J. Front Retailing Co., Ltd. · TSE:3086
J. Front Retailing — FY2020 Earnings Presentation
61 slides from J. Front Retailing's earnings presentation, Apr 13, 2021
Slide 1: Presentation of Results for Fiscal Year Ended February 28, 2021 and FY2021-2023 Medium-term Business Plan
～ From Full Recovery to Regrowth ～ Presentation of Results for Fiscal Year Ended February 28, 2021 and FY2021 – 2023 Medium-term Business Plan April 13, 2021 J. Front Retailing Co., Ltd. YOSHIMOTO Tatsuya President and Representative Executive Officer Create and Bring to Life “New Happiness.”
Slide 2: Today's Agenda
Today’s Agenda Ⅰ. FY2020 Results Ⅱ. FY2021 Forecast Ⅲ. FY2021 – 2023 Medium-term Business Plan 1
Slide 3: FY2020 Results (IFRS)
@ J. FRONT RETAILING FY2020 Results (IFRS)
Slide 4: Consolidated PL (IFRS)
Consolidated PL (IFRS) Mainly Department Store and Parco significantly decreased revenue in spite of gradual recovery from impact of COVID-19 In spite of business profit for full year, posted operating loss partly due to costs of closing two PARCO stores and impairment Year-end dividend is ¥18 per s
Slide 5: Segment Information (IFRS)
Segment Information (IFRS) Department Store: Gradually recovered but stood still later in the year due to 3rd wave of COVID-19 Parco: Rent relief continued in some stores but its impact was smaller than expected, entertainment remained sluggish Real Estate: Percentage rent decreased but performed re
Slide 6: Segment Information <Business Profit> (IFRS)
Segment Information <Business Profit> (IFRS) 0,000 Department (Millions of yen) Store Business profit analysis 0,000 0,000 (31,360) 45,363 0,000 Parco (6,520) Real Credit Estate and 0,000 Finance (1,727) Credit (1,505) Other Adjustments and Department Adjustments Real (1,722) Other Finance Estate St
Slide 7: Segment Information <Operating Profit> (IFRS)
Segment Information <Operating Profit> (IFRS) ,000 Department Store ,000 (Millions of yen) Operating profit analysis ,000 ,000 40,286 (39,824) ,000 Parco 0 (17,728) ,000 Real (20,600) Estate Credit ( 24,265) Department and Credit Store (4,739) Adjustments Adjustments Finance and Real Parco ,000 Othe
Slide 8: Segment Performance (1) Department Store Business (IFRS)
Segment Performance (1) Department Store Business (IFRS) Gradually recovered from impact of COVID-19 in H2 but struggled due to 3rd wave of COVID-19 and restriction of attracting customers during year end and new year holidays Inbound sales remained almost disappeared, steady sales, mainly of big ti
Slide 9: Daimaru Matsuzakaya Department Stores PL (IFRS)
Daimaru Matsuzakaya Department Stores PL (IFRS) Terminal stores such as Tokyo store remained sluggish but Shinsaibashi store, Nagoya store, etc. recovered steadily Pure EC sales exceeded ¥10 billion, up 40% YoY, also received a good response to live sales, etc. Starting in H2, transferred many of pr
Slide 10: Daimaru Matsuzakaya Department Stores SGA Analysis (IFRS)
Daimaru Matsuzakaya Department Stores SGA Analysis (IFRS) FY2020 Decrease in personnel expenses Decrease in SGA analysis (Millions of yen) (173) packing and transportation costs Decrease in (448) depreciation (4,210) Decrease Decrease in in ad rent expenses expenses (3,140) Decrease in (315) other S
Slide 11: 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 Business profit was above October forecast due to reduction of tenant rent relief and SGA Operating profit was below October forecast mainly due to recognition of
Slide 12: Shinsaibashi PARCO opened
Segment Performance (2) Parco Business (IFRS) Shinsaibashi PARCO opened (November 20, 2020 -) Luxury on levels 1 and 2, culture on level 6, etc. performed particularly well as originally expected Widened Parco’s customer base, generated synergy with Daimaru Shinsaibashi store adjacent to and integra
Slide 13: Real Estate, Credit and Finance, Other (IFRS)
Segment Performance (3) Real Estate Business (4) Credit and Finance Business (5) Other (IFRS) Real Estate: Achieved profitability despite rent relief according to the length of closure and decrease in percentage rent Credit and Finance: Affected by card renewal costs and change in annual fee account
