Snow Peak, Inc. / 7816

R Snow Peak, Inc. / 7816

COVERAGE INITIATED ON: 2017.01.30 LAST UPDATE: 2020.07.14

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. Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

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.

Executive Summary ------3 Key financial data ------4 Recent updates ------5 Highlights ------5 Trends and outlook ------7 Business ------19 Description ------19 Outdoor business (development, manufacturing) ------26 Earnings model ------37 Strengths and Weaknesses ------41 Group companies ------42 Market and value chain ------43 Historical performance ------46 Income statement ------55 Balance sheet ------56 Statement of Cash flows ------59 Other information ------60 History ------60 News and topics ------61 Corporate governance and top management ------64 Top management ------64 Major shareholders ------65 Profile ------66

02/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Executive Summary

Core businesses

Snow Peak develops, manufactures, and sells high-end camping items: The company offers about 600 different ◤ products for campers, with main product categories including tents and tarps, cookware, tableware, and furniture. In FY12/14, it also entered the apparel business, which accounted for 12.1% of total sales in FY12/19. By region, Japan accounts for about 85% of sales while overseas operations (the US, Taiwan, and South Korea) account for about 15%.

Premium products: Snow Peak’s product prices are 2–5x higher than competitors’ products. The company says it ◤ differentiates itself with user-driven product development.

User-driven development: Snow Peak has handled car camping goods for half of the 60 years since its founding. The ◤ company explains that based on its philosophy of user-driven development, it provides customers with products its own employees would use. Product development managers handle all stages from planning through outsourced manufacturing, and conduct repeated product testing under real conditions. All products come with lifetime guarantees. This allows the company to generate long-selling products that sell for relatively high prices.

Relationship with customers: Snow Peak builds close relationships with customers by organizing camping events and ◤ running social media sites. We believe this enables the company to reflect customer feedback in its product development and improvement, as well as encourages customers to recommend products to other customers.

Metalworking techniques of Tsubame-Sanjo: Snow Peak develops products in-house but outsources production to ◤ factories in the Tsubame-Sanjo region, where the company is headquartered. Snow Peak explains that the area is home to numerous metalworking factories that have the people, equipment, and expertise necessary to manufacture metal products. In FY12/19, of the 600 camping goods the company handled, about half were hardware and tableware, and the bulk of these goods were manufactured in the Tsubame-Sanjo area.

Lower distribution costs due to direct transactions: Snow Peak sells directly to retailers rather than through wholesalers. ◤ It says this approach keeps distribution costs down and lowers in-store prices by around 25%.

Trends and outlook

In FY12/19, the company reported consolidated sales of JPY14.3bn (+18.1% YoY), operating profit of JPY924mn (+0.4% YoY), ◤ recurring profit of JPY963mn (+9.0% YoY), and net income attributable to owners of the parent of JPY425mn (-11.1% YoY).

In May 2020, the company has withdrawn its forecast for FY12/20, since the impact of the COVID-19 outbreak makes ◤ forecasting difficult at this stage. Prior to this, the company’s FY12/20 forecast was consolidated sales of JPY16.5bn (+15.7% YoY), operating profit of JPY1.0bn (+8.2% YoY), recurring profit of JPY1.0bn (+3.9% YoY), and net income attributable to owners of the parent of JPY700mn (+64.5% YoY).

Under its medium-term business plan, Snow Peak is targeting FY12/22 sales of JPY23.0bn (+61.3% versus FY12/19) and ◤ operating profit of JPY2.8bn (+203.0% versus FY12/19). In Japan, it is looking to grow its earnings by expanding its customer base with increased sales of entry-level goods such as the Entry Pack TT (launched in April 2018). Overseas, it is looking to promote understanding of the functionality and quality of its products and improve brand recognition by operating campgrounds and developing stores, with a focus on directly managed stores.

Strengths and weaknesses

Shared Research thinks Snow Peak’s strengths are differentiation through user-driven product development, access to Tsubame-Sanjo metalworking techniques, and low distribution costs due to cutting out wholesalers. We consider Snow Peak’s weaknesses to be the difficulty in differentiating designs despite prices being 2–3x higher than industry peers’, limited replacement demand due to high durability, and a low share of overseas markets amid a maturing domestic market. (See the Strengths and weaknesses section.)

03/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Key financial data

Income statement FY12/12 FY12/13 FY12/14 FY12/15 FY12/16 FY12/17 FY12/18 FY12/19 FY12/20 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Est. Sales 3,693 4,487 5,559 7,854 9,222 9,910 12,071 14,261 - YoY 13.6% 21.5% 23.9% 41.3% 17.4% 7.5% 21.8% 18.1% - Gross profit 1,774 2,222 2,710 3,606 4,649 4,931 6,433 7,720 YoY 10.6% 25.3% 21.9% 33.1% 28.9% 6.1% 30.5% 20.0% GPM 48.0% 49.5% 48.7% 45.9% 50.4% 49.8% 53.3% 54.1% Operating profit 37 113 231 568 853 -142 920 924 - YoY -38.7% 207.1% 104.2% 145.7% 50.1% - - 0.4% - OPM 1.0% 2.5% 4.2% 7.2% 9.3% - 7.6% 6.5% - Recurring profit 219 288 272 518 806 -39 883 963 - YoY 329.2% 31.8% -5.7% 90.3% 55.6% - - 9.0% - RPM 5.9% 6.4% 4.9% 6.6% 8.7% - 7.3% 6.8% - Net in co me 133 177 116 285 485 -251 479 425 - YoY 484.5% 33.6% -34.3% 144.6% 70.3% - - -11.1% - Net margin 3.6% 4.0% 2.1% 3.6% 5.3% - 4.0% 3.0% - Per share data Shares issued (year-end; '000) 88 88 1,760 7,040 7,040 14,080 15,480 17,490 EPS 25.9 34.6 22.3 43.3 34.7 -18.0 33.6 26.9 - EPS (fully dilut ed) ------33.2 26.7 Dividend per share 1.3 1.3 1.3 5.0 15.0 12.5 12.5 12.5 12.5 Book value per share 228.2 262.0 330.1 580.0 316.7 295.6 413.0 495.7 Balance sheet (JPYmn) Cash and cash equivalents 205 245 913 2,109 1,160 994 3,012 3,298 Total current assets 1,533 1,759 2,476 4,100 3,482 4,111 6,412 7,729 T angible fixed asset s 1,982 2,035 1,958 2,037 3,819 4,325 4,138 4,840 Investments and other assets 223 326 320 399 580 705 1,079 1,578 Int angible fixed asset s 227 243 237 307 419 702 589 767 Total assets 3,965 4,364 4,991 6,842 8,299 9,843 12,218 14,915 Accounts payable 103 94 57 123 127 172 316 319 Short-term interest-bearing debt 675 895 792 666 707 2,455 2,554 3,686 Tot al current liabilit ies 1,061 1,309 1,253 1,423 1,634 3,227 4,049 5,220 Long-term interest-bearing debt 1,173 1,119 908 605 1,382 1,522 796 30 Tot al fixed liabilit ies 1,736 1,712 1,573 1,354 2,223 2,465 1,784 1,143 Tot al liabilit ies 2,796 3,021 2,826 2,777 3,857 5,692 5,833 6,363 Net assets 1,169 1,342 2,164 4,065 4,442 4,150 6,385 8,552 Total interest-bearing debt 1,848 2,014 1,700 1,271 2,089 3,977 3,350 3,716 Cash flow statement (JPYmn) Cash flow s from operat ing act ivit ies 358 247 518 380 728 -287 1,437 496 Cash flow s from invest ing act ivit ies -237 -360 -223 -370 -2,387 -1,661 -556 -1,949 Cash flow s from financing act ivit ies -110 140 368 1,186 712 1,775 1,145 1,739 Financial rat ios ROA (RP-based) 5.5% 6.9% 5.8% 8.8% 10.6% - 8.0% 7.1% ROE 11.4% 14.1% 6.6% 9.1% 11.4% - 9.1% 5.7% Equit y rat io 29.5% 30.8% 43.4% 59.4% 53.3% 42.1% 52.1% 57.2% Source: Shared Research based on company data Note: Amounts in the table may differ from company data due to differences in rounding methods. Note: Net income refers to net income attributable to owners of the parent.

04/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Recent updates

Highlights On July 14, 2020, Shared Research updated the report following interviews with Snow Peak, Inc.

On May 14, 2020, the company announced earnings results for Q1 FY12/20; see the results section for details.

On the same day, the company announced that it was withdrawing its forecast for FY12/20.

Withdrawal of earnings forecast for FY12/20 In May 2020, the company has withdrawn its earnings forecast for FY12/20 due to the lack of visibility on the outlook. Prior to this, the company’s forecast for FY12/20 was consolidated sales of JPY16.5bn (+15.7% YoY), operating profit of JPY1.0bn (+8.2% YoY), recurring profit of JPY1.0bn (+3.9% YoY), and net income attributable to owners of the parent of JPY700mn (+64.5% YoY).

Reason for withdrawal of earnings forecast Against the backdrop of the spread of the COVID-19, the company anticipates a decline in the number of customers visiting its stores. Consumer sentiment has been impacted by people refraining from going out, and temporary closures are in place following the government’s declaration of a state of emergency in April 2020. The overall impact of this on the company’s financial position and business performance remains difficult to quantify at this stage.

The company has taken steps to strengthen its online sales operations, control variable costs through optimizing its approach to purchasing, lower fixed costs through reducing executive compensation, reinforce its internal structures, and closely scrutinize its investment projects. It has not revised its dividend forecast at this time.

Likewise, the company will also have to review its medium-term business plan announced in February 2020. Any numerical changes to the plan will be promptly disclosed as required.

On the same day, the company issued a statement on its COVID-19 response and the impact of this.

Domestic stores At the request of the national government and of local governments, the company is implementing the following measures at its directly managed stores, in-store channels, campgrounds, and online store.

Directly managed stores: The company temporarily closed 25 directly managed stores in the 13 prefectures designated as ▷ requiring “special vigilance” (Tokyo, Kanagawa, Saitama, Chiba, Osaka, Hyogo, Fukuoka, Hokkaido, Ibaraki, Ishikawa, Gifu, Aichi, and Kyoto) and in other municipalities where it was requested to close by local authorities. On May 9, 2020, the company reopened stores in areas that were not designated as requiring “special vigilance,” but as of May 14, 2020, 24 stores remained temporarily closed. In-store sales: Employees at 46 stores, including those in the 13 prefectures designated as requiring “special vigilance,” have ▷ been instructed to work from home for the time being. Campgrounds: Snow Peak’s headquarters campground (directly managed by the company) and six campgrounds nationwide ▷ operated under contract (a system whereby a private company takes on management responsibility of a public facility) are temporarily closed. From May 9, 2020, three campgrounds located in Niigata and Kochi prefectures have reopened. As of May 14, 2020, four campgrounds remained temporarily closed.

05/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Online store: The company’s online store is operating normally, with appropriate measures in place to prevent the spread of ▷ infection amongst staff.

Overseas stores

US: Since March 17, 2020, directly managed stores in New York and Portland have been temporarily closed. ▷ UK: The directly managed store in London has been temporarily closed since March 17, 2020. ▷ South Korea, Taiwan: The company’s stores are currently open, and have not been instructed to close. ▷

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

06/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Trends and outlook Quarterly trends and results Cumulative FY12/19 FY12/20 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Sales 2,827 6,863 10,532 14,261 3,105 YoY 22.5% 15.0% 19.5% 18.1% 9.8% Gross profit 1,471 3,659 5,696 7,720 1,698 YoY 22.1% 15.2% 20.5% 20.0% 15.5% GPM 52.0% 53.3% 54.1% 54.1% 54.7% SG&A expenses 1,476 3,188 4,906 6,796 1,693 YoY 17.6% 19.1% 21.3% 23.3% 14.7% SG&A rat io 52.2% 46.4% 46.6% 47.7% 54.5% Operating profit -6 472 790 924 5 YoY - -5.4% 15.9% 0.4% - OPM - 6.9% 7.5% 6.5% 0.2% Recurring profit -22 484 826 963 -14 YoY - 17.1% 23.3% 9.0% - RPM - 7.1% 7.8% 6.8% - Net income -46 339 512 425 95 YoY - 63.3% 43.9% -11.1% - Net margin - 4.9% 4.9% 3.0% 3.1% Quarterly FY12/19 FY12/20 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Sales 2,827 4,037 3,668 3,729 3,105 YoY 22.5% 10.4% 28.7% 14.6% 9.8% Gross profit 1,471 2,189 2,037 2,024 1,698 YoY 22.1% 11.1% 31.3% 18.6% 15.5% GPM 52.0% 54.2% 55.5% 54.3% 54.7% SG&A expenses 1,476 1,711 1,718 1,890 1,693 YoY 17.6% 20.4% 25.6% 28.7% 14.7% SG&A ratio 52.2% 42.4% 46.8% 50.7% 54.5% Operating profit -6 477 319 134 5 YoY - -13.1% 73.5% -43.9% - OPM - 11.8% 8.7% 3.6% 0.2% Recurring profit -22 506 342 137 -14 YoY - 0.4% 33.4% -36.0% - RPM - 12.5% 9.3% 3.7% - Net income -46 385 173 -86 95 YoY - 26.6% 16.7% - - Net margin - 9.5% 4.7% - 3.1% Source: Shared Research based on company data Note: Amounts in the table may differ from company data due to differences in rounding methods.

Because Snow Peak primarily sells car camping goods, sales tend to be higher in Q2 and Q3 (spring to summer) than Q4 and Q1 (autumn to winter).

Number of stores

FY12/18 FY12/19 (number of stores) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Directly managed stores 30 31 32 33 33 34 33 35 Japan 22 23 24 25 25 26 26 27 Overseas 8 8 8 8 8 8 7 8 In-store 72 67 68 70 73 64 67 75 Japan 65 60 61 63 66 63 66 74 Taiwan 7 7 7 7 7 1 1 1 Shop-in-shop 163 175 174 197 208 205 211 204 Japan 147 159 162 179 190 180 191 186 South Korea 16 16 12 18 18 25 20 18 Shop-in-shop - - - 223 239 245 242 241 Japan 223 245 238 Overseas 0 0 3 Source: Shared Research based on company data

07/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Sales by business (including overseas sales)

Cumulative FY12/19 FY12/20 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Total sales 2,827 6,863 10,532 14,261 3,105 YoY 22.5% 15.0% 19.5% 18.1% 9.8% Outdoor 2,104 5,630 8,650 11,210 2,400 YoY 21.3% 12.9% 17.0% 13.8% 14.1% Apparel 443 780 1,180 1,720 410 YoY 37.6% 28.3% 19.4% 18.1% -7.4% Urban Outdoor 26 80 130 170 30 YoY 4.0% 17.6% 42.9% 22.3% 15.4% Regional Revitalization 131 140 170 240 40 YoY -25.6% -28.9% -17.9% -7.0% -69.5% Business Solutions 122 230 400 650 160 YoY 510.0% 351.0% 376.2% 432.8% 31.1% Quarterly FY12/19 FY12/20 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Total sales 2,827 4,037 3,668 3,729 3,105 YoY 22.5% 10.4% 28.7% 14.6% 9.8% Outdoor 2,104 3,526 3,020 2,560 2,400 YoY 21.3% 8.4% 25.5% 4.2% 14.1% Apparel 443 337 400 540 410 YoY 37.6% 17.8% 5.3% 15.4% -7.4% Urban Outdoor 26 54 50 40 30 YoY 4.0% 25.6% 117.4% -16.7% 15.4% Regional Revitalization 131 9 30 70 40 YoY -25.6% -57.1% 200.0% 37.3% -69.5% Business Solutions 122 108 170 250 160 YoY 510.0% 248.4% 415.2% 557.9% 31.1% Source: Shared Research based on company data Note: Amounts in the table may differ from company data due to differences in rounding methods. Note: Business Solutions denotes sales from Snow Peak Business Solutions Inc., which is comprised of Camping Office sales and sales from the system development business of Heartis System & Consulting Inc. (acquired through absorption-type merger in January 2019).

Sales by region

Cumulative FY12/19 FY12/20 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Sales 2,827 6,863 10,532 14,261 3,105 YoY 22.5% 15.0% 19.5% 18.1% 9.8% Japan 2,296 5,790 8,960 12,040 2,560 YoY 28.0% 21.3% 26.4% 22.6% 11.5% US 155 350 510 730 160 YoY -10.9% -9.3% -12.1% -1.4% 3.2% Taiwan 113 210 290 370 130 YoY -33.1% -35.8% -32.6% -31.6% 15.0% South Korea 187 430 590 800 180 YoY 45.0% 14.1% 9.3% 9.3% -3.7% UK 20 YoY - Quarterly FY12/19 FY12/20 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Sales 2,827 4,037 3,668 3,729 3,105 YoY 22.5% 10.4% 28.7% 14.6% 9.8% Japan 2,296 3,494 3,170 3,080 2,560 YoY 28.0% 17.2% 36.9% 12.8% 11.5% US 155 195 160 220 160 YoY -10.9% -8.0% -17.5% 37.5% 3.2% Taiwan 113 97 80 80 130 YoY -33.1% -38.6% -22.3% -27.9% 15.0% South Korea 187 243 160 210 180 YoY 45.0% -2.0% -1.8% 9.4% -3.7% UK 20 YoY - Source: Shared Research based on company data Note: Amounts in the table may differ from company data due to differences in rounding methods.

08/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Sales by sales channel (Japan)

Cumulative FY12/19 FY12/20 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Sales 2,296 5,790 8,960 12,040 2,560 YoY 28.0% 21.3% 26.4% 22.6% 11.5% Directly managed stores 530 1,310 2,130 2,920 620 YoY - 17.0% 13.9% 12.7% 17.0% % of sales 23.1% 22.6% 23.8% 24.3% 24.2% E-commmerce (direct) 90 200 340 480 130 YoY - 33.3% 30.8% 29.7% 44.4% % of sales 3.9% 3.5% 3.8% 4.0% 5.1% E-commmerce (wholesale) 170 410 670 860 160 YoY - 57.7% 55.8% 56.4% -5.9% % of sales 7.4% 7.1% 7.5% 7.1% 6.3% In-store 450 1,420 2,180 2,930 590 YoY - 12.7% 25.3% 23.6% 31.1% % of sales 19.6% 24.5% 24.3% 24.3% 23.0% Wholesale dealers 780 2,030 3,050 4,060 900 YoY - 20.8% 27.6% 18.0% 15.4% % of sales 34.0% 35.1% 34.0% 33.7% 35.2% Quarterly FY12/19 FY12/20 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Sales 2,296 3,494 3,170 3,080 2,560 YoY 28.0% 17.2% 36.9% 12.8% 11.5% Directly managed stores 530 780 820 790 620 YoY - -30.4% 9.3% 9.7% 17.0% % of sales 23.1% 22.3% 25.9% 25.6% 24.2% E-commmerce (direct) 90 110 140 140 130 YoY - -26.7% 27.3% 27.3% 44.4% % of sales 3.9% 3.1% 4.4% 4.5% 5.1% E-commmerce (wholesale) 170 240 260 190 160 YoY - -7.7% 52.9% 58.3% -5.9% % of sales 7.4% 6.9% 8.2% 6.2% 6.3% In-store 450 970 760 750 590 YoY - -23.0% 58.3% 19.0% 31.1% % of sales 19.6% 27.8% 24.0% 24.4% 23.0% Wholesale dealers 780 1,250 1,020 1,010 900 YoY - -25.6% 43.7% -3.8% 15.4% % of sales 34.0% 35.8% 32.2% 32.8% 35.2% Source: Shared Research based on company data Note: Amounts in the table may differ from company data due to differences in rounding methods.

09/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Q1 FY12/20 results

Sales: JPY3.1bn (+9.8% YoY) ▷ Operating profit: JPY5mn (loss of JPY6mn in Q1 FY12/19) ▷ Recurring loss: JPY14mn (loss of JPY22mn in Q1 FY12/19) ▷ Net income*: JPY95mn (loss of JPY46mn in Q1 FY12/19) ▷ *Net income attributable to owners of the parent

The company has set out a three-year medium-term management plan up to FY12/21. It has emphasized its key priorities as accelerating overseas development and strengthening the experience-based business.

Sales were up YoY as domestic sales of outdoor goods steadily increased. Sales in Q1 increased YoY. Sales of existing businesses (including Apparel and overseas businesses) rose 13.0% YoY to JPY2.9bn. Sales of new businesses were JPY224mn (-19.6% YoY). Sales were robust and in line with the plan, notwithstanding the COVID-19 impact.

Q1 results were in line with the initial plan, but the company has withdrawn its full-year FY03/20 forecast because the impact of the COVID-19 pandemic on performance from Q2 onward remains uncertain (see below for the impact of the COVID-19 pandemic and company countermeasures).

Factors affecting sales Domestic sales: Existing businesses (including Apparel) Domestically, sales in the existing businesses were JPY2.3bn (+JPY14.6% YoY). Due to the mild winter, the camping season started earlier than usual, and entry-level products such as low-priced tents sold well. Q1 new member acquisitions numbered 16,454 (+22.8% YoY).

Trends by sales channel Directly managed sales channels (directly managed stores, the company’s e-commerce site) showed 22.7% growth YoY, and wholesale channels (in-store, regular wholesale, e-commerce wholesale) increased 17.0% YoY.

Sales at directly managed stores were JPY620mn (+17.0% YoY), rising on an increase in comparable store sales and ▷ contribution from new stores. Although customer visits to directly managed stores fell due to the COVID-19 situation, comparable store sales at directly operated stores increased 6.3% YoY to JPY554mn. Sales from the company's e-commerce site were up 52.5% YoY to JPY131mn. As noted below, e-commerce sales rose due to ▷ efforts to enhance online sales operations. In-store sales increased 31.1% YoY to JPY590mn, regular wholesale sales (i.e., excluding in-store and EC wholesale) rose 15.4% ▷ YoY to JPY900mn. EC wholesale sales decreased 5.9% YoY to JPY160mn. Sales were focused on daily necessities in light of the COVID-19 ▷ situation.

