Annual Report 2015
PARCO CO.,LTD. Annual Report 2015 The PARCO Group Value Creation Process
Performance PARCO, together with its stakeholders, strives to create new lifestyles, guided by the Risks and Opportunities PARCO Group Corporate Mission and the sentiment embodied in the PARCO name. Strategy and Resource In business, PARCO leverages its capabilities as a comprehensive commercial Allocation space producer, while pursuing management strategies in step with the times, to Outlook Planning propose ways to enrich consumer lifestyles. This encapsulates the creation of new P14 Strategy value to which society can connect. PARCO views the tireless advancement of such value through “Incubation,” “Urban Revitalization” and “Trends Communica- tion” as its social role. By taking full advantage of its “Six Capitals” and keeping the PARCO Group Marketing business model revolving, the delivery of new value becomes synonymous with the brand value of the PARCO Group. Put differently, this results in a process for the creation of new value to which society at large can connect. Business Model Equal Partnership Strong in Comprehensive Shopping Complex Production Renovation Profit Structure for the Shopping Complex Business
Mission and Vision P08 PARCO Business Model
P03 Introduction
Outputs
Maintenance Superiority Services P34 Performance
Initiatives by Segment Business Activities Strategy Produced by PARCO Brand PARCO Entertainment P14 Strategy PARCO Group CSR
Cultivation of Major Urban Areas
The Six Capitals Expansion of Core Targets Innovative Use of ICT Financial Manufactured Intellectual Human Social and Relationship Sales Promotion Natural Advertising
PARCO CO., LTD. Annual Report 2015 Governance Introduction P44 Corporate Governance
Tenant Leasing Outcomes The Six Capitals Social Responsibility Boosting financial and shareholder value P24 Special Feature Financial Strategy
PARCO stores that are futuristic, innovative and Incubation brimming with hospitality Manufactured
Improving operational value Special Feature Intellectual Urban Revitalization
Enhancing human resources and client value Human
Trends Communication Customer understanding, Performance confidence and trust Social and Relationship
Creating commercial spaces with minimal envi- ronmental footprint Natural Corporate Governance
Designing Financial Section
Operations Corporate Information
PARCO CO., LTD. Annual Report 2015 01 CONTENTS
Introduction 03 PARCO Corporate Mission and The Concept Behind Our Name 04 To Our Stakeholders 06 PARCO SNAPSHOT 06 PARCO Group Business Fields 08 PARCO Business Model 10 PARCO Stores 12 Consolidated Financial and Non-Financial Highlights Strategy 14 Interview with the President Special Feature 24 Feature 1: Evolving From Our Point of Origin – Three Social Roles of the PARCO Group 24 Concepts Conveyed and Created by PARCO 26 Incubation 28 Urban Revitalization 30 Trends Communication 32 Feature 2: Evolving From Our Point of Origin – PARCO Entertainment Performance 34 Segment Initiatives 34 Shopping Complex Business 36 Retail Business and Space Engineering and Management Business 37 Other Business 38 Produced by PARCO Brand 40 PARCO Entertainment 42 PARCO Group CSR Corporate Governance 44 Corporate Governance 47 Board of Directors and Officers Financial Section 48 Management’s Discussion and Analysis 54 Consolidated Balance Sheets 56 Consolidated Statements of Income 57 Consolidated Statement of Comprehensive Income 58 Consolidated Statements of Changes in Net Assets 59 Consolidated Statements of Cash Flows 60 Notes to Consolidated Financial Statements 79 Independent Auditor’s Report Corporate Information 80 Information on PARCO’s Website 81 About PARCO 82 Organization Chart 83 Stock Information
“PARCO Annual Report 2015” was compiled and edited with reference to the “International Integrated Reporting Framework” propagated by the International Integrated Reporting Council. In addition to the content found in previous reports, this latest report contains content describing non-financial business value, such as an explanation of the cycle of business activities labeled the “PARCO Group Value Creation Process,” “Three Social Roles of the PARCO Group,” and insight into the corporate governance system that underpins business. The cover for this year’s report was produced by Cap, a design office involved in PARCO campaign posters and seasonal catalogs, as well as high-quality design advertising. In the design, PARCO’s pioneering cultural activities and boundary traversing, diverse business activities, stack and overlap like mountains, expressing a vision for outstanding growth.
Refer to the Investor Relations section of the PARCO website for more detailed information concerning financial reporting. www.parco.co.jp/en/ir/
Refer to the CSR section of the PARCO website for detailed information concerning CSR. www.parco.co.jp/en/csr/
Cautionary Statement About Forecasts Descriptions related to future prospects in this report are based on our targets and forecasts and are not intended to provide any assurance or guarantee. Please use this report with the understanding that future earnings of PARCO may differ from our current forecasts.
02 PARCO CO., LTD. Annual Report 2015 Introduction Strategy Special Feature Performance Corporate Governance Financial Section Corporate Information 03 Annual Report 2015 CO., LTD. PARCO Our Corporate Mission is “Creating futuristic, innovative spaces that brim Our Corporate Mission is “Creating futuristic, location are the people who gather The “main characters” at each PARCO Our employees are constantly striving to create new value that surpasses Our company name, PARCO, is the Italian word for “park.” Like a park, each Our company name, PARCO, where people come together to share time and space, location is a space PARCO where they can relax and have fun. provide an enjoyable experience for customers visiting our with hospitality, stores, and help our tenants prosper.” as a company is to there, that is, customers and retail shops. The role of PARCO create stores that customers want to visit, and then visit again, and to strengthen the link between retail shops and customers. what customers expect in order to provide a space where people can feel happy and inspired. The Concept The Concept Behind Our Name Creating futuristic, innovative spaces that brim with hospitality, brim with hospitality, innovative spaces that Creating futuristic, visiting experience for customers providing an enjoyable helping our tenants prosper. our stores, and PARCO PARCO Mission Corporate To Our Stakeholders
04 PARCO CO., LTD. Annual Report 2015 Introduction
This fiscal year marks my fifth since appointment as president of PARCO. Until now, I used the phrase “evolving from our point of origin” as a marker in considering, together with our workforce, ways to reassess and clarify the path that PARCO has taken, and driving the evolution of our Strategy starting point as a company forward. For the PARCO Group, I view our “point of origin” as carrying out attractive urban revitalization and spreading high-value-added communication on trends, which ultimately have a tremendous impact on people’s lifestyles. I define this in three key concepts – “Incubation,” “Urban Revitalization,” and “Trends Communication.” I am convinced that driving this evolution in our point of origin by predicting social and market changes Special Feature to take on business with entirely new concepts is the key to ensuring that the PARCO Group can fulfill its social role and achieve future growth. At the same time, the domestic consumer environment is witnessing a dramatic transformation in market structure, particularly as urban populations rise in step with globalization and an ongoing return to urban areas, coupled with changes in the generational makeup of the population and more diverse customer needs triggered by increasing ICT sophistication.
Outside of Japan, along with China’s maturing market, cities in the ASEAN Performance region are entering a growth phase. Taken together, these changes signal that a plethora of new business opportunities are now emerging. To ensure that we securely capture these global changes and translate them into business opportunities, in fiscal 2014, we declared our a Long- term Vision for the year 2020, announced our Medium-term Business Plan (FY 2014-2016), and revolutionized our business portfolio by spurring Corporate Governance progress in existing businesses and adding vigorous support to new operations. The initial year of the plan went smoothly, with operating and ordinary income both reaching record highs for a third consecutive year. Furthermore, we are planning to raise the dividend scheduled for payment in the February 2016 fiscal year. Our name, PARCO, comes from the Italian word for “park.” Like its namesake, PARCO provides spaces where people can come together to share time and space, where they can relax and have fun. Financial Section As a corporate group, we are committed to driving the evolution of the PARCO Group’s “points of origin” of “Incubation,” “Urban Revitalization” and “Trends Communication,” and to doing our utmost to deliver PARCO locations as spaces where the creation of new lifestyle stories consistently happens. We ask for the continued understanding and support of our many stakeholders as we move forward. Corporate Information
July 2015
PARCO CO., LTD. President and Representative Executive Officer
PARCO CO., LTD. Annual Report 2015 05 PARCO Group Business Fields SNAPSHOT
PARCO Group Net Sales and Operating Income Composition
The PARCO Group is involved in four categories of business. Our core Shopping Complex Business operates our PARCO commercial facilities. The Retail Business operates distinctive specialty shops. The Space Engineering and Management Business conducts interior design, decorating and electrical work, and manages buildings. Finally, our Other Business segment operates our entertainment business and provides web-based information services. PARCO works with its tenants to create commercial spaces that provide customers with enjoyment and maximize synergies within the Group.
Shopping Complex Business P34 Retail Business P36
Ikebukuro PARCO New business Tour de Brain, a lifestyle proposition-based general merchandise select shop
The Shopping Complex Business is the PARCO Group’s flagship operation. The Retail Business is centered on NEUVE A CO., LTD., which develops As a commercial developer, this business functions as a hybrid business and operates select stores based on a five-business structure consisting of model that combines retail and real estate operations. wristwatches, eyewear, cosmetics, fashion accessories, and business On the retail side, this business seeks to improve the sales of each tenant format development. by enhancing the appeal of new shopping complex additions through Guided by the concept of being a “group specializing in unique aspects of renovation, attracting customers through advertisement and sales promotion fashion,” NEUVE A has 182 store locations across Japan (as of February activities, and by offering detailed tenant support. On the real estate side, 2015) and an online store, with 60 new locations opening in just the last this business serves as a comprehensive producer for a full menu of services four years. NEUVE A aims to expand earnings by enhancing its lineup of essential to commercial facility operation, ranging from building original goods, taking steps to develop new business formats, and development and planning to upkeep and management. promoting the opening of stores in highly fashionable commercial facilities While focusing on the development and operation of PARCO locations, in established and emerging urban centers. (As of February 2015, 124 this business is involved in the promotion of ZERO GATE as a new business non-PARCO locations, with 68.0% of locations outside of PARCO) model, as well as undertaking property management/consulting work.
PARCO CO., LTD. www.parco.co.jp/en/ NEUVE A CO., LTD. www.neuve-a.com Head Office 8-16 Shinsen-cho, Shibuya-ku, Tokyo Head Office 8-16 Shinsen-cho, Shibuya-ku, Tokyo Established February 13, 1953 Established June 1, 2001 Net Sales ¥245,646 million Net Sales ¥19,802 million Operating Income ¥11,747 million Operating Income ¥647 million Paid-in Capital ¥34,367 million Paid-in Capital ¥490 million Employees 629 Employees 542 No. of locations (PARCO/ZERO GATE) 19 locations/5 locations No. of locations 182
Net Sales and Operating Income* Net Sales and Operating Income (Millions of yen) (Millions of yen)
248,307 235,841 239,806 241,680 243,783 19,802 11,317 18,344 11,437 17,174 16,404 15,396 647 9,788 530 565
8,434 8,158 415 332
2010 2011 2012 2013 2014 2010 2011 2012 2013 2014
Net Sales Operating Income ■ Net Sales ■ Operating Income
* The entertainment business of PARCO CO., LTD. included in Shopping Complex Business until Fiscal 2010, has been included in Other Business from fiscal 2011.
06 PARCO CO., LTD. Annual Report 2015 Introduction
PARCO Group Net Sales and Operating Income Composition
Space Engineering and Space Engineering and Net Sales Other Business Net Income Other Business Management Business 2.4% Management Business 2.0% Composition 6.6% Composition 2.6% (Fiscal 2014) (Fiscal 2014) Retail Business Retail Business 6.8% 5.2% Strategy
Shopping Complex Business Shopping Complex Business * Figures calculated using figures before eliminations of 84.2% inter-segment transactions. 90.2% * Other operating revenue is included in “Sales.”
Space Engineering and Management Business P36 Other Business P37 Special Feature
Environmental design, interior supervision, lighting-related operations, and tenant interior work Digital signage placed at various sites in Fukuoka PARCO New Building Performance for AMU Plaza Kagoshima Premium Shopping Complex
PARCO SPACE SYSTEMS CO., LTD., which handles the Space Engineering Entertainment Business and Management Business, provides comprehensive services and solutions In the entertainment business, handled by PARCO CO., LTD., we produce a for every phase of the creation of a facility, including space design planning wide variety of compelling content for theater, music, movies and publications. and construction, facility operation, and safety management. Services range Through this business, we disseminate information of the most popular topics from the space product business, which covers aspects of space creation of the day and create added value, which in turn enhances the PARCO brand. such as interior design and display presentation, to the building management business, concerned with the maintenance and management of Web-based Consulting Business
PARCO-CITY CO., LTD., responsible for the web-based consulting Corporate Governance facility safety and comfort. business, offers PARCO and a host of other commercial facilities and For shopping complexes, specialty stores, public facilities, large-scale city specialty stores consulting services in areas such as web-based sales hotels, medical facilities, museums, and other facilities where users value promotions, as well as HR recruitment and training. Together with Group aesthetic design and comfort, we take advantage of PARCO’s deep expertise companies PARCO and NEUVE A, PARCO-CITY is involved in the to help sustain and enhance the business partner’s asset value. development of effective services and applications for the sales floor. Its impressive track record and expertise have won PARCO-CITY praise from many companies in Japan, where it has provided ICT utilization support to over 70 commercial facilities and specialty stores. PARCO SPACE SYSTEMS CO., LTD. www.parco-space.co.jp www.parco-city.co.jp Head Office 8-16 Shinsen-cho, Shibuya-ku, Tokyo PARCO-CITY CO., LTD. Established April 1, 1969 Head Office 8-16 Shinsen-cho, Shibuya-ku, Tokyo Net Sales ¥18,983 million Established March 1, 2000 Financial Section Operating Income ¥328 million Net Sales ¥687 million Paid-in Capital ¥490 million Operating Income ¥6 million Employees 833 Paid-in Capital ¥10 million No. of locations 30 Employees 52
Net Sales and Operating Income Net Sales and Operating Income (Loss)* (Millions of yen) (Millions of yen)
18,983 18,830 18,221 18,581 6,630 6,891 17,643 6,287
5,624 Corporate Information 256
167 385 406 410 328 90 255 591 16
-20
2010 2011 2012 2013 2014 2010 2011 2012 2013 2014
Net Sales Operating Income Net Sales Operating Income (Loss)
PARCO CO., LTD. Annual Report 2015 07 PARCO Business Model SNAPSHOT
Equal Partnership
One of the main characteristics that distinguishes the PARCO Group’s core Shopping Complex Business is our equal partnership with tenants. We view our tenants as partners with whom we can grow and develop by virtue of our mutually shared values. Every one of our corporate divisions at PARCO headquarters works to support the operations of the PARCO shopping complexes where our ten- ants open their stores. The Store Management Division is responsible for comprehensive oversight and support pertaining to the management of each store. The Estate Strategy Division proposes and enacts policies regarding the strategic utilization of owned real estate, and promotes the development of new real estate in ways that contribute to the PARCO business and shopping complexes based on new business for- mats. The ZERO GATE Business Group and Business Strategy Division, meanwhile, take advantage of expertise from the operation and development of PARCO shopping complexes in new businesses.
Building “win-win” relationships through strong ties of trust with tenants
Customer
Providing commercial spaces that exemplify foresight, creativity and hospitality
Product sales Customers, Customers, brand image shopping
Reputation and trust Approx. 800 companies PARCO Tenant Approx. 2,300 tenants Equal Partnership (As of February 28, 2015)
Leveraging expertise cultivated in the operation and development of PARCO shopping complexes in new businesses
PARCO CO., LTD.
Advertising and sales promotion activities
Store Management
Division Existing stores Store visits
Operation of PARCO Tenant Customer service and sales Estate Strategy Customer Division Development by PARCO New stores
Leveraging expertise
ZERO GATE Business Group Property management/ Consulting
Business Strategy Development and operation of ZERO GATE Overseas subsidiaries and offices Division Overseas projects Domestic subsidiaries
08 PARCO CO., LTD. Annual Report 2015 Introduction
PARCO Group: Strong in Comprehensive Shopping Complex Production
The production of shopping complexes involves marketing in the area of the store, planning the building from the proposal stage onward, Marketing the selection of tenants and design of environments that fit the con-
Renovation Planning cept, and the store’s management. At the same time, we enhance Strategy customer appeal through advertising and sales promotion activities utilizing ICT and through our management of daily maintenance, and Maintenance Strong in Tenant Services Comprehensive Leasing support the safety and peace of mind operation of shops. In addition, Shopping Complex we are constantly creating novel sales spaces by promoting their Production remodeling. This integrated production supports the creation of Sales Designing attractive commercial spaces. Promotion Special Feature
Advertising Operations
Profit Structure for the Shopping Complex Business Performance Under store lease agreements, tenants conduct sales with the support of PARCO’s advertising, sales promotion and other marketing activities. PARCO receives the revenue that these tenants generate through sales to customers as its net sales. After a certain period of time, PARCO pays tenants a commission on these sales after deduction of rent and other items. This system has the advantages of eliminating the risks of carrying inventories and bad debt. Commissions are based on a declining rate system, with commissions fixed up to a certain amount of sales and a lower rate applying beyond a certain sales amount. The setting of a minimum rent amount hedges the risk of stagnant sales. The application of a diminishing rent rate to sales offers advantages to both the tenant and to Corporate Governance PARCO. If tenant sales from customer purchases increase due to the tenant’s sales efforts, the tenant’s rent rate decreases. At the same time, PARCO’s rent income increases in terms of the absolute amount. In contrast to earlier PARCO-style operations, in the ZERO GATE Business there are no sales promotions, and profits come from rental revenue.
PARCO-style Operations Profit Structure Advertising and sales promotion activities
Sales activities Financial Section
PARCO Tenant Daily net sales margin Sales from customer purchases Receipts from sales by tenants Customer Receipt of sales after Cost of sales by tenants Payments after deduction of rent cancellation of commissions and operation expenses
ZERO GATE Business Profit Structure Corporate Information
Property development Sales activities
PARCO Tenant Sales from Customer Rental fee customer purchases
PARCO CO., LTD. Annual Report 2015 09 PARCO Stores SNAPSHOT
We operate PARCO Complexes as either Urban Complexes or Community Complexes, depending on the target market and are also strengthening our ZERO GATE business as a new business model. In each market where PARCO shopping complexes open, we utilize a different store concept. In order to be able to respond quickly and pre- cisely to the constant changes in the environments of each location, we group the 19 shopping complexes according to function based on their target market characteristics. After categorizing a complex as either an Urban Complex or a Community Complex, the next step in building a robust revenue base is to optimize product composition and operation methods at each facility to suit the applicable customer base. The ZERO GATE Business Group is strengthening the development of urban low- to medium-rise commercial facilities as a new business model established in the Shopping Complex Business. The Group is currently opening five facilities.
Sapporo PARCO ■ ■ Sapporo ZERO GATE (tentative name) Urban Complexes (Due to open in spring 2016) Community Complexes ZERO GATE Business Group Utsunomiya PARCO (Tentative name) Sendai PARCO New Annex ■ Other stores (Due to open in early summer 2016) Shin-Tokorozawa PARCO Urawa PARCO Ikebukuro PARCO ■ New South Wing of Sendai PARCO ■ ■ ■ Nagoya ZERO GATE Hibarigaoka PARCO ■ Matsuzakaya Ueno (Due to open in fall 2017) Matsumoto PARCO Kichijoji PARCO ■ ■ ■ Hiroshima ZERO GATE ■ Chofu PARCO ■ ■ Tsudanuma PARCO ■■ ■ ■ Chiba PARCO Otsu PARCO ■ Shibuya ZERO GATE Fukuoka PARCO Pedi SHIODOME ■■ ■■ ■■ Shizuoka PARCO Shibuya PARCO Hiroshima PARCO ■ ■ Kumamoto PARCO Nagoya PARCO Shinsaibashi ZERO GATE
Dotonbori ZERO GATE
Urban Complexes
PARCO will secure predominance in the market by providing well-informed, active urban consumers with relevant themes and topics, while offering fashionable, innovative and enjoyable lifestyle propositions. We will also lay the foundation for new business by pursuing unique collaborations with tenants, creators and companies in other industries.
Sapporo PARCO Shibuya PARCO Shizuoka PARCO 3-3 Minami-Ichijo Nishi, Chuo-ku, 15-1 Udagawa-cho, Shibuya-ku, Tokyo 6-7 Koyamachi, Aoi-ku, Sapporo City, Hokkaido PART 1: B1F–9F Shizuoka City, Shizuoka B2F–8F Open 14 June, 1973 B1F–8F Open 24 August, 1975 PART 3: B1F–8F Open 15 March, 2007 shizuoka.parco.jp sapporo.parco.jp Open 10 September, 1981 CLUB QUATTRO: 4F–5F Sendai PARCO Open 28 June, 1988 Fukuoka PARCO 1-2-3 Chuo, Aoba-ku, ZERO GATE: B1F–4F 2-11-1 Tenjin, Chuo-ku, Sendai City, Miyagi Open 27 April, 2002 Fukuoka City, Fukuoka Main Building:B1F–9F From April 16, 2011, it changed its business format to a ZERO GATE business. Main Building: B1F–8F Open 23 August, 2008 shibuya.parco.jp Open 19 March, 2010 sendai.parco.jp New Building: B2F–6F (Tentative name) Sendai PARCO New Annex Nagoya PARCO Open 13 November, 2014 3 Chuo, Aoba-ku, Sendai City, Miyagi fukuoka.parco.jp Due to open in early summer 2016 3-29-1 Sakae, Naka-ku, Nagoya City, Aichi West Building: B1F–11F Hiroshima PARCO Ikebukuro PARCO East Building: B1F–8F 10-1 Hondori, Naka-ku, 1-28-2 Minami-Ikebukuro, Open 29 June, 1989 Hiroshima City, Hiroshima Toshima-ku, Tokyo South Building: B1F–10F Main Building: B1F–10F Main Building: B2F–8F Open 6 November, 1998 Open 9 April, 1994 Open 23 November, 1969 midi: 1F–3F New Building: B1F–9F P’PARCO: B2F–8F Open 27 March, 2015 Open 21 September, 2001 Open 10 March, 1994 nagoya.parco.jp hiroshima.parco.jp ikebukuro.parco.jp
10 PARCO CO., LTD. Annual Report 2015 Introduction
Community Complexes
This category of complex does not merely market fashion but will make proposals that respond to regional needs by taking into account such market characteristics as functionality and convenience. Facilities are multi-functional and multi-purpose, featuring a range of goods and services from food, general merchandise, appliances, school supplies, to sports goods. Various activities such as community events will be organized to attract customers from the local neighborhood. Strategy Utsunomiya PARCO Shin-Tokorozawa PARCO Matsumoto PARCO 3-1-1 Baba-dori, 1-2-1 Midori-cho, 1-10-30 Chuo, Utsunomiya City, Tochigi Tokorozawa City, Saitama Matsumoto City, Nagano B1F–10F PARCO: B1F–5F B1F–6F Open 20 March, 1997 Let’s: B1F–4F Open 23 August, 1984 utsunomiya.parco.jp Open 23 June, 1983 matsumoto.parco.jp shintokorozawa.parco.jp
Urawa PARCO Hibarigaoka PARCO Otsu PARCO
11-1 Higashi-Takasago-cho, 1-1-1 Hibarigaoka, 14-30 Uchidehama, Special Feature Urawa-ku, Saitama City, Saitama Nishi-Tokyo City, Tokyo Otsu City, Shiga B1F–7F B1F–5F B1F–8F Open 10 October, 2007 Open 8 October, 1993 Open 2 November, 1996 urawa.parco.jp hibarigaoka.parco.jp otsu.parco.jp
Chiba PARCO Kichijoji PARCO Kumamoto PARCO 2-2-2 Chuo, Chuo-ku, 1-5-1 Kichijoji-honcho, 5-1 Tetorihoncho, Chuo-ku, Chiba City, Chiba Musashino City, Tokyo Kumamoto City, Kumamoto B1F–8F B2F–8F B1F–9F Open 1 December, 1976 Open 21 September, 1980 Open 2 May, 1986 chiba.parco.jp kichijoji.parco.jp kumamoto.parco.jp Performance
Tsudanuma PARCO Chofu PARCO 2-18-1 Maebara-Nishi, 1-38-1 Kojima-cho, Funabashi City, Chiba Chofu City, Tokyo A Building: B1F–6F B1F–10F B Building: B1F–6F Open 25 May, 1989 Open 1 July, 1977 chofu.parco.jp tsudanuma.parco.jp Corporate Governance
ZERO GATE Business Other Stores
PARCO has been producing and proposing urban lifestyles centered on fashion, culture, and a variety of Pedi SHIODOME other themes. Now, the ZERO GATE business will propose new lifestyles and values based on the concepts 1-9-1 Higashi-Shinbashi, of making a new beginning, or “ZERO,” followed by a “GATE,” which symbolizes making an entry to an Minato-ku, Tokyo urban area. B2F–B1F, 2F Open 16 February, 2005 www.pedi-s.com/
Shibuya ZERO GATE Hiroshima ZERO GATE Financial Section 16-9 Udagawa-cho, 2-10, Shintenchi, Naka-ku, Shibuya-ku, Tokyo Hiroshima B1F–4F B1F–14F (Floors that are leased to New South Wing of Matsuzakaya Ueno Open 16 April, 2011 PARCO:1F–3F) Open 10 October, 2013 22-3 Ueno, Taito-ku, Tokyo 1F–6F Due to open in fall 2017 Shinsaibashi ZERO GATE Nagoya ZERO GATE 1-9-1 Shinsaibashi-suji, Chuo-ku, 3-28 Sakae, Naka-ku, Osaka City, Osaka Nagoya City, Aichi B2F–4F 1F–3F Corporate Information Open 13 April, 2013 Open 10 October, 2014
Dotonbori ZERO GATE Sapporo ZERO GATE 1-8-22 Dotonbori, Chuo-ku, (tentative name) Osaka City, Osaka 3-15-1 Minami-Nijo Nishi, Chuo-ku, 1F–3F Sapporo City, Hokkaido Open 20 April, 2013 B1F–4F Due to open in spring 2016
PARCO CO., LTD. Annual Report 2015 11 Consolidated Financial and Non-Financial Highlights SNAPSHOT
Operating Income / Ordinary Income / Net Income ROA / ROE
(Millions of yen) （%）
12,508 12,196 12,013 12,499 6.4 5.7 10,824 5.5 5.4 10,329 5.2 9,218 8,750 9,168 8,966 5.6 5.6 5.0 6,778 6,294 4.3 4.2 5,083 4,400 4,319
2010 2011 2012 2013 2014 2010 2011 2012 2013 2014
Operating Income Ordinary Income Net Income ROA ROE
(Millions of yen)
Fiscal 2010 Fiscal 2011 Fiscal 2012 Fiscal 2013 Fiscal 2014
Net Sales 264,840 259,789 264,779 264,384 269,889 Operating Income 9,218 9,168 10,824 12,196 12,508 Ordinary Income 8,750 8,966 10,329 12,013 12,499 Net Income 4,400 4,319 5,083 6,778 6,294 EBITDA*1 15,837 15,508 16,926 18,052 18,402
Cash Dividend per Share (Yen) 17.00 17.00 18.00 18.00 18.00
Return on Assets (ROA) (%)*2 4.3 4.2 5.0 5.6 5.6 Return on Equity (ROE) (%) 5.5 5.2 5.4 6.4 5.7
Sales floor areas (Non-consolidated) (m2) 454,000 443,000 442,600 442,600 451,000 Area renovated (Non-consolidated) (m2) 45,000 64,000 53,000 44,000 46,000
PARCO Card Sales Amounts 45,115 44,738 49,214 52,465 56,478 PARCO Card Holders (People) 1,618,616 1,612,634 1,614,637 1,643,027 1,754,321
Percent of Female Employees (%) 44.5 43.6 43.1 43.7 43.4 Number of Female Managers (People) 9 9 13 16 17
Electricity Consumption (1,000 kw/h)*3 122,774 98,653 96,660 94,092 89,748 Total Water Consumption (1,000 m2)*3 698 602 551 549 533 Recycling Rate (%) 62.34 66.08 66.51 66.71 67.29
*1 EBITDA=Operating Income + Depreciation and Amortization *2 Return on Assets=Ordinary Income/Assets (average of start and end of year values) ×100 *3 Prior-year comparisons of electricity consumption and total water consumption at existing locations were calculated based on the opening of Fukuoka PARCO and Oita PARCO in fiscal 2010, the opening of Shinsaibashi PARCO in fiscal 2011, and the opening of the Fukuoka PARCO New Annex in fiscal 2014, excluding tenant areas.
