R Ryohin Keikaku / 7453

COVERAGE INITIATED ON: 2014.05.09 LAST UPDATE: 2018.07.04

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

Research Coverage Report by Shared Research Inc. Ryohin Keikaku / 7453

RCoverage LAST UPDATE: 2018.07.04 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

INDEX

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

Key financial data ------3 Recent updates ------4 Highlights ------4 Trends and outlook ------5 Monthly trends and results ------5 Quarterly trends and results ------6 Reference data ------18 Full-year outlook (initial estimates) ------20 Medium-term management plan (initial targets as of FY02/18) ------36 Strengths and weaknesses ------45 Market and value chain ------46 Business of Ryohin Keikaku: design-driven retailing ------49 Ryohin Keikaku: corporate milestones ------50 Domestic business ------52 Financial statements------76 Income statement ------76 Balance sheet ------77 Cash flow statement ------78 ROE, ROA, ROIC ------79 Other information ------81 Corporate timeline ------81 Major shareholders ------81 Top management ------81 Employees ------82 Products that shaped MUJI ------82 Historical performance ------84 Reference data ------116 News and topics ------120 Profile ------121

02/122 Ryohin Keikaku / 7453

RCoverage LAST UPDATE: 2018.07.04 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Key financial data

Income statement FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Est. Operating revenue 140,890 157,063 162,840 163,757 164,341 169,748 178,186 188,350 220,620 260,254 307,532 333,281 379,551 424,300 YoY 9.7% 11.5% 3.7% 0.6% 0.4% 3.3% 5.0% 5.7% 17.1% 18.0% 18.2% 8.4% 13.9% 11.8% Sales 140,185 156,204 162,060 162,814 163,733 169,137 177,532 187,693 220,029 259,655 307,199 332,581 378,801 423,500 YoY 9.7% 11.4% 3.7% 0.5% 0.6% 3.3% 5.0% 5.7% 17.2% 18.0% 18.3% 8.3% 13.9% 11.8% Gross profit 61,751 68,721 74,133 73,923 73,956 76,660 80,943 86,719 101,074 122,232 150,118 165,160 191,070 212,600 YoY 10.0% 11.3% 7.9% -0.3% 0.0% 3.7% 5.6% 7.1% 16.6% 20.9% 22.8% 10.0% 15.7% 11.3% GPM (% of sales) 44.0% 44.0% 45.7% 45.4% 45.2% 45.3% 45.6% 46.2% 45.9% 47.1% 48.9% 49.7% 50.4% 50.2% Operating gross profit 62,455 69,580 74,912 74,866 74,565 77,271 81,596 87,376 101,665 122,831 150,451 165,160 191,070 212,600 YoY 10.1% 11.4% 7.7% -0.1% -0.4% 3.6% 5.6% 7.1% 16.4% 20.8% 22.5% 9.8% 15.7% 11.3% Op. GPM (% of operating revenue) 44.3% 44.3% 46.0% 45.7% 45.4% 45.5% 45.8% 46.4% 46.1% 47.2% 48.9% 49.6% 50.3% 50.1% Operating profit 15,234 16,582 18,579 17,223 14,134 13,900 15,438 18,351 20,916 23,846 34,439 38,278 45,286 50,000 YoY 32.7% 8.8% 12.0% -7.3% -17.9% -1.7% 11.1% 18.9% 14.0% 14.0% 44.4% 11.1% 18.3% 10.4% OPM (% of operating revenue) 10.8% 10.6% 11.4% 10.5% 8.6% 8.2% 8.7% 9.7% 9.5% 9.2% 11.2% 11.5% 11.9% 11.8% Recurring profit 15,653 16,931 18,666 17,358 14,608 14,229 16,135 19,760 23,047 26,602 32,700 38,582 45,985 50,300 YoY 32.2% 8.2% 10.2% -7.0% -15.8% -2.6% 13.4% 22.5% 16.6% 15.4% 22.9% 18.0% 19.2% 9.4% RPM (% of operating revenue) 11.1% 10.8% 11.5% 10.6% 8.9% 8.4% 9.1% 10.5% 10.4% 10.2% 10.6% 11.6% 12.1% 11.9% Net in co me 9,344 9,313 10,689 6,936 7,506 7,859 8,850 10,970 17,096 16,623 21,718 25,831 30,113 33,300 YoY 47.2% -0.3% 14.8% - - 4.7% 12.6% 24.0% 55.8% -2.8% 30.7% 18.9% 16.6% 10.6% Net margin (% of operating revenue) 6.6% 5.9% 6.6% 4.2% 4.6% 4.6% 5.0% 5.8% 7.7% 6.4% 7.1% 7.8% 7.9% 7.8% Per share data (JPY) Shares issued (year end; '000) 28,078 28,078 28,078 28,078 28,078 28,078 28,078 28,078 28,078 28,078 28,078 28,078 28,078 - EPS 338 337 385 250 270 286 330 409 645 628 818 975 1,147 1,269 EPS (fully dilut ed) 337 336 385 249 270 285 329 408 642 625 816 972 1,144 - Dividend per share 80 90 97 110 110 110 110 110 155 190 246 293 345 382 Book value per share 1,951 2,208 2,439 2,523 2,718 2,871 3,056 3,488 4,072 4,724 5,248 5,792 6,477 - Balance sheet (JPYmn) Cash and cash equivalents 24,063 23,473 26,960 22,242 28,194 23,295 25,045 31,586 25,226 33,044 43,692 38,555 50,875 Total current assets 43,309 45,606 50,229 50,486 56,246 54,802 59,833 72,556 77,290 106,316 119,547 131,435 149,329 T angible fixed asset s 10,904 11,988 11,806 12,884 13,046 12,044 11,743 14,236 22,178 35,252 37,712 38,613 41,225 Investments and other assets 11,827 16,484 22,821 25,056 26,663 27,036 27,020 28,454 28,376 31,807 29,817 31,128 33,558 Int angible fixed asset s 3,406 4,752 4,257 3,574 3,424 3,596 3,696 4,113 12,383 13,570 13,841 13,528 14,200 Total assets 69,447 78,831 89,115 92,000 99,381 97,481 100,293 119,360 140,229 186,947 200,919 214,705 238,313 Accounts payable 6,465 8,049 8,839 12,529 11,607 9,840 8,933 10,155 12,752 21,562 17,382 19,096 20,172 Short-term debt - 161 240 - 276 244 67 407 190 5,005 7,215 10,887 477 Tot al current liabilit ies 14,936 16,862 18,767 20,046 21,332 18,370 18,186 22,685 26,865 42,404 44,625 50,699 49,843 Long-term debt ------1,150 11,692 7,913 - 1,614 Tot al fixed liabilit ies 349 386 411 426 982 608 578 625 2,349 15,872 13,120 6,987 14,043 Tot al liabilit ies 15,286 17,249 19,178 20,472 22,314 18,979 18,765 23,310 29,214 58,276 57,746 57,686 63,886 Net assets 54,160 61,582 69,936 71,528 77,066 78,502 83,528 96,050 111,015 128,670 143,173 157,018 174,426 Total interest-bearing debt - 161 240 - 276 244 67 407 1,340 16,697 15,128 10,887 2,091 Cash flow statement (JPYmn) Cash flow s from operat ing act ivit ies 11,174 11,448 14,971 11,321 11,546 7,155 9,729 13,176 15,117 14,619 26,133 19,742 46,982 Cash flow s from invest ing act ivit ies -3,282 -10,513 -10,296 -10,845 -5,135 -3,381 -4,747 -4,945 -17,842 -22,193 -8,647 -9,856 -14,290 Cash flow s from financing act ivit ies -974 -1,861 -1,035 -3,104 -2,779 -6,075 -3,120 -2,540 -5,385 11,377 -6,520 -14,361 -21,759 Financial rat ios ROA (RP-based) 24.1% 22.8% 22.2% 19.2% 15.3% 14.5% 16.3% 18.0% 17.8% 16.3% 16.9% 18.6% 20.3% ROE 18.8% 16.2% 16.6% 10.1% 10.3% 10.3% 11.1% 12.5% 17.0% 14.3% 16.4% 17.7% 18.6% Equit y rat io 77.6% 77.5% 76.0% 76.1% 76.0% 78.9% 81.6% 78.3% 76.9% 67.0% 69.4% 71.3% 71.3% Source: Shared Research based on company data

03/122 Ryohin Keikaku / 7453

RCoverage LAST UPDATE: 2018.07.04 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Recent updates

Highlights

On July 4, 2018, Ryohin Keikaku Co., Ltd announced earnings results for Q1 FY02/19; see the results section for details.

On July 3, 2018, the company announced monthly sales data for June 2018; see the monthly section for details.

On June 4, 2018, the company announced monthly sales data for May 2018.

On May 23, 2018, Shared Research updated the report following interviews with the company.

On May 2, 2018, the company announced monthly sales data for April 2018.

On April 11, 2018, the company announced earnings results for full-year FY02/18.

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

04/122 Ryohin Keikaku / 7453

RCoverage LAST UPDATE: 2018.07.04 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Trends and outlook

Monthly trends and results

FY02/17 Mar Apr May Jun Jul Aug Sep Oct No v Dec Jan Feb Q1 Q2 Q3 Q4 1H 2H FY Directly managed stores: comparable 8.1% 7.3% 6.4% 4.0% -2.0% -6.9% 0.0% 5.5% 3.4% 1.7% 0.2% -3.9% 7.3% -1.6% 3.1% -0.7% 3.3% 1.0% 2.1% Directly managed stores: total 13.8% 13.2% 11.9% 10.5% 4.1% -0.6% 5.1% 12.9% 9.3% 5.7% 4.9% 3.6% 13.0% 4.9% 9.4% 4.9% 9.3% 7.2% 8.2% Licensed st ores (incl. Seiyu): comparable 5.0% 4.3% 6.9% 4.6% 2.8% -6.3% 1.2% 7.4% 7.1% -2.9% -0.3% -2.2% 5.5% 0.8% 5.6% -1.6% 3.9% 2.5% 3.3% Licensed st ores (incl. Seiyu): t ot al -2.9% -3.6% 2.1% -2.1% -4.8% -13.6% -4.4% 1.0% 1.0% -7.3% -4.9% -6.6% -1.5% -6.6% -0.5% -6.3% -3.8% -3.2% -3.5% Instore: comparable 7.6% 6.7% 6.5% 4.1% -1.2% -6.8% 0.2% 5.8% 4.0% 0.9% 0.1% -3.6% 7.0% -1.2% 3.5% -0.9% 3.4% 1.2% 2.3% Instore: total 10.7% 10.1% 10.2% 8.3% 2.6% -2.9% 3.5% 10.8% 7.9% 3.5% 3.3% 2.0% 10.3% 2.8% 7.7% 3.0% 6.9% 5.5% 6.2% Total 13.2% 14.2% 12.3% 9.1% 6.5% 3.2% 9.8% 10.9% 13.0% 3.1% 8.9% 7.9% 13.6% 7.0% 11.8% 7.6% 10.5% 9.8% 10.1% Excluding overseas w holesale 12.7% 12.2% 12.2% 8.5% 4.2% 1.2% 10.2% 9.8% 12.4% 4.5% 6.6% 4.6% 12.4% 4.9% 10.9% 5.3% 9.0% 8.2% 8.6% FY02/18 Mar Apr May Jun Jul Aug Sep Oct No v Dec Jan Feb Q1 Q2 Q3 Q4 1H 2H FY Directly managed stores: comparable 2.1% 8.9% 4.4% 8.8% 12.4% 12.5% 8.0% 1.3% 6.6% 7.5% 5.9% 6.5% 5.0% 11.3% 5.0% 6.5% 7.9% 5.7% 6.8% Directly managed stores: total 9.1% 13.0% 9.8% 12.2% 15.3% 16.5% 14.5% 6.1% 12.2% 11.2% 9.8% 9.7% 10.6% 14.5% 10.6% 10.6% 12.3% 10.4% 11.4% Licensed st ores (incl. Seiyu): comparable 4.5% 7.1% 4.4% 8.1% 8.3% 9.8% 7.5% -1.5% 10.8% 12.7% 9.3% 7.6% 5.8% 8.6% 5.2% 10.6% 6.9% 7.8% 7.5% Licensed st ores (incl. Seiyu): t ot al 3.1% 4.4% 0.7% 4.9% 7.3% 5.9% 0.9% -4.0% 6.8% 9.4% 8.1% 8.7% 2.7% 6.0% 1.2% 8.8% 4.2% 4.6% 4.4% Instore: comparable 2.4% 8.6% 4.4% 8.7% 11.8% 12.2% 7.9% 0.9% 7.2% 8.2% 6.3% 6.7% 5.1% 10.9% 5.0% 7.1% 7.8% 6.0% 6.9% Instore: total 8.1% 11.6% 8.3% 11.0% 14.1% 14.8% 12.3% 4.5% 11.3% 10.9% 9.6% 9.5% 9.3% 13.2% 9.1% 10.1% 11.0% 9.5% 10.3% Total 14.4% 10.2% 8.3% 13.9% 16.7% 20.2% 7.3% 2.9% 8.3% 5.5% 7.4% 10.9% 11.5% 17.3% 7.0% 9.2% 14.1% 7.7% 10.8% Excluding overseas w holesale 9.9% 9.8% 8.8% 12.4% 15.1% 13.3% 4.0% 3.9% 9.1% 9.2% 7.0% 7.7% 9.5% 13.6% 5.7% 8.1% 11.3% 6.8% 9.0% FY02/19 Mar Apr May Jun Jul Aug Sep Oct No v Dec Jan Feb Q1 Q2 Q3 Q4 1H 2H FY Directly managed stores: comparable 6.3% 4.9% 2.4% 5.9% 4.6% Directly managed stores: total 9.0% 9.3% 4.5% 9.1% 7.7% Licensed st ores (incl. Seiyu): comparable 9.4% 13.9% 10.4% 13.9% 11.1% Licensed st ores (incl. Seiyu): t ot al 12.5% 15.9% 8.2% 15.1% 12.2% Instore: comparable 6.7% 6.1% 3.5% 6.9% 5.5% Instore: total 9.6% 10.3% 5.0% 10.1% 8.4% Total 4.8% 8.9% 5.2% 4.4% 7.4% Excluding overseas w holesale 7.7% 6.4% 4.4% 5.6% 6.3%

FY02/17 Mar Apr May Jun Jul Aug Sep Oct No v Dec Jan Feb Q1 Q2 Q3 Q4 1H 2H FY Directly managed comparable store sales 8.1% 7.3% 6.4% 4.0% -2.0% -6.9% 0.0% 5.5% 3.4% 1.7% 0.2% -3.9% 7.3% -1.6% 3.1% -0.7% 3.3% 1.0% 2.1% Apparel it ems 5.6% 3.6% -2.5% -2.1% -3.3% -12.2% -8.9% 1.6% 2.8% -3.0% -1.1% -3.2% 1.9% -5.6% -0.9% -2.5% -1.5% -1.7% -1.6% Household goods 9.6% 10.0% 14.5% 8.3% -1.7% -3.8% 4.7% 7.1% 2.9% 4.4% 1.0% -3.5% 11.2% 1.0% 4.8% 0.4% 6.6% 2.2% 4.2% Food 6.3% 8.0% 6.1% 6.0% 2.1% -4.3% 11.1% 14.4% 11.1% 5.6% 0.3% -7.9% 6.9% 1.2% 11.9% -0.7% 4.2% 5.0% 4.8% Customer count 0.2% 1.8% -0.3% -0.1% -1.5% -8.0% 2.2% 5.9% 4.2% 1.9% -0.2% -2.7% 0.6% -3.3% 4.0% -0.3% -1.3% 1.9% 0.3% Apparel it ems -4.6% -3.4% -8.0% -8.0% -10.3% -19.7% -5.8% 4.4% 6.1% 0.7% -0.3% 3.4% -5.5% -12.7% 1.6% 1.1% -9.1% 1.3% -4.5% Household goods 5.7% 6.8% 6.4% 5.9% 4.6% -1.7% 7.4% 8.8% 5.8% 4.0% 1.9% -0.4% 6.3% 2.8% 7.2% 1.9% 4.7% 4.5% 4.6% Food -3.0% 0.5% 0.6% -0.8% -0.7% -6.2% 5.2% 7.6% 4.9% 1.3% -2.5% -6.9% -0.7% -2.7% 5.7% -2.7% -1.6% 1.4% 0.0% Customer spend 7.9% 5.4% 6.7% 4.0% -0.5% 1.2% -2.1% -0.4% -0.7% -0.2% 0.4% -1.2% 6.7% 1.8% -0.9% -0.4% 4.7% -0.9% 1.8% Apparel it ems 10.7% 7.2% 6.0% 6.4% 7.8% 9.3% -3.2% -2.6% -3.1% -3.7% -0.9% -6.3% 7.9% 8.1% -2.5% -3.4% 8.4% -3.0% 3.0% Household goods 3.7% 2.9% 7.6% 2.3% -6.0% -2.2% -2.5% -1.6% -2.8% 0.4% -0.9% -3.2% 4.6% -1.8% -2.3% -1.4% 1.9% -2.3% -0.3% Food 9.6% 7.4% 5.5% 6.9% 2.9% 2.1% 5.6% 6.3% 5.9% 4.3% 2.9% -1.1% 7.6% 4.0% 5.9% 1.7% 6.0% 3.6% 4.8% FY02/18 Mar Apr May Jun Jul Aug Sep Oct No v Dec Jan Feb Q1 Q2 Q3 Q4 1H 2H FY Directly managed comparable store sales 2.1% 8.9% 4.4% 8.8% 12.4% 12.5% 8.0% 1.3% 6.6% 7.5% 5.9% 6.5% 5.0% 11.3% 5.0% 6.5% 7.9% 5.7% 6.8% Apparel it ems -1.8% 7.1% 7.5% 10.1% 16.0% 15.9% 13.4% 12.9% 15.0% 20.2% 17.1% 10.8% 4.5% 13.9% 13.8% 16.5% 8.8% 15.0% 11.9% Household goods 3.5% 10.9% 2.2% 8.0% 10.3% 10.7% 6.3% -5.6% 0.6% -0.8% -1.2% 5.4% 5.3% 9.8% -0.3% 0.6% 7.5% 0.2% 3.7% Food 6.4% 4.0% 2.7% 7.5% 7.9% 10.9% -2.2% -5.1% 7.0% 6.0% 6.1% 0.3% 4.5% 8.8% 0.0% 4.1% 6.6% 2.1% 4.2% Customer count 4.7% 5.4% 3.0% 7.4% 9.1% 10.3% 3.7% 1.0% 7.5% 7.8% 6.5% 7.7% 4.4% 9.0% 4.0% 7.3% 6.7% 5.6% 6.1% Apparel it ems 1.9% 9.5% 8.7% 13.0% 14.8% 17.7% 12.8% 14.6% 17.6% 26.4% 23.5% 15.6% 6.8% 15.1% 15.1% 22.2% 11.0% 18.4% 14.5% Household goods 8.6% 7.4% 3.8% 9.0% 10.0% 12.1% 6.0% -0.8% 7.7% 4.4% 3.5% 10.8% 6.7% 10.4% 4.1% 5.9% 8.5% 5.0% 6.7% Food 5.3% 3.6% -0.1% 6.0% 6.1% 6.9% -1.9% -3.9% 4.4% 5.0% 4.2% 3.5% 3.0% 6.4% -0.5% 4.3% 4.7% 1.9% 3.3% Customer spend -2.5% 3.3% 1.3% 1.3% 3.0% 2.0% 4.1% 0.3% -0.8% -0.4% -0.5% -1.1% 0.6% 2.1% 0.9% -0.7% 1.2% 0.1% 0.6% Apparel it ems -3.6% -2.2% -1.1% -2.6% 1.1% -1.6% 0.5% -1.5% -2.3% -4.9% -5.2% -4.2% -2.2% -1.1% -1.2% -4.6% -2.0% -2.8% -2.3% Household goods -4.7% 3.2% -1.6% -0.9% 0.3% -1.3% 0.2% -4.8% -6.6% -5.0% -4.5% -4.9% -1.3% -0.5% -4.2% -5.0% -1.0% -4.6% -2.8% Food 1.0% 0.4% 2.9% 1.4% 1.7% 3.7% -0.3% -1.2% 2.5% 0.9% 1.8% -3.1% 1.5% 2.2% 0.5% -0.2% 1.8% 0.2% 0.9% FY02/19 Mar Apr May Jun Jul Aug Sep Oct No v Dec Jan Feb Q1 Q2 Q3 Q4 1H 2H FY Directly managed comparable store sales 6.3% 4.9% 2.4% 5.9% 4.6% Apparel it ems 19.0% 8.1% 3.6% 12.2% 9.6% Household goods 0.2% 1.4% 0.3% -0.6% 0.7% Food 6.1% 13.1% 11.1% 19.0% 9.8% Customer count 9.5% 9.2% 6.2% 10.1% 8.3% Apparel it ems 24.4% 14.2% 9.6% 13.1% 15.4% Household goods 8.0% 9.2% 6.6% 9.9% 8.0% Food 6.2% 9.6% 6.7% 11.7% 7.4% Customer spend -2.9% -3.9% -3.5% -3.8% -3.4% Apparel it ems -4.3% -5.3% -5.5% -0.8% -5.0% Household goods -7.2% -7.1% -6.0% -9.6% -6.8% Food -0.1% 3.2% 4.1% 6.5% 2.2% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods. Note: Comparable stores are considered those open for at least two years. Note: Licensed stores are wholesale client firms other than FamilyMart and com KIOSK stores.

05/122 Ryohin Keikaku / 7453

RCoverage LAST UPDATE: 2018.07.04 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Quarterly trends and results

FY02/17 FY02/18 FY02/19 FY02/17 FY02/18 FY02/19 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 1H 1H 1H Est. % of 1H Cons. Cons. Cons. Est. Change % of FY Operating revenue 87,536 74,181 85,310 86,254 97,135 85,853 96,962 99,599 106,521 161,717 182,988 203,500 100.0% 307,532 333,281 379,551 424,300 44,749 25.1% Sales 87,408 73,944 85,146 86,080 96,975 85,625 96,765 99,434 106,307 161,353 182,601 203,100 100.0% 307,199 332,581 378,801 423,500 44,699 25.1% YoY 13.0% 5.9% 7.4% 6.6% 10.9% 15.8% 13.6% 15.5% 9.6% 9.6% 13.2% 11.2% 18.3% 8.3% 13.9% 11.8% Gross profit 42,866 37,867 41,886 42,539 47,743 43,440 49,403 50,483 53,311 80,734 91,183 101,700 100.0% 150,118 165,160 191,070 212,600 21,530 25.1% YoY 15.2% 12.3% 6.9% 6.4% 11.4% 14.7% 17.9% 18.7% 11.7% 13.8% 12.9% 11.5% 22.8% 10.0% 15.7% 11.3% GPM (% of sales) 49.0% 51.2% 49.2% 49.4% 49.2% 50.7% 51.1% 50.8% 50.1% 50.0% 49.9% 50.1% 48.9% 49.7% 50.4% 50.2% Operating gross profit 42,993 38,104 42,050 42,713 47,902 43,668 49,599 50,649 53,525 81,098 91,570 102,100 100.0% 150,451 165,861 191,819 213,400 21,581 25.1% YoY 15.2% 12.5% 7.1% 6.7% 11.4% 14.6% 18.0% 18.6% 11.7% 13.9% 12.9% 11.5% 22.5% 10.2% 15.7% 11.3% Op. GPM (% of operating revenue) 49.1% 51.4% 49.3% 49.5% 49.3% 50.9% 51.2% 50.9% 50.2% 50.1% 50.0% 50.2% 48.9% 49.8% 50.5% 50.3% SG&A expenses 31,570 29,768 32,156 34,086 36,035 34,405 37,191 38,900 40,206 61,339 70,440 78,600 100.0% 116,012 127,583 146,532 163,400 16,868 24.6% Advert ising 1,324 993 1,437 1,419 1,536 1,173 1,480 1,739 1,612 2,318 2,710 5,049 5,174 5,930 Logist ics 3,575 3,010 3,437 3,445 4,215 3,393 3,792 3,889 4,549 6,585 7,608 11,696 13,468 15,290 Personnel 10,402 10,525 10,668 11,771 11,666 12,265 12,406 13,513 13,602 20,928 23,932 38,360 43,367 49,852 Rents 8,285 7,533 8,045 8,533 9,051 8,538 9,279 9,539 10,046 15,818 17,590 30,877 32,397 36,409 Dep. & goodw ill amort izat ion 2,023 2,022 2,058 2,236 2,249 2,324 2,439 2,498 2,535 4,046 4,574 7,661 8,341 9,511 Other 5,959 5,682 6,510 6,681 7,315 6,709 7,793 7,720 7,859 11,641 14,024 22,366 24,832 29,538 YoY 13.7% 8.8% 9.3% 8.3% 14.1% 15.6% 15.7% 14.1% 11.6% 11.3% 14.8% 28.1% 17.2% 10.0% 14.9% 11.5% Advert ising 13.1% 0.2% 6.8% -7.9% 16.0% 18.1% 3.0% 22.6% 4.9% 7.2% 16.9% 18.1% 2.5% 14.6% Logist ics 9.6% 11.6% 22.9% 17.4% 17.9% 12.7% 10.3% 12.9% 7.9% 10.4% 15.5% 9.0% 15.2% 13.5% Personnel 20.1% 14.0% 12.1% 7.4% 12.2% 16.5% 16.3% 14.8% 16.6% 17.0% 14.4% 18.7% 13.1% 15.0% Rents 8.7% 1.9% 3.0% 5.9% 9.2% 13.3% 15.3% 11.8% 11.0% 5.4% 11.2% 14.4% 4.9% 12.4% Dep. & goodw ill amort izat ion 28.6% 7.2% 6.4% 8.8% 11.2% 14.9% 18.5% 11.7% 12.7% 10.3% 13.0% 35.4% 8.9% 14.0% Other 8.9% 10.2% 8.0% 12.9% 22.8% 18.1% 19.7% 15.6% 7.4% 11.7% 20.5% 17.7% 11.0% 19.0% % of sales 36.1% 40.3% 37.8% 39.6% 37.2% 40.2% 38.4% 39.1% 37.8% 38.0% 38.6% 38.7% 37.8% 38.4% 38.7% 38.6% Advert ising 1.5% 1.3% 1.7% 1.6% 1.6% 1.4% 1.5% 1.7% 1.5% 1.4% 1.5% 1.6% 1.6% 1.6% Logist ics 4.1% 4.1% 4.0% 4.0% 4.3% 4.0% 3.9% 3.9% 4.3% 4.1% 4.2% 3.8% 4.0% 4.0% Personnel 11.9% 14.2% 12.5% 13.7% 12.0% 14.3% 12.8% 13.6% 12.8% 13.0% 13.1% 12.5% 13.0% 13.2% Rents 9.5% 10.2% 9.4% 9.9% 9.3% 10.0% 9.6% 9.6% 9.4% 9.8% 9.6% 10.1% 9.7% 9.6% Dep. & goodw ill amort izat ion 2.3% 2.7% 2.4% 2.6% 2.3% 2.7% 2.5% 2.5% 2.4% 2.5% 2.5% 2.5% 2.5% 2.5% Other 6.8% 7.7% 7.6% 7.8% 7.5% 7.8% 8.1% 7.8% 7.4% 7.2% 7.7% 7.3% 7.5% 7.8% Operating profit 11,423 8,335 9,893 8,626 11,867 9,262 12,407 11,748 13,319 19,758 21,130 23,500 100.0% 34,439 38,278 45,286 50,000 4,714 26.6% YoY 19.6% 27.8% 0.8% 0.9% 3.9% 11.1% 25.4% 36.2% 12.2% 22.9% 6.9% 11.2% 44.4% 11.1% 18.3% 10.4% OPM (% of op. revenue) 13.0% 11.2% 11.6% 10.0% 12.2% 10.8% 12.8% 11.8% 12.5% 12.2% 11.5% 11.5% 11.2% 11.5% 11.9% 11.8% Non-operating income (expense) 4 -2,370 1,824 845 -345 774 486 -216 130 -2,365 429 200 -1,739 304 699 Financial income 212 47 137 75 137 146 138 119 188 248 282 350 461 - Gains on foreign exchange -314 -2,520 1,611 457 -597 518 266 -850 -172 -2,834 -79 -2,654 -764 - Other 106 103 76 313 115 110 82 515 114 221 226 200 - 565 607 699 Recurring profit 11,427 5,965 11,717 9,471 11,522 10,036 12,893 11,532 13,449 17,393 21,559 23,700 100.0% 32,700 38,582 45,985 50,300 4,315 26.7% YoY 16.6% -7.9% 20.8% 40.7% 0.8% 68.2% 10.0% 21.8% 16.7% 6.9% 24.0% 9.9% 22.9% 18.0% 19.2% 9.4% RPM (% of op. revenue) 13.1% 8.0% 13.7% 11.0% 11.9% 11.7% 13.3% 11.6% 12.6% 10.8% 11.8% 11.6% 10.6% 11.6% 12.1% 11.9% Net in co me 7,671 4,044 8,280 5,835 7,841 6,743 8,687 6,841 9,542 11,715 14,584 16,100 100.0% 21,718 25,831 30,113 33,300 3,187 28.7% YoY 27.2% -6.8% 22.4% 27.4% 2.2% 66.7% 4.9% 17.2% 21.7% 12.9% 24.5% 10.4% 30.7% 18.9% 16.6% 10.6% Net margin (% of op. revenue) 8.8% 5.5% 9.7% 6.8% 8.1% 7.9% 9.0% 6.9% 9.0% 7.2% 8.0% 7.9% 7.1% 7.8% 7.9% 7.8% Inventories 56,226 60,558 66,116 72,672 68,688 72,034 76,109 74,473 71,802 60,558 72,034 56,930 72,670 74,472 YoY 5.9% 14.5% 14.8% 27.7% 22.2% 19.0% 15.1% 2.5% 4.5% 14.5% 19.0% - 9.3% 27.6% 2.5% Days in inventory 115.9 147.7 133.6 145.4 131.0 152.2 142.7 140.4 125.9 USD/JPY (year end) 112.7 102.9 101.1 116.5 112.2 112.0 112.7 113.0 106.2 102.9 112.0 120.6 116.5 113.0 113.0 QoQ -6.6% -8.7% -1.7% 15.2% -3.7% -0.2% 0.7% 0.2% -6.0% -16.0% 8.8% - 0.0% -3.4% -3.0% 0.0% CNY/JPY (year end) 17.39 15.46 15.14 16.76 16.29 16.49 16.96 17.29 16.92 15.46 16.49 18.36 16.76 17.29 17.14 QoQ -5.3% -11.1% -2.1% 10.7% -2.8% 1.2% 2.9% 1.9% -2.1% -21.6% 6.7% - -5.1% -8.7% 3.2% -0.9% FY02/17 FY02/18 FY02/19 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Act. Act. Act. Est. Change % of FY Operating revenue 87,536 74,181 85,310 86,254 97,135 85,853 96,962 99,599 106,521 - 307,532 333,281 379,551 424,300 +44,749 25.1% Domest ic 59,186 46,568 58,741 51,220 64,649 52,774 62,088 55,278 68,830 - 198,449 215,716 234,791 251,800 +17,009 27.3% Overseas 28,346 27,615 26,568 35,033 32,485 33,078 34,873 44,320 37,690 - 109,080 117,563 144,758 172,500 +27,742 21.8% East Asia 21,978 21,240 19,998 26,486 25,221 25,372 25,778 33,431 29,156 - 83,045 89,704 109,803 129,100 +19,297 22.6% Europe and the Americas 4,029 3,938 4,172 5,462 4,393 4,552 5,524 6,754 4,968 - 17,124 17,603 21,225 27,400 +6,175 18.1% West and South Asia, Oceania 2,338 2,436 2,397 3,084 2,870 3,153 3,570 4,134 3,565 - 8,911 10,256 13,729 16,000 +2,271 22.3% Other 3 -2 0 - 0 0 0 0 0 - 2 1 1 Yo Y 13.0% 6.0% 7.5% 6.8% 11.0% 15.7% 13.7% 15.5% 9.7% - 18.2% 8.4% 13.9% 11.8% Domest ic 11.9% 5.2% 10.9% 6.0% 9.2% 13.3% 5.7% 7.9% 6.5% - 8.6% 8.7% 8.8% 7.2% Overseas 15.2% 7.4% 0.8% 8.0% 14.6% 19.8% 31.3% 26.5% 16.0% - 40.7% 7.8% 23.1% 19.2% East Asia 13.9% 7.8% 1.4% 8.9% 14.8% 19.5% 28.9% 26.2% 15.6% - 47.2% 8.0% 22.4% 17.6% Europe and the Americas 15.4% 1.7% -5.8% 2.5% 9.0% 15.6% 32.4% 23.7% 13.1% - 15.2% 2.8% 20.6% 29.1% West and South Asia, Oceania 29.8% 14.9% 8.8% 10.8% 22.8% 29.4% 48.9% 34.0% 24.2% - 42.5% 15.1% 33.9% 16.5% Comparable store sales YoY (local currency) Parent 7.3% -1.6% 3.1% -0.7% 5.0% 11.3% 5.0% 6.5% 4.6% - 4.9% 2.1% 6.8% 4.0% -2.8pp Overseas 7.0% 7.0% 1.4% 3.5% 2.1% 2.7% 6.0% 4.9% 1.0% - 11.7% 4.6% 4.1% 4.6% +0.5pp East Asia 5.0% 5.9% 0.8% 4.2% 2.3% 1.8% 6.0% 5.2% 0.8% - 13.1% 4.1% 3.9% 4.5% +0.6pp Europe and the Americas 11.8% 5.8% -0.4% -0.2% 2.0% 7.4% 5.9% 2.8% -0.4% - 5.4% 3.7% 4.4% 5.6% +1.2pp West and South Asia, Oceania 18.9% 20.3% 14.1% 2.7% 0.7% 3.9% 6.3% 3.4% 4.3% - 12.7% 12.5% 4.7% 4.2% -0.5pp Operating gross profit 42,993 38,104 42,050 42,713 47,902 43,668 49,599 50,649 53,525 - 150,451 165,160 191,070 212,600 +21,530 25.2% Domest ic 26,557 20,848 27,325 22,105 30,462 25,101 30,201 24,934 - - 85,389 96,836 110,701 Operating GPM 49.1% 51.4% 49.3% 49.5% 49.3% 50.9% 51.2% 50.9% 50.2% - 48.9% 49.6% 50.3% 50.1% Domest ic 44.9% 44.8% 46.5% 43.2% 47.1% 47.6% 48.6% 45.1% - - 43.0% 44.9% 47.1% Operating profit 11,423 8,335 9,893 8,626 11,867 9,262 12,407 11,748 13,319 - 34,439 38,278 45,286 50,000 +4,714 26.6% Domest ic 7,135 3,790 7,751 3,275 8,772 6,234 8,887 4,657 8,882 - 17,062 21,953 28,551 29,400 +849 30.2% Overseas 4,121 4,442 1,987 5,188 2,912 2,904 3,315 6,958 4,181 - 17,042 15,740 16,090 20,400 +4,310 20.5% East Asia 4,503 4,773 2,318 4,858 3,221 3,870 3,361 6,407 4,399 - 17,261 16,454 16,861 20,600 +3,739 21.4% Europe and the Americas -417 -347 -382 295 -330 -778 -139 350 -273 - -414 -852 -898 -400 +498 68.3% West and South Asia, Oceania 35 17 51 34 21 -187 94 200 55 - 195 138 128 200 +72 27.5% Other 110 120 214 173 93 144 176 127 132 - 586 620 541 200 -341 66.0% Adjustments 55 -18 -60 -11 89 -19 27 5 122 - -253 -35 103 - OPM 13.0% 11.2% 11.6% 10.0% 12.2% 10.8% 12.8% 11.8% 12.5% - 11.2% 11.5% 11.9% 11.8% -0.1pp Domest ic 12.1% 8.1% 13.2% 6.4% 13.6% 11.8% 14.3% 8.4% 12.9% - 8.6% 10.2% 12.2% 11.7% -0.5pp Overseas 14.5% 16.1% 7.5% 14.8% 9.0% 8.8% 9.5% 15.7% 11.1% - 15.6% 13.4% 11.1% 11.8% +0.7pp East Asia 20.5% 22.5% 11.6% 18.3% 12.8% 15.3% 13.0% 19.2% 15.1% - 20.8% 18.3% 15.4% 16.0% +0.6pp Europe and the Americas -10.3% -8.8% -9.2% 5.4% -7.5% -17.1% -2.5% 5.2% -5.5% - -2.4% -4.8% -4.2% -1.5% +2.8pp West and South Asia, Oceania 1.5% 0.7% 2.1% 1.1% 0.7% -5.9% 2.6% 4.8% 1.5% - 2.2% 1.3% 0.9% 1.3% +0.3pp Yo Y 19.6% 27.8% 0.8% 0.9% 3.9% 11.1% 25.4% 36.2% 12.2% - 44.4% 11.1% 18.3% 10.4% Domest ic 23.7% 26.8% 32.0% 34.6% 22.9% 64.5% 14.7% 42.2% 1.3% - 16.0% 28.7% 30.1% 3.0% Overseas 14.5% 20.3% -47.7% -12.9% -29.3% -34.6% 66.8% 34.1% 43.6% - 97.8% -7.6% 2.2% 26.8% East Asia 16.3% 20.2% -38.9% -13.6% -28.5% -18.9% 45.0% 31.9% 36.6% - 104.6% -4.7% 2.5% 22.2% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

06/122 Ryohin Keikaku / 7453

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Q1 FY02/19 results (out July 4, 2018)

Q1 FY02/19: Maintained positive earnings growth with a JPY1.5bn (+12.2%) YoY rise in operating profit, mainly driven by a ▷ JPY1.3bn (+43.6%) rise in OP at Overseas business centered on East Asia. OP at Domestic business also increased by JPY100mn (+1.3%)

 Versus forecast: rise in personnel expenses in Japan within expectation; steady consolidated Q1 results were in line with plan  Inventory: Overseas inventory still has issues to resolve such as reducing inventory from previous fiscal years. The company plans to further promote global supply chain management (GSCM) by developing key performance indicators (KPI) in each country Domestic: Although profit margin narrowed temporarily due to higher personnel expenses resulting from efforts to achieve ▷ 100% fill rates at stores, GPM maintained the previous year’s level thanks to revised prices reflecting lower CoGS and fewer markdowns. Strengthened business foundation resulted in growth in comparable store customer traffic and apparel sales

 Strong apparel sales drove growth. Sales at appropriate prices gained momentum on the back of price revisions reflecting improved CoGS. Strong performance continues in Q2 as well Overseas: East Asia moved into the black in Q3 FY02/18 and saw a YoY increase of JPY1.2bn in profit in Q1, significantly ▷ contributing to the consolidated results. Despite delayed recovery of North America business, Europe was able to narrow losses partly owing to the effects of warehouse relocation as part of business restructuring

 East Asia: Improved CoGS ratio mainly due to favorable exchange rate shifts contributed to a 2.3pp increase in OPM. In Q2, comparable stores in China seem to be performing worse than expected Progress with initiatives: In Japan, effects of price revisions were seen mainly in apparel and contributed to a rise in customer ▷ count. Average floor space of stores is gradually increasing in an initiative to establish large stores. The company has not changed

its forecasts for household goods for 2H. It achieved 100% personnel fill rates at stores in the first half of Q1

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Consolidated earnings results (JPYmn)

Operating revenue Operating profit OPM (right axis) 100,000 20%

80,000 16% 13.0% 12.3% 12.4% 12.2% 12.8% 12.5% 11.8% 11.6% 11.2%11.6% 11.8% 11.1% 11.1% 10.6% 10.8% 60,000 10.1% 10.4% 9.9% 10.0% 12% 8.8% 8.8%9.3% 9.3% 8.1% 8.1% 8.6% 7.1% 6.6% 40,000 6.0% 8%

20,000 12,407 13,319 4% 9,547 9,815 11,423 9,893 11,8679,262 11,748 5,811 5,680 5,729 6,473 6,624 6,1946,017 6,524 8,553 8,335 8,626 4,5792,4255,1683,266 3,692 3,168 3,993 4,721 5,012 0 0% (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19

Left: Operating revenue by segment (JPYbn), Right: Operating profit by segment (JPYbn)

80 10 Q1 Q1 Q1 8.8 8.9 68.8 Q1 Q1 Q1 70 64.6 FY02/15 FY02/16 FY02/17 FY02/15 FY02/16 FY02/17 8 7.1 59.2 Q1 Q1 60 Q1 Q1 51.252.9 FY02/18 FY02/19 5.8 6 5.3 FY02/18 FY02/19 50 4.5 4.4 3.9 40 4 3.2 29.2 30 25.2 22.0 2 1.4 19.3 20 0.0 0.0 0.1 11.4 0 10 3.5 4.0 4.4 5.0 3.6 -0.1-0.2 -0.1-0.1 3.0 1.1 1.8 2.3 2.9 -0.4-0.3-0.3 0 -2 Japan East Asia Europe and the West and South Japan East Asia Europe and the West and South (JPYbn) Americas Asia, Oceania (JPYbn) Americas Asia, Oceania

Comparable store sales growth

Directly managed stores (parent) East Asia Europe and the Americas West and South Asia, Oceania 30%

25%

20%

15%

10% 11.3% 5% 7.8% 7.4% 5.7% 5.9% 5.8% 7.3% 6.5% 4.1% 5.0% 5.0% 4.6% 0% 2.1% 2.1% 2.3% 1.3% 3.1% 0.0% 0.7% -0.7% -5% -1.6% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19

YoY changes in operating profit by segment

(JPYmn) Japan East Asia Europe and the Americas West and South Asia, and Oceania Operating profit 4,000

3,000 2,354 2,000 1,549 2,454 2,649 632 1,043 2,343 802 2,444 1,000 1,370 1,880 656 1,441 1,367 1,637 1,382 1,178 1,126 800 842 1,136 342 574 430 398 400 0 -190 110 -772 -765 -903 -1,531 -1,478 -1,282 -1,000

-2,000 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 Source: Shared Research based on company data

Earnings overview Q1: Operating profit rose by JPY1.5bn (+12.2%), driven by a JPY1.3bn (+43.6%) increase at the Overseas business centered on East Asia. Domestic business also saw an OP increase of JPY100mn (+1.3%) For Q1 FY02/19, Ryohin Keikaku reported a 9.6% YoY increase in operating revenue and a 12.2% increase in operating profit as OPM rose 0.3pp to 12.5%. Operating profit rose JPY1.5bn YoY as a JPY1.3bn increase in operating profit at the company's Overseas business made a significant contribution. In the Overseas business, profit was down JPY2.7bn YoY in 1H FY02/18, but up JPY3.1bn in 2H the same year, leading to a JPY407mn increase for the full year. This upward trend continued into Q1 FY02/19.

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East Asia, especially China, made a significant contribution to the recovery thanks to improved CoGS ratio on favorable exchange rate shifts. In the Domestic business, while personnel expenses rose as a result of hiring more employees in an effort to improve customer satisfaction and reduce opportunity losses, this increase was within expectation. Operating profit continued on an upward trajectory, increasing JPY110mn.

From a balance sheet perspective, inventory at end-Q1 was up 4.5% YoY, running behind growth in sales. An increase of JPY3.1bn at the parent, which included JPY2.0bn resulting from consolidation of subsidiaries, is not of serious concern if the effects of consolidation are excluded. Ryohin Keikaku is continuing to see benefits in Japan from a practice of bolstering store inventory (keeping store shelves fully stocked), while estimating demand volume and adjusting warehouse inventory as necessary. Further, total interest-bearing debts fell to JPY2.1bn (-JPY13.5bn YoY), making the company practically debt-free.

In the Domestic business, the company saw continued success with efforts to differentiate apparel lineup (through the use of new fabrics and materials), revise prices in reflection of lower CoGS, and reduce markdowns. The company launched an initiative to reach 100% store personnel fill rates in 2H FY02/18 in an effort to prevent opportunity losses, and achieved the target 100% at an early stage in Q1, which contributed to an increase of 4.6% in comparable store sales (customer count, +8.3%; average customer spend, -3.4%). Although personnel expenses increased by JPY1.0bn in Q1, impacts of one-time factors (overtime pay and others) are expected to decline from Q2.

Thanks in part to the effects of price revisions carried out in the beginning of FY02/19, apparel sales continued to perform well (comparable store sales, +9.6%; customer count, +15.4%). Despite continued steady performance of health and beauty products, comparable store sales of household goods grew only 0.7% (customer count: +8.0%); the company is maintaining its expectations for contributions from new products and prices (also plans to carry out price revisions) in 2H FY02/19.

Domestic operating GPM (left) and comparable store sales (right)

YoY (left axis) Operating GPM Apparel items Household goods Food +3.0pp 50% 25% Stacking shelves sold out due to global popularity 48.6% Backlash from previous year's boom in body-fit cushion: production capacity increased in July 2015 47.6% 20% +2.5pp 47.1% 48% 46.5% 15% +2.0pp 45.1% 46% 44.9%44.8% 44.3% 10% 43.8% +1.5pp 43.2% 44% 5%

41.9% 41.8% 0% +1.0pp 42% -5% Price review effects in accessories +0.5pp 40% -10% Advance demand Inventory reduction (inner wear) (e.g. men's polo shirts) - 38% -15% Opportunity loss (e.g. men's polo shirts) Q1 Q1 Q1 Q1 Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec FY02/16 FY02/17 FY02/18 FY02/19 2015 2016 2017 2018

Inventories

Parent Diff. (cons.-par.) (JPYbn) Inventory (domestic directly managed stores; JPY'000/sqm) (Days) Inventory YoY (domestic directly managed stores; left axis) YoY (par.; left axis) YoY (cons.; left axis) 76 70% 74 80 Days in inventory (cons.) 152 73 72 72 24% 148 160 69 Days in inventory (par.) 145 66 143140 60% 70 134 134 61 18% 132 129 131 140 58 57 56 126128 126 50% 53 53 60 120 119 51 52 116 12% 120 40% 43 50 104 104 41 100 99 36 37 94 94 30% 40 6% 90 100 30 29 88 28 27 82 25 78 77 20% 23 30 73 74 74 0% 69 70 69 70 80 66 66 68 68 67 67 68 68 62 63 65 10% 20 58 -6% 60 0% 10 -10% 0 -12% 40 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19

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(JPYbn) (JPYbn) Store inventory Head office inventory MUJI sales (left axis) 60 MUJI sales (left axis) Store inventory Head office inventory 25 60%

50% 50 20 40% 40 30% 15 30 20%

10 10% 20 0% 5 10 -10%

0 0 -20% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 Source: Shared Research based on company data

In the Overseas business, an increase of JPY1.3bn in operating profit was driven by East Asia, whose operating profit rose 36.6% (+JPY1.2bn). While sluggish performance in FY02/18 was also a factor behind the OP growth, OPM increased 2.3pp YoY to 15.1%, making steady progress toward the full-year target (16.0%) despite Q1 coinciding with a seasonal bargain period. Operating profit losses in Europe and North America narrowed JPY57mn YoY. In Europe, SG&A expenses were controlled owing to the effects of warehouse relocation as part of business restructuring, leading to loss reduction. In North America, however, delayed opening of refurbished stores continued to have negative impacts.

Overseas sales (left) and operating profit (right)

(JPYbn) (JPYbn) East Asia Europe and the Americas West and South Asia, Oceania East Asia Europe and the Americas West and South Asia, Oceania 50 8 44.3 7.0 45 7 0.2 4.1 6.0 0.4 40 37.7 6 35.0 34.9 0.2 5.2 32.4 32.5 33.1 6.8 3.6 4.4 0.0 35 5 4.1 0.0 0.3 4.2 3.1 3.6 3.8 0.0 2.8 28.3 27.6 2.9 3.2 5.0 3.6 3.7 0.1 26.3 26.6 0.0 3.3 30 25.7 5.5 5.5 4 0.1 24.6 2.3 4.4 4.6 2.9 2.9 5.3 2.4 0.0 0.1 6.4 25 2.1 2.2 2.4 3 1.8 4.0 3.9 5.6 2.0 3.5 3.9 4.4 4.2 4.5 4.8 0.1 4.9 4.4 20 2 3.9 4.0 3.8 3.9 3.2 3.4 33.4 2.3 15 29.2 1 24.3 26.5 25.2 25.4 25.8 22.0 21.2 10 19.3 19.7 19.7 20.0 0 -0.2 -0.3 -0.1 -0.1 -0.3 -0.1 -0.4 -0.3 -0.4 -0.3 -0.8 5 -1 -0.2 0 -2 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/16 FY02/17 FY02/18 FY02/19 FY02/16 FY02/17 FY02/18 FY02/19 Source: Shared Research based on company data Domestic business: Successful measures drove 4.6% rise in comparable store sales. Price revision strategies contributed greatly to earnings, strengthening business foundation The Domestic business reported a 6.5% YoY increase (+JPY4.2bn) in operating revenue, to JPY68.8bn, and a 1.3% YoY increase (+JPY100mn) in operating profit, to JPY8.9bn. Against a backdrop of revised prices among other factors, apparel sales continued to contribute to growth in comparable store sales and customer traffic. Profit also increased as higher sales offset the rise in personnel expenses.

Comparable store customer traffic increased for 16 consecutive months; price revisions embracing the slogan “lower priced for a reason” gain support Ryohin Keikaku has continued to focus on increasing customer count since Satoru Matsuzaki became president in FY02/16. As a result, the count consistently trended upward in the twelve months of FY02/18 (growth of 6.1% at comparable stores and 9.7% at all stores), while customer spend also trended upward (0.6% at comparable stores and 1.5% at all stores). This trend continued in Q1 FY02/19 with comparable store customer traffic staying on an upward trajectory for 16 consecutive months as of June 2018. As apparel (+15.4%) drove the growth in customer traffic in Q1, household goods (+8.0%) and food (+7.4%) also continued to enjoy greater customer count.

In apparel, customer traffic was 11.0% higher YoY in 1H FY02/18. While this was partly due to the absence of opportunity losses and inventory cuts observed in 1H FY02/17, customer traffic still managed to rise 15.4% in Q1 FY02/19 even after these factors dropped out (comparable store sales also grew 9.6% in Q1 FY02/19 versus +8.8% in 1H FY02/18). Ryohin Keikaku believes this is mainly attributable to price revisions. Ryohin Keikaku believes that striking a balance between value and quality on the one hand and price on the other is the best way to gain the support of customers. This represents the company’s core philosophy as

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expressed in the slogan “lower price for a reason.” The recent price revisions are consistent with this philosophy, with a reduction in CoGS enabling Ryohin Keikaku to offer goods at more “appropriate” prices.

In March 2018, the company adjusted prices for approximately 200 items, including more than 120 in apparel and about 60 items under food. Apparel sales declined in the first half of 2016, hurt by earlier efforts to boost sales (which ate into sales that would have been made in the second half of 2016 onward), opportunity losses, and cuts in inventory. However, the company quickly turned apparel sales around in 2017. Ryohin Keikaku believes that there is plenty of room for apparel sales to grow in 2018 with the help of price adjustments and the use of new materials that will help its clothing line stand out from competitors. In 2H 2018, the company also plans on price revisions and new product launch focusing on household goods. We will keep a close eye on developments.

Domestic business

Domestic business FY02/17 FY02/18 FY02/19 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Act. Act. Act. Est. Change % o f FY Operating revenue 59,186 46,568 58,741 51,220 64,649 52,774 62,088 55,278 68,830 - 198,449 215,716 234,791 251,800 +17,009 27.3% YoY 11.9% 5.2% 10.9% 6.0% 9.2% 13.3% 5.7% 7.9% 6.5% - 8.6% 8.7% 8.8% 7.2% Directly managed comp. store sales YoY 7.3% -1.6% 3.1% -0.7% 5.0% 11.3% 5.0% 6.5% 4.6% - 4.9% 2.1% 6.8% 4.0% -2.8pp Apparel it ems 1.9% -5.6% -0.9% -2.5% 4.5% 13.9% 13.8% 16.5% 9.6% - 2.1% -1.6% 11.9% Household goods 11.2% 1.0% 4.8% 0.4% 5.3% 9.8% -0.3% 0.6% 0.7% - 8.1% 4.2% 3.7% Food 6.9% 1.2% 11.9% -1.0% 4.5% 8.8% - 4.1% 9.8% - -2.7% 4.8% 4.2% Customer count 0.6% -3.3% 4.0% -0.3% 4.4% 9.0% 4.0% 7.3% 8.3% - -2.6% 0.3% 6.1% Apparel it ems -5.5% -12.7% 1.6% 1.0% 6.8% 15.1% 15.1% 22.2% 15.4% - -4.5% 14.5% Household goods 6.3% 2.8% 7.2% 1.9% 6.7% 10.4% 4.1% 5.9% 8.0% - 4.6% 6.7% Food -0.7% -2.7% 5.7% -2.7% 3.0% 6.4% -0.5% 4.3% 7.4% - - 3.3% Customer spend 6.7% 1.8% -0.9% -0.4% 0.6% 2.1% 0.9% -0.7% -3.4% - 0.7% 1.8% 0.6% Apparel it ems 7.9% 8.1% -2.5% -3.4% -2.2% -1.1% -1.2% -4.6% -5.0% - 3.0% -2.3% Household goods 4.6% -1.8% -2.3% -1.4% -1.3% -0.5% -4.2% -5.0% -6.8% - -0.3% -2.8% Food 7.6% 4.0% 5.9% 1.8% 1.5% 2.2% 0.5% -0.2% 2.2% - 4.8% 0.9% Operating gross profit 26,557 20,848 27,325 22,105 30,462 25,101 30,201 24,934 - - 85,389 96,836 110,701 YoY 14.7% 12.4% 16.3% 9.4% 14.7% 20.4% 10.5% 12.8% - - 9.7% 13.4% 14.3% Operating GPM 44.9% 44.8% 46.5% 43.2% 47.1% 47.6% 48.6% 45.1% - - 43.0% 44.9% 47.1% Operating expenses 19,422 17,058 19,574 18,830 21,690 18,867 21,314 20,277 - - 68,327 74,883 82,150 YoY 11.7% 9.6% 11.1% 6.0% 11.7% 10.6% 8.9% 7.7% - - 8.2% 9.6% 9.7% % of operating revenue 32.8% 36.6% 33.3% 36.8% 33.6% 35.8% 34.3% 36.7% - - 34.4% 34.7% 35.0% Operating profit 7,135 3,790 7,751 3,275 8,772 6,234 8,887 4,657 8,882 - 17,062 21,953 28,551 29,400 +849 30.2% YoY 23.7% 26.8% 32.0% 34.6% 22.9% 64.5% 14.7% 42.2% 1.3% - 16.0% 28.7% 30.1% 3.0% OPM 12.1% 8.1% 13.2% 6.4% 13.6% 11.8% 14.3% 8.4% 12.9% - 8.6% 10.2% 12.2% 11.7% -0.5pp MUJI directly managed store count 322 323 328 328 332 334 338 335 340 312 328 335 351 +16 Openings 11 2 7 1 5 2 6 1 5 39 21 14 16 +2 Closures -1 -1 -2 -1 -1 - -2 -4 - -11 -5 -7 - +7 Floor space (period end; sqm) 234,613 234,819 240,491 240,305 245,627 247,262 255,018 253,409 262,059 226,229 240,305 253,409 275,915 +22,506 YoY 7.2% 7.6% 5.9% 6.2% 4.7% 5.3% 6.0% 5.5% 6.7% 8.7% 6.2% 5.5% 8.9% Floor space per store 729 727 733 733 740 740 754 756 771 725 733 756 786 +30 YoY -1.1% -1.4% 0.4% 1.0% 1.5% 1.8% 2.9% 3.2% 4.2% -1.1% 1.0% 3.2% 3.9% Floor space (period average) 230,368 232,366 233,849 235,567 242,921 244,652 246,955 248,634 258,908 219,837 235,567 248,634 YoY 7.5% 7.5% 7.5% 7.2% 5.4% 5.3% 5.6% 5.5% 6.6% 7.1% 7.2% 5.5% Sales per sqm (JPY) 187 146 179 162 196 159 188 169 198 660 666 703 YoY 5.1% -2.5% 1.8% -2.1% 4.9% 8.8% 4.7% 4.5% 1.0% 3.8% 1.0% 5.5% Inventory per sqm (JPY) 54 53 56 56 55 54 56 56 53 57 56 56 YoY -10.6% -7.2% -4.0% -1.9% 1.9% 1.8% 0.1% -1.2% -3.6% -9.6% -1.9% -1.2% Personnel expenses 6,252 6,374 6,528 6,874 6,687 7,033 7,166 7,537 8,300 23,123 26,028 28,423 YoY 17.0% 15.7% 13.2% 5.7% 7.0% 10.3% 9.8% 9.6% 24.1% 12.5% 12.6% 9.2% Employees + part-timers 7,153 7,252 7,337 7,501 7,459 7,486 7,486 7,845 8,985 6,566 7,501 7,845 Employees 1,699 1,745 1,764 1,808 1,829 1,842 1,842 2,035 2,184 1,646 1,808 2,035 Part-timers (8-hour equivalent) 5,454 5,507 5,573 5,693 5,630 5,644 5,644 5,810 6,801 4,920 5,693 5,810 Personnel expenses per head (JPY'000) 874 867 870 860 897 936 957 845 924 3,522 3,470 3,623 YoY 2.4% -0.5% -1.4% -5.6% 2.6% 8.0% 10.1% -1.8% 3.0% 5.5% -1.5% 4.4% Source: Shared Research based on company data

Domestic business performance

80,000 Operating revenue Operating profit OPM (right axis) 16% 13.6% 14.3% 68,830 70,000 64,649 13.2% 62,088 14% 59,186 58,741 60,000 12.1% 55,278 11.1% 51,162 52,872 52,988 51,220 52,774 12.9% 12% 48,007 48,314 46,568 50,000 45,678 43,880 44,275 11.8% 45,044 43,290 12.1% 10% 37,912 39,653 40,000 10.4% 10.9% 11.1% 9.9% 8.2% 8% 30,000 7.3% 8.1% 8.4% 6.5% 6% 20,000 6.8% 6.4% 5.0% 7,135 7,751 8,772 8,887 8,882 10,000 4,995 5,517 5,337 4,745 4.6% 5,768 5,871 6,234 4,657 4% 2,782 3,565 2,593 2,033 2,990 2,433 3,790 3,275 0 2% Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 (JPYmn) FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 Source: Shared Research based on company data

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Directly managed stores: sales per sqm (left), inventory per sqm (middle), sales per head (right)

(JPY) (JPY) Sales per sqm YoY (left axis) (JPY) Inventorhy per sqm YoY (left axis) Sales per head YoY (left axis) 10% 25% 70 15% 8,000

8% 200 20% 65 10% 7,000 6% 15% 60 150 5% 6,000 4% 10% 55

2% 5% 50 0% 5,000 100 0% 0% 45 -5% 4,000 -2% -5% 40 50 -10% 3,000 -4% -10% 35

-6% 0 -15% 30-15% 2,000 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/13FY02/14FY02/15FY02/16FY02/17FY02/18FY02/19 FY02/13FY02/14FY02/15FY02/16FY02/17FY02/18FY02/19 FY02/13FY02/14FY02/15FY02/16FY02/17FY02/18FY02/19 Source: Shared Research based on company data

Online store sales

(JPYmn) 7,000 Online store sales % of directly managed store sales in Japan (right axis) YoY (right axis) 30% 5,885 5,894 6,000 5,392 25% 4,874 4,830 5,000 4,529 4,240 4,298 20% 3,874 3,818 4,000 3,579 3,573 3,516 3,704 3,631 3,407 3,442 3,264 2,838 3,024 2,849 15% 3,000 2,608 2,533 2,597 2,600 2,273 2,294 2,198 1,970 10% 2,000

1,000 5%

0 0% Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 Source: Shared Research based on company data

Overseas business

Overseas business FY02/17 FY02/18 FY02/19 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Act. Act. Act. Est. Change % o f FY Operating revenue 28,346 27,615 26,568 35,033 32,485 33,078 34,873 44,320 37,690 - 109,080 117,563 144,758 172,500 +27,742 21.8% East Asia 21,978 21,240 19,998 26,486 25,221 25,372 25,778 33,431 29,156 - 83,045 89,704 109,803 129,100 +19,297 22.6% Europe and the Americas 4,029 3,938 4,172 5,462 4,393 4,552 5,524 6,754 4,968 - 17,124 17,603 21,225 27,400 +6,175 18.1% West and South Asia, and Oceania 2,338 2,436 2,397 3,084 2,870 3,153 3,570 4,134 3,565 - 8,911 10,256 13,729 16,000 +2,271 22.3% YoY 15.2% 7.4% 0.8% 8.0% 14.6% 19.8% 31.3% 26.5% 16.0% - 40.7% 7.8% 23.1% 19.2% East Asia 13.9% 7.8% 1.4% 8.9% 14.8% 19.5% 28.9% 26.2% 15.6% - 47.2% 8.0% 22.4% 17.6% Europe and the Americas 15.4% 1.7% -5.8% 2.5% 9.0% 15.6% 32.4% 23.7% 13.1% - 15.2% 2.8% 20.6% 29.1% West and South Asia, and Oceania 29.8% 14.9% 8.8% 10.8% 22.8% 29.4% 48.9% 34.0% 24.2% - 42.5% 15.1% 33.9% 16.5% YoY (local currency) 24.1% 22.4% 19.6% 23.4% 18.2% 18.0% 19.0% 16.0% 13.9% - 28.9% 24.1% 18.0% 15.9% East Asia 22.6% 22.1% 17.8% 25.3% 18.2% 17.9% 18.3% 18.3% 14.0% - 32.1% 24.7% 14.0% 14.4% Europe and the Americas 23.0% 19.4% 10.4% 17.0% 15.1% 13.8% 16.0% 18.2% 9.0% - 12.1% 19.0% 18.2% 25.6% West and South Asia, and Oceania 42.2% 30.8% 43.3% 20.2% 24.2% 25.9% 30.1% 30.1% 20.8% - 37.3% 28.4% 25.9% 12.9% YoY (local currency; comparable store sales) 7.0% 7.0% 1.4% 3.5% 2.1% 2.7% 6.0% 4.9% 1.0% - 11.7% 4.6% 4.1% 4.6% East Asia 5.0% 5.9% 0.8% 4.2% 2.3% 1.8% 6.0% 5.2% 0.8% - 13.1% 4.1% 3.9% 4.5% Europe and the Americas 11.8% 5.8% -0.4% -0.2% 2.0% 7.4% 5.9% 2.8% -0.4% - 5.4% 3.7% 4.4% 5.6% West and South Asia, and Oceania 18.9% 20.3% 14.1% 2.7% 0.7% 3.9% 6.3% 3.4% 4.3% - 12.7% 12.5% 4.7% 4.2% Operating profit 4,121 4,442 1,987 5,188 2,912 2,904 3,315 6,958 4,181 - 17,042 15,740 16,090 20,400 +4,310 20.5% East Asia 4,503 4,773 2,318 4,858 3,221 3,870 3,361 6,407 4,399 - 17,261 16,454 16,861 20,600 +3,739 21.4% Europe and the Americas -417 -347 -382 295 -330 -778 -139 350 -273 - -414 -852 -898 -400 +498 68.3% West and South Asia, and Oceania 35 17 51 34 21 -187 94 200 55 - 195 138 128 200 +72 27.5% YoY 14.5% 20.3% -47.7% -12.9% -29.3% -34.6% 66.8% 34.1% 43.6% - 97.8% -7.6% 2.2% 26.8% East Asia 16.3% 20.2% -38.9% -13.6% -28.5% -18.9% 45.0% 31.9% 36.6% - 104.6% -4.7% 2.5% 22.2% Europe and the Americas - - - 79.1% - - - 18.6% ------West and South Asia, and Oceania - 18.1% -47.0% -79.7% -40.0% - 84.3% 488.2% 161.9% - 114.6% -29.2% -7.2% 56.3% OPM 14.5% 16.1% 7.5% 14.8% 9.0% 8.8% 9.5% 15.7% 11.1% - 15.6% 13.4% 11.1% 11.8% +0.7pp East Asia 20.5% 22.5% 11.6% 18.3% 12.8% 15.3% 13.0% 19.2% 15.1% - 20.8% 18.3% 15.4% 16.0% +0.6pp Europe and the Americas -10.3% -8.8% -9.2% 5.4% -7.5% -17.1% -2.5% 5.2% -5.5% - -2.4% -4.8% -4.2% -1.5% +2.8pp West and South Asia, and Oceania 1.5% 0.7% 2.1% 1.1% 0.7% -5.9% 2.6% 4.8% 1.5% - 2.2% 1.3% 0.9% 1.3% +0.3pp Store count (including licensees) 347 362 384 403 408 422 439 457 456 - 344 403 457 505 +48 East Asia 232 245 260 279 283 293 306 319 322 - 227 279 319 362 +43 Europe and the Americas 70 69 70 69 71 70 71 72 68 - 72 69 72 71 -1 West and South Asia, and Oceania 45 48 54 55 54 59 62 66 66 - 45 55 66 72 +6 Source: Shared Research based on company data

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Operating profit at Overseas businesses

Consolidated OP Overseas OP Overseas OP as % of cons. OP (right axis) (JPYbn) East Asia Europe and the Americas West and South Asia, Oceania (JPYbn) 7 14 70% 6 12 60% 5

10 50% 4

8 40% 3

6 30% 2

4 20% 1

2 10% 0

0 0% -1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 Source: Shared Research based on company data

Sales (left) and operating profit (right) at Overseas business

(JPYbn) (JPYbn) East Asia Europe and the Americas West and South Asia, Oceania East Asia Europe and the Americas West and South Asia, Oceania 50 8 44.3 7.0 45 7 0.2 4.1 6.0 0.4 40 37.7 6 35.0 34.9 0.2 5.2 32.4 32.5 33.1 6.8 3.6 4.4 0.0 35 5 4.1 0.0 0.3 4.2 3.1 3.6 3.8 0.0 2.8 28.3 27.6 2.9 3.2 5.0 3.6 3.7 0.1 30 25.7 26.3 26.6 5.5 4 0.0 0.1 3.3 24.6 4.6 5.5 2.9 2.9 5.3 2.3 2.4 4.4 0.1 2.2 2.4 0.0 6.4 25 1.8 2.1 4.0 3 5.6 3.9 2.0 4.9 3.5 3.9 4.4 4.2 4.5 4.8 0.1 4.4 20 2 3.9 4.0 3.8 3.9 3.2 3.4 33.4 2.3 15 29.2 1 24.3 26.5 25.2 25.4 25.8 22.0 21.2 10 19.3 19.7 19.7 20.0 0 -0.2 -0.3 -0.1 -0.1 -0.3 -0.1 -0.4 -0.3 -0.4 -0.3 -0.8 5 -1 -0.2 0 -2 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/16 FY02/17 FY02/18 FY02/19 FY02/16 FY02/17 FY02/18 FY02/19 Source: Shared research based on company data

East Asia (fiscal year ending December)

East Asia FY02/17 FY02/18 FY02/19 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Act. Act. Act. Est. Change % o f FY Operating revenue 21,978 21,240 19,998 26,486 25,221 25,372 25,778 33,431 29,156 - 83,045 89,704 109,803 129,100 +19,297 22.6% Sales (operating revenue from FY02/17) China 13,384 13,048 12,227 16,293 15,616 15,191 15,964 22,127 18,443 - 49,736 54,952 68,898 Hong Kong 3,680 3,164 3,217 3,824 3,686 3,504 3,721 4,607 - - 13,943 13,885 15,518 Taiwan 3,390 3,224 2,753 4,123 3,765 3,941 3,457 5,124 - - 13,335 13,490 16,287 South Korea 1,522 1,805 1,801 2,247 2,152 2,737 2,636 3,363 - - 6,028 7,375 10,888 YoY 13.9% 7.8% 1.4% 8.9% 14.8% 19.5% 28.9% 26.2% 15.6% - 47.2% 8.0% 22.4% 17.6% -4.8pp Sales China 18.9% 11.8% 1.5% 10.4% 16.7% 16.4% 30.6% 35.8% 18.1% - 65.1% 10.5% 25.4% Hong Kong 3.0% -3.2% -4.9% 2.9% 0.2% 10.7% 15.7% 20.5% - - 28.2% -0.4% 11.8% Taiwan 8.5% -3.1% -4.5% 3.0% 11.1% 22.2% 25.6% 24.3% - - 25.8% 1.2% 20.7% South Korea 12.9% 25.4% 28.5% 22.2% 41.4% 51.6% 46.4% 49.7% - - 24.9% 22.3% 47.6% Sales (local currency) 22.6% 22.1% 17.8% 25.3% 18.2% 17.9% 18.3% 18.3% 14.0% - 32.1% 24.7% 14.0% 14.4% +0.4pp China 28.8% 26.5% 18.8% 32.2% 24.0% 22.6% 29.6% 20.9% 14.8% - 47.6% 29.8% 23.4% Hong Kong 6.5% 4.2% 5.9% 14.1% 1.5% 8.9% 16.8% 16.8% - - 12.2% 10.7% 8.8% Taiwan 17.6% 13.9% 13.4% 12.8% 5.9% 11.3% 10.3% 10.3% - - 14.9% 14.3% 10.6% South Korea 27.3% 48.8% 46.4% 37.3% 37.7% 43.4% 36.9% 36.9% - - 17.2% 39.9% 39.3% Sales (local currency; comparable st ores) 5.0% 5.9% 0.8% 4.2% 2.3% 1.8% 6.0% 5.2% 0.8% - 13.1% 4.1% 3.9% 4.5% +0.6pp China 4.7% 5.4% 0.8% 7.6% 5.8% 1.8% 7.1% 4.0% 1.8% - 20.4% 4.7% 4.6% Hong Kong 1.6% 3.4% -2.9% -0.8% -4.8% -1.8% 1.8% 2.7% - - 8.1% 0.7% -0.6% Taiwan 5.6% 4.6% 0.7% -2.1% -3.5% 1.3% 5.5% 10.3% - - -2.3% 2.1% 3.9% South Korea 18.0% 20.9% 10.2% 0.1% -2.8% 8.2% 5.7% 10.7% - - 0.9% 11.4% 6.3% Operating profit 4,503 4,773 2,318 4,858 3,221 3,870 3,361 6,407 4,399 - 17,261 16,452 16,861 20,600 +3,739 21.4% YoY 16.3% 20.2% -38.9% -13.6% -28.5% -18.9% 45.0% 31.9% 36.6% - 104.7% -4.7% 2.5% 22.2% OPM 20.5% 22.5% 11.6% 18.3% 12.8% 15.3% 13.0% 19.2% 15.1% - 20.8% 18.3% 15.4% 16.0% +0.6pp Store count (including licensees) 232 245 260 279 283 293 306 319 322 - 227 279 319 362 +43 China 163 173 183 200 202 210 219 229 229 - 160 200 229 264 +35 Hong Kong 15 16 17 17 16 17 18 19 19 - 15 17 19 19 - Taiwan 39 40 41 42 43 43 44 45 45 - 38 42 45 48 +3 South Korea 15 16 19 20 22 23 25 26 29 - 14 20 26 31 +5 Source: Shared Research based on company data

