J. Front Retailing Co., Ltd. · TSE:3086
J. Front Retailing — H1 FY2023 Earnings Presentation
47 slides from J. Front Retailing's earnings presentation, Oct 10, 2023
Slide 1: Connect to Renewed Growth: Results for First Six Months of FY Ending Feb 2024
～ Connect to Renewed Growth ～ Presentation of Results for First Six Months of Fiscal Year Ending February 29, 2024 October 10, 2023 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 I. Overview of H1 FY2023 Results II. H2/Full FY2023 Forecast III. Toward Renewed Growth in the Medium to Long Term 1
Slide 3: Overview of H1 FY2023 Results (IFRS)
Overview of H1 FY2023 Results (IFRS) 2
Slide 4: Consolidated PL (IFRS)
Consolidated PL (IFRS) Gross sales up, mainly in mainstay Department Store, and business profit up despite unexpected cost increases Despite impairment losses on Shimonoseki Daimaru, operating profit also rose due to gain on sale of fixed assets and other factors Interim dividend of ¥16 yen per shar
Slide 5: Segment Performance (1) Department Store (IFRS)
Segment Performance (1) Department Store (IFRS) Spending, mainly on luxury items, by affluent consumers remained strong and inbound sales further accelerated from Q2 Business profit up despite unexpected increase in SGA, but operating profit down due to impairment losses Revenue Business profit Oper
Slide 6: Daimaru Matsuzakaya Department Stores Major Store Sales
Daimaru Matsuzakaya Department Stores Major Store Sales Comparable store sales in H1 were down 1.1% compared to FY2019, up 1.8% in Q2 alone Sales growth of core stores excluding terminal stores all turned positive compared to FY2019 in Q2 alone (% change) First six months of YoY vs. FY2019 vs. FY201
Slide 7: Daimaru Matsuzakaya Department Stores Inbound Sales Trends
Daimaru Matsuzakaya Department Stores Inbound Sales Trends Inbound sales accelerated further in Q2, exceeding the pre-COVID-19 level from July Driven by tourists from East Asia, including Hong Kong, Taiwan, and South Korea; the number of tourists from mainland China is also gradually increasing Duty
Slide 8: Daimaru Matsuzakaya Department Stores SGA Analysis (IFRS) H1 FY2023
Daimaru Matsuzakaya Department Stores SGA Analysis (IFRS) H1 FY2023 SGA analysis (Millions of yen) Decrease in depreciation Increase in Increase in ・Increase in utilities expenses (¥200 mn) ad expenses personnel Decrease in ・Increase in commissions due to sales growth (¥700 mn) (85) 46 expenses othe
Slide 9: Segment Performance (2) SC Business (IFRS)
Segment Performance (2) SC Business (IFRS) Transaction volume increased due to the effect of core store renovations, growth of inbound sales, and other factors, but commission income did not reach the target Business profit rose due to successful cost reductions, and operating profit rose sharply du
Slide 10: Segment Performance (3) Developer Business (IFRS)
Segment Performance (3) Developer Business (IFRS) Sales rose sharply, driven by J. Front Design & Construction, which recorded sales of large properties and did well in interior works of department stores Significant increase in both business profit and operating profit mainly due to the effect of c
Slide 11: Segment Performance (4) Payment and Finance Business (IFRS)
Segment Performance (4) Payment and Finance Business (IFRS) Sales increased due to increase in merchant commissions, but revenue did not reach the target due to revision of point accounting and other factors Profit decreased mainly due to upfront costs to expand business base by consolidating cards
Slide 12: Segment Performance (5) Other (IFRS)
Segment Performance (5) Other (IFRS) Mainstay Daimaru Kogyo increased sales and profit due to strong sales of electronic devices and automobile-related parts Revenue Business Profit Operating profit 30,000 26,677 27,299 800 1,200 649 680 1,018 700 1,000 25,000 600 769 20,000 500 800 15,000 400 600 3
Slide 13: Consolidated BS (IFRS)
Consolidated BS (IFRS) Total assets were ¥1,121.9 billion, an increase of ¥0.9 billion from the end of the previous fiscal year Interest-bearing liabilities (excluding lease liabilities) were ¥239.2 billion, a reduction of ¥9.8 billion from the end of the previous fiscal year Ratio of equity attribu
Slide 14: Consolidated CF (IFRS)
Consolidated CF (IFRS) Net cash provided by operating activities was ¥37.0 billion, an increase of ¥12.0 billion from the previous year, mainly due to profit growth Net cash used in investing activities was ¥0.6 billion mainly due to proceeds from sale of assets, despite investments in store renovat
Slide 15: H2/Full FY2023 Forecast (IFRS)
H2/Full FY2023 Forecast (IFRS) 14
Slide 16: Business Environment Awareness
Business Environment Awareness ＋） Favorable employment environment and increased consumer confidence against a backdrop of normalization of economic activity ＋） Spending by inbound tourists has recovered and wealthy consumers continue to spend well mainly due to asset effects －） Rising resource and
Slide 17: Consolidated PL Forecast (IFRS)