For long-term numerical data and other indices, please refer to the PARCO website and FACTBOOK 2015
[Investor Relations] www.parco.co.jp/en/ [CSR] www.parco.co.jp/en/csr/ [FACT BOOK 2015] www.parco.co.jp/en/ir/library/financial/factbook.php
12 PARCO CO., LTD. Annual Report 2015 Introduction
Third straight year of Planned increase in Percent of independent record-high operating income annual dividend external directors annual ¥12.5 billion ¥20 dividend 50% Strategy From steady progress on the Medium-term PARCO positions the return of profit to PARCO has adopted the “Company with Business Plan (FY2014-2016), operating shareholders as one of its most important three Committees” system in order to build a income rose 2.6% year on year, with ordinary management polices. For the fiscal term ended highly transparent corporate governance income also up 4.0%, for a third consecutive February 2016, we plan to increase the annual structure. Accordingly, more than half of the year of record-high earnings. dividend by ¥2 per share to ¥20. Board of Directors is made up of independent external directors. Special Feature Inbound sales growth PARCO Card year-on-year PARCO Card Class S member Year-on-year comparison of sales sales comparison sales amount share amounts for overseas issued credit cards 160.4% 107.6% 53.9%
Sales from foreign visitors to Japan are Sales from PARCO Card holders are growing, Class S member transaction volume experi- increasing. Thanks to growth in the number of with conversion of more into customers enced steady growth, up 17.8% year on year, duty-free stores and more robust gaining momentum. Collaboration with and now accounts for over half of PARCO multi-language support, we are creating an PARCO’s original smartphone app is spurring Card transaction volume. We will increase the Performance environment that makes shopping more growth in transaction volume and attracting number of loyal customers by planning further enjoyable for those visiting from abroad. more loyal customers. expansion of services for Class S members.
PARCO PARCO Shop Blog Renovated zone social media followers Number of views per article year-on-year sales comparison Corporate Governance
Over 1 million Approximately 250 118.6%
Social media has led to over 1 million PARCO By utilizing the PARCO Shop Blog, shop staff Through renovations reflecting themes that followers. Through store-backed web utiliza- can use the Web to stay in contact with many propose new lifestyles, PARCO is aggressively tion efforts, we aim to offer new enjoyment of their customers. With an average of roughly unveiling shops that meet various needs, and services for commercial facilities. 12,000 posts per month, PARCO is fostering including those for new consumption and Web-based communication with customers. inbound demand. Financial Section
Percent of employees returning Electricity consumption*3 Total water consumption*3 to work after childbirth fiscal 2010*5 comparison at existing stores fiscal 2010*5 comparison at existing stores
100% 73.1% 76.4% Corporate Information Work-life management is deeply embedded In terms of electricity consumption, which accounts for PARCO is creating new commercial facilities within PARCO, and we work to support both the bulk of energy used by commercial facilities, PARCO with a smaller environmental impact. To working life and the childrearing and nursing is using energy more efficiently through efforts to conserve promote water conservation, in addition active care demands of our employees. PARCO has a energy and switch to energy-saving models for a variety of use of well water and gray water, other full menu of systems in place that exceed legal equipment and machinery, including air conditioning, PARCO actions include the adoption of standards, and is sharing role models for elevators, and lighting fixtures, and through the adoption water-saving valves and automatic water- diverse working styles. of cutting-edge technologies, among other actions. saving sensors.
*4 Calculated from sales amount accounted for by credit cards issued overseas used at PARCO (Shibuya, Ikebukuro, Sapporo, Fukuoka, and Nagoya). Does not include cash sales and other options used by visitors to Japan. *5 As stipulated in the “PARCO Group Environmental Policy,” from fiscal 2010, we have recognized the relationship with the global environment as an important theme within the Shopping Complex Business and related fields where PARCO is active, and promote environmental conservation activities to leave a sustainable society to future generations. PARCO CO., LTD. Annual Report 2015 13 Interview with the President
14 PARCO CO., LTD. Annual Report 2015 Introduction Strategy
Q1 In your view, how has the consumer environment changed in recent years? Special Feature
A. Looking back to the 1970s, when There was once a time when the youth called “influencers,” to communicate infor- PARCO first opened, to today, there have market led the way in fashion and other mation has become extremely high. These been three particularly noteworthy changes in trends. By contrast, rather than trends divided individuals, in turn, have begun to have an the consumer environment – the polarization by age, people today can enjoy a variety of impact on the market. The era we live in is of consumption, lifestyle diversification, and different fashions that change daily based on transforming from one in which mass media changes in consumption trends from the their social scene, interests, or orientation. previously had an absolute lock on informa- emergence of a networked society. Moreover, with the emergence of a net- tion transmission, to one in which consum-
As consumer lifestyles changed due to worked society, the prominence of social ers themselves use social media and other Performance high economic growth in the 1970s, retail media and the rapid uptake of smartphones communication tools to create new informa- embodying the functionality and conve- has triggered changes in the methods con- tion value. In this way, my sense is that the nience of shopping complexes and specialty sumers use to access information, purchasing changing mindset of people today and the chains led the way. After the economic trends, and even lifestyles. Consumers them- advancement of information and communi- bubble collapsed, there was a period of selves use social media, and with communi- cation technology (ICT) are guiding us to a low-price competition to sell quality goods cation with so many other people now time of enormous change in people’s values. cheaply, as best seen with outlet malls. As possible, the ability of certain individuals, Corporate Governance the market matured, the consumer approach to shopping became more rational. We are now in an era defined by a clear division Year-on-year sales comparison by retail format (existing stores) known as “the polarization of consump- （%） tion.” While consumers, on the one hand, 101.6 have no problem spending money on their 100.5 100.3 likes and tastes, consumers also view con- 100.1 100.3 99.5 99.2 sumption as a space where they demand cost 99.4 99.3 performance based on the type and quality 98.0 98.7 Financial Section of the goods concerned. 98.0 98.1 97.4 In this type of maturing market, the life- 96.9 styles of women, PARCO’s main target audi- 2010 2011 2012 2013 2014 ence, also began diversifying, leading to an era in which our customers want to lead Shopping centers Department stores Chain stores flexible lives that are more comfortable and Sourced from the Japan Council of Shopping Centers, Japan Department Stores Association, better fit with their own personal values. and Japan Chain Stores Association Corporate Information
PARCO CO., LTD. Annual Report 2015 15 Given the changes in the consumer environment, what priorities have you Q2 pursued since your appointment as president in 2011?
A. In light of these significant changes in Revitalization,” and “Trends Communica- Also, we launched the ZERO GATE business consumer values, I felt the time had come to tion,” and have promoted business that seeks as a new operation specializing in the devel- join forces with our entire workforce to to evolve these three unique aspects of opment, management and operation of low- consider what PARCO should look like in the PARCO by constantly pursuing new ideas and medium-rise commercial facilities in future, and what our next businesses should while accurately capturing the changing times. urban centers. be. To this end, I coined the slogan, “evolving Under the previous Medium-term Business Furthermore, PARCO initiated a move- from our point of origin,” setting it as a Plan (FY2010-2012), we stated a vision for ment for ushering in the next era in style, signpost for reexamining the path PARCO PARCO as an “urban lifestyle producer” that fashion, social trends and other areas through has taken in order to evolve further. In doing enriches the lifestyles of customers, and efforts since its founding to identify and so, I clarified our points of origin, or what promoted three business strategies—innova- support new trendsetting talent. To put even makes PARCO unique, and focused on tion at existing complexes, expansion of more energy into incubation efforts of this renewing recognition of that uniqueness. commercial activities in urban areas both in kind, we broadly communicated our corpo- I believe that the points of origin for the Japan and overseas, and rapid development rate message, offered PARCO as a space for PARCO Group, or what makes the Group of related and new businesses. For innovation expression by artists and creators, and pur- unique, are our collaboration with new and at existing complexes, we promoted innova- sued measures to create spaces to have mean- pioneering talent to create new value, the tion along two categories—urban stores and ingful interactions with consumers. We also development of appealing urban spaces, and community stores—tailored to the unique proactively supported the activity of the next the communication of high-value-added characteristics of the surrounding commercial generation of human resources, working information, all of which have an enormous area. Under expansion of commercial activi- together with customers to establish struc- influence on people’s lifestyles. I define these ties in urban areas both in Japan and over- tures for supporting young designers, and points as “Incubation,” “Urban seas, we opened Fukuoka PARCO in 2010. enacting projects that introduced the public to young designers and artists from outside Japan, among other actions. These are ways in which initiatives for Net Sales and Operating Income “evolving from our point of origin” have (Millions of yen) 269,889 become a growth engine for PARCO. Oper- 261,076 264,840 259,789 264,779 264,384 12,196 12,508 ating income has grown by roughly 1.4 10,824 times over the past five years, and business 9,218 9,168 8,601 growth has advanced steadily. However, with sights set on realizing further growth in the future, my sense was that we needed to Operating income growth of 1.4 times over past 5 years declare a new growth vision and hammer out our next strategies for achieving it. So in fiscal 2014, we formulated both a Long-term 2009 2010 2011 2012 2013 2014 Vision for the year 2020 and a Medium-term
Previous Medium-term Business Plan (FY2010-2012) Medium-term Business Plan Business Plan (FY2014-2016). (FY2014-2016) Net sales Operating income
16 PARCO CO., LTD. Annual Report 2015 Can you say more about your Long-term Vision for 2020 and the Medium- Introduction Q3 term Business Plan (FY2014-2016)?
A. Under the Long-term Vision, in order to Finally, our third strategy is innovative use Tactic 1 will see prioritization of the accurately grasp this kind of market environ- of ICT. This strategy will see PARCO take PARCO stores business by making PARCO ment and link it to opportunities for business advantage of ICT to accelerate its omni- stores the leaders in urban retail by attracting growth, our stated target is to be “a business channel approach to customer contact. Along tenants and increasing customer traffic. group that prospers in urban markets,” with providing an experience at stores not Tactic 2 is to use a variety of approaches which we will aim for by becoming both found online through enjoyment created by to aggressively promote property develop- Strategy designers of unique offerings for 24/7 urban digital signage, events and other means, this ment in urban areas. life and creative drivers of urban evolution. will entail things like anytime/anywhere Tactic 3 is to enhance corporate value and We are pursuing three business strategies online access to the PARCO website, and customer satisfaction by creating a third to achieve this Long-term Vision for 2020. having an online environment that enables revenue pillar to follow on from the PARCO The first strategy is cultivation of major visitors to view staff suggestions for fashion stores business and development business. urban areas. This will entail expanding our coordination and to purchase products found Tactic 4 will see PARCO move to establish a network of commercial sites in Tokyo and in in stores. foundation for a globalized PARCO business. Special Feature other major cities nationwide, as well as the The Medium-term Business Plan (FY2014- Finally, under Tactic 5, we will further full-scale promotion of ZERO GATE as our 2016), as a concrete timetable for enacting strengthen diversity management to lay the new, urban-centric business model. growth strategy, will see PARCO pursue groundwork for sustainable business growth The second strategy is expansion of core what we have dubbed “The Five Tactics” to in the future. targets. Here, we will respond broadly to the spur the advancement of our existing diversifying values and lifestyles taking place PARCO stores business, promote develop- Visit our website for more presentation alongside the maturation of urban markets ment, and conduct both expansion of related materials on the Medium-term Business Plan and demographic changes by expanding our businesses and new business creation. (FY2014-2016). core targets to include older adults who www.parco.co.jp/en/ir/plan/ Performance retain youthful sensibilities.
PARCO Group 2020 Long-term Vision and Medium-term Business Plan (FY2014-2016)
PARCO Group 2020 Long-term Vision Three Business Strategies Five Tactics
1. Prioritization of the PARCO store business A business group that prospers in urban markets 1 Cultivation of major urban areas 2. Development centered on areas around core urban stores and entry into new major cities in Japan Corporate Governance ―Designers of unique offerings for 24/7 urban life 2 Expansion of core targets 3. Expansion of related business and creation of new business Creative drivers of urban evolution ― 3 4. Rebuilding overseas business Innovative use of ICT 5. Strengthen management foundation to support further business advances
How would you rate the first year of the Medium-term Business Plan Financial Section Q4 (FY2014-2016)?
A. In fiscal 2014, the first year of the thematic, proposal-based renovations at measures, the PARCO Group recorded net Medium-term Business Plan (FY2014-2016), each store, and aggressively enacted both sales of ¥269,889 million, up 2.1% year on we pushed ahead with business site expan- sales promotions and mobilization projects year, operating income of ¥12,508 million, sion in urban areas. This saw the opening in centered around PARCO Card. Elsewhere, up 2.6%, and ordinary income of ¥12,499 October 2014 of Nagoya ZERO GATE, the in the specialty store business, we opened million, up 4.0%. All of these figures were Corporate Information largest facility yet under our ZERO GATE new stores and developed new formats; in record highs, so I would say we made defi- format, and the opening in November of the space engineering and management and nite progress toward our targets for the Fukuoka PARCO New Building. Both open- other businesses, we identified new clients; plan’s final year. ings made major headlines in Japan. At and in the entertainment business, we devel- existing PARCO stores, we carried out oped new content. As a result of these
PARCO CO., LTD. Annual Report 2015 17 What specific approaches and measures are you taking regarding the three Q5 business strategies you mentioned?
1. Cultivation of major urban areas
A. Along with promoting PARCO and facilities in the Tenjin area. In early summer GATE business. Located in the heart of the ZERO GATE development in urban areas, 2016, we plan to open the tentatively named Sakae area, home to our flagship store, we will also examine the development of new Sendai PARCO New Annex, a move that will Nagoya PARCO, and other department business formats. For PARCO, we envision create more energy and buzz in front of stores and street-level shops, the store is development centered on areas around core Sendai Station. helping to further enliven the area. In spring urban stores and major cities (Tokyo’s 23 For the PARCO Group, ZERO GATE 2016, we plan to open the tentatively named wards, Yokohama, Osaka, Kyoto and Kobe). represents a new business model in which we Sapporo ZERO GATE. For ZERO GATE, we will promote develop- leverage prime site locations and strive for In terms of development methods, we are ment centered on prime locations in urban efficient operations tailored to scale for employing diverse approaches that include areas and in the vicinity of PARCO core low- and medium-rise commercial facilities in switching business formats at existing com- urban stores. urban areas. ZERO GATE openings in mercial facilities, property management, and As part of PARCO development, in Tokyo and Shibuya in 2011 were followed collaboration with the J. Front Retailing November 2011 we opened Fukuoka by the opening of two stores in Shinsaibashi Group. Similarly, a decision has been reached PARCO New Building next to the Fukuoka and Dotonbori in April 2013, and an open- to open a new store in the New South Wing PARCO Main Building. In March 2015, we ing in Hiroshima in October 2013. Nagoya of the Matsuzakaya Ueno department store added floor space to the main building, ZERO GATE, which opened in October in fall 2017. making it one of the largest commercial 2014, is the largest facility yet in our ZERO
2. Expansion of core targets
A. When PARCO first emerged in the 1960s Employment Rates for Women to 1970s, it was a time when the social 1975 Opened Sapporo PARCO advancement of women was just beginning. 1969 Opened Ikebukuro PARCO 1989 2010 Opened Nagoya PARCO Opened Fukuoka PARCO The main target for PARCO at that time was (%) 1973 Opened Shibuya PARCO office ladies in their twenties, so we commu- 75 nicated information on trends with strong women set who would lead the next genera- 70
tion and working women in mind, and 65 adopted functions that made PARCO a site where women could enjoy fashion, art and 60
entertainment after work. For the generation 55 of adults who have enjoyed this kind of urban culture and lifestyle, while they may be 50
older now, they still have refined sensibilities, 45 1968 1974 1980 1986 1992 1998 2004 2011 and want to have flexible lifestyles that are All ages Ages 20-24 Ages 25-29 Ages 30-34 Ages 35-39 more comfortable and in step with their *1 Okinawa figures not included prior to 1972. values. And today, whether in fashion or *2 For 2011, figures are supplemented with estimates due to temporary difficulties in conducting the survey in Iwate, Miyagi and other trends, the dividing line has come to be Fukushima prefectures caused by the Great East Japan Earthquake. one’s social scene or feeling, not a person’s Produced by Japan’s Ministry of Land, Infrastructure and Transport from a labor survey conducted by the Ministry of Internal Affairs and Communications
18 PARCO CO., LTD. Annual Report 2015 Introduction Strategy age. To effectively respond to these diverse making in-store information available in lifestyles in this generation with its rich multiple languages, and pursuing sales pro- sensibilities, we will take steps to increase motion measures in collaboration with fans of the PARCO brand by creating new commercial facilities overseas. I think the value that surpasses market expectations. reason so many foreign visitors use our stores Another new customer base that is grow- is the reputation for originality and reliability ing dramatically is foreign visitors to Japan. of the floor plans and shop product listings
At PARCO stores in districts and cities with PARCO compiles. Going forward, we intend Special Feature the most foreign visitors (Shibuya, Ikebu- to improve services and offer sales promotion kuro, Sapporo, Fukuoka, and Nagoya), the campaigns that will make for a more com- number of customers from abroad is rising fortable and enjoyable shopping experience yearly. For this reason, we are taking actions for customers from abroad. that include expanding our duty-free shops,
Number of Foreign Visitors to Japan Performance (1,000) 13,413
10,363
8,346 8,350 8,611 8,358 7,334 6,727 6,137 5,211 6,789 6,218 Corporate Governance
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
From foreign visitor data compiled by the Japan National Tourism Organization (JNTO)
Past Inbound Demand for Reference (As of February 28, 2015)
Shibuya Sapporo Ikebukuro Fukuoka Nagoya
PARCO PARCO PARCO PARCO PARCO Total Financial Section
Year-on-year comparison of 152.2% 200.4% 156.1% 167.0% 126.7% 160.4% sales to foreign customers
Share of sales to foreign 7.6% 3.9% 1.2% 0.6% 0.3% 1.6% customers
“Year-on-year comparison of sales to foreign customers” is calculated based on year-on-year percentage change in the amount of total sales accounted for by credit cards issued overseas. Does not include cash sales and other options used by visitors to Japan Corporate Information
PARCO CO., LTD. Annual Report 2015 19 3. Innovative use of ICT
A. Our approach to ICT utilization is to also see that PARCO Card holders who growth in purchases per user compared to use Web-based content to make physical register with POCKET PARCO have higher non-registered cardholders. stores more appealing, while retaining stores frequency of use and there is substantial as our foundation. With advancements in IT sparking changes in communication, and as
mobile applications in particular accelerate Changes in Information Access the widespread use of smartphones, roughly 80% of those viewing PARCO’s official Changes in devices used to view the PARCO website website do so from their smartphones. Percentage using smartphones to view websites 79% Given these changes in customer behavior, Percentage using smartphones to view websites for specific sales events 94% we will use ICT to provide a new PARCO FY2014 research by PARCO
consumer experience. Widespread smartphone use For example, we revamped the PARCO Number of smartphone contracts official website and began offering more than 6.75 million (as of March 31, 2010) 57.34 million (as of March 31, 2014) just basic information on PARCO by enhanc- 103 million (as of March 31, 2019) ing the communication of trends via the From MM Research Institute, Ltd.: “Trends and Forecasts for the Smartphone Market”
PARCO Shop Blog, which is updated daily Changes in interaction time with media via smartphones by tenant shop staff. Being able to experience 25.2 minutes (2010) 74.0 minutes (2014)
the unique approaches to customer interac- From Hakuhodo DY Media Partners Inc.: “Media Fixed Point Survey 2013” tion of shop staff helps foster a new avenue for communication between customers and “POCKET PARCO User Behavior Analysis” (researched March 2015) shop staff. Moreover, in May 2014, we began offer- Data suggest that high percentages of customers using POCKET PARCO to check PARCO information come to PARCO stores and make purchases. ing a service, “Kaeru PARCO,” which allows customers to reserve and purchase goods recommended by shop staff through PARCO Shop Blog. In November, we partnered with this service to launch a smartphone applica- tion, POCKET PARCO, that enables users to view PARCO information anytime and Conversion Purchase anywhere on their smartphones, providing a fun way to find out both when PARCO 67％ stores are open and to check what’s available. Check In Visit to store Customer communication of this kind, made possible through the use of ICT, links 45％ directly to providing opportunities for cus- Clip Prior to store visit tomers to use PARCO. In analyzing the behavior of actual POCKET PARCO users, for posted articles, 45% of customers who viewed them checked in when visiting Usage by PARCO Card holders who register with the POCKET PARCO PARCO, and 67% of those customers smartphone application shopped in the store. Compared to the pur- Active use of POCKET PARCO helps foster communication between PARCO and customers.
chasing rate of typical PARCO store visitors Comparison of PARCO Card holders who register card information with POCKET PARCO with (average of 50% for all PARCO stores in cardholders who do not fiscal 2014), this figure suggests these cus- PARCO Card usage tomers come with a strong intent to purchase Frequency of PARCO store visits: 1.2 times frequency and that the blog is extremely effective. We Amount spent at PARCO: 1.3 times 1.6 times
20 PARCO CO., LTD. Annual Report 2015 What initiatives can we expect for the second year (fiscal 2015) of the Introduction Q6 Medium-term Business Plan (FY2014-2016)?
A. To prompt future growth, in fiscal 2015, stores, in their capacity as shopping com- earnings, projecting net sales for fiscal 2015 we will strengthen both our existing business plexes closely tied to the community, we will of ¥285.6 billion (up 5.8% year on year), base and commercial facilities, and promote look to cultivate markets through multi- operating income of ¥12.8 billion (up expansion in related and new businesses. In functionality and promoting coexistence 2.3%), and net income of ¥6.9 billion (up March 2015, among other steps, we opened with the community. 9.6%).
extended floor area at the Fukuoka PARCO From these initiatives, we are aiming for Strategy * Digital native generation: Refers to the generation of Main Building, and opened Nagoya PARCO top- and bottom-line growth for the year people for whom the Internet and computers were already in widespread use either during early childhood midi adjacent to Nagoya PARCO, which and a fourth consecutive year of record-high or prior to birth. features trendy restaurants and shops open- ing in the area for the first time. Many Progress on management indicators and objectives customers are enjoying what these new (Millions of yen) spaces have to offer. 20,000 19,000 18,402 Regarding renovations, our plans call for 293,000
2 Special Feature renovating roughly 48,000 m of space as we 285,600 12,800 13,500 conduct tenant incubation and develop new 12,508 arrangement methodologies to cope with 269,889 7,500 changes and diversification in consumer 6,900 6,294 needs, and bolster our capacity to meet inbound demand as well as for the consump- tion of animation and other new commodi- ties for the “digital native”* generation. At 2014 actual 2015 plan 2016 plan urban stores, we will expand our core tar- Net sales Operating income Net income EBITDA* Performance gets and continue to propose options that * EBITDA=Operating Income + Depreciation and Amortization enrich urban lifestyles. For community Corporate Governance Q7 What are your thoughts on shareholder returns?
A. We view the return of profits to share- Cash dividend per share and Payout ratio holders as one of our most important poli- (Yen) cies. In paying cash dividends from retained 31.8% 32.4% 33.1% 29.0% 29.4% earnings, our basic stance is to pay a stable 26.9%
20 dividend to shareholders following careful Financial Section consideration of business performance and 18 18 18 the payout ratio. Our policy regarding 17 17 internal reserves is to effectively utilize such funds to preserve financial soundness and promote future business development. In fiscal 2014, our annual dividend per share 2010 2011 2012 2013 2014 2015 plan was ¥18, and the payout ratio was 29.0%. Cash dividend per share Payout ratio For fiscal 2015, we plan to raise the annual Corporate Information dividend by ¥2 per share to ¥20, with an expected payout ratio of 29.4%. We are also improving shareholder rewards to make Visit our website for details on shareholder rewards shopping at PARCO an even more enjoyable www.parco.co.jp/en/ir/benefit/ experience for our shareholders.
PARCO CO., LTD. Annual Report 2015 21 Q8 Finally, as president, what do you consider to be CSR for the PARCO Group?
A. I view CSR as the embodiment of our PARCO unique – “Incubation,” “Urban complex to launch a crowd-funding service, corporate mission, and as the very founda- Revitalization,” and “Trends Communica- called BOOSTER. Content development for tion of our business. Our corporate mission tion.” This demands a constant effort by this service takes advantage of the networks is “creating futuristic, innovative spaces every PARCO Group employee to approach and knowledge of our employees from every that brim with hospitality providing an business with fresh concepts and ideas. corner of PARCO. The human capital of the enjoyable experience for customers visiting Since fiscal 2014, I have chaired our Diver- PARCO Group wants to contribute to build- our stores, and helping our tenants pros- sity Committee, and we are moving with ing a world that brings individuals with per.” PARCO Group CSR is the quest to speed to confront a variety of issues in order ideas and talent together with consumers realize this mission while earning the trust to build a corporate culture that optimally looking to share in these ideas with them, and ensuring the satisfaction of our draws on the uniqueness of our employees, and where innovation is constantly happen- stakeholders. and generates a steady stream of new con- ing. While working to fully grasp the chang- Furthermore, the “forward-thinking, cepts and ideas through horizontal communi- ing times and evolving from our point of innovative” business activities suggested by cation with diverse human resources utilizing origin, the PARCO Group will create new the mission involve grasping the changing an array of working styles. value to share with society at large. times and pushing the evolution of the three Also, from among these types of CSR points of origin I mentioned earlier that make activities, PARCO became the first shopping
PARCO Group Fundamental CSR Policy
Embodiment of Corporate Mission Definition of CSR Creating welcoming, forward-thinking, innovative spaces that provide an enjoyable experience for customers and help our tenants prosper.
Three Social Contributions Incubation Urban revitalization Trends communication
CSR Mission PARCO WAY The PARCO Group will contribute through futuristic, innovative business activities to the realization of a society where urban consumers lead fulfilling lives.
Main Themes Next-generation human resources Culture The PARCO Group will support the talents of the next-generation’s The PARCO Group will constantly provide new value, transmit information, workforce, thereby contributing to an energetic and diverse society. and create culture-based markets, starting with fashion and entertainment.
Local communities Environment PARCO means ”park” in Italian. The PARCO Group will provide a The PARCO Group will promote the creation of stores that place a smaller ”park” or a space where people come together to share time and burden on the environment. space, where they can relax and have fun. We will also work to enhance the attractiveness of local communities and neighborhoods.
