J. Front Retailing Co., Ltd. · TSE:3086
J. Front Retailing — H1 FY2020 Earnings Presentation
44 slides from J. Front Retailing's earnings presentation, Oct 13, 2020
Slide 1: Results Presentation for First Six Months of Fiscal Year Ending February 28, 2021
Results Presentation for First Six Months of Fiscal Year Ending February 28, 2021 ©TAKENAKA CORPORATION October 13, 2020 J. Front Retailing Co., Ltd. YOSHIMOTO Tatsuya 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 everyone affected by COVID-19 and everyone concerned and express our deepest appreciation to everyone, including healthcare workers, who are committed to preventing the spread of infection. 1
Slide 3: Today's Agenda
Today’s Agenda I. Overview of H1 FY2020 Results II. H2/Full FY2020 Forecast III. Toward “Full Recovery” and “Regrowth” 2
Slide 4: H1 FY2020 Results (IFRS)
QD J. FRONT RETAILING H1 FY2020 Results (IFRS)
Slide 5: Consolidated P/L (IFRS)
Consolidated P/L (IFRS) Mainly Department Store and Parco significantly decreased revenue, greatly affected by COVID-19 Posted slight business profit of ¥0.2 bn but significant operating loss of more than ¥20 bn Decreased interim dividend ¥9 YoY to ¥9 per share to ensure management stability (Millio
Slide 6: Segment Information (IFRS)
Segment Information (IFRS) Department Store: Closed for 1.5 months due to COVID-19, and after that, gradually recovered but remained sluggish Parco: Affected by closure, some of rent concessions continued after reopening, entertainment was also sluggish Real Estate: Ginza Six and others were affecte
Slide 7: Segment Information <Business Profit> (IFRS)
Segment Information <Business Profit> (IFRS) Business profit analysis (Millions of yen) (16,382) 23,743 Parco (3,864) Department Real Credit Store Estate and (1,447) Finance Other Adjustments Credit (614) Adjustments and Real (392) (792) Other 250 169 Finance Estate 801 354 524 Department 2,117 Stor
Slide 8: Segment Information <Operating Profit> (IFRS)
Segment Information <Operating Profit> (IFRS) Operating profit analysis (Millions of yen) 25,175 (31,937) Parco Department Store (20,637) (8,469) Real Credit Estate and Credit Finance and (30,000) (4,095) Other Other Finance Real (636) (858) 183 485 Estate 730 373 Parco Adjustments Adjustments 634 D
Slide 9: Segment Performance (1) Department Store Business (IFRS)
Segment Performance (1) Department Store Business (IFRS) Significantly decreased partly due to 1.5 month closure from April to May After reopening, recovered to around 70% in June and July but came to a standstill temporarily in August due to the spread of infection Inbound sales continued to decrea
Slide 10: Daimaru Matsuzakaya Department Stores P/L (IFRS)
Daimaru Matsuzakaya Department Stores P/L (IFRS) Department Store: Urban stores such as Tokyo store struggled but Kobe store recovered fast Business loss and operating loss decreased below forecast were attributable to SGA reduction such as review of investments Subsidies for employment adjustment w
Slide 11: Daimaru Matsuzakaya Department Stores SGA Analysis (IFRS)
Daimaru Matsuzakaya Department Stores SGA Analysis (IFRS) Decrease in H1 FY2020 personnel expenses Decrease in SGA analysis (Millions of yen) (2,088) packing and transportation Decrease in costs depreciation (1,957) (284) (206) Decrease in Decrease Decrease in Decrease in Decrease in other SGA packi
Slide 12: Segment Performance (2) PARCO Business (IFRS)
Segment Performance (2) PARCO Business (IFRS) Greatly affected by about 2-month store closure and reduced business hours due to COVID-19 Some of tenant rent concessions continued not only during closure but also after reopening In the entertainment business, many of planned performances were cancell
Slide 13: Segment Performance (3) Real Estate (4) Credit and Finance (5) Other (IFRS)
Segment Performance (3) Real Estate (4) Credit and Finance (5) Other (IFRS) Real Estate: Posted profit in spite of rent concessions according to the length of closure and decrease in percentage rent Credit and Finance: Decrease in transaction volume of Daimaru Matsuzakaya Department Stores and upfro
Slide 14: Consolidated B/S (IFRS)
Consolidated B/S (IFRS) Total assets increased ¥43.9 bn YoY partly because cash and deposits were secured to cope with COVID-19 Interest-bearing liabilities increased ¥99.6 bn YoY due to procurement of new funds to cope with COVID-19 Ratio of equity attributable to owners of parent was 28.5%, down 2
Slide 15: Consolidated CF (IFRS)
Consolidated CF (IFRS) Operating CF significantly decreased. In investing CF, investments except the north wing of Shinsaibashi store were considerably reduced from the original plan Free cash flow was positive at ¥8.4 bn though it significantly decreased ¥2.9 bn YoY Secured cash reserves enough to
