J. Front Retailing Co., Ltd. · TSE:3086
J. Front Retailing — H1 FY2022 Earnings Presentation
42 slides from J. Front Retailing's earnings presentation, Oct 11, 2022
Slide 1: Presentation of Results for First Six Months of Fiscal Year Ending February 28, 2023
～ Step Up a Gear for Change ～ Presentation of Results for First Six Months of Fiscal Year Ending February 28, 2023 October 11, 2022 YOSHIMOTO Tatsuya President and Representative Executive Officer J. Front Retailing Co., Ltd. Create and Bring to Life “New Happiness.”
Slide 2: Today's Agenda
Today’s Agenda III. Overview of H1 FY2022 Results III. H2/Full FY2022 Forecast III. Progress of Medium-term Business Plan 1
Slide 3: Overview of H1 FY2022 Results (IFRS)
Overview of H1 FY2022 Results (IFRS) 2
Slide 4: Consolidated PL (IFRS)
Consolidated PL (IFRS) Sales significantly increased but recovery was slower than expected due to 6th and 7th waves of COVID-19 Cost control succeeded; business profit, operating profit, profit attributable to owners of parent were all above forecast Paid interim dividend of ¥15 per share, up ¥1 YoY
Slide 5: Segment Performance (1) Department Store (IFRS)
Segment Performance (1) Department Store (IFRS) Recovery was slower than expected due to 6th and 7th waves of COVID-19 SGA: Positively affected by restructuring and control of advertising expenses, repair expenses, etc. during period Business profit was ¥1.2 billion above forecast, operating profit
Slide 6: Daimaru Matsuzakaya Department Stores Major Store Sales
Daimaru Matsuzakaya Department Stores Major Store Sales Sales decreased 15.4% in H1 compared to FY2019, decrease in sales excluding inbound sales recovered to 6.2% in Q2 Sales of Kobe store that has strong regular customers were above FY2019 level; domestic sales of Shinsaibashi, Sapporo, Nagoya sto
Slide 7: Gaisho Sales Are Steadily Growing
Gaisho Sales Are Steadily Growing Sales from gaisho customers continued strong, driving domestic sales, already increased 10.4% compared to FY2019 Brisk spending by young people, sales share of customers in their 20s to 40s of total gaisho share increased to 29.7% Daimaru Matsuzakaya Department Stor
Slide 8: Daimaru Matsuzakaya Department Stores SGA Analysis (IFRS) H1 FY2022
Daimaru Matsuzakaya Department Stores SGA Analysis (IFRS) H1 FY2022 ・Effect of restructuring △¥1.6 bn SGA analysis (Millions of yen) ・Increase largely due to merger with Daimaru Matsuzakaya Rent Sales Associates on Sep 1 of LY (¥4.2 bn) Operational expenses Ad expenses △ 642 ・Increase in reaction to
Slide 9: Segment Performance (2) SC Business (IFRS)
Segment Performance (2) SC Business (IFRS) Revenue decreased due to remaining effect of exclusion of Neuve A from consolidation through share transfer at end of June last year As a result of efforts to reduce cost and SGA, business profit increased but fell short of April forecast Operating profit w
Slide 10: Segment Performance (3) Developer Business (IFRS)
Segment Performance (3) Developer Business (IFRS) In spite of reaction to J. Front Design & Construction’s large scale construction last year, revenue increased due to increase in orders received by PSS Revenue was below forecast largely due to J. Front Design & Construction’s delay in construction
Slide 11: Segment Performance (4) Payment and Finance Business (IFRS)
Segment Performance (4) Payment and Finance Business (IFRS) Increase in commissions due to increase in transaction volume of external merchants as well as increase in annual fee income contributed Business profit and operating profit were above forecast due to efforts to reduce SGA though it slightl
Slide 12: Segment Performance (5) Other (IFRS)
Segment Performance (5) Other (IFRS) Revenue decreased because core business Daimaru Kogyo struggled due to shortage of semiconductors and Dimples’ was excluded from consolidation SGA reduced due to exclusion of Dimples’ from consolidation, Daimaru Kogyo improved profitability Business profit Operat
Slide 13: Consolidated BS (IFRS)
Consolidated BS (IFRS) Total assets decreased ¥31.8 billion compared to previous year end partly due to reduction of cash and deposits Interest-bearing liabilities decreased ¥37.8 billion compared to previous year end partly due to repayment of bonds, borrowings, etc. Ratio of equity attributable to
Slide 14: Consolidated CF (IFRS)
Consolidated CF (IFRS) Net cash provided by operating activities increased ¥7.7 billion YoY partly due to returning to profit before tax Net cash used in investing activities increased ¥1.4 billion YoY due to renovation investment by SC Business Free CF was positive at ¥18.6 billion, up ¥6.2 billion