Sales of overseas business Overseas business sales increased 7.0% YoY to JPY545mn. Sales by country were as follows:

In the US, sales increased by 2.4% YoY to JPY160mn. Snowpeak worked to build its business for medium- to long-term growth ▷ with a new management system. The COVID-19 pandemic became serious in the US in March 2020, prompting the company to temporarily close two stores. However, sales rose YoY as Snowpeak succeeded in reworking its brand image based on a campfire motif. Previously in the US, the company sold small gas burners, titanium mugs, and other products through outdoor retail stores, and these products were placed in separate sales areas based on category. The company says this practice is responsible for its image as a brand of small precision equipment and titanium products, rather than as a comprehensive

10/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

camping equipment brand. Since FY12/19, Snowpeak has been working to renew its brand image by stepping up sales of products that embody its philosophy (which is centered on equipment for campfires) through product exhibitions in the US and other means. The market in Taiwan remains in an adjustment phase. However, sales were up 15.0% YoY to JPY130mn, underpinned by ▷ restructuring initiatives. South Korea experienced a 3.7% YoY decrease to JPY180mn against a strong comparative in Q1 FY12/19, which was boosted ▷ by strong sales of limited-edition products. Notwithstanding a trend toward boycotting of Japanese products and the impact of COVID-19, the company’s customer engagement initiatives paid off to the extent that sales were ahead of plan. In Europe, the company had JPY20mn of sales in the UK (no sales in FY03/19). It opened Snow Peak London St James’s, its first ▷ strategic location in Europe, in October the same year. The new wholesale system was put in place in Q1 with the business fully up and running. Sales were ahead of the company's plan up until February 2020 but tailed off in March as the COVID-19 situation intensified. As a result, overall sales were below the company's plan for Q1. In other countries, sales (mainly wholesale) increased by 3.5% YoY to JPY50mn. ▷

Sales: New businesses New business sales fell 19.6% YoY to JPY220mn. The breakdown by business was as follows.

Camping Office sales increased 31.1% YoY to JPY160mn. The use of camping equipment as office furniture and proposals ▷ aimed at work style reforms and outdoor training programs were well received. In the Urban Outdoor business, sales increased 15.4% YoY to JPY30mn. Sales at partner construction companies showed good ▷ growth. In the Regional Revitalization business, sales fell 69.5% YoY to JPY40mn. The impact of launching Snow Peak Tosashimizu ▷ Campground in Q1 FY12/19 dropped out. The company entered a new comprehensive regional revitalization collaboration

agreement with Hitoyoshi, Kumamoto Prefecture and Miyazaki Bank.

Factors affecting profit

Gross profit was JPY1.7bn (+15.5% YoY). The GPM was 54.7% (+2.7pp YoY). The company produces roughly 60% of its ▷ products overseas, mostly in China. In FY03/19, the company increased its GPM by transferring a part of its production in China to Vietnam, which has lower manufacturing costs. According to the company, it still has production in China that can be transferred to Vietnam, leaving room for improvement in GPM. A rise in the sales mix of relatively high-GPM directly managed sales (including e-commerce) also contributed to GPM increase.

 GPM by product was 55.6% for new outdoor products (+0.2pp YoY), 52.8% for existing outdoor products (+0.4pp YoY), and 51.5% for apparel (+0.9pp YoY). The above-mentioned transfer of production from China to Vietnam covered the manufacture of entry products in the existing outdoor product category.

 GPM by sales channel was 62% for directly managed sales (including e-commerce; +1.0pp YoY), 50% for wholesale sales (+1.0pp YoY), and 58% for overseas/other group companies (+7.0pp YoY). The aforementioned transfer of production increased the GPMs of all sales channels. Operating loss improved and turned profit as gross profit rose, despite an increase in SG&A expenses. SG&A expenses were ▷ JPY1.7bn (+14.7% YoY), reflecting an increase in base salaries for existing personnel in April 2019 and an increase in personnel

expenses for the operation of overseas locations.

11/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Although the company recorded operating profit, it reported a recurring loss. The company booked a non-operating income ▷ of JPY10mn in dividends received from Tiemco Ltd., with whom Snow Peak formed a capital and business alliance in April 2019, but the gain was offset by non-operating expenses of JPY29mn due to foreign exchange losses and other factors. Snow Peak recorded net income attributable to parent company shareholders. It benefited from a JPY23mn subsidy for Snow ▷ Peak Land Station Hakuba (recorded as an extraordinary gain), pushing net income into the black.

Impact of the COVID-19 pandemic Domestic stores At the request of the national government and of local governments, the company is implementing the following measures at its directly managed stores, in-store channels, campgrounds, and online store. As of June 2020, operations (all sales formats) have been resumed at all but a portion of stores.

Directly managed stores (27 stores as of end-December 2019): After the state of emergency declaration on April 7, 2020, the ▷ company temporarily closed 25 directly managed stores in the 13 prefectures designated as requiring “special vigilance” (Tokyo, Kanagawa, Saitama, Chiba, Osaka, Hyogo, Fukuoka, Hokkaido, Ibaraki, Ishikawa, Gifu, Aichi, and Kyoto) and in other municipalities where it was requested to close by local authorities. On May 9, 2020, the company reopened stores in areas that were not designated as requiring “special vigilance,” but as of May 14, 2020, 24 stores remained temporarily closed. In-store sales: (74 stores as of end-December 2019): After the state of emergency declaration on April 7, 2020, employees at ▷ 46 stores, including those in the 13 prefectures designated as requiring “special vigilance,” have been instructed to work from home. Campgrounds (six as of end-December 2019): Snow Peak’s headquarters campground (directly managed by the company) ▷ and six campgrounds nationwide operated under contract (a system whereby a private company takes on management responsibility of a public facility) are temporarily closed. From May 9, 2020, three campgrounds located in Niigata and Kochi prefectures have reopened. As of May 14, 2020, four campgrounds remained temporarily closed. Online stores: The company’s online store is operating normally, with appropriate measures in place to prevent the spread of ▷ infection amongst staff.

Overseas stores

US (two stores as of end-December 2019): Since March 17, 2020, directly managed stores in New York and Portland have ▷ been temporarily closed. UK (one store as of end-December 2019): The directly managed store in London has been temporarily closed since March 17, ▷ 2020. South Korea, Taiwan: The company’s stores are currently open, and have not been instructed to close. ▷

Countermeasures implemented in response to COVID-19’s impact on business performance The company has taken steps to enhance online sales operations, control variable costs through optimizing its approach to purchasing, lower fixed costs through reducing executive compensation, reinforce its internal structures, and closely scrutinize its investment projects. The company said these measures successfully reduced monthly sales needed to break-even from JPY1.2bn to JPY1.1bn.

12/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Suppressing variable expenses by optimizing procurement: Anticipating future trends in the outdoor products market, ▷ the company reviewed its purchasing of outdoor products and has established a purchasing system that can respond to both increases and decreases in demand. The company plans to limit the purchasing of apparel. Reducing fixed costs: Other than negotiating with the real estate owners to lower rental payments for closed stores, the ▷ company plans to reduce executive compensation.

See the Historical performance section for past quarterly and full-year results.

13/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Full-year company forecast FY12/20 company forecast The company has withdrawn its FY12/20 forecast in light of the COVID-19 situation. Its previous forecast was consolidated sales of JPY16.5bn (+15.7% YoY), operating profit of JPY1.0bn (+8.2% YoY), recurring profit of JPY1.0bn (+3.9% YoY), and net income attributable to owners of the parent of JPY700mn (+64.5% YoY).

Against the backdrop of the spread of the COVID-19 infection, the company anticipates a decline in the number of customers visiting its stores. Consumer sentiment has been impacted by people refraining from going out, and temporary closures are in place following the government’s declaration of a state of emergency in April 2020. The overall impact of this on the company’s financial position and business performance remains difficult to quantify at this stage.

The company has taken steps to enhance online sales operations, control variable costs through optimizing its approach to purchasing, lower fixed costs through reducing executive compensation, reinforce its internal structures, and closely scrutinize its investment projects. The company said these measures successfully reduced monthly sales needed to break-even from JPY1.2bn to JPY1.1bn.

Enhance online sales operations: The company has set out to enhance its content distribution on social networking sites ▷ (Instagram, Facebook, others) and engage in sales activities through a video conferencing system for point card members. It also started online customer support through a chat function on the company’s e-commerce site. During the COVID-related store closures, these measures helped increase the number of visits to the company’s e-commerce site versus pre-store closure figures by 17% and the purchase rate by 78%. Suppressing variable expenses by optimizing procurement: Anticipating future trends in the outdoor products market, ▷ the company reviewed its purchasing of outdoor products and has established a purchasing system that can respond to both

increases and decreases in demand. The company plans to limit the purchasing of apparel. Reducing fixed costs: Other than negotiating with the real estate owners to lower rental payments for closed stores, the ▷ company plans to reduce executive compensation.

The dividend forecast has not been revised as of May 2020. The annual dividend per share forecast for FY12/20 is JPY12.5 (JPY12.5 in FY12/19).

home. Campgrounds (six as of end-December 2019): Snow Peak’s headquarters campground (directly managed by the company) ▷ and six campgrounds nationwide operated under contract (a system whereby a private company takes on management

14/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

responsibility of a public facility) are temporarily closed. From May 9, 2020, three campgrounds located in Niigata and Kochi prefectures have reopened. As of May 14, 2020, four campgrounds remained temporarily closed. Online stores: The company’s online store is operating normally, with appropriate measures in place to prevent the spread of ▷ infection amongst staff.

Overseas stores

Store openings

Japan: The company had 26 directly managed stores in operation as of end-FY12/19. In May the company opened the Snow ▷ Peak Land Station Hakuba store (a large store with in-store dining area; Nagano Prefecture), and in June, it opened Snow Peak Land Station Harajuku store (Tokyo). As of June 2020, it is preparing to open the Snow Peak Kyoto Arashiyama store (tentative name; Kyoto). United States: For its US operations, the company forecasts FY12/20 sales of JPY1.3bn (+71.2% YoY). The rise in US sales ▷ reflects the planned opening its US headquarters (combination of head office and retail store) in June 2020. Referred to by the company as HQ4, the new headquarters store will prominently feature an open-pit fire to help convey the company’s world vision and establish its brand image as a manufacturer of camping-related good. In the past, the company’s sales operations in North America focused on selling individual items, such as its small gas burners and titanium mug-cups, through third-party retailers of outdoor goods. However, as this meant each item was displayed separately, Snow Peak had no way of establishing

its brand image as a full-line provider of camping-related goods, and was instead simply perceived as a seller of small precision products or titanium products. In the past, the company’s US operations also did not do enough camping events or social media networking that would allow it to interact with and become better known among consumers. Moving into 2020, with the opening of its new headquarters store the company is aiming to bring all the products it sells together under a single roof. Aided by a design that features a centralized display with an open-pit fire, the new headquarters store is aimed at creating an environment that will covey its world view and help increase sales of its entire lineup of camping-related goods. Other efforts aimed at increase US sales include a brand makeover and more camping-related events to help strength ties with its customers.

15/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Medium- to long-term outlook

The company updated its rolling medium-term business plan in February 2020. Covering the three-year period from FY12/20 through FY12/22, the new medium-term plan sets a FY12/22 target for consolidated sales of JPY23.0bn (+61.3% versus FY12/19) and operating profit of JPY2.8bn (+203.0% versus FY12/19).

Under its previous medium-term plan announced in February 2019, the company had been targeting FY12/21 consolidated sales of JPY18.5bn (+53.3% versus FY12/18) and operating profit of JPY2.8bn (+202.5% versus FY12/18). With the new medium-term plan, the company has effectively pushed back its previous operating profit target by one year.

In regard to its medium-term sales target, in Japan Snow Peak aims to increase its customer count by expanding domestic sales of its strategic product Entry Pack TT and other entry-level products. Overseas, it aims to increase sales of its products by promoting understanding of the functionality and quality of those products and improving brand recognition through the operation of campgrounds and development of stores, with a focus on directly managed stores.

Snow Peak expects gross profit to increase in line with sales, but the company also expects to improve its gross profit margin. During FY12/18, it raised its targeted gross profit margin for new products from 55% to 60%. It aims for new products (those developed within the last three years) to comprise 30% of sales. By raising the proportion of sales accounted for by new products, which have higher margins, the company aims to increase its overall gross profit margin on sales. It also plans to put more energy into campground operation and camping goods rental, since such services also have relatively high margins.

Snow Peak expects operating profit to grow along with gross profit. In FY12/20, the company sees increases in SG&A expenses outpacing sales and this pushing down its operating profit margin. However, from FY12/21 it expects to keep growth in SG&A expenses in check, allowing its operating profit margin to rise. In December 2018, Snow Peak announced that it would make system development firm Heartis System & Consulting Inc. a consolidated subsidiary and then merge it with another of its subsidiaries. Shifting system development in-house from FY12/19 will help the company control SG&A expenses.

Targets under new medium-term business plan (announced February 2020)

Targets FY12/19 FY12/20 FY12/21 FY12/22 (JPYmn) Act. Est. Targets Targets Sales 14,261 16,500 19,500 23,000 YoY 18.1% 15.7% 18.2% 17.9% Operating profit 924 1,000 1,800 2,800 YoY 0.4% 8.2% 80.0% 55.6% OPM 6.5% 6.1% 9.2% 12.2% Source: Shared Research, based on company data

Targets under previous medium-term business plan (announced February 2019)

Targets FY12/18 FY12/19 FY12/20 FY12/21 (JPYmn) Act. Est. Targets Targets Sales 12,071 14,000 16,000 18,500 YoY 21.8% 16.0% 14.3% 15.6% Operating profit 926 1,000 1,800 2,800 YoY - 8.0% 80.0% 55.6% OPM 7.7% 7.1% 11.3% 15.1% Source: Shared Research, based on company data

Major initiatives from FY12/20 to FY12/22 Expand sales of entry-level goods, especially strategic products such as Entry Pack TT and Entry 2-Room Elfield tent In addition to new store openings, Snow Peak is also looking to capture entry-level customers with its strategic products such as its Entry Pack TT and Entry 2 Room Elfield tent. The company launched Entry Pack TT (at unit price of JPY49,800 excluding tax), a combination set including Vault (an entry model tent priced at JPY29,800 per unit excluding tax) and a tarp, in April 2018. Entry Pack TT costs JPY9,800 less than the tent and tarp purchased separately, and the company thinks the lower price will be effective in appealing to entry-level customers. In November 2018, the company rolled out its new Entry 2-Room Elfield tent. Priced at JPY79,800 (excluding tax), the Entry 2-Room Elfield tent provides a sleeping area like regular tents and a separate area offering

16/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

sheltered living space. Sales of this new tent have been strong. In FY12/19, sales of entry-level camping products totaled JPY1.3bn (+17.4% YoY), with sales of Entry 2-Room Elfield tent accounting for roughly half of this figure.

Snow Peak has been steadily rolling out new entry-level products since FY12/18, starting in April 2018 with Entry Pack TT (a tent and tarp set) and Vault (an entry-level tent). This was followed in November 2018 by the introduction of its new Entry 2 Room Elfield tent, which provides an area for sleeping (like regular tents) and a separate sheltered living area, and in June 2019 by Entry Pack TS (an entry-level tent and shelter set). Along with these new products, the company’s entry-level product lineup includes an “amenity dome” for its tents.

The company expects the gross margin on its Entry Pack TT to be 45% in contrast to the 20% margin on the Amenity Dome, the previous entry model. According to the company, the higher margin reflects structural simplification and changes in the subcontractors used for manufacturing.

Expanded overseas development Snow Peak made its first move overseas in 1996, selling outdoor goods in the US market. The company is currently selling products in 25 different countries around the world. Starting in FY12/19, the company is also moving to open directly managed stores in the US and Europe and, as it is already doing in Japan, will also work to improve consumer recognition of the functionality and quality of its products by establishing company-operated campgrounds and opening new stores (primarily directly managed stores).

In conjunction with this effort to build up its overseas presence, in FY12/18 Snow Peak announced it planned to establish local subsidiaries in England (London) and the US (Portland, Oregon).

The company’s first directly managed retail store in the US was opened in Portland, Oregon, in 2013. This was followed by the opening of its flagship apparel story in New York City’s Soho neighborhood. Still, the majority of the company’s sales in the US are derived from its wholesaling operations.

In July 2019, the company established wholly owned subsidiary Snow Peak USA, Inc. (capitalization of USD9mn or approximately JPY970mn) to lead its push into the US market, naming current company CEO Toru Yamai as president of the new overseas subsidiary. Snow Peak plans to open a new headquarters in Portland, Oregon, in June 2020. The facility will house the US subsidiary’s head office and a directly managed store, which will include an in-store cafe. Going forward, plans call for Snow Peak USA to open more directly managed stores and otherwise work to expand its business by developing campgrounds, further expanding its product lineup, and establishing deeper connections with outdoor equipment users through its sponsorship of the Snow Peak Way USA outdoor camping festival and other outdoor camping events. In addition, the company is considering to develop shop-in-shop stores similar to those used in Japan to help sell more Snow Peak brand products through third-party outdoor goods retailers in the US.

Working from its new base in London, starting in FY12/19 the company plans to build up its presence in Europe, especially in the apparel market. In FY12/19, the company opened an e-commerce website in the UK and also opened a directly managed store in London (marking its first directly managed store in Europe).

Long-term goals The company believes that with the stresses of modern society, people are losing touch with nature. In developed countries, the company sees a growing desire to rediscover natural and human connections, which it thinks can be achieved through more exposure to nature and communication with family and friends, and it sees helping people reconnect with nature and with the people around them as its social mission. Leveraging its main business of developing, manufacturing, and selling camping goods, the company hopes to achieve this aim over the long term by operating campgrounds and developing other business lines including its Urban Outdoor business, its Business Solutions business, and its Camping Office business. Shared Research thinks this could lead to the company’s long-term expansion into various domains.

17/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Snow Peak cites two studies by the Forestry and Forest Products Research Institute indicating that exposure to nature can help boost immunity and lower stress. The first study, entitled “A Clarification of the Physiological Effects on People of Exposure to Forest Environments,” suggests that spending time in forest atmospheres helps activate NK cells (“natural killer” cells, a type of lymphocyte and a component of the immune system). The second study, “A Scientific Clarification of the Physiological Effects of Forest Therapy,” indicates that forest environments are better than cities at stimulating parasympathetic nerve activity, which increases as people relax, and lowering sympathetic nerve activity, which drops as people relax. This study also points to a decreased concentration of cortisol (present in saliva), a representative stress hormone when in forests.

18/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Business

Description Develops, manufactures, and sells high-end items for camping enthusiasts Snow Peak was founded in 1958 by Yukio Yamai, father of Toru Yamai, the current CEO. In 1986, the company began developing, manufacturing, and selling high-end camping items for car camping enthusiasts, and this business grew, sparked by the Japanese car camping boom in the early 1990s. The company develops tents and tarps, cookware, and tableware, and outsources most production to other factories. Snow Peak employees explain and sell the company’s products to customers at directly managed stores and sporting goods stores.

Car camping is a camping style that gained popularity in Japan in the late 1980s. Enthusiasts drive their vehicles to campsites and set up tents and tarps alongside their vehicles to enjoy living in nature. Car camping locations are divided into sections with space for a tent and parking. According to the Japan Car camping Federation, Japan has more than 1,300 car camping sites. Some locations have both tent sites and cabins (cottages, bungalows). Most are equipped with flush toilets and hot showers. Some camp sites even rent out tents, sleeping bags, stoves, and dishes.

Items considered essential for car camping include tents, tarps, sleeping bags, stoves, and tables. Tents are used as sleeping rooms and tarps provide living spaces, allowing each site to be divided into separate rooms.

Premium products According to the company, Snow Peak’s products are known for their quality, such as durability and sturdiness, reflecting the ◤ commitment of the product development managers.

Because of the company’s insistence on quality and certain production methods, production costs are high, so it expects to ◤ earn an appropriate margin. Shared Research believes these factors differentiate Snow Peak’s products from its competitors’ and lead to support from core customers.

Snow Peak’s products are designed to be part of larger systems and complement other products, stimulating demand. ◤

User-driven development, leveraging Tsubame-Sanjo metalworking techniques Shared Research believes Snow Peak differentiates its products through product development and manufacturing.

Product development managers are camping enthusiasts. ▷ They reference their experiences to oversee (from planning and design through production) development of products they ▷ would use. Products are repeatedly tested in actual conditions. ▷ Most manufacturing is outsourced; company resources are concentrated on development. ▷ The company leverages production expertise dating back to its founding and gained through in-house production. ▷ It uses Tsubame-Sanjo metalworking techniques in production. ▷

Sales through directly managed stores and distributors

Sales are mainly through distributors ▷ Sales channels: directly managed stores, in-store format, shop-in-shop format ▷ In principle, no discounting ▷

Customers mainly in 30s and 40s. “Snowpeakers” (fans of Snow Peak products) make up 1/4 of sales

Snow Peak’s customers are typically in their 30s and 40s with children. ▷ Roughly 6–7% of the company’s customers are platinum or black members (spend JPY300,000 or more on Snow Peak ▷ products per year) and account for 20–30% of sales.

19/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Outdoor business (products)

Snow Peak develops, manufactures, and sells high-end camping items to car camping enthusiasts. Products include tents, tarps, sleeping gear (sleeping bags), fire pits (open-air grills), furniture (tables and chairs), kitchen systems, cookware (pots, cooking utensils), tableware (utensils), heaters (stoves), and lighting gear (lanterns).

Representative company products

Tent Tarp Shelter Stake, hammer, Sleeping bag, pillow Mat and sheet rope, pole

Furniture Lantern and light Iron grill table (IGT) Stove Fireplace BBQ box

Cookware Cutlery and Tableware Carry case and Field gear Bike chopsticks container

Dog lead Soft cooler Camera case

Source: Company data

Tents and tarps account for more than 40% of sales As of December 2019, Snow Peak offered around 600 products. In FY12/15, tents and tarps accounted for more than 40% of sales, with cookware, tableware, and furniture making up 8% each. The company began manufacturing apparel in the fall/winter 2014 season, and apparel sales accounted for 12.1% of total sales in FY12/19 (versus 12.0% of total sales in FY12/18).

Key features of Snow Peak products are high prices for quality (premium products), products designed as part of a system motivating additional purchases, and a lifetime guarantee on all products.