Slide 16: H2/Full FY2020 Forecast
QD J. FRONT RETAILING H2/Full F¥Y2020 Forecast 15
Slide 17: Consolidated Forecast P/L (IFRS)
Consolidated Forecast P/L (IFRS) Reflected positive difference between H1 results and June forecast in full year forecast for business profit, operating profit and profit For H2, carefully reviewed sales but June forecast for each profit category remains unchanged due to SGA reduction Year-end divid
Slide 18: Segment Performance (IFRS)
Segment Performance (IFRS) (Millions of yen, %) Business Profit Fiscal year ending Vs Jun Vs Jun H2 YoY forecast Full year YoY forecast February 28, 2021 forecast Change % change Change forecast Change % change Change Department Store 2,416 (12,078) (83.3) 716 (2,000) (28,461) － 5,000 Parco (1,817)
Slide 19: Segment Performance (1) Department Store Business
Segment Performance (1) Department Store Business Carefully reviewed H2 sales in light of the current situation and revised down Jun forecast by ¥5.9 bn Expect inbound sales in H2 to be the same level as H1 (¥0.7 bn), difficult to recover Domestic consumption will gradually recover toward later this
Slide 20: Daimaru Matsuzakaya Department Stores Forecast P/L (IFRS)
Daimaru Matsuzakaya Department Stores Forecast P/L (IFRS) Department Store: Increase profits by carefully reviewing sales and further reducing SGA Real Estate: Transferred to Parco in Sep but Ginza Six is managed by Daimaru Matsuzakaya Department Store (Millions of yen, %) Total Second six Daimaru M
Slide 21: Daimaru Matsuzakaya Department Stores Major Store Sales
Daimaru Matsuzakaya Department Stores Major Store Sales Monthly sales changed greatly this year due to last-minute buying in September last year before consumption tax hike and sales decrease in October in reaction to it More severe forecast for Shinsaibashi store that has a high tax-free sales rati
Slide 22: Daimaru Matsuzakaya Department Stores SGA Analysis (IFRS)
Daimaru Matsuzakaya Department Stores SGA Analysis (IFRS) H2 FY2020 Personnel Ad expenses expenses SGA analysis (Millions of yen) Rental (623) expenses (91) 87 Operational (593) costs Packing and Other 39 transportation costs Depreciation (618) Personnel 3,321 expenses Packing and transportation (45
Slide 23: Segment Performance (2) Parco Business (IFRS)
Segment Performance (2) Parco Business (IFRS) Full operation of Shibuya PARCO, which opened in November last year, opening of Shinsaibashi PARCO in November this year, but decrease in reaction to sales of reserve floor space of Shibuya PARCO (¥21.7 bn) last year Revenue will be above Jun forecast bu
Slide 24: Segment Performance (2) Parco Business
Segment Performance (2) Parco Business Shinsaibashi New PARCO Urban PARCO will open in November 2020 Essence of new Shibuya PARCO Mode / animation / new restaurants & cafes /art Theme of department store Luxury / high class restaurants & cafes / golf & sport Large specialty stores Cinema complex Mul
Slide 25: Segment Performance (3) Real Estate (4) Credit and Finance (5) Other (IFRS)
Segment Performance (3) Real Estate (4) Credit and Finance (5) Other (IFRS) Real Estate: Cost reduction resulting from transfer of the north wing asset of Shinsaibashi store to Parco, which was not factored in at the beginning of the current period Credit and Finance: Affected by an increase in card
Slide 26: Consolidated B/S Forecast (IFRS)
Consolidated B/S Forecast (IFRS) Total assets will increase ¥39.6 bn YoY partly due to continuously securing of cash and deposits Interest-bearing liabilities will increase ¥101.2 bn YoY due to procurement of new funds to cope with COVID-19 Ratio of equity attributable to owners of parent will be 28
Slide 27: Consolidated CF Forecast (IFRS)
Consolidated CF Forecast (IFRS) Operating CF will significantly decrease, negative investing CF will be significantly reduced by reviewing the original plan Free cash flow will be positive at ¥7 bn though it will significantly decrease ¥16.7 bn YoY Continue to secure enough cash reserves until COVID
Slide 28: Toward “Full Recovery” and “Regrowth”
百貨店 事業 百貨店 パルコ Toward “Full Recovery” and “Regrowth” 事業 事業 27
Slide 29: Business Environment Recognition
Business Environment Recognition How will we coexist with COVID-19? Changes in consumption behavior and values about consumption due to COVID-19 Response to digitalization that was dramatically widespread in society Concern about maintaining and increasing stores’ additional value of “prime location
Slide 30: Priority Policies