Consolidated PL Forecast (IFRS) Strong consumption by wealthy people and mainstay department stores with accelerated spending by inbound tourists will drive performance improvement Despite higher utilities expenses and additional restructuring expenses, significant increases are expected and forecas
Slide 18: Trends in Dividends per Share
Trends in Dividends per Share After COVID-19, we will continue to improve dividend levels steadily each year while monitoring earnings recovery 40 (Yen) Ordinary dividends Commemorative dividends 35 2 30 25 20 35 36 33 33 15 31 28 29 27 27 25 22 10 18 16 16 14 14 5 0 2008 2009 2010 2011 2012 2013 20
Slide 19: Segment Performance Forecast (1) Department Store Business
Segment Performance Forecast (1) Department Store Business Spending by affluent consumers on luxury and other items continues to be strong, spending by inbound tourists is expected to accelerate further Profit forecast was revised upward due to significant top-line growth forecast despite lower prof
Slide 20: Daimaru Matsuzakaya Department Stores Major Store Sales Forecast
Daimaru Matsuzakaya Department Stores Major Store Sales Forecast Positive growth is expected in H2 compared to both 2019 and 2018 due to sustained strong spending by affluent consumers and acceleration of spending by inbound tourists In particular, sales are expected to be boosted by inbound sales a
Slide 21: Daimaru Matsuzakaya Department Stores SGA Analysis (IFRS) H2 FY2023
Daimaru Matsuzakaya Department Stores SGA Analysis (IFRS) H2 FY2023 SGA analysis (Millions of yen) ・Increase in commissions due to sales growth (¥400 mn) ・Increase in outsourcing and staffing expenses (¥300 mn) Decrease in Increase in Increase in and others operational packing and personnel costs In
Slide 22: Segment Performance Forecast (2) SC Business (IFRS)
Segment Performance Forecast (2) SC Business (IFRS) Strong performance is expected to continue at urban stores such as Shibuya PARCO and Shinsaibashi PARCO, but recovery at rural stores is expected to be slow Despite cost increase factors such as utilities expenses, increase in profit levels is expe
Slide 23: Segment Performance Forecast (3) Developer Business (IFRS)
Segment Performance Forecast (3) Developer Business (IFRS) Gain on sale of developed properties whose value was increased by J. Front City Development will be recorded in H2 (business profit) Increases in both business profit and operating profit are expected to be almost the same as the increases i
Slide 24: Segment Performance Forecast (4) Payment and Finance Business (IFRS)
Segment Performance Forecast (4) Payment and Finance Business (IFRS) Expect an increase in commission income, etc. due to higher transaction volume at department stores and external merchants Even though upfront costs will be incurred to expand the business base, profit forecast in April is expected
Slide 25: Segment Performance Forecast (5) Other (IFRS)
Segment Performance Forecast (5) Other (IFRS) Profitability is expected to improve significantly at mainstay Daimaru Kogyo, both business profit and operating profit are expected to increase sharply Revenue Business profit Operating profit 60,000 55,922 56,400 1,800 1,700 1,600 1,400 1,400 1,600 50,
Slide 26: Consolidated BS Forecast (IFRS)
Consolidated BS Forecast (IFRS) Total assets are expected to be ¥1,100.0 billion, a decrease of ¥20.9 billion from the end of the previous fiscal year Interest-bearing liabilities (excluding lease liabilities) are expected to be ¥215.0 billion, a reduction of ¥34.1 billion from the end of the previo
Slide 27: Consolidated CF Forecast (IFRS)
Consolidated CF Forecast (IFRS) Net cash provided by operating activities is expected to be ¥82.0 billion, with increased profit and proceeds from asset sale planned in the Developer Business Net cash used in and provided by investing activities is expected to be the same mainly due to proceeds from
Slide 28: Toward Renewed Growth in the Medium to Long Term
Toward Renewed Growth in the Medium to Long Term 27
Slide 29: Progress and Results of the Current Medium-term Business Plan (Revival Phase)
Progress and Results of the Current Medium-term Business Plan (Revival Phase) 1) Real × Digital Strategy 4) Restructuring ・No. of Department Store app users: 1.77 mn (Feb 28, 2023) ・Reduction of fixed costs ⇒ ¥10.4 bn ・Department Store app sales: ¥237.1 bn (FY2022) (total FY2021-FY2022) ・GINZA SIX a
Slide 30: Tangible Results (1) Daimaru Shinsaibashi Store × Shinsaibashi PARCO
Tangible Results (1) “Daimaru Shinsaibashi Store × Shinsaibashi PARCO” Potential for creating the Group synergies Points Daimaru Shinsaibashi Store： Transaction volume already exceeded the FY2019 level Shinsaibashi PARCO： Significantly exceeded the plan made at the time of opening Mutual inflow of c
Slide 31: Tangible Results (2) GINZA SIX
Tangible Results (2) “GINZA SIX” Potential for new value creation and access to young affluent consumers Points Record high transaction volume in FY2022 Half of transaction volume comes from customers in their 20s to 30s Strong support from young affluent consumers Exclusive experience value through
Slide 32: Tangible Results (3) Shibuya PARCO