Premium products Prices 2–3x higher than competitors’ products Competitors in the camping goods category include Coleman Japan Co., Ltd. (a subsidiary of Coleman Company, Inc., of the US), Logos Corporation (unlisted), Montbell Co., Ltd. (unlisted), and Shinetsu Works Corporation (unlisted; manages the Uniflame brand). Competitors in outdoor products, which includes outdoor apparel, are Goldwin Inc. (TSE1: 8111) and US-based Patagonia, Inc. (unlisted).

20/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Competitors

Company Description Snow Peak Handles general camping goods. Manufactures and sells quality products at higher prices than competitors. Coleman Japan Handles general camping goods. Prices are lower than Snow Peak’s. Targets mass consumers.

Montbell Founded by mountaineer Isamu Tatsuno. Sells mountaineering equipment and outdoor apparel.

Logos Corporation Targets entry-level customers, particularly younger generations.

Shinetsu Works Like Snow Peak, employs Tsubame-Sanjo metalworking techniques. Particularly competitive in cookware. Lower prices than Snow Peak’s products. Source: Shared Research based on company data

Snow Peak’s products are high in both price and quality. Although it offers entry-level tents at a strategically low price, other products are priced at around 2–3x competitors’ items, as the following figure illustrates. Production costs are high because of the company’s insistence on quality and certain production methods for its products, and Snow Peak expects to earn an appropriate margin (see the Outdoor business [development, manufacturing] section for details). Shared Research believes that these factors differentiate Snow Peak’s products from its competitors’ and are underpin its support from a core customer base, leading to sales growth despite the high prices.

Snow Peak’s positioning versus competitors

（Price range）

Premium camping goods and outdoor apparel Snow Peak

Townwear and outdoor apparel THE NORTH FACE（Goldwin） patagonia Outdoor apparel and mountaineering equipment mont-bell Entry-model camping goods LOGOS

Low-priced camping goods for general public Coleman

Townwear Outdoor apparel Mountaineering Camping goods （Use） equipment Source: Shared Research

21/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Pricing by product category (excluding tax)

Snow Peak Coleman Logos Corporation Montbell

Tents Product Dock Dome Pro. 6 Weathermaster 4S Dome neos AL PANEL V-DOME — (high-end model) name Notos/300 WXL-AI

Specs Indoor floor size: Indoor floor size: Indoor floor size: — 290x290cm 300x300cm 335x420cm

Price JPY149,000 JPY90,727 JPY44,000 —

Tarps Product HD Tarp Shield Hexa Evo WeatherMaster® Hexa Gran Basic BIG Octagon Big Tarp HX name Pro. Tarp/L Tarp-BJ

Specs Size: 640x565cm Size: 530x465cm Size: 555x500cm Size: 500x480cm

Price JPY39,800 JPY43,454 JPY24,900 JPY21,000

Sleeping gear Product Grand Often Single 1000 Tasman Camping Ultracompact Alieva -15 Burrow Bag #0 name Mummy/L-15

Specs Low temperature rating: Low temperature rating: Low temperature rating: Low temperature rating: –15°C –15°C –15°C –14°C

Price JPY52,800 JPY12,545 JPY20,900 JPY20,500

Furniture Product One Action Bamboo Table Natural Wood Roll Table Logos Life Table 9060 Folding Table (table) name /90

Specs Size: 72x91cm Size: 90x70cm Size: 90x60cm Size: 71x70cm

Price JPY32,000 JPY13,455 JPY6,100 JPY14,900

Fire pit (open-air Product Takibidai M Fire Disk™ Logos the Pyramid Master Folding Fire Pit grill) name Specs Size: 350x350mm Size: 450xH230mm Size: 510x510mm Size: 430x220mm φ Weight: 3.5kg Weight: 1.6kg Weight: 9.6kg Weight: 4.1kg Material: Stainless steel Material: Stainless steel Material: Stainless steel Material: Stainless steel (1.5mm thick)

Price JPY12,600 JPY6,345 JPY54,000 JPY16,900-

Cookware (Dutch Product Japanese Steel Dutch Dutch Oven SF (12-inch) SL Dutch oven, 12-inch, — oven) name Oven 26 deep Specs Size: 268xH120mm Size: 290xH120mm Size: 295xH120mm — φ φ φ Weight: 7.9kg Weight: 10kg Weight: 11kg Feature: Super-thin cast material using Tsubame-Sanjo technology

Price JPY25,800 JPY12,545 JPY13,600 — Source: Shared Research based on company data

Backing up high prices with quality (i.e., high-end tents) The company sells entry-level tents at a strategically low price to match competitors’ pricing. These tents are priced low considering their specifications, but Snow Peak’s high-end tents are priced at around double those of its competitors. Snow Peak’s tents have a frame design that makes them water and wind proof, which cannot be easily measured quantitatively.

Product specifications for tents compare flysheet water pressure resistance and frame materials, indicating resistance to wind and rain, and durability. The following table suggests no major differences between Snow Peak’s products and its competitors’ in terms of flysheet water pressure resistance and frame material. All of the companies in the table use polyester taffeta as flysheet material, and the high-end models have sheet water pressure resistance of around 3,000mm. Snow Peak’s product differs somewhat in having a 1,800mm minimum. For frame materials, all of the companies use high-hardness extra super duralumin (an aluminum alloy) that is lightweight.

According to company materials, flysheet water pressure resistance of 1,500mm makes the tent watertight even in heavy rain.

22/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Differentiating factors other than flysheet water pressure resistance and frame material include product design, optional ad-on products that can connect to the tent, the volume of mesh material used to permit ventilation, and after-sales systems such as for repairs. Snow Peak’s tents demonstrate a major difference from competitors in frame construction: Snow Peak’s Dock Dome Pro. 6 uses two short intersecting body frame members and two long intersecting members, supporting the tent at seven intersecting points. Shared Research believes this design makes Snow Peak’s tents sturdier than its competitors’. By keeping heights low and applying a design that can handle strong winds, tents are highly resistant to wind and rain. Coleman Japan’s Weathermaster4S Dome Notos/300 and Logos Corporation’s neos AL PANEL V-DOME WXL-AI each have four frame members, the same number as the Dock Dome Pro. 6, but the two main intersecting poles each meet with two separate support poles, meaning that the tent is supported by only five intersecting points. As tents of Coleman Japan and Logos Corporation are relatively tall, Shared Research thinks it would be more susceptible to wind. Montbell’s tent lineup includes high-end tents for mountain camping but has no high-end tents for car camping.

High-end tent models

Snow Peak Coleman Japan Logos Corporation

Product name Dock Dome Pro. 6 Weathermaster 4S Dome neos AL PANEL V-DOME Notos/300 WXL-AI

Frame material A7001 extra super Aluminum alloy 6061 aluminum, fiberglass duralumin

Frame construction Two short body frame Two main poles, two Two main frame members, members, two long body support poles two inner ridge frame frame members members

Flysheet water 3,000mm 3,000mm 2,000mm pressure resistance 1,800mm minimum*

Room size 290x290cm 300x300cm 335x420cm

Room height 160cm 190cm 165cm

Weight 12.8kg 14.5kg 9.0kg

Price (excl. tax) JPY149,000 JPY90,727 JPY44,000 Source: Shared Research based on company data *Minimum indicates the minimum guaranteed water pressure resistance of the tent material at all points. Average values are typically given, so water pressure resistance does not meet indicated product specs in some places of the fabric.

Comparison of high-end tent models

Snow Peak Dock Dome Pro. 6 Coleman Japan Weathermaster4S Dome Notos/300

Logos Corporation neos AL PANEL V-DOME WXL-AI Source: Company images

23/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Even for products other than high-model tents, the company’s product development managers are committed to maintaining quality. Compared with similar products by competitors, differences in materials, construction, and production methods make Snow Peak’s products more lightweight, sturdy, and easy to use.

Snow Peak prices its entry-level tents to be comparable with competitors’. The Snow Peak Vault has a minimum flysheet water pressure resistance of 1,800mm and uses extra super duralumin as frame material. The company sells Vault as a standalone product, but it aims to capture new customers by focusing on the Entry Pack TT (JPY49,800 excluding tax), which is a set that combines Vault (JPY29,800 excluding tax) and Amenity Tarp Hexa L Set (JPY26,800 excluding tax).

Snow Peak’s products are designed to be part of a system, which allows the company to recommend additional products to customers and cultivate its customer base. This is part of the company’s strategy to expand earnings opportunities.

Entry-level tents

Snow Peak Coleman Japan Logos Corporation Montbell

Product name Vault BC Cross Dome/270 Logos Navaho Tepee 300 Chronos Dome 4

Frame material Extra super duralumin Fiber-reinforced plastic 7075 extra super duralumin 7001 extra super duralumin (FRP), steel

Frame construction Three body frame members Two roof poles One frame member One set of poles

Flysheet water pressure 1,800mm minimum* 1,500mm 1,600mm 1,500mm resistance

Room size 285x210cm 270x270cm 300x250cm 240x210cm

Room height 150cm 175cm 180cm 123cm

Weight 7.9kg 10kg 4.0kg 3.4kg

Price (excluding tax) JPY29,800 JPY20,727 JPY21,800 JPY35,500 Source: Shared Research based on company data *Minimum indicates the minimum guaranteed water pressure resistance of the tent material at all points. Average values are typically given, so water pressure resistance does not meet indicated products specs in some places.

Tent and tarp sets

Snow Peak Coleman Japan Logos Corporation Montbell

Product name Entry Pack TT Tough Wide Dome IV/300 No set available No set available Hexa Set

Set content Tent: Vault (JPY29,800) Tent: Tough Wide Dome Tent: Logos Navaho Tepee Tent: Chronos Dome 4 (if no set, entry-level Tarp: Amenity Tarp Hexa L IV/300 (JPY40,727) 300 (JPY21,800) (JPY35,500) tent and tarp) Set Tarp: XP Hexa Tarp/MDX Tarp: Logos Navaho Tepee Tarp: Big Tarp HX (JPY26,800) (JPY16,800) Bridge Hexa Tarp-AE (JPY21,000) (JPY15,000)

Price (excluding tax) JPY49,800 JPY54,363 Total of JPY36,800 Total of JPY56,500 Source: Shared Research based on company data

Designing products as part of a system Snow Peak’s products are designed to be part of a system. Tents and tarps connect to each other, and tables, chairs, and cookware can be added on. This interconnectedness encourages customers to purchase a range of Snow Peak camping goods. The company says that owning a lineup of relatively high-priced Snow Peak camping goods has become a status symbol.

Not only do customers need to buy basic optional products to make a tent comfortable, such as an inner mat, but by buying add on products they can make the space even more comfortable. For example, the Dock Dome series Living Shell Long Pro shelter (the series with the company’s highest specs) connects with Snow Peak’s pro model dome tent. Connecting the two provides a living space plus a sleeping area.

24/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Dock Dome Pro. 6 and Living Shell Pro: Optional product uses and prices Product Use Price (excl. tax) Dock Dome Pro. 6 Six-person dome tent JPY149,000 Dock Dome Pro. 6 Shield Roof Optional product to keep sunlight and rain out of the tent JPY7,800 Dock Dome Pro. 6 Inner Mat Inner mat JPY25,800 Living Shell Long Pro Large tent that expands living space JPY173,000 Living Shell Long Pro. Shield Roof Optional product to keep sun and rain out of the tent JPY12,500 Living Shell Long Pro. Inner Mat Inner mat JPY25,000 Source: Company data

Dock Dome Pro. 6 Dock Dome Pro. 6 connected to Living Shell Long Pro

Source: Company data For the open-air grill, various add-ons are sold separately: a tool set containing fire tongs, a shovel, and poker, as well as a base plate, storage case, table, grilling bridge, and grilling mesh and plate. All of these optional products are related.

Open-air grill: optional products and prices

Product Use Price (excl. tax)

Open-air grill stand L Stand for the open-air grill JPY15,600

Open-air grill stand base plate L Plate to secure the open-air grill stand JPY2,800 Connector to provide different cooking options, including using a grill mesh Open-air grill bridge L JPY5,400 and grill plate, by connecting to the open-air grill stand

Open-air grill base plate stand L/M (for Plate to minimize heat damage to grass from the open-air grill JPY3,300 open-air grill stand L and M)

Dustpan pot Square-sided pot shaped like a dustpan JPY11,300

Jikaro table Table to surround the open-air grill and flame JPY29,800

25/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Components of an open-air grill Dustpan pot Open-air grill bridge L

Open-air grill stand L

Open-air grill stand L base plate

Open-air grill base plate stand L/M

Source: Company images

Lifetime guarantee on all products Snow Peak’s products all come with a lifetime guarantee. If any product loses the function because of a manufacturing defect, the company repairs that product free of charge. In other instances, products are repaired at appropriate prices. (Repairs are not possible when materials deteriorate due to aging, when products are severely damaged during use, or for products with stated lives.) The company books the costs needed to fulfill its lifetime guarantee as expenditures by reversing the provision for product warranties. Each year, Snow Peak records a provision for product warranties as a liability.

Snow Peak has staff at headquarters that repair sewn products, accelerating after-sales services. The company also trains managers of Snow Peak stores around Japan to handle repairs that are simple and occur frequently, allowing for same-day, in-store repair.

Outdoor business (development, manufacturing)

Shared Research believes Snow Peak’s dedication to quality and production methods in development and production gives its products a competitive edge, and is a key reason for support by its core customer base.

Development Product development features Snow Peak’s product development is conducted while looking two years ahead, and each year the company develops 30–50 items. Products are improved through monthly creative reviews based on development proposals. Reviews are attended by the CEO and several employees. Snow Peak’s development uses a user-driven approach, and one person remains in charge of development from planning through to production outsourcing. Testing is repeated in realistic environments where products will be used.

Product development managers who are camping enthusiasts develop products they would use Snow Peak has product development managers who are camping enthusiasts, and most studied art in school. Snow Peak’s management philosophy is “in our customers’ shoes.” Accordingly, the people in charge of developing products are camping enthusiasts who develop products they themselves would use. The company does not develop products based on comparison with rivals or market analysis.

26/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

The company mainly takes a user-driven approach to development, and product development managers share the view point of customers. In addition to developing, manufacturing, and selling camping goods, Snow Peak operates five campgrounds: at its headquarters in Sanjo, Niigata Prefecture; in Mino, Osaka; in Hita, Oita Prefecture; in Obihiro, Hokkaido; and in Ochi, Takaoka District, Kochi. At each campground, the company holds regular “Snow Peak Way” events to interact with customers. The events give Snow Peak a chance to listen to customer opinions, and because development takes place at offices at the camps, Shared Research thinks these events allow the company’s development to be user-driven.

Product development managers oversee planning through production outsourcing At Snow Peak, one person takes charge of developing each product, from initial planning and design until the product goes onto the production line at an outsourced factory. For outdoor products, the company believes that integrated function and design are key, and having one person involved in all processes of a product helps it develop products that integrate function and design.

One example of the integration of function and design is Snow Peak’s high-end peg (the Solid Stake). Pegs are hammered into holes in the ground to hold tents’ ropes fast. Competitors’ products are mostly of aluminum or plastic, so tend to bend when hammered into hard ground. The Solid Stake, made of forged steel, is hard enough to be pounded into an asphalt surface. The surface of the Solid Stake that meets a hammer’s head when pounded is circular, and a round hole is provided to make the stake easier to pull from the ground. Furthermore, hooks help keep stakes fast in the ground.

Solid Stake #30 Duralumin peg Solid Stake functions and design

Circular head cylindrically for hammering Holes for pulling stakes out of the ground Hook fastened into ground keeps stake from rotating and rope from slipping out Source: Company data

Snow Peak requires that product development managers have design skills, enjoy the outdoors, and understand technology. The company says it recruits people based on the first two conditions, as the understanding of technology can be accumulated while working with collaborating factories and absorbing their development knowhow. The people in charge of development at Snow Peak commute to factories in Tsubame-Sanjo to learn manufacturing techniques from the craftsmen there and accumulate knowhow.

Product optimization by repeated testing in real conditions Camping goods must have the capability and safety to withstand sudden changes in the natural environment, and Snow Peak’s product development includes making sample products and taking them out into the field. Repeated testing helps confirm product strength and utility. This process sets the standard for products that can be used to be comfortable outdoors.

27/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

When developing stainless steel pots for camping, for example, the company made pots of various diameters and thicknesses, and then subjected them to harsh conditions, like heating them in open-air grills. The company found that pots with a diameter of more than 150mm needed to be at least 0.5mm thick, which became a company standard.

Product development results Through the development process described above, the company has developed new products, earned numerous Good Design Awards, and extended product life. Differences in product materials, structures, and processing methods make Snow Peak’s products more lightweight, sturdy, and easier to use than competitors’ products. Snow Peak’s products are sold at higher prices and designed to have a long life.

Developing new products Snow Peak’s product development approach has led to multiple unique products. Examples include high-end tents, micro stoves, and high-end pegs.

High-end tents: When Snow Peak began developing and selling car camping goods in 1986, tents generally sold for either ▷ JPY9,800 or JPY19,800, but Snow Peak developed a tent that sold for JPY168,000. Whereas other tents often leaked and were buffeted by wind, Snow Peak’s tents incorporated materials and technologies that made them resistant to wind and rain, and were said to be durable enough to use 50 times a year for five years. Snow Peak’s in-house forecast was that it would sell zero tents in the first year, but it ended up selling more than 100. Micro stoves: In 1998, Snow Peak came out with a single-burner gas stove it claimed as the “world’s smallest, lightest, and ▷ most compact.” In 1999, this stove was named “EDITOR’S CHOICE” by Backpacker, an outdoor magazine. High-end pegs (Solid Stake): Solid Stake is the brand name of Snow Peak’s pegs. Pegs are hammered into the ground to ▷ hold tents’ ropes fast. Competitors’ products are mostly made of aluminum or plastic, so they tend to bend when hammered into hard ground. Being made of forged steel, the Solid Stake is hard enough to be pounded into an asphalt surface. The Solid Stake #30, a 30mm peg, is priced at JPY420 (excluding tax), eight times the price of competitors’ aluminum pegs.

Good Design Award* received for 77 Snow Peak products Snow Peak offers some 600 products. The company is confident in its ability to develop products that other companies cannot imitate. Between 1990 and 2019, Snow Peak won Good Design Awards for 77 products. The company commented that three of its products entered in the Good Design Awards did not win an award, but they have won other prestigious overseas awards.

Established in 1957, the Good Design Award is Japan’s only comprehensive design evaluation and commendation system. The award is sponsored by the Japan Institute of Design Promotion. Each year, some 4,800 products from a wide range of fields are submitted, with around 1,400 receiving awards. Over 61 years, 45,000 products have received awards.

Extending product life Many of Snow Peak’s products are long lived: its portable chopsticks and open-air grill have been on sale for more than 20 years, and its FD Chair Wide has been selling continuously for about 30 years. Because of a user-driven development approach that assigns camping enthusiasts as product development managers, it may take several years for a product to catch on among general consumers.

Manufacturing Manufacturing features Snow Peak outsources most of its production, uses Tsubame-Sanjo metalworking techniques, produces its own series of open-air grills, and accumulates and retains manufacturing expertise.

Most production outsourced Snow Peak handles its own product development, but the only product it manufactures internally is the open-air grill series, outsourcing all other production. The company outsources most of its manufacturing to factories in the Tsubame-Sanjo region

28/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

where it is headquartered (near the cities of Sanjo and Tsubame in central Niigata Prefecture). According to Snow Peak, Tsubame-Sanjo has maintained a metalworking tradition since the Edo era and is home to numerous metalworking factories with the personnel , equipment, and expertise necessary to manufacture its metal products.

The Economic Census for Business Activity conducted by the Ministry of Economy, Trade and Industry in 2016 indicated that Sanjo City had 259 establishments (with at least four employees) manufacturing metal products, and Tsubame City 367. By leveraging the advanced metalworking techniques found in the Tsubame-Sanjo region, Snow Peak produces high-quality products that are highly functional. The company has outsourced production to seven principal companies, and maintains relations with more than 200. In FY12/19, of the 600 camping goods the company handled, about half were hardware and tableware, and the bulk of these goods were manufactured in the Tsubame-Sanjo area.

The history of blacksmiths in Tsubame-Sanjo dates back to 1625–1628. Seibei Otani, a local magistrate, invited from the city of Edo some blacksmiths specializing in the forging of nails to teach farmers in his area how to make wakugi (Japanese nails). He reasoned that this business might provide an alternative source of income to farmers struggling to make a living because of frequent flooding. As imports of Western nails caused wakugi production to drop off sharply in the Meiji era (1868–1912), local craftsmen turned their skills to other types of metalworking.

During the Edo era (1603–1868) Tsubame acquired the skills to make Tsuchiki copperware (formed by hammering out plates of copper into thinner sheets and then shrink-molding them into desired shapes). Using the excellent copper produced from nearby mountains, craftsman also used their expertise for other types of metalworking, producing different types of copperware, as well as files, boiler tubes, and yatate (portable brush-and-ink cases). In the Taisho era (1912–1926), these metalworking techniques were put to use in the production of Western tableware. In Sanjo, artisans began making working tools, as lifestyles changed in the region. Nowadays, Sanjo’s forging technology is used to make kitchen knives, sharp-edged hand tools, work tools, measuring instruments, woodworking tools, outdoor items, and air conditioning units. A workman’s guild in the region is known for having been contracted to mirror-polish Apple’s iPod casings.

Accumulated manufacturing expertise makes it possible to outsource and concentrate on product development Snow Peak outsources manufacturing, concentrating management resources on product development.

Snow Peak describes how Yukio Yamai founded the company after working as a hardware wholesaler. When the company started developing and selling mountain climbing equipment, half the products it sold were manufactured at its own factories. As such, Snow Peak retained the skills to make metal products. The company uses this knowledge in product development, taking manufacturing processes, production costs, and quality control into consideration. The company continues to manufacture open-air grills in-house to maintain its manufacturing knowledge.

Production system achievements Snow Peak has adopted the name Solid Stake for the steel pegs it sells for fastening tents to the ground; competitors’ pegs are generally made of plastic or aluminum. Solid Stake pegs are produced at factories in Tsubame-Sanjo by forging (a method of shaping metal by applying force, producing harder steel than other metalworking methods), making them strong enough to pound into hard ground.

