Financial Results Presentation Materials€¦ · Pct. of total sales (directly operated existing...

Ⓒ2018 BOOKOFF CORPORATION LIMITED All rights reserved.

Financial Results Presentation Materials

for the Fiscal Year Ended March 2018 (FY3/2018)

May 16, 2018

BOOKOFF CORPORATION LIMITED TSE First Section: 3313


Contents

1

Financial Results Overview P3

Business Results by Segment P9

Accomplishments of Key Initiatives P16

Medium-term Management Policies P27

Outlook for FY3/2019 P57

Appendix P61

(Contact) Corporate Planning Department, BOOKOFF CORPORATION LIMITED TEL: +81-42-750-8588

Note Concerning Forward-Looking Statements

The plans, strategies, and financial forecasts presented in these materials contain forward-looking statements not based on historical fact. Forward-looking statements are based on management judgments using information available at the time. Actual results may vary significantly from forecasts due to changes in the business environment and other factors.


Financial Results Overview and Outlook

2

• Sales down from one year earlier but a reduction in SG&A expenses increased consolidated operating profit and ordinary profit

• Third consecutive loss attributable to owners of parent due mainly to impairment losses in the HUGALL Business and losses for the reorganization and termination of unprofitable businesses

• Goal is growth to raise ordinary profit to ¥2 billion by implementing medium-term management policies


Financial Results Overview


Consolidated Business Results

4

• Operating profit and ordinary profit were much higher than one year earlier due to lower SG&A expenses, while net sales and gross profit were down from one year earlier.

• Loss attributable to owners of parent was caused by impairment losses of non-current assets resulting from the poor performance of the HUGALL Business and other extraordinary losses.

(Million yen) FY3/2017 FY3/2018 % to sales % to sales

YoY change (Amount)

YoY change (Ratio)

Net sales 81,344 100.0% 80,049 100.0% (1,294) 98.4%

Gross profit 47,179 58.0% 46,994 58.7% (184) 99.6%

SG&A expenses 47,063 57.9% 46,381 57.9% (682) 98.6%

Operating profit 116 0.1% 613 0.8% +497 526.6%

Ordinary profit 588 0.7% 1,092 1.4% +503 185.6%

Profit (loss) attributable to owners of parent (1,159) - (889) - +269 -


Selling, General and Administrative Expenses

5

• Total SG&A expenses decreased 1.4% because of the more efficient use of personnel, lower investments, a review of the use of supplies, and other cost-saving measures.

• Rents increased 2.2% because of stores opened in the Reuse Store Business and the relocation of HUGALL Business operations to a large logistics warehouse.


YoY change (Amount)

YoY change (Ratio)

Net sales 81,344 100.0% 80,049 100.0% (1,294) 98.4%

Gross profit 47,179 58.0% 46,994 58.7% (184) 99.6%

SG&A expenses 47,063 57.9% 46,381 57.9% (682) 98.6%

Personnel* 21,380 26.3% 20,943 26.2% (436) 98.0%

Rents 11,657 14.3% 11,908 14.9% +251 102.2%

Depreciation 2,052 2.5% 1,833 2.3% (218) 89.4%

Advertising and sales promotion 1,603 2.0% 1,632 2.0% +28 101.8%

Supplies 1,428 1.8% 1,295 1.6% (132) 90.7%

Others 8,941 11.0% 8,766 10.9% (174) 98.0%

* Includes recruiting expenses

Ⓒ2018 BOOKOFF CORPORATION LIMITED All rights reserved. 6

Sales and Earnings by Segment


YoY change (Amount)

YoY change (Ratio)

Net sales 81,344 100.0% 80,049 100.0% (1,294) 98.4%

Reuse Store Business 71,150 87.5% 70,565 88.2% (585) 99.2%

BOOKOFF Online Business 6,522 8.0% 6,140 7.7% (381) 94.1%

HUGALL Business 2,244 2.8% 2,071 2.6% (173) 92.3%

Others 1,426 1.8% 1,272 1.6% (153) 89.2%


Reuse Store Business 2,611 - 3,419 - +808 131.0%

BOOKOFF Online Business 413 - 232 - (180) 56.2%

HUGALL Business (680) - (897) - (216) -

Others (124) - (114) - +9 -

Corporate expenses and adjustments

(2,103) - (2,026) - +76 -


YoY Change in Operating Profit

7

FY3/2017 Operating

profit

Reuse Store Business +808 (Million yen)

• In the Reuse Store Business, existing store gross profit decreased but cost cutting made a big contribution to earnings growth.

