J. Front Retailing Co., Ltd. · TSE:3086
J. Front Retailing — FY2019 Earnings Presentation
42 slides from J. Front Retailing's earnings presentation, Apr 13, 2020
Slide 1: Results Presentation for Fiscal Year Ended February 29, 2020
Results Presentation for Fiscal Year Ended February 29, 2020 April 13, 2020 J. Front Retailing Co., Ltd. YAMAMOTO Ryoichi President and Representative Executive Officer Create and Bring to Life “New Happiness.”
Slide 2: Sympathy for those affected by COVID-19
We would like to express our heartfelt sympathy for all affected by COVID-19 and all concerned. 1
Slide 3: New Management (as of May 28, 2020)
New Management (as of May 28, 2020) 【Oversight function】 Director and Chairperson of Board of Directors YAMAMOTO Ryoichi 【Execution control function】 Director, President and Representative Executive Officer YOSHIMOTO Tatsuya Director and Senior Managing Executive Officer SAWADA Taro President and Re
Slide 4: Today's Agenda
Today’s Agenda Ⅰ． FY2019 Results Ⅱ． 1H/Full FY2020 Forecast Ⅲ． Review of Promotion System for Medium-term Growth Business forecasts in this document have been calculated based on information on the impact of the spread of COVID-19 we have at the end of March. Customer traffic is expected to decrease
Slide 5: FY2019 Results (IFRS)
QD J. FRONT RETAILING FY2019 Results (IFRS)
Slide 6: Consolidated P/L (IFRS)
Consolidated P/L (IFRS) Business profit was below forecast mainly in Department Store and PARCO partly affected by record warm winter and COVID-19 Operating profit was affected by unplanned increase in other expenses including loss on retirement of fixed assets and impairment Year-end dividend is ¥1
Slide 7: Segment Information (IFRS)
Segment Information (IFRS) Department Store: Both inbound and domestic consumption stalled partly affected by record warm winter and COVID-19 PARCO: Weak performance of rural stores and NEUVE A in spite of opening of Shibuya PARCO and Kinshicho PARCO Real Estate: Affected by cost increase resulting
Slide 8: Segment Information <Business Profit> (IFRS)
Segment Information <Business Profit> (IFRS) (Millions of yen) Business profit analysis Department Store △2,039 PARCO Department Real △ 1,918 PARCO Estate Credit Other Adjustment Store 1,307 △ 141 and 1,321 △ 1,502 △ 698 Credit Finance and Real △ 437 Adjustment Other Estate Finance △ 73 △ 74 201 △ 2
Slide 9: Segment Information <Operating Profit> (IFRS)
Segment Information <Operating Profit> (IFRS) (Millions of yen) Operating profit analysis Department Store △ 4,075 Credit Credit Real and Adjustment PARCO and Real Department Estate Finance Other △ 1,677 1,193 △ 2,213 Finance Estate Store 2,061 △ 452 Adjustment Other 158 △ 275 △ 6,569 PARCO △ 646 △
Slide 10: Segment Performance (1) Department Store Business (IFRS)
Segment Performance (1) Department Store Business (IFRS) In addition to sluggish consumption after tax hike, COVID-19 caused heavy damage to both inbound and domestic consumption Business profit increased due to cost reduction such as significant decrease in retirement benefit expenses resulting fro
Slide 11: Daimaru Matsuzakaya Department Stores P/L (IFRS)
Daimaru Matsuzakaya Department Stores P/L (IFRS) Sales rapidly slowed down in 4Q partly affected by record warm winter and COVID-19 Business profit was below Oct forecast mainly due to decrease in gross profit for the reason above Operating profit was below Oct forecast due to increase in one-time e
Slide 12: Daimaru Matsuzakaya Department Stores SGA Analysis (IFRS)
Daimaru Matsuzakaya Department Stores SGA Analysis (IFRS) Mainly impact of FY2019 application of IFRS 16 SGA analysis (Millions of yen) Increase Increase in Decrease in operational costs Increase in ad rent expenses Decrease in Decrease in in ad expenses △ Increase in 206 △ 16,791 operational costs
Slide 13: Daimaru Matsuzakaya Department Stores Other Expenses (IFRS)
Daimaru Matsuzakaya Department Stores Other Expenses (IFRS) FY2019 Other expenses analysis (Millions of yen) Loss on business Loss on disposal Loss on liquidation of fixed assets Loss on business disposal of liquidation 781 △ 1,255 Demolition of exterior fixed △326 △ 1,019 1,926 wall of north wing o
Slide 14: Main Building of Daimaru Shinsaibashi Store
Segment Performance (1) Department Store Business Daimaru Matsuzakaya Department Stores: Main Building of Daimaru Shinsaibashi Store Main building of Daimaru Shinsaibashi store opened as new “hybrid business model” in September 2019 Opened on Sep 20, 2019 Total transaction volume +15.0 % Customer tr
