%). Takashimaya Credit Co Ltd (66.6% owned) undertakes credit card operations for the parent.

Finance FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act. Act. Act. Init. Est. Operating revenue 8,268 8,967 9,424 8,822 11,017 7,986 8,738 10,346 10,916 11,689 11,514 11,655 11,911 12,385 12,865 13,414 14,187 14,681 Takashimaya Credit 10,733 11,011 11,501 11,667 11,673 12,237 13,590 15,124 15,247 15,894 15,542 15,759 16,205 16,789 17,257 17,662 18,444 19,098 YoY 4.8% 8.5% 5.1% -6.4% 24.9% -27.5% 9.4% 18.4% 5.5% 7.1% -1.5% 1.2% 2.2% 4.0% 3.9% 4.3% 5.8% 3.5% Takashimaya Credit - 2.6% 4.5% 1.4% 0.1% 4.8% 11.1% 11.3% 0.8% 4.2% -2.2% 1.4% 2.8% 3.6% 2.8% 2.3% 4.4% 3.5% Operating profit 1,692 1,458 1,665 2,611 2,362 2,084 960 1,531 1,613 2,135 3,228 3,625 4,144 4,176 4,376 4,495 4,563 4,724 Takashimaya Credit 642 323 987 1,862 2,356 2,094 967 1,536 1,615 2,135 3,229 3,625 4,101 4,137 4,341 4,468 4,543 4,805 YoY -23.2% -13.8% 14.2% 56.8% -9.5% -11.8% -53.9% 59.5% 5.4% 32.4% 51.2% 12.3% 14.3% 0.8% 4.8% 2.7% 1.5% 3.5% Takashimaya Credit - -49.7% 205.6% 88.7% 26.5% -11.1% -53.8% 58.8% 5.1% 32.2% 51.2% 12.3% 13.1% 0.9% 4.9% 2.9% 1.7% 5.8% OPM 20.5% 16.3% 17.7% 29.6% 21.4% 26.1% 11.0% 14.8% 14.8% 18.3% 28.0% 31.1% 34.8% 33.7% 34.0% 33.5% 32.2% 32.2% Takashimaya Credit 6.0% 2.9% 8.6% 16.0% 20.2% 17.1% 7.1% 10.2% 10.6% 13.4% 20.8% 23.0% 25.3% 24.6% 25.2% 25.3% 24.6% 25.2% Contract and Design FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init. Est. Operating revenue 43,849 37,620 35,887 26,906 34,581 33,388 25,861 20,814 15,737 17,451 17,097 19,010 20,622 24,658 26,710 30,874 25,916 27,797 Takashimaya Space Create 30,443 36,300 35,747 38,488 30,890 38,775 32,687 24,891 20,908 21,293 19,175 23,647 24,893 28,327 30,251 34,521 29,320 31,300 Takashimaya Space Create Tohoku ------551773910564533800 YoY -3.7% -14.2% -4.6% -25.0% 28.5% -3.4% -22.5% -19.5% -24.4% 10.9% -2.0% 11.2% 8.5% 19.6% 8.3% 15.6% -16.1% 7.3% Takashimaya Space Create - 19.2% -1.5% 7.7% -19.7% 25.5% -15.7% -23.9% -16.0% 1.8% -9.9% 23.3% 5.3% 13.8% 6.8% 14.1% -15.1% 6.8% Takashimaya Space Create Tohoku ------40.3%17.7%-38.0% -5.5% 50.1% Operat ing profit -507 -413 -439 417 522 475 955 64 -501 121 217 868 1,110 1,439 1,898 2,342 1,207 1,440 Takashimaya Space Create -71-207-237 520 524 468 966 2 -523 126 217 870 1,123 1,414 1,871 2,352 1,231 1,410 Takashimaya Space Create Tohoku ------1 -12 25 27 -9 -23 30 YoY -227.4% -18.5% 6.3% -195.0% 25.2% -9.0% 101.1% -93.3% -882.8% -124.2% 79.3% 300.0% 27.9% 29.6% 31.9% 23.4% -48.5% 19.3% Takashimaya Space Create - 191.5% 14.5% -319.4% 0.8% -10.7% 106.4% -99.8% -26,250.0% -124.1% 72.2% 300.9% 29.1% 25.9% 32.3% 25.7% -47.7% 14.5% OPM -1.2% -1.1% -1.2% 1.5% 1.5% 1.4% 3.7% 0.3% -3.2% 0.7% 1.3% 4.6% 5.4% 5.8% 7.1% 7.6% 4.7% 5.2% Takashimaya Space Create -0.2% -0.6% -0.7% 1.4% 1.7% 1.2% 3.0% 0.0% -2.5% 0.6% 1.1% 3.7% 4.5% 5.0% 6.2% 6.8% 4.2% 4.5% Takashimaya Space Create Tohoku ------2.2% 3.2% 3.0% -1.6% -4.3% 3.8% Others FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Init. Est. Operating revenue 146,962 144,098 102,844 44,488 45,950 42,249 38,983 35,925 34,718 33,421 34,424 35,714 36,762 34,420 35,974 34,135 35,430 36,842 YoY -2.0% -1.9% -28.6% -56.7% 3.3% -8.1% -7.7% -7.8% -3.4% -3.7% 3.0% 3.7% 2.9% -6.4% 4.5% -5.1% 3.8% 4.0% Operating profit 1,479 1,390 3,186 1,042 1,229 2,085 1,688 1,271 938 -1,280 248 1,261 1,650 1,590 1,496 2,333 3,331 - YoY -66.3% -6.0% 129.2% -67.3% 17.9% 69.7% -19.0% -24.7% -26.2% -236.5% -119.4% 408.5% 30.8% -3.6% -5.9% 55.9% 42.8% OPM 1.0%1.0%3.1%2.3%2.7%4.9%4.3%3.5%2.7%-3.8% 0.7% 3.5% 4.5% 4.6% 4.2% 6.8% 9.4% - Source: Shared Research based on company data

New business development New growth strategy via new business development and M&A Takashimaya is promoting development of new businesses by cooperating with companies in different sectors. It plans to accelerate growth by expanding business areas through synergies with department stores.

From FY02/16 onward, there were three new businesses through alliances with different-sector companies: 1) In March 2015, Takashimaya and transcosmos inc. (TSE1: 9715) established a joint venture company, Takashimaya Transcosmos International Commerce Pte. Ltd. (TTIC), which will carry out wholesale and retail sales operations as a platform for proposals and will supply Japanese products overseas. 2) In April 2015, Takashimaya and Kai Corporation established a joint venture company, Food and Partners, which will develop brands to convey the charm of Japanese food by integrating high-quality ingredients, processing technologies, and food experts. Food and Partners, capitalized at JPY920mn, is owned 66.3% by Takashimaya and 33.7% by Kai. 3) In March 2016, Takashimaya announced the establishment of a joint venture in the airport-style duty-free business, capitalized at JPY980mn, with a 60% ownership stake, 20% owned by All Nippon Airways Trading, and 20% owned by Hotel Shilla. The first store opened in April 2017.

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Partnership with Food and Partners Food and Partners

＜Food production sales＞ Takashimaya Kai Street stores, shopping centers, online, etc.

・Product planning Extensive network ＜Food-related communication business＞・Store through food development ・Store ＜Overseas development（long-term plan)＞

New "Japanese food" brand development

Takashimaya Transcosmos International Commerce scheme Dealings with Takashimaya Transcosmos International Commerce

＜Handling mat erials＞＜Overseas channels＞ High-quality Japanese products Overseas corporate clients who want high-quality Japanese products TAKASHIMAYA

 Products with good design and quality TRANSCOSMOS  Takashimaya overseas stores  Everyday goods inspired by technology and ideas INTERNATIONAL  Regional partner retailers  Food COMMERCE  E-commerce and TV mail-orders  Arts and crafts, building materials  Hotels, commercial facilities, design offices Source: Shared Research based on company data Airport-style duty free shops

Airport-style duty free shop: Unlike tax-free shops, duty-free shops are exempt from the payment of not only consumption tax but also customs duties, liquor tax, and tobacco tax. International visitors, and even Japanese citizens who are going abroad, may purchase duty-free goods provided they present their passport and plane ticket at the shop. After completing departure procedures, customers will be able to receive their purchased goods at a pickup counter established by the duty-free area concerned.

The new joint venture seeks to further stimulate consumer demand among international visitors to Japan, and establish facilities that enable more convenient shopping. The new joint venture is designed to fully capitalize on the respective strengths of each partner. A new venture company was established by three companies, Takashimaya (60% stake), All Nippon Airways Trading (20%) and Hotel Shilla (20%). Takashimaya contributes its expertise in retail curation, and its ability to procure merchandise by leveraging the creditworthiness and financial clout it has built up over many years in retail. All Nippon Airways Trading contributes its expertise in existing airport-based duty-free shopping, and Hotel Shilla contributes its expertise in airport-based duty-free shops in overseas countries such as South Korea, and its ability to appeal to customers.

The company opened the first shop (roughly 2,800 sqm) in April 2017 on the 11th floor of Takashimaya Shinjuku Store. The shop targeted sales of JPY3.3bn in its first year, FY02/18, and JPY7.0bn for FY02/19.

Cost structure

Costs are mainly costs of goods sold (COGS), personnel, rent, and advertising. Its GPM is about average for the industry. The SG&A-to-sales ratio is above average for the peer group. Specifically, the company’s rental costs are high and depreciation costs are low, highlighting the fact that Takashimaya tends to own less real estate compared with competitors. Its advertising and point system promotion costs are high and there is scope for cutting. In FY02/13 the company changed its award points for food purchases, and its point system promotion costs as a percentage of sales were 1.97% (2.25% FY02/12).

Personnel expenses are higher than at Daimaru or Matsuzakaya highlighting the fact that Takashimaya has refrained from restructuring through voluntary retirement programs. Through FY02/17, the number of employees reaching retirement age will increase naturally and that should help to lower the weight of personnel expenses in SG&A to a level comparable to that of its competitors. This underpins expectations for a higher OPM.

Under International Financial Reporting Standards (IFRS), when a consignment transaction occurs, the department store would not be seen as the main executor of the transaction but as an agent. This means that under those standards, the revenues (sales) would be recorded at net and not the current gross level. In other words, the currently recorded gross profit for

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“purchase-as-sold” consignment transaction would disappear with only outright purchasing gross profit left. Overall this would lead to a substantial drop in reported revenues and gross profit but have no bearing on operating profit.

Percentage of sales (parent, FY02/18) Sales Cost of sales Personnel Advertising (Point costs) Distribution Operations Utilities Repair Depreciation Rents Other OPM 100.0% 75.9% 8.1% 3.5% 2.1% 1.0% 3.2% 0.7% 0.4% 1.8% 3.3% 0.7% 1.8% Note: Figures may differ from company materials due to differences in rounding methods. Source: Shared Research based on company data

Operating profit margin (parent)

Note: Takashimaya, Mitsukoshi and Isetan book other operating revenue. Due to this, their GPMs minus SG&A-to-sales ratios do not match with their OPMs. Source: Shared Research based on company data

SG&A ratios (parent) 36% Takashimaya Isetan Mitsukoshi Mitsukoshi Isetan Daimaru Matsuzakaya Daimaru Matsuzakaya

33%

30%

27%

24%

21%

18% 2005 2007 2009 2011 2013 2015 2017

Source: Shared Research based on company data

Sales Cost of sales Personnel Advertising (Point costs) Depreciation Rents Other Total Isetan Mitsukoshi 100.0% 71.8% 8.5% 1.5% 1.7% 1.6% 1.9% 12.5% 27.8% Daimaru Matsuzakaya 100.0% 77.9% 3.9% 1.2% n/a 1.2% 2.7% 8.6% 18.1%

Takashimaya 100.0% 75.9% 8.1% 3.5% 2.1% 1.8% 3.3% 0.7% 23.8% Note: Figures may differ from company materials due to differences in rounding methods. Source: Shared Research based on company data

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Strengths and weaknesses

Strengths

◤ Strong support from core senior affluent customers: Since its start as a store selling kimono fabrics, for many years the company has placed importance on history and culture. Known for its rose-motif wrapping paper, it has many faithful customers and among domestic department stores only Mitsukoshi can rival the power of its brand, to the extent that the name Takashimaya has become synonymous with gifts. It is known as the department store used by the Japanese royal family and is one of Japan’s most prestigious department store operators, much as Harrods is in the UK. It is also well known for the events it holds (cultural, historical, artistic, kimono-related).

◤ Strength of the store network and group’s development capability: The company’s competitors tend to be heavily reliant on their main store (e.g., Isetan’s reliance on Shinjuku, Mitsukoshi’s on Nihombashi, and Matsuzakaya’s on Nagoya). In contrast, Takashimaya’s store network is more balanced and has several core stores in several regions (Nihombashi, Yokohama, Shinjuku, Osaka, and Kyoto). Moreover, the company has a number of stores that are a part of its own shopping center developments and has a track record of developing (via Toshin Development) commercial properties that are integrated with local communities.

◤ Strong presence in Asia: The image held of Japan-affiliated department stores outside of Japan is that they can only attract as customers tourists or Japanese living overseas who want to buy gifts. But the company’s Singapore store was the first Japanese department store to adopt a localization strategy and to attract non-Japanese customers. In fact, in Asia many people think that Takashimaya is a Singaporean store, not a Japanese one. In the future the company is likely to use the brand power of Takashimaya Singapore in its store openings in Asia.

Weaknesses

◤ Demographic change: The number of seniors—the company’s main customers, often affluent—will decline over the long term.

◤ Continual capex requirement: Department stores are generally laden with capex centered on existing store renovations. The ROI in such investments is not necessarily high, but competition forces department store operators to make such investments. Profitability would worsen without such capex.

◤ Itaku hanbai (consignment sales): This implies the goods become department store inventory (returnable to the manufacturer if unsold). The entire Japanese department store industry has traditionally avoided risks in procurement. In this way, the industry overall has mitigated inventory risks. However, risks in procurement could become valuable information. Avoiding such risks can result in a slower response to consumer needs and an over-reliance on existing suppliers.

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Market and value chain

Market overview

Long-term secular decline. The Japanese retail market is mature and in a long-term secular decline driven by adverse demographic trends. Japan’s population started to decline in 2007 and the twin trends of a declining birthrate and an aging population show no signs of abating. In this environment where overall consumer spending is dropping, many big retailers found that they had no choice but to adopt a low-price strategy to survive (although Wal-Mart`s experiences in Japan suggest that that low prices alone are not the solution).

Consolidating and getting bigger does not seem to provide the answer either. Japan’s supply chain has traditionally been very fragmented, partly due to varying local needs (particularly in food). Many national retailers found that differentiating themselves from entrenched local competition is not easy—the situation often leads to deflationary stalemate, supported by low interest rates and easily available financing. The ability to raise money at a close-to-zero cost goes a long way in supporting barely profitable companies. SR thinks easy money is the main problem. Three interlinked factors play a role here—political pressure, the role of banks, and monetary policy.

Cutting jobs is extremely sensitive. Retailers are major employers. People who lose their jobs in restructurings are often older employees, many of whom have rigid company-specific skills, making it hard for them to seek re-employment. In Japan therefore, potentially more than elsewhere, restructurings lead to a rise in structural unemployment and personal hardship. Older people are not only more numerous but also more politically active as voters.

Ultra-low interest rates make economically suboptimal decisions tenable. Compared with the US or UK, Japanese banks have traditionally played and continue to play a disproportionally important role. In deciding whether to allow businesses to fail, no other outside stakeholders come close. In an environment where corporate governance is not centered on shareholders, the Japanese banks have incentives to support the status quo. Political pressures make other choices difficult.

Premium pricing or deep discounting. The changes underway in the Japanese retail industry broadly reflect the trends seen across the world. Most successful companies increasingly seem to fall into one of the two opposing pricing strategies—luxury branding and premium prices, or deep discounting. Those retailers stuck in the middle of these pricing and branding extremes, and unable to go either way, generally perish.

In the US, upscale department stores with strength in merchandising have survived through integration and reorganization. Discounters such as Wal-Mart, Target, and Costco have grown rapidly. Meanwhile, a large number of retailers in the middle found it hard to compete and went extinct. Online retailers are shaking up the industry.

Sector shakeout. Japan is seeing similar trends. The department stores were caught up in a wave of integration and reorganization. Low price retail chains strengthened their push for market dominance. In September 2007, Matsuzakaya Holdings and Daimaru integrated to create J. Front Retailing (TSE1: 3086). In October 2010, Hanshin Department Store and Hankyu Department Store integrated to create H2O Retailing (TSE1: 8242). In April 2008, Mitsukoshi and Isetan integrated to create Isetan Mitsukoshi Holdings (TSE1: 3099).

Isetan Mitsukoshi Holdings, which became the leading company in the industry by size, provided support to the now bankrupt Marui Imai of Hokkaido and also, in October 2009, acquired Iwataya Department Stores, a medium-sized chain. Six unprofitable stores were closed, including Mitsukoshi Ikebukuro. Takashimaya announced a capital and business tie-up with H2O Retailing in 2008. This was widely expected to be a prelude to a full-blown merger but in March 2010 negotiations stopped and the relationship continues to be limited although the parties still own stakes in each other (around 10%).

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Total store space and number of stores 7,500,000 320 Floor space Number of stores 310 300 7,000,000 290 280 6,500,000 270 260 250 6,000,000 240 230 5,500,000 220 (sqm) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (店)

Source: Shared Research based on data from Japan Department Stores Association

Due to the declining population, Japan’s retail market looks set to keep contracting. However Shared Research considers that one possible area of growth is the increase in the number of foreign tourists, particularly from China. Chinese visitor numbers are trending north.

Trends in overseas tourists traveling to Japan

8,000 120% 96% 7,000 90% 6,000 54% 44%48% 60% 5,000 42% 38% 40% 43%39% 29% 30% 27% 29%27% 22% 25%25% 21% 24% 4,000 18%18% 19%17%15% 19% 30% 11% 9% 9% 9% 14% 2% 3,000 -2% -16% -16% -13% -13% 0% 2,000 -27%-30% -31% -30% 1,000 -50% 0 -60% ('000) Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 Tourists visiting Japan Tourists visiting Japan (YoY) Source: Shared Research, based on Ministry of Tourism data

Visitors to Japan by country (region) ('000) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 CAGR South Korea 1,747 2,117 2,601 2,382 1,587 2,440 1,658 2,044 2,456 27,755 4,002 5,090 10.2% Taiwan 1,275 1,309 1,385 1,390 1,024 1,268 994 1,467 2,211 2,830 3,677 4,168 11.4% China 653 812 942 1,000 1,006 1,413 1,043 1,430 1,314 2,409 4,994 6,373 23.0% Hong Kong 299 352 432 550 450 509 365 482 746 926 1,524 1,839 18.0% Thailand 120 126 90 82 178 215 145 261 454 658 797 901 20.1% Singapore 94 116 167 192 145 181 111 142 189 228 309 362 13.0% Malaysia 78 86 152 168 90 115 82 130 177 250 305 394 15.8% Indonesia5960646764816210113715920527114.9% India 596368675967596975881031237.0% Source: Shared Research based on Japan National Tourist Organization (JNTO) data

Visitors to Japan, % of population (2015) % of Population Population ('000) Visitors to Japan ('000) India 0.01% 1,311,050 103 China 0.36% 1,371,220 4,994 Thailand 1.17% 67,959 797 Singapore 5.58% 5,535 309 South Korea 7.91% 50,617 4,002 Taiwan 15.73% 23,381 3,677 Hong Kong 20.86% 7,306 1,524 Source: Shared Research based on Japan National Tourist Organization (JNTO) and World Bank data

Customers

Takashimaya’s customers are 70% female and 30% male and tend to be in their 40s or older. The company is particularly popular with affluent senior customers. Gaisho sales account for about 20% of total sales, about equal to sales associated with Takashimaya Gold Card members.

The company’s Nihombashi store customers tend to be older and more affluent. The Yokohama and Shinjuku stores serve a wide variety of commuters passing through those major railway hubs. While the Futako-Tamagawa store attracts affluent residents of the Jonan area, its clientele counts more families and is substantially younger compared with Nihombashi. The company notes

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that its Kansai stores (the area dominated by old established local players) are seen by locals as being less upscale and sophisticated compared with major rivals. This is in sharp contrast to the perception of Takashimaya in Greater Tokyo.

Barriers to entry

High barriers. When limiting the analysis to the department store sector, barriers to entry are formidable: department stores must open in city centers so as to attract customers and it is not easy to find sites in these locations with the required area more than 50,000sqm. Brand power is vital. With these formidable barriers, in the last few decades there have been no new entrants into the department store market. However, barriers to entry are considerably lower if alternative forms of retailers or specialty stores are included. In recent years these specialty stores have been competing against department stores.

Competition

In a narrow sense, competition within the department store market is easing. This is because the total number of stores is decreasing as unprofitable stores are closed and as department store operators have been merging with each other. This trend is likely to continue. However, in a broad sense, department stores’ competitors are no longer just other department stores, but include a diverse number of retailers, ranging from specialty stores with a wide product range to e-commerce retailers. Specialty stores are growing in strength and diversity; they are managed by companies such as Uniqlo Co., Ltd. (the primary subsidiary of First Retailing Co., Ltd. (TSE1: 9983)), United Arrows Ltd. (TSE1: 7606), Yamada-Denki Co., Ltd (TSE1: 9831), Nitori Holdings Co., Ltd. (TSE1: 9843), and Ryohin Keikaku Co., Ltd. (TSE1: 7453). The competition also includes shopping centers, especially urban ones managed by real estate developers such as Mitsui Fudosan (TSE1: 8011) and Mitsubishi Estate (TSE1: 8802).

The competitive environment is also affected by the development of areas surrounding department stores and changes in the movement of rail passengers. For instance, direct connection between the Tokyu Toyoko and Fukutoshin lines began in March 2013 making it easier for passengers using Toyoko Line to travel in the direction of Shinjuku and Ikebukuro. As a result, it is possible that shoppers who have previously stopped at Shibuya will continue to Shinjuku.

Shinjuku Takashimaya is located at the south exit of Shinjuku Station, where infrastructure-related construction work is underway as a cooperative venture between the Ministry of Land, Infrastructure and Transport (MLIT) and East Japan Railway (TSE1: 9020). This project includes maintenance of traffic junctions, such as the areas south of the Koushu Road. Currently, the National Route No. 20 (Koushu Road) that passes in front of the south exit has a daily traffic volume of about 60,000 vehicles and 140,000 pedestrians and due to this huge volume, lacks space for people to stop and relax. Moreover, the Koushu Road overbridge that was built in 1925 needs to be repaired and there have been safety concerns about its ability to withstand an earthquake. After is has been redeveloped, it is possible that pedestrians will end up being redirected toward Shinjuku Station’s south exit. The Shinjuku Station South Exit Development Building was opened in the spring of 2016.

Tokyu Corporation (TSE1: 9005) has developments underway in Shibuya and in April 2012 opened Shibuya Hikarie, a large-scale entertainment facility. In 2019 Sagami Railway and Tokyu Corporation will open a directly connecting line between their respective lines, which will have some effect on sales at the Yokohama store.

Another trend in the competitive environment is a shift toward larger-scale stores among department stores and other type of retailers. For instance, a large-scale redevelopment project is underway in the area around Osaka Station. In May 2011 Osaka Station City was opened. The Hankyu Department Store reopened in the Hankyu Umeda building in Osaka’s Kita Ward in the second half of November 2012 with a sales floor area of 80,000sqm, 1.3x larger than prior to the rebuilding.

56/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Strategy

Among the company’s competitors, J Front Retailing (TSE1: 3086), which manages the Daimaru and Matsuzakaya stores, is pursuing a unique strategy among the Japanese department stores. It is attempting to escape from the traditional department store model, making PARCO (TSE1: 8251) a subsidiary by increasing its equity holdings to 65% through a public offering. Its goal is to realize a low-cost new department store model, which entails attracting as tenants specialty stores capable of pulling in customers and capturing a younger market.

Takashimaya’s approach is to incorporate specialty stores to the department stores. The company’s motto is “unchanging yet new.” It likes tradition and instead of implementing sweeping reforms, the company’s strategy has been to attract customers by developing the areas surrounding its stores and to participate in a range of development projects that will support the growth of its department stores (strengthening its SC operations by redeveloping its Nihombashi store and adjacent land [urban redevelopment]).