Outdoor business (sales)

Sales characteristics For sales, Snow Peak conducts transactions directly with distributors. It has multiple sales channels (directly managed stores, in-store, shop-in-shop store, and entry store formats). In principle, it does not conduct sales discounts.

Direct transactions with distributors Snow Peak explains that competitors’ typical distribution route for outdoor products is manufacturers to wholesalers, wholesalers to retailers (product supply), and retailers to consumers (product sales). Snow Peak derives around 20% of revenues from direct sales to consumers at directly managed stores, and 80% from products supplied to retailers who sell products on to consumers. This sales channel structure eliminates the wholesaling margin and allows Snow Peak to keep final prices lower.

Snow Peak sold products to wholesale dealers until 1999. With its performance sagging after the end of the car camping boom, in 1998 the company staged Snow Peak Way, an event for communicating with customers. Learning that customers thought

29/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Snow Peak’s product quality was good but prices were high, in 2000 Snow Peak changed its distribution route, moving from wholesale dealers to direct transactions with authorized dealers. The decision to stop doing business with wholesale dealers reduced the number of stores handling Snow Peak products from 1,000 to 250. However, the company was able to maintain its manufacturing margins, cut distribution costs, and lower store prices by 30%.

Sales channels: Directly managed stores, in-store, shop-in-shop Snow Peak categorizes its sales channels into directly managed stores, e-commerce, in-store, shop-in-shop, and wholesale to dealers. The company defines “Snow Peak stores” as directly managed stores and in-store locations that employ Snow Peak staff. The following table shows the number of stores, sales, and sales mix for each sales channel.

In the in-store sales channel, Snow Peak wholesales products to sporting goods retailers and outdoor specialty stores. Snow Peak does not pay rent for store space, but does pay personnel costs for store staff.

In-store retailers include L-Breath (outdoor specialty store operated by Victoria Inc., a subsidiary of XEBIO Holdings Co., Ltd. (TSE1: 8281)), WILD-1 (outdoor specialty store operated by Kanseki Co., Ltd. (TSE JASDAQ Standard: 9903), Sports Authority (sports specialty store operated by Mega Sports Co., Ltd., which is owned by AEON Co., Ltd. (TSE1: 8267)), Himaraya Sports (Himaraya Co., Ltd. (TSE1: 7514)), Super Sports XEBIO (sporting goods store operated by XEBIO Holdings subsidiary XEBIO Corporation), and Yodobashi Camera (Yodobashi Camera Co., Ltd. (unlisted) electronics mass retailer).

Sales channel and characteristics

Sales channel Snow Peak Characteristics Store area Store Domestic sales sells to: count (% of total)

Directly managed End consumers In stores that Snow Peak manages directly, Snow Peak 100–400sqm 26 JPY2.9bn stores staff provide product explanations directly to customers. (30–120 (24.3%) tsubo)

E-commerce site End consumers Snow Peak retails products via an online store. — — JPY480mn (own website, (4.0%) retail)

E-commerce Website Snow Park wholesales to major e-commerce website — — JPY860mn (third-party operators such operators. (7.1%) website, as Amazon and wholesale) ZOZOTOWN

In-store Dealers Areas for Snow Peak products in sporting goods retailers 100sqm (30 74 JPY2.9bn and outdoor specialty stores. These areas are staffed by tsubo) (24.3%) Snow Peak personnel, who explain and sell the products.

Shop-in-shop Dealers Areas dedicated to Snow Peak products set aside within 33–66sqm 186 — sporting goods retailers and outdoor specialty stores, (10–20 tsubo) run by the hosting store’s staff, who are trained by Snow Peak and sell Snow Peak products.

Wholesales to Dealers Snow Peak sells products to dealers who operate (entry stores — JPY4.1bn dealers (entry multiple sporting goods retailers and outdoor specialty are 10sqm [3 (33.7%) stores) stores. These stores then sell Snow Peak products to end tsubo]) users. Through FY12/18, no store areas were dedicated to Snow Peak products, but starting in FY12/19 the company will be selling through its entry store format (using dedicated floor space). Source: Shared Research based on company data Note: Starting in FY12/19, the company began reporting sales through its shop-in-shop operations under wholesale sales to dealers. In FY12/18, the company report shop-in-shop sales of JPY2.0bn, equal to 16.9% of domestic sales.

The company uses these sales channels to enable products explanations to customers. When Snow Peak moved to direct transactions with authorized dealers in 2000, it mainly sold products wholesale to 250 stores. In 2003, it began opening directly managed stores to meet more customers face to face and explain products to them. In the 1990s, it was standard procedure for

30/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

staff at outdoor specialty stores to conduct sales face to face, but this trend tailed off in the 2000s when increasingly stringent price competition prompted stores to lower costs by curtailing face-to-face selling. With fewer salespeople explaining its products, it was hard to communicate product benefits, as Snow Peak’s products looked little different from competitors’ at first glance. To resolve this problem, in 2003 Snow Peak opened directly managed stores in Harumi (Chuo-ku, Tokyo) and Dazufu (Fukuoka Prefecture).

Snow Peak launched the in-store sales store format in 2005. The company had to quickly relocate a directly managed store in Harumi due to the circumstances of its lessor, but instead of relocating a directly managed store, Snow Peak opted to set up a dedicated area inside L-Breath’s Ochanomizu store to sell Snow Peak products. Snow Peak staff provided product explanations and conducted sales. This was the beginning of the in-store format.

Snow Peak says that opening a directly managed store costs JPY50–60mn, including launch costs, deposits, and interior work, but an in-store location costs only around JPY2mn, for interior work. Directly managed stores are staffed by four or five people, but one person can handle an in-store location. Also, sales efficiency per area is significantly higher. Directly managed stores take three to five years to become profitable, but in-store locations can be profitable from the first year. Because of these advantages, since 2005 Snow Peak’s store network expansion has centered on in-store locations. That said, at in-store locations, product space is limited, while directly managed stores have enough space for product installations, allowing the company to present its full product lineup of apparel, urban outdoor, and glamping (glamorous camping) items, in addition to standard camping goods. Directly managed stores also serve as training grounds for in-store managers.

Store network

FY12/12 FY12/13 FY12/14 FY12/15 FY12/16 FY12/17 FY12/18 FY12/19 Directly managed stores 7 12 11 18 24 30 33 34 Japan 4 6 7 11 19 22 25 26

In-store 50 73 52 53 62 71 70 75 Japan 40 49 46 47 56 64 63 74 Taiwan - 5 6 6 6 7 7 1 South Korea 10 19 ------Shop-in-shop - - 53 99 154 159 197 204 Japan - - 38 65 121 145 179 186 South Korea - - 15 34 33 14 18 18 Entry stores ------223 241 Japan ------223 238 South Korea ------3 Source: Shared Research based on company data Note: Amounts in the table may differ from company data due to differences in rounding methods.

Shop-in-shop launched in 2014 Snow Peak began launching the shop-in-shop format in 2014. With this format, the employees of host stores who will be explaining Snow Peak products go through training at a Snow Peak campground and become certified “Snow Peak meisters.” Shop-in-shop locations have dedicated selling areas of around 50sqm (15 tsubo), and launch costs are JPY1mn.

Entry store format in sporting goods stores and outdoor specialty stores in use from 2018 In FY12/18, to replace dealer wholesale (sporting goods stores and outdoor specialty stores), Snow Peak established dedicated sections in 223 stores using the entry store format.

The company says the entry store format involves floor space of about 10sqm dedicated to Snow Peak products within sporting goods stores and outdoor specialty stores. With the conventional dealer wholesale arrangement, retailers displayed the company’s tents, tarps, furniture, and other products separately in appropriate areas in their stores. With the entry store format, the company can display all its products in unified and consistent design in one dedicated area. With the establishment of entry stores, it plans to stop the dispersed display of its products in sporting goods stores and outdoor specialty stores from FY12/19 onward. With the conventional wholesale arrangement, the retailers’ regular sales staff would oversee sales, but with the entry

31/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

store format, as with the shop-in-shop format, sales will be handled by Snow Peak meisters (staff that have undergone education and received training on the company’s products).

In principle, no discounting Snow Peak’s basic policy is to sell at list price. It does not discount to clear inventories. The reasons for this policy are that many products are standard, long-selling items and that the company is confident in its product development expertise and therefore expects to eventually sell all its products. Its wholesale prices are set at around 70% of the retail price. Snow Peak explains that retailers want to ensure a 30% gross profit margin, so it sets prices accordingly. Shared Research believes this no-discounting policy is the main way Snow Peak maintains brand value.

Outdoor business (customers)

Main customers are parents in their 30s and 40s; core users (6–7% of total customers) account for 20–30% of sales Snow Peak’s customers center on people in their 30s and 40s with children. Customers typically begin using Snow Peak products because someone near them is a fan.

Snow Peak uses point cards to categorize customers by how much they spend each year. Customers who spend more than JPY300,000 on Snow Peak products in a year are ranked platinum or higher. These members make up 6–7% of the company’s customers but account for 20–30% of sales, according to the company. It explains that these core customers recommend Snow Peak products to camping novices.

Point card membership system for customer management; memberships trending up Snow Peak uses the point card membership system to manage customers. Members accumulate points when they buy Snow Peak products. When points reach a certain level, members receive gift points that they can exchange for (special-edition, not-for-sale) products. Sub-platinum level embers move up or down in rank according to their cumulative annual purchases, and each rank has different granted point percentages and award services.

The point-card can be used at directly managed stores, in-store, and shop-in-shop locations, and other dealers’ stores. This approach allows Snow Peak to conduct customer management by end-users, although it is a manufacturer. Using information about what customers buy, it can suggest camping styles and cultivate customers through marketing on a regular basis. The terms of annual membership are as follows:

Regular members Silver members Gold members Platinum members Black members Sapphire members

Purchase Less than JPY100,000 to JPY200,000 to More than Cumulative Cumulative amount JPY100,000 per year JPY200,000 per year JPY300,000 per year JPY300,000 per year purchases of JPY1mn purchases of JPY3mn or more or more

Snow Peak uses point card membership as a key performance indicator (KPI). The number of point card members has grown in line with store network expansion and sales growth.

Number of point card members

FY12/12 FY12/13 FY12/14 FY12/15 FY12/16 FY12/17 FY12/18 FY12/19 Number of point card members ('000) 70 89 116 156 244 293 340 428 YoY - 27.1% 30.3% 34.5% 56.4% 20.1% 16.0% 25.9% Source: Shared Research based on company data Note: Amounts in the table may differ from company data due to differences in rounding methods.

Snow Peak has close relationships with customers, who communicate with each other through the company The company builds close relationships between customers and its president and employees. Snow Peak’s president and employees remember the names and faces of core users, and core users say that they are familiar with Snow Peak’s president and employees. We think this relationship allows the company to reflect customer feedback in product development and

32/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

improvement, and also encourages customers to recommend products to other customers. Snow Peak organizes camping events and runs social media sites to maintain a close relationship with customers.

Organizes camping events to interact with customers Starting in 1995, Snow Peak has been running an event called Snow Peak Way for customers and employees to enjoy camping together. The event attracts around 5,000 participants selected by a lottery. Twelve Snow Peak Way events have been held around the country as of 2018.

Snow Peak Way increases employees’ job satisfaction and reaffirms their sense of purpose in their work, because they can engage directly with the users of Snow Peak products. Not only does it provide a point of contact between the company and its customers, but it also helps customers meet each other, fostering friendships and camping communities. Encouraging friendships between customers is one of the company’s unique characteristics.

Leveraging social media sites The camping event provides an opportunity for direct contact between customers and employees. However, the company can only hold a limited number of events each year. Thus, Snow Peak uses social media sites to foster relationships with customers on a day-to-day basis. The company’s social media sites are forums for exchanging information on outdoor activities such as product reviews, outdoor recipes, and campsite recommendations.

The company says customers all over Japan become close by attending Snow Peak Way events and communicating on its social media sites, often forming groups to go camping together.

Overview by segment and department

Snow Peak has a single business segment, the Outdoor Lifestyle business, so it does not disclose segment information. It releases sales by region and by business; in Japan its main business is Outdoor. In FY12/19, Japan accounted for roughly 85% of sales, and the Outdoor and Apparel businesses made up 90% of the total.

Sales by region Snow Peak sells products at directly managed stores and in-store and shop-in-shop locations in Japan, the US, Taiwan, and South Korea. In FY12/19, Japan accounted for about 85% of sales by region.

Sales by region

FY12/12 FY12/13 FY12/14 FY12/15 FY12/16 FY12/17 FY12/18 FY12/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Sales 3,693 4,487 5,559 7,854 9,222 9,910 12,071 14,261 YoY 9.0% 21.5% 23.9% 41.3% 17.4% 7.5% 21.8% 18.1% Japan 2,691 2,930 3,701 5,767 7,393 7,757 9,821 12,040 YoY 7.5% 8.9% 26.3% 55.8% 28.2% 4.9% 26.6% 22.6% % of sales 72.9% 65.3% 66.6% 73.4% 80.2% 78.3% 81.4% 84.4% US 320 514 645 787 610 618 740 730 YoY 14.6% 60.5% 25.5% 22.0% -22.5% 1.3% 19.7% -1.4% % of sales 8.7% 11.5% 11.6% 10.0% 6.6% 6.2% 6.1% 5.1% Taiwan 216 426 714 712 734 541 370 YoY - 97.2% 67.6% -0.3% 3.1% -26.3% -31.6% % of sales 4.8% 7.7% 9.1% 7.7% 7.4% 4.5% 2.6% South Korea 682 827 737 551 505 622 732 800 YoY 12.5% 21.3% -10.9% -25.2% -8.3% 23.2% 17.7% 9.3% % of sales 18.5% 18.4% 13.3% 7.0% 5.5% 6.3% 6.1% 5.6% Overseas, other 56 176 237 230 YoY - 214.3% 34.7% -3.0% % of sales 0.6% 1.8% 2.0% 1.6% Source: Shared Research based on company data Note: Amounts in the table may differ from company data due to differences in rounding methods.

33/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

United States As of December 2019, the company has two retail locations in the US: a directly managed store in Portland, Oregon, and a flagship apparel store in New York City’s SoHo region for North Europe and the US, opened in November 2015. Snow Peak also sells products in these markets via its e-commerce site.

Backpackers and other travelers are the main customers in the US market. Principal products are heating gear such as gas stoves, and compact portable cookers, mugs, and other titanium and stainless-steel cookware and tableware items. As well as the US, the US branch sells products in Canada and Oceania.

In December 2018, Snow Peak established a locally incorporated subsidiary in the US. Plans call for the opening of a new facility in June 2020 that includes a directly managed store and the head office of its US subsidiary. Referred to by the company as HQ4, the new headquarters store will prominently feature an open-pit fire and will be aimed conveying the company’s world view and establishing its brand image as a full-line manufacturer of camping goods as opposed to its past image tied closely to its small gas burners and titanium mug-cups. Along with the new headquarters store opening, the US business plans to make greater use of camping events and social media networking to increase interaction with consumers and establish closer ties with its customers.

Taiwan Snow Peak sells products in this market through its Taiwan branch. The company established the Taiwan branch in 2013 with a view to develop its wholesale-to-dealer business in Taiwan.

Snow Peak sells products in Taiwan via two directly managed stores and seven in-store locations. The company’s main customers in Taiwan are campers, and sales are mainly of tents, tarps, tableware, cookware, and furniture.

South Korea Consolidated subsidiary Snow Peak Korea, Inc. sells Snow Peak products. Snow Peak moved into the South Korean market in 2001 and established Snow Peak Korea in 2008.

Snow Peak Korea sells products on a wholesale basis to four directly managed stores, via e-commerce, and at 18 shop-in-shop locations. The company’s main customers in South Korea are campers (camping enthusiasts), and sales are mainly of tents, tarps, tableware, cookware, and furniture.

Europe Snow Peak began developing its European business in FY12/19, focusing primarily on its apparel line. The company plans to build up its presence in Europe, especially in the apparel market. In FY12/19, the company set up an e-commerce website in UK and opened a directly managed store in London (its first directly managed store in Europe).

Sales by business Snow Peak categorizes its businesses as Outdoor (78.6% of sales in FY12/19), Apparel (12.1%), and other new businesses such as Urban Outdoor, Glamping, Regional Revitalization, and Camping Office (7.4%).

New businesses made only a limited contribution to earnings in FY12/19, but Snow Peak is concentrating in this area to expand its business among non-campers.

34/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Sales breakdown by business

FY12/12 FY12/13 FY12/14 FY12/15 FY12/16 FY12/17 FY12/18 FY12/19 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Total sales 3,693 4,487 5,559 7,854 9,222 9,910 12,071 14,261 YoY - 21.5% 23.9% 41.3% 17.4% 7.5% 21.8% 18.1% Outdoor 3,617 4,418 5,350 7,297 8,211 8,503 9,850 11,210 YoY - 22.1% 21.1% 36.4% 12.5% 3.6% 15.8% 13.8% % of t ot al sales 97.9% 98.5% 96.2% 92.9% 89.0% 85.8% 81.6% 78.6% Apparel 42 32 138 394 743 983 1,456 1,720 YoY - -23.8% 331.3% 185.5% 88.6% 32.3% 48.1% 18.1% % of t ot al sales 1.1% 0.7% 2.5% 5.0% 8.1% 9.9% 12.1% 12.1% Urban Outdoor 19 37 109 113 139 170 YoY - 94.7% 194.6% 3.7% 23.0% 22.3% % of t ot al sales 0.3% 0.5% 1.2% 1.1% 1.2% 1.2% Regional Revitalization 29 258 240 YoY - 789.7% -7.0% % of t ot al sales 0.3% 2.1% 1.7% Business Solutions 43 122 650 YoY - 183.7% 432.8% % of t ot al sales 0.4% 1.0% 4.6% Source: Shared Research based on company data Note: Business Solutions denotes sales from Snow Peak Business Solutions Inc., which is comprised of Camping Office sales and sales from the system development business of Heartis System & Consulting Inc. (acquired through absorption-type merger in January 2019).

Business other than Outdoor business In addition to the Outdoor business, the company has the Apparel, Urban Outdoor, Glamping, Regional Revitalization, and Camping Office businesses.

Apparel business Snow Peak launched its Apparel business in the fall/winter season of FY12/14. FY12/19 sales of JPY1.7bn accounted for 12.1% of total sales; FY12/18 sales of JPY1.5bn accounted for 12.1% of total sales. Snow Peak’s apparel lineup features down jackets, coats, shirts, sweatshirts, sweatpants, and T-shirts designed to also be appropriate for daily use. Colors tend toward black, gray, and khaki monotones, which are unlikely to be swayed by fashion trends.

Snow Peak has mainly directly managed apparel stores, along with in-store locations and shop-in-shop locations. The company also sells products via its online store and online fashion sites such as ZOZOTOWN.

Urban Outdoor business With this business, the company sells products that suggest a certain lifestyle. It aims to bring elements of the outdoors into the home, so that urbanites who do not camp can reconnect with nature. Specifically, the company aims for customer to bring Snow Peak products into the gardens of detached homes, and condominium verandas and rooftops. Collaboration with housing-related companies are the basis of this business.

As of the end of December 2018, the company had opened 16 Urban Outdoor shop-in-shop stores (12 as of the end of December 2017). These are real estate and home improvement stores where “Snow Peak meisters” (staff that have undergone education and received training on the company’s products) are stationed.

Snow Peak has been pursuing collaborations with Mitsui Fudosan Residential Co., Ltd., Renovation Real Estate K.K., and Cosmos Initia Co., Ltd. (TSE JASDAQ: 8844).

35/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Collaboration in the Urban Outdoor business Collaborator Collaboration Mitsui Fudosan Residential In September 2015, Snow Peak announced a collaborative business with Mitsui Fudosan Residential. In this business, a triangular shade by Snow Peak is to be erected over terrace gardens on first-floor condominiums. Other Snow Peak items can be combined with the shades, according to how they are used. The first such shades are scheduled for installation on condominiums in Tachikawa, Tokyo, that are scheduled for completion in March 2017. Renovation Real Estate Began in October 2015. Products from Snow Peak’s Urban Outdoor category are offered for sale at Renovation Real Estate showrooms, where this company sells pre-owned residences and offers refurbishment services. Snow Peak’s products are included in “lifestyle packages” that combine residences and refurbished properties. Snow Peak acquired a 5.1% stake in Wakuta Makigumi Co., Ltd., Renovation Real Estate’s parent company, in May 2016. Cosmos Initia Announced in April 2016. At new condominiums in Saitama Prefecture, some units include a space where the residents can walk in without removing their shoes. This creates a space that is a cross between indoor and outdoor. Buildings’ common areas will be equipped with Snow Peak tarps, cooking equipment, chair sets and burners as emergency supplies that can also be lent out for outdoor use.

Regional Revitalization Consulting In February 2017, Snow Peak established Snow Peak Chiho Saisei (Regional Revitalization) Consulting, a subsidiary that provides consulting services relating to regional revitalization.

Snow Peak stated that while it will leverage its outdoors knowledge to provide consulting services to municipal governments, the subsidiary was established to develop new businesses. It will partner with municipal governments, associations and companies that have an edge when it comes to promoting nature’s resources, and aims to contribute to the development of regional society.

Camping Office Consolidated subsidiary Snow Peak Business Solutions Inc. (established in July 2016, 66.7% owned by Snow Peak) runs the group’s Camping Office business, which involves arranging camping and other outdoor activities for companies to promote communication among employees and encourage team-based cooperation. For companies, the subsidiary erects tents inside offices, provides outdoor working spaces, and sets up meeting locations around open-air grills. Snow Peak Business Solutions sales of JPY650mn in FY12/19 were up 432.8% YoY and accounted for 4.6% of overall sales versus 1.0% of sales in FY12/18. The rise in sales in FY12/19 reflects the acquisition of Heartis System & Consulting Inc., a system development company acquired by Snow Peak Business Solutions through absorption-type merger in January 2019.

36/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Earnings model Sales We believe analyzing Snow Peak’s sales data according to the number of members, sales per member, number of stores by sales channel, and sales per store is helpful to understand the main factors affecting sales.