13/122 Ryohin Keikaku / 7453

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East Asia: Earnings

40,000 Operating revenue Operating profit OPM (right axis) 40% 35,000 33,431 35% 29,156 30,000 26,486 30% 25,778 24,319 25,221 25,372 25,000 25% 21,978 21,240 20.7% 19,708 19,714 19,998 18,751 19,304 18.3% 19.2% 20,000 23.1% 22.5% 20% 15.6% 20.5% 20.1% 20.2% 19.3% 12,580 13,657 15,000 11,443 15% 15.9% 15.3% 15.1% 8,401 8,708 10,000 7,451 12.4% 12.8% 13.0% 10% 11.3% 5,623 11.6% 6,407 10.3% 10.6% 4,503 4,773 4,858 4,399 6,717 3,871 3,971 3,796 3,221 3,870 3,361 5,000 7.2% 2,601 2,974 2,318 5% 761 1,160 869 630 1,417 1,443 0 0% Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 (JPYmn) FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19

East Asia: Comparable store sales growth (left) and OPM (right)

Comp. store sales growth (local currency) All store sales growth (local currency) (JPY) Exchange rate (USD/JPY) East Asia OPM (right axis) All store sales growth (JPY) CNY/JPY (right axis) 130 25% 120% 21

100% 20 120 20%

80% 19 110 15%

60% 18 100 10% 40% 17 90 5% 20% 16 Sale periods (Q1 and Q3) 0% 15 80 0% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 Source: Shared Research based on company data

East Asia: Comparable store sales growth (left) and all stores’ sales growth (right) in local currency terms

East Asia China Hong Kong Taiwan South Korea East Asia China Hong Kong Taiwan South Korea 40% 80% 70% 30% 60%

20% 50% 40% 10% 30% 20% 0% 10% -10% 0% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 Source: Shared Research based on company data

China: Sales and number of stores

25,000 229 229 250 Sales (JPYmn) YoY (local currency; SR est.) Store count (right axis) 219 210 22,127 200 202 183 20,000 173 18,443 200 160 163 16,293 15,616 15,964 140 15,191 15,000 128 128 132 13,384 150 14,758 13,048 108 112 12,049 12,227 100 101 11,25811,671 82 10,496 10,000 75 7,637 100 65 67 6,662 55 6,1595,806 44 34 38 39 4,758 5,000 26 28 3,1533,6834,263 50 1,8922,238 1,5572,417 1,869 1,167 1,242 0 0 (JPYmn) Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 Source: Shared Research based on company data

14/122 Ryohin Keikaku / 7453

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Comparable sales growth, operating revenue growth, and YoY increase in store count in China

Store count YoY change (right axis) Comparable store sales (local currency) Operating revenue (local currency) Difference 90% 45 80% 40 70% 35 60% 30 50% 25 40% 20 30% 15 20% 10 10% 5 0% 0 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 Source: Shared Research based on company data

Europe and the Americas (fiscal year ending January for Europe and December for the Americas)

Europe and the Americas FY02/17 FY02/18 FY02/19 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Act. Act. Act. Est. Change % o f FY Operating revenue 4,029 3,938 4,172 5,462 4,393 4,552 5,524 6,754 4,968 - 17,124 17,603 21,225 27,400 +6,175 18.1% Sales (operating revenue from FY02/17) UK 819 729 895 1,082 779 847 1,022 1,134 - - 4,252 3,525 3,782 France 623 596 604 901 612 657 692 823 - - 3,055 2,724 2,784 It aly 344 403 389 560 398 397 444 564 - - 1,646 1,696 1,803 Germany 455 426 391 532 416 471 524 623 - - 1,985 1,804 2,034 Spain 192 185 181 281 211 231 230 318 - - - 839 990 Portugal 41 44 49 56 57 66 70 77 - - - 190 270 US 1,273 1,261 1,358 1,552 1,518 1,468 1,784 2,152 - - 4,651 5,444 6,922 Canada 198 226 240 1,145 329 353 692 905 - - 721 1,809 2,279 Other (wholesale) 79 68 68 72 70 61 66 160 - - 811 287 357 YoY 15.4% 1.7% -5.8% 2.5% 9.0% 15.6% 32.4% 23.7% 13.1% - 15.2% 2.8% 20.6% 29.1% +8.5pp Sales - UK -21.1% -6.5% -22.4% -15.5% -4.9% 16.2% 14.2% 4.8% - - 9.1% -17.1% 7.3% France -9.3% -15.0% -16.9% -4.1% -1.8% 10.2% 14.6% -8.7% - - -3.2% -10.8% 2.2% It aly 3.6% 8.6% -2.5% 2.9% 15.7% -1.5% 14.1% 0.7% - - 2.0% 3.0% 6.3% Germany 11.8% -10.3% -18.4% -14.7% -8.6% 10.6% 34.0% 17.1% - - 3.3% -9.1% 12.7% Spain 9.9% 24.9% 27.1% 13.2% - - 18.0% Portugal 39.0% 50.0% 42.9% 37.5% - - 42.1% US 43.2% 20.0% 14.0% 2.1% 19.2% 16.4% 31.4% 38.7% - - 40.7% 17.1% 27.1% Canada 70.7% 37.8% 47.2% 311.9% 66.2% 56.2% 188.3% -21.0% - - 580.2% 150.9% 26.0% Sales (local currency) 23.0% 19.4% 10.4% 17.0% 15.1% 13.8% 16.0% 18.2% 9.0% - 12.1% 19.0% 18.2% 25.6% +7.4pp UK 5.9% -1.5% 6.9% 7.8% 9.2% 19.4% 6.1% 6.1% - - 3.5% 5.2% 7.2% France -5.3% -2.4% -1.5% 5.0% 3.3% 4.0% -0.3% -0.3% - - 0.1% 0.9% -4.2% It aly 8.4% 23.4% 15.5% 12.7% 21.5% -6.5% -0.3% 9.5% - - 7.0% 14.9% -0.3% Germany 16.8% 2.8% -3.0% -6.5% -3.9% 4.3% 16.9% 5.2% - - 8.3% 1.4% 5.7% Spain 15.7% 17.7% 10.3% 2.0% - - 8.3% 1.4% 10.6% Portugal 43.7% 44.3% 25.3% 21.8% - - 8.3% 1.4% 33.0% US 47.5% 34.4% 34.6% 13.4% 21.2% 13.4% 22.1% 35.4% - - 22.8% 30.5% 23.4% Canada 94.8% 62.4% 73.9% 73.8% 62.1% 58.1% 162.3% 98.6% - - 74.7% 98.4% Sales (local currency; comparable st ores) 11.8% 5.8% -0.4% -0.2% 2.0% 7.4% 5.9% 2.8% -0.4% - 5.4% 3.7% 4.4% 5.6% +1.2pp UK 5.3% -3.2% 6.2% 5.6% 9.7% 13.3% 9.4% 1.3% - - 1.2% 4.6% 8.4% France 10.7% 11.2% -3.8% 10.6% 6.2% 7.5% 10.7% -2.4% - - -4.0% 5.4% 5.0% It aly 14.9% 5.6% 3.0% -5.2% -1.7% -6.4% -0.1% -5.1% - - 5.7% 3.2% -1.9% Germany 16.0% 5.9% 15.1% 14.1% 12.2% 14.3% -1.5% -2.0% - - 2.1% 9.2% 4.5% Spain 11.5% 13.1% 11.6% 10.6% - - 11.6% Portugal 43.0% 43.4% 28.4% 77.5% - - 46.5% US 10.8% 6.6% -12.1% -11.1% -4.3% 6.8% 4.5% 6.8% - - 17.5% -3.2% 3.3% Canada 29.9% 13.0% 19.4% 4.5% -7.5% -4.2% 0.1% 2.4% - - 15.3% -1.9% Operating profit -417 -347 -382 295 -330 -778 -139 350 -273 - -414 -851 -898 -400 +498 68.3% OPM -10.3% -8.8% -9.2% 5.4% -7.5% -17.1% -2.5% 5.2% -5.5% - -2.4% -4.8% -4.2% -1.5% +2.8pp Store count 70 69 70 69 71 70 71 72 68 - 72 69 72 71 -1 UK 12 12 12 12 12 12 12 12 12 - 12 12 12 12 - France 9 9 9 9 9 8 7 7 7 - 9 9 7 7 - It aly 9 9 9 9 9 9 8 8 8 - 9 9 8 8 - Germany 8 7 7 7 7 7 7 7 7 - 8 7 7 7 - Spain 6 6 6 6 6 6 6 6 6 - 6 6 6 - Portugal 1 1 1 1 1 1 1 1 1 - 1 1 2 +1 US 11 11 12 12 14 14 15 15 15 - 11 12 15 17 +2 Canada 2 2 2 3 3 3 5 6 7 - 2 3 6 9 +3 Licensees 12 12 12 10 10 10 10 10 5 - 21 10 10 3 -7 Source: Shared Research based on company data

15/122 Ryohin Keikaku / 7453

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Earnings for Europe and the Americas

Operating revenue Operating profit OPM (right axis) 8,000 30% 6,754 7,000 25% 6,000 5,328 5,462 5,524 5,103 4,968 20% 5,000 4,430 4,393 4,552 4,143 3,874 4,029 3,938 4,172 3,618 3,493 15% 4,000 3,099 3,165 2,698 8.9% 2,975 3,000 2,366 7.8% 10% 5.4% 5.2% 2,000 3.1% 5% 0.3% 368 -1.4% 398 350 1,000 -2.0% -2.2% 8 -2.2% -2.5% -4.2% -3.8% 0% 0 -5.5% -48 -60 -43 -188 -97 165 295-7.5% -1,000 -126 -137 -294 -417 -347 -382 -139 -273 -5% -5.4% -330 -778 -9.2% -2,000 -7.6% -8.8% -10% Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 (JPYmn) FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19

Comparable store sales growth (left) and all stores’ sales growth (right) in local currency terms

Europe & the Americas UK France Italy Germany Europe & the Americas UK France Italy Germany 25% 15% 20% 10% 15% 10% 5% 5% 0% 0% -5% -5% -10% -10% -15% -15% -20% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19

Europe & the Americas US Canada Europe & the Americas US Canada 30% 160% 25% 140% 20% 120% 15% 100% 10% 80% 5% 60% 0% 40% -5% 20% -10% 0% -15% -20% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19

Remodeling of No. 1 and No. 2 flagship stores in Europe and the Americas

UK France Germany It aly Spain US Forum des Halles Tottenham Court Fifth Avenue No. 1 store Place Carree Munich Corso Buenos Aires Barcelona Road (new store) (new store) Renovated in Q3 FY02/16 Q3 FY02/15 Q3 FY02/16 Q1 FY02/17 Q4 FY02/16 Q4 FY02/16

No. 2 store Covent Garden Francs Bourgeois Berlin V ia T orino

Renovated in Q3 FY02/16 Q3 FY02/16 Q3 FY02/16 Q3 FY02/18 Source: Shared Research based on company data

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West and South Asia, and Oceania (fiscal year ending December)

West and South Asia, Oceania FY02/17 FY02/18 FY02/19 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Act. Act. Act. Est. Change % o f FY Operating revenue 2,338 2,436 2,397 3,084 2,870 3,153 3,570 4,134 3,565 - 8,911 10,256 13,729 16,000 +2,271 22.3% Sales (operating revenue from FY02/17) 13,729 Singapore 915 898 925 1,144 1,007 1,108 1,355 1,629 - - 3,616 3,882 5,099 Malaysia 260 256 247 298 301 378 421 469 - - 896 1,061 1,569 T hailand 557 522 488 648 613 668 719 831 - - 1,913 2,215 2,831 India - - 60 77 63 131 109 147 - - 137 450 Aust ralia 386 416 406 532 522 530 606 647 - - 1,302 1,740 2,305 Ot her w holesale 218 345 270 385 361 340 359 413 - - 1,182 1,218 1,473 YoY 29.8% 14.9% 8.8% 10.8% 22.8% 29.4% 48.9% 34.0% 24.2% - 42.5% 15.1% 33.9% 16.5% -17.3pp Sales Singapore 18.4% 1.5% 2.9% 8.0% 10.1% 23.4% 46.5% 42.4% - - 30.7% 7.4% 31.3% Malaysia 14.5% 40.7% 15.4% 9.2% 15.8% 47.7% 70.4% 57.4% - - 51.4% 18.4% 47.9% T hailand 15.1% 24.6% 11.7% 13.1% 10.1% 28.0% 47.3% 28.2% - - 28.6% 15.8% 27.8% Aust ralia 179.7% 16.2% 3.6% 28.5% 35.2% 27.4% 49.3% 21.6% - - 160.9% 33.6% 32.5% Sales (local currency) 42.2% 30.8% 43.3% 20.2% 24.2% 25.9% 30.1% 30.1% 20.8% - 37.3% 28.4% 25.9% 12.9% -13.0pp Singapore 26.4% 15.0% 19.1% 20.5% 12.8% 23.1% 36.7% 29.3% - - 23.2% 19.9% 27.3% Malaysia 37.2% 73.9% 38.4% 25.6% 24.2% 55.3% 66.5% 45.7% - - 55.1% 36.8% 48.7% T hailand 29.7% 48.4% 32.2% 24.5% 10.0% 20.9% 30.1% 17.1% - - 29.1% 32.0% 19.3% Aust ralia 214.5% 35.6% 20.0% 39.5% 30.7% 23.1% 32.8% 14.4% - - 160.7% 50.5% 24.5% Sales (local currency; comparable st ores) 18.9% 20.3% 14.1% 2.7% 0.7% 3.9% 6.3% 3.4% 4.3% - 12.7% 12.5% 4.7% 4.2% -0.5pp Singapore 24.2% 13.7% 12.7% -4.8% -6.4% 2.0% -3.4% 1.2% - - 13.4% 9.9% -1.6% Malaysia 0.8% 26.5% 13.8% 18.5% 11.5% 13.3% 17.5% 5.4% - - 17.1% 11.8% 11.6% T hailand 12.6% 23.8% 15.7% 9.6% -0.8% - 10.0% 1.1% - - 11.5% 15.5% 3.5% Aust ralia 35.0% 46.2% 22.0% 32.2% 13.3% 8.9% 15.8% 9.7% - - 2.1% 31.7% 11.8% Operating profit 35 17 51 34 21 -187 94 200 55 - 195 137 128 200 +72 27.5% YoY - 18.1% -47.0% -79.7% -40.0% - 84.3% 488.2% 161.9% - 116.7% -29.7% -6.6% 56.3% OPM 1.5% 0.7% 2.1% 1.1% 0.7% -5.9% 2.6% 4.8% 1.5% - 2.2% 1.3% 0.9% 1.3% +0.3pp Store count (including licensees) 45 48 54 55 54 59 62 66 66 - 45 55 66 72 +6 Singapore 9 9 10 10 10 10 11 11 11 - 9 10 11 11 - Malaysia 5 5 5 5 6 7 7 7 7 - 5 5 7 7 - T hailand 13 13 13 14 14 15 15 16 16 - 13 14 16 17 +1 India - - 2 2 2 3 3 4 4 - - 2 4 6 +2 Aust ralia 3 3 3 3 3 3 3 3 4 - 3 3 3 5 +2 Indonesia 3 4 6 6 6 8 8 8 7 - 3 6 8 7 -1 Philippines 7 7 7 7 5 4 4 4 4 - 7 7 4 5 +1 Kuw ait 2 2 2 2 2 2 2 2 2 - 2 2 2 2 - UAE 3 4 4 4 4 4 5 5 5 - 3 4 5 6 +1 Source: Shared Research based on company data

Earnings for West and South Asia, and Oceania

5,000 Operating revenue Operating profit OPM (right axis) 20% 4,134 16% 4,000 3,570 3,565 3,084 3,153 2,870 12% 3,000 2,784 7.7% 2,338 2,436 2,397 2,141 2,121 2,204 5.9% 2,016 6.0% 8% 1,634 1,802 4.4% 2,000 1,4823.3% 1,123 2.1% 4% 889 912 947 0.8% 0.7% 1.5% 4.8% 0.7% 1.1% 0.7% 1,000 2.6% 200 1.5% 0% 54 49 156 14 96 167 35 17 51 34 21 94 55 0 -2.0% -32 -4% -39 -3.3%-31 17 -82 -83 -4.3% -4.6% -187 -1,000 -7.3% -5.9% -8% Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 (JPYmn) FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19

Comparable store sales trends (local currency basis)

West and South Asia, and Oceania Singapore West and South Asia, and Oceania Singapore Malaysia Thailand 50% Malaysia Thailand 120% Australia Australia 40% 100% 30% 80% 20% 60% 10% 40% 0% 20% -10% 0% -20% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 Source: Shared Research based on company data

17/122 Ryohin Keikaku / 7453

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Reference data Directly managed stores in Japan Domestic directly managed business FY02/17 FY02/18 FY02/19 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Act. Act. Act. Est. Change Sales 49,294 38,363 47,584 42,486 54,302 43,382 52,478 47,104 58,862 - 163,980 177,729 197,268 - Directly managed stores 43,073 33,917 41,918 38,056 47,623 38,842 46,352 41,970 51,275 - 145,061 156,965 174,788 Online st ore 5,392 3,516 4,874 3,704 5,885 3,631 4,830 3,818 5,894 - 15,665 17,486 18,166 Others 829 929 791 725 793 908 1,295 1,315 1,692 - 3,254 3,276 4,312 YoY 13.5% 5.1% 9.6% 4.6% 10.2% 13.1% 10.3% 10.9% 8.4% - 11.9% 8.4% 11.0% Directly managed stores 13.0% 4.9% 9.4% 4.9% 10.6% 14.5% 10.6% 10.3% 7.7% - 11.1% 8.2% 11.4% Online st ore 19.1% 7.7% 13.4% 3.7% 9.1% 3.3% -0.9% 3.1% 0.2% - 18.1% 11.6% 3.9% Store count (directly managed stores) 322 323 328 328 332 334 338 335 340 - 312 328 335 351 +16 Openings 11 13 20 21 5 7 13 14 5 - 39 21 14 16 +2 Closures -1 -2 -4 -5 -1 -1 -3 -7 - - -11 -5 -7 - +7 Renovation 7 8 21 21 13 22 31 21 3 - 23 21 21 8 -13 Sales growth (directly managed comparable stores) 7.3% -1.6% 3.1% -0.7% 5.0% 11.3% 5.0% 6.5% 4.6% - 4.9% 2.1% 6.8% 4.0% Apparel it ems 1.9% -5.6% -0.9% -2.5% 4.5% 13.9% 13.8% 16.5% 9.6% - 2.1% -1.6% 11.9% Household goods 11.2% 1.0% 4.8% 0.4% 5.3% 9.8% -0.3% 0.6% 0.7% - 8.1% 4.2% 3.7% Food 6.9% 1.2% 11.9% -1.0% 4.5% 8.8% - 4.1% 9.8% - -2.7% 4.8% 4.2% Customer count 0.6% -3.3% 4.0% -0.3% 4.4% 9.0% 4.0% 7.3% 8.3% - -2.6% 0.3% 6.1% Customer spend 6.7% 1.8% -0.9% -0.4% 0.6% 2.1% 0.9% -0.7% -3.4% - 7.7% 1.8% 0.6% Floor space (directly managed stores; sqm) 234,613 234,819 240,491 240,305 245,627 247,262 255,018 253,409 262,059 - 226,229 240,305 253,409 275,915 +22,506 YoY 7.2% 7.6% 5.9% 6.2% 4.7% 5.3% 6.0% 5.5% 6.7% - 8.7% 6.2% 5.5% 8.9% Sales per sqm (JPY'000) 187 146 179 162 196 159 188 169 198 - 660 666 703 YoY 5.1% -2.5% 1.8% -2.1% 4.9% 8.8% 4.7% 4.5% 1.0% - 3.8% 1.0% 5.5% Floor space (cumulative quarter average; sqm) 230,368 232,366 233,849 235,567 242,921 244,652 246,955 248,634 258,908 - 219,837 235,567 248,634 YoY 7.5% 7.5% 7.5% 7.2% 5.4% 5.3% 5.6% 5.5% 6.6% - 7.1% 7.2% 5.5% Inventories per space (JPY'000/sqm) 54.4 53.3 55.8 56.4 55.5 54.3 55.9 55.7 53.5 - 57.5 56.4 55.7 YoY -10.6% -7.2% -4.0% -1.9% 1.9% 1.8% 0.1% -1.2% -3.6% - -9.6% -1.9% -1.2% Inventories 12,542 12,391 13,051 13,276 13,471 13,282 13,794 13,839 13,839 - 12,633 13,276 13,839 YoY -3.9% -0.2% 3.1% 5.1% 7.4% 7.2% 5.7% 4.2% 2.7% - -3.2% 5.1% 4.2% Sales per employee (JPY'000) 6,989 5,443 6,793 6,099 7,438 6,061 7,162 6,402 7,148 - 26,142 25,155 26,661 YoY -2.4% -10.0% -3.7% -6.7% 6.4% 11.4% 5.4% 5.0% -3.9% - 1.8% -3.8% 6.0% Store staff (cumulative quarter average) 6,163 6,231 6,171 6,240 6,403 6,408 6,472 6,556 7,173 - 5,549 6,240 6,556 YoY 15.7% 16.5% 13.6% 12.5% 3.9% 2.8% 4.9% 5.1% 12.0% - 9.2% 12.5% 5.1%

Domestic wholesale business

Domestic wholesale business FY02/17 FY02/18 FY02/19 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Act. Act. Act. Est. Change Sales 8,239 5,895 9,608 6,582 8,701 6,988 8,456 6,487 8,914 - 27,676 30,415 30,633 Licensed stores 5,083 3,474 4,886 3,734 5,277 3,694 5,383 4,020 6,159 - 16,037 17,178 18,376 Seiyu 855 583 824 569 721 443 657 430 676 - 4,288 2,832 2,253 FM Group 1,891 1,577 3,477 1,828 2,373 2,473 1,915 1,522 1,544 - 5,806 8,774 8,285 com KIOSK 61 16 0 ------365 77 - Askul 347 333 419 450 328 377 499 513 534 - 1,178 1,551 1,718 YoY 6.2% 1.8% 17.7% 10.3% 5.6% 18.5% -12.0% -1.4% 2.4% - -1.2% 9.9% 0.7% Licensed stores 12.3% 12.9% 0.9% 4.0% 3.8% 6.3% 10.2% 7.7% 16.7% - 6.4% 7.1% 7.0% Seiyu -35.0% -32.7% -37.1% -28.7% -15.7% -24.0% -20.3% -24.4% -6.2% - -25.0% -34.0% -20.4% FM Group 24.6% 5.5% 117.2% 53.5% 25.5% 56.8% -44.9% -16.7% -34.9% - -1.3% 51.1% -5.6% com KIOSK -38.4% -82.8% -100.0% ------8.5% -78.9% - Askul 17.6% 29.1% 34.7% 43.8% -5.5% 13.2% 19.1% 14.0% 62.8% - 24.5% 31.7% 10.8% Licensee store count 100 95 95 90 90 86 85 84 83 - 102 90 84 72 -12 Licensed stores 67 67 67 67 67 67 67 67 69 - 65 67 67 72 +5 Seiyu 33 28 28 23 23 19 18 17 14 - 37 23 17 - -17 Licensee floor space (sqm) 62,872 60,236 60,267 56,697 56,625 54,527 53,968 52,907 54,136 - 63,670 56,697 52,907 48,088 -4,819 YoY -14.6% -15.9% -11.7% -11.0% -9.9% -9.5% -10.5% -6.7% -4.4% - -13.9% -11.0% -6.7% -9.1% Licensed stores 44,532 44,579 44,610 44,053 43,981 43,876 44,072 44,072 46,415 - 43,257 44,053 44,072 48,088 +4,016 Seiyu 18,340 15,657 15,657 12,644 12,644 10,651 9,896 8,835 7,721 - 20,413 12,644 8,835 - -8,835

Number of items by product and other indicators

Number of items by product FY02/17 FY02/18 FY02/19 FY02/16 FY02/17 FY02/18 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Act. Act. Act. Number of items 6,329 7,553 5,654 7,600 - 8,155 7,553 7,600 Apparel it ems 2,082 1,706 2,078 1,671 - 2,178 1,706 1,671 Spring and summer 1,634 524 1,426 379 - 568 524 379 Fall and winter 448 1,182 652 1,292 - 1,610 1,182 1,292 Household goods 3,752 5,328 3,073 5,436 - 5,467 5,328 5,436 Food 495 519 503 493 - 510 519 493 YoY 2.8% -7.4% -10.7% 0.6% - -3.6% -7.4% 0.6% Apparel items 10.3% -21.7% -0.2% -2.1% - -10.5% -21.7% -2.1% Spring and summer 9.0% -7.7% -12.7% -27.7% - -2.9% -7.7% -27.7% Fall and winter 15.2% -26.6% 45.5% 9.3% - -12.9% -26.6% 9.3% Household goods - -2.5% -18.1% 2.0% - -0.6% -2.5% 2.0% Food -4.1% 1.8% 1.6% -5.0% - -3.8% 1.8% -5.0% Customer count YoY 6.6% 3.4% 10.6% 4.9% 8.7% 11.7% 8.1% 10.3% 13.0% - 3.6% 6.3% 9.7% Customer spend YoY 5.9% 1.5% -1.0% 0.0% 1.7% 2.5% 2.3% 0.0% -5.0% - 7.3% 1.7% 1.5% Sales volume YoY 13.1% 6.5% 16.7% 4.9% 6.4% 2.5% 2.0% 6.6% 8.7% - 7.4% 8.2% 4.4% Average selling price YoY -0.1% -1.5% -6.2% 1.6% 4.0% 11.8% 8.4% 3.4% -1.0% - 3.5% -1.6% 6.7% Source: Shared Research based on company data

18/122 Ryohin Keikaku / 7453

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Parent sales by product

Sales by product FY02/17 FY02/18 FY02/19 FY02/16 FY02/17 FY02/18 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Act. Act. Act. Sales 65,563 56,141 66,927 60,882 73,073 65,846 71,644 66,849 78,505 - 226,611 249,515 277,412 Apparel it ems 22,771 20,799 23,142 21,599 23,962 26,100 25,701 24,538 26,485 - 83,184 88,313 100,331 YoY 10.0% 0.7% 5.5% 8.6% 5.2% 25.5% 11.1% 13.6% 10.5% - 11.5% 6.2% 13.6% Comparable store sales growth 1.9% -5.6% -0.9% -2.5% 4.5% 13.9% 13.8% 16.5% 9.6% - 2.1% -1.6% 11.9% GPM 44.6% 34.1% 43.8% 34.2% 49.0% 39.4% 50.1% 39.9% - - 39.7% 39.3% 44.6% Menswear 3,082 3,011 3,569 3,780 3,332 4,236 4,045 4,204 3,854 - 12,395 13,442 15,811 Womenswear 9,132 7,870 8,353 7,882 9,727 8,731 10,357 9,004 10,953 - 31,695 33,238 37,802 Children's w ear 2,381 1,722 2,516 1,988 2,507 2,126 2,824 2,245 2,381 - 8,291 8,608 9,698 Accessories 2,756 3,048 3,376 2,692 3,143 3,414 2,923 3,134 3,272 - 10,737 11,873 12,609 Bags and shoes 2,341 1,944 1,842 2,035 2,171 2,915 2,065 2,273 2,556 - 8,446 8,163 9,420 Inner wear 3,077 3,203 3,483 3,222 3,080 4,676 3,484 3,675 3,466 - 11,617 12,986 14,920 Household goods 37,225 30,293 37,643 33,191 42,859 34,180 39,284 35,419 44,575 - 123,460 138,353 151,787 YoY 16.1% 11.2% 14.4% 6.2% 15.1% 12.8% 4.4% 6.7% 4.0% - 14.0% 12.1% 9.7% Comparable store sales growth 11.2% 1.0% 4.8% 0.4% 5.3% 9.8% -0.3% 0.6% 0.7% - 8.1% 4.2% 3.7% GPM 36.4% 33.9% 37.4% 38.2% 38.0% 37.2% 39.0% 37.6% - - 35.9% 36.6% 38.0% Linens and interior goods 5,693 4,821 6,230 5,317 6,356 5,751 5,951 5,597 6,114 - 21,583 22,063 23,647 Furniture 12,532 8,400 10,466 8,935 13,010 8,621 10,126 8,721 13,142 - 37,691 40,335 40,467 Elect ronic appliances 1,661 1,172 1,527 1,494 2,013 1,536 1,668 1,627 1,863 - 5,973 5,855 6,842 Housewares 3,798 3,200 3,828 3,509 4,360 3,567 3,849 3,405 4,371 - 11,810 14,336 15,168 Stationery 4,433 4,096 4,746 4,611 5,261 4,465 5,158 5,020 5,479 - 15,965 17,888 19,901 Health and beauty 8,955 8,514 10,762 9,254 11,710 10,149 12,452 10,984 13,468 - 30,067 37,487 45,282 Houseplants and flowers 149 86 81 68 146 88 77 62 135 - 369 386 375 Food 4,699 4,083 5,291 5,303 5,382 4,596 5,299 5,507 5,976 - 16,626 19,377 20,792 YoY 12.8% 11.2% 27.4% 14.4% 14.5% 12.6% 0.2% 3.8% 11.0% - 0.0% 16.5% 7.3% Comparable store sales growth 6.9% 1.2% 11.9% -1.0% 4.5% 8.8% - 4.1% 9.8% - -2.7% 4.8% 4.2% GPM 34.2% 33.0% 32.1% 33.3% 33.2% 33.9% 33.4% 33.8% - - 35.3% 33.1% 33.6% Processed food 1,518 1,292 1,680 1,375 1,627 1,458 1,751 1,546 1,911 - 4,696 5,867 6,382 Confectionery 2,478 2,146 2,922 3,314 3,045 2,506 2,939 3,352 3,346 - 9,412 10,862 11,843 Beverages and frozen food 702 644 688 612 710 631 608 607 718 - 2,517 2,648 2,557 Others 867 964 849 788 867 969 1,359 1,384 1,467 - 3,340 3,470 4,502 YoY 9.5% 7.6% -1.3% -0.5% - 0.5% 60.1% 75.6% 69.2% - 19.2% 3.9% 29.7% GPM 66.9% 67.6% 65.8% 64.5% 64.8% 65.5% 60.0% 56.6% - - 67.1% 66.3% 62.1% % of sales by product FY02/17 FY02/18 FY02/19 FY02/16 FY02/17 FY02/18 (Parent) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Act. Act. Act. Apparel it ems 34.7% 37.0% 34.6% 35.5% 32.8% 39.6% 35.9% 36.7% 33.7% - 36.7% 35.4% 36.2% Menswear 4.7% 5.4% 5.3% 6.2% 4.6% 6.4% 5.6% 6.3% 4.9% - 5.5% 5.4% 5.7% Womenswear 13.9% 14.0% 12.5% 12.9% 13.3% 13.3% 14.5% 13.5% 14.0% - 14.0% 13.3% 13.6% Children's w ear 3.6% 3.1% 3.8% 3.3% 3.4% 3.2% 3.9% 3.4% 3.0% - 3.7% 3.4% 3.5% Accessories 4.2% 5.4% 5.0% 4.4% 4.3% 5.2% 4.1% 4.7% 4.2% - 4.7% 4.8% 4.5% Bags and shoes 3.6% 3.5% 2.8% 3.3% 3.0% 4.4% 2.9% 3.4% 3.3% - 3.7% 3.3% 3.4% Inner wear 4.7% 5.7% 5.2% 5.3% 4.2% 7.1% 4.9% 5.5% 4.4% - 5.1% 5.2% 5.4% Household goods 56.8% 54.0% 56.2% 54.5% 58.7% 51.9% 54.8% 53.0% 56.8% - 54.5% 55.4% 54.7% Linens and interior goods 8.7% 8.6% 9.3% 8.7% 8.7% 8.7% 8.3% 8.4% 7.8% - 9.5% 8.8% 8.5% Furniture 19.1% 15.0% 15.6% 14.7% 17.8% 13.1% 14.1% 13.0% 16.7% - 16.6% 16.2% 14.6% Elect ronic appliances 2.5% 2.1% 2.3% 2.5% 2.8% 2.3% 2.3% 2.4% 2.4% - 2.6% 2.3% 2.5% Housewares 5.8% 5.7% 5.7% 5.8% 6.0% 5.4% 5.4% 5.1% 5.6% - 5.2% 5.7% 5.5% Stationery 6.8% 7.3% 7.1% 7.6% 7.2% 6.8% 7.2% 7.5% 7.0% - 7.0% 7.2% 7.2% Health and beauty 13.7% 15.2% 16.1% 15.2% 16.0% 15.4% 17.4% 16.4% 17.2% - 13.3% 15.0% 16.3% Houseplants and flowers 0.2% 0.2% 0.1% 0.1% 0.2% 0.1% 0.1% 0.1% 0.2% - 0.2% 0.2% 0.1% Food 7.2% 7.3% 7.9% 8.7% 7.4% 7.0% 7.4% 8.2% 7.6% - 7.3% 7.8% 7.5% Processed food 2.3% 2.3% 2.5% 2.3% 2.2% 2.2% 2.4% 2.3% 2.4% - 2.1% 2.4% 2.3% Confectionery 3.8% 3.8% 4.4% 5.4% 4.2% 3.8% 4.1% 5.0% 4.3% - 4.2% 4.4% 4.3% Beverages and frozen food 1.1% 1.1% 1.0% 1.0% 1.0% 1.0% 0.8% 0.9% 0.9% - 1.1% 1.1% 0.9% Others 1.3% 1.7% 1.3% 1.3% 1.2% 1.5% 1.9% 2.1% 1.9% - 1.5% 1.4% 1.6% Sales Yo Y by product FY02/17 FY02/18 FY02/19 FY02/16 FY02/17 FY02/18 (Parent) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Act. Act. Act. Apparel it ems 10.0% 0.7% 5.5% 8.6% 5.2% 25.5% 11.1% 13.6% 10.5% 11.5% 6.2% 13.6% Menswear 14.4% -1.1% 8.1% 13.3% 8.1% 40.7% 13.3% 11.2% 15.7% 5.2% 8.4% 17.6% Womenswear 10.0% 4.4% -3.4% 10.0% 6.5% 10.9% 24.0% 14.2% 12.6% 14.5% 4.9% 13.7% Children's w ear 5.9% -1.8% -0.6% 5.0% 5.3% 23.5% 12.2% 12.9% -5.0% 9.6% 3.8% 12.7% Accessories -1.8% 14.2% 32.5% -0.2% 14.0% 12.0% -13.4% 16.4% 4.1% 2.4% 10.6% 6.2% Bags and shoes 16.5% -13.8% -12.9% 0.7% -7.3% 49.9% 12.1% 11.7% 17.7% 28.6% -3.4% 15.4% Inner wear 16.9% -5.5% 24.4% 16.0% 0.1% 46.0% 0.0% 14.1% 12.5% 10.4% 11.8% 14.9% Household goods 16.1% 11.2% 14.4% 6.2% 15.1% 12.8% 4.4% 6.7% 4.0% 14.0% 12.1% 9.7% Linens and interior goods 4.9% 4.0% 1.6% -1.8% 11.6% 19.3% -4.5% 5.3% -3.8% 2.0% 2.2% 7.2% Furniture 16.2% 3.0% 4.3% 2.1% 3.8% 2.6% -3.2% -2.4% 1.0% 19.6% 7.0% 0.3% Elect ronic appliances 5.7% -4.0% -0.5% -9.6% 21.2% 31.1% 9.2% 8.9% -7.5% 8.3% -2.0% 16.9% Housewares 18.7% 25.5% 25.6% 16.1% 14.8% 11.5% 0.5% -3.0% 0.3% 7.7% 21.4% 5.8% Stationery 17.0% 11.7% 16.6% 6.7% 18.7% 9.0% 8.7% 8.9% 4.1% 10.9% 12.0% 11.3% Health and beauty 25.2% 23.1% 34.5% 15.3% 30.8% 19.2% 15.7% 18.7% 15.0% 23.2% 24.7% 20.8% Houseplants and flowers 8.8% 3.6% 3.8% -1.4% -2.0% 2.3% -4.9% -8.8% -7.5% 12.2% 4.6% -2.8% Food 12.8% 11.2% 27.4% 14.4% 14.5% 12.6% 0.2% 3.8% 11.0% 0.0% 16.5% 7.3% Processed food 27.0% 16.0% 33.2% 22.3% 7.2% 12.8% 4.2% 12.4% 17.5% 2.4% 24.9% 8.8% Confectionery 6.6% 9.0% 29.9% 15.5% 22.9% 16.8% 0.6% 1.1% 9.9% -2.4% 15.4% 9.0% Beverages and frozen food 8.5% 9.3% 7.5% -4.2% 1.1% -2.0% -11.6% -0.8% 1.1% 5.1% 5.2% -3.4% Others 9.5% 7.6% -1.3% -0.5% - 0.5% 60.1% 75.6% 69.2% 19.2% 3.9% 29.7% Source: Shared Research based on company data

For details on previous quarterly and annual results, see the Historical performance section.

19/122 Ryohin Keikaku / 7453

RCoverage LAST UPDATE: 2018.07.04 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Full-year outlook (initial estimates)

FY02/16 FY02/17 FY02/18 FY02/19 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) 1H 2H 1H 2H 1H 2H 1H Est. 2H Est. Act. Act. Act. Act. Est. Change Operating revenue 147,448 160,084 161,717 171,564 182,988 196,563 203,500 220,800 260,254 307,532 333,281 379,551 424,300 +44,749 Domest ic 97,147 101,302 105,754 109,962 117,423 117,368 182,702 198,449 215,716 234,791 251,800 +17,009 Overseas 50,300 58,780 55,961 61,602 65,564 79,194 77,547 109,080 117,563 144,758 172,500 +27,742 East Asia 39,011 44,034 43,219 46,485 50,594 59,209 56,430 83,045 89,704 109,803 129,100 +19,297 Europe and the Americas 7,366 9,758 7,967 9,636 8,945 12,280 14,861 17,124 17,603 21,225 27,400 +6,175 West and South Asia, Oceania 3,922 4,989 4,774 5,482 6,024 7,705 6,255 8,911 10,256 13,729 16,000 +2,271 Other - 2 - 1 0 1 6 2 1 1 - Yo Y 19.3% 17.1% 9.7% 7.2% 13.2% 14.6% 11.2% 12.3% 18.0% 18.2% 8.4% 13.9% 11.8% Domest ic 7.0% 10.2% 8.9% 8.5% 11.0% 6.7% 6.3% 8.6% 8.7% 8.8% 7.2% Overseas 53.5% 31.3% 11.3% 4.8% 17.2% 28.6% 60.0% 40.7% 7.8% 23.1% 19.2% East Asia 62.4% 35.9% 10.8% 5.6% 17.1% 27.4% 80.4% 47.2% 8.0% 22.4% 17.6% Europe and the Americas 20.0% 11.9% 8.2% -1.3% 12.3% 27.4% 20.8% 15.2% 2.8% 20.6% 29.1% West and South Asia, Oceania 50.6% 36.6% 21.7% 9.9% 26.2% 40.6% 27.9% 42.5% 15.1% 33.9% 16.5% Comparable store sales YoY (local c Parent 3.9% 6.0% 3.3% 1.0% 7.9% 5.7% 4.0% 4.0% 2.7% 4.9% 2.1% 6.8% 4.0% -2.8pp Overseas 16.1% 7.0% 2.5% 5.1% 6.6% 11.7% 4.6% 4.1% 4.6% +0.5pp East Asia 19.2% 5.5% 2.1% 10.1% 13.1% 4.1% 3.9% 4.5% +0.6pp Europe and the Americas 4.2% 8.7% 5.0% -2.0% 5.4% 3.7% 4.4% 5.6% +1.2pp West and South Asia, Oceania 11.7% 19.6% 2.2% 5.5% 12.7% 12.5% 4.7% 4.2% -0.5pp Sales 147,187 160,012 161,353 171,228 182,601 196,200 203,100 220,400 259,655 307,199 332,581 378,801 423,500 +44,699 YoY 19.4% 17.3% 9.6% 7.0% 13.2% 14.6% 11.2% 12.3% 18.0% 18.3% 8.3% 13.9% 11.8% Cost of goods sold 76,260 80,821 80,619 86,802 91,418 96,313 101,400 109,500 137,423 157,081 167,421 187,731 210,900 Gross profit 70,926 79,192 80,734 84,426 91,183 99,887 101,700 110,900 122,232 150,118 165,160 191,070 212,600 +21,530 YoY 21.6% 23.9% 13.8% 6.6% 12.9% 18.3% 11.5% 11.0% 20.9% 22.8% 10.0% 15.7% 11.3% GPM 48.2% 49.5% 50.0% 49.3% 49.9% 50.9% 50.1% 50.3% 47.1% 48.9% 49.7% 50.4% 50.2% -0.2pp Operating gross profit 71,188 79,263 81,098 84,763 91,570 100,249 102,100 111,300 122,831 150,451 165,861 191,819 213,400 +21,581 YoY 21.4% 23.5% 13.9% 6.9% 12.9% 18.3% 11.5% 11.0% 20.8% 22.5% 10.2% 15.7% 11.3% Operating GPM 48.3% 49.5% 50.1% 49.4% 50.0% 51.0% 50.2% 50.4% 47.2% 48.9% 49.8% 50.5% 50.3% -0.2pp SG&A expenses 55,117 60,895 61,339 66,244 70,440 76,092 78,600 84,800 98,984 116,012 127,583 146,532 163,400 +16,868 YoY 17.2% 17.2% 11.3% 8.8% 14.8% 14.9% 11.6% 11.4% 22.6% 17.2% 10.0% 14.9% 11.5% % of operating revenue 37.4% 38.0% 37.9% 38.6% 38.5% 38.7% 38.6% 38.4% 38.0% 37.7% 38.3% 38.6% 38.5% -0.1pp Operating profit 16,071 18,368 19,758 18,520 21,130 24,156 23,500 26,500 23,846 34,439 38,278 45,286 50,000 +4,714 Domest ic 8,757 8,305 10,925 11,028 15,006 13,545 14,708 17,062 21,953 28,551 29,400 +849 Overseas 7,291 9,751 8,564 7,176 5,816 10,274 8,618 17,042 15,740 16,090 20,400 +4,310 East Asia 7,842 9,419 9,277 7,177 7,091 9,770 8,434 17,261 16,454 16,861 20,600 +3,739 Europe and the Americas -482 68 -765 -87 -1,109 211 93 -414 -852 -898 -400 +498 West and South Asia, Oceania -68 263 52 86 -166 294 91 195 138 128 200 +72 Other 237 349 231 389 237 304 479 586 620 541 200 -341 Adjustments -215 -38 37 -72 70 33 - 42 -253 -35 103 - OPM 10.9% 11.5% 12.2% 10.8% 11.5% 12.3% 11.5% 12.0% 9.2% 11.2% 11.5% 11.9% 11.8% -0.1pp Domest ic 9.0% 8.2% 10.3% 10.0% 12.8% 11.5% - - 8.1% 8.6% 10.2% 12.2% 11.7% -0.5pp Overseas 14.5% 16.6% 15.3% 11.6% 8.9% 13.0% - - 11.1% 15.6% 13.4% 11.1% 11.8% +0.7pp East Asia 20.1% 21.4% 21.5% 15.4% 14.0% 16.5% - - 14.9% 20.8% 18.3% 15.4% 16.0% +0.6pp Europe and the Americas -6.5% 0.7% -9.6% -0.9% -12.4% 1.7% - - 0.6% -2.4% -4.8% -4.2% -1.5% +2.8pp West and South Asia, Oceania -1.7% 5.3% 1.1% 1.6% -2.8% 3.8% - - 1.5% 2.2% 1.3% 0.9% 1.3% +0.3pp Yo Y 38.1% 50.4% 22.9% 0.8% 6.9% 30.4% 11.2% 9.7% 14.0% 44.4% 11.1% 18.3% 10.4% Domest ic 10.4% 22.5% 24.8% 32.8% 37.4% 22.8% - - -12.8% 16.0% 28.7% 30.1% 3.0% Overseas 91.1% 103.1% 17.5% -26.4% -32.1% 43.2% - - 133.6% 97.8% -7.6% 2.2% 26.8% East Asia 95.2% 113.3% 18.3% -23.8% -23.6% 36.1% - - 146.6% 104.6% -4.7% 2.5% 22.2% Europe and the Americas - -74.0% ------65.4% - - - - West and South Asia, Oceania - 112.3% - -67.3% - 241.9% - - 5,797.0% 114.6% -29.2% -7.2% 56.3% Non-operating income (expenses) 204 -1,943 -2,365 2,669 429 270 200 100 2,756 -1,739 304 699 300 -399 Recurring profit 16,275 16,425 17,393 21,189 21,559 24,426 23,700 26,600 26,602 32,700 38,582 45,985 50,300 +4,315 YoY 37.9% 11.0% 6.9% 29.0% 24.0% 15.3% 9.9% 8.9% 15.4% 22.9% 18.0% 19.2% 9.4% RPM 11.0% 10.3% 10.8% 12.4% 11.8% 12.4% 11.6% 12.0% 10.2% 10.6% 11.6% 12.1% 11.9% -0.3pp Net income attrib. to parent company shareholders 10,373 11,345 11,715 14,116 14,584 15,529 16,100 17,200 16,623 21,718 25,831 30,113 33,300 +3,187 YoY 49.7% 17.1% 12.9% 24.4% 24.5% 10.0% 10.4% 10.8% -2.8% 30.7% 18.9% 16.6% 10.6% Net margin 7.0% 7.1% 7.2% 8.2% 8.0% 7.9% 7.9% 7.8% 6.4% 7.1% 7.8% 7.9% 7.8% -0.1pp Store count (MUJI) 716 758 780 821 842 876 928 702 758 821 876 928 +52 Domest ic 408 414 418 418 420 419 423 401 414 418 419 423 +4 Directly managed stores 284 284 312 312 328 328 335 269 284 312 328 335 +7 Licensed stores 63 63 65 65 67 67 67 61 63 65 67 67 - Seiyu 54 54 37 37 23 23 17 55 54 37 23 17 -6 Overseas 308 344 362 403 422 457 505 301 344 403 457 505 +48 East Asia 197 227 245 279 293 319 362 189 227 279 319 362 +43 Europe and the Americas 70 72 69 69 70 72 71 74 72 69 72 71 -1 West and South Asia, Oceania 41 45 48 55 59 66 72 39 45 55 66 72 +6 Store openings (MUJI) 29 63 37 55 37 48 85 92 92 85 Domest ic 18 25 15 9 10 7 29 43 24 17 21 +4 Directly managed stores 14 25 13 8 7 7 24 39 21 14 16 +2 Licensed stores 4 - 2 1 3 - 5 4 3 3 5 +2 Seiyu ------Overseas 11 38 22 46 27 41 56 49 68 68 East Asia 9 30 19 37 18 29 38 39 56 47 Europe and the Americas - 4 - 2 2 5 9 4 2 7 West and South Asia, Oceania 2 4 3 7 7 7 9 6 10 14 Store closures (MUJI) -15 -21 -15 -14 -16 -14 -23 -36 -29 -30 Domest ic -11 -19 -11 -9 -8 -8 -13 -30 -20 -16 -17 -1 Directly managed stores -2 -9 -2 -3 -1 -6 -9 -11 -5 -7 - +7 Licensed stores -1 -1 - -1 -3 - -3 -2 -1 -3 - +3 Seiyu -8 -9 -9 -5 -4 -2 -1 -17 -14 -6 -17 -11 Overseas -4 -2 -4 -5 -8 -6 -10 -6 -9 -14 East Asia -1 - -1 -3 -4 -3 -2 -1 -4 -7 Europe and the Americas -3 -2 -3 -2 -1 -3 -4 -5 -5 -4 West and South Asia, Oceania - - - - -3 - -4 - - -3 Exchange rate (quarter average) USD/JPY 120.2 121.9 111.8 105.9 112.4 105.3 113.0 113.0 105.9 121.1 108.8 108.8 113.0 +4 EUR/JPY 133.9 133.3 122.4 117.2 122.9 116.7 133.7 133.7 140.1 133.6 119.8 119.8 133.7 +14 CNY/JPY 19.3 19.1 17.1 15.7 16.4 16.4 17.1 17.1 17.2 19.2 16.4 16.4 17.1 +1 Source: Shared Research based on company data Figures may differ from company materials due to differences in rounding methods.

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Measures for FY02/19 toward medium-term plan

In April 2017, the company announced a medium-term management plan ending in FY02/21. The following table shows main numerical targets. The company thinks it can achieve them (if there are no foreign exchange fluctuations) if the speed as of FY02/17 is maintained. Shared Research understands the essential points of the medium-term plan as deepening the strategies in the previous medium-term plan to improve operation accuracy at stores and of global supply chain management (GSCM), and to increase its product development capability to accelerate opening of competitive stores especially in the latter half.

Each year in the four years of the plan is positioned as follows. In FY02/18, the company plans to thoroughly focus on remaining issues from the previous medium-term plan and work on rebuilding of cost structure in SCM and product development while exchange fluctuations settle. In FY02/19, new products and its SCM should produce effects. In FY02/20 and FY02/21, GSCM is expected to steadily work at the management level and the store network expansion should accelerate.

The company’s management policies for FY02/18 were increasing efficiency per sales floor through increasing product appeal; evolving GSCM; cultivating experts who can operate globally; and advancing further work standardization to reform its corporate culture to establish a robust corporate quality. These measures have proven effective, and Ryohin Keikaku is likely to maintain this approach in FY02/19. See below for an outline of progress toward medium-term plan targets and FY02/19 measures toward that plan.

Medium-term plan

FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/18 FY02/19 FY02/20 FY02/21 (JPYmn) Act. Act. Act. Act. Act. Vs. Est. Est. Change Init. Est. MTP MTP MTP Change Operating revenue 220,620 260,254 307,532 333,281 379,551 +5,651 424,300 +44,749 373,900 500,000 +166,719 Domest ic 171,924 182,702 198,449 215,716 234,791 +1,591 251,800 +17,009 233,200 290,000 +74,284 Overseas 48,472 77,547 109,080 117,563 144,758 +4,058 172,500 +27,742 140,700 210,000 +92,437 East Asia 31,276 56,430 83,045 89,704 109,803 +4,303 129,100 +19,297 105,500 Europe and the Americas 12,306 14,861 17,124 17,603 21,225 -375 27,400 +6,175 21,600 West and South Asia, Oceania 4,890 6,255 8,911 10,256 13,729 +129 16,000 +2,271 13,600 Other 224 6 2 1 1 +1 - -1 - 4-yr CAGR Yo Y - 18.0% 18.2% 8.4% 13.9% 11.8% 12.2% * 10.7% Domest ic - 6.3% 8.6% 8.7% 8.8% 7.2% 8.1% * 7.7% Overseas - 60.0% 40.7% 7.8% 23.1% 19.2% 19.7% * 15.6% East Asia - 80.4% 47.2% 8.0% 22.4% 17.6% 17.6% Europe and the Americas - 20.8% 15.2% 2.8% 20.6% 29.1% 22.7% West and South Asia, Oceania - 27.9% 42.5% 15.1% 33.9% 16.5% 32.6% Comparable store sales growth (local currency) - Parent 3.8% 2.7% 4.9% 2.1% 6.8% +2.8pp 4.0% -2.8pp 4.0% Overseas 5.8% 6.6% 11.7% 4.6% 4.1% -0.2pp 4.6% +0.5pp 4.3% East Asia 10.5% 10.1% 13.1% 4.1% 3.9% +0.3pp 4.5% +0.6pp 3.6% Aim for 5% Aim for 5% Aim for 5% Operating gross profit 101,665 122,831 150,451 165,861 191,819 +6,919 213,400 +21,581 184,900 Operating GPM 46.1% 47.2% 48.9% 49.8% 50.5% +1.1pp 50.3% -0.2pp 49.5% Aim higher SG&A expenses 80,749 98,984 116,012 127,583 146,532 +3,932 163,400 +16,868 142,600 YoY - 22.6% 17.2% 10.0% 14.9% +3.1pp 11.5% -3.3pp 11.8% % of operating revenue 36.6% 38.0% 37.7% 38.3% 38.6% +0.5pp 38.5% -0.1pp 38.1% Current level Operating profit 20,916 23,846 34,439 38,278 45,286 +2,986 50,000 +4,714 42,300 60,000 +21,722 Domest ic 16,859 14,708 17,062 21,953 28,551 +4,551 29,400 +849 24,000 Overseas 3,689 8,618 17,042 15,740 16,090 -1,610 20,400 +4,310 17,700 East Asia 3,420 8,434 17,261 16,454 16,861 -1,339 20,600 +3,739 18,200 Europe and the Americas 268 93 -414 -852 -898 -98 -400 +498 -800 West and South Asia, Oceania 2 91 195 138 128 -172 200 +72 300 Other 360 479 586 620 541 -59 200 -341 600 Adjustments 8 42 -253 -35 103 +103 - -103 - Yo Y - 14.0% 44.4% 11.1% 18.3% 10.4% 10.5% * 11.9% OPM 9.5% 9.2% 11.2% 11.5% 11.9% +0.6pp 11.8% -0.1pp 11.3% 12.0% +0.5pp Domest ic 9.8% 8.1% 8.6% 10.2% 12.2% +1.9pp 11.7% -0.5pp 10.3% - Overseas 7.6% 11.1% 15.6% 13.4% 11.1% -1.5pp 11.8% +0.7pp 12.6% - East Asia 10.9% 14.9% 20.8% 18.3% 15.4% -1.9pp 16.0% +0.6pp 17.3% Current level Europe and the Americas 2.2% 0.6% -2.4% -4.8% -4.2% -0.5pp -1.5% +2.8pp -3.7% Aim for 5% West and South Asia, Oceania 0.0% 1.5% 2.2% 1.3% 0.9% -1.3pp 1.3% +0.3pp 2.2% Aim for 10% Store count (incl. Café&Meal and IDÉE) 8 806 870 928 -6 985 +57 934 1,000 1,100 1,200 +330 Domest ic 450 452 454 -2 461 +7 456 465 483 502 +50 Small-scale stores (330sqm or below) NA 13 19 +1 26 +7 18 100 +87 Overseas 356 418 474 -4 524 +50 478 535 617 698 +280 East Asia 236 292 333 +1 378 +45 332 376 425 474 +182 Europe and the Americas 72 69 72 -5 71 -1 77 80 91 102 +33 West and South Asia, Oceania 48 57 69 - 75 +6 69 79 101 122 +65 MUJI 760 821 876 -8 928 +52 884 957 1,047 1,138 +317 Café&Meal, IDÉE, others 46 49 52 +2 57 +5 50 43 53 62 +13 Op. revenue / Store count (year-end average) 398 422 +8 444 +21 415 435 +37 Domest ic 478 518 +5 550 +32 514 589 +111 Overseas 304 325 +11 346 +21 314 319 +16 Net increase 64 58 -6 57 -1 64 66 100 100 +36 Domest ic 2 2 -2 7 +5 4 9 18 19 +17 Overseas 62 56 -4 50 -6 60 57 82 81 +19 East Asia 56 41 +1 45 +4 40 44 49 49 -7 Europe and the Americas -3 3 -5 -1 -4 8 3 11 11 +14 West and South Asia, Oceania 9 12 - 6 -6 12 10 22 21 +12 MUJI 61 55 -8 52 -3 63 73 90 91 +30 Café&Meal, IDÉE, others 3 3 +2 5 +2 1 -7 10 9 +6 Exchange rate (annual average) USD/JPY 97.7 105.9 121.1 108.8 112.2 +2.4 113.0 +0.8 109.8 EUR/JPY 131.6 140.1 133.6 119.8 127.8 +3.3 133.7 +5.9 124.5 CNY/JPY 15.9 17.2 19.2 16.4 16.6 -0.3 17.1 +0.5 16.9 Source: Shared Research based on company data

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Targets and tasks

Goals Tasks

Provide unparalleled selection of merchandise at Improve global supply chain management reasonable prices

Contribute to regional community through proper quality Strengthen product development and prices

Develop human resources focusing on expertise and diversity Develop human resources for global operations

Build the base for sustainable growth Ensure corporate governance

Specific tasks

Action items for each task

- Reduce store mark down by making more precise plans (20% improvement for Apparel) Improve global supply chain management - Make inventories more efficient through better procurement flows（50% cut in warehouse inventories)

- Develop core it ems t hat contribute t o regional communit ies Expand flagship st ores in main count ries Strengthen product development Enlarge domestic store size (aim for 100 stores with floor space around 15,000sqm) Promote renovation in Japan and overseas (20 stores per year in China) - Reduce price differences globally (unify pricing of global strategic goods)

Develop human resources for global operations - Build management system of personnel for global operations - Int roduce incentive plans globally

Ensure corporate governance - Build st andard systems to be applied globally

Source: Shared Research based on company data

Boosting global supply chain management (GSCM) Improve planning accuracy to reduce in-store markdown ratio Ryohin Keikaku appears to be making generally good progress toward the targets set in its medium-term business plan (see above exhibit). As measures toward GSCM improvement, the company seeks to a) improve planning accuracy to reduce in-store discounting (by 20% in apparel); and b) improve the sourcing process for more efficient inventory management (by 50% at warehouses, from about JPY30.0bn to JPY15.0bn). Measure a) is pretty much complete, while with b), there has been some reduction in inventory, especially in Japan.

With respect to a), the price reductions implemented in FY02/18—reflecting lower CoGS and geared toward offering apparel in particular at more “appropriate” prices—have rendered products more affordable and hence more attractive. Curbs on unnecessary discounting have led to more sales at regular (non-sale) prices, such that the markdown ratio at directly operated stores has improved by 3.6pp (from about 20% to around 16%). In this manner, the company has more or less met its target of 20% improvement in in-store discounting in apparel. Ryohin Keikaku believes that weather conditions combined with better inventory management to deliver this effect in FY02/18. In FY02/19, the company intends to follow the same approach with a view to keeping the markdown ratio around 16% even without contributions from the weather.

Markdown ratio at directly operated apparel stores

Apparel items: rate of price declines (directly managed stores) Apparel items comparable store sales 35% 30% 31.4% Apparel items comparable store customer count 30.8% 25% 29.8% 29.3% 29.6% Apparel items comparable store customer spend 30% 28.4% 20% 26.8% 26.9% 25.4% 25.2% 15% 25% 23.1% 10% 22.3% 5% 19.9% 19.5% 20% 18.7% 18.2% 0% 17.5% 17.9% 17.1% 16.9% 17.2% 16.1% 15.3% 15.5% 15.1% -5% 14.1% 14.5% 15% 13.1% 13.3% -10% 12.2% 14.8% -15% 13.4% 13.5% 13.0% 12.1% 10% 11.2% -20% Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data

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Improve sourcing process for more efficient inventory management Ryohin Keikaku uses another KPI to measure inventory efficiency—namely, weeks of supply (WOS), calculated as the number of weeks of planned sales that warehouse inventory value represents. This has improved from 10.3 weeks in FY02/17 (8.6 weeks in Japan and 11.3 weeks overseas), to 9.5 weeks in FY02/18 (7.8 weeks and 10.6 weeks). As the target is five to six weeks, this leaves plenty of room for improvement. That said, WOS is decreasing gradually as steps are taken to boost inventory efficiency at individual sales offices. The company’s automated store supply system is proving to be highly effective for household goods with little seasonality staple goods in particular. Ryohin Keikaku is overhauling its entire approach to inventory management, to one — of calculating the absolute minimum inventory that warehouses can hold while keeping store shelves and backrooms fully stocked with merchandise the company plans to sell.

In FY02/19 as well, the company intends to keep tight control over inventory so as to a) closely coordinate business, product, sales, inventory, and production planning, as well as ordering, to facilitate b) sweeping adjustments to supply/demand (via additional production or production cuts) as dictated by sales levels during the fiscal year, and c) maximize sales and gross profit at each store. Ryohin Keikaku is furthermore working toward a system enabling it to perform these tasks with as few personnel as possible, while maintaining optimal precision

Measures to enhance inventory efficiency

- Plan seasonal, monthly, and weekly sales - Analyze current warehouse inventory Key performance indicators - Make revisions during FY; manage and space versus optimal levels (KPIs) operations - Define optimal centralized inventory Store inventory DCs (All categories) Stores in each Supply products based on sales plan Inventory management with sales country and standard store inventory level planning and total volume control Centralized inventories (Household goods) - Define standard bays by store size - Household goods: Set the goal for inventory - Define standard facing and shelves value equivalent to 4–8 weeks of planned sales Digestion rate of - Define optimal store inventory incl. backyard - Apparel items: Manage end of season inventory seasonal inventories → manage inventory by value by orders the beginning of year, and year-end (Apparel items) optimal inventory

Source: Shared Research based on company data

Based on issues encountered thus far, management looks to upgrade and refine the system in the first two years of the current medium-term plan, while finalizing the system and reaping resulting effects in the second half (two years) of the plan. In FY02/18, its automated store supply system was upgraded to reflect actual conditions in Japan and was released for domestic use in November 2017. In FY02/19, the company intends to deploy the system overseas. The new system refines demand projections, adopts stricter management rules, and eliminates arbitrariness by preventing store managers from placing orders that exceed projections. In addition, the company plans to link with clients and production lines, and such links are expected to have a major impact. On the whole, the company appears to be making steady progress.

Building standardized global platforms In addition to pursuing GSCM, Ryohin Keikaku is working to establish other standardized systems that can be applied globally (see below exhibit). In merchandising, which is the core component that determines the outlook for products and sales, the company is laying out the operational requirements factoring in broader procurement in future of fresh foods including vegetables. Ryohin Keikaku is also shifting to a uniform accounting system. The framework for the new accounting system is slated for completion in Japan by June 2019 for a rollout worldwide from late 2019 to early 2020.

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Building standardized global platforms

FY02/19 FY02/20 Mar֪–May Jun–Aug Sep–Nov Dec–Feb Mar–May Jun–Aug Sep–Nov Dec–Feb

Expand to the rest of countries and regions Customer Build and implement new multi-channel Japan platform for customer communication communication East Asia Asia North America Europe Existing systems Expand to the rest of countries and regions Global HQs Merchandising Build and implement new merchandising system Sales offices Asian countries

Implementation of the new system Accounting Build global standard templates North America system Japan Asia and Europe

Improving product development Product strategy: Strengthen product development and revise prices to achieve market share of at least 3% for 50 household goods in final year of medium-term plan Ryohin Keikaku started initiatives targeting a market share of at least 3% for 50 household goods in the final year of the medium-term plan. The growth envisioned in the plan hinges on efforts to expand sales of everyday staple products and creating incentives for store visits. According to Ryohin Keikaku, the basis of its product development is to create products that are truly fundamental to day-to-day life without any unnecessary complexity, and in 2017 it identified a number of these “key strategic products” for which it targets a domestic market share of at least 3%.

The company divides its products into two categories: (1) extremely competitively priced products, and (2) products sold at an appropriate price for their value. Price strategies are implemented accordingly. The former maintains the quality standard and Mujirushi Ryohin spirit, but can be offered at lower prices by streamlining production processes and selecting suitable materials (examples: socks, towels, and boxer shorts, which were subject to price revisions in 1H and 2H). The latter consists of products that can be sold at higher prices based on the consumers’ appreciation of the product’s value (example: coffee maker that grinds coffee beans; sales of 20,000 units or total sales of JPY600mn in 1H FY02/18; sells for JPY32,000 incl. tax; previous model launched in 2013 only sold 842 units in six months).

Ryohin Keikaku aims to achieve market share of 3–5% for 50 products included in the competitively priced category by the final year of the medium-term plan (51 items in FY02/18; target of 40 items in 2020 and 100 in 2030). It has already started simultaneous global sales promotions in FY02/18, is reducing costs by developing products suitable for mass production, and is setting up large displays in stores. This approach has already paid off for products such as socks and towels (sales up 80% YoY to JPY2.6bn in FY02/18) and cleaning products (up 37% to JPY1.1bn).

The company estimates its domestic market share for socks and towels at just 1.87% and 1.57%, respectively, in 1H FY02/18. Expanding market share to 3% each would add sales of JPY3.8bn for socks and JPY2.5bn for towels. Management believes that continued efforts in product development and consolidation of production (such as materials and production centers) will lead to sustained growth in comparable store sales in Japan.

Price revisions: Pursuing “appropriate pricing” in FY02/19 also Price adjustments made a significant contribution to the Domestic business in FY02/18, partly by increasing customer traffic and sales in apparel, but also in the form of margin improvement, as a higher weighting of sales at appropriate prices led to fewer markdowns and less reliance on promotional campaigns. In FY02/19 as well, prices for some 200 items were reduced in March 2018 (just over 120 apparel items, and about 60 food items). Ryohin Keikaku also adjusted prices for around 2,200 items whose pricing had been difficult to comprehend.

Ryohin Keikaku believes that striking a balance between value and quality on the one hand and price on the other is the best way to gain the support of customers. This represents the company’s core philosophy as expressed in the slogan “lower price for a reason.” The recent price revisions are consistent with this philosophy, with a reduction in CoGS enabling Ryohin Keikaku to offer goods at more “appropriate” prices. By enhancing product appeal in this manner, the company seeks to increase customer traffic

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and the number of items purchased by each customer, thereby buoying sales volume and enhancing sales per square meter. Ryohin Keikaku plans further price revisions in 2H FY02/19, chiefly for household goods, and also plans to roll out new merchandise to bolster each category of household goods. Shared Research expects these initiatives to improve earnings in 2H as well as in FY02/20 onward.

In food, an expanded lineup of “pochi gashi” (small packs of candies, gums, and chocolates that can be purchased for as little as JPY100) contributed to an increase in items purchased in FY02/18. In FY02/19, Ryohin Keikaku plans to add new categories to its food lineup. The company acknowledges that its food portfolio is lacking in many respects, and intends to start filling these gaps.

Rollout of large stores The medium-term plan spanning FY02/18 through FY02/21 calls for final-year sales of JPY500.0bn (average annual growth of 10.7%, breaking down as 7.7% growth in Japan and 15.6% overseas) and operating profit of JPY60.0bn (margin of 12%). A key factor in achieving these targets will be the establishment of a global store network of 1,200 stores (increase of 50 stores to 502 in the Domestic business, increase of 280 stores to 698 overseas), and opening 100 large stores in Japan. The company intends to proceed cautiously with the store openings to avoid repeating past errors. It will only open a few large stores alongside existing store expansions over the first two years of the plan, and in the second two years it will accelerate the pace of store rollouts. Management also regards improvements in product development as an important initiative on par with the rollout of large stores. Expanding the lineup of core items will not only contribute to the development of large stores and flagship stores in Japan and overseas, but also support growth for existing stores.

Large stores: Defined as stores with area of around 500 tsubo (1,650sqm). Not only are these stores large in area, but also sales per square meter are higher than for regular stores, as more area is devoted to apparel sales (no new large stores in FY02/17, up four in FY02/18).

Increasing the store size strengthening product development capability = increased items offered application to comparable stores → → improvement of sales per square meter at comparable stores → Product development does not produce effects immediately. However, it is vital for the company to increase items to achieve growth targeted by the current medium-term management plan and the next one. Adding items is largely synchronized with store development. The company worries about sluggish consumption after the 2020 Olympic Games due to prolonged aftermath of another raise in the consumption tax scheduled for 2019. Therefore, the current medium-term management plan aims to expand product lineup and develop services before consumption drops; establish a successful large store model to accelerate opening of large stores in the latter half of the plan; and offset a decline in sales per square meter from an increase in large stores by improving them at existing stores.

During the next medium-term management plan the company intends to further raise sales per square meter by introducing new products, which sell in large quantity at large stores, into comparable stores. In the current medium-term management plan sales per square meter may remain unchanged due to store upsizing, but the company’s strategy is to raise them during the next medium-term plan.