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Financial statements Income statement

Income statement FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Operating revenue 1,042,711 976,116 877,762 869,476 858,123 870,333 904,180 912,523 929,588 923,601 949,572 Department Stores 940,086 879,440 786,987 777,478 762,827 770,089 798,079 802,956 811,648 797,253 826,561 Contract and Design 25,861 20,814 15,737 17,451 17,097 19,010 20,622 24,658 26,710 30,874 25,916 Real Estate 29,040 29,590 29,401 29,434 32,259 33,863 36,804 38,102 42,389 47,923 47,476 Finance 8,738 10,346 10,916 11,689 11,514 11,655 11,911 12,385 12,865 13,414 14,187 Others 38,983 35,925 34,718 33,421 34,424 35,714 36,762 34,420 35,974 34,135 35,430 YoY -0.6% -6.4% -10.1% -0.9% -1.3% 1.4% 3.9% 0.9% 1.9% -0.6% 2.8% Department Stores -0.2% -6.5% -10.5% -1.2% -1.9% 1.0% 3.6% 0.6% 1.1% -1.8% 3.7% Contract and Design -22.5% -19.5% -24.4% 10.9% -2.0% 11.2% 8.5% 19.6% 8.3% 15.6% -16.1% Real Estate 20.6% 1.9% -0.6% 0.1% 9.6% 5.0% 8.7% 3.5% 11.3% 13.1% -0.9% Finance 9.4% 18.4% 5.5% 7.1% -1.5% 1.2% 2.2% 4.0% 3.9% 4.3% 5.8% Others -7.7% -7.8% -3.4% -3.7% 3.0% 3.7% 2.9% -6.4% 4.5% -5.1% 3.8% Sales 994,585 926,281 827,872 819,062 805,757 815,387 845,785 851,374 865,889 860,761 886,700 YoY -1.3% -6.9% -10.6% -1.1% -1.6% 1.2% 3.7% 0.7% 1.7% -0.6% 3.0% CoGS 725,993 678,701 609,816 606,812 597,511 605,687 631,111 636,881 651,010 648,765 668,295 Gross profit 268,591 247,579 218,056 212,249 208,245 209,700 214,673 214,492 214,878 211,996 218,405 YoY -1.8% -7.8% -11.9% -2.7% -1.9% 0.7% 2.4% -0.1% 0.2% -1.3% 3.0% GPM 27.0% 26.7% 26.3% 25.9% 25.8% 25.7% 25.4% 25.2% 24.8% 24.6% 24.6% Gross operating profit 316,717 297,415 267,945 262,663 260,611 264,646 273,068 275,641 278,577 274,836 281,276 SG&A expenses 279,018 272,605 254,517 244,489 239,512 239,169 243,969 243,618 245,605 240,835 245,957 SG&A-to-sales ratio 28.1% 29.4% 30.7% 29.8% 29.7% 29.3% 28.8% 28.6% 28.4% 28.0% 27.7% Operating profit 37,699 24,810 13,428 18,173 21,099 25,476 29,099 32,022 32,972 34,000 35,318 YoY 11.3% -34.2% -45.9% 35.3% 16.1% 20.7% 14.2% 10.0% 3.0% 3.1% 3.9% OPM 3.8% 2.7% 1.6% 2.2% 2.6% 3.1% 3.4% 3.8% 3.8% 3.9% 4.0% Non-operating income 7,437 5,330 5,667 6,460 5,239 6,157 5,734 5,536 5,982 5,054 5,223 Non-operating expenses 3,067 2,136 2,331 2,150 1,983 1,766 1,483 1,653 1,169 1,839 1,935 Recurring profit 42,070 28,003 16,764 22,484 24,355 29,866 33,350 35,904 37,785 37,215 38,606 YoY 6.4% -33.4% -40.1% 34.1% 8.3% 22.6% 11.7% 7.7% 5.2% -1.5% 3.7% RPM 4.2% 3.0% 2.0% 2.7% 3.0% 3.7% 3.9% 4.2% 4.4% 4.3% 4.4% Extraordinary gains 7,293 447 1,184 10,500 185 286 3,049 13,734 6,410 2,630 Extraordinary losses 17,177 8,494 5,549 7,527 5,265 3,686 4,116 2,736 10,068 9,023 6,228 Tax charges 13,300 8,038 4,327 11,201 7,868 8,949 10,029 12,808 17,181 13,022 10,889 Implied tax rate 41.3% 40.3% 34.9% 44.0% 40.8% 34.2% 34.0% 35.4% 41.4% 37.6% 31.1% Minority interests 188 168 362 407 511 690 774 827 441 709 460 Net income 18,697 11,750 7,709 13,849 10,895 16,540 18,716 22,581 23,829 20,870 23,658 YoY -26.2% -37.2% -34.4% 79.6% -21.3% 51.8% 13.2% 20.7% 5.5% -12.4% 13.4% Net margin 1.9% 1.3% 0.9% 1.7% 1.4% 2.0% 2.2% 2.7% 2.8% 2.4% 2.7% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

Profitability and financial ratios

Profit margins FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Gross profit 273,392 268,591 247,579 218,056 212,249 208,245 209,700 214,673 214,492 214,878 211,996 218,405 GPM 27.1% 27.0% 26.7% 26.3% 25.9% 25.8% 25.7% 25.4% 25.2% 24.8% 24.6% 24.6% Operating profit 33,860 37,699 24,810 13,428 18,173 21,099 25,476 29,099 32,022 32,972 34,000 35,318 OPM 3.4% 3.8% 2.7% 1.6% 2.2% 2.6% 3.1% 3.4% 3.8% 3.8% 3.9% 4.0% EBITDA 46,850 52,480 40,286 29,207 34,396 38,499 44,016 47,430 51,479 52,852 53,534 54,471 EBITDA margin 4.7% 5.3% 4.3% 3.5% 4.2% 4.8% 5.4% 5.6% 6.0% 6.1% 6.2% 6.1% Net margin 2.5% 1.9% 1.3% 0.9% 1.7% 1.4% 2.0% 2.2% 2.7% 2.8% 2.4% 2.7% Financial ratios FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. ROA (RP-based) 5.1% 5.5% 3.7% 2.2% 2.8% 3.0% 3.7% 3.9% 3.8% 3.9% 3.8% 3.8% ROE 9.9% 6.5% 4.1% 2.7% 4.7% 3.6% 5.2% 5.4% 5.9% 6.0% 5.1% 5.6% Total asset turnover 1.31.31.21.11.01.01.01.00.90.90.90.9 Inventory turnover 17.8 17.0 15.3 13.8 14.8 15.6 15.9 16.3 15.6 14.7 14.2 14.9 Days in inventory 20.5 21.4 23.8 26.4 24.6 23.3 22.9 22.4 23.4 24.8 25.7 24.5 Working capital requirement 15,096 40,204 54,661 59,734 72,581 71,980 49,329 50,009 61,220 61,962 66,457 82,355 Current ratio 75.9% 70.5% 65.8% 79.3% 87.4% 81.3% 80.2% 99.0% 85.6% 89.4% 101.8% 88.3% Quick ratio 57.9% 47.5% 43.8% 55.5% 64.6% 63.1% 59.2% 78.4% 64.8% 63.2% 75.4% 67.3% OCF / Current liabilities 8.6% 20.4% 4.8% 7.6% 6.8% 10.2% 14.3% 12.9% 12.2% 7.7% 13.1% 10.7% Net debt / Equity 21.4% 17.0% 25.2% 22.2% 25.3% 21.6% 8.7% 16.7% 18.5% 19.4% 11.4% 16.6% OCF / Total liabilities 5.8% 14.0% 3.1% 4.7% 4.0% 6.4% 9.7% 7.6% 7.2% 4.5%7.5%6.3% Cash cycle (days) -3.6 2.411.518.422.425.019.513.615.517.919.423.0 Changes in working capital 8,091 25,108 14,457 5,073 12,847 -601 -22,651 680 11,211 742 4,495 15,898 Source: Shared Research based on company data

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ROE, ROA, ROIC

FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. ROE 2.2% -2.0% 7.4% 10.0% 9.9% 6.5% 4.1% 2.7% 4.7% 3.6% 5.2% 5.4% 5.9% 6.0% 5.1% 5.6% Net margin 0.3% -0.3% 1.4% 2.1% 2.4% 1.8% 1.2% 0.9% 1.6% 1.3% 1.9% 2.1% 2.5% 2.6% 2.3% 2.5% Total asset turnover 1.44 1.42 1.34 1.33 1.36 1.38 1.27 1.10 1.07 1.08 1.03 0.96 0.93 0.95 0.91 0.90 Financial leverage 4.51 4.30 4.06 3.66 3.02 2.64 2.71 2.83 2.78 2.66 2.68 2.74 2.57 2.45 2.49 2.47 ROA (RP-based) 2.1% 3.4% 4.3% 4.7% 5.1% 5.6% 3.6% 2.1% 2.8% 3.1% 3.5% 3.5% 3.7% 3.9% 3.7% 3.7% ROIC 2.4% 3.8% 4.6% 5.5% 5.6% 5.8% 3.7% 1.9% 2.5% 3.0% 3.3% 3.5% 3.6% 3.8% 3.9%3.9% NOPAT 9,571 14,760 16,876 19,427 20,083 22,360 14,715 7,964 10,779 12,514 15,110 18,038 19,850 21,221 22,758 24,422 Net assets + Interest-bearing debt 395,511 386,446 367,651 351,110 357,667 382,538 397,978 412,734 425,790 417,453 454,650 515,701 545,754 562,863 579,400 619,839 ROIC (before tax) 4.2% 6.6% 7.9% 9.3% 9.5% 9.9% 6.2% 3.3% 4.3% 5.1% 5.6% 5.6% 5.9% 5.9% 5.9% 5.7% OPM 1.4% 2.3% 2.8% 3.2% 3.2% 3.6% 2.5% 1.5% 2.1% 2.5% 2.9% 3.2% 3.5% 3.5% 3.7% 3.7% Operating revenue / Invested capital 2.99 2.88 2.79 2.94 2.93 2.73 2.45 2.13 2.04 2.06 1.91 1.75 1.67 1.65 1.59 1.53

12% ROE ROA (RP-based) ROIC 10.0% 9.9% 10% 7.4% 8% 6.5% 5.9% 6.0% 5.2% 5.4% 5.6% 6% 4.7% 5.1% 4.1% 5.6% 5.8% 3.6% 4% 5.5% 4.6% 2.7% 2.2% 3.9% 3.9% 3.8% 3.7% 3.5% 3.6% 3.8% 2% 3.0% 3.3% 2.4% 2.5% 1.9% 0% -2.0% -2%

-4% FY02/03 FY02/08 FY02/13 FY02/18

ROE

12% ROE Net margin Total asset turnover (right axis) Financial leverage (right axis) 5 4.5 4.3 10.0% 9.9% 10% 4.1 7.4% 3.7 4 8% 6.5% 3.0 5.9% 6.0% 5.6% 5.2% 5.4% 5.1% 6% 2.8 2.7 2.6 4.1% 2.8 2.7 2.7 2.6 3 2.5 2.5 2.5 4% 2.7 2.7% 4.7% 2.2% 3.6% 2% 2 2.5% 2.6% 2.5% 2.1% 2.4% 2.1% 2.3% 1.8% 1.2% 1.6% 1.9% 0% 1.4% 0.9% 1.3% 0.3% -2.0% 1 -2% -0.3% -4% 0 FY02/03 FY02/08 FY02/13 FY02/18 Source: Shared Research based on company data

ROIC

12% ROIC (before tax) OPM Operating revenue / Invested capital (right axis) 4

10% 3.0 2.9 2.9 2.9 2.8 2.7 3 8% 2.5 2.1 2.0 2.1 1.9 6% 1.8 1.7 1.7 2 1.6 1.5 4%

3.6% 3.5% 3.5% 3.7% 3.7% 1 3.2% 3.2% 3.2% 2% 2.8% 2.9% 2.5% 2.5% 2.3% 2.1% 1.4% 1.5% 0% 0 FY02/03 FY02/08 FY02/13 FY02/18 (JPYbn) Net assets Interest-bearing debt Operating profit (right axis) (JPYbn) 700 37.7 40 35.3 33.9 33.0 34.0 600 32.8 32.0 35 29.0 29.1 194.0 174.3 30 500 25.4 24.8 25.5 154.6 155.3 163.5 25 400 21.1 167.5 131.8 127.5 98.8 16.4 84.8 102.2 120.6 20 300 214.4 193.6 163.1 116.5 13.4 18.2 15 449.5 200 408.5 407.4 421.9 335.4 364.9 10 286.8 291.3 281.9 291.2 301.1 307.5 227.3 100 181.7 183.3 195.4 5 0 0 FY02/03 FY02/08 FY02/13 FY02/18 Source: Shared Research based on company data

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Balance sheet

Balance sheet FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. ASSETS Cash and deposits 52,593 55,009 35,130 31,165 56,011 55,503 61,124 69,495 106,451 87,887 75,487 107,159 99,541 Marketable securities 899 599 5,000 20 3,000 15,000 15,000 - 43,099 2,000 2,003 2,000 - Accounts receivable 62,715 72,622 96,396 98,960 102,200 121,263 121,414 98,978 106,671 120,380 119,174 122,728 140,038 Inventories 41,148 41,494 43,729 44,889 43,218 38,566 37,863 38,234 39,239 42,398 46,151 45,049 44,745 Guarantee deposits 63,757------Deferred tax assets 3,922 6,210 8,011 8,321 7,281 5,160 6,989 6,601 7,221 8,501 9,309 9,459 10,163 Other 30,309 19,773 25,568 24,163 28,599 30,944 20,880 23,529 29,876 27,424 38,929 39,440 33,318 Allowance for doubtful accounts -698 -611 -948 -902 -497 -562 -877 -577 -439 -446 -430 -336 -306 Total current assets 190,888 258,857 212,888 206,617 239,816 265,878 262,394 236,263 332,121 288,147 290,625 325,500 327,501 Buildings 114,386 114,850 161,607 160,854 162,591 160,020 155,348 154,003 157,381 173,110 171,610 164,940 167,732 Equipment 8,623 8,955 10,556 9,889 8,990 8,814 8,357 8,160 9,667 9,337 9,438 10,466 11,014 Land 143,358 142,229 201,015 202,165 201,608 208,772 208,682 213,057 223,296 225,209 231,174 230,386 361,362 Lease assets - - 986 2,456 2,611 2,939 2,615 2,233 1,929 1,285 989 Construction in progress 6,971 15,357 11,428 9,898 7,766 1,856 750 594 1,476 2,582 3,153 6,622 9,658 Total tangible fixed assets 273,341 281,394 384,608 382,808 381,943 381,920 375,748 378,755 394,436 412,474 417,307 413,703 550,757 Leasehold 6,227 11,354 11,354 11,354 11,354 11,354 11,404 11,414 11,414 93,712 93,712 93,725 4,939 Goodwill 1,240 1,145 1,050 954 859 764 669 745 631 518 404 193 97 Other 3,758 3,395 3,306 6,964 7,203 14,332 17,725 16,819 16,670 15,275 14,210 13,254 12,998 Total intangible fixed assets 11,226 15,894 15,710 19,273 19,417 26,451 29,799 28,979 28,716 109,505 108,327 107,172 18,035 Investment securities 104,005 100,162 87,028 74,854 79,394 79,528 77,474 96,100 105,890 127,040 102,550 89,114 95,231 Deferred tax assets 6,932 3,738 10,888 19,150 17,840 16,655 13,467 7,131 4,292 6,133 9,771 8,256 4,946 Long-term loans 83,815 82,821 ------Guarantee deposits 99,911 36,875 42,937 43,787 42,760 43,613 42,082 41,288 34,420 34,045 33,151 31,892 29,227 Other 7,393 6,330 7,825 8,019 8,741 7,830 7,358 4,962 5,029 4,944 15,268 13,278 12,045 Allowance for doubtful accounts -12,027 -3,078 -3,017 -3,553 -4,816 -4,790 -4,406 -2,794 -2,768 -2,679 -2,579 -2,454 -1,938 Investments and other assets 290,030 226,849 145,662 142,257 143,921 142,838 135,975 146,688 146,864 169,483 158,161 140,087 139,511 Total fixed assets 574,598 524,138 545,982 544,340 545,282 551,209 541,522 554,423 570,017 691,464 683,795 660,963 708,305 Total assets 765,487 782,996 758,870 750,957 785,098 817,088 803,917 790,687 902,139 979,611 974,421 986,464 1,035,807 LIA BILITIES Accounts payable 96,858 99,020 99,921 89,188 85,684 87,248 87,297 87,883 95,901 101,558 103,363 101,320 102,428 Short-term debt 51,772 60,898 16,072 38,480 24,593 14,083 39,811 19,172 47,301 37,292 17,187 9,007 50,382 Lease obligations - - 125 500 652 856 923 796 698 509 395 Income taxes payable 5,622 9,959 8,939 3,571 3,202 3,035 4,177 4,045 7,822 9,784 10,045 5,597 6,236 Advance received 62,600 67,876 71,631 73,536 77,020 76,871 75,713 77,022 78,125 79,321 82,954 91,852 96,102 Gift certificate 43,761 44,637 51,515 49,572 59,489 77,174 63,070 57,174 54,498 53,184 52,299 51,702 52,663 Deposits 23,166 23,538 24,716 28,606 22,309 21,248 26,178 25,545 24,505 23,384 27,069 24,702 26,725 Provision for point card certificates 3,194 3,731 4,437 4,177 3,742 3,828 3,517 3,136 3,260 3,252 3,233 2,509 2,561 Allowance for losses on removal 2,379 1,451 810 - 341 - - - - 581 2,160 2,743 Other 40,367 29,019 23,352 25,890 26,275 19,866 22,495 19,812 23,264 28,132 27,653 30,430 30,647 Tot al current liabilit ies 327,340 341,057 302,034 313,830 302,444 304,198 322,910 294,645 335,599 336,703 325,082 319,793 370,888 Long-term debt 111,294 55,592 68,686 63,755 95,962 117,679 87,667 79,674 120,227 126,225 137,412 146,255 123,878 Lease obligations - - 860 1,955 1,967 2,109 1,715 1,458 1,250 858 641 Reserve for retirement allowance 57,369 56,824 55,573 56,639 55,383 51,889 49,763 43,648 42,098 62,983 61,875 58,251 54,616 Deferred tax liabilities 146 124 112 72 67 121 103 109 360 2,235 49 44 286 Deferred tax liabilities on revaluation 7,619 10,184 10,080 10,266 9,838 9,838 8,630 8,721 8,721 7,570 7,117 6,879 6,879 Other 33,931 32,385 31,130 24,481 29,301 30,307 25,395 26,336 28,506 33,959 34,248 32,489 29,087 Tot al fixed liabilit ies 210,359 155,109 165,583 155,215 191,415 211,789 173,525 160,597 201,627 234,430 241,951 244,780 215,392 Tot al liabilit ies 537,700 496,166 467,617 469,046 493,859 515,988 496,436 455,243 537,227 571,133 567,034 564,574 586,281 NET ASSETS Capital stock 39,161 56,025 56,025 56,025 56,025 56,025 56,025 56,025 56,025 66,025 66,025 66,025 66,025 Capital surplus 28,227 45,076 45,080 45,084 45,085 45,085 45,085 45,085 45,085 55,085 55,085 55,085 55,025 Retained earnings 127,264 145,975 161,524 169,704 174,741 185,272 193,362 206,440 221,857 229,185 249,145 265,033 284,320 Treasury stock -345 -425 -478 -501 -514 -528 -531 -536 -549 -562 -6,153 -6,160 -6,170 Valuation and translation differences 32,946 36,939 25,718 8,086 12,060 10,383 8,211 22,413 35,775 51,374 34,824 32,240 39,971 Minority interests 3,237 3,382 3,511 3,842 4,861 5,328 6,015 6,718 7,370 8,458 9,665 10,353 Total net assets 227,255 286,829 291,253 281,911 291,239 301,099 307,481 335,443 364,912 408,477 407,386 421,890 449,526 Working capital 7,005 15,096 40,204 54,661 59,734 72,581 71,980 49,329 50,009 61,220 61,962 66,457 82,355 Total interest-bearing debt 163,066 116,490 84,758 102,235 120,555 131,762 127,478 98,846 167,528 163,517 154,599 155,262 174,260 Net debt 110,473 61,481 49,628 71,070 64,544 76,259 66,354 29,351 61,077 75,630 79,112 48,103 74,719 Source: Shared Research based on company data

Characteristics One characteristic of all department stores: inventory accounts for a small proportion of total assets. For Takashimaya in FY02/14 the proportion of inventory in total assets was 4.3%. Land and buildings constitute a high percentage, and in FY02/14 made up 42% of Takashimaya’s total assets.

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Statement of cash flows

Cash flow statement FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cash flows from operating actitivities (1) 28,762 65,480 14,686 23,428 20,645 31,921 44,141 40,582 41,018 25,638 42,266 36,870 Cash flow s from invest ing act ivit ies (2) -10,075 -45,522 -38,348 -10,508 -13,240 -16,356 -28,470 -30,389 -116,049 -16,081 -9,124 -62,286 Free cash flow (1+2) 18,687 19,958 -23,662 12,920 7,405 15,565 15,671 10,193 -75,031 9,557 33,142 -25,416 Cash flows from financing activities -15,848 -35,125 14,121 14,817 7,673 -8,210 -32,931 64,391 11,619 -19,239 -4,228 14,185 Depreciation and amortization (A) 12,990 14,781 15,476 15,779 16,223 17,400 18,540 18,331 19,457 19,880 19,534 19,153 Capital expenditures (B) -1,927 -43,928 -23,084 -16,441 -16,441 -15,709 -20,425 -34,546 -124,670 -23,646 -21,792 -69,437 Working capital changes (C) 8,091 25,108 14,457 5,073 12,847 -601 -22,651 680 11,211 742 4,495 15,898 Simple FCF (NI + A + B - C) 28,291 -35,558 -10,315 1,974 784 13,187 37,306 1,821 -93,843 19,321 14,117 -42,524 Source: Shared Research based on company data

At FY02/14 net interest-bearing debt was around JPY61.0bn and operating cash flow was approximately JPY40.5bn. In FY02/14, the company raised JPY65.5bn from the issuance of warrant bonds. It plans to use the funds raised to acquire a portion of the land and buildings of the Shinjuku store that it does not already own.

Apart from transactions related to the Shinjuku store, the company plans to make annual capex of around JPY40.0bn during the period of its medium-term plan. Hence, further fund raising is unlikely.

Cash conversion cycle Cash conversion cycle FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Accounts receivable turnover14.911.89.58.27.36.67.48.27.57.27.16.7 Accounts receivable days 24.5 31.0 38.5 44.3 49.8 55.0 49.3 44.4 48.7 50.551.354.1 Inventory turnover 17.8 17.0 15.3 13.8 14.8 15.6 15.9 16.3 15.6 14.7 14.2 14.9 Days in inventory 20.521.423.826.424.623.322.922.423.424.825.724.5 Accounts payable turnover 7.57.37.27.07.06.86.96.96.56.46.36.6 Accounts payable days 48.750.050.952.352.053.352.853.156.657.457.6 55.6 Cash conversion cycle (days) -3.6 2.411.518.422.425.019.513.615.517.919.423.0 Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

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Other information

History

Founding to the Meiji era In 1831, the founder, Iida Shinshichi, opened a clothing and cotton cloth store in Kyoto. In 1888, the store exhibited a number of items at international exhibitions and received numerous prizes. This led to the store winning the title “Purveyor to the Imperial Household Ministry” in 1897 (the purveyor system is now abolished). In 1896, Kyoto Minami (South) store unveiled an innovative show window, which became the prototype for show windows in modern department stores. Two years later, the Osaka store was opened in Shinsaibashisuji, Minami Ward, Osaka Prefecture, and the Nihombashi store (Nishikonyamachi, Kyobashi Ward, Tokyo) in 1900.

In 1910, the company set up the Takashimaya pavilion at the London Japan-UK Expo, exhibiting products that included a velvet yuzen-print wall hanging and Are Yuudachi by the artist Takeuchi Seihou, winning four honorary prizes.

Source: Company data Taisho to early-Showa era In 1919, Takashimaya Gofukuten KK was established. In 1922, the company constructed and opened a new store (10,000sqm) at Nagahoribashi, Minami Ward, Osaka. Made of reinforced concrete and with seven floors above ground and one below ground, it represented the start of Takashimaya’s modern method of store management. In 1930, the company started using the corporate name Takashimaya Co Ltd. Three years later, the company built and opened a new store on the high street of Nihombashi, Tokyo, with two floors below ground and eight above ground (about 27,500sqm), gaining recognition.

Post-WWII period In 1949, the company’s stock was listed on the Osaka Securities Exchange and the Tokyo Stock Exchange. In 1952, the company adopted the rose design for its paper wrapping and the rose mark became the symbol of Takashimaya. Four years later, the company held an Italian Fair at each store, the first such international fair held in post-war Japan. In 1958, a new Takashimaya store was opened on 5th Street, New York, the first Japanese department store outside of Japan. In the following year, the company signed a licensing agreement with Pierre Cardin; with this agreement, Takashimaya became the first Japanese company to enter into an agreement with a foreign designer. In the same year, the Yokohama Takashimaya store opened after the extension and renovation of the Takashimaya store in the Yokohama Station building (opened in 1956). With this, the company established large stores in prime locations of major cities, forming the foundation for its store network today.

Growth period In 1963, the company established Toshin Development Co Ltd (now a consolidated subsidiary), and six years later Toshin Development opened Tamagawa Takashimaya SC as Japan’s first large-scale suburban shopping center. In the 1970s, the company opened Tachikawa, Omiya, Kashiwa, Wakayama and Senboku stores. In 1989, Takashimaya Group sales (fiscal 1988) exceeded JPY1tn.

Recent years In 1993, the company opened its first store in Asia in Singapore, followed by the Taipei store in 1994, accelerating overseas expansion.

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In 1995, the company established Yokohama Takashimaya Co Ltd, Gifu Takashimaya Co Ltd, Senboku Takashimaya Co Ltd, Okayama Takashimaya Co Ltd, and Yonago Takashimaya Co Ltd and newly opened the Yokohama, Tamagawa (former Yokohama Takashimaya Tamagawa store), Konandai (former Yokohama Takashimaya Konandai store), Gifu, Senboku, Okayama, Tsuyama (Tsuyama City, Okayama Prefecture; closed in 1999), and Yonago stores (the Yonago store became a subsidiary in 2003 and the Okayama and Gifu stores in 2004).

In 1996, the company introduced the Takashimaya card point system, the first time such a system had been used in the department store industry. In the same year, the company opened Takashimaya Times Square in Shinjuku. In 2000, the JR Nagoya Takashimaya was opened jointly with Central Japan Railway Company.

In 2006, the Nihombashi Takashimaya store was given historic building status by the Tokyo Metropolitan government, followed by the 2009 designation as one of Japan’s Important Cultural Properties.

Source: Company data

In 2008, the company agreed on a business and capital tie-up with H2O Retailing, with the aim of eventually merging two companies. However, the merger plan was abandoned with continued business tie-up.

2011: the company’s 180th founding anniversary.

2012: opened Shanghai Takashimaya, its first store in China.

2016: opened Takashimaya Ho Chi Minh City in Vietnam. The one-stop shopping center Saigon Centre was opened at the same time, with Takashimaya as the core tenant.

Major shareholders

As of February 28, 2018

Top shareholders Shareholding ratio

Japan Trustee Services Bank, Ltd. (Trust account) 9.30% The Master Trust Bank of Japan, Ltd. (Trust account) 8.16% H2O RETAILING CORPORATION 5.00% Nippon Life Insurance Company 2.79% Trust & Custody Services Bank, Ltd. (Investment trust collateral account) 1.94% Takashimaya Kyoeikai 1.78% Japan Trustee Services Bank, Ltd. (Trust account 5) 1.66% Japan Trustee Services Bank, Ltd. (Trust account 9) 1.48% State Street Bank West Client-Treaty 505234 1.41% Sotetsu Holdings, Inc. 1.35% Source: Shared Research based on company data

Top management

The company’s chairman and representative director is Koji Suzuki (born 1945). He joined the company in 1968 and in 1995 was appointed a director and became the head of the Central Management Planning Office. After serving in a number of senior

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positions, he was appointed president and representative director in 2003, and then chairman and representative director in 2014.

President and representative director Shigeru Kimoto (born 1956) joined Yokohama Takashimaya Co., Ltd. in 1979. In 2010, he was appointed head of the Shinjuku store and an executive officer of the company. In 2011, he became a managing director of the company, vice-president of planning and head of the restructuring office. In 2014 he was appointed to his current position.