Members and sales per member When analyzing the sales relationship between point card members and sales per member, the company uses the formula “sales = members x sales per member.” This methodology does not reflect differences in product sales by sales channel. The number of point card members increases as the company opens more stores, and it has been demonstrated that an increase in the number of point card members leads to higher sales. For each directly managed store, in-store, and shop-in-shop location, the number of members ranges from 900 to 1,000.

Snow Peak had 428,000 point card members as of the end of FY12/19 (340,000 at the end of FY12/18), equal to 5.0% of Japan’s car camping population of 8.5mn (versus 4.0% in FY12/18). Even assuming that the average household size of the car camping population is four, and that only the head of the household is a Snow Peak member, the real number of point card members is still only 20% of the Japan car camping population, leaving plenty of room for further growth.

Point card members and sales

FY12/12 FY12/13 FY12/14 FY12/15 FY12/16 FY12/17 FY12/18 FY12/19 Number of point card members ('000) 70 89 116 156 244 293 340 428 YoY - 27.1% 30.3% 34.5% 56.4% 20.1% 16.0% 25.9% Avg. number of point card members ('000) - 80 103 136 200 269 317 384 YoY - - 28.9% 32.7% 47.1% 34.3% 17.9% 21.3% Sales (JPYmn) - 4,487 5,559 7,854 9,222 9,910 12,071 14,261 YoY - - 23.9% 41.3% 17.4% 7.5% 21.8% 18.1% Sales per member (JPY'000) - 56.4 54.2 57.8 46.1 36.9 38.1 37.1 YoY - - -3.9% 6.5% -20.2% -20.0% 3.3% -2.6% Source: Shared Research based on company data Note: Amounts in the table may differ from company data due to differences in rounding methods. Sales per member = sales average number of point card members FY12/16 point card members÷ include an increase of 41,000 members due to system modifications

Number of stores by sales channel and sales per store When analyzing the relationship between the number of stores by sales channel and sales per store, the company uses the formula “sales = number of stores by sales channel x sales per store by sales channel.” This method lets the company see differences in sales amounts by sales channel.

In FY12/19, sales per directly managed store in Japan averaged JPY115mn while sales per in-store location averaged JPY43mn. The company stopped disclosing sales figures for shop-in-shop locations in FY12/19 but in FY12/18 reported average sales at shop-in-shop locations of JPY11mn. Excluding differences attributable to store location, differences in sales per store location by channel are attributable to the differences between direct sales and wholesaling operations and also the store area (i.e., sales floor space).

Difference between direct sales and wholesaling Sales differences between direct sales and wholesaling exist because at directly managed stores, Snow Peak sells products to customers at retail prices, whereas the sales at in-store and shop-in-shop locations are done at wholesale prices (equal to roughly 65–70% of the retail price).

Store area by sales channel and efficiency per area By sales channel, sales floor space runs between 130 and 400sqm (40–120 tsubo) at directly managed stores, 100sqm (30 tsubo) at in-store locations, and about 50sqm (15 tsubo) at shop-in-shop locations. Snow Peak says that efficiency per unit of sales floorspace in FY12/17 was JPY1.1mn per tsubo (3.3sqm) at directly managed stores, more than double the figure of JPY2.4mn at in-store locations.

37/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Number of stores by sales channel

FY12/12 FY12/13 FY12/14 FY12/15 FY12/16 FY12/17 FY12/18 FY12/19 Directly managed stores 7 12 11 18 24 30 33 34 Japan 4 6 7 11 19 22 25 26 In-store 50 73 52 53 62 71 70 75 Japan 40 49 46 47 56 64 63 74 Taiwan - 5 6 6 6 7 7 1 South Korea 10 19 ------Shop-in-shop - - 53 99 154 159 197 204 Japan - - 38 65 121 145 179 186 South Korea - - 15 34 33 14 18 18 Entry stores ------223 241 Japan ------223 238 South Korea ------3 Source: Shared Research based on company data Note: Amounts in the table may differ from company data due to differences in rounding methods.

Sales by channel (Japan)

FY12/17 FY12/18 FY12/19 (JPYmn) Act. Act. Act. Total sales 7,757 9,821 12,040 YoY 4.9% 26.6% 22.6% Directly managed stores 1,820 2,590 2,920 YoY - 42.3% 12.7% % of sales 23.5% 26.4% 24.3% Sales per store 89 110 115 E-commerce (Snowpeak) 240 370 480 YoY - 54.2% 29.7% % of sales 3.1% 3.8% 4.0% E-commerce (wholesale) 490 550 860 YoY - 12.2% 56.4% YoY 6.3% 5.6% 7.1% In-store 2,210 2,370 2,930 YoY - 7.2% 23.6% % of sales 28.5% 24.1% 24.3% Sales per store 37 37 43 Dealers 2,840 3,440 4,060 YoY - 21.1% 18.0% % of sales 36.6% 35.0% 33.7% Source: Shared Research based on company data Note: Amounts in the table may differ from company data due to differences in rounding methods. Note: The company stopped disclosing sales figures for shop-in-shop locations in FY12/19. In FY12/18, shop-in-shop locations generated sales of JPY2.0bn (+21.3% YoY).

Timing of sales recognition differs by sales channel Sales channels differ due to selling at retail or wholesale prices, but also differ in the timing of booking sales. For directly managed stores and e-commerce sites, Snow Peak records sales when customers buy products, and holds inventories of directly managed stores. By comparison, for the in-store, shop-in-shop, and dealer sales channels, Snow Peak books sales when products are delivered to sporting goods retailers or outdoor specialty stores, and those stores hold inventories.

Gross profit The company’s gross profit margin is affected by changes in the sales mix of each channel and exchange rate fluctuations.

Gross profit margin

(JPYmn) FY12/12 FY12/13 FY12/14 FY12/15 FY12/16 FY12/17 FY12/18 FY12/19 Sales 3,693 4,487 5,559 7,854 9,222 9,910 12,071 14,261 YoY - 21.5% 23.9% 41.3% 17.4% 7.5% 21.8% 18.1% Cost of goods sold 1,919 2,265 2,849 4,248 4,574 4,979 5,638 6,549 Cost ratio 52.0% 50.5% 51.3% 54.1% 49.6% 50.2% 46.7% 45.9% Gross profit 1,774 2,222 2,710 3,606 4,649 4,931 6,433 7,712 YoY - 25.3% 21.9% 33.1% 28.9% 6.1% 30.5% 19.9% GPM 48.0% 49.5% 48.7% 45.9% 50.4% 49.8% 53.3% 54.1% Source: Shared Research based on company data Note: Amounts in the table may differ from company data due to differences in rounding methods.

38/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Manufacturing cost details (parent)

(JPYmn) FY12/12 FY12/13 FY12/14 FY12/15 FY12/16 FY12/17 FY12/18 FY12/19 Cost of goods manufactured 1,749 2,439 2,677 3,925 4,116 4,850 4,570 5,736 % of sales 51.1% 59.2% 51.6% 52.6% 46.2% 51.7% 40.7% 43.9% Total manufacturing cost 1,751 2,421 2,673 3,926 4,108 4,867 4,570 5,772 % of sales 51.1% 58.7% 51.6% 52.6% 46.2% 51.9% 40.7% 44.2% Raw material costs 1,559 2,232 2,549 3,754 3,921 4,467 4,132 5,268 % of sales 45.5% 54.2% 49.2% 50.3% 44.1% 47.7% 36.8% 40.3% % of total manufacturing cost 89.0% 92.2% 95.4% 95.6% 95.4% 91.8% 90.4% 91.3% Labor costs 43 32 27 27 24 25 28 43 % of total manufacturing cost 2.4% 1.3% 1.0% 0.7% 0.6% 0.5% 0.6% 0.8% Other costs 150 157 97 145 163 374 410 460 % of total manufacturing cost 8.5% 6.5% 3.6% 3.7% 4.0% 7.7% 9.0% 8.0% Work in process inventory (beginning of year) 50 52 34 31 32 24 40 41 Work in process inventory (end of year) -52 -34 -31 -32 -24 -40 -41 -77 Source: Shared Research based on company data Note: Amounts in the table may differ from company data due to differences in rounding methods.

Gross profit margins differ by sales channel For directly managed stores and e-commerce, Snow Peak books the retail sales amount as sales. These sales have a gross profit margin of 60–65%. By contrast, Snow Peak wholesales products to sporting goods retailers and outdoor specialty stores in the in-store, shop-in-shop, and dealer sales channels. These stores have gross profit margins of around 30%, so Snow Peak’s gross profit margin in wholesaling sales channels is around 50%, lower than for directly managed stores or e-commerce. As such, whether the gross profit margin is high or low hinges on whether directly managed stores and e-commerce account for a high or low percentage of total sales.

Snow Peak’s policy is to sell at list price, so it does not discount to clear inventories. The reasons for this policy are that many products are standard, long-selling items, and the company is confident in its product development expertise and therefore expects to eventually sell all products. Its wholesale prices are set at around 70% of retail prices. Snow Peak explains that retailers want to ensure a 30% gross profit margin, and it sets prices accordingly.

Impact of exchange rate fluctuations Snow Peak’s import value exceeds its export value. Although it does not disclose import value, Snow Peak outsources production of most of its tents and other sewn products to companies in China and Southeast Asia. FY12/15 sales of tents and tarps were JPY3.2bn. Assuming CoGS of 50%, import costs would be JPY1.6bn. However, overseas sales in FY12/15 were JPY2.0bn, and the company calculates its export value at JPY1.0bn. On a yen basis, therefore, imports exceeded exports by a net JPY600mn. Taking this as equal to USD6mn, Shared Research estimates that appreciation of JPY1 against the dollar would push up profits by JPY6mn.

However, ongoing yen depreciation means that selling prices need to be adjusted to secure profits. In FY12/16, Snow Peak raised prices in response to yen depreciation in 1H, causing profitability to increase.

39/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

SG&A expenses Snow Peak’s primary SG&A expenses are personnel expenses and depreciation. SG&A expenses also include leasing expenses for directly managed stores, and advertising and promotional expenses. Most SG&A expenses are fixed and not directly affected by sales fluctuations. They are indirectly affected, however, by changes in the number of stores and store personnel.

In the in-store sales channel, Snow Peak pays for the cost of full-time employees. It does not incur leasing expenses on in-store locations, which is a wholesale channel.

SG&A expenses

(JPYmn) FY12/12 FY12/13 FY12/14 FY12/15 FY12/16 FY12/17 FY12/18 FY12/19 SG&A expenses 1,737 2,109 2,479 3,037 3,795 5,073 5,513 6,796 % of sales 47.0% 47.0% 44.6% 38.7% 41.2% 51.2% 45.7% 47.7% Salaries and allowances 486 613 651 689 810 1,080 1,163 1,555 % of sales 13.2% 13.7% 11.7% 8.8% 8.8% 10.9% 9.6% 10.9% Rents - - - 227 404 518 627 683 % of sales - - - 2.9% 4.4% 5.2% 5.2% 4.8% Depreciation 182 203 212 206 213 405 461 458 % of sales 4.9% 4.5% 3.8% 2.6% 2.3% 4.1% 3.8% 3.2% Provision for product warranties 14 20 24 25 29 20 20 7 % of sales 0.4% 0.4% 0.4% 0.3% 0.3% 0.2% 0.2% 0.1% Provision for point certificates 9 10 8 29 41 38 28 34 % of sales 0.2% 0.2% 0.1% 0.4% 0.4% 0.4% 0.2% 0.2% Source: Shared Research based on company data Note: Amounts in the table may differ from company data due to differences in rounding methods.

40/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Strengths and Weaknesses Strengths Differentiation through product development: The structure, concept, and process behind developing each Snow Peak ◤ product is underpinned by its management philosophy, “in our customers’ shoes.” The company operates a campground at its headquarters. Product development managers are camping enthusiasts who develop products with designs, materials, production methods, and functions that they would buy. They oversee design through outsourced production, and repeatedly test products under realistic camping conditions. As a result, the company develops products with sophisticated designs and functions that sell at higher price points than competitors (2–3x). Core users (who spend at least JPY300,000 a year on the company’s products) generate 20–30% of total sales. These core customers develop friendships by attending camping events and communicating via the company’s social media sites, making them more loyal fans of Snow Peak products. Customers with firsthand experience using Snow Peak’s products often recommend products to new campers, raising the company’s visibility, and leading to sales growth.

Tsubame-Sanjo metalworking techniques: Snow Peak develops products in-house but mostly outsources production to ◤ partner factories close to its headquarters in Tsubame-Sanjo, Niigata Prefecture where metalworking techniques have been passed down since the Edo period (1603–1868), and is home to numerous metalworking factories with the people, equipment, and expertise to manufacture metal products. Product managers go to the plants to learn about manufacturing techniques, and the proximity of headquarters to these plants helps build up the company’s expertise.

Lower distribution costs due to cutting out wholesalers: Snow Peak has sold products through directly managed stores ◤ or directly to distributors since 2000. Competitors go through wholesalers, who sell their products on to sporting goods and retailers. This difference reduces Snow Peak’s distribution costs, meaning Snow Peak can offer customers comparable products a 30% lower price than competitors.

Weaknesses

Hard to make customers see the differentiation of products priced 2–3x higher than rival products: The company’s ◤ products are 2–3x more expensive than its peers’ since it uses different materials, structures, and manufacturing methods for lighter, sturdier, and easy-to-use products. Yet it is difficult to see the difference in competing products at first glance, making product explanations from employees of the company or host stores key. As such, we believe that the company’s products have a weak appeal to camping novices. To help overcome the reluctance of consumer to buy owing to high prices, the company began offering various competitively priced products aimed at entry-level consumers, such as its Entry Pack TT tent/tarp set (priced at JPY49,800).

Limited replacement demand due to high durability: Snow Peak’s camping products are highly durable owing to its ◤ insistence on specific materials and production methods. At a time when most conventional tents still leaked when it rained, Snow Peak came out with a tent that can be used 50 times/year for five to seven years. Further, “open-air grill stands,” one of the company’s flagship products, has a stainless steel thickness of 1.5mm, but similar products launched by competitors have a stainless steel thickness of 1.0mm. The company offers other durable products such as the Solid Stake (see Business description). Because of longer product life and higher durability, we think this limits replacement demand, despite helping Snow Peak create and maintain brand value.

Low share of overseas markets as the domestic market matures: Domestic sales of camping goods were only JPY40.8bn ◤ as of 2017 (excluding outdoor clothing, outdoor shoes, backpacks, and other outdoor products). We believe this market has limited room for growth given the projected population decline in Japan, so long-term expansion requires overseas sales growth. Snow Peak established a US company in 1996 and entered South Korea in 2001. Despite over a decade-long presence in each, Snow Peak has only 0.1% of the outdoor market in the US (JPY960bn) and 0.1% in South Korea (JPY500bn). Snow Peak’s overseas sales ratio fell from 34.7% in FY12/13 to 14.9% in FY12/19 due to sluggish sales in South Korea and Taiwan, affected by a slowdown in the camping boom.

41/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Group companies

The Snow Peak group comprises Snow Peak and seven consolidated subsidiaries.

Snow Peak Korea, Inc. (100%): Sells Snow Peak products in South Korea. ◤ Snow Peak Well K.K. (100%): The first private company in Niigata Prefecture established as a Type A business offering support ◤ for continuous employment, the company provides light work such as inspecting products and cleaning the campground adjoining Snow Peak’s headquarters.

Snow Peak Business Solutions Inc. (66.7%): Established in July 2016. Arranges camping and other outdoor activities for ◤ companies to promote communication among employees and encourage team-based cooperation. For companies, the subsidiary erects tents inside offices, provides outdoor working spaces, and sets up meeting locations around open-air grills.

Snow Peak Chiho Saisei (Regional Revitalization) Consulting Co., Ltd. (100%): Established in February 2017. Mainly provides ◤ consulting services to municipal governments that leverage the company’s outdoors knowledge and ability to attract customers.

Snow Peak Hakuba Co., Ltd. (100%): Established in September 2018. Mainly develops new format stores in Hakuba, Nagano ◤ Prefecture, and sells goods and experiences. Works to strengthen collaboration with local governments and companies.

Snow Peak London, Limited (100%): Established in December 2018. Mainly develops businesses centered on apparel in the ◤ UK.

Snow Peak USA, Inc. (100%): Established in July 2019. Sells Snow Peak products in the US. ◤

42/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Market and value chain Market strategy Outdoor and camping goods markets According to Yano Research Institute, the Japanese outdoor market (shipment basis) in 2019 had an estimated value of JPY264.9bn (+5.6% YoY), having grown consistently since the 2000s. Within the outdoor market, the camping goods market (shipment basis), which excludes outdoor clothing, outdoor shoes, backpacks, and other outdoor products, was valued at JPY40.8bn (+7.0% YoY) in 2017. This market was worth only JPY32.0bn in 2012, but has been on the upswing since 2013. Shared Research believes this increase is due to a rebound in the car camping population.

Outdoor and camping goods markets

(JPYmn) (JPYmn) Outdoor goods Camping goods (right axis) 300,000 45,000

40,000 250,000 35,000

200,000 30,000

25,000 150,000 20,000

100,000 15,000

10,000 50,000 5,000

0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E2020F

Source: Shared Research based on Market Scale by Sporting Goods Field, by Yano Research Institute, and company data

Car camping population and tent import prices The Auto Camping White Paper 2019, published by the Japan Auto Camping Federation, indicates that the Japanese car camping population was 8.5mn in 2018 (+1.2% YoY). This population peaked at 15.8mn people in 1996, following the car camping boom of the late 1980s and early 1990s, after which it trended downward. However, the car camping population has been increasing since 2013. According to Snow Peak, the increase stems from junior baby boomers (children of the baby boomer generation, which account for a relatively high percentage of the population), entering their 30s and 40s.

Statistics for the camping goods market are available for only a limited timeframe, but we can still get a good idea of long-term trends in the camping goods market by looking at the value of tent imports, as shown in the accompanying graph. Here, we find tent imports into Japan bottoming out in 2008 and rising every year since then, reaching JPY8.7bn (+10.9% YoY) in 2018.

A loose connection exists between tent imports and the car camping population. Tent imports surged in the mid-1990s, and peaked in 1996 at JPY9.1bn. Tent imports thus trended upward in line with the car camping boom in the 1990s. As the car camping boom wound down, tent imports also fell. Tent imports have been rising since 2008. Shared Research believes that this resurgence is because the baby boomer generation is retiring and now has the leisure to enjoy the outdoors with their families. Another reason may be that as salaries have not risen in 20 years, employees are finding that enjoying nature is a healthy and low-cost way to spend leisure time with friends.

43/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Car camping population and tent imports

(mn) (JPYmn) 18 14,000

16 Car camping population 12,000

14 Imported tents (value, right axis)) 10,000 12

10 8,000

8 6,000

6 4,000 4 2,000 2

0 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: Shared Research based on Tokyo Customs material, trade statistics at Ministry of Finance and Car camping Overview

Car camping participants by age group, and population estimate According to the Auto Camping White Paper 2015, published by the Auto Camping Federation, the percentage of people in the car camping population in their 30s is 50.4%, with 32.8% in their 40s, 6.3% in their 50s, and 1.8% in their 60s. The largest percentage is people in their 30s and 40s with children.

The National Institute of Population and Social Security Research projects that the total number of households in Japan will decrease from 2020. The institute forecasts that the number of households headed by a person aged 30–49 will decline from 2017, falling at a faster pace than the total number of households. Due to a declining population as junior baby boomers age, as well as to a falling birthrate, the number of households headed by people in their 30s and 40s (the core car camping group) is expected to fall.

Total households and forecast for the number of households headed by people aged 30–49

('000) 2010 2015 2020 2025 2030 2035 2040 Number of total households 51,842 53,332 54,107 54,116 53,484 52,315 50,757 CAGR - 0.6% 0.3% 0.0% -0.2% -0.4% -0.6% Households with the head aged 30-49 16,152 16,133 15,510 13,942 12,944 12,244 11,800 CAGR - 0.0% -0.8% -2.1% -1.5% -1.1% -0.7% Source: Shared Research based on “Household Projection for Japan: 2015–2040 (2018)” by the National Institute of Population and Social Security Research

Competitors

Snow Peak’s competitors in camping goods include Coleman Japan Co., Ltd. (subsidiary of US company Coleman Company, Inc.), Montbell Co., Ltd. (unlisted), Logos Corporation (unlisted), and Shinetsu Works Corporation (unlisted; manages the Uniflame brand). In outdoor products, including outdoor clothing, Goldwin Inc. (TSE1: 8111) and Patagonia, Inc. (unlisted) are competitors.

Snow Peak estimates that its sales of camping goods in FY12/15 were JPY3.4bn, accounting for a 9.3% share of the market and ranking the company second in terms of market share after Coleman Japan, which had sales of JPY8.1bn and a 22.3% market share. Montbell had sales of JPY3.0bn and Logos of JPY2.4bn.

Shared Research seeks Snow Peak’s market positioning as unique, due to its pricing structure, product quality, and selling methods. The company differentiates itself from competitors and is therefore not overly susceptible to competition.

44/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Product comparison Snow Peak’s products are of higher quality than those of its competitors. Prices are also 2–3x higher. (See “Outdoor business (products) section.”) The higher prices stem from higher production costs due to a development and manufacturing process that emphasizes product quality and production methods, while aiming to secure a reasonable profit margin. Shared Research believes that Snow Peak has earned the support of core customers by differentiating its product range from competitors’ in this way.

Store networks Snow Peak’s store strategy differs from its competitors. The industry leader, Coleman Japan, focuses on wholesaling its products to be sold in numerous locations. By comparison, Snow Peak, Montbell, and Logos Corporation have sales networks centered on directly managed stores or stores that are close to this model.