Slide 15: H2/Full FY2022 Forecast (IFRS)
H2/Full FY2022 Forecast (IFRS) 14
Slide 16: Business Environment Awareness
Business Environment Awareness ◆ Accelerating move to push forward economic activities based on living with COVID-19 ◆ Sweeping relaxation of restrictions on inbound tourists such as lifting cap on entry numbers ◆ Accelerating inflation, paying close attention to its impact on economy and consumer s
Slide 17: Consolidated PL Forecast (IFRS)
Consolidated PL Forecast (IFRS) Revised down gross sales forecast for H2, mainly for the Department Store, by ¥17.0 billion considering the situation in H1 Revised up business profit and operating profit forecasts by amount increased above forecast in H1 through further cost reduction Plan to pay ye
Slide 18: Segment Performance Forecast (1) Department Store Business
Segment Performance Forecast (1) Department Store Business Gaisho will continue strong; for inbound sales, expect a certain growth but carefully estimate spending by middle class Actively make “offensive” investments but further control costs totally Revenue Business profit Operating profit 250,000
Slide 19: Daimaru Matsuzakaya Department Stores Major Store Sales Forecast
Daimaru Matsuzakaya Department Stores Major Store Sales Forecast Renovate sales floors in flagship stores to strengthen luxury, watch categories Factored in inbound sales of ¥12.0 billion in H2 (¥5.3 billion in H1) partly due to relaxation of entry restrictions Tokyo store will expand high-end watch
Slide 20: Daimaru Matsuzakaya Department Stores SGA Analysis (IFRS) H2 FY2022
Daimaru Matsuzakaya Department Stores SGA Analysis (IFRS) H2 FY2022 SGA analysis (Millions of yen) ・Increase in bonuses resulting from business recovery (¥1.1 bn) ・Increase due to shift to insourcing (¥0.9 bn, outsourcing expenses decreased) Packing and Personnel transportation expenses Depreciation
Slide 21: Segment Performance Forecast (2) SC Business (IFRS)
Segment Performance Forecast (2) SC Business (IFRS) Expect effect of renovation underway in flagship stores and improvement of relaxing of conditions for tenants Ensure that business profit will increase in H2 but operating profit is expected to decrease due to absence of subsidies recorded last yea
Slide 22: Segment Performance Forecast (3) Developer Business (IFRS)
Segment Performance Forecast (3) Developer Business (IFRS) J. Front Design & Construction, which will renovate hotels and department stores, and PSS are expected to increase revenue and profits In total, revenue will increase but profits will decrease due to increase in upfront development expenses
Slide 23: Segment Performance Forecast (4) Payment and Finance Business (IFRS)
Segment Performance Forecast (4) Payment and Finance Business (IFRS) Commission income from department stores and external merchants, which are improving performance, is expected to continue to increase Likely to achieve operating profit of more than ¥3.0 billion, which is target level under medium-
Slide 24: Segment Performance Forecast (5) Other (IFRS)
Segment Performance Forecast (5) Other (IFRS) Daimaru Kogyo factors in continued shortage of semiconductors but it is expected to increase revenue and profits in full year due to improvement of profitability Other as a whole is expected to decrease revenue and profits partly because effect of exclus
Slide 25: Consolidated BS Forecast (IFRS)
Consolidated BS Forecast (IFRS) By reducing balance of cash and deposits to pre-COVID-19 levels, total assets are expected to decrease ¥62.9 billion YoY Interest-bearing liabilities (excluding lease liabilities) are expected to be ¥260.0 billion, achieving target under medium-term plan a year ahead
Slide 26: Consolidated CF Forecast (IFRS)
Consolidated CF Forecast (IFRS) Net cash provided by operating activities is expected to increase ¥7.1 billion YoY partly due to significant increase in profit before tax By promoting active investment in key categories, etc., net cash used in investing activities is expected to increase ¥18.7 billi
Slide 27: Progress of Medium-term Business Plan
FY2021 - FY2023 Progress of Medium-term Business Plan 26
Slide 28: Turning Point of Medium-term Business Plan
Turning Point of Medium-term Business Plan ● FY2022 is a year for stepping up a gear to shift from “defense” to “offense” ● Strengthen investment to increase added value of real stores and accelerate digitization ● Also promote initiatives for regrowth for FY2024 and beyond 27
Slide 29: Establishment of Developer Business Company