Employees

On a consolidated basis, the company had 7,569 full-time employees at end-February 2018 and employed an average of 8,595 part-time workers during the course of a year. On a parent basis, the company had 4,801 full-time workers and a yearly average of 4,875 part-time workers. The average age and average length of employment for its full-time workers in FY02/18 and on a parent basis are shown below.

▷ Average age 46.3 years ▷ Average length of employment 23.3 years

Dividends and shareholder returns

The company seeks to make stable dividend payments to shareholders, with shareholder returns conducted based on comprehensive consideration of performance and management status. Internal reserves are used as capital for enhancing sales ability (for example by renovating stores) and for strengthening the company’s financial standing. Takashimaya issues a shareholder benefit card twice a year, at the end of February and August, to all shareholders who own at least 1,000 shares at those times. The card provides the holder with a 10% discount on designated products at Takashimaya stores. Depending on the card held, up to three people can attend free of charge the cultural events held at any Takashimaya store.

FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Total dividends a) 2,311 2,311 2,773 3,119 3,299 3,299 3,299 3,299 3,299 3,298 3,298 3,456 4,193 4,193 4,193 Total treasury stock acquired b) ---1 77 49 19 13 13 3 4 12 13 5,590 5,591 5,592 Total returns to shareholders c) = a) + b) 2,311 2,311 2,772 3,196 3,348 3,318 3,312 3,312 3,302 3,302 3,310 3,469 9,783 9,784 9,785 Net income attributable to d) -3,609 13,946 21,192 25,319 18,697 11,750 7,709 13,849 10,895 16,540 18,716 22,581 23,829 20,870 23,658 parent company shareholders

Dividend payout ratio a) / d) -64.0% 16.6% 13.1% 12.3% 17.6% 28.1% 42.8% 23.8% 30.3% 19.9% 17.6% 15.3% 17.6% 20.1% 17.7% Total shareholder return ratio c) / d) -64.0% 16.6% 13.1% 12.6% 17.9% 28.2% 43.0% 23.9% 30.3% 20.0% 17.7% 15.4% 41.1% 46.9% 41.4%

Net assets available to 183,275 195,407 227,255 283,592 287,871 278,400 287,397 296,238 302,153 329,428 358,194 401,107 398,928 412,225 439,173 common shareholders (year end) Average of beginning and end of 182,476 189,341 211,331 255,424 285,732 283,136 282,899 291,818 299,196 315,791 343,811 379,651 400,018 405,577 425,699 f) year Before deducting assets available to 183,275 195,407 227,255 283,592 287,871 278,400 287,397 296,238 302,153 329,428 358,194 401,107 398,928 412,225 439,173

holders of Class A preferred shares EPS (JPY) -11.9 45.3 68.8 77.8 56.7 35.6 23.4 42.0 33.0 50.1 56.7 66.3 67.9 59.7 67.7 DPS (JPY) 7.5 7.5 9.0 9.5 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 12.0 12.0 12.0 DOE a) / f) 1.3% 1.2% 1.3% 1.2% 1.2% 1.2% 1.2% 1.1% 1.1% 1.0% 1.0% 0.9% 1.0% 1.0% 1.0%

60% Payout ratio Total shareholder return ratio DOE (right axis) 1.4%

50% 1.3%

40% 1.2%

30% 1.1%

20% 1.0%

10% 0.9%

0% 0.8% FY02/03 FY02/08 FY02/13 FY02/18 Source: Shared Research based on company data

Investor relations

The company holds results briefings twice a year (April and November).

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By the way Hiraba The Japanese term for the space operated by the department store itself and selling a mix of merchandise from several manufacturers.

Shouka The Japanese term for purchase-as-sold transaction method, generally translated as consignment sales. Confusion can arise in the relationship with itaku hanbai transaction method, also translated as consignment sales. Despite common translation, the two methods have different accounting treatments. The former (purchase-as-sold) presumes that the title is not transferred to a department store until actual sale, i.e., never booked as department store inventory; the latter consignment sales implies the goods become department store inventory (returnable to the manufacturer if unsold).

Gaisho The Japanese term for “out-of-store sales.” A traditional sales method in Japan’s department store industry where department store sales clerks visit the homes of loyal customers or the offices of loyal companies to take their orders, like a personal shopping service.

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Historical performance and news

Historical performance

Full-year FY02/18 results (out April 9, 2018)

▷ FY02/18: Earnings at domestic department stores were driven by a rise in inbound tourist demand and success of the company’s alliance member strategy. This offset lower earnings at new businesses and subsidiaries, allowing the company to post higher sales and earnings  Versus plan: Operating profit finished JPY700mn below plan as the strong performance of domestic department stores failed to compensate for a JPY1.0bn shortfall at the Contract and Design business stemming from the deferral of a large project and the failure to win a big order ▷ Domestic department Stores: Sales and operating profit up 3% and 26% respectively. Sales steadily increased, led by large stores. Inbound tourist demand combined with solid consumer spending contributed  Inbound: In addition to current initiatives, the company worked on improving the quality of its services (mainly at the Osaka store), resulting in significant growth in both sales and the number of items sold

 Parent gross profit margin: Even though GPM declined 0.18pp YoY due to an increase in sales to inbound tourists, gross profit was up on increased sales. Various initiatives limited the decline in GPM ▷ Overseas department stores: All three locations reported higher sales. Sales increased on positive momentum in the market environment in Singapore. Sales were up in Shanghai on effective use of an event sales space, and sales in Vietnam were steady ▷ FY02/19: The company sees operating profit falling JPY5.3bn, owing to JPY1.9bn in opening costs for the Nihombashi Shopping Center and growth-oriented spending, including for the Group Reform Project. It expects profit to be squeezed also by a

projected JPY2.3bn increase in personnel costs at domestic department stores. The Group Reform Project is aimed at decisively reforming group management, with a view to boosting operational efficiency  Project impact: In FY02/19 the project is expected to cost JPY400mn as upfront expenditures, but the company should start

to recoup its investment, with a projected profit contribution of JPY400mn in FY02/20 and beyond ▷ FY02/20: The company guides for a JPY6.0bn increase from the operating profit of JPY30.0bn forecast for FY02/19, driven primarily by profit growth of JPY1.2bn and JPY2.4bn, respectively at the Nihombashi Shopping Center and group subsidiaries ▷ Reverse stock split, change in trading unit: In order to bring the trading unit of its shares to the appropriate level, the company plans to execute a 1-for-2 reverse share split and reduce the trading unit of its shares from 1,000 shares to 100 shares on September 1, 2018

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Earnings (bottom half of this figure shows operating profit by segment; Unit: Billion yen)

Quarterly performance FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FYFYFYEst. Diff. % of FY Init. Est. Init. Est.* Diff. Operating revenue 219,392 230,390 219,757 260,049 219,318 224,003 215,469 264,811 225,480 227,500 225,914 270,678 929,588 923,601 949,572 951,000 -1,428 99.8% 919,000 965,000 15,428 YoY -2.2% 6.0% 2.8% 1.2% -0.0% -2.8% -2.0% 1.8% 2.8% 1.6% 4.8% 2.2% 1.9% -0.6% 2.8% 3.0% 1.2% 1.6% 1.7% Sales 203,899 214,390 203,963 243,637 203,340 207,818 200,483 249,120 209,966 211,639 210,771 254,324 865,889 860,761 886,700 887,900 -1,200 99.9% 851,400 897,400 10,700 YoY -2.5% 5.9% 2.6% 1.1% -0.3% -3.1% -1.7% 2.3% 3.3% 1.8% 5.1% 2.1% 1.7% -0.6% 3.0% 3.2% 0.8% 1.2% Gross profit 51,739 52,400 51,382 59,357 50,815 50,731 50,428 60,022 51,849 52,065 52,144 62,347 214,878 211,996 218,405 217,900 505 100.2% 219,200 219,200 795 YoY -2.6% 2.9% 1.3% -0.7% -1.8% -3.2% -1.9% 1.1% 2.0% 2.6% 3.4% 3.9% 0.2% -1.3% 3.0% 2.8% 0.4% 0.4% GPM 25.4% 24.4% 25.2% 24.4% 25.0% 24.4% 25.2% 24.1% 24.7% 24.6% 24.7% 24.5% 24.8% 24.6% 24.6% 24.5% 25.7% 24.4% SG&A expenses 59,781 62,030 59,720 64,074 66,793 53,139 58,641 62,262 59,276 62,120 59,469 65,092 245,605 240,835 245,957 245,000 957 100.4% 256,800 256,800 10,843 YoY -1.6% 1.3% -0.6% 4.1% 11.7% -14.3% -1.8% -2.8% -11.3% 16.9% 1.4% 4.5% 0.8% -1.9% 2.1% 1.7% 4.4% 4.4% SG&A ratio 29.3% 28.9% 29.3% 26.3% 32.8% 25.6% 29.2% 25.0% 28.2% 29.4% 28.2% 25.6% 28.4% 28.0% 27.7% 27.6% 30.2% 28.6% Operating profit 7,451 6,369 7,456 11,696 7,692 6,085 6,774 13,449 8,088 5,805 7,817 13,608 32,972 34,000 35,318 36,000 -682 98.1% 30,000 30,000 -5,318 YoY -1.1% 36.1% 32.5% -17.5% 3.2% -4.5% -9.1% 15.0% 5.1% -4.6% 15.4% 1.2% 3.0% 3.1% 3.9% 5.9% -15.1% -15.1% OPM 3.7% 3.0% 3.7% 4.8% 3.8% 2.9% 3.4% 5.4% 3.9% 2.7% 3.7% 5.4% 3.8% 3.9% 4.0% 4.1% 3.5% 3.3% Recurring profit 8,347 7,866 8,839 12,733 8,106 6,949 7,989 14,171 8,691 6,945 8,740 14,230 37,785 37,215 38,606 39,000 -394 99.0% 33,500 33,500 -5,106 YoY -2.4% 39.2% 39.0% -17.0% -2.9% -11.7% -9.6% 11.3% 7.2% -0.1% 9.4% 0.4% 5.2% -1.5% 3.7% 4.8% -13.2% -13.2% RPM 4.1% 3.7% 4.3% 5.2% 4.0% 3.3% 4.0% 5.7% 4.1% 3.3% 4.1% 5.6% 4.4% 4.3% 4.4% 4.4% 3.9% 3.7% Net income 6,319 4,719 5,211 7,580 3,563 4,914 4,748 7,645 5,154 3,858 5,465 9,181 23,829 20,870 23,658 23,000 658 102.9% 18,500 18,500 -5,158 YoY 38.8% -6.1% 50.9% -20.6% -43.6% 4.1% -8.9% 0.9% 44.7% -21.5% 15.1% 20.1% 5.5% -12.4% 13.4% 10.2% -21.8% -21.8% Net margin 3.1% 2.2% 2.6% 3.1% 1.8% 2.4% 2.4% 3.1% 2.5% 1.8% 2.6% 3.6% 2.8% 2.4% 2.7% 2.6% 2.2% 2.1% FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4FYFYFYEst.Diff.% of FYInit. Est. Init. Est.* Diff.* Operating revenue 219,392 230,390 219,757 260,049 219,318 224,003 215,469 264,811 225,480 227,500 225,914 270,678 929,588 923,601 949,572 951,000 -1,428 99.8% 919,000 965,000 15,428 Department Stores 192,714 198,905 194,384 225,645 192,315 192,281 187,614 225,043 197,351 199,351 200,063 229,796 811,648 797,253 826,561 822,766 +3,795 100.5% 793,896 839,896 13,335 Real Estate 10,348 10,531 10,692 10,818 10,671 10,438 10,024 16,790 9,960 9,965 9,875 17,676 42,389 47,923 47,476 49,793 -2,317 95.3% 45,782 45,782 -1,694 Finance 3,316 3,037 3,097 3,415 3,483 3,234 3,245 3,452 3,607 3,590 3,375 3,615 12,865 13,414 14,187 14,048 +139 101.0% 14,681 14,681 494 Contract and Design 4,980 9,024 3,401 9,305 4,805 9,430 7,316 9,323 6,926 6,442 4,876 7,672 26,710 30,874 25,916 30,846 -4,930 84.0% 27,797 27,797 1,881 Others 8,032 8,892 8,184 10,866 8,041 8,622 7,269 10,203 7,634 8,152 7,725 11,919 35,974 34,135 35,430 33,544 +1,886 105.6% 36,842 36,842 1,412 YoY -2.2% 6.0% 2.8% 1.2% -0.0% -2.8% -2.0% 1.8% 2.8% 1.6% 4.8% 2.2% 1.9% -0.6% 2.8% 3.0% 1.2% 1.6% Department Stores -2.6% 4.6% 3.7% 0.3% -0.2% -3.3% -3.5% -0.3% 2.6% 3.7% 6.6% 2.1% 1.4% -1.8% 3.7% 3.2% 1.2% 1.6% Real Estate 3.1% 6.0% 6.6% 3.7% 3.1% -0.9% -6.2% 55.2% -6.7% -4.5% -1.5% 5.3% 4.8% 13.1% -0.9% 3.9% -3.6% -3.6% Finance 2.7% 5.0% 3.8% 4.1% 5.0% 6.5% 4.8% 1.1% 3.6% 11.0% 4.0% 4.7% 3.9% 4.3% 5.8% 4.7% 3.5% 3.5% Contract and Design -10.3% 42.0% -30.8% 18.7% -3.5% 4.5% 115.1% 0.2% 44.1% -31.7% -33.4% -17.7% 8.3%15.6%-16.1% -0.1% 7.3% 7.3% Others 7.5% 11.5% -3.0% 3.2% 0.1% -3.0% -11.2% -6.1% -5.1% -5.5% 6.3% 16.8% 4.5% -5.1% 3.8% -1.7% 4.0% 4.0% Operating profit 7,451 6,369 7,456 11,696 7,692 6,085 6,774 13,449 8,088 5,805 7,817 13,608 32,972 34,000 35,318 36,000 -682 98.1% 30,000 30,000 -5,318 Department Stores 3,223 2,142 3,462 6,148 3,372 1,385 2,241 5,184 2,948 1,182 3,945 5,434 14,975 12,182 13,509 13,005 +504 103.9% 10,653 10,653 -2,856 Real Estate 2,619 2,412 2,772 2,494 2,912 2,514 2,494 3,108 2,783 2,317 2,444 3,849 10,297 11,028 11,393 11,521 -128 98.9% 10,304 10,304 -1,089 Finance 1,146 1,038 1,047 1,145 1,173 1,129 1,059 1,134 1,190 1,053 1,025 1,295 4,376 4,495 4,563 4,508 +55 101.2% 4,724 4,724 161 Contract and Design 112 649 47 1,090 -80 944 519 959 264 474 -170 639 1,898 2,342 1,207 2,227 -1,020 54.2% 1,440 1,440 233 Others 100 281 196 919 166 281 620 1,266 550 803 689 1,289 1,496 2,333 3,331 4,737 +92 98.1% 2,877 2,877 -1,768 Adjustments 249 -154 -67 -97 147 -168 -158 1,795 350 -24 -116 1,104 -69 1,616 1,314 YoY Department Stores -17.4% 112.3% 62.7% -27.6% 4.6% -35.3% -35.3% -15.7% -12.6% -14.7% 76.0% 4.8% -3.5% -18.7% 10.9% 6.8% -21.1% -21.1% Real Estate 16.4% 12.0% 19.2% -10.8% 11.2% 4.2% -10.0% 24.6% -4.4% -7.8% -2.0% 23.8% 8.0% 7.1% 3.3% 4.5% -9.6% -9.6% Finance 1.0% 11.6% 8.5% -0.1% 2.4% 8.8% 1.1% -1.0% 1.4% -6.7% -3.2% 14.2% 4.8% 2.7% 1.5% 0.3% 3.5% 3.5% Contract and Design 41.8% 88.1% -64.1% 23.3% 45.5% 1,004.3% -12.0% 31.9%23.4%-48.5% -4.9% 19.3% 19.3% Others 38.9% -6.6% -13.3% -7.3% 66.0% - 216.3% 37.8% 231.3% 185.8% 11.1% 1.8% -5.9% 55.9% 42.8% 1.4% -13.6% -13.6% OPM 3.4% 2.8% 3.4% 4.5% 3.5% 2.7% 3.1% 5.1% 3.6% 2.6% 3.5% 5.0% 3.5% 3.7% 3.7% 3.8% 3.3% 3.1% Department Stores 1.7%1.1%1.8%2.7%1.8%0.7%1.2%2.3%1.5%0.6%2.0%2.4% 1.8% 1.5% 1.6% 1.6% 1.3% 1.3% Real Estate 25.3% 22.9% 25.9% 23.1% 27.3% 24.1% 24.9% 18.5% 27.9% 23.3% 24.7% 21.8% 24.3% 23.0% 24.0% 23.1% 22.5% 22.5% Finance 34.6% 34.2% 33.8% 33.5% 33.7% 34.9% 32.6% 32.9% 33.0% 29.3% 30.4% 35.8% 34.0% 33.5% 32.2% 32.1% 32.2% 32.2% Contract and Design 2.2% 7.2% 1.4% 11.7% -1.7% 10.0% 7.1% 10.3% 3.8% 7.4% -3.5% 8.3% 7.1% 7.6% 4.7% 7.2% 5.2% 5.2% Others 4.3% 1.4% 1.6% 7.6% 3.9% 1.3% 6.4% 30.0% 11.8% 9.6% 7.4% 20.1% 4.0% 11.6% 13.1% 14.1% 7.8% 7.8% Note: Starting in FY02/19, the amount equal to the net profit from transactions with overseas subsidiaries will be posted as sales. The figures given for the initial forecast* and increase/decrease will be the same gross amount reported previously. Note: The gross amount will be shown in the initial forecast* for only those subsidiaries that are impacted by this change in reporting from gross figures to net figures. Source: Shared Research, based on company data

Operating profit by segment

(JPYbn) Department Stores Real Estate Finance Contract and Design Others 14.2 13.4 13.6 14 12.6 11.7 12 11.1 1.1

10 1.4 1.3 8.7 0.9 2.8 1.1 8.1 7.8 2.2 7.5 7.7 1.1 8 1.9 7.5 7.5 6.4 2.5 6.8 3.8 1.0 6.1 1.2 6.1 5.8 1.0 5.6 5.9 5.3 1.1 5.6 1.1 1.0 3.1 1.2 6 1.6 5.1 4.2 1.1 4.7 0.7 1.1 4.3 2.2 1.0 1.0 1.1 2.4 3.5 3.3 0.8 2.6 2.8 2.9 1.1 0.9 8.5 2.8 1.1 4 1.7 0.8 7.1 2.2 7.4 0.9 0.8 0.7 2.0 0.8 2.1 2.3 2.4 6.1 2.5 1.9 2.5 5.2 5.4 5.1 1.9 2.3 2 1.8 2.1 2.0 3.9 2.2 3.5 3.4 3.9 2.9 2.5 2.7 3.2 2.9 1.7 2.2 2.1 2.1 1.4 2.2 0 1.1 0.8 1.2 1.1 1.0 1.2 -2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data Note: Effective Q1 FY02/17, subsidiary Fashion Plaza Sunroser was moved from Department Stores segment to Real Estate segment.

67/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Group company performance

Main subsidiaries FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4FYFYFYEst.Diff.% of FYInit. Est. Init. Est.* Diff.* Operating revenue Takashimaya Singapore 13,664 14,582 13,086 16,486 13,264 12,009 10,942 14,530 12,233 12,610 12,149 15,515 57,818 50,745 52,507 51,612 +895 101.7% 18,118 54,038 1,531 Shanghai Takashimaya 1,868 1,782 1,680 1,976 1,748 1,467 1,469 1,649 1,779 1,617 1,748 1,858 7,306 6,333 7,002 7,023 -21 99.7% 3,635 8,007 1,005 Takashimaya Vietnam -1,8194,3654,300+65101.5%1,5784,678 313 Siam Takashimaya (Thailand) ------1,2273,3833,383 A&S Takashimaya Duty Free --3,3073,463-156 95.5% 7,000 3,693 Toshin Development 8,555 8,584 8,837 9,032 8,882 8,849 9,795 17,055 10,010 10,176 9,876 22,250 35,008 44,581 52,312 54,985 -2,673 95.1% 45,391 -6,921 TDS 2,284 2,442 2,385 2,379 2,376 2,197 2,070 2,142 2,224 2,215 2,220 2,293 9,490 8,785 8,952 8,907 +45 100.5% 9,059 107 Takashimaya Credit 4,376 4,219 4,255 4,407 4,455 4,306 4,376 4,525 4,619 4,513 4,610 4,702 17,257 17,662 18,444 18,497 -53 99.7% 19,098 654 Takashimaya Space Create 6,100 8,075 6,197 9,879 5,309 10,850 8,547 9,815 7,631 6,944 6,670 8,075 30,251 34,521 29,320 34,225 -4,905 85.7% 31,300 1,980 YoY Takashimaya Singapore 6.8% 12.9% 2.8% -0.5% -2.9% -17.6% -16.4% -11.9% -7.8% 5.0% 11.0% 6.8% 5.1% -12.2% 3.5% 1.7% 2.9% Shanghai Takashimaya 18.2% 24.9% 12.1% 10.5% -6.4% -17.7% -12.6% -16.5% 1.8% 10.2% 19.0% 12.7% 16.1% -13.3% 10.6% 10.9% 14.4% Takashimaya Vietnam 140.0%136.4% 7.2% Toshin Development 1.5% 1.4% 4.9% 4.6% 3.8% 3.1% 10.8% 88.8% 12.7% 15.0% 0.8% 30.5% 3.1% 27.3% 17.3% 23.3% -13.2% TDS 8.7% 22.3% 12.4% 3.1% 4.1% -10.1% -13.2% -10.0% -6.4% 0.8% 7.2% 7.0% 11.3% -7.4% 1.9% 1.4% 1.2% Takashimaya Credit 1.0% 4.4% 3.0% 2.9% 1.8% 2.1% 2.8% 2.7% 3.7% 4.8% 5.3% 3.9% 2.8% 2.3% 4.4% 4.7% 3.5% Takashimaya Space Create -4.4% 19.1% -6.6% 15.9% -13.0% 34.4% 37.9% -0.6% 43.7% -36.0% -22.0% -17.7% 6.8%14.1%-15.1% -0.9% 6.8% Operating profit Takashimaya Singapore 938 1,002 790 1,346 967 422 623 1,141 653 707 620 1,642 4,076 3,153 3,622 3,165 +457 114.4% 3,239 -383 Shanghai Takashimaya -254 -341 -353 -294 -264 -272 -218 -226 -270 -297 -276 -297 -1,242 -980 -1,140 -1,148 +8 - -848 292 Takashimaya Vietnam --508 -281 -311 +30 - -264 17 Siam Takashimaya (Thailand) ------420 -420 A&S Takashimaya Duty Free Approx. 300 Approx. 400 ---1,309 -1,162 -147 - -671 638 Toshin Development 2,066 1,855 2,123 1,962 2,188 1,968 1,988 2,696 2,182 1,802 1,736 3,324 8,006 8,840 9,044 9,307 -263 97.2% 7,943 -1,101 TDS 588 605 687 596 756 592 545 447 617 572 569 726 2,476 2,340 2,484 2,327 +157 106.7% 2,339 -145 Takashimaya Credit 1,136 1,028 1,039 1,138 1,166 1,121 1,053 1,128 1,183 1,047 1,018 1,295 4,341 4,468 4,543 4,481 +62 101.4% 4,805 262 Takashimaya Space Create 121 633 38 1,079 -91 946 531 966 272 476 -159 642 1,871 2,352 1,231 2,219 -988 55.5% 1,410 179 YoY Takashimaya Singapore 121.3% 41.1% 16.5% -45.9% 3.2% -57.9% -21.1% -15.2% -32.5% 67.7% -0.5% 43.9% -5.3% -22.6% 14.9% 0.4% -10.6% Shanghai Takashimaya ------Takashimaya Vietnam------Toshin Development 7.8% 0.6% 9.2% -4.2% 5.9% 6.1% -6.4% 37.4% -0.3% -8.4% -12.7% 23.3% 3.2% 10.4% 2.3% 5.3% -12.2% TDS 58.3% 69.7% 63.2% -26.6% 28.5% -2.1% -20.7% -25.0% -18.4% -3.4% 4.4% 62.4% 26.3% -5.5% 6.2% -0.6% -5.8% Takashimaya Credit 0.9% 12.1% 8.7% - 2.6% 9.1% 1.3% -0.9% 1.5% -6.6% -3.3% 14.8% 4.9% 2.9% 1.7% 0.3% 5.8% Takashimaya Space Create 32.6% 96.1% -73.6% 26.1% - 49.3% 1,297.4% -10.5% - -49.7% - -33.5% 32.3% 25.7% -47.7% -5.7% 14.5% OPM Takashimaya Singapore 6.9%6.9%6.0%8.2%7.3%3.5%5.7%7.9%5.3%5.6%5.1% 10.6% 7.0% 6.2% 6.9% 6.1% 17.9% Shanghai Takashimaya -13.6% -19.1% -21.0% -14.9% -15.1% -18.5% -14.8% -13.7% -15.2% -18.4% -15.8% -16.0% -17.0% -15.5% -16.3% -16.3% -23.3% Takashimaya Vietnam --27.9% -6.4% -7.2% -16.7% Siam Takashimaya (Thailand) ---- -34.2% A&S Takashimaya Duty Free ---39.6% -33.6% -9.6% Toshin Development 24.1% 21.6% 24.0% 21.7% 24.6% 22.2% 20.3% 15.8% 21.8% 17.7% 17.6% 14.9% 22.9% 19.8% 17.3% 16.9% 17.5% TDS 25.8% 24.8% 28.8% 25.1% 31.8% 26.9% 26.3% 20.9% 27.7% 25.8% 25.6% 31.7% 26.1% 26.6% 27.7% 26.1% 25.8% Takashimaya Credit 26.0% 24.4% 24.4% 25.8% 26.2% 26.0% 24.1% 24.9% 25.6% 23.2% 22.1% 27.5% 25.2% 25.3% 24.6% 24.2% 25.2% Takashimaya Space Create 2.0% 7.8% 0.6% 10.9% -1.7% 8.7% 6.2% 9.8% 3.6% 6.9% -2.4% 8.0% 6.2% 6.8% 4.2% 6.5% 4.5% Source: Shared Research based on company data Note: Effective Q1 FY02/17, subsidiary Fashion Plaza Sunroser was moved from Department Stores segment to Real Estate segment. Note: Starting in FY02/19, the amount equal to the net profit from transactions with overseas subsidiaries will be posted as sales. The figures given for the initial forecast* and increase/decrease will be the same gross amount reported previously. Note: The gross amount will be shown in the initial forecast* for only those subsidiaries that are impacted by this change in reporting from gross figures to net figures.