Slide 15: Segment Performance (2) PARCO Business (IFRS)
Segment Performance (2) PARCO Business (IFRS) Boosted by opening of Shibuya PARCO, Kinshicho PARCO, Kawasaki ZERO GATE, etc. Revenue equal to sales of reserve floor space of Shibuya PARCO (¥21.7 bn) was recognized as cost Business profit slightly decreased due to weak performance of some rural store
Slide 16: Shibuya PARCO
Segment Performance (2) Parco Business Shibuya PARCO New Shibuya PARCO as a symbol of PARCO brand made its grand opening in November 2019 Contents on higher floors attract foot traffic Opened on Nov 22, 2019 Expanded luxury brands Unconventional floor composition and zones Newly curated sales areas
Slide 17: Real Estate, Credit and Finance, Other (IFRS)
Segment Performance (3) Real Estate (4) Credit and Finance (5) Other (IFRS) Real Estate: Business profit decreased due to cost increase resulting from transfer of north wing of Shinsaibashi store to Real Estate Business segment Credit and Finance: Revenue increased due to increase in external mercha
Slide 18: Consolidated B/S and CF (IFRS)
Consolidated B/S and CF (IFRS) Total assets increased partly due to recognition of “right-of-use assets” on balance sheet Interest-bearing liabilities increased ¥304.3 bn YoY partly due to recognition of “lease liabilities” and TOB fund Free cash flows were positive at ¥23.7 bn, slightly negative if
Slide 19: 1H/Full FY2020 Forecast
QD J. FRONT RETAILING 1H/Full FY2020 Forecast 18
Slide 20: Major Business Risks
Major Business Risks Negative risk (threat) Positive risk (opportunity) Direction for considering how to address risk ・Promote redevelopment of BCP plan, establishment ・Spread of COVID-19 ・Growing need for minimizing/avoiding risk of HQ, strengthening of drills, investment in aging Risk associated ・
Slide 21: Response to Impact of COVID-19
Response to Impact of COVID-19 Spread of COVID-19 Growing tendency to voluntarily refrain from leaving home Increasing risk against the Increasing risk ability to attract customers associated with commuting Temporary closing and shorter business hours Promotion of telework Cancellation of big events
Slide 22: Idea on Guidance for FY2020
Idea on Guidance for FY2020 When COVID-19 will end and how consumption will recover remain uncertain Maximize consideration for “risks” that are expected to have negative impact on the Company’s sales Overhaul nonessential costs and investments on a zero basis 21
Slide 23: Consolidated Forecast P/L (IFRS)
Consolidated Forecast P/L (IFRS) The entire Group, mainly Department Store and PARCO, is expected to struggle due to impact of COVID-19 Gross sales and operating profit are expected to decrease ¥165 bn and ¥3.3 bn, respectively, affected by COVID-19 Annual dividend has not yet been decided and will
Slide 24: Full Year Forecast P/L Difference from Original Plan
Full Year Forecast P/L (IFRS) Difference from Original Plan 500 ▲0.９: JF Design & Construction (Billions of yen) +5.1 +2 (reaction to construction of 450 +0.1 Shinsaibashi store in LY, etc.) ▲1.3 ▲1.7 ▲1 400 ▲0.7: Shinsaibashi north ▲26.8: Department Store wing cost ▲0.６: Upfront cost for ▲4: PARCO
Slide 25: Segment Information Forecast (IFRS)
Segment Information Forecast (IFRS) Department Store: Strictly project sales mainly for 1H, expect operating loss in 1H, ensure profit in full year PARCO: Expect sluggish entertainment but contribution of full operation of Shibuya PARCO Real Estate: Expect cost related to “north wing” of Shinsaibash
Slide 26: Changes of Each Segment (IFRS)
Changes of Each Segment（IFRS） (Millions of yen) Department Store Business profit Operating profit △ 21,961 Department Store △15,325 PARCO PARCO Real Credit △4,823 △1,982 Estate and Real 45,363 △1,464 Finance Other Estate Credit △201 △ 2,276 Adjustment △4,225 and 40,286 Finance Other △ 477 △ 208 △ 2,
Slide 27: Daimaru Matsuzakaya Department Stores Forecast P/L (IFRS)
Daimaru Matsuzakaya Department Stores Forecast P/L (IFRS) (Millions of yen, %) Total Daimaru Matsuzakaya Fiscal year ending Department Store Real estate Department Stores February 28, 2021 YoY YoY YoY Forecast Forecast Forecast % change % change % change Gross sales 244,700 (22.7) 8,600 (3.1) 253,20
Slide 28: Daimaru Matsuzakaya Department Stores SGA Analysis (IFRS)