Large stores (upper: existing store, lower: stores in the medium-term plan)

FY02/17 Directly managed stores sqm sqm sqm Licensed stores Yurakucho 3,200 T enjin Daimyo 2,066 Parco Hiroshima 1,815 Kobe BAL Grand Front Osaka 2,450 Meitetsu dept. store 2,040 Namba 1,798 Marui Kichijoji 2,410 Aeon Mall Kyot o 1,818 Act a Nishinomiya 1,779 MUJI Canal City Hakata 2,334 Seibu Shibuya 1,821 Seibu Ikebukuro 1,683

FY02/18 sqm 1H FY02/19 sqm 2H FY02/19 sqm sqm Yurakucho Exist ing 3,200 Aeon Mall Sakaikitahanada New 2,975 Grand Front Osaka Exist ing 2,450 Aeon Mall Okayama Exist ing 1,527 Marui Kichijoji Exist ing 2,410 Keihan Cit y Mall Exist ing 1,587 Act a Nishinomiya Exist ing 1,779 Sharestar Hakodate Exist ing 2,450 Seibu Shibuya Exist ing 1,821 Ario Kurashiki New 1,653 Seibu Ikebukuro Exist ing 1,683 Aoen Mall Mat sumot o Exist ing 1,679 Parco Hiroshima Exist ing 1,815 T enjin Daimyo Exist ing 2,066 Namba Exist ing 1,798 Seven new stores New - Aeon Mall Kyot o Exist ing 550 Meitetsu dept. store Exist ing 617 LaLaPort Shin Misato Exist ing 460 Terrace Mall Shonan Exist ing 465 Source: Shared Research based on company data

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Store strategy: Started trial initiatives at existing large stores such as expansion of product lineups ahead of the establishment of 100 large stores Existing large stores focus on offering top-selling products across a wide variety of sales floors (MUJI BOOKS, Café&Meal, etc.). However, in anticipation of the accelerated rollout of large stores in the second half of the medium-term plan, management is working to strengthen product lineups and review product categorization, placement, and ordering methods. The stronger apparel product lineup in this context overlap with the company’s product strategy. In comparison with its competitors in apparel, the company believes its apparel lineup and presentation is still insufficient. Based on apparel sales trends overseas, management sees scope to roughly double men’s apparel sales, and has started running trial initiatives at four existing large stores. At present, it is strengthening apparel sales mainly by showcasing coordinated looks comprising multiple items; once the company reaches a certain number of large stores, it plans to utilize the resulting sales capabilities, which should lead to an expansion in the number of products sold. The aim is to ensure that sales per square meter do not deteriorate at large stores; rather, sales per square meter should improve with expansion in apparel sales areas.

As at end-FY02/17, there were 12 directly operated large stores of around 1,650 sqm and one licensed large store, for a total of 13. In FY02/18, the company opened new stores as planned, also investing in improvements at four existing large stores as a trial. As this investment looks to have delivered some benefits, in FY02/19 Ryohin Keikaku plans to invest in improvements at 26 stores, including nine new stores. At the beginning of FY02/20, the company is scheduled to open a Ginza store that will also house a MUJI Hotel.

Ginza store: With its release of Q1 FY02/18 results, Ryohin Keikaku announced plans to open a new flagship store that will rival (and eventually replace) its existing Yurakucho store (3,700sqm) in the neighboring Ginza 3-chome district in the spring of 2019 (Maronie x Namiki Yomiuri Ginza Project). It will be positioned as a global flagship store, and the store building will also house the first domestic MUJI Hotel (tentative name). The company intends to exclusively lease a newly developed property (site area: 1,343sqm, total floor space: 14,219sqm, store floor space: roughly 3,300sqm) for this purpose. While the plan is to accomplish a swift transition from the Yurakucho store to the Ginza store, management intends to operate both stores simultaneously for a while. The rent for the new property is expected to be on par with the average rent the company is paying elsewhere, and hotel operations will be entrusted to a partner with professional expertise. The hotel will be developed around the concept of “anti-gorgeous, anti-cheap,” reflecting the company’s focus on minimalistic yet high-quality design and materials, and will showcase spaces that highlight the appeal of MUJI’s aesthetic philosophy.

Maronie x Namiki Yomiuri Ginza Project

Images provided by Mitsui Fudosan

FY02/19 full-year forecasts (out April 2018)

The company expects to post an operating revenue of JPY424.3bn (+11.8% YoY or +JPY44.7bn YoY) and an operating profit of JPY50.0bn (+10.4% YoY or +JPY4.7bn YoY) in FY02/19. In FY02/18, the Domestic business accounted for JPY6.6bn of the JPY7.0bn YoY increase in operating profit, but in FY02/19 the company expects East Asia (up JPY3.7bn) to drive profit growth, with profit up JPY0.8bn at the Domestic business and JPY4.3bn at the Overseas business. Operating revenue is forecast to increase in each region in both local currency terms and yen terms. Japan (+JPY17.0bn) and East Asia (+JPY27.7bn) are expected to be drivers.

In Europe and the Americas, price increases implemented in January 2017 have virtually eliminated the effects of less profitable inventories purchased when the British pound was weak in FY02/17. Thus, in FY02/18 the Europe business turned a profit when excluding head-office costs. The aim is to turn the Europe business profitable in FY02/19 even with head-office costs included,

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followed by shift to profit for North America in FY02/20. With Singapore also expected to move into the black, it seems none of the major regions are exerting much of a drain on profits.

Earnings trends

(JPYbn) (JPYbn) Operating revenue Operating profit OPM (right axis) Operating revenue Operating profit 120 14% 450 13% OPM (right axis) 13% 400 12% 100 12% 350 11% 11% 80 300 10% 10% 250 60 9% 9% 200 8% 8% 40 150 7% 7% 6% 100 20 11.9 12.4 11.7 45.3 50.0 9.5 9.8 8.6 11.4 8.3 9.9 8.6 9.3 34.4 38.3 6% 5.7 4.0 6.5 4.7 6.6 5.0 6.2 6.0 6.5 5% 50 20.9 23.8 0 4% 0 5% Q1 Q1 Q1 Q1 Q1 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Est.

Domestic (left), Overseas (middle), and East Asia (right) businesses

(JPYbn) (JPYbn) (JPYbn) Operating revenue Operating profit Operating revenue Operating profit Operating revenue Operating profit 300 12% 200 18% 140 22% OPM (right axis) OPM (right axis) OPM (right axis) 180 16% 250 120 20% 11% 160 14% 140 100 200 18% 10% 120 12% 80 150 100 10% 16% 60 9% 80 8% 100 14% 60 40 6% 8% 40 20.6 50 17.3 16.5 16.9 12% 28.6 29.4 17.0 15.7 16.1 20.4 20 16.9 14.7 17.1 22.0 4% 8.4 20 3.7 8.6 3.4 0 7% 0 2% 0 10% FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 Est. Est. Est. Source: Shared Research based on company data

Domestic business

(JPYbn) (JPYbn) Operating revenue Operating profit OPM (right axis) Operating revenue Operating profit 70 16% 300 13% OPM (right axis) 14% 60 250 12% 12% 50 200 11% 10% 40 8% 150 10% 30 6% 100 9% 20 4% 7.8 8.8 8.9 5.9 7.1 6.2 50 28.6 29.4 8% 10 5.0 5.5 5.3 4.7 5.8 4.7 2% 16.9 17.1 22.0 2.8 3.6 2.6 2.0 3.0 2.4 3.8 3.3 14.7 0 0% 0 7% Q1 Q1 Q1 Q1 Q1 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Est. Source: Shared Research based on company data

The Domestic business is forecasted to post an operating revenue of JPY251.8bn (+7.2% YoY or +JPY17.0bn) and an operating profit of JPY29.4bn (+3% YoY or +JPY0.8bn). 14 new directly managed stores opened in FY02/18 (7 stores closed) will make a full-year earnings contribution and 16 new directly managed stores to be opened in FY02/19 (no store closing) are also expected to make an earnings contribution this year. Sales at comparable stores are expected to grow 4.0%. The number of directly managed stores will likely be 351 at the end of FY02/19, for a net increase of 16 (+4.8%). Ryohin Keikaku intends to roll out nine large stores (area of around 1,650sqm), resulting in an 8.9% increase in sales floor space. Price reductions in March applied mostly to apparel, with the focus to shift in 2H to household goods.

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Comparable stores and product strategy Still targeting growth in customer traffic At comparable stores, the company continues to aim for 4% sales growth mostly by increasing customer count. While on the one hand taking various steps to grow customer traffic, the company also is instituting measures to increase the number of items purchased per customer, so as to avoid any decline in average customer spend. Ryohin Keikaku is not one to raise unit prices in order to lift customer spend.

Ryohin Keikaku intends to keep apparel sales, which were the driving force behind FY02/18 earnings, buoyant in FY02/19. At the same time, though, it expects household goods to act as a growth engine in 2H onward. In FY02/18, apparel sales rose 11.9% YoY (customer count: +14.5%; average customer spend: -2.3%), driving growth. This has a high impact since apparel sales accounted for 36.2% of parent sales (in FY02/18). In FY02/18, the company sought to make up for a 1.6% sales drop in FY02/17 in order to raise the sales level at all comparable stores, and experienced more success than anticipated. Ryohin Keikaku says, though, that while Mujirushi Ryohin has long been known as a go-to destination for household goods, it still has a low profile as an apparel retailer. The company evidently believes there remains plenty of room to grow customer traffic and sales, including via expansion of the product portfolio.

Apparel sales dropped in FY02/16 due to a mild winter. Initial FY02/17 full-year forecasts expected the company to recover, but it was not able to do so. In 1H FY02/17 it saw temporary disruptions (an inventory shortage of polo shirts in Q2 due to selling out in Q1; excessively narrowed innerwear inventory before a product change; and raised price of socks). Due partly to these factors, apparel sales at comparable stores fell 5.6% in Q2, 0.9% in Q3, and 2.5% in Q4, for a 1.6% decline for the full year (customer count: -4.5%; average customer spend: +3%). Thus, the lower customer count particularly contributed to the weak sales. That said, the company took action in response to issues seen in 1H. Specifically, it set the price of socks back from JPY1,200/three pairs to JPY990, which restored sock sales in 2H and boosted gross profit by 21%. It expanded price reviews to other goods such as standard innerwear and basic knitwear, and achieved a substantial sales recovery in FY02/18.

Directly-managed comparable stores’ sales growth

Customer count Customer count Customer spend Domestic directly managed stores sales growth 14% 10% Customer spend Domestic directly managed stores sales growth 12% 8% 6.8% 10% 6.1% 8% 6% 4.9% 4.0% 6% 3.8% 4% 2.7% 4% 2.1% 2% 2% 0.9% 0.3% 0% 0% -2% -2% -0.9% -4% -2.6% -6% -4% Q1 Q1 Q1 Q1 Q1 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Est. Source: Shared Research based on company data Store strategy One of the FY02/18 management policies was increasing efficiency per store space through increasing product appeal, and the same is true for FY02/19. This policy includes strengthening product development and revitalizing existing stores. The policy is also a preparatory step for increasing the size of stores (100 stores of about 1,650sqm) as targeted in the medium-term plan.

In its bid to increase sales per square meter by expanding floor space for apparel, Ryohin Keikaku conducted a trial in FY02/18, investing in improvements at four existing large stores (Yurakucho, Marui Kichijoji, Shibuya Seibu, and Hiroshima Parco). It added apparel offerings to these stores and expanded space dedicated to apparel sales. Based on the results of this trial, the company will invest in improvements at six more stores in 1H FY02/19 (including two new stores) and another 16 stores in 2H (including seven new stores). By end-FY02/19, Ryohin Keikaku aims to have 26 large* stores.

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Large stores (upper: existing store, lower: stores in the medium-term plan)

FY02/17 Directly managed stores sqm sqm sqm Licensed stores Yurakucho 3,200 T enjin Daimyo 2,066 Parco Hiroshima 1,815 Kobe BAL Grand Front Osaka 2,450 Meitetsu dept. store 2,040 Namba 1,798 Marui Kichijoji 2,410 Aeon Mall Kyot o 1,818 Act a Nishinomiya 1,779 MUJI Canal City Hakata 2,334 Seibu Shibuya 1,821 Seibu Ikebukuro 1,683

FY02/18 sqm 1H FY02/19 sqm 2H FY02/19 sqm sqm Yurakucho Exist ing 3,200 Aeon Mall Sakaikitahanada New 2,975 Grand Front Osaka Exist ing 2,450 Aeon Mall Okayama Exist ing 1,527 Marui Kichijoji Exist ing 2,410 Keihan Cit y Mall Exist ing 1,587 Act a Nishinomiya Exist ing 1,779 Sharestar Hakodate Exist ing 2,450 Seibu Shibuya Exist ing 1,821 Ario Kurashiki New 1,653 Seibu Ikebukuro Exist ing 1,683 Aoen Mall Mat sumot o Exist ing 1,679 Parco Hiroshima Exist ing 1,815 T enjin Daimyo Exist ing 2,066 Namba Exist ing 1,798 Seven new stores New - Aeon Mall Kyot o Exist ing 550 Meitetsu dept. store Exist ing 617 LaLaPort Shin Misato Exist ing 460 Terrace Mall Shonan Exist ing 465 Source: Shared Research based on company data

Experimenting with new store formats In March 2018, Ryohin Keikaku re-opened its Sakai Kitahanada store inside the local Aeon Mall shopping center, after expanding the store to make it one of the largest worldwide. The store features the company’s first large, food-themed area dedicated to fresh foods, as well as a Café&Meal MUJI outlet and a food court. It has a total floor space of 4,318sqm, with Mujirushi Ryohin occupying 400sqm pre-expansion and 3,931sqm post-expansion, and the new Café&Meal MUJI outlet occupying 386sqm. The Sakai Kitahanada store is distinguished from others by its dedicated food sales area, which functions as a kind of fresh food supermarket. Ryohin Keikaku already had been selling fruit and vegetables at the Yurakucho store, starting in July 2017, but the Sakai Kitahanada store takes this concept further. In essence, the store is the realization of Ryohin Keikaku’s desire to address consumer concerns by closing the gap between them and the area/people producing agricultural and marine produce, and conveying to consumers the inherent value of products being sold. In principal, the store retails food sourced straight from local producers; for example, freshly picked vegetables and freshly packaged meat, in addition to fish shipped directly from the harbor. The Sakai Kitahanada store also offers baked goods and groceries that are rigorously selected in line with the Mujirushi Ryohin concept. Furthermore, the sales floor is staffed by a team of specialist “food concierges” responsible for communicating with customers.

According to Ryohin Keikaku, the Sakai Kitahanada store is only an experiment, and the company has yet to settle on a business scheme. At the very least, though, it appears the company has no intention of rolling out dedicated food supermarkets. If the experiment gives rise to some kind of model for success, Ryohin Keikaku says it will hasten moves to develop a new business. Customer count metric will prove significant as stores increase in the future (while not being recorded as comparable store data for now, the companywide impact would be sizable). Disclosure on these stores should prove interesting, especially as pertaining to the method for booking sales.

“Food”: Ryohin Keikaku seeks to facilitate interrelationships between individuals, individuals and society, and individuals and nature, through the products and services it supplies. Among the basic lifestyle needs of clothing, food, and shelter, "food" is the most fundamental and indispensable aspect, and according to Ryohin Keikaku, the goal of these new stores is to offer an opportunity for customers to think about the producers and places where the food comes from, and review their relationship with food.

Aeon Mall Sakai Kitahanada

Source: Company data

OPM: Risk in logistics cost trends; improves CoGS-to-sales ratio for higher OPM while keeping SG&A-to-sales ratio flat FY02/18 OPM at the Domestic business rose 2.0pp YoY to 12.2%. Operating GPM rose 2.3pp YoY owing to price adjustments, which offset increases in the ratios of personnel and logistics costs (SG&A-to-sales ratio rose 0.3pp YoY). In FY02/19, however, OPM is expected to drop 0.5pp YoY to 11.7%, premised on the SG&A-to-sales ratio remaining largely unchanged YoY and the operating GPM narrowing. As reasons for this forecast, Ryohin Keikaku has said that a) in FY02/18, brisk sales of apparel led to a significant drop in the markdown ratio, but FY02/19 forecast is conservative in this respect; and b) the plan to grow sales of

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household goods (GPM of 38.0% in FY02/18, versus 44.6% for apparel) in FY02/19 will alter the sales mix in a way that depresses operating GPM. In terms of recent sales trends, spring and summer apparel items apparently are still selling well, but the company is unsure as to whether this can be sustained over the full fiscal year.

According to the medium-term management plan, the company intends to raise operating GPM to increase OPM (+1pp vs. FY02/17) while driving down or maintaining the SG&A-to-sales ratio. Its stance for FY02/19 likely is the same. However, logistics costs are largely accounted for by personnel costs and the company is receiving requests for higher freight rates and needs to secure manpower. It is therefore aware of risks in logistics cost trends.

Regarding personnel costs, Ryohin Keikaku acknowledges it has suffered opportunity losses because of having insufficient in-store staff to adequately interact with customers. For its KPI, ratio of staffing versus required store headcount*, it strove to achieve 100% in FY02/18. Both personnel costs and personnel numbers rose as a consequence, but as sales per employee also rose, this initiative seems to be yielding results. As of October 2017, Ryohin Keikaku scored 95% for this KPI, rising to more than 99% as of February 15, 2018.

Ratio of staffing versus required store headcount: A proprietary performance metric indicating the extent to which staff numbers meet the headcount requirement for each store, based on a range of variables including sales, floor space, and opening hours.

Operating GPM: Advance GSCM and achieve cost reduction The company has not disclosed assumptions of operating GPM, but as described above it apparently is expecting a decline. In the medium-term management plan, Ryohin Keikaku outlines its initiatives to lower CoGS by strengthening its global supply chain management (GSCM). Specific measures include reducing in-store markdown ratios by creating a more accurate production plan, implementing better production planning and procurement for staple products, and controlling additional production costs by preventing stockouts. We believe the company’s approach remains the same for FY02/19, and the company’s expectation for a decline in operating GPM primarily comes from its conservative outlook in response to the higher-than-expected increase in FY02/18.

Domestic operating GPM

(pp) Operating GPM: Japan GPM: Parent (pp) Operating GPM: Japan Inventory turnover: Ryohin Keikaku stores Exchange rate YoY (USD/JPY; right axis) 4 4 -20% 2H FY02/15-1H FY02/16: Weaker yen pushes up overseas procurement costs

2 2 -10%

0 0 0%

-2 -2 10% 1H FY02/17: 1H FY02/18: Rapid yen appreciation Yen turns weaker, but drives a quick recovery -4 -4 Apr. 2014: cost cuts and limited 20% Tax-inclusive prices maintained discounts drive GPM when consumption tax raised to 8% higher -6 -6 30% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/18 FY02/15 FY02/16 FY02/17 FY02/18

Ratios of logistics and personnel expenses

Logistics ratio (parent) Logistics ratio (cons.) Personnel ratio (parent) Personnel ratio (cons.) 5.0% 15% 14.2% 14.3% 4.8% 13.9% 14% 13.6% 13.7% 13.6% 4.6% 13.2% 13.2% 12.8% 13% 12.7% 12.5% 4.4% 12.5% 12.0% 12.0% 11.9% 12.0% 4.2% 12% 11.4% 11.3% 11.2% 10.8%11.8% 4.0% 11.5% 11% 11.3% 11.4% 11.3% 3.8% 11.0% 11.0% 10.8% 10.7% 10% 10.5% 3.6% 10.0% 9.7% 9.6% 9.8% 9.5% 9.5% 9.5% 3.4% 9% 9.3% 9.3% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 9.2%Q1 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data

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Overseas business At the Overseas business, the company forecasts an operating revenue of JPY172.5bn (+19.2% YoY or +JPY27.7bn) and an operating profit of JPY20.4bn (+26.8% YoY or +JPY4.3bn). It expects higher sales and profits in all regions, but in Europe and the Americas it expects to post an operating loss again. The East Asia business remains a key driver of the higher operating profit.

Overseas business

Overseas business FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Act. Est. Est. Change Operating revenue 24,598 25,702 26,348 32,431 28,346 27,615 26,568 35,033 32,485 33,078 34,873 44,320 109,080 117,563 144,758 140,700 172,500 +27,742 East Asia 19,304 19,708 19,714 24,319 21,978 21,240 19,998 26,486 25,221 25,372 25,778 33,431 83,045 89,704 109,803 105,500 129,100 +19,297 Europe and the Americas 3,493 3,874 4,430 5,328 4,029 3,938 4,172 5,462 4,393 4,552 5,524 6,754 17,124 17,603 21,225 21,600 27,400 +6,175 West and South Asia, and Oceania 1,802 2,121 2,204 2,784 2,338 2,436 2,397 3,084 2,870 3,153 3,570 4,134 8,911 10,256 13,729 13,600 16,000 +2,271 YoY 58.3% 49.2% 39.3% 25.4% 15.2% 7.4% 0.8% 8.0% 14.6% 19.8% 31.3% 26.5% 40.7% 7.8% 23.1% 19.7% 19.2% East Asia 68.7% 56.7% 44.4% 29.7% 13.9% 7.8% 1.4% 8.9% 14.8% 19.5% 28.9% 26.2% 47.2% 8.0% 22.4% 17.6% 17.6% Europe and the Americas 17.4% 22.4% 22.4% 4.4% 15.4% 1.7% -5.8% 2.5% 9.0% 15.6% 32.4% 23.7% 15.2% 2.8% 20.6% 22.7% 29.1% West and South Asia, and Oceania 60.4% 43.1% 34.9% 38.1% 29.8% 14.9% 8.8% 10.8% 22.8% 29.4% 48.9% 34.0% 42.5% 15.1% 33.9% 32.6% 16.5% YoY (local currency) 41.8% 29.5% 24.8% 17.7% 24.1% 22.4% 19.6% 23.4% 18.2% 18.0% 19.0% 16.0% 28.9% 24.1% 18.0% 15.9% East Asia 48.9% 33.5% 26.5% 18.2% 22.6% 22.1% 17.8% 25.3% 18.2% 17.9% 18.3% 18.3% 32.1% 24.7% 14.0% 14.4% Europe and the Americas 11.9% 10.6% 15.3% 6.3% 23.0% 19.4% 10.4% 17.0% 15.1% 13.8% 16.0% 18.2% 12.1% 19.0% 18.2% 25.6% West and South Asia, and Oceania 47.2% 33.7% 30.6% 41.5% 42.2% 30.8% 43.3% 20.2% 24.2% 25.9% 30.1% 30.1% 37.3% 28.4% 25.9% 12.9% YoY (local currency; comparable store sales) 21.7% 11.2% 9.7% 5.3% 7.0% 7.0% 1.4% 3.5% 2.1% 2.7% 6.0% 4.9% 11.7% 4.6% 4.1% 4.3% 4.6% East Asia 26.5% 12.9% 10.1% 4.7% 5.0% 5.9% 0.8% 4.2% 2.3% 1.8% 6.0% 5.2% 13.1% 4.1% 3.9% 3.6% 4.5% Europe and the Americas 3.2% 4.7% 9.1% 2.6% 11.8% 5.8% -0.4% -0.2% 2.0% 7.4% 5.9% 2.8% 5.4% 3.7% 4.4% 5.6% 5.6% West and South Asia, and Oceania 15.7% 8.0% 8.0% 17.6% 18.9% 20.3% 14.1% 2.7% 0.7% 3.9% 6.3% 3.4% 12.7% 12.5% 4.7% 7.6% 4.2% Operating profit 3,600 3,692 3,796 5,955 4,121 4,442 1,987 5,188 2,912 2,904 3,315 6,958 17,042 15,740 16,090 16,300 20,400 +4,310 East Asia 3,871 3,971 3,796 5,623 4,503 4,773 2,318 4,858 3,221 3,870 3,361 6,407 17,261 16,454 16,861 17,200 20,600 +3,739 Europe and the Americas -188 -294 -97 165 -417 -347 -382 295 -330 -778 -139 350 -414 -852 -898 -1,100 -400 +498 West and South Asia, and Oceania -83 14 96 167 35 17 51 34 21 -187 94 200 195 138 128 200 200 +72 YoY 197.7% 41.6% 198.0% 68.8% 14.5% 20.3% -47.7% -12.9% -29.3% -34.6% 66.8% 34.1% 97.8% -7.6% 2.2% 3.6% 26.8% East Asia 173.1% 52.7% 163.2% 89.1% 16.3% 20.2% -38.9% -13.6% -28.5% -18.9% 45.0% 31.9% 104.6% -4.7% 2.5% 4.5% 22.2% Europe and the Americas - - - -58.6% - - - 79.1% - - - 18.6% - - - - - West and South Asia, and Oceania - -70.6% - 7.2% - 18.1% -47.0% -79.7% -40.0% - 84.3% 488.2% 114.6% -29.2% -7.2% 44.9% 56.3% OPM 14.6% 14.4% 14.4% 18.4% 14.5% 16.1% 7.5% 14.8% 9.0% 8.8% 9.5% 15.7% 15.6% 13.4% 11.1% 11.6% 11.8% +0.7pp East Asia 20.1% 20.2% 19.3% 23.1% 20.5% 22.5% 11.6% 18.3% 12.8% 15.3% 13.0% 19.2% 20.8% 18.3% 15.4% 16.3% 16.0% +0.6pp Europe and the Americas -5.4% -7.6% -2.2% 3.1% -10.3% -8.8% -9.2% 5.4% -7.5% -17.1% -2.5% 5.2% -2.4% -4.8% -4.2% -5.1% -1.5% +2.8pp West and South Asia, and Oceania -4.6% 0.7% 4.4% 6.0% 1.5% 0.7% 2.1% 1.1% 0.7% -5.9% 2.6% 4.8% 2.2% 1.3% 0.9% 1.5% 1.3% +0.3pp Store count (including licensees) 302 308 320 344 347 362 384 403 408 422 439 457 344 403 457 457 505 +48 East Asia 190 197 207 227 232 245 260 279 283 293 306 319 227 279 319 316 362 +43 Europe and the Americas 73 70 70 72 70 69 70 69 71 70 71 72 72 69 72 74 71 -1 West and South Asia, and Oceania 39 41 43 45 45 48 54 55 54 59 62 66 45 55 66 67 72 +6

(JPYbn) (JPYbn) Operating revenue Operating profit OPM (right axis) Operating revenue Operating profit 50 20% 200 18% OPM (right axis) 45 18% 180 16% 40 160 16% 14% 35 140 30 14% 120 12% 25 12% 100 10% 20 10% 80 8% 15 60 8% 6% 10 7.0 40 6.0 5.2 20.4 3.5 3.6 3.7 3.8 4.1 4.4 3.3 17.0 15.7 16.1 2.6 2.0 2.9 2.9 6% 8.6 4% 5 0.7 1.2 0.8 1.0 1.2 1.3 20 3.7 0 4% 0 2% Q1 Q1 Q1 Q1 Q1 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Est. Source: Shared Research based on company data East Asia

East Asia FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Act. Est. Est. Change Operating revenue 19,304 19,708 19,714 24,319 21,978 21,240 19,998 26,486 25,221 25,372 25,778 33,431 83,045 89,704 109,803 105,500 129,100 +19,297 Sales 19,303 19,784 19,726 24,362 China 11,258 11,671 12,049 14,758 13,384 13,048 12,227 16,293 15,616 15,191 15,964 22,127 49,736 54,952 68,898 Hong Kong 3,573 3,269 3,383 3,718 3,680 3,164 3,217 3,824 3,686 3,504 3,721 4,607 13,943 13,885 15,518 Taiwan 3,123 3,327 2,882 4,003 3,390 3,224 2,753 4,123 3,765 3,941 3,457 5,124 13,335 13,490 16,287 South Korea 1,348 1,439 1,402 1,839 1,522 1,805 1,801 2,247 2,152 2,737 2,636 3,363 6,028 7,375 10,888 YoY 68.7% 56.7% 44.4% 29.7% 13.9% 7.8% 1.4% 8.9% 14.8% 19.5% 28.9% 26.2% 47.2% 8.0% 22.4% 17.6% 17.6% -4.8pp Sales 68.6% 57.4% 44.6% 26.7% China 93.9% 75.2% 57.8% 40.6% 18.9% 11.8% 1.5% 10.4% 16.7% 16.4% 30.6% 35.8% 65.1% 10.5% 25.4% Hong Kong 39.7% 41.3% 33.0% 7.9% 3.0% -3.2% -4.9% 2.9% 0.2% 10.7% 15.7% 20.5% 28.2% -0.4% 11.8% Taiwan 43.1% 36.7% 27.9% 7.3% 8.5% -3.1% -4.5% 3.0% 11.1% 22.2% 25.6% 24.3% 25.8% 1.2% 20.7% South Korea 48.8% 24.2% 15.6% 18.6% 12.9% 25.4% 28.5% 22.2% 41.4% 51.6% 46.4% 49.7% 24.9% 22.3% 47.6% Sales (local currency) 48.9% 33.5% 26.5% 18.2% 22.6% 22.1% 17.8% 25.3% 18.2% 17.9% 18.3% 18.3% 32.1% 24.7% 14.0% 14.4% +0.4pp China 71.8% 48.2% 37.7% 31.8% 28.8% 26.5% 18.8% 32.2% 24.0% 22.6% 29.6% 20.9% 47.6% 29.8% 23.4% Hong Kong 20.6% 18.7% 13.0% -5.8% 6.5% 4.2% 5.9% 14.1% 1.5% 8.9% 16.8% 16.8% 12.2% 10.7% 8.8% Taiwan 28.3% 17.7% 15.6% 4.2% 17.6% 13.9% 13.4% 12.8% 5.9% 11.3% 10.3% 10.3% 14.9% 14.3% 10.6% South Korea 32.1% 11.3% 11.8% 16.7% 27.3% 48.8% 46.4% 37.3% 37.7% 43.4% 36.9% 36.9% 17.2% 39.9% 39.3% Sales (local currency; comparable st ores) 26.5% 12.9% 10.1% 4.7% 5.0% 5.9% 0.8% 4.2% 2.3% 1.8% 6.0% 5.2% 13.1% 4.1% 3.9% 3.6% 4.5% +0.6pp China 38.6% 22.6% 15.9% 9.7% 4.7% 5.4% 0.8% 7.6% 5.8% 1.8% 7.1% 4.0% 20.4% 4.7% 4.6% Hong Kong 16.0% 8.9% 9.8% 0.5% 1.6% 3.4% -2.9% -0.8% -4.8% -1.8% 1.8% 2.7% 8.1% 0.7% -0.6% Taiwan 11.0% -3.6% -2.1% -8.9% 5.6% 4.6% 0.7% -2.1% -3.5% 1.3% 5.5% 10.3% -2.3% 2.1% 3.9% South Korea 8.2% -7.4% -0.5% 10.0% 18.0% 20.9% 10.2% 0.1% -2.8% 8.2% 5.7% 10.7% 0.9% 11.4% 6.3% Operating profit 3,871 3,971 3,796 5,623 4,503 4,773 2,318 4,858 3,221 3,870 3,361 6,407 17,261 16,452 16,861 17,200 20,600 +3,739 YoY 173.1% 52.7% 163.2% 89.1% 16.3% 20.2% -38.9% -13.6% -28.5% -18.9% 45.0% 31.9% 104.7% -4.7% 2.5% 4.5% 22.2% OPM 20.1% 20.2% 19.3% 23.1% 20.5% 22.5% 11.6% 18.3% 12.8% 15.3% 13.0% 19.2% 20.8% 18.3% 15.4% 16.3% 16.0% +0.6pp Store count (including licensees) 190 197 207 227 232 245 260 279 283 293 306 319 227 279 319 316 362 +43 China 128 132 140 160 163 173 183 200 202 210 219 229 160 200 229 230 264 +35 Hong Kong 14 15 15 15 15 16 17 17 16 17 18 19 15 17 19 18 19 - Taiwan 34 36 38 38 39 40 41 42 43 43 44 45 38 42 45 44 48 +3 South Korea 14 14 14 14 15 16 19 20 22 23 25 26 14 20 26 24 31 +5 Source: Shared Research based on company data

At the East Asia business, the company forecasts 17.6% higher sales and 22.2% higher operating profit. It forecasts 14.4% higher sales in local currency terms. Comparable store sales are expected to rise 4.5% as new store openings in China and other areas

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will make a contribution. In FY02/19, the East Asia business is again expected to drive consolidated earnings as the impact of valuation losses had more or less dropped out by Q4 FY02/18; the company is projecting comparable store sales growth of 4.5% (with the aid of a resumption of cosmetics shipments to China* from June); and 35 new stores are scheduled to open. Refurbishments are expected to proceed in line with the medium-term plan (target of 20 stores annually). At stores refurbished in FY02/18, sales growth picked up sharply from 4.1% prior to the renovations, to 21.4% afterward.

OPM OPM is expected to be up 0.6pp YoY to 16.0%, still short of the 17–18% targeted by the company. In light of rising personnel costs alongside economic developments in China, Ryohin Keikaku says it aims to achieve an OPM of at least 15% in the East Asia business, which really is not inconsistent with the goal of a 17–18% OPM. Not only does the company have the capacity to open more high-performance stores, but now that its brand power is increasing it can also achieve this in minor cities and suburban areas. The company’s plan is therefore to increase the total amount of operating profit while maintaining a 15% OPM. Shared Research understands that Ryohin Keikaku ultimately aims to achieve an OPM of 17–18% by growing sales.

Merchandising In addition, due to economic developments in China, the company’s sales mix has shifted from foods (roughly 10% of FY02/18 sales) to apparel (46%) and household goods (45%). It expects household goods, where its strength lies, to drive earnings—not only health & beauty products (over 22%), but also fabric and furniture, for which the company reported an increased sales weighting in FY02/18. In food, Ryohin Keikaku aims to raise the ratio of items sourced domestically (of the 200 or so items available in FY02/18, about 150 were produced in China). In apparel, meanwhile, the company looks to continue growing sales of womenswear by maintaining a focus on natural materials, while also expanding offerings in other popular categories including inner wear, menswear and children’s clothing.

Cosmetics licensing issue: In China, licenses governing hygiene products must be renewed every four years. Ryohin Keikaku began full-fledged sales of skincare products in China in 2013, and in 2017 it was required to renew the license for its anti-aging cosmetics. Obtaining this license was time-consuming, though, as 1) a change in the brand name necessitated a new certificate to permit customs clearance; and 2) at that time the Chinese government was cracking down on imports. As a consequence, there was a fall from Jul–Aug 2017 in exports of some products to China. This had a massive impact, as sales of these products had reached around CNY12mn monthly (about JPY200mn, or JPY2.4bn annually). Ryohin Keikaku puts the drain on sales at around JPY1.0bn. Even without these products, though, sales of health and beauty products in China grew by more than 20% in FY02/18. A new license was obtained in April 2018, and Ryohin Keikaku will be able to resume sales from June, likely buoying both sales and profits in FY02/19.

E-commerce In addition, the e-commerce weighting in China is still only 6.9% (operating revenue in China is JPY68.9bn), leaving abundant room for growth. In 1H FY02/19, the company says it plans to construct a new standardized global platform for the MUJI Passport, integrating logistics and payment systems. In terms of logistics, Ryohin Keikaku seeks to improve profitability through the relocation of distribution centers and an overhaul of methods used to select delivery contractors. At present there are only two online sales channels—the company’s own website and T-mall—but Ryohin Keikaku says this could change if the opportunity arises.

East Asia

(JPYbn) (JPYbn) Operating revenue Operating profit OPM (right axis) Operating revenue Operating profit 40 24% 140 22% OPM (right axis) 35 20% 120 20% 30 100 16% 18% 25 80 20 12% 16% 60 15 8% 14% 40 10 6.4 5.6 4.9 17.3 20.6 3.9 4.0 3.8 4.5 4.8 3.9 4% 16.5 16.9 12% 5 2.6 3.0 2.3 3.2 3.4 20 8.4 0.8 1.2 0.9 0.6 1.4 1.4 3.4 0 0% 0 10% Q1 Q1 Q1 Q1 Q1 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Est. Source: Shared Research based on company data

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China 25 90% Sales (JPYbn) YoY (local currency; right axis) 22.1 300 Store count Net increase (right axis) 45 80% 264 20 250 70% 40 229 40 16.3 15.6 16.0 200 14.8 15.2 60% 15 200 13.413.0 35 35 35 12.0 12.2 50% 160 11.311.7 10.5 40% 150 128 32 10 7.6 100 30 6.7 30% 29 6.2 5.8 100 28 4.8 65 27 3.7 4.3 20% 5 3.2 38 25 2.4 1.9 1.9 2.2 50 1.2 1.2 1.6 10% 0 0% 0 20 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/12 FY02/14 FY02/16 FY02/18 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18

Comparable store sales growth (left) and all stores’ sales growth (right) in local currency terms

East Asia China Hong Kong Taiwan South Korea East Asia China Hong Kong Taiwan South Korea 40% 80%

70% 30% 60%

20% 50% 40% 10% 30%

20% 0% 10%

-10% 0% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/18 FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data Europe and the Americas

Europe and the Americas FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Act. Est. Est. Change Operating revenue 3,493 3,874 4,430 5,328 4,029 3,938 4,172 5,462 4,393 4,552 5,524 6,754 17,124 17,603 21,225 21,600 27,400 +6,175 Sales 3,471 3,838 4,402 5,308 UK 1,038 780 1,153 1,281 819 729 895 1,082 779 847 1,022 1,134 4,252 3,525 3,782 France 687 701 727 940 623 596 604 901 612 657 692 823 3,055 2,724 2,784 It aly 332 371 399 544 344 403 389 560 398 397 444 564 1,646 1,696 1,803 Germany 407 475 479 624 455 426 391 532 416 471 524 623 1,985 1,804 2,034 Spain - - - - 192 185 181 281 211 231 230 318 - 839 990 Portugal - - - - 41 44 49 56 57 66 70 77 - 190 270 US 889 1,051 1,191 1,520 1,273 1,261 1,358 1,552 1,518 1,468 1,784 2,152 4,651 5,444 6,922 Canada 116 164 163 278 198 226 240 1,145 329 353 692 905 721 1,809 2,279 Other (wholesale) 191 162 318 140 79 68 68 72 70 61 66 160 811 287 357 YoY 17.4% 22.4% 22.4% 4.4% 15.4% 1.7% -5.8% 2.5% 9.0% 15.6% 32.4% 23.7% 15.2% 2.8% 20.6% 22.7% 29.1% +8.5pp Sales 52.4% 56.8% 60.1% 36.1% - UK 12.9% -20.6% -5.8% -14.3% -21.1% -6.5% -22.4% -15.5% -4.9% 16.2% 14.2% 4.8% 9.1% -17.1% 7.3% France 6.0% 2.6% 3.0% -20.7% -9.3% -15.0% -16.9% -4.1% -1.8% 10.2% 14.6% -8.7% -3.2% -10.8% 2.2% It aly 0.0% 3.6% 13.0% -3.9% 3.6% 8.6% -2.5% 2.9% 15.7% -1.5% 14.1% 0.7% 2.0% 3.0% 6.3% Germany 7.7% 12.0% 2.8% -4.4% 11.8% -10.3% -18.4% -14.7% -8.6% 10.6% 34.0% 17.1% 3.3% -9.1% 12.7% Spain 9.9% 24.9% 27.1% 13.2% 18.0% Portugal 39.0% 50.0% 42.9% 37.5% 42.1% US 43.2% 20.0% 14.0% 2.1% 19.2% 16.4% 31.4% 38.7% 40.7% 17.1% 27.1% Canada 70.7% 37.8% 47.2% 311.9% 66.2% 56.2% 188.3% -21.0% 580.2% 150.9% 26.0% Sales (local currency) 11.9% 10.6% 15.3% 6.3% 23.0% 19.4% 10.4% 17.0% 15.1% 13.8% 16.0% 18.2% 12.1% 19.0% 18.2% - 25.6% +7.4pp UK 6.7% -0.7% 7.0% -3.0% 5.9% -1.5% 6.9% 7.8% 9.2% 19.4% 6.1% 6.1% 3.5% 5.2% 7.2% France 13.6% 4.6% 6.8% -12.8% -5.3% -2.4% -1.5% 5.0% 3.3% 4.0% -0.3% -0.3% 0.1% 0.9% -4.2% It aly 7.2% 5.8% 14.1% 3.3% 8.4% 23.4% 15.5% 12.7% 21.5% -6.5% -0.3% 9.5% 7.0% 14.9% -0.3% Germany 15.4% 14.5% 4.4% 3.1% 16.8% 2.8% -3.0% -6.5% -3.9% 4.3% 16.9% 5.2% 8.3% 1.4% 5.7% Spain 15.7% 17.7% 10.3% 2.0% 8.3% 1.4% 10.6% Portugal 43.7% 44.3% 25.3% 21.8% 8.3% 1.4% 33.0% US 18.2% 32.2% 15.1% 31.3% 47.5% 34.4% 34.6% 13.4% 21.2% 13.4% 22.1% 35.4% 22.8% 30.5% 23.4% Canada 94.8% 62.4% 73.9% 73.8% 62.1% 58.1% 162.3% 98.6% 74.7% 98.4% Sales (local currency; comparable st ores) 3.2% 4.7% 9.1% 2.6% 11.8% 5.8% -0.4% -0.2% 2.0% 7.4% 5.9% 2.8% 5.4% 3.7% 4.4% 5.6% 5.6% +1.2pp UK 1.7% 4.4% 5.2% -6.9% 5.3% -3.2% 6.2% 5.6% 9.7% 13.3% 9.4% 1.3% 1.2% 4.6% 8.4% France -4.2% -14.6% 2.8% -3.4% 10.7% 11.2% -3.8% 10.6% 6.2% 7.5% 10.7% -2.4% -4.0% 5.4% 5.0% It aly 5.5% 4.6% 10.6% 1.5% 14.9% 5.6% 3.0% -5.2% -1.7% -6.4% -0.1% -5.1% 5.7% 3.2% -1.9% Germany 5.2% 4.1% 0.5% -0.4% 16.0% 5.9% 15.1% 14.1% 12.2% 14.3% -1.5% -2.0% 2.1% 9.2% 4.5% Spain 11.5% 13.1% 11.6% 10.6% 11.6% Portugal 43.0% 43.4% 28.4% 77.5% 46.5% US 8.9% 20.3% 24.0% 16.1% 10.8% 6.6% -12.1% -11.1% -4.3% 6.8% 4.5% 6.8% 17.5% -3.2% 3.3% Canada 29.9% 13.0% 19.4% 4.5% -7.5% -4.2% 0.1% 2.4% 15.3% -1.9% Operating profit -188 -294 -97 165 -417 -347 -382 295 -330 -778 -139 350 -414 -851 -898 -1,100 -400 +498 OPM -5.4% -7.6% -2.2% 3.1% -10.3% -8.8% -9.2% 5.4% -7.5% -17.1% -2.5% 5.2% -2.4% -4.8% -4.2% -5.1% -1.5% +2.8pp Store count 73 70 70 72 70 69 70 69 71 70 71 72 72 69 72 74 71 -1 UK 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 - France 12 10 10 9 9 9 9 9 9 8 7 7 9 9 7 7 7 - It aly 9 9 9 9 9 9 9 9 9 9 8 8 9 9 8 8 8 - Germany 8 8 8 8 8 7 7 7 7 7 7 7 8 7 7 7 7 - Spain 6 6 6 6 6 6 6 6 6 6 6 6 - Portugal 1 1 1 1 1 1 1 1 1 1 1 2 +1 US 9 9 10 11 11 11 12 12 14 14 15 15 11 12 15 16 17 +2 Canada 1 1 1 2 2 2 2 3 3 3 5 6 2 3 6 7 9 +3 Licensees 22 21 20 21 12 12 12 10 10 10 10 10 21 10 10 10 3 -7 Source: Shared Research based on company data

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(JPYbn) (JPYbn) Operating revenue Operating profit Operating revenue Operating profit 30 8 7 25 6 20 5 4 15 3 10 2 5 1 0.4 0.4 0.3 0.4 0.0 0.2 0.3 0.1 0 0 -0.0 -0.1 -0.1 -0.0 -0.1 -0.1 -0.1 -1 -0.2 -0.3 -0.4 -0.3 -0.4 -0.3 -0.4 -0.9 -0.9 -0.4 -0.8 -5 -2 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 Q1 Q1 Q1 Q1 Q1 Est. FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data

In Europe and the Americas, Ryohin Keikaku seeks to achieve an OPM of 5%. It expects operating losses to linger in FY02/19, but only because of the North America business. In Europe, elimination of unprofitable stores is more or less complete, and the business is now profitable if head-office costs are excluded. In FY02/19 the aim is to achieve profitability on an accounting basis also. Also, Ryohin Keikaku intends to open a third (large) store in Berlin, Germany, as part of its scheme for opening global flagship stores in Europe. This is consistent with the company’s plan to roll out stores conveying the Mujirushi Ryohin world view in major cities around the global, carrying a product lineup similar to those in Japanese stores.

Earnings at the North America business have been hard hit by delays in opening the flagship US store (in New York) after refurbishment. The store closed for refurbishment in March 2017, but because of these delays the re-opening has been pushed back to May 2018. In Canada, new store rollout is proceeding apace. Since opening its first store in Toronto in 2014, the company has sought to build a dominant position in the market, opening its first Vancouver store in August 2017, and promptly opening its Canadian flagship store, also in Vancouver, in December 2017. In FY02/19, Ryohin Keikaku is targeting two new stores in the US and three in Canada. It seeks to bring the North America business into the black in FY02/20.

Europe business: A subsidiary in the UK controls the European business, which means that a weak British pound affects procurement prices for the whole Europe business. The business has seen protracted effects from less profitable inventories purchased when the British pound was weak in FY02/17, at the time of Brexit, and from low inventory turnover (the company has an inventory turnover rate of less than two times in the Overseas business).

West and South Asia, and Oceania

West and South Asia, Oceania FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 - FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Act. Est. Est. Change Operating revenue 1,802 2,121 2,204 2,784 2,338 2,436 2,397 3,084 2,870 3,153 3,570 4,134 8,911 10,256 13,729 13,600 16,000 +2,271 Sales (operating revenue from FY02/17) 1,624 1,843 1,943 3,425 13,729 Singapore 773 885 899 1,059 915 898 925 1,144 1,007 1,108 1,355 1,629 3,616 3,882 5,099 Malaysia 227 182 214 273 260 256 247 298 301 378 421 469 896 1,061 1,569 T hailand 484 419 437 573 557 522 488 648 613 668 719 831 1,913 2,215 2,831 India - - 60 77 63 131 109 147 137 450 Aust ralia 138 358 392 414 386 416 406 532 522 530 606 647 1,302 1,740 2,305 Ot her w holesale - 454 261 467 218 345 270 385 361 340 359 413 1,182 1,218 1,473 YoY 60.4% 43.1% 34.9% 38.1% 29.8% 14.9% 8.8% 10.8% 22.8% 29.4% 48.9% 34.0% 42.5% 15.1% 33.9% 32.6% 16.5% -17.3pp Sales 62.5% 52.6% 38.6% 30.3% Singapore 47.8% 49.0% 20.8% 15.0% 18.4% 1.5% 2.9% 8.0% 10.1% 23.4% 46.5% 42.4% 30.7% 7.4% 31.3% Malaysia 127.0% 33.8% 45.6% 40.7% 14.5% 40.7% 15.4% 9.2% 15.8% 47.7% 70.4% 57.4% 51.4% 18.4% 47.9% T hailand 48.9% 26.6% 17.2% 26.5% 15.1% 24.6% 11.7% 13.1% 10.1% 28.0% 47.3% 28.2% 28.6% 15.8% 27.8% Aust ralia 181.6% 143.5% 186.1% 149.4% 179.7% 16.2% 3.6% 28.5% 35.2% 27.4% 49.3% 21.6% 160.9% 33.6% 32.5% Sales (local currency) 47.2% 33.7% 30.6% 41.5% 42.2% 30.8% 43.3% 20.2% 24.2% 25.9% 30.1% 30.1% 37.3% 28.4% 25.9% - 12.9% -13.0pp Singapore 37.2% 34.7% 13.8% 15.4% 26.4% 15.0% 19.1% 20.5% 12.8% 23.1% 36.7% 29.3% 23.2% 19.9% 27.3% Malaysia 114.4% 26.2% 55.6% 60.7% 37.2% 73.9% 38.4% 25.6% 24.2% 55.3% 66.5% 45.7% 55.1% 36.8% 48.7% T hailand 28.4% 9.4% 9.0% 27.4% 29.7% 48.4% 32.2% 24.5% 10.0% 20.9% 30.1% 17.1% 29.1% 32.0% 19.3% Aust ralia 176.8% 143.0% 204.0% 173.9% 214.5% 35.6% 20.0% 39.5% 30.7% 23.1% 32.8% 14.4% 160.7% 50.5% 24.5% Sales (local currency; comparable st ores) 15.7% 8.0% 8.0% 17.6% 18.9% 20.3% 14.1% 2.7% 0.7% 3.9% 6.3% 3.4% 12.7% 12.5% 4.7% 7.6% 4.2% -0.5pp Singapore 8.9% 10.8% 10.2% 22.0% 24.2% 13.7% 12.7% -4.8% -6.4% 2.0% -3.4% 1.2% 13.4% 9.9% -1.6% Malaysia 35.0% 2.7% 15.5% 16.9% 0.8% 26.5% 13.8% 18.5% 11.5% 13.3% 17.5% 5.4% 17.1% 11.8% 11.6% T hailand 25.1% 6.1% 2.7% 9.8% 12.6% 23.8% 15.7% 9.6% -0.8% - 10.0% 1.1% 11.5% 15.5% 3.5% Aust ralia -13.8% -2.2% 5.8% 17.5% 35.0% 46.2% 22.0% 32.2% 13.3% 8.9% 15.8% 9.7% 2.1% 31.7% 11.8% Operating profit -83 14 96 167 35 17 51 34 21 -187 94 200 195 137 128 200 200 +72 YoY - -70.6% - 7.2% - 18.1% -47.0% -79.7% -40.0% - 84.3% 488.2% 116.7% -29.7% -6.6% 2.6% 56.3% OPM -4.6% 0.7% 4.4% 6.0% 1.5% 0.7% 2.1% 1.1% 0.7% -5.9% 2.6% 4.8% 2.2% 1.3% 0.9% 1.5% 1.3% +0.3pp Store count (including licensees) 39 41 43 45 45 48 54 55 54 59 62 66 45 55 66 67 72 +6 Singapore 9 9 9 9 9 9 10 10 10 10 11 11 9 10 11 11 11 - Malaysia 4 4 5 5 5 5 5 5 6 7 7 7 5 5 7 7 7 - T hailand 11 11 12 13 13 13 13 14 14 15 15 16 13 14 16 17 17 +1 India ------2 2 2 3 3 4 - 2 4 4 6 +2 Aust ralia 2 3 3 3 3 3 3 3 3 3 3 3 3 3 3 4 5 +2 Indonesia 2 2 2 3 3 4 6 6 6 8 8 8 3 6 8 6 7 -1 Philippines 7 7 7 7 7 7 7 7 5 4 4 4 7 7 4 4 5 +1 Kuw ait 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 - UAE 3 3 3 3 3 4 4 4 4 4 5 5 3 4 5 6 6 +1 Source: Shared Research based on company data

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(JPYbn) (JPYbn) Operating revenue Operating profit Operating revenue Operating profit 4.5 18 4% OPM (right axis) 4.0 16 3.5 14 3% 3.0 12 2.5 10 2.0 2% 8 1.5 6 1.0 4 1% 0.5 0.2 0.2 0.2 0.1 0.0 0.0 0.0 0.1 0.0 0.0 0.1 0.0 0.0 0.1 0.0 2 0.1 0.2 0.1 0.1 0.2 -0.0 -0.0 -0.0 0.0 -0.5 -0.1 -0.1 -0.2 0 0% Q1 Q1 Q1 Q1 Q1 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Est. Source: Shared Research based on company data

In West and South Asia, and Oceania, the company targets an OPM of 7–8%. By FY02/21, though, it apparently is determined to achieve an OPM as close as possible to 10%. The plan is to continue opening stores at the current speed.

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Medium-term management plan (initial targets as of FY02/18)

FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 FY02/21 (JPYmn) Act. Act. Act. Act. Est. Target Target Target Change Operating revenue 220,620 260,254 307,532 333,281 373,900 500,000 +166,719 Domest ic 171,924 182,702 198,449 215,716 233,200 290,000 +74,284 Overseas 48,472 77,547 109,080 117,563 140,700 210,000 +92,437 East Asia 31,276 56,430 83,045 89,704 105,500 Europe and the Americas 12,306 14,861 17,124 17,603 21,600 West and South Asia, Oceania 4,890 6,255 8,911 10,256 13,600 Other 224 6 2 1 - 4-yr CAGR Yo Y - 18.0% 18.2% 8.4% 12.2% * 10.7% Domest ic - 6.3% 8.6% 8.7% 8.1% * 7.7% Overseas - 60.0% 40.7% 7.8% 19.7% * 15.6% East Asia - 80.4% 47.2% 8.0% 17.6% Europe and the Americas - 20.8% 15.2% 2.8% 22.7% West and South Asia, Oceania - 27.9% 42.5% 15.1% 32.6% Comparable store sales growth (local currency) - Parent 3.8% 2.7% 4.9% 2.1% 4.0% Overseas 5.8% 6.6% 11.7% 4.6% 4.3% East Asia 10.5% 10.1% 13.1% 4.1% 3.6% Aim for 5% Aim for 5% Aim for 5% Operating gross profit 101,665 122,831 150,451 165,861 184,900 Operating GPM 46.1% 47.2% 48.9% 49.8% 49.5% Aim higher SG&A expenses 80,749 98,984 116,012 127,583 142,600 YoY - 22.6% 17.2% 10.0% 11.8% % of operating revenue 36.6% 38.0% 37.7% 38.3% 38.1% Current level Operating profit 20,916 23,846 34,439 38,278 42,300 60,000 +21,722 Domest ic 16,859 14,708 17,062 21,953 24,000 Overseas 3,689 8,618 17,042 15,740 17,700 East Asia 3,420 8,434 17,261 16,454 18,200 Europe and the Americas 268 93 -414 -852 -800 West and South Asia, Oceania 2 91 195 138 300 Other 360 479 586 620 600 Adjustments 8 42 -253 -35 - Yo Y - 14.0% 44.4% 11.1% 10.5% * 11.9% OPM 9.5% 9.2% 11.2% 11.5% 11.3% 12.0% +0.5pp Domest ic 9.8% 8.1% 8.6% 10.2% 10.3% - Overseas 7.6% 11.1% 15.6% 13.4% 12.6% - East Asia 10.9% 14.9% 20.8% 18.3% 17.3% Current level Europe and the Americas 2.2% 0.6% -2.4% -4.8% -3.7% Aim for 5% West and South Asia, Oceania 0.0% 1.5% 2.2% 1.3% 2.2% Aim for 10% Store count (incl. Café&Meal and IDÉE) 8 806 870 934 1,000 1,100 1,200 +330 Domest ic 450 452 456 465 483 502 +50 Small-scale stores (330sqm or below) NA 13 18 100 +87 Overseas 356 418 478 535 617 698 +280 East Asia 236 292 332 376 425 474 +182 Europe and the Americas 72 69 77 80 91 102 +33 West and South Asia, Oceania 48 57 69 79 101 122 +65 MUJI 760 821 884 957 1,047 1,138 +317 Café&Meal, IDÉE, others 46 49 50 43 53 62 +13 Op. revenue / Store count (year-end average) 398 415 435 +37 Domest ic 478 514 589 +111 Overseas 304 314 319 +16 Net increase 64 64 66 100 100 +36 Domest ic 2 4 9 18 19 +17 Overseas 62 60 57 82 81 +19 East Asia 56 40 44 49 49 -7 Europe and the Americas -3 8 3 11 11 +14 West and South Asia, Oceania 9 12 10 22 21 +12 MUJI 61 63 73 90 91 +30 Café&Meal, IDÉE, others 3 1 -7 10 9 +6 Exchange rate (annual average) JPY/USD 97.7 105.9 121.1 108.8 109.8 JPY/EUR 131.6 140.1 133.6 119.8 124.5 JPY/CNY 15.9 17.2 19.2 16.4 16.9 Source: Shared Research based on company data

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Review of the previous medium-term management plan (FY02/14 to FY02/17)

Earnings since foundation

(JPYbn) Operating profit OPM 2 years each to reach (JPYbn) Operating revenue 45% 2 years to 500 14% 10 yrs to reach JPY10bn 14 more years to reach JPY20bn JPY30bn and 40bn 70 reach JPY300bn 40% 10 yrs to reach JPY100bn 14 more years to reach JPY200bn 12% 60 35% 400 30% 10% 50

25% 300 8% 40 20% 15% 200 6% 30 10% 4% 20 5% 100 2% 10 0% -5% 0 0% 0 FY02/91 FY02/96 FY02/01 FY02/06 FY02/11 FY02/16 FY02/21 FY02/91 FY02/96 FY02/01 FY02/06 FY02/11 FY02/16 FY02/21 Source: Shared Research based on company data

The numerical targets in the previous medium-term plan are consolidated sales of JPY300bn (overseas sales: JPY100bn), a consolidated recurring profit of JPY35.0bn, and ROE of over 15%. In order to attain these targets, the company set the following sub-targets: an increase of 10% in sales per square meter globally; a reduction of 1% in the ratio of logistics-related costs to sales; and a global e-commerce sales composition ratio of 8% (JPY24.0bn). As shown in the table blow, the company achieved all the numerical targets, but failed to achieve some sub-targets. It is noticeable that the company is behind in GSCM-related initiatives. According to the new medium-term plan, the company looks to continue the direction presented in the previous medium-term plan to increase operational accuracy and also take early action against the unachieved targets.

Review on the previous medium-term plan

Target FY02/17 Act. Evaluation by company and comments Consolidat ed sales JPY300.0bn JPY332.5bn ++ Met target in FY02/16 thanks to rise in composition of overseas business and solid domestic business Overseas sales JPY100.0bn JPY117.5bn ++ Met target in FY02/16 thanks to solid store openings in China and favorable business in East Asia Cons. recurring profit JPY35.0bn JPY38.6bn ++ Met target thanks to contributions of business in East Asia ROE Over 15% 17.7% ++ Continuing to meet the target in FY02/18 and onward with double-digit profit growth Objectives FY02/17 Act. Evaluation by company and comments Global store count 888 stores Japan: 418 stores - - Domestic store openings in line with plan; Seiyu closure meant net store count underperforming target Overseas: 403 stores Target missed due to restructuring in Europe and delays in openings in newly entering countries Total: 821 stores Reached 200 stores in China Global sales space efficiency Up 10% Up 15.0% (FY02/17) ++ Up 10% (Japan) and 24.7% (overseas) vs. FY02/14 due to comparable store sales growth (2.1% in Japan, 4.6% overseas in FY02/17) Renovate to "new environment" format 87 stores in Japan, 39 overseas + Largely in line w it h plans in Japan; renovat ed regional flagship st ores in Europe follow ing Asia 60 in Japan, 40 overseas Promote global strategic products with proper pricing - Prices reviewed in each market, but recent stronger yen forced price increases; need operations to maintain prices even with forex changes Logistics cost cut by 1% of sales (JPY3.0bn) Cost cuts equivalent to JPY2.7bn - - Domest ic invent ory not in line w it h plan; expense opt imizat ion by opening of Hat oyama cent er limit ed Preferential tariff treatment has large impact overseas Global invent ory efficiency Up 20% Down 33.9% vs. FY02/14 - - Consolidated merchandise turnover down by 34% (3.73 in FY02/14, 3.10 in FY02/15, 2.89 in FY02/16, and 2.55 in FY02/17) (FY02/17) Inventory increase overseas for growth in sales and transaction volume; strategic inventory build for household goods in Japan Global e-commerce rat io 8％ (JPY24.0bn) Approx. JPY22.6bn - - Introduce systems to match local demand, and use them as the base for communication with local community Source: Shared Research based on company data

Overall impression Looking at the new medium-term plan, Shared Research understands that the company looks to develop a business foundation that allows continuous long-term growth in Japan and abroad. The company plans to resolve remaining issues from the previous medium-term plan and evolve and deepen its foundation (GSCM, product development capability, store development, and human resource development). Therefore, Shared Research understands that the company plans to increase operational accuracy in GSCM etc., develop attractive stores of a high per-square meter efficiency, improve its product development capability to provide a wide range of products to the infrastructure at appropriate quality and prices, and accelerate store opening on the basis of these achievements especially in the latter half of the plan.

The new medium-term plan presents targets, tasks, and actions to achieve the tasks. The following shows the outline of the plan along with thoughts about the numerical targets. As shown in the table above, the numerical targets can be understood as an extension of past results. The company appears to consider that it can achieve these targets (excluding exchange fluctuations) if it maintains the speed of FY02/17.

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Basic policy As a basic policy, the medium-term plan “prioritizes the sale floor, globally developing a culture and structure where everyone can demonstrate good-heartedness and creativity.” Specifically, the company plans to establish standardized operations to realize efficient work processes for a variety of personnel and operations; create a culture for creative ideas and practices as the next step of standardization; and keep improving brand and corporate values.

Targets and tasks

Goals Tasks

Provide unparalleled selection of merchandise at Improve global supply chain management reasonable prices

Contribute to regional community through proper quality Strengthen product development and prices

Develop human resources focusing on expertise and diversity Develop human resources for global operations

Build the base for sustainable growth Ensure corporate governance

Specific tasks

Action items for each task

- Reduce store mark down by making more precise plans (20% improvement for Apparel) Improve global supply chain management - Make inventories more efficient through better procurement flows（50% cut in warehouse inventories)

- Develop core it ems t hat contribute t o regional communit ies Expand flagship st ores in main count ries Strengthen product development Enlarge domestic store size (aim for 100 stores with floor space around 15,000sqm) Promote renovation in Japan and overseas (20 stores per year in China) - Reduce price differences globally (unify pricing of global strategic goods)

Develop human resources for global operations - Build management system of personnel for global operations - Int roduce incentive plans globally

Ensure corporate governance - Build st andard systems to be applied globally

Source: Shared Research based on company data

Numerical targets Sales of JPY500bn FY02/21 numerical targets are sales of JPY500.0bn and an operating profit of JPY60.0bn (OPM: 12%). The company expects sales to increase JPY166.7bn in four years (average annual growth rate: 10.7%). Domestic and overseas sales are expected to increase JPY74.3bn (average: 7.7%) and JPY92.4bn (average: 15.6%), respectively. Both domestic and overseas sales are expected to grow, and overseas sales in particular are expected to make a significant contribution to overall sales.

Although the company has not disclosed an overseas sales breakdown, it is possible to roughly calculate using the store-count plan. Comparing year-end store counts in FY02/17 with those expected for FY02/21, the four-year average store increase rate is 17% in East Asia, 13.7% in Europe and the Americas, and 21.2% in West and South Asia, and Oceania. Applying this to sales, sales targets are JPY153.0bn in East Asia, JPY24.0bn in Europe and the Americas, and JPY22.0bn in West and South Asia, and Oceania, which totals JPY199.0bn, JPY11.0bn short of the overall overseas target JPY210.0bn. The company commented that it plans to increase large flagship stores in North America, the next priority area following East Asia. By adding JPY11.0bn to the sales in Europe and the Americas, Shared Research estimates that sales in Europe and the Americas will be around JPY35.0bn.

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Store opening plan (Left: store counts; right: net increase)

Domestic East Asia Domestic East Asia Europe and the Americas West and South Asia, Oceania 1,200 120 Europe and the Americas West and South Asia, Oceania 1,200 1,100 100 100 122 1,000 100 101 1,000 934 102 22 21 870 79 91 69 80 806 80 64 64 66 11 57 77 11 800 48 69 9 72 474 60 12 10 425 3 376 600 292 332 8 236 40 49 49 56 44 400 20 40 18 19 450 452 456 465 483 502 9 200 0 2 4 -3 0 -20 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20 FY02/21 FY02/17 FY02/18 FY02/19 FY02/20 FY02/21 Source: Shared Research based on company data

1,200 stores worldwide The store-count target is 1,200, up 330 over FY02/17 year-end. The breakdown is 502 domestic stores (+50 stores) and 698 overseas stores (+280 stores). Although the company targets a domestic store net increase of just 50, it plans to expand stores to ensure sales contribution that makes up for the store count. It plans on 100 large stores of over 1,600sqm by adding 87 large stores (new stores or expanded ones) during the medium-term plan (large stores as of FY02/17 included 12 directly managed stores and one licensed stores). In the first year of the medium-term plan, FY02/18, it plans to open five large stores. The company expects solid results at these large stores to accelerate store openings in the latter half.

On April 22, 2017, a large store, the touchstone of store upsizing, opened in Hakodate. At 2,700sqm, it also contains stores such as Café&Meal, MUJI BOOKS, and OPEN MUJI. At large stores, furniture sales tend to represent a large percentage of overall sales and average customer spend on furniture also tends to rise. Although sales per square meter tends to be lower at large stores than at standard-sized stores, the company looks to focus on product development to raise average customer spend and sales per square meter since it thinks there is still room to expand its apparel lineup.

According to the medium-term plan, the company looks to raise sales per square meter at standard-sized domestic stores. On the other hand, it appears to predict a flat trend in per-square meter efficiency in consideration of the impact of store upsizing. Selling a new product at large stores allows more selling space for the product so that the product can be prominently displayed. If there are more large stores, it becomes possible to secure a large volume of new products. Distributing new products to comparable stores leads to higher sales per square meter at comparable stores. Such new products will be growth drivers over the next four years. The medium-term plan mentions improvement of product development capability. Increasing core items not only contributes to the creation of large stores and flagship stores in Japan and abroad, but also allows the company to prepare for future growth. Whether large stores attain success is crucial to future growth and product development.

Hakodate store

Source: Shared Research based on company data

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Comparable stores The company predicts that sales growth at domestic comparable stores will be on par with FY02/18 (+4% forecast). In the beginning, it expected to increase sales in 2019 onward by increasing average customer spend since the number of customers was forecasted to stay flat. When average customer spend rose 7.7% in FY02/16 (customer count: -2.6%), it switched to a strategy to increase customer count to achieve comparable store sales growth in FY02/17, without raising average customer spend. The company will continue this strategy in FY02/18. According to the new medium-term plan, the company expects higher average customer spend in FY02/19 onward. As stated above, this is because strengthened product development should facilitate store upsizing and boosting the team of specialized salespeople should raise the composition ratios of furniture and other products with higher average customer spend. Outside Japan, average customer spend is expected to decline due to a large difference between domestic and foreign prices of strategic products and the company’s intention to increase its market share.

The company plans to continue to revitalize comparable stores. The percentage of stores remodeled into the "new environment" format reached 55% of all stores at the end of FY02/17 (Japan: 60%; Overseas: 51%). The percentage of domestic directly managed stores remodeled into the new format is expected to reach 100% in FY02/19. The company plans to continue store remodeling in FY02/20 onward though at a slower pace. Successful cases at "new environment" directly managed stores are encouraging licensed stores to remodel as well.

Sales at domestic directly managed comparable stores

Customer count Customer count Customer spend Domestic directly managed stores sales growth 10% 10% Customer spend Domestic directly managed stores sales growth 8% 8% 6% 6% 4.9% 4% 3.8% 4.0% 4% 2.7% 2% 2.1% 2% 0.9% 0% 0.3% 0% -2% -0.9% -4% -2% -2.6% -6% -4% Q1 Q1 Q1 Q1 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/14 FY02/15 FY02/16 FY02/17 Est. Source: Shared Research based on company data

Progress of remodeling into the "new environment" format

FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 Act. Act. Act. Act. Target % of stores converted to the “new environment” format 14% 29% 44% 55% Converted to "new environment" 15 35 32 59 Japan 9% 22% 36% 60% 100% Total stores in Japan 385 401 414 417 Opened as "new environment" 9 26 42 23 Converted to "new environment" 15 26 20 41 Overseas 22% 41% 45% 51% Total stores overseas 255 301 344 403 New openings 57 56 50 68 Converted to "new environment" - 9 12 18

Number of specialized sales employees

FY02/14 FY02/15 FY02/16 FY02/17 （people） Act. Act. Act. Act. Number of specialized salespeople in Japan IA Interior advisors 79 88 87 112 SA St yling advisors 32 48 35 63 TA T ast ing advisors - 53 145 249 Source: Shared Research based on company data

Operating profit of JPY60.0bn (OPM: 12%) OPM is expected to be 12.0%, up 0.5pp from FY02/17. The company sees major difficulty in improving the SG&A-to-sales ratio considering that it is receiving requests for higher freight rates and needs to secure manpower for logistics, and higher personnel costs in East Asia. Therefore, it intends to increase OPM by raising operating GPM. In improving operating GPM, the company aims to combine a strengthened GSCM; rebuilt cost structure and a price strategy.

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In strengthening GSCM, the company controls cost by reducing the markdown ratio at stores through improved accuracy of production planning; well-planned production of staple products; improved procurement operations; and contained additional production costs by avoiding running out of stock. It plans to build desirable cost structure within FY02/18 while exchange fluctuations are settling down.

The pricing strategy involves reviewing prices globally with an eye on price rationality in sync with strengthening GSCM and rebuilding its cost structure. In particular, it plans to aggressively review prices for China to secure earnings growth. That said, the price strategy is carried out in consideration of consolidated OPM. If the company strategically cuts prices in China, it offsets a decline in GPM by profits from other stable areas.

Overseas business At the Overseas business, the company plans to boost operating revenue by JPY92.4bn in total, from JPY117.6bn in FY02/17 to JPY210.0bn, which means an average annual growth of 15.6%. It plans to add a total of 280 stores. In East Asia (182 stores in total), it will focus on China first and then open new stores in South Korea in the latter half. In Europe and the Americas (33 stores in total), it plans to maintain the current store count in Europe and accelerate openings in North America in the latter half. In West and South Asia, and Oceania (65 stores in total), it plans to increase stores in all the areas. The company commented that the next target area following China is North America. Shared Research therefore is looking at whether the company can build its business foundation so that North America can be one of its growth drivers in the next medium-term plan.

East Asia In East Asia, OPM is expected to remain at the current level. In opening new stores, the company plans to slow down in China to a rate of about 30 stores/year and improve store quality by remodeling about 20 comparable stores. In Taiwan and Hong Kong, it expects to add new stores at its current speed. In Korea, it will increase stores in the latter half of the plan. It will also expand stores overseas as it has been in Japan. It hopes to open one flagship store (over 3,300sqm) every year while carefully considering conditions and location.

In China, the company aims for comparable store sales growth equivalent to China’s GDP growth. By adding the effect of new store opening, it expects faster growth than China’s GDP growth. It plans to revitalize comparable stores through store remodeling and a price strategy. Since store remodeling requires that operations are interrupted for two months, landlords tend to dislike store remodeling, making it difficult to carry out full-scale store remodeling. In FY02/18, in view of this, the company plans to expand its store development and negotiation teams (store development: six to sixteen members; negotiation: one to six members) to increase its capability to negotiate with landlords. It plans to reduce the remodeling period, which is a maximum of two months, to aggressively carry out store remodeling.