Store networks Store network Snow Peak Operates 313 stores: 34 directly managed stores, 75 in-store locations, and 204 shop-in-shop locations. Face-to-face sales at directly managed stores, and in-store and shop-in-shop formats. Coleman Japan Has 11 directly managed stores and outlets, and some 1,300 selling locations. Selling locations include outdoor products and sporting goods retailers such as L-Breath, Victoria, WILD-1, Super Sports XEBIO, and Sports Authority; and home improvement retailers, such as Olympic (Olympic Group Corporation [TSE1: 8289] stores), Shimachu (Shimachu Co., Ltd. [TSE1: 8184] stores), and CAINZ (a store of CAINZ Co. [unlisted]). Out of these sales outlets, 14 include so-called advisory shops where Coleman has staff permanently stationed on-site. Montbell Operates roughly 140 directly managed stores (Montbell stores), mainly in shopping malls. More than 500 other stores carry Montbell products. Logos Corporation Operates 42 directly managed stores, mainly in shopping malls and outlet malls. Operates a total of 15 Logos stores where Logos staff is stationed on-site during weekends only. Also sells through eight stores that have special Logos Flagship Corners where all Logos products are grouped together in a single display but do not have any Logos staff that are on-site on a regular basis. Also has sales displays in Yodobashi Camera stores and AEON Mall stores. Source: Shared Research based on company data

Sporting goods retailers and outdoor specialty stores

In Japan, Snow Peak wholesales products to sporting goods retailers and outdoor specialty stores. Sporting goods retailers Alpen Co., Ltd. (TSE1: 3028) and XEBIO Holdings Co., Ltd. (TSE1: 8281) are the industry leaders, each with sales of more than JPY200bn. Next in size are Himaraya Sports (Himaraya Co., Ltd. (TSE1: 7514)) and Mega Sports Co., Ltd. (AEON Co., Ltd. (TSE1: 8267) group). Outdoor specialty stores include WILD-1 (Kanseki Co., Ltd. (TSE JASDAQ Standard 9903)).

Leading Japanese sporting goods retailers Sales/Operating profit Stores Alpen Sales JPY228.3bn 404 Operates Sports Depot, general sporting goods stores; Alpen, which Operating profit JPY1.5bn sells items geared toward winter sports; and Golf 5, which specializes in golfing items. Carries own-brand products, as Japana and Kissmark Japan. XEBIO Holdings Sales JPY225.3bn 860 Operates Super Sports XEBIO, general sporting goods stores; Victoria; Operating profit JPY5.2bn Golf Partner, which specializes in golfing items; and L-Breath, outdoor products specialists. In 2005, acquired all shares of Victoria Inc., converting the company to a wholly owned subsidiary. Himaraya Sales JPY66.6bn 106 Established in 1976 in Gifu Prefecture. Signed a capital tie-up with Operating profit JPY867mn Mitsubishi Corporation (TSE: 8085) in 2011. Mega Sports Sales JPY70.7bn 165 Manages AEON Group sporting goods store Sports Authority Operating loss JPY1.4bn Source: Shared Research based on financial reports and public notices of respective companies Note: Figures for Alpen for FY06/19, for XEBIO Holdings for FY03/20, for Himaraya for FY08/19, and for Mega Sports for FY02/20

Since FY12/15, Snow Peak has also been developing in-store areas at Yodobashi Camera Co., Ltd. (unlisted), a major electronics retailer that operates 23 stores in locations near train stations around Japan.

45/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Historical performance

Full-year FY12/19 results Sales: JPY14.3bn (+18.1% YoY) ▷ Operating profit: JPY924mn (+0.4% YoY) ▷ Recurring profit: JPY963mn (+9.0% YoY) ▷ Net income*: JPY425mn (-11.1% YoY) ▷ *Net income attributable to owners of the parent

FY12/19 sales were up YoY thanks to strong gains at its Outdoor and Apparel businesses in Japan. In addition to sales growth, gross profit increased in the Outdoor business as relatively high-GPM entry-level goods occupied a higher percentage of the sales composition. Profit lines from operating profit down were up YoY thanks to the increase in gross profit, despite a rise in SG&A expenses.

FY12/19 sales reached 101.9% of company forecast, operating profit 92.4%, recurring profit 101.4%, and net income attributable to owners of the parent 81.3%. The company said sales and gross profit were generally in line with its initial forecast, but legal and other one-time expenses pushed up SG&A expenses and left operating profit below plan.

Factors contributing to YoY changes in sales Sales grew YoY, reflecting a combination of rising sales of entry-level goods sold online (including B2B sales to third-party online retailers), in-store, and through outdoor goods wholesalers, and rising sales of apparel through the company’s own directly managed stores. Sales of entry-level goods of JPY1.3bn were up 17.4% YoY and apparel sales of JPY1.7bn (including overseas sales) were up 18.1% YoY.

Sales: Existing domestic businesses (including Apparel) At existing domestic businesses, sales in the Outdoor business of JPY11.2bn were up 13.8% YoY, underpinned by strong growth in sales of goods such as the company’s Entry 2 Room Elfield tent and Home & Camp Burner stove set. Featuring a trivet that can be stored in the main body, the Home & Camp Burner stove set was launched in July 2019 at a price of JPY9,980 (excluding tax) and generated JPY320mn in sales in FY12/19. Also contributing to the double-digit growth in sales was strong sales of apparel such as the company’s Flexible Insulation line.

Including new businesses, sales were up across all domestic sales channels as the company withstood the impact of typhoons and other inclement weather by acquiring new customers through its entry-level products and entry stores. Aided by new customers, the company lifted the number of point card members up to 428,000 at the end of FY12/19, an increase of 88,000 over the end of FY12/18.

At directly managed stores, sales of JPY2.9bn were up 12.7% YoY, the gains underpinned by strong sales of apparel and its new ▷ Entry 2 Room Elfield tent (as mentioned previously). Comparable store sales were up 3.9% YoY. At the company's proprietary e-commerce site, full-year sales of JPY480mn were up 29.7% YoY. ▷ At third-party e-commerce sites, wholesale sales through third-party sellers of JPY860mn were up 56.4% YoY. Products the ▷ company sold exclusively on Amazon.com as part of a new sales initiative performed strongly.

46/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

In-store sales of JPY2.9bn were up 23.6% YoY, driven in large part by the opening of five new store-in-stores inside of Alpen ▷ Outdoors, the new experimental retail format for outdoor goods by Alpen, a major big-box retailer of sporting goods. Wholesale sales to dealers of JPY4.1bn were up 18.0% YoY, reflecting sales through the growing dedicated retail floor space of ▷ the many (store-in-store) “entry stores” that were opened in November 2018 (total 238 as of the end of FY12/19).

Sales: Overseas business

In the US, full-year sales of JPY730mn were down 1.4% YoY. The new management team undertook structural reforms geared ▷ toward medium- to long-term growth. The company also pushed forward with plans to open a US headquarters in June 2020. Sales rose YoY as sales events held in connection with the 20-year anniversary of Snow Peak’s entry into the US market boosted sales in Q4 (October–December 2019) to JPY220mn, up 37.5% YoY. Sales in Taiwan of JPY370mn were down 31.6% YoY, hurt by ongoing market adjustments. ▷ Despite worsening Japan–Korea relations, sales in South Korea rose 9.3% YoY to JPY800mn, buoyed by increased sales at ▷ directly operated stores and in wholesaling stemming from success in building close customer relationships through camping events and the use of social media. In Europe, the company established an e-commerce site in the UK in September 2019. The company opened its first European ▷ store in the UK in October 2019. Elsewhere, sales (mainly wholesale) declined 3.0% YoY to JPY230mn, hurt by weak sales in Oceania. ▷

Sales: New businesses

Camping Office sales of roughly JPY165mn were up 35.0% YoY. Participating companies and orders increased. Subsidiary ▷ Snow Peak Business Solutions, which operates the Camping Office business, saw sales jump to JPY650mn (+432.% YoY) The four-fold gain was driven by the January 2019 merger with Heartis System & Consulting Inc., a systems development company. In the Urban Outdoor business, sales of JPY170mn were up 24.6% YoY. Sales increased at partner construction companies, ▷ with the 2019 release of limited colors in the Urban Shade series for houses. In the Regional Revitalization business, sales of JPY240mn were down 7.0% YoY. In FY12/19, the company signed a total of 12 ▷ comprehensive cooperation agreements with local governments. In July 2019, the company opened Snow Peak Field Suite Hakuba Kitaone Kogen (Hakuba, Nagano Prefecture), a glamping field with supervised field facilities and experience programs. The company launched a range of initiatives to drive group growth over the medium to long term through new experience-based venues.

Factors contributing to YoY changes in profit

Driven by sales growth, gross profit rose 19.9% YoY to JPY7.7bn and the gross profit margin grew 0.8pp YoY to 54.1%. The ▷ increase in the gross profit margin reflected the rising portion of sales at its Outdoor business derived from higher-margin entry-level products coupled with a YoY decline in inventory valuation losses (as a percent of sales). Operating profit rose YoY on higher gross profit, despite an increase in SG&A spending, which at JPY6.8bn was up 23.3% YoY. ▷ The jump in SG&A expenses was driven by a number of factors, including increases in expenses in conjunction with the expansion of its business infrastructure overseas, increases in the base pay of employees (effective April 2019), additional systems-related spending following the startup of a new core system for overseas subsidiaries, and increases in logistics expenses accompanying higher shipping expenses and the rising portion of sales coming from online sales.

47/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Recurring profit grew YoY on higher operating profit. The pace of recurring profit growth outstripped that of operating profit, ▷ due mainly to the impact of forex gains/losses, as the company logged forex gains of JPY2mn in FY12/19 versus forex losses of JPY72mn in FY12/18. With the booking of a valuation loss on investment securities, extraordinary losses climbed 157.7% YoY to JPY166mn, resulting ▷ in a lower net income attributable to owners of the parent.

Other topics: Development of a spa resort Snow Peak is developing a spa resort on a lot adjacent to its headquarters in Sanjo, Niigata Prefecture. The multifunctional facility will host lodging facilities, hot springs baths, restaurants, and stores. The company plans to open the facility, which emphasizes a new business format centered on experiences rather than things, in October 2021. It expects total investment to run JPY2.5bn. Progress has already been made on both the architectural design for the facility and boring surveys for the hot springs.

In October 2019, the company announced the issuance of stock acquisition rights through third-party allotment (estimated net proceeds: JPY3.2bn). The company plans to allot JPY1.8bn of the capital raised toward capital investment targeting the establishment of a spa resort business.

Cumulative Q3 FY12/19 results

Sales: JPY10.5bn (+19.5% YoY) ▷ Operating profit: JPY790mn (+15.9% YoY) ▷ Recurring profit: JPY826mn (+23.3% YoY) ▷ Net income*: JPY512mn (+43.9% YoY) ▷ *Net income attributable to owners of the parent

At the beginning of FY12/19, the company set out its three-year medium-term management plan up to FY12/21. It has emphasized its key priorities as accelerating overseas development and strengthening the experience-based business. In terms of numerical targets, Snow Peak aims for sales of JPY16.0bn and operating profit of 1.8bn in FY12/20, and sales of JPY18.5bn and operating profit of JPY2.8bn in FY12/21.

Q3 FY12/19 sales were up thanks to strong gains at its Outdoor and Apparel businesses. Gross profit was up on higher sales and lower inventory valuation losses, but operating profit finished down, hurt by rising SG&A expenses. Gross profit increased in the Outdoor business as relatively high-GPM entry-level goods occupied a higher percentage of the sales composition. Profit lines from operating profit down were up YoY thanks to the increase in gross profit, despite a rise in SG&A expenses.

Cumulative Q3 results reached 75.2% of the company’s full-year target for sales (versus 73.0% at this time last year), 79.0% of its full-term target for operating profit (versus 74.1%), 87.0% of its full-year target for recurring profit (versus 75.8%), and 97.9% of its full-year target for net income (versus 74.3% at this time last year).

Factors contributing to YoY changes in cumulative Q3 sales The top-line gains in Q3 FY12/19 reflect a combination of rising sales of entry-level goods sold online (including B2B sales to third-party online retailers), in store, and at outdoor wholesale dealers, and rising sales of apparel through the company’s own directly managed stores. Including overseas sales, Q3 sales of entry-level goods of JPY1.2bn were up 26.6% YoY and apparel sales of JPY1.2bn were up 19.4% YoY.

48/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

an “amenity dome” for its tents.

Domestic sales: existing businesses (including Apparel) Q3 FY12/19 domestic sales at existing businesses were up YoY, aided by double-digit growth in apparel sales and strong sales of its Entry 2 Room Elfield tent and Home & Camp Burner stove set. Snow Peak launched Home & Camp Burner (which features a trivet that can be stored in the main body and is priced at JPY9,980 excluding tax) in July 2019. The company achieved approximately JPY200mn in sales of this set in Q3 FY12/19 (July–September). Apparel sales were driven by the Flexible Insulation line. The company plans to release a line of down jackets made from flame-retardant materials, FR Down, in Q4, which it expects to be one of its main products in 2H.

Including new businesses, sales were up across all domestic channels as the company withstood the impact of typhoons and other inclement weather by acquiring new customers through its entry-level products and entry stores.

At directly managed stores, cumulative Q3 sales of JPY2.1bn were up 13.9% YoY, the gains underpinned by strong sales of ▷ apparel and its new Entry 2 Room Elfield tent (as mentioned previously). At the company's proprietary e-commerce site, Q3 sales of JPY340mn were up 30.8% YoY, aided by strong growth in sales of ▷ apparel, limited-edition goods, and collaborative goods. At third-party e-commerce sites, wholesale sales through third-party sellers of JPY410mn were up 57.7% YoY. Products the ▷ company sold exclusively on Amazon.com as part of a new initiative performed strongly. In-store sales of JPY2.2bn were up 25.3% YoY, driven in large part by the opening of five new store-in-stores inside of Alpen ▷ Outdoors, the new experimental retail format for outdoor goods by Alpen, a major big-box retailer of sporting goods. Wholesale sales to dealers of JPY3.1bn were up 27.6% YoY, reflecting sales through the growing dedicated retail floor space of ▷ the many (store-in-store) “entry stores” that were opened simultaneously in November 2018 (totaling 242 as of end-March 2019).

Sales of overseas business

In the US, fell 12.1% YoY to JPY510mn. The new management team undertook structural reforms geared toward medium- to ▷ long-term growth. The company also progressed with plans to open a US headquarters in spring 2020. Sales in Taiwan fell 32.6% YoY to JPY290mn, amid ongoing market adjustment. ▷ Despite worsening Japan–Korea relations, sales in South Korea rose 9.3% YoY to JPY590, buoyed by increased sales at directly ▷ operated stores and in wholesaling stemming from success in building close customer relationships through camping events and the use of social media. In Europe, the company established an e-commerce site in the UK in September 2019. The company opened its first European ▷ store in the UK in October 2019. In other countries, sales (mainly wholesale) decreased by 9.6% YoY to JPY150mn, although there were orders in the Oceania ▷ region.

Sales: New businesses

Camping Office sales increased 26.9% YoY to JPY110mn. Participating companies and orders increased. Subsidiary Snow Peak ▷ Business Solutions, which operates the Camping Office business, achieved 376.2% growth in sales to JPY400mn. Sales increased due to the January 2019 acquisition of Heartis System & Consulting Inc., which operates a system development business. In the Urban Outdoor business, sales increased 32.9% YoY. Sales increased at partner construction companies, with the 2019 ▷ release of limited colors in the Urban Shade series for houses.

49/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

In the Regional Revitalization business and the Glamping business, sales fell 18.9% YoY to JPY170mn, affected by project ▷ contract timing, which is weighted toward December. In July 2019 the company opened Snow Peak Field Suite Hakuba Kitaone Kogen (Hakuba, Nagano Prefecture), a glamping field with supervised field facilities and experience programs. The company launched a range of initiatives to drive group growth over the medium to long term through new experience-based venues.

Factors contributing to YoY changes in cumulative Q3 profit

Gross profit was JPY5.7bn (+20.5% YoY), reflecting higher sales. The GPM was 54.1% (up 0.5pp YoY). In the Outdoor business, ▷ the sales composition occupied by entry-level goods, which have a relatively high GPM, grew. Moreover, sales for entry-level goods with particularly high GPMs were robust, leading to an overall increase in GPM. Operating profit increased YoY due to higher GPM, despite an increase in SG&A expenses. SG&A expenses, which included ▷ expenses associated with establishing business infrastructure overseas, and the expense of an April 2019 increase in base pay for employees, rose 21.3% YoY to JPY4.9bn. Recurring profit and net income also increased due to higher operating profit as well as higher non-operating income. ▷ Non-operating income came in at JPY80mn (JPY27mn in Q3 FY12/18), due to the booking of JPY54mn in subsidies for construction of a new commercial tourism complex by Snow Peak Hakuba Co., Ltd.

1H FY12/19 results

Sales: JPY6.9bn (+15.0% YoY) ▷ Operating profit: JPY472mn (-5.4% YoY) ▷ Recurring profit: JPY484mn (+17.1% YoY) ▷ Net income*: JPY339mn (+63.3% YoY) ▷ *Net income attributable to owners of the parent

At the beginning of FY12/19, the company set out its three-year medium-term business plan going out to FY12/21. The plan laid out its key priorities as accelerating overseas development and strengthening the experience-based business. Under this plan, Snow Peak is targeting FY12/21 sales of JPY18.5bn and operating profit of JPY2.8bn.

1H FY12/19 sales were up thanks to strong gains at its Outdoor and Apparel businesses. Gross profit was up on higher sales and lower inventory valuation losses, but operating profit finished down, hurt by rising SG&A expenses.

Even though operating profit decreased, recurring profit increased on the back of higher non-operating income and a decline in non-operating expenses. Non-operating income came in at JPY72mn (JPY11mn in 1H FY12/18), due to the booking of JPY53mn in subsidies for construction of a new commercial tourism complex by Snow Peak Hakuba Co., Ltd., while non-operating expenses totaled JPY59mn (JPY96mn in 1H FY12/18), thanks to a decrease in foreign exchange losses. Net income attributable to owners of

50/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

the parent increased, as although extraordinary losses were higher YoY due in part to impairment charges for US stores, recurring profits increased and corporate and other taxes decreased.

Consolidated 1H results were generally in line with plan, leaving the company with 49.0% of its full-year target for sales (versus 49.4% at this time last year), 47.2% of its full-term target for operating profit (versus 54.2%), 51.0% of its full-year target for recurring profit (versus 46.8%), and 64.8% of its full-year target for net income (versus 43.3% at this time last year).

The company noted that in Q4 FY12/18 sales got a boost of roughly JPY300mn from the simultaneous opening of multiple “entry stores” in November but that it does not expect a similar boost to sales from the delivery of goods to stock new entry store openings this year. According to the company, its drive to meet its full-year sales target will kick off in Q3 lead by down jackets and other items in its apparel lineup.

Factors contributing to YoY changes in 1H sales The top-line gains in 1H FY12/19 reflect a combination of rising sales of entry-level goods (mostly online sales, including B2B sales to third-party online retailers), rising sales of outdoor products to wholesale dealers, and rising sales of apparel through the company’s own directly managed stores. Including overseas sales, 1H sales of entry-level goods of JPY790mn were up 19.7% YoY and apparel sales of JPY780mn were up 28.3% YoY.

Domestic sales: existing businesses (including Apparel) 1H domestic sales at existing businesses were up YoY, aided by double-digit growth in apparel sales and strong sales of its new Entry 2 Room Elfield tent, which it began selling only in November last year. Apparel sales were driven by its Flexible Insulation line and its TAKIBI line (made from flame-retardant materials).

Including new businesses, sales were up across all domestic channels. The top-line gains were driven by strong sales growth at directly managed entry stores and, under sales to wholesale dealers, more sales via its entry store format.

At directly managed stores, 1H sales of JPY1.3bn were up 17.0% YoY, the gains underpinned by strong sales of apparel and its ▷ new Entry 2 Room Elfield tent (as mentioned previously). At the company's proprietary e-commerce site, 1H sales of JPY200mn were up 33.3% YoY, aided by strong growth in sales of ▷ apparel, limited-edition goods, and collaborative goods. At third-party e-commerce sites, wholesale sales through third-party sellers of JPY410mn were up 57.7% YoY, the sharp gains ▷ driven by a combination of sales promotions and increases in its product lineup available for sales through third-party sellers. In-store sales of JPY1.4bn were up 12.6% YoY, driven in large part by the opening of five new store-in-stores inside of Alpen ▷ Outdoors, the new experimental retail format for outdoor goods by Alpen, a major big-box retailer of sporting goods. Wholesale sales to dealers of JPY2.0bn were up 20.3% YoY, reflecting sales through the growing dedicated retail floor space of ▷ the many (store-in-store) “entry stores” that were opened simultaneously in November 2018 (totaling 245 as of end-March 2019) and additional sales channels, including new stores opened in cooperation with its business partner Aeon Pet.

Sales of overseas business

In the US, 1H sales of JPY350mn were down 9.8% YoY. The new management team undertook structural reforms geared ▷ toward medium- to long-term growth, such as negotiating business with leading dealers and opening campgrounds. Brand

51/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

recognition also increased, with a new product winning a major US outdoor gear award. The company established Snow Peak USA, Inc. in July 2019, appointing Snow Peak CEO Toru Yamai as president of the new local subsidiary. In Taiwan, sales of JPY210mn were down 35.4% amid a general decline in the market. ▷ In South Korea, sales of JPY430mn were up 13.6% YoY, with sales rising at directly managed retail stores and through ▷ wholesalers, and the company also reporting strong sales of products developed in collaboration with LINE Corp.

Sales of new businesses

At its Urban Outdoor business, 1H sales of JPY80mn were up 17.6% YoY. Projects proceeded apace, including the completion ▷ of a model room at the Yamagata Ecotown Maeakashi community building project, for which Snow Peak has responsibility for design supervision. Sales also increased at partner construction companies, with the 2019 release in limited colors of the Urban Shade series of shade sales for houses. At its Regional Revitalization and Glamping businesses, combined sales of JPY140mn were down 33.1% YoY. As the drop in ▷ sales was due mainly to delays in the finalization of some contracts, the company says it is still expecting full-year sales in this area to finish generally in line with plan. The company has a range of initiatives underway in this area to drive group growth over the medium to long term through new experience-based venues, such as Snow Peak Kawanoeki Ochi, which opened in June in Kochi Prefecture. At its Camping Office business, 1H sales of JPY230mn were up 351.0% YoY, the gains reflecting the acquisition of IT specialist ▷ Heartis System & Consulting in January 2019, along with increases in the number of client companies and orders for systems development and other IT-related work.