Slide 14: Consolidated BS (IFRS)
Consolidated BS (IFRS) Total assets increased ¥23.4 bn YoY partly because cash and deposits were secured to cope with COVID-19 Interest-bearing liabilities increased ¥84 bn YoY due to procurement of new funds to cope with COVID-19 Ratio of equity attributable to owners of parent was 27.9%, down 3.3
Slide 15: Consolidated CF (IFRS)
Consolidated CF (IFRS) Operating CF decreased ¥16.8 bn YoY due to profit decrease Free cash flow was ¥35.6 bn, up ¥11.8 bn YoY due to significant reduction of investment Secured cash reserves enough to cope with COVID-19 by issuing CP and borrowing money from banks Balance of cash Operating CF Inves
Slide 16: FY2021 Forecast (IFRS)
@ J. FRONT RETAILING FY2021 Forecast (IFRS) 15
Slide 17: Consolidated Forecast PL (IFRS)
Consolidated Forecast PL (IFRS) Gross sales are expected to recover to less than 90% of results FY2019, business profit to be ¥18.5 bn Factored in costs of ¥6 bn to accelerate structural reform Plan to pay interim dividend of ¥14 per share, annual dividend of ¥29, up ¥2 YoY (Millions of yen, %) H1 H
Slide 18: Changes in Reportable Segments
Changes in Reportable Segments - August 2020 - February 2021 March 2021 - Department Store Department Store Business Department Store Business Business Real Estate Business Real Estate Business (Held by Daimaru Matsuzakaya) (Held by Daimaru Matsuzakaya) GINZA SIX GINZA SIX GINZA SIX Tenants around d
Slide 19: Segment Performance (IFRS)
Segment Performance (IFRS) (Millions of yen, %) Business profit Fiscal year ending February 28, 2022 H1 YoY H2 YoY Full year YoY Forecast Change % change Forecast Change % change Forecast Change % change Department Store 700 3,682 － 6,800 6,928) － 7,500 10,610) － SC 4,900 3,950) 415.6) 2,500 2,371)
Slide 20: Segment Performance (1) Department Store Business
Segment Performance (1) Department Store Business The entire business is driven by affluent people in Japan and expected to steadily recover month by month Inbound sales are expected to gradually move later in the year SGA is expected to decrease more than ¥5 bn compared to FY2019 despite reaction t
Slide 21: Daimaru Matsuzakaya Department Store Major Store Sales
Daimaru Matsuzakaya Department Store Major Store Sales Sales are expected to recover, down 19.2% in H1, 5.8% in H2 compared to FY2019 Remain relatively cautious about Tokyo and Umeda stores, which highly depend on railway passengers Shinsaibashi and Sapporo stores, whose share of inbound sales is la
Slide 22: Daimaru Matsuzakaya Department Stores SGA Analysis (IFRS)
Daimaru Matsuzakaya Department Stores SGA Analysis (IFRS) FY2021 SGA analysis (Millions of yen) Packing and * Of fixed costs incurred during closure, SGA of (¥6.69 bn) was transportation reclassified to “other operating expenses in H1 last year. costs Depreciation ・Personnel expenses (¥1.21 bn) (32)
Slide 23: Segment Performance (2) SC Business (Parco) (IFRS)
Segment Performance (2) SC Business (Parco) (IFRS) Shinsaibashi PARCO including restaurants and cinema complex, which made its grand opening in March, is expected to fully contribute Entertainment is also expected to head for recovery with significant reduction of tenant rent relief (Millions of yen
Slide 24: Developer, Payment and Finance, Other (IFRS)
Segment Performance (3) Developer Business (4) Payment and Finance Business (5) Other (IFRS) Developer: Expected to be driven by revenue of design and construction business due to upfront investment in properties Payment and Finance: Expected to continue to be affected by increase in promotion costs
Slide 25: Consolidated BS Forecast (IFRS)
Consolidated BS Forecast (IFRS) Total assets are expected to decrease ¥23.7 bn partly due to decrease in fixed assets caused by depreciation Interest-bearing liabilities are expected to decrease ¥28.8 bn YoY partly due to repayment of lease liabilities Ratio of equity attributable to owners of paren
Slide 26: Consolidated CF Forecast (IFRS)