North America The company targets an OPM of 5%. It plans to largely maintain the current store count in Europe and accelerate store openings in North America. In Canada, which is robust, it plans to continue to create new stores. In the US, it plans to open stores in large cities and at shopping malls and accelerate store openings in the latter half of the plan, while considering the stores’ performance. Unlike China, store opening in the US requires high amortization cost and rent is also relatively high. Accounting issues make US business more costly. As such, the four new stores to be opened in the US and the four in Canada in FY02/18 (a fiscal year ends in December in North America) will play a key role. Share Research will watch whether these stores hold the key to future growth. The company says store performance can be evaluated half a year to one year after opening.

West and South Asia, and Oceania The company aims for an OPM of 10%. It plans to open stores in all the areas at its current speed. In India, it plans to open two stores a year.

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Overcoming issues in the medium-term plan through FY02/17 Global supply chain management Progress of the previous medium-term plan The company in October 2013 installed a global merchandising system as its operations management system to centrally manage information on sales and inventory for each product. Since FY02/15, the company has been seeking to establish global supply chain management to automate merchandise orders. Under the previous medium-term plan that ended in FY02/17, it established GSCM to strengthen management control at the headquarters and establish a mechanism that allows each sales unit to focus on product sales; reduce logistics costs (by 1% versus sales, or JPY3bn); and come up with global strategic products during FY02/21.

Ryohin Keikaku in FY02/15 reduced its distribution cost by JPY660mn from a year earlier, but its reduction of JPY1.3bn in FY02/16 fell short of both its revised target of JPY2.1bn and the initial target of JPY1.8bn, owing to increased delivery costs. Although the company had an ambitious target for FY02/17 (cumulative JPY3.0bn reduction), it managed to achieve a cumulative JPY2.7bn reduction due largely to the application of preferential duties. The shortfall is largely attributable to limited accounting cost streamlining at the logistics center in Hatoyama (Japan) owing to higher personnel costs and requests for raising freight rates.

Automated ordering system for staple products The establishment of a global supply chain management system involved three phases. During FY02/17, the company improved its Phase1 (boosting automatic supply for stores) and Phase 2 (operate automatic supply system between centers) measures, and began implementation of Phase 3 (automating production orders). At the end of FY02/17, it finished introduction of systems for each phase into all bases and developed an automated supply system that operates according to sales results and predictions for partner factories and domestic and overseas stores. However, it said the systems have been “merely connected.” This is because it thinks there is room for improvement at the stage for operating the systems and setting indexes etc. The numbers of basic stock items (displayed items + safety stock items) that stores should have were inaccurate; there were issues with a planning system for securing stock items that meet annual sales; and some stock items increased, backlogged, or ran short due to failure to register with the system products that were sent without using the system in emergency cases.

Initiative and targets in latest medium-term plan As the company recognizes the necessity to raise accuracy of basic aspects of its operations, it plans to continue the initiatives to increase accuracy under the latest medium-term plan. Besides, instead of conventional inventory forecasting based on an annual plan, it first creates four-year sales and purchase plans, and taking into consideration monthly sales, projects unit sales for these four years. This allows it to incorporate production capacity management into the system. With this initiative, it aims to keep down the out of stock ratio of the top 30 items sold worldwide to under 3%; reduce apparel’s markdown ratios (in value terms) by 20% to raise consolidated operating GPM by 1pp; and reduce domestic and overseas warehouse inventories by 50% (from 10–11 weeks’ items as of FY02/17 to 5–6 weeks’). The company wants to first set numerical targets to correct or improve this system. In addition, it looks to reduce costs required after shipment (Free On Board) by 5% and also reduce logistics costs by 2%.

Global supply chain management

Action plan for Ryohin Keikaku group automatic ordering of staple goods global supply chain management

① Sales DC in each Stores GDC Factories country ② Production ⑤ Inventory Developed and plan started operation Phase 1 Phase 2 Phase 3 of system to Automatically replenish Operate system for Automate production visualize figures at store inventories automatic supply among HQs orders ④ Supply (Automatic ordering of proper DCs ③ Production and delivery

2014 SS: Testing 2014 SS: Testing 2015 AW: Testing - Enhance HQ management of tags, quality and specification 2014 AW: In operation 2014 AW: In operation 2016 SS: In operation - Establish operational structure to allow sales offices to focus on sales and marketing Source: Shared Research based on company data

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Strategic global products Competitive pricing through global supply chain management The establishment of a global supply chain management system will help the company reduce logistics costs and make its sales activities more efficient. The cost savings will allow the company to generate money to create “strategic global products.” The company will move production sites; leverage preferential tariff treatment, and improve its distribution systems. These measures will lead to lower production costs and allow the company to set competitive prices.

Price rationality: Appropriate prices for each market The company will offer prices that are appropriate for each market when selling strategic global products. The company wants to increase the number of customers and the number of products purchased by each customer. The company will improve its sales per square meter, expand sales, and open more stores. The goal is to appeal to a wider range of consumers, instead of focusing on well-heeled individuals as is currently the case. This does not mean, however, that the company will indiscriminately slash prices. The company will instead determine prices appropriate for each market.

Price increase possible if customers want better value—marketing Japanese products During the latest medium-term plan, the company plans to review prices worldwide for price rationality. Strategic global products will be priced lower. However, in China, prices already reflect what the market can bear. In such a market—after analyzing the prices of competitors’ products—the company may raise prices of some products as customers may be willing to pay higher prices for Japanese products. There are countries where Japanese cosmetics in general, and the MUJI brand in particular, are held in high regard. In such nations, there may be room for a price increase even above Japanese prices.

The target OPM of 12% in the medium-term plan is a consolidated figure. The company may be able to use stable profits from a certain area to offset a price cut in another area.

Forecast accuracy

Historical forecast accuracy

(JPYmn) FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Operating revenue Int ial Est . 172,400 170,190 174,870 172,800 190,810 206,260 252,700 290,100 336,500 373,900 Result s 163,757 164,341 169,748 178,186 188,350 220,620 260,254 307,532 333,281 379,551 Diff. -5.0% -3.4% -2.9% 3.1% -1.3% 7.0% 3.0% 6.0% -1.0% 1.5% Operating profit Int ial Est . 19,800 17,560 14,490 13,550 18,040 21,630 25,500 30,000 38,000 42,300 Result s 17,223 14,134 13,900 15,438 18,351 20,916 23,846 34,439 38,278 45,286 Diff. -13.0% -19.5% -4.1% 13.9% 1.7% -3.3% -6.5% 14.8% 0.7% 7.1% Recurring profit Int ial Est . 20,160 17,880 14,920 14,020 18,100 22,120 25,600 30,200 38,000 42,500 Result s 17,358 14,608 14,229 16,135 19,760 23,047 26,602 32,700 38,582 45,985 Diff. -13.9% -18.3% -4.6% 15.1% 9.2% 4.2% 3.9% 8.3% 1.5% 8.2% Net income Int ial Est . 11,440 10,480 8,860 7,950 10,690 13,600 15,400 18,800 24,300 28,500 Result s 6,936 7,506 7,859 8,850 10,970 17,096 16,623 21,718 25,831 30,113 Diff. -39.4% -28.4% -11.3% 11.3% 2.6% 25.7% 7.9% 15.5% 6.3% 5.7% Source: Shared Research based on company data

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E-commerce business

The company plans to grow e-commerce sales focused primarily on China and the US.

‘MUJI passport’ to encourage potential customers The company will promote MUJI passport, a smartphone application, to encourage potential customers. In Japan, the app had 11.23mn downloads since its release in May 2013 (as of end-FY02/18). The app provides information to encourage people to visit the stores.

Ryohin Keikaku launched overseas versions of MUJI passport starting in FY02/16. The company first developed Asia versions, and the China version was created in April 2015. Service began in December 2015 in Taiwan.

MUJI passport ('000; as of end-February 2018) Japan China Taiwan Hong Kong South Korea No. of downloads 11,230 3,790 780 210 250 No. of activation (at least once a month) 5,920 680 520 170 220 Membership rat io (display of digit al ID at st ores) 35.2% 35.2% 14.8% 10.9% 14.0% Membership ratio (sales at stores) 50.3% 38.8% 27.1% 19.8% 31.0%

Data related to MUJI social networks ('000 people) FY02/14 FY02/15 FY02/16 FY02/17 MUJI.net Members 4,340 4,940 5,620 6,300 MUJI Card Cardholders 430 440 490 560 MUJI passport Downloads: Japan 1,380 3,340 6,110 8,770 Downloads: Overseas 2,670 3,800 Facebook Follow ers: Japan 990 1,060 1,020 1,050 Followers: Overseas 560 600 600 620 Twitter Follow ers: Japan 290 380 460 530 LINE 1,890 2,590 3,070 3,290 Instagram 180 560 YouTube 20 Source: Shared Research based on company data

Ryohin Keikaku web business sales

(JPYmn) Online sales % of direct sales in Japan (right axis) 24,000 12%

9.6% 9.8% 9.2% 20,000 9.2% 9.1% 18,166 10% 8.6% 17,486 8.0% 15,665 16,000 7.3% 7.4% 8% 6.8% 13,268 5.8% 12,446 12,000 10,923 6% 9,689 8,228 8,566 7,486 8,000 6,205 4%

4,000 2%

0 0% FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data

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Strengths and weaknesses Strengths Distinctive MUJI brand: The MUJI (Mujirushi Ryohin) brand is one of the most recognized brands in Japan (ranked 24th ◤ among all consumer brands in the Brand Japan 2013 survey by Nikkei BP Consulting) with many core customers. Unobtrusive, timeless features of MUJI, while distinctly Japanese, also make the brand readily appreciated and intuitively understood by consumers worldwide.

Global niche powerhouse potential: SR believes Ryohin Keikaku has one of the most exportable business models among ◤ Japanese retailers. Basic design easily translated in any culture. Combination of household goods, apparel, and food under one roof, allowing for flexibility in merchandising approaches. Affordable pricing for high quality products that lend themselves to both global and local sourcing. Distinctive stores that fit well in a multitude of real estate locations worldwide. Low absolute overseas markets penetration as of 2014 but extensive experience of operations in various markets. All this makes overseas growth a high-probability scenario.

Strong management execution: Ryohin Keikaku went through a substantial evolution and transformation over the years. ◤ The company grew from an experimental design brand to a focused and disciplined firm, implementing programs ranging from MUJIGRAM, a comprehensive store operation manual, to IT systems, to logistics. Although there are issues to be tackled, its proven track record reflects Ryohin Keikaku’s ability to execute.

Weaknesses

Many different items + no own manufacturing = limited ability to control product cost: Ryohin Keikaku does not own ◤ or control manufacturing facilities. While that makes it asset-light and allows it to avoid issues, such as managing capacity utilization, it also reduces the degree of control over the cost. In addition, Ryohin Keikaku sells a wide variety of items in several categories. It means that even as the company grows overseas, its order lot size will remain small and as such, fundamentally difficult to optimize. Products for different countries require localization to account for issues such as differing cultures and body types. So far, the brand value more than compensates for this cost gap. However, SR is concerned that category specialists gain scale and at the same time become better imitators of MUJI design, the proliferation of online retailing also allows small high design value-added brands to prosper and eat away on Ryohin Keikaku’s pie in small increments.

Lack of sound online retail strategy or presence: SR believes that as more consumers move online for both their essential ◤ and discretionary shopping, it is essential for retailers—especially those with strong brands—to recognize this tectonic trend shift and go where customers go. Instead, Ryohin Keikaku hopes that the consumer will never abandon its brick-and-mortar stores. As of FY02/14, the company shuns the online malls (Amazon, Rakuten, etc.) and effectively limits its internet strategy to that of communication, instead standing by its belief that customers wish to visit retail locations. In light of low margins, SR is worried that this lack of partnership with online malls may be passing up a solid opportunity.

Core customer = shrinking middle class: Income inequality in Japan is growing, eroding the traditional middle class. ◤ According to the 2012 Employment Status Survey released by the Statistics Bureau of the Ministry of Internal Affairs and Communications in July 2013, the total number of part-time or contract employees reached over 20mn people, a record 38.2% of the total labor force. The middle class—households with stable discretionary income—is the core of the company’s customer base. As their income becomes less stable, consumers may increasingly turn to discounters for their everyday shopping needs—a trend very pronounced in the US, a country with high income polarization. Add to this the overall decline in population, and the company may be facing an uphill struggle as it is trying to maintain at least some domestic growth.

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Market and value chain

Market strategy

After reaching a peak of about JPY148tn in 1996, the Japanese retail market had slowly shrunk to JPY135tn by 2011. By 2013 it grew somewhat to JPY138.9tn (+1.0% YoY), primarily a rebound from the Tohoku Earthquake of 2011 and possibly with some help from the mix of the nascent cyclical economic recovery, optimism related to Abenomics, and anticipation of the consumption tax hike in 2014 (source: Ministry of Economy, Trade and Industry [METI]).

Seen longer term however, the mature Japanese retail market is on the decline, driven by inexorable demographic trends. One reason for this lies in the fact that the population of Japan has been falling since 2007. There is also the issue of an aging population. When these factors are considered, it appears that the overall retail market will continue to shrink in the future.

The National Institute of Population and Social Security Research (IPSS) forecasts that the population of Japan will be 124.1mn people in 2020 (-2.7% from 2012), 116.6mn in 2030 (-8.5%), and 107.3mn in 2040 (-15.9%). It translates into a decline in household consumption expenditures by JPY8.4tn between 2020 and 2030. In June 2011, the Japan Tourism Agency (JTA) established a program to attract 30mn tourists to Japan from overseas, with an interim target of 20mn tourists by 2020. There were 19.7mn foreign tourists in 2015, so the JTA’s goal of 30mn tourists means an increase of about 10mn tourists. Given that the average spend per tourist is JPY176,168—of which shopping accounts for JPY73,663, or 41% (source: JTA (January 19, 2016))—overseas tourists could make up about 10% of the decrease in consumption caused by the decline in Japanese population. This is based on an average annual consumption of JPY1.3mn per domestic consumer, calculated as a total domestic retail market of JPY135tn divided by a population of about 102mn people between the ages of 15 and 80 (source: Ministry of Internal Affairs and Communications [MIC]).

Household goods According to Yano Research Institute, the total size of the Japanese home fashion retail market in 2016 was JPY3,426.4bn (-2.3% YoY). Yano estimated that the Japanese home fashion retail market grew 1.0% in 2017 to JPY3,461.0bn.

The Yano Research Institute’s definition of the home fashion market covers seven types of product—namely, bed linen and other bedding, towels, nightwear and other homewear, home furniture, interior fabrics, home lighting, and kitchen and tableware.

New housing starts dropped off in 2008, due the economic downturn caused by the global financial crisis, and the revision of the Building Standards Act the previous year, which resulted in delays to construction inspections. However, 2012 and 2013 saw increases in new housing starts, thanks to a recovery in consumer appetites and a rush to beat the sales tax hike in 2014.

Japanese home furniture market

(JPYbn) 2007 2008 2009 2010 2011 2012 Market size 891 819 623 626 635 665 YoY - -8.1% -23.8% 0.4% 1.5% 4.7% Source: Shared Research based on Yano Research Institute Ltd. data

Following the end of the high economic growth era of the 1980s, in the 1990s Japanese consumer attitudes toward home fashion became polarized—with relative indifference to prices but a desire for refined and differentiated products by relatively affluent consumers, and a preference for ever-lower prices by the mass consumer. After the global financial crisis of 2008, the trend shifted again. At the higher-discretionary-income part of the consumption pyramid, consumers started demanding more value, but without sacrificing quality and styling. The mass consumer began to appreciate more sophisticated design while still aggressively hunting for bargains. These yearnings were addressed by retailers such as Nitori—operated by Nitori Holdings Co., Ltd. (TSE1: 9843)—and IKEA —operated by Ikea Japan (unlisted). Many higher-end brands increasingly employed sophisticated forms of differentiated discounting, opening stores at malls mushrooming all over Japan. At the same time, poorly differentiated middle-of-the-road retailers felt the pinch. Overall, the market saw lower price points across the board, and shrank in value terms.

At the same time, certain categories such as bed linen, home furniture, lighting, and kitchen- and tableware saw growth from 2011, supported by better housing starts and post-Tohoku Earthquake reconstruction.

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Japanese home fashion market

(JPYbn) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Bed linen 515.9 487.8 468.1 470.8 491.8 512.3 654.3 669.9 692.0 679.6 683.0 YoY -6.0% -5.4% -4.0% 0.6% 4.5% 4.2% 27.7% 2.4% 3.3% -1.8% 0.5% Towels 164.0 162.0 152.5 144.5 148.0 156.0 163.0 162.5 160.0 166.0 167.0 YoY -2.7% -1.2% -5.9% -5.2% 2.4% 5.4% 4.5% -0.3% -1.5% 3.8% 0.6% Nightwear 174.5 166.1 141.7 144.5 151.7 148.2 158.6 162.5 165.0 147.0 150.0 YoY -5.2% -4.8% -14.7% 2.0% 5.0% -2.3% 7.0% 2.5% 1.5% -10.9% 2.0% Furniture 1,080.8 1,002.0 920.6 849.1 881.5 921.5 970.0 992.3 1,020.0 999.0 1,010.0 YoY -1.6% -7.3% -8.1% -7.8% 3.8% 4.5% 5.3% 2.3% 2.8% -2.1% 1.1% Fabrics 652.0 603.1 536.8 540.4 545.8 550.4 578.2 582.2 584.0 582.8 586.0 YoY -2.2% -7.5% -11.0% 0.7% 1.0% 0.8% 5.1% 0.7% 0.3% -0.2% 0.5% Lighting 427.0 410.0 387.9 384.0 397.5 412.5 434.0 440.0 444.0 437.0 440.0 YoY -1.2% -4.0% -5.4% -1.0% 3.5% 3.8% 5.2% 1.4% 0.9% -1.6% 0.7% Kitchenware 440.6 411.5 367.5 366.9 374.5 389.2 433.0 426.5 442.0 415.0 425.0 YoY -2.0% -6.6% -10.7% -0.2% 2.1% 3.9% 11.3% -1.5% 3.6% -6.1% 2.4% Total 3,454.8 3,242.5 2,975.1 2,900.2 2,990.8 3,090.1 3,391.1 3,435.9 3,507.0 3,426.4 3,461.0 YoY -2.7% -6.1% -8.2% -2.5% 3.1% 3.3% 9.7% 1.3% 2.1% -2.3% 1.0% Source: Shared Research based on Yano Research Institute Ltd. data (November 16, 2017) Apparel The Japanese apparel retail market in 2016 saw its second straight year of YoY decline, with the total size of the market at JPY9.2tn (-1.5% YoY), according to Yano Research Institute.

Japanese apparel retail market

(JPYbn) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Menswear 2,813.6 2,716.6 2,492.2 2,422.5 2,470.0 2,518.5 2,547.5 2,547.6 2,558.5 2,547.8 YoY - -3.4% -8.3% -2.8% 2.0% 2.0% 1.2% 0.0% 0.4% -0.4% Womenswear 6,514.5 6,169.4 5,679.0 5,615.0 5,685.2 5,750.0 5,829.0 5,908.6 5,884.4 5,756.3 YoY - -5.3% -7.9% -1.1% 1.3% 1.1% 1.4% 1.4% -0.4% -2.2% Children's clothing 956.7 942.0 890.0 885.5 895.0 896.0 916.0 922.3 918.0 916.1 YoY - -1.5% -5.5% -0.5% 1.1% 0.1% 2.2% 0.7% -0.5% -0.2% Total 10,284.8 9,828.0 9,061.2 8,923.0 9,050.2 9,164.5 9,292.5 9,378.4 9,360.9 9,220.2 YoY - -4.4% -7.8% -1.5% 1.4% 1.3% 1.4% 0.9% -0.2% -1.5% Source: Shared Research based on Yano Research Institute Ltd. data (October 26, 2017)

The Japanese apparel retail market suffered in the wake of the global financial crisis. The credit crunch and resulting global economic downturn drove consumers to safeguard their lifestyles by cutting down on clothing purchases and looking for lower priced products. However, consumption is now trending upward, thanks to an increase in consumers’ demand for clothing with attractive features—such as that designed to keep office workers cool in the summer or warm in the winter—since 2011, and the effect of Abenomics in 2012 and onward. In 2014, while the overall market struggled in the backlash of spike in demand before the consumption tax hike, the market in the city area started to recover helped by demand from overseas tourists. In the second half of 2015, consumers resumed the tendency to safeguard their lifestyles by looking for lower priced products, and this continued in 2016 and beyond. The e-commerce market is showing a favorable growth.

Total size of the Japanese e-commerce market

(JPYbn) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 E-commerce market size 5,300 6,100 6,696 7,788 8,459 9,513 11,166 12,797 13,775 15,136 16,504 E-commerce ratio 1.52% 1.79% 2.08% 2.84% 3.17% 3.40% 3.85% 4.37% 4.75% 5.43% 5.79% Source: Shared Research based on Ministry of Economy, Trade and Industry data (April 25, 2018)

The METI data show that the breakdown of the e-commerce market by product type in 2017 was as follows:

Products retail: JPY8.60tn (+7.5% YoY) ▷ Fashion and accessories: JPY1.65tn (+11.5%) ▷ Food, beverages, and liquor: JPY1.56tn (+2.4%) ▷

Food The total size of the Japanese retail market in private brand food products was JPY2.99tn, and it is forecast to grow to JPY3.21tn by 2017 (+21.6% from 2012). Within this market, sales of private brand goods at convenience stores are forecast to grow up to JPY1.12tn (+29.9% from 2012) (source: Fuji-Keizai Group). Demand for instant food is growing as manufacturers’ respond to housewives’ and senior citizens’ desire for simple, convenient food that is easy to store.

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China The total size of the Chinese retail market—which Ryohin Keikaku views as a pillar of future growth—was around CNY36tn in 2017, making it the largest retail market in Asia, and second largest in the world after the US (source: National Bureau of Statistics of the People’s Republic of China).

Total size of the Chinese retail market

40 24% Retail market in China Growth rate 36.6 35 33.2 21% 30.1 17.1% 30 18% 26.2 14.3% 25 13.1% 15% 12.0% 20 18.1 10.7% 10.4% 12% 23.4 10.2% 20.7 15 9%

10 6%

5 3%

0 0% （CNYtn） 2011 2012 2013 2014 2015 2016 2017 Source: Shared Research based on National Bureau of Statistics of the People’s Republic of China Note: Growth rate for 2015 is based on the original statistics.

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Business of Ryohin Keikaku: design-driven retailing

Ryohin Keikaku is a specialty retailer selling household goods, apparel and fashion items, and food under the single brand for which the company interchangeably uses two names, Mujirushi Ryohin and MUJI. While the company operates globally, the bulk of its sales come from Japan and increasingly, China.

The company’s segments comprise domestic, overseas, and other. In the domestic segment, the company directly manages stores as a manufacturer and retailer, and also supplies goods wholesale to licensed companies. The company is thus involved in MUJI product planning, manufacturing, distribution, and sales. In the overseas segment, the company operates directly managed stores and a wholesale business in East Asia, Europe and the Americas, West and South Asia and Oceania.

The Domestic business is the core of the company’s operations. Yet the overseas segment is the basis for much of the company’s growth; in particular, business in China is a significant contributor to profits on the consolidated level.

When analyzing Ryohin Keikaku, SR concludes that if investors want to truly understand the company and grasp both its competitiveness and its growth potential, they must understand the history of the company and its brand evolution. Once that becomes clear, it is easier to grasp elements of the unique business model— including pricing, merchandising, and pace of expansion both in Japan and overseas.

MUJI brand: concept and origins

Seiji Tsutsumi, head of the Saison Group, created the Mujirushi Ryohin brand (MUJI) in 1980, together with such prominent figures in Japanese art and design as Ikko Tanaka, Kazuko Koike, and Takashi Sugimoto.

Seiji Tsutsumi (1927–2013), a son of Yasujiro Tsutsumi, founder of the Seibu Railway Company, started his career at the Seibu Department Stores, a division of his father’s business empire. After the father’s death, he took over the department store business and proceeded to build it into a diversified group that included the Seiyu supermarkets (now a part of Walmart) and FamilyMart convenience stores (now a part of the Itochu Group). Famous for his “sensibility management” style, he launched the MUJI brand in 1980. Tsutsumi was active in arts and letters, both as a patron and author, writing under the pen names of Takashi Tsujii and Ikuo Yokose.

Ikko Tanaka (1930–2002) was a graphic designer who was renowned for creating simple designs. Tanaka said of the MUJI brand, “Simplicity is not inferior to opulence. Rather, there is a hidden side to simplicity that appeals both to our intellect and to our senses. If we build a world and system of values around such simplicity, we can enrich our lives even with only meager resources.” The MUJI brand is built around a concept that may be expressed as “enough is as good as a feast”—people will never stop desiring things, but it is possible to be satisfied with what one has.

The MUJI brand is the antithesis of mass production consumer culture. It views products not from the producer (capital) viewpoint, but from the lifestyle viewpoint. Concentrating on techniques in materials inspection, process simplification, and packaging reassessment, the company exhaustively developed products that were true necessities and central to modern living.

In addition, by harnessing the power of the top Japanese creators at the time, Ryohin Keikaku developed a comprehensive business that spanned product specifications, store design, and communications design. Through this approach, the company was able to establish a unique position in an excessively competitive consumer marketplace to move its business forward.

Ryohin Keikaku became independent from Seiyu in 1990. Advanced SCM has allowed it to evolve into a global specialty store retailer of private label apparel (SPA) to create universal appeal while staying firmly rooted in is corporate roots. The company has attained global recognition not just by listening to customers, but showing concern for the planet’s limited resources and placing emphasis on harmonious relationships with suppliers.

According to Masaaki Kanai, the president of Ryohin Keikaku, “Mujirushi Ryohin was built by designers, and then commercialized. We don’t sell what consumers want, we remove all that is unnecessary and offer them what we believe will make their everyday

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life better. Although this may make it an odd brand since it leaves so much up to the consumer, we believe that it is this progressive and universal concept that makes the brand loved across the world.”

Ryohin Keikaku: corporate milestones Early days Mujirushi Ryohin (MUJI) was created in 1980 as a private brand of The Seiyu, a major general merchandise retailer and a part of the Saison group. The brand initially had a total of 40 products, made up of nine household goods and 31 food products. It was launched in 14 Seiyu department stores and six FamilyMart convenience stores (FamilyMart Co., Ltd.; TSE1: 8028), in addition to the food and household goods sections of Seiyu supermarkets.

Consumer spending in Japan fell into a deep depression in the wake of the second oil crisis of 1979. An appetite for value for money products grew among consumers, and general merchandise retailers rushed to meet this demand with private brands. For example, The Daiei, Inc. (TSE1: 8263) launched its NO BRAND label in 1978. MUJI was created later than many of those generic private brands.

Establishing Ryohin Keikaku Co., Ltd. Between 1980 and 1988 the brand grew as it sold in various Seiyu retail locations. In 1983, Mujirushi Ryohin Aoyama opened its doors in Aoyama, Tokyo, as the first directly managed store stocking only MUJI goods. In the same year, The Seiyu opened MUJI outlets in the Seibu Shibuya department store (Tokyo) and the Hanshin Umeda department store (Osaka). In 1985, The Seiyu established a Mujirushi Ryohin division within the firm. It reported sales of about JPY14bn in its first year (1985) as a business unit. Then, four years later in 1989, Ryohin Keikaku Co., Ltd. was established as a standalone company. It was thought the new company would sell not just MUJI products but also other brands. The management therefore chose the name Ryohin Keikaku (“planning of good products”), rather than Mujirushi Ryohin. Ryohin Keikaku’s history as a retailer began in 1990, after officially acquiring the rights to the business from its parent, Seiyu.

The bubble bursts The first half of the 1990s saw the bursting of Japan’s bubble economy and a subsequent decline in consumer spending. However, MUJI brand sales continued to grow, arguably because the brand concept was well-suited to consumer attitudes at the time, with its philosophy of creating “simple products by making the best use of the materials”. In 1993, MUJI Lalaport opened its doors in Funabashi, Chiba. The size of this large store was over 1000sqm, making it between two to three times the size of existing Mujirushi Ryohin stores. This was a turning point for Ryohin Keikaku, and it began opening large-scale stores in shopping centers and department stores, such as the Parco department store in Shibuya, Tokyo; the Birds department store in Konandai, Yokohama; and Canal City Hakata, in Fukuoka.

Stagnation However, earnings took a downward turn after hitting a peak in FY02/00. One of the reasons was that the company relied on a so-called product-out approach: develop the product and it will sell. Perhaps some complacency had set in in the course of a long period of success, and the company came to believe that consumers would always buy quality products. The company’s strategy of pushing for rapid growth through new store openings also hurt earnings, as the company opened large-scale stores in shopping centers and department stores. The company accelerated this strategy to meet the expectations of investors after listing on the First Section of the Tokyo Stock Exchange in 2000. However, product development was unable to keep up with rapid growth in sales area, with the result that the efficiency of the company’s retail space dropped. Ryohin Keikaku also soon suffered from the inefficiencies common in large firms as it grew and felt its business was safe. Its organization became less flexible as it embarked on a number of short-term measures designed to improve sluggish earnings. Another factor outside the company’s control was the appearance of strong competitors within different types of product—from Uniqlo (by Fast Retailing Co., Ltd; TSE1: 9983), to 100-yen shops, to Nitori Co., Ltd. (TSE1: 9843)—a low-price vertically integrated furniture and household goods retailer.

Although the company recorded a JPY13.4bn operating profit in FY02/00, this figure significantly decreased in FY02/02 to JPY5.5bn.

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Reform In 2001, Tadamitsu Matsui took up his post as president of the company. Under his leadership, Ryohin Keikaku set about restructuring overseas operations, closing and downsizing unprofitable domestic stores, dealing with bad inventories, and implementing a complete management overhaul, including cutting back on management costs. The company curbed large-scale store openings, and made the criteria for opening new stores stricter with the introduction of a points-based system of evaluation. In 2003, the company began to emphasize personnel training. MUJIGRAM—a sales operation manual compiled with the aim of standardizing the business—and the Head Office Work Standards formed the foundation of its training initiatives.

In June 2002, fashion designer Yohji Yamamoto’s company, Yohji Yamamoto Inc. agreed to oversee apparel design. The idea behind this agreement was that apparel is a type of luxury item and therefore must be constantly changing or it will lose consumers’ interest. Thus, apparel must move with the times, even if its basic function does not change. Ryohin Keikaku therefore entered into the agreement with Yohji Yamamoto because it was able to come up with simple yet fashionable designs. This particular agreement has since expired.

In 2003, the company also launched Found MUJI and World MUJI (see note below). The above initiatives bore fruit from FY02/04 onward, when comparable store sales began trending north once again.

In FY02/05, following sales growth, Ryohin Keikaku set up the 30% Committee—aimed at cutting SG&A expenses with the then president, Tadamitsu Matsui, as chair. This committee aimed to keep SG&A expenses down to 30% or less of sales, acting on the principle that the seeds of decline are sown in times of success. The result was that profits rose sharply between FY02/04 and FY02/08.

World MUJI

Wall-mounted CD player Digital calendar Stainless steel kettle

Source: Shared Research based on Company materials

Found MUJI

Aluminium hanger "Station clock", wall-mounted clock Right-angled socks Source: Shared Research based on company data

Found MUJI: For this format the company sources household goods from across the globe that have continued to be used without becoming obsolete or falling out of favor. The company makes slight improvements to the products to adapt them to local culture and customs, before selling them at a fair price. World MUJI: For this brand the company sells products that take advantage of global knowledge and expertise, while also sharing the core concepts of the Mujirushi Ryohin brand.

Overseas In 1991, Ryohin Keikaku opened its first overseas store, MUJI West Soho in partnership with Liberty Plc. However, the company ended its partnership with Liberty in 1997, before transferring its Overseas business to Ryohin Keikaku Europe Ltd. This was followed in 1998 by the establishment of Ryohin Keikaku France S.A.S. and the opening of the company’s first store in France. In Asia, the company opened a store in Hong Kong in 1991, then one in Singapore in 1995. However, it closed these stores and pulled out of Asia following poor earnings results. The company reentered Asia in 2001 with the opening of a store in Hong Kong. This was followed by stores in Singapore in 2003, and Taiwan in 2004. In 2005 the company moved into the Chinese mainland, with the establishment of MUJI (Shanghai) Co., Ltd.

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Domestic business

Ryohin Keikaku FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Operating revenue 142,845 145,448 142,721 145,832 150,919 158,021 178,704 206,591 232,012 255,818 284,955 Sales 141,644 144,213 141,651 144,711 149,385 156,281 176,405 202,325 226,611 249,515 277,414 Apparel it ems 50,485 51,140 48,987 47,411 49,644 54,621 60,650 74,598 83,184 88,313 100,331 Household goods 76,708 78,079 77,410 80,528 82,690 84,719 95,849 108,304 123,460 138,353 151,787 Food 12,339 12,813 13,069 14,387 14,680 14,367 17,331 16,620 16,626 19,377 20,792 Others 2,110 2,181 2,185 2,384 2,369 2,572 2,573 2,802 3,340 3,470 4,502 YoY 1.8% -1.9% 2.2% 3.5% 4.7% 13.1% 15.6% 12.3% 10.3% 11.4% Sales 1.8% -1.8% 2.2% 3.2% 4.6% 12.9% 14.7% 12.0% 10.1% 11.2% Apparel it ems 1.3% -4.2% -3.2% 4.7% 10.0% 11.0% 23.0% 11.5% 6.2% 13.6% Household goods 1.8% -0.9% 4.0% 2.7% 2.5% 13.1% 13.0% 14.0% 12.1% 9.7% Food 3.8% 2.0% 10.1% 2.0% -2.1% 20.6% -4.1% 0.0% 16.5% 7.3% Others 3.4% 0.2% 9.1% -0.6% 8.6% 0.0% 8.9% 19.2% 3.9% 29.7% Gross profit 62,057 63,448 61,609 63,136 65,570 69,188 73,432 77,513 85,472 94,059 112,151 Apparel it ems 24,422 25,014 23,038 22,389 23,785 26,671 27,649 29,897 33,061 34,740 44,711 Household goods 32,514 33,077 33,073 34,642 35,583 36,278 38,265 40,044 44,295 50,598 57,661 Food 4,143 4,347 4,500 4,914 4,953 4,800 5,956 5,827 5,873 6,419 6,980 Others 977 1,009 997 1,190 1,246 1,438 1,560 1,744 2,241 2,301 2,797 GPM 43.8% 44.0% 43.5% 43.6% 43.9% 44.3% 41.6% 38.3% 37.7% 37.7% 40.4% Apparel it ems 48.4% 48.9% 47.0% 47.2% 47.9% 48.8% 45.6% 40.1% 39.7% 39.3% 44.6% Household goods 42.4% 42.4% 42.7% 43.0% 43.0% 42.8% 39.9% 37.0% 35.9% 36.6% 38.0% Food 33.6% 33.9% 34.4% 34.2% 33.7% 33.4% 34.4% 35.1% 35.3% 33.1% 33.6% Others 46.3% 46.3% 45.6% 49.9% 52.6% 55.9% 60.6% 62.2% 67.1% 66.3% 62.1% SG&A expenses 45,836 48,336 49,912 52,624 54,307 55,260 59,258 64,288 71,343 79,531 88,340 Advert ising 2,687 2,990 3,414 4,434 3,632 3,260 2,707 3,300 3,733 3,879 4,235 Logist ics 5,583 5,888 6,162 6,556 6,448 6,860 7,622 8,351 9,070 10,520 11,062 Personnel 13,445 14,239 14,537 15,625 16,700 17,201 18,484 20,560 23,123 26,028 28,423 Rents 12,517 13,188 13,866 14,464 15,196 15,456 15,918 16,630 17,226 18,467 20,220 Depreciat ion and amort izat ion 1,854 2,395 2,542 2,528 2,486 2,376 2,811 2,758 3,953 4,421 4,959 Others 9,750 9,636 9,389 9,013 9,843 10,105 11,713 12,686 14,235 16,213 19,459 YoY 5.5% 3.3% 5.4% 3.2% 1.8% 7.2% 8.5% 11.0% 11.5% 11.1% Advert ising 11.3% 14.2% 29.9% -18.1% -10.2% -17.0% 21.9% 13.1% 3.9% 9.2% Logist ics 5.5% 4.7% 6.4% -1.6% 6.4% 11.1% 9.6% 8.6% 16.0% 5.2% Personnel 5.9% 2.1% 7.5% 6.9% 3.0% 7.5% 11.2% 12.5% 12.6% 9.2% Rents 5.4% 5.1% 4.3% 5.1% 1.7% 3.0% 4.5% 3.6% 7.2% 9.5% Depreciat ion and amort izat ion 29.2% 6.1% -0.6% -1.7% -4.4% 18.3% -1.9% 43.3% 11.8% 12.2% Others -1.2% -2.6% -4.0% 9.2% 2.7% 15.9% 8.3% 12.2% 13.9% 20.0% % of sales 33.5% 35.2% 36.4% 36.4% 35.4% 33.6% 31.8% 31.5% 31.9% 31.8% Advert ising 2.1% 2.4% 3.1% 2.4% 2.1% 1.5% 1.6% 1.6% 1.6% 1.5% Logist ics 4.1% 4.4% 4.5% 4.3% 4.4% 4.3% 4.1% 4.0% 4.2% 4.0% Personnel 9.9% 10.3% 10.8% 11.2% 11.0% 10.5% 10.2% 10.2% 10.4% 10.2% Rents 9.1% 9.8% 10.0% 10.2% 9.9% 9.0% 8.2% 7.6% 7.4% 7.3% Depreciat ion and amort izat ion 1.7% 1.8% 1.7% 1.7% 1.5% 1.6% 1.4% 1.7% 1.8% 1.8% Others 6.7% 6.6% 6.2% 6.6% 6.5% 6.6% 6.3% 6.3% 6.5% 7.0% Operating profit 17,422 16,346 12,767 11,633 12,797 15,669 16,472 17,491 19,530 20,831 31,351 YoY -6.2% -21.9% -8.9% 10.0% 22.4% 5.1% 6.2% 11.7% 6.7% 50.5% OPM (% of sales) 11.3% 9.0% 8.0% 8.6% 10.0% 9.3% 8.6% 8.6% 8.3% 11.3% Inventories 9,760 12,572 11,651 14,004 15,995 17,628 21,067 25,212 25,498 34,091 33,777 Days in inventory 50.5 55.2 57.4 65.3 70.5 68.6 67.7 65.6 70.0 74.9 Source: Shared Research based on company data

Formerly, the Domestic business was almost equivalent to the parent’s business. However, the China business’ growth significantly boosted sales at the overseas supply business, which has a major impact on GPM. The parent’s business comprises directly managed stores, a wholesale business, and an export business. The discussion below is centered on the core direct retail business. For information on the Domestic business, see the FY02/18 full-year forecasts section and Medium-term plan and strategy section.

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Sales by business type

Sales by format FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. T ot al sales 144,711 149,385 156,281 176,405 202,325 226,611 249,515 277,414 Domest ic 141,643 144,210 141,651 143,871 148,213 153,093 163,407 174,618 191,656 208,144 227,901 Domest ic direct ly managed business 106,552 110,435 112,475 115,565 121,299 126,557 135,976 146,600 163,980 177,729 197,268 Directly managed stores 100,347 102,949 104,247 105,171 109,712 113,421 121,029 130,527 145,061 156,965 174,788 Online st ore 6,205 7,486 8,228 8,566 9,689 10,923 12,446 13,268 15,665 17,486 18,166 Others 1,828 1,898 2,213 2,500 2,804 3,254 3,276 4,312 Domest ic w holesale business 35,091 33,775 29,176 28,306 26,914 26,536 27,430 28,017 27,676 30,415 30,633 Licensed stores 16,052 16,399 15,385 14,680 13,833 13,924 14,302 15,070 16,037 17,178 18,376 Seiyu 11,169 9,682 6,717 6,534 6,053 5,725 6,009 5,715 4,288 2,832 2,253 FamilyMart Group 6,345 6,112 5,611 5,697 5,960 5,893 6,041 5,884 5,806 8,774 8,285 com KIOSK 1,070 1,101 1,002 875 560 473 411 399 365 77 - Askul Corporation 454 481 460 521 506 519 666 946 1,178 1,551 1,718 Export 835 1,169 3,186 12,998 27,707 34,954 41,370 49,512 Export (t o subsidiaries) 751 1,131 2,698 10,168 26,779 33,847 40,206 48,029 Export (others) 84 38 488 2,830 928 1,106 1,164 1,482 T ot al sales - - - - 3.2% 4.6% 12.9% 14.7% 12.0% 10.1% 11.2% Domest ic - 1.8% -1.8% 1.6% 3.0% 3.3% 6.7% 6.9% 9.8% 8.6% 9.5% Domest ic direct ly managed business - 3.6% 1.8% 2.7% 5.0% 4.3% 7.4% 7.8% 11.9% 8.4% 11.0% Directly managed stores - 2.6% 1.3% 0.9% 4.3% 3.4% 6.7% 7.8% 11.1% 8.2% 11.4% Online st ore - 20.6% 9.9% 4.1% 13.1% 12.7% 13.9% 6.6% 18.1% 11.6% 3.9% Others - - - - 3.8% 16.6% 13.0% 12.2% 16.0% 0.7% 31.6% Domest ic w holesale business - -3.8% -13.6% -3.0% -4.9% -1.4% 3.4% 2.1% -1.2% 9.9% 0.7% Licensed stores - 2.2% -6.2% -4.6% -5.8% 0.7% 2.7% 5.4% 6.4% 7.1% 7.0% Seiyu - -13.3% -30.6% -2.7% -7.4% -5.4% 5.0% -4.9% -25.0% -34.0% -20.4% FamilyMart Group - -3.7% -8.2% 1.5% 4.6% -1.1% 2.5% -2.6% -1.3% 51.1% -5.6% com KIOSK - 2.9% -9.0% -12.7% -36.0% -15.5% -13.1% -2.9% -8.5% -78.9% -100.0% Askul Corporation - 5.9% -4.4% 13.3% -2.9% 2.6% 28.3% 42.0% 24.5% 31.7% 10.8% Export - - - - 40.0% 172.5% 308.0% 113.2% 26.2% 18.4% 19.7% Export (t o subsidiaries) - - - - 50.6% 138.5% 276.9% 163.4% 26.4% 18.8% 19.5% Export (others) - - - - -54.8% 1,184.2% 479.9% -67.2% 19.2% 5.2% 27.3% Source: Shared Research based on company data

Domestic directly managed business

Domestic directly managed business FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Operating revenue 106,552 110,435 112,475 115,565 121,299 126,557 135,976 146,600 163,980 177,729 197,268 Directly managed stores 100,347 102,949 104,247 105,171 109,712 113,421 121,029 130,527 145,061 156,965 174,788 Online st ore 6,205 7,486 8,228 8,566 9,689 10,923 12,446 13,268 15,665 17,486 18,166 Others - - - 1,828 1,898 2,213 2,500 2,804 3,254 3,276 4,312 YoY - 3.6% 1.8% 2.7% 5.0% 4.3% 7.4% 7.8% 11.9% 8.4% 11.0% Directly managed stores - 2.6% 1.3% 0.9% 4.3% 3.4% 6.7% 7.8% 11.1% 8.2% 11.4% Online st ore - 20.6% 9.9% 4.1% 13.1% 12.7% 13.9% 6.6% 18.1% 11.6% 3.9% Number of directly managed stores 181 197 212 238 256 262 269 284 312 328 335 Openings 22 27 23 16 18 24 39 21 14 Closures -7 -1 -5 -10 -11 -9 -11 -5 -7 Renovations 3 13 16 7 15 24 23 21 21 Comparable store sales growth -2.6% -2.9% -5.8% -5.7% -1.7% 0.4% 3.8% 2.7% 4.9% 2.1% 6.8% Apparel it ems -0.1% -3.4% -7.7% -10.8% 1.5% 7.2% 3.6% 5.0% 2.1% -1.6% 11.9% Household goods -4.1% -2.7% -5.1% -3.8% -3.5% -2.8% 2.5% 3.1% 8.1% 4.2% 3.7% Food -2.6% -1.7% 0.4% 5.2% -2.0% -5.9% 14.9% -7.3% -2.7% 4.8% 4.2% Customer count -3.3% -4.4% -4.0% -2.7% -5.1% -4.2% 0.9% -0.9% -2.6% 0.3% 6.1% Customer spend 0.6% 1.5% -1.8% -3.1% 3.6% 4.8% 2.9% 3.6% 7.7% 1.8% 0.6% Floor space (directly managed stores; sqm) 144,091 155,664 166,981 181,456 187,716 190,123 196,661 208,143 226,229 240,305 - YoY - 8.0% 7.3% 8.7% 3.4% 1.3% 3.4% 5.8% 8.7% 6.2% -100.0% Sales per sqm (JPY'000) 711 680 646 604 591 593 621 636 660 666 703 YoY - -4.3% -5.0% -6.6% -2.1% 0.3% 4.7% 2.4% 3.8% 1.0% 5.5% Floor space (annual average; sqm) 141,217 151,380 161,323 174,219 185,626 191,267 194,969 205,319 219,837 235,567 248,634 YoY - 7.2% 6.6% 8.0% 6.5% 3.0% 1.9% 5.3% 7.1% 7.2% 5.5% Inventories per sqm (JPY'000) 40.7 41.8 44.0 42.0 49.7 58.0 60.2 63.6 57.5 56.4 55.7 YoY - 2.7% 5.2% -4.5% 18.3% 16.8% 3.7% 5.6% -9.6% -1.9% -1.2% Inventories 5,752 6,331 7,095 7,321 9,224 11,099 11,735 13,055 12,633 13,276 13,839 YoY - 10.1% 12.1% 3.2% 26.0% 20.3% 5.7% 11.2% -3.2% 5.1% 4.2% Sales per employee (JPY'000) 28,307 27,387 27,049 25,215 25,544 25,801 26,089 25,679 26,142 25,155 26,661 YoY - -3.2% -1.2% -6.8% 1.3% 1.0% 1.1% -1.6% 1.8% -3.8% 6.0% Store staff (annual average) 3,545 3,759 3,854 4,171 4,295 4,396 4,639 5,083 5,549 6,240 6,556 YoY - 6.0% 2.5% 8.2% 3.0% 2.4% 5.5% 9.6% 9.2% 12.5% 5.1% Source: Shared Research based on company data Products Household products represent the highest sales among products. A standard store contains roughly 7,000 different products (variations such as color and size are not counted as separate products). Between FY02/09 and FY02/11, the company reduced its product range and moved to narrower merchandizing. Product price tags include information such as where the product was made and notable characteristics.

Product description for the Igayaki earthenware pot with kiseto glaze (for two to three people): We used lightweight materials to make this pot up to 10% lighter than regular pots. In addition to its use as a pot for stewed food, this pot can also be used for tabletop steamed food when combined with our steamer plate (sold separately). (Source: Shared Research based on company data)

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Sales by product

Directly managed store performance FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Sales 141,644 144,213 141,651 144,711 149,385 156,281 176,405 202,325 226,611 249,515 277,414 Apparel it ems 50,485 51,140 48,987 47,411 49,644 54,621 60,650 74,598 83,184 88,313 100,331 YoY - 1.3% -4.2% -3.2% 4.7% 10.0% 11.0% 23.0% 11.5% 6.2% 13.6% Comparable store sales growth -0.1% -3.4% -7.7% -10.8% 1.5% 7.2% 3.6% 5.0% 2.1% -1.6% 11.9% GPM 48.4% 48.9% 47.0% 47.2% 47.9% 48.8% 45.6% 40.1% 39.7% 39.3% 44.6% Menswear 7,683 7,360 6,090 5,554 6,195 7,020 8,544 11,782 12,395 13,442 15,811 Womenswear 18,166 17,869 17,369 16,677 16,203 18,298 21,197 27,677 31,695 33,238 37,802 Children's w ear 5,432 5,358 5,060 4,949 5,641 6,394 6,778 7,566 8,291 8,608 9,698 Accessories 5,556 6,227 6,484 8,011 8,652 8,688 9,070 10,481 10,737 11,873 12,609 Bags and shoes 4,990 5,077 4,966 4,348 4,212 4,672 5,345 6,570 8,446 8,163 9,420 Inner wear 8,656 9,245 9,019 7,871 8,662 9,324 9,628 10,518 11,617 12,986 14,920 Household goods 76,708 78,079 77,410 80,528 82,690 84,719 95,849 108,304 123,460 138,353 151,787 YoY - 1.8% -0.9% 4.0% 2.7% 2.5% 13.1% 13.0% 14.0% 12.1% 9.7% Comparable store sales growth -4.1% -2.7% -5.1% -3.8% -3.5% -2.8% 2.5% 3.1% 8.1% 4.2% 3.7% GPM 42.4% 42.4% 42.7% 43.0% 43.0% 42.8% 39.9% 37.0% 35.9% 36.6% 38.0% Linens and interior goods 19,338 18,159 16,352 15,923 17,546 18,052 19,702 21,169 21,583 22,063 23,647 Furniture 16,707 16,877 22,556 25,018 24,729 25,685 28,416 31,522 37,691 40,335 40,467 Elect ronic appliances 7,161 7,473 6,698 6,070 6,009 5,319 5,419 5,515 5,973 5,855 6,842 Housewares 13,937 14,032 7,541 7,846 8,193 8,395 10,048 10,967 11,810 14,336 15,168 Stationery 10,609 10,549 11,099 11,186 10,807 10,582 12,918 14,398 15,965 17,888 19,901 Health and beauty 8,954 10,986 13,165 14,315 15,247 16,416 18,873 24,401 30,067 37,487 45,282 Houseplants and flowers 168 157 267 322 329 369 386 375 Food 12,339 12,813 13,069 14,387 14,680 14,367 17,331 16,620 16,626 19,377 20,792 YoY - 3.8% 2.0% 10.1% 2.0% -2.1% 20.6% -4.1% 0.0% 16.5% 7.3% Comparable store sales growth -2.6% -1.7% 0.4% 5.2% -2.0% -5.9% 14.9% -7.3% -2.7% 4.8% 4.2% GPM 33.6% 33.9% 34.4% 34.2% 33.7% 33.4% 34.4% 35.1% 35.3% 33.1% 33.6% Processed food 2,341 2,783 3,325 3,889 3,742 2,682 4,626 4,586 4,696 5,867 6,382 Confectionery 7,894 7,911 7,638 8,117 8,477 9,309 10,319 9,639 9,412 10,862 11,843 Beverages and frozen food 2,103 2,118 2,106 2,375 2,460 2,376 2,385 2,394 2,517 2,648 2,557 Others 2,110 2,181 2,185 2,384 2,369 2,572 2,573 2,802 3,340 3,470 4,502 YoY - 3.4% 0.2% 9.1% -0.6% 8.6% 0.0% 8.9% 19.2% 3.9% 29.7% GPM 46.3% 46.3% 45.6% 49.9% 52.6% 55.9% 60.6% 62.2% 67.1% 66.3% 62.1% Source: Shared Research based on company data Average selling price The average selling price has fallen since peaking in FY02/08, before the global financial crisis. In FY02/10, the company began lowering its unit price by increasing the proportion of sales of products covered by the always a good price slogan (to provide useful daily products with quality at reasonable prices) aiming at an increase in customer count. However, customer interests began to shift toward the other category of frequently used consumables with high quality and low prices, average selling price recovered from FY02/12 onward.

Number of items

Number of items by product FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 Act. Act. Act. Act. Act. Act. Act. Act. Act. Number of items 7,767 8,112 7,816 7,260 7,413 7,419 7,332 6,477 7,131 Apparel 2,094 2,113 1,952 1,915 2,063 2,108 2,040 1,977 2,154 Household Goods 4,912 5,265 5,168 4,693 4,710 4,680 4,663 3,970 4,467 Food 761 734 696 652 640 631 629 530 510 YoY -1.0% 4.4% -3.6% -7.1% 2.1% 0.1% -1.2% -11.7% 10.1% Apparel 19.9% 0.9% -7.6% -1.9% 7.7% 2.2% -3.2% -3.1% 9.0% Household Goods -7.8% 7.2% -1.8% -9.2% 0.4% -0.6% -0.4% -14.9% 12.5% Food -1.4% -3.5% -5.2% -6.3% -1.8% -1.4% -0.3% -15.7% -3.8% Customer count ('000) 45,145 46,894 48,518 51,465 52,356 51,780 53,592 55,522 57,520 YoY 1.6% 3.9% 3.5% 6.1% 1.7% -1.1% 3.5% 3.6% 3.6% Customer spend (JPY) 2,174 2,162 2,114 2,044 2,096 2,190 2,263 2,355 2,527 YoY 0.6% -0.6% -2.2% -3.3% 2.5% 4.5% 3.3% 4.1% 7.3% Sales volume ('000 units) 133,604 139,326 143,394 155,735 158,488 159,914 169,669 181,376 194,798 YoY -0.3% 4.3% 2.9% 8.6% 1.8% 0.9% 6.1% 6.9% 7.4% Average selling price (JPY ) 729 723 715 675 692 709 715 721 747 YoY 2.7% -0.8% -1.1% -5.6% 2.5% 2.5% 0.8% 0.9% 3.5% Source: Shared Research based on company data

Household goods Household goods make up a large share of products at stores. These products have been at the core of the MUJI brand since its inception. Household goods cover a wide range of products, including:

Furniture ▷ Linens ▷ Health and beauty ▷

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Stationery ▷

The company sells a selection of products, particularly consumable goods, at prices that are low enough to challenge even budget 100-yen shops. This is to draw customers into stores. Ryohin Keikaku aims to increase repeat customers by providing frequently used consumables at low prices and reasonable quality.

Apparel items Apparel items include:

Womenswear ▷ Inner wear ▷ Accessories ▷ Menswear ▷

MUJI brand clothes have a focus on natural materials such as organic cotton, hemp, and wool. By interweaving high-quality materials with more common materials, Ryohin Keikaku is able to provide products that capture the essence of the material, but at noticeably lower prices. Natural materials and fabric spinning can be problematic for mass production and short lead times, but the company meticulously plans the production process using standard practices to realize its goals and maintain its individuality. The company is able to offer a high-quality material at a reasonable price because it is involved in the process even down to visiting the place where the wool is produced and selecting the raw materials, as in the case of cashmere sweaters.

Food The company appears to be enjoying success with products such as its Hand-made Thai Curry Kit, which meet the demand for simple, convenient food with an authentic taste.

Sales by product FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Apparel it ems 35.6% 35.5% 34.6% 32.8% 33.2% 35.0% 34.4% 36.9% 36.7% 35.4% 36.2% Menswear 5.4% 5.1% 4.3% 3.8% 4.1% 4.5% 4.8% 5.8% 5.5% 5.4% 5.7% Womenswear 12.8% 12.4% 12.3% 11.5% 10.8% 11.7% 12.0% 13.7% 14.0% 13.3% 13.6% Children's w ear 3.8% 3.7% 3.6% 3.4% 3.8% 4.1% 3.8% 3.7% 3.7% 3.4% 3.5% Accessories 3.9% 4.3% 4.6% 5.5% 5.8% 5.6% 5.1% 5.2% 4.7% 4.8% 4.5% Bags and shoes 3.5% 3.5% 3.5% 3.0% 2.8% 3.0% 3.0% 3.2% 3.7% 3.3% 3.4% Inner wear 6.1% 6.4% 6.4% 5.4% 5.8% 6.0% 5.5% 5.2% 5.1% 5.2% 5.4% Household goods 54.2% 54.1% 54.6% 55.6% 55.4% 54.2% 54.3% 53.5% 54.5% 55.4% 54.7% Linens and interior goods 13.7% 12.6% 11.5% 11.0% 11.7% 11.6% 11.2% 10.5% 9.5% 8.8% 8.5% Furniture 11.8% 11.7% 15.9% 17.3% 16.6% 16.4% 16.1% 15.6% 16.6% 16.2% 14.6% Elect ronic appliances 5.1% 5.2% 4.7% 4.2% 4.0% 3.4% 3.1% 2.7% 2.6% 2.3% 2.5% Housewares 9.8% 9.7% 5.3% 5.4% 5.5% 5.4% 5.7% 5.4% 5.2% 5.7% 5.5% Stationery 7.5% 7.3% 7.8% 7.7% 7.2% 6.8% 7.3% 7.1% 7.0% 7.2% 7.2% Health and beauty 6.3% 7.6% 9.3% 9.9% 10.2% 10.5% 10.7% 12.1% 13.3% 15.0% 16.3% Houseplants and flowers - - - 0.1% 0.1% 0.2% 0.2% 0.2% 0.2% 0.2% 0.1% Food 8.7% 8.9% 9.2% 9.9% 9.8% 9.2% 9.8% 8.2% 7.3% 7.8% 7.5% Processed food 1.7% 1.9% 2.3% 2.7% 2.5% 1.7% 2.6% 2.3% 2.1% 2.4% 2.3% Confectionery 5.6% 5.5% 5.4% 5.6% 5.7% 6.0% 5.8% 4.8% 4.2% 4.4% 4.3% Beverages and frozen food 1.5% 1.5% 1.5% 1.6% 1.6% 1.5% 1.4% 1.2% 1.1% 1.1% 0.9% Others 1.5% 1.5% 1.5% 1.6% 1.6% 1.6% 1.5% 1.4% 1.5% 1.4% 1.6% Source: Shared Research based on company data Product development When developing products, Ryohin Keikaku works with a concept of “marketing to ourselves” (i.e., Ryohin Keikaku employees and designers). The idea is to “produce products that we want, or that will appeal to us as a solution to our problems”. Furthermore, the company conducts research and liaises with consumers to ensure that customer feedback is accounted for and it is not just trying to force products out onto shelves. For example, product developers came up with the idea of see-through square containers for bathing products, after noticing that shampoos, conditioners, and body washes were all in different shapes and sizes of container. Square, see-through containers would be easier to line up on a shelf or rack, as well as allowing the consumer to see the contents. According to the company, this type of research—which it calls “observation”—helps it to develop new products that meet the needs of consumers. Product developers visit the homes of consumers to take photographs and conduct “observation” when designing when new products. Ryohin Keikaku also utilizes its website to communicate with its fan base and conduct test marketing.

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Wall-mounted fixtures-designed following “observation”

Source: Shared Research based on company data

The company is also talking to its customers. It has developed a website, MUJI Laboratory for Living, in order to communicate with consumers. After forming a hypothesis from observations and feedback from stores, the company invites opinions and product proposals from customers. This serves to allow the company to continue to maintain its position as a provider of comfortable lifestyles.

Strategic products Since FY02/08, the company has been increasing the number of what it identifies as strategic products in its line-up. These products fall into two categories. First, there are products that use high quality materials yet are offered at a reasonable price (fastidious about quality products). Second, there are products that consumers use often, offered for a low price with attractive features (always a good price products). The company will expand the range of these staple strategic products over the medium term. It will also cut CoGS and run promotional campaigns in the media for these lines.

Merchandizing The company’s product department sets merchandising approach for each store, including licensed stores in the wholesale business.

Directly managed stores

The directly managed stores segment, as reported by the company, covers the company’s domestic directly managed stores and its e-commerce business.

The company has few stand-alone stores. Most of its stores are in shopping centers or station shopping malls. The company does not purchase real estate for its stores, but leases all real estate.

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Domestic directly managed stores

Domestic directly managed business FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Operating revenue 106,552 110,435 112,475 115,565 121,299 126,557 135,976 146,600 163,980 177,729 197,268 Directly managed stores 100,347 102,949 104,247 105,171 109,712 113,421 121,029 130,527 145,061 156,965 174,788 Online st ore 6,205 7,486 8,228 8,566 9,689 10,923 12,446 13,268 15,665 17,486 18,166 Others - - - 1,828 1,898 2,213 2,500 2,804 3,254 3,276 4,312 YoY - 3.6% 1.8% 2.7% 5.0% 4.3% 7.4% 7.8% 11.9% 8.4% 11.0% Directly managed stores - 2.6% 1.3% 0.9% 4.3% 3.4% 6.7% 7.8% 11.1% 8.2% 11.4% Online st ore - 20.6% 9.9% 4.1% 13.1% 12.7% 13.9% 6.6% 18.1% 11.6% 3.9% Number of directly managed stores 181 197 212 238 256 262 269 284 312 328 335 Openings 22 27 23 16 18 24 39 21 14 Closures -7 -1 -5 -10 -11 -9 -11 -5 -7 Renovations 3 13 16 7 15 24 23 21 21 Comparable store sales growth -2.6% -2.9% -5.8% -5.7% -1.7% 0.4% 3.8% 2.7% 4.9% 2.1% 6.8% Apparel it ems -0.1% -3.4% -7.7% -10.8% 1.5% 7.2% 3.6% 5.0% 2.1% -1.6% 11.9% Household goods -4.1% -2.7% -5.1% -3.8% -3.5% -2.8% 2.5% 3.1% 8.1% 4.2% 3.7% Food -2.6% -1.7% 0.4% 5.2% -2.0% -5.9% 14.9% -7.3% -2.7% 4.8% 4.2% Customer count -3.3% -4.4% -4.0% -2.7% -5.1% -4.2% 0.9% -0.9% -2.6% 0.3% 6.1% Customer spend 0.6% 1.5% -1.8% -3.1% 3.6% 4.8% 2.9% 3.6% 7.7% 1.8% 0.6% Floor space (directly managed stores; sqm) 144,091 155,664 166,981 181,456 187,716 190,123 196,661 208,143 226,229 240,305 - YoY - 8.0% 7.3% 8.7% 3.4% 1.3% 3.4% 5.8% 8.7% 6.2% -100.0% Sales per sqm (JPY'000) 711 680 646 604 591 593 621 636 660 666 703 YoY - -4.3% -5.0% -6.6% -2.1% 0.3% 4.7% 2.4% 3.8% 1.0% 5.5% Floor space (annual average; sqm) 141,217 151,380 161,323 174,219 185,626 191,267 194,969 205,319 219,837 235,567 248,634 YoY - 7.2% 6.6% 8.0% 6.5% 3.0% 1.9% 5.3% 7.1% 7.2% 5.5% Inventories per sqm (JPY'000) 40.7 41.8 44.0 42.0 49.7 58.0 60.2 63.6 57.5 56.4 55.7 YoY - 2.7% 5.2% -4.5% 18.3% 16.8% 3.7% 5.6% -9.6% -1.9% -1.2% Inventories 5,752 6,331 7,095 7,321 9,224 11,099 11,735 13,055 12,633 13,276 13,839 YoY - 10.1% 12.1% 3.2% 26.0% 20.3% 5.7% 11.2% -3.2% 5.1% 4.2% Sales per employee (JPY'000) 28,307 27,387 27,049 25,215 25,544 25,801 26,089 25,679 26,142 25,155 26,661 YoY - -3.2% -1.2% -6.8% 1.3% 1.0% 1.1% -1.6% 1.8% -3.8% 6.0% Store staff (annual average) 3,545 3,759 3,854 4,171 4,295 4,396 4,639 5,083 5,549 6,240 6,556 YoY - 6.0% 2.5% 8.2% 3.0% 2.4% 5.5% 9.6% 9.2% 12.5% 5.1% Source: Shared Research based on company data

The details of the company’s standard store format are as follows (end FY02/14):

Store size: 650–1,000sqm ▷ Capex: JPY50mn (includes depreciable assets, expenses) ▷ Security deposit: JPY30mn ▷ Inventory: JPY40mn ▷ Store-level operating profit margin (before overhead): 20% ▷ Capex payback period: 10 months or less ▷ Annual sales: JPY400mn ▷ (Note, since 2010, an increasing number of stores have sales of between JPY200mn and JPY300mn per year) ▷ Employees: <20 ▷ (Note, about three full-time employees, with the rest part-time employees) ▷ Average lease period: About five years (periodically remodel, rebuild) ▷ Average store life: 99 months (as of end FY02/14) ▷

The company generally aims for rental costs of 15% or less of sales. If rental costs at a particular store rise higher than this figure, the company will quickly negotiate lower rent, or move to a different location in the same area. The company’s strategy of closing stores with high rent-to-sales ratios means that none of its stores make a loss. Shopping center developers often ask the company to become a tenant because established brands like MUJI rent more floor space, have a wide variety of product offerings, and are generally good for attracting customers. In addition, many apparel and general goods stores can exist side by side in the same shopping center, unlike book shops and eyewear stores. The flagship store in Japan is the Yurakucho store (3,700sqm).

As a new store format, the company is implementing MUJI to GO and MUJI COM brand small-format stores. They are between 165 and 330sqm, located in high-traffic areas such as station shopping malls and airports, and mainly stock travel goods. In line with its position as a flagship tenant and to satisfy its need for large amounts of floor space, new stores are increasingly located on higher floors in shopping centers that have less foot traffic. This makes the above small-scale stores essential as part of the company’s strategy to provide frequently used consumables with high quality and low prices.

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“New environment” store format New environment stores to account for 57% of all outlets in FY02/17 The comp any is converting many of its stores to a “new environment” format to increase sales per square meter. From FY02/14 onward until FY02/17, the company converted 141 shops in Japan and elsewhere and opened 331 “new environment” stores. Of the company’s 820 stores, 55% have been converted to the new format.

New format raises sales per-square meter by 10% The new format has improved the company’s sales per square meter by 10% (as of April 2015). In FY02/19, all the domestic stores are expected to be "new environment" stores. Successful remodeling cases at directly managed stores are encouraging licensed stores to remodel.

Composition of stores converted to the “new environment” format

FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 Act. Act. Act. Act. Target % of stores converted to the “new environment” format 14% 29% 44% 55% Converted to "new environment" 15 35 32 59 Japan 9% 22% 36% 60% 100% Total stores in Japan 385 401 414 417 Opened as "new environment" 9 26 42 23 Converted to "new environment" 15 26 20 41 Overseas 22% 41% 45% 51% Total stores overseas 255 301 344 403 New openings 57 56 50 68 Converted to "new environment" - 9 12 18 Source: Shared Research based on company data

Large store strategy Large stores: building large stores while maintaining profitability, increasing sales space by 10% The company, in addition to creating new environment stores, is also focusing on store space expansion. While maintaining or improving its sales per square meter, it wants to increase sales by expanding store space. It aims for higher sales per square meter on a global basis.

Large stores: continuing to accelerate the opening of large-scale stores in FY02/17 The company, while continuing to open small shops in prime locations, will accelerate the opening of large-scale stores. In Japan, the company renovated a store almost 2,000sqm in size in Tokyo’s Shibuya district in November 2013, and a store over 2,500sqm in size (including a Café&Meal restaurant of over 200sqm) in Kichijoji, a Tokyo suburb, in April 2014.

The company also opened a store of some 2,200sqm in Tenjin Daimyo in southwestern Japan (of which Café&Meal takes up some 170sqm) in March 2015, an outlet of about 2,200sqm in Meitetsu Department Store in Nagoya, central Japan (with a 170sqm or so Café&Meal), and renovated the Yurakucho store (3,700sqm with a 400sqm Café&Meal). These shops will serve as a model for the company’s other flagship shops to open in the coming years. As shown in the table below, as of FY02/17, 13 stores (including one licensed store) have a store space of over 1,600sqm.

Large stores: more variation in product sections As stores become larger, there is more variation in product sections. In the above large stores, products and services that make use of the increased floor area are available, such as MUJI BOOKS, MUJI INFILL, ReMUJI, Café&Meal, and OpenMUJI. Among these, OpenMUJI (event space) holds periodic events such as exhibitions for local creators and artists, and workshops hosted by Ryohin Keikaku specialists. While increasing brand recognition, such events also work to strengthen ties with local communities.

In March 2016, the Atre Ebisu store moved, doubling its floor space to 1,200sqm, also introducing MUJI BOOKS and OpenMUJI sections. The company will likely accelerate its push for large stores both within Japan and abroad.

MUJI BOOKS: Present customers with books from MUJI’s unique perspective, to encourage customers to “find something new” MUJI INFILL +: With a concept of freedom in living and customization, provide products and services in lifestyle goods with renovation products at the core

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MUJI INFILL 0: In addition to MUJI INFILL +, provide services in cooperation with MUJI HOUSE to break down existing spaces and renovate in the customer’s vision ReMUJI: Sale of clothing such as shirts and cut and sew garments that are produced from used clothing that is collected by the company OpenMUJI: Event spaces that share discoveries and hits to enrich lifestyles, with an emphasis on participative communication

Number of newly opened directly managed stores by sales floor space (excluding Café&Meal)

Source: Shared Research based on company data Large stores: seeking to avoid a repeat of past mistakes Ryohin Keikaku aggressively opened large-scale stores in Japan around 2000 only to reverse this expansion policy in the subsequent years. Executives said that the company now has more stringent assessment standards in place and ensures that rent payments are not too high in order to avoid similar mistakes.