Overview According to Takashimaya, consumer spending was solid thanks to gradual growth in the domestic economy. At the group’s domestic department stores, sales have been growing steadily, not only because of robust consumer spending, but also because demand from visitors to Japan has been favorable. However, the company recognizes that the economic outlook remains uncertain in Europe and the US amid the normalization following ultra-loose monetary policy, the impact of geopolitical risk in Asia, and uncertain stock market conditions.

FY02/18: Earnings at domestic department stores driven by rise in consumer spending and increase in inbound tourist demand. This offset lower earnings at new businesses and subsidiaries, allowing company to post higher sales and earnings Against this backdrop, the Takashimaya group continued to work on various initiatives aimed at strengthening sales capabilities. To maximize the appeal of its buildings and surroundings, the company advanced its urban development strategy that draws on the expertise of the Toshin Development Company, a subsidiary that manages collaborative group projects with local communities and the group’s real estate business, particularly for department stores. In addition to creating an anchor store that will draw people to the area, the combination of a department store and specialty stores, leveraging commercial development functions (a core business) covered by Toshin Development helped Takashimaya maximize the appeal of its buildings. The company also began work on its "Group Reform Project," under which it will transition to digital technology and otherwise make radical changes in group management aimed at increasing efficiency.

As a result, consolidated operating revenue grew by 2.8% YoY and operating profit by 3.9%. By segment, at the domestic department store business, the parent drove earnings, as operating revenue grew by 3.1% and operating profit by 25.5% (+JPY2.6bn). Looking at demand by customer segment in parent sales, demand was strong among affluent customers (Gaisho* sales accounts for over 20% of sales), while demand from middle-class customers bottomed in August and has been recovering, with some contribution from business alliances. Demand among inbound tourists (6% of sales) grew a sharp 42% YoY (+JPY14.3bn, excluding JPY3.3bn in sales in airport-style duty free shop business), accounting for more than 70% of the sales

68/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

increase of domestic department stores (+JPY19.9bn). Profit grew YoY, with GPM and SG&A expenses in line with the company forecast.

The gross profit margin on merchandise sales slipped 0.18pp YoY to 24.06% due to rising sales to inbound tourists and higher sales at the low-margin corporate business, but still managed to finish 0.02pp above plan. SG&A expenses of JPY184.0bn were up JPY2.2bn YoY and JPY700mn above plan. Under SG&A costs, personnel-related spending rose JPY600mn YoY to JPY61.8bn as social insurance payments increased, but still finished JPY200mn below plan; general SG&A spending rose JPY700mn YoY to JPY66.3bn but was JPY1.0bn above plan, due in large part to increases in variable costs, namely shipping (JPY8.0bn, +6.7%) and commissions (JPY8.1bn, +14.2%). Accounting costs of JPY30.2bn were up JPY800mn but in line with plan, and excluding the impact of the change in leasing arrangements for the Shinjuku store would have been down by JPY900mn. Advertising costs of JPY25.7bn was up JPY100mn and in line with plan, with lpoint system promotion costs of JPY14.6bn up 2.0%.

Sales to inbound tourists

(JPYbn) Department stores: 37.0 18 9% 8.0% Inbound subsidary: 8.0 16 7.4% 7.6% 8% 52.0 (JPYbn) 1H 48.0 14 6.2% 7% 50 2H 45.0 7.3% 8% 5.7% % of parent sales (right axis) 6.8% 12 6% 6.6% 5.0% 4.9% 40 34.4 10 4.4% 4.3% 5% 28.7 4.2% 4.2% 4.1% 29.9 5.0% 24.7 6% 4.3% 8 4% 30 3.1% 15.0 13.7 19.2 4% 6 12.6 3% 14.0 15.6 2.2% 11.2 10.7 20 23.3 23.3 2.0% 4 1.3% 8.5 8.3 8.0 2% 8.3 1.3% 7.2 7.2 7.1 6.9 6.0 10 1.2% 14.4 15.2 2% 9.6 2 3.6 1% 4.8 Dept stores: 44.5 Dept stores: 48.7 2.3 2.1 Inbound subsidary: 3.5 Inbound subsidary: 3.3 0 3.5 4.4 0% 0 0% FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/18 FY02/18 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Init. Est. Est. FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data

Department Stores failed to compensate for weakness of Contract and Design The Contract and Design business recorded only JPY1.2bn in operating profit, or JPY1.0bn short of the full-year target of JPY2.2bn. Takashimaya commented that the reasons for the weak performance were the pushback of a major project until FY02/19 and the unexpected failure to win a big order, both of which occurred in Q3. Given a 60% YoY increase in the order backlog, the company expected the business to recover in FY02/19 and had initially thought the strong performance of the Department Stores business would compensate for the shortfall in the Contract and Design business. As things turned out, however, Department Stores finished more than JPY500mn below plan and consolidated operating profit finished JPY700mn below plan. In FY02/19, management sees operating profit at the Contract and Design business rising JPY233mn to JPY1.4bn as a favorable operating environment fosters a strong order flow and more design and construction orders are received from the Nihombashi 2-chome redevelopment project.

Changes in operating profit

40 -1.4

38 -2.2 +6.4 36 -1.2 -1.1 +0.7 34

Domestic department stores Group subsidiaries 35.3 32 34.0 34.5

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Department stores

Department stores FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4FYFYFYEst.Diff.% of FYInit. Est. Init. Est.* Diff.* Operating revenue 193,344 199,508 195,006 226,237 192,315 192,281 187,614 225,043 197,351 199,351 200,063 229,796 814,095 797,253 826,561 822,766 +3,795 100.5% 793,896 839,896 13,335 Takashimaya (parent) 167,711 173,152 170,992 198,306 168,251 170,282 166,021 198,502 173,177 175,232 175,562 200,633 710,161 703,056 724,604 719,500 +5,104 100.7% 727,048 2,444 Difference 25,633 26,356 24,014 27,931 24,064 21,999 21,593 26,541 24,174 24,119 24,501 29,163 103,934 94,197 101,957 103,266 -1,309 66,848 112,848 10,891 YoY -2.6% 4.6% 3.7% 0.3% -0.5% -3.6% -3.8% -0.5% 2.6% 3.7% 6.6% 2.1% 1.4% -2.1% 3.7% 3.2% -4.0% 1.6% Takashimaya (parent) -3.1% 4.2% 4.2% 1.0% 0.3% -1.7% -2.9% 0.1% 2.9% 2.9% 5.7% 1.1% 1.5% -1.0% 3.1% 2.3% 0.3% Difference 0.7% 7.2% 0.0% -4.5% -6.1% -16.5% -10.1% -5.0% 0.5% 9.6% 13.5% 9.9% 0.6% -9.4% 8.2% 9.6% -34.4% 10.7% Operating profit 3,236 2,140 3,470 6,129 3,372 1,385 2,241 5,184 2,948 1,182 3,945 5,434 14,975 12,182 13,509 13,005 +504 103.9% 10,653 -2,856 Takashimaya (parent) 2,235 1,283 2,515 4,907 2,482 1,312 1,863 4,635 2,916 1,536 3,427 5,041 10,940 10,292 12,920 12,400 +520 104.2% 9,461 -3,459 Difference 1,001 857 955 1,222 890 73 378 549 32 -354 518 393 4,035 1,890 589 605 -16 1,192 603 YoY -17.4% 112.3% 62.7% -27.6% 4.2% -35.3% -35.4% -15.4% -12.6% -14.7% 76.0% 4.8% -3.5% -18.7% 10.9% 6.8% -21.1% Takashimaya (parent) -37.2% 108.3% 56.3% -24.1% 11.1% 2.3% -25.9% -5.5% 17.5% 17.1% 84.0% 8.8% -10.7% -5.9% 25.5% 20.5% -26.8% Difference 182.0% 118.6% 82.3% -38.8% -11.1% -91.5% -60.4% -55.1% -96.4% -37.0%-28.4% 23.4%-53.2% -68.8% -68.0% 102.4% OPM 1.7%1.1%1.8%2.7%1.8%0.7%1.2%2.3%1.5%0.6%2.0%2.4% 1.8%1.5%1.6% 1.6% 1.3% 1.3% Takashimaya (parent) 1.3% 0.7% 1.5% 2.5% 1.5% 0.8% 1.1% 2.3% 1.7% 0.9% 2.0% 2.5% 1.5% 1.5% 1.8% 1.7% 1.3% Difference 3.9% 3.3% 4.0% 4.4% 3.7% 0.3% 1.8% 2.1% 0.1% -1.5% 2.1% 1.3% 3.9% 2.0% 0.6% 0.6% 1.8% 1.1% Main subsidiaries FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4FYFYFYEst.Diff.% of FYInit. Est. Init. Est.* Diff.* Operating revenue Takashimaya Singapore 13,664 14,582 13,086 16,486 13,264 12,009 10,942 14,530 12,233 12,610 12,149 15,515 57,818 50,745 52,507 51,612 +895 101.7% 18,118 54,038 1,531 Shanghai Takashimaya 1,868 1,782 1,680 1,976 1,748 1,467 1,469 1,649 1,779 1,617 1,748 1,858 7,306 6,333 7,002 7,023 -21 99.7% 3,635 8,007 1,005 Takashimaya Vietnam------1,8194,3654,300+65101.5%1,5784,678 313 Siam Takashimaya (Thailand)------1,2273,3833,383 YoY Takashimaya Singapore 6.8% 12.9% 2.8% -0.5% -2.9% -17.6% -16.4% -11.9% -7.8% 5.0% 11.0% 6.8% 5.1% -12.2% 3.5% 1.7% 2.9% Shanghai Takashimaya 18.2% 24.9% 12.1% 10.5% -6.4% -17.7% -12.6% -16.5% 1.8% 10.2% 19.0% 12.7% 16.1% -13.3% 10.6% 10.9% 14.4% Operating profit Takashimaya Singapore 938 1,002 790 1,346 967 422 623 1,141 653 707 620 1,642 4,076 3,153 3,622 3,165 +457 114.4% 3,239 -383 Shanghai Takashimaya -254 -341 -353 -294 -264 -272 -218 -226 -270 -297 -276 -297 -1,242 -980 -1,140 -1,148 +8 - -848 292 Takashimaya Vietnam------508 -281 -311 +30 - -264 17 YoY Takashimaya Singapore 121.3% 41.1% 16.5% -45.9% 3.2% -57.9% -21.1% -15.2% -32.5% 67.7% -0.5% 43.9% -5.3% -22.6% 14.9% 0.4% -10.6% Shanghai Takashimaya ------Takashimaya Vietnam------OPM Takashimaya Singapore 6.9%6.9%6.0%8.2%7.3%3.5%5.7%7.9%5.3%5.6%5.1% 10.6% 7.0% 6.2% 6.9% 6.1% 17.9% 6.0% Shanghai Takashimaya -13.6% -19.1% -21.0% -14.9% -15.1% -18.5% -14.8% -13.7% -15.2% -18.4% -15.8% -16.0% -17.0% -15.5% -16.3% -16.3% -23.3% -10.6% Takashimaya Vietnam --27.9% -6.4% -7.2% -16.7% -5.6% Parent company performance

Parent earnings FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4FYFYFYEst.Diff.% of FYInit. Est. Diff.* Operating revenue 167,711 173,152 170,992 198,306 168,251 170,282 166,021 198,502 173,177 175,232 175,562 200,633 710,161 703,056 724,604 719,500 +5,104 100.7% 727,048 2,444 Sales 165,263 170,599 168,478 195,705 165,756 167,709 162,756 195,132 169,858 171,901 172,298 197,284 700,045 691,353 711,341 706,300 +5,041 100.7% 713,171 1,830 Difference 2,448 2,553 2,514 2,601 2,495 2,573 3,265 3,370 3,319 3,331 3,264 3,349 10,116 11,703 13,263 13,200 +63 100.5% 13,877 614 YoY -3.1% 4.2% 4.2% 1.0% 0.3% -1.7% -2.9% 0.1% 2.9% 2.9% 5.7% 1.1% 1.5% -1.0% 3.1% 2.3% 0.3% Sales -3.2% 4.2% 4.2% 1.1% 0.3% -1.7% -3.4% -0.3% 2.5% 2.5% 5.9% 1.1% 1.5% -1.2% 2.9% 2.2% 0.3% Difference -0.4% 4.1% 5.7% 0.5% 1.9% 0.8% 29.9% 29.6% 33.0% 29.5% -0.0% -0.6% 2.4% 15.7% 13.3% 12.8% 4.6% Gross profit 41,027 41,809 41,620 47,392 40,542 41,041 40,047 46,551 41,021 41,714 41,975 46,995 171,848 168,179 171,705 170,400 +1,305 100.8% 171,640 -65 GPM 24.8% 24.5% 24.7% 24.3% 24.5% 24.5% 24.6% 23.9% 24.2% 24.3% 24.4% 23.8% 24.5% 24.3% 24.1% 24.1% 24.1% SG&A expenses 41,240 43,079 41,619 45,085 40,555 42,301 41,449 45,286 41,419 43,513 41,804 45,672 171,023 169,591 172,408 171,200 +1,208 100.7% 176,056 3,648 Personnel 13,736 14,788 14,042 15,458 13,283 14,472 13,968 15,434 13,419 14,670 14,031 15,702 58,024 57,157 57,822 58,000 -178 99.7% 59,719 1,897 Advertising 7,314 5,778 6,914 6,176 6,832 5,466 6,729 5,776 6,580 5,343 7,192 5,740 26,182 24,803 24,855 24,934 -79 99.7% 25,288 433 General and administrative 14,247 16,061 14,777 16,555 14,240 15,783 13,875 16,343 14,440 15,998 14,256 16,368 61,640 60,241 61,012 60,013 +999 101.7% 63,043 2,031 Other 5,942 6,451 5,888 6,895 6,198 6,580 6,878 7,732 6,979 7,501 6,376 7,503 25,176 27,388 28,359 28,253 +106 100.4% 28,006 -353 YoY -1.5% 0.8% 0.2% 2.9% -1.7% -1.8% -0.4% 0.4% 2.1% 2.9% 0.9% 0.9% 0.6% -0.8% 1.7% 0.9% 2.1% Personnel -2.4% -1.6% -2.4% -2.9% -3.3% -2.1% -0.5% -0.2% 1.0% 1.4% 0.5% 1.7% -2.3% -1.5% 1.2% 1.5% 3.3% Advert ising 6.6% 6.5% -6.7% 9.2% -6.6% -5.4% -2.7% -6.5% -3.7% -2.3% 6.9% -0.6% 3.3%-5.3% 0.2% 0.5% 1.7% General and administrative -2.2% 0.9% 4.2% 3.3% -0.0% -1.7% -6.1% -1.3% 1.4% 1.4% 2.7% 0.2% 1.6% -2.3% 1.3% -0.4% 3.3% Other -6.9% 1.2% 5.6% 11.1% 4.3% 2.0% 16.8% 12.1% 12.6% 14.0% -7.3% -3.0% 2.6% 8.8% 3.5% 3.2% -1.2% % of operating revenue 24.6% 24.9% 24.3% 22.7% 24.1% 24.8% 25.0% 22.8% 23.9% 24.8% 23.8% 22.8% 24.1% 24.1% 23.8% 23.8% 24.2% Personnel 8.2%8.5%8.2%7.8%7.9%8.5%8.4%7.8%7.7%8.4%8.0%7.8% 8.2%8.1% 8.0% 8.1% 8.2% Advertising 4.4%3.3%4.0%3.1%4.1%3.2%4.1%2.9%3.8%3.0%4.1%2.9% 3.7% 3.5% 3.4% 3.5% 3.5% General and administrative 8.5% 9.3% 8.6% 8.3% 8.5% 9.3% 8.4% 8.2% 8.3% 9.1% 8.1% 8.2% 8.7% 8.6% 8.4% 8.3% 8.7% Other 3.5%3.7%3.4%3.5%3.7%3.9%4.1%3.9%4.0%4.3%3.6%3.7% 3.5%3.9%3.9% 3.9% 3.9% Operating profit 2,235 1,283 2,515 4,907 2,482 1,312 1,863 4,635 2,916 1,536 3,427 5,041 10,940 10,292 12,920 12,400 +520 104.2% 9,461 -3,459 YoY -37.2% 108.3% 56.3% -24.1% 11.1% 2.3% -25.9% -5.5% 17.5% 17.1% 84.0% 8.8% -10.7% -5.9% 25.5% 20.5% -26.8% OPM 1.4%0.8%1.5%2.5%1.5%0.8%1.1%2.4%1.7%0.9%2.0%2.6% 1.6%1.5%1.8% 1.8% 1.3% Source: Shared Research based on company data

▷ FY02/18: Inbound sales, which have been rising significantly starting in Q4 FY02/17, combined with solid personal spending. Domestic department stores have increased sales. Parent company sales and profit both up ▷ By customer segment: Affluent customers and inbound demand remained robust. Demand also has ceased falling among middle-class customers, and the company is making progress in attracting the next generation of customers thorough an alliance strategy  Inbound demand: In-store duty-free sales rose 42% YoY to JPY48.7bn (+JPY14.3bn), accounting for more than 70% the sales increase of JPY19.9bn at domestic department stores. Sales at airport-style duty-free subsidiaries of JPY3.3bn were generally in line with plan (1H sales of JPY800mn and 2H sales of JPY2.5bn versus plan of JPY2.7bn). FY02/19 forecast sees duty-free sales at airport shops rising to JPY7.0bn  Alliance members (Docomo d-points, Ponta): Alliance-related sales rose JPY29.8bn YoY to JPY 38.5bn, with alliances contributing to the capture of younger customers ▷ Gross profit margin on domestic merchandise sales: Even though the GPM declined 0.18pp YoY, gross profit was up on increased sales. Other operating revenue also increased, helping domestic operating profit to increase by JPY2.8bn  Increase in inbound sales (driven by discount coupons apply to cosmetics and other popular items) and increase in low-margin corporate sales put downward pressure on the GPM

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▷ Overseas department stores: Sales rose in response to in the upturn in the market environment in Singapore. New tenants and other measures led to higher sales in Shanghai, and in Ho Chi Minh City sales were brisk

Sales by customer segment: earnings lifted by growth in sales to inbound tourists and alliance members In FY02/18, the company cultivated new markets while using its alliance strategy (alliance member sales totaled JPY29.8bn) to increase sales to existing, affluent customers (gaisho sales rose by JPY6.1bn) and capture more demand from inbound tourists (duty-free sales rose by JPY14.3bn), adding to both sales and earnings. Corporate business division: Aided by a favorable business environment, the corporate business division’s aggressive sales efforts proved successful, leading to a large JPY3.7bn increase in sales.

Factors contributing to sales growth YoY

780 NTT Docomo: d POINT Loyalty Marketing: Ponta point 770 -16.1 +3.7 760 +6.1 +29.8 -17.9 750 +14.3

740 761.3 765.0 745.1 730 Affluent customers Middle-class customers (SR estimate) (SR estimates) 720 Domestic Inbound Out-of-store Holders of Holders of Other card Corporate Domestic department sales to Takashimaya tie-up holders department store sales Takashimaya card cards and cash store sales FY02/17 card holders FY02/18 (JPYbn) Source: Shared Research based on company data

Specific measures undertaken during FY02/18 include:

◤ Store-related measures: The company implemented initiatives to create sales spaces that provide new value in response to the diversification of customer needs. For example, at the Shinjuku store, the WELLBE FIELD floor (with stores selected by the company) was reopened as a lifestyle proposal space complete with shops, cafes, a studio, and a gym. After a roll out in large stores, the company opened Hello Baby Salon (product planning and line up decided by Takashimaya) for baby goods in the Tamagawa store. It also opened Dear Kids Square (redesigned sales spaces for children’s goods that offer total child-rearing lifestyle options) in the Osaka and Shinjuku stores. In September, the company completely remodeled the entire store in conjunction with the Takasaki Station-front redevelopment project, and strengthened relations between its Senboku store, Tachikawa store, Yonago store and specialty shops, coops, and local government agencies as part of an effort to create a network that would bring in more shoppers.

◤ Alliances with other companies: Through further alliances with NTT Docomo and Loyalty Marketing, Inc. (Ponta points), the company has captured new customers in their 20s and 30s with multifaceted initiatives including marketing targeting the customers and point club members of these companies. In October, the company entered a business alliance with Sony Bank Inc. and issued the Takashimaya Platinum Debit Card, making it the first department store to issue a debit card.

◤ Promotion of omni-channel retailing: Sales were robust thanks to measures including making the same products available at both brick-and-mortar stores and the online store, and developing distinctive merchandise, showing cosmetics-related videos, and using tablets when serving customers at brick-and-mortar stores to promote the online store as well.

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distribution of coupons (in cooperation with NTT Docomo) to mobile devices used by inbound tourists, the active promotion of sales using mobile payment services Alipay and WeChat Pay, and a campaign in partnership with Ctrip, China’s largest online travel agency, in advance of the Chinese New Year holidays. In a further effort to boost sales to overseas visitors, the company coordinated the data from its specialty stores, restaurant areas, and even at the airport-style duty-free shops opened in April 2017, and used this information to bolster sales promotion activities under a unified Takashimaya Times Square framework.

Alliance effect In terms of developing new markets, alliances with other companies had a positive impact on sales and helped draw customers. Point-related sales amounted to JPY15.8bn in 1H, accounting for 4.3% of domestic department store sales (around 4% in Q1). The company was targeting JPY35.0bn in related sales for the full year (4.6% of domestic department store sales in 1H and 4.9% in 2H), and progress in Q3 was good, with point-related sales at JPY9.0bn (4.8%) versus the 2H target of JPY19.2bn. Q4 results were also good, leading to a JPY29.8bn YoY increase in full-year sales to JPY38.5bn (JPY22.7bn in 2H). Takashimaya initiated an alliance with NTT Docomo in April 2016 (users of NTT Docomo’s credit card service receive d-points equal to a maximum of 3% of purchases; starting in August, users receive 3% even with a d-point card and can pay using points). Starting in October 2016, Takashimaya also permits customers to use Loyalty Marketing’s Ponta point service. These alliances have allowed the company to capture younger customers, leading to increased sales.

According to the company, 70% of its card members are aged 50 or older, while more than half of members with alliance companies are 20–40 years old. By continuing to increase the number of alliance companies, the company expects to increase customer satisfaction and capture new customers. Related fees (booked as general and administrative expenses) represent a cost increase, but these alliances still contribute to increasing profit, just as new customers and inbound demand do. Takashimaya estimates that new customers account for roughly 30% of sales (as of Q3 FY02/18).

Cultivation of existing markets In terms of cultivating existing markets, Takashimaya began offering the Takashimaya Platinum Debit Card (annual fee JPY30,000) from October 9. With this issue of the first debit card for the department store industry, the company hopes to further cultivate the affluent customer market by improving the convenience of payments and expanding the Platinum service menu. It also hopes to capture new customers through a partnership with Sony Bank. Aiming for 30,000 accounts within three years, the company will conduct about JPY200mn in upfront spending during the initial year, but forecasts a profit contribution of around JPY400mn after the third year. Although initial progress has been slower than expected, the number of younger cardholders appears to be rising. Accompanying the issuance of the debit cards, in November the company started to provide the Takashimaya Royal Customer Service targeting affluent customers.

Demand from inbound tourists There was a leap in inbound demand starting near the end of 2016, and momentum was maintained in 1H, particularly in the Kansai region. Q1 sales were JPY12.6bn (+51.5% YoY, +JPY4.3bn). This is already 34% of the initial full-year forecast of JPY37.0bn (+JPY2.6bn). The Osaka store in particular had sales of JPY6.3bn (+85.4%, +JPY2.9bn), accounting for 19.5% of sales. Excluding the subsidiary indicated in the following graph, sales at the Shinjuku store stood at JPY3.1bn (+9.8%, +JPY300mn, 17.6% of sales) as it took advantage of the characteristics of the region, which is popular with inbound tourists.

Growth exceeding 50% continued in Q2, and 1H sales reached JPY23.3bn (+53.6% YoY; JPY22.5bn excluding duty-free subsidiary, +JPY7.4bn). Initial full-year forecasts were JPY45.0bn (JPY37.0bn from department stores and JPY8.0bn from duty-free subsidiary), but the company revised these figures upward to JPY48.0bn (JPY44.5bn from department stores [+30% YoY, +JPY10.1bn]; JPY3.5bn from duty-free subsidiary). Growth has been relatively slow at the Shinjuku store (JPY5.2bn in 1H, +JPY200mn), but the Osaka store (JPY11.3bn, +JPY5.0bn) was the growth driver. The Osaka store appears to have benefited from measures such as store layout that offers a relaxed shopping experience, product range and sales floor design that fits demand (e.g., stocking baby goods), and communications strategies to keep customers informed. Sales trends have also been brisk at the Kyoto store.

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Sales growth remained robust in Q3, reaching JPY13.7bn (JPY12.6bn from department stores (+57% YoY) and JPY1.1bn from duty-free subsidiary), driven by the Osaka store (JPY6.3bn, +80% YoY) and Kyoto store (JPY2.8bn, 2x). Sales growth accelerated from 5% YoY in 1H at the Shinjuku store (JPY2.8bn, +15% YoY). In Q3, Takashimaya worked on improving the quality of its services, including expanding the duty-free counter at the Osaka store in November in response to growing demand.

Sales continued to rise in Q4, bringing full-year sales to JPY48.7bn; including JPY3.3bn in sales at a subsidiary, total sales to inbound tourists came to JPY52.0bn versus the company's target of JPY48.0bn. The company attributed the above-plan results to the success of the various promotional measures launched ahead of the Chinese New Year holidays. By store, the Osaka store and Kyoto Store remained the main contributors to growth, generating sales of JPY24.0bn (+59% YoY) and JPY7.1bn (+69% YoY), respectively, while the Shinjuku store also amassed solid sales, up 7% YoY to JPY11.5bn. The company beefed up duty-free services at the Kyoto store as well, with this and other measures increasing convenience and helping to capture new demand. Over full-year FY02/18, duty-free sales accounted for 7% of total sales. Duty-free sales weightings were highest at the Osaka store (18%) and Shinjuku store (16%), while there would still seem to be room for growth at the Kyoto store (8%). For reference, duty-free sales amounted to 3% of total sales at the Nihombashi store, at JPY2.9bn.