• Stores opened in FY3/2017 as well as new stores in FY3/2018 contributed to earnings.

• Only a small benefit in FY3/2018 the reduction in expenses from closing unprofitable stores, but anticipate a medium to long-term contribution to earnings due to the redeployment of people and other reasons.

Closing unprofitable

stores

Lower existing-store gross profit

Lower costs at existing stores

First profits from new FY3/2017 and FY3/2018

stores

BOOKOFF Online

Business HUGALL Business

Subsidiary consolidation

Corporate expenses and

others

FY3/2018 Operating

profit

116

613

+1,742

(1,246)

+229 (180)

(216) +86


Reasons for Loss Attributable to Owners of Parent

8

Million yen FY3/2018

Ordinary profit 1,092

Extraordinary income 59

Extraordinary losses 1,250

Impairment loss 1,103

Loss on closing of stores and Provision for loss on store closing

124

Others 22

Profit before income taxes (98)

Income taxes paid and non-controlling shareholder income

791

Profit (loss) attributable to owners of parent

(889)

Note: BOOKOFF Online, Inc. and hugall Inc. merged in March 2018 with BOOKOFF Online the remaining company.

The result of quickly acting on decisions to close unprofitable stores in the Reuse Store Business (Closed 12 stores in FY3/2018 and have already selected several stores for closing in FY3/2019)

Higher than planned tax rate because, due to the loss at subsidiary hugall Inc.(Note), which has an accumulated loss, BOOKOFF and other consolidated subsidiaries accounted for a larger share of consolidated operating profit

Reuse Store Business 462

Existing stores 332

1 BSB location opened in FY3/2017 130

BOOKOFF Online Business 78

HUGALL Business 464

Corporate expenses and others 97

Goodwill 75

Others 21

Total 1,103

Red items are losses not foreseen at the beginning of the FY


Business Results by Segment


Reuse Store Business –Business Results Overview

10

• In the first quarter of FY3/2018, comprehensive large-format stores were opened and BOOKOFF With Co., Ltd. became a consolidated subsidiary. However, fiscal year sales decreased because existing store sales were lower.

• Earnings improved because of a reexamination of expenses that started in the third quarter of FY3/2017.

■ Sales and earnings

(Million yen) FY3/2017 FY3/2018 YoY change (Amount)

YoY change (Ratio)

Net sales 71,150 70,565 (585) 99.2%

Operating profit 2,611 3,419 +808 131.0%


Reuse Store Business –New Stores

11

Store name Opening date Location Floor space

Directly operated

New stores

SEIYU Omori Store May 18 Shinagawa-ku, Tokyo

1,758m2

Northport Mall Store June 22 Yokohama City, Kanagawa

2,961m2

AEON Sendai Store June 29 Sendai City, Miyagi 1,689m2

Jalan Jalan Japan 1 Shamelin Mall Store September 30 Malaysia 1,421m2

Repackaged stores

Maebashi Hirose Store April 8 Maebashi City, Gunma

813m2

Nara Kashihara Store September 15 Kashihara City, Nara

869m2

Franchised

New stores

Hamamatsu Kitaterashima Store April 21 Hamamatsu City, Shizuoka

307m2

ACROSSPLAZA Yojiro Store April 21 Kagoshima City, Kagoshima

737m2

Repackaged stores

Fujinakajima Store July 22 Fuji City, Shizuoka 915m2

Route 22 Ichinomiya Bypass Store October 26 Ichinomiya City, Aichi

823m2

• Three directly operated BOOKOFF SUPER BAZAAR stores were opened as planned.

• Opened four BOOKOFF PLUS stores (two directly operated and two franchised), a format that adds apparel and other merchandise to the BOOKOFF store format.

• Opened the second “Jalan Jalan Japan” reuse store in Malaysia.


Reuse Store Business –Existing Store Sales

12

96.8% 95.9% 96.3%

94.6%

99.5%

99.1%

94.2%

97.0%

95.2%

93.8%

97.0%

100.3% 102.9% 102.3% 102.0%

105.2%

94.1%

100.0% 100.0% 98.9%

101.7% 102.2%

95.2%

97.3%

Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.