Consolidated CF Forecast (IFRS) Operating CF is expected to decrease ¥4.4 bn partly due to increase in working capital Secure free cash flow of ¥30 bn by keeping investment within the scope of depreciation Continue to secure enough cash reserves until COVID-19 comes to an end Balance of cash Operati
Slide 27: FY2021-2023 Medium-term Business Plan
百貨店 事業 百貨店 FY2021 パルコ – 2023 Medium-term Business Plan 事業 事業 26
Slide 28: Review of Previous Medium-term Plan
Review of Previous Medium-term Plan Evalua- Major initiatives Results tion Multi Service Retailer ◆ Entered into childcare business (expansion of business ◆ Invested in only 2 companies to develop new businesses ◆ Could not show path to growth of 3 key businesses (JFR Card, JF Design & Construction,
Slide 29: Business Risk Identification
Business Risk Identification Response to external environment Response to internal environment of competitive advantage Creation of new value, gaining Ⅰ. Risk associated with development of new market Ⅱ. Risk associated with provision of new customer experience 3. Urban decentralization 12. Changes
Slide 30: Awareness Gained from COVID-19
Awareness Gained from COVID-19 Vulnerability of business model Concern about advantage of urban location Delay in digitalization Lack of resilience of business portfolio Importance of person-to-person communication Renewed awareness of attention to safety and security Attention to all stakeholders 2
Slide 31: Revision of Materiality Issues
Revision of Materiality Issues Newly added 2 items to materiality issues to promote sustainability management Realization of decarbonized society Realization of customers’ Promotion of healthy/safe/ diversity & secure life inclusion (Newly added) 7 materiality Realization of issues Coexistence work-
Slide 32: System of High Level Concept and Strategy
System of High Level Concept and Strategy Integrate corporate strategy / business strategy with sustainability management Corporate Credo Service before Profit Group Vision Create and Practice of CSV Bring to Life Proposal for “New Happiness” (Creating Shared Sustainability Policy Well-being Life Va
Slide 33: 3 Key Strategies
３ Key Strategies Group Structure Commercial Good Department SC production customer Store Business capability assets Business × Core Core Competence Business Partners Payment Real estate including Developer and assets in Business Finance suppliers and creators urban areas Business Focus on 3 strategi
Slide 34: Overall Structure of Medium-term Business Plan
Overall Structure of Medium-term Business Plan (1) Real × Digital Strategy (2) Prime Life Strategy (3) Developer Strategy － Department store: Enhance － Develop new solution services － Mixed use not limited to appeal of stores and use to realize high quality customer commercial use stores for media c
Slide 35: No Change, No Full Recovery
3 Years for Increasing Resilience for Regrowth No Change, No Full Recovery Waiting will not recover anything. Never miss this opportunity to change. 34
Slide 36: Image of Portfolio Changes
Image of Portfolio Changes Expand share of Developer, Payment and Finance, Other while steadily growing Department Store, SC 80 (Billions of yen) “Operating profit” share of each segment Developer 40% Payment and Finance Other Other* 40.2 40.3 1% Payment and 7.0% 6% Finance 4.7% 11% 9.8% Developer 2
Slide 37: Management Numerical Targets
Management Numerical Targets Aim for “full recovery” of both PL and BS to FY2019 level in FY2023 Add sustainability items to targets of medium-term business plan as officer remuneration evaluation indicators FY2023 ROE ROIC Capital profitability 7% 5% Operating profit Business profit Business growth
Slide 38: Path to Full Recovery (Contribution of Each Measure)
Path to “Full Recovery” (Contribution of Each Measure) (Billions of yen) (2.5) Operating profit +4.1 Consolidation +3.7 Prime Life adjustments Strategy etc. +5.7 Digital shift +2.7 Enhancement of appeal of Developer stores/content 40.3 40.2 Strategy +10 Real ✕ Digital Strategy Structural reform (64.