Sales to inbound tourists

Sales by store

(JPYbn) Shinjuku Osaka Others (JPYmn) Shinjuku Osaka (JPYbn) Shinjuku Osaka Others (JPYmn) Shinjuku Osaka 60 56.0 18% Duty-free total 16 20% Duty-free total 13.5 48.7 16% 14 18% 50 12.6 12.6 14% 16% 12 11.2 10.0 14% 40 34.4 12% 10 12% 29.9 10% 8.3 8.0 30 8 6.9 10% 8% 6.4 8% 24.0 6 5.3 6.3 6.3 20 6% 14.0 15.1 3.4 5.0 6% 11.7 4 3.5 8.3 4% 2.9 4% 10 4.9 2% 2 3.3 3.3 2% 9.6 10.8 11.5 2.8 2.3 2.4 3.1 2.3 2.8 2.1 5.1 0 3.0 0% 0 0% FY02/14 FY02/16 FY02/18 FY02/14 FY02/16 FY02/18 Q1 Q1 Q1 Q1 FY02/17 FY02/18 FY02/17 FY02/18 Source: Shared Research based on company data

Exchange rate

USD/JPY CNY/JPY HKD/JPY (right axis)

120 24

100 20

80 16

60 12 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Source: Shared Research based on data from Mizuho Bank, Ltd.

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Airport-style duty-free shop in Tokyo Earnings are improving at a subsidiary established to operate airport-style duty-free stores to capture inbound demand. A&S Takashimaya Duty Free, a joint venture with ANA Trading and Hotel Shilla (Korea), was opened at Shinjuku Takashimaya Times Square in April 2017. 1H sales were JPY760mn and operating loss was JPY730mn (about JPY300mn in Q1). Sales were only about 30% of the forecast (sales of JPY2.7bn and operating loss of JPY700mn). Primary causes were fewer package tours visiting the shops than originally expected and delays in starting operations. The former cause had greater impact. The company plans to increase the number of package tours by conducting sales activities and concentrating management resources on major travel agencies in China (via joint ventures) to get them to send customers and on major travel agencies in Japan that arrange lodgings. It will also seek to capture individual tourists through a variety of measures.

In light of 1H performance, the company revised down its full-year forecasts for the duty-free subsidiary (sales of JPY3.5bn and operating loss of JPY1.2bn) (original forecasts: sales of JPY8.0bn, operating loss of JPY685mn) when it announced its 1H results. In Q3, the duty-free subsidiary worked together with the Shinjuku store on initiatives to attract inbound tourists, but sales were a modest JPY1.1bn, trailing the 2H target of JPY2.7bn. Full-year results finished somewhat below plan, with sales coming in at JPY3.3bn (JPY2.6bn in 2H) and operating losses coming at JPY1.3bn. Management is looking for improvement in FY02/19, with sales rising to JPY7.0bn (JPY3.2bn in 1H and JPY3.8bn in 2H) and operating losses shrinking to JPY671mn.

By product Cosmetics posted double-digit growth in sales every month except February (when sales were down 3% YoY) and finished the year up 19%. Roughly 40% of cosmetics sales came from inbound demand, with both tax-free and non-tax-free sales rising YoY. Luxury products sales (art, jewelry, precious metals) also did well, rising 5.5% YoY thanks in part to the wealth effect of the robust stock market.

By store Large stores drove sales higher. In particular, the Osaka store, which has a high ratio of inbound tourists (sales ratio to inbound tourists:18% in FY02/18 versus 16% at Shinjuku store and 8% at Kyoto), saw sales rise 8.8% to JPY141.5bn, with duty-free sales rising 59% to JPY24.0bn. The Nihombashi store saw sales rise 1.0% to JPY134.2bn, indicating that aggressive sales activities by the corporate division (sales up JPY3.7bn to JPY36.3bn, of which most were for the Nihombashi store) paid off. Sales at the Yokoyama store sales were up 1.7% (to JPY131.6bn), at the Shinjuku store up 3.5% (to JPY73.3bn, with duty-free sales up 7% to JPY11.5bn), and at the Kyoto store up 3.9% (to JPY88.1bn, with duty-free sales up 69% to JPY7.1bn).

Gaisho sales were solid also, increasing JPY6.1bn YoY. The 260,000 or so accounts held by the company (more than 20% share of all domestic department store sales) are being revitalized as a result of cultivating new customers. The Osaka store, for example, signs up around 2,000 new accounts per year, of which 90% spend more than JPY1mn annually shopping at the store. The remodeling effect is lasting a long time at the Takasaki Store, while the Tachikawa store has benefited from taking Nitori as a tenant, which has led to an increase in customer traffic despite a 20–30% loss of sales floor space.

Sales by main product

Apparel Personal items Food Accessories 40% Cosmetics Art work and jewelry 20% 35% 15% 30% 25% 10% 20% 5% 15% 10% 0% 5% -5% 0% -5% -10% -10% -15% -15% Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Source: Shared Research based on company data

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Domestic department store sales

Domestic dept. stores FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4FYFYFYEst.Diff.% of FYInit. Est. Diff.* Sales 178,529 183,832 181,693 210,987 178,849 180,483 175,607 210,207 182,691 184,747 185,355 212,244 755,041 745,146 765,037 760,120 +4,917 100.6% 767,711 2,674 Parent 165,263 170,599 168,478 195,705 165,756 167,709 162,756 195,132 169,858 171,901 172,298 197,284 700,045 691,353 711,341 706,300 +5,041 100.7% 713,171 1,830 Osaka 30,174 31,179 30,736 35,541 31,083 30,674 30,884 37,311 33,998 33,462 34,577 39,413 127,630 129,952 141,450 138,671 +2,779 102.0% 143,187 1,737 Sakai 3,203 3,613 3,150 3,894 3,026 3,372 2,915 3,675 3,047 3,293 3,040 3,742 13,860 12,988 13,122 12,877 +245 101.9% 12,474 -648 Kyoto 20,472 20,778 20,643 24,052 20,363 20,470 20,070 23,912 20,697 21,015 21,528 24,886 85,945 84,815 88,126 87,696 +430 100.5% 89,330 1,204 Senboku 4,285 4,741 4,266 5,322 4,155 4,594 4,085 5,165 3,828 4,274 3,814 4,962 18,614 17,999 16,878 16,709 +169 101.0% 17,420 542 Tokyo (Nihombashi) 31,143 32,402 34,755 38,331 32,258 32,676 31,381 36,593 32,568 32,109 33,562 36,002 136,631 132,908 134,241 132,494 +1,747 101.3% 131,675 -2,566 Yokohama 31,834 32,353 31,738 36,110 31,099 31,358 30,838 36,136 31,512 31,975 32,011 36,151 132,035 129,431 131,649 132,484 -835 99.4% 133,390 1,741 Konandai 2,283 2,554 2,281 2,850 2,321 2,238 1,936 2,400 1,901 2,119 1,886 2,331 9,968 8,895 8,237 8,380 -143 98.3% 8,337 100 Shinjuku 17,208 16,919 16,481 19,833 17,267 16,864 16,495 20,217 17,550 17,256 17,641 20,884 70,441 70,843 73,331 72,793 +538 100.7% 74,552 1,221 Tamagawa 9,688 10,746 10,072 12,402 9,994 10,680 10,021 12,392 10,002 10,853 10,293 12,517 42,908 43,087 43,665 43,835 -170 99.6% 43,712 47 Tachikawa 3,708 3,980 3,654 4,411 3,347 3,691 3,373 4,178 3,312 3,586 2,477 2,957 15,753 14,589 12,332 11,963 +369 103.1% 10,021 -2,311 Omiya 2,519 2,706 2,438 2,865 2,357 2,672 2,346 2,754 2,313 2,693 2,392 2,760 10,528 10,129 10,158 10,178 -20 99.8% 10,353 195 Kashiwa 8,741 8,626 8,267 10,092 8,480 8,422 8,411 10,398 9,125 9,265 9,075 10,682 35,726 35,711 38,147 38,220 -73 99.8% 38,720 573 Okayama Takashiyama 4,493 4,469 4,497 5,058 4,471 4,307 4,422 5,115 4,628 4,428 4,591 5,027 18,517 18,315 18,674 18,731 -57 99.7% 19,085 411 Gifu Takashimaya 3,712 3,621 3,724 4,273 3,665 3,522 3,583 4,190 3,475 3,517 3,514 4,157 15,330 14,960 14,663 14,603 +60 100.4% 14,709 46 Yonago Takashimaya 1,447 1,476 1,415 1,655 1,337 1,344 1,268 1,384 1,189 1,204 1,166 1,353 5,993 5,333 4,912 5,006 -94 98.1% 4,837 -75 Takasaki Takashimaya 3,613 3,666 3,580 4,296 3,618 3,601 3,578 4,387 3,538 3,698 3,787 4,423 15,155 15,184 15,446 15,480 -34 99.8% 15,909 463 YoY -3.3% 4.0% 3.9% 1.0% 0.2% -1.8% -3.3% -0.4% 2.1% 2.4% 5.6% 1.0% 1.3% -1.3% 2.7% 2.0% 0.3% Parent -3.2% 4.2% 4.2% 1.1% 0.3% -1.7% -3.4% -0.3% 2.5% 2.5% 5.9% 1.1% 1.5% -1.2% 2.9% 2.2% 0.3% Osaka -0.4% 7.2% 5.9% 4.2% 3.0% -1.6% 0.5% 5.0% 9.4% 9.1% 12.0% 5.6% 4.2% 1.8% 8.8% 6.7% 1.2% Sakai -6.0% 1.2% -2.4% -3.6% -5.5% -6.7% -7.5% -5.6% 0.7% -2.3% 4.3% 1.8% -2.7% -6.3% 1.0% -0.9% -4.9% Kyoto -1.7% 4.2% 3.3% 1.8% -0.5% -1.5% -2.8% -0.6% 1.6% 2.7% 7.3% 4.1% 1.8% -1.3% 3.9% 3.4% 1.4% Senboku -8.7% -3.3% -4.1% -2.9% -3.0% -3.1% -4.2% -3.0% -7.9% -7.0% -6.6% -3.9% -4.7% -3.3% -6.2% -7.2% 3.2% Tokyo (Nihombashi) -1.0% 6.8% 12.6% 3.1% 3.6% 0.8% -9.7% -4.5% 1.0% -1.7% 7.0% -1.6% 5.2%-2.7% 1.0% -0.3% -1.9% Yokohama -7.4% 1.9% -0.1% -2.3% -2.3% -3.1% -2.8% 0.1% 1.3% 2.0% 3.8% 0.0% -2.1% -2.0% 1.7% 2.4% 1.3% Konandai -7.2%-2.3%-2.6%-3.7% 1.7% -12.4% -15.1% -15.8% -18.1% -5.3% -2.6% -2.9% -4.0% -10.8% -7.4% -5.8% 1.2% Shinjuku 2.2% 7.8% 5.4% 0.5% 0.3% -0.3% 0.1% 1.9% 1.6% 2.3% 6.9% 3.3% 3.7% 0.6% 3.5% 2.8% 1.7% Tamagawa -6.7% 3.9% 3.4% 3.7% 3.2% -0.6% -0.5% -0.1% 0.1% 1.6% 2.7% 1.0% 1.1% 0.4% 1.3% 1.7% 0.1% Tachikawa -13.4% -4.1% -6.9% -4.8% -9.7% -7.3% -7.7% -5.3% -1.0% -2.8% -26.6% -29.2% -7.3% -7.4% -15.5% -18.0% -18.7% Omiya -4.9% -3.6% -1.4% -3.8% -6.4% -1.3% -3.8% -3.9% -1.9% 0.8% 2.0% 0.2% -3.5% -3.8% 0.3% 0.5% 1.9% Kashiwa -2.7% 0.3% 0.8% 0.9% -3.0% -2.4% 1.7% 3.0% 7.6% 10.0% 7.9% 2.7% -0.2% -0.0% 6.8% 7.0% 1.5% Okayama Takashiyama -3.4% 2.6% 1.5% -1.0% -0.5% -3.6% -1.7% 1.1% 3.5% 2.8% 3.8% -1.7% -0.2% -1.1% 2.0% 2.3% 2.2% Gifu Takashimaya -4.9% 1.8% -0.3% 1.7% -1.3% -2.7% -3.8% -1.9% -5.2% -0.1% -1.9% -0.8% -0.4% -2.4% -2.0% -2.4% 0.3% Yonago Takashimaya -7.1% 0.1% -5.0% 1.2% -7.6% -8.9% -10.4% -16.4% -11.1% -10.4% -8.0% -2.2% -2.7% -11.0% -7.9% -6.1% -1.5% Takasaki Takashimaya -4.0% 3.4% 0.7% 0.0% 0.1% -1.8% -0.1% 2.1% -2.2% 2.7% 5.8% 0.8% 0.0% 0.2% 1.7% 1.9% 3.0% Source: Shared Research based on company data

GPM The parent GPM declined 0.19pp YoY to 24.14% (versus full-year estimate of 24.13%, -0.20pp YoY). The company has been implementing various measures to counter the GPM downtrend toward a 0.30pp drop per annum owed to the pressure from an increase in duty-free sales (discount coupons apply to cosmetics, which are popular with inbound tourists) and low-margin corporate sales (drops of 0.06pp and 0.05pp, respectively). That being said, we note that the increase in tax-free sales raises gross profit. The GPM on merchandise sales at domestic department stores declined 0.18pp to 24.06%, finishing 0.02pp ahead of plan.

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While only transitory, there also was 0.02pp drop in the GPM from decreased sales of relatively high-margin women’s apparel, owing to Nitori’s occupancy of two floors (4F, 5F) at the Tachikawa store from November 2017.

SG&A expenses of JPY172.4bn were JPY1.2bn over budget. The steady rise in sales pushed up costs listed under general SG&A expenses more than expected. The effect of a change in recording rent of the Shinjuku store wore off in 1H, but a JPY500mn expense saving (five months’ worth) in 2H as the company began to benefit from the 100% ownership of the Shinjuku store kept the YoY increase to JPY800mn, in line with plan.

Parent gross profit margin

26.5% 0.0pp

24.0% 23.9% 23.8% -0.5pp

23.5% -0.6pp Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data

Parent SG&A expenses (left), percent of sales (right)

Personnel Advertising General and admin. Other YoY (left axis) Personnel Advertising General and admin. 3% 60 Other SG&A (right axis) 10% 28%

2% 45.3 45.7 50 43.9 44.2 43.8 45.1 9% 27% 42.7 42.2 42.7 43.1 42.3 43.5 41.9 41.5 41.2 41.6 40.6 41.4 41.4 41.8 6.2 6.9 7.7 7.5 8% 26% 1% 7.4 7.4 7.7 6.4 6.5 6.6 7.5 40 7.1 6.4 5.6 5.9 5.9 6.2 6.9 7.0 6.4 7% 25%

0% 15.5 14.216.0 16.6 16.3 16.4 30 14.415.913.8 14.615.9 14.216.114.8 14.215.813.9 14.416.014.3 6% 24%

-1% 20 5% 23% 5.7 6.2 5.8 5.7 7.1 5.3 6.9 5.7 6.9 5.4 7.4 7.3 5.8 6.9 6.8 5.5 6.7 6.6 5.3 7.2 4% 22% -2% 10 13.815.314.415.214.115.014.415.913.714.814.015.513.314.514.015.413.414.714.015.7 3% 21% -3% 0 2% 20% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYbn) FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data

Department stores overseas At the Takashimaya department store in Singapore, sales increased in line with signs that the domestic economy has been improving since August, strengthened sales promotions for its own store card, and steady tourist sales. At the Shanghai Takashimaya, sales increased as the company added a new tenant, made use of a special “Nihonkan” sales space introducing Japanese culture and selling related specialty products, and also benefited from increase in memberships and customer enclosure on the back of policies for card customers. At Takashimaya Ho Chi Minh City (opened July 30, 2016), sales were steady thanks to targeted promotions held in collaboration with specialty stores, the store’s cosmetics offering (it boasts the largest offering in the region), and food products that are sold in the basement floor, which recreates the Takashimaya stores in Japan. At Takashimaya

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Ho Chi Minh City, sales finished ahead of plan (+1.5%) and the JPY281mn operating loss was smaller than the JPY311mn loss expected.

Real Estate In this segment, Toshin Development, a major subsidiary, pursued collaborative projects with local communities as part of group-wide efforts in Japan and overseas. In particular, at the Tachikawa TM building and Shinjuku Takashimaya Times Square, both of which moved to the new integrated management system under Toshin Development, the company worked to provide quality services based on enhanced communication between the department stores and tenants, and implemented initiatives including building-wide sales promotions, with the aim of developing the Takashimaya brand throughout the buildings. In addition, remodeling was conducted in Kashiwa and Nagareyama, where the store is approaching the 10-year anniversary of its opening. At Nagareyama, to match the region’s theme of being “a town where young parents want to live,” the company established a children’s zone that includes children’s goods, a nursery, and a nursing room. As it approaches its 25th anniversary, the Kashiwa Takashimaya Station Mall is strengthening its fashion lineup geared toward working customers in their 30s and 40s, and has also added a large book store floor. Going forward, it plans to continue leveraging its competitive location (directly connected to JR Kashiwa Station, signifying convenience and daily traffic) and implement incremental renovations.

At Toshin Development Singapore Pte. Ltd., the company's Machi-Zukuri initiative (urban development strategy) is also being pursued in the ASEAN region and led to the opening of the Saigon Centre SC in July 2016. Takashimaya Ho Chi Minh City is the core tenant. The Saigon Centre is entering its second year of operation and has gained high praise locally for providing one of the top commercial environments in Vietnam, thanks to cooperation with a major real estate company in Singapore. In addition, the company acquired partial ownership of the A&B Tower located in the same area in March 2017, and it intends to further pursue its urban development strategy in the city.

It should be noted also that in Q4 of both FY02/17 and FY02/18, there were operating profit contributions of JPY2.4bn across the group as a whole from the sale of idle land (sale of real estate) for the purpose of streamlining assets and improving liquidity, with Toshin Development booking sales of JPY600mn and JPY1.2bn, respectively, in FY02/17 and FY02/18.

Real Estate performance

Real Estate FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4FYFYFYEst.Diff.% of FYInit. Est. Diff.* Operating revenue 9,719 9,928 10,069 10,226 10,671 10,438 10,024 16,790 9,960 9,965 9,875 17,676 42,389 47,923 47,476 49,793 -2,317 95.3% 45,782 -1,694 YoY 3.1% 6.0% 6.6% 3.7% 9.8% 5.1% -0.4% 64.2% -6.7% -4.5% -1.5% 5.3% 71.9% 13.1% -0.9% 3.9% -3.6% Operating profit 2,607 2,414 2,763 2,510 2,912 2,514 2,494 3,108 2,783 2,317 2,444 3,849 10,297 11,028 11,393 11,521 -128 98.9% 10,304 -1,089 YoY 16.4% 12.0% 19.2% -10.8% 11.7% 4.1% -9.7% 23.8% -4.4% -7.8% -2.0% 23.8% 615.6% 7.1% 3.3% 4.5% -9.6% OPM 26.8% 24.3% 27.4% 24.5% 27.3% 24.1% 24.9% 18.5% 27.9% 23.3% 24.7% 21.8% 24.3% 23.0% 24.0% 23.1% 22.5% Main subsidiaries FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4FYFYFYEst.Diff.% of FYInit. Est. Diff.* Operating revenue Toshin Development 8,555 8,584 8,837 9,032 8,882 8,849 9,795 17,055 10,010 10,176 9,876 22,250 35,008 44,581 52,312 54,985 -2,673 95.1% 45,391 -6,921 TDS 2,284 2,442 2,385 2,379 2,376 2,197 2,070 2,142 2,224 2,215 2,220 2,293 9,490 8,785 8,952 8,907 +45 100.5% 9,059 107 YoY Toshin Development 1.5% 1.4% 4.9% 4.6% 3.8% 3.1% 10.8% 88.8% 12.7% 15.0% 0.8% 30.5% 3.1% 27.3% 17.3% 23.3% -13.2% TDS 8.7% 22.3% 12.4% 3.1% 4.1% -10.1% -13.2% -10.0% -6.4% 0.8% 7.2% 7.0% 11.3% -7.4% 1.9% 1.4% 1.2% Operating profit Toshin Development 2,066 1,855 2,123 1,962 2,188 1,968 1,988 2,696 2,182 1,802 1,736 3,324 8,006 8,840 9,044 9,307 -263 97.2% 7,943 -1,101 TDS 588 605 687 596 756 592 545 447 617 572 569 726 2,476 2,340 2,484 2,327 +157 106.7% 2,339 -145 YoY Toshin Development 7.8% 0.6% 9.2% -4.2% 5.9% 6.1% -6.4% 37.4% -0.3% -8.4% -12.7% 23.3% 3.2% 10.4% 2.3% 5.3% -12.2% TDS 58.3% 69.7% 63.2% -26.6% 28.5% -2.1% -20.7% -25.0% -18.4% -3.4% 4.4% 62.4% 26.3% -5.5% 6.2% -0.6% -5.8% OPM Toshin Development 24.1% 21.6% 24.0% 21.7% 24.6% 22.2% 20.3% 15.8% 21.8% 17.7% 17.6% 14.9% 22.9% 19.8% 17.3% 16.9% 17.5% TDS 25.8% 24.8% 28.8% 25.1% 31.8% 26.9% 26.3% 20.9% 27.7% 25.8% 25.6% 31.7% 26.1% 26.6% 27.7% 26.1% 25.8% Source: Shared Research based on company data

Finance Card usage continues to increase for transactions outside the Takashimaya group Operating revenue was up YoY at the company’s main subsidiary Takashimaya Credit Co., Ltd., underpinned by both an increase in the number of cardholders in connection with special events marking the 10th anniversary of the Takashimaya Gold Card and an increase in transaction volume and related fee income.

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Finance performance

Finance FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 - FY02/19 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4FYFYFYEst.Diff.% of FYInit. Est. Diff.* Operating revenue 3,316 3,037 3,097 3,415 3,483 3,234 3,245 3,452 3,607 3,590 3,375 3,615 12,865 13,414 14,187 14,048 +139 101.0% 14,681 494 YoY 2.7% 5.0% 3.8% 4.1% 5.0% 6.5% 4.8% 1.1% 3.6% 11.0% 4.0% 4.7% 3.9% 4.3% 5.8% 4.7% 3.5% Operating profit 1,146 1,038 1,047 1,145 1,173 1,129 1,059 1,134 1,190 1,053 1,025 1,295 4,376 4,495 4,563 4,508 +55 101.2% 4,724 161 YoY 1.0% 11.6% 8.5% -0.1% 2.4% 8.8% 1.1% -1.0% 1.4% -6.7% -3.2% 14.2% 4.8% 2.7% 1.5% 0.3% 3.5% OPM 34.6% 34.2% 33.8% 33.5% 33.7% 34.9% 32.6% 32.9% 33.0% 29.3% 30.4% 35.8% 34.0% 33.5% 32.2% 32.1% 32.2% Source: Shared Research based on company data

Contract and Design The company’s main subsidiary, Takashimaya Space Create Co., Ltd., saw solid progress at hotels and commercial facilities, but operating revenue and profit declined as a large project booked in the previous year (redevelopment around Nagoya Station) dropped out as a factor. As well, a large project was delayed until FY02/19 and the company unexpectedly failed to win a large order. Contract and Design posted an operating loss in Q3 and finished the year below plan. Still, the strong operating environment has helped to foster a steady order flow, and the company has been strengthening its sales capabilities with the aim of further increasing revenue by finding more construction opportunities at hotels and other facilities that are benefiting from demand from inbound tourists.

Contract and Design performance

Contract and Design FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 - FY02/19 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4FYFYFYEst.Diff.% of FYInit. Est. Diff.* Operating revenue 4,980 9,024 3,401 9,305 4,805 9,430 7,316 9,323 6,926 6,442 4,876 7,672 26,710 30,874 25,916 30,846 -4,930 84.0% 27,797 1,881 Takashimaya Space Create 6,100 8,075 6,197 9,879 5,309 10,850 8,547 9,815 7,631 6,944 6,670 8,075 30,251 34,521 29,320 34,225 -4,905 85.7% 31,300 1,980 YoY -10.3% 42.0% -30.8% 18.7% -3.5% 4.5% 115.1% 0.2% 44.1% -31.7% -33.4% -17.7% 8.3%15.6%-16.1% -0.1% 7.3% Takashimaya Space Create -4.4% 19.1% -6.6% 15.9% -13.0% 34.4% 37.9% -0.6% 43.7% -36.0% -22.0% -17.7% 6.8%14.1%-15.1% -0.9% 6.8% Operating profit 112 649 47 1,090 -80 944 519 959 264 474 -170 639 1,898 2,342 1,207 2,227 -1,020 54.2% 1,440 233 Takashimaya Space Create 121 633 38 1,079 -91 946 531 966 272 476 -159 642 1,871 2,352 1,231 2,219 -988 55.5% 1,410 179 YoY 41.8% 88.1% -64.1% 23.3% - 45.5% 1,004.3% -12.0% - -49.8% - -33.4% 31.9% 23.4% -48.5% -4.9% 19.3% Takashimaya Space Create 32.6% 96.1% -73.6% 26.1% - 49.3% 1,297.4% -10.5% - -49.7% - -33.5% 32.3% 25.7% -47.7% -5.7% 14.5% OPM 2.2% 7.2% 1.4% 11.7% -1.7% 10.0% 7.1% 10.3% 3.8% 7.4% -3.5% 8.3% 7.1% 7.6% 4.7% 7.2% 5.2% Takashimaya Space Create 2.0% 7.8% 0.6% 10.9% -1.7% 8.7% 6.2% 9.8% 3.6% 6.9% -2.4% 8.0% 6.2% 6.8% 4.2% 6.5% - 4.5% Source: Shared Research based on company data

Other Sales in the cross-media business improved as online sales grew steadily and changes to measures in the catalog business brought down costs and pushed the division back into the black at the operating profit level.