Factors contributing to YoY changes in earnings

On the earnings front, gross profit was up on higher sales and lower inventory valuation losses but operating profit finished down, hurt by rising SG&A expenses. 1H gross profit of JPY3.7bn was up 15.2% or JPY480mn YoY. The gross profit margin of 53.3% was up 0.1pp YoY. ▷ SG&A expenses of JPY3.2bn were up 19.1% YoY, or JPY510mn, outpacing the rise in gross profit and leaving operating profit ▷ down. Increases in major components of SG&A spending are detailed below.  Personnel-related spending was up JPY180mn YoY, reflecting increases in both the number of employees and increases in base salaries that went into effect on April 1, 2019.  A one-time, summer bonus payment to employees of JPY80m also added to personnel costs.  The addition of Heartis System & Consulting to consolidated results in January 2019 added JPY50mn to SG&A expenses.  Additions to the company’s overseas business infrastructure added JPY60mn to SG&A expenses.  Costs tied to sales (mainly distribution costs and rents) added JPY40mn to SG&A expenses  Other miscellaneous costs added JPY100mn to SG&A expenses.

Q1 FY12/19 results For Q1 FY12/19, the company reported sales of JPY2.8bn (+22.5% YoY), an operating loss of JPY6mn (JPY51mn operating loss in Q1 FY12/18), recurring loss of JPY22mn (JPY91mn recurring loss), and a net loss attributable to owners of the parent of JPY46mn (net loss attributable to owners of the parent of JPY96mn).

At the beginning of FY12/19, the company set out its three-year medium-term management plan up to FY12/21. It has emphasized its key priorities as accelerating overseas development and strengthening the experience-based business. According to this plan, Snow Peak aims for sales of JPY18.5bn in FY12/21 and operating profit of JPY2.8bn.

52/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Q1 sales reached 20.2% of full-year company forecasts (19.1% of the full-year results in Q1 FY12/18) while all profit categories posted losses. While Q1 results surpassed company forecasts, Snow Peak left its full-year forecasts unchanged. Because the company’s mainstay products are car camping goods, Q2 and Q3 (spring and summer) sales tend to comprise a higher share of full-year sales than those made in Q4 and Q1 (fall and winter).

Factors affecting sales Q1 sales rose on strong sales at the Apparel business in addition to sales growth at the Outdoor business driven by favorable performance of entry-level products.

Sales by region

Domestic sales were up 28.0% YoY to JPY2.3bn. Sales of new entry-level products Entry Pack TT (launched in April 2018) and ▷ Entry 2 Room Elfield (launched in November 2018), and the existing entry-level product Amenity Dome totaled JPY210mn (JPY100mn in Q1 FY12/18). Also contributing to sales growth was a 16.0% YoY rise in comparable store sales in Japan attributed to strong sales at directly managed apparel stores. Overseas, sales fell in the US and Taiwan while sales grew in South Korea. ▷  In the US, sales were down 10.9% YoY to JPY155mn. Sales fell temporarily due to a delay in product supply, but trended up in February and March 2019.

 In Taiwan, sales fell 33.1% YoY to JPY113mn. Supply exceeded demand, and the market as a whole entered a phase of inventory adjustment.

 South Korea saw sales increase 45.0% YoY to JPY184mn, thanks to favorable performance of goods produced in collaboration with LINE Corporation.

Sales by channel (including overseas sites and new businesses)

Sales at directly managed stores rose 25.3% YoY to JPY643mn on robust performance of the Apparel business. ▷ Sales from the company’s e-commerce site were up 12.6% YoY to JPY116mn. The increase in sales was attributed to the ▷ smartphone app launched in March 2018 reaching 100,000 downloads as of end-Q1 FY12/19 and robust apparel sales. In-store sales were up 11.3% YoY to JPY570mn, boosted by the launch of in-store format stores in Alpen Outdoors, a large-scale ▷ store of a major sporting goods volume retailer in a new store format. Shop-in-shop sales increased 70.5% YoY to JPY457mn. ▷ Wholesale sales to dealers rose 14.0% YoY to JPY1.0bn. Having secured dedicated floor space in multiple entry stores opened ▷ simultaneously in November 2018 (239 stores as of end-March 2019) contributed to sales growth. An increase in wholesale sales through e-commerce sites such as Amazon also helped boost sales.

Sales by business In existing businesses (Outdoor and Apparel), Outdoor posted JPY2.1bn in sales (+21.3% YoY) and Apparel JPY443mn (+37.6% YoY). In the Outdoor business, sales of entry-level products were strong. In the Apparel business, sales activities at directly managed stores helped improve awareness of the company’s apparel among users of its camping goods, and sales via the company’s e-commerce site were favorable.

Among new businesses, Urban Outdoor booked sales of JPY26mn (+4.0% YoY), Regional Revitalization JPY131mn (-25.6% YoY), and Camping Office JPY122mn (+510.0% YoY).

In the Urban Outdoor business, a partner construction company added a new store in December 2018. ▷ In the Regional Revitalization business, sales fell due to a decline in the number of JYUBAKO mobile houses delivered to 12 ▷ units from 17 in Q1 FY12/18. In addition to signing a comprehensive partnership agreement with Hakuba Village in Nagano

53/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Prefecture in January 2019, the company launched a range of initiatives to drive group growth over the medium to long term through new experience-based venues, such as Snow Peak Tosashimizu Campground (Kochi Prefecture) which opened in April and Snow Peak Kawanoeki Ochi, scheduled to open in June (Kochi Prefecture). Sales of the Camping Office business grew largely as a result of making Heartis System & Consulting Inc., a company ▷ specializing in system development, a consolidated subsidiary in January 2019. Excluding the impact of the consolidation, sales would have been up 54.7% YoY. Heartis System & Consulting was purchased for JPY280mn, with JPY251mn in goodwill resulting from the purchase (goodwill amortization of roughly JPY50mn per year, over the period of five years).

Factors affecting profit Gross profit rose 22.1% YoY to JPY1.5bn on higher sales, but GPM fell 0.2pp YoY to 52.0%.

While a decline in inventory write-downs pushed up the GPM by 0.7pp, the change in product mix (relatively low margin products making up a larger share of total sales) and currency fluctuations depressed the GPM by 0.8pp and 0.1pp, respectively, resulting in an overall decline in GPM.

Inventory write-downs declined as a result of the company’s efforts to make planned sales of products. Disposing a part of ▷ inventory in Q4 FY12/18 (October–December 2018) also contributed to decreasing inventory write-downs. Sales of Entry Pack TT, which has a relatively high GPM, were robust in Q1 FY12/18. While sales of Entry Pack TT were largely ▷ unchanged YoY in Q1 FY12/19, sales of Entry 2 Room Elfield and Amenity Dome, products with lower GPM compared with Entry Pack TT, grew, resulting in an overall decline in the GPM.

Operating loss, recurring loss, and net loss all narrowed as gross profit increased at a greater rate than SG&A expenses owing to the company’s efforts to optimally manage expenses and control fixed costs.

54/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Income statement

Income statement FY12/10 FY12/11 FY12/12 FY12/13 FY12/14 FY12/15 FY12/16 FY12/17 FY12/18 FY12/19 (JPYmn) Par. Par. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Sales 2,944 3,250 3,693 4,487 5,559 7,854 9,222 9,910 12,071 14,261 YoY - 10.4% 13.6% 21.5% 23.9% 41.3% 17.4% 7.5% 21.8% 18.1% Cost of goods sold 1,455 1,647 1,919 2,265 2,849 4,248 4,574 4,979 5,638 6,541 Gross profit 1,489 1,603 1,774 2,222 2,710 3,606 4,649 4,931 6,433 7,720 YoY - 7.7% 10.6% 25.3% 21.9% 33.1% 28.9% 6.1% 30.5% 20.0% Gross profit margin 50.6% 49.3% 48.0% 49.5% 48.7% 45.9% 50.4% 49.8% 53.3% 54.1% SG&A expenses 1,355 1,543 1,737 2,109 2,479 3,037 3,795 5,073 5,513 6,796 SG&A ratio 46.0% 47.5% 47.0% 47.0% 44.6% 38.7% 41.2% 51.2% 45.7% 47.7% Operating profit 134 60 37 113 231 568 853 -142 920 924 YoY - -55.0% -38.7% 207.1% 104.2% 145.7% 50.1% - - 0.4% Operating profit margin 4.5% 1.9% 1.0% 2.5% 4.2% 7.2% 9.3% - 7.6% 6.5% Non-operating income 14 50 200 193 74 51 25 123 68 81 Non-operating expenses 62 59 18 18 34 101 72 21 104 43 Recurring profit 86 51 219 288 272 518 806 -39 883 963 YoY - -40.6% 329.2% 31.8% -5.7% 90.3% 55.6% - - 9.0% Recurring profit margin 2.9% 1.6% 5.9% 6.4% 4.9% 6.6% 8.7% - 7.3% 6.8% Extraordinary gains 61 79 0 0 ------Extraordinary losses 686 59 12 8 11 2 29 193 65 166 Tax charges -110 27 9 104 144 231 296 24 346 371 Implied tax rate 20.4% 38.6% 4.6% 36.9% 55.4% 44.8% 38.1% - - - Ne t in c o me -466 23 133 177 116 285 485 -251 479 425 YoY - - 484.5% 33.6% -34.3% 144.6% 70.3% - - -11.1% Net margin - 0.7% 3.6% 4.0% 2.1% 3.6% 5.3% - 4.0% 3.0% Source: Shared Research based on company data Note: Amounts in the table may differ from company data due to differences in rounding methods.

Refer to the Earnings model section for more information about sales through operating profit.

Recurring profit may fluctuate based on non-operating foreign exchange losses or gains caused by shifts in the exchange rate. With the exception of FY12/10, FY12/17, and FY12/19, extraordinary gains or losses have not had a large impact on pre-tax profits. In FY12/10, the company booked extraordinary losses from retirement benefits and provisions for retirement benefits. In FY12/17, it booked impairment losses of JPY70mn from older logistics centers on activation of and relocation to a new logistics center and impairment losses of JPY82mn on liquidation of Snow Peak Glamping. In FY12/19, the company booked JPY97mn in valuation loss on investment securities and JPY46mn in impairment loss to reflect the writedown of fixed assets associated with directly managed stores.

55/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Balance sheet

Balance sheet FY12/10 FY12/11 FY12/12 FY12/13 FY12/14 FY12/15 FY12/16 FY12/17 FY12/18 FY12/19 (JPYmn) Par. Par. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. ASSETS Cash and deposits 383 168 205 245 913 2,109 1,160 994 3,012 3,298 Notes and accounts receivable 490 683 632 493 560 816 908 1,048 2,047 2,097 Inventories 536 540 617 902 903 1,066 1,232 1,328 1,284 2,151 Other 74 170 79 119 99 110 182 741 69 183 Total current assets 1,483 1,560 1,533 1,759 2,476 4,100 3,482 4,111 6,412 7,729 Buildings and structures (net) 109 1,404 1,320 1,367 1,283 1,364 1,534 3,063 2,982 3,041 Machinery, equipment, and vehicles (net) 10 12 7 31 23 31 48 84 51 72 Land 384 527 528 528 528 528 915 771 771 835 Lease assets (net) 16 55 54 41 29 22 16 10 16 31 Construction in progress 1,034 - 4 - 36 24 1,237 210 165 679 Other 66 62 69 67 59 68 67 186 153 181 Total tangible fixed assets 1,619 2,060 1,982 2,035 1,958 2,037 3,819 4,325 4,138 4,840 Total intangible fixed assets 63 96 227 243 237 307 419 702 589 767 Investments and other assets 368 314 223 326 320 399 580 705 1,079 1,578 Total fixed assets 2,050 247 2,432 2,604 2,515 2,742 4,817 5,732 5,805 7,186 Total assets 3,533 4,031 3,965 4,364 4,991 6,842 8,299 9,843 12,218 14,915

LIA BILITIES Accounts payable 104 86 103 94 57 123 127 172 316 319 Accounts payable–other 62 152 - - 220 388 343 460 427 719 Short-term debt 594 605 675 895 792 666 707 2,455 2,554 3,686 Income taxes payable 27 8 76 67 99 159 263 56 417 175 Other 102 89 207 254 85 88 193 84 335 322 Total current liabilities 889 940 1,061 1,309 1,253 1,423 1,634 3,227 4,049 5,220 Long-term debt 926 1,328 1,173 1,119 908 605 1,382 1,522 796 30 Provision for directors' retirement benefits 315 308 347 367 389 410 - - - - Provision for product warranties 55 56 70 90 114 139 168 188 208 216 Provision for point certificates 13 22 32 48 65 85 120 162 195 229 Asset retirement obligations - 35 22 36 44 73 91 121 133 149 Other 194 188 92 53 54 42 463 473 451 518 Total long-term liabilities 1,503 1,938 1,736 1,712 1,573 1,354 2,223 2,465 1,784 1,143 Total liabilities 2,796 3,021 2,826 2,777 3,857 5,692 5,833 6,363 Shareholders' equity Capital stock 100 100 100 100 100 100 100 100 1,070 2,155 Capital surplus 50 51 51 51 717 2,346 2,453 2,453 3,424 4,508 Retained earnings 1,048 1,058 1,071 1,236 1,340 1,608 2,058 1,701 2,005 2,230 Treasury stock -57 -56 -56 -56 -14 -1 -188 -135 -135 -403 Accumulated other comprehensive income -0 -0 3 12 22 13 4 22 -1 47 New share subscription rights ------6 11 Non-controlling interests ------16 11 18 5 Total net assets 1,141 1,153 1,169 1,342 2,164 4,065 4,442 4,150 6,385 8,552 Working capital 922 1,136 1,146 1,302 1,406 1,758 2,012 2,203 3,015 3,929 Total interest-bearing debt 1,520 1,932 1,848 2,014 1,700 1,271 2,089 3,977 3,350 3,716 Net debt 1,138 1,764 1,643 1,768 787 -838 929 2,982 338 418 Source: Shared Research based on company data Note: Amounts in the table may differ from company data due to differences in rounding methods.

Assets Snow Peak outsources production to other factories for almost all of its products. It leases space only for directly managed stores. As it sells on a wholesale basis to in-store and shop-in-shop locations, Snow Peak has no need for capital investment. Therefore, the headquarters make up the bulk of fixed assets, and the company has no need to raise production efficiency as sales increase.

Cash and deposits As of the end of FY12/19, current assets accounted for 51.8% of total assets (versus 52.5% at the end of FY12/18), the majority of which were cash and deposits, and inventories. Snow Peak says it needs to maintain around JPY500mn in cash and deposits, an amount equivalent to one months’ purchases. The balance of cash and deposits swung sharply in FY12/15, FY12/16, and FY12/18.

Cash and deposits increased in FY12/14 and FY12/15 due to proceeds from the sale of treasury stock. Cash and deposits increased to JPY2.1bn in FY12/15, but dropped to JPY1.2bn in FY12/16 following cash outlays of some JPY2.0bn to acquire tangible fixed assets, including a site for Snow Peak Operation Core (concentrates product distribution, manufacture, purchasing and after-service functions in one facility). In FY12/18, the company made a private placement of warrants, raising JPY3.4bn (exercise period: April 2018–April 2020; total 22,900 warrants). As of the end of December 2018, 14,000 of the warrants had been exercised, boosting the company’s cash balance at the end of FY12/18 to JPY3.0bn.

56/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Inventories Snow Peak’s sales are focused on wholesaling to sporting goods retailers and outdoor specialty stores, and it mainly outsources production to partner factories. Inventories therefore comprise directly managed stores’ product inventories and pre-wholesaling inventories for sporting goods retailers and outdoor specialty stores. In FY12/19, the company had an inventory turnover rate of 8.3x (versus 9.2x in FY12/18), and average turnover period was 44.0 days (versus 39.5 days in FY12/18).

Tangible fixed assets The majority of tangible fixed assets are the company’s headquarters (FY12/18 balance sheet value of JPY1.3bn) and Operation Core HQ2 (JPY2.0bn), activated in December 2017. Most of the remainder is store fixtures. Tangible fixed assets increased due to the acquisition of a site for Operation Core HQ2 and other assets in FY12/16, and the construction of Operation Core HQ2 in FY12/17.

Liabilities Snow Peak’s main liability is interest-bearing debt. Distinctive liability items are a provision for product warrantees and a points provision.

Accounts payable As of the end of FY12/19, accounts payable stood at JPY319mn (versus JPY316mn at the end of FY12/18). In principle, Snow Peak pays its production outsourcing partners on time.

Interest-bearing debt At the end of FY12/19, total interest-bearing debt came to JPY3.7bn (versus JPY3.4bn at the end of FY12/18). Interest bearing debt had been coming down after peaking at JPY2.0bn in FY12/13, but in FY12/16 the company increased its long-term borrowings to acquire funds to purchase a site for Snow Peak’s Operation Core and other assets.

Provision for product warranties The company provides lifetime guarantees on all of its products. If a purchased product loses its function due to a manufacturing defect, the company repairs that product free of charge. In other instances, products are repaired at appropriate prices. (Some repairs may not be possible for products at the end of their lives, due to materials deterioration because of aging or severe damage to the products during use.)

The provision for product warranties provides the costs required to fulfill the lifetime guarantee of its products. The company prepares against any warranty expenses that could occur from the next period by booking this cost based on past results. In FY12/19, the ratio of increase in provision for product warranties (on sales) was only 0.1% (versus 0.2% in FY12/18). The provision for product warranties accounted for only 1.4% of total assets.

Points provision Snow Peak uses a point card membership system to manage customers. Members accumulate points when they buy Snow Peak products. When points reach a certain level, members receive gift points that can be exchanged for special-edition products. Members may also exchange points for discounts to associated campgrounds or special services. Members move up or down in rank according to their cumulative annual purchases, and each rank has different granted point percentages (2–8%) and rewards.

Points provision covers the costs associated with the use of loyalty points by customers. In FY12/19, the ratio of increase in points provision (on sales) was only 0.2% (versus 0.3% in FY12/18). Points provision accounted for only 1.5% of total assets.

Net assets Net assets increased substantially in FY12/14, FY12/15, FY12/18, and FY12/19. Outside of those years, retained earnings have increased gradually on additions to retained earnings.

57/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

The company disposed of treasury stock in FY12/14 and FY12/15, causing the capital surplus to expand JPY666mn and JPY1.6bn in these years, respectively.

In FY12/18, the company issued its first share subscription rights (warrants) through a third-party allotment (net proceeds: JPY3.4bn; exercise period: April 2018–April 2020). As these warrants have been exercised, the company’s capital and capital surplus balances have risen. The funds procured are used primarily to repay loans.

In FY12/19, more warrants were exercised from its first issue. In addition, the company issued the second series of warrants in November 2019 through a third-party allotment (net proceeds: JPY3.2bn; exercise period: November 2019–November 2021). As this second series of warrants has been exercised, the company has seen further additions to the balances of its capital and capital surplus. Most of the proceeds are used to finance the capital spending needed to start up its Spa & Resort business.

58/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Statement of Cash flows

Cash flow statement FY12/10 FY12/11 FY12/12 FY12/13 FY12/14 FY12/15 FY12/16 FY12/17 FY12/18 FY12/19 (JPYmn) Par. Par. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cash flows from operating activities (1) 51 29 358 247 518 380 728 -287 1,437 496 Cash flows from investing activities (2) -1,052 -666 -237 -360 -223 -370 -2,387 -1,661 -556 -1,949 Free cash flow (1+2) -1,001 -637 122 -113 295 11 -1,659 -1,948 880 -1,453 Cash flows from financing activities 1,017 442 -110 140 368 1,186 712 1,775 1,145 1,739 Depreciation and amortization (A) 93 197 239 270 265 287 297 528 573 604 Capital expenditures (B) -1,119 -663 -272 -322 -198 -298 -2,246 -1,580 -353 -1,184 Working capital change (C) -922 -214 -10 -156 -105 -352 -254 -191 -812 -914 Simple FCF (NI + A + B - C) -570 -230 110 281 289 625 -1,209 -1,112 1,511 760 Source: Shared Research, based on company data Note: Amounts in the table may differ from company data due to differences in rounding methods.

Cash flows from operating activities Cash flows from operating activities are affected mainly by net income and changes in depreciation. Net cash flow from operating activities have been positive every year since FY12/10 with the exception of FY12/17, when the company reported a pre-tax loss of JPY232mn but still had to pay JPY452mn in taxes, resulting in negative net cash flow from operations.

Cash flows from investing activities Cash flows from investing activities fluctuate mainly as a result of payments for the purchase of tangible fixed assets. Snow Peak’s outflows for investing in fixtures of the stores it launches are minimal. Looking at the period between FY12/10 and FY12/18, we note especially large net outflows from investing activities in FY12/16 and again in FY12/17.

In FY12/16, investing activities resulted in a net cash outflow of JPY2.4bn, reflecting outlays of nearly JPY2.0bn to acquire tangible fixed assets, including the site for Snow Peak’s Operation Core (concentrates product distribution, manufacture, purchasing and after-service functions in one facility). In FY12/17, investing activities resulted in a net cash outflow of JPY1.7bn, reflecting an expenditure of JPY1.1bn to open directly managed stores and to acquire fixed assets, including the construction of Snow Peak Operation Core HQ2. In FY12/19, investing activities resulted in a net cash outflow of JPY1.9bn, JPY1.0bn of which went for purchases of tangible fixed assets.

Cash flows from financing activities Cash flows from financing activities fluctuate due to changes in interest-bearing debt, sales of treasury stock, and share issuance. Looking at the period between FY12/10 and FY12/18, we note that net cash flow from financing activities has almost always been positive and, since FY12/15, has shown a marked increase over years prior to FY12/15.

In FY12/14 and FY12/15, net cash flow from financing activities was bolstered by sales of treasury stock. FY12/16 saw the receipt of JPY1.2bn in long-term loans, FY12/17 saw the receipt of JPY1.7bn in short-term loans and JPY60mn in long-term loans, and in FY12/18 the company received JPY1.9bn from new share issuance in response to the exercise of warrants. In FY12/19, the company received a total of JPY2.2bn from new share issuance in response to the exercise of warrants.