Tangible Results (3) “Shibuya PARCO” Potential as global content Points Share of inbound tourists in transaction volume is about 30% Discovers globally applicable content Established a unique position with strengths in fashion, culture, and entertainment Pursue expansion of trade area from Japan to
Slide 33: Tangible Results (4) AnotherADdress (Subscription Business)
Tangible Results (4) “AnotherADdress (Subscription Business)” Potential for creating new businesses Points Launched in Mar 2021 Developed new markets without cannibalization with department stores Sustainability-oriented business model resonates well with customers Deepen and expand retail domain th
Slide 34: Future Direction for Dramatic Medium- to Long-term Growth
Future Direction for Dramatic Medium- to Long-term Growth Aggressive strategic investment based on sound BS with a focus on “growth” Core businesses = Deepening and growth of retail Build a foundation for growth for Developer Business and Payment and Finance Business Human capital investment Pursue
Slide 35: Core Businesses: Strengthen Store Competitiveness
Core Businesses = Deepening and Growth of Retail Strengthen store competitiveness Large-scale renovation of Matsuzakaya Nagoya Store (typical example) Points ✓ Overwhelmingly enhanced services to gaisho customers (affluent consumers) ✓ Rebuilt fashion & lifestyle zone (including accommodating the ne
Slide 36: Core Businesses: Strengthen Area Competitiveness
Core Businesses = Deepening and Growth of Retail Strengthen area competitiveness Example of the “Nagoya area” Matsuzakaya Nagoya Store Nagoya PARCO Nishiki 3-chome District 25 Project (tentative name) Further add synergies with Developer Business and Payment and Finance Business on the premise of st
Slide 37: Strengthen Store Competitiveness × Area Competitiveness
Core Businesses = Deepening and Growth of Retail Strengthen “store competitiveness” × “area competitiveness” ・App data Department SC Store Use of JCDP* ・Collaboration with Card ・Mutual customer transfer ・Community Properties developed by Developer *JCDP stands for JFR Customer Data Platform Graduall
Slide 38: Initiatives for Overseas Markets
Core Businesses = Deepening and Growth of Retail Initiatives for overseas markets Overseas strategy ≠ Overseas store opening How to approach overseas “customers” “Expansion of trade area” Created a new section in charge of Overseas Business Strategy in the Management Strategy Unit of the holding com
Slide 39: Core Businesses = Deepening and Growth of Retail
Core Businesses = Deepening and Growth of Retail Another ADdress New New business business コンテンツ Department サーキュラー ビジネス展開 Store SC ビジネス展開 Esports Content Content development development Redefine retail as a core business that creates new value unique to the Group 38
Slide 40: Building a Foundation for Growth (1) Developer Business
Building a Foundation for Growth (1) Developer Business Reconstruction of core facilities in seven major cities in Japan < Major pipelines announced > ・”Shinsaibashi Project (tentative name)” (2026) ・”Nishiki 3-chome District 25 Project (tentative name)” (2026) Sapporo ・”Tenjin 2-chome South Block S
Slide 41: Building a Foundation for Growth (2) Payment and Finance Business
Building a Foundation for Growth (2) Payment and Finance Business Expansion of card customer base Consolidate cards within the Group Strengthen collaboration with department stores and shopping centers according to area characteristics GINZA Hakata PARCO Daimaru SIX Steadily build a solid customer b
Slide 42: Building a Foundation for Growth (3) Human Capital
Building a Foundation for Growth (3) Human Capital Investment in human capital Input Output Outcome Restructuring of Financial Human resources strategy to human resources value eliminate the gap between portfolio as-is and to-be Realization of the Vision Improved productivity Skills, mindsets, and P
Slide 43: Innovative Human Resource Development
Building a Foundation for Growth (3) Human Capital Innovative human resource development Use of CVC fund Development of digital human resources ✓ Provide opportunities for “external contacts and ✓ 100 core human resources in major divisions exchanges,” “knowledge and know-how,” and (FY2024), 1,000 i
Slide 44: Full-scale Introduction of ROIC by Business
Pursuit of Growth and Profitability through Advanced Business Management Full-scale introduction of ROIC by business WACC Department Store 5% SC 4.5% Developer 4% Aim for consolidated ROIC of 5% or more by Payment and Finance 3% increasing the spread in New business WACC of new business each busines
Slide 45: Realize ROE of 8% or More
Pursuit of Growth and Profitability through Advanced Business Management Realize ROE of ８% or more The Company’s recognition ✓ Cost of shareholders’ equity 6 - 7% ✓ WACC (capital cost) 4 - 4.5% Implement cash allocation based on the balance between growth investment and appropriate returns Achieve R
Slide 46: 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 × Improve Social Economic Strength
Slide 47: 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