Stakeholders Seven stakeholders
Members of the Shareholders and Landowners and Contract business Customers Tenants Employees local community investors leaseholders partners and society at large
22 PARCO CO., LTD. Annual Report 2015 Introduction Strategy Special Feature Performance Corporate Governance Financial Section Corporate Information 23 Annual Report 2015 CO., LTD. PARCO Special Feature 1: Evolving From Our Point of Origin —Three Social Roles of the PARCO Group Concepts Conveyed and Created by PARCO
Since its initial opening, PARCO has proposed new lifestyles to the public by Enacted Hello Shibuya TOKYO with Singapore, a project supporting business growth of young creative talent from Japan overseas actively introducing the cutting edge of culture not only in fashion but also Sponsored Shibukaru Festival cultural event music, the arts, theater, and other areas. By functioning as a space for the featuring female creative talents creativity of many new people of talent, PARCO has also created new value Initiated FIGHT FASHION FUND, a micro-fund supporting business growth of young designers shared by society at large. Amid the changing times and economic climate, and even transformation in Opened Fukuoka PARCO consumer trends, facing these challenges and evolving the social role of the 2010 PARCO Group, namely its origin points of “Incubation,” “Urban Revitaliza- tion,” and “Trends Communication,” will become the foundation that spurs business growth. Opened PARCO Museum
Opened single-screen theater CINE QUINTO
Launched urban art exhibit (selection of works by Japanese artists) 2004 Opened Shibuya QUATTRO by PARCO (later renamed PARCO QUATTRO)
Established “PARCO Gallery” in Shibuya PARCO 1999 Opened Japan graphics exhibit and Japan objet d’art exhibit (selection and display of graphic art and objects by young Japanese artists) 1992 1988 Published first issue of ACROSS Monthly 1986
Opened Shibuya PARCO 2011 1980 Female creative talent-led cultural event Shibukaru Festival Opened Seibu Theater (later renamed PARCO Theater) 1977
Opened Ikebukuro PARCO 1973
1969
1981 “COOL AS WOMAN”
1979 1986 “CAN OCCIDENT WEAR ORIENT?” “LOVES SAVES SO MUCH” 1977 Appearance of the Shibuya PARCO Statue of Liberty
1980 “THE BEST YOU FOR ME 1977 IN THE WORLD” “SUMMER” 1973 “Women of Tomorrow Will Set the World Afire” Fashion House Shibuya PARCO established June 14
24 PARCO CO., LTD. Annual Report 2015 Opened QUATTRO LABO, a music café and dining bar
Launched BOOSTER, a crowd-funding service framework supporting innovative initiatives in creative domains
Started ASIA FASHION COLLECTION to support business growth of young Asian designers Introduction Concepts Conveyed and Created by PARCO 2014
2013
2012
2011 2014 2015 Fall and winter campaign posters Spring and summer campaign posters Strategy
2013 Singapore runway show PARCO next NEXT for grooming young Singaporean designers Special Feature 2012 Tokyo Collection debut of Jun Okamoto, a designer supported by PARCO’s FIGHT FASHION FUND micro-fund 2014 ASIA FASHION EXCHANGE Young designers from Japan invited to take part in a fashion show in Singapore Performance 2013 Event supporting business growth of young Japanese creative talents Hello Shibuya TOKYO with Singapore
2012 Corporate Governance “LOVE HUMAN.” 2014 “SPECIAL IN YOU.” Urban Revitalization Incubation Leveraging a wealth of expertise in store development, PARCO pursues store operations, new development, and property renovations A new generation always follows the emergence of that contribute to the advancement and prosperity of towns and cities.
dynamic new talent. At the PARCO Group, we Financial Section To this end, we derive high-value-added plans for each project to believe that identifying, encouraging, and growing promote appealing store development. alongside new talent—a process we call “Incubation”—leads to business growth. P28 P26
Trends Communication Corporate Information
PARCO produces quality cultural events in Japan and abroad, proposing options to consumers for enriching their lifestyles. Utilizing advanced ICT, we are also enhancing services for delivering new enjoyment and cultivating communication. P30
PARCO CO., LTD. Annual Report 2015 25 Special Feature 1: Evolving From Our Point of Origin —Three Social Roles of the PARCO Group Incubation
INCUBATION Incubation initiatives for identifying and encouraging new talent and creating new value Since its founding, PARCO has been at the forefront of introducing the public to the cutting edge of culture, whether in music, the arts, the theater or other areas, discovering and supporting a host of new talent along the way. PARCO is taking advantage of its domestic and overseas networks and business expertise to provide opportunities for business growth.
Encouraging the success of Japan’s next generation of young designers Ahead of the expansion into Paris of ANREALAGE, one of Japan’s next- generation fashion brands, PARCO provided support for the brand’s Paris collection runway show and “A REAL UN REAL AGE,” the brand’s Paris traveling exhibit featured at Shibuya PARCO. These efforts have evolved into a wide range of other initiatives, including the opening at Shibuya PARCO of a limited-time shop and the sale of original project merchandise from a self-designed and arranged PARCO shop.
Support for the global efforts of young designers from Asia ASIA FASHION COLLECTION Through partnerships with apparel design schools in Japan and fashion organizations in countries across Asia, PARCO is involved in measures to discover and encourage young designers in Japan, Korea, Taiwan and Hong Kong. Through various support programs, including runway shows at fashion events in Tokyo, New York and Taiwan, PARCO is providing designers with opportunities to grow their business. Our aim is to spur advancement of both the global efforts of young Asian designers and Asia’s fashion industry.
26 PARCO CO., LTD. Annual Report 2015 Supporting growth of creative talent via crowd-funding service www.booster-parco.com/
BOOSTER Introduction In fiscal 2014, PARCO launched BOOSTER, a crowd-funding service dedicated to supporting the realization of projects across the full Incubation spectrum of creative content domains through a framework that enables individual consumers to come together to put innovative challenges out into the public sphere. As a company committed to “Incubation” (the discovery and encouragement of new talent), PARCO hopes to use BOOSTER as an avenue for joining forces with many people to realize a society where individuals with ideas and talent can continue to tackle those challenges, and create a world that sparks a steady stream of innovation.
How BOOSTER Works Strategy BOOSTER is an “all or nothing” approach to funding that minimizes risk for both the project owner and supporters. Since the project owner INCUBATION creates goods or services after meeting a funding target, the project owner can take on ambitious challenges without bearing risk. If the funding target is not reached, the project is marked “not funded” and all monies given are returned, making it risk-free for supporters as well. Special Feature Project owner Supporter Post Funds (Initiator of project) ￥ (Crowd-funding individual)
Project
Funds received beyond target are returned (Actual produced items, tickets to exhibits, etc.) Performance
Using BOOSTER, young designers can put on runway shows Noted fashion designer Mikio Sakabe, known globally for his “mikio sakabe” label, joined with “writtenafterwards” artist Yoshikazu Yamagata as project owner on a support project to sponsor a fashion show for Tokyo New Age, a novel young brand group. Through the support of many members of the public, the project was Corporate Governance funded. In spring 2015, during the debut of the Tokyo Collection, the project owners used CLUB QUATTRO to put on their dynamic live fashion show.
At PARCO Museum in Shibuya PARCO, an exhibition was This energy-filled live fashion show took place at CLUB held presenting works from Tokyo New Age and other QUATTRO with many customers looking on young fashion designers Financial Section
Message Message from stakeholders Fashion designer. Born in Tokyo in 1976. 2006 graduate of the Master course in the Fashion Department at the Antwerp Royal Academy of Fine Arts. The same year, joined with Taiwan-born designer Shueh Jen-Fang to launch “mikio sakabe.” Took part in the Paris Collection presentation for fall and winter 2007-08. Since spring and summer 2008, anchored by Tokyo and Paris, he has announced collections in major cities spanning Milan, New York, and Barcelona. His collaborations have included work with artist group Chim Pom and Akihabara-style idol squad DENPAGUMI.inc. In 2013, he produced the highly pro- vocative exhibit Zetsumeiten (PARCO Museum) together with Yoshikazu Yamagata.
Fashion Designer Official site: www.mikiosakabe.com Corporate Information Mikio Sakabe
Using the BOOSTER service to create a runway show I think my latest efforts with BOOSTER allowed me to share shows and designs as initiatives and communication between myself, as a fashion designer, and cus- tomers in a new ways that are different from customers buying clothes in a store. I thought to myself, I hope to use BOOSTER to make new relationships like this in a long-term way.
PARCO CO., LTD. Annual Report 2015 27 Special Feature 1: Evolving From Our Point of Origin —Three Social Roles of the PARCO Group Urban Revitalization URBAN REVITALIZATION Urban revitalization bringing distinctiveness to urban settings through multifaceted development In addition to its existing business, PARCO assertively develops an entire target area through the new ZERO GATE business model and other operations, for urban revitalization that emphasizes comfort and enjoyment. Guided by a view of PARCO store tenants as equal partners, we work with them to take on new challenges and create distinctiveness in towns and cities in order to tap into market potential and meet customer expectations.
Planned Store Openings
Due to open in Due to open in Due to open in early summer spring 2016 fall 2017 2016 Sapporo Area Sendai Area Ueno Area Sapporo ZERO GATE (Tentative name) Opening of store in New South (tentative name) Sendai PARCO New Annex Wing of Matsuzakaya Ueno
With sights on a spring 2016 opening, we are This new commercial site facing the railway Set to open in a new high-rise complex (New creating a new commercial space on the station in the heart of Sendai is scheduled to South Wing) adjacent to Matsuzakaya Ueno, southern side of Sapporo PARCO, in the Odori open in early summer 2016. The opening of a PARCO is bringing its comprehensive skills in district, Sapporo’s commercial center. second store in the heart of this pivotal city in urban commercial facility production to bear Japan’s Tohoku region will magnify PARCO’s to develop a commercial space well matched to presence in the market. the market.
28 PARCO CO., LTD. Annual Report 2015 Introduction Urban Revitalization Strategy
Opening of extended floor space in the Fukuoka PARCO main building March 19, 2015, and Nagoya PARCO midi opened March 27, 2015 opening of New Building (inner right) November 12, 2014
Fukuoka Area Nagoya Area Fukuoka PARCO New Building Nagoya ZERO GATE Fukuoka PARCO Additional floor space Nagoya PARCO midi
With the opening of Fukuoka PARCO New Building in October 2014 saw the opening of Nagoya ZERO GATE, Special Feature November 2014 and extended floor space in the Fukuoka followed by the opening in March 2015 of Nagoya PARCO midi PARCO main building in March 2015, this location has evolved next to Nagoya PARCO West Building. into the largest shopping complex in the Tenjin area. Along with the introduction of high concept fashion and The complex is filled with cafés and high concept fashion select noteworthy restaurants, the existing Nagoya PARCO was also shops making their first appearance in Kyushu, as well as a renovated, including with changes made to the environment upon gallery store featuring locally known crafters and artists, and entering the building. PARCO is thus using the expansive area shops showcasing anime, games, and other new pop culture. It is offered by a new property and improvements to existing environs also equipped with Wi-Fi and will adopt features such as digital to provide an urban space in which it is enjoyable to walk. Performance signage, as PARCO builds a digital communication environment that will deliver a new consumer experience.
Message Message Message from stakeholders Message from stakeholders
Bakery café GONTRAN CHERRIER Restaurant and café Eggs ‘n Things now open in Fukuoka PARCO New Building now open in Nagoya PARCO midi Corporate Governance BAYCREW‘S Co., Ltd. Director and Executive Officer, Corporate EGGS ’N THINGS JAPAN KK Planning Division Representative Director Jun Takikoshi Shinobu Ogino
One reason that bakery café GONTRAN CHERRIER chose to open in We are very grateful for the opportunity to open a location in Fukuoka PARCO New Building has to do with the market appeal of Nagoya PARCO midi. This particular restaurant is a milestone since Fukuoka, where those sensitive to trends in this area congregate. But it is Eggs ’n Things Japan’s tenth store and our first in the Tokai more than anything, this decision reflects how well PARCO’s notion of area. To have it open in no less than Nagoya PARCO is something wanting to propose value across the lifestyles of a wide range of for which we are deeply thankful. There is a deeply embedded
customers meshes with our own. breakfast culture in the Tokai area, so I was worried if Eggs ’n Financial Section Two things that led to this successful opening are PARCO‘s powerful Things’ concept of “all day breakfast” would really catch on. But backup efforts, steeped in the idea of making businesses succeed thanks to PARCO’s cooperation in advertising work, we had over together with tenants based on its approach to treating tenants as equal 400 customers waiting in line to eat on opening day. Rather than a partners, and responding flexibly to tenant requests and needs. flash in the pan, we hope to prosper together with Nagoya PARCO Collaboration between developers and tenants has to be strong in to become a well-loved fixture in Nagoya. order to win amid the tumultuous changes in the market environment. By holding a mutual desire to make businesses succeed and working together to face challenges, I want to offer new value to our customers. Corporate Information
GONTRAN CHERRIER, the first bakery café in the Fukuoka area, was Originally from Hawaii, Eggs ’n Things, with its amazing selection chosen as one of the spotlight of big-plate pancakes, has become shops of Fukuoka PARCO New a popular spot in the Nagoya- Building. Through food, we propose Sakae area that customers are a lifestyle that many customers have willing to line up for. come to enjoy.
PARCO CO., LTD. Annual Report 2015 29 Special Feature 1: Evolving From Our Point of Origin —Three Social Roles of the PARCO Group Trends Communication TRENDS COMMUNICATIONProviding Web-based Trends Communication and Services for a “24-Hour PARCO”
Backed by its store network, PARCO is aggressively leveraging advanced information and communications technology (ICT) to create new ways to enjoy commercial facilities. To make PARCO store information available faster and more appealing, shops within PARCO make use of the PARCO Shop Blog, with roughly 3,000 such tenants involved in trends communication that encourages store visits. Furthermore, we operate a service, called “Kaeru PARCO,” that enables in-store goods found on the PARCO Shop Blog to be reserved or ordered for delivery online, and have released a smartphone application, POCKET PARCO. In these ways, we are creating an environment that allows customers to enjoy a “24-hour PARCO” via the Web.
PARCO Omni-channel Strategy PARCO offers a variety of Web-based services to optimally highlight the appeal of its stores. By enhancing the ability of shop staff, as powerful influencers who communicate store information, to provide customer service through online tools, we are focusing on training “omni-channel customer service” staff capable of proposing options to customers before visits, during visits, and during purchasing.
Store reservation and order Customer service training PARCO Card Official smartphone app for delivery service
PARCO Shop Blog Team-based customer In-store customer service Omni-channel customer service service role-playing contests customer service Shop support portal site
Real-time Web-based customer service customer service
Multi-language Inbound translation service Social media
30 PARCO CO., LTD. Annual Report 2015 service for reserving and “Kaeru PARCO” Message from stakeholders purchasing shop merchandise
Opinion from shop staff who use the Kaeru Introduction We have added online reservation and order for delivery functions PARCO service to the PARCO Shop Blog, with users also able to reserve and Trends Communication Growth in online sales from use of purchase in-store items they checked on the blog for pickup. Kaeru PARCO service
Confirm and Shizuoka PARCO Reservation for in-store purchase in store Message UNDEFEATED pickup function Store manager
Reserve for pickup Ryota Ogitani or At our shop, we make use of Kaeru PARCO and the PARCO Shop Strategy Order for delivery online Blog, with promotions that can show our shop’s uniqueness as featured content. The expansion of shops like ours will, I think, be a key point in reenergizing the retail sector. As shops using these tools increase, this will strengthen both the availability of retail information and product lineups, which will lead directly to sales. For this reason, I Order for delivery function think it is important that PARCO and shops work together to promote Home delivery the active use of online services. I believe that the information we share at training sessions for Special Feature encouraging use of the Web, particularly reviews and impressions “POCKET PARCO” smartphone application from customers who use these services, will lead to improved services. Through the app, we provide a wealth of information and So I want PARCO to keep strengthening these services, and would services for an enjoyable PARCO shopping experience. In love for them to regularly hear input from staff as well. addition to displaying customized information, including the Creating fans nationwide through PARCO Shop Blog and in-store events, app users receive virtual Kaeru PARCO and social media coins (points) from store visits, credit card Hiroshima PARCO Performance purchases, and other RODEO CROWNS Message Store manager actions, that are Riho Nakanou redeemable for shopping coupons. While it’s difficult to provide an unseen customer online with the same customer service found in a physical store, for customers living far from stores, I think Kaeru PARCO is a very convenient service for them, since it is on time and allows customers to make purchases easily
without actually going to a store. It is also leading to sales at our shop, Corporate Governance so I want to utilize the service even more to add to sales. I’m looking forward to measures that will stimulate use of the service, such as exclusive Kaeru PARCO sales campaigns and benefits. Also, since our shop views the blog quite a lot, I extensively PARCO Web-based recommend both the blog and POCKET PARCO to customers. customer service training Leveraging Kaeru PARCO to sell In a bid to strengthen online customer service capabilities, original products nationwide PARCO holds regular tenant training on topics such as PARCO
Shop Blog utilization methods, how to display products, and Financial Section Hiroshima PARCO Message effective options for communicating with customers, in a drive to TOWER RECORDS Store manager use the Web to communicate appealing PARCO store information Takashi Ishikawa and encourage store visits. My impression in adopting use of the service was that it would lower the threshold in the best possible sense. After completing the initial setup, operating the service day to day has not been hard. The interface developed is extremely user friendly, so anyone with
experience buying something from a website can operate it (at our Corporate Information store, part-time staff do this). Looking at it from a customer’s perspective, my impression is that the process leading up to a purchase is simpler and less stressful compared to other e-commerce sites. The main social media our shop uses is Twitter. When we time our tweets in step with trending topics, our orders increase. Other branches are also paying close attention to our shop’s sales figures, so PARCO staff periodically hold training sessions on Web utilization I want to keep utilizing this service. with shop staff.
PARCO CO., LTD. Annual Report 2015 31 Special Feature 2: Evolving From Our Point of Origin —PARCO Entertainment
PARCO as Site for Trends Communication Since emerging on the scene in 1973, Shibuya PARCO has functioned TRENDSever since as a cultural touchstone that goes well beyond the limits of a typical large shopping center. Take PARCO Theater – from its opening through now, the top floor of the venue (PART 1) has pre- sented an array of unique and powerful works that have profoundly COMMUNICATIONimpacted many theatergoers. In 2007, multitalented film and stage director Isao Yukisada directed at PARCO Theater for the first time. In this interview, we ask this acclaimed director about PARCO’s role as a mechanism for communicating trends to the public.
Isao Yukisada Film and stage director Interviewee: Film and Stage Director Born in 1968 in Kumamoto, Japan. Long involved in films, music videos, commercials and other visual media production, in 2000, Yukisada won the International Federation of Film Critics (FIPRESCI) Prize at the 5th Busan International Film Festival for his second film as director, “Himawari (Sunflower).” Yukisada catapulted to Isao Yukisada stardom with his 2001 release, “Go,” winner of the 25th Japan Academy Prize for Director of the Year and a host of other film prizes. His 2004 film, the megahit “Crying Out Love, In the Q1: How would you describe the role of turn different in concept and spirit from Center of the World,” became a social phenomenon, followed PARCO Theater in communicating new trends? the PARCO-produced version. by his direction of “Kita no Zeronen (Year One in the North),” “Spring Snow,” “Kondo wa Aisai Ka” (Next Time, a good Whether it’s the main culture or a Husband) “Closed Note,” cementing Yukisada’s place as a hit filmmaker. In 2010, he directed “Parade,” which won Yukisada subculture we’re discussing, there is no Q2: Thinking about PARCO Theater, the FIPRESCI Prize at the 60th Berlin International Film Festival. doubt that PARCO Theater is an which PARCO manages, as a venue, what In 2011, Yukisada made news again with his direction of “Kamome,” a vignette within the omnibus film “Camellia,” embedded part of Tokyo’s cultural circuit. are your thoughts on the planning and produced by the Busan International Film Festival. His latest While the flow of people there has changed production staff behind performances films include 2014’s “Entaku (Round Table)” and “Five Minutes to Tomorrow,” and the film “Pink and Gray,” scheduled for dramatically over the last 20 years, produced by PARCO? release in 2016. Yukisada’s works for the stage include “Fool for PARCO is a major reason why the image I work with four stage producers, and it is Love” (PARCO Theater, others), “Mishiranu Onna no Tegami (Letter from an Unknown Woman)” (PARCO Theater, others), of Shibuya as a cultural spot for young very clear that they enjoy the creative “Parade” (The Galaxy Theater, others), “Taking Sides” (The Galaxy Theater, others), “Shumi-no-Heya (Room of Hobbies)” people still rings true today. The presence process, and they are adamant. If they (PARCO Theater, others), and “Midnight in Buenos Aires” (New of PARCO Theater is an important element want something done their way, they National Theater-Playhouse, others). In 2015, Yukisada is directing a new version of “Tango – Fuyo no Owari ni (Tango at behind this. communicate that clearly and do not the End of Winter),” a production that first appeared at PARCO As someone who has seen many works deviate from it. Also, while they are all Theater in 1984. at PARCO Theater, I still have a sense of very unique personalities, there is nothing awe for the venue even after directing four cold or standoffish about them. In other them at the PARCO Theater, it is the shows there myself, and feel enormous words, it’s easy to joke with them (laughs). atmosphere posed by the venue and the pressure not to sully the stage. The reason I That’s why, as a creator, sharing opinions venue staff that determines whether high art can speak this way about a venue is the with them is no problem. I would say they can change, even in part, to entertainment. undeniable reputation that PARCO have the capacity to really take the Take, for example, Yukiko Motoya, who Theater has inspired. That’s why it has creator’s vision to heart. also is a noted novelist, and Daisuke Miura, become a part of our cultural circuitry. Take, for instance, “Shumi no Heya,” a who recently had his film directorial debut. It is that outstanding reputation and play I did with actor Kiichi Nakai. The Since their collaborations with PARCO, my brand power that, I would argue, makes it producers were even willing to take impression is that they have both become a possible for performances produced there seriously Nakai-san’s artistic flight of fancy bit less scathing in their commentary. The to appear at other venues. For example, to use loads of vulgarity (laughs), like a works of French stage director Philippe when “Midnight in Buenos Aires” was show for the common folk, in such an Genty, which have appeared in venues performed at New National Theater- elegant venue. worldwide, are very artsy in nature. Yet no Playhouse, there was a real sense that the When those who create works that are matter how bombastic these works may producers were striving to find a dramatic highly artistic or indie in flavor perform seem, they can be appreciated as
32 PARCO CO., LTD. Annual Report 2015 entertainment when seen on that particular locations are found all across Japan, I’d would lift PARCO’s brand power even stage. Fashion is the same. For example, love to see PARCO borrow a page from higher, and enable PARCO to absorb Introduction when shops COMME des GARÇONS and the concept of regional revitalization to diverse talent, particularly in culture and UNDERCOVER came to the 1st floor of create a nice-sized theater connected to fashion. This is because PARCO has long Shibuya PARCO PART1, an image certainly PARCO Theater in Shibuya at the top of had the ability to groom talent, and has the emerged that the PARCO brand is gaining PARCO buildings in every city. Since we capacity to bring in and put outside talent traction far and wide. have the great fortune to live in an era to the test. Though perhaps not terribly I also think the size of the backstage when famous actors from film and profitable at first, I’m convinced that dressing room is nice—everyone from the television also perform on stage, I think it’s PARCO will ultimately see a return on this actors to the producers and staff have to vital that we encourage that ecosystem, investment. The reason is simple—if
stand in the narrow hallway to eat snacks and that we can’t just let it be concentrated PARCO were simply a fashion building Strategy (laughs). I think that atmosphere has a in Tokyo. We need the power those regions without PARCO Theater, it probably positive impact on the performance. have to offer. I would argue that if we do would never have prospered as it has. that, we may see our culture grow from all If PARCO Theater didn’t exist, I think Q3: What are your future expectations for parts of Japan. Tokyo’s cultural ecosystem would break PARCO Theater? We can also imagine things flowing in down. I could say the same for fashion. Once a month, I travel back to Kumamoto, the opposite direction, with works created Going forward, I want PARCO to where I’m from, to do a radio program for theaters at other PARCO locations incorporate the cultural circuitry it has
(FMK “Isao Yukisada Evening Edition”), being invited in for performances at the built into the design of the entire building, Special Feature and there’s a PARCO there. Since PARCO PARCO Theater in Shibuya. I think that and even into the sign out front.
Produced by PARCO Isao Yukisada, Director
First stage production Back by popular demand February 2007 “Fool for Love” March 2015 PARCO Theater Written by Sam Shepard “Shumi-no-heya (Room of Hobbies)” PARCO Theater
Cast: Teruyuki Kagawa, Shinobu Terajima, Performance Written by Ryota Kosawa Masahiro Komoto and Ryosuke Otani Cast: Kiichi Nakai, Shigeyuki Totsugi, Jay Kabira and Akira Shirai
Experimental works by directors Corporate Governance “Directors Choice” Installment 2 May 2008 “Letter from an Unknown Woman” PARCO Theater Written by Stefan Zweig Cast: Tomoko Nakajima and Kazuhiro Nishijima New work for the stage by Isao Yukisada A famed work first presented at PARCO Theater PARCO Theater 40th Anniversary Presentation in 1984 returns after 30 years March 2013 “Tango at the End of Winter” “Shumi-no-heya (Room of Hobbies)” Dates Saturday, September 5 to Sunday, September 27, 2015 PARCO Theater PARCO Theater Written by Ryota Kosawa
Cast: Kiichi Nakai, Shigeyuki Totsugi, Jay Kabira and Financial Section Akira Shirai “Directors Choice” Installment 4 June 2013 “Letter from an Unknown Woman” PARCO Theater Written by Stefan Zweig Cast: Tomoko Nakajima and Kazuhiro Nishijima
Shu Fujisawa’s Akutagawa Prize-winning novel,
a timeless classic, comes to the stage Corporate Information November 2014 Written by Kunio Shimizu “Buenos Aires ZERO HOUR” Directed by Isao Yukisada Playhouse, NEW NATIONAL THEATER, TOKYO Cast: Hiroshi Mikami, Kana Kurashina, Misuzu Kanno, Written by Shu Fujisawa “Midnight in Buenos Aires” Yoshinori Okada, Masashi Arifuku, Makoto Arikawa, (Kawade Shobo Shinsha Publishers) Takeshi Ogura, Masayo Umezawa and Yusuke Santamaria, Script by Ryuta Horai others Music by coba Cast: Go Morita, Miori Takimoto Performances also scheduled for Osaka, Kanagawa, Fukuoka, Jun Hashimoto, Tetsuya Chiba and Mieko Harada Aichi, Niigata, Toyama and Miyagi
PARCO CO., LTD. Annual Report 2015 33 Segment Initiatives
Shopping Complex Business
Net Sales: ¥243,783 million Operating Income: ¥11,317 million
Themes for Fiscal 2015 • Stronger base from opening of extended floor area at Fukuoka PARCO main building in March 2015 and opening of Nagoya PARCO midi • At all PARCO stores, expand core target audience and respond to service consumption and inbound demand • Promote sales and marketing planning and shopping environment development all driven by ICT utilization • Address business site expansion, including development of areas around existing stores, and business development
Store Data Highlights Sales by Store (Tenant Sales and Year-on-year Sales Comparison*1)
Sales floor areas: 451,000m2 (101.9%) The Urban Complexes Group led sales performance, the result of synergy effects from inbound demand and the opening of Fukuoka Store visitors: 143,626,000 (102.6%) PARCO New Building. Year-on-year comparison of existing avg. spent per customer: 101.2% (Millions of yen) Year-on-year Fiscal 2013 Fiscal 2014 change
Urban Complexes Group 141,856 143,454 101.1％ Sales Composition by Category Sapporo PARCO 11,417 11,891 104.1％ Strengthening our hand not only in fashion, but also in personal goods Sendai PARCO 13,312 13,135 98.7％ and foods, in response to changing lifestyles. Ikebukuro PARCO 28,409 28,256 99.5％
Fiscal 2010 10.2％ Shibuya PARCO 13,468 14,666 108.9％
45.1％ 15.2％ 17.3％ Shizuoka PARCO 10,300 10,096 98.0％
Nagoya PARCO 35,616 35,215 98.9％ 5.9％ 6.3％ Hiroshima PARCO 17,270 16,989 98.4％
2 Fiscal 2014 14.2％ Fukuoka PARCO* 12,059 13,202 109.5％
42.0％ 16.2％ 14.8％ Community Complexes Group 95,532 94,078 98.5％
6.6％ Utsunomiya PARCO 4,767 4,478 93.9％ 6.2％ Urawa PARCO 16,934 17,441 103.0％ Clothing Personal goods General merchandise Foods Restaurants Other Shin-Tokorozawa PARCO 8,881 9,051 101.9％
Year-on-year comparisons use total store sales. Chiba PARCO 6,383 5,718 89.6％ In order to demonstrate the total sales capability of each store, total store sales include tenant sales as well as sales from fixed-rate rent tenants such as PARCO Theatre. Tsudanuma PARCO 9,121 8,811 96.6％
Hibarigaoka PARCO 7,575 7,460 98.5％
Store Renovations Results Kichijoji PARCO 7,575 7,274 96.0％
Primarily for Urban Complexes, we promoted core target audience Chofu PARCO 17,082 16,915 99.0％ expansion, stronger lifestyle proposals, and responsiveness to inbound Matsumoto PARCO 7,531 7,477 99.3％ demand as key themes. Otsu PARCO 4,495 4,276 95.1％ Fiscal 2010 Fiscal 2011 Fiscal 2012 Fiscal 2013 Fiscal 2014 Kumamoto PARCO 5,184 5,173 99.8％ Zones renovated 429 639 522 450 425 3 Area renovated (m2) 45,000 64,000 53,000 44,000 46,000 Total of Existing Store Group* 237,389 237,532 100.1％
Renovation effect (Year-on- year sales comparison by 120.4 132.2 117.4 111.0 118.6 Total*4 237,389 239,157 100.7％ zone/%)
New tenant store openings *1 Tenant sales exclude fixed rent tenants. 181 255 232 249 233 in renovated zones *2 Data for New Building (opened November 13, 2014) excluded from year-on-year figures for Fukuoka PARCO. *3 Data for Fukuoka PARCO New Building excluded from “Total of Existing Store Group.” *4 Year-on-year comparisons for “Total” include post-opening data from Fukuoka PARCO New Building.