FY3/2017

FY3/2018

■ YoY change in monthly sales of directly operated existing stores in Japan

• Existing store sales in the Reuse Store Business were down 3.5% from FY3/2017 when there were promotions for the start of sales of reuse home appliances and many special sale events.

FY3/2018 96.5%

(FY3/2017 100.2%)


Reuse Store Business –Results by Product Categories

13

Sales YoY change

(Ratio)

Purchases YoY change

(Ratio)

Books 94.7% 97.7%

Software media 98.3% 100.5%

Apparel 98.6% 89.4%

Trading cards/hobby goods 101.2% 102.2%

Home appliances/mobile phones

80.6% 75.3%

Precious metals/watches/ luxury-brand bags

103.9% 114.7%

Others 100.1% 97.8%

Total 96.5% 97.6%

Books 33.9%

Software media 30.2%

Apparel 13.7%

Trading cards/hobby

goods 5.3%

Home appliances/

mobile phones

5.3%

Precious metals 6.2%

Others 5.4%

■YoY changes in sales and purchases by product category (directly operated existing stores in Japan)

■Pct. of total sales (directly operated existing stores in Japan)

• Sales of books, software media and apparel, all of which are a large share of total sales, were lower than one year earlier.

• A decline in sales of home appliances and mobile phones mainly because of a downturn in mobile phone purchases as carriers take used phones as trade-ins for the purchase of new models.

• Consistently strong sales of trading cards, hobby goods, precious metals, watches and luxury-brand bags.

• Purchased a large volume of software media in the second half because of the new Kaumaenique purchasing service.


BOOKOFF Online Business –Business Results Overview

14

• Sales in the BOOKOFF Online Business, which operates a home e-commerce business, decreased because of a decline in inventories caused by the suspension of shipments of items in store inventories and by weakness in the home pick-up purchasing service.

• Decline in operating profit was caused primarily by lower sales and an increase in the cost of merchandise resulting from the purchasing price-up campaign for obtaining a sufficient level of inventories.



YoY change (Ratio)

Net sales 6,522 6,140 (381) 94.1%

Operating profit 413 232 (180) 56.2%


HUGALL Business –Business Results Overview

15

• Sales were lower from one year earlier due to the termination of Tokyo Reuse Apparel special events.

• Larger operating loss was caused primarily by inventory write-offs associated with the termination of Tokyo Reuse Apparel special events and the relocation to a large logistics warehouse (which has been sub-leased), resulting in higher rents.



YoY change (Ratio)

Net sales 2,244 2,071 (173) 92.3%

Operating profit (loss)

(680) (897) (216) -


Accomplishments of Key Initiatives


FY3/2018 Key Initiatives

17

FY3/2018 was a year for focusing on the following two actions for quickly establishing consistent profitability in order to establish a base for growth starting in FY3/2019.

1. Significantly alter the HUGALL Business

2. Make the Reuse Store Business more profitable


HUGALL Business –Merged with BOOKOFF Online

BOOKOFF logistics

operations

• hugall Inc., which operates the HUGALL Business, was absorbed by BOOKOFF Online, Inc. on March 2018 with BOOKOFF Online the surviving company.

• Combining HUGALL with the BOOKOFF Group’s logistics operations and the operations of BOOKOFF Online is expected to improve efficiency.

Combining HUGALL and BOOKOFF Online makes department store one-stop purchasing consultation desks the only purchasing channel

and creates a framework for aiming for profitability quickly


(1) Concentrate resources on only carefully chosen purchasing channels while abandoning other channels

Continuing to use department store one-stop purchasing consultation desks, which have excellent potential as a purchasing channel

Stopped using or downsized other purchasing channels

(2) Downsize distribution centers to match the overall scale of operations Integrated major HUGALL activities with the operations of the BOOKOFF

Online distribution center in Yokohama

The existing HUGALL distribution center in Chiba (Funabashi) was downsized (floor area cut to one-sixth the original area) to leave only absolutely necessary functions; unused space has been sub-leased

(3) Eliminate inventories of lower-priced merchandise

Terminated the Tokyo Reuse Apparel special event sales business and disposed of the unsold inventories

HUGALL Business –Results of Business Reforms

19


Reuse Store Business –Improvement in Profit and Loss

20

• Rigorous use of low-cost operations made stores more efficient. Personnel and all other cost items were cut, resulting in a 1.8% decrease in Reuse Store Business SG&A expenses that made a big contribution to earnings growth.

• The gross profit margin increased because of special sales events and a review of inventory standards for each merchandise category.