Other performance

Other FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 - FY02/19 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4FYFYFYEst.Diff.% of FYInit. Est. Diff.* Operating revenue 8,032 8,892 8,184 10,866 8,041 8,622 7,269 10,203 7,634 8,152 7,725 11,919 35,974 34,135 35,430 33,544 +1,886 105.6% 36,842 1,412 YoY 7.5% 11.5% -3.0% 3.2% 0.1% -3.0% -11.2% -6.1% -5.1% -5.5% 6.3% 16.8% 4.5% -5.1% 3.8% -1.7% 4.0% Operating profit 100 281 196 919 166 281 620 1,266 550 803 689 1,289 1,496 2,333 3,331 2,877 -454 YoY 38.9% -6.6% -13.3% -7.3% 66.0% - 216.3% 37.8% 231.3% 185.8% 11.1% 1.8% -5.9% 55.9% 42.8% -13.6% OPM 1.2% 3.2% 2.4% 8.5% 2.1% 3.3% 8.5% 12.4% 7.2% 9.9% 8.9% 10.8% 4.2% 6.8% 9.4% 7.8% Source: Shared Research based on company data

Q3 FY02/18 results (out December 25, 2017)

▷ Cumulative Q3 FY02/18: Earnings remained robust at domestic department stores, driven by rise in consumer spending and increase in inbound tourist demand. The company registered growth in sales and profit at both the consolidated and parent levels  Versus plan: Brisk performance of domestic department stores compensates for shortfall versus target in Contract and Design business due to a large project being deferred until FY02/19 and failing to win a big order ▷ Department Stores: Sales and operating profit up 4% and 6% respectively. Sales steadily increased, led by large stores. Inbound tourist demand combined with solid consumer spending contributed  Inbound: In addition to current initiatives, the company worked on improving the quality of its services (mainly at the Osaka store), resulting in significant growth in both sales and the number of items sold  Parent gross profit margin: Even though GPM declined 0.25pp YoY due to an increase in sales to inbound tourists, gross profit was up JPY3.1bn on increased sales. Various initiatives limited the decline in GPM

79/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

▷ Overseas department stores: Sales increased on positive momentum in the market environment in Singapore. Sales were up in Shanghai on effective use of an event sales space, and sales in Vietnam were steady ▷ Full-year targets: Business remained robust (mainly at department stores), but the company left full-year targets unchanged. The company expects the Contract and Design business to remain profitable in 2H, although not reaching full-year targets ▷ FY02/19: Focus on opening of new Nihombashi annex in fall 2018 (main building to be renovated thereafter to reopen in spring 2019) and opening of store in Bangkok, Thailand in 2018

Earnings

Quarterly performance FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q3 Q3 Q3FYFYEst. Init. .Est. Diff. % of FY Operating revenue 219,392 230,390 219,757 260,049 219,318 224,003 215,469 264,811 225,480 227,500 225,914 669,539 658,790 678,894 929,588 923,601 951,000 943,000 8,000 71.4% YoY -2.2% 6.0% 2.8% 1.2% -0.0% -2.8% -2.0% 1.8% 2.8% 1.6% 4.8% 2.1% -1.6% 3.1% 1.9% -0.6% 3.0% 2.1% Sales 203,899 214,390 203,963 243,637 203,340 207,818 200,483 249,120 209,966 211,639 210,771 622,252 611,641 632,376 865,889 860,761 887,900 879,457 8,443 71.2% YoY -2.5% 5.9% 2.6% 1.1% -0.3% -3.1% -1.7% 2.3% 3.3% 1.8% 5.1% 2.0% -1.7% 3.4% 1.7% -0.6% 3.2% 2.2% Gross profit 51,739 52,400 51,382 59,357 50,815 50,731 50,428 60,022 51,849 103,914 156,058 155,521 151,974 156,058 214,878 211,996 217,900 215,427 2,473 143.1% YoY -2.6% 2.9% 1.3% -0.7% -1.8% -3.2% -1.9% 1.1% 2.0% 104.8% 209.5% 0.5% -2.3% 2.7% 0.2% -1.3% 2.8% 1.6% GPM 25.4% 24.4% 25.2% 24.4% 25.0% 24.4% 25.2% 24.1% 24.7% 49.1% 74.0% 25.0% 24.8% 24.7% 24.8% 24.6% 24.5% 24.5% SG&A expenses 59,781 62,030 59,720 64,074 66,793 53,139 58,641 62,262 59,276 62,120 59,469 181,531 178,573 180,865 245,605 240,835 245,000 243,970 1,030 73.8% YoY -1.6% 1.3% -0.6% 4.1% 11.7% -14.3% -1.8% -2.8% -11.3% 16.9% 1.4% -0.3% -1.6% 1.3% 0.8% -1.9% 1.7% 1.3% SG&A ratio 29.3% 28.9% 29.3% 26.3% 32.8% 25.6% 29.2% 25.0% 28.2% 29.4% 28.2% 29.2% 29.2% 28.6% 28.4% 28.0% 27.6% 27.7% Operating profit 7,451 6,369 7,456 11,696 7,692 6,085 6,774 13,449 8,088 5,805 7,817 21,276 20,551 21,710 32,972 34,000 36,000 35,000 1,000 60.3% YoY -1.1% 36.1% 32.5% -17.5% 3.2% -4.5% -9.1% 15.0% 5.1% -4.6% 15.4% 19.3% -3.4% 5.6% 3.0% 3.1% 5.9% 2.9% OPM 3.7% 3.0% 3.7% 4.8% 3.8% 2.9% 3.4% 5.4% 3.9% 2.7% 3.7% 3.4% 3.4% 3.4% 3.8% 3.9% 4.1% 4.0% Recurring profit 8,347 7,866 8,839 12,733 8,106 6,949 7,989 14,171 8,691 6,945 8,740 25,052 23,044 24,376 37,785 37,215 39,000 37,500 1,500 62.5% YoY -2.4% 39.2% 39.0% -17.0% -2.9% -11.7% -9.6% 11.3% 7.2% -0.1% 9.4% 21.8% -8.0% 5.8% 5.2% -1.5% 4.8% 0.8% RPM 4.1% 3.7% 4.3% 5.2% 4.0% 3.3% 4.0% 5.7% 4.1% 3.3% 4.1% 4.0% 3.8% 3.9% 4.4% 4.3% 4.4% 4.3% Net income 6,319 4,719 5,211 7,580 3,563 4,914 4,748 7,645 5,154 3,858 5,465 16,249 13,225 14,477 23,829 20,870 23,000 21,500 1,500 62.9% YoY 38.8% -6.1% 50.9% -20.6% -43.6% 4.1% -8.9% 0.9% 44.7% -21.5% 15.1% 24.7% -18.6% 9.5% 5.5% -12.4% 10.2% 3.0% Net margin 3.1% 2.2% 2.6% 3.1% 1.8% 2.4% 2.4% 3.1% 2.5% 1.8% 2.6% 2.6% 2.2% 2.3% 2.8% 2.4% 2.6% 2.4% FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Cml. Q3Cml. Q3Cml. Q3Act.Act.Est.Init. Est. Diff. % of FY Operating revenue 219,392 230,390 219,757 260,049 219,318 224,003 215,469 264,811 225,480 227,500 225,914 669,539 658,790 678,894 929,588 923,601 951,000 943,000 +8,000 71.4% Department Stores 192,714 198,905 194,384 225,645 192,315 192,281 187,614 225,043 197,351 199,351 200,063 586,003 572,210 596,765 811,648 797,253 822,766 807,184 +15,582 72.5% Real Estate 10,348 10,531 10,692 10,818 10,671 10,438 10,024 16,790 9,960 9,965 9,875 31,571 31,133 29,800 42,389 47,923 49,793 56,998 -7,205 59.8% Finance 3,316 3,037 3,097 3,415 3,483 3,234 3,245 3,452 3,607 3,590 3,375 9,450 9,962 10,572 12,865 13,414 14,048 13,796 +252 75.3% Contract and Design 4,980 9,024 3,401 9,305 4,805 9,430 7,316 9,323 6,926 6,442 4,876 17,405 21,551 18,244 26,710 30,874 30,846 32,455 -1,609 59.1% Others 8,032 8,892 8,184 10,866 8,041 8,622 7,269 10,203 7,634 8,152 7,725 25,108 23,932 23,511 35,974 34,135 33,544 32,567 +977 70.1% YoY Department Stores -2.6% 4.6% 3.7% 0.3% -0.2% -3.3% -3.5% -0.3% 2.6% 3.7% 6.6% - -2.4% 4.3% 1.4% -1.8% 3.2% 1.2% Real Estate 3.1% 6.0% 6.6% 3.7% 3.1% -0.9% -6.2% 55.2% -6.7% -4.5% -1.5% --1.4% -4.3% 4.8% 13.1% 3.9% 18.9% Finance 2.7% 5.0% 3.8% 4.1% 5.0% 6.5% 4.8% 1.1% 3.6% 11.0% 4.0% 3.8% 5.4% 6.1% 3.9% 4.3% 4.7% 2.8% Contract and Design -10.3% 42.0% -30.8% 18.7% -3.5% 4.5% 115.1% 0.2% 44.1% -31.7% -33.4% 3.5% 23.8% -15.3% 8.3% 15.6% -0.1% 5.1% Others 7.5% 11.5% -3.0% 3.2% 0.1% -3.0% -11.2% -6.1% -5.1% -5.5% 6.3% 5.1% -4.7% -1.8% 4.5%-5.1% -1.7% -4.6% Operating profit 7,451 6,369 7,456 11,696 7,692 6,085 6,774 13,449 8,088 5,805 7,817 21,276 20,551 21,710 32,972 34,000 36,000 35,000 +1,000 60.3% Department Stores 3,223 2,142 3,462 6,148 3,372 1,385 2,241 5,184 2,948 1,182 3,945 8,827 6,998 8,075 14,975 12,182 13,005 12,486 +519 62.1% Real Estate 2,619 2,412 2,772 2,494 2,912 2,514 2,494 3,108 2,783 2,317 2,444 7,803 7,920 7,544 10,297 11,028 11,521 11,504 +17 65.5% Finance 1,146 1,038 1,047 1,145 1,173 1,129 1,059 1,134 1,190 1,053 1,025 3,231 3,361 3,268 4,376 4,495 4,508 4,496 +12 72.5% Contract and Design 112 649 47 1,090 -80 944 519 959 264 474 -170 808 1,383 568 1,898 2,342 2,227 2,350 -123 25.5% Others 100 281 196 919 166 281 620 1,266 550 803 689 577 1,067 2,042 1,496 2,333 4,737 4,165 +572 47.5% Adjustments 249 -154 -67 -97 147 -168 -158 1,795 350 -24 -116 28-179 210 -69 1,616 YoY Department Stores -17.4% 112.3% 62.7% -27.6% 4.6% -35.3% -35.3% -15.7% -12.6% -14.7% 76.0% - -20.7% 15.4% -3.5% -18.7% 6.8% 2.5% Real Estate 16.4% 12.0% 19.2% -10.8% 11.2% 4.2% -10.0% 24.6% -4.4% -7.8% -2.0% - 1.5% -4.7% 8.0% 7.1% 4.5% 4.3% Finance 1.0% 11.6% 8.5% -0.1% 2.4% 8.8% 1.1% -1.0% 1.4% -6.7% -3.2% 6.6%4.0%-2.8% 4.8% 2.7% 0.3% 0.0% Contract and Design 41.8% 88.1% -64.1% 23.3% 45.5% 1,004.3% -12.0% 45.6% 71.2% -58.9% 31.9% 23.4% -4.9% 0.3% Others 38.9% -6.6% -13.3% -7.3% 66.0% - 216.3% 37.8% 231.3% 185.8% 11.1% -3.7% 84.9% 91.4% -5.9% 55.9% 1.4% -10.9% OPM 3.4% 2.8% 3.4% 4.5% 3.5% 2.7% 3.1% 5.1% 3.6% 2.6% 3.5% 3.2% 3.1% 3.2% 3.5% 3.7%3.8%3.7% Department Stores 1.7% 1.1% 1.8% 2.7% 1.8% 0.7% 1.2% 2.3% 1.5% 0.6% 2.0% 1.5% 1.2% 1.4% 1.8% 1.5% 1.6% 1.5% Real Estate 25.3% 22.9% 25.9% 23.1% 27.3% 24.1% 24.9% 18.5% 27.9% 23.3% 24.7% 24.7% 25.4% 25.3% 24.3% 23.0% 23.1% 20.2% Finance 34.6% 34.2% 33.8% 33.5% 33.7% 34.9% 32.6% 32.9% 33.0% 29.3% 30.4% 34.2% 33.7% 30.9% 34.0% 33.5% 32.1% 32.6% Contract and Design 2.2% 7.2% 1.4% 11.7% -1.7% 10.0% 7.1% 10.3% 3.8% 7.4% -3.5% 4.6% 6.4% 3.1% 7.1% 7.6% 7.2% 7.2% Others 4.3% 1.4% 1.6% 7.6% 3.9% 1.3% 6.4% 30.0% 11.8% 9.6% 7.4% 2.3% 4.5% 8.7% 4.0% 11.6% 14.1% 12.8% Source: Shared Research based on company data Note: Effective Q1 FY02/17, subsidiary Fashion Plaza Sunroser was moved from Department Stores segment to Real Estate segment.

Operating profit by segment

(JPYbn) Department Stores Real Estate Finance Contract and Design Others 14.2 13.4 14 12.6 11.7 12 11.1 1.1

10 1.4 2.8 8.7 0.9 1.1 1.1 8.1 7.8 2.2 7.5 7.5 7.5 7.7 8 1.9 6.8 1.0 6.4 2.5 6.1 6.1 1.1 5.6 1.0 1.2 3.1 5.8 1.0 5.6 5.9 5.1 5.3 1.1 1.2 6 1.6 4.7 0.7 1.1 4.2 4.3 1.1 2.2 1.0 1.1 2.4 3.5 3.3 0.8 1.0 2.6 2.8 2.9 0.9 8.5 1.1 2.8 1.1 4 1.7 0.8 7.1 2.2 7.4 0.9 0.8 0.7 2.0 0.8 2.1 2.3 2.4 6.1 2.5 1.9 2.5 5.2 5.1 1.9 2.3 2 1.8 2.1 2.0 3.9 2.2 3.5 3.4 3.9 2.9 2.5 2.7 3.2 2.9 1.7 2.2 2.1 2.1 1.4 2.2 0 1.1 0.8 1.2 1.1 1.0 1.2 -2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data Note: Effective Q1 FY02/17, subsidiary Fashion Plaza Sunroser was moved from Department Stores segment to Real Estate segment.

80/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Group company performance

Main subsidiaries FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Cml. Q3Cml. Q3Cml. Q3Act.Act.Est.Init. Est. Diff. % of FY Operating revenue Takashimaya Singapore 13,664 14,582 13,086 16,486 13,264 12,009 10,942 14,530 12,233 12,610 12,149 41,332 36,215 36,992 57,818 50,745 51,612 50,500 +1,112 71.7% Takashimaya Shanghai 1,868 1,782 1,680 1,976 1,748 1,467 1,469 1,649 1,779 1,617 1,748 5,330 4,684 5,144 7,306 6,333 7,023 6,845 +178 73.2% Takashimaya Vietnam - -1,8194,3004,228+72- A&S Takashimaya Duty Free - --3,4638,000-4,537 - Toshin Development 8,555 8,584 8,837 9,032 8,882 8,849 9,795 17,055 10,010 10,176 9,876 25,976 27,526 30,062 35,008 44,581 54,985 55,711 -726 54.7% TDS 2,284 2,442 2,385 2,379 2,376 2,197 2,070 2,142 2,224 2,215 2,220 7,111 6,643 6,659 9,490 8,785 8,907 8,743 +164 74.8% Takashimaya Credit 4,376 4,219 4,255 4,407 4,455 4,306 4,376 4,525 4,619 4,513 4,610 12,850 13,137 13,742 17,257 17,662 18,497 18,165 +332 74.3% Takashimaya Space Create 6,100 8,075 6,197 9,879 5,309 10,850 8,547 9,815 7,631 6,944 6,670 20,372 24,706 21,245 30,251 34,521 34,225 36,000 -1,775 62.1% YoY Takashimaya Singapore 6.8% 12.9% 2.8% -0.5% -2.9% -17.6% -16.4% -11.9% -7.8% 5.0% 11.0% 7.5% -12.4% 2.1% 5.1% -12.2% 1.7% -0.5% Takashimaya Shanghai 18.2% 24.9% 12.1% 10.5% -6.4% -17.7% -12.6% -16.5% 1.8% 10.2% 19.0% 18.3% -12.1% 9.8% 16.1% -13.3% 10.9% 8.1% Toshin Development 1.5% 1.4% 4.9% 4.6% 3.8% 3.1% 10.8% 88.8% 12.7% 15.0% 0.8% 2.6% 6.0% 9.2% 3.1% 27.3% 23.3% 25.0% TDS 8.7% 22.3% 12.4% 3.1% 4.1% -10.1% -13.2% -10.0% -6.4% 0.8% 7.2% 14.3% -6.6% 0.2% 11.3% -7.4% 1.4% -0.5% Takashimaya Credit 1.0% 4.4% 3.0% 2.9% 1.8% 2.1% 2.8% 2.7% 3.7% 4.8% 5.3% 2.8% 2.2% 4.6% 2.8% 2.3% 4.7% 2.8% Takashimaya Space Create -4.4% 19.1% -6.6% 15.9% -13.0% 34.4% 37.9% -0.6% 43.7% -36.0% -22.0% 2.9% 21.3% -14.0% 6.8% 14.1% -0.9% 4.3% Operating profit Takashimaya Singapore 938 1,002 790 1,346 967 422 623 1,141 653 707 620 2,730 2,012 1,980 4,076 3,153 3,165 3,250 -85 62.6% Takashimaya Shanghai -254 -341 -353 -294 -264 -272 -218 -226 -270 -297 -276 -948 -754 -843 -1,242 -980 -1,148 -1,151 +3 - Takashimaya Vietnam - --508 -311 -327 +16 - A&S Takashimaya Duty Free Approx. 300 Approx. 400 - ---1,162 -685 -477 - Toshin Development 2,066 1,855 2,123 1,962 2,188 1,968 1,988 2,696 2,182 1,802 1,736 6,044 6,144 5,720 8,006 8,840 9,307 9,250 +57 61.5% TDS 588 605 687 596 756 592 545 447 617 572 569 1,880 1,893 1,758 2,476 2,340 2,327 2,363 -36 75.5% Takashimaya Credit 1,136 1,028 1,039 1,138 1,166 1,121 1,053 1,128 1,183 1,047 1,018 3,203 3,340 3,248 4,341 4,468 4,481 4,469 +12 72.5% Takashimaya Space Create 121 633 38 1,079 -91 946 531 966 272 476 -159 792 1,386 589 1,871 2,352 2,219 2,320 -101 26.5% YoY Takashimaya Singapore 121.3% 41.1% 16.5% -45.9% 3.2% -57.9% -21.1% -15.2% -32.5% 67.7% -0.5% 50.7% -26.3% -1.6% -5.3% -22.6% 0.4% 3.1% Takashimaya Shanghai ------Takashimaya Vietnam------Toshin Development 7.8% 0.6% 9.2% -4.2% 5.9% 6.1% -6.4% 37.4% -0.3% -8.4% -12.7% 5.9%1.7%-6.9% 3.2% 10.4% 5.3% 4.6% TDS 58.3% 69.7% 63.2% -26.6% 28.5% -2.1% -20.7% -25.0% -18.4% -3.4% 4.4% 63.6% 0.7% -7.1% 26.3% -5.5% -0.6% 1.0% Takashimaya Credit 0.9% 12.1% 8.7% - 2.6% 9.1% 1.3% -0.9% 1.5% -6.6% -3.3% 6.8%4.3%-2.8% 4.9% 2.9% 0.3% 0.0% Takashimaya Space Create 32.6% 96.1% -73.6% 26.1% - 49.3% 1,297.4% -10.5% - -49.7% - 41.9% 75.0% -57.5% 32.3% 25.7% -5.7% -1.4% OPM Takashimaya Singapore 6.9% 6.9% 6.0% 8.2% 7.3% 3.5% 5.7% 7.9% 5.3% 5.6% 5.1% 6.6% 5.6% 5.4% 7.0% 6.2% 6.1% 6.4% Takashimaya Shanghai -13.6% -19.1% -21.0% -14.9% -15.1% -18.5% -14.8% -13.7% -15.2% -18.4% -15.8% -17.8% -16.1% -16.4% -17.0% -15.5% -16.3% -16.8% Takashimaya Vietnam --- --27.9% -7.2% -7.7% A&S Takashimaya Duty Free ------33.6% -8.6% Toshin Development 24.1% 21.6% 24.0% 21.7% 24.6% 22.2% 20.3% 15.8% 21.8% 17.7% 17.6% 23.3% 22.3% 19.0% 22.9% 19.8% 16.9% 16.6% TDS 25.8% 24.8% 28.8% 25.1% 31.8% 26.9% 26.3% 20.9% 27.7% 25.8% 25.6% 26.4% 28.5% 26.4% 26.1% 26.6% 26.1% 27.0% Takashimaya Credit 26.0% 24.4% 24.4% 25.8% 26.2% 26.0% 24.1% 24.9% 25.6% 23.2% 22.1% 24.9% 25.4% 23.6% 25.2% 25.3% 24.2% 24.6% Takashimaya Space Create 2.0% 7.8% 0.6% 10.9% -1.7% 8.7% 6.2% 9.8% 3.6% 6.9% -2.4% 3.9% 5.6% 2.8% 6.2% 6.8% 6.5% 6.4% Source: Shared Research based on company data Note: Effective Q1 FY02/17, subsidiary Fashion Plaza Sunroser was moved from Department Stores segment to Real Estate segment.

Overview According to Takashimaya, consumer spending was solid thanks to gradual growth in the domestic economy. At the group’s domestic department stores, sales have been growing steadily, not only because of robust consumer spending, but also because demand from visitors to Japan has been favorable. However, the company understands the economic outlook remains uncertain amid tightening monetary policy in Europe and the US in the form of a normalization following ultra-loose monetary policy, as well as impact of geopolitical risk in Asia.

Cumulative Q3 FY02/18: Earnings remained robust at domestic department stores, driven by rise in consumer spending and increase in inbound tourist demand. The company registered growth in sales and profit at both the consolidated and parent levels Against this backdrop, the Takashimaya group continued to work on various initiatives aimed at strengthening sales capabilities. To maximize the appeal of its buildings and surroundings, the company advanced its urban development strategy that draws on the expertise of the Toshin Development Company, a subsidiary that manages collaborative group projects with local communities and the group’s real estate business, particularly for department stores. In addition to creating an anchor store that will draw people to the area, the combination of a department store and specialty stores, leveraging commercial development functions (a core business) covered by Toshin Development helped Takashimaya maximize the appeal of its buildings.

As a result, consolidated operating revenue grew by 3.1% YoY and operating profit by 5.6%. By segment, at the domestic department store business, the parent drove earnings, as operating revenue grew by 3.8% and operating profit by 39.3% (+JPY2.2bn). Looking at demand by customer segment in parent sales, demand was strong among affluent customers (Gaisho accounts for over 20% of sales), while demand from middle-class customers bottomed in August and has been recovering, with some contribution from business alliances. Demand among inbound tourists (7% sales share) grew a sharp 57% YoY (+JPY4.7bn), accounting for 50% of the sales increase of domestic department stores (+JPY9.7bn). Profit grew YoY, with GPM and SG&A expenses in line with the company forecast.

81/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Sales to inbound tourists

Q1 Department stores: 48.0 (JPYbn) (JPYbn) 45.0 16 7.4% 7.4% 8% 1H 37.0 Inbound subsidary: Q3 Dept stores: 14 7% 8.0 8% 6.2% 40 2H 44.5 34.4 6.6% 6.8% 5.7% Q2-Q4 24.7 Inbound 12 6% 29.9 subsidary: 5.0% 4.9% 3.5 6% 10 4.4% 4.3% 5% 30 5.0% 4.2% 4.2% 4.1% 4.3% 19.2 8 4% 3.1% 15.6 4% 20 6 12.6 12.7 3% 14.0 2.2% 11.2 10.7 2.0% 4 8.5 8.3 8.0 2% 8.3 23.3 1.3% 1.3% 7.2 7.2 7.1 6.9 10 1.2% 9.6 2% 6.0 15.2 4.8 14.4 2 3.6 1% 2.3 2.1 3.5 4.4 0 0% 0 0% FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/18 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Init. Est. Est. FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data

Department Stores compensate for weakness of Contract and Design The Contract and Design business recorded only JPY568mn operating profit in cumulative Q3 after posting a JPY170mn operating loss in Q3, falling behind the company’s full-year OP target of JPY2.2bn. Takashimaya commented that the reasons for the weak performance were the pushback of a major project until FY02/19 and the unexpected failure to win a big order. That being said, the business is likely to recover in FY02/19 given a 60% YoY increase in the order backlog. The consolidated OP target likely assumes that the brisk performance of the Department Stores business will compensate for the shortfall in the Contract and Design business.

Outlook from Q4 onward From Q4 onward, the company expects the same trends as seen in Q3 to continue at both domestic and overseas department stores. It expects domestic department stores to continue to capture inbound demand, which will push down parent GPM but help to increase gross profit. If the stock market remains robust, the wealth effect is likely to continue. Another positive factor is that demand from middle-class customers is recovering after bottoming in summer 2017; the company is making progress cultivating new demand via alliances. Duty-free sales have been brisk, with instore sales reaching JPY12.6bn (+57%) in Q3 versus the 2H company forecast of JPY22bn in instore sales and JPY2.7bn from the duty-free sales subsidiary for a 14.6% YoY growth overall. Sales remained strong in December (estimated at +30% YoY) despite a high year-ago hurdle. Q3 sales were a modest JPY800mn at the duty-free subsidiary, but duty-free sales overall exceeded the company forecast and is likely to contribute toward higher gross profit.

82/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

FY02/18 should also make a contribution. In the Finance segment, we expect a reduction in expenses associated with the 10th anniversary of the issue of the Gold Card recorded in FY02/18.

Toward 2H and onward (provided as a reference; as of Q2): Based on the 1H results, the company made an upward revision to its full-year forecasts. The revised forecasts call for operating revenue of JPY951.0bn (+3.0% or JPY27.4bn YoY and +0.8% or JPY8.0bn compared to initial forecast) and operating profit of JPY36.0bn (+5.9% or JPY2.0bn YoY and +2.9% or JPY1.0bn compared to initial forecast). The main reasons for this increased revenue are increased revenue at domestic department stores (in both 1H and 2H) and the contribution of new business at Takashimaya’s Vietnam subsidiary. The main reasons for increased profit are the effect of increased revenue and more efficient use of SG&A expenses.

The revised forecasts for domestic department stores call for operating revenue of JPY773.6bn (+JPY16.5bn YoY and +JPY19.8bn compared to initial forecast) on robust inbound demand and domestic consumption. The forecast for product profit margin is 24.04% (-0.20pp YoY and -0.04pp compared to initial forecast) on the impact of discounts associated with an increase in inbound demand and ordinary decline (0.30pp) largely countered by improvement measures. The forecast for SG&A expenses is JPY183.4bn (+JPY1.5bn YoY and +JPY3.6bn compared to initial forecast) on improved efficiency despite an increase in variable expenses accompanying increased revenue and on contributions from reduced rents brought about by making the Shinjuku store a company asset. The forecast for operating profit is JPY12.9bn (+JPY2.1bn YoY and +JPY1.0bn compared to initial forecast) on increased revenue.