34 PARCO CO., LTD. Annual Report 2015 Introduction
Fiscal 2014 saw, among other things, the opening of Fukuoka service that allows users to reserve or order in-store merchandise PARCO New Building as the latest PARCO model, the promotion for pickup or home delivery. As a step to strengthen our ability to of theme-based renovations in response to greater consumption of capture rapidly growing inbound demand, we made efforts to services and other content over physical goods, sales promotions take on high-demand tenants specializing in areas such as Tokyo- centered around (PARCO Card), and talked-about mobilization based creators, Japanese brands, and animation culture. We events. During the year, we also put an omni-channel platform in intend to bolster the most successful of these measures in fiscal place in our quest to become the leading shopping complex in 2015 as well, with sights on realizing our Long-term Vision for Strategy terms of ICT utilization, and launched “Kaeru PARCO” and 2020 goal of becoming “a business group that prospers in urban smartphone application “POCKET PARCO.” Kaeru PARCO is a markets.”
Web Strategy Unique to PARCO Approximately 80% of PARCO store website viewers access those
sites via their smartphones. Accordingly, we use the smartphone Special Feature app as a measure to strengthen relations with individual customers. We individually personalize and recommend articles on the PARCO Shop Blog, updated by tenant shops, to each customer, which motivates them to visit stores. Additionally, customers receive coins (points) for checking in during store visits or using credit cards registered with the app for shopping, which they can save and redeem for shopping coupons. Through this and other services, we are enhancing not only ongoing measures
to bolster (PARCO Card), but also delivering more robust services Performance to our customers. PARCO Shop Blog produced daily by shop tenants
Promoting theme-based renovations in Strengthening services to meet inbound demand response to greater service consumption We are heightening awareness of the PARCO store network among At Urban Complexes, in a drive to propose new lifestyles to urban foreign visitors to Japan. Along with expanding the number of
dwellers, PARCO was among the first to adopt themes responsive duty-free shops and the use of systems that simplify duty-free Corporate Governance to the transformation in lifestyles from consumption centered on procedures, our actions have included multi-language support for physical goods, to greater consumption of services and other store websites, more robust communication about PARCO through content. Similarly, PARCO was an early adopter of stores tailored to alliances with informational programming directed abroad, and the needs of foreign visitors to Japan. At Community Complexes, inviting influential bloggers active outside of Japan to be “PARCO we enhanced variety to ensure a rich lineup of clothing, food and Ambassadors” who spread the word about PARCO locally. living items is on hand to answer the needs of local communities. Similarly, as one measure to improve customer service In fiscal 2015, expanding the core target audience and proposing capabilities with regard to foreign visitors, we conduct English lifestyles to urban dwellers will be key renovation themes for Urban conversation training sessions for shop staff. We are also expanding Complexes. For Community Complexes, the key themes for the number of shops using our multi-language call center and Financial Section renovation will be multi-functionality to deepen market deploying information staff capable of multi-language support entrenchment as a shopping center with close ties to the during high tourism seasons to enable smooth customer service community, and the adoption of high market-need items. support by shop staff. In these and other ways, we are fortifying our customer service capabilities for foreign visitors to Japan. Corporate Information
Ikebukuro PARCO P’PARCO B2-B1 Nagoya PARCO West Building 2nd floor “niko niko honsha” “Organic Market Kitchen” PARCO is now home to several shops Under the theme of proposing high-quality targeting digital natives from video site living to the market, PARCO introduced Multi-language support counter set up in Shibuya Influential Thai bloggers spread “niko niko honsha,” including a satellite shops handling variety goods, natural PARCO during the spring season information locally about PARCO studio, and anime and game shops. foods, and other items.
PARCO CO., LTD. Annual Report 2015 35 Retail Business
Net Sales: ¥19,802 million Operating Income: ¥647 million
Themes for Fiscal 2015 • Promote dynamic store expansion measures centered on three operations—TiC TAC (watch specialty store), EYEWEAR (eyeglass specialty store), and COLLECTORS (men’s and women’s variety shop) • Move to boost profit margins through a full range of original products and improved product mix, while aiming for continued business expansion by advancing development of new business formats
NEUVE A CO., LTD.
Top- and bottom-line growth through aggressive store openings, new business format development, and robust inbound demand Ikebukuro PARCO Main Building 5th floor Opened in November 2014 For fiscal 2015, further extend base network and promote new business format stores Store specializing in handmade soaps and oils with no chemical additives NEUVE A CO., LTD. has two sales channels—a network of 182 stores (18 newly opened) and “Rirerecipe natural soap marche” an online store. Overall business performance was led by TiC TAC, which aggressively opened new stores, and EYEWEAR. Guided by the Medium-term Business Plan (FY2014-2016), NEUVE A also developed new business formats, two of which opened as stores. These efforts resulted in year-on-year growth in sales and operating income. In fiscal 2015, along with promoting active opening of new stores, NUEVA A has decided to open two new business format stores centered around stationery, and will also focus on development of new business formats.
Number of locations: 182 (58 in PARCO complex) Ratio of shops outside of PARCO: 68.0% Second lower level of The CUBE, a specialty store gallery in TiC TAC Business Watch specialty store 90 (18 in PARCO complex) Kyoto Station EYEWEAR Business Eyeglass specialty store 27 (11 in PARCO complex) Opened in November 2014 “TiC TAC” ROSEMARY Business Cosmetics and accessories specialty shop 23 (15 in PARCO complex) COLLECTORS Business Men’s variety shop/Women’s variety shop 36 (12 in PARCO complex) Business format development 6 (2 in PARCO complex)
Space Engineering and Management Business
Net Sales: ¥18,983 million Operating Income: ¥328 million
Themes for Fiscal 2015 • Leveraging expertise and technologies honed through work with PARCO and outside commercial facilities as a key strength, will move to expand orders for electrical work for outside commercial facilities and interior work for specialty stores
PARCO SPACE SYSTEMS CO., LTD.
Sales and earnings growth primarily through orders for new large-scale commercial facilities For fiscal 2015, will promote gaining orders for several large-scale commercial complex Fukuoka PARCO New Building 1st-2nd floor construction projects and external PM* work Select shop “BEAMS” Despite a decline in orders from existing major clients, PARCO SPACE SYSTEMS CO., LTD. recorded year-on-year growth in sales and operating income, reflecting the capture of new clients for interior and electrical work, as well as expansion in hotel and building maintenance operations. In fiscal 2015, in parallel with orders for construction work for multiple tenants in a new commercial complex, PARCO SPACE SYSTEMS will move to develop a structure for taking on external PM work through stronger Group ties.
*PM: Property Management Tokyo Dome Hotel “Hikari no Chapel” wedding chapel
36 PARCO CO., LTD. Annual Report 2015 Other Business (Entertainment Business and PARCO CITY CO., LTD.) Introduction
Net Sales: ¥6,891 million Operating Income: ¥256 million
Entertainment Business
Themes for Fiscal 2015 • Ongoing development of trendsetting cafés • Actively develop outside live performances through business alliances with live entertainment companies Strategy • Promote new businesses in entertainment
Shibuya PARCO PART1 7th floor In addition to attracting a record number of attendants for the stage performance of Menu for “Funassyi no FUNA café,” a collaboration café with invited foreign musical “SINGIN’ IN THE RAIN,” the Entertainment Business drew popular character Funassyi critical acclaim for its showing on stage of many talked-about works, including Yomiuri Theater Award winner for Best Work “Manju Kowai.” Attendance was also strong at trendsetting character cafés. In fiscal 2015, the Entertainment Business will continue to advance its ongoing Special Feature development of trendsetting cafés based on popular character motifs.
“Manju Kowai,” winner of the Yomiuri Theater Award for Best Work
PARCO CITY CO., LTD.
Themes for Fiscal 2015 Performance • Devise a complete lineup of original products, including “SC Concierge,” a service supporting the ICT strategies of shopping centers, and “Kaeru Blog,” for the sale of specialty shop in-store goods via a blog, in a bid to attract new customers
Development of customer service In addition to growth in orders from specialty stores and other existing clients in the information app utilizing Pepper, the emotion recognition robot Web consulting business, PARCO CITY CO., LTD. expanded its provision of services for new shopping centers and specialty stores. The latter included “Jinryu Kaiseki,” a Corporate Governance new service supporting the ICT strategies of shopping centers, and the development, among others, of a customer service-response information app for utilizing the emotion recognition robot named “Pepper.” In fiscal 2015, PARCO CITY will take steps to expand sales of its Web-based sales support system, while actively promoting proposal of its fashion recruitment and recruitment management systems to outside clients.
“Jinryu Kaiseki” SC Concierge® research Capture of beacon signal from smartphones used specifically for research carried by customers who take part in the study
Fiscal 2014 Accolades and Awards Financial Section
Shopping Complex Business Fukuoka PARCO Recipient of the Fiscal 2014 Senken Shimbun Nationwide Prominent Tenants Choice Developer Award Innovation Prize SC Business Fair Exhibit Booth Winner second year running of the SC Business Fair 2015 (January 21-23, 2015) Booth Award “Zetsumeiten (The Borderline Exhibit)” 2014 Recipient of the 32nd Mainichi Fashion Grand Prix Special Prize – On the Outer Limits of Fashion Space Engineering and Management Business Assertive measures targeting health and Commendation from the Head of the Shibuya Labor Standards Surveillance Department at the 13th Shibuya and Setagaya
safety and improved operational efficiency Industrial Health and Safety Promotion Competition Corporate Information “Amu Plaza Kagoshima Premium” Commendation for interior design work from Kyushu Railway Company “Ekimachi 1-Chome Meinohama” Commendation for interior design work from JR Kyushu Building Management Other Business (Entertainment Business) “Manju Kowai” produced by PARCO 2015 Winner of the 22nd Yomiuri Theater Award for Best Work (announced Feb. 2015) Books ”Gyatoruzu 1—Niku (”Flesh”),” Winner of the Governor of Tokyo Prize at the 48th Japan Book Design Concours (2014) ”Gyatoruzu 2—Koi (”Love”),”and ”Gyatoruzu 3—Mujo (”Impermanence”)”
PARCO CO., LTD. Annual Report 2015 37 Produced by PARCO Brand
Since it was founded, PARCO has done more than simply sell merchandise. We have produced and proposed fun ways to spend time and new avenues for enjoying life, ushering in a distinctive culture by becoming a locus for trendsetting information. These actions have been decisive in enhancing our corporate brand and setting PARCO shopping complexes apart in the marketplace.
Advertising Campaigns parco.jp/style/cm_poster/
Seasonal campaigns centered on memorable advertising
Memorable advertising is the heart of PARCO seasonal campaigns, with world-famous French design unit M/M (Paris) serving as creative director, camera work by international award-winning photographer Viviane Sassen, and modeling by supermodel Lily McMenamy. Beautifully intertwining images of the female form with objets d’art, these campaigns express the continuity of the entire year, while also suggesting the timelessness of fashion through a concept that seeks to capture the changing of the seasons. Embedded in this is a desire for viewers to viscerally feel the wonder of the four seasons, the importance of experiencing this change, and the excitement of fashion through these advertisements.
M/M (Paris) This Paris-based creative unit was formed in 1992 by Michael Amzalag and Mathias Augustyniak. Active in a range of fields spanning music and fashion, the arts, and design, this duo’s distinctive graphic style, coupled with the original typography that is a defining
April 3 to 20, 2015 M/M (Paris) SUGOROKU DE L’OIE Shibuya PARCO PART 1 3rd floor PARCO Museum feature of their work, has attracted and had a powerful In April 2015, M/M (Paris) provided design direction for an exhibit at PARCO impact on many people. Museum of some of their most memorable visual posters to date. The exhibit also showcased new original visual art and posters created specifically for the event, (Right) Michael Amzalag providing a window into the unique worldview created by M/M (Paris). (Left) Mathias Augustyniak
38 PARCO CO., LTD. Annual Report 2015 Introduction
PARCO Corporate Message www.parco.co.jp/specialinyou/
“SPECIAL IN YOU.” From the opening of Ikebukuro PARCO in 1969, PARCO has looked beyond fashion to actively introduce music, art, theater and an array of other culture to Strategy the public. At the same time, PARCO has worked to identify new talent, and support those talented individuals as they create the future with confidence. As a continuation of the sentiment embodied in PARCO’s 2010 corporate message “LOVE HUMAN.” from 2014, we unveiled “SPECIAL IN YOU.” This new corporate message focuses even more intensely on PARCO’s incubation activities of identifying and supporting talent.
PARCO is involved in an array of initiatives with those who appear in our posters. Special Feature Fall 2014 Appearing Artist 2015 Spring Appearing Artist KYUN-CHOME Steve Aoki Performance
In fall 2014, KYUN-CHOME participated in the Shibukaru Festival, an annual event for young female creative talents held at Shibuya PARCO, where she unveiled her work.
Artist KYUN-CHOME, winner in spring 2014 of the highest honor awarded by the This campaign featured world-renowned EDM Taro Okamoto Award for Contemporary Art – the Taro Okamoto Award – for her (Electronic Dance Music) DJ Steve Aoki. In parallel, the work “Makka ni Nagareru” (Awash in Red), was the model for the “SPECIAL IN Entertainment Department launched publishing, film, YOU.” campaign, where she created a powerful piece of art within the festival and apparel businesses with Aoki to expose Corporate Governance advertisement itself. the world to the PARCO brand.
Street Fashion Marketing www.web-across.com
ACROSS Now online, “ACROSS” is a magazine managed since 1977 by PARCO’s ACROSS
Editing Team that researches the fashion and Financial Section culture of Tokyo youth. Based on “fixed- point observation” started in August 1980, the team applies its micro-perspective beyond fashion, analyzing “street fashion marketing” created from the interaction of people, stores and towns. The accumulated data and knowhow are used across our
varied business activities, and is increasingly Corporate Information 2014 marked the 400th “fixed-point being used on an outsourcing basis and for observation” conducted every first joint research by outside domestic and for- Saturday of the month, providing eign companies and groups. valuable data offering a glimpse into consumer lifestyles. March 1982 June 2015
PARCO CO., LTD. Annual Report 2015 39 PARCO Entertainment
From the inception of PARCO itself, PARCO’s entertainment business has proposed a richer lifestyle to customers by dynamically introducing new culture in the fields of theater, music and art. To this end, the business produces a host of highly appealing content through the avenues of theater, music, film and publishing. In addition to multiplatform promotion beyond individual fields, such as conversion of works to DVD or publications, and collaborative projects, PARCO also offers live entertainment emotional impact and discovery to happen in person. Through this business, PARCO takes steps to communicate trending information and create added value, all of which helps to enhance its corporate brand. www.parco-enta.com
THEATERTheater www.parco-play.com PARCO develops theatrical, musical and dance productions at stage theaters nationwide, mainly at PARCO Theater (Shibuya PARCO PART 1 9th floor). These high-quality productions feature talented creators and acting troupes with mass appeal. In fiscal 2014, PARCO productions were on 700 stages nationwide and seen by 500,000 people. “Macbeth” “The Woman in Black”
Dates: Sunday 12 July to Sunday 2 August, 2015 Dates: Friday 7 August to Sunday 30 August, 2015 PARCO Theater PARCO Theater Original work by William Shakespeare Original work by Susan Hill Directed by Andrew Goldberg Adapted by Stephen Mallatratt Starring: Kuranosuke Sasaki Directed by Robin Herford Translated by Koushi Odajima Among Shakespeare’s many works, “Macbeth” stands Starring: Masaki Okada and Masanobu Katsumura out as his most famous psychological drama. Created with full cooperation from the National Theatre of “The Woman in Black” is a classic tale of gothic horror Scotland, this innovative, never-before-seen version of from the UK. Using the perception of fear to outstanding “Macbeth” features a bold and ambitious concept – all of entertainment effect, this production will enter its 26th year the 20 characters in the play are portrayed by a single in London in 2015. Translated into 12 languages and actor. The setting is a mental hospital, and the character is shown in more than 40 countries, this show has also been a patient isolated in a room. The characters of “Macbeth” a popular production at PARCO Theater since 1992, residing in the patient recreate this horrifying drama in a coupled with a powerful talented cast. Returning to the breath-stopping 100-minute production. stage for the first time in seven years, this all-star production will see rising star character actor Masaki Performances also scheduled for Toyohashi, Osaka, Okada join the stage with veteran method actor Masanobu Yokohama and Kitakyushu. Katsumura. A middle-aged attorney and a young actor use a “play within a play” to reenact a frightening experience from the past, but something goes awry…
Performances also scheduled for Nagoya, Niigata and Osaka.
Movies www.cinequinto.com CINE QUINTO (Shibuya PARCO PART 3 8th floor) screensMOVIE a wide range of first-run films from Japan and overseas. PARCO also produces films, has operations pertaining to entertainment rights*, and arranges tie-ins and other exciting events that generate synergies with PARCO stores. *Involves the purchase and screening of foreign films in Japan, as well as investment and participation in the Japanese film industry
PARCO entertainment rights business “Pitch Perfect” PARCO entertainment rights business “Heroine Shikkaku” (Heroine Fail)
Friday, May 29, 2015 Sneak preview nationwide Saturday September 19, 2015 Sneak preview nationwide Directed by Jason Moore Starring: Mirei Kiritani, Kento Produced and directed by Yamazaki and Kentaro Sakaguchi, Elizabeth Banks “The Hunger Games” others Starring: Anna Kendrick, Rebel Wilson, From the original manga “Heroine Anna Camp and Brittany Snow Shikkaku” by Momoko Kouda (Published by SHUEISHA Margret Comics) Script by Erika Yoshida Directed by Tsutomu Hanabusa
©2012 UNIVERSAL STUDIOS ©2015 Heroine Shikkaku Production Committee All Rights Reserved. ©Momoko Kouda/SHUEISHA
A ne’er-do-well women’s a cappella club. Their greatest weapon is…their outrageous personalities?! Hatori Matsuzaki is a high school student in love with a boy, Rita Terasaka, her close friend When they come together as one, the sound they make is unbelievable! since childhood. Hatori is absolutely convinced that she is destined to be Rita’s heroine. To Beca (Anna Kendrick) is an aspiring DJ who loves music. Pushed and prodded by her her shock, Reta begins dating Miho Adachi, an unattractive girl in their class who confesses parents, she goes off to college where an odd turn of events has her joining a women’s a her love for him. As they question how this happened, another wrinkle appears—the coolest cappella club set to appear in a major competition. While their different and difficult guy in school, Kosuke Hiromitsu, begins showing interest in Hatori—leading to an personalities at first cause strife for the team, as the deadline for the competition looms, their unexpected love triangle. Which one is Hatori’s true hero? You will laugh and cry at this friendship as women begins to emerge. heartwarming new love story.
40 PARCO CO., LTD. Annual Report 2015 Introduction
Music www.club-quattro.com
In offering quality live music, we invite popular new performers from Japan and abroad to perform at our four CLUB QUATTRO venues in Shibuya, Nagoya (Nagoya PARCO East Building 8th floor), Hiroshima (Hiroshima PARCO Main Building 10th floor), and Umeda. A total of 1,135 live stage MUSICperformances were held in fiscal 2014. In November 2014, QUATTRO LABO (Kichijoji, Tokyo), a music café and dining bar operated by CLUB QUAT- TRO, began operating as a light café during the day, and a slow-paced bar for listening to analog records at night. Strategy
CLUB QUATTRO QUATTRO LABO Opened November 1, 2014
CLUB QUATTRO offers quality, genre-spanning live music from Japan and abroad. As its In fact, QUATTRO LABO has a collection of over 5,000 records and CDs on hand, mostly reputation grows as a launch pad for new artists from home and overseas, the list of artists vintage rock from the 60s and 70s, but also soul, jazz, root music and world music, all who got their start at CLUB QUATTRO before going on to even bigger stages and stardom played through those giant homemade speakers. is growing. Whether alone or with a good friend, QUATTRO LABO offers a “third place for grownups” where visitors can enjoy some quality time. Special Feature
Live performance at Shibuya CLUB QUATTRO Inside the café, the audio system features enormous, Performance homemade speakers and an analog record collection centered on American rock. CONTENTS PublishingBOOKwww.parco-publishing.jp Content Development Corporate Governance PARCO is involved in a variety of publishing activities, from art books The Entertainment Department works closely with other departments and practical guidebooks to works of literature. We are engaged in a wide and divisions in a wide range of operations involving entertainment, range of publishing projects, including publishing the works of the most including gallery planning and management, the promotion of collabora- contemporary artists and creators of our era in Japan and overseas, and tion cafes between artists and characters, and exhibition production. those tied in with various events.
ELLE café Cold Pressed Juice RECIPE BOOK Collaboration Café
Recipes from ELLE café, a popular spot We are developing a collaboration café, where specializing in cold-pressed juice, are made public adorable products featuring popular characters Financial Section in this book for the first time. Cold-pressed juice, recreated as food menu offerings are drawing in which vegetables and fruits are squeezed in a attention. At THE GUEST café & diner (Shibuya low-speed juicer to minimize heat from friction, is PARCO PART 1 7th floor), where the menu a hot topic today. changes regularly, we offer a fun and exciting This book features recipes from the popular menu and service. ELLE café, recipes simple to make at home, and recipes divided based on health effect. It also offers details on how to do a juice cleanse, and recipes for smoothies, superfoods, and granola, as well. This book tops the list for those looking to up their beauty game. Corporate Information
Shibuya PARCO PART 1 7th floor Products from collaboration café “My Melody Café” Published June 2015 ¥1,512 (tax included) featuring Sanrio character “My Melody”
©’76,’05,’14 SANRIO CO., LTD.
PARCO CO., LTD. Annual Report 2015 41 PARCO Group CSR
At the PARCO Group, we believe that the definition of our CSR activities is embodied in our corporate mission—creating welcoming, forward- thinking, innovative spaces that provide an enjoyable experience for customers and help our tenants prosper. To this end, we have established four main themes that anchor a host of CSR activities—“next-generation human resources,” “culture,” “local communities,” and “environ- ment.” We also proactively conduct fundamental CSR activities, including initiatives targeting peace of mind and safety. In doing so, our aim is to improve corporate value by earning the understanding and support of our seven key stakeholders, specifically customers, tenants, employees, shareholders and investors, members of the local community and society at large, landowners and leaseholders, and contract business partners.
Visit the website for details regarding CSR-related initiatives. www.parco.co.jp/en/csr/
Initiatives for peace of mind and safety Since PARCO stores are places where members of local communities gather, we have taken a wide range of measures to ensure both the peace of mind and safety of the people who visit our stores.
1. Initiatives to achieve “Safety in day-to-day living” The restaurants and food stores inside PARCO conform to rigorous standards for health and safety management. Furthermore, PARCO conducts its own periodic health and safety inspections, checking the sanitary conditions in kitchens and the storage conditions for food products and ingredients. Checks are also made as needed to ensure that restaurant menus display appropriate information, and Third-party hygiene inspection that raw ingredients, potential allergens, and expiration dates are all properly displayed.
2. Initiatives to achieve “Safety in the shop” There are many shop windows in a PARCO store. Each of these glass panes is coated with anti- shattering film to protect people in the unlikely event of window breakage. The large display shelves have mechanisms to prevent the shelves from collapsing. We also have staff who are specially trained in disaster prevention roles, and they practice each day. We actively participate in fire-fighting technology training tournaments held by local fire stations, and Fire extinguisher training drill have achieved some good results. We also offer training to the shop staff on how to use fire extinguishers so that they can take action in initial fire fighting. We have set up an information system that links each shop to our Disaster Prevention Center so that the shops can rapidly respond to emergencies. Furthermore, we are actively involved in crime prevention activities, holding regular training sessions designed to share examples of problematic behavior and other aspects of crime prevention.
3. Initiatives to achieve “Life-protecting safety” Crime prevention training session To prepare for the possibility that a shopper may suffer an injury or suddenly take ill, all PARCO security staff and maintenance personnel undergo paramedic training with the local fire station staff. All shops have an AED (Automated External Defibrillator) and the staff is trained in their use.
PARCO Group Business Continuity Plan (BCP) In the PARCO Group, our disaster-readiness efforts include periodic fire drills for PARCO building staff, coupled with paramedic response training courses, to protect lives and safeguard assets in the Training on how to transport injured people event of an emergency. In addition, to provide services on a continuous basis, we have procedures in place to prevent or minimize risks that could occur in the event of a major disaster. The “PARCO Basic Business Continuity Plan for Major Earthquake Disasters” was formulated in 2011. After two subsequent partial revisions, the document was completely revised in February 2014. We conduct regularly scheduled BCP drills each year to test our about to react quickly to scenarios simulating the occurrence of an actual major disaster. At Nagoya PARCO, we adopted a ground filtration system as a measure to ensure potable water supplies exist should a natural disaster occur. The filtered groundwater is used for drinking water and facility equipment throughout the complex. Groundwater filtration system at Nagoya PARCO
42 PARCO CO., LTD. Annual Report 2015 Introduction Strategy Special Feature Performance Corporate Governance Corporate Information 43 Kurumin Certification Logo Annual Report 2015 CO., LTD. PARCO Under this project, nutritionally rich food items purchased food items purchased nutritionally rich Under this project, as school lunches to children delivered the menu are from at 15 in developing countries. In fiscal 2014, 93 restaurants locations took part in this project. PARCO PARCO CITY, which operates a job recruitment site a job recruitment which operates CITY, PARCO holds regular staff, specializing in fashion industry retail seminars, info exchange sessions, and other events models for women working role many designed to share in the industry. initiatives at forums on career announced its own PARCO by training for women and work-life balance sponsored companies. other retail fieldwork” refers “undeveloped woodland revitalization to experiential learning designed to encourage thought on new business models that leverage a community’s employees take part in distinctive advantages. PARCO these activities alongside international students. PARCO also cooperated in the launch in fiscal 2014 of PARCO Empowerment in Fashion, an organization Women’s working in supporting the participation of women PARCO’s fields. This decision reflected fashion-related of with the stated mission understanding and agreement the organization. ％ 15
Target 11.1 10.7 9.8 care reasons care 3) Systems accessible during childrearing/nursing care 3) Systems accessible during childrearing/nursing 1. Return to work system leave (paid) 2. Childcare full days and partial and 3. care, Leave options for childcare/nursing reasons care for childcare/nursing site selection system 4. Work for childcare/nursing that retired employees 5. System for rehiring Share of women in management positions 9.4 8.0 (%) March 2011 March 2012 March 2013 March 2014 March 2015 2) System accessible after childbirth 1. Spousal childbirth leave Systems Above and Beyond Mandated Standards Systems Above and Beyond 1) Systems accessible during pregnancy pregnancy adjustment during 1. Workload paid annual leave 2. Restoration of expired Since fiscal 2014, PARCO has been a participant in “undeveloped woodland revitalization fieldwork” has been a participant in “undeveloped woodland Since fiscal 2014, PARCO Also, since fiscal 2010, in partnership with student groups addressing ways to correct global for a class on global citizenship, part of the Global Management Strategy course found at Hitotsubashi The class creates learning opportunities Graduate School of International Corporate Strategy. University’s employees to join forces with international students set to become global business leaders to for PARCO consider solutions to social issues. buildings imbalances in food supplies, we have carried out a project in which restaurants within PARCO date, food equivalent to 63,832 such meals offer “charity menus” of nutritionally rich food items. To have been delivered as school lunches to children in developing countries. Given today’s global economic environment, taking time to consider the next generation of human Given today’s Group can resources and societal issues provides an important opportunity to think of how the PARCO help bring about a more sustainable society. Interaction with next-generation human resources Promoting dynamic participation of women Promoting dynamic participation is promoting diversity management as a move for achieving a sturdier business base Group The PARCO Guided by the Diversity Committee, we pursue that will lead directly to its advancement as a company. diverse values are mutually recognized, and realmeasures for fostering a corporate climate in which Among the issues addressed, their skills and to grow. opportunities exist for all employees to showcase increase female participation of women. To one of the most important is promoting the dynamic the Medium-term Business Plan (FY2014-2016), weparticipation in management decision-making, under management posts as part of the recruitment of moreset a target of having women comprise 15% of all career seminars, management seminars, also propagate women into managerial and leadership roles. We Company. and work-life management extensively within the PARCO supports employees with both childcare and nursing care responsibilities and their work care responsibilities both childcare and nursing supports employees with PARCO certified as was 2012, PARCO of our work-life balance initiative. In 2007 and responsibilities as a part Law for Promoting for general employers in accordance with the conforming to the standards formulating and implementing Development of the Next Generation through Measures to Support the As a result of this, PARCO for the establishment of employment conditions. an appropriate action plan 4th phase of the period through June 2020 set for the certification logo. With received the “Kurumin” for reaching our objectives plan, we have drafted two policies as measures the general-employer action employment conditions, and balance systems, establishment of related of promoting use of work-life and “Greater awareness styles—“Promotion of a review of working styles,” improvement in working needs.” for balancing work with child and nursing care and promotion of systems Employee Work/Life Balance Support System Balance Work/Life Employee Corporate Governance
Fundamental Policy experience, with the aim of further improving the transparency of PARCO constantly works to strengthen its corporate governance, management and the effectiveness of the supervision of business recognizing that to enhance its corporate value it is essential for it execution. Of the six external directors, four are independent to protect the rights and earnings of shareholders, build smooth directors, and each is appointed as the head or a committee relationships with stakeholders other than shareholders and member of the Nominating Committee, Audit Committee or investors, preserve transparency in management and establish an Compensation Committee. effective management oversight structure. PARCO has adopted the “Company with three Committees” system, which includes a Role and Performance of the Board of Directors Nominating Committee, in order to build a highly transparent and Other Key Committees corporate governance structure. Independent directors (external Board of Directors—Convened 14 Times in Fiscal 2014 directors) make up more than half of the Board of Directors, The Board of Directors is responsible for deciding fundamental ensuring the objectivity necessary to supervise management. policies regarding management, and for the supervision of Furthermore, PARCO has signed a capital partnership agreement directors and executive officers. The Board of Directors comprises with parent company J. FRONT RETAILING. The purpose of this eight directors (six men and two women), of which six are external agreement is to respect the autonomy of PARCO, recognizing that directors), and it convenes once a month, with additional irregular the autonomy and creativity of our management and employees is meetings held flexibly as necessary.
the source of PARCO’s corporate value creation efforts. Fiscal 2014 Attendance Record of External Directors Aiko Okawara 14 out of 14 meetings Hiroshi Takahashi 14 out of 14 meetings Role of External Directors Yasuyuki Kobayashi 14 out of 14 meetings Tomonori Ito 13 out of 14 meetings Haruyoshi Fujino 10 out of 11 meetings Noriko Nakamura 9 out of 11 meetings Each external director is selected for the Board of Directors from the viewpoint of possessing a variety of external knowledge and
Framework for Management Supervision and Execution
Management Supervision
General Meeting of Shareholders Nominating Committee (5 members, including 4 external directors (independent directors)) Collaboration Board of Directors Audit Committee (8 members, including 6 external (All 4 directors are external directors directors) (independent directors))
Compensation Committee (5 members, including 4 external CSR Committee directors (independent directors))
Coordinates CSR Management Diversity Committee Activities Supervision Group Auditor Office
Execution of Management Risk Management Committee President and Representative Executive Officer
Management Committee
Executive Officer
Departments Internal Audit
Indicates an appointment, report, instruction, audit or decision.