YoY change (Ratio)

Net sales 71,150 70,565 (585) 99.2%

Gross profit 42,701 42,777 +76 100.2%

SG&A expenses 40,089 39,357 (731) 98.2%

Personnel 19,082 18,690 (392) 97.9%

Rents 10,945 11,139 +194 101.8%

Depreciation 1,790 1,576 (214) 88.0%

Advertising and promotion

1,257 1,240 (17) 98.6%

Supplies 1,227 1,134 (93) 92.4%

Others 5,784 5,576 (208) 96.4%

Operating profit 2,611 3,419 +808 131.0%

Reuse Store Business Consolidated statement of income

Special sales events and a review of inventory standards raised the gross profit margin

Down because of numerous measures for low-cost operations

Mainly the result of holding down large investments

Lower mainly due to decline following higher expenses in FY3/2017 for new actions (used home appliances, etc.) and to holding down new store openings


Reuse Store Business –Limit New Store Openings and Investments

21

FY3/2017 FY3/2018

New comprehensive large-format stores in Japan (directly operated) 6 stores 3 stores

Fewer new stores because expenditures are large and first-year losses are high

Repackaged stores from existing stores to BOOKOFF PLUS (directly operated)

6 stores 2 stores Use existing packages to create improved sales areas

One-stop purchasing consultation desks 1 location 5 locations

More small investments that can contribute to future growth

IT and other systems Continue investments to improve

operational efficiency

Reuse Store Business Total amount of capital expenditures

¥2,264 million ¥1,121 million A 50% reduction

Reuse Store Business Major capital expenditures and total amount

• A temporary reduction in new store and other investments in order to quickly make the Reuse Store Business consistently profitable; smaller capital expenditures will raise earnings by lowering depreciation and many other expenses.

• Small investments, such as for more one-stop purchasing consultation desks, and more IT and other investments for improving operating efficiency.


• Three directly operated comprehensive large-format stores opened as planned.

• The initial performance at all three stores has been strong and first-year profitability is generally as planned.

Reuse Store Business –New Store Openings

SEIYU Omori Store Opened in May 2017

Northport Mall Store Opened in Jun. 2017

AEON Sendai Store Opened in Jun. 2017


Reuse Store Business –Measures for Improving Existing Stores

23

• A store operating policy manual will be produced for each directly operated store over the next two to three years.

• The policies in these manuals will be used for altering merchandise, sales areas and other aspects of operations for matching the characteristics of each store and its local market. The goal of these store-specific actions is consistent earnings starting in FY3/2019.

Produce store operating policy manuals for individual stores

BOOKOFF xxx Store Operating Policy Manual

Performance Market characteristics Customer

characteristics Best-selling

merchandise Recruiting of part-time

workers Terms of store leasing

agreement …and other items

Links with inventories

Key merchandise

Sales area configurations

Employee training


• We will use clearly defined standards for store closing decisions and select stores that are candidates for closing over the next two or three years.

• In FY3/2018, 12 directly operated stores were closed. (does not include stores that were replaced by new comprehensive large-format stores)

• We will continue to move quickly once a decision has been made in order to become more profitable.

Standards for selecting stores to close

Earnings and prospects for a recovery

Geographical considerations with respect to the new store strategy

Lease agreement terms (cancelation penalty, etc.) that would make a store closing too costly

and other standards

In FY3/2018, 12 directly operated stores were closed

Several stores are already selected for closing in FY3/2019

Will continue using the same standards for store closing decisions

Reuse Store Business –Close Unprofitable Stores


Reuse Store Business –Growth in Malaysia

25

Unsold reuse merchandise in Japan

is sent to Malaysia

1 Shamelin Mall Store One City Store

• The first “Jalan Jalan Japan” store opened in November 2016 and the second in September 2017. Both are in suburban Kuala Lumpur and are performing well.

• “Jalan Jalan Japan” is a channel for selling unsold reuse merchandise of the BOOKOFF Group and more stores will be opened to enlarge this channel. Establishing the “Jalan Jalan Japan” brand in Malaysia will give larger numbers of people an opportunity to enjoy shopping at these distinctive stores.