Slide 39: Path to Full Recovery (PL, BS)
Path to “Full Recovery” (PL, BS) 【PL】 【BS】 (Millions of yen) Business profit Operating profit (Millions of yen) (Times) Interest-bearing liabilities Net D/E 50,000 45,363 44,000 500,000 0.8 40,286 40,300 40,000 450,000 0.7 0.7 0.7 0.7 30,000 400,000 30,000 26,000 0.6 360,000 0.6 0.6 359,930 350,000
Slide 40: Redefinition of Commercial Model
Redefinition of Commercial Model Vulnerability of core business base revealed by COVID-19 Current retail business model, which is overly dependent on attracting customers to real stores, has reached a limit Redefinition of commercial model is an unavoidable necessity Important to create new experien
Slide 41: Merger of Real and Digital (Department Store)
Merger of Real and Digital (Department Store) Overcome time and location constraints Provide unique OMO shopping experiences: cosmetics in FY2021, art in FY2022 Enhance customer convenience by equipping shop blog and connaissligne sites with payment function Get Select/consider/ Buy Receive Share in
Slide 42: Merger of Real and Digital (Parco)
Merger of Real and Digital (Parco) Maximize experience value via Real × Digital Realize OMO via cycle of mutually sending customers between real channels and online channels by building multi-platform Strengthen hybrid entertainment (live + digital) instead of relying on only attracting customers to
Slide 43: Media Commerce Focused on People
“Media Commerce” Focused on People Online media Product Offline Curation Website media App Service Value Experience Focused on Focused on Loca- Space “people” value “people” tion Social Trust contri- Credibility bution Store Beyond time and space constraints Content created with “human Media that co
Slide 44: Enhance Appeal of Real Stores and Content (Department Store)
Enhance Appeal of Real Stores and Content (Department Store) Increase share of categories/areas to be strengthened Renovation via greater allocation of investment in key stores, mainly expansion of luxury Development/introduction of new services and tenants by maximizing synergy with Parco Bold over
Slide 45: Enhance Appeal of Real Stores and Content (Parco)
Enhance Appeal of Real Stores and Content (Parco) Development of new content Newly launched wellness service that supports women’s inner beauty and health Opened community WS “SkiiMa” in Kichijoji PARCO following Shinsaibashi PARCO Created exciting food space Shinsaibashi Neon Shokudo-gai that provi
Slide 46: Creation of New Content: Entry into subscription business
Creation of New Content Entry into subscription business Introduced subscription model that enhances intrinsic value of fashion and leads to sustainable future ￥SUBSCRIPTION (STOCK) BUY Delivery Customer company ORDER 100% 3PL company RENT WEB Recycling Cleaning Apparel company company company Chall
Slide 47: Prime Life Strategy: Advanced gaisho customer strategy
Prime Life Strategy Advanced gaisho customer strategy Promote deep cultivation of core content such as luxury and development of new solution Expand OMO shopping using connaissligne and increase virtual events Expand Tokyo area / nouveau riche customers and promote retention of affluent foreign cust
Slide 48: Prime Life Strategy: Expansion of customer base by advancing CRM
Prime Life Strategy Expansion of customer base by advancing CRM Entice new ID customers who joined app membership to hold in-house credit cards Expand LTV by full use of the Group integrated data base LTS-Hub Create new value Buying data / Marketing/CRM behavior log using data Integrated customer da
Slide 49: Growth process of Payment and Finance Business
Prime Life Strategy Growth process of Payment and Finance Business Strengthen alliance with department store and expand basis for growth by promoting acquisition of new cardholders Increase cardholders ・Renewed Daimaru Matsuzakaya Card (January 2021) ・Increase the number of cardholders online, via a