44 PARCO CO., LTD. Annual Report 2015 Introduction
Committees Each committee acts in its capacity to conduct management supervision and reports to the Board of Directors. A Committees’ Secretariat has been established to support the activities of each committee by providing dedicated staff.
• Nominating Committee—Convened Nine Times in Fiscal 2014
The Nominating Committee determines the content of proposals to be submitted at the General Meeting of Shareholders regarding the Strategy appointment or dismissal of directors, as well as nominates candidates for representative director for the Board of Directors and executive officers, and recommends their removal.
The five-person Nominating Committee consists of four external directors (all independent directors) and the President and Representative Executive Officer. The Nominating Committee is responsible for two key tasks—drafting, as required by law, agenda items for submission to the General Meeting of Shareholders regarding the election or termination of directors; and the proposal, pursuant to Company regulations, of recommendations regarding candidates for, or the termination of, the posts of executive officer and Representative Executive Officer. Special Feature With the national-level drafting of both a formalized stewardship code and corporate governance code, the corporate governance environment in Japan has changed dramatically over the past year. Of these changes, one of the most important Tomonori Ito is the more objective evaluation of representative executive officers and the nomination of successors from an external External director (Independent director) standpoint. Consequently, we recognize that the role of the Nominating Committee will thus be increasingly vital to the Nominating Committee chair creation of shareholder value from a long-term perspective.
• Audit Committee—Convened 13 Times in Fiscal 2014
The Audit Committee monitors the execution of business by directors and executive officers, and determines the content of proposals to be Performance submitted at the General Meeting of Shareholders regarding the selection, dismissal or reappointment of the financial auditor.
The Audit Committee consists of four members, all of whom are external directors (independent directors). The Audit Committee is tasked with monitoring and inspecting the development and operational status of the Company’s system of internal controls to ensure corporate soundness and sustainable growth, and to establish a quality corporate governance structure that earns public trust. In so doing, the Audit Committee strives to maintain a system that ensures audit effectiveness. The Audit Committee audits the actions of executive officers and others in the conscientious, faithful and legally prescribed performance of their duties by receiving reports from the Group Auditor Office, the Independent Auditor, and the external Corporate Governance auditors of Group companies, requesting reports from relevant executive officers, and attending weekly meetings of the Hiroshi Takahashi Management Committee, among other actions. External director (Independent director) In particular, the Audit Committee collaborates closely regarding audit planning, execution and reporting with the Group Audit Committee chair Auditor Office, responsible for internal audits within the PARCO Group. In this way, the Audit Committee is dedicated not only to audits that preserve confidence in the Group’s financial reporting and operational integrity, but also to efforts to enhance corporate value by utilizing audits to make recommendations to management concerning vital areas for improvement.
• Compensation Committee—Convened Four Times in Fiscal 2014
The Compensation Committee determines the compensation of individual directors and executive officers. Financial Section
The five-person Compensation Committee consists of four external directors (all independent directors) and the President and Representative Executive Officer. The Compensation Committee is tasked with determining compensation for individual directors and executive officers. Under this remit, the Compensation Committee, in accordance with its compensation policies and set regulations and criteria, determines compensation for directors based on the director’s specific role, and for executive officers based on rank, role, and an evaluation of corporate performance and individual duty performance.
PARCO recognizes that strengthening governance is one of the most important issues in achieving its management goal of Corporate Information raising corporate value through an improved level of satisfaction among internal and external stakeholders. To this end, the Aiko Okawara Compensation Committee strives to enhance management transparency in compensation, which can often include elements External director (Independent director) seen as vague or unclear, by adopting a highly objective process conducted in line with clearly stated regulations and criteria. Compensation Committee chair
PARCO CO., LTD. Annual Report 2015 45 Executive Officers and the Management Committee department. It audits the status of legal compliance, operational Executive officers execute specific operations based on the streamlining and risk management of all business aspects of PARCO fundamental policies decided by the Board of Directors. There are and the PARCO Group subsidiaries, based on the auditing plan. It 14 executive officers (12 men and two women). also exchanges information with the Audit Committee and auditors of The Management Committee is a deliberative organ designed to group subsidiaries as necessary, and conducts effective audits. facilitate decision-making by a president and representative executive officer in the execution of specific business operations. CSR Management Structure The Management Committee comprises the managing executive • CSR Committee officers, the various executive officers for the Finance Group, the In addition to promoting the PARCO Group’s corporate social Accounting Group, the Business Operation Group, the Personnel responsibility (CSR) activities, the CSR Committee was established in Group, the Administration and Legal Group, and the Group an effort to strengthen internal controls, and is chaired alternatively Auditor Office, and the executive officers for departments. The by managing executive officers or the heads of the Corporate Planning Management Committee has one female member. Office, the Public Relations and Investor Relations Office, the IT Promotion Office, and the Executive Assistants Office. The CSR Internal Controls Committee sets the direction for, plans and implements the CSR Fundamental Policy activities of the PARCO Group, and takes measures to support PARCO retains a structure to maintain the appropriateness of the in-house and external PR, promote in-house information sharing, and operations of PARCO and the PARCO Group in terms of the encourage cooperation with outside companies and groups around effectiveness and efficiency of operations, the credibility of financial CSR activities. The scope of activity of the CSR Committee spans the statements, compliance with laws and regulations related to business entire company, encompassing discussions held with all executive activities and the protection of assets and other areas. At the same officers, as well as coordination and engagement with the Diversity time, PARCO works to further improve corporate value. Committee, Risk Management Committee, various in-house divisions, and Group companies. Compliance Structure To ensure legal compliance and to conduct fair and highly transparent • Diversity Committee corporate activities, PARCO has formulated a basic philosophy on Chaired by the president, this committee, in step with our compliance and behavioral expectations; it has also drafted management strategy, is striving to create a corporate culture that compliance regulations, including those stipulating preventive can translate diversity into improved corporate value. The launch of mechanisms, action steps, and corrective procedures regarding legal these efforts as the PARCO Women’s Network back in November violations by executive officers and other key personnel. As part of its 2005 broadened from 2011 into the Diversity Project, with themes measures for the compliance structure, PARCO has implemented an that no longer focused solely on women. From fiscal 2014, these internal awareness program that includes formulation of the Basic efforts were reorganized into the Diversity Committee to provide a Principles of Compliance, and a Code of Conduct, which all more powerful push forward. employees are expected to adhere to and follow, the posting of conduct guidelines in business offices, and distribution to all • Risk Management Committee employees and directors of the PARCO Employee Handbook The Risk Management Committee, chaired by a senior executive incorporating guidelines for compliance activities. Also, in officer, works in accordance with the risk management regulations to consideration of compliancy and risk management, we have set up an identify risks incurred in the course of corporate activities, assesses internal reporting system to protect persons providing information risks and develops countermeasures, and conducts internal awareness from any negative consequences that might arise from disclosure. programs. It also works to put in place an internal control structure across the company that is able to quickly respond to risks as they Group Auditor Office materialize, including establishing a response headquarters for times The Group Auditor Office (10 members) was established under a of emergency and implementing information management.
full-time executive officer as the company’s internal auditing Refer to the PARCO website for detailed information concerning Corporate Governance. www.parco.co.jp/en/about/governance/ 46 PARCO CO., LTD. Annual Report 2015 Board of Directors and Officers (As of 31 June, 2015) Introduction
Directors
Kouzou Makiyama Hidekazu Hirano
Member of the Board, Senior Executive Member of the Board, Officer, Senior Manager of the Business Chairman of the Board, Strategy Division, Executive Officer for President and Representative the New Business Planning Group and Executive Officer the Related Business Group Strategy
1981 Enters PARCO CO., LTD. 1981 Enters PARCO CO., LTD. 2004 Serves as Executive Officer 2004 Serves as Executive Officer 2007 Serves as Managing Executive Officer 2007 Serves as Managing Executive Officer 2008 Serves as Director and Senior Executive Officer 2008 Serves as Director, Chairman of the Board, President and 2011 Serves as Director, President and Representative Executive Officer Representative Executive Officer 2013 Serves as Director for J. FRONT RETAILING Co., Ltd. (current post) 2011 Serves as Senior Executive Officer Serves as Director, Chairman of the Board, President and 2013 Serves as Director and Senior Executive Officer (current post) Representative Executive Officer (current post)
Hiroshi Takahashi Yasuyuki Kobayashi Special Feature Aiko Okawara
External director External director (Independent director) (Independent director) External director Compensation Committee Chair Audit Committee Chair (Independent director)
1978 Serves as President & CEO for JC Foods Corporation 1973 Enters Huso Audit Corporation 1973 Enters Daimaru, Inc. (currently JC Comsa Corporation) 1986 Serves as Partner for Shinko Audit Corporation 2003 Serves as Director and Executive Officer for the company above 1985 Serves as President & CEO for JCC Corporation 1995 Serves as Representative Partner for Chuo Audit Corporation 2007 Serves as Executive Officer for J. FRONT RETAILING Co., Ltd. 2003 Serves as Chairman & CEO for JC Comsa Corporation 2007 Serves as Representative Partner and Regular Officer responsible for 2008 Serves as Director and Executive Officer for Daimaru, Inc. (current post) business development in the Marketing Department for Shin Nihon 2010 Serves as Director and Executive Officer for Daimaru Matsuzakaya 2011 Serves as External Director for PARCO CO., LTD. (current post) Audit Corporation (currently Ernst & Young Shin Nihon LLC.) Department Stores Co. Ltd. and Director and Managing Executive 2009 Serves as Regular Officer of the Business Development Office, Audit Officer for Daimaru, Inc. Performance Supervision Division, Client Service Department for the auditor above 2012 Serves as External Director for PARCO CO., LTD. (current post) 2010 Serves as Manager of the Business Development Office, Audit 2013 Serves as Director and Managing Executive Officer for Operation Department for the auditor above J. FRONT RETAILING Co., Ltd. 2011 Serves as External Director for PARCO CO., LTD. (current post) 2015 Serves as Director and Senior Managing Executive Officer for Serves as President & CEO for Pronet Inc. (current post) J. FRONT RETAILING Co., Ltd. (current post) 2012 Serves as External Director for Sansei Landic Co., Ltd (current post) 2015 Serves as External Director for HUMANWEB, Inc. (current post)
Tomonori Ito Haruyoshi Fujino Noriko Nakamura Corporate Governance
External director (Independent director) External director Nominating Committee Chair External director (Independent director)
1979 Enters The Bank of Tokyo, Ltd. (currently The Bank of Tokyo- 1983 Enters The Daimaru, Inc. 1973 Enters TV Asahi Corporation Mitsubishi UFJ, Ltd.) 2010 Serves as Executive Officer of Daimaru Matsuzakaya Department 1985 Serves as Representative of Japan Association for Female Executives 1990 Serves as Investment Banking Group Vice President for the New Stores Co. Ltd. (JAFE) (current post) York Branch of the bank’s trust company 2014 Serves as Executive Officer of J. FRONT RETAILING Co., Ltd. 1987 Serves as Representative Director of JAFE Service Co., Ltd. (currently 1995 Enters Tokyo Branch of Union Bank of Switzerland (currently UBS-AG) Serves as Director & Managing Executive Officer of J. FRONT Poppins Corporation) 1997 Serves as Tokyo Branch Manager and Investment Banking Unit RETAILING Co., Ltd. (current post) 2003 Serves as Member of Office for the Promotion of Special Zones for Manager for the bank above Serves as External Director for PARCO CO., LTD. (current post) Structural Reform, Cabinet Secretariat (current post) 1998 Serves as General Manager, Japan Investment Banking Division, 2010 Serves as Member of Central Environment Council, Ministry of the Managing Director for UBS Securities Japan Co., Ltd. Environment (current post) Financial Section 2012 Serves as External Director for PARCO CO., LTD. (current post) 2011 Serves as CEO for Poppins Corporation (current post) Serves as Professor at Hitotsubashi University’s Graduate School of 2014 Serves as External Director for PARCO CO., LTD. (current post) International Corporate Strategy (current post) 2013 Serves as External Auditor for AIN PHARMACIEZ INC. (current post) 2014 Serves as External Director for Aozora Bank, Ltd. (current post) Executive Officers
Masaaki Abe Takashi Sensui Yuji Hirai Kazuko Hamada Managing Executive Officer for the Corporate Managing Executive Officer, Senior Manager of the Executive Officer for the Estate Management Executive Officer for the Group Auditor Office Planning Office, the Public Relations and Investor Store Management Division, Executive Officer for Group, the Development Group, the Architectural
Relations Office, the IT Promotion Office and the Environmental and Store Administration Group Group, and the ZERO GATE Business Group Corporate Information Executive Assistants Office
Shigeyoshi Sato Hideki Noguchi Hajime Inoue Tomoyuki Yamaki Executive Officer for the Overseas Business Group Executive Officer for the Finance Group, the Executive Officer for the Entertainment Department Executive Officer and Store Manager of Nagoya Accounting Group, and the Accounting PARCO Coordination Group Gaku Mizoguchi Chiaki Nakano Masao Tominaga Takashi Kashimoto Executive Officer for the Store Planning Group and Executive Officer for the Store Operation Group, Executive Officer for the Personal Group and Executive Officer and Store Manager of Shibuya Store Design Group the Media Communication Group and Web Administration and Legal Group PARCO Marketing Group
PARCO CO., LTD. Annual Report 2015 47 Financial Section
48 Management’s Discussion and Analysis 54 Consolidated Balance Sheets 56 Consolidated Statements of Income 57 Consolidated Statement of Comprehensive Income 58 Consolidated Statements of Changes in Net Assets 59 Consolidated Statements of Cash Flows 60 Notes to Consolidated Financial Statements 79 Independent Auditor’s Report
For long-term numerical data and graph data, please refer to the PARCO website and FACTBOOK 2015. Investor Relations www.parco.co.jp/en/ir/
FACTBOOK 2015 www.parco.co.jp/en/ir/library/financial/factbook.php
Management’s Discussion and Analysis
Current Situation At existing PARCO stores, we carried out proposal-based store In fiscal 2014, ended February 28, 2015, there were some signs of renovations with strong design themes and sales promotions focused on weakness in the Japanese economy, but economic stimulus measures the PARCO Card, as part of active efforts to boost customer traffic. and monetary policies implemented by the Japanese government and Also, we developed new stores and formats in the Retail Business, the Bank of Japan supported a continued moderate recovery. In the worked to secure new clients in the Space Engineering and Management domestic consumption environment, an increase in overseas visitors, Business and Others Business, and continued to develop content in the particularly from Asia, provided some support to consumer spending, entertainment business. but there was continued instability due to poor weather and a pullback As a result, the PARCO Group’s net sales increased 2.1%, or in demand after a spike before the increase in consumption tax. ¥5,505 million, to ¥269,889 million. Gross profit was up 2.7%, or ¥1,078 million, to ¥40,946 million. The gross profit ratio was 15.2%, Evaluating Fiscal 2014 Results an improvement of 0.1 percentage point compared with the previous Overview fiscal year. Under the market environment described above, the PARCO Group Selling, general and administrative expenses rose 3.7%, or ¥1,180 pushed ahead with business development in line with its new medium- million, to ¥32,760 million. The ratio of SG&A expenses to net sales term plan (fiscal 2014-16). In fiscal 2014, the first year of the plan, we increased 0.2 of a percentage point, to 12.1%. expanded our urban business locations. Specifically, in October 2014, Operating income increased 2.6%, or ¥312 million, to ¥12,508 we opened Nagoya ZERO GATE, the largest store in our ZERO GATE million, a record high for the third consecutive year. The operating business so far, and the following month we opened the Fukuoka margin was 4.6%, unchanged from the previous fiscal year. PARCO New Building. Both stores attracted a great deal of attention In other income (expenses), the Company booked net other expenses in their respective areas. Along with the opening of more floor space of ¥1,925 million, mainly due to impairment losses on non-current at Fukuoka PARCO in March 2015, we will work to enhance the assets at Chiba PARCO. appeal of the Fukuoka Tenjin district, Kyushu’s main business and As a result of the foregoing, net income decreased 7.1%, or ¥484 shopping center, by improving access between the main building and million, to ¥6,294 million. the two new buildings.
48 PARCO CO., LTD. Annual Report 2015 Introduction
Net income per share was ¥62.04, while return on equity declined In store development, we decided to open a number of new stores to 0.7 of a percentage point to 5.7%. expand our business locations in urban markets. We plan to open a new In line with our policy of maintaining stable shareholder returns, retail complex near the west exit of Sendai Station (scheduled to open management paid a year-end dividend of ¥9 per share for fiscal 2014, in early summer 2016), and we opened Nagoya PARCO midi on a site giving a total cash dividend applicable to the year of ¥18 per share. adjoining Nagoya PARCO’s West and East buildings in March 2015. As an initiative to cultivate the talents of the next generation, we Segment Performances launched “Booster,” the first crowd funding service in Japan run by a Strategy ■ Shopping Complex Business shopping complex business operator. This initiative enables ordinary Shopping Complex Business sales were ¥243,783 million, up 0.9%. people to support the development of new talent in fashion, music, art Operating income declined 1.0% to ¥11,317 million. and a range of other areas. At PARCO’s 19 complexes across Japan, we continued to carry out renovation work to enhance our two different types of shopping facili- ■ Retail Business ties: Urban Complexes and Community Complexes. Retail Business sales were ¥19,802 million, up 7.9%. Operating income In store renovations, we focused on three main themes – expanding rose 14.6% to ¥647 million.
the customer base in our core target market, strengthening proposals NEUVE A CO., LTD. reported increases in net sales and operating Special Feature for different lifestyles, and responding to inbound demand – primarily income in fiscal 2013. Company-wide performance was driven by the through the renovation of Urban Complexes. As a result of these mea- TiCTAC watch business, which actively opened new stores. A total of sures, renovated space in fiscal 2014 totaled approximately 46,000 m2 18 stores were opened during fiscal 2014, resulting in a total of 182 for all stores, with sales in refurbished areas rising a strong 18.6% year stores in the Retail Business at the end of the fiscal year. on year. In marketing, we offered more rewards for PARCO Card members ■ Space Engineering and Management Business in March 2014, aiming to tap into the spike in demand ahead of the Space Engineering and Management Business sales were ¥18,983 consumption tax hike. These campaigns, along with strong growth in million, up 7.6%. Operating income was up 28.9% to ¥328 million. new card members and an increase in Class S PARCO Card members, Despite a decline in orders from existing major clients, PARCO Performance our top customers with strong loyalty to the brand, lifted PARCO card SPACE SYSTEMS CO., LTD. reported higher sales and operating sales amounts 7.6% year on year. In September 2014, we started income compared with the previous fiscal year, supported by success in accepting nationwide department store gift cards, aiming to enhance securing new clients for interior fitting and electrical work and external customer service. maintenance work. Furthermore, the Shibuya PARCO museum held a range of popular events, such as “Suiyo Dodesho EXPO Kosai” and the “We Love AAA ■ Other Business
Exhibition.” These events were subsequently transferred to other stores, The Other Business reported sales of ¥6,891 million, up 22.5%, and Corporate Governance helping to boost customer traffic. operating income of ¥256 million, compared with operating loss of ¥20 Also, as part of efforts to address the growing number of overseas million in the previous fiscal year. visitors to Japan, we implemented a range of initiatives to create a In PARCO CO. LTD.’s entertainment business the hugely popular better customer experience, mainly at our Urban Complexes. This “SINGIN’ IN THE RAIN” musical from overseas drew record crowds included opening stores that are popular with overseas visitors, expand- and generated significant interest. A popular character-themed café also ing the number of tax-free stores, and offering free in-store Wi-Fi. attracted a large number of customers. These factors supported higher Building on efforts in the previous fiscal year, we actively promoted net sales and operating income compared with the previous fiscal year. unique ICT initiatives. In fiscal 2014, we added a new service to the PARCO-CITY CO., LTD. posted sales of ¥687 million, down 5.0% PARCO Shop Blog called Kaeru PARCO, which enables customers to year on year, and operating income of ¥6 million, down 85.4% from Financial Section reserve and pick up products bought online. We also released POCKET the previous fiscal year. In the website consulting business, orders from PARCO, our official smartphone app, which works with the Kaeru specialty retailers and other existing clients increased, but sales and PARCO service. This app provides PARCO Shop Blog content and operating income declined compared with the previous fiscal year, when store event information tailored to individual customer needs, and it there were a number of large orders. also allows users to accumulate virtual coins for each PARCO store visit and items purchased with a registered credit card. These coins can then be exchanged for shopping coupons. Corporate Information
PARCO CO., LTD. Annual Report 2015 49 Management’s Discussion and Analysis
Financial Position This was mainly due to the repayment of interest-bearing debt and cash Assets dividends paid. Total assets at the end of fiscal 2013 were ¥226,830 million, up ¥6,073 million. Capital Investment Total current assets were ¥27,410 million, an increase of ¥5,014 Capital investment decreased ¥25,798 million, to ¥10,532 million, and million that primarily reflected a ¥4,074 million increase in notes and included tangible fixed assets, intangible fixed assets, long-term prepaid operating accounts receivable—trade. expenses, and lease and guarantee deposits. Investments and other assets decreased ¥3,006 million, to ¥29,813 Depreciation decreased ¥38 million, to ¥5,894 million. million. The main factor was a ¥3,224 million decrease in lease and guarantee deposits. Fiscal 2015 Initiatives Property and equipment was ¥169,606 million, an increase of We have formulated a Long-term Vision to take the PARCO Group ¥4,066 million, mainly reflecting the acquisition of assets related to through to fiscal 2020 and a medium-term business plan ending in fiscal capital investment such as the construction of the Fukuoka PARCO 2016. In fiscal 2014-16, we will work to realize our long-term vision by New Building. implementing five tactics in line with three business strategies. Total asset turnover was 1.21 times, while return on assets was 5.6%. < Long-term corporate vision > A business group that prospers in urban markets Liabilities —Designers of unique offerings for 24/7 urban life Total liabilities were ¥113,618 million, up ¥1,685 million from the —Creative drivers of urban evolution close of the previous term. Current liabilities were ¥47,472 million, up ¥6,442 million. This < Three Business Strategies > was largely due to a net increase of ¥2,286 million in notes and operat- Cultivation of major urban areas ing accounts payable—trade. Expansion of core targets Non-current liabilities were ¥66,146 million, down ¥4,756 million. Innovative use of ICT This was due largely to a decrease of ¥3,544 million in long-term loans payable. < Five Strategic Initiatives > Interest-bearing debt was ¥45,229 million, down ¥5,195 million. 1. Prioritization of the PARCO Stores Business The debt-equity ratio was 0.40. 2. Development centered on areas around core urban stores and entry into new major cities in Japan Net Assets 3. Expansion of related businesses and creation of new businesses Net assets at the end of the term were ¥113,211 million, up ¥4,388 4. Rebuilding overseas business million from a year earlier. This mainly reflected an increase in retained 5. Strengthen management foundations to support further earnings due to an increase in net income. The equity ratio was thus business advances 49.9%, while the net asset value per share was ¥1,115.83. Please refer to the Interview with the President on P14 and our Cash Flows website for more details about the medium-term business plan. Net cash provided by operating activities was ¥15,281 million, up from www.parco.co.jp/en/ir/plan/ ¥9,864 million a year earlier. This was after adjustments to ¥10,582 million in income before income taxes and minority interests for non- ■ Shopping Complex Business cash items including depreciation, and extraordinary income (loss). We will continue to develop two types of shopping facilities: Urban Net cash used in investing activities was ¥7,612 million, down from Complexes and Community Complexes. Specifically, we will expand ¥27,886 million in the previous term. The main use of cash was for the the customer base in our core target market, refurbish stores and purchase of property, plant and equipment related to the construction develop formats to address new themes such as a more discerning of the Fukuoka PARCO New Building. approach to consumption based on “value” rather than simply Net cash used in financing activities was ¥7,206 million, compared “things," build stronger links with tenant companies, step up marketing with net cash provided of ¥11,049 million in the previous fiscal year. to grow membership and sales amounts for PARCO Card, respond to
50 PARCO CO., LTD. Annual Report 2015 Introduction
rising demand from overseas visitors, promote wider use of ICT, and app can now receive coins at any PARCO store nationwide, and the optimize store operations. In March 2015, we opened more floor space app’s customer service functions have been upgraded. Going forward, in the Fukuoka PARCO Main Building. Together with its new build- we plan to roll out marketing campaigns targeting the needs of ings, Fukuoka PARCO is now the largest shopping center in the Tenjin POCKET PARCO users, introduce free Wi-Fi at all our stores, and area. Also in March, we opened Nagoya PARCO midi on a site adjoin- continue to experiment with new types of promotions. ing Nagoya PARCO’s West and East buildings. In fiscal 2015, we plan In store development, we plan to open Sapporo ZERO GATE (ten- to refurbish a total of 48,000m2 of floor space across our existing tative name) in spring 2016, a new retail complex near the west exit of Strategy network of PARCO stores. Our aim is to address the changing needs of Sendai Station in early summer 2016, and the new South Wing of consumers, attract more diverse tenants, respond to inbound demand Matsuzakaya Ueno in autumn 2017, as part of our tie-up with the J. and improve our ability to keep pace with the consumption patterns of Front Retailing Group. Going forward, we will develop areas around today’s digital native generation. The main spring renovation projects our existing stores, particularly Urban Complexes in Japan, accelerate are as follows: efforts to expand our urban locations, including the ZERO GATE format and properties managed under contract, and develop our over- Fukuoka PARCO seas operations.