Establishment of Developer Business Company ＜Business concept＞ Development of multi-purpose buildings that contribute to increasing value of 7 cities with retail at its core Transfer Parco/Developer Business to developer business company through company split Ensure Ensure Improve Ensure proper Stre
Slide 30: Initiatives to Grow Developer Business
Initiatives to Grow Developer Business Development projects that will lead to medium- to long-term growth for 2024 and beyond will be realized one after another Nagoya Osaka Sakae Shinsaibashi ＋ Rendering of “(tentative name) Nishiki 3-chome District 25 project” Rendering of “(tentative name) Shinsa
Slide 31: Department Store - Promote Digitization Centering on App
For Full Recovery Department Store ー Promote Digitization Centering on App Customer touch points via app steadily expanded and deepened and sophistication of CRM made substantial progress Sales via app (¥100 million) Number of active app users (1,000 people) 2,100 1,800 2,000 1,600 1,900 1,400 1,800
Slide 32: Department Store - Promote Digitization Centering on App
Department Store ー Promote Digitization Centering on App Customer touch points via app steadily expanded and deepened and sophistication of CRM made substantial progress 《 Utilization of logistic regression analysis 》 Purpose: To find potential customers Customer data Universal Approach to each Purc
Slide 33: Data Analysis and Utilization via JCDP
Data Analysis and Utilization via JCDP Analyze customer buying patterns of Daimaru Shinsaibashi store and Shinsaibashi PARCO that adjoin each other in Shinsaibashi area Average spend per customer who bought in both stores is twice average spend per customer who bought in either of them Daimaru Shins
Slide 34: Real/Digital Concept for New Value Creation
Real/Digital Concept for New Value Creation Create new space using digital technologies at the Group level while taking advantage of real stores Realize coexistence and development with local communities in the way only the Group can, also using data The Group’s unique new value creation in key area
Slide 35: Promotion of Trial of Metaverse (Example)
Promotion of Trial of Metaverse (Example) Opened a virtual store Virtual Daimaru Matsuzakaya in Metaverse New York Sold summer gourmet food Staff avatars first served customers in Metaverse space in Metaverse In Metaverse space, customers can freely walk around the store, pick up 3D In Virtual Daima
Slide 36: Development of Digital Human Resources
Development of Digital Human Resources Develop human resources who contribute to customer-driven management and business model transformation Raise digital literacy across the Group and foster culture in which data and digital technologies are utilized Core digital human resources (Data analyst + Di
Slide 37: Establishment of CVC Fund
Establishment of CVC Fund Actively leverage innovative business models and technologies of startup companies Promote creation of new businesses and transformation/innovation of existing businesses in the Group J. Front Retailing VC (partner) Management/ know-how Investment Investment Capital gain CV
Slide 38: Promotion of Human Capital Management via CVC
Promotion of Human Capital Management via CVC Contribute to creating new businesses as well as developing human resources and reforming culture by actively appointing young employees Business seeds Develop managerial talents and Explore business seeds outside the Group entrepreneurial human resource
Slide 39: Management Restructuring (Lowering of Break-Even Point)
Management Restructuring (Lowering of Break-Even Point) Original target under current Medium-term Business Plan was to reduce fixed costs ¥10.0 billion or more Reduction is progressing more than planned in both 1st and 2nd years, expected to be ¥12.6 billion in total for 3 years Progress of reductio
Slide 40: Step Up a Gear for Change
Step Up a Gear for Change R＆D ＋ D＆I Research & Development Diversity & Inclusion F＆R Full recovery & Regrowth 39
Slide 41: Sustainability Management and Value Creation
Sustainability Management and Value Creation Practice of Corporate Credo ＝ CSV Social Financial Human Manufactured Intellectual relationship Natural capital capital capital capital capital capital Organization ability Opportunity Management strategy Risk Governance × Social Economic Improve value va
Slide 42: https://www.j-front-retailing.com
https://www.j-front-retailing.com Create and Bring to Life “New Happiness.” Forward-looking statements in this document represent our assumptions based on information currently available to us and inherently involve potential risks, uncertainties and other factors. Therefore, actual results may diff