Sales per square meter at directly managed stores

Sales per sqm (parent; direct stores; right axis) YoY (JPY'000/sqm) Sales per staff (parent; direct stores; right axis) YoY (JPYmn/sqm) 8% 740 8% 28.3 711 703 6.0% 6% 4.7% 28 700 6% 680 3.8% 27.4 4% 666 5.5% 2.4% 660 4% 27.0 646 660 1.8% 2% 636 1.0% 1.3% 1.1% 26.7 27 0.3% 2% 1.0% 621 0% 620 26.1 26.1 604 0% -1.2% -1.6% 591 593 25.8 25.7 26 -2% -2% 25.5 -3.8% -2.1% 580 -3.2% -4.3% 25.2 25.2 -4% -5.0% -4% 25 -6.6% 540 -6% -6% -6.8%

-8% 500 -8% 24 FY02/08 FY02/10 FY02/12 FY02/14 FY02/16 FY02/18 FY02/08 FY02/10 FY02/12 FY02/14 FY02/16 FY02/18

Sales space (parent-level)

Directly managed stores (parent) FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18

Floor space (year end) (sqm) a) 144,091 155,664 166,981 181,456 187,716 190,123 196,661 208,143 226,229 240,305 253,409 YoY 8.0% 7.3% 8.7% 3.4% 1.3% 3.4% 5.8% 8.7% 6.2% 5.5% Store count (year end) b) 181 197 212 238 256 262 269 284 312 328 335 YoY 8.8% 7.6% 12.3% 7.6% 2.3% 2.7% 5.6% 9.9% 5.1% 2.1% a) / b) 796 790 788 762 733 726 731 733 725 733 756 YoY -0.7% -0.3% -3.2% -3.8% -1.0% 0.7% 0.2% -1.1% 1.0% 3.2% Directly managed store sales (JPYmn) c) 100,347 102,949 104,247 105,171 109,712 113,421 121,029 130,527 145,061 156,965 174,788 YoY 2.6% 1.3% 0.9% 4.3% 3.4% 6.7% 7.8% 11.1% 8.2% 11.4% Floor space (annual average) (sqm) d) 141,217 151,380 161,323 174,219 185,626 191,267 194,969 205,319 219,837 235,567 248,634 YoY 7.2% 6.6% 8.0% 6.5% 3.0% 1.9% 5.3% 7.1% 7.2% 5.5% c) / d) (JPY'000/sqm) 711 680 646 604 591 593 621 636 660 666 703 YoY -4.3% -5.0% -6.6% -2.1% 0.3% 4.7% 2.4% 3.8% 1.0% 5.5%

Ryohin Keikaku (parent) FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18

Floor space (year end) (sqm) a) 233,582 247,003 249,197 261,431 263,177 265,038 270,250 282,083 289,899 297,002 306,316 YoY 5.7% 0.9% 4.9% 0.7% 0.7% 2.0% 4.4% 2.8% 2.5% 3.1% Store count (year end) b) 328 344 339 359 372 379 385 401 414 418 335 YoY 4.9% -1.5% 5.9% 3.6% 1.9% 1.6% 4.2% 3.2% 1.0% -19.9% a) / b) 712 718 735 728 707 699 702 703 700 711 914 YoY 0.8% 2.4% -0.9% -2.9% -1.2% 0.4% 0.2% -0.5% 1.5% 28.7% Sales (parent) (JPYmn) 141,644 144,213 141,651 144,711 149,385 156,281 176,405 202,325 226,611 249,515 277,412 YoY 1.8% -1.8% 2.2% 3.2% 4.6% 12.9% 14.7% 12.0% 10.1% 11.2% Source: Shared Research based on company data Large stores: flagship stores outside Japan The company opened a Paris store of some 700sqm in September 2014, and an outlet of almost 2,500sqm in Chengdu, China, and a store of 1,115sqm in Taipei, Taiwan in December 2014. Additional openings include stores in Sydney (1,000sqm) and Seoul (renovation; 900sqm) in May 2015, a store in New York (1,100sqm) in November, and a store in Shanghai (2,500sqm) in

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December. Having established a model for opening flagship stores, the company opened stores in Singapore in July 2017 (around 1,400sqm) and Vancouver, Canada in December (1,140sqm), followed by another in Shenzhen, China in January 2018 (1,725sqm). MUJI Fifth avenue and Shanghai

Source: Shared Research based on company data Sales capabilities: dealing with customers The company will deploy many interior advisers and “styling” advisers during FY02/17. In a bid to increase customer satisfaction and sales with higher sales expertise, the company will increase the number of specialized sales employees. The number of interior advisers, styling advisers, and tasting advisers will also increase.

The effects were pronounced in FY02/16, and at stores where advisers were dispatched, additional sales growth of 7.5pp was seen at those with interior advisers, 12pp at those with styling advisers, and 3.1pp at those with tasting advisers, versus stores without these specialists. Gains are also projected for FY02/17, but note that placement of these advisers at stores where the largest increases can be expected is mostly finished.

‘MUJI passport’ to encourage potential customers The company will promote MUJI passport, a smartphone application, to encourage potential customers. In Japan, the app had 12.6mn downloads since its release in May 2013 (as of end February 2017; Japan: 8.8mn downloads). The app provides information to encourage people to visit the stores. It first aims to focus on getting customers to visit stores, so instead of encouraging users to buy products, MUJI passport distributes information to encourage customers to visit its stores.

Ryohin Keikaku launched overseas versions of MUJI passport starting in FY02/16. The company first developed Asia versions, and the China version was created in April 2015. Service began in December 2015 in Taiwan, in August 2016 in Hong Kong, and in October 2016 in South Korea, which totals five countries including Japan as of FY02/17. In FY02/18 or later, the company is scheduled to release versions for Europe and the Americas, nearly completing its global rollout.

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MUJI passport ('000; as of end-February 2018) Japan China Taiwan Hong Kong South Korea No. of downloads 11,230 3,790 780 210 250 No. of activation (at least once a month) 5,920 680 520 170 220 Membership rat io (display of digit al ID at st ores) 35.2% 35.2% 14.8% 10.9% 14.0% Membership ratio (sales at stores) 50.3% 38.8% 27.1% 19.8% 31.0%

Data related to “good information” ('000 people) FY02/14 FY02/15 FY02/16 FY02/17 MUJI.net Members 4,340 4,940 5,620 6,300 MUJI Card Cardholders 430 440 490 560 MUJI passport Downloads: Japan 1,380 3,340 6,110 8,770 Downloads: Overseas 2,670 3,800 Facebook Follow ers: Japan 990 1,060 1,020 1,050 Followers: Overseas 560 600 600 620 Twitter Follow ers: Japan 290 380 460 530 LINE 1,890 2,590 3,070 3,290 Instagram 180 560 YouTube 20 Source: Shared Research based on company data

MUJI.net: shunning online malls; web as a promotional tool Ryohin Keikaku sells MUJI brand products on the MUJI.net e-commerce site.

Most products available in-store are also available online. The breakdown of sales by product type is as follows (FY02/14):

Apparel: 19% ▷ Household goods: 79% ▷ Food: 2%. ▷

It is notable that products in the “interior” category—such as linens (12% of sales), furniture (47%), and electronics (6%)—account for 65% of sales. Therefore, average spend per customer is high at about JPY8,000, with an estimated customer count of 1.5mn (FY02/14). The company aims to increase sales of fashion items in FY02/15.

Online sales have a high operating profit margin because although logistics expenses eat up around 10% of sales (5% for stores), there are no personnel or rent costs. Besides its e-commerce site, the company’s online presence includes the MUJI Laboratory for Living. The company uses this site to communicate with consumers, and to provide information about its stores. Ryohin Keikaku only sells online on its own website and does not use any other e-commerce vendors in Japan or overseas.

E-commerce sales in Japan

(JPYmn) Online sales % of direct sales in Japan (right axis) 24,000 12%

9.6% 9.8% 9.2% 20,000 9.2% 9.1% 18,166 10% 8.6% 17,486 8.0% 15,665 16,000 7.3% 7.4% 8% 6.8% 13,268 5.8% 12,446 12,000 10,923 6% 9,689 8,228 8,566 7,486 8,000 6,205 4%

4,000 2%

0 0% FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data Customer demographics The MUJI brand’s main customers are urban and suburban residents in their 30s and 40s, particularly in the Kanto region (more than half of domestic sales). The average customer is 36.9 years of age, and 78.8% of customers are female (June 2012). According to the company, many of its customers are housewives purchasing products for their families and homes.

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Customer base

2006 2007 2008 2009 2011 2012 Average age 32.5 33.4 34.1 34.8 37.3 36.9 Females 75% 70% 75% 78% 81% 79% Males 25% 30% 25% 22% 21% 21% Teens 9% 10% 9% 9% 6% 6% 20s 38% 32% 31% 29% 24% 27% 30s 31% 30% 32% 31% 33% 29% 40s 23% 27% 29% 30% 39% 39% Source: Shar ed Research based on company data

The average age of the company’s customer base has risen by four years since 2006. The company has been shifting its product focus to meet the needs of consumers 30–40 years of age.

Lower interest from young consumers is a concern. However, according to the company, it does not create products with a specific sex or age in mind, but creates products with a focus on lifestyles. As a result, it believes that this trend is related more to the locations of its stores (due to physically larger stores, many stores are flagship tenants in areas with relatively less foot traffic). Thus, to tackle the challenge of attracting younger consumers, the company believes that launching small-scale stores in locations with higher foot traffic will alleviate the issue.

Toward higher customer count To increase customer count, the company plans the following:

Stronger publicity (provide product information to mass media outlets to encourage coverage of products; separate from ▷ advertising); Stronger staple products such as stationery (basic products with longer product lifecycles for which period sales can be ▷ expected); Effects of remodeling. ▷

The company recognizes that one of its weaknesses lies in its current inability to effectively convey the strengths of its products to consumers, despite harboring products that customers find attractive. As such, Ryohin Keikaku sees increasing product recognition as a method to increase customer count. The company has already stepped up its publicity campaigns since the beginning of 2016, with the result that its products are often featured on television shows. Such measures primarily impacted food products during the months of March, April, and September. One factor leading to the success of this initiative was third parties spreading information about products, and not direct advertising by the company. For example, in nonfood products, the company conducted activities to spread information about its “body fitting sofa” by making it a trending topic on social media.

Sourcing and logistics Production outsourced to outside factories Ryohin Keikaku contracts factories for manufacturing instead of owning its own factories. In FY02/14, the company procured 8% of fashion products domestically, and 92% from overseas. It procured 44% of household goods domestically and 56% from overseas. All food was procured domestically. Direct trading, which composes approximately 20%, is handled by Singaporean subsidiary MUJI Global Sourcing PRIVATE LTD. Other sourcing is contracted, which covers all aspects of the procurement, from materials procurement to manufacturing. The company currently contracts with Mitsubishi Corporation (TSE1: 8058), Marubeni Corporation (TSE1: 8002), Nippon Steel & Sumikin Bussan Corporation (TSE1: 9810). However, the company still manages product specifications and factory negotiations, with the aim of utilizing factories in the long term.

A subsidiary, RK Trucks Co., Ltd., is responsible for Ryohin Keikaku’s domestic logistics and distribution operations. Products imported from overseas first come to the company’s distribution center in Nagaoka, Niigata Prefecture. They are then moved to transfer centers in other regions, before being delivered to stores. The company has four transfer centers, in Urayasu (Chiba Prefecture), Kobe (Hyogo Prefecture), Fukuoka (Fukuoka Prefecture), and Niigata (Niigata Prefecture).

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The company will shift product supply to Greater Tokyo Area stores from the Urayasu transfer center to the Hatoyama distribution center. It hopes that this will improve efficiency and flexibility, thereby helping it grow in the Greater Tokyo Area—a region where it still sees potential for growth. The company also hopes to make savings in the region of JPY1.4bn per year as it transfers the management of imported goods—mainly fashion items—to the Hatoyama center, along with the distribution work of the Nagaoka center. Accordingly, it plans to close the Urayasu center in FY02/15. It will keep the Nagaoka center on as a transfer center. The distribution center in Kobe handles exports.

With the aim of increasing efficiency in domestic logistics, the company established a logistics center (total investment: JPY13.9bn; total size: 168,295sqm; facility size: 105,231sqm) in Hatoyama, Saitama Prefecture in 2014, which is contributing to inventory picking, higher efficiency in dividing products among stores, and reduction of warehousing expenses. However, personnel expenses are on the rise due to a robust labor market, and productivity is declining due to a higher composition of temporary and part-time staff that have been hired to combat the shortage of personnel. In addition, the company is receiving requests from its logistics partners to raise rates, and logistics costs overall are on an increasing trend. To combat these issues, the company is considering taking control of logistics on its own, or joining forces with competitors in a joint logistics venture, in addition to increased automation and taking personnel with a wider range of responsibilities.

Restructuring global expansion in e-commerce The e-commerce business is showing steady sales gains in the Japanese market and is a contributor to profits. However, its costs are high overseas. The company is working to revise its overseas e-commerce operations, including selling via third-party websites. Upon grasping e-commerce buying trends in each country, the company will look to establish methods and processes to sell in cooperation with local firms, and seek e-commerce solutions that fit in with the MUJI standard of service.

Logistics outside Japan In June 2013, the company began stockpiling common items at its two global distribution centers in China (Shanghai and Huanan). Under the new system the company will check inventory levels and send products out directly from the distribution centers in China. The company hopes this will help create a better inventory system, allowing it to cut down on lead times, increase the frequency of orders it can take on, and allow it to handle orders in smaller lots. Previously, the company had imported products to Japan first, and then exported to global subsidiaries.

Furthermore, in October 2013, the company introduced a global merchandizing system in all countries it operates in. As a result, global data can be checked from headquarters. From FY02/15 onward, the company has focused on development of its global supply chain management, which was completed to a certain degree as a system by FY02/17. The company aims to improve operational accuracy under the latest medium-term plan starting from FY02/18.

Domestic wholesale business

Domestic wholesale business FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Sales 35,091 33,775 29,176 28,306 26,914 26,536 27,430 28,017 27,676 30,415 30,633 Licensed stores 16,052 16,399 15,385 14,680 13,833 13,924 14,302 15,070 16,037 17,178 18,376 Seiyu 11,169 9,682 6,717 6,534 6,053 5,725 6,009 5,715 4,288 2,832 2,253 FM Group 6,345 6,112 5,611 5,697 5,960 5,893 6,041 5,884 5,806 8,774 8,285 com KIOSK 1,070 1,101 1,002 875 560 473 411 399 365 77 - Askul 454 481 460 521 506 519 666 946 1,178 1,551 1,718 YoY - -3.8% -13.6% -3.0% -4.9% -1.4% 3.4% 2.1% -1.2% 9.9% 0.7% Licensed stores - 2.2% -6.2% -4.6% -5.8% 0.7% 2.7% 5.4% 6.4% 7.1% 7.0% Seiyu - -13.3% -30.6% -2.7% -7.4% -5.4% 5.0% -4.9% -25.0% -34.0% -20.4% FM Group - -3.7% -8.2% 1.5% 4.6% -1.1% 2.5% -2.6% -1.3% 51.1% -5.6% com KIOSK - 2.9% -9.0% -12.7% -36.0% -15.5% -13.1% -2.9% -8.5% -78.9% - Askul - 5.9% -4.4% 13.3% -2.9% 2.6% 28.3% 42.0% 24.5% 31.7% 10.8% Licensee store count 147 147 127 121 116 117 116 117 102 90 84 Licensed stores 68 72 70 64 60 61 61 63 65 67 67 Seiyu 79 75 57 57 56 56 55 54 37 23 17 Licensee floor space (sqm) 89,490 91,338 82,216 79,973 75,461 74,915 73,589 73,940 63,670 56,697 52,907 YoY - 2.1% -10.0% -2.7% -5.6% -0.7% -1.8% 0.5% -13.9% -11.0% -6.7% Licensed stores 43,926 47,460 46,014 43,871 41,870 41,272 40,971 42,115 43,257 44,053 44,072 Seiyu 45,564 43,878 36,202 36,102 33,591 33,643 32,618 31,825 20,413 12,644 8,835 Source: Shared Research based on company data

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Licensed companies’ selling areas are small-scale compared to directly managed stores, which tend to be about 725sqm. These are composed of Seiyu stores, the company’s former parent, and stores operated by licensing partners from early in the company’s history. Ryohin Keikaku has not recently expanded these channels. In FY02/17, however, shipments to Circle K and Sunkus significantly increased due to the management integration between FamilyMart and UNY Group Holdings.

For FamilyMart stores, the company wholesales products through a vendor selected by FamilyMart.

The company supplied products for sale at seven com KIOSK stores (just under 66sqm) located inside JR rail stations, thanks to an agreement made in 1999 between Ryohin Keikaku, the East Japan Railway Company (TSE1: 9020), and JR East Retail Net Co., Ltd. (unlisted; formerly East Japan Kiosk Co., Ltd.), but terminated this business in FY02/17.

In addition, the company has supplied MUJI brand products to Askul Corporation for sale on its website, ASKUL, since 2002. This may be an effective method for B2B market sales that are difficult for simple store expansion to produce.

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Profitability

Gross profit margin (GPM) is high for apparel, and low for food. The company’s target customer is an urban dweller. To sell unique lifestyle goods in such an environment, building rent and personnel costs are a constant issue. Thus, the company collects high margins on fashion and household goods, and uses foods to encourage customers to visit the stores. The company chooses and concentrates its energy on select items, and it does not believe that simply increasing the mix to include more high margin goods will lead to increased profitability.

In addition to twice-yearly sales (spring/summer sales and fall/winter sales), the company also gives members of its MUJI Card/MUJI.net scheme 10% off the price of all products four times a year (the dates vary). These periods are called “MUJI weeks”. Average markdown is low at around 10–15% because of simple designs, and the fact that there are many staple products. When the sale is over, the company bumps the same products back up to full price—thus there is no need to report valuation losses on products because a certain number of years have passed. Valuation losses are prevented because of the simplicity of the design. From FY02/11 onward, after the company established an effective method to carry over inventories to the next year, its GPM is trending upward. Although the sudden weakening of the yen in FY02/14 temporarily hurt GPM, it is possible that concentration of factories and inventories and the ASEAN shift will provide a boost to GPM improvement.

Parent GPM by product

Ryohin Keikaku FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. GPM 43.8% 44.0% 43.5% 43.6% 43.9% 44.3% 41.6% 38.3% 37.7% 37.7% 40.4% Apparel it ems 48.4% 48.9% 47.0% 47.2% 47.9% 48.8% 45.6% 40.1% 39.7% 39.3% 44.6% Household goods 42.4% 42.4% 42.7% 43.0% 43.0% 42.8% 39.9% 37.0% 35.9% 36.6% 38.0% Food 33.6% 33.9% 34.4% 34.2% 33.7% 33.4% 34.4% 35.1% 35.3% 33.1% 33.6% Others 46.3% 46.3% 45.6% 49.9% 52.6% 55.9% 60.6% 62.2% 67.1% 66.3% 62.1%

Parent SG&A expenses

Ryohin Keikaku FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. SG&A expenses 45,836 48,336 49,912 52,624 54,307 55,260 59,258 64,288 71,343 79,531 88,340 Advert ising 2,687 2,990 3,414 4,434 3,632 3,260 2,707 3,300 3,733 3,879 4,235 Logist ics 5,583 5,888 6,162 6,556 6,448 6,860 7,622 8,351 9,070 10,520 11,062 Personnel 13,445 14,239 14,537 15,625 16,700 17,201 18,484 20,560 23,123 26,028 28,423 Rents 12,517 13,188 13,866 14,464 15,196 15,456 15,918 16,630 17,226 18,467 20,220 Depreciat ion and amort izat ion 1,854 2,395 2,542 2,528 2,486 2,376 2,811 2,758 3,953 4,421 4,959 Others 9,750 9,636 9,389 9,013 9,843 10,105 11,713 12,686 14,235 16,213 19,459 YoY 5.5% 3.3% 5.4% 3.2% 1.8% 7.2% 8.5% 11.0% 11.5% 11.1% Advert ising 11.3% 14.2% 29.9% -18.1% -10.2% -17.0% 21.9% 13.1% 3.9% 9.2% Logist ics 5.5% 4.7% 6.4% -1.6% 6.4% 11.1% 9.6% 8.6% 16.0% 5.2% Personnel 5.9% 2.1% 7.5% 6.9% 3.0% 7.5% 11.2% 12.5% 12.6% 9.2% Rents 5.4% 5.1% 4.3% 5.1% 1.7% 3.0% 4.5% 3.6% 7.2% 9.5% Depreciat ion and amort izat ion 29.2% 6.1% -0.6% -1.7% -4.4% 18.3% -1.9% 43.3% 11.8% 12.2% Others -1.2% -2.6% -4.0% 9.2% 2.7% 15.9% 8.3% 12.2% 13.9% 20.0% % of sales 33.5% 35.2% 36.4% 36.4% 35.4% 33.6% 31.8% 31.5% 31.9% 31.8% Advert ising 2.1% 2.4% 3.1% 2.4% 2.1% 1.5% 1.6% 1.6% 1.6% 1.5% Logist ics 4.1% 4.4% 4.5% 4.3% 4.4% 4.3% 4.1% 4.0% 4.2% 4.0% Personnel 9.9% 10.3% 10.8% 11.2% 11.0% 10.5% 10.2% 10.2% 10.4% 10.2% Rents 9.1% 9.8% 10.0% 10.2% 9.9% 9.0% 8.2% 7.6% 7.4% 7.3% Depreciat ion and amort izat ion 1.7% 1.8% 1.7% 1.7% 1.5% 1.6% 1.4% 1.7% 1.8% 1.8% Others 6.7% 6.6% 6.2% 6.6% 6.5% 6.6% 6.3% 6.3% 6.5% 7.0% Operating profit 17,422 16,346 12,767 11,633 12,797 15,669 16,472 17,491 19,530 20,831 31,351 YoY -6.2% -21.9% -8.9% 10.0% 22.4% 5.1% 6.2% 11.7% 6.7% 50.5% OPM (% of sales) 11.3% 9.0% 8.0% 8.6% 10.0% 9.3% 8.6% 8.6% 8.3% 11.3% Inventories 9,760 12,572 11,651 14,004 15,995 17,628 21,067 25,212 25,498 34,091 33,777 Days in inventory 50.5 55.2 57.4 65.3 70.5 68.6 67.7 65.6 70.0 74.9 Source: Shared Research based on company data

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Production in ASEAN region and cuts to logistics costs

(JPYbn) 80% Planned reduction in logistics costs (initial) Actual 68% 3.5 70% 3.1 57% 60% 60% 53% 3.0 50% 41% 2.5 40% 2.0 1.8 30% 17% 18% 18% 20% 14% 15% 1.5 1.3 10% 1.0 0% 0.7 0.4 2014SS 2014AW 2015SS 2015AW 2016SS Est. 0.5 Apparel production in ASEAN (% of total) 0.0 Household goods production in ASEAN (% of total) FY02/15 FY02/16 FY02/17 Source: Shared Research based on company data

Personnel, distribution, and rent make up the bulk of the company’s SG&A expenses. Advertising expenses have fallen in line with the company’s efforts to increase efficiency by focusing on online promotions. The company also made logistics more efficient with the use of the Hatoyama distribution center (Saitama Prefecture) from November 2014, but rising delivery costs were a key factor during FY02/16.

Profit margins FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Gross profit 62,455 69,580 74,912 74,866 74,565 77,271 81,596 87,376 101,665 122,831 150,451 165,160 191,070 GPM 44.0% 44.0% 45.7% 45.4% 45.2% 45.3% 45.6% 46.2% 45.9% 47.1% 48.9% 49.7% 50.4% Operating profit 15,234 16,582 18,579 17,223 14,134 13,900 15,438 18,351 20,916 23,846 34,439 38,278 45,286 OPM 10.8% 10.6% 11.4% 10.5% 8.6% 8.2% 8.7% 9.7% 9.5% 9.2% 11.2% 11.5% 11.9% EBITDA 17,799 19,290 21,783 20,568 17,861 17,330 18,868 21,692 25,264 29,695 42,288 46,879 55,150 EBITDA margin 12.6% 12.3% 13.4% 12.6% 10.9% 10.2% 10.6% 11.5% 11.5% 11.4% 13.8% 14.1% 14.5% Net margin 6.6% 5.9% 6.6% 4.2% 4.6% 4.6% 5.0% 5.8% 7.7% 6.4% 7.1% 7.8% 7.9% Financial rat ios ROA (RP-based) 24.1% 22.8% 22.2% 19.2% 15.3% 14.5% 16.3% 18.0% 17.8% 16.3% 16.9% 18.6% 20.3% ROE 18.8% 16.2% 16.6% 10.1% 10.3% 10.3% 11.1% 12.5% 17.0% 14.3% 16.4% 17.7% 18.6% Total asset turnover 216.6% 211.8% 193.9% 180.8% 171.7% 172.5% 180.2% 171.5% 170.0% 159.1% 158.6% 160.4% 167.6% Inventory turnover 826.6% 813.2% 747.6% 646.5% 586.7% 549.5% 479.3% 411.3% 371.5% 309.1% 288.2% 258.4% 255.2% Days in inventory 44 45 49 56 62 66 76 89 98 118 127 141 143 W orking capit al (JPY mn) 7,293 7,721 8,197 8,844 9,877 13,718 17,963 23,131 31,061 39,398 46,827 61,503 63,428 Current ratio 290.0% 270.5% 267.6% 251.9% 263.7% 298.3% 329.0% 319.8% 287.7% 250.7% 267.9% 259.2% 299.6% Quick rat io 211.3% 190.9% 193.1% 164.6% 184.4% 182.7% 194.3% 192.2% 141.7% 122.5% 135.6% 111.7% 145.4% OCF / Current liabilit ies 64.7% 63.1% 85.0% 61.3% 54.0% 29.7% 32.0% 42.0% 41.2% 38.1% 61.6% 44.2% 92.7% Net debt / Equity 44.4% 37.9% 38.2% 31.1% 36.2% 29.4% 29.9% 32.5% 21.5% 12.7% 20.0% 17.6% 28.0% OCF / T ot al liabilit ies 73.1% 66.4% 78.1% 55.3% 51.7% 37.7% 51.8% 56.5% 51.7% 25.1% 45.3% 34.2% 73.5% Cash cycle (days) 22 24 24 25 27 36 51 65 74 84 91 110 113 Changes in working capital 2,045 428 476 647 1,033 3,841 4,245 5,168 7,930 8,337 7,429 14,676 1,925 Source: Shared Research based on company data

Comparable companies

SR believes that Ryohin Keikaku, with its unique brand and somewhat higher price points and number of different items compared to low-price mass retailers, is in a league of its own. Therefore, any direct comparison may be misleading and hold little information value. Having said that, Ryohin Keikaku is a retailer, and several leading Japanese retailers can be seen both as comparative benchmarks and competitors.

Ryohin Keikaku oversees all aspects of its retail operations, from product planning and development to logistics and sales. It handles a wide variety of everyday products, ranging from clothing to household goods and food. Companies using a similar “SPA” style business model (see note below) include Fast Retailing (TSE1: 9983) and Shimamura (TSE1: 8227) in terms of apparel, and Nitori (TSE1: 9843) in terms of household goods and furniture.

SPA stands for “Specialty store retailer of Private label Apparel.” SPA retailers oversee every aspect of the manufacturing and retail process, including materials procurement, product planning, manufacturing, distribution, sales, promotional activity, and inventory management.

Nitori has a far higher gross profit margin and operating profit margin than most its peers, due to the fact its owns manufacturing. Fast Retailing also has a high gross profit margin, as is typical for apparel sales. Shimamura has a low gross profit margin, due to its competitive pricing, but its operating profit margin is on a par with Ryohin Keikaku’s, because its stores are only lightly staffed.

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Ryohin Keikaku places a strong emphasis on the efficiency of inventory investment, measured as gross profit margin multiplied by inventory turnover (the “cross ratio”). This metric is particularly useful for retailers as a way of measuring how much gross profit is created by inventory investment. The company saw its cross ratio fall slightly in FY02/13 as it invested in inventory ahead of moves to globalize.

Overseas business

Overseas business FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Act. Est. Operating revenue 24,598 25,702 26,348 32,431 28,346 27,615 26,568 35,033 32,485 33,078 34,873 44,320 109,080 117,563 144,758 172,500 East Asia 19,304 19,708 19,714 24,319 21,978 21,240 19,998 26,486 25,221 25,372 25,778 33,431 83,045 89,704 109,803 129,100 Europe and the Americas 3,493 3,874 4,430 5,328 4,029 3,938 4,172 5,462 4,393 4,552 5,524 6,754 17,124 17,603 21,225 27,400 West and South Asia, and Oceania 1,802 2,121 2,204 2,784 2,338 2,436 2,397 3,084 2,870 3,153 3,570 4,134 8,911 10,256 13,729 16,000 YoY 58.3% 49.2% 39.3% 25.4% 15.2% 7.4% 0.8% 8.0% 14.6% 19.8% 31.3% 26.5% 40.7% 7.8% 23.1% 19.2% East Asia 68.7% 56.7% 44.4% 29.7% 13.9% 7.8% 1.4% 8.9% 14.8% 19.5% 28.9% 26.2% 47.2% 8.0% 22.4% 17.6% Europe and the Americas 17.4% 22.4% 22.4% 4.4% 15.4% 1.7% -5.8% 2.5% 9.0% 15.6% 32.4% 23.7% 15.2% 2.8% 20.6% 29.1% West and South Asia, and Oceania 60.4% 43.1% 34.9% 38.1% 29.8% 14.9% 8.8% 10.8% 22.8% 29.4% 48.9% 34.0% 42.5% 15.1% 33.9% 16.5% YoY (local currency) 41.8% 29.5% 24.8% 17.7% 24.1% 22.4% 19.6% 23.4% 18.2% 18.0% 19.0% 16.0% 28.9% 24.1% 18.0% 15.9% East Asia 48.9% 33.5% 26.5% 18.2% 22.6% 22.1% 17.8% 25.3% 18.2% 17.9% 18.3% 18.3% 32.1% 24.7% 14.0% 14.4% Europe and the Americas 11.9% 10.6% 15.3% 6.3% 23.0% 19.4% 10.4% 17.0% 15.1% 13.8% 16.0% 18.2% 12.1% 19.0% 18.2% 25.6% West and South Asia, and Oceania 47.2% 33.7% 30.6% 41.5% 42.2% 30.8% 43.3% 20.2% 24.2% 25.9% 30.1% 30.1% 37.3% 28.4% 25.9% 12.9% YoY (local currency; comparable store sales) 21.7% 11.2% 9.7% 5.3% 7.0% 7.0% 1.4% 3.5% 2.1% 2.7% 6.0% 4.9% 11.7% 4.6% 4.1% 4.6% East Asia 26.5% 12.9% 10.1% 4.7% 5.0% 5.9% 0.8% 4.2% 2.3% 1.8% 6.0% 5.2% 13.1% 4.1% 3.9% 4.5% Europe and the Americas 3.2% 4.7% 9.1% 2.6% 11.8% 5.8% -0.4% -0.2% 2.0% 7.4% 5.9% 2.8% 5.4% 3.7% 4.4% 5.6% West and South Asia, and Oceania 15.7% 8.0% 8.0% 17.6% 18.9% 20.3% 14.1% 2.7% 0.7% 3.9% 6.3% 3.4% 12.7% 12.5% 4.7% 4.2% Operating profit 3,600 3,692 3,796 5,955 4,121 4,442 1,987 5,188 2,912 2,904 3,315 6,958 17,042 15,740 16,090 20,400 East Asia 3,871 3,971 3,796 5,623 4,503 4,773 2,318 4,858 3,221 3,870 3,361 6,407 17,261 16,454 16,861 20,600 Europe and the Americas -188 -294 -97 165 -417 -347 -382 295 -330 -778 -139 350 -414 -852 -898 -400 West and South Asia, and Oceania -83 14 96 167 35 17 51 34 21 -187 94 200 195 138 128 200 YoY 197.7% 41.6% 198.0% 68.8% 14.5% 20.3% -47.7% -12.9% -29.3% -34.6% 66.8% 34.1% 97.8% -7.6% 2.2% 26.8% East Asia 173.1% 52.7% 163.2% 89.1% 16.3% 20.2% -38.9% -13.6% -28.5% -18.9% 45.0% 31.9% 104.6% -4.7% 2.5% 22.2% Europe and the Americas - - - -58.6% - - - 79.1% - - - 18.6% - - - - West and South Asia, and Oceania - -70.6% - 7.2% - 18.1% -47.0% -79.7% -40.0% - 84.3% 488.2% 114.6% -29.2% -7.2% 56.3% OPM 14.6% 14.4% 14.4% 18.4% 14.5% 16.1% 7.5% 14.8% 9.0% 8.8% 9.5% 15.7% 15.6% 13.4% 11.1% 11.8% East Asia 20.1% 20.2% 19.3% 23.1% 20.5% 22.5% 11.6% 18.3% 12.8% 15.3% 13.0% 19.2% 20.8% 18.3% 15.4% 16.0% Europe and the Americas -5.4% -7.6% -2.2% 3.1% -10.3% -8.8% -9.2% 5.4% -7.5% -17.1% -2.5% 5.2% -2.4% -4.8% -4.2% -1.5% West and South Asia, and Oceania -4.6% 0.7% 4.4% 6.0% 1.5% 0.7% 2.1% 1.1% 0.7% -5.9% 2.6% 4.8% 2.2% 1.3% 0.9% 1.3% Store count (including licensees) 302 308 320 344 347 362 384 403 408 422 439 457 344 403 457 505 East Asia 190 197 207 227 232 245 260 279 283 293 306 319 227 279 319 362 Europe and the Americas 73 70 70 72 70 69 70 69 71 70 71 72 72 69 72 71 West and South Asia, and Oceania 39 41 43 45 45 48 54 55 54 59 62 66 45 55 66 72 Source: Shared Research based on company data

MUJI has built a strong brand in overseas markets, where the core philosophy of “simple, practical goods that make the best use of the materials” has struck a chord with consumers. This brand strength is the company’s most powerful weapon. Ryohin Keikaku is focusing on middle- and high-income consumers in their 20s to 40s.

East Asia (December year-end)

East Asia FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Act. Est. Operating revenue 19,304 19,708 19,714 24,319 21,978 21,240 19,998 26,486 25,221 25,372 25,778 33,431 83,045 89,704 109,803 129,100 Sales (operating revenue from FY02/17) 19,303 19,784 19,726 24,362 China 11,258 11,671 12,049 14,758 13,384 13,048 12,227 16,293 15,616 15,191 15,964 22,127 49,736 54,952 68,898 Hong Kong 3,573 3,269 3,383 3,718 3,680 3,164 3,217 3,824 3,686 3,504 3,721 4,607 13,943 13,885 15,518 Taiwan 3,123 3,327 2,882 4,003 3,390 3,224 2,753 4,123 3,765 3,941 3,457 5,124 13,335 13,490 16,287 South Korea 1,348 1,439 1,402 1,839 1,522 1,805 1,801 2,247 2,152 2,737 2,636 3,363 6,028 7,375 10,888 YoY 68.7% 56.7% 44.4% 29.7% 13.9% 7.8% 1.4% 8.9% 14.8% 19.5% 28.9% 26.2% 47.2% 8.0% 22.4% 17.6% Sales 68.6% 57.4% 44.6% 26.7% China 93.9% 75.2% 57.8% 40.6% 18.9% 11.8% 1.5% 10.4% 16.7% 16.4% 30.6% 35.8% 65.1% 10.5% 25.4% Hong Kong 39.7% 41.3% 33.0% 7.9% 3.0% -3.2% -4.9% 2.9% 0.2% 10.7% 15.7% 20.5% 28.2% -0.4% 11.8% Taiwan 43.1% 36.7% 27.9% 7.3% 8.5% -3.1% -4.5% 3.0% 11.1% 22.2% 25.6% 24.3% 25.8% 1.2% 20.7% South Korea 48.8% 24.2% 15.6% 18.6% 12.9% 25.4% 28.5% 22.2% 41.4% 51.6% 46.4% 49.7% 24.9% 22.3% 47.6% Sales (local currency) 48.9% 33.5% 26.5% 18.2% 22.6% 22.1% 17.8% 25.3% 18.2% 17.9% 18.3% 18.3% 32.1% 24.7% 14.0% 14.4% China 71.8% 48.2% 37.7% 31.8% 28.8% 26.5% 18.8% 32.2% 24.0% 22.6% 29.6% 20.9% 47.6% 29.8% 23.4% Hong Kong 20.6% 18.7% 13.0% -5.8% 6.5% 4.2% 5.9% 14.1% 1.5% 8.9% 16.8% 16.8% 12.2% 10.7% 8.8% Taiwan 28.3% 17.7% 15.6% 4.2% 17.6% 13.9% 13.4% 12.8% 5.9% 11.3% 10.3% 10.3% 14.9% 14.3% 10.6% South Korea 32.1% 11.3% 11.8% 16.7% 27.3% 48.8% 46.4% 37.3% 37.7% 43.4% 36.9% 36.9% 17.2% 39.9% 39.3% Sales (local currency; comparable st ores) 26.5% 12.9% 10.1% 4.7% 5.0% 5.9% 0.8% 4.2% 2.3% 1.8% 6.0% 5.2% 13.1% 4.1% 3.9% 4.5% China 38.6% 22.6% 15.9% 9.7% 4.7% 5.4% 0.8% 7.6% 5.8% 1.8% 7.1% 4.0% 20.4% 4.7% 4.6% Hong Kong 16.0% 8.9% 9.8% 0.5% 1.6% 3.4% -2.9% -0.8% -4.8% -1.8% 1.8% 2.7% 8.1% 0.7% -0.6% Taiwan 11.0% -3.6% -2.1% -8.9% 5.6% 4.6% 0.7% -2.1% -3.5% 1.3% 5.5% 10.3% -2.3% 2.1% 3.9% South Korea 8.2% -7.4% -0.5% 10.0% 18.0% 20.9% 10.2% 0.1% -2.8% 8.2% 5.7% 10.7% 0.9% 11.4% 6.3% Operating profit 3,871 3,971 3,796 5,623 4,503 4,773 2,318 4,858 3,221 3,870 3,361 6,407 17,261 16,452 16,861 20,600 YoY 173.1% 52.7% 163.2% 89.1% 16.3% 20.2% -38.9% -13.6% -28.5% -18.9% 45.0% 31.9% 104.7% -4.7% 2.5% 22.2% OPM 20.1% 20.2% 19.3% 23.1% 20.5% 22.5% 11.6% 18.3% 12.8% 15.3% 13.0% 19.2% 20.8% 18.3% 15.4% 16.0% Store count (including licensees) 190 197 207 227 232 245 260 279 283 293 306 319 227 279 319 362 China 128 132 140 160 163 173 183 200 202 210 219 229 160 200 229 264 Hong Kong 14 15 15 15 15 16 17 17 16 17 18 19 15 17 19 19 Taiwan 34 36 38 38 39 40 41 42 43 43 44 45 38 42 45 48 South Korea 14 14 14 14 15 16 19 20 22 23 25 26 14 20 26 31 Source: Shared Research based on company data

The company expects the Domestic business and the East Asia business to be an earnings driver during the period of the latest medium-term plan. The company opened the MUJI Ocean Centre in Hong Kong—its first overseas store in Asia—in November 1991 in collaboration with the Wing On Group. In 1995 it entered Singapore, and had seven stores by 1998. However, it closed all these stores in 1999 and temporarily pulled out of Asia due to poor earnings results. In 2001 the company established a local

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subsidiary in Hong Kong and opened a domestic shop there, before doing the same thing in Singapore in 2003. In 2005, the company entered the Chinese mainland with the establishment of MUJI (Shanghai) Co. Ltd.

China In FY02/14, the average spend per customer was higher than Japan, at about CNY200 (approximately JPY3,400 at JPY17/CNY; compared to JPY2,282 in Japan). Unit prices for apparel are between 10% and 15% higher than in Japan; household goods are about 30% higher. Some areas had a high average spend per customer of CNY380 (JPY6,300). Total customer count was about 7mn as of FY02/14.

The sales composition of health and beauty products is 22% (as of FY02/16), the highest of any region. For food products, that began full-scale sales in FY02/15, the sales composition rose from 0.4% in FY02/15 to 2.4% in FY02/16. Food products were rolled out to all stores in January 2016, causing the company to expect further increases in composition from FY02/17 onward.

Also, improving standards of living are reflected first in consumers’ choice of food, then clothing, followed finally by household goods. In the future, Ryohin Keikaku will seek to strengthen its offerings in household goods such as furniture and fabrics. Due to stricter government standards in China, the number of product offerings for furniture in China is limited compared to Japan. The company projects that approvals will be granted for furniture-related products during FY02/17, and while increasing its lineup, it will also seek to grow sales through fabric accessories.

Most customers were between 20 and 49, and the proportion of male customers was higher than in Japan (30% compared to nearly 20% in Japan; as of FY02/14).

Leases are typically for between three and five years, and rates vary depending on store sales. Distribution costs—mainly trucking—are high, as is the number of staff per store. As a result, the cost structure leans toward high variable cost ratios.

Stores are about 650sqm in size. The company opens stores in shopping centers and department stores in large urban areas. The average capex (including depreciable assets and expenses) is higher than Japan, at around JPY40mn. Inventories are lower than Japan at around JPY30mn. The security deposit can vary widely. The company aims for a payback period of less than 18 months, slightly longer than that of stores in Japan.

Ryohin Keikaku entered mainland China in July 2005, with the opening of its first shop in Shanghai. However, the reason it was late to enter this country was because of counterfeit products. To combat the issue, the company posted a declaration in the People’s Daily to bring the issue to light and warn consumers about counterfeits. The number of stores stood at 229 as of end-FY02/18.

In 1994, Jet Best Investment (JBI), a company based in Hong Kong, registered trademarks for fashion and clothing items under the “Mujirushi Ryohin” and “MUJI” brands. JBI also operated stores in mainland China with kanji signage that was strikingly similar to Mujirushi Ryohin. In May 2000, Ryohin Keikaku filed in Chinese court to have the trademarks canceled. Seven years later, in December 2007, the Beijing Higher People’s Court awarded victory to the company. However, the “Mujirushi Ryohin” trademark is still held by copycat Chinese companies for certain categories of products such as select foods, sheets, and covers. The company has decided to get around this by using the MUJI (alphabetic) logo on these products, and it appears that this issue no longer presents a major obstacle to the company’s business in China.

Expansion of customer base In order to expand its customer base, the company was more aggressive in reducing product prices during FY02/17. In China, product prices are planned to be reduced at the ideal time. In general, prices are revised twice a year, in January and September, at times when demand is also high for products at ordinary prices. By explaining to consumers the reasoning behind lower prices, Ryohin Keikaku hopes to extend its core customer base.

Store opening strategy: Issue with human resource development At the China business, the company switched to another store opening policy after reaching 200 store openings at the end of December 2016. Formerly, it had expected 40–50 store openings a year, but now aims to open 30 stores and remodel 20 stores a

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year since 2017. The idea behind this is improving the quality of comparable stores to achieve comparable store sales growth that is 2pp higher than the market average.

Ryohin Keikaku views its most pressing issue in China as human resource development.

This is the result of the company’s view that if sales and management at stores do not function smoothly, it will lead to a deterioration in the quality of service, and damage the brand’s reputation. It does not appear that there are any particular issues with respect to the number of properties under consideration for new store locations, product procurement, or store development and design.

Plans are also underway for large store openings, following the openings in Chengdu (December 2014) and Shanghai (December 2015). The company is targeting locations in first-tier cities, and there appear to be numerous locations under consideration. However, the company will continue with its stance on comprehensive evaluation; even if a location can provide high levels of foot traffic, Ryohin Keikaku is cautious in its negotiations. This stems from past experience in Japan, where poor negotiations ultimately led to store failures.

Lease agreements in China are commonly for between three and five years, but in light of inflation concerns, the company is seeking longer terms. As lease agreement renewals will occur in the near future, the company is also fostering personnel skilled in negotiation.

Store locations in China (as of end-FY02/18)

Xuzhou 2 Zibo1

Tangshan 2 Harbin 2

Beijing 20 Changchun 4

Tianjin 6 Shenyang 3 Dalian 3 Baoding 1 Wulumuqi 5 Baotou 1 Shijiazhuang 3 Xian 6 Jinan 4 Taiyuan 2 Yantai 2 Handan 1 Xining 1 Qingt ao 7 Hohhot 1 Yinchuan 1 Yangzhou 1

Nanjing 5 Lanzhou 1 Wuhu 2

Zhengzhou 1 Changzhou 3

Chengdu 12 Suzhou 6

FY02/18 Chongqing 7 Nandong 3 Store count: 229 Wuhan 6 Wuxi 3 Shanghai 26 (incl. Café&Meal 4) Changsha 6 Zhuzhou 1 Kunshan 1 Store locations: 56 cities Kuiyang 2 Nin g b o 3 Tier-1 4 cities 67 stores Kunming 5 Jiaxing 1 Guangzhou 6 Nanchang 1 New tier-1 15 cities 90 stores Nanning 2 Shaoxing 1 Shenzhen 15 Xiamen 3 Tier-2 23 cities 55 stores Hangzhou 7 Haikou 1 Shenzhou 3 Wenzhou 1 Tier-3 14 cities 17 stores Foshan 2 Fuzhou 2 Hefei 3 Zhuhai 1 Source: Shared Research based on company data Product strategy The product lineup in China has been filled out as of April 2016. However, the company aims to increase items in some categories to boost sales at comparable store sales, and all stores in the country carried foods as of January 2016 (until this point, foods were limited only to large stores in Chengdu and Shanghai, etc.).

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Although it appears that margins on food products are similar to household products, this may change if new locally sourced products are introduced at lower prices.

Stores in China have completed the stage of increasing inventory to secure sales, causing turnover to improve by about 0.1x or on par with FY02/16. Ideally, the company would like to reduce turnover even further, but due to factors such as the opening of new large stores and securing inventory for staple products, turnover is not expected to undergo any significant change.

It also appears that there is still room for expansion in furniture. As seen in developed markets, customer interest in China is shifting from food and clothing to homes, and Ryohin Keikaku is looking to introduce items that meet local regulations.

Hong Kong and Taiwan Household goods accounted for 46% of sales in FY02/14; fashion accounted for 39%, and food made up the remaining 14%—a relatively high percentage compared to other countries. As of FY02/14, the company had 11 stores in Hong Kong, and it is looking to further expand its reach via small-scale stores (such as within subway stations) and the food business. According to the company, its brand strategy has been more successful in Hong Kong than anywhere else. Sales per store were around JPY700mn in FY02/13.

In Taiwan, Ryohin Keikaku expanded via an equity-method affiliate until 2013, but it made this company into a wholly owned subsidiary in January 2014. The breakdown of sales in FY02/14 was as follows:

Household goods: 52%; ▷ Apparel: 42%; ▷ Food: 6%. ▷ Considerations are underway for expansion via small-scale and food stores, much like in Hong Kong.

In February 2014, Ryohin Keikaku completed its set of three wholly owned subsidiaries spread across Taiwan, mainland China, and Hong Kong. Ryohin Keikaku is focused on building a strong brand in those three territories. The company hopes to use its success there as a springboard to eventually establish its worldwide presence and build the MUJI brand into a global household name.

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Europe and the Americas

Europe and the Americas FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Act. Est. Operating revenue 3,493 3,874 4,430 5,328 4,029 3,938 4,172 5,462 4,393 4,552 5,524 6,754 17,124 17,603 21,225 27,400 Sales (operating revenue from FY02/17) 3,471 3,838 4,402 5,308 UK 1,038 780 1,153 1,281 819 729 895 1,082 779 847 1,022 1,134 4,252 3,525 3,782 France 687 701 727 940 623 596 604 901 612 657 692 823 3,055 2,724 2,784 It aly 332 371 399 544 344 403 389 560 398 397 444 564 1,646 1,696 1,803 Germany 407 475 479 624 455 426 391 532 416 471 524 623 1,985 1,804 2,034 Spain - - - - 192 185 181 281 211 231 230 318 - 839 990 Portugal - - - - 41 44 49 56 57 66 70 77 - 190 270 US 889 1,051 1,191 1,520 1,273 1,261 1,358 1,552 1,518 1,468 1,784 2,152 4,651 5,444 6,922 Canada 116 164 163 278 198 226 240 1,145 329 353 692 905 721 1,809 2,279 Other (wholesale) 191 162 318 140 79 68 68 72 70 61 66 160 811 287 357 YoY 17.4% 22.4% 22.4% 4.4% 15.4% 1.7% -5.8% 2.5% 9.0% 15.6% 32.4% 23.7% 15.2% 2.8% 20.6% 29.1% Sales 52.4% 56.8% 60.1% 36.1% - UK 12.9% -20.6% -5.8% -14.3% -21.1% -6.5% -22.4% -15.5% -4.9% 16.2% 14.2% 4.8% 9.1% -17.1% 7.3% France 6.0% 2.6% 3.0% -20.7% -9.3% -15.0% -16.9% -4.1% -1.8% 10.2% 14.6% -8.7% -3.2% -10.8% 2.2% It aly 0.0% 3.6% 13.0% -3.9% 3.6% 8.6% -2.5% 2.9% 15.7% -1.5% 14.1% 0.7% 2.0% 3.0% 6.3% Germany 7.7% 12.0% 2.8% -4.4% 11.8% -10.3% -18.4% -14.7% -8.6% 10.6% 34.0% 17.1% 3.3% -9.1% 12.7% Spain 9.9% 24.9% 27.1% 13.2% 18.0% Portugal 39.0% 50.0% 42.9% 37.5% 42.1% US 43.2% 20.0% 14.0% 2.1% 19.2% 16.4% 31.4% 38.7% 40.7% 17.1% 27.1% Canada 70.7% 37.8% 47.2% 311.9% 66.2% 56.2% 188.3% -21.0% 580.2% 150.9% 26.0% Sales (local currency) 11.9% 10.6% 15.3% 6.3% 23.0% 19.4% 10.4% 17.0% 15.1% 13.8% 16.0% 18.2% 12.1% 19.0% 18.2% 25.6% UK 6.7% -0.7% 7.0% -3.0% 5.9% -1.5% 6.9% 7.8% 9.2% 19.4% 6.1% 6.1% 3.5% 5.2% 7.2% France 13.6% 4.6% 6.8% -12.8% -5.3% -2.4% -1.5% 5.0% 3.3% 4.0% -0.3% -0.3% 0.1% 0.9% -4.2% It aly 7.2% 5.8% 14.1% 3.3% 8.4% 23.4% 15.5% 12.7% 21.5% -6.5% -0.3% 9.5% 7.0% 14.9% -0.3% Germany 15.4% 14.5% 4.4% 3.1% 16.8% 2.8% -3.0% -6.5% -3.9% 4.3% 16.9% 5.2% 8.3% 1.4% 5.7% Spain 15.7% 17.7% 10.3% 2.0% 8.3% 1.4% 10.6% Portugal 43.7% 44.3% 25.3% 21.8% 8.3% 1.4% 33.0% US 18.2% 32.2% 15.1% 31.3% 47.5% 34.4% 34.6% 13.4% 21.2% 13.4% 22.1% 35.4% 22.8% 30.5% 23.4% Canada 94.8% 62.4% 73.9% 73.8% 62.1% 58.1% 162.3% 98.6% 74.7% 98.4% Sales (local currency; comparable st ores) 3.2% 4.7% 9.1% 2.6% 11.8% 5.8% -0.4% -0.2% 2.0% 7.4% 5.9% 2.8% 5.4% 3.7% 4.4% 5.6% UK 1.7% 4.4% 5.2% -6.9% 5.3% -3.2% 6.2% 5.6% 9.7% 13.3% 9.4% 1.3% 1.2% 4.6% 8.4% France -4.2% -14.6% 2.8% -3.4% 10.7% 11.2% -3.8% 10.6% 6.2% 7.5% 10.7% -2.4% -4.0% 5.4% 5.0% It aly 5.5% 4.6% 10.6% 1.5% 14.9% 5.6% 3.0% -5.2% -1.7% -6.4% -0.1% -5.1% 5.7% 3.2% -1.9% Germany 5.2% 4.1% 0.5% -0.4% 16.0% 5.9% 15.1% 14.1% 12.2% 14.3% -1.5% -2.0% 2.1% 9.2% 4.5% Spain 11.5% 13.1% 11.6% 10.6% 11.6% Portugal 43.0% 43.4% 28.4% 77.5% 46.5% US 8.9% 20.3% 24.0% 16.1% 10.8% 6.6% -12.1% -11.1% -4.3% 6.8% 4.5% 6.8% 17.5% -3.2% 3.3% Canada 29.9% 13.0% 19.4% 4.5% -7.5% -4.2% 0.1% 2.4% 15.3% -1.9% Operating profit -188 -294 -97 165 -417 -347 -382 295 -330 -778 -139 350 -414 -851 -898 -400 OPM -5.4% -7.6% -2.2% 3.1% -10.3% -8.8% -9.2% 5.4% -7.5% -17.1% -2.5% 5.2% -2.4% -4.8% -4.2% -1.5% Store count 73 70 70 72 70 69 70 69 71 70 71 72 72 69 72 71 UK 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 France 12 10 10 9 9 9 9 9 9 8 7 7 9 9 7 7 It aly 9 9 9 9 9 9 9 9 9 9 8 8 9 9 8 8 Germany 8 8 8 8 8 7 7 7 7 7 7 7 8 7 7 7 Spain 6 6 6 6 6 6 6 6 6 6 6 Portugal 1 1 1 1 1 1 1 1 1 1 2 US 9 9 10 11 11 11 12 12 14 14 15 15 11 12 15 17 Canada 1 1 1 2 2 2 2 3 3 3 5 6 2 3 6 9 Licensees 22 21 20 21 12 12 12 10 10 10 10 10 21 10 10 3 Source: Shared Research based on company data

History In July 1991, Ryohin Keikaku opened its first overseas store—MUJI West Soho (155sqm)—in one of London’s central shopping districts. This store was opened in partnership with the British department store Liberty Ltd. This partnership came about because at the time, in 1991, Liberty had an agreement with the former Saison Group (a large Japanese department store group). Liberty then took an interest in Ryohin Keikaku’s business and offered to provide sales space. Liberty and the company split the initial investment equally, with Ryohin Keikaku supplying the products and Liberty taking charge of sales. However, it became difficult to maintain the business with Liberty in light of rising inventory and logistics costs in 1997. The company considered closing the store, but decided against it due to strict rules concerning rent in the UK and the fact that the lease on the shop was a long-term one, as is usual in the UK. In the end, Liberty and Ryohin Keikaku ended their partnership, and the business was transferred to Ryohin Keikaku Europe Ltd., with the company buying out the remaining inventory. Then the company expanded its store network in Europe, opening 13 stores in the UK and nine stores in France in 2000. However, it moved to restructure unprofitable overseas stores from FY02/01 onward, in light of poor earnings results. It closed five unprofitable stores, such as that in Lyon, France.

Restructuring in Europe In the Europe business, with the intent of restoring growth by the end of the next medium-term plan, measures to fundamentally restructure were implemented under the previous medium-term plan ending in FY02/17.

Specifically, the company will seek to advance measures in the areas of introducing a unified global core IT system for operations management, and remodel its flagship stores in each country to respond to the “new environment” format. The new core IT system will allow for improvement of management of and revision to sales plans, while the remodeling will contribute to

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improved store traffic and brand recognition. The company plans to focus on these initiatives to secure growth in the European business, for which it sees significant room for growth.

Introduction of global core IT system One of the factors contributing to poor performance in Europe may be the lack of an adequate IT system. Since entering the UK in partnership with Liberty in 1991 (partnership dissolved in 1997), the operations management and accounting systems were handled separately by the local subsidiary. The lack of a unified global system for operations management served as an obstacle toward formulating product strategy and sales plans across the supply chain, and in making swift decisions in processes such as product procurement.

Concerning the operations management system, the new system will temporarily run concurrently with existing accounting systems in each country, while a bridge will be formed to integrate each existing system with the new global version. This will allow for general trends in each country to be monitored by headquarters in Japan. As the initiative progresses, the accounting systems will be unified to allow for more detailed management. This will allow for sales analysis, product price adjustment, inventory strategy, and securing profitability across the organization.

Unified global core IT system: The operations management system was introduced to the China business in 2010 by transplanting the system used in Japan into the operations in China. This was a factor leading to success in China, allowing for swift evaluation and support of local issues. Afterward, “bridges” were put into place in 2014 to link local systems with the system at headquarters in Japan (first in Asia, then in Europe) upon commencement of global expansion. The accounting system was first introduced at the parent and domestic subsidiaries in March 2015, and then installed in the US business in January 2016. Plans call for its introduction in Canada in January 2017, while its introduction across Europe will occur in February 2018. Afterward, about three countries are planned to introduce the system each year.

Expects to turn into the black in FY02/19; opens stores mainly in North America under medium-term plan According to initial forecasts, the company expected to pave the way in FY02/16 and FY02/17 for reconstruction to turn into the black in FY02/18. However, it now expects to not post an operating profit until FY02/19. That said, this is attributable to a weak British pound, not a delay in the reconstruction plan. In Europe, procurement costs are affected by the British pound as the company’s European headquarters is located in the UK. The British pound sharply fell owing to the Brexit in June 2016. Since the company still carries low-margin inventory goods procured during this period, it will see an operating loss in FY02/18. Considering the inventory turnover period, however, FY02/19 should not be affected by such inventory goods, and the company also plans on handling this inventory with a price revision. The company therefore commented that it is highly likely to move into the black in 2H FY02/18 or later.

Store strategy: Transitioning to the “new environment” format and promoting regional flagship stores As its store strategy, the company continued with structural reforms such as the closing of unprofitable stores during FY02/16, and remodeled flagship stores in various regions (France, the UK, and Germany in September 2015). It also remodeled secondary flagship stores, most of which were completed in FY02/17.

However, remodeling of stores requires the store to close for about two months, and fixed costs are incurred even during the closure. These costs led to wider losses in FY02/16 and FY02/17.

Remodeling of No. 1 and No. 2 flagship stores in Europe and the Americas

UK France Germany It aly Spain US Forum des Halles Tottenham Court Fifth Avenue No. 1 store Place Carree Munich Corso Buenos Aires Barcelona Road (new store) (new store) Renovated in Q3 FY02/16 Q3 FY02/15 Q3 FY02/16 Q1 FY02/17 Q4 FY02/16 Q4 FY02/16

No. 2 store Covent Garden Francs Bourgeois Berlin V ia T orino

Renovated in Q3 FY02/16 Q3 FY02/16 Q3 FY02/16 Q3 FY02/18 Source: Shared Research based on company data

The company directly manages its stores in the UK, France, Italy, Germany, Spain, and Portugal. The company conducts wholesale operations via its subsidiary, MUJI Europe Holdings Ltd. in a number of countries in Europe, such as Ireland, Sweden,

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Norway, and Turkey. The parent company reports sales on products to MUJI Europe Holdings (UK-based European headquarters), which then wholesales the products to licensed companies in various countries.

The Americas Ryohin Keikaku expanded into the US in 2007, and opened the first store in Canada in 2014. In the US, the company views its flagship store opening on Fifth Avenue in New York (November 2015) as a success. To achieve this, the company utilized small-scale advertising, such as working with designers and creators in specialist areas to host talk shows and hold exhibitions to capture a core customer audience. This is in contrast to more traditional advertising, such as those utilizing billboards, taxis, and subways. From FY02/17 onward, Ryohin Keikaku is continuing with its focus on branding.

Stores are currently concentrated in New York and the west coast, but the company sees possibilities in expanding its reach to include shopping centers across the US, and will work to refine its store models with this in mind. Consideration is also being made for further refinements to procurement and logistics ahead of future business expansion in the existing mainstay markets on the east and west coasts. The company plans to accelerate store opening in Canada in 2019 and 2020, the latter half of the latest medium-term plan. The financial year ends in December in the US and Canada.

West and South Asia, and Oceania

West and South Asia, Oceania FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Act. Est. Operating revenue 1,802 2,121 2,204 2,784 2,338 2,436 2,397 3,084 2,870 3,153 3,570 4,134 8,911 10,256 13,729 16,000 Sales (operating revenue from FY02/17) 1,624 1,843 1,943 3,425 13,729 Singapore 773 885 899 1,059 915 898 925 1,144 1,007 1,108 1,355 1,629 3,616 3,882 5,099 Malaysia 227 182 214 273 260 256 247 298 301 378 421 469 896 1,061 1,569 T hailand 484 419 437 573 557 522 488 648 613 668 719 831 1,913 2,215 2,831 India - - 60 77 63 131 109 147 137 450 Aust ralia 138 358 392 414 386 416 406 532 522 530 606 647 1,302 1,740 2,305 Ot her w holesale - 454 261 467 218 345 270 385 361 340 359 413 1,182 1,218 1,473 YoY 60.4% 43.1% 34.9% 38.1% 29.8% 14.9% 8.8% 10.8% 22.8% 29.4% 48.9% 34.0% 42.5% 15.1% 33.9% 16.5% Sales 62.5% 52.6% 38.6% 30.3% Singapore 47.8% 49.0% 20.8% 15.0% 18.4% 1.5% 2.9% 8.0% 10.1% 23.4% 46.5% 42.4% 30.7% 7.4% 31.3% Malaysia 127.0% 33.8% 45.6% 40.7% 14.5% 40.7% 15.4% 9.2% 15.8% 47.7% 70.4% 57.4% 51.4% 18.4% 47.9% T hailand 48.9% 26.6% 17.2% 26.5% 15.1% 24.6% 11.7% 13.1% 10.1% 28.0% 47.3% 28.2% 28.6% 15.8% 27.8% Aust ralia 181.6% 143.5% 186.1% 149.4% 179.7% 16.2% 3.6% 28.5% 35.2% 27.4% 49.3% 21.6% 160.9% 33.6% 32.5% Sales (local currency) 47.2% 33.7% 30.6% 41.5% 42.2% 30.8% 43.3% 20.2% 24.2% 25.9% 30.1% 30.1% 37.3% 28.4% 25.9% 12.9% Singapore 37.2% 34.7% 13.8% 15.4% 26.4% 15.0% 19.1% 20.5% 12.8% 23.1% 36.7% 29.3% 23.2% 19.9% 27.3% Malaysia 114.4% 26.2% 55.6% 60.7% 37.2% 73.9% 38.4% 25.6% 24.2% 55.3% 66.5% 45.7% 55.1% 36.8% 48.7% T hailand 28.4% 9.4% 9.0% 27.4% 29.7% 48.4% 32.2% 24.5% 10.0% 20.9% 30.1% 17.1% 29.1% 32.0% 19.3% Aust ralia 176.8% 143.0% 204.0% 173.9% 214.5% 35.6% 20.0% 39.5% 30.7% 23.1% 32.8% 14.4% 160.7% 50.5% 24.5% Sales (local currency; comparable st ores) 15.7% 8.0% 8.0% 17.6% 18.9% 20.3% 14.1% 2.7% 0.7% 3.9% 6.3% 3.4% 12.7% 12.5% 4.7% 4.2% Singapore 8.9% 10.8% 10.2% 22.0% 24.2% 13.7% 12.7% -4.8% -6.4% 2.0% -3.4% 1.2% 13.4% 9.9% -1.6% Malaysia 35.0% 2.7% 15.5% 16.9% 0.8% 26.5% 13.8% 18.5% 11.5% 13.3% 17.5% 5.4% 17.1% 11.8% 11.6% T hailand 25.1% 6.1% 2.7% 9.8% 12.6% 23.8% 15.7% 9.6% -0.8% - 10.0% 1.1% 11.5% 15.5% 3.5% Aust ralia -13.8% -2.2% 5.8% 17.5% 35.0% 46.2% 22.0% 32.2% 13.3% 8.9% 15.8% 9.7% 2.1% 31.7% 11.8% Operating profit -83 14 96 167 35 17 51 34 21 -187 94 200 195 137 128 200 YoY - -70.6% - 7.2% - 18.1% -47.0% -79.7% -40.0% - 84.3% 488.2% 116.7% -29.7% -6.6% 56.3% OPM -4.6% 0.7% 4.4% 6.0% 1.5% 0.7% 2.1% 1.1% 0.7% -5.9% 2.6% 4.8% 2.2% 1.3% 0.9% 1.3% Store count (including licensees) 39 41 43 45 45 48 54 55 54 59 62 66 45 55 66 72 Singapore 9 9 9 9 9 9 10 10 10 10 11 11 9 10 11 11 Malaysia 4 4 5 5 5 5 5 5 6 7 7 7 5 5 7 7 T hailand 11 11 12 13 13 13 13 14 14 15 15 16 13 14 16 17 India ------2 2 2 3 3 4 - 2 4 6 Aust ralia 2 3 3 3 3 3 3 3 3 3 3 3 3 3 3 5 Indonesia 2 2 2 3 3 4 6 6 6 8 8 8 3 6 8 7 Philippines 7 7 7 7 7 7 7 7 5 4 4 4 7 7 4 5 Kuw ait 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 UAE 3 3 3 3 3 4 4 4 4 4 5 5 3 4 5 6 Source: Shared Research based on company data

Although the sales composition of Singapore is significant, growth in Australia is noteworthy. Singapore is a wholly owned subsidiary that was relaunched in 2003, and holds Malaysia as a subsidiary. South Korea began as a joint venture with the Lotte Group, and Ryohin Keikaku currently holds 60% of shares. Australia is a wholly owned subsidiary that began operations in FY02/14.

In 2016, the company established Ryohin-Keikaku Reliance India Private Limited (51% ownership) in cooperation with Reliance, and was the first Japanese retailing firm to receive FDI approval from India’s Foreign Investment Promotion Board. The first and second stores are scheduled to open in August 2016. For India, however, it appears that the company is estimating startup costs of about JPY30-40mn for standard stores, and annual sales of between JPY200mn and JPY300mn. New store opening plans call for two stores in FY02/17 and one store per year from FY02/18 onward. For the foreseeable future, the business scale in India will remain small, and there is no expected contribution to profits. Unlike developed markets and China, India has a large population of young consumers, and the company sees this as an attractive condition. Recently, the company is aggressively opening stores in the Middle East and at licensed partners.

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Other businesses

The other businesses segment comprises the overseas supply business, the beverage business, the housing sales business, and the MUJI campsite operation business (the company operates summer camps for children on its land).

In the overseas supply business, the company supplies products to overseas entities.

Ryohin Keikaku began booking the supply of products (intra-group transactions) to its subsidiaries in China as sales in June 2010, and in other countries in January 2013 (previously booked as advances paid).

The beverage business refers to the operation of “Café&Meal MUJI”—a line of restaurants and cafeterias, and the company currently has outlets both within and outside of Japan.

In the housing sales business, the company manages residences—mainly under the “MUJI House” name via its subsidiary, MUJI House Co., Ltd. The company also conducts a networking business, plans and develops products, and carries out wholesale operations.

The MUJI House business is a collaboration between New Constructor’s Network Co., Ltd. (NCN) and Ryohin Keikaku, who provide the MUJI brand (as MUJI House) and in return receive licensing fees. NCN use a special method of construction called “SE Construction” (Safety Engineering construction) to construct the houses. As of FY02/14, there are three different types of MUJI House available—the “Wood House”, which has an airy, open feel; the “Window House”, with large windows; and the “Morning House”, designed to aid communication between family members.

MUJI Houses

FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 Number of houses 1 1 12 45 44 83 155 182 173 243 241 Source: Shared Research based on company data

According to the company, the light, airy feel to the Wood House is achieved by the lack of supporting pillars and walls between rooms that SE construction makes possible. The company has designed the houses around the idea that the layout can be changed whenever the residents wish, by using MUJI furniture to create temporary boundaries between rooms. The company provides consulting about the best way to divide the rooms in this way, and has also linked up with the Urban Renaissance Agency in its renovation business.

In addition to the above, the company has begun selling Idée Co., Ltd. products. Idée produces upmarket furniture.