With the addition of more floor space, Fukuoka PARCO is now our Special Feature third largest store after Nagoya PARCO and Urawa PARCO. Fukuoka ■ Retail Business PARCO has been transformed into a comfortable shopping destination NEUVE A CO., LTD. plans to actively open new stores centered on in Tenjin with the addition of a new underground restaurant zone, an three business formats: the TiCTAC business (specialty watch stores), anime culture zone called “Fuku-Pop,” and stores selling interior and EYEWEAR business (specialty glasses stores), and the COLLECTORS variety goods, some of which are new in the retail market. We plan to business. The company will also work to increase profit margins by continue offering new and stimulating shopping experiences to the expanding its product lineup and improving the product mix, while many urbanites looking for new ways of having fun. continuing to expand its operations by developing new retail formats.
Nagoya PARCO ■ Space Engineering and Management Business Performance In March 2015, we opened Nagoya PARCO midi, a new shopping PARCO SPACE SYSTEMS CO., LTD. will leverage the expertise and complex with up-market fashions and trendy eateries. Also, in order to technologies it has built up through the development of commercial improve access between Nagoya PARCO’s four buildings and create an facilities for PARCO and external clients, aiming to boost orders for even better total shopping experience, we converted the first floor of the electrical work from non-PARCO commercial facilities and for store West Building into a unisex clothing and accessory goods space and fitting work from specialty retailers. opened more stores in the West and South Buildings, including some
that are new to Nagoya. These in-store renovations were also comple- ■ Others Business Corporate Governance mented by improvements to the area around the store, including an PARCO CO., LTD.’s entertainment business plans to stage a number of upgraded entrance to the East Building, as part of efforts to revitalize topical plays, such as “Maku ga Agaru,” based on the book by Orisa the Sakae area, a popular area for pedestrians. Hirata and featuring Katsuyuki Motohiro and Momoiro Clover Z, and “Mary Stuart” starring Miki Nakatani. The business will also expand In marketing activities, we will work to attract new PARCO Card its themed café concept, which was popular in fiscal 2014, and actively members to boost sales amounts, conduct reward campaigns for exist- work on producing new content, including content developed through ing members to encourage more store visits, and hold in-store events partnerships with overseas agents. that increase customer traffic. PARCO-CITY CO., LTD. aims to attract new external clients in the Initiatives to target overseas visitors will include increasing the retail facility and specialty retailer fields by enhancing its lineup of Financial Section number of tax-free shops, upgrading the shopping environment by proprietary products such as SC Concierge, an ICT strategy support introducing tax-free systems and other improvements, and enhancing service for shopping centers, and Blog Cart, which enables specialty communication through media aimed at overseas visitors. retailers to sell their in-store items online through their blogs. We will also continue to promote wider use of ICT. Specifically, from March 2015, shoppers using our POCKET PARCO smartphone Corporate Information
PARCO CO., LTD. Annual Report 2015 51 Management’s Discussion and Analysis
Outlook for Fiscal 2015 Earthquakes, and conducting disaster drills at the stores. However, Through the above initiatives, we expect a 5.8% increase in net sales depending on the specific circumstances, the PARCO Group’s business for fiscal 2015, to ¥285,600 million, with operating income rising 2.3% performance and financial position may be significantly affected. to ¥12,800 million and ordinary income increasing 0.0% to ¥12,500 million. At the same time, we project a 9.6% increase in net income, to 3. Risk of Regulatory Restraints ¥6,900 million, thereby achieving record high profits. The PARCO Group operates its business under a regulated environ- ment, shaped by legislation including the Large-Scale Retail Stores Risks Related to Our Business Location Law, the Central City Invigoration Law, the City Planning With respect to information contained in the financial statements relat- Law, the Building Law and the Building Standard Law. In planning new ing to business and accounting conditions, the following factors may store openings and expanding floor space in the future, we may be significantly affect investment decisions. Recognizing these risks, the subject to regulatory controls that may affect our new store plans and PARCO Group will strive to prevent their occurrence and to respond operational plans, and restrict our business activities. Under such cir- appropriately in the event they occur. Information pertaining to the cumstances, the PARCO Group’s business performance and financial future is based on the PARCO Group’s knowledge as of May 25, 2015. position may be significantly affected.
1. Risk of Fluctuations in Demand 4. Risk of Fluctuations in the Industry and Markets The PARCO Group engages in the Shopping Complex Business, includ- The PARCO Group conducts detailed marketing to develop ing the operation of shopping centers; the Retail Business; and the shopping complexes and launch new outlets for specialty stores. Space Engineering and Management Business. The Group’s business However, an unpredictable intensification of competition and performance and financial position may be significantly affected by changes in market conditions may affect store sales and new store decreased sales and orders caused by declining consumer confidence opening plans. To quickly respond to such changes in the business and a slowdown in corporate profitability due to deterioration in the environment, the Group is rationalizing its store operating system economy and tax reforms such as higher consumption tax rates. Slug- and adopting a scrap-and-build approach. However, under certain gish sales of seasonal products caused by unusual weather, such as cool circumstances, the Group’s business performance and financial summers and warm winters, could also dampen sales. position may be significantly affected.
2. Risk of Natural Disasters and Accidents 5. Risk of Corporate Reorganization The PARCO Group has business bases in Japan and overseas. It oper- The PARCO Group undertakes its business as an integrated whole, ates, or operates under contract, shopping complexes in major cities in comprising PARCO CO., LTD. and its affiliates in Japan and Japan, as well as standalone tenant stores in shopping complexes in abroad, through an organic collaboration among the Group mem- Japan. These locations may experience difficulties in their sales activi- bers. In the future, the scope or business domain of this corporate ties in the event of disasters such as earthquakes, fire, acts of terrorism, group may change due to mergers, transfers or acquisition of opera- or unrest. In particular, the PARCO Group has stores and locations in tions, and the sale or disposal of affiliated companies, in which case the Tokai and Kanto regions, where major earthquakes are predicted, the Group’s business performance and financial position may be and may therefore incur damages in these regions. A risk response significantly affected. system is being set up and enhanced to minimize damage from such incidents by implementing countermeasures such as ensuring anti-seis- mic measures, formulating and disseminating the Manual on Major
52 PARCO CO., LTD. Annual Report 2015 Introduction
6. Risk Related to Business Associates a manual of rules, employee education, and certification regarding the The PARCO Group provides fixed leasehold deposits to land and handling of personal information. However, in the event a leak of property owners in its Shopping Complex and Retail Businesses. personal information results in claims for damages and loss of the It also has claims to sales receivables against its business associates in public’s trust, the Group’s business performance and financial position the Space Engineering and Management Business. While we conduct may be significantly affected. due diligence in credit management with respect to these business associates, land and property owners may experience financial difficul- 10. Risk related to IT systems Strategy ties, causing problems in the collection of fixed leasehold deposits. The The PARCO Group utilizes various IT systems in its business opera- business associates may also suffer deterioration in credit standing, tions. Management of these systems is largely carried out at data centers giving rise to irrecoverable loans. Under these circumstances, the operated by external contractors. These data centers incorporate vari- PARCO Group’s business performance and financial position may be ous safety measures, such as earthquake-proof designs, redundancy in significantly affected. power and communications cabling, on-site power generation and security systems to prevent unauthorized access. However, in the event 7. Risk Related to the Supply of Products and Services of a natural disaster or accident that exceeds expectations, the Group’s
The PARCO Group handles clothing, sundries and foods, and provides business activities could be affected by damage to facilities, system Special Feature services including interior design and construction work, and building outages and communication difficulties between business sites, which management and operation. While the utmost care is exercised to may have a significant impact on the PARCO Group’s business perfor- control quality and ensure the hygienic aspects of products and services, mance and financial position. should flaws or defects in products or services cause damage to custom- ers, the Group may lose customers and the public’s trust, with a result- ing impact on business performance and financial position.
8. Risk Related to Fixed Assets in Possession
The PARCO Group possesses fixed assets for business purposes, includ- Performance ing land intended for stores and buildings, as part of its business activi- ties. In the event that profits from business and cash flows deteriorate, or should the application of impairment accounting result in a decline in land prices, the PARCO Group’s business performance and financial position may be significantly affected.
9. Risk Related to the Protection of Personal Information Corporate Governance The PARCO Group possesses personal information of its customers for marketing activities. Recognizing the consequences of any leakage of personal information on corporate management and trust, the Group has established a system for managing personal information, including Financial Section Corporate Information
PARCO CO., LTD. Annual Report 2015 53 Consolidated Balance Sheets
February 28, 2014 and February 28, 2015
Thousands of U.S. dollars Millions of yen (Note 5) ASSETS 2014 2015 2015 Current assets: Cash and deposits (Notes 6 and 14) ¥ 3,529 ¥ 4,333 $ 36,412 Notes and operating accounts receivable (Note 14): Trade 7,581 11,655 97,941 Other 5,934 5,352 44,975 Less: Allowance for doubtful accounts (5) (4) (34) 13,510 17,003 142,882 Inventories 3,304 3,776 31,731 Prepaid expenses and other current assets 1,118 1,194 10,034 Deferred tax assets (Note 16) 934 1,102 9,261 Total current assets 22,396 27,410 230,336
Investments and other assets: Investment securities (Notes 9 and 14) 2,803 2,282 19,176 Investments to unconsolidated subsidiaries 83 89 748 Other investments 468 524 4,403 Lease and guarantee deposits (Notes 10 and 14) 27,299 24,075 202,311 Deferred tax assets (Note 16) 745 1,308 10,992 Other assets 1,419 1,533 12,882 Total investments and other assets 32,819 29,813 250,529
Property and equipment: Store facilities, at cost 252,754 260,692 2,190,689 Less: Accumulated depreciation (85,944) (89,790) (754,538) Less: Accumulated impairment losses (Note 8) (1,269) (1,295) (10,882) 165,540 169,606 1,425,261
Total assets ¥220,757 ¥226,830 $1,906,134
The accompanying notes are an integral part of these balance sheets.
54 PARCO CO., LTD. Annual Report 2015 Introduction
Thousands of U.S. dollars Millions of yen (Note 5) LIABILITIES 2014 2015 2015 Current liabilities: Short-term loans payable (Notes 11 and 14) ¥ 14,719 ¥ 8,569 $ 72,008 Commercial papers(Note 14) — 4,499 37,807 Notes and operating accounts payable (Note 14): Strategy Trade 15,564 17,850 150,000 Other 2,521 3,779 31,756 18,085 21,630 181,765 Income taxes payable 1,216 3,556 29,882 Accrued expenses 3,206 3,465 29,118 Other current liabilities 3,803 5,751 48,328 Total current liabilities 41,030 47,472 398,924 Special Feature
Non-current liabilities: Long-term loans payable (Notes 11,14 and 18) 35,705 32,161 270,261 Guarantee deposits received (Notes 14 and 17) 32,740 31,206 262,235 Provision for retirement benefits (Note 15) 1,788 — — Net defined benefit liability (Note 15) — 1,964 16,504 Asset retirement obligations (Note 12) 376 447 3,756 Other non-current liabilities 291 367 3,084 Total non-current liabilities 70,902 66,146 555,849 Performance Total liabilities 111,933 113,618 954,773
NET ASSETS (Note 22): Shareholders’ equity Capital stock
Authorized: Corporate Governance 320,000,000 shares at February 28, 2014 and February 28, 2015 Issued: 101,462,977 shares at February 28, 2014 and February 28, 2015 34,367 34,367 288,798 Capital surplus 35,129 35,129 295,202 Retained earnings 38,781 43,249 363,437 Treasury shares (Note 24) (2) (2) (17) Total shareholders’ equity 108,276 112,743 947,420 Accumulated other comprehensive income
Valuation difference on available-for-sale securities 671 656 5,513 Financial Section Foreign currency translation adjustment (124) (59) (496) Remeasurements of defined benefit plans — (129) (1,084) Total accumulated other comprehensive income 547 467 3,924 Minority interests — — — Total net assets 108,823 113,211 951,353
Total liabilities and net assets ¥220,757 ¥226,830 $1,906,134 Corporate Information
PARCO CO., LTD. Annual Report 2015 55 Consolidated Statements of Income
For the years ended February 28, 2014 and February 28, 2015
Thousands of U.S. dollars Millions of yen (Note 5) 2014 2015 2015 Net sales ¥264,384 ¥269,889 $2,267,975 Cost of sales 224,516 228,943 1,923,891 Gross profit 39,868 40,946 344,084 Operating revenue 3,908 4,322 36,319 Operating gross profit 43,776 45,269 380,412 Selling, general and administrative expenses 31,580 32,760 275,294 Operating income 12,196 12,508 105,109
Other income (expenses): Interest income 54 43 361 Interest expenses (513) (430) (3,613) Loss on sales and retirement of non-current assets (621) (649) (5,454) Gain on sales of investment securities 12 211 1,773 Impairment loss (Note 8) (70) (1,463) (12,294) Loss on closing of stores (Note 7) (94) — — Compensation income 201 — — Other 119 363 3,050 (913) (1,925) (16,176) Income before income taxes and minority interests 11,283 10,582 88,924
Income taxes (Note 16): Current 3,320 4,939 41,504 Deferred 1,184 (650) (5,462) Total 4,505 4,288 36,034 Income before minority interests 6,778 6,294 52,891
Minority interests — — — Net income ¥ 6,778 ¥ 6,294 $ 52,891
U.S. dollars Yen (Note 5) 2014 2015 2015 Per share (Note 25): Net income, basic ¥ 66.81 ¥ 62.04 $ 0.52 Net income, diluted — — — Cash dividends applicable to the year ¥ 18.00 ¥ 18.00 $ 0.15
The accompanying notes are an integral part of these statements.
56 PARCO CO., LTD. Annual Report 2015 Consolidated Statement of Comprehensive Income
For the years ended February 28, 2014 and February 28, 2015 Introduction
Thousands of U.S. dollars Millions of yen (Note 5) 2014 2015 2015 Income before minority interests ¥6,778 ¥6,294 $52,891 Other comprehensive income (Note 23) Valuation difference on available-for-sale securities 274 (15) (126) Foreign currency translation adjustment 5 58 487 Strategy Share of other comprehensive income of entities accounted for using equity method 9 6 50 Total other comprehensive income 288 49 412 Comprehensive income (Note 23) ¥7,066 ¥6,343 $53,303
Comprehensive income attributable to (Note 23): Comprehensive income attributable to owners of parent ¥7,066 ¥6,343 $53,303
Comprehensive income attributable to minority interests — — — Special Feature
The accompanying notes are an integral part of these statements. Performance Corporate Governance Financial Section Corporate Information
PARCO CO., LTD. Annual Report 2015 57 Consolidated Statements of Changes in Net Assets
For the years ended February 28, 2014 and February 28, 2015
Millions of yen Accumulated other Shareholders’ equity comprehensive income Valuation difference Number of on Foreign Remeasure- shares available- currency ments issued Capital Capital Retained Treasury for-sale translation of defined Minority Total (thousands) stock surplus earnings shares securities adjustment benefit plans interests net assets Balance at February 28, 2013 101,462 ¥34,367 ¥35,124 ¥33,830 ¥(7) ¥397 ¥(138) ¥ — ¥— ¥103,573 Net income for the year ended February 28, 2014 — — — 6,778 — — — — — 6,778 Dividends of surplus — — — (1,826) — — — — — (1,826) Purchase of treasury shares (Note 24) — — — — (0) — — — — (0) Disposal of treasury shares (Note 24) — — 4 — 6 — — — — 10 Net changes of items other than shareholders’ equity — — — — — 274 14 — — 288 Balance at February 28, 2014 101,462 ¥34,367 ¥35,129 ¥38,781 ¥(2) ¥671 ¥(124) ¥ — ¥— ¥108,823 Net income for the year ended February 28, 2015 — — — 6,294 — — — — — 6,294 Dividends of surplus — — — (1,826) — — — — — (1,826) Purchase of treasury shares (Note 24) — — — — (0) — — — — (0) Disposal of treasury shares (Note 24) — — — — — — — — — — Net changes of items other than shareholders’ equity — — — — — (15) 64 (129) — (79) Balance at February 28, 2015 101,462 ¥34,367 ¥35,129 ¥43,249 ¥(2) ¥656 ¥ (59) ¥(129) ¥— ¥113,211
Thousands of U.S. dollars (Note 5) Accumulated other Shareholders’ equity comprehensive income Valuation difference on Foreign Remeasure- available- currency ments Capital Capital Retained Treasury for-sale translation of defined Minority Total stock surplus earnings shares securities adjustment benefit plans interests net assets Balance at February 28, 2014 $ 288,798 $ 295,202 $ 325,891 $ (17) $ 5,639 $(1,042) $ — $ — $ 914,479 Net income for the year ended February 28, 2015 — — 52,891 — — — — — 52,891 Dividends of surplus — — (15,345) — — — — — (15,345) Purchase of treasury shares (Note 24) — — — (0) — — — — (0) Disposal of treasury shares (Note 24) — — — — — — — — — Net changes of items other than shareholders’ equity — — — — (126) 538 (1,084) — (664) Balance at February 28, 2015 $288,798 $295,202 $363,437 $(17) $5,513 $ (496) $(1,084) $— $951,353 The accompanying notes are an integral part of these statements.
58 PARCO CO., LTD. Annual Report 2015 Consolidated Statements of Cash Flows
For the years ended February 28, 2014 and February 28, 2015 Introduction
Thousands of U.S. dollars Millions of yen (Note 5) 2014 2015 2015 Cash flows from operating activities: Income before income taxes and minority interests ¥ 11,283 ¥10,582 $ 88,924 Adjustments for: Depreciation 5,877 5,921 49,756 Impairment loss 70 1,463 12,294 Strategy Increase in provision for bonuses 7 53 445 Increase in provision for retirement benefits 50 — — Decrease in net defined benefit liability — (23) (193) Loss on store closings 94 — — Interest and dividend income (96) (80) (672) Interest expenses 513 430 3,613 Compensation income (201) — —
Loss on sales and retirement of non-current assets 209 213 1,790 Special Feature Loss (gain) on sales of investment securities 75 (211) (1,773) Decrease (increase) in notes and accounts receivable—trade 98 (4,071) (34,210) Increase in inventories (278) (472) (3,966) Increase (decrease) in notes and accounts payable—trade (713) 2,286 19,210 Increase/decrease in other assets/liabilities (558) 2,317 19,471 Other, net 79 (5) (42) Subtotal 16,512 18,403 154,647 Interest and dividend income received 96 80 672 Interest expenses paid (498) (456) (3,832)
Proceeds from compensation 204 — — Performance Payment resulting from store closing — (114) (958) Payments for cancellation of rental contracts (999) — — Income taxes paid (5,451) (2,632) (22,118) Net cash provided by operating activities 9,864 15,281 128,412 Cash flows from investing activities: Payments into time deposits — (273) (2,294) Purchase of property, plant and equipment (35,450) (9,218) (77,462)
Proceeds from sales of property, plant and equipment 8 20 168 Corporate Governance Purchase of investment securities (56) (2) (17) Proceeds from sales of investment securities 454 711 5,975 Payments for lease and guarantee deposits (612) (856) (7,193) Proceeds from collection of lease and guarantee deposits 8,973 4,020 33,782 Decrease in guarantee deposits received (927) (1,527) (12,832) Other, net (275) (485) (4,076) Net cash used in investing activities (27,886) (7,612) (63,966) Cash flows from financing activities: Net increase (decrease) in short-term loans payable 6,000 (5,000) (42,017)
Net increase in commercial papers — 4,499 37,807 Financial Section Proceeds from long-term loans payable 15,500 4,000 33,613 Repayments of long-term loans payable (7,459) (8,700) (73,109) Redemption of bonds (1,000) — — Net decrease (increase) in treasury shares 9 (0) (0) Cash dividends paid (1,826) (1,826) (15,345) Other, net (174) (179) (1,504) Net cash provided by (used in) financing activities 11,049 (7,206) (60,555) Effect of exchange rate change on cash and cash equivalents 38 68 571 Corporate Information Net increase (decrease) in cash and cash equivalents (6,933) 530 4,454 Cash and cash equivalents at beginning of period 10,463 3,529 29,655 Cash and cash equivalents at end of period (Note 6) ¥ 3,529 ¥ 4,059 $ 34,109
The accompanying notes are an integral part of these statements.
PARCO CO., LTD. Annual Report 2015 59 Notes to Consolidated Financial Statements
PARCO CO., LTD. and Consolidated Subsidiaries
1. Basis of Presenting the Consolidated Financial Statements The accompanying consolidated financial statements are prepared from Certain items presented in the consolidated financial statements accounts and records maintained by PARCO CO., LTD. (the “Company”) submitted to the Director of the Kanto Finance Bureau in Japan are and its consolidated subsidiaries (together, the “Companies”) in accor- reclassified in these accounts for the convenience of readers outside Japan. dance with the provisions set forth in the Corporate Law and the Japa- The consolidated financial statements are not intended to present the nese Financial Instruments and Exchange Law, and in conformity with consolidated financial position or results of operations and cash flows in accounting principles and practices generally accepted in Japan, which accordance with accounting principles and practices generally accepted are different in certain respects as to application and disclosure require- in countries and jurisdictions other than Japan. ments from International Financial Reporting Standards.
2. Summary of Significant Accounting Policies (1) Scope of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its 4 subsidiaries as of February 28, 2014 and February 28, 2015.
The consolidated subsidiaries for the year ended February 28, 2015 are as follows: Capital Stock Thousands of Singapore Percentage of dollars shares PARCO (Singapore) Pte Ltd $4,500 100.0%
Capital Stock Percentage of Millions of yen shares NEUVE A CO., LTD. ¥490 100.0% PARCO SPACE SYSTEMS CO., LTD. ¥490 100.0% PARCO-CITY CO., LTD. ¥ 10 100.0%
The reporting date of the following consolidated subsidiary is as follows:
PARCO (Singapore) Pte Ltd December 31 (*1)
(*1) The financial statements of the subsidiary used in the consolidation are drawn up at the reporting date. Adjustments are made for the significant transactions or other events that occur between this date and the date of the Company’s financial statements.
(2) Elimination of Intercompany Accounts and Transactions affiliate or a subsidiary, or (d) all other securities that are not classified All significant intercompany accounts and transactions including unreal- in any of the above categories (“available-for-sale securities”). The ized intercompany profits are eliminated in preparing the accompanying Companies have no trading securities or held-to-maturity debt securities. consolidated financial statements. The portion attributable to minority Available-for-sale securities with available fair market value are shareholders is recognized as minority interests. stated at fair market value. Unrealized gains and losses on these securi- ties are reported, net of applicable income taxes, as a separate compo- (3) Equity Method nent of “Net assets.” The cost of securities sold is determined by the Investments in unconsolidated subsidiaries are accounted for by the moving-average method. equity method and, accordingly, are stated at cost adjusted for equity Available-for-sale securities with no available fair market value are earnings and losses of the investments after elimination of unrealized stated at cost by the moving-average cost method. intercompany profits and losses from the date of acquisition of shares. (6) Inventories (4) Cash and Cash Equivalents Inventories are stated at cost as determined mainly by the specific identi- Cash and cash equivalents in the accompanying consolidated statements fication method (the cost method with book value written down to the of cash flows are composed of cash on hand, demand deposits, and other net realizable value). short-term highly liquid investments with original maturities of three months or less. (7) Property and Equipment Buildings (excluding leasehold improvements and attached facilities) are (5) Securities depreciated mainly on a straight-line basis. A declining-balance method Securities are classified as (a) securities held for trading purposes (“trad- is mainly used for the other assets. The trust beneficiary right is amor- ing securities”), (b) debt securities intended to be held to maturity tized by the straight-line method. (“held-to-maturity debt securities”), (c) equity securities issued by an
60 PARCO CO., LTD. Annual Report 2015 Introduction
(8) Intangible Assets and Long-term Prepaid Expenses average remaining service years as of the time they occur (mainly 11 Intangible assets and long-term prepaid expenses included in “Other years). The amortization of unrecognized actuarial differences starts assets” are amortized on a straight-line basis. from the subsequent year. Costs of software for internal use are amortized on a straight-line basis over their expected useful lives (5 years). (12) Derivative Financial Instruments The Companies use interest rate swap and currency swap contracts only (9) Leases for the purpose of mitigating the risk of fluctuations in interest rates and
Lease assets in finance lease transactions that do not transfer ownership foreign exchange rates. Interest rate swap contracts that are used as a Strategy are depreciated on a straight-line basis over the lease term with zero hedge and meet certain hedging criteria are accounted for by the special residual value. case interest rate swap treatment. Currency swap contracts that are used The Companies account for finance leases that commenced on or as a hedge and meet certain hedging criteria are accounted for by the before February 28, 2009 and that did not transfer ownership by the appropriation treatment in the following manner: same method as for operating leases. Where a currency swap contract is executed to hedge a transaction denominated in a foreign currency, the transaction is recorded using the (10) Allowances and Accruals contracted forward rate and no gains or losses on the forward foreign The Companies use the accrual basis of accounting for all income and exchange contract are recognized. Special Feature expenses. (the “Appropriation Treatment”) i) Allowance for Doubtful Accounts Also, where interest rate swap contracts of the Companies are used The allowance for doubtful accounts is provided for possible losses as hedges and meet certain hedging criteria, the net amount to be paid or on bad debts. For general receivables, the amount is determined received under the interest rate swap contract is added to or deducted based on the actual bad debt ratio. For doubtful receivables, the from the interest on the assets or liabilities for which the swap contract estimated uncollectible amounts for each receivable are used. was executed. ii) Provision for Bonuses (the “Special Case Interest Rate Swap Treatment”) The estimated bonuses payable in the future as of the balance sheet The following summarizes hedging derivative financial instruments date are accrued. used by the Companies and items hedged: iii) Provision for Sales Promotion Expenses Hedging instruments: Performance Provision for sales promotion expenses is recorded for the projected Currency swap contracts amounts of unused vouchers issued on the promotional reward Interest rate swap contracts card system to be used in the future based on the past actual rate Hedged items: of usage. Bank loans and interest thereon iv) Provision for Loss on Store Closing Provision for loss on store closing is recorded based on the reason- (13) Net Income and Dividends per Share ably estimated loss on store closing for a store the Company decided Basic net income per share is computed based on the net income avail-
to close. able for distribution to shareholders of common shares and the weighted Corporate Governance v) Other Provisions average number of shares outstanding for respective years. Japanese income tax laws set limits to the amounts of certain Diluted net income per share is not presented since the Company had accrued expenses, which are essentially future estimates, deductible no securities with dilutive effect. from the tax base. The provision for sales returns and the provision Cash dividends per share are computed based on dividends declared for books unsold are recorded in accordance with income tax laws. for each year.