Inbound demand has been in an upswing since Q4 2016, but the increase may dwindle in 2H. However, if the company can maintain a level of sales similar to the current quarter, it can expect an ongoing increase in revenue. At the beginning of FY02/18, the company forecast inbound demand-related sales of JPY45.0bn (+30.9% YoY, with JPY37.0bn from department stores and JPY8.0bn from duty-free shops), but revised these figures upward to JPY48.0bn (+39.5%, JPY44.5bn, JPY3.5bn). Actual sales in 1H were JPY23.3bn (+53.6%, JPY22.5bn, JPY800mn), which means the forecast for 2H is JPY24.7bn (+14.6%, JPY22.0bn, JPY2.7bn). It seems the company is being cautious about the department store portion. Shared Research will be watching the effects of the Platinum Debit Card initiative targeting affluent customers and the company’s efforts to capture new middle-class customers via its alliances in order to continue the recovery sensed in Q2.

The company says the domestic department store business has remained strong in September and October. The urban development strategy is also bearing fruit. Renovation of the Takasaki store in September has resulted in a greater than 50% increase in sales in early October, so although the scale of sales is small (2% of total sales in 1H), the renovation has proven effective. After making the land and building of the Shinjuku store wholly owned assets in September, the company will be able from October to reduce rents by JPY1.1bn on an annual basis (in FY02/18, this is five months of rent totaling JPY500mn). The Tachikawa store has also been renovated and in November a Nitori will open on an upper floor. At the Nihombashi store, the east annex (2,000sqm) is scheduled to open in 2018, so the company is expecting contributions from that in FY02/19.

Overseas as well, the company aims to strengthen profitability in Singapore through cost reductions, despite the tendency for its operations there to be impacted by economic trends. It expects sales to remain solid in Shanghai, China, but there is concern of a temporary drop in demand following the National Congress of the Communist Party of China (from October 18, 2017). Operations in Vietnam are going according to plan and customer counts are favorable as Takashimaya improves its name recognition there. Operations in Thailand are set to start in fall 2018, and the company says it may be able to move into the black from the first fiscal year, as it has high expectations from its role as a core tenant.

83/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Department stores

Department stores FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Cml. Q3Cml. Q3Cml. Q3Act.Act.Est.Init. Est. Diff. % of FY Operating revenue 193,344 199,508 195,006 226,237 192,315 192,281 187,614 225,043 197,351 199,351 200,063 587,858 572,210 596,765 814,095 797,253 822,766 807,184 +15,582 72.5% Takashimaya (parent) 167,711 173,152 170,992 198,306 168,251 170,282 166,021 198,502 173,177 175,232 175,562 511,855 504,554 523,971 710,161 703,056 719,500 700,000 +19,500 72.8% Difference 25,633 26,356 24,014 27,931 24,064 21,999 21,593 26,541 24,174 24,119 24,501 76,003 67,656 72,794 103,934 94,197 103,266 107,184 -3,918 YoY -2.6% 4.6% 3.7% 0.3% -0.5% -3.6% -3.8% -0.5% 2.6% 3.7% 6.6% 1.8% -2.7% 4.3% 1.4% -2.1% 3.2% 1.2% Takashimaya (parent) -3.1% 4.2% 4.2% 1.0% 0.3% -1.7% -2.9% 0.1% 2.9% 2.9% 5.7% 1.7% -1.4% 3.8% 1.5% -1.0% 2.3% -0.4% Difference 0.7% 7.2% 0.0% -4.5% -6.1% -16.5% -10.1% -5.0% 0.5% 9.6% 13.5% 2.7% -11.0% 7.6% 0.6% -9.4% 9.6% 13.8% Operating profit 3,236 2,140 3,470 6,129 3,372 1,385 2,241 5,184 2,948 1,182 3,945 8,846 6,998 8,075 14,975 12,182 13,005 12,486 +519 62.1% Takashimaya (parent) 2,235 1,283 2,515 4,907 2,482 1,312 1,863 4,635 2,916 1,536 3,427 6,033 5,657 7,879 10,940 10,292 12,400 11,300 +1,100 63.5% Difference 1,001 857 955 1,222 890 73 378 549 32 -354 518 2,813 1,341 196 4,035 1,890 605 1,186 -581 YoY -17.4% 112.3% 62.7% -27.6% 4.2% -35.3% -35.4% -15.4% -12.6% -14.7% 76.0% 25.4% -20.9% 15.4% -3.5% -18.7% 6.8% 2.5% Takashimaya (parent) -37.2% 108.3% 56.3% -24.1% 11.1% 2.3% -25.9% -5.5% 17.5% 17.1% 84.0% 4.3% -6.2% 39.3% -10.7% -5.9% 20.5% 9.8% Difference 182.0% 118.6% 82.3% -38.8% -11.1% -91.5% -60.4% -55.1% -96.4% - 37.0% 121.3% -52.3% -85.4% 23.4% -53.2% -68.0% -37.2% OPM 1.7% 1.1% 1.8% 2.7% 1.8% 0.7% 1.2% 2.3% 1.5% 0.6% 2.0% 1.5% 1.2% 1.4% 1.8% 1.5% 1.6% 1.5% Takashimaya (parent) 1.3% 0.7% 1.5% 2.5% 1.5% 0.8% 1.1% 2.3% 1.7% 0.9% 2.0% 1.2% 1.1% 1.5% 1.5% 1.5% 1.7% 1.6% Difference 3.9% 3.3% 4.0% 4.4% 3.7% 0.3% 1.8% 2.1% 0.1% -1.5% 2.1% 3.7% 2.0% 0.3% 3.9% 2.0% 0.6% 1.1% Main subsidiaries FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Cml. Q3Cml. Q3Cml. Q3Act.Act.Est.Init. Est. Diff. % of FY Operating revenue Takashimaya Singapore 13,664 14,582 13,086 16,486 13,264 12,009 10,942 14,530 12,233 12,610 12,149 41,332 36,215 36,992 57,818 50,745 51,612 50,500 +1,112 71.7% Takashimaya Shanghai 1,868 1,782 1,680 1,976 1,748 1,467 1,469 1,649 1,779 1,617 1,748 5,330 4,684 5,144 7,306 6,333 7,023 6,845 +178 73.2% Takashimaya Vietnam------1,8194,3004,228+72- YoY Takashimaya Singapore 6.8% 12.9% 2.8% -0.5% -2.9% -17.6% -16.4% -11.9% -7.8% 5.0% 11.0% 7.5% -12.4% 2.1% 5.1% -12.2% 1.7% -0.5% Takashimaya Shanghai 18.2% 24.9% 12.1% 10.5% -6.4% -17.7% -12.6% -16.5% 1.8% 10.2% 19.0% 18.3% -12.1% 9.8% 16.1% -13.3% 10.9% 8.1% Operating profit Takashimaya Singapore 938 1,002 790 1,346 967 422 623 1,141 653 707 620 2,730 2,012 1,980 4,076 3,153 3,165 3,250 -85 62.6% Takashimaya Shanghai -254 -341 -353 -294 -264 -272 -218 -226 -270 -297 -276 -948 -754 -843 -1,242 -980 -1,148 -1,151 +3 - Takashimaya Vietnam------508 -311 -327 +16 - YoY Takashimaya Singapore 121.3% 41.1% 16.5% -45.9% 3.2% -57.9% -21.1% -15.2% -32.5% 67.7% -0.5% 50.7% -26.3% -1.6% -5.3% -22.6% 0.4% 3.1% Takashimaya Shanghai ------Takashimaya Vietnam------OPM Takashimaya Singapore 6.9% 6.9% 6.0% 8.2% 7.3% 3.5% 5.7% 7.9% 5.3% 5.6% 5.1% 6.6% 5.6% 5.4% 7.0% 6.2% 6.1% 6.4% Takashimaya Shanghai -13.6% -19.1% -21.0% -14.9% -15.1% -18.5% -14.8% -13.7% -15.2% -18.4% -15.8% -17.8% -16.1% -16.4% -17.0% -15.5% -16.3% -16.8% Takashimaya Vietnam --27.9% -7.2% -7.7% Parent company performance

Parent earnings FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Cml. Q3Cml. Q3Cml. Q3Act.Act.Est.Init. Est. Diff. % of FY Operating revenue 167,711 173,152 170,992 198,306 168,251 170,282 166,021 198,502 173,177 175,232 175,562 511,855 504,554 523,971 710,161 703,056 719,500 700,000 +19,500 72.8% Sales 165,263 170,599 168,478 195,705 165,756 167,709 162,756 195,132 169,858 171,901 172,298 504,340 496,221 514,057 700,045 691,353 706,300 687,000 +19,300 72.8% Difference 2,448 2,553 2,514 2,601 2,495 2,573 3,265 3,370 3,319 3,331 3,264 7,515 8,333 9,914 10,116 11,703 13,200 13,000 +200 75.1% YoY -3.1% 4.2% 4.2% 1.0% 0.3% -1.7% -2.9% 0.1% 2.9% 2.9% 5.7% 1.7% -1.4% 3.8% 1.5% -1.0% 2.3% -0.4% Sales -3.2% 4.2% 4.2% 1.1% 0.3% -1.7% -3.4% -0.3% 2.5% 2.5% 5.9% 1.7% -1.6% 3.6% 1.5% -1.2% 2.2% -0.6% Difference -0.4% 4.1% 5.7% 0.5% 1.9% 0.8% 29.9% 29.6% 33.0% 29.5% -0.0% 3.1% 10.9% 19.0% 2.4% 15.7% 12.8% 11.1% Gross profit 41,027 41,809 41,620 47,392 40,542 41,041 40,047 46,551 41,021 41,714 41,975 124,456 121,630 124,710 171,848 168,179 170,400 166,000 +4,400 73.2% GPM 24.8% 24.5% 24.7% 24.3% 24.5% 24.5% 24.6% 23.9% 24.2% 24.3% 24.4% 24.7% 24.5% 24.3% 24.5% 24.3% 24.1% 24.2% SG&A expenses 41,240 43,079 41,619 45,085 40,555 42,301 41,449 45,286 41,419 43,513 41,804 125,938 124,305 126,736 171,023 169,591 171,200 167,700 +3,500 74.0% Personnel 13,736 14,788 14,042 15,458 13,283 14,472 13,968 15,434 13,419 14,670 14,031 42,566 41,723 42,120 58,024 57,157 58,000 57,473 +527 72.6% Advertising 7,314 5,778 6,914 6,176 6,832 5,466 6,729 5,776 6,580 5,343 7,192 20,006 19,027 19,115 26,182 24,803 24,934 23,989 +945 76.7% General and administrative 14,247 16,061 14,777 16,555 14,240 15,783 13,875 16,343 14,440 15,998 14,256 45,085 43,898 44,644 61,640 60,241 60,013 57,488 +2,525 74.4% Other 5,942 6,451 5,888 6,895 6,198 6,580 6,878 7,732 6,979 7,501 6,376 18,281 19,656 20,856 25,176 27,388 28,253 28,750 -497 73.8% YoY -1.5% 0.8% 0.2% 2.9% -1.7% -1.8% -0.4% 0.4% 2.1% 2.9% 0.9% -0.2% -1.3% 2.0% 0.6% -0.8% 0.9% -1.1% Personnel -2.4% -1.6% -2.4% -2.9% -3.3% -2.1% -0.5% -0.2% 1.0% 1.4% 0.5% -2.1% -2.0% 1.0% -2.3% -1.5% 1.5% 0.6% Advert ising 6.6% 6.5% -6.7% 9.2% -6.6% -5.4% -2.7% -6.5% -3.7% -2.3% 6.9% 1.6% -4.9% 0.5% 3.3% -5.3% 0.5% -3.3% General and administrative -2.2% 0.9% 4.2% 3.3% -0.0% -1.7% -6.1% -1.3% 1.4% 1.4% 2.7% 0.9% -2.6% 1.7% 1.6% -2.3% -0.4% -4.6% Other -6.9% 1.2% 5.6% 11.1% 4.3% 2.0% 16.8% 12.1% 12.6% 14.0% -7.3% -0.3% 7.5% 6.1% 2.6% 8.8% 3.2% 5.0% % of operating revenue 24.6% 24.9% 24.3% 22.7% 24.1% 24.8% 25.0% 22.8% 23.9% 24.8% 23.8% 24.6% 24.6% 24.2% 24.1% 24.1% 23.8% 24.0% Personnel 8.2% 8.5% 8.2% 7.8% 7.9% 8.5% 8.4% 7.8% 7.7% 8.4% 8.0% 8.3% 8.3% 8.0% 8.2% 8.1% 8.1% 8.2% Advertising 4.4% 3.3% 4.0% 3.1% 4.1% 3.2% 4.1% 2.9% 3.8% 3.0% 4.1% 3.9% 3.8% 3.6% 3.7% 3.5% 3.5% 3.4% General and administrative 8.5% 9.3% 8.6% 8.3% 8.5% 9.3% 8.4% 8.2% 8.3% 9.1% 8.1% 8.8% 8.7% 8.5% 8.7% 8.6% 8.3% 8.2% Other 3.5% 3.7% 3.4% 3.5% 3.7% 3.9% 4.1% 3.9% 4.0% 4.3% 3.6% 3.6% 3.9% 4.0% 3.5% 3.9% 3.9% 4.1% Operating profit 2,235 1,283 2,515 4,907 2,482 1,312 1,863 4,635 2,916 1,536 3,427 6,033 5,657 7,879 10,940 10,292 12,400 11,300 +1,100 63.5% YoY -37.2% 108.3% 56.3% -24.1% 11.1% 2.3% -25.9% -5.5% 17.5% 17.1% 84.0% 4.3% -6.2% 39.3% -10.7% -5.9% 20.5% 9.8% OPM 1.4% 0.8% 1.5% 2.5% 1.5% 0.8% 1.1% 2.4% 1.7% 0.9% 2.0% 1.2% 1.1% 1.5% 1.6% 1.5% 1.8% 1.6% Source: Shared Research based on company data

▷ Cumulative Q3 FY02/18: Inbound sales, which have been rising significantly starting in Q4 FY02/17, combined with solid personal spending. Domestic department stores have increased sales. Parent company sales and profit both up ▷ By customer segment: Affluent customers and inbound demand remains robust. Demand is recovering among middle-class customers, and the company is making progress in attracting the next generation of customers thorough an alliance strategy  Inbound demand: Instore duty-free sales were JPY12.6bn (+57% YoY), accounting for roughly half the sales increase of domestic department stores. Sales remained brisk in December and look set to exceed the 2H target of JPY22bn. Sales of the subsidiary dedicated to inbound sales were disappointing at JPY1.1bn versus targets of JPY800mn in 1H and JPY2.7bn in 2H ▷ Parent gross profit margin: Even though GPM declined 0.25pp YoY, gross profit was up on increased sales. Other operating revenue also increased, helping parent operating profit to increase by JPY2.2bn  Increase in inbound sales puts downward pressure on GPM (discount coupons apply to cosmetics and other popular items), although contributes to gross profit; counteracting downward trend by steps to improve GPM ▷ Overseas department stores: Sales increase from September on positive momentum in the market environment in Singapore. Sales were up in Shanghai on effective use of an event sales space, and in Ho Chi Minh City sales were brisk

84/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Specific measures undertaken in cumulative Q3 FY02/18 include:

◤ Inbound demand: Both the inbound customer count and sales to this customer segment have increased thanks to a range of measures conducted with partners plus expanding the duty-free counter at the Osaka store. These measures include the distribution of coupons (in cooperation with NTT Docomo) to mobile devices used by inbound tourists, the active promotion of sales using mobile payment services Alipay and WeChat Pay, and a campaign in partnership with Ctrip, China’s largest online travel agency.

Alliance effect In terms of developing new markets, alliances with other companies had a positive impact on sales and helped draw customers. Point-related sales accounted for 4.3% of 1H domestic department store sales (Q1 was around 4%, and Q3 was 4.8%. Related sales in 1H were JPY15.8bn, and the company is targeting JPY35.0bn for the full year (4.6% of total sales; 4.9% in 2H). Progress in Q3 has been good, with point-related sales at JPY9.0bn versus the 2H target of JPY19.2bn. Takashimaya initiated an alliance with NTT Docomo in April 2016 (users of NTT Docomo’s credit card service receive d-points equal to a maximum of 3% of purchases; starting in August, users receive 3% even with a d-point card and can pay using points). Starting in October 2016, Takashimaya also permits customers to use Loyalty Marketing’s Ponta point service. These alliances have allowed the company to capture younger customers, leading to increased sales.

85/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

will conduct about JPY200mn in upfront spending during the initial year, but forecasts a profit contribution of around JPY400mn after the third year. Although initial progress has been slower than expected, the number of younger cardholders appears to be rising. Accompanying the issuance of the debit cards, in November the company started to provide the Takashimaya Royal Customer Service (tentative name) targeting affluent customers.

Sales growth remained robust in Q3, reaching JPY13.7bn (JPY12.6bn from department stores [+57% YoY] and JPY1.1bn from duty-free subsidiary), driven by the Osaka store (JPY6.3bn, +80% YoY) and Kyoto store (JPY2.8bn, 2x). Sales growth accelerated from 5% YoY in 1H at the Shinjuku store (JPY2.8bn, +15% YoY). In Q3, Takashimaya worked on improving the quality of its services, including expanding the duty-free counter at the Osaka store in November in response to growing demand.

Sales to inbound tourists

Sales by store

(JPYbn) Shinjuku Osaka Others (JPYmn) Shinjuku Osaka (JPYbn) Shinjuku Osaka Others (JPYmn) Shinjuku Osaka 50 18% Duty-free total 14 20% Duty-free total 44.6 12.6 12.6 45 16% 18% 12 11.2 40 10.0 16% 34.4 14% 35 10 14% 29.9 12% 8.3 8.0 30 12% 10% 8 6.9 25 10% 21.3 8% 6 6.3 20 5.3 6.3 8% 14.0 15.1 6% 5.0 15 11.7 3.4 3.5 6% 4 2.9 8.3 4% 10 4% 4.9 2 10.8 11.1 2% 3.3 3.1 5 2.1 9.6 2.8 2.3 2.4 2.3 2.8 2% 5.1 0 3.0 0% 0 0% FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Q1 Q1 Q1 Q1 Est. Est. FY02/17 FY02/18 FY02/17 FY02/18 Source: Shared Research based on company data

86/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Exchange rate

JPY/USD JPY/CNY JPY/HKD (right axis)

120 24

100 20

80 16

60 12 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Source: Shared Research based on data from Mizuho Bank, Ltd.

Duty-free shop in Tokyo In addition, A&S Takashimaya Duty Free, a joint venture with ANA Trading and Hotel Shilla (Korea), was opened at Shinjuku Takashimaya Times Square in April 2017. 1H sales were JPY760mn and operating loss was JPY730mn (about JPY300mn in Q1). Sales were only about 30% of the forecast (sales of JPY2.7bn and operating loss of JPY700mn). Primary causes were fewer package tours visiting the shops than originally expected and delays in starting operations. The former cause had greater impact. The company plans to increase the number of package tours by conducting sales activities and concentrating management resources on major travel agencies in China (via joint ventures) to get them to send customers and on major travel agencies in Japan that arrange lodgings. It will also seek to capture individual tourists through a variety of measures. The company is currently in discussions with three major Chinese banks about referring customers.

By product By product, based on monthly trends, until July, monthly sales were negative YoY and apparel (especially womenswear) performed poorly. However, sales have been positive YoY since August, when monthly sales were down 0.1% YoY (excluding October) and appear to be recovering (seasonal factors hurt October sales, including two typhoons that arrived on weekends). Of the lucrative products planned and managed by Takashimaya, sales of cashmere items improved almost 20% YoY after a revamp, including a change of stylists. Further, fashion goods and cosmetics performed favorably. Roughly 40% of cosmetics sales came from inbound demand, but both tax-free and non-tax-free business apparently produced higher revenue YoY. Luxury products performed steadily, underpinned by the wealth effect of the robust stock market.

By store Large stores drove sales higher. In particular, the Osaka store, which has a high ratio of inbound tourists, saw sales rise 10.1% (+18% in Q3 versus +16% for Shinjuku and +10% for Kyoto). The Nihombashi store posted an increase of 2.0%, indicating that aggressive sales activities by the corporate division paid off. The 260,000 or so accounts held by the company (more than 20% share of all domestic department store sales) are being revitalized as a result of cultivating new customers. The Osaka store, for example, signs up around 2,000 new accounts per year, of which 90% spend more than JPY1mn annually shopping at the store. The remodeling effect is lasting a long time at the Takasaki Store, while the Tachikawa store has benefited from taking Nitori as a tenant, which has led to an increase in customer traffic despite a 20–30% loss of sales floor space.

87/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Domestic department store sales

Domestic dept. stores FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Cml. Q3Cml. Q3Cml. Q3Act.Act.Est.Init. Est. Diff. % of FY Sales 178,529 183,832 181,693 210,987 178,849 180,483 175,607 210,207 182,691 184,747 185,355 544,054 534,939 552,793 755,041 745,146 760,120 740,532 +19,588 72.7% Parent 165,263 170,599 168,478 195,705 165,756 167,709 162,756 195,132 169,858 171,901 172,298 504,340 496,221 514,057 700,045 691,353 706,300 687,000 +19,300 72.8% Osaka 30,174 31,179 30,736 35,541 31,083 30,674 30,884 37,311 33,998 33,462 34,577 92,089 92,641 102,037 127,630 129,952 138,671 132,877 +5,794 73.6% Sakai 3,203 3,613 3,150 3,894 3,026 3,372 2,915 3,675 3,047 3,293 3,040 9,966 9,313 9,380 13,860 12,988 12,877 12,563 +314 72.8% Kyoto 20,472 20,778 20,643 24,052 20,363 20,470 20,070 23,912 20,697 21,015 21,528 61,893 60,903 63,240 85,945 84,815 87,696 85,725 +1,971 72.1% Senboku 4,285 4,741 4,266 5,322 4,155 4,594 4,085 5,165 3,828 4,274 3,814 13,292 12,834 11,916 18,614 17,999 16,709 16,485 +224 71.3% Tokyo (Nihombashi) 31,143 32,402 34,755 38,331 32,258 32,676 31,381 36,593 32,568 32,109 33,562 98,300 96,315 98,239 136,631 132,908 132,494 126,021 +6,473 74.1% Yokohama 31,834 32,353 31,738 36,110 31,099 31,358 30,838 36,136 31,512 31,975 32,011 95,925 93,295 95,498 132,035 129,431 132,484 130,208 +2,276 72.1% Konandai 2,283 2,554 2,281 2,850 2,321 2,238 1,936 2,400 1,901 2,119 1,886 7,118 6,495 5,906 9,968 8,895 8,380 8,670 -290 70.5% Shinjuku 17,208 16,919 16,481 19,833 17,267 16,864 16,495 20,217 17,550 17,256 17,641 50,608 50,626 52,447 70,441 70,843 72,793 72,225 +568 72.0% Tamagawa 9,688 10,746 10,072 12,402 9,994 10,680 10,021 12,392 10,002 10,853 10,293 30,506 30,695 31,148 42,908 43,087 43,835 43,626 +209 71.1% Tachikawa 3,708 3,980 3,654 4,411 3,347 3,691 3,373 4,178 3,312 3,586 2,477 11,342 10,411 9,375 15,753 14,589 11,963 11,476 +487 78.4% Omiya 2,519 2,706 2,438 2,865 2,357 2,672 2,346 2,754 2,313 2,693 2,392 7,663 7,375 7,398 10,528 10,129 10,178 10,187 -9 72.7% Kashiwa 8,741 8,626 8,267 10,092 8,480 8,422 8,411 10,398 9,125 9,265 9,075 25,634 25,313 27,465 35,726 35,711 38,220 36,937 +1,283 71.9% Okayama Takashiyama 4,493 4,469 4,497 5,058 4,471 4,307 4,422 5,115 4,628 4,428 4,591 13,459 13,200 13,647 18,517 18,315 18,731 18,284 +447 72.9% Gifu Takashimaya 3,712 3,621 3,724 4,273 3,665 3,522 3,583 4,190 3,475 3,517 3,514 11,057 10,770 10,506 15,330 14,960 14,603 14,664 -61 71.9% Yonago Takashimaya 1,447 1,476 1,415 1,655 1,337 1,344 1,268 1,384 1,189 1,204 1,166 4,338 3,949 3,559 5,993 5,333 5,006 5,279 -273 71.1% Takasaki Takashimaya 3,613 3,666 3,580 4,296 3,618 3,601 3,578 4,387 3,538 3,698 3,787 10,859 10,797 11,023 15,155 15,184 15,480 15,305 +175 71.2% Yo Y -3.3% 4.0% 3.9% 1.0% 0.2% -1.8% -3.3% -0.4% 2.1% 2.4% 5.6% 1.5% -1.7% 3.3% 1.3% -1.3% 2.0% -0.6% Parent -3.2% 4.2% 4.2% 1.1% 0.3% -1.7% -3.4% -0.3% 2.5% 2.5% 5.9% 1.7% -1.6% 3.6% 1.5% -1.2% 2.2% -0.6% Osaka -0.4% 7.2% 5.9% 4.2% 3.0% -1.6% 0.5% 5.0% 9.4% 9.1% 12.0% 4.2% 0.6% 10.1% 4.2% 1.8% 6.7% 2.3% Sakai -6.0% 1.2% -2.4% -3.6% -5.5% -6.7% -7.5% -5.6% 0.7% -2.3% 4.3% -2.3% -6.6% 0.7% -2.7% -6.3% -0.9% -3.3% Kyoto -1.7% 4.2% 3.3% 1.8% -0.5% -1.5% -2.8% -0.6% 1.6% 2.7% 7.3% 1.9% -1.6% 3.8% 1.8% -1.3% 3.4% 1.1% Senboku -8.7% -3.3% -4.1% -2.9% -3.0% -3.1% -4.2% -3.0% -7.9% -7.0% -6.6% -5.4% -3.4% -7.2% -4.7% -3.3% -7.2% -8.4% Tokyo (Nihombashi) -1.0% 6.8% 12.6% 3.1% 3.6% 0.8% -9.7% -4.5% 1.0% -1.7% 7.0% 6.1% -2.0% 2.0% 5.2% -2.7% -0.3% -5.2% Yokohama -7.4% 1.9% -0.1% -2.3% -2.3% -3.1% -2.8% 0.1% 1.3% 2.0% 3.8% -2.0% -2.7% 2.4% -2.1% -2.0% 2.4% 0.6% Konandai -7.2% -2.3% -2.6% -3.7% 1.7% -12.4% -15.1% -15.8% -18.1% -5.3% -2.6% -4.0% -8.8% -9.1% -4.0% -10.8% -5.8% -2.5% Shinjuku 2.2% 7.8% 5.4% 0.5% 0.3% -0.3% 0.1% 1.9% 1.6% 2.3% 6.9% 5.1% 0.0% 3.6% 3.7% 0.6% 2.8% 2.0% Tamagawa -6.7% 3.9% 3.4% 3.7% 3.2% -0.6% -0.5% -0.1% 0.1% 1.6% 2.7% 0.1% 0.6% 1.5% 1.1% 0.4% 1.7% 1.3% Tachikawa -13.4% -4.1% -6.9% -4.8% -9.7% -7.3% -7.7% -5.3% -1.0% -2.8% -26.6% -8.2% -8.2% -10.0% -7.3% -7.4% -18.0% -21.3% Omiya -4.9% -3.6% -1.4% -3.8% -6.4% -1.3% -3.8% -3.9% -1.9% 0.8% 2.0% -3.3% -3.8% 0.3% -3.5% -3.8% 0.5% 0.6% Kashiwa -2.7% 0.3% 0.8% 0.9% -3.0% -2.4% 1.7% 3.0% 7.6% 10.0% 7.9% -0.6% -1.3% 8.5% -0.2% -0.0% 7.0% 3.4% Okayama Takashiyama -3.4% 2.6% 1.5% -1.0% -0.5% -3.6% -1.7% 1.1% 3.5% 2.8% 3.8% 0.1% -1.9% 3.4% -0.2% -1.1% 2.3% -0.2% Gifu Takashimaya -4.9% 1.8% -0.3% 1.7% -1.3% -2.7% -3.8% -1.9% -5.2% -0.1% -1.9% -1.2% -2.6% -2.5% -0.4% -2.4% -2.4% -2.0% Yonago Takashimaya -7.1% 0.1% -5.0% 1.2% -7.6% -8.9% -10.4% -16.4% -11.1% -10.4% -8.0% -4.1% -9.0% -9.9% -2.7% -11.0% -6.1% -1.0% Takasaki Takashimaya -4.0% 3.4% 0.7% 0.0% 0.1% -1.8% -0.1% 2.1% -2.2% 2.7% 5.8% -0.0% -0.6% 2.1% 0.0% 0.2% 1.9% 0.8% Source: Shared Research based on company data