Main group companies

As of February 28, 2017, the company’s main subsidiaries were as follows (Ryohin Keikaku’s stake in parentheses):

RK Trucks Co., Ltd. (100%): Handles logistics processing ▷ MUJI House Co., Ltd. (60%): Housing sales ▷ Idée Co., Ltd. (100%): Manufactures and sells furniture ▷ MUJI Europe Holdings Ltd. (66%): Supplies products to local subsidiaries in Europe. The remaining stake is held by Mitsubishi ▷ Corporation (TSE1: 8058) Ryohin Keikaku Europe Ltd. (66%): Local subsidiary for sales of MUJI products in the UK ▷ Ryohin Keikaku France S.A.S. (66%): Local subsidiary for sales of MUJI products in France ▷ MUJI Italia S.p.A. (66%): Local subsidiary for sales of MUJI products in Italy ▷ MUJI Deutschland GmbH (66%): Local subsidiary for sales of MUJI products in Germany ▷ MUJI (Hong Kong) Co., Ltd. (100%): Local subsidiary for sales of MUJI products in Hong Kong ▷

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MUJI (Singapore) Private, Ltd. (100%): Local subsidiary for sales of MUJI products in Singapore ▷ MUJI (Malaysia) Sdn. Bhd (100%): Local subsidiary for sales of MUJI products in Malaysia ▷ MUJI Korea Co., Ltd. (60%): Local subsidiary in South Korea. The remaining stake is held by Lotte Shoji Co., Ltd. ▷ MUJI (Shanghai) Co., Ltd. (100%): Local subsidiary for sales of MUJI products in China ▷ MUJI Global Sourcing Private, Ltd. (100%): Supplies products ▷ MUJI Retail (Thailand) Co., Ltd. (50%): Local subsidiary for sales of MUJI products in the Kingdom of Thailand. The remaining ▷ stake is held by the Central Group

MUJI Retail (Australia) Pty., Ltd. (100%): Local subsidiary for sales of MUJI products in Australia ▷ MUJI U.S.A. Ltd. (100%): Local subsidiary for sales of MUJI products in the US ▷ MUJI Taiwan Co., Ltd. (100%): Local subsidiary for sales of MUJI products in Taiwan ▷ Ryohin-Keikaku Reliance India Private Limited (51%): Local subsidiary for sales of MUJI products in India (as of February 2016) ▷ MGS (Shanghai) Trading Co., Ltd. (100%): Product procurement ▷ MUJI CANADA LIMITED (100%): Local subsidiary for sales of MUJI products in Canada ▷

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Financial statements Income statement Income statement FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Operating revenue 128,468 140,890 157,063 162,840 163,757 164,341 169,748 178,186 188,350 220,620 260,254 307,532 333,281 379,551 Sales 127,836 140,185 156,204 162,060 162,814 163,733 169,137 177,532 187,693 220,029 259,655 307,199 332,581 378,801 Operat ing income 631 704 859 779 943 608 611 653 657 590 599 333 700 750 YoY 7.2% 9.7% 11.5% 3.7% 0.6% 0.4% 3.3% 5.0% 5.7% 17.1% 18.0% 18.2% 8.4% 13.9% Sales 7.3% 9.7% 11.4% 3.7% 0.5% 0.6% 3.3% 5.0% 5.7% 17.2% 18.0% 18.3% 8.3% 13.9% Operat ing income -1.1% 11.6% 22.0% -9.3% 21.1% -35.5% 0.5% 6.9% 0.6% -10.2% 1.5% -44.4% 110.2% 7.1% CoGS 71,724 78,434 87,482 87,927 88,890 89,776 92,477 96,589 100,974 118,955 137,423 157,080 167,420 187,731 Gross profit 56,112 61,751 68,721 74,133 73,923 73,956 76,660 80,943 86,719 101,074 122,232 150,118 165,160 191,070 YoY 10.9% 10.0% 11.3% 7.9% -0.3% 0.0% 3.7% 5.6% 7.1% 16.6% 20.9% 22.8% 10.0% 15.7% GPM (% of sales) 43.9% 44.0% 44.0% 45.7% 45.4% 45.2% 45.3% 45.6% 46.2% 45.9% 47.1% 48.9% 49.7% 50.4% Operating gross profit 56,744 62,455 69,580 74,912 74,866 74,565 77,271 81,596 87,376 101,665 122,831 150,451 165,160 191,070 Op. GPM (% of operating revenue) 44.2% 44.3% 44.3% 46.0% 45.7% 45.4% 45.5% 45.8% 46.4% 46.1% 47.2% 48.9% 49.6% 50.3% SG&A expenses 45,265 47,220 52,998 56,332 57,643 60,431 63,371 66,158 69,024 80,749 98,984 116,012 165,861 191,819 SG&A ratio (% of operating revenue) 35.2% 33.5% 33.7% 34.6% 35.2% 36.8% 37.3% 37.1% 36.6% 36.6% 38.0% 37.7% 49.8% 50.5% Operating profit 11,478 15,234 16,582 18,579 17,223 14,134 13,900 15,438 18,351 20,916 23,846 34,439 38,278 45,286 YoY 30.6% 32.7% 8.8% 12.0% -7.3% -17.9% -1.7% 11.1% 18.9% 14.0% 14.0% 44.4% 11.1% 18.3% OPM (% of operating revenue) 8.9% 10.8% 10.6% 11.4% 10.5% 8.6% 8.2% 8.7% 9.7% 9.5% 9.2% 11.2% 11.5% 11.9% Non-operating income (expenses) 362 419 349 87 135 474 329 697 1,409 2,131 2,756 -1,739 304 699 Non-Operating Income 430 518 398 461 566 548 582 713 1,427 2,182 2,855 1,075 1,172 1,462 Non-Operating Expenses 68 99 49 374 432 74 252 17 18 50 100 2,813 867 763 Financial income (expenses) 22 39 77 243 310 312 308 305 311 348 335 350 461 543 Foreign currency gains (losses) 153 233 81 -329 -351 -41 -205 25 739 813 2,174 -2,654 -764 -663 Equit y in earnings of affiliat es - - - 86 96 134 168 221 145 424 Other non-operating income 187 147 191 87 80 69 58 146 214 546 247 565 608 819 Recurring profit 11,840 15,653 16,931 18,666 17,358 14,608 14,229 16,135 19,760 23,047 26,602 32,700 38,582 45,985 YoY 31.5% 32.2% 8.2% 10.2% -7.0% -15.8% -2.6% 13.4% 22.5% 16.6% 15.4% 22.9% 18.0% 19.2% RPM (% of operating revenue) 9.2% 11.1% 10.8% 11.5% 10.6% 8.9% 8.4% 9.1% 10.5% 10.4% 10.2% 10.6% 11.6% 12.1% Extraordinary gains 52 82 19 407 43 45 330 146 3,727 475 1,240 704 16 Extraordinary losses 1,013 275 1,090 896 5,285 1,871 1,535 992 1,740 772 583 433 637 838 Income taxes 4,403 6,154 6,543 7,469 5,276 5,376 5,062 6,282 6,920 8,794 9,850 11,893 12,798 14,969 Implied t ax rat e 40.5% 39.8% 41.3% 41.1% 43.5% 42.1% 38.9% 41.1% 38.4% 33.8% 37.2% 35.5% 33.1% 33.1% Minorit y int erest s 129 -39 4 17 -95 -101 103 157 128 111 19 -104 19 80 Net in co me 6,347 9,344 9,313 10,689 6,936 7,506 7,859 8,850 10,970 17,096 16,623 21,718 25,831 30,113 YoY 35.2% 47.2% -0.3% 14.8% -35.1% 8.2% 4.7% 12.6% 24.0% 55.8% -2.8% 30.7% 18.9% 16.6% Net margin (% of operating revenue) 4.9% 6.6% 5.9% 6.6% 4.2% 4.6% 4.6% 5.0% 5.8% 7.7% 6.4% 7.1% 7.8% 7.9%

Per share data FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPY) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Shares issued (year end; '000) 28,078 28,078 28,078 28,078 28,078 28,078 28,078 28,078 28,078 28,078 28,078 28,078 28,078 28,078 EPS 232 338 337 385 250 270 286 330 409 645 628 818 975 1,147 EPS (fully dilut ed) 232 337 336 385 249 270 285 329 408 642 625 816 972 1,144 Dividend per share 55 80 90 97 110 110 110 110 110 155 190 246 293 345 Book value per share 1,654 1,951 2,208 2,439 2,523 2,718 2,871 3,056 3,488 4,072 4,724 5,248 5,792 6,477 Source: Shared Research based on company data

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Balance sheet

Balance sheet FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Total current assets 34,366 43,309 45,606 50,229 50,486 56,246 54,802 59,833 72,556 77,290 106,316 119,547 131,435 149,329 Cash and deposits 16,961 24,063 18,438 16,928 12,246 16,196 14,258 16,033 21,563 25,206 33,044 43,692 38,555 50,875 Marketable securities - - 5,035 10,032 9,996 11,998 9,037 9,012 10,023 20 - - - - Accounts receivable 3,183 3,604 4,408 4,876 6,033 6,218 5,164 4,988 6,092 6,965 8,879 7,281 7,929 9,128 Inventories 8,823 10,154 11,362 12,160 15,340 15,266 18,394 21,908 27,194 36,848 52,081 56,928 72,670 74,472 Deferred tax assets 584 445 407 424 423 370 501 577 758 957 2,089 1,825 1,376 3,313 Accounts receivable–other 3,339 3,484 3,932 4,002 4,320 4,565 4,616 4,732 5,168 4,933 7,943 7,727 8,807 9,211 Allowance for doubtful accounts -28 -31 -35 -29 -25 -21 -17 -3 -4 -7 -9 -8 -49 -36 Others 1,504 1,589 2,057 1,833 2,149 1,651 2,846 2,583 1,758 2,366 2,286 2,098 2,144 2,362 Total tangible fixed assets 11,255 10,904 11,988 11,806 12,884 13,046 12,044 11,743 14,236 22,178 35,252 37,712 38,613 41,225 Buildings and structures 7,731 7,311 7,513 7,761 8,489 9,184 8,346 8,194 8,671 11,392 24,617 26,336 26,598 28,176 Machinery, equipment, and vehicles 461 521 430 423 421 399 388 438 708 671 2,194 2,274 2,165 2,459 Tools, furniture, and fixtures 2,181 2,172 3,034 2,514 2,165 2,251 2,165 1,968 2,652 3,962 6,128 6,922 7,365 7,889 Lease assets - - 7 8 1 13 12 7 5 4 2 1 1 76 Land 875 875 875 875 1,038 1,038 1,038 1,038 1,324 1,350 1,891 1,890 1,931 1,907 Construction in progress 6 23 125 222 768 158 93 97 874 4,797 417 288 550 716 Total intangible assets 3,290 3,406 4,752 4,257 3,574 3,424 3,596 3,696 4,113 12,383 13,570 13,841 13,528 14,200 Goodw ill 439 351 585 316 90 1 - - 36 7,619 7,413 6,924 5,907 5,348 Others 2,851 3,055 4,167 3,941 3,484 3,423 3,596 3,696 4,077 4,764 6,157 6,917 7,620 8,851 Investments and other assets 11,743 11,827 16,484 22,821 25,056 26,663 27,036 27,020 28,454 28,376 31,807 29,817 31,128 33,558 Investments securities 370 315 3,834 8,841 9,675 10,740 10,825 10,140 12,047 12,183 12,918 10,204 10,917 12,526 Deferred tax assets 257 148 543 1,323 1,996 1,595 1,608 1,726 975 145 242 341 448 354 Lease and guarantee deposits 11,074 11,196 11,917 12,490 13,179 14,314 14,430 15,001 15,230 15,595 15,684 16,333 16,983 17,829 Allowance for doubtful accounts -80 -50 -72 -12 -20 -523 -198 -179 -164 -155 -206 -143 -137 -131 Others 21 216 260 178 223 535 370 330 366 609 3,168 3,082 2,916 2,979 Total fixed assets 26,290 26,137 33,224 38,885 41,514 43,135 42,678 42,460 46,804 62,939 80,631 81,372 83,270 88,983 Total assets 60,657 69,447 78,831 89,115 92,000 99,381 97,481 100,293 119,360 140,229 186,947 200,919 214,705 238,313 Tot al current liabilit ies 14,491 14,936 16,862 18,767 20,046 21,332 18,370 18,186 22,685 26,865 42,404 44,625 50,699 49,843 Accounts payable 6,758 6,465 8,049 8,839 12,529 11,607 9,840 8,933 10,155 12,752 21,562 17,382 19,096 20,172 Short-term debt - - 161 240 - 276 244 67 407 190 5,005 7,215 10,887 477 Accrued expenses 3,494 3,065 3,453 3,386 3,589 3,539 3,626 3,981 4,124 4,803 5,436 4,181 4,486 5,012 Income tax payable 2,837 4,127 3,707 4,190 2,514 2,368 2,769 3,235 4,446 4,017 4,391 4,929 5,711 9,127 Provision for bonuses 5 8 43 17 111 135 143 186 243 635 955 1,136 1,132 1,064 Provision for directors' bonuses - - 30 49 32 30 42 71 73 74 81 74 71 80 Provision for merchandise return ------46 64 96 37 33 22 Provision for point card cert ificat es ------39 52 84 73 69 Provision for loss on store closure - - - - 77 167 225 152 19 32 - - - - Others 1,395 1,270 1,416 2,043 1,194 3,208 1,477 1,561 3,168 4,254 4,821 3,179 3,219 7,155 Tot al fixed iabilit ies 600 349 386 411 426 982 608 578 625 2,349 15,872 13,120 6,987 14,043 Long-term debt ------1,150 11,692 7,913 - 1,614 Lease obligat ions - - - - - 5 5 3 ------Provision for directors' retirement benefits 390 146 145 148 148 137 138 115 109 109 109 25 25 36 Provision for loss on break lease charges - - - - 138 463 160 80 50 46 105 - - - Others 210 203 241 262 139 375 304 379 465 1,044 3,965 5,182 2,179 6,604 Tot al liabilit ies 15,092 15,286 17,249 19,178 20,472 22,314 18,979 18,765 23,310 29,214 58,276 57,746 57,686 63,886 Net assets 45,564 54,160 61,582 69,936 71,528 77,066 78,502 83,528 96,050 111,015 128,670 143,173 157,018 174,426 Capit al st ock 6,766 6,766 6,766 6,766 6,766 6,766 6,766 6,766 6,766 6,766 6,766 6,766 6,766 6,766 Capit al surplus 10,106 10,122 10,118 10,123 10,122 10,122 10,122 10,119 10,116 10,825 10,825 10,807 10,785 10,791 Retained earnings 30,583 38,086 44,870 53,009 57,030 61,474 66,280 72,183 80,207 93,845 106,084 122,085 140,652 162,376 Treasury stock -2,239 -1,449 -1,237 -969 -963 -964 -3,964 -3,961 -3,927 -7,578 -7,174 -6,849 -10,681 -15,334 Valuation difference on marketable securities 6 -38 -324 -1,535 -1,322 -673 -302 -829 1,192 1,641 2,739 2,102 3,963 4,937 Foreign currency translation adjustment 91 434 913 314 -1,586 -1,240 -1,987 -2,416 -870 2,291 5,978 4,469 1,543 3,348 Subscription rights to shares - - 46 88 142 197 244 286 310 345 408 348 344 377 Minorit y int erest s 249 238 429 2,138 1,338 1,383 1,344 1,380 2,254 2,876 3,042 3,442 3,645 4,103 W orking capit al 5,248 7,293 7,721 8,197 8,844 9,877 13,718 17,963 23,131 31,061 39,398 46,827 61,503 63,428 Total interest-bearing debt - - 161 240 - 276 244 67 407 1,340 16,697 15,128 10,887 2,091 Net cash 16,961 24,063 23,312 26,720 22,242 27,918 23,051 24,978 31,179 23,886 16,347 28,564 27,668 48,784 Source: Shared Research based on company data Figures may differ from company materials due to differences in rounding methods. Assets The table above shows the company’s net cash (i.e., negative net debt; calculated as the total of cash and equivalents, securities, and investments minus interest-bearing debt). The company’s liquidity on hand looks abundant.

In addition to the above, lease and guarantee deposits increase as the number of stores increases, thanks to its policy of opening stores with lease contracts. In contrast, land and buildings represent a small percentage. Also, the fact that the company only stocks private brand products means that it has a sizable inventory. Therefore, we will also be keeping a watch on inventory assets.

Liabilities Ryohin Keikaku does not buy products on consignment, but instead purchases outright. The result is that accounts payable tends to be large. Securities filings show accounts payable are mostly owed to Sanyei Corporation (JASDAQ: 8119), Smile Corporation (Senko Co., Ltd. subsidiary; TSE1: 9069), Mitsubishi Corporation Fashion (Mitsubishi Corporation subsidiary; TSE1: 8058), Marubeni Corporation (TSE1: 8002), and Sumikin Bussan Corporation (TSE1: 9810). Smile Corporation is a specialist trading company that supports the former Saison Group by manufacturing and selling packaging materials, as well as wholesaling food and household goods. Sanyei Corporation is a trading company that plans and develops household goods.

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Shares issued As mentioned above, the company holds a large amount of short-term liquid assets, and therefore has little need of additional financing. Shares issued have been steady at 28,078,000 shares since FY02/05.

Cash flow statement

Cash flow statement FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cash flow s from operat ing act ivit ies (1) 8,375 11,174 11,448 14,971 11,321 11,546 7,155 9,729 13,176 15,117 14,619 26,133 19,742 46,982 Cash flow s from invest ing act ivit ies (2) -3,577 -3,282 -10,513 -10,296 -10,845 -5,135 -3,381 -4,747 -4,945 -17,842 -22,193 -8,647 -9,856 -14,290 Free cash flow (1+2) 4,798 7,892 935 4,675 476 6,411 3,774 4,982 8,231 -2,725 -7,574 17,486 9,886 32,692 Cash flow s from financing act ivit ies 348 -974 -1,861 -1,035 -3,104 -2,779 -6,075 -3,120 -2,540 -5,385 11,377 -6,520 -14,361 -21,759 Depreciat ion and amort izat ion (A) 1,941 2,565 2,708 3,204 3,345 3,727 3,430 3,430 3,341 4,348 5,849 7,849 8,601 9,864 Capit al expendit ures (B) -2,522 -3,927 -5,076 -3,518 -4,932 -3,885 -3,085 -3,901 -4,842 -11,820 -18,686 -9,751 -11,038 -12,620 W orking capit al changes (C) 1,382 2,045 428 476 647 1,033 3,841 4,245 5,168 7,930 8,337 7,429 14,676 1,925 Simple FCF (NI + A + B - C) 4,384 5,937 6,517 9,899 4,702 6,315 4,363 4,134 4,301 1,694 -4,551 12,387 8,718 25,432 Source: Shared Research based on company data Cash flows from operating activities Income before taxes and changes in working capital are the main factors affecting Ryohin Keikaku’s operating cash flow. Days in inventory are between two and three months, and therefore working capital has increased as the company has grown.

Cash flows from investing activities Ryohin Keikaku’s cash flow from investing activities is large because it invests in distributors overseas and in logistics, such as the Hatoyama center in Saitama Prefecture.

Cash flows from financing activities The company’s large cash reserves and low interest-bearing debt mean it has net cash (i.e., negative net debt). Therefore, it has little need to raise funds by financing and its financial cash flow is limited to dividend payments.

Cash conversion cycle FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Accounts receivable turnover 41.5 39.2 35.1 30.0 26.8 29.8 35.1 34.0 33.8 32.9 38.1 43.8 44.5 Accounts receivable days 8.8 9.3 10.4 12.2 13.6 12.2 10.4 10.7 10.8 11.1 9.6 8.3 8.2 Inventory turnover 8.3 8.1 7.5 6.5 5.9 5.5 4.8 4.1 3.7 3.1 2.9 2.6 2.6 Days in inventory 44.2 44.9 48.8 56.5 62.2 66.4 76.1 88.7 98.3 118.1 126.6 141.3 143.0 Accounts payable turnover 11.9 12.1 10.4 8.3 7.4 8.6 10.3 10.6 10.4 8.0 8.1 9.2 9.6 Accounts payable days 30.8 30.3 35.1 43.9 49.1 42.3 35.5 34.5 35.1 45.6 45.2 39.8 38.2 Cash conversion cycle (days) 22.2 23.9 24.2 24.7 26.8 36.3 51.1 65.0 73.9 83.6 91.0 109.8 113.1 Source: Shared Research based on company data Figures may differ from company materials due to differences in rounding methods.

The company’s main business is the cash business of selling products at stores to consumers, and therefore its accounts payable are larger than its accounts receivable. Days in inventory are around two months, whereas payables are outstanding for between one and two months. The company’s cash conversion cycle is between one and two months, and working capital is increasing as the company grows.

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ROE, ROA, ROIC

FY02/02 FY02/03 FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. ROE 0.0% 6.1% 12.1% 15.1% 18.8% 16.2% 16.6% 10.1% 10.3% 10.3% 11.1% 12.5% 17.0% 14.3% 16.4% 17.7% 18.6% Net margin 0.0% 2.0% 3.9% 4.9% 6.6% 5.9% 6.6% 4.2% 4.6% 4.6% 5.0% 5.8% 7.7% 6.4% 7.1% 7.8% 7.9% Total asset turnover 2.22 2.25 2.29 2.23 2.17 2.12 1.94 1.81 1.72 1.72 1.80 1.71 1.70 1.59 1.59 1.60 1.68 Financial leverage 1.40 1.34 1.35 1.37 1.31 1.29 1.30 1.31 1.32 1.29 1.25 1.25 1.29 1.40 1.47 1.42 1.40 ROA (RP-based) 10.5% 14.0% 17.2% 20.6% 24.1% 22.8% 22.2% 19.2% 15.3% 14.5% 16.3% 18.0% 17.8% 16.3% 16.9% 18.6% 20.3% ROIC 7.9% 10.0% 13.1% 15.8% 18.1% 17.0% 16.7% 14.4% 11.3% 10.6% 11.3% 12.1% 12.4% 11.5% 14.6% 15.7% 18.2% NOPAT 3,209 3,929 5,116 6,680 9,035 9,835 11,019 10,215 8,383 8,244 9,156 10,884 12,966 14,782 22,165 25,622 31,315 Interest-bearing debt＋Net assets 40,564 39,450 38,996 42,353 49,862 57,952 65,960 70,852 74,435 78,044 81,171 90,026 104,406 128,861 151,834 163,103 172,211 ROIC (before tax) 13.6% 17.1% 22.5% 27.1% 30.6% 28.6% 28.2% 24.3% 19.0% 17.8% 19.0% 20.4% 20.0% 18.5% 22.7% 23.5% 26.3% OPM 4.6% 5.9% 7.3% 8.9% 10.8% 10.6% 11.4% 10.5% 8.6% 8.2% 8.7% 9.7% 9.5% 9.2% 11.2% 11.5% 11.9% Operating revenue / Invested capital 2.96 2.92 3.07 3.03 2.83 2.71 2.47 2.31 2.21 2.18 2.20 2.09 2.11 2.02 2.03 2.04 2.20 Source: Shared Research based on company data

ROE, ROA, ROIC

30% ROE ROA (RP-based) ROIC

25%

20% 18.8% 18.6% 17.0% 17.7% 16.2% 16.6% 16.4% 15.1% 18.1% 14.3% 18.2% 15% 12.1% 17.0% 16.7% 12.5% 15.8% 11.1% 15.7% 14.4% 10.3% 10.3% 14.6% 13.1% 12.1% 12.4% 10% 11.3% 11.3% 11.5% 10.0% 10.6% 7.9% 10.1% 5% 6.1% 0.0% 0% FY02/02 FY02/07 FY02/12 FY02/17

ROE ROE 20% 18.8% 18.6% 3 Net margin 17.7% 17.0% 18% 16.2% 16.6% Total asset turnover (right axis) 16.4% 15.1% Financial leverage (right axis) 16% 14.3% 2 14% 12.1% 12.5% 1.5 1.4 11.1% 1.4 1.3 1.4 1.4 1.4 12% 1.4 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 2 1.2 10% 10.1% 10.3% 10.3% 8% 7.7% 7.8% 7.9% 1 6.1% 7.1% 6.6% 6.6% 6.4% 6% 5.9% 5.8% 4.9% 4.6% 4.6% 5.0% 4% 3.9% 4.2% 1 2.0% 2% 0.0% 0% 0.0% 0 FY02/02 FY02/07 FY02/12 FY02/17

ROIC

35% ROIC (before tax) OPM Revenue / invested capital (right axis) 4

30% 3.1 3.0 3.0 2.9 2.8 2.7 3 25% 2.5 2.3 2.2 2.2 2.2 2.2 20% 2.1 2.1 2.0 2.0 2.0 2 15%

10% 11.9% 10.8% 11.4% 11.2% 11.5% 1 10.6% 10.5% 9.7% 8.9% 8.6% 8.7% 9.5% 9.2% 5% 7.3% 8.2% 5.9% 4.6% 0% 0 FY02/02 FY02/07 FY02/12 FY02/17

(JPYbn) (JPYbn) Net assets Interest-bearing debt Operating profit (right axis) 200 45.3 50 180 2.1 45 160 10.9 40 15.1 140 16.7 38.3 35 120 34.4 30 1.3 23.8 100 0.4 20.9 25 18.6 17.2 0.1 18.4 174.4 80 16.6 0.3 0.2 15.4 157.0 20 15.2 0.2 0.0 14.1 13.9 143.2 11.5 0.2 128.7 60 0.0 111.0 15 5.5 6.8 8.8 96.1 0.0 83.5 40 0.0 0.0 69.9 71.5 77.1 78.5 10 1.8 54.2 61.6 20 38.3 38.9 39.1 45.6 5 0 0 FY02/02 FY02/07 FY02/12 FY02/17 Source: Shared Research based on company data

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Dividend

Basic policy Aiming for an ROE of 15% or more as an important management index, the company is improving its corporate value. Its dividend policy is continuously returning profits to shareholders at an annual payout ratio of 30% calculated based on consolidated earnings since FY02/14.

Data related to dividends

FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. T ot al dividends a) 1,235 1,500 2,204 2,490 2,963 3,054 3,054 3,000 2,946 2,947 4,110 5,048 6,545 7,768 7,768 Total treasury stock acquired b) - 2 2 3 3 2 0 3,000 - - 4,149 0 1 4,475 4,475 Total returns to shareholders c) = a) + b) 1,235 1,502 2,206 2,493 2,966 3,056 3,054 6,000 2,946 2,947 8,259 5,048 6,546 12,243 12,243 Net income attributable to parent company shareholders d) 4,695 6,347 9,344 9,313 10,689 6,936 7,506 7,859 8,850 10,970 17,096 16,623 21,718 25,831 30,113

Dividend payout rat io a) / d) 26.3% 23.6% 23.6% 26.7% 27.7% 44.0% 40.7% 38.2% 33.3% 26.9% 24.0% 30.4% 30.1% 30.1% 25.8% Total shareholder return ratio c) / d) 26.3% 23.7% 23.6% 26.8% 27.7% 44.1% 40.7% 76.3% 33.3% 26.9% 48.3% 30.4% 30.1% 47.4% 40.7%

Net assets available to common sharehold 38,865 45,315 53,922 61,107 67,710 70,048 75,486 76,914 81,862 93,486 107,794 125,220 139,383 153,029 169,946 Average of beginning and end of f) 38,673 42,090 49,619 57,515 64,409 68,879 72,767 76,200 79,388 87,674 100,640 116,507 132,302 146,206 161,488 year Before deducting assets available to 38,865 45,315 53,922 61,107 67,710 70,048 75,486 76,914 81,862 93,486 107,794 125,220 139,383 153,029 169,946 holders of Class A preferred shares EPS (JPY) - 231.9 338.4 336.8 385.2 249.8 270.3 285.9 330.4 409.5 644.6 627.5 818.4 975.0 1,147.0 DPS (JPY) - 55.0 80.0 90.0 97.0 110.0 110.0 110.0 110.0 110.0 155.0 190.0 246.0 293.0 345.0 DOE a) / f) 3.2% 3.6% 4.4% 4.3% 4.6% 4.4% 4.2% 3.9% 3.7% 3.4% 4.1% 4.3% 4.9% 5.3% 4.8%

100% Payout ratio Total shareholder return ratio DOE (right axis)

80% 5%

60%

40% 4%

20%

0% 3% FY02/02 FY02/07 FY02/12 FY02/17 Source: Shared Research based on company data

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Other information

Corporate timeline

Year Corporate event 1980 MUJI was established as a private brand of The Seiyu, Ltd. with a total of nine household articles and 31 food products 1981 Started selling clothes 1982 Started wholesaling to affiliated stores 1983 Opened its first directly managed store, MUJI Aoyama (103sqm) 1984 Opened outlets inside large Seiyu stores 1985 The MUJI Business Department established 1986 Started overseas production and procurement (comprehensive production overseas) 1987 Accumulated expertise in overseas production and procurement including factory direct orders and original distribution channels 1989 Ryohin Keikaku Co., Ltd. established 1990 MUJI business transferred from The Seiyu, Ltd. 1991 Opened its first overseas store in London 1993 Established RK Truck Co., Ltd.; opened a large one-floor store, MUJI Lalaport 1994 Established Ryohin Keikaku Europe, Ltd. 1995 Shares registered with the Japan Securities Dealers Association for trading on the OTC market; opened the MUJI Tsunan C a mpsit e 1998 Listed on the Second Section (mid-sized companies) of the Tokyo Stock Exchange 1999 Opened MUJI com KIOSK Shinjuku South Exit shop 2000 Listed on the First Section (large companies) of the Tokyo Stock Exchange; established MUJI.net Co., Ltd. 2001 Opened MUJI Yurakucho and MUJI Namba stores, which are designed to spread information 2003 Established MUJI (Singapore) Pte., Ltd. 2004 Established MUJI Italia S.p.A. and MUJI Korea Co., Ltd. 2005 Received five gold product design awards from the International Forum Design in Germany 2006 Held its first international design competition, the MUJI AWARD 01 2007 Opened MUJI Tokyo Midtown and its first store in the US, MUJI Soho 2008 Opened new flagship stores MUJI Shinjuku and MUJI Ginza Matsuzakaya, along with the first MUJI to GO store 2009 Relocated and renewed the MUJI Ikebukuro Seibu store; established the MUJI Laboratory for Living 2011 Renewed its first store, MUJI Aoyama to become Found MUJI Aoyama 2012 Opened MUJI Pavilion, its first store in Malaysia; opened MUJI Soma on the west coast of the US 2013 Signed license agreement with Alshaya Trading Co.W.L.L. and opened its first store in the Middle East. Set up Muji Retail (Australia) PTY Ltd. 2014 Acquired 100% stake in MUJI Taiwan Co., Ltd. Set up Muji Canada Limited 2015 Muji Europe Holdings acquired shares in MuJi Spain S.L., and Muji Portugal, making them into subsidiaries 2016 Established Ryohin-Keikaku Reliance India Private Limited Source: Shared Research based on company data Major shareholders

Top shareholders Shareholding ratio

JP Morgan Chase Bank 380055 6.70% The Master Trust Bank of Japan, Ltd. (Trust account) 5.76% Japan Trustee Services Bank, Ltd. (Trust account) 4.53% Mitsubishi Corporation 4.09% GIC PRIVATE LIMITED-C 3.86% The Bank Of New York Melon As Depositary Bank For DR Holders 2.85% JP Morgan Chase Bank 385632 2.55% GIC PRIVATE LIMITED-H 2.50% Credit Saison Co., Ltd. 2.40% FamilyMart Co., Ltd. 2.12% Source: Shared Research based on company data (As of February 28, 2018)

Ryohin Keikaku was born out of the former Saison Group. However, between 1998 and 1999, companies in the Seiyu Group began to sell off Ryohin Keikaku shares, and by FY02/13 FamilyMart and Credit Saison were the only companies in the group still holding shares in the company.

Top management

Chairman Masaaki Kanai (born 1957) joined the Seiyu Store Co., Ltd. in Nagano (now Seiyu GK) in 1976, before moving to Ryohin Keikaku in 1993. In 2000 he became General Manager of the Household Division and Sales Headquarters. Later he

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became Managing Director and General Manager of Sales Headquarters, then Executive Officer and Chief Director of Product, before becoming President in 2008, and chairman in 2015.

President Satoru Matsuzaki (born 1954) joined The Seiyu Store Co., Ltd. (now Seiyu GK) in 1978, where he worked in the Legal Department and the International Business Department. He joined Ryohin Keikaku in 2005, as General Manager of Regional Management for Asia, Overseas Operations Division. He later became General Manager of Regional Management for China, Overseas Operations Division, then Director and General Manager of Overseas Operations Division, before becoming president in 2015. He is the fifth president, after Masao Kiuchi (served 1993–1997; the company’s first president in the practical sense), Kaoru Ariga (1997–2000), Tadamitsu Matsui (2001–2008), and Masaaki Kanai (2009–2015, current chairman).

Corporate governance Ryohin Keikaku’s board of directors is composed of six directors (all of whom also serve as executive officers) and three outside directors (all of whom are registered with the Tokyo Stock Exchange as independent directors).

The company has been keen to strengthen corporate governance from an early stage, and invited Shuji Abe (President of Yoshinoya D&C Co., Ltd., now Yoshinoya Holdings; TSE1: 9861) and Hidejiro Fujiwara (President of Shimamura Co., Ltd.; TSE1: 8227) as outside directors in 2002.

Individuals serving as outside directors as of the end of FY02/14 were:

Hisashi Sakamaki (President of Canon Electronics Inc.; TSE1: 7739); ▷ Isao Endo (Chairman of Roland Berger Ltd., subsidiary of Roland Berger Strategy Consultants GmbH; unlisted); ▷ Toshiaki Ito (Advisor to Jafco Co., Ltd.; TSE1: 8595). ▷

Overhaul of overseas management Overhaul of management structure, creation of three overseas divisions During FY02/16, the company drastically changed its management structure. Masaaki Kanai, president and representative director, became chairman and representative director, replacing Chuzo Matsui. Satoru Matsuzaki, who previously served as senior managing director, became president and representative director.

The company has also overhauled its overseas management structure. The overseas operations were reorganized into Europe and the Americas (led by director Satoshi Okazaki), West and South Asia and Oceania (led by director Yuki Yamamoto, and East Asia (led by director Satoshi Shimizu).

Managers carefully chosen to make overseas operations future growth driver Ryohin Keikaku said that the company carefully selected these managers, who are experienced in their respective fields, as it seeks to make Overseas businesses a future growth driver.

Employees

Ryohin Keikaku had 6,992 full-time employees on a consolidated basis as of end FY02/17, and 1,808 on a parent-level basis. In addition, the company also had 9,203 part-time employees on a consolidated basis and 5,603 part-time employees on a parent-level basis, assuming that the total number of part-time employees is converted based on an eight-hour working day.

Products that shaped MUJI

In 1980, the year of its inception, the MUJI brand began selling “Dried Shiitake Mushrooms”. These mushrooms are more flavorsome dried than raw, but also more expensive. The creators of the MUJI brand got around this issue by including broken and irregular mushrooms in packs, thereby lowering the price. The copy on the packet of this early hit product—“They may be all

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different sizes, and some might be broken, but they all taste the same”—expressed the core concept of the MUJI brand, “Lower price for a reason”.

Key MUJI products

1980 1990 2000 2010

Toilet paper (12 roll set) Yunnan style indigo series Business suit for work Stacking cabinets

Kitchen wrap Indian cotton parka Indian cotton t-shirt Thin wooden shelfing

Tissue paper refill Army light twill down jacket Modular sofa Acrylic water filter pot

Fabric softener Linen jacket DVD player Silicone kitchenware

Phosphorus free detergent Poplin jumper Flashlight Toilet paper air freshener

Liquid detergent Waterproof bag Mousepad Carpet cleaner (self-standing) Washing up liquid Oil leather Tyrolean shoes Espresso maker Compact ultrasound aroma diffuser Tooth brush (5 colors) Relaxing shoes Stainless steel pot Whitening skincare Dried shiitake mushrooms Handmade Indian bath towels Bone china tableware Denim tag stationery Canned salmon Wooden tables/chairs PP placemat Erasable pen Instant coffee Steel table, chairs, cabinet Nail polish 26" shaft drive three-gear bicycle Soy sauce Palm frond boxes Baby soap and shampoo Wall-mounted cd player Karinto (sweet crunch snack) Congee Stroller DIY cardboard children's chair Salad oil Low-fat dressing Custom color bicycle (20"/26") Silk cotton cardigan Ramen noodles (soy sauce/miso) Seaweed for salads Italian ingredients Silk cotton sweater Orange/grape/pineapple drinks Dried spinach Dashi (stock) Slow weave cotton Corn snack Corn flakes Breakfast cereal Cut and sewn jacket Flavored seaweed Hard-baked bread Genmai (brown rice) Multi-cape Flour Handmade miso kit Dried foods Back mesh camisole warmth cups Curry paste Sliced seaweed (wakame) Banana baum cake Warm inners Toasted tea Sweat absorbing socks (children's) Genmai (brown rice) tea Make-it-yourself sweets Peanuts (270g/400g) Fair trade coffee Dried bonito pack Canned peach Boiled red beans White miso Coffee beans Ceylon tea bags Honey Strawberry jam Butter peanuts Canned snow crab flakes Canned mushrooms Source: Shared Research based on company data

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Historical performance

Full-year FY02/18 results (out April 11, 2018)

FY02/18: Maintained positive earnings growth with JPY7.0bn (+18.3%) YoY rise in operating profit with JPY6.6bn (+30.1%) OP ▷ rise at Domestic business and JPY400mn rise at Overseas business (after achieving increases in Q3 and Q4)

 Q4: Operating profit rose 42.2% in three months (+JPY3.1bn). Both Domestic (+42.2%, +JPY1.4bn) and Overseas (+34.1%, +JPY1.8bn) businesses contributed to higher profits

 Inventory: Achieved reduction in warehouse inventory even as store inventory increased. Effect of global supply chain management (GSCM) began to appear and the company moved to a new stage

 Domestic: Enjoyed continued success with strategy to increase traffic at existing stores; revised prices to reflect decline in CoGS, reducing markdowns while increasing store traffic; strengthened business foundation

 Strong apparel sales drove growth. Sales at appropriate prices gained momentum on the back of price revisions, reducing markdown ratio and raising GPM

 Overseas: In East Asia, Q3 saw an increase in profit and Q4 added further profit to achieve a JPY400mn rise YoY (+JPY1.5bn in Q4). In Europe, impact of a weak British pound in the UK wound down, logistics expenses fell, and recovery continued. The cost of opening new stores in North America rose. The company kept losses lower than forecast in Europe and the Americas

 East Asia: Achieved non-bargain period OPM target of 19% in Q4. Ratio of household goods, the company’s specialty, is steadily increasing FY02/19: Operating profit forecast is JPY50.0bn (+10.4% YoY), moving steadily toward medium-term targets (operating profit of ▷ JPY60.0bn and ROE of 15%) for FY02/21

 JPY4.7bn increase in operating profit includes JPY800mn increase in Domestic and JPY4.3bn in Overseas (JPY3.7bn in East Asia and JPY500mn in Europe and the Americas). East Asia will be the driver, especially China

 Domestic: Domestic apparel sales have the potential to grow. Sales of household goods expected to rebound as company resumes new product introductions in 2H. Revised prices in March for more than 120 items of apparel and roughly 60 food products; also planning to adjust price levels of existing products in household goods, while aiming to maintain GPM

 East Asia: In China, the company is still looking for more than 5% growth in comparable store sales; it originally planned to open 30 new stores and renovate 20, but has raised the target for new stores to 35. Temporary factors seen in Q3 are

expected to dissipate. The company is looking to achieve OPM of 16% while covering the cost of new store openings and store remodelings, expanding particularly in minor cities and suburban areas

 Europe and the Americas: Still working to put North American and European operations in the black, but planning for JPY400mn loss; in Europe, fading impact of weaker British pound expected to bring operations into the black; aiming to shift North American operations to profit in FY02/20 Progress with medium-term plan: Product strategy, store strategy, and GSCM all progressing steadily. Not letting up on ▷ measures to strengthen business foundations

 Product strategy: Targeting minimum domestic market share of 3% for 50 household goods, and is strengthening product development and efforts to review pricing

 Goal for reducing markdown ratio more or less achieved; key now is to keep markdowns at that level  Store strategy: Running trial initiatives at existing large stores such as expansion of product lineups with the aim of establishing 100 large stores by end of FY02/21; planning broader implementation in FY02/19

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 GSCM: Effects of reducing warehouse inventory evident in Japan, especially in household goods; expecting benefits going forward in apparel and at overseas operations

Consolidated earnings results (JPYmn)

Operating revenue Operating profit OPM (right axis) 100,000 20%

80,000 16% 13.0% 12.3% 12.4% 12.2% 12.8% 11.8% 11.6% 11.2%11.6% 11.8% 11.1% 11.1% 10.6% 10.8% 60,000 10.1% 10.4% 9.9% 10.0% 12% 8.8% 8.8% 9.3% 9.3% 8.1% 8.1% 8.6% 7.1% 6.6% 40,000 6.0% 8%

20,000 12,407 4% 9,547 9,815 11,423 9,893 11,8679,262 11,748 5,811 5,680 5,729 6,473 6,624 6,194 6,017 6,524 8,553 8,335 8,626 4,579 2,425 5,168 3,266 3,692 3,168 3,993 4,721 5,012 0 0% (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18

Left: Operating revenue by segment (JPYbn), Right: Operating profit by segment (JPYbn)

250 234.8 35 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 215.7 28.6 198.4 30 200 182.7 171.9 25 22.0 20 150 16.9 17.1 17.3 16.5 16.9 14.7 109.8 15 89.7 100 83.0 10 8.4 56.4 5 3.4 50 31.3 0.3 0.1 0.0 0.1 0.2 0.1 0.1 21.2 12.3 14.9 17.1 17.6 13.7 0 4.9 6.3 8.9 10.3 -0.4 -0.9 -0.9 0 -5 Japan East Asia Europe and the West and South Japan East Asia Europe and the West and South (JPYbn) Americas Asia, Oceania (JPYbn) Americas Asia, Oceania

Comparable store sales growth

Directly managed stores (parent) East Asia Europe and the Americas West and South Asia, Oceania 30%

25%

20%

15%

10% 11.3% 5% 7.8% 7.4% 5.7% 5.9% 5.8% 7.3% 6.5% 4.1% 5.0% 5.0% 0% 2.1% 2.1% 2.3% 1.3% 3.1% 0.0% 0.7% -0.7% -5% -1.6% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18

YoY changes in operating profit by segment

(JPYmn) Japan East Asia Europe and the Americas West and South Asia, and Oceania Operating profit 4,000

3,000 2,354 2,000 1,549 2,454 2,649 632 1,043 2,343 802 2,444 1,000 1,370 1,880 656 1,441 1,367 1,637 1,382 1,126 800 842 1,136 342 574 430 398 400 0 -190 -772 -765 -903 -1,531 -1,478 -1,282 -1,000

-2,000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data

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Earnings overview FY02/18: Maintained positive earnings growth with JPY7.0bn (+18.3%) YoY rise in operating profit, with JPY6.6bn (+30.1%) OP rise at Domestic business and JPY400mn rise at Overseas business (after achieving increases in Q3 and Q4) For FY02/18, Ryohin Keikaku reported a 13.9% YoY increase in operating revenue and an 18.3% increase in operating profit as OPM rose 0.4pp to 12.0%. Operating profit finished up JPY7.0bn YoY as a JPY6.6bn increase in operating profit at the company's Domestic business made a significant contribution. In the Overseas business too, profit was down JPY2.7bn YoY in 1H, but up JPY3.1bn in 2H, leading to a JPY407mn increase for the full year. The 2H recovery happened across the board, but East Asia made a particular contribution, especially China. From a balance sheet perspective, inventory at the FY-end was up 2% YoY, running behind growth in sales, and the company succeeded in reducing inventory at the parent. Ryohin Keikaku is seeing benefits in Japan from a practice of bolstering store inventory (keeping store shelves fully stocked), while estimating demand volume and adjusting warehouse inventory as necessary.

In the Domestic business, OPM rose 0.4pp to 12.0% as the company succeeded with efforts to differentiate apparel lineup (through the use of new fabrics and materials), revise prices in reflection of lower COGS, and reduce markdowns. Operating profit was JPY2.8bn above plan. Price revisions were particularly effective, resulting in a) an increase in customer traffic across all months in FY02/18; b) a reduction in the markdown ratio, as a greater weighting of sales at appropriate prices effectively resulted in less discounting and need for promotional campaigns; and c) substantial improvement in the GPM. The company says its apparel was successful in FY02/18 and demonstrated further growth potential. It aims to expand the business by uncovering more products suited to the MUJI brand and revising prices, working to get closer to the company’s ideal format by launching new household goods at new prices (as well as revising prices for existing products) from 2H FY02/19 onward.

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Domestic operating GPM (left) and comparable store sales (right)

YoY (left axis) Operating GPM Apparel items Household goods Food +3.0pp 50% 25% Stacking shelves sold out due to global popularity 48.6% Backlash from previous year's boom in body-fit cushion: 47.6% 20% production capacity increased in July 2015 +2.5pp 47.1% 48% 46.5% 15% +2.0pp 45.1% 46% 44.9% 44.8% 10% 44.3% 43.8% +1.5pp 43.2% 44% 5%

41.9% 41.8% 0% +1.0pp 42% -5% Price review effects in accessories +0.5pp 40% -10% Advance demand Inventory reduction (inner wear) (e.g. men's polo shirts) - 38% -15% Opportunity loss (e.g. men's polo shirts) Q1 Q1 Q1 Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec FY02/16 FY02/17 FY02/18 2015 2016 2017

Inventories

Parent Diff. (cons.-par.) (JPYbn) Inventory (domestic directly managed stores; JPY'000/sqm) (Days) YoY (par.; left axis) YoY (cons.; left axis) Inventory YoY (domestic directly managed stores; left axis) 76 74 Days in inventory (cons.) 70% 73 72 80 24% 152 160 Days in inventory (par.) 148 69 145 143 60% 66 70 140 134 134 61 18% 132 129 131 140 58 57 56 126128 50% 53 53 60 120 119 51 52 116 12% 120 40% 43 50 104 104 41 100 99 36 37 94 94 30% 40 6% 90 100 30 29 88 28 27 82 84 20% 25 30 77 78 77 23 75 73 74 74 0% 69 69 70 69 70 80 67 66 68 68 66 67 67 68 62 63 10% 20 58 -6% 60 0% 10

-10% 0 -12% 40 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18

(JPYbn) (JPYbn) MUJI sales (left axis) Store inventory Head office inventory Store inventory Head office inventory MUJI sales (left axis) 60 25 60%

50% 50 20 40% 40 15 30% 30 20%

10 10% 20 0% 5 10 -10%

0 0 -20% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data

In the Overseas business, losses shrank JPY202mn more than expected in Europe and the Americas, but East Asia finished JPY339mn below plan owing to inventory valuation losses on apparel stemming from strategic stockpiling of apparel in China. However, it is worth noting that the profit situation in East Asia has been improving since 2H FY02/18, with the business achieving the non-bargain period OPM target of 19% in Q4. The company continues to target an East Asia profit margin of 17– 18%, while for the Overseas business as a whole it seeks to maintain an OPM of at least 15% as it anticipates an increase in personnel costs. Ryohin Keikaku thinks its FY02/19 OPM goal of 16% is well within reach. In Europe and the Americas, the company already has brought the European business into profit at the consolidated level, excluding head office expenses, and in FY02/19 it also aims to turn the business profitable with head office expenses included.

At the non-operating level, although forex-related losses increased in Q4, losses still shrank YoY by JPY101mn, powering a 19.2% rise in recurring profit and 16.6% rise in net income, significant growths similar to that shown in operating profit.

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Overseas sales (left) and operating profit (right)

(JPYbn) (JPYbn) East Asia Europe and the Americas West and South Asia, Oceania East Asia Europe and the Americas West and South Asia, Oceania 50 8 44.3 7.0 45 7 0.2 4.1 6.0 0.4 40 6 0.2 5.2 35.0 34.9 0.2 32.4 32.5 33.1 6.8 4.4 0.0 35 5 4.1 0.0 0.3 3.1 3.6 3.8 0.0 2.8 28.3 2.9 3.2 3.6 3.7 27.6 26.6 0.0 3.3 30 25.7 26.3 5.5 5.5 4 0.1 24.6 2.3 4.4 4.6 2.9 2.9 5.3 2.4 0.0 0.1 6.4 25 2.1 2.2 2.4 3 1.8 4.0 3.9 5.6 2.0 3.5 3.9 4.4 4.2 4.5 4.8 0.1 4.9 20 2 3.9 4.0 3.8 3.9 3.2 3.4 33.4 15 1 2.3 24.3 26.5 25.2 25.4 25.8 22.0 21.2 10 19.3 19.7 19.7 20.0 0 -0.2 -0.3 -0.1 -0.1 -0.1 -0.4 -0.3 -0.4 -0.3 -0.8 5 -1 -0.2 0 -2 Q1 Q1 Q1 Q1 Q1 Q1 FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data

Full-year outlook (as of Q3, for reference): The above-plan 1H results prompted the company to raise its outlook for the full year at end-1H, but only by the amount that consolidated 1H results exceeded its initial forecast; the company's forecast for consolidated 2H results is essentially unchanged. At the segment level the company raised its operating profit forecast for the Domestic business by JPY1.8bn and lowered its operating profit forecast for its Overseas business by JPY1.4bn (JPY1.0bn for East Asia, JPY300mn for the US and Europe, JPY100m for West and South Asia) and for its Other business by JPY100mn. In Q3, the Domestic business drove results and set a pace to exceed forecasts. However, the company decided that the results were not significant enough to warrant a change in forecasts (only store openings were changed due to the results). In light of Q3 results, domestic operations are running ahead of plan, East Asia slightly below plan, and other regions in line with plan.

Domestic business: Successful measures drove 6.8% rise in comparable store sales. Strategy of price reviews contributed greatly to earnings, strengthening business foundation The Domestic business reported an 8.8% (+JPY19.0bn) YoY increase in operating revenue, to JPY234.8bn, and a 30.1% (+JPY6.6bn) YoY increase in operating profit, to JPY28.6bn. Both sales and profits look to have benefited as a review of prices (for apparel in particular) contributed substantially to increases in customer traffic, customer spend, and GPM.

The Domestic business saw increases in shipping and personnel as well as store renovation expenses, but still posted sharp operating profit growth of 30.1% (+JPY6.6bn) as the negatives were offset by a) a jump in sales of apparel in response to changes in price points in early spring and successful promotions of household goods and other daily-use goods leading to an upturn in customer traffic at existing stores and contributions from new store openings; b) an improvement in operating GPM stemming from a favorable shift in the exchange rate, cost reduction effects reflecting lowered material costs, plant consolidation, and improved trade channels, plus other factors; and c) a rise in the operating GPM stemming largely from successful efforts to differentiate its apparel offering (through the use of new fabrics and materials), a reduction in the markdown ratio, as changes in price points led to a greater weighting of sales at appropriate prices, effectively resulting in less discounting and need for promotional campaigns, and reduction in the number of products while keeping hit products on the shelves in order to reduce markdown.

Comparable store sales saw strong growth as a result of several successful measures including (1) measures to counter the opportunity losses for apparel and household goods observed in 1H FY02/17 (2) initiatives to provide apparel goods at appropriate prices through price revisions (roughly 200 items; successful example: socks) (3) initiatives to highlight the quality and value of premium-value products (successful example: coffee maker priced at JPY32,000 including tax) (4) the MUJI Passport app reaching over 10mn downloads and being used more often since the introduction of push notifications in June 2017, with notifications about new products, prices, and store events driving more customers to stores

In addition to measures aimed at improving operating GPM, the company was also able to strengthen its underlying business foundation. It reduced warehouse inventory even as it maintained ample store inventory, and the effect of GSCM initiatives has begun to appear. These developments are also worth watching.

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Comparable store customer traffic increased consistently across all months of FY02/18; price revisions embracing slogan “lower priced for a reason” gain support Ryohin Keikaku has continued to focus on increasing customer count since Satoru Matsuzaki became president in FY02/16. As a result, the count consistently trended upward in the twelve months of FY02/18 (growth of 6.1% at comparable stores and 9.7% at all stores), while customer spend also trended upward (0.6% at comparable stores and 1.5% at all stores). Customer traffic was up 14.5% in apparel, 6.7% in household goods, and 3.3% in food; thus although traffic rose across the board, growth was particularly strong in apparel.

In apparel, customer traffic was 11.0% higher YoY in 1H FY02/18. While this was partly in the absence of opportunity losses and inventory cuts observed in 1H FY02/17, growth in customer count remained high in 2H (+18.4% YoY, +22.2% in Q4). Ryohin Keikaku believes this is mainly attributable to price reviews. Significantly, customer spend remained on an uptrend (rising 0.6%) even as customer traffic grew. Generally, customer spend is broken down as the average unit price x number of units purchased, but as indicated by the strategy of price adjustments, Ryohin Keikaku is not one to raise unit prices in order to buoy customer spend. Rather, the increase in customer spend and customer traffic appears to stem from measures (such as adding to the lineup of “pochi gashi,” which are candies, gums, and chocolates that can be purchased for as little as JPY100) encouraging customers to visit more often and buy in greater volume.

Ryohin Keikaku believes that striking a balance between value and quality on the one hand and price on the other is the best way to gain the support of customers. This represents the company’s core philosophy as expressed in the slogan “lower price for a reason.” The recent price revisions are consistent with this philosophy, with a reduction in CoGS enabling Ryohin Keikaku to offer goods at more “appropriate” prices. For example, the following table illustrates the performance of socks. Shared Research notes that, a) since the company officially rolled out price reductions on August 26, 2016, volume certainly has risen but so too have sales and the GPM; b) since 2H FY02/17, the increase in gross profits has outpaced that for sales, causing the GPM to trend upward; and c) the benefits of a) and b) remained evident in 2H FY02/18, even after a year had passed since the price adjustments.

In March 2018 the company adjusted prices for approximately 200 items, including more than 120 in apparel and about 60 items under food. Apparel sales declined in the first half of 2016, hurt by earlier efforts to boost sales (which ate into sales that would have been made in the second half of 2016 onward), opportunity losses, and cuts in inventory. However, the company quickly turned apparel sales around in 2017. Ryohin Keikaku believes that there is plenty of room for apparel sales to grow in 2018 with the help of price adjustments and the use of new materials that will help its clothing line stand out from competitors. In 2H 2018, the company also plans on price revisions and new product launch focusing on household goods. We will keep a close eye on developments.

The company raised prices for socks (three pairs) from JPY1,000 to JPY1,200 on December 4, 2015, but subsequent sales softened. As a result, following a JPY990 limited-time sale campaign, the company officially revised the price down to JPY990. The price revisions were achieved by reducing costs while maintaining product quality. As a result the company not only increased sales volume and value by adopting an appropriate price, but also eliminated excessive reliance on discounts to compensate for sales declines. This in turn fueled growth in gross profit and GPM and led to a higher customer count.

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Half-yearly comparable store sales and gross profit for socks (three products) at directly managed stores

FY02/16 FY02/17 FY02/18 Yo Y 2H 1H 2H 1H 2H Sales Unit s -0.3% -2.7% 49.0% 25.4% 18.4% V alue -3.1% 1.0% 28.2% 15.5% 17.3% Gross profit V alue 2.7% 6.2% 21.6% 18.2% 28.9% GPM +1.8pp +1.0pp -3.9pp +5.4pp Apparel items: customer count -10.1% -9.1% 1.3% 11.0% 18.4% Dec.4, 2015: Raised price Aug. 26, 2016: Set the Back to MUJI's Further effects even after Frequent bargain sales from JPY1,000 to JPY1,200 price at JPY990 "Lower priced for a reason" the first round

YoY change in domestic operating GPM

(pp) Operating GPM: Japan GPM: Parent (pp) Operating GPM: Japan Inventory turnover: Ryohin Keikaku stores Exchange rate YoY (USD/JPY; right axis) 4 4 -20% 2H FY02/15-1H FY02/16: Weaker yen pushes up overseas procurement costs

2 2 -10%

0 0 0%

-2 -2 10% 1H FY02/17: 1H FY02/18: Rapid yen appreciation Yen turns weaker, but drives a quick recovery -4 -4 Apr. 2014: cost cuts and limited 20% Tax-inclusive prices maintained discounts drive GPM when consumption tax raised to 8% higher -6 -6 30% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/18 FY02/15 FY02/16 FY02/17 FY02/18

Sales at directly managed comparable stores in Japan (top); total customer count, etc., for directly managed stores in Japan (YoY; bottom)

Comparable stores Customer count Customer spend Apparel items Household goods Food 25% Stacking shelves sold out due to global popularity 12% Backlash from previous year's boom in body-fit cushion: 20% production capacity increased in July 2015

15% 7% 10%

5% 2% 0%

-5% -3% Price review effects in accessories -10% Advance demand Inventory reduction (inner wear) (e.g. men's polo shirts) -8% -15% Opportunity loss (e.g. men's polo shirts) Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec 2015 2016 2017 2015 2016 2017

Customer count Customer spend Sales units Average selling price 14% 20% 12% 15% 10% 8% 10% 6% 4% 5% 2% 0% 0% -2% -5% -4% -6% -10% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data

Trends in East Asia Operating profit in East Asia increased 2.5% YoY to JPY16.9bn (+JPY409mn) after profit began increasing from Q3, adding JPY1.0bn in Q3 and JPY1.5bn in Q4.

Sales: Food sales and customer traffic affected in 1H by state media reports in China, where cosmetics licensing issue also caused problems in 2H The East Asia business is heavily reliant on China, where in FY02/18 there was adverse coverage by state media outlets, depressing food sales in particular in Q1 and Q2, and also driving customer traffic sharply lower. In Q3, the effects of this media coverage waned, and earnings from food especially recovered, such that customer traffic still increased over the full year. However, an entirely new problem surfaced in Q3 (around July–August 2017), when Ryohin Keikaku had to cease sales of cosmetics (worth around CNY12mn or roughly JPY200mn monthly) owing to failure to renew a license. This was the unfortunate

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consequence of a Chinese government crackdown on imports, and the requirement to obtain a new hygiene license following rebranding. That license was issued in April 2018, and Ryohin Keikaku will be able to resume sales of cosmetics in June. As a result of these hindrances, Ryohin Keikaku lowered its plan for East Asia business operating profit by JPY1.0bn when reporting Q2 results, although ultimately, FY02/18 operating profit came in JPY340mn lower than the revised target. Rather than speculating as to what the outcome would have been in the absence of this licensing issue, it makes more sense, perhaps, to consider the potential lift to FY02/19 profit.

Operating profit: Squeezed by higher procurement costs for yen-denominated products owing to stronger yen, and impact of inventory valuation losses The OPM in East Asia dropped 3.0pp YoY to 15.4%, reflecting the following factors: a) General: a rise in procurement costs for yen-denominated products stemming from the appreciation of the yen; b) China: efforts to strategically stockpile apparel inventory in anticipation of the negative impact from reduced number of new household goods led to inventory valuation losses in Q3 (some impact in Q4, however this impact will dissipate by FY02/19); c) China: a decline in sales, particularly food, following reports by Chinese state media on March 15, which hurt Q2 results, and opportunity losses stemming from a cosmetics licensing issue*; d) Hong Kong and Taiwan: operations in Hong Kong were affected by decline in inbound demand from Chinese visitors, as well as by the closure of a major store due to large-scale renovations at a commercial complex, while operations in Taiwan struggled due to food import regulations and competition among the company’s urban stores (recovery witnessed from Q3 onward).

In China, the media impact was factored into initial forecasts. However, the Q3 inventory valuation losses were unexpected, as was the cosmetics licensing problem. In Hong Kong and Taiwan, results did not reach forecasts. According to the company, as of Q3 operating profit was expected to be slightly less than the JPY17.2bn targeted in the full-year forecasts, but it ended up finishing at JPY16.9bn, quite close to the forecast as of Q3. The company did not disclose the exact size of the inventory valuation losses, but said as of Q3 that it seemed the OPM for East Asia would have finished in line with plan (16.3%) had there been no valuation losses.

Cosmetics licensing issue: In China, licenses governing hygiene products must be renewed every four years. Ryohin Keikaku began full-fledged sales of skincare products in China in 2013, and in 2017 it was required to renew the license for its anti-aging cosmetics. Obtaining this license was time-consuming, though, as 1) a change in the brand name necessitated a new certificate to permit customs clearance; and 2) at that time the Chinese government was cracking down on imports. As a consequence, there was a fall from July–August 2017 in exports of some products to China. This had a massive impact, as sales of these products had reached around CNY12mn monthly (about JPY200mn, or JPY2.4bn annually). Ryohin Keikaku puts the drain on sales at around JPY1.0bn. Even without these products, though, sales of health and beauty products in China grew by more than 20% in FY02/18. A new license was obtained in April 2018, and Ryohin Keikaku will be able to resume sales from June, likely buoying both sales and profits in FY02/19.

Targeting OPM of at least 15% in East Asia, while pursuing gross profit and expanding scale; goal is to raise OPM to 17–18% through sales growth For the full year, the company initially projected an OPM of 17.3%, down 1.0pp versus FY02/17; key assumptions include a lower operating GPM due to a stronger yen (including a 3.5% YoY decline in the yuan versus the yen) and increases in store remodeling, personnel, and other costs. In the East Asia business, the company is generally looking for OPM around 15% in Q1 and Q3 (which each coincide with discounted sales periods) and around 19% for Q2 and Q4, but came in more than 2pp below the 15% target in Q1 and Q3 and nearly 4pp below the 19% target in Q2. Shared Research attributes this to lower sales in the wake of some news reports in China* and sluggish operations in Hong Kong and Taiwan (in Q1–Q2), operating GPM being impacted by higher procurement costs amid sharp yen appreciation (in Q1–Q2), inventory valuation losses (in Q3), and the cosmetics licensing issue (in Q3–Q4). The company achieved OPM of 19.2% in Q4, indicating the East Asia business is getting up to speed at last.

Looking toward FY02/19, the company expects this region to drive consolidated results because a) the impact of valuation losses appears to have dissipated by the end of Q4; b) the company forecasts around 4.5% sales growth in comparable stores (with cosmetics sales to resume from June); and c) it again plans to open more than 30 new stores (in this case, 35). In light of rising personnel costs alongside economic developments in China, Ryohin Keikaku says it aims to achieve an OPM of at least 15% in the East Asia business. This is not inconsistent with its long-held goal of a 17–18% OPM. Not only does the company have the

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capacity to open more high-performance stores, but now that its brand power is increasing it can also achieve this in minor cities and suburban areas. The company’s plan is therefore to increase the total amount of operating profit while maintaining a 15% OPM. It is the understanding of Shared Research that Ryohin Keikaku ultimately aims to achieve an OPM of 17–18% by growing sales. In addition, due to economic developments in China, the company has been shifting in that market away from foods and toward apparel and household goods. It expects household goods, where its strength lies, to drive earnings.

Comparable store sales growth: The company's medium-term plan assumes comparable store sales growth of more than 5% in China but it projected only 4% growth in FY02/18 in anticipation of a pullback after higher sales growth at Shanghai area stores following the opening of its new flagship store in Shanghai in Q1 FY02/17. As this was expected to reduce comparable store sales growth in China by as much as 1pp in FY02/18, the company effectively assumed comparable store sales of 5% in China if the impact of the opening of Shanghai flagship store is excluded.

News report by CCTV (“315” program): According to the news in China, Ryohin Keikaku sold foods produced in designated areas of Japan banned by the Chinese government (Fukushima, Tochigi, Ibaraki, Chiba, Miyagi, Niigata, Toyama, Saitama, and Tokyo). The company immediately announced that the reported products were not produced in the designated areas and that it has food products inspected and quarantined according to laws and submits certificates of origin to authorities before exporting products to China. According to the company, the reason for this misunderstanding was product labels saying “Seller: Ryohin Keikaku Co., Ltd. Address: …Tokyo…,” meaning the location of headquarters was misunderstood to be the production location. Comparable store sales for food were down roughly 5% YoY in February, prior the state media reporting, and down around 10% YoY in March–June. However, the number of stores subject to a sales ban declined from the initial 72 to zero in June, and comparable store sales accordingly sharply recovered to a decline of just over 5% YoY in July, an increase of 20% in August, and a rise of 30–40% in September. In China, one out of four store visitors purchases food (versus one out of three visitors in Japan). This represents a high sales weighting for food (5% in China, 7% in Japan), and the impact on apparel and household goods also appears to have been substantial.

East Asia: Sales growth (left) and OPM (right) of comparable stores

Comp. store sales growth (local currency) All store sales growth (local currency) (JPY/USD) Exchange rate (USD/JPY) East Asia OPM (right axis) All store sales growth (JPY) JPY/CNY (right axis) 130 25% 120% 21

100% 20 120 20%

80% 19 110 15%

60% 18 100 10% 40% 17 90 5% 20% 16 Sale periods (Q1 and Q3) 0% 15 80 0% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/18 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18

East Asia: Comparable store sales growth (left) and all stores’ sales growth (right) in local currency terms

East Asia China Hong Kong Taiwan South Korea East Asia China Hong Kong Taiwan South Korea 40% 80% 70% 30% 60%

20% 50% 40% 10% 30% 20% 0% 10% -10% 0% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/18 FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data

Outlook for FY02/19 (as of Q3, for reference): FY02/19 will be the second year under the company's medium-term plan. Covering the years from FY02/18 through FY02/21, the medium-term plan targets an ROE of over 15%, JPY600mn in operating profit, JPY500.0bn in operating revenue, and 1,200 stores. With the company currently on track to surpass its forecast for the first year under this medium-term plan (i.e., FY02/18), it is likely that no significant changes will be made to the strategy or measures currently planned. Store openings are also expected to continue running in line with expectations.

In domestic apparel (35% of domestic sales in FY02/17), the company sees room to grow sales with the help of price revisions and the introduction of products made from new materials, and also expects to maintain its GPM with the help of lower CoGS. In domestic household goods (55% of domestic sales), in addition to altering its pricing structure for existing products to make it easier for consumers to understand, after having held off on new product introductions for a while, the company plans to resume new product introductions in 2H with the aim of attracting more attention and creating more of a buzz among consumers. In East Asia, the company looks set to achieve OPM of 17%, aided by the dropout of inventory valuation

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losses in China, comparable store sales growth of more than 5%, 30 new store openings, 20 store remodelings, and the opening of more flagship stores. In Europe, the company sees operations moving into the black in FY02/19 as the impact of a weaker British pound and price hikes fade. And in North America, the company anticipates smaller losses YoY even as it ramps up spending on new store openings, and sees this together with the improvement in Europe putting operations in Europe and the Americas in the black on a combined basis.

In domestic household goods, the company attributed the slowdown in sales of furniture (16% of domestic sales) and fabrics (9% of domestic sales) in Q3 to its decision to hold off on new product introductions and limit eligibility for free shipping. In these areas, the company is conscious of the fact that consumers want to see affordable prices no matter when they visit Ryohin Keikaku stores, and not worry about coming back at a later date only to find that they could have bought the same item at a lower price. Accordingly, the company is working to make sure that consumers feel comfortable shopping at its stores at any time, because the company thinks that consumers who buy its products only when it is running bargain sales or special events will not become regular customers. To further increase consumer confidence in its prices, Ryohin Keikaku may also look to establish a simpler price structure and reduce the number of special bargain sales events. That said, the company is planning to set new prices for around 200 items in March 2018 (including more than 120 items under apparel and roughly 60 items under food), and will also move to create a pricing structure for household goods that conveys the value of the goods and is more easily understood by consumers. We will be keeping a close eye on whether this attempt to establish an everyday-low-price strategy for items that consumers use frequently are accepted by consumers and lead to higher sales.

Supplementary earnings information Operating GPM The operating GPM rose 0.8pp YoY to 50.3%, as the decline in gross profit from East Asia was largely offset by gains on the domestic front. A similar trend was observed from Q2 onward. In 1H, the yen weakened slightly YoY, and the resulting decline in costs coupled with markdown restraint (as prices were lowered to more appropriate levels in the first place) supported a 2.3pp YoY increase in domestic operating GPM to 47.1%. The domestic operating GPM improved 2.1pp to 48.6% in Q3 and 1.9pp to 45.1% in Q4. It appears that the company maintained a positive trend, primarily in apparel.

YoY change in domestic operating GPM and the yen-dollar forex rate (left); OPM and the yen-dollar forex rate in the East Asia operations (right)

(pp) Operating GPM: Japan Inventory turnover: Ryohin Keikaku stores Exchange rate (USD/JPY) Exchange rate YoY (USD/JPY; right axis) Inventory turnover: consolidated (zero YoY change at "120" on the left asxis) 4 -20% 140 25% 2H FY02/15-1H FY02/16: Weaker yen pushes up overseas procurement costs East Asia OPM (right axis) 130 2 -10% 20% 120 0 0% 15% 110 -2 10% 10% 1H FY02/17: 1H FY02/18: 100 Rapid yen appreciation Yen turns weaker, but drives a quick recovery -4 Apr. 2014: cost cuts and limited 20% 90 5% Tax-inclusive prices maintained discounts drive GPM Sales periods (Q1 and Q3) when consumption tax raised to 8% higher -6 30% 80 0% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/18 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data Note: Domestic inventory turnover times reflect a YoY comparison of annualized turnover times. Overseas inventory turnover times reflect a YoY comparison after setting 120 on the left axis to zero (132 corresponds to +0.1 turn, and 108 to -0.1 turn.) SG&A expenses SG&A expenses rose 14.9% YoY versus a 13.9% increase in sales, pushing the SG&A ratio up 0.3pp to 38.7%. This increase occurred across all expense categories. The impact from revising hourly wages in Japan, effective September 2015, and raising the share of full-time staff have subsided in terms of personnel costs; on the other hand, new store openings across Japan and the rest of the world appear to be the major drivers of increased SG&A expenses (however, this increase has settled down).

The increase in logistics costs can largely be attributed to a one-time increase in warehouse costs associated with the relocation of a facility in Europe (the facility was relocated in June and additional expenses were incurred from a container backlog), an increase in warehouse expenses due to a strategic addition of staple goods inventory, a (one-time) increase in shipping fees to deliver the initial inventory of goods to be handled by approximately 6,300 Circle K and Sunkus convenience stores starting in October 2016 (dissipating from Q2), and higher personnel costs. Although personnel shortages in Japan resulted in lost opportunities, the company is working to add personnel. Efficiency is also improving. At Ryohin Keikaku, a specific number of personnel is allocated to each store, with a view to maintaining enough personnel to handle sales to every customer. The company includes among its KPIs the “ratio of staffing versus required store headcount*,” and as of October 2017 it scored 95% for this KPI, rising to 99% as of February 2018. The aim is to achieve 100% by end-FY02/19.

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Other SG&A expenses reflected higher one-time costs accompanying store remodeling (mainly in Q1) and an increase in various fees. While remodeling costs can be regarded as upfront investments that will support future sales growth, the company recognizes it will need to take measures to counter fee expenses. Ratio of staffing versus required store headcount: A proprietary performance metric indicating the extent to which staff numbers meet the headcount requirement for each store, based on a range of variables including sales, floor space, and opening hours.