(11) Accounting Methods for Retirement Benefits (14) Consumption Tax The estimated amount of all retirement benefits to be paid at the future Consumption tax is an indirect tax levied on domestic consumption retirement dates is allocated equally to each service year using the esti- goods and services at the flat rate of 8%. Subject transactions are mated number of total service years. recorded at the amounts net of consumption taxes that are withheld as Financial Section The unrecognized transition amount arising from adopting the new assets/liabilities until tax filing. standard is amortized on a straight-line basis over a period of 15 years. Unrecognized prior service costs and unrecognized actuarial differ- ences are amortized on a straight-line basis within the employee’s Corporate Information
PARCO CO., LTD. Annual Report 2015 61 Notes to Consolidated Financial Statements
(15) Appropriation of Retained Earnings “Guidance on Accounting Standard for Business Combina- Appropriation of retained earnings is recorded when it is actually tions and Accounting Standard for Business Divestitures” approved by the Board of Directors. (ASBJ Guidance No. 10 of September 13, 2013) “Guidance on Accounting Standard for Earnings per (16) Change in Presentation Shares”(ASBJ Guidance No. 4 of September 13, 2013) Consolidated Statements of Income a) Summary Although “Gain on sales of investment securities” was included in 1) Handling of changes in equity of the parent company for subsidiaries “Other” account for the previous fiscal year, it was changed to be pre- in the event that it continues to have control following purchases of sented as a separate account of “Other income (expenses)” as its impor- additional shares in subsidiaries, etc., 2) handling of expenses related tance in monetary terms was increased for the current fiscal year. to purchases, 3) presentation of net income and changes of the presen- Consolidated statements of Cash Flows tation to non-controlling interests from minority interests, and 4) Although “Loss (gain) on sales of investment securities” was included in handling of provisional accounting, etc., were amended. “Other, net” account for the previous fiscal year, it was changed to be b) Timing of application presented as a separate account of “Cash flows from operating activi- The amendments will come into effect from the beginning of the fiscal ties” as its importance in monetary terms was increased for the current period ending February 28, 2017. The handling of provisional fiscal year. accounting will come into effect after the beginning of the fiscal period ending February 2017 following the implementation of the 3. Accounting Standards Issued But Not Yet Applied business combination. (1) “Accounting Standard for Retirement Benefits” (ASBJ State- c) Effect of application of accounting standards ment No. 26 of May 17, 2012) The effect of the application of these accounting standards on the “Guidance on Accounting Standard for Retirement Benefits” consolidated financial statements is not yet determined. (ASBJ Guidance No. 25 of May 17, 2012) a) Summary 4. Change in Accounting Policy The methods of processing unrecognized actuarial differences and unrecog- Effective from the year ended February 28, 2015, the Company and its nized prior service costs, the methods of calculating retirement benefit consolidated domestic subsidiaries have applied the Accounting Standard obligations and service costs, and the expansion of disclosure were amended. for Retirement Benefits (ASBJ Statement No. 26 of May 17, 2012 (the b) Timing of application “Statement No.26”)) and Guidance on Accounting Standard for Retire- The amendments to the methods of calculating the retirement benefit ment Benefits (ASBJ Guidance No. 25 of May 17, 2012 (the “Guidance obligations and service costs shall be effective from the beginning of the No.25”)) except the article 35 of the Statement No.26 and the article 67 fiscal period ending February 28, 2016. of the Guidance No.25 and actuarial differences, prior service costs and In addition, because a transitional arrangement is prescribed in transition amount arising from adopting the new standard that are yet said accounting standard, it will not be applied retroactively to past to be recognized have been recognized and the difference between financial statements. retirement benefit obligations and plan assets has been recognized as a c) Effect of application of accounting standards liability for retirement benefits. The effect of the application of these accounting standards on the In accordance with the article 37 of the Statement No.26, the effect consolidated financial statements is currently being estimated. of the change in accounting policies arising from initial application has been recognized in accumulated adjustments for retirement benefit in (2) “Accounting Standard for Business Combinations” (ASBJ accumulated other comprehensive income. Statement No. 21 of September 13, 2013) As a result of the application, net defined benefit liability in the “Accounting Standard for Consolidated Financial State- amount of 1,964 million yen (16,504 thousand U.S. dollars) has been ments” (ASBJ Statement No. 22 of September 13, 2013) recognized and accumulated other comprehensive income has decreased “Accounting Standard for Business Divestitures” (ASBJ by 129 million yen (1,084 thousand U.S. dollars), at the end of the fiscal Statement No. 7 of September 13, 2013) year ended February 28, 2015. “Accounting Standard for Earnings per Shares”(ASBJ State- ment No. 2 of September 13, 2013)
62 PARCO CO., LTD. Annual Report 2015 Introduction
5. Japanese Yen Amounts and U.S. Dollar Amounts in the consolidated financial statements are translated into U.S. dollar The consolidated financial statements presented herein are expressed in amounts at the exchange rate of ¥119 = U.S.$1, the prevailing exchange Japanese yen, which are stated in millions of yen by discarding fractional rate on February 27, 2015. The translations should not be construed as amounts less than one million yen. Therefore, their total or subtotal representations that the Japanese yen amounts have been, could have amounts do not necessarily agree with the aggregate sum of such been, can be or could in the future be converted into U.S. dollars at that account balances. rate or any other rate. Solely for the convenience of readers, Japanese yen amounts shown Strategy 6. Consolidated Statements of Cash Flows Cash and cash equivalents in the consolidated statements of cash flows for the years ended February 28, 2014 and February 28, 2015 consist of the following: Thousands of Millions of yen U.S. dollars 2014 2015 2015 Cash and deposits ¥3,529 ¥4,333 $36,412 Time deposits with maturities exceeding three months — (273) (2,294)
Cash and cash equivalents ¥3,529 ¥4,059 $34,109 Special Feature
7. Loss on Closing of Stores For consolidated subsidiaries, interior removal expenses, etc., for a store the Company decided to close for the year ended February 28, 2014 have been recorded.
8. Impairment Loss The Companies recorded impairment losses on the following asset groups for the years ended February 28, 2014 and February 28, 2015. For the year ended February 28, 2014 Millions of yen Location Use Classification 2014 Performance NEUVE A CO., LTD. [Toyonaka City, Osaka,etc.] Store Buildings, etc. ¥70
The Companies group their fixed assets based on the managerial 70 million yen for “Buildings, etc.” was recorded. accounting segment. The recoverable amount of a “Store” is computed based on its selling The book values of other assets that incurred continuous operating price and value in use. losses were written off to recoverable amounts. An impairment loss of
Thousands of Corporate Governance For the year ended February 28, 2015 Millions of yen U.S. dollars Location Use Classification 2015 2015 PARCO CO., LTD. Chiba PARCO [Chuo City, Chiba.] Store Land, Buildings, etc. ¥1,389 $11,672 NEUVE A CO., LTD. Other [Aoi City, Shizuoka,etc.] Store Buildings, etc. ¥ 74 $ 622
The Companies group their fixed assets based on the managerial of 74 million yen (622 thousand U.S. dollars) for “Buildings, etc.”
accounting segment. was recorded. Financial Section The book values of Chiba PARCO assets were written off to recover- The recoverable amount of “Chiba PARCO” is the appraisal value able amounts because recoverable amounts were less than the book according to an outside real estate appraiser based on Japanese Real values. An impairment loss of 1,389 million yen (11,672 thousand U.S. Estate Appraisal Standards. dollars) for “Land, Buildings, etc.” was recorded. The recoverable amount of “Other” is computed based on its selling The book values of other assets that incurred continuous operating price and value in use. losses were written off to recoverable amounts. An impairment loss Corporate Information
PARCO CO., LTD. Annual Report 2015 63 Notes to Consolidated Financial Statements
9. Securities Available-for-sale Securities Acquisition costs and book values of Available-for-sale Securities with available fair market values are as follows: Millions of yen Acquisition As of February 28, 2014 cost Book value Difference Book value exceeding acquisition cost: Equity shares ¥ 977 ¥2,025 ¥1,047 Book value not exceeding acquisition cost: Equity shares 143 139 (4) Total ¥1,121 ¥2,164 ¥1,042
Millions of yen Acquisition As of February 28, 2015 cost Book value Difference Book value exceeding acquisition cost: Equity shares ¥523 ¥1,552 ¥1,029 Book value not exceeding acquisition cost: Equity shares 140 130 (10) Total ¥664 ¥1,683 ¥1,018
Thousands of U.S. dollars Acquisition As of February 28, 2015 cost Book value Difference Book value exceeding acquisition cost: Equity shares $4,395 $13,042 $8,647 Book value not exceeding acquisition cost: Equity shares 1,176 1,092 (84) Total $5,580 $14,143 $8,555
Available-for-sale Securities sold are as follows: Thousands of Millions of yen U.S. dollars 2014 2015 2015 Total sold ¥454 ¥711 $5,975 Total gain on sales 12 211 1,773 Total loss on sales 87 0 0
Impairment loss on securities For the year ended February 28, 2014 and February 28, 2015, no impairment loss on securities was recognized. When the fair market value of Available-for-sale Securities has declined by more than 30% from their acquisition costs, impairment losses are recognized by taking into account recoverability and other factors. For Available-for-sale Securities without fair market value, when the value of those securities has significantly declined from their acquisition costs, impairment losses are recognized by taking into account recoverability and other factors.
10. Lease and Guarantee Deposits Lease and guarantee deposits are those deposits furnished by the Companies in accordance with customary business practices in Japan. In connection with the leasing of store buildings, lessees are required to furnish lessors with deposits in an amount deemed sufficient to secure the lease contracts and the annual lease rental payments. The Lease and guarantee deposits are normally non-interest-bearing and are refundable only when the lease contracts are terminated.
64 PARCO CO., LTD. Annual Report 2015 Introduction
11. Short-Term Loans Payable and Long-Term Loans Payable The weighted average interest rates for short-term loans payable were 0.73% and 0.29% for the years ended February 28, 2014 and February 28, 2015, respectively. The breakdown of long-term loans payable is as follows: Thousands of Millions of yen U.S. dollars 2014 2015 2015 Long-term loans from banks including current portion ¥44,405 ¥39,711 $333,706 Weighted average interest rates of the above long-term loans 1.05% 1.01% — Strategy 44,405 39,711 333,706 Less: Portion due within 1 year (8,700) (7,550) (63,445) ¥35,705 ¥32,161 $270,261
The Companies’ assets pledged as collateral for short-term and long-term loans payable from banks as of February 28, 2015 are as follows: Thousands of Millions of yen U.S. dollars Net book value of assets pledged as collateral: Special Feature Buildings and structures in trust ¥11,759 $ 98,815 Machinery and equipment in trust 6 50 Tools, furniture and fixtures in trust 53 445 Land in trust 10,898 91,580 ¥22,718 $190,908
Secured liabilities as of February 28, 2015 are as follows: Thousands of Millions of yen U.S. dollars Short-term loans payable ¥ 800 $ 6,723 Long-term loans payable ¥7,200 $60,504 Performance
The aggregate annual maturities of long-term loans payable as of February 28, 2015 are as follows: Thousands of Year ending February 28/29, Millions of yen U.S. dollars 2016 ¥ 7,550 $ 63,445 2017 6,500 54,622 2018 15,400 129,412 2019 4,800 40,336 2020 and thereafter 5,461 45,891 Corporate Governance ¥39,711 $333,706
12. Asset Retirement Obligations (1) Asset Retirement Obligations Recognized in the Consolidated Balance Sheets as of February 28, 2014 and February 28, 2015 i) Summary of the asset retirement obligations Expenses for removing asbestos used in buildings and expenses for the obligation to remove the facilities from leased real estate. ii) Basis for calculating the asset retirement obligations Asset retirement obligations are calculated on the assumption of prospective usable years of 10 to 34 years and discount rates of 1.236 to 2.050%. iii) Changes in the asset retirement obligations for the year ended February 28, 2014 and February 28, 2015 Financial Section Thousands of Millions of yen U.S. dollars 2014 2015 2015 Balance at March 1, 2014 ¥320 ¥405 $3,403 Increase by acquisition of property and equipment 97 87 731 Adjustment with the passing of time 4 5 42 Decrease by fulfillment of obligation (21) (47) (395) Foreign currency translation differences 3 2 17
Balance at February 28, 2015 ¥405 ¥453 $3,807 Corporate Information
(2) Asset Retirement Obligations not Recognized in the Consolidated Balance Sheets In leased real estate, the Companies have entered into real estate lease contracts and are obligated to the landlords to dismantle the facilities upon exit. However, sufficient information is not available to reasonably estimate the obligation amount due to uncertainty about the timing of a settlement or lack of a plan to settle. Thus, asset retirement obligations are not recognized except for those mentioned in (1) above.
PARCO CO., LTD. Annual Report 2015 65 Notes to Consolidated Financial Statements
13. Leases (1) Finance Leases The Companies account for finance leases that commenced on or before February 28, 2009 and that did not transfer ownership by the same method as for operating leases. Pro forma information on leased property, such as acquisition costs, accumulated depreciation, net book value and future minimum lease payments under finance leases that do not transfer ownership of the leased assets to lessees is as follows (See Note 2(9)): Millions of yen Acquisition Accumulated Net book As of February 28, 2014 costs depreciation value Machinery and equipment ¥28 ¥27 ¥1 Total ¥28 ¥27 ¥1
Millions of yen Acquisition Accumulated Net book As of February 28, 2015 costs depreciation value Machinery and equipment ¥15 ¥15 — Total ¥15 ¥15 —
Thousands of U.S. dollars Acquisition Accumulated Net book As of February 28, 2015 costs depreciation value Machinery and equipment $126 $126 — Total $126 $126 —
Thousands of Millions of yen U.S. dollars 2014 2015 2015 Future minimum lease payments: Due within 1 year ¥1 — — Due after 1 year — — — Total ¥1 — —
Lease expenses, depreciation equivalents and interest expense equivalents are as follows: Thousands of Millions of yen U.S. dollars 2014 2015 2015 Lease expenses ¥59 ¥1 $8 Depreciation equivalents 58 1 8 Interest expense equivalents 1 — —
Depreciation equivalents are calculated on a straight-line basis over the lease terms without residual value. Interest expense equivalents are computed using the interest method based on the differences between the lease payments and acquisition costs of each asset, which are considered to be interest-bearing.
(2) Impairment Loss No impairment loss was allocated to leased assets for the years ended February 28, 2014 and February 28, 2015.
66 PARCO CO., LTD. Annual Report 2015 Introduction
(3) Operating Leases Thousands of Millions of yen U.S. dollars 2014 2015 2015 As a lessee Due within 1 year ¥ 169 ¥ 906 $ 7,613 Due after 1 year 1,908 9,594 80,622
Total ¥2,077 ¥10,501 $88,244 Strategy As a lessor Due within 1 year ¥1,413 ¥ 2,233 $18,765 Due after 1 year 7,676 9,219 77,471 Total ¥9,089 ¥11,452 $96,235
14. Financial Instruments (1) Matters Regarding the Conditions of Financial Instruments periodical checks of the credit conditions of customers. The Special Feature i) Policy on financial instruments same management system is used for the consolidated The Companies procure necessary funding mainly from loans subsidiaries. from financial institutions. Occasional idle funds are invested in In order to avoid credit risk, the Companies enter into high-grade financial instruments. The Companies use derivatives derivative transactions with financial institutions with high transactions in order to mitigate interest rate fluctuation risk and credit ratings. exchange rate fluctuation risk, but they do not enter into specula- 2. Management of interest fluctuation risk and exchange rate tive transactions. fluctuation risk ii) Details of financial instruments and their risks The Company utilizes derivative transactions (interest rate Trades receivable—namely, notes receivable and operating swap transactions) in order to mitigate interest fluctuations
accounts receivable—are exposed to credit risk of customers. for loans payable and to attempt to fix the amounts of interest Performance Lease and guarantee deposits are exposed to credit risk of the payments. land owners. Moreover, in regards to a debt denominated in a foreign The Companies hold investment securities of business- currency, in order to avoid the currency risks and the foreign related parties. Certain securities are exposed to market price exchange risk of an interest expense, interest rate and cur- fluctuation risk. rency swap dealings are used to fix the principal and interest. The majority of trades payable—namely, notes payable and The approval decisions of swap transactions are made at a operating accounts payable—have due dates within one year. management round-table. As for the consolidated subsidiaries,
Loans and commercial papers are used to procure funds to they conform to the accounting rules set by each subsidiary. Corporate Governance invest mainly in facilities. Loans with variable interest rates are 3. Management of market price fluctuation risk exposed to interest rate fluctuation risk. Thus, for long-term As for investment securities, the Companies periodically loans, the Companies use interest rate swaps to avoid such risk review the market prices and financial positions of the issuers and minimize the interest expense. In addition, the Companies and make modifications accordingly, taking their business are exposed to exchange rate fluctuation risk with respect to relations into consideration. foreign currency loans. To avoid such risk, the Companies use 4. Management of insolvency risk on procurement of funds currency swaps. (Risk of inability to make timely payment by due date) iii) Risk management of financial instruments With in the Companies, the finance divisions manage insol- 1. Management of credit risk (Breach of contracts by the cus- vency risk, by making and modifying the funding plans to
tomers, etc.) maintain financial solvency based on reports from each Financial Section As per the Company’s internal accounting regulations, the department and by maintaining liquidity. Company limits its exposures to credit risk by controlling the due dates and balances for each customer, and by making Corporate Information
PARCO CO., LTD. Annual Report 2015 67 Notes to Consolidated Financial Statements
(2) Fair Values of Financial Instruments The book value, fair value and their differences are as follows. The financial instruments for which fair value is considered to be difficult to obtain are excluded. (See Note II below) Millions of yen As of February 28, 2014 Book value Fair value Difference (i) Cash and deposits ¥ 3,529 ¥ 3,529 ¥ — (ii) Notes and operating accounts receivable—trade 7,581 7,581 — (iii) Investment securities 2,164 2,164 — (iv) Lease and guarantee deposits 7,255 7,132 (122) Total ¥20,531 ¥20,408 ¥(122) (i) Short-term loans payable ¥14,719 ¥14,719 ¥ — (ii) Commercial papers — — — (iii) Notes and operating accounts payable—trade 15,564 15,564 — (iv) Long-term loans payable 35,705 35,844 139 Total ¥65,989 ¥66,128 ¥ 139 Derivative transactions ¥ — ¥ — ¥ —
Millions of yen As of February 28, 2015 Book value Fair value Difference (i) Cash and deposits ¥ 4,333 ¥ 4,333 ¥ — (ii) Notes and operating accounts receivable—trade 11,655 11,655 — (iii) Investment securities 1,683 1,683 — (iv) Lease and guarantee deposits 5,335 5,327 (7) Total ¥23,007 ¥22,999 ¥ (7) (i) Short-term loans payable ¥ 8,569 ¥ 8,569 ¥ — (ii) Commercial papers 4,499 4,499 — (iii) Notes and operating accounts payable—trade 17,850 17,850 — (iv) Long-term loans payable 32,161 32,131 (29) Total ¥63,080 ¥63,051 ¥(29) Derivative transactions ¥ — ¥ — ¥ —
Thousands of U.S. dollars As of February 28, 2015 Book value Fair value Difference (i) Cash and deposits $ 36,412 $36,412 $ — (ii) Notes and operating accounts receivable—trade 97,941 97,941 — (iii) Investment securities 14,143 14,143 — (iv) Lease and guarantee deposits 44,832 44,765 (59) Total $193,336 $193,269 $ (59) (i) Short-term loans payable $ 72,008 $72,008 $ — (ii) Commercial papers 37,807 37,807 — (iii) Notes and operating accounts payable—trade 150,000 150,000 — (iv) Long-term loans payable 270,261 270,008 (244) Total $530,084 $529,840 $(244) Derivative transactions $ — $ — $ —
68 PARCO CO., LTD. Annual Report 2015 Introduction
Note I. Calculations of fair values for financial instruments and items regarding security instruments and derivative transactions Assets (i) Cash and deposits and (ii) Notes and operating accounts receivable—trade Since these accounts are to be settled in the short-term, the fair values and the book values are similar. Therefore, the fair values of these accounts are stated by the applicable book values. (iii) Investment securities These are stated at market prices. (iv) Lease and guarantee deposits These values are calculated by discounting the present value of the future cash flow by a risk-free rate.
Liabilities Strategy (i) Short-term loans payable, (ii) Commercial papers and (iii) Notes and operating accounts payable—trade Since these accounts are to be settled in the short-term, the fair values and the book values are similar. Therefore, fair values of these accounts are stated by the applicable book values. (iv) Long-term loans payable Fair values are calculated by discounting the rate at which the Companies assume to pay to borrow a new loan. In regards to long-term loans, to which the interest rate swapping exception rule was applied or a currency swap was assigned in the consolidated financial accounting fiscal years ended February 28, 2014 and February 28, 2015, the total amount of the principal and interest calculated by an applicable interest rate swap and currency swap was discounted by a reasonable borrowing rate that may be used to make a similar loan. Long-term bank loans are included in long-term loans payable in the balance sheets. Derivative transactions The fair values of interest rate swaps or currency swaps are included in the fair value of long-term debt since such interest rate swaps and currency swaps are
treated together with long-term debt being hedged. Special Feature
Note II. Financial instruments for which fair value is considered to be difficult to obtain are as follows: As of February 28, 2014 Millions of yen Classification Book value Non-listed securities ¥ 722 Lease and guarantee deposits 20,043 Guarantee deposits received 32,740
As of February 28 2015 Millions of yen Classification Book value
Non-listed securities ¥ 688 Performance Lease and guarantee deposits 18,739 Guarantee deposits received 31,206
As of February 28 2015 Thousands of U.S. dollars Classification Book value Non-listed securities $ 5,782 Lease and guarantee deposits 157,471 Guarantee deposits received 262,235 These items have no market price and it is impossible to estimate their future cash flow. Therefore, they are excluded from the table above. Corporate Governance
Note III. The redemption schedules for receivables are as follows: Millions of yen Over 1 year, Over 5 years, As of February 28, 2014 Within 1 year within 5 years within 10 years Over 10 years Cash and deposits ¥ 3,529 ¥ — ¥ — ¥ — Notes and operating accounts receivable—trade 7,581 — — — Lease and guarantee deposits — 3,255 2,985 1,013 Total ¥11,111 ¥3,255 ¥2,985 ¥1,013
Millions of yen Financial Section Over 1 year, Over 5 years, As of February 28, 2015 Within 1 year within 5 years within 10 years Over 10 years Cash and deposits ¥ 4,333 ¥ — ¥ — ¥ — Notes and operating accounts receivable—trade 11,655 — — — Lease and guarantee deposits — 2,461 2,027 845 Total ¥15,988 ¥2,461 ¥2,027 ¥845
Thousands of U.S. dollars Over 1 year, Over 5 years, As of February 28, 2015 Within 1 year within 5 years within 10 years Over 10 years Corporate Information Cash and deposits $ 36,412 $ — $ — $ — Notes and operating accounts receivable—trade 97,941 — — — Lease and guarantee deposits — 20,681 17,034 7,101 Total $134,353 $20,681 $17,034 $7,101
PARCO CO., LTD. Annual Report 2015 69 Notes to Consolidated Financial Statements
Note: IV. The redemption schedules for short-term loans payable, commercial papers and long-term loans payable are as follows: Millions of yen Over 1 year, Over 5 years, As of February 28, 2014 Within 1 year within 5 years within 10 years Over 10 years Short-term loans payable ¥14,719 ¥ — ¥ — ¥— Commercial papers — — — — Long-term loans payable — 31,050 4,600 55 Total ¥14,719 ¥31,050 ¥4,600 ¥55
Millions of yen Over 1 year, Over 5 years, As of February 28, 2015 Within 1 year within 5 years within 10 years Over 10 years Short-term loans payable ¥ 8,569 ¥ — ¥ — ¥— Commercial papers 4,499 — — — Long-term loans payable — 31,300 800 61 Total ¥13,068 ¥31,300 ¥800 ¥61
Thousands of U.S. dollars Over 1 year, Over 5 years, As of February 28, 2015 Within 1 year within 5 years within 10 years Over 10 years Short-term loans payable $ 72,008 $ — $ — $ — Commercial papers 37,807 — — — Long-term loans payable — 263,025 6,723 513 Total $109,815 $263,025 $6,723 $513
15. Retirement Benefit Plan For the year ended February 28, 2014 1) Summary of retirement benefit plans The Company and major subsidiaries have defined benefit plans (i.e., lump-sum retirement benefit plan, prepaid retirement benefit plan and Corpo- rate pension fund plan). Additional retirement payments are made in some cases when employees retire or resign.
2) Retirement benefit obligations Millions of yen 2014 Retirement benefit obligation ¥(5,410) Fair value of pension assets 3,053 Unrecognized prior service costs (114) Unrecognized actuarial differences 494 Unrecognized transition amount arising from adopting the new standard 188 Provision for retirement benefits ¥(1,788)
3) Retirement benefit expenses Millions of yen 2014 Service cost ¥265 Interest cost 96 Expected return on plan assets (54) Amortization of unrecognized prior service costs (91) Amortization of unrecognized actuarial differences 136 Amortization of unrecognized transition amount arising from adopting the new standard 105 Premium severance pay 22 Prepaid retirement benefit 132 Retirement benefit expenses ¥612
The discount rates are mainly 1.1%. The rates of expected return on unrecognized transition amount arising from adopting the new standard plan assets used are 2.0%. Prior service costs and actuarial differences is amortized on a straight-line basis over a period of 15 years. are amortized on a straight-line basis mainly over 11 years. The
70 PARCO CO., LTD. Annual Report 2015 Introduction
For the year ended February 28, 2015 1) Summary of retirement benefit plans The Company and its major subsidiaries have defined benefit plans (i.e., lump-sum retirement benefit plan, prepaid retirement benefit plan and corporate pension fund system plan). Additional retirement payments are made in some cases when employees retire or resign.
2) Defined benefit plans (a) Movement in retirement benefit obligations
Thousands of Strategy Millions of yen U.S. dollars 2015 2015 Balance at March 1, 2014 ¥5,410 $45,462 Service cost 280 2,353 Interest cost 54 454 Actuarial gain (25) (210) Benefits paid (295) (2,479)
Balance at February 28, 2015 ¥5,423 $45,571 Special Feature
(b) Movement in plan assets Thousands of Millions of yen U.S. dollars 2015 2015 Balance at March 1, 2014 ¥3,053 $25,655 Expected return on plan assets 61 513 Actuarial gain 237 1,992 Contributions paid by the employer 378 3,176 Performance Benefits paid (271) (2,277) Balance at February 28, 2015 ¥3,458 $29,059
(c) Reconciliation from retirement benefit obligations and plan assets to net defined benefit liability and asset Thousands of Millions of yen U.S. dollars
2015 2015 Corporate Governance Funded retirement benefit obligations ¥ 4,974 $ 41,798 Plan assets (3,458) (29,059) 1,515 12,731 Unfunded retirement benefit obligations 449 3,773 Total net defined benefit liability and asset at February 28, 2015 1,964 16,504 Net defined benefit liability 1,964 16,504 Total net defined benefit liability and asset at February 28, 2015 ¥ 1,964 $ 16,504 Financial Section Corporate Information
PARCO CO., LTD. Annual Report 2015 71 Notes to Consolidated Financial Statements
(d) Retirement benefit costs Thousands of Millions of yen U.S. dollars 2015 2015 Service cost ¥280 $2,353 Interest cost 54 454 Expected return on plan assets (61) (513) Net actuarial loss amortization 92 773 Past service costs amortization (91) (765) Transition amount amortization arising from adopting the new standard 105 882 Prepaid retirement benefit 131 1,101 Other 31 261 Total retirement benefit costs for the fiscal year ended February 28, 2015 ¥541 $4,546
(e) Accumulated adjustments for retirement benefit Thousands of Millions of yen U.S. dollars 2015 2015 Actuarial gains and losses that are yet to be recognized ¥(140) $(1,176) Past service costs that are yet to be recognized 22 185 Transition amounts arising from adopting the new standard that are yet to be recognized (83) (697) Total balance at February 28, 2015 ¥(200) $(1,681)
(f) Plan assets I. Plan assets comprise:
Bonds 45.4% Equity securities 21.3% Life insurance general account 14.0% Cash and deposits 1.8% Other 17.5% Total 100.0%
II. Long-term expected rate of return Current and target asset allocations, historical and expected returns on various categories of plan assets have been considered in determining the long-term expected rate of return.