Sales by main product

Apparel Personal items Food Accessories 40% Cosmetics Art work and jewelry 20% 35% 15% 30% 25% 10% 20% 5% 15% 10% 0% 5% -5% 0% -5% -10% -10% -15% -15% Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Source: Shared Research based on company data

88/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Domestic dept. store FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H Sales 333,263 411,758 321,539 408,207 329,317 406,015 334,376 413,436 334,456 410,583 362,361 392,680 359,332 385,814 367,438 Apparel total 101,967 130,737 105,541 137,281 107,571 135,847 107,952 135,577 106,916 134,933 113,342 120,707 107,758 113,335 105,342 Menswear 21,819 29,225 21,201 29,001 21,570 28,925 21,431 28,878 21,214 29,816 22,661 25,813 21,905 23,928 20,886 Womenswear 62,551 80,750 66,816 87,520 68,469 86,649 68,908 86,360 67,756 85,330 71,863 77,068 68,041 72,690 66,593 Children's w ear 9,829 10,524 9,640 10,728 9,448 10,223 9,382 10,078 9,450 10,091 10,277 9,383 9,929 9,191 10,035 Other apparel 7,767 10,238 7,882 10,033 8,083 10,050 8,230 10,260 8,495 9,696 8,539 8,444 7,881 7,526 7,826 Personal items 55,578 64,940 46,023 57,329 48,546 57,811 50,112 60,143 50,597 58,735 55,272 58,182 53,700 56,963 55,938 Accessories total 42,224 51,693 39,750 48,778 40,493 50,094 42,569 52,865 44,654 55,134 52,422 57,921 56,655 61,734 63,720 Cosmetics 18,058 23,198 18,082 23,169 18,507 23,471 18,821 24,170 19,923 25,680 25,153 28,064 29,308 33,142 36,165 Art work and jewelry 13,457 16,334 12,293 14,989 13,174 16,581 15,380 18,825 16,436 20,222 19,309 20,003 18,645 19,364 19,587 Other accessories 10,708 12,161 9,374 10,620 8,812 10,041 8,367 9,870 8,294 9,231 7,959 9,853 8,702 9,228 7,967 Household goods total 28,258 32,015 26,684 31,277 26,781 30,033 27,473 31,471 27,809 29,494 28,613 28,810 28,095 26,596 25,423 Furniture 6,784 7,073 6,611 6,725 6,263 6,318 6,618 6,821 6,427 6,037 6,164 5,883 5,635 5,140 4,746 Home appliances 783 1,312 818 1,105 860 1,096 1,292 1,559 1,470 1,316 1,549 932 1,778 1,139 1,382 Other household goods 20,689 23,631 19,254 23,447 19,657 22,619 19,562 23,091 19,911 22,141 20,899 21,996 20,680 20,318 19,294 Foods total 94,903 121,213 93,741 121,902 95,448 120,501 95,303 121,146 93,284 120,246 100,447 114,536 100,129 114,691 101,196 Fresh produce 19,654 26,555 17,935 24,312 18,095 24,413 18,080 24,488 17,826 23,999 19,357 21,701 18,875 21,518 18,707 Confectionery 24,613 31,122 24,235 30,911 24,213 30,574 24,182 31,078 24,223 31,966 26,568 31,678 26,825 31,763 27,295 Deli foods 20,453 27,407 24,681 33,058 24,381 32,086 24,286 32,175 23,880 31,903 25,158 31,400 25,367 31,101 25,538 Other foods 30,183 36,127 26,888 33,621 28,757 33,428 28,753 33,405 27,354 32,378 29,363 29,757 29,061 30,308 29,655 Restaurant and cafes 6,319 6,767 6,020 6,865 6,425 6,891 6,796 7,079 6,888 7,083 7,399 6,716 7,392 6,625 7,497 Services and others 4,011 4,393 3,776 4,777 4,050 4,837 4,166 5,157 4,304 4,959 4,864 5,806 5,599 5,871 8,319 Sales -2.2% -0.7% -3.5% -0.9% 2.4% -0.5% 1.5% 1.8% 0.0% -0.7% 8.3% -4.4% -0.8% -1.7% 2.3% Apparel total -4.2% -0.9% 3.5% 5.0% 1.9% -1.0% 0.4% -0.2% -1.0% -0.5% 6.0% -10.5% -4.9% -6.1% -2.2% Menswear -4.8% -0.4% -2.8% -0.8% 1.7% -0.3% -0.6% -0.2% -1.0% 3.2% 6.8% -13.4% -3.3% -7.3% -4.7% Womenswear -4.5% -1.1% 6.8% 8.4% 2.5% -1.0% 0.6% -0.3% -1.7% -1.2% 6.1% -9.7% -5.3% -5.7% -2.1% Children's w ear -0.8% -1.7% -1.9% 1.9% -2.0% -4.7% -0.7% -1.4% 0.7% 0.1% 8.8% -7.0% -3.4% -2.0% 1.1% Other apparel -5.0% 0.2% 1.5% -2.0% 2.6% 0.2% 1.8% 2.1% 3.2% -5.5% 0.5% -12.9% -7.7% -10.9% -0.7% Personal items -0.0% -1.4% -17.2% -11.7% 5.5% 0.8% 3.2% 4.0% 1.0% -2.3% 9.2% -0.9% -2.8% -2.1% 4.2% Accessories total -4.9% -0.5% -5.9% -5.6% 1.9% 2.7% 5.1% 5.5% 4.9% 4.3% 17.4% 5.1% 8.1% 6.6% 12.5% Cosmetics -2.2% 1.3% 1.7% 3.0% 5.9% 6.2% 26.3% 9.3% 16.5% 18.1% 23.4% 1.3% 0.1% -0.1% 2.4% Art work and jewelry -5.2% 10.6% 16.7% 13.5% 6.9% 7.4% 17.5% -1.1% -3.4% -3.2% 5.1% Other accessories -8.8% -5.2% -12.5% -12.7% -6.0% -5.5% -5.0% -1.7% -0.9% -6.5% -4.0% 6.7% 9.3% -6.3% -8.4% Household goods total -0.4% -1.7% -5.6% -2.3% 0.4% -4.0% 2.6% 4.8% 1.2% -6.3% 2.9% -2.3% -1.8% -7.7% -9.5% Furniture 1.1% -6.1% 5.7% 8.0% -2.9% -11.5% -4.1% -2.6% -8.6% -12.6% -15.8% 0.2% -2.6% -4.9% -5.3% Home appliances -22.6% -0.8% 50.2% 42.2% 13.8% -15.6% 5.4% -29.2% 14.8% 22.2% -22.3% Other household goods 0.2% -2.3% -6.9% -0.8% 2.1% -3.5% -0.5% 2.1% 1.8% -4.1% 5.0% -0.7% -1.0% -7.6% -6.7% Foods total -0.3% 0.9% -1.2% 0.6% 1.8% -1.1% -0.2% 0.5% -2.1% -0.7% 7.7% -4.7% -0.3% 0.1% 1.1% Fresh produce -0.4% 1.3% -8.7% -8.4% 0.9% 0.4% -0.1% 0.3% -1.4% -2.0% 8.6% -9.6% -2.5% -0.8% -0.9% Confectionery -1.4% -0.5% -1.5% -0.7% -0.1% -1.1% -0.1% 1.6% 0.2% 2.9% 9.7% -0.9% 1.0% 0.3% 1.8% Deli foods -1.7% -0.1% 20.7% 20.6% -1.2% -2.9% -0.4% 0.3% -1.7% -0.8% 5.4% -1.6% 0.8% -1.0% 0.7% Other foods 1.8% 2.6% -10.9% -6.9% 7.0% -0.6% -0.0% -0.1% -4.9% -3.1% 7.3% -8.1% -1.0% 1.9% 2.0% Restaurant and cafes -3.0% -5.0% -4.7% 1.4% 6.7% 0.4% 5.8% 2.7% 1.4% 0.1% 7.4% -5.2% -0.1% -1.4% 1.4% Services and others -5.2% -13.0% -5.9% 8.7% 7.3% 1.3% 2.9% 6.6% 3.3% -3.8% 13.0% 17.1% 15.1% 1.1% 48.6% Source: Shared Research based on company data

GPM Parent GPM worsened 0.25pp YoY in cumulative Q3 to 24.26% (Q3 estimate: 24.36%, -0.24pp YoY), but is more or less on track versus the full-year target of 24.13% (-0.20pp). The company has been implementing various measures to counter the GPM downtrend toward a 0.30pp drop per annum owed to the pressure from an increase in duty-free sales (discount coupons apply to cosmetics, which are popular with inbound tourists). That being said, we note that the increase in tax-free sales raises gross profit.

SG&A expenses were also on track. Personnel expenses are rising in line with steady sales growth. The effect of a change in recording rent of the Shinjuku store wore off in 1H, but a JPY500mn expense saving (five months’ worth) is expected in 2H as the company begins to benefit from the 100% ownership of the Shinjuku store. We assume no significant one-time expenses or accounting treatment changes in Q4.

Parent gross profit margin

26.5% 25.9% 26.0% 25.7%25.7% 25.6% 25.6% 25.5% 25.5% 25.3% 25.4% 25.3% 25.2% 25.2% 25.2% 25.0% 25.0% 24.8% 25.0% 24.7% 24.7% 24.6% 24.6% 24.5% 24.5%24.5% 24.4% 24.5% 24.3% 24.3% 24.2% 24.0% 23.9%

23.5% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data

89/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Parent SG&A expenses

Personnel Advertising General and administrative Other YoY (left axis) Personnel Advertising 3% 60 General and administrative Other SG&A (right axis) 10% 28% 2% 50 43.9 44.2 43.8 45.1 45.3 42.7 42.2 42.7 43.1 42.3 43.5 9% 27% 41.9 41.5 41.2 41.6 40.6 41.4 41.4 41.8 6.2 6.9 7.7 1% 7.4 7.4 7.7 6.4 6.5 6.6 7.5 40 8% 26% 7.1 6.4 5.6 5.9 5.9 6.2 6.9 7.0 6.4 7% 25% 0% 15.5 14.2 16.0 16.6 16.3 30 14.4 15.9 13.8 14.6 15.9 14.2 16.1 14.8 14.2 15.8 13.9 14.4 16.0 14.3 6% 24% 5% 23% -1% 5.7 6.2 5.8 20 7.1 5.3 6.9 5.7 6.9 5.4 7.4 7.3 5.8 6.9 6.8 5.5 6.7 6.6 5.3 7.2 4% 22% -2% 10 13.8 15.3 14.4 15.2 14.1 15.0 14.4 15.9 13.7 14.8 14.0 15.5 13.3 14.5 14.0 15.4 13.4 14.7 14.0 3% 21% -3% 0 2% 20% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data

Department stores overseas At the Takashimaya department store in Singapore, sales increased in line with signs that the domestic economy has been improving since August, strengthened sales promotions for its own store card, and steady tourist sales. At the Shanghai Takashimaya, sales increased as the company made use of a special “Nihonkan” sales space introducing Japanese culture and selling related specialty products, and also benefited from increase in memberships and customer enclosure on the back of policies for card customers. At Takashimaya Ho Chi Minh City (opened July 30, 2016), sales were steady thanks to targeted promotions held in collaboration with specialty stores, the store’s cosmetics offering (it boasts the largest offering in the region), and food products that are sold in the basement floor, which recreates the Takashimaya stores in Japan. Sales are on track and the JPY311mn operating loss is forecast to shrink at Takashimaya Ho Chi Minh City.

In fall 2018, the company plans to open Siam Takashimaya in Thailand in cooperation with a major local company, but as it is entering a commercial facility as a core tenant, it believes it is possible to turn an operating profit from the first year if sales are brisk (although it expects to post a loss).

Change in the Shinjuku store’s method of booking rents The Shinjuku store previously had an operation structure in which the parent managed the department store and subsidiary Toshin Development Company managed tenants. Under the new integrated system that began in 2H FY02/17, Toshin Development manages the entire building. Accounting wise, the parent now posts an amount that equals the rent it pays Toshin Development as operating revenue, and at the same time books the same amount as rent under SG&A expenses (Toshin Development does the same). While this change will not have any impact at the consolidated level, both the parent and Toshin Development saw a nominal increase of about JPY1.7bn (=six months) in both operating revenue and SG&A expenses in 1H FY02/18.

Real Estate In this segment, Toshin Development, a major subsidiary, pursued collaborative projects with local communities as part of group-wide efforts in Japan and overseas. In particular, at the Tachikawa TM building and Shinjuku Takashimaya Times Square, both of which moved to the new integrated management system under Toshin Development, the company worked to provide quality services based on enhanced communication between the department stores and tenants, and implemented initiatives including building-wide sales promotions, with the aim of developing the Takashimaya brand throughout the buildings. In addition, remodeling was conducted in Kashiwa and Nagareyama. At Nagareyama, to match the region’s theme of being “a town where young parents want to live,” the company established a children’s zone that includes children’s goods, a nursery, and a nursing room. As it approaches its 25th anniversary, the Kashiwa Takashimaya Station Mall is strengthening its fashion lineup geared toward working customers in their 30s and 40s, and has also added a large book store floor. Going forward, it plans to continue leveraging its competitive location (directly connected to JR Kashiwa Station) and implement incremental renovations. The decline in profit during 1H was due to decreased revenue from tenants because of remodeling at Kashiwa and Nagareyama, and this impact should disappear from 2H onward.

90/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

At Toshin Development Singapore Pte. Ltd., the company's Machi-Zukuri initiative (urban development strategy) is also being pursued in the ASEAN region and led to the opening of the Saigon Centre SC in July 2016. Takashimaya Ho Chi Minh City is the core tenant. The Saigon Centre is entering its second year and has gained high praise locally for providing one of the top commercial environments in Vietnam, thanks to cooperation with a major real estate company in Singapore. In addition, the company acquired partial ownership of the A&B Tower located in the same area in March, and it intends to further pursue its urban development strategy in the city.

Real Estate performance

Real Estate FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Cml. Q3Cml. Q3Cml. Q3Act.Act.Est.Init. Est. Diff. % of FY Operating revenue 9,719 9,928 10,069 10,226 10,671 10,438 10,024 16,790 9,960 9,965 9,875 29,716 31,133 29,800 42,389 47,923 49,793 56,998 -7,205 59.8% YoY 3.1% 6.0% 6.6% 3.7% 9.8% 5.1% -0.4% 64.2% -6.7% -4.5% -1.5% 5.2%4.8%-4.3% 71.9% 13.1% 3.9% 18.9% Operating profit 2,607 2,414 2,763 2,510 2,912 2,514 2,494 3,108 2,783 2,317 2,444 7,784 7,920 7,544 10,297 11,028 11,521 11,504 +17 65.5% YoY 16.4% 12.0% 19.2% -10.8% 11.7% 4.1% -9.7% 23.8% -4.4% -7.8% -2.0% 16.0% 1.7% -4.7% 615.6%7.1%4.5%4.3% OPM 26.8% 24.3% 27.4% 24.5% 27.3% 24.1% 24.9% 18.5% 27.9% 23.3% 24.7% 26.2% 25.4% 25.3% 24.3% 23.0% 23.1% 20.2% Main subsidiaries FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Cml. Q3Cml. Q3Cml. Q3Act.Act.Est.Init. Est. Diff. % of FY Operating revenue Toshin Development 8,555 8,584 8,837 9,032 8,882 8,849 9,795 17,055 10,010 10,176 9,876 25,976 27,526 30,062 35,008 44,581 54,985 55,711 -726 54.7% TDS 2,284 2,442 2,385 2,379 2,376 2,197 2,070 2,142 2,224 2,215 2,220 7,111 6,643 6,659 9,490 8,785 8,907 8,743 +164 74.8% YoY Toshin Development 1.5% 1.4% 4.9% 4.6% 3.8% 3.1% 10.8% 88.8% 12.7% 15.0% 0.8% 2.6% 6.0% 9.2% 3.1% 27.3% 23.3% 25.0% TDS 8.7% 22.3% 12.4% 3.1% 4.1% -10.1% -13.2% -10.0% -6.4% 0.8% 7.2% 14.3% -6.6% 0.2% 11.3% -7.4% 1.4% -0.5% Operating profit Toshin Development 2,066 1,855 2,123 1,962 2,188 1,968 1,988 2,696 2,182 1,802 1,736 6,044 6,144 5,720 8,006 8,840 9,307 9,250 +57 61.5% TDS 588 605 687 596 756 592 545 447 617 572 569 1,880 1,893 1,758 2,476 2,340 2,327 2,363 -36 75.5% YoY Toshin Development 7.8% 0.6% 9.2% -4.2% 5.9% 6.1% -6.4% 37.4% -0.3% -8.4% -12.7% 5.9%1.7%-6.9% 3.2% 10.4% 5.3% 4.6% TDS 58.3% 69.7% 63.2% -26.6% 28.5% -2.1% -20.7% -25.0% -18.4% -3.4% 4.4% 63.6% 0.7% -7.1% 26.3% -5.5% -0.6% 1.0% OPM Toshin Development 24.1% 21.6% 24.0% 21.7% 24.6% 22.2% 20.3% 15.8% 21.8% 17.7% 17.6% 23.3% 22.3% 19.0% 22.9% 19.8% 16.9% 16.6% TDS 25.8% 24.8% 28.8% 25.1% 31.8% 26.9% 26.3% 20.9% 27.7% 25.8% 25.6% 26.4% 28.5% 26.4% 26.1% 26.6% 26.1% 27.0% Source: Shared Research based on company data

Finance performance

Finance FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Cml. Q3Cml. Q3Cml. Q3Act.Act.Est.Init. Est. Diff. % of FY Operating revenue 3,316 3,037 3,097 3,415 3,483 3,234 3,245 3,452 3,607 3,590 3,375 9,450 9,962 10,572 12,865 13,414 14,048 13,796 +252 75.3% YoY 2.7% 5.0% 3.8% 4.1% 5.0% 6.5% 4.8% 1.1% 3.6% 11.0% 4.0% 3.8% 5.4% 6.1% 3.9% 4.3% 4.7% 2.8% Operating profit 1,146 1,038 1,047 1,145 1,173 1,129 1,059 1,134 1,190 1,053 1,025 3,231 3,361 3,268 4,376 4,495 4,508 4,496 +12 72.5% YoY 1.0% 11.6% 8.5% -0.1% 2.4% 8.8% 1.1% -1.0% 1.4% -6.7% -3.2% 6.6%4.0%-2.8% 4.8% 2.7% 0.3% 0.0% OPM 34.6% 34.2% 33.8% 33.5% 33.7% 34.9% 32.6% 32.9% 33.0% 29.3% 30.4% 34.2% 33.7% 30.9% 34.0% 33.5% 32.1% 32.6% Source: Shared Research based on company data

Contract and Design The company’s main subsidiary, Takashimaya Space Create Co., Ltd., saw solid progress at hotels and commercial facilities, but operating revenue and profit declined as a large project booked in the previous year (redevelopment around Nagoya Station) dropped out as a factor. As well, a large project was delayed until FY02/19 and the company unexpectedly failed to win a large order. Contract and Design posted an operating loss in Q3. Although earnings are typically concentrated in Q4, we think it is lagging the full-year target. That being said, the company noted that the order backlog increased 60% YoY. The company has been strengthening its sales capabilities with the aim of further increasing revenue by finding more construction opportunities at hotels and other facilities that are benefiting from demand from inbound tourists.

Contract and Design performance

Contract and Design FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 - (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Cml. Q3Cml. Q3Cml. Q3Act.Act.Est.Init. Est. Diff. % of FY Operating revenue 4,980 9,024 3,401 9,305 4,805 9,430 7,316 9,323 6,926 6,442 4,876 17,405 21,551 18,244 26,710 30,874 30,846 32,455 -1,609 59.1% Takashimaya Space Create 6,100 8,075 6,197 9,879 5,309 10,850 8,547 9,815 7,631 6,944 6,670 20,372 24,706 21,245 30,251 34,521 34,225 36,000 -1,775 62.1% YoY -10.3% 42.0% -30.8% 18.7% -3.5% 4.5% 115.1% 0.2% 44.1% -31.7% -33.4% 3.5% 23.8% -15.3% 8.3% 15.6% -0.1% 5.1% Takashimaya Space Create -4.4% 19.1% -6.6% 15.9% -13.0% 34.4% 37.9% -0.6% 43.7% -36.0% -22.0% 2.9% 21.3% -14.0% 6.8% 14.1% -0.9% 4.3% Operating profit 112 649 47 1,090 -80 944 519 959 264 474 -170 808 1,383 568 1,898 2,342 2,227 2,350 -123 25.5% Takashimaya Space Create 121 633 38 1,079 -91 946 531 966 272 476 -159 792 1,386 589 1,871 2,352 2,219 2,320 -101 26.5% YoY 41.8% 88.1% -64.1% 23.3% - 45.5% 1,004.3% -12.0% - -49.8% - 45.6% 71.2% -58.9% 31.9% 23.4% -4.9% 0.3% Takashimaya Space Create 32.6% 96.1% -73.6% 26.1% - 49.3% 1,297.4% -10.5% - -49.7% - 41.9% 75.0% -57.5% 32.3% 25.7% -5.7% -1.4% OPM 2.2% 7.2% 1.4% 11.7% -1.7% 10.0% 7.1% 10.3% 3.8% 7.4% -3.5% 4.6% 6.4% 3.1% 7.1% 7.6% 7.2% 7.2% Takashimaya Space Create 2.0% 7.8% 0.6% 10.9% -1.7% 8.7% 6.2% 9.8% 3.6% 6.9% -2.4% 3.9% 5.6% 2.8% 6.2% 6.8% 6.5% 6.4% - Source: Shared Research based on company data

91/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Other Sales in the cross-media business improved as online sales grew steadily and changes to measures in the catalog business brought down costs.

92/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

News and topics

December 2017 On December 1, 2017, the company signed an agreement with Takeda Pharmaceutical Real Estate Company to acquire the land and buildings of Tokyo Takeda Building (acquisition price: JPY48.1bn) and Takeda Shin-Edobashi Building (acquisition price: JPY1.4bn), which are located near Takashimaya’s Nihombashi store. The properties are slated to be handed over to the company at end-March 2019. Takashimaya plans to bring together the headquarters, other offices, and group companies that are currently scattered around the Nihombashi area to the Tokyo Takeda Building, as the company aims to increase productivity of operations and advance management collectively as a group.

October 2017 On October 2, 2017, the company announced the acquisition of fixed asset (trust beneficiary rights). The asset is Times Square Building, where the company’s Shinjuku store is located, and the acquisition amount is JPY21.0bn.

The aim of the acquisition is to reduce SG&A expenses through lower rent expenses of the Shinjuku store, as well as with the aim of improving the freedom of real estate use. This is underpinned by the need to generate stable profits despite the projection of an increasingly sluggish consumption environment amid the aging and shrinking domestic population and the consumption tax hike. The company had been progressing negotiations with Tokyu Land Corporation to acquire land co-ownership interests from the latter, and as those negotiations turned into an agreement, the company was able to acquire this asset. As such, both the land and the building where the Shinjuku store is located is now owned by the Takashimaya group. The assets are placed in a trust.

The company is currently evaluating the effect on FY02/18 results, and plans to incorporate this acquisition into full-year earnings forecasts slated to be announced on October 10, 2017, together with 1H earnings results.

July 2017 On July 31, 2017, the company announced a change in executive leadership indicating that its representative director and managing director, Shinji Monda, has resigned due to personal reasons. Managing Director Yoshio Murata will be assuming the position. Murata owns 19,000 shares of Takashimaya.

93/95 Takashimaya / 8233 RCoverage LAST UPDATE: 2018.09.03 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Company profile

Company Head office 5-1-5 Namba Chuo-ku Takashimaya Co., Ltd. Osaka, Japan 542-8510 Phone Listed on +81-6-6631-1101 Tokyo Stock Exchange 1st Section Established Exchange listing August 20, 1919 May 16, 1949 Website Fiscal year-end https://www.takashimaya.co.jp/store/foreign/index.html February IR phone IR web +81-3-3668-7253 https://www.takashimaya.co.jp/corp/english/index.html

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