SG&A expenses

Advertising Logistics Advertising Logistics Personnel Rents, depreciation and amortization Others Personnel Rents, depreciation and amortization 45 Others SG&A-to-sales ratio 41% 16% 14.2% 14.3% Personnel 38.9 13.9% 13.7% 40 37.2 13.2% 13.2% 13.6% 13.6% 36.0 40% 14% 12.5% 12.7% 12.5% 12.8% 34.1 34.4 12.0% 12.0% 11.9% 12.0% 35 31.531.6 32.2 7.7 11.3% 11.4% 11.2% 10.8%13.0% 13.1% 13.3% 11.9% 29.4 29.8 7.8 12% 12.6% 12.9%13.0% 12.9% 12.7% 7.3 39% 12.3%12.5% 12.5% 12.1% 27.227.827.4 6.7 6.7 11.9% 11.8% 12.1% 30 6.5 11.5% 11.7% 11.4% 11.7% 24.2 24.7 5.9 6.0 10% Rents & dep. 22.8 6.0 5.7 8.1% 25 21.9 5.1 5.5 5.2 12.0 38% 7.5%7.7% 7.6% 7.7%7.6%7.8%7.5%7.8% 7.8% 19.7 20.2 11.3 11.7 7.2%7.3% 7.4% 7.3%7.1%7.4% 7.3% 19.0 5.0 4.5 10.8 10.9 8% 6.8% 6.8% 6.8% 4.4 10.110.3 10.1 20 4.3 9.7 9.6 37% Others 3.9 3.6 4.0 9.0 9.2 9.3 8.6 6% 4.5% 15 7.6 7.4 4.4% 4.1% 4.2% 4.1%4.1%4.0% 4.3% 7.3 3.9% 3.9% 3.9%4.0% 3.9% 3.6% 4.0% 4.0%3.9%3.9% 6.3 6.4 6.8 13.5 36% 3.6% 3.5% 11.811.712.312.4 4% 10 11.010.410.510.7 Logistics 7.6 8.9 8.7 9.2 9.5 6.0 7.3 7.9 8.0 5 6.5 6.6 35% 2% 2.8 3.3 2.8 2.9 3.6 3.4 3.4 4.2 3.4 3.8 3.9 2.1% 2.4 1.9 2.1 2.3 3.0 2.3 2.6 2.7 3.0 2.0% 1.7%1.9% 1.7%1.6% 1.7% 0 34% 0% 1.3%1.4%1.2%1.5%1.4%1.5% 1.5%1.4% 1.5%1.3% 1.6%1.4%1.5% (JPYbn)Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Advertising FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18

SG&A rat io FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/19 (Yo Y change) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Act. Est. SG&A expenses -0.5pp -1.0pp +0.1pp -0.1pp +0.2pp +1.1pp +0.6pp +0.6pp +1.0pp -0.1pp +0.7pp -0.5pp -0.4pp +0.6pp +0.3pp -0.1pp Advert ising -0.0pp -0.0pp +0.2pp -0.2pp +0.0pp -0.1pp -0.0pp -0.3pp +0.1pp +0.0pp -0.2pp +0.1pp -0.0pp -0.1pp +0.0pp Logist ics -0.3pp -0.2pp -0.4pp -0.4pp -0.1pp +0.2pp +0.5pp +0.4pp +0.3pp -0.1pp -0.1pp -0.1pp -0.3pp +0.2pp -0.0pp Personnel -0.2pp -0.7pp +0.0pp +0.8pp +0.7pp +1.0pp +0.5pp +0.1pp +0.1pp +0.1pp +0.3pp -0.1pp +0.0pp +0.6pp +0.1pp Rents +0.0pp -0.6pp -0.3pp -0.5pp -0.4pp -0.4pp -0.4pp -0.1pp -0.1pp -0.2pp +0.1pp -0.3pp -0.3pp -0.3pp -0.1pp Dep., goodwill amort. +0.5pp +0.8pp -0.3pp +0.1pp +0.3pp +0.0pp -0.0pp +0.1pp +0.0pp -0.0pp +0.1pp -0.1pp +0.3pp +0.0pp +0.0pp Other -0.5pp -0.3pp +0.8pp +0.0pp -0.3pp +0.3pp +0.0pp +0.4pp +0.7pp +0.2pp +0.4pp +0.0pp -0.0pp +0.2pp +0.3pp Source: Shared Research based on company data

Domestic business

Domestic business FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Act. Est. Est. Change Operating revenue 52,872 44,275 52,988 48,314 59,186 46,568 58,741 51,220 64,649 52,774 62,088 55,278 198,449 215,716 234,791 237,100 251,800 +17,009 YoY 3.3% 11.7% 10.4% 10.1% 11.9% 5.2% 10.9% 6.0% 9.2% 13.3% 5.7% 7.9% 8.6% 8.7% 8.8% 9.9% 7.2% Directly managed comp. store sales YoY 2.3% 5.8% 7.4% 4.1% 7.3% -1.6% 3.1% -0.7% 5.0% 11.3% 5.0% 6.5% 4.9% 2.1% 6.8% 4.0% -2.8pp Apparel it ems 6.2% 5.5% -1.0% -2.3% 1.9% -5.6% -0.9% -2.5% 4.5% 13.9% 13.8% 16.5% 2.1% -1.6% 11.9% Household goods 0.8% 7.8% 14.8% 9.6% 11.2% 1.0% 4.8% 0.4% 5.3% 9.8% -0.3% 0.6% 8.1% 4.2% 3.7% Food -5.6% -5.4% 2.3% -2.1% 6.9% 1.2% 11.9% -1.0% 4.5% 8.8% - 4.1% -2.7% 4.8% 4.2% Customer count -3.1% -3.0% -1.4% -3.0% 0.6% -3.3% 4.0% -0.3% 4.4% 9.0% 4.0% 7.3% -2.6% 0.3% 6.1% Apparel it ems -5.5% -12.7% 1.6% 1.0% 6.8% 15.1% 15.1% 22.2% -4.5% 14.5% Household goods 6.3% 2.8% 7.2% 1.9% 6.7% 10.4% 4.1% 5.9% 4.6% 6.7% Food -0.7% -2.7% 5.7% -2.7% 3.0% 6.4% -0.5% 4.3% - 3.3% Customer spend 5.6% 9.1% 8.9% 7.3% 6.7% 1.8% -0.9% -0.4% 0.6% 2.1% 0.9% -0.7% 0.7% 1.8% 0.6% Apparel it ems 7.9% 8.1% -2.5% -3.4% -2.2% -1.1% -1.2% -4.6% 3.0% -2.3% Household goods 4.6% -1.8% -2.3% -1.4% -1.3% -0.5% -4.2% -5.0% -0.3% -2.8% Food 7.6% 4.0% 5.9% 1.8% 1.5% 2.2% 0.5% -0.2% 4.8% 0.9% Operating gross profit 23,151 18,547 23,487 20,204 26,557 20,848 27,325 22,105 30,462 25,101 30,201 24,934 85,389 96,836 110,701 YoY - - - - 14.7% 12.4% 16.3% 9.4% 14.7% 20.4% 10.5% 12.8% 9.7% 13.4% 14.3% Operating GPM 43.8% 41.9% 44.3% 41.8% 44.9% 44.8% 46.5% 43.2% 47.1% 47.6% 48.6% 45.1% 43.0% 44.9% 47.1% Operating expenses 17,383 15,557 17,616 17,771 19,422 17,058 19,574 18,830 21,690 18,867 21,314 20,277 68,327 74,883 82,150 YoY - - - - 11.7% 9.6% 11.1% 6.0% 11.7% 10.6% 8.9% 7.7% 8.2% 9.6% 9.7% % of operating revenue 32.9% 35.1% 33.2% 36.8% 32.8% 36.6% 33.3% 36.8% 33.6% 35.8% 34.3% 36.7% 34.4% 34.7% 35.0% Operating profit 5,768 2,990 5,871 2,433 7,135 3,790 7,751 3,275 8,772 6,234 8,887 4,657 17,062 21,953 28,551 25,800 29,400 +849 YoY 8.1% 15.3% 23.7% 19.7% 23.7% 26.8% 32.0% 34.6% 22.9% 64.5% 14.7% 42.2% 16.0% 28.7% 30.1% 17.5% 3.0% OPM 10.9% 6.8% 11.1% 5.0% 12.1% 8.1% 13.2% 6.4% 13.6% 11.8% 14.3% 8.4% 8.6% 10.2% 12.2% 10.9% 11.7% -0.5pp MUJI directly managed store count 297 296 311 312 322 323 328 328 332 334 338 335 312 328 335 351 +16 Openings 13 1 20 5 11 2 7 1 5 2 6 1 39 21 14 16 +2 Closures - -2 -5 -4 -1 -1 -2 -1 -1 - -2 -4 -11 -5 -7 - +7 Floor space (period end; sqm) 218,759 218,298 227,052 226,229 234,613 234,819 240,491 240,305 245,627 247,262 255,018 253,409 226,229 240,305 253,409 275,915 +22,506 YoY 8.0% 6.8% 8.0% 8.7% 7.2% 7.6% 5.9% 6.2% 4.7% 5.3% 6.0% 5.5% 8.7% 6.2% 5.5% 8.9% Floor space per store 737 737 730 725 729 727 733 733 740 740 754 756 725 733 756 786 +30 YoY 1.5% 1.4% 0.4% -1.1% -1.1% -1.4% 0.4% 1.0% 1.5% 1.8% 2.9% 3.2% -1.1% 1.0% 3.2% 3.9% Floor space (period average) 214,293 216,075 217,573 219,837 230,368 232,366 233,849 235,567 242,921 244,652 246,955 248,634 219,837 235,567 248,634 YoY 7.0% 6.9% 6.6% 7.1% 7.5% 7.5% 7.5% 7.2% 5.4% 5.3% 5.6% 5.5% 7.1% 7.2% 5.5% Sales per sqm (JPY) 178 148 174 160 187 145 177 158 196 158 184 165 660 666 703 YoY 0.6% 4.3% 6.4% 4.1% 5.1% -2.5% 1.9% -1.3% 4.9% 8.9% 4.1% 4.7% 3.8% 1.0% 5.5% Inventory per sqm (JPY) 61 57 57 56 54 53 55 55 55 54 55 55 57 56 56 YoY 0.0% -5.7% -7.9% -10.7% -10.6% -7.2% -3.9% -1.1% 1.9% 2.0% -0.5% -1.1% -9.6% -1.9% -1.2% Personnel expenses 5,345 5,510 5,766 6,502 6,252 6,374 6,528 6,874 6,687 7,033 7,166 7,537 23,123 26,028 28,423 YoY 6.5% 7.4% 13.6% 21.9% 17.0% 15.7% 13.2% 5.7% 7.0% 10.3% 9.8% 9.6% 12.5% 12.6% 9.2% Employees + part-timers 6,264 6,293 6,375 6,566 7,153 7,252 7,337 7,501 7,459 7,486 7,486 7,845 6,566 7,501 7,845 Employees 1,553 1,567 1,569 1,646 1,699 1,745 1,764 1,808 1,829 1,842 1,842 2,035 1,646 1,808 2,035 Part-timers (8-hour equivalent) 4,711 4,726 4,806 4,920 5,454 5,507 5,573 5,693 5,630 5,644 5,644 5,810 4,920 5,693 5,810 Personnel expenses per head (JPY'000) 853 872 882 911 874 867 870 860 897 936 957 845 3,522 3,470 3,623 YoY 1.0% 2.4% 5.9% 12.3% 2.4% -0.5% -1.4% -5.6% 2.6% 8.0% 10.1% -1.8% 5.5% -1.5% 4.4%

Results: Price revisions tremendous effective, buoying apparel sales in particular. Operating revenue up 8.8% with comparable ▷ store sales up 6.8% on increased customer count and additional sales from newly opened stores; OPM also increased 2.0pp,

helping to drive 30.1% increase in operating profit. FY02/18 a year devoted to strengthening business foundations, by such means as revising prices to reflect decline in CoGS, thereby reducing markdowns while increasing store traffic, and increasing store inventory while reducing warehouse inventory.

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 Strong apparel sales drove growth. Sales at appropriate prices gained momentum on the back of price revisions, reducing markdown ratio and raising GPM Comparable store sales: Customer traffic up 6.1% versus full-year target of +4.0%, owing to successful efforts to increase ▷ customer count, such as increased publicity, strategic inventory measures, and store remodeling

Store openings: Net increase of 14 directly operated stores (some large ones in the 1,650sqm class, and some regular stores ▷ larger than the conventional average of about 825sqm), including those converted from Seiyu Online sales: Grew only 4%, held down by upgrades to the website and a slump in sales of interior goods (50% of which are ▷ sold online, accounting for 25% of overall domestic sales) Inbound: Sales to visitors from overseas rose JPY1.5bn YoY to JPY6.1bn, for a 0.7pp contribution to growth in operating revenue ▷ Apparel: Measures to reduce number of items and fully stock hit products were successful. Menswear and luggage were drivers ▷ Household goods: Having shifted promotions away from interior goods to everyday goods during 1H, new products are ▷ expected to drive growth in 2H FY02/19, in tandem with price reductions Future outlook: Strengthening two-pronged strategy of continuing price revisions to deliver competitively priced household ▷ goods as part of a strategy to offer an extensive lineup of affordable items, and premium-value products with low prices for a reason

 Establishment of large stores: In FY02/18, completed the opening of two stores in September (one in Matsumoto, one in Yao); trial initiatives related to product lineup implemented at existing large stores with an eye toward future rollout

Domestic business performance

70,000 Operating revenue Operating profit OPM (right axis) 64,649 16% 62,088 59,186 58,741 60,000 13.2% 13.6% 55,278 14% 52,872 52,988 52,774 14.3% 12.1% 51,162 51,220 48,007 48,314 46,568 50,000 45,678 12% 45,044 43,290 43,880 44,275 39,653 11.8% 40,00011.1% 37,912 12.1% 10% 10.4% 10.9% 11.1% 9.9% 30,000 8.2% 8% 7.3% 8.1% 8.4% 20,000 6.5% 6% 6.8% 6.4% 5.0% 7,135 7,751 8,772 8,887 10,000 4,995 5,517 5,337 4,745 4.6% 5,768 5,871 6,234 4,657 4% 2,782 3,565 2,593 2,033 2,990 2,433 3,790 3,275 0 2% Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 (JPYmn) FY02/14 FY02/15 FY02/16 FY02/17 FY02/18

Sales at directly operated comparable stores in Japan

Comparable stores Customer count Customer spend Apparel items Household goods Food 25% Stacking shelves sold out due to global popularity 12% Backlash from previous year's boom in body-fit cushion: 20% production capacity increased in July 2015

15% 7% 10%

5% 2% 0%

-5% -3% Price review effects in accessories -10% Advance demand Inventory reduction (inner wear) (e.g. men's polo shirts) -8% -15% Opportunity loss (e.g. men's polo shirts) Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec 2015 2016 2017 2015 2016 2017 Source: Shared Research based on company data

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YoY changes in domestic operating GPM

(pp) Operating GPM: Japan GPM: Parent (pp) Operating GPM: Japan Inventory turnover: Ryohin Keikaku stores Exchange rate YoY (USD/JPY; right axis) 4 4 -20% 2H FY02/15-1H FY02/16: Weaker yen pushes up overseas procurement costs

2 2 -10%

0 0 0%

-2 -2 10% 1H FY02/17: 1H FY02/18: Rapid yen appreciation Yen turns weaker, but drives a quick recovery -4 -4 Apr. 2014: cost cuts and limited 20% Tax-inclusive prices maintained discounts drive GPM when consumption tax raised to 8% higher -6 -6 30% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/18 FY02/15 FY02/16 FY02/17 FY02/18

Directly managed stores: sales per sqm (left), inventory per sqm (middle), sales per head (right)

(JPY) (JPY) Sales per sqm YoY (left axis) (JPY) Inventorhy per sqm YoY (left axis) Sales per head YoY (left axis) 10% 25% 70 15% 8,000

8% 200 20% 65 10% 7,000 6% 15% 60 4% 150 5% 6,000 10% 55 2% 5% 50 0% 5,000 0% 100 0% 45 -2% -5% 4,000 -5% 40 -4% 50 -10% 3,000 -6% -10% 35

-8% 0 -15% 30 -15% 2,000 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data Overseas business

Overseas business FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Act. Est. Est. Change Operating revenue 24,598 25,702 26,348 32,431 28,346 27,615 26,568 35,033 32,485 33,078 34,873 44,320 109,080 117,563 144,758 140,700 172,500 +27,742 East Asia 19,304 19,708 19,714 24,319 21,978 21,240 19,998 26,486 25,221 25,372 25,778 33,431 83,045 89,704 109,803 105,500 129,100 +19,297 Europe and the Americas 3,493 3,874 4,430 5,328 4,029 3,938 4,172 5,462 4,393 4,552 5,524 6,754 17,124 17,603 21,225 21,600 27,400 +6,175 West and South Asia, and Oceania 1,802 2,121 2,204 2,784 2,338 2,436 2,397 3,084 2,870 3,153 3,570 4,134 8,911 10,256 13,729 13,600 16,000 +2,271 YoY 58.3% 49.2% 39.3% 25.4% 15.2% 7.4% 0.8% 8.0% 14.6% 19.8% 31.3% 26.5% 40.7% 7.8% 23.1% 19.7% 19.2% East Asia 68.7% 56.7% 44.4% 29.7% 13.9% 7.8% 1.4% 8.9% 14.8% 19.5% 28.9% 26.2% 47.2% 8.0% 22.4% 17.6% 17.6% Europe and the Americas 17.4% 22.4% 22.4% 4.4% 15.4% 1.7% -5.8% 2.5% 9.0% 15.6% 32.4% 23.7% 15.2% 2.8% 20.6% 22.7% 29.1% West and South Asia, and Oceania 60.4% 43.1% 34.9% 38.1% 29.8% 14.9% 8.8% 10.8% 22.8% 29.4% 48.9% 34.0% 42.5% 15.1% 33.9% 32.6% 16.5% YoY (local currency) 41.8% 29.5% 24.8% 17.7% 24.1% 22.4% 19.6% 23.4% 18.2% 18.0% 19.0% 16.0% 28.9% 24.1% 18.0% 15.9% East Asia 48.9% 33.5% 26.5% 18.2% 22.6% 22.1% 17.8% 25.3% 18.2% 17.9% 18.3% 18.3% 32.1% 24.7% 14.0% 14.4% Europe and the Americas 11.9% 10.6% 15.3% 6.3% 23.0% 19.4% 10.4% 17.0% 15.1% 13.8% 16.0% 18.2% 12.1% 19.0% 18.2% 25.6% West and South Asia, and Oceania 47.2% 33.7% 30.6% 41.5% 42.2% 30.8% 43.3% 20.2% 24.2% 25.9% 30.1% 30.1% 37.3% 28.4% 25.9% 12.9% YoY (local currency; comparable store sales) 21.7% 11.2% 9.7% 5.3% 7.0% 7.0% 1.4% 3.5% 2.1% 2.7% 6.0% 4.9% 11.7% 4.6% 4.1% 4.3% 4.6% East Asia 26.5% 12.9% 10.1% 4.7% 5.0% 5.9% 0.8% 4.2% 2.3% 1.8% 6.0% 5.2% 13.1% 4.1% 3.9% 3.6% 4.5% Europe and the Americas 3.2% 4.7% 9.1% 2.6% 11.8% 5.8% -0.4% -0.2% 2.0% 7.4% 5.9% 2.8% 5.4% 3.7% 4.4% 5.6% 5.6% West and South Asia, and Oceania 15.7% 8.0% 8.0% 17.6% 18.9% 20.3% 14.1% 2.7% 0.7% 3.9% 6.3% 3.4% 12.7% 12.5% 4.7% 7.6% 4.2% Operating profit 3,600 3,692 3,796 5,955 4,121 4,442 1,987 5,188 2,912 2,904 3,315 6,958 17,042 15,740 16,090 16,300 20,400 +4,310 East Asia 3,871 3,971 3,796 5,623 4,503 4,773 2,318 4,858 3,221 3,870 3,361 6,407 17,261 16,454 16,861 17,200 20,600 +3,739 Europe and the Americas -188 -294 -97 165 -417 -347 -382 295 -330 -778 -139 350 -414 -852 -898 -1,100 -400 +498 West and South Asia, and Oceania -83 14 96 167 35 17 51 34 21 -187 94 200 195 138 128 200 200 +72 YoY 197.7% 41.6% 198.0% 68.8% 14.5% 20.3% -47.7% -12.9% -29.3% -34.6% 66.8% 34.1% 97.8% -7.6% 2.2% 3.6% 26.8% East Asia 173.1% 52.7% 163.2% 89.1% 16.3% 20.2% -38.9% -13.6% -28.5% -18.9% 45.0% 31.9% 104.6% -4.7% 2.5% 4.5% 22.2% Europe and the Americas - - - -58.6% - - - 79.1% - - - 18.6% - - - - - West and South Asia, and Oceania - -70.6% - 7.2% - 18.1% -47.0% -79.7% -40.0% - 84.3% 488.2% 114.6% -29.2% -7.2% 44.9% 56.3% OPM 14.6% 14.4% 14.4% 18.4% 14.5% 16.1% 7.5% 14.8% 9.0% 8.8% 9.5% 15.7% 15.6% 13.4% 11.1% 11.6% 11.8% +0.7pp East Asia 20.1% 20.2% 19.3% 23.1% 20.5% 22.5% 11.6% 18.3% 12.8% 15.3% 13.0% 19.2% 20.8% 18.3% 15.4% 16.3% 16.0% +0.6pp Europe and the Americas -5.4% -7.6% -2.2% 3.1% -10.3% -8.8% -9.2% 5.4% -7.5% -17.1% -2.5% 5.2% -2.4% -4.8% -4.2% -5.1% -1.5% +2.8pp West and South Asia, and Oceania -4.6% 0.7% 4.4% 6.0% 1.5% 0.7% 2.1% 1.1% 0.7% -5.9% 2.6% 4.8% 2.2% 1.3% 0.9% 1.5% 1.3% +0.3pp Store count (including licensees) 302 308 320 344 347 362 384 403 408 422 439 457 344 403 457 457 505 +48 East Asia 190 197 207 227 232 245 260 279 283 293 306 319 227 279 319 316 362 +43 Europe and the Americas 73 70 70 72 70 69 70 69 71 70 71 72 72 69 72 74 71 -1 West and South Asia, and Oceania 39 41 43 45 45 48 54 55 54 59 62 66 45 55 66 67 72 +6 Source: Shared Research based on company data

Operating profit at Overseas businesses

Consolidated OP Overseas OP Overseas OP as % of cons. OP (right axis) (JPYbn) East Asia Europe and the Americas West and South Asia, Oceania (JPYbn) 7 14 70% 6 12 60% 5 10 50% 4 8 40% 3 6 30% 2 4 20% 1 2 10% 0 0 0% -1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data

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East Asia (fiscal year ending December)

East Asia FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Act. Est. Est. Change Operating revenue 19,304 19,708 19,714 24,319 21,978 21,240 19,998 26,486 25,221 25,372 25,778 33,431 83,045 89,704 109,803 105,500 129,100 +19,297 Sales (operating revenue from FY02/17) 19,303 19,784 19,726 24,362 China 11,258 11,671 12,049 14,758 13,384 13,048 12,227 16,293 15,616 15,191 15,964 22,127 49,736 54,952 68,898 Hong Kong 3,573 3,269 3,383 3,718 3,680 3,164 3,217 3,824 3,686 3,504 3,721 4,607 13,943 13,885 15,518 Taiwan 3,123 3,327 2,882 4,003 3,390 3,224 2,753 4,123 3,765 3,941 3,457 5,124 13,335 13,490 16,287 South Korea 1,348 1,439 1,402 1,839 1,522 1,805 1,801 2,247 2,152 2,737 2,636 3,363 6,028 7,375 10,888 YoY 68.7% 56.7% 44.4% 29.7% 13.9% 7.8% 1.4% 8.9% 14.8% 19.5% 28.9% 26.2% 47.2% 8.0% 22.4% 17.6% 17.6% -4.8pp Sales 68.6% 57.4% 44.6% 26.7% China 93.9% 75.2% 57.8% 40.6% 18.9% 11.8% 1.5% 10.4% 16.7% 16.4% 30.6% 35.8% 65.1% 10.5% 25.4% Hong Kong 39.7% 41.3% 33.0% 7.9% 3.0% -3.2% -4.9% 2.9% 0.2% 10.7% 15.7% 20.5% 28.2% -0.4% 11.8% Taiwan 43.1% 36.7% 27.9% 7.3% 8.5% -3.1% -4.5% 3.0% 11.1% 22.2% 25.6% 24.3% 25.8% 1.2% 20.7% South Korea 48.8% 24.2% 15.6% 18.6% 12.9% 25.4% 28.5% 22.2% 41.4% 51.6% 46.4% 49.7% 24.9% 22.3% 47.6% Sales (local currency) 48.9% 33.5% 26.5% 18.2% 22.6% 22.1% 17.8% 25.3% 18.2% 17.9% 18.3% 18.3% 32.1% 24.7% 14.0% 14.4% +0.4pp China 71.8% 48.2% 37.7% 31.8% 28.8% 26.5% 18.8% 32.2% 24.0% 22.6% 29.6% 20.9% 47.6% 29.8% 23.4% Hong Kong 20.6% 18.7% 13.0% -5.8% 6.5% 4.2% 5.9% 14.1% 1.5% 8.9% 16.8% 16.8% 12.2% 10.7% 8.8% Taiwan 28.3% 17.7% 15.6% 4.2% 17.6% 13.9% 13.4% 12.8% 5.9% 11.3% 10.3% 10.3% 14.9% 14.3% 10.6% South Korea 32.1% 11.3% 11.8% 16.7% 27.3% 48.8% 46.4% 37.3% 37.7% 43.4% 36.9% 36.9% 17.2% 39.9% 39.3% Sales (local currency; comparable st ores) 26.5% 12.9% 10.1% 4.7% 5.0% 5.9% 0.8% 4.2% 2.3% 1.8% 6.0% 5.2% 13.1% 4.1% 3.9% 3.6% 4.5% +0.6pp China 38.6% 22.6% 15.9% 9.7% 4.7% 5.4% 0.8% 7.6% 5.8% 1.8% 7.1% 4.0% 20.4% 4.7% 4.6% Hong Kong 16.0% 8.9% 9.8% 0.5% 1.6% 3.4% -2.9% -0.8% -4.8% -1.8% 1.8% 2.7% 8.1% 0.7% -0.6% Taiwan 11.0% -3.6% -2.1% -8.9% 5.6% 4.6% 0.7% -2.1% -3.5% 1.3% 5.5% 10.3% -2.3% 2.1% 3.9% South Korea 8.2% -7.4% -0.5% 10.0% 18.0% 20.9% 10.2% 0.1% -2.8% 8.2% 5.7% 10.7% 0.9% 11.4% 6.3% Operating profit 3,871 3,971 3,796 5,623 4,503 4,773 2,318 4,858 3,221 3,870 3,361 6,407 17,261 16,452 16,861 17,200 20,600 +3,739 YoY 173.1% 52.7% 163.2% 89.1% 16.3% 20.2% -38.9% -13.6% -28.5% -18.9% 45.0% 31.9% 104.7% -4.7% 2.5% 4.5% 22.2% OPM 20.1% 20.2% 19.3% 23.1% 20.5% 22.5% 11.6% 18.3% 12.8% 15.3% 13.0% 19.2% 20.8% 18.3% 15.4% 16.3% 16.0% +0.6pp Store count (including licensees) 190 197 207 227 232 245 260 279 283 293 306 319 227 279 319 316 362 +43 China 128 132 140 160 163 173 183 200 202 210 219 229 160 200 229 230 264 +35 Hong Kong 14 15 15 15 15 16 17 17 16 17 18 19 15 17 19 18 19 - Taiwan 34 36 38 38 39 40 41 42 43 43 44 45 38 42 45 44 48 +3 South Korea 14 14 14 14 15 16 19 20 22 23 25 26 14 20 26 24 31 +5 Source: Shared Research based on company data

Results: Sales up 22.4% YoY (with comparable store sales up 14% in local currency terms) and operating profit up 2.5%. Profit ▷ increased from Q3 onward. Q4 achieved the non-bargain period target OPM of 19%

 Versus plan: In China, Q3 valuation losses on inventory were unexpected. Operating profit was 2% under plan, in line with outlook as of Q3 (when a slight shortfall was expected)

 Outlook: The company aims to maintain OPM of 15% as the impact of personnel expenses increases. Also targets higher total amount of operating profit as brand power increases and high-performance stores are opened

 China: 42 successful new store openings last year (year-end store count of 200), overall sales finish up 23.4% in local currency terms. Comparable store sales up 4.6%, recovering from impact of Chinese media reports, cosmetics licensing issue, etc.

 Issue concerning renewal of cosmetics license arose in July–August 2017, eroding sales previously in region of CNY12mn (about JPY200mn) per month; license renewed in April 2018

 Comparable store sales: Aims for above 5% full-year growth in 2018 and later; from Q3 media fallout dissipates, and full-year sales expected to be up 4.6% (4% in forecast)

 Q1 (January–March): Comparable store sales up 5.8%, but sales of food products and other items turned sluggish due to impact from the inaccurate March 15 news report released by state media

 Q2 (April–June): Hurt by negative state media reports, comparable store sales up only 1.8% in Q2, but stores subject to ban on sales gradually reached zero in June; after this, comparable store sales of food recovered

 Q3 (July–September): Comparable store sales up 7.1%; food sales recovered sharply with increases of 20% in August and 35% in September; this also contributed to a higher customer count

 Q4 (October-December): Up 4.0%. Affected by cosmetics licensing issue, one unexpected store closing  Food: Accounted for 5% of sales in China, with one in four customers making food purchases (7% of sales in Japan, one in three customers); key growth driver

 Furniture: Expansion in number of items. Higher sales weightings for H&B, furniture, and fabric driving earnings  Furniture sales weighting of roughly 4% across all stores, but almost 10% at global flagship stores in Shanghai and Chengdu; stronger furniture performance also expected to increase comparable store sales

 Store openings: In FY02/19, the company expects to open 35 stores and renovate 20 stores. Medium-term management plan seems on schedule

97/122 Ryohin Keikaku / 7453

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East Asia: Earnings

40,000 Operating revenue Operating profit OPM (right axis) 30% 35,000 33,431 23.1% 22.5% 25% 30,000 20.7% 20.2% 20.5% 20.1% 19.3% 26,486 25,778 19.2% 24,319 18.3% 25,221 25,372 20% 25,000 15.6% 15.9% 21,978 21,240 19,998 15.3% 18,751 19,304 19,708 19,714 20,000 12.4% 12.8% 13.0% 15% 11.3% 11.6% 10.3% 10.6% 15,000 12,580 13,657 7.2% 11,443 10% 8,708 10,000 7,451 8,401 6,717 5,623 6,407 3,871 3,971 3,796 4,503 4,773 4,858 3,870 5% 5,000 2,601 2,974 2,318 3,221 3,361 761 1,160 869 630 1,417 1,443 0 0% Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 (JPYmn) FY02/14 FY02/15 FY02/16 FY02/17 FY02/18

East Asia: Comparable store sales growth (left) and OPM (right)

Comp. store sales growth (local currency) All store sales growth (local currency) (JPY) Exchange rate (USD/JPY) East Asia OPM (right axis) All store sales growth (JPY) CNY/JPY (right axis) 130 25% 120% 21

100% 20 120 20%

80% 19 110 15%

60% 18 100 10% 40% 17 90 5% 20% 16 Sale periods (Q1 and Q3) 0% 15 80 0% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/18 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18

East Asia: Comparable store sales growth (left) and all stores’ sales growth (right) in local currency terms

East Asia China Hong Kong Taiwan South Korea East Asia China Hong Kong Taiwan South Korea 40% 80% 70% 30% 60%

20% 50% 40% 10% 30% 20% 0% 10% -10% 0% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/18 FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data

China: Sales and number of stores

25,000 229 250 Sales (JPYmn) YoY (local currency; SR est.) Store count (right axis) 219 210 22,127 200 202 183 20,000 173 200 160 163 16,293 15,616 15,964 140 15,191 15,000 132 13,384 150 128 128 14,802 13,048 108 112 12,059 12,227 100 101 11,25811,748 82 10,496 10,000 75 7,637 100 65 67 6,662 55 6,159 5,806 44 34 38 39 4,758 5,000 26 28 3,153 3,683 4,263 50 1,892 2,238 1,557 2,417 1,869 1,167 1,242 0 0 (JPYmn) Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18

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Comparable sales growth, operating revenue growth, and YoY increase in store count in China

Store count YoY change (right axis) Comparable store sales (local currency) Operating revenue (local currency) Difference 90% 45 80% 40 70% 35 60% 30 50% 25 40% 20 30% 15 20% 10 10% 5 0% 0 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data

99/122 Ryohin Keikaku / 7453

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Europe and the Americas (fiscal year ending January for Europe and December for the Americas)

Europe and the Americas FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Act. Est. Est. Change Operating revenue 3,493 3,874 4,430 5,328 4,029 3,938 4,172 5,462 4,393 4,552 5,524 6,754 17,124 17,603 21,225 21,600 27,400 +6,175 Sales (operating revenue from FY02/17) 3,471 3,838 4,402 5,308 UK 1,038 780 1,153 1,281 819 729 895 1,082 779 847 1,022 1,134 4,252 3,525 3,782 France 687 701 727 940 623 596 604 901 612 657 692 823 3,055 2,724 2,784 It aly 332 371 399 544 344 403 389 560 398 397 444 564 1,646 1,696 1,803 Germany 407 475 479 624 455 426 391 532 416 471 524 623 1,985 1,804 2,034 Spain - - - - 192 185 181 281 211 231 230 318 - 839 990 Portugal - - - - 41 44 49 56 57 66 70 77 - 190 270 US 889 1,051 1,191 1,520 1,273 1,261 1,358 1,552 1,518 1,468 1,784 2,152 4,651 5,444 6,922 Canada 116 164 163 278 198 226 240 1,145 329 353 692 905 721 1,809 2,279 Other (wholesale) 191 162 318 140 79 68 68 72 70 61 66 160 811 287 357 YoY 17.4% 22.4% 22.4% 4.4% 15.4% 1.7% -5.8% 2.5% 9.0% 15.6% 32.4% 23.7% 15.2% 2.8% 20.6% 22.7% 29.1% +8.5pp Sales 52.4% 56.8% 60.1% 36.1% - UK 12.9% -20.6% -5.8% -14.3% -21.1% -6.5% -22.4% -15.5% -4.9% 16.2% 14.2% 4.8% 9.1% -17.1% 7.3% France 6.0% 2.6% 3.0% -20.7% -9.3% -15.0% -16.9% -4.1% -1.8% 10.2% 14.6% -8.7% -3.2% -10.8% 2.2% It aly 0.0% 3.6% 13.0% -3.9% 3.6% 8.6% -2.5% 2.9% 15.7% -1.5% 14.1% 0.7% 2.0% 3.0% 6.3% Germany 7.7% 12.0% 2.8% -4.4% 11.8% -10.3% -18.4% -14.7% -8.6% 10.6% 34.0% 17.1% 3.3% -9.1% 12.7% Spain 9.9% 24.9% 27.1% 13.2% 18.0% Portugal 39.0% 50.0% 42.9% 37.5% 42.1% US 43.2% 20.0% 14.0% 2.1% 19.2% 16.4% 31.4% 38.7% 40.7% 17.1% 27.1% Canada 70.7% 37.8% 47.2% 311.9% 66.2% 56.2% 188.3% -21.0% 580.2% 150.9% 26.0% Sales (local currency) 11.9% 10.6% 15.3% 6.3% 23.0% 19.4% 10.4% 17.0% 15.1% 13.8% 16.0% 18.2% 12.1% 19.0% 18.2% - 25.6% +7.4pp UK 6.7% -0.7% 7.0% -3.0% 5.9% -1.5% 6.9% 7.8% 9.2% 19.4% 6.1% 6.1% 3.5% 5.2% 7.2% France 13.6% 4.6% 6.8% -12.8% -5.3% -2.4% -1.5% 5.0% 3.3% 4.0% -0.3% -0.3% 0.1% 0.9% -4.2% It aly 7.2% 5.8% 14.1% 3.3% 8.4% 23.4% 15.5% 12.7% 21.5% -6.5% -0.3% 9.5% 7.0% 14.9% -0.3% Germany 15.4% 14.5% 4.4% 3.1% 16.8% 2.8% -3.0% -6.5% -3.9% 4.3% 16.9% 5.2% 8.3% 1.4% 5.7% Spain 15.7% 17.7% 10.3% 2.0% 8.3% 1.4% 10.6% Portugal 43.7% 44.3% 25.3% 21.8% 8.3% 1.4% 33.0% US 18.2% 32.2% 15.1% 31.3% 47.5% 34.4% 34.6% 13.4% 21.2% 13.4% 22.1% 35.4% 22.8% 30.5% 23.4% Canada 94.8% 62.4% 73.9% 73.8% 62.1% 58.1% 162.3% 98.6% 74.7% 98.4% Sales (local currency; comparable st ores) 3.2% 4.7% 9.1% 2.6% 11.8% 5.8% -0.4% -0.2% 2.0% 7.4% 5.9% 2.8% 5.4% 3.7% 4.4% 5.6% 5.6% +1.2pp UK 1.7% 4.4% 5.2% -6.9% 5.3% -3.2% 6.2% 5.6% 9.7% 13.3% 9.4% 1.3% 1.2% 4.6% 8.4% France -4.2% -14.6% 2.8% -3.4% 10.7% 11.2% -3.8% 10.6% 6.2% 7.5% 10.7% -2.4% -4.0% 5.4% 5.0% It aly 5.5% 4.6% 10.6% 1.5% 14.9% 5.6% 3.0% -5.2% -1.7% -6.4% -0.1% -5.1% 5.7% 3.2% -1.9% Germany 5.2% 4.1% 0.5% -0.4% 16.0% 5.9% 15.1% 14.1% 12.2% 14.3% -1.5% -2.0% 2.1% 9.2% 4.5% Spain 11.5% 13.1% 11.6% 10.6% 11.6% Portugal 43.0% 43.4% 28.4% 77.5% 46.5% US 8.9% 20.3% 24.0% 16.1% 10.8% 6.6% -12.1% -11.1% -4.3% 6.8% 4.5% 6.8% 17.5% -3.2% 3.3% Canada 29.9% 13.0% 19.4% 4.5% -7.5% -4.2% 0.1% 2.4% 15.3% -1.9% Operating profit -188 -294 -97 165 -417 -347 -382 295 -330 -778 -139 350 -414 -851 -898 -1,100 -400 +498 OPM -5.4% -7.6% -2.2% 3.1% -10.3% -8.8% -9.2% 5.4% -7.5% -17.1% -2.5% 5.2% -2.4% -4.8% -4.2% -5.1% -1.5% +2.8pp Store count 73 70 70 72 70 69 70 69 71 70 71 72 72 69 72 74 71 -1 UK 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 - France 12 10 10 9 9 9 9 9 9 8 7 7 9 9 7 7 7 - It aly 9 9 9 9 9 9 9 9 9 9 8 8 9 9 8 8 8 - Germany 8 8 8 8 8 7 7 7 7 7 7 7 8 7 7 7 7 - Spain 6 6 6 6 6 6 6 6 6 6 6 6 - Portugal 1 1 1 1 1 1 1 1 1 1 1 2 +1 US 9 9 10 11 11 11 12 12 14 14 15 15 11 12 15 16 17 +2 Canada 1 1 1 2 2 2 2 3 3 3 5 6 2 3 6 7 9 +3 Licensees 22 21 20 21 12 12 12 10 10 10 10 10 21 10 10 10 3 -7 Source: Shared Research based on company data

FY02/18: Shift to profit for Europe business as a whole if head-office costs are excluded, on strength of store closures and ▷ refurbishments undertaken since FY02/16, revisions to local-currency based prices, and impact of opening new logistics center (also dissipation of disruption when this center first opened). Earnings in North America squeezed by delay in reopening of US flagship store after refurbishment (store closed in March 2017 and was not scheduled to open again until May 2018) Europe: Sales rose in each region on yen basis, with comparable store sales also increasing on a local currency basis except for ▷ Italy (-1.9% YoY) and Canada (-1.9%)

 Adjustments to local-currency prices: Prices raised in January 2017 with view to addressing deterioration in profitability caused by GBP weakness following Brexit

 New logistics facility: New logistics center opened in Rotterdam in May 2016 with goal of standardizing operations and reducing costs; initial disruption now easing, with drop in logistics costs becoming evident North America: Reopening of US flagship store now scheduled for May 2018 after construction delays, but earnings affected ▷ already by closure exceeding 12 months

 Canada: Comparable store sales decreased in 1H as several new stores opened in Toronto, but management was not concerned as end-result was expansion (doubling) of overall sales. Comparable store sales back on growth trajectory since Q3. Vancouver flagship store, opened in August 2017, is company’s largest in North America FY02/19: Aim is to turn Europe business profitable even with head-office costs included, followed by shift to profit for US ▷ business in FY02/20

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Earnings for Europe and the Americas

Operating revenue Operating profit OPM (right axis) 8,000 30% 6,754 7,000 25% 5,462 5,524 6,000 5,103 5,328 4,552 20% 5,000 4,430 4,172 4,393 4,143 3,874 4,029 3,938 3,618 3,493 15% 4,000 3,099 3,165 2,698 8.9% 2,975 3,000 2,366 7.8% 10% 5.4% 5.2% 2,000 3.1% 5% 0.3% 1,000 368 -1.4% 398 350 -2.0% -2.2% 8 -2.2% -2.5% 0% 0 -4.2% -3.8% -48 -60 -43 -188 -97 165 295 -7.5% -1,000 -126 -137 -294 -417 -347 -382 -139 -5% -5.4% -330 -778 -9.2% -2,000 -7.6% -8.8% -10% Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 (JPYmn) FY02/14 FY02/15 FY02/16 FY02/17 FY02/18

Comparable store sales growth (left) and all stores’ sales growth (right) in local currency terms

Europe & the Americas UK France Italy Germany Europe & the Americas UK France Italy Germany 25% 15% 20% 10% 15% 10% 5% 5% 0% 0%

-5% -5% -10% -10% -15% -15% -20% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/18 FY02/15 FY02/16 FY02/17 FY02/18

Europe & the Americas US Canada Europe & the Americas US Canada 30% 160% 25% 140% 20% 120% 15% 100% 10% 80% 5% 60% 0% 40% -5% 20% -10% 0% -15% -20% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/18 FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data

Remodeling of No. 1 and No. 2 flagship stores in Europe and the Americas

UK France Germany It aly Spain US Forum des Halles Tottenham Court Fifth Avenue No. 1 store Place Carree Munich Corso Buenos Aires Barcelona Road (new store) (new store) Renovated in Q3 FY02/16 Q3 FY02/15 Q3 FY02/16 Q1 FY02/17 Q4 FY02/16 Q4 FY02/16

No. 2 store Covent Garden Francs Bourgeois Berlin V ia T orino

Renovated in Q3 FY02/16 Q3 FY02/16 Q3 FY02/16 Q3 FY02/18 Source: Shared Research based on company data

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West and South Asia, and Oceania (fiscal year ending December)

West and South Asia, Oceania FY02/16 FY02/17 FY02/18 FY02/16 FY02/17 FY02/18 - FY02/19 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Act. Est. Est. Change Operating revenue 1,802 2,121 2,204 2,784 2,338 2,436 2,397 3,084 2,870 3,153 3,570 4,134 8,911 10,256 13,729 13,600 16,000 +2,271 Sales (operating revenue from FY02/17) 1,624 1,843 1,943 3,425 13,729 Singapore 773 885 899 1,059 915 898 925 1,144 1,007 1,108 1,355 1,629 3,616 3,882 5,099 Malaysia 227 182 214 273 260 256 247 298 301 378 421 469 896 1,061 1,569 T hailand 484 419 437 573 557 522 488 648 613 668 719 831 1,913 2,215 2,831 India - - 60 77 63 131 109 147 137 450 Aust ralia 138 358 392 414 386 416 406 532 522 530 606 647 1,302 1,740 2,305 Ot her w holesale - 454 261 467 218 345 270 385 361 340 359 413 1,182 1,218 1,473 YoY 60.4% 43.1% 34.9% 38.1% 29.8% 14.9% 8.8% 10.8% 22.8% 29.4% 48.9% 34.0% 42.5% 15.1% 33.9% 32.6% 16.5% -17.3pp Sales 62.5% 52.6% 38.6% 30.3% Singapore 47.8% 49.0% 20.8% 15.0% 18.4% 1.5% 2.9% 8.0% 10.1% 23.4% 46.5% 42.4% 30.7% 7.4% 31.3% Malaysia 127.0% 33.8% 45.6% 40.7% 14.5% 40.7% 15.4% 9.2% 15.8% 47.7% 70.4% 57.4% 51.4% 18.4% 47.9% T hailand 48.9% 26.6% 17.2% 26.5% 15.1% 24.6% 11.7% 13.1% 10.1% 28.0% 47.3% 28.2% 28.6% 15.8% 27.8% Aust ralia 181.6% 143.5% 186.1% 149.4% 179.7% 16.2% 3.6% 28.5% 35.2% 27.4% 49.3% 21.6% 160.9% 33.6% 32.5% Sales (local currency) 47.2% 33.7% 30.6% 41.5% 42.2% 30.8% 43.3% 20.2% 24.2% 25.9% 30.1% 30.1% 37.3% 28.4% 25.9% - 12.9% -13.0pp Singapore 37.2% 34.7% 13.8% 15.4% 26.4% 15.0% 19.1% 20.5% 12.8% 23.1% 36.7% 29.3% 23.2% 19.9% 27.3% Malaysia 114.4% 26.2% 55.6% 60.7% 37.2% 73.9% 38.4% 25.6% 24.2% 55.3% 66.5% 45.7% 55.1% 36.8% 48.7% T hailand 28.4% 9.4% 9.0% 27.4% 29.7% 48.4% 32.2% 24.5% 10.0% 20.9% 30.1% 17.1% 29.1% 32.0% 19.3% Aust ralia 176.8% 143.0% 204.0% 173.9% 214.5% 35.6% 20.0% 39.5% 30.7% 23.1% 32.8% 14.4% 160.7% 50.5% 24.5% Sales (local currency; comparable st ores) 15.7% 8.0% 8.0% 17.6% 18.9% 20.3% 14.1% 2.7% 0.7% 3.9% 6.3% 3.4% 12.7% 12.5% 4.7% 7.6% 4.2% -0.5pp Singapore 8.9% 10.8% 10.2% 22.0% 24.2% 13.7% 12.7% -4.8% -6.4% 2.0% -3.4% 1.2% 13.4% 9.9% -1.6% Malaysia 35.0% 2.7% 15.5% 16.9% 0.8% 26.5% 13.8% 18.5% 11.5% 13.3% 17.5% 5.4% 17.1% 11.8% 11.6% T hailand 25.1% 6.1% 2.7% 9.8% 12.6% 23.8% 15.7% 9.6% -0.8% - 10.0% 1.1% 11.5% 15.5% 3.5% Aust ralia -13.8% -2.2% 5.8% 17.5% 35.0% 46.2% 22.0% 32.2% 13.3% 8.9% 15.8% 9.7% 2.1% 31.7% 11.8% Operating profit -83 14 96 167 35 17 51 34 21 -187 94 200 195 137 128 200 200 +72 YoY - -70.6% - 7.2% - 18.1% -47.0% -79.7% -40.0% - 84.3% 488.2% 116.7% -29.7% -6.6% 2.6% 56.3% OPM -4.6% 0.7% 4.4% 6.0% 1.5% 0.7% 2.1% 1.1% 0.7% -5.9% 2.6% 4.8% 2.2% 1.3% 0.9% 1.5% 1.3% +0.3pp Store count (including licensees) 39 41 43 45 45 48 54 55 54 59 62 66 45 55 66 67 72 +6 Singapore 9 9 9 9 9 9 10 10 10 10 11 11 9 10 11 11 11 - Malaysia 4 4 5 5 5 5 5 5 6 7 7 7 5 5 7 7 7 - T hailand 11 11 12 13 13 13 13 14 14 15 15 16 13 14 16 17 17 +1 India ------2 2 2 3 3 4 - 2 4 4 6 +2 Aust ralia 2 3 3 3 3 3 3 3 3 3 3 3 3 3 3 4 5 +2 Indonesia 2 2 2 3 3 4 6 6 6 8 8 8 3 6 8 6 7 -1 Philippines 7 7 7 7 7 7 7 7 5 4 4 4 7 7 4 4 5 +1 Kuw ait 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 - UAE 3 3 3 3 3 4 4 4 4 4 5 5 3 4 5 6 6 +1 Source: Shared Research based on company data

FY02/18: Still posting operating profit even as new store openings continue, which management says is testament to earnings ▷ structure capable of generating steady flow of income Singapore: Operating losses continue but now reporting recurring profit (aided by opening of flagship store in July 2017), ▷ with aim of achieving operating profit in FY02/19

Earnings for West and South Asia, and Oceania

5,000 Operating revenue Operating profit OPM (right axis) 20% 4,134 16% 4,000 3,570 3,084 3,153 2,870 12% 3,000 2,784 2,436 2,397 7.7% 2,204 2,338 5.9% 2,141 2,016 2,121 8% 1,802 6.0% 1,634 4.4% 2,000 1,4823.3% 1,123 2.1% 4% 912 947 0.8% 0.7% 1.5% 4.8% 889 0.7% 1.1% 0.7% 1,000 2.6% 200 0% 54 49 156 14 96 167 35 17 51 34 21 94 0 -2.0% -32 -4% -39 -3.3%-31 17 -82 -83 -4.3% -4.6% -187 -1,000 -7.3% -5.9% -8% Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 (JPYmn) FY02/14 FY02/15 FY02/16 FY02/17 FY02/18

Comparable store sales trends (local currency basis)

West and South Asia, and Oceania Singapore West and South Asia, and Oceania Singapore Malaysia Thailand Malaysia Thailand 50% 120% Australia Australia 40% 100% 30% 80% 20% 60% 10% 40% 0%

-10% 20%

-20% 0% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/18 FY02/15 FY02/16 FY02/17 FY02/18 Source: Shared Research based on company data

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FY02/17 results (out April 12, 2017)

FY02/17: Maintains double-digit growth rate with 11% YoY rise in operating profit; operating profit at Domestic business up ▷ 28.7% (JPY4.9bn), offsets JPY1.3bn decline in operating profit overseas

 Success in strategy to bring customer count up at comparable stores in Domestic business, lower procurement costs due to favorable exchange rates improved GPM and strengthened business foundation

 Overseas: Results in East Asia in line with forecasts excluding influence of higher procurement costs due to a strong yen; European business expected to move into the black China: Comparable store sales finish year up 4.7% in local currency terms as a 7.6% jump in Q4 offset a sluggish 0.8% rise in Q3 ▷ (weak Q3 sales reflect 10% YoY decline in August on difficult comparisons with year earlier)

 Store openings: New openings in line with plan, bringing store count to 200; expects to reach 230 stores by end of FY02/18; aims for qualitative improvement of stores by reducing new store openings and increasing store renovations Dividend hike: Raises year-end dividend to JPY156 (versus forecast of JPY137), bringing annual dividend to JPY293; forecasts ▷ FY02/18 annual dividend of JPY324 FY02/18: Forecasting 10.5% increase in operating profit in FY02/18, with half of JPY4.0bn increase coming from Domestic ▷ business and half from Overseas (including JPY1.7bn from China) Medium-term plan: Targeting FY02/21 sales of JPY500bn, representing a JPY167.7bn increase over the next four years (JPY74.3bn ▷ from Domestic business, JPY92.4bn from Overseas); FY02/21 operating profit target of JPY60bn represents JPY21.7bn increase;

aiming for ROE of 15% or better, store count of 1,200 (an increase of 379 stores); These goals appear to be achievable if current cruising speed is maintained

 Strategy: Continuing and deepening initiatives of previous medium-term plan; further strengthening business foundations such as global supply chain management, product development, and training to prepare for future growth acceleration

 First half, latter half of the plan: Domestic and China businesses expected to be drivers in first two years of the plan; plans to accelerate large store openings in Japan and store openings in North America in latter two years

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Earnings results (JPYmn)

80,000 16% 13.0% 60,000 12.3% 12.4% 12% 11.8% 11.6% 11.2% 11.6% 11.1% 11.1% 10.6% 10.1% 10.4% 9.9% 10.0% 8.8% 8.8% 9.3% 9.3% 40,000 8.1% 8.1% 8.6% 8% 7.1% 6.6% 6.0%

20,000 11,423 4% 9,547 9,815 8,553 8,335 9,893 8,626 5,168 5,811 5,680 5,729 6,473 6,624 6,194 6,017 6,524 4,579 2,425 3,266 3,692 3,168 3,993 4,721 5,012 0 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 (JPYmn) FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 Operating revenue Operating profit OPM (right axis)

Left: Sales (JPYbn), Right: Operating profit (JPYbn)

250 25 22.0 215.7 FY02/14 FY02/15 FY02/16 FY02/17 FY02/14 FY02/15 FY02/16 FY02/17 198.4 20 200 182.7 16.9 17.1 17.3 171.9 16.5 14.7 15 150 10 8.4 100 83.0 89.7 5 3.4 56.4 50 0.3 0.1 0.0 0.1 0.2 0.1 31.3 0 12.3 14.9 17.1 17.6 4.9 6.3 8.9 10.3 -0.4 -0.9 0 -5 Japan East Asia Europe and the West and South Japan East Asia Europe and the West and South (JPYbn) Americas Asia, Oceania (JPYbn) Americas Asia, Oceania

Comparable store sales growth

Parent East Asia Europe and the Americas West and South Asia, Oceania 30% 26.5% 25%

20% 16.8% 14.5% 14.5% 12.9% 15% 10.1% 9.0% 10% 5.0% 5.9% 4.7% 4.2% 5% 7.8% 7.4% 0.8% 5.7% 5.9% 5.8% 7.3% 4.1% 0% 2.1% 2.1% 2.3% 1.3% 3.1% 0.0% 0.7% -0.7% -5% -1.6% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY02/14 FY02/15 FY02/16 FY02/17 Source: Shared Research based on company data

Earnings overview FY02/17: Maintains double-digit growth rate with 11% YoY rise in operating profit; operating profit at Domestic business up 28.7% (JPY4.9bn), offsets JPY1.3bn decline in operating profit overseas For FY02/17, Ryohin Keikaku reported an 8.4% YoY increase in operating revenue and an 11.1% increase in operating profit (+6.8 YoY for sales YoY and +0.9% YoY for profit in Q4). Operating profit finished up JPY3.8bn YoY as the JPY4.9bn increase in operating profit in the Domestic business offset the JPY1.3bn decline in operating profit in the Overseas business. The Domestic business’s higher personnel costs were offset by steady comparable store sales from an increase in customers and positive effects from new store openings, and improvement in operating GPM through lower CoGS including exchange rates, resulting in operating profit growing by 28.7%. The JPY1.3bn drop in Overseas earnings reflected a JPY807mn decline in operating profit in East Asia and a JPY438mn decline in operating profit in Europe and the Americas. If exchange rates were the same as in FY02/16, Overseas operating profit would have increased 12%. Therefore, exchange rate fluctuations can be calculated to have weighed down profits by roughly JPY3.3bn. Likewise, operating profit from East Asia would have increased approximately 13%, with forex fluctuations weighing down profits by approximately JPY3.0bn.

The operating GPM was up 0.8pp YoY. Domestic operating GPM was up 1.9pp, but East Asia operating GPM dropped roughly 1– 2pp. This is because lower procurement costs due to a strong yen contributed to the higher operating GPM in Japan whereas in

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East Asia higher procurement costs due to the strong yen contributed to the lower operating GPM. Non-operating profit was up compared with Q3 due to a fall in the yen toward end FY02/17, but there was an exchange loss of JPY764mn for FY02/17 since the yen was stronger YoY. Ryohin Keikaku has approximately JPY18bn–20bn in foreign assets, meaning that a 10% depreciation in yen would generate gains of roughly JPY2bn.

YoY changes in operating profit by segment (JPYmn) Japan East Asia Europe and the Americas West and South Asia, and Oceania Operating profit 4,000

3,000 2,354 2,000 2,454 2,649 632 2,343 802 1,000 1,370 1,880 656 1,441 1,367 1,126 800 842 342 574 430 398 400 0 -190 -772 -765 -1,531 -1,478 -1,000

-2,000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY02/15 FY02/16 FY02/17 OPM changes in the Domestic business and the yen-dollar forex rate (left); OPM and the yen-dollar forex rate in the East Asia operations (right)

(pp) Operating GPM: Japan Exchange rate YoY (JPY/USD; right axis) (JPY/USD) Exchange rate (JPY/USD) East Asia OPM (right axis) 4 2H FY02/15-1H FY02/16: Weaker yen -20% 130 25% pushes up overseas procurement costs 2 -10% 120 20%

0 0% 110 15%

-2 10% 100 10%

1H FY02/17: -4 Apr. 2014: Rapid yen appreciation 20% 90 5% Tax-inclusive prices maintained drives a quick recovery Sale periods (Q1 and Q3) when consumption tax raised to 8% -6 30% 80 0% Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/14 FY02/15 FY02/16 FY02/17 Source: Shared Research based on company data OPM in East Asia OPM fell 2.4pp to 18.3% in East Asia. In Q3, OPM was as low as 11.6% (-7.7pp YoY, of which about 5pp is attributable to lower operating GPM) due to temporary price reduction and the strong yen, but it recovered to 18.3% (-4.8pp YoY) in Q4. Shared Research considers that exchange fluctuations caused a full-year decline of about 0.5pp (estimation based on 24.7% sales growth and 13% operating profit growth on a local currency basis). For FY02/18, the company also expects OPM to decline 1.0pp to 17.3%. This is because it expects lower operating GPM due to a strong yen (3.5% YoY fall in the yuan) and higher costs including renovation and personnel costs.

The company decided to cut prices in Q3 for two reasons: It had posted a high operating GPM in FY02/16 during the seasonal bargain sales events in Q3 (July– September) due to a low ratio of bargain prices; and, due to the popularity of price changes in August 2015, comparable store sales dropped about 10% YoY, and the company focused on offsetting the difference by lowering prices, but the range of price cuts went beyond expectations. However, the company commented that the price cuts were temporary, only a response to lower sales rather than an increase in competition.

In Q4, operating GPM and OPM increased QoQ thanks to there being no seasonal bargain sales events in Q4 (products are sold at list price), similar levels of comparable store sales in each month between October and December that rose 4.2% (+7.6% in China), and a lack of competitors in household goods distancing Ryohin Keikaku from excessive price competition, helping it sustain sales operations at stable pricing.

Inventory Consolidated inventories increased 27.7% (+JPY15.7bn) YoY. Although this is larger than the sales increase (+8.3%) and days in inventory look worse, the company stated its inventory status is healthy. The increase in inventories largely reflects the company’s strategy to expand its lineup mainly of staple goods, to prevent opportunity loss while also boosting customer count. In contrast, the company keeps a small inventory of seasonal products, and therefore believes its inventory has low chance of damaging operating GPM due to greater discount losses. However, the company is aware that increasing inventory of household goods, which occupy a large area, poses the problem of increased storage fees in SG&A expenses.

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By region, domestic inventories increased JPY8.4bn (apparel: +JPY3.1bn; lifestyle goods: +JPY5.4bn) and inventories in China increased JPY3.1bn. The increase in apparel inventory is attributable mainly to larger transportation inventory (JPY2.3bn) due to a higher proportion of deliveries within producing areas than deliveries within Japan; and earlier inventory preparation for spring clothing (about JPY500mn). This is largely because the company accumulated apparel inventory to prevent a stockout since some apparel and accessories ran out of stock in 1H FY02/16, which led to opportunity loss. The company therefore sees its inventories as healthy. Likewise, the increase in the inventory of lifestyle goods is largely for prevention of opportunity loss.

Inventory trends

Parent Diff. (cons.-par.) (JPYbn) Inventory (domestic directly managed stores; JPY'000/sqm) Inventory YoY (domestic directly managed stores; left axis) (Days) 70% YoY (par., left axis) YoY (cons., left axis) 73 80 Days in inventory (cons.) 148 145 66 Days in inventory (par.) 60% 70 132 134 134 61 18% 129 128 140 58 57 126 50% 56 60 120 119 51 52 53 53 116 12% 120 40% 43 50 104 104 41 100 99 36 37 94 94 30% 40 6% 90 88 100 30 29 84 28 27 82 25 77 78 77 20% 23 30 75 73 74 0% 69 69 70 80 67 66 68 68 66 67 67 62 63 10% 20 58 -6% 60 0% 10 -10% 0 -12% 40 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 Source: Shared Research based on company data SG&A expenses SG&A expenses were up 10.0% YoY, more than the increase in sales (8.3%), causing the SG&A-to-sales ratio to increase 0.6pp to 38.4%. Compared with forecasts, SG&A expenses exceeded targets mainly in the Domestic business. By category, the increase was most prominent in personnel expenses and logistics costs. The impact from revising hourly wages, effective September 2015, have subsided in terms of personnel costs; on the other hand, new store openings across Japan and the rest of the world appear to be the major drivers of increased SG&A expenses. The increase in logistics costs can largely be attributed to a one-time increase in warehouse costs associated with the relocation of a facility in Europe (the facility was relocated in June and additional expenses were incurred from a container backlog), an increase in warehouse expenses due to a strategic addition of staple goods inventory, a (one-time) increase in shipping fees to deliver the initial inventory of goods to be handled by approximately 6,300 Circle K and Sunkus convenience stores starting in October 2016, and higher personnel costs. However, growth in labor costs is gradually slowing down on a quarterly basis.

SG&A expenses

Advertising Logistics Advertising Logistics Personnel Rents, dep. & amotization Others Personnel Rents, dep. & amotization 40 41% 16% Personnel Others SG&A-to-sales ratio 14.2% 13.9% 13.7% 34.1 13.2% 13.2% 13.6% 35 31.5 31.6 32.2 40% 14% 12.5% 12.7% 12.5% 29.4 29.8 12.0% 12.0% 11.9% 27.8 6.7 11.3% 11.4% 11.2% 30 27.2 27.4 12% 10.8%13.0% 13.1% 13.0% 13.3% 11.9% 5.9 6.0 6.5 39% 12.6% 12.9% 12.5% 12.9% 12.5% 24.2 24.7 12.3% 6.0 5.7 11.5% 11.7% 11.9% 11.8% 25 21.9 22.8 5.1 5.5 5.2 10% 11.4% Rents & dep. 20.2 19.7 19.0 5.0 4.5 10.8 38% 7.5% 7.7% 7.6% 7.7% 7.6% 7.8% 4.4 10.1 10.3 10.1 7.2% 7.3% 7.4% 7.3% 7.1% 7.4% 7.3% 20 4.3 9.6 8% 6.8% 6.8% 6.8% 4.0 9.7 3.9 3.6 9.0 9.2 9.3 37% Others 7.6 8.6 15 7.3 7.4 6% 4.4% 4.5% 6.8 3.9% 4.1% 3.9% 4.0% 4.2% 4.1% 4.1% 4.0% 4.0% 6.3 6.4 36% 3.6% 3.9% 3.9% 3.5% 3.6% 11.0 10.4 10.7 11.8 10 8.9 8.7 9.5 10.5 4% 7.6 8.0 9.2 Logistics 6.0 7.3 7.9 5 6.5 6.6 35% 2% 2.4 3.0 2.6 2.8 3.3 2.7 2.8 2.9 3.6 3.0 3.4 3.4 2.1% 1.9 2.1 2.3 2.3 2.0% 1.7% 1.9% 1.7% 1.6% 0 34% 0% 1.3% 1.4% 1.2% 1.5% 1.4% 1.5% 1.5% 1.4% 1.5% 1.3% (JPYbn)Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Advertising FY02/14 FY02/15 FY02/16 FY02/17 FY02/14 FY02/15 FY02/16 FY02/17 Source: Shared Research based on company data

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Domestic business

Domestic business performance

70,000 Operating revenue Operating profit OPM (right axis) 13.2% 14% 59,186 60,000 12.1% 58,741 12% 51,162 52,872 52,988 51,220 11.1% 48,007 48,314 50,000 43,290 12.1% 46,568 45,044 45,678 43,880 44,275 10% 39,653 37,912 10.4% 10.9% 11.1% 40,000 9.9% 8.2% 8% 30,000 7.3% 8.1% 6.5% 6.8% 6% 20,000 6.4% 5.0% 4.6% 7,135 7,751 4% 10,000 4,995 5,517 5,337 4,745 5,768 5,871 2,782 3,565 2,593 2,033 2,990 2,433 3,790 3,275 0 2% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 (JPYmn) FY02/14 FY02/15 FY02/16 FY02/17

Sales at directly operated comparable stores in Japan

Comparable stores Number of customers Customer spend Apparel Household goods Food 12% Stacking shelves sold out due to global popularity Narrow inventories: Publicity effects (SR est.) 25% Backlash from previous year's boom in body-fit innerwear 10% cushion: production capacity increased in July 2015 20% 8% 6% 15% 4% 10% 2% 5% 0% 0% -2% -5% -4% -6% -10% Advance demand Opportunity loss -8% -15% (e.g. men's polo shirts) (e.g. men's polo shirts) Jun Sep Dec Mar Jun Sep Dec Jun Sep Dec Mar Jun Sep Dec 2015 2015 2015 2016 2016 2016 2016 2015 2015 2015 2016 2016 2016 2016 Source: Shared Research based on company data

Results: Sales up 8.7%, as comparable store sales up 2.1% with additional sales by newly opened stores; operating GPM also ▷ increased 1.9pp, helping OPM to rise 28.7% Comparable store sales: Largest full-year customer count since FY02/14, owing to successful efforts to increase customer count, ▷ such as increased publicity, strategic inventory measures, and store remodeling. Operating GPM: Up 1.9pp YoY; in addition to measures to cut CoGS, reduction in procurement costs due to impact of exchange ▷ rate (yen appreciation) contributed FY02/18: Targeting +4% higher sales at comparable stores; room for growth in apparel sales, which were sluggish in FY02/17; ▷ aiming to grow customer count by continuing store remodeling and reviewing prices

 OPM rose 0.1pp; nearly flat operating GPM; growth in personnel costs slowed, and the company plans to hold down SG&A expenses including logistics costs, and offset these costs with higher sales

Comparable stores After rising 7.3% YoY in Q1 then declining 1.6% YoY in Q2, comparable store sales got back on the growth track with a 3.1% YoY increase in Q3. In Q4, sales fell again by 0.7%. Sales fluctuated on a quarterly basis, but full-year comparable store sales were up 2.1%, maintaining sales growth for five years running. In FY02/17, the company advanced various measures focused on gaining more customers, which resulted in a 0.3% increase in customers, up for the first time since FY02/14. The company attributed the increase in customer count to a number of factors, including increased publicity, an expanded lineup of stationery and other staple goods, and remodeling. Average customer spend increased for seven years running, continuing to contribute to comparable store sales growth.

Apparel In 2H, the company seems to have succeeded in solving the issues it faced in 1H FY02/17 (including reducing inventory of innerwear and setting prices of socks and other products) through measures to revise production plans to allow extra inventory space and price cuts (while it expects additional orders to be effective in the second half of the fall/winter campaign). However, it

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struggled in the womenswear category, owing to measures to get inventory to appropriate levels in an aim to increase profits, which instead created discrepancies in items, sizes, and colors, resulting in lower sales than expected.

Household goods Sales of health and beauty products went up 24.7%, with the largest sales composition ratio, surpassing furniture in three consecutive quarters (Q2, Q3, and Q4).

Food Sustained solid results owing to an expanded lineup of well-performing products (launched sales of matcha strawberry in the irregularly sized chocolate lineup in September 2016).

Overall, increased publicity, an expanded lineup of staple goods, and remodeling bolstered results. The remodeling includes not only completely changing store settings, but also smaller touch-ups like the addition and replacement of fixtures. Note, however, that accumulating inventory of staple goods, mainly of lifestyle goods, brought about increases in inventories and storage fees. Shared Research also intends to watch whether the company can solve issues with apparel seen in 1H FY02/17 in 1H FY02/18.