Priority Policies ～ In order for the Group to achieve “full recovery” and “regrowth” ～ Management structure reform Digital transformation (DX) Full creation of synergy with Parco We must clarify timeline, plan and “do to completion” to survive COVID-19 29
Slide 31: Management Structure Reform (1): Structural reduction of fixed costs
Management Structure Reform (1) Structural reduction of “fixed costs” How will we lower the break-even point? Implement organization/HR structure reform by accelerating business model transformation Full-scale work style Drastic cost reduction Expansion of and organization in Parco and hybrid depart
Slide 32: Management Structure Reform (2)
Management Structure Reform (2) Strict identification of unprofitable stores/businesses Restructuring of the Group businesses / replacement of businesses More quickly decide to shrink or withdraw from businesses Improve management efficiency by integrating/consolidating the Group businesses Implemen
Slide 33: DX (Digital Transformation)
DX (Digital Transformation) Transform to a new business model through DX Consumption is more radically polarized and digital shift has progressed at once Difficult to meet customers’ expectations only by promoting the expansion of online transactions and digitalization symptomatically Improve a “cus
Slide 34: DX – Creation of Customer Experiences
DX – Creation of Customer Experiences Creation of new “venues for experiences” that merges real with digital Build a digital platform that connects customers Departure from restrictions of “time” and “place” Digitally reproduce real experience values to sales floors with “warmth” Chat Entertainment
Slide 35: DX – OMO (Online Merges with Offline)
DX – OMO (Online Merges with Offline) OMO by Daimaru Matsuzakaya Department Stores Create systems where sales people serve customers both online and offline Build systems that allow customers to shop using shop blogs Realize unique OMO customer shopping experiences for cosmetics by the end of fiscal
Slide 36: DX – Use of the Group Data
DX – Use of the Group Data Deepen the understanding of customers by visualizing a customer base <J. Front Retailing Group> New value creation Purchase data / Marketing/CRM behavior log using data Integrated customer database (LTS Hub) Accumulation/analysis/feedback of data 35
Slide 37: DX – Improvement of Operational Efficiency
DX – Improvement of Operational Efficiency Rebuild business operation using digital technology Streamlined back office processes using RPA Next, phase of paperless operations, also in stores Reduction of costs for slips and their delivery and storage warehouse Drastic HR structure reform by overhaul
Slide 38: Creation of Synergy with Parco (1)
Creation of Synergy with Parco (1) Expand new initiatives starting from Shinsaibashi PARCO Send Mutual customers to Integrate reward points each other customer DB Use of each other’s suppliers’ channels Provide Parco’s unique content in department stores 37 Increase the appeal of stores and brand st
Slide 39: Creation of Synergy with Parco (2)
Creation of Synergy with Parco (2) Consolidate know-how and resources by transfer of Real Estate Business Innovate real estate portfolio with various uses and initiatives Develop semi-urban locations Consider the combined development project in Tokyo/Nagoya/Osaka ＋ Fukuoka areas Consider using a cir
Slide 40: Increase Resilience through Two “Mergers”
Increase Resilience through Two “Mergers” Merger Merger of real and digital of Parco and the Group × Create a strong portfolio with an enhanced “ability to respond to changes” for unforeseeable times 39
Slide 41: Formulate a New Medium- to Long-term Plan
Formulate a New Medium- to Long-term Plan Decide what we should be 10 years from now and formulate a medium-term three-year business plan toward “full recovery” and “regrowth” FY2021 2023 2024 2030 Full recovery Regrowth (Structural reform / digital innovation) (Acceleration of the Group innovation)
Slide 42: Turn Crisis into Opportunity
Turn Crisis into Opportunity Practice of corporate credo “Service before Profit” = CSV × Social Economic value value Important to face changes in customers and society, find the best “solution” and continue to provide it Actually “Create and Bring to Life ‘New Happiness.’” 41
Slide 43: <Reference> Links to Initiatives That Use Digital Technology
<Reference> Links to Initiatives That Use Digital Technology (1) SK-II webinar only for Daimaru Matsuzakaya gaisho customers Video (5) PARCO Live Commerce at an online mall https://youtu.be/Rf0lRYhdU5s Website https://parco.jp/onlinemarket Sep 26 (Sat) 17:00 - 18:00 / Invited customers to a special
Slide 44: 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