Slide 50: Developer Strategy: Developer Business developed from Real Estate Business
Developer Strategy “Developer Business” developed from Real Estate Business Accumulate know-how using transferred properties for multiple purposes not limited to commercial purpose Maximize real estate value by implementing CRE strategy via sale and replacement of assets Changes in portfolio for rev
Slide 51: Developer Strategy: Medium-term pipeline
Developer Strategy Medium-term pipeline Current medium-term plan period is upfront investment phase, realize dramatic growth in or after next medium-term plan period Large-scale complex development Shinsaibashi PARCO Development of Sakae Kadochi, Nagoya / development of Nagoya area Open multiple lar
Slide 52: Strengthening of Project Promotion System
Strengthening of Project Promotion System Set up 3 committees in HD Make maximum use of the Group’s strengths and management resources beyond boundaries of operating companies in the Group Committees are led by Executive Officers to promote across the Group (I) (III) (II) Developer Prime Life Digita
Slide 53: Management Structure Reform
Management Structure Reform Reduction of fixed costs (lowering of break-even point) ・Reform HR structure via business model reform ・Shift operation base to new normal ・Digital advertising etc. Reduce fixed costs more than ¥10 billion (vs. FY2019) Narrowing of business base Strictly assess businesses
Slide 54: Strengthening of Management Base: IT strategy, HR strategy
Strengthening of Management Base IT strategy Renovate core systems to advance business management, reduce IT risk, improve management efficiency Shift to high value added operations and respond to diversified work styles using advanced IT technologies Steadily operate systems and achieve robust secu
Slide 55: Finance Strategy: Introduction of ROIC
Finance Strategy Introduction of ROIC Set hurdle rates for each business segment and aim for ROIC above them Strengthen management of Developer Business and Payment and Finance Business for which medium- to long-term growth is expected ROIC Increase NOPAT margin Increase invested capital turnover In
Slide 56: Cash Flow Allocation
Cash Flow Allocation From generated operating CF of ¥190 bn, allocate ¥90 bn to investing CF, ¥100 bn to FCF Reduce cash and deposits to ¥30 bn from ¥128.9 bn to repay lease liabilities and interest- bearing liabilities Give priority to improvement of BS damaged by COVID-19 and provide appropriate r
Slide 57: Capital Investment / Growth Investment
Capital Investment / Growth Investment Basically, plan and implement capital investment within the scope of depreciation Allocate ¥10 bn as funds for growth investment for the future including M&A and alliance 【Investment plan for each segment】 【Historical and medium-term 3-year forecast capital inv
Slide 58: Return to Shareholders
Return to Shareholders Basic policy is to return profits with consolidated dividend payout ratio of at least 30% and to consider share buyback as appropriate Aim to recover dividend per share to FY2019 level as early as possible (Yen) 40 Annual dividend per share after establishment of J. Front Reta
Slide 59: Sustainable Growth and Enhancement of Corporate Value
Sustainable Growth and Enhancement of Corporate Value 2021 2023 2030 － Full recovery － － Regrowth － Aim to FY2023 increase FY2030 ROE 7％ operating ROE 10％ ROIC 5％ profit at ROIC 5％ Operating profit ¥40.3 bn annual Operating profit ¥80 bn Business profit ¥44 bn average rate Business profit ¥83 bn GHG
Slide 60: Reference
<Reference> PARCO online TV Nagoya PARCO “LEE” Links to https://www.instagram.com/tv/CM3wa_hj8Bj/ Renewed “PARCO online mall,” which was Daimaru Matsuzakaya & Parco launched to serve customers online last year, Examples of “Real × Digital Strategy” as “PARCO online TV” that streams special videos an
Slide 61: 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