59/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Other information

History

Founded in 1958 by Yukio Yamai, the first CEO Yukio Yamai, Snow Peak’s first CEO, founded the company in 1958 as a hardware wholesaler. A mountain climbing enthusiast, each week he would take a night train out to the mountains to immerse himself in rock climbing. Mountaineering equipment at that time was mostly imported from Europe and the US, and sizes were not suited to Japanese people. Dissatisfied with this situation, Yamai applied his climbing experience to develop and sell mountaineering equipment that was reliable and easy to use. He developed products that he thought were necessary and wanted to use himself. And because a climber’s life can depend on his mountaineering equipment, he put his products through repeated field tests to ensure their quality. The company’s corporate philosophy, “The Snow Peak Way,” carries the founder’s spirit of “in our customers’ shoes.”

Toru Yamai joins company in 1986, full-fledged entry into car camping business Toru Yamai, the current CEO, joined Snow Peak in 1986. At that time, camping in Japan was mainly an extracurricular event at school or a way to travel at low cost. An advocate of car camping, Toru Yamai enjoyed going out with his family in their SUV and spending time sleeping and eating in nature. He led Snow Peak toward the development and sale of products for car camping.

In car camping goods, Snow Peak followed the company tradition of developing products the product development managers themselves would use. Whereas competitors were offering tents priced mainly below JPY20,000, Snow Peak’s tent sold for JPY168,000. Characterized by the durability of its materials, less time to erect, smaller carrying size, and larger space when erected, these tents added a touch of luxury to camping.

In the five years after 1988, the Japanese car camping population grew to 20mn people. Earnings grew for five consecutive years, and sales quintupled. By 1993, sales had grown from around JPY500mn to JPY2.5bn, with recurring profit of JPY350mn.

Peaking in 1993, sales fell for six straight years; in 1998 transitioned from wholesales to dealers to direct sales Car camping was in vogue in the late 1980s to early 1990s, and the camping population increased. The trend then peaked in 1996, with the car camping population continuing to fall until 2008.

In tandem with the market, Snow Peak’s operating performance peaked in 1993, with sales then falling for six consecutive years. In 1999, sales were JPY1.5bn and recurring profit JPY40mn. As performance continued to slide, in 1998 the company held Snow Peak Way, an event to foster interaction with customers. Reflecting the customer opinion that the quality of Snow Peak’s products was high, but so were prices, the company decided to improve the situation. In 2000, the company shifted its distribution route, transitioning from wholesales to dealers to direct sales to authorized dealers. The company explains that as a result, its sales have trended upward since 2000, even while the car camping population has continued to decline.

The company opened its first directly managed Snow Peak store in 2003. In 2005, it began developing in-store Snow Peak stores, centered on high-end stores operated by authorized dealers.

Snow Peak listed on the Mothers market of the Tokyo Stock Exchange in 2015, changing its designation to the First Section in 2015.

Date Event

Jul. 1958 Yukio Yamai, the first CEO, founded Yukio Yamai Shoten in the city of Sanjo, Niigata Prefecture, establishing the hardware store that would later become Snow Peak.

Apr. 1959 As a climbing enthusiast, Yukio Yamai was dissatisfied with the mountaineering equipment available at the time, so developed his own mountaineering equipment. The company began selling products nationwide.

Jul. 1986 Full-fledged entry into the car camping business.

60/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Dec. 1996 Toru Yamai becomes president. Name changed to Snow Peak Co., Ltd. Established US subsidiary, Snow Peak U.S.A., Inc., in Oregon.

Oct. 1998 Began holding Snow Peak Way event in Yanase Motosu Park (Yamanashi Prefecture) Yanase Motosu Park. Jan. 2001 Commenced exports to Europe and began full-fledged entry into South Korea and other Asian markets.

May 2003 Opened the first directly managed Snow Peak store in the city of Dazufu, Fukuoka Prefecture.

Nov. 2008 Established Snow Peak Korea, Inc., in Seoul.

Sep. 2009 Reorganized US branch from Snow Peak U.S.A., Inc., to Snow Peak Inc., Corporation of Japan.

Apr. 2011 Relocated headquarters and factory to headquarters (in Sanjo, Niigata Prefecture) combining a camping field and store, factory, and offices. Opened distribution center at the site of the company’s previous headquarters.

Apr. 2012 Established Snow Peak Well K.K., in Sanjo-shi, Niigata Prefecture, starting a business to provide work to people with disabilities.

Sep. 2014 Made a full-fledged launch into the Apparel business with in the fall/winter 2014 season.

Dec. 2014 Listed on the Mothers market of the Tokyo Stock Exchange.

Dec. 2015 Listed on the First Section of the Tokyo Stock Exchange

Jul. 2016 Established Snow Peak Business Solutions to develop and strengthen the Camping Office business.

Feb. 2017 Established Snow Peak Chiho Saisei Consulting to provide consulting services relating to regional revitalization.

Mar. 2017 Began operation of Snow Peak Operation Core HQ2, aimed at concentrating core functions and streamlining operations. Installed and began operation of a new SAP core system.

Jan. 2018 Began operation of Snow Peak Tokyo HQ3.

Jul. 2019 Established subsidiary Snow Peak USA, Inc. to develop business in the US.

Oct. 2019 Opened Snow Peak London St. James’s, its first directly managed store in Europe.

News and topics February 2020 On February 26, 2020, the company announced changes in representative directors.

At a board of directors meeting held on the same day, the company resolved on the following changes to its representative directors (effective March 27, 2020).

Details of the change

Name New position Current position

Toru Yamai Chairman and representative director President, representative director, and chief executive officer

Risa Yamai President and representative director Vice president, representative director, and chief development officer

Fumihiro Takai Vice president and representative Senior managing director and chief director operation officer

January 2020 On January 27, 2020, the company announced a capital and business alliance with VirtualTek Corporation, and the underwriting of a third-party allotment of new shares by VirtualTek.

The company has entered into a capital and business alliance with VirtualTek Corporation (headquartered in Seoul, South Korea). Through this capital and business alliance, the brand recognition cultivated by the company will be combined with VirtualTek’s

61/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

product development and sales structure for the apparel and sports equipment markets in South Korea and the Asia region for the two parties to jointly develop and sell products focusing on apparel in South Korea. Starting with its opening of a store in the Lotte Department Store in Pyeongchon (scheduled for February 20, 2020), Snow Peak plans to open a total of 70 stores in South Korea during 2020 (with a focus on major department stores in Seoul such as Galleria, Shinsegae, and Hyundai). The company will expand its business into the South Korean market through two axes: the sale of apparel products developed by VirtualTek under the Snow Peak brand, as well as the sale of Snow Peak, Korea, Inc. products.

Details of the business and capital alliance Details of the business alliance

The company has entered into a trademark license agreement with VirtualTek and Devgru (a subsidiary of VirtualTek). ▷ VirtualTek and Devgru will develop products mainly for sports apparel, and sell products in South Korea. Snow Peak will earn royalties based on the sale of products by VirtualTek and Devgru that use its trademarks. In addition, there are plans for the implementation of projects that will benefit from the synergy of each company’s businesses, ▷ and discussions will continue regarding such projects.

Details of the capital alliance The company acquired common shares in VirtualTek through a third-party allotment. The investment amount and shareholding are low enough so as not to make VirtualTek an affiliated company.

Overview of the underwriting of third-party allotment

Total payment amount: KRW3.0bn (JPY287mn) ▷ Payment date: December 27, 2019 ▷

Number of shares acquired, acquisition price, and status of shares before and after acquisition

Number of shares held by the company prior to transfer: 0 shares (shareholding: 0.0%) ▷ Number of shares acquired: 3,800,000 shares (acquisition price: KRW3.0bn) ▷ Number of shares held by the company after the transfer: 3,800,000 shares (shareholding: 6.6%) ▷

Overview of counterpart in the capital and business alliance

Name: VirtualTek Corporation ▷ Businesses: Collection and sale of used paper for newsprint production; development, production, and sale of apparel and ▷ sporting goods; management and licensing of intellectual property rights such as trademark rights

VirtualTek operating results and financial position

(KRWmn) FY12/16 FY12/17 FY12/18 Net assets 12,326 9,649 10,536 Total assets 33,979 20,441 16,291 Sales 10,945 14,829 9,123 Operating profit -782 15 -1,600 Net income 9,029 -3,061 -6,645

October 2019 On October 18, 2019, the company announced the issuance of its second share subscription rights (with provisions to revise exercise price) through a third-party allotment and the conclusion of a corresponding facility agreement.

62/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

The company will raise capital through a third-party allotment of share subscription rights (with provisions to revise exercise price) with an exercise period of about two years (from November 2019 to November 2021) to SMBC Nikko Securities Inc. The exercise of the share subscription rights by SMBC Nikko Securities will increase the company’s capital.

In addition to the share subscription rights purchase agreement, the company also plans to conclude a facility agreement with SMBC Nikko Securities. The facility agreement between the two parties will stipulate the exercise procedure for the share subscription rights. The agreement specifies that SMBC Nikko Securities will in principle make every effort to exercise the share subscription rights during the exercise period while giving Snow Peak, Inc. the option to designate a certain period for exercise suspension.

The JPY3.2bn in net proceeds will be allocated as follows.

Capital investment for startup of the Spa & Resort business (estimated total investment: JPY2.5bn): JPY1.9bn ▷ Capital investment for new facility openings (mainly commercial complexes that include lodging and restaurants): JPY770mn ▷ Reserve for the purchase of investment securities (investment in companies that help create new customer contacts): ▷ JPY500mn Repayment of loans from financial institutions: JPY124mn ▷

In the Spa & Resort business, Snow Peak is developing near its headquarters a multi-purpose spa resort, which offers lodging, hot springs, restaurants, and shopping facilities. The project reflects the company’s push toward selling an experience, a key focus area for Snow Peak. As the opening of the resort is planned for October 2021, boring surveys for hot springs and architectural design work is already in progress. Hence, the company expects about JPY100mn in expenses during FY12/19.

The exercise of all share subscription rights is expected to dilute the total number of voting rights (163,573 as of the end of September 2019) on common shares of the company by 16.51%.

Details of offering Allotment date November 5, 2019 Number of share subscription rights 27,000 units to be issued Issue price JPY706 per share subscription right (total of JPY19,062,000) Number of shares issuable upon 2,700,000 shares (16.51% of shares outstanding) exercise The issue price may be adjusted. The number of shares issuable shall remain fixed at 2,700,000 shares regardless of the issue price. Amount of capital to be raised JPY3,240mn (net of expenses) Exercise price and provisions for Initial exercise price of JPY1,196 revision The minimum exercise price shall be JPY598 (no maximum exercise price). On the effective date of each exercise request, the exercise price shall be revised to an amount equivalent to 90% of the volume-weighted average price (VWAP) of the company’s common shares at the close of the trading day preceding said effective date. If the resulting amount is below the minimum exercise price, the minimum exercise price shall be used as the revised exercise price. The exercise period is from November 6, 2019 to November 30, 2021. Offering and allotment method Third-party allotment Allottee SMBC Nikko Securities Inc.

63/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Corporate governance and top management Corporate governance In March 2016, Snow Peak transitioned to a company with an audit and supervisory committee. Snow Peak’s Board of Directors has seven members who are not Audit and Supervisory Committee members and three who are members (of which, two are outside directors). The board holds regular monthly meetings and extraordinary meetings as necessary to decide important matters of business and confirm the status of business execution.

Corporate governance

Capital structure

Controlling interests -

Parent company ticker N

Directors

Number of directors (per Articles of Incorporation) 15

Directors’ term of office (per Articles of Incorporation) (years) 1

Outside directors (independent directors) 2

Audit and Supervisory Board members

Directors who are Audit and Supervisory Board members (per Articles of 5 Incorporation)

Other

Participation in electronic voting platform N

Submission of convocation notice (executive summary) in English N

Disclosure of director compensation No disclosure on individuals

Disclosure of compensation amounts and policy for determining calculation method Y

Corporate takeover defenses N

Top management

Toru Yamai, chairman and representative director Toru Yamai is the son of Yukio Yamai, the company’s founder. He was born in Sanjo, Niigata Prefecture, in 1959. After graduating from Meiji University in 1982, he joined Liebermann-Wälchli & Co., SA., a trading company. He joined Yamakou Co., Ltd. (now Snow Peak) in 1986, and began developing car camping goods. He was appointed to the position of president and representative director in 1996 and assumed the position of chairman and representative director in March 2020. Since establishing Snow Peak USA, Inc. in July 2019 and assuming the position of CEO of the subsidiary, he has focused much of his efforts on expanding the company’s business in North America. He spends at least 30 days a year camping and 40–50 days on average.

Lisa Yamai, president and representative director Born in 1987, Lisa Yamai is the eldest daughter of current chairman Toru Yamai. She joined Snow Peak in 2012 and was closely involved with the startup of the company’ apparel business. She assumed the position of president and representative director in March 2020.

Fumihiro Takai, vice president and representative director Born in 1973, Fumihiro Takai joined the company in 1991. He was named to executive officer, head of the domestic sales department, and senior manager of the corporate sales department in August 2018, was subsequently appointed to the position of director, executive officer, and head of the domestic sales department in March 2016, then elevated to the position of senior managing director in January 2019. He assumed the position of vice president and representative director in March 2020. He also

64/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

serves as a director at subsidiaries Snow Peak Hakuba and Snow Peak Well, and president and representative director of Snow Peak Chiho Saisei (Regional Revitalization) Consulting.

Major shareholders

Shareholding Top shareholders Shares held ratio Toru Yamai 2,693,840 15.4% Japan Trustee Services Bank, Ltd. (Trust Account) 2,161,147 12.4% The Master Trust Bank of Japan, Ltd. (Trust Account) 1,096,000 6.3% Tokyo Small and Medium Business Investment & Consultation Co., Ltd. 1,056,000 6.0% State Street London care of State Street Bank and Trust, Boston SSBTC A/C UK 591,000 3.4% London Branch Clients - United Kingdom Sepposha, Inc. 559,400 3.2% Ryusuke Yamai 469,920 2.7% Lisa Yamai 368,368 2.1% Natsumi Yamai 367,040 2.1% Government of Norway 338,900 1.9% SUM 9,701,615 55.5% Source: Shared Research based on company data (as of end December 2019) Note: Shareholding ratio calculated on total shares outstanding (excluding treasury stock)

65/67 Snow Peak , Inc. / 7816 R LAST UPDATE: 2020.07.14 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Profile Company Head office Snow Peak, Inc. 456 Nakanohara, Sanjo-shi, Niigata Phone Listed on +81-3-6805-7738 Tokyo Stock Exchange 1st Section Established Exchange listing January 1964 December 2014

Website Financial year-end https://www.snowpeak.co.jp/ (Japanese only) December IR Contact IR Web http://ir.snowpeak.co.jp/index.html (Japanese only) -

66/67 About Shared Research Inc. R Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

We offer corporate clients comprehensive report coverage, a service that allows them to better inform investors and other stakeholders by presenting a continuously updated third-party view of business fundamentals, independent of investment biases. Shared Research can be found on the web at https://sharedresearch.jp.

Current Client Coverage of Shared Research Inc. Accordia Golf Trust Demae-Can CO., LTD KAMEDA SEIKA CO., LTD. RYOHIN KEIKAKU CO., LTD. Advance Create Co., Ltd. DIC Corporation Kanamic Network Co.,LTD SanBio Company Limited ADJUVANT COSME JAPAN CO., LTD. Digital Arts Inc. Kawanishi Holdings, Inc. SANIX INCORPORATED Aeon Delight Co., Ltd. Digital Garage Inc. KFC Holdings Japan, Ltd. Sanrio Company, Ltd. Aeon Fantasy Co., Ltd. DIP Corporation KI-Star Real Estate Co., Ltd. SATO HOLDINGS CORPORATION Ai Holdings Corporation Doshisha Corporation Kondotec Inc. SBS Holdings, Inc. AI inside Inc. Dream Incubator Inc. Kumiai Chemical Industry Co., Ltd. Seikagaku Corporation AirTrip Corp. Earth Corporation Lasertec Corporation Seria Co.,Ltd. and factory, inc. Edion Corporation Locondo, Inc. SHIFT Inc. ANEST IWATA Corporation Elecom Co., Ltd. LUCKLAND CO., LTD. Shikigaku Co., Ltd AnGes Inc. en-Japan Inc. MATSUI SECURITIES CO., LTD. SHIP HEALTHCARE HOLDINGS, INC. Anicom Holdings, Inc. euglena Co., Ltd. Media Do Holdings Co., Ltd. SIGMAXYZ Inc. Anritsu Corporation FaithNetwork Co., Ltd. Medical System Network Co., Ltd. SMS Co., Ltd. Apaman Co., Ltd. Ferrotec Holdings Corporation MEDINET Co., Ltd. Snow Peak, Inc. ARATA CORPORATION FIELDS CORPORATION MedPeer,Inc. Solasia Pharma K.K. Artspark Holdings Inc. Financial Products Group Co., Ltd. Mercuria Investment Co., Ltd. SOURCENEXT Corporation AS ONE CORPORATION First Brothers Col, Ltd. Micronics Japan Co., Ltd. Star Mica Holdings Co., Ltd. Ateam Inc. FreeBit Co., Ltd. MIRAIT Holdings Corporation Strike Co., Ltd. Aucfan Co., Ltd. Fujita Kanko Inc. Monex Goup Inc. SymBio Pharmaceuticals Limited AVANT CORPORATION Gamecard-Joyco Holdings, Inc. MORINAGA MILK INDUSTRY CO., LTD. Synchro Food Co., Ltd. Axell Corporation GameWith, Inc. Mortgage Service Japan Limited. TAIYO HOLDINGS CO., LTD. Azbil Corporation GCA Corporation NAGASE & CO., LTD Takashimaya Company, Limited AZIA CO., LTD. Good Com Asset Co., Ltd. NAIGAI TRANS LINE LTD. Take and Give Needs Co., Ltd. AZoom, Co., Ltd. Grandy House Corporation NanoCarrier Co., Ltd. Takihyo Co., Ltd. Base Co., Ltd Hakuto Co., Ltd. Net Marketing Co., Ltd. TEAR Corporation BEENOS Inc. Hamee Corp. Net One Systems Co.,Ltd. Tenpo Innovation Inc. Bell-Park Co., Ltd. Happinet Corporation Nichi-Iko Pharmaceutical Co., Ltd. 3-D Matrix, Ltd. Benefit One Inc. Harmonic Drive Systems Inc. Nihon Denkei Co., Ltd. TKC Corporation B-lot Co.,Ltd. HOUSEDO Co., Ltd. Nippon Koei Co., Ltd. TKP Corporation Broadleaf Co., Ltd. H2O Retailing Corporation NIPPON PARKING DEVELOPMENT Co., Ltd. Tsuzuki Denki Co., Ltd. CanBas Co., Ltd. IDOM Inc. NIPRO CORPORATION TOCALO Co., Ltd. Canon Marketing Japan Inc. IGNIS LTD. Nisshinbo Holdings Inc. TOKAI Holdings Corporation Career Design Center Co., Ltd. i-mobile Co.,Ltd. NS TOOL CO., LTD. Tokyu Construction Co., Ltd. Carna Biosciences, Inc. Inabata & Co., Ltd. OHIZUMI MFG. CO., LTD. TOYOBO CO., LTD. CARTA HOLDINGS, INC Infocom Corporation Oisix ra daichi Inc. Toyo Ink SC Holdings Co., Ltd CERES INC. Infomart Corporation Oki Electric Industry Co., Ltd Toyo Tanso Co., Ltd. Chiyoda Co., Ltd. Intelligent Wave, Inc. ONO SOKKI Co., Ltd. Tri-Stage Inc. Chori Co., Ltd. ipet Insurance CO., Ltd. ONWARD HOLDINGS CO.,LTD. TSURUHA Holdings Chugoku Marine Paints, Ltd. Itochu Enex Co., Ltd. Pan Pacific International Holdings Corporation VISION INC. cocokara fine Inc. JMDC Inc. PARIS MIKI HOLDINGS Inc. VISIONARY HOLDINGS CO., LTD. COMSYS Holdings Corporation JSB Co., Ltd. PIGEON CORPORATION WirelessGate, Inc. COTA CO.,LTD. JTEC Corporation QB Net Holdings Co., Ltd. YELLOW HAT LTD. CRE, Inc. J Trust Co., Ltd RACCOON HOLDINGS, Inc. YOSHINOYA HOLDINGS CO., LTD. CREEK & RIVER Co., Ltd. Japan Best Rescue System Co., Ltd. Raysum Co., Ltd. YUMESHIN HOLDINGS CO., LTD. Daiichi Kigenso Kagaku Kogyo Co., Ltd. JINS HOLDINGS Inc. RESORTTRUST, INC. ZAPPALLAS, INC. Daiseki Co., Ltd. JP-HOLDINGS, INC. ROUND ONE Corporation

Attention: If you would like to see companies you invest in on this list, ask them to become our client, or sponsor a report yourself.

Disclaimer: This document is provided for informational purposes only. No investment opinion or advice is provided, intended, or solicited. Shared Research Inc. offers no warranty, either expressed or implied, regarding the veracity of data or interpretations of data included in this report. We shall not be held responsible for any damage caused by the use of this report. The copyright of this report and the rights regarding the creation and exploitation of the derivative work of this and other Shared Research Reports belong to Shared Research. This report may be reproduced or modified for personal use; distribution, transfer, or other uses of this report are strictly prohibited and a violation of the copyright of this report. Our officers and employees may currently, or in the future, have a position in securities of the companies mentioned in this report, which may affect this report’s objectivity.

Japanese Financial Instruments and Exchange Law (FIEL) Disclaimer: The report has been prepared by Shared Research under a contract with the company described in this report (“the company”). Opinions and views presented are ours where so stated. Such opinions and views attributed to the company are interpretations made by Shared Research. We represent that if this report is deemed to include an opinion from us that could influence investment decisions in the company, such an opinion may be in exchange for consideration or promise of consideration from the company to Shared Research.

Contact Details Shared Research Inc. 3-31-12 Sendagi Bunkyo-ku Tokyo, Japan https://sharedresearch.jp Phone: +81 (0)3 5834-8787 Email: [email protected]

67/67