Daimaru Matsuzakaya Department Stores SGA Analysis (IFRS) <FY2020 Daimaru Matsuzakaya Department Stores SGA analysis> (Millions of yen) Other Personnel Operational 762 Ad expenses Rent costs expenses 4,437 expenses 287 △ 251 86 △ 33 266 Packing and Depreciation transportation expenses Personnel expe
Slide 29: Consolidated B/S and CF Forecast (IFRS)
Consolidated B/S and CF Forecast (IFRS) Despite severe outlook for operating CF due to impact of COVID-19, we intend to maximize decrease in free CF by scrutinizing investment plan, etc. again Ensure sufficient funds on hand and availability of funding through CP, commitment lines, etc. We recognize
Slide 30: Review of Promotion System for Medium-term Growth
百貨店 事業 Review 百貨店of Promotion System for 事業 パルコ 事業 Medium-term Growth 29
Slide 31: Look Back on Past Three Years (Growth Strategy)
Look Back on Past Three Years (Growth Strategy) Evalua- Major initiatives Results/progress Challenge tion ◆Launched child care business ◆Realization of new businesses other than child ・Established JFR Kodomo Mirai, opened 1st facility care area Multi Service Retailer ◆Invested in only 2 companies to
Slide 32: Look Back on Past Three Years (Reinforcement of Base)
Look Back on Past Three Years (Reinforcement of Base) Evalua- Major initiatives Results/progress Challenge tion ◆Strengthened the Group governance function ◆Review of functions of holding company and ・Transition to Company with Three Committees (Nomination, operating companies after converting PARCO
Slide 33: Changes in Business Profit (IFRS)
Changes in “Business Profit” (IFRS) Our intention in current midterm plan was that business profit would turn up after bottoming out in FY2019 but business environment drastically changed In FY2020, impossible to avoid substantial decline in profit levels due to tremendous impact of COVID-19 and del
Slide 34: Progress of Business Portfolio Transformation
Progress of Business Portfolio Transformation Real Estate is steadily growing but Department Store still has a majority share Balance of business composition of the Group has not been improved, ability to respond to environmental changes weakens Composition of “operating profit” (before application
Slide 35: Changes in Assumptions (1) External Environment
Changes in Assumptions (1) External Environment More than expected weakening of middle class, particularly abruptly accelerated shrinkage of apparel market after consumption tax hike Declining competitiveness of urban flagship stores as well as declining rural stores Vulnerability of group structure
Slide 36: Changes in Assumptions (2) Internal Environment
Changes in Assumptions (2) Internal Environment Important “turning point” of the Group Converted PARCO into wholly owned subsidiary Initiatives for dynamic business structural changes and drastic HR exchanges became possible Readiness to build framework in which we can aim to maximize synergy at inc
Slide 37: For True Business Portfolio Transformation
For True “Business Portfolio Transformation” Overhaul of management/organizational structure Ambitious goal setting for a long term Upgrade strategy to bring out the strength of the Group more than ever Terminate current midterm plan in FY2020 “Cement a foothold” in FY2020 36
Slide 38: Direction of New Medium-term Business Plan
Direction of New Medium-term Business Plan <Construction of new mid- to long-term plan> Quantitative goal setting for 10 years later (2030) using KPIs “Medium-term three-year plan” that will start in 2021 at the core Management cycle with long-term and quantitative vision that achieves results durin
Slide 39: New Promotion System
New Promotion System Created “New System Review Committee” to generate the Group synergy and promote highly efficient management New System Review Committee Corporate Finance Administration Real Estate Subcommittee Subcommittee Subcommittee Subcommittee Created “Medium-term Business Plan Working Gro
Slide 40: Maximize Synergy with PARCO
Maximize Synergy with PARCO North wing New main building Planned to open in fall 2020 Opened in September 2019 Specialty shop mall Daimaru Embody direction for creating synergy 39 toward new Medium-term Business Plan
Slide 41: Strengthen Defense and Prepare for Offense
Strengthen “Defense” and Prepare for “Offense” Practice of corporate credo “Service before Profit” = CSV Social value × Economic value Strengthen “defense” in the short term and prepare for “offense” for the future at the same time Get over crisis and enhance corporate value in the medium to long te
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