Parent sales by product

Directly managed store performance FY02/15 FY02/16 FY02/17 FY02/15 FY02/16 FY02/17 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Act. Sales 53,768 45,515 53,595 49,445 57,728 52,451 59,860 56,572 65,563 56,141 66,927 60,882 202,325 226,611 249,515 Apparel 18,112 16,996 21,131 18,359 20,700 20,651 21,945 19,888 22,771 20,799 23,142 21,599 74,598 83,184 88,313 YoY 17.6% 26.8% 24.1% 23.8% 14.3% 21.5% 3.9% 8.3% 10.0% 0.7% 5.5% 8.6% 23.0% 11.5% 6.2% Comparable store sales growth 7.5% 4.6% 3.2% 4.4% 6.2% 5.5% -1.0% -2.3% 1.9% -5.6% -0.9% -2.5% 5.0% 2.1% -1.6% Gross margin 45.5% 37.0% 40.8% 36.8% 45.3% 35.0% 42.3% 36.0% 44.6% 34.1% 43.8% 34.2% 40.1% 39.7% 39.3% Menswear 2,584 2,900 3,240 3,038 2,695 3,043 3,303 3,335 3,082 3,011 3,569 3,780 11,782 12,395 13,442 Womenswear 6,686 5,590 8,632 6,720 8,305 7,536 8,645 7,163 9,132 7,870 8,353 7,882 27,677 31,695 33,238 Children's wear 2,069 1,473 2,399 1,749 2,248 1,753 2,532 1,893 2,381 1,722 2,516 1,988 7,566 8,291 8,608 Accessories 2,593 2,501 2,727 2,642 2,807 2,670 2,547 2,697 2,756 3,048 3,376 2,692 10,481 10,737 11,873 Bags and shoes 1,477 1,639 1,795 1,640 2,010 2,255 2,114 2,020 2,341 1,944 1,842 2,035 6,570 8,446 8,163 Inner wear 2,701 2,892 2,340 2,566 2,632 3,391 2,800 2,777 3,077 3,203 3,483 3,222 10,518 11,617 12,986 Household Goods 30,600 23,965 27,841 25,898 32,067 27,231 32,904 31,258 37,225 30,293 37,643 33,191 108,304 123,460 138,353 YoY 20.6% 14.1% 10.5% 6.7% 4.8% 13.6% 18.2% 20.7% 16.1% 11.2% 14.4% 6.2% 13.0% 14.0% 12.1% Comparable store sales growth 9.2% 1.8% 0.1% 0.4% 0.8% 7.8% 14.8% 9.6% 11.2% 1.0% 4.8% 0.4% 3.1% 8.1% 4.2% Gross margin 37.8% 35.9% 37.4% 36.6% 36.1% 35.5% 36.8% 35.0% 36.4% 33.9% 37.4% 38.2% 37.0% 35.9% 36.6% Linens and interior goods 5,620 4,807 5,745 5,020 5,427 4,634 6,131 5,412 5,693 4,821 6,230 5,317 21,169 21,583 22,063 Furniture 10,242 6,589 7,749 6,975 10,788 8,155 10,037 8,750 12,532 8,400 10,466 8,935 31,522 37,691 40,335 Electronic appliances 1,651 1,159 1,457 1,253 1,571 1,221 1,534 1,652 1,661 1,172 1,527 1,494 5,515 5,973 5,855 Housewares 3,081 2,559 2,675 2,664 3,201 2,550 3,047 3,023 3,798 3,200 3,828 3,509 10,967 11,810 14,336 Stationery 3,861 3,401 3,489 3,542 3,788 3,667 4,071 4,322 4,433 4,096 4,746 4,611 14,398 15,965 17,888 Health and beauty 6,015 5,382 6,654 6,379 7,153 6,916 8,003 8,025 8,955 8,514 10,762 9,254 24,401 30,067 37,487 Houseplants and flowers 127 68 72 61 137 83 78 69 149 86 81 68 329 369 386 Food 4,365 3,792 3,925 4,538 4,167 3,673 4,152 4,634 4,699 4,083 5,291 5,303 16,620 16,626 19,377 YoY 7.7% -1.4% -12.6% -8.1% -4.5% -3.1% 5.8% 2.1% 12.8% 11.2% 27.4% 14.4% -4.1% 0.0% 16.5% Comparable store sales growth 3.7% -6.1% -15.1% -10.1% -5.6% -5.4% 2.3% -2.1% 6.9% 1.2% 11.9% -1.0% -7.3% -2.7% 4.8% Gross margin 34.5% 34.7% 34.5% 36.4% 36.1% 35.8% 34.3% 35.2% 34.2% 33.0% 32.1% 33.3% 35.1% 35.3% 33.1% Processed food 1,162 1,187 1,181 1,055 1,195 1,114 1,261 1,124 1,518 1,292 1,680 1,375 4,586 4,696 5,867 Confectionery 2,563 2,058 2,140 2,877 2,324 1,969 2,249 2,869 2,478 2,146 2,922 3,314 9,639 9,412 10,862 Beverages and frozen food 638 548 604 604 647 589 640 639 702 644 688 612 2,394 2,517 2,648 Others 690 763 698 651 792 896 860 792 867 964 849 788 2,802 3,340 3,470 YoY 3.9% 8.5% 12.0% 11.7% 14.8% 17.4% 23.2% 21.7% 9.5% 7.6% -1.3% -0.5% 8.9% 19.2% 3.9% Gross margin 64.2% 65.5% 60.6% 58.1% 68.3% 68.0% 66.5% 65.5% 66.9% 67.6% 65.8% 64.5% 62.2% 67.1% 66.3%

Sales composition by product FY02/15 FY02/16 FY02/17 FY02/15 FY02/16 FY02/17 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Act. Apparel 33.7% 37.3% 39.4% 37.1% 35.9% 39.4% 36.7% 35.2% 34.7% 37.0% 34.6% 35.5% 36.9% 36.7% 35.4% Menswear 4.8% 6.4% 6.0% 6.1% 4.7% 5.8% 5.5% 5.9% 4.7% 5.4% 5.3% 6.2% 5.8% 5.5% 5.4% Womenswear 12.4% 12.3% 16.1% 13.6% 14.4% 14.4% 14.4% 12.7% 13.9% 14.0% 12.5% 12.9% 13.7% 14.0% 13.3% Children's wear 3.8% 3.2% 4.5% 3.5% 3.9% 3.3% 4.2% 3.3% 3.6% 3.1% 3.8% 3.3% 3.7% 3.7% 3.4% Accessories 4.8% 5.5% 5.1% 5.3% 4.9% 5.1% 4.3% 4.8% 4.2% 5.4% 5.0% 4.4% 5.2% 4.7% 4.8% Bags and shoes 2.7% 3.6% 3.3% 3.3% 3.5% 4.3% 3.5% 3.6% 3.6% 3.5% 2.8% 3.3% 3.2% 3.7% 3.3% Inner wear 5.0% 6.4% 4.4% 5.2% 4.6% 6.5% 4.7% 4.9% 4.7% 5.7% 5.2% 5.3% 5.2% 5.1% 5.2% Household Goods 56.9% 52.7% 51.9% 52.4% 55.5% 51.9% 55.0% 55.3% 56.8% 54.0% 56.2% 54.5% 53.5% 54.5% 55.4% Linens and interior goods 10.5% 10.6% 10.7% 10.2% 9.4% 8.8% 10.2% 9.6% 8.7% 8.6% 9.3% 8.7% 10.5% 9.5% 8.8% Furniture 19.0% 14.5% 14.5% 14.1% 18.7% 15.5% 16.8% 15.5% 19.1% 15.0% 15.6% 14.7% 15.6% 16.6% 16.2% Electronic appliances 3.1% 2.5% 2.7% 2.5% 2.7% 2.3% 2.6% 2.9% 2.5% 2.1% 2.3% 2.5% 2.7% 2.6% 2.3% Housewares 5.7% 5.6% 5.0% 5.4% 5.5% 4.9% 5.1% 5.3% 5.8% 5.7% 5.7% 5.8% 5.4% 5.2% 5.7% Stationery 7.2% 7.5% 6.5% 7.2% 6.6% 7.0% 6.8% 7.6% 6.8% 7.3% 7.1% 7.6% 7.1% 7.0% 7.2% Health and beauty 11.2% 11.8% 12.4% 12.9% 12.4% 13.2% 13.4% 14.2% 13.7% 15.2% 16.1% 15.2% 12.1% 13.3% 15.0% Houseplants and flowers 0.2% 0.1% 0.1% 0.1% 0.2% 0.2% 0.1% 0.1% 0.2% 0.2% 0.1% 0.1% 0.2% 0.2% 0.2% Food 8.1% 8.3% 7.3% 9.2% 7.2% 7.0% 6.9% 8.2% 7.2% 7.3% 7.9% 8.7% 8.2% 7.3% 7.8% Processed food 2.2% 2.6% 2.2% 2.1% 2.1% 2.1% 2.1% 2.0% 2.3% 2.3% 2.5% 2.3% 2.3% 2.1% 2.4% Confectionery 4.8% 4.5% 4.0% 5.8% 4.0% 3.8% 3.8% 5.1% 3.8% 3.8% 4.4% 5.4% 4.8% 4.2% 4.4% Beverages and frozen food 1.2% 1.2% 1.1% 1.2% 1.1% 1.1% 1.1% 1.1% 1.1% 1.1% 1.0% 1.0% 1.2% 1.1% 1.1% Others 1.3% 1.7% 1.3% 1.3% 1.4% 1.7% 1.4% 1.4% 1.3% 1.7% 1.3% 1.3% 1.4% 1.5% 1.4% Source: Shared Research based on company data Operating GPM As stated above, operating GPM was up more than 1.9pp YoY. The company continued to reduce raw material costs, and it benefited from yen appreciation.

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Domestic operating GPM (pp) Operating GPM: Japan Operating GPM: parent (pp) Operating GPM: Japan Exchange rate YoY (JPY/USD; right axis) 4 4 2H FY02/15-1H FY02/16: -20% Weaker yen pushes up overseas procurement costs 2 2 -10% 0 0 0%

-2 -2 10%

-4 -4 1H FY02/17: 20% Apr. 2014: Rapid yen appreciation Tax-inclusive prices maintained when drives a quick recovery -6 -6 consumption tax raised to 8% 30% Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/15 FY02/16 FY02/17 Source: Shared Research based on company data Overseas business

Overseas business FY02/15 FY02/16 FY02/17 FY02/15 FY02/16 FY02/17 FY02/18 FY02/17 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Act. Est. Init. Est. Operating revenue 15,541 17,227 18,908 25,870 24,598 25,702 26,348 32,431 28,346 27,615 26,568 35,033 77,547 109,080 117,563 140,700 119,100 East Asia 11,443 12,580 13,657 18,751 19,304 19,708 19,714 24,319 21,978 21,240 19,998 26,486 56,430 83,045 89,704 105,500 90,300 Europe and the Americas 2,975 3,165 3,618 5,103 3,493 3,874 4,430 5,328 4,029 3,938 4,172 5,462 14,861 17,124 17,603 21,600 19,100 West and South Asia, and Oceania 1,123 1,482 1,634 2,016 1,802 2,121 2,204 2,784 2,338 2,436 2,397 3,084 6,255 8,911 10,256 13,600 9,700 YoY 55.8% 55.7% 51.9% 72.6% 58.3% 49.2% 39.3% 25.4% 15.2% 7.4% 0.8% 8.0% 60.0% 40.7% 7.8% 19.7% 9.2% East Asia 70.3% 68.8% 62.6% 115.3% 68.7% 56.7% 44.4% 29.7% 13.9% 7.8% 1.4% 8.9% 80.4% 47.2% 8.0% 17.6% 8.7% Europe and the Americas 25.8% 17.3% 16.7% 23.2% 17.4% 22.4% 22.4% 4.4% 15.4% 1.7% -5.8% 2.5% 20.8% 15.2% 2.8% 22.7% 11.5% West and South Asia, and Oceania 26.3% 62.5% 72.4% -5.8% 60.4% 43.1% 34.9% 38.1% 29.8% 14.9% 8.8% 10.8% 27.9% 42.5% 15.1% 32.6% 8.9% YoY (local curency; sales up to FY02/16) 62.5% 62.5% 61.7% 42.7% 41.8% 29.5% 24.8% 17.7% 24.1% 22.4% 19.6% 23.4% 30.8% 28.9% 24.1% 20.0% 17.6% East Asia 80.9% 79.6% 77.8% 63.1% 48.9% 33.5% 26.5% 18.2% 22.6% 22.1% 17.8% 25.3% 62.9% 32.1% 24.7% 17.7% 18.6% Europe and the Americas 26.0% 17.4% 17.4% -10.2% 11.9% 10.6% 15.3% 6.3% 23.0% 19.4% 10.4% 17.0% 11.0% 12.1% 19.0% 23.0% 19.6% West and South Asia, and Oceania 26.6% 63.3% 73.8% 42.9% 47.2% 33.7% 30.6% 41.5% 42.2% 30.8% 43.3% 20.2% 46.6% 37.3% 28.4% 35.2% 4.6% YoY (local currency; comparable store sales) -0.1% 6.7% 10.1% 9.6% 21.7% 11.2% 9.7% 5.3% 7.0% 7.0% 1.4% 3.5% 6.6% 11.7% 4.6% 4.3% 5.4% East Asia 14.5% 9.0% 16.8% 14.5% 26.5% 12.9% 10.1% 4.7% 5.0% 5.9% 0.8% 4.2% 10.1% 13.1% 4.1% 3.6% 5.4% Europe and the Americas -0.4% 0.2% -0.8% -2.2% 3.2% 4.7% 9.1% 2.6% 11.8% 5.8% -0.4% -0.2% -2.0% 5.4% 3.7% 5.6% 5.0% West and South Asia, and Oceania 5.2% 10.5% -0.8% 7.0% 15.7% 8.0% 8.0% 17.6% 18.9% 20.3% 14.1% 2.7% 5.5% 12.7% 12.5% 7.6% 6.8% Operating profit 1,209 2,607 1,274 3,528 3,600 3,692 3,796 5,955 4,121 4,442 1,987 5,188 8,618 17,042 15,740 17,700 17,100 East Asia 1,417 2,601 1,443 2,974 3,871 3,971 3,796 5,623 4,503 4,773 2,318 4,858 8,434 17,261 16,454 18,200 17,500 Europe and the Americas -126 -43 -137 398 -188 -294 -97 165 -417 -347 -382 295 93 -414 -852 -800 -600 West and South Asia, and Oceania -82 49 -32 156 -83 14 96 167 35 17 51 34 91 195 138 300 200 YoY 79.4% 125.8% 50.7% 247.6% 197.7% 41.6% 198.0% 68.8% 14.5% 20.3% -47.7% -12.9% 133.6% 97.8% -7.6% 12.5% 0.3% East Asia 86.3% 124.2% 66.1% 371.9% 173.1% 52.7% 163.2% 89.1% 16.3% 20.2% -38.9% -13.6% 146.6% 104.6% -4.7% 10.6% 1.4% Europe and the Americas - - - 8.3% - - - -58.6% - - - 79.1% -65.4% - - - - West and South Asia, and Oceania - -9.5% - 802.2% - -70.6% - 7.2% - 18.1% -47.0% -79.7% 5,797.0% 114.6% -29.2% 117.4% 2.6% OPM 7.8% 15.1% 6.7% 13.6% 14.6% 14.4% 14.4% 18.4% 14.5% 16.1% 7.5% 14.8% 11.1% 15.6% 13.4% 12.6% 14.4% East Asia 12.4% 20.7% 10.6% 15.9% 20.1% 20.2% 19.3% 23.1% 20.5% 22.5% 11.6% 18.3% 14.9% 20.8% 18.3% 17.3% 19.4% Europe and the Americas -4.2% -1.4% -3.8% 7.8% -5.4% -7.6% -2.2% 3.1% -10.3% -8.8% -9.2% 5.4% 0.6% -2.4% -4.8% -3.7% -3.1% West and South Asia, and Oceania -7.3% 3.3% -2.0% 7.7% -4.6% 0.7% 4.4% 6.0% 1.5% 0.7% 2.1% 1.1% 1.5% 2.2% 1.3% 2.2% 2.1% Store count (including licensees) 257 269 283 302 302 308 320 344 347 362 384 403 301 344 403 460 403 East Asia 154 162 171 189 190 197 207 227 232 245 260 279 189 227 279 316 277 Europe and the Americas 68 69 72 74 73 70 70 72 70 69 70 69 73 72 69 77 72 West and South Asia, and Oceania 35 38 40 39 39 41 43 45 45 48 54 55 39 45 55 67 54

Profit at Overseas businesses (JPYmn)

(JPYbn) Consolidated operating profit (JPYbn) East Asia Europe and the Americas West and South Asia, Oceania 14 Overseas operating profit 70% 6 Overseas OP % of cons. OP (right axis) 12 60% 5

10 50% 4

8 40% 3

6 30% 2

4 20% 1

2 10% 0

0 0% -1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/14 FY02/15 FY02/16 FY02/17 FY02/14 FY02/15 FY02/16 FY02/17 Source: Shared Research based on company data

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East Asia (fiscal year ending December)

East Asia FY02/15 FY02/16 FY02/17 FY02/15 FY02/16 FY02/17 FY02/18 FY02/17 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Act. Est. Init. Est. Operating revenue 11,443 12,580 13,657 18,751 19,304 19,708 19,714 24,319 21,978 21,240 19,998 26,486 56,430 83,045 89,704 105,500 90,300 Sales (operating revenue from FY02/17) 11,452 12,569 13,646 19,224 19,303 19,784 19,726 24,362 90,400 China 5,806 6,662 7,637 10,496 11,258 11,748 12,059 14,802 13,384 13,048 12,227 16,293 30,121 49,736 54,952 - Hong Kong 2,557 2,314 2,543 3,447 3,573 3,269 3,383 3,718 3,680 3,164 3,217 3,824 10,879 13,943 13,885 - Taiwan 2,183 2,434 2,253 3,731 3,123 3,327 2,882 4,003 3,390 3,224 2,753 4,123 10,601 13,335 13,490 - South Korea 906 1,159 1,213 1,550 1,348 1,439 1,402 1,839 1,522 1,805 1,801 2,247 4,828 6,028 7,375 - YoY 70.3% 68.8% 62.6% 115.3% 68.7% 56.7% 44.4% 29.7% 13.9% 7.8% 1.4% 8.9% 80.4% 47.2% 8.0% 17.6% 8.7% Sales 80.9% 79.6% 77.8% 92.5% 68.6% 57.4% 44.6% 26.7% China 57.6% 56.3% 60.5% 70.4% 93.9% 76.3% 57.9% 41.0% 18.9% 11.1% 1.4% 10.1% 59.7% 65.1% 10.5% Hong Kong 26.0% 15.8% 21.3% 24.6% 39.7% 41.3% 33.0% 7.9% 3.0% -3.2% -4.9% 2.9% 22.3% 28.2% -0.4% Taiwan 43.1% 36.7% 27.9% 7.3% 8.5% -3.1% -4.5% 3.0% 25.8% 1.2% South Korea 46.8% 57.3% 48.3% 46.0% 48.8% 24.2% 15.6% 18.6% 12.9% 25.4% 28.5% 22.2% 49.3% 24.9% 22.3% Sales (local currency) 80.9% 79.6% 77.8% 63.1% 48.9% 33.5% 26.5% 18.2% 22.6% 22.1% 17.8% 25.3% 62.9% 32.1% 24.7% 17.7% 18.6% China 57.6% 56.3% 60.5% 53.2% 71.8% 48.2% 37.7% 31.8% 28.8% 26.5% 18.8% 32.2% 47.7% 47.6% 29.8% Hong Kong 26.0% 15.7% 21.2% 10.4% 20.6% 18.7% 13.0% -5.8% 6.5% 4.2% 5.9% 14.1% 12.7% 12.2% 10.7% Taiwan 28.3% 17.7% 15.6% 4.2% 17.6% 13.9% 13.4% 12.8% 14.9% 14.3% South Korea 46.7% 57.3% 48.2% 30.4% 32.1% 11.3% 11.8% 16.7% 27.3% 48.8% 46.4% 37.3% 32.6% 17.2% 39.9% Sales (local currency; comparable stores) 14.5% 9.0% 16.8% 14.5% 26.5% 12.9% 10.1% 4.7% 5.0% 5.9% 0.8% 4.2% 10.1% 13.1% 4.1% 3.6% 5.4% China 2.0% 12.6% 20.9% 20.6% 38.6% 22.6% 15.9% 9.7% 4.7% 5.4% 0.8% 7.6% 14.5% 20.4% 4.7% Hong Kong -5.5% -2.4% 7.1% 4.5% 16.0% 8.9% 9.8% 0.5% 1.6% 3.4% -2.9% -0.8% 0.8% 8.1% 0.7% Taiwan -4.6% 12.3% 7.0% 9.3% 11.0% -3.6% -2.1% -8.9% 5.6% 4.6% 0.7% -2.1% -2.3% 2.1% South Korea 4.6% 16.7% 20.4% 8.4% 8.2% -7.4% -0.5% 10.0% 18.0% 20.9% 10.2% 0.1% 12.4% 0.9% 11.4% Operating profit 1,417 2,601 1,443 2,974 3,871 3,971 3,796 5,623 4,503 4,773 2,318 4,858 8,434 17,261 16,452 18,200 17,500 YoY 86.3% 124.2% 66.1% 371.9% 173.1% 52.7% 163.2% 89.1% 16.3% 20.2% -38.9% -13.6% 146.7% 104.7% -4.7% 10.6% 1.4% OPM 12.4% 20.7% 10.6% 15.9% 20.1% 20.2% 19.3% 23.1% 20.5% 22.5% 11.6% 18.3% 14.9% 20.8% 18.3% 17.3% 19.4% Store count (including licensees) 154 162 171 189 190 197 207 227 232 245 260 279 189 227 279 316 277 China 101 108 112 128 128 132 140 160 163 173 183 200 128 160 200 230 200 Hong Kong 12 13 13 14 14 15 15 15 15 16 17 17 14 15 17 18 17 Taiwan 29 29 33 33 34 36 38 38 39 40 41 42 33 38 42 44 41 South Korea 12 12 13 14 14 14 14 14 15 16 19 20 14 14 20 24 19 Source: Shared Research based on company data

FY02/17 results: Sales up 8.0% YoY (+24.7% in local currency terms) but operating profit down 4.7% (+13.0%) as sharp swing in ▷ exchange rates and strong yen depressed operating profit margin

 OPM: Down 2.4pp YoY, mainly due to seasonal bargain sales events, exchange rates, and temporary price cuts in Q3; Q4 showed recovery QoQ as these temporary factors disappear China: Comparable store sales stably up +4.7% in local currency terms; new store sales up 29.8% in local currency terms owing ▷ to aggressive store openings (42 stores) using standardized store format

 Sales trends: Steady sales of everyday items amid changing consumer behavior; significant sales growth of innerwear in apparel category and furniture in lifestyle goods category sold in extended display spaces; earnings contribution by increased items in foods category (189 items; +73 items YoY), particularly by confectionary such as chocolate

 Comparable store sales: Target is to achieve above 5% full-year growth in 2018 and beyond, aiming to add about 2pp over macroenvironment

 Store openings: Achieved target of 200 stores by fiscal year-end; shifts somewhat to revamping comparable stores in FY02/18, planning new 30 stores and 20 store renovations

 Product lineup: Contribution to comparable store sales by strengthened lineup of foods and lifestyle goods; significantly increased food items; furniture sales up 58% YoY and sales composition ratio also up by 0.3pp to 3.7%; plans to increase items and review prices to revamp comparable stores and expand business foundation Other regions: Sluggish comparable store sales in Taiwan; positive effects from strengthened store renovations/openings in ▷ Hong Kong amid deteriorating market environment; robust sales in South Korea lowered fixed cost ratio, marking record high profit FY02/18 forecasts: Comparable stores expected to post 3.6% higher sales; plans to improve quality of comparable stores ▷ through strengthening of store renovation and expanding lineup; OPM expected to fall 1.1pp as procurement costs are rise due to exchange fluctuations

 Q1 FY02/18: Comparable store sales in China expected to rise 5.8%; steady start in China following opening of Shanghai flagship store on December 12, 2015 (sales in Shanghai area, including Shanghai flagship store, account for 15–20% of overall sales and sales in this area were robust due to opening of the store when it was opened)

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Earnings for East Asia 30,000 Operating revenue Operating profit OPM (right axis) 30% 26,486 24,319 25,000 25% 21,978 21,240 19,304 19,708 19,714 19,998 18,751 23.1% 22.5% 20,000 20% 20.7% 20.2% 20.5% 20.1% 19.3% 13,657 18.3% 15,000 12,580 15% 15.6% 11,443 15.9% 8,401 8,708 12.4% 10,000 7,451 11.6% 10% 6,71711.3% 10.6% 10.3% 5,623 4,503 4,773 4,858 7.2% 3,871 3,971 3,796 5,000 2,601 2,974 2,318 5% 761 1,160 869 630 1,417 1,443 0 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 (JPYmn) FY02/14 FY02/15 FY02/16 FY02/17 Comparable stores: sales growth (left) and OPM (right)

Comp. store sales growth (local currency) All store sales growth (local currency) (JPY/USD) Exchange rate (JPY/USD) East Asia OPM (right axis) All store sales growth (JPY) JPY/CNY (right axis) 130 25% 120% 21

100% 20 120 20%

80% 19 110 15%

60% 18 100 10% 40% 17 90 5% 20% 16 Sale periods (Q1 and Q3) 0% 15 80 0% Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/14 FY02/15 FY02/16 FY02/17

Comparable store sales growth (left) and all stores’ sales growth (right) in local currency terms

East Asia China Hong Kong Taiwan South Korea East Asia China Hong Kong Taiwan South Korea 40% 80% 70% 30% 60%

20% 50% 40% 10% 30% 20% 0% 10% -10% 0% Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/15 FY02/16 FY02/17

Sales and number of stores in China 200 20,000 183 200 Sales (JPYmn) YoY (Local currency; Shared Research est.) Store count (right axis) 173 160 163 16,293 140 14,802 15,000 128 128 132 13,38413,048 150 12,059 12,227 108 112 11,25811,748 100 101 10,496 10,000 82 100 75 7,637 65 67 6,662 55 6,159 5,806 44 4,758 5,000 34 38 39 3,683 4,263 50 26 28 3,153 2,417 1,869 1,892 2,238 1,167 1,242 1,557 0 0 (JPYmn) Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17

Source: Shared Research based on company data

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Europe and the Americas (fiscal year ending January for Europe and December for the Americas)

Europe and the Americas FY02/15 FY02/16 FY02/17 FY02/15 FY02/16 FY02/17 FY02/18 FY02/17 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Act. Est. Init. Est. Operating revenue 2,975 3,165 3,618 5,103 3,493 3,874 4,430 5,328 4,029 3,938 4,172 5,462 14,861 17,124 17,603 21,600 19,100 Sales (operating revenue from FY02/17) 2,926 3,117 3,580 5,090 3,471 3,838 4,402 5,308 18,900 UK 919 982 1,224 1,495 1,038 1,077 1,443 1,401 819 729 895 1,082 3,898 4,252 3,525 - France 648 683 706 1,186 687 701 727 940 623 596 604 901 3,156 3,055 2,724 - Italy 332 358 353 566 332 371 399 544 344 403 389 560 1,613 1,646 1,696 - Germany 378 424 466 653 407 475 479 624 455 426 391 532 1,921 1,985 1,804 - US 649 670 831 1,084 889 1,051 1,191 1,520 1,272 1,262 1,358 1,552 3,305 4,651 5,444 - Canada 106 116 164 163 278 198 226 240 425 106 721 1,089 - Spain 192 185 181 281 839 Portugal 41 44 49 56 190 Other (wholesale) 79 68 68 72 287 YoY 25.8% 17.3% 16.7% 23.2% 17.4% 22.4% 22.4% 4.4% 15.4% 1.7% -5.8% 2.5% 20.8% 15.2% 2.8% 22.7% 11.5% Sales 26.0% 17.4% 17.3% 22.7% 18.6% 23.1% 23.0% 4.3% UK 24.7% 27.7% 19.0% 20.7% 12.9% 9.7% 17.9% -6.3% -21.1% -32.3% -38.0% -22.8% 3.3% 9.1% -17.1% France 15.5% 7.9% 6.5% 16.4% 6.0% 2.6% 3.0% -20.7% -9.3% -15.0% -16.9% -4.1% 9.7% -3.2% -10.8% Italy 16.1% 6.5% 3.2% -0.7% 0.0% 3.6% 13.0% -3.9% 3.6% 8.6% -2.5% 2.9% 5.1% 2.0% 3.0% Germany 15.2% 12.2% 13.9% 19.4% 7.7% 12.0% 2.8% -4.4% 11.8% -10.3% -18.4% -14.7% 15.6% 3.3% -9.1% US 58.3% 24.3% 36.7% 40.1% 37.0% 56.9% 43.3% 40.2% 43.1% 20.1% 14.0% 2.1% 41.8% 40.7% 17.1% Canada 162.3% 70.7% 37.8% 47.2% 52.9% 580.2% 51.0% Sales (local currency) 26.0% 17.4% 17.4% -10.2% 11.9% 10.6% 15.3% 6.3% 23.0% 19.4% 10.4% 17.0% 11.0% 12.1% 19.0% 23.0% 19.6% UK 6.6% 12.7% 6.0% 9.4% 6.7% -0.7% 7.0% -3.0% 5.9% -1.5% 6.9% 7.8% 11.5% 3.5% 5.2% France 2.4% 0.9% 2.0% 12.0% 13.6% 4.6% 6.8% -12.8% -5.3% -2.4% -1.5% 5.0% 4.8% 0.1% 0.9% Italy 3.0% -0.4% -1.0% -4.8% 7.2% 5.8% 14.1% 3.3% 8.4% 23.4% 15.5% 12.7% -1.2% 7.0% 14.9% Germany 2.2% 4.8% 9.0% 15.2% 15.4% 14.5% 4.4% 3.1% 16.8% 2.8% -3.0% -6.5% 8.6% 8.3% 1.4% US 42.3% 19.4% 29.8% 24.4% 18.2% 32.2% 15.1% 31.3% 47.5% 34.4% 34.6% 13.4% 27.6% 22.8% 30.5% Canada 174.8% 94.8% 62.4% 73.9% 73.8% 74.7% Sales (local currency; comparable stores) 0.4% -0.2% 0.8% -2.2% 3.2% 4.7% 9.1% 2.6% 11.8% 5.8% -0.4% -0.2% -2.0% 5.4% 3.7% 5.0% 5.0% UK 7.8% 4.4% 2.7% 0.6% 1.7% 4.4% 5.2% -6.9% 5.3% -3.2% 6.2% 5.6% 3.4% 1.2% 4.6% France -5.4% -6.1% -13.8% -6.9% -4.2% -14.6% 2.8% -3.4% 10.7% 11.2% -3.8% 10.6% -9.4% -4.0% 5.4% Italy -7.8% -6.5% -4.0% -7.5% 5.5% 4.6% 10.6% 1.5% 14.9% 5.6% 3.0% -5.2% -6.5% 5.7% 3.2% Germany -0.4% 2.5% 2.5% 4.7% 5.2% 4.1% 0.5% -0.4% 16.0% 5.9% 15.1% 14.1% 2.6% 2.1% 9.2% US -3.1% 6.4% 10.0% -1.2% 8.9% 20.3% 24.0% 16.1% 10.8% 6.6% -12.1% -11.1% 2.6% 17.5% -3.2% Canada 29.9% 13.0% 19.4% 4.5% 15.3% Operating profit -126 -43 -137 398 -188 -294 -97 165 -417 -347 -382 295 92 -414 -851 -800 -600 YoY - - - 8.3% - - - -58.6% - - - 79.1% -65.5% - - - - OPM -4.2% -1.4% -3.8% 7.8% -5.4% -7.6% -2.2% 3.1% -10.3% -8.8% -9.2% 5.4% 0.6% -2.4% -4.8% -3.7% -3.1% Store count 68 69 72 74 73 70 70 72 70 69 70 69 73 72 69 77 72 UK 11 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 11 France 12 11 12 12 12 10 10 9 9 9 9 9 12 9 9 9 9 Italy 7 7 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 Germany 9 9 8 8 8 8 8 8 8 7 7 7 8 8 7 7 7 US 8 9 9 10 9 9 10 11 11 11 12 12 9 11 12 16 12 Canada 1 1 1 1 2 2 2 2 3 1 2 3 7 3 Spain 6 6 6 6 6 6 Portugal 1 1 1 1 1 1 Licensees 21 21 22 22 22 21 20 21 12 12 12 10 22 21 10 10 21 Source: Shared Research based on company data

FY02/17: Operating losses continue across Europe as one-time expenses associated with store closures for remodeling and ▷ relocation of distribution centers weigh heavily on earnings

 Reconstruction in Europe: Improved profit structure; moving into black within reach, if no impacts from sharp swing in currency rate or one-time expenses of relocating distribution centers

 Target: Higher profit than expected, with limited negative impact of strong yen on costs owing to bottoming out of British pound and low inventory turnover rate

 Europe: Sales in the UK largely in line with forecasts owing to steady Christmas business; in France, streamlining cost in progress and sales on target despite remaining aftermath of terrorist attack; Spain moved into black owing to steady sales from full-year sales contribution by No. 1 store in Spain remodeled in Q4 FY02/16

 US: Carried out infrastructure development including introduction of accounting system; steady sales at new stores despite negative effect of disruption in maritime traffic on comparable stores in 2H

 Canada: Sales exceeded target; new medium-term plan expects acceleration of store openings in second half as profitability is high Remodeling: Remodeling of No.1 and No. 2 flagship stores in each country completed in Q3 and the stores are steadily ▷ generating sales; in Europe, the company expects to open one remodeled store in FY02/18 FY02/18: Due to a weak British pound (a subsidiary in the UK controls the European business, meaning a weak British pound ▷ affects the whole European business) and low inventory turnover rate (less than 2), the company has to sell inventory goods of higher procurement costs, which led to a forecast of an operating loss of JPY800mn, although the initial forecasts expected the business to move into the black; however, the company expects to move into the black in FY02/19 with price increase

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Comparable store sales growth (left) and all stores’ sales growth (right) in local currency terms

Europe & the Americas UK France Italy Germany Europe & the Americas UK France Italy Germany 25% 15% 20% 10% 15% 10% 5% 5% 0% 0%

-5% -5% -10% -10% -15% -15% -20% Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/15 FY02/16 FY02/17

Europe & the Americas US Canada Europe & the Americas US Canada 30% 160% 25% 140% 20% 120% 15% 100% 10% 80% 5% 60% 0% 40% -5% 20% -10% 0% -15% -20% Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/15 FY02/16 FY02/17

Earnings for Europe and the Americas

6,000 Operating revenue Operating profit OPM (right axis) 5,462 30% 5,103 5,328 5,000 4,430 25% 4,143 4,172 3,874 4,029 3,938 4,000 3,618 3,493 20% 3,099 2,975 3,165 2,698 3,000 2,366 15% 8.9% 2,000 7.8% 10% 5.4% 1,000 368 398 165 5% 8 0 0% -48 -60 0.3% -43 295 -126 -137 -188 -294 -97 3.1% -1,000 -2.0% -2.2% -1.4% -2.2% -417 -347 -382 -5% -4.2% -3.8% -8.8% -5.4% -7.6% -9.2% -2,000 -10% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 (JPYmn) FY02/14 FY02/15 FY02/16 FY02/17

Foreign exchange rates

200 JPY/USD JPY/GBP JPY/EUR 180

160

140

120

100

80

60 March-12 March-13 March-14 March-15 March-16 March-17 Source: Shared Research based on data from Mizuho Bank, Ltd.

Remodeling of No. 1 and No. 2 flagship stores in Europe and the Americas

UK France Germany It aly Spain US Forum des Halles Tottenham Court Fifth Avenue No. 1 store Place Carree Munich Corso Buenos Aires Barcelona Road (new store) (new store) Renovated in Q3 FY02/16 Q3 FY02/15 Q3 FY02/16 Q1 FY02/17 Q4 FY02/16 Q4 FY02/16

No. 2 store Covent Garden Francs Bourgeois Berlin V ia T orino

Renovated in Q3 FY02/16 Q3 FY02/16 Q3 FY02/16 Q3 FY02/18 Source: Shared Research based on company data

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West and South Asia, and Oceania (fiscal year ending December)

West and South Asia, Oceania FY02/15 FY02/16 FY02/17 FY02/15 FY02/16 FY02/17 FY02/18 FY02/17 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Act. Est. Init. Est. Operating revenue 1,123 1,482 1,634 2,016 1,802 2,121 2,204 2,784 2,338 2,436 2,397 3,084 6,255 8,911 10,256 13,600 9,700 Sales (operating revenue from FY02/17) 999 1,207 1,402 2,628 1,624 1,843 1,943 3,425 9,600 Singapore 523 594 744 921 773 885 899 1,059 915 898 925 1,144 2,767 3,616 3,882 - Malaysia 100 136 147 194 227 182 214 273 260 256 247 298 592 896 1,061 - India 137 Thailand 325 331 373 453 484 419 437 573 557 522 488 648 1,488 1,913 2,215 - Australia 49 147 137 166 138 358 392 414 386 416 406 532 499 1,302 1,740 - Other (wholesale) 218 345 330 325 907 1,182 1,218 YoY 26.3% 62.5% 72.4% -5.8% 60.4% 43.1% 34.9% 38.1% 29.8% 14.9% 8.8% 10.8% 27.9% 42.5% 15.1% 32.6% 8.9% Sales 62.5% 52.6% 38.6% 30.3% Singapore 16.0% 17.2% 42.3% 156.5% 47.8% 49.0% 20.8% 15.0% 18.4% 1.5% 2.9% 8.0% 50.4% 30.7% 7.4% Malaysia -45.2% 127.0% 33.8% 45.6% 40.7% 14.5% 40.7% 15.4% 9.2% 67.2% 51.4% 18.4% Thailand 23.6% 20.4% 14.1% 21.4% 48.9% 26.6% 17.2% 26.5% 15.1% 24.6% 11.7% 13.1% 20.2% 28.6% 15.8% Australia 219.2% 181.6% 143.5% 186.1% 149.4% 179.7% 16.2% 3.6% 28.5% 859.6% 160.9% 33.6% Sales (local currency) 26.6% 63.3% 73.8% 42.9% 47.2% 33.7% 30.6% 41.5% 42.2% 30.8% 43.3% 20.2% 46.6% 37.3% 28.4% 35.2% 4.6% Singapore 42.3% 40.1% 70.0% 37.2% 37.2% 34.7% 13.8% 15.4% 26.4% 15.0% 19.1% 20.5% 41.2% 23.2% 19.9% Malaysia 20.4% 63.5% 85.6% 78.8% 114.4% 26.2% 55.6% 60.7% 37.2% 73.9% 38.4% 25.6% 62.9% 55.1% 36.8% Thailand 23.8% 20.2% 14.0% 10.8% 28.4% 9.4% 9.0% 27.4% 29.7% 48.4% 32.2% 24.5% 19.7% 29.1% 32.0% Australia 210.2% 176.8% 143.0% 204.0% 173.9% 214.5% 35.6% 20.0% 39.5% 850.1% 160.7% 50.5% Sales (local currency; comparable stores) 5.2% 10.5% -0.8% 7.0% 15.7% 8.0% 8.0% 17.6% 18.9% 20.3% 14.1% 2.7% 5.5% 12.7% 12.5% 7.6% 6.8% Singapore -0.5% 1.7% -6.0% 6.9% 8.9% 10.8% 10.2% 22.0% 24.2% 13.7% 12.7% -4.8% 0.6% 13.4% 9.9% Malaysia 1.2% 19.3% 11.5% 6.9% 35.0% 2.7% 15.5% 16.9% 0.8% 26.5% 13.8% 18.5% 9.7% 17.1% 11.8% Thailand 14.2% 20.0% 2.3% 7.7% 25.1% 6.1% 2.7% 9.8% 12.6% 23.8% 15.7% 9.6% 10.1% 11.5% 15.5% Australia -13.8% -2.2% 5.8% 17.5% 35.0% 46.2% 22.0% 32.2% 2.1% 31.7% Operating profit -82 49 -32 156 -83 14 96 167 35 17 51 34 90 195 137 300 200 YoY - -9.5% - 802.2% - -70.6% - 7.2% - 18.1% -47.0% -79.7% 8,900.0% 116.7% -29.7% 119.0% 2.6% OPM -7.3% 3.3% -2.0% 7.7% -4.6% 0.7% 4.4% 6.0% 1.5% 0.7% 2.1% 1.1% 1.4% 2.2% 1.3% 2.2% 2.1% Store count (including licensees) 35 38 40 39 39 41 43 45 45 48 54 55 39 45 55 67 54 Singapore 7 8 9 9 9 9 9 9 9 9 10 10 9 9 10 11 10 Malaysia 3 3 3 4 4 4 5 5 5 5 5 5 4 5 5 7 5 Thailand 10 10 11 11 11 11 12 13 13 13 13 14 11 13 14 17 15 India 2 2 - - 2 4 2 Australia 1 2 2 2 2 3 3 3 3 3 3 3 2 3 3 4 3 Indonesia 5 5 5 2 2 2 2 3 3 4 6 6 2 3 6 6 6 Philippines 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 4 7 Kuwait 1 1 1 1 1 2 2 2 2 2 2 2 1 2 2 2 2 UAE 1 2 2 3 3 3 3 3 3 4 4 4 3 3 4 6 4 Source: Shared Research based on company data

FY02/17: Growth and margins remained favorable as the company continues to open new stores and remodel existing stores ▷ across the region; above-plan results in India bodes well for future developments  The company aggressively invested in store environment improvement, which led to steady sales; it can now target a 10% OPM due to steady growth in earnings  The company considers India one of its top priority markets with high potential for growth, following China and the US, under its regional growth strategy  India: Solid results posted by both stores; looking to open additional stores while continuing to invest in IT-related improvements FY02/18: Expects an operating profit of JPY13.6bn (+32.6%) though OPM remains low at the 2% level ▷ Earnings for West and South Asia, and Oceania

Operating revenue Operating profit OPM (right axis) 3,500 3,084 20% 2,784 3,000 16% 2,338 2,436 2,397 2,500 2,204 2,141 2,016 2,121 1,802 12% 2,000 1,634 1,482 7.7% 1,500 5.9% 8% 1,123 4.4% 889 912 947 3.3% 1,000 6.0% 4% 0.8% 0.7% 500 167 54 49 156 96 35 2.1%51 34 17 14 1.5% 17 1.1% 0% 0 0.7% -39 -31 -82 -2.0%-32 -83 -4% -500 -3.3% -4.3% -4.6% -1,000 -8% Q1 Q2 Q3 Q4 -7.3%Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 (JPYmn) FY02/14 FY02/15 FY02/16 FY02/17 Source: Shared Research based on company data

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Comparable store sales trends (local currency basis)

50% West and South Asia, and Oceania Singapore 120% West and South Asia, and Oceania Singapore Malaysia Thailand Malaysia Thailand 40% 100% Australia Australia 30% 80% 20% 60% 10% 40% 0%

-10% 20%

-20% 0% Q1 Q1 Q1 Q1 Q1 Q1 FY02/15 FY02/16 FY02/17 FY02/15 FY02/16 FY02/17 Source: Shared Research based on company data

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Reference data Directly managed stores in Japan

Domestic directly managed business FY02/15 FY02/16 FY02/17 FY02/15 FY02/16 FY02/17 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Act. Operating revenue 40,348 32,362 38,218 35,672 43,437 36,490 43,426 40,626 49,294 38,363 47,584 42,486 146,600 163,980 177,729 Directly managed stores 35,417 28,999 33,938 32,173 38,129 32,342 38,300 36,289 43,073 33,917 41,918 38,056 130,527 145,061 156,965 Online store 4,240 2,600 3,579 2,849 4,529 3,264 4,298 3,573 5,392 3,516 4,874 3,704 13,268 15,665 17,486 Others 690 763 701 650 778 883 829 763 829 929 791 725 2,804 3,254 3,276 YoY 12.4% 6.1% 6.3% 6.2% 7.7% 12.8% 13.6% 13.9% 13.5% 5.1% 9.6% 4.6% 7.8% 11.9% 8.4% Directly managed stores 12.6% 6.3% 6.4% 5.8% 7.7% 11.5% 12.9% 12.8% 13.0% 4.9% 9.4% 4.9% 7.8% 11.1% 8.2% Online store 9.4% 2.6% 4.0% 9.7% 6.8% 25.5% 20.1% 25.4% 19.1% 7.7% 13.4% 3.7% 6.6% 18.1% 11.6% Store count (directly managed stores) 279 281 289 284 297 296 311 312 322 323 328 328 284 312 328 Openings 11 3 9 1 13 1 20 5 11 2 7 1 24 39 21 Closures -1 -1 -1 -6 - -2 -5 -4 -1 -1 -2 -1 -9 -11 -5 Renovation 11 2 7 4 4 2 16 - 7 1 13 - 24 23 21 Sales growth at existing directly managed stores 7.8% 2.1% 0.0% 0.7% 2.3% 5.8% 7.4% 4.1% 7.3% -1.6% 3.1% -0.7% 2.7% 4.9% 2.1% Apparel 7.5% 4.6% 3.2% 4.4% 6.2% 5.5% -1.0% -2.3% 1.9% -5.6% -0.9% -2.5% 5.0% 2.1% -1.6% Household Goods 9.2% 1.8% 0.1% 0.4% 0.8% 7.8% 14.8% 9.6% 11.2% 1.0% 4.8% 0.4% 3.1% 8.1% 4.2% Food 3.7% -6.1% -15.1% -10.1% -5.6% -5.4% 2.3% -2.1% 6.9% 1.2% 11.9% -1.0% -7.3% -2.7% 4.8% Customer count 2.2% 1.3% -4.1% -2.7% -3.1% -3.0% -1.4% -3.0% 0.6% -3.3% 4.0% -0.3% -0.9% -2.6% 0.3% Customer spend 5.6% 0.8% 4.3% 3.5% 5.6% 9.1% 8.9% 7.3% 6.7% 1.8% -0.9% -0.4% 3.6% 7.7% 1.8% Floor space (sqm) 202,503 204,327 210,254 208,143 218,759 218,298 227,052 226,244 234,613 234,819 240,491 240,305 208,143 226,229 240,305 YoY 3.2% 6.4% 6.5% 5.8% 8.0% 6.8% 8.0% 8.7% 7.2% 7.6% 5.9% 6.2% 5.8% 8.7% 6.2% Sales per space (JPY'000/sqm) 177 142 163 154 178 148 174 160 187 145 177 159 636 660 666 YoY 8.7% 1.2% 0.1% -0.5% 0.6% 4.3% 6.4% 4.1% 5.1% -2.5% 1.9% -0.6% 2.4% 3.8% 1.0% Floor space (cumulative quarter average) 200,301 202,064 204,007 205,319 214,293 216,075 217,573 219,837 230,368 232,366 233,849 235,567 205,319 219,837 235,567 YoY 3.6% 4.3% 5.0% 5.3% 7.0% 6.9% 6.6% 7.1% 7.5% 7.5% 7.5% 7.2% 5.3% 7.1% 7.2% Inventories per space (JPY'000/sqm) 60.9 60.5 62.3 62.4 60.9 57.0 57.4 55.7 54.4 52.9 55.1 55.5 63.6 57.5 56.4 YoY 4.8% 5.3% 5.3% 4.7% 0.0% -5.7% -7.9% -10.7% -10.6% -7.2% -3.9% -0.4% 5.6% -9.6% -1.9% Inventories 12,198 12,326 12,955 13,055 13,055 12,418 12,653 12,633 12,542 12,391 13,051 13,276 13,055 12,633 13,276 YoY 8.5% 10.6% 11.8% 11.2% 7.0% 0.7% -2.3% -3.2% -3.9% -0.2% 3.1% 5.1% 11.2% -3.2% 5.1% Sales per employee (JPY'000) 7,129 5,677 6,661 6,234 7,159 6,020 6,845 6,148 6,989 5,385 6,927 5,967 25,679 26,142 25,155 YoY 2.3% -5.4% -1.6% -1.8% 0.4% 6.0% 2.8% -1.4% -2.4% -10.6% 1.2% -2.9% -1.6% 1.8% -3.8% Store staff (cumulative quarter average) 4,968 5,038 5,057 5,083 5,326 5,349 5,431 5,549 6,163 6,231 6,171 6,240 5,083 5,549 6,240 YoY 10.1% 11.3% 10.2% 9.6% 7.2% 6.2% 7.4% 9.2% 15.7% 16.5% 13.6% 12.5% 9.6% 9.2% 12.5%

Domestic directly managed stores: YoY changes in comparable store sales, customer count, and customer spend

30% Comparable stores (MUJI) Customer count Customer spend 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16

Online store sales

(JPYmn) 6,000 Online store sales % of directly managed Japan store sales YoY (right axis) 30% 5,392 4,874 5,000 4,529 25% 4,240 4,298 3,874 3,704 4,000 3,579 3,573 3,516 20% 3,407 3,442 3,264 3,024 2,838 2,849 3,000 2,608 2,533 2,597 2,600 15% 2,273 2,294 2,198 1,970 2,000 10%

1,000 5%

0 0% Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17

GPM (%) and YoY improvement in GPM (pp) 60% 51.2% 49.4% 49.5% 49.2% 49.4% 48.7% 47.6% 48.1% 48.3% 49.0% 46.1% 46.0% 46.7% 47.2% 46.8% 46.1% 46.6% 46.1% 46.1% 50% 45.1% 45.2% 44.2% 45.7% 45.4%

45.6% 45.6% 44.6% 45.4% 44.7% 43.8% 40% 43.3% 42.2% 42.2% 42.1% 41.0% 40.5% 38.4% 38.8% 39.8% 39.1% 39.5% 39.6% 36.7% 36.9% 36.7% 30% 35.9% 35.8% 34.5%

16.7% 20% 13.8% 12.0% 12.4% 12.7% 10.7% 10.3% 9.6% 9.6% 7.0% 7.3% 8.2% 10% 4.4% 5.7% 3.0% 2.5% 3.2% 2.3% 3.6% 1.5% 1.8% 0.6% 1.2% 1.1% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 Consolidated Parent Cons-parent difference Source: Shared Research based on company data

116/122 Ryohin Keikaku / 7453

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8 7.6 6 4.3 3.9 3.6 3.6 3.4 3.1 3.1 4 2.5 2.6 1.9 1.3 2 0.9 0.7 1.1 0.9 0.3 0.6 -0.3 0.5 0.2 0.4 0.5 -0.3 1.4 0 1.0 0.9 -0.1 0.3 0.3 -0.9 -0.4 -0.6 -0.4 -0.7 -2 -1.1 -0.8 -1.1 -1.0 -1.7 -1.5 -1.4 -2.5 -4 -2.6 -3.4 -5.5 -3.2 -3.5 -6 (pp) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 Consolidated Parent Cons-parent difference

GPM on a per-product basis at the parent (top), YoY change (bottom; pp)

55% Apparel Household goods Food 52.0% 50.3% 49.9% 50.6% 49.6% 49.7% 49.1% 50% 47.7% 47.2% 46.9% 46.5% 44.0% 44.8% 46.2% 45.5% 44.0% 45.3% 44.6% 43.8% 45% 42.3% 38.8% 40.8% 43.9% 44.0% 44.0% 42.8% 43.5% 43.3% 42.7% 42.7% 43.1% 36.8% 35.0% 36.0% 40% 42.6% 41.8% 41.1% 37.0% 38.2% 40.8% 39.9% 40.2% 36.4% 38.4% 37.8% 37.4% 36.8% 34.1% 34.2% 35% 36.6% 37.4% 35.9% 36.1%35.5% 35.0% 33.9% 30% Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17

Apparel Household goods Food 4.0 2.0 0.0 -2.0 -4.0 -6.0 -8.0 -10.0 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17

Ryohin Keikaku earnings JPYbn （ ） 70 45.6% 45.6% 48% 44.8% 44.6% 45.4% 44.7% 43.6%43.4% 43.3% 43.8% 60 42.6% 42.2% 42.2%42.1% 44% 41.0% 40.5% 39.8% 39.1% 39.5% 39.6% 50 38.4% 38.8% 40% 36.7% 36.7% 40 34.5% 36% 36.9% 35.9% 35.8% 30 25.9 26.5 32% 21.8 23.0 23.4 22.3 19.2 18.7 19.9 19.9 20.8 18.8 20.2 19.4 17.1 17.2 17.3 17.9 16.4 17.1 16.7 18.2 20 13.7 15.1 14.7 15.7 15.6 15.7 28% 10 24% 0 20% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 (JPYbn) Sales Gross profit GPM (right axis) Ryohin Keikaku

10% Average sales per space (JPY'000/sqm) 8.7%YoY 200 6.9% 8% 5.9% 6.4% 180 5.6% 5.1% 6% 4.3% 160 3.7% 4.1% 4% 2.3% 1.9% 140 1.4% 1.2% 2% 0.1% 0.6% 120 -0.2% -0.5% -0.6% 0% 100 -2.5% -2% 80 -4% -5.4% 60 -6% 40 -8% 20 -10% 0 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 Source: Shared Research based on company data

117/122 Ryohin Keikaku / 7453

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Ryohin Keikaku parent earnings

Ryohin Keikaku FY02/15 FY02/16 FY02/17 FY02/15 FY02/16 FY02/17 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Act. Operating revenue 54,671 46,460 54,720 50,739 58,985 53,740 61,251 58,036 66,931 57,684 68,181 63,021 206,591 232,012 255,818 Sales 53,768 45,515 53,595 49,445 57,728 52,451 59,860 56,572 65,563 56,141 66,927 60,882 202,325 226,611 249,515 Apparel 18,112 16,996 21,131 18,359 20,700 20,651 21,945 19,888 22,771 20,799 23,142 21,599 74,598 83,184 88,313 Household Goods 30,600 23,965 27,841 25,898 32,067 27,231 32,904 31,258 37,225 30,293 37,643 33,191 108,304 123,460 138,353 Food 4,365 3,792 3,925 4,538 4,167 3,673 4,152 4,634 4,699 4,083 5,291 5,303 16,620 16,626 19,377 Others 690 763 698 651 792 896 860 792 867 964 849 788 2,802 3,340 3,470 YoY 19.0% 17.7% 14.2% 11.8% 7.9% 15.7% 11.9% 14.4% 13.5% 7.3% 11.3% 8.6% 15.6% 12.3% 10.3% Sales 18.2% 16.9% 13.2% 10.8% 7.4% 15.2% 11.7% 14.4% 13.6% 7.0% 11.8% 7.6% 14.7% 12.0% 10.1% Apparel 17.6% 26.8% 24.1% 23.8% 14.3% 21.5% 3.9% 8.3% 10.0% 0.7% 5.5% 8.6% 23.0% 11.5% 6.2% Household Goods 20.6% 14.1% 10.5% 6.7% 4.8% 13.6% 18.2% 20.7% 16.1% 11.2% 14.4% 6.2% 13.0% 14.0% 12.1% Food 7.7% -1.4% -12.6% -8.1% -4.5% -3.1% 5.8% 2.1% 12.8% 11.2% 27.4% 14.4% -4.1% 0.0% 16.5% Others 3.9% 8.5% 12.0% 11.7% 14.8% 17.4% 23.2% 21.7% 9.5% 7.6% -1.3% -0.5% 8.9% 19.2% 3.9% Gross profit 21,755 16,695 20,814 18,249 22,996 18,825 23,403 20,248 25,876 19,365 26,479 22,337 77,513 85,472 94,059 Apparel 8,249 6,281 8,617 6,750 9,377 7,238 9,286 7,160 10,149 7,085 10,126 7,379 29,897 33,061 34,740 Household Goods 11,556 8,597 10,422 9,469 11,574 9,665 12,120 10,936 13,538 10,279 14,096 12,683 40,044 44,295 50,598 Food 1,505 1,317 1,354 1,651 1,503 1,314 1,426 1,630 1,607 1,347 1,697 1,766 5,827 5,873 6,419 Others 443 500 423 378 541 609 572 519 580 652 559 508 1,744 2,241 2,301 GPM 40.5% 36.7% 38.8% 36.9% 39.8% 35.9% 39.1% 35.8% 39.5% 34.5% 39.6% 36.7% 38.3% 37.7% 37.7% Apparel 45.5% 37.0% 40.8% 36.8% 45.3% 35.0% 42.3% 36.0% 44.6% 34.1% 43.8% 34.2% 40.1% 39.7% 39.3% Household Goods 37.8% 35.9% 37.4% 36.6% 36.1% 35.5% 36.8% 35.0% 36.4% 33.9% 37.4% 38.2% 37.0% 35.9% 36.6% Food 34.5% 34.7% 34.5% 36.4% 36.1% 35.8% 34.3% 35.2% 34.2% 33.0% 32.1% 33.3% 35.1% 35.3% 33.1% Others 64.2% 65.5% 60.6% 58.1% 68.3% 68.0% 66.5% 65.5% 66.9% 67.6% 65.8% 64.5% 62.2% 67.1% 66.3% SG&A expenses 16,730 14,855 16,349 16,354 17,935 16,334 18,428 18,646 20,257 18,490 20,421 20,361 64,288 71,343 79,531 Advertising 851 582 736 1,131 923 649 1,005 1,156 1,050 706 1,096 1,026 3,300 3,733 3,879 Logistics 2,660 1,727 2,063 1,901 2,731 1,996 2,171 2,172 2,977 2,398 2,358 2,786 8,351 9,070 10,520 Personnel 5,021 5,129 5,077 5,333 5,345 5,510 5,766 6,502 6,252 6,373 6,528 6,873 20,560 23,123 26,028 Rents 4,366 3,979 4,236 4,049 4,434 4,040 4,415 4,337 4,811 4,222 4,807 4,626 16,630 17,226 18,467 Depreciation and amortization 541 586 756 875 907 967 1,000 1,079 1,039 1,083 1,119 1,179 2,758 3,953 4,421 Others 3,289 2,852 3,480 3,065 3,593 3,172 4,073 3,397 4,126 3,707 4,510 3,869 12,686 14,235 16,213 YoY 9.3% 6.4% 10.2% 7.9% 7.2% 10.0% 12.7% 14.0% 12.9% 13.2% 10.8% 9.2% 8.5% 11.0% 11.5% Advertising -11.3% 10.2% 7.6% 111.0% 8.5% 11.5% 36.5% 2.2% 13.8% 8.8% 9.1% -11.2% 21.9% 13.1% 3.9% Logistics 18.3% 3.0% 11.5% 2.9% 2.7% 15.6% 5.2% 14.3% 9.0% 20.1% 8.6% 28.3% 9.6% 8.6% 16.0% Personnel 15.6% 11.4% 10.0% 8.4% 6.5% 7.4% 13.6% 21.9% 17.0% 15.7% 13.2% 5.7% 11.2% 12.5% 12.6% Rents 8.7% 4.5% 5.3% -0.5% 1.6% 1.5% 4.2% 7.1% 8.5% 4.5% 8.9% 6.7% 4.5% 3.6% 7.2% Depreciation and amortization -15.3% -11.7% 6.8% 9.4% 67.7% 65.0% 32.3% 23.3% 14.6% 12.0% 11.9% 9.3% -1.9% 43.3% 11.8% Others 6.3% 6.5% 17.8% 2.6% 9.2% 11.2% 17.0% 10.8% 14.8% 16.9% 10.7% 13.9% 8.3% 12.2% 13.9% % of sales 31.1% 32.6% 30.5% 33.1% 31.1% 31.1% 30.8% 33.0% 30.9% 32.9% 30.5% 33.4% 31.8% 31.5% 31.9% Advertising 1.6% 1.3% 1.4% 2.3% 1.6% 1.2% 1.7% 2.0% 1.6% 1.3% 1.6% 1.7% 1.6% 1.6% 1.6% Logistics 4.9% 3.8% 3.8% 3.8% 4.7% 3.8% 3.6% 3.8% 4.5% 4.3% 3.5% 4.6% 4.1% 4.0% 4.2% Personnel 9.3% 11.3% 9.5% 10.8% 9.3% 10.5% 9.6% 11.5% 9.5% 11.4% 9.8% 11.3% 10.2% 10.2% 10.4% Rents 8.1% 8.7% 7.9% 8.2% 7.7% 7.7% 7.4% 7.7% 7.3% 7.5% 7.2% 7.6% 8.2% 7.6% 7.4% Depreciation and amortization 1.0% 1.3% 1.4% 1.8% 1.6% 1.8% 1.7% 1.9% 1.6% 1.9% 1.7% 1.9% 1.4% 1.7% 1.8% Others 6.1% 6.3% 6.5% 6.2% 6.2% 6.0% 6.8% 6.0% 6.3% 6.6% 6.7% 6.4% 6.3% 6.3% 6.5% Operating profit 5,927 2,785 5,591 3,187 6,318 3,779 6,365 4,238 6,987 2,416 7,312 4,114 17,491 19,530 20,831 YoY 16.3% -7.3% -1.3% 17.6% 6.6% 35.7% 13.8% 33.0% 10.6% -36.1% 14.9% -2.9% 6.2% 11.7% 6.7% OPM (% of sales) 11.0% 6.1% 10.4% 6.4% 10.9% 7.2% 10.6% 7.5% 10.7% 4.3% 10.9% 6.8% 8.6% 8.6% 8.3% Inventories 22,624 21,607 25,712 25,212 26,469 23,383 26,679 25,498 25,290 28,362 30,981 34,091 25,212 25,498 34,091 Days in inventory 62.3 70.0 65.9 74.5 67.9 67.6 62.7 65.5 58.4 66.6 66.9 77.0 Recurring profit 7,404 3,579 7,355 3,080 8,464 3,942 6,614 1,386 8,461 1,140 8,721 4,394 21,418 20,409 22,719 Net income 4,518 2,395 4,813 2,424 5,719 2,771 4,729 934 6,080 576 6,242 3,022 14,152 14,155 15,921 Inventories (consolidated) 40,725 43,458 51,331 52,082 53,072 52,884 57,591 56,930 56,226 60,558 66,116 72,672 Days in inventory 98.7 132.1 120.2 129.3 119.5 133.9 125.7 128.3 115.9 147.7 133.6 145.4

FY02/15 FY02/16 FY02/17 FY02/15 FY02/16 FY02/17 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Act. Total sales 53,768 45,515 53,595 49,445 57,728 52,451 59,860 56,572 65,563 56,141 66,927 60,882 202,325 226,611 249,513 Domestic 49,077 37,716 46,319 41,505 51,194 42,278 51,586 46,597 57,534 44,349 57,192 49,068 174,618 191,656 208,144 Domestic directly managed business 40,348 32,362 38,218 35,672 43,437 36,490 43,426 40,626 49,294 38,363 47,584 42,486 146,600 163,980 177,729 Directly managed stores 35,417 28,999 33,938 32,173 38,129 32,342 38,300 36,289 43,073 33,917 41,918 38,056 130,527 145,061 156,965 Online store 4,240 2,600 3,579 2,849 4,529 3,264 4,298 3,573 5,392 3,516 4,874 3,704 13,268 15,665 17,486 Others 690 763 701 650 778 883 829 763 829 929 791 725 2,804 3,254 3,276 Domestic wholesale business 8,729 5,354 8,101 5,827 7,757 5,788 8,160 5,970 8,239 5,895 9,608 6,582 28,017 27,676 30,415 Licensed stores 4,481 2,743 4,612 3,234 4,528 3,077 4,842 3,589 5,083 3,474 4,886 3,734 15,070 16,037 17,178 Seiyu 1,731 1,065 1,796 1,123 1,315 866 1,309 798 855 583 824 569 5,715 4,288 2,832 FamilyMart Group 2,168 1,253 1,330 1,133 1,518 1,495 1,601 1,191 1,891 1,577 3,477 1,828 5,884 5,806 8,774 com KIOSK 105 93 105 96 99 93 96 77 61 16 0 - 399 365 77 Askul Corporation 241 201 258 246 295 258 311 313 347 333 419 450 946 1,178 1,551 Export 4,689 7,807 7,270 7,940 6,533 10,172 8,273 9,974 8,029 11,792 9,734 11,814 27,707 34,954 41,370 Export (to subsidiaries) 4,560 7,553 7,035 7,630 6,374 9,916 8,031 9,525 7,811 11,472 9,475 11,447 26,779 33,847 40,206 Export (others) 129 254 235 309 158 256 242 448 218 320 258 367 928 1,106 1,164 YoY 18.2% 16.9% 13.2% 10.8% 7.4% 15.2% 11.7% 14.4% 13.6% 7.0% 11.8% 7.6% 14.7% 12.0% 10.1% Domestic 13.1% 4.4% 5.6% 3.7% 4.3% 12.1% 11.4% 12.3% 12.4% 4.9% 10.9% 5.3% 6.9% 9.8% 8.6% Domestic directly managed business 12.4% 6.1% 6.3% 6.2% 7.7% 12.8% 13.6% 13.9% 13.5% 5.1% 9.6% 4.6% 7.8% 11.9% 8.4% Directly managed stores 12.6% 6.3% 6.4% 5.8% 7.7% 11.5% 12.9% 12.8% 13.0% 4.9% 9.4% 4.9% 7.8% 11.1% 8.2% Online store 9.4% 2.6% 4.0% 9.7% 6.8% 25.5% 20.1% 25.4% 19.1% 7.7% 13.4% 3.7% 6.6% 18.1% 11.6% Others 17.7% 7.9% 12.3% 11.5% 12.8% 15.7% 18.3% 17.4% 6.6% 5.2% -4.6% -5.0% 12.2% 16.0% 0.7% Domestic wholesale business 16.5% -4.9% 2.8% -9.3% -11.1% 8.1% 0.7% 2.5% 6.2% 1.8% 17.7% 10.3% 2.1% -1.2% 9.9% Licensed stores 9.6% 4.6% 7.5% -2.1% 1.0% 12.2% 5.0% 11.0% 12.3% 12.9% 0.9% 4.0% 5.4% 6.4% 7.1% Seiyu 1.9% -2.6% -2.6% -18.3% -24.0% -18.7% -27.1% -28.9% -35.0% -32.7% -37.1% -28.7% -4.9% -25.0% -34.0% FamilyMart Group 49.6% -24.5% -8.3% -23.5% -30.0% 19.3% 20.4% 5.1% 24.6% 5.5% 117.2% 53.5% -2.6% -1.3% 51.1% com KIOSK - -9.7% -6.3% 5.5% -5.7% - -8.6% -19.8% -38.4% -82.8% -100.0% -100.0% -2.9% -8.5% -78.9% Askul Corporation 60.7% 30.5% 40.2% 38.2% 22.4% 28.4% 20.5% 27.2% 17.6% 29.1% 34.7% 43.8% 42.0% 24.5% 31.7% Export 124.7% 177.9% 108.4% 72.1% 39.3% 30.3% 13.8% 25.6% 22.9% 15.9% 17.7% 18.4% 113.2% 26.2% 18.4% Export (to subsidiaries) 214.5% 221.4% 162.7% 106.8% 39.8% 31.3% 14.2% 24.8% 22.5% 15.7% 18.0% 20.2% 163.4% 26.4% 18.8% Export (others) -79.7% -44.7% -71.0% -66.6% 22.5% 0.8% 3.0% 45.0% 38.0% 25.0% 6.6% -18.1% -67.2% 19.2% 5.2% Source: Shared Research based on company data

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Domestic wholesale business

Domestic directly managed business FY02/15 FY02/16 FY02/17 FY02/15 FY02/16 FY02/17 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Act. Operating revenue 40,348 32,362 38,218 35,672 43,437 36,490 43,426 40,626 49,294 38,363 47,584 42,486 146,600 163,980 177,729 Directly managed stores 35,417 28,999 33,938 32,173 38,129 32,342 38,300 36,289 43,073 33,917 41,918 38,056 130,527 145,061 156,965 Online store 4,240 2,600 3,579 2,849 4,529 3,264 4,298 3,573 5,392 3,516 4,874 3,704 13,268 15,665 17,486 Others 690 763 701 650 778 883 829 763 829 929 791 725 2,804 3,254 3,276 YoY 12.4% 6.1% 6.3% 6.2% 7.7% 12.8% 13.6% 13.9% 13.5% 5.1% 9.6% 4.6% 7.8% 11.9% 8.4% Directly managed stores 12.6% 6.3% 6.4% 5.8% 7.7% 11.5% 12.9% 12.8% 13.0% 4.9% 9.4% 4.9% 7.8% 11.1% 8.2% Online store 9.4% 2.6% 4.0% 9.7% 6.8% 25.5% 20.1% 25.4% 19.1% 7.7% 13.4% 3.7% 6.6% 18.1% 11.6% Store count (directly managed stores) 279 281 289 284 297 296 311 312 322 323 328 328 284 312 328 Openings 11 3 9 1 13 1 20 5 11 2 7 1 24 39 21 Closures -1 -1 -1 -6 - -2 -5 -4 -1 -1 -2 -1 -9 -11 -5 Renovation 11 2 7 4 4 2 16 - 7 1 13 - 24 23 21 Sales growth at existing directly managed stores 7.8% 2.1% 0.0% 0.7% 2.3% 5.8% 7.4% 4.1% 7.3% -1.6% 3.1% -0.7% 2.7% 4.9% 2.1% Apparel 7.5% 4.6% 3.2% 4.4% 6.2% 5.5% -1.0% -2.3% 1.9% -5.6% -0.9% -2.5% 5.0% 2.1% -1.6% Household Goods 9.2% 1.8% 0.1% 0.4% 0.8% 7.8% 14.8% 9.6% 11.2% 1.0% 4.8% 0.4% 3.1% 8.1% 4.2% Food 3.7% -6.1% -15.1% -10.1% -5.6% -5.4% 2.3% -2.1% 6.9% 1.2% 11.9% -1.0% -7.3% -2.7% 4.8% Customer count 2.2% 1.3% -4.1% -2.7% -3.1% -3.0% -1.4% -3.0% 0.6% -3.3% 4.0% -0.3% -0.9% -2.6% 0.3% Customer spend 5.6% 0.8% 4.3% 3.5% 5.6% 9.1% 8.9% 7.3% 6.7% 1.8% -0.9% -0.4% 3.6% 7.7% 1.8% Floor space (sqm) 202,503 204,327 210,254 208,143 218,759 218,298 227,052 226,244 234,613 234,819 240,491 240,305 208,143 226,229 240,305 YoY 3.2% 6.4% 6.5% 5.8% 8.0% 6.8% 8.0% 8.7% 7.2% 7.6% 5.9% 6.2% 5.8% 8.7% 6.2% Sales per space (JPY'000/sqm) 177 142 163 154 178 148 174 160 187 145 177 159 636 660 666 YoY 8.7% 1.2% 0.1% -0.5% 0.6% 4.3% 6.4% 4.1% 5.1% -2.5% 1.9% -0.6% 2.4% 3.8% 1.0% Floor space (quarter average) 200,301 202,064 204,007 205,319 214,293 216,075 217,573 219,837 230,368 232,366 233,849 235,567 205,319 219,837 235,567 YoY 3.6% 4.3% 5.0% 5.3% 7.0% 6.9% 6.6% 7.1% 7.5% 7.5% 7.5% 7.2% 5.3% 7.1% 7.2% Inventories per space (JPY'000/sqm) 60.9 60.5 62.3 62.4 60.9 57.0 57.4 55.7 54.4 52.9 55.1 55.5 63.6 57.5 56.4 YoY 4.8% 5.3% 5.3% 4.7% 0.0% -5.7% -7.9% -10.7% -10.6% -7.2% -3.9% -0.4% 5.6% -9.6% -1.9% Inventories 12,198 12,326 12,955 13,055 13,055 12,418 12,653 12,633 12,542 12,391 13,051 13,276 13,055 12,633 13,276 YoY 8.5% 10.6% 11.8% 11.2% 7.0% 0.7% -2.3% -3.2% -3.9% -0.2% 3.1% 5.1% 11.2% -3.2% 5.1% Sales per employee (JPY'000) 7,129 5,677 6,661 6,234 7,159 6,020 6,845 6,148 6,989 5,385 6,927 5,967 25,679 26,142 25,155 YoY 2.3% -5.4% -1.6% -1.8% 0.4% 6.0% 2.8% -1.4% -2.4% -10.6% 1.2% -2.9% -1.6% 1.8% -3.8% Store staff (cumulative quarter average) 4,968 5,038 5,057 5,083 5,326 5,349 5,431 5,549 6,163 6,231 6,171 6,240 5,083 5,549 6,240 YoY 10.1% 11.3% 10.2% 9.6% 7.2% 6.2% 7.4% 9.2% 15.7% 16.5% 13.6% 12.5% 9.6% 9.2% 12.5% Source: Shared Research based on company data

119/122 Ryohin Keikaku / 7453

RCoverage LAST UPDATE: 2018.07.04 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

News and topics

October 2016 On October 18, 2016, the company announced that about 260 items including apparel, stationery, and food of Mujirushi Ryohin (which it is developing as a wholesale business) will be launched at roughly 6,300 Circle K and Sankus convenience stores nationwide from October 19, 2016. This is due to the merger of FamilyMart Co., Ltd. and UNY Group Holdings Co., Ltd., and will mean that 18,000 convenience stores will handle the company’s products, 1.5x more than when only FamilyMart stores sold its products.

Source: Shared Research based on company data

120/122 Ryohin Keikaku / 7453

RCoverage LAST UPDATE: 2018.07.04 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Profile Company Name Head Office 4–26–3, Higashi-Ikebukuro, Toshima-ku, Ryohin Keikaku Co., Ltd. Tokyo, Japan 170–8424

Phone Listed On +81–3-3989–4403 Tokyo Stock Exchange 1st Section Established Exchange Listing June 30, 1989 August 1, 1995 Website Fiscal Year-End https://ryohin-keikaku.jp/eng/ February IR Contact IR Web - https://ryohin-keikaku.jp/eng/ir/

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