(g) Actuarial assumptions The principal actuarial assumptions at February 28, 2015 (expressed as weighted averages) are as follows:
Discount rate (Mainly) 1.1% Long-term expected rate of return 2.0%
72 PARCO CO., LTD. Annual Report 2015 Introduction
16. Income Taxes Japanese income taxes applicable to the Companies consist of corporate tax, inhabitants’ tax and corporate enterprise tax, which in the aggregate resulted in the statutory tax rate of approximately 38.0% for 2014 and 2015. Major items in deferred tax assets and liabilities are as follows: Thousands of Millions of yen U.S. dollars 2014 2015 2015
Deferred tax assets: Strategy Adjustments for unrealized gains ¥ 761 ¥ 760 $ 6,387 Accrued bonuses to employees 395 389 3,269 Provision for sales promotion 127 124 1,042 Accrued corporate enterprise tax 122 270 2,269 Allowance for doubtful accounts 83 73 613 Provision for retirement benefits 686 — — Net defined benefit liability — 742 6,235 Special Feature Impairment loss 137 628 5,277 Write-down of investment securities 178 177 1,487 Asset retirement obligations 135 161 1,353 Others 335 349 2,933 Gross deferred tax assets 2,964 3,679 30,916 Less: Valuation allowance (67) (44) (370) Total deferred tax assets ¥2,897 ¥3,634 $30,538 Deferred tax liabilities: Loss on conversion of land title 724 724 6,084 Performance Valuation difference on available-for-sale securities 371 362 3,042 Investment in a subsidiary 61 61 513 Asset retirement obligations 59 74 622 Others 0 0 0 Total deferred tax liabilities ¥1,216 ¥1,223 $10,277 Net deferred tax assets ¥1,680 ¥2,411 $20,261
Reconciliations between the statutory tax rates and the effective tax rates are as follows: Corporate Governance Percentage 2014 2015 Statutory tax rates 38.0% 38.0% Adjustments: Permanent non-deductible differences including entertainment expenses 0.5 0.7 Permanent non-taxable differences including dividend income (0.2) (0.1) Inhabitants’ tax—per capita levy 0.7 0.7 Valuation allowance 1.6 0.3
Impact of statutory income tax rate changes — 0.8 Financial Section Others (0.7) 0.1 Effective income tax rates 39.9% 40.5% Corporate Information
PARCO CO., LTD. Annual Report 2015 73 Notes to Consolidated Financial Statements
Following the promulgation on March 31, 2014 of the “Act for the “Act for Partial Revision of the Local Tax Act, etc.” (Act No. 2 of Partial Revision of the Income Tax Act, etc.” (Act No. 10 of 2014), the 2015), the corporate tax rate is reduced effective from the year beginning “Act for Partial Revision of the Local Tax Act, etc.” (Act No. 4 of on or after April 1, 2015. 2014), and the “Local Corporate Tax Act” (Act No. 11 of 2014), the The Companies changed the statutory tax rate from 35.6% to 33.1% corporate tax rate is reduced effective from the year beginning on or in calculating the deferred tax assets and liabilities for temporary differ- after April 1, 2014. ences that are expected to reverse from the year beginning on or after The Companies changed the statutory tax rate from 38.0% to 35.6% March 1, 2016. in calculating the deferred tax assets and liabilities for temporary differ- The Companies changed the statutory tax rate from 35.6% to 32.3% ences that are expected to reverse from the year beginning on or after in calculating the deferred tax assets and liabilities for temporary differ- March 1, 2015. ences that are expected to reverse from the year beginning on or after The effect of this change was immaterial. March 1, 2017. Following the promulgation on March 31, 2015 of the “Act for The effect of this change was immaterial. Partial Revision of the Income Tax Act, etc.” (Act No.9 of 2015), and
17.Guarantee Deposits Received The Company receives guarantee deposits of floor space according to Tenant Agreements for specialty stores and shops. These deposits do not bear interest and are refundable when the agreements are terminated.
18. Derivative Information The Companies enter into interest rate swap agreements in order to The Companies are exposed to the risk of credit loss in the event of a minimize the risk of fluctuation in interest rates and exchange rates on breach of contract by the counterparties to the interest. However, the borrowings. The Companies do not enter into these agreements for Companies do not anticipate a breach of contract by any of these coun- trading or speculative purposes. terparties, all of whom are financial institutions with high credit ratings. The Companies have established a risk management system for reporting and monitoring transactions involving derivative financial instruments.
The derivative instruments for the years ended February 28, 2014 and February 28, 2015 are as follows: Millions of yen 2014 Method of hedge Contractual Over 1 year accounting Type of transaction Main subject of a hedge prices contractual prices Fair value Appropriation treatment Currency swaps Long-term U.S. dollar receipts/Japanese yen payments loans payable ¥ 300 ¥ 300 (See Note) Special case interest rate Interest rate swap transaction Long-term swap treatment (fluctuating receipts/fixed payments) loans payable ¥21,100 ¥14,700 (See Note)
Millions of yen 2015 Method of hedge Contractual Over 1 year accounting Type of transaction Main subject of a hedge prices contractual prices Fair value Appropriation treatment Currency swaps Long-term U.S. dollar receipts/Japanese yen payments loans payable ¥ 300 ¥ 300 (See Note) Special case interest rate Interest rate swap transaction Long-term swap treatment (fluctuating receipts/fixed payments) loans payable ¥16,600 ¥12,120 (See Note)
Thousands of U.S. dollars 2015 Method of hedge Contractual Over 1 year accounting Type of transaction Main subject of a hedge prices contractual prices Fair value Appropriation treatment Currency swaps Long-term U.S. dollar receipts/ Japanese yen payments loans payable $ 2,521 $ 2,521 (See Note) Special case interest rate Interest rate swap transaction Long-term swap treatment (fluctuating receipts/fixed payments) loans payable $139,496 $101,849 (See Note)
Note: The above currency swaps and interest rate swap transactions, both of which qualify for hedge accounting and meet specific matching criteria, are not remeasured at market value, but the differences in payments made or received under the swap agreements are recognized and included in interest expense. In addition, the fair values of such currency swaps and interest rate swap transactions are considered part of the fair values of hedged items.
74 PARCO CO., LTD. Annual Report 2015 Introduction
19. RENTAL PROPERTY The Company owns rental property in several cities across the country. Rental revenues are recorded in operating revenue and rental expenses Rental income related to such rental property in the fiscal year ended are recorded in selling, general and administrative expenses. February 28, 2015 is 127 million yen (1,067 thousand U.S. dollars). Book value, increase/decrease and fair value are as follows: Thousands of Millions of yen U.S. dollars 2015 2015
Book value Strategy Balance at March 1, 2014 ¥1,204 $10,118 Increase/decrease 1,089 9,151 Balance at February 28, 2015 2,293 19,269 Fair value at February 28, 2015 2,221 18,664
Book value is acquisition cost less accumulated depreciation and loss The fair value as of the end of the fiscal year is the appraisal value on impairment of fixed assets. according to an outside real estate appraiser based on Japanese Real For the amounts for the fiscal year ended February 28, 2015, the Estate Appraisal Standards in the case of key properties and is Special Feature main increases were acquisitions of real estate of 1,201 million yen deemed to be the book value in the case of depreciable assets such as (10,092 thousand U.S. dollars). The main decreases were depreciation of some buildings 112 million yen (941 thousand U.S. dollars).
20. Segment Information For the years ended February 28, 2014 and February 28, 2015 “Space engineering and management” is design and construction of (1) Summary of reportable segments building interiors and providing cleaning, security and maintenance The reportable segments of the Companies are constituent units of the services for buildings. “Others” is Entertainment business and Companies whose separate financial information is readily available and Internet business.
which are periodically examined by the Board of Directors for the pur- Performance pose of deciding the allocation of management resources and evaluating (2) Calculation of sales, income or loss, assets and other by the business results. reportable segment The Companies have identified four reportable segments: The accounting method for the business segments that are reported is “Shopping complex”, “Retail”, “Space engineering and management” generally the same as described in Note 2. The segment income figures and “Others”. The “Shopping complex” business is the Companies’ stated in the reportable segments are based on operating income. The flagship operation. inter-segment sales or the inter-segment figures are based on actual “Shopping complex” is development, management and operation of market prices. shopping centers. “Retail” is sales of accessories and sundry goods. Corporate Governance Millions of yen Space engineering Shopping and For the year ended February 28, 2014: complex Retail management Others Total Adjustment Consolidated Sales: External customers ¥241,680 ¥11,633 ¥ 9,826 ¥5,151 ¥268,292 ¥ — ¥268,292 Inter-segment — 6,711 7,816 472 15,000 (15,000) — Total 241,680 18,344 17,643 5,624 283,293 (15,000) 268,292
Segment income(loss) ¥ 11,437 ¥ 565 ¥ 255 ¥ (20) ¥ 12,236 ¥ (39) ¥ 12,196 Financial Section Segment assets ¥215,702 ¥ 5,814 ¥ 7,543 ¥2,607 ¥231,668 ¥(10,911) ¥220,757 Other: Depreciation 5,330 377 121 109 5,938 (60) 5,877 Loss on impairment of fixed assets — 72 — — 72 (1) 70 Increase of property and equipment and intangible assets 35,090 402 128 78 35,700 17 35,717
Notes: 1. The adjustments are as follows:
(1) Adjustment of segment income of (39) million yen is inter-segment eliminations. Corporate Information (2) Adjustment of segment assets of (10,911) million yen is inter-segment eliminations. (3) Adjustment of depreciation of (60) million yen is inter-segment eliminations. (4) Adjustment of loss on impairment of fixed assets of (1) million yen is inter-segment eliminations. (5) Adjustment of increase in property and equipment and intangible assets of 17 million yen is inter-segment eliminations. 2. Segment income(loss) is reconciled to operating income in the consolidated statements of income. 3. Other operating revenue is included in “Sales.”
PARCO CO., LTD. Annual Report 2015 75 Notes to Consolidated Financial Statements
Millions of yen Space engineering Shopping and For the year ended February 28, 2015: complex Retail management Others Total Adjustment Consolidated Sales: External customers ¥243,782 ¥12,937 ¥11,025 ¥6,467 ¥274,212 ¥ — ¥274,212 Inter-segment 1 6,865 7,958 424 15,249 (15,249) — Total 243,783 19,802 18,983 6,891 289,461 (15,249) 274,212 Segment income ¥ 11,317 ¥ 647 ¥ 328 ¥ 256 ¥ 12,550 ¥ (42) ¥ 12,508 Segment assets ¥219,673 ¥ 6,569 ¥ 9,040 ¥2,807 ¥238,090 ¥(11,260) ¥226,830 Other: Depreciation 5,372 387 129 99 5,989 (67) 5,921 Loss on impairment of fixed assets 1,406 76 — — 1,483 (19) 1,463 Increase of property and equipment and intangible assets 9,206 491 70 95 9,864 (188) 9,676
Thousands of U.S. dollars Space engineering Shopping and For the year ended February 28, 2015: complex Retail management Others Total Adjustment Consolidated Sales: External customers $2,048,588 $108,714 $ 92,647 $54,345 $2,304,303 $ — $2,304,303 Inter-segment 8 57,689 66,874 3,563 128,143 (128,143) — Total 2,048,597 166,403 159,521 57,908 2,432,445 $(128,143) 2,304,303 Segment income $ 95,101 $ 5,437 $ 2,756 $ 2,151 $ 105,462 $ (353) $ 105,109 Segment assets $1,845,992 $ 55,202 $ 75,966 $23,588 $2,000,756 $ (94,622) $1,906,134 Other: Depreciation 45,143 3,252 1,084 832 50,328 (563) 49,756 Loss on impairment of fixed assets 11,815 639 — — 12,462 (160) 12,294 Increase of property and equipment and intangible assets 77,361 4,126 588 798 82,891 (1,580) 81,311
Notes: 1. The adjustments are as follows: (1) Adjustment of segment income of (42) million yen ((353) thousand U.S. dollars) is inter-segment eliminations. (2) Adjustment of segment assets of (11,260) million yen ((94,622) thousand U.S. dollars) is inter-segment eliminations. (3) Adjustment of depreciation of (67) million yen ((563) thousand U.S. dollars) is inter-segment eliminations. (4) Adjustment of loss on impairment of fixed assets of (19) million yen ((160) thousand U.S. dollars) is inter-segment eliminations. (5) Adjustment of increase in property and equipment and intangible assets of (188) million yen ((1,580) thousand U.S. dollars) is inter-segment eliminations. 2. Segment income is reconciled to operating income in the consolidated statements of income. 3. Other operating revenue is included in “Sales.”
(3) Related information located in the Japan area accounted for more than 90% of revenue i) Products and Services from operations in the consolidated income statements and property Information on products and services has been omitted since similar and equipment in the consolidated balance sheets, respectively. information is disclosed in the segment information. iii) Customer ii) Sales and property and equipment information by region Customer information has been omitted since revenue from no Geographic area information has been omitted since revenue from single customer exceeded 10% of revenue from operations in the outside customers in the Japan area and property and equipment consolidated income statements.
76 PARCO CO., LTD. Annual Report 2015 Introduction
(4) Information regarding loss on impairment of fixed assets by reportable segment Information on loss on impairment of fixed assets has been omitted since similar information is disclosed in the segment information.
(5) Information regarding amortization of goodwill and remaining goodwill balance by reportable segment Not applicable.
(6) Information regarding gain on negative goodwill by reportable segment
Not applicable. Strategy
21. Related Party Transactions Parent Company J. FRONT RETAILING Co., Ltd. is listed on the first sections of the Tokyo and Nagoya Stock Exchanges.
22. Net Assets Under the Japanese Corporate Law (the “Law”), the entire amount paid earnings reserve may be transferred to other capital surplus and retained for new shares is required to be designated as common stock. However, earnings, respectively, which are potentially available for dividends upon Special Feature the Company may, by a resolution of the Board of Directors, designate resolution of the shareholders. The maximum amount that the Company an amount not exceeding one-half of the prices of the new shares as can distribute as dividends is calculated based on the non-consolidated additional paid-in capital, which is included in capital surplus. The Law financial statements of the Company in accordance with Japanese laws requires that an amount equal to 10% of the dividends must be appro- and regulations. priated as legal earnings reserve (a component of retained earnings) or as Retained earnings at February 28, 2015 include amounts represent- additional paid-in capital (a component of capital surplus), depending on ing year-end cash dividends of 913 million yen (7,672 thousand U.S. the equity account charged upon payment of such dividends, until the dollars), based on 9.0 yen (0.08 U.S. dollars) per share, which was aggregate amount of legal earnings reserve or additional paid-in capital resolved at the Board of Directors meeting held on April 7, 2015. equals 25% of common stock. All additional paid-in-capital and all legal Performance 23. Comprehensive Income An analysis of each component of other comprehensive income and related tax effects for the year ended February 28, 2014 and February 28, 2015 is presented as follows. Thousands of Millions of yen U.S. dollars 2014 2015 2015 Valuation difference on available-for-sale securities
Unrealized holding gains arising during the year ¥ 349 ¥ 77 $ 647 Corporate Governance Reclassification to income for the year 75 (101) (849) Pretax amount 425 (23) (193) Tax (expense) benefit (151) 8 67 Net-of-tax amount 274 (15) (126) Foreign currency translation adjustments Aggregated adjustment during the year resulting from foreign currency translation 31 58 487 Reclassification to income for the year (26) — — Pretax amount 5 58 487
Tax (expense) benefit — — — Financial Section Net-of-tax amount 5 58 487 Share of other comprehensive income of associates accounted for using equity method Unrealized profits arising during the year 9 6 50 Total ¥ 288 ¥ 49 $ 412 Corporate Information
PARCO CO., LTD. Annual Report 2015 77 Notes to Consolidated Financial Statements
24. Treasury Shares The breakdown of treasury shares (common shares) for the years ended February 28, 2014 and February 28, 2015 is as follows: Number of shares outstanding (thousands) Balance at February 28, 2013 11 Purchase of fractional shares from stockholders 0 Application for takeover bid and the sale by ESOP Trust (10) Balance at February 28, 2014 2 Purchase of fractional shares from stockholders 0 Balance at February 28, 2015 3
25. Net Income per Share The basis of computation of basic net income and diluted net income per share (“EPS”) for the years ended February 28, 2014 and February 28, 2015 is as follows: Weighted- Net income average shares EPS Thousands of For the year ended February 28, 2014 Millions of yen shares Yen Basic EPS: Net income available to common shareholders ¥6,778 101,458 ¥66.81
Weighted- Net income average shares EPS Thousands of For the year ended February 28, 2015 Millions of yen shares Yen U.S. dollars Basic EPS: Net income available to common shareholders ¥6,294 101,460 ¥62.04 $0.52
26. Subsequent Event Development Project Proposal for Udagawa-cho 15 as a Spe- renaissance district, in accordance with the “Act on Special Measures cial Urban Renaissance District Concerning Urban Renaissance”, and it was accepted. This proposal will On June 30, 2015, the Company, as a scheduled executor of the have no impact on business performance for the fiscal year ended Febru- “Udagawa-cho 15 Development Project,” submitted a proposal to the ary 29, 2016. Tokyo Metropolitan Government for urban planning as a special urban
Summary Developer PARCO CO., LTD Address Udagawa-cho 15 and part of Udagawa-cho 14 Shibuya-ku, Tokyo Intended purpose Shops, offices, business incubation facilities, commercialization support facilities, cultural facilities (e.g. theatres), car parking, etc. Planned construction period March 2017 - September 2019
78 PARCO CO., LTD. Annual Report 2015 Introduction Strategy Special Feature Performance Corporate Governance Financial Section Corporate Information 79 Annual Report 2015 CO., LTD. PARCO
Information on PARCO’s Website
Store and Entertainment Information (Japanese) www.parco.co.jp/parco/
Information is presented on PARCO stores, entertainment and more in an appealing manner using the latest Web functions.
About PARCO www.parco.co.jp/en/
Revamped in March 2014. The website offers an intuitive introduction to PARCO Group business data, such as corporate and investor relations information, news releases, and information on our corporate social responsibility (CSR) activities. There is also a PARCO Group Information Blog where we post the latest information.
Investor Relations www.parco.co.jp/en/ir/
IR News IR news and other timely disclosures are posted here. Visit here for graphs of net sales, operating income and other key Financial Highlights financial indicators, with data downloadable in PDF and Excel formats. Monthly Sales Summary Monthly sales data by store are disclosed with year-on-year comparisons. Financial Indicators View data on key performance indicators for the past seven years. Supporting materials and news releases related to the medium-term Medium-term Business Plan business plan are posted here. Financial Results Check here for disclosure of quarterly financial results. The FACT BOOK provides disclosure of detailed information including FACT BOOK key indicators on a consolidated and non-consolidated basis and an FACT BOOK 2015 itemized breakdown of sales by category. Detailed management indicators can Financial Reports Financial Supporting materials from financial presentations are disclosed here. IR Library be found here. Presentations Results of Major PARCO’s latest annual report is available for download in PDF and Companies of E@BOOK formats. PARCO Group Annual Report Here we disclose trends in business results for Group companies. IR Calendar View schedules for announcements of financial results and other events. Shareholder Rewards Details concerning shareholder rewards can be viewed here. Stock Information Visit here for a guide to clerical procedures for shareholders. View information on PARCO’s current principal shareholders and Shareholder Composition related matters. Stock Price Information Information on PARCO’s stock price is presented via Bloomberg. Disclosure Policy View our basic policy regarding investor relations here.
CSR www.parco.co.jp/en/csr/
View for an introduction to CSR initiatives by the PARCO Group. The President’s CSR Message, PARCO’s Fundamental CSR Policy, and CSR activities are reported here.
80 PARCO CO., LTD. Annual Report 2015 About PARCO Introduction
Corporate Profile As of 28 February, 2015
Company Name PARCO CO., LTD. Consolidated Sales ¥269,889 million (Fiscal 2014) Headquarters 1-28-2 Minami-Ikebukuro, Sales Floor Area 451,000 m2 Toshima-ku, Tokyo 171-0022, Japan Tenants 2,303 Head Office Shibuya First Place Bldg. 8-16 Group Companies NEUVE A CO., LTD. Strategy Shinsen-cho, Shibuya-ku, (Retail Business) Tokyo 150-0045, Japan PARCO SPACE SYSTEMS CO., LTD. (Space Engineering and Management Business) Founded February 13, 1953 PARCO-CITY CO., LTD. Paid-in Capital ¥34,367 million (Web-based Consulting Business) Employees 629 (male 356, female 273) PARCO (Singapore) Pte Ltd (Southeast Asia Shopping Center Development) Consolidated Employees 2,060 Special Feature
Corporate History
1953 Feb. Established Ikebukuro Station Building Co., Ltd. 1991 Sept. Acquired stake in SEIDENKO CO., LTD.
1954 Oct. With the capital participation of Marubutsu Co., Ltd., Nov. Established PARCO (Singapore) Pte Ltd the Company shifted operations from the management of 1993 Oct. Opened Hibarigaoka PARCO the Ikebukuro Station Building to the operation of 1994 Mar. Opened Ikebukuro P’PARCO
department stores Performance Apr. Opened Hiroshima PARCO 1957 May Changed company name to Tokyo Marubutsu Co., Ltd. 1996 Apr. Expanded floor space of Matsumoto PARCO Dec. Started operation of department store under the name Nov. Opened Otsu PARCO Tokyo Marubutsu 1997 Mar. Opened Utsunomiya PARCO 1963 Jul. Tokyo Marubutsu Co., Ltd. became a registered stock 1998 Nov. Opened Nagoya PARCO South Building with the Osaka Securities Dealers Association 2000 Mar. Established PARCO-CITY CO., LTD. 1969 Jun. Tokyo Marubutsu closed; commenced preparations for the establishment of the PARCO store Sept. Merged SEIDENKO CO., LTD. and PARCO Corporate Governance PROMOTION CO., LTD.; adopted new corporate name Nov. Opened Ikebukuro PARCO of PARCO SPACE SYSTEMS CO., LTD. 1970 Apr. Changed company name to PARCO CO., LTD. 2001 Jun. NEUVE A CO., LTD. started operations 1973 Jun. Opened Shibuya PARCO Sept. Opened Hiroshima PARCO Annex Opened Seibu Theater (later renamed PARCO Theater) 2002 Apr. Opened Shibuya ZERO GATE 1975 Aug. Opened Sapporo PARCO 2003 May Adopted “Company with Committees System” (later 1976 Dec. Opened Chiba PARCO renamed “Company with Three Committees” System) 1977 Jul. Opened Tsudanuma PARCO 2005 Feb. Opened Pedi SHIODOME 1980 Sept. Opened Kichijoji PARCO 2006 Mar. Credit card PEC Card renamed as PARCO Card
1981 Sept. Opened Shibuya PARCO PART 3 Financial Section 2007 Mar. Opened Shizuoka PARCO 1983 Jun. Opened Shin-Tokorozawa PARCO Oct. Opened Urawa PARCO 1984 Aug. Opened Matsumoto PARCO 2008 Aug. Opened Sendai PARCO 1986 May Opened Kumamoto PARCO 2010 Mar. Opened Fukuoka PARCO 1987 Jan. Stock listed on the Second Section of the Tokyo Stock 2011 Apr. Complex format of Shibuya ZERO GATE changed Exchange 2013 Apr. Opened Shinsaibashi ZERO GATE 1988 Jun. Opened Shibuya QUATTRO by PARCO (later renamed Opened Dotonbori ZERO GATE PARCO QUATTRO)
Oct. Opened Hiroshima ZERO GATE Corporate Information Aug. Stock listed on the First Section of the Tokyo Stock Exchange 2014 Oct. Opened Nagoya ZERO GATE Sept. Established PARCO PROMOTION CO., LTD. Nov. Opened Fukuoka PARCO Building 1989 Apr. Launched PEC Card 2015 Mar Expanded floor space of Fukuoka PARCO Opened Nagoya PARCO midi May Opened Chofu PARCO Jun. Opened Nagoya PARCO
PARCO CO., LTD. Annual Report 2015 81 Organization Chart
In striving to realize the PARCO Group 2020 Long-term Vision, we are bolstering our business base, while investing management resources with greater selectivity and focus, to create businesses with definite growth potential.
General Meeting of Shareholders
Nominating Committee
Board of Directors Audit Committee Committees Secretariat
Compensation Committee
Group Auditor Office President
Management Committee
Corporate Operations Division Diversity Committee
Corporate Planning Office CSR Committee
Public Relations and Investor Relations Office Risk Management Committee
IT Promotion Office Investment Committee
Executive Assistants Office
Administration Division Store Management Division Estate Strategy Division Business Strategy Division
Personnel Group Store Operation Group Estate Management Group New Business Planning Group
Administration and Legal Group Media Communications Group Development Group Overseas Business Group
Finance Group Web Marketing Group Architectural Group Entertainment Department
Accounting Group Environment and Store Administration Group Related Businesses Group
Accounting Coordination Group Store Planning Group
Store Design Group
Sendai New Building Urban Complexes Community Complexes Overseas Subsidiaries and Offices Domestic Subsidiaries Planning Office Sapporo Shizuoka Utsunomiya Shin-Tokorozawa Matsumoto PARCO（Singapore）Pte Ltd PARCO SPACE SYSTEMS CO., LTD. Ueno New South Building Planning Office Sendai Nagoya Urawa Hibarigaoka Otsu PARCO CO., LTD. Hong NEUVE A CO., LTD. Kong Representative Office Ikebukuro Hiroshima Chiba Kichijoji Kumamoto PARCO-CITY CO., LTD.
Shibuya Fukuoka Tsudanuma Chofu ZERO GATE Business Group
Business Strategy Division Store Management Division The Business Strategy Division comprises four groups: the New Business Plan- This division comprises six groups: the Store Operation Group, the Media ning Group, the Overseas Business Group, the Entertainment Department and Communications Group, the Web Marketing Group, the Environment and the Related Business Group. The division is working to develop new shopping Store Administration Group, the Store Planning Group, the Store Design complex formats, along with developing and nurturing related businesses. Group. The division is working to drive further advancement and differentia- tion in the two types of shopping complexes in the PARCO store business: ZERO GATE Business Group urban and community complexes. The division also aims to maintain the The ZERO GATE Business Group is promoting all aspects of the ZERO PARCO Group’s stable earnings base. GATE business, namely ZERO GATE property development, merchandise development and store operations, as well as peripheral operations such as Administration Division property management of commercial facilities in urban areas. This division has five groups: the Personnel Group, the Administration and In the future, the ZERO GATE Business Group aims to be spun-off from Legal Group, the Finance Group, the Accounting Group and the Accounting the Company as an independent enterprise. Coordination Group. The division offers wide-ranging support to the entire PARCO Group. Estate Strategy Division The Estate Strategy Division comprises three groups: the Estate Management Corporate Operations Division Group, the Development Group and the Architectural Group. The division is The Corporate Operations Division comprises four offices: the Corporate pressing ahead with formulating and executing policies regarding the strategic Planning Office, the Public Relations and Investor Relations Office, the IT use of real estate holdings, as well as developing new real estate that will Promotion Office and the Executive Assistants Office. These offices work to contribute to the PARCO business and new shopping complex formats. promote measures to maximize corporate value, including by formulating business strategies, enhancing communication with external stakeholders, and strengthening company-wide IT strategy functions.
82 PARCO CO., LTD. Annual Report 2015 Stock Information (As of February 28, 2015) Introduction
Number of shares authorized 320,000,000 Stock Listings The Tokyo Stock Exchange 1st Section Number of shareholders 32,196 Independent Auditors KPMG AZSA LLC Number of shares issued and outstanding 101,462,977 Strategy Principal Shareholders Number of shares held Shareholding ratio Name (thousands) (%) J. FRONT RETAILING Co., Ltd. 65,922 64.97 Aeon Co., Ltd. 8,272 8.15 Credit Saison Co., Ltd. 7,771 7.66 Japan Trustee Services Bank, Ltd. (Trust Account) 2,205 2.17
NORTHERN TRUST CO. (AVFC) SUB A/C NON TREATY 2,162 2.13 Special Feature The Bank of Tokyo-Mitsubishi UFJ, Ltd. 930 0.92 GOLDMAN SACHS INTERNATIONAL 825 0.81 Japan Trustee Services Bank, Ltd. (Trust Account 9) 339 0.33 CREDIT SUISSE SECURITIES (EUROPE) LIMITED PB OMNIBUS CLIENT ACCOUNT 305 0.30 The Master Trust Bank of Japan, Ltd. (Trust Account) 286 0.28 *Shareholding ratios are calculated after deduction of treasury stock (3,242 shares).
Breakdown of Shares by Type of Shareholder Performance
■ Japanese financial institutions and ■ Japanese financial institutions and Japanese securities companies Japanese securities companies 54 0.2% 5,921 5.8% ■ Other Japanese companies ■ Other Japanese companies 297 0.9% 82,265 81.1% Number of Number of shares ■ Foreign investors ■ Foreign investors shareholders 175 0.5% held (thousands) 6,788 6.7% ■ Japanese individuals and others ■ Japanese individuals and others 31,669 98.4% 6,485 6.4% Corporate Governance ■ Treasury stock ■ Treasury stock 1 0.0% 3 0.0%
Stock Performance
TOPIX (Points) (Yen) Financial Section 1,200 1,800
1,000 1,200
800 600
600 Volume (Thousands) 15,000
400 Corporate Information 10,000
200 5,000
0 0 Apr. May Jun. Jul. Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May (2012) (2013) (2014) (2015)
PARCO CO., LTD. Annual Report 2015 83 PARCO CO.,LTD. Annual Report 2015
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