The third store will open in June 2018


Building on FY3/2018 Accomplishments

26

Looking ahead to FY3/2019

Reuse Store Business

• Earnings are recovering, stores can generate earnings

• Need to achieve earnings stability quickly by altering sales areas, such as by adding merchandise to offset Japan’s shrinking comic book market

BOOKOFF Online Business / HUGALL Business

• Need to improve efficiency and profitability of one-stop purchasing consultation desks at department stores quickly in order to build a base for future earnings growth as delivery and other expenses rise


Medium-term Management Policies


Japan’s Reuse Market

28

1,127 1,144 1,259

1,359

1,492 1,597

1,652 1,774

1,950 2,050

2009 2010 2011 2012 2013 2014 2015 2016 2020 2025

• The reuse market in Japan has grown for seven consecutive years

• Forecast to reach ¥2 trillion in 2025

Growth of Japan’s reuse market and Forecast (Billion yen)

Source: Secondhand Market Databook 2018, The Reuse Business Journal


Japan’s Reuse Market

29

Retail format Internet platform

B-to-C Purchasing only B-to-C C-to-C

■Major players in Japan’s reuse market

• Competition has been increasing in Japan’s reuse market

• Growth in this market is shifting from stores to Internet

B-to-C and C-to-C platforms

Currently growing rapidly


Distinctive Features of the BOOKOFF Business Model

30

Customers

Sales Purchases

Store

Online

Customers • Submit items at any time • No need to visit a store • Direct payment to a bank

account

• Convenient and easy • Sell many items at once • Immediate receipt of cash

• Home delivery of merchandise • Very large inventories

• Hands-on selection of items • Direct customer service • Take merchandise home immediately

• Purchasing as many quality reuse items from customers as possible is essential for earnings growth


BOOKOFF’s Strengths –A Large Volume of Books

31

Japan’s used book market

Annual buyers of used merchandise in Japan (estimates)

Books Apparel, accessories

Games/ Software media

Daily

necessities/Household

goods

20.9

14.1

10.6

Source: Secondhand Market Databook 2018, The Reuse Business Journal

Far ahead of competitors Books attract many customers

Appeals to a broad spectrum of customer segments

Company T

Company R

Others

The power of books

(Million people)


More customers use BOOKOFF than any other reuse store chain in Japan*

*BOOKOFF estimate based on customer purchases/sales per store

Point Card Members

About 17 million people

Annual customer transactions at BOOKOFF

stores*

About 90 million

E-commerce website members

About 3.6 million people

Japan’s largest inventory of used

books

Store Online

BOOKOFF’s Strengths –Japan’s Largest Reuse Store Network

More than 800 reuse stores

throughout Japan


Corporate Philosophy and New Mission

33

Corporate Philosophy

Contributions to society through our business

activities

Pursuit of employees’ material and spiritual

wellbeing

Mission

Be a source of enjoyable and enriching lives for as many people as possible

Vision Japan’s leading “reuse” company

(the reuse store network with the largest number of customers)


Medium-term Management Policies Business Policies

34

Upgrade individual stores ✕

Use all group strengths to compete

and win


Medium-term Management Policies Business Policies (1)

35



and win


Upgrade Individual Stores –Maintain and Improve Small/Midsize Store Earnings

36

Stores nationwide with strong local market ties that are raising earnings by enhancing existing merchandise (books and software), adding new merchandise categories and taking other actions

Use know-how acquired by stores all over Japan to invigorate existing stores

Examples of stores with strong performances

BOOKOFF Omuta Funatsu Store

Effective book/software sales areas

Addition of home appliances, hobby goods, trading cards

Sales up 14% over prior year

A conventional package centered on books and software

Interior and exterior marketing measures

Addition of new comic books

Removed the small apparel business

BOOKOFF Himeji Miyake Store

Sales up 10% over prior year


Centralize expertise acquired in different regions and at individual stores

Improve customer satisfaction by using the latest accomplishments and successful initiatives

Merchandise (books/software) : A key point of contact with customers

Examples of improvements to book and software sales areas



Develop and add new merchandise categories, selecting items that best match the characteristics of each store location

Reduce expenses for new merchandise by using e-purchasing and a larger database

Increase the share of items other than books and software from the current level of about 10%

More merchandise categories : Action for additional earnings

Examples of new merchandise categories



●

● ● ●

●

●

●

Yukigaya-Otsuka Store

Waseda Store

Yoyogi-Uehara Store

Nakameguro Store

Jiyugaoka Store

Sangenjaya Store

Kaminoge Store

Upgrade Individual Stores –More Purchasing Power at Small/Midsize Stores Addition of One-Stop Purchasing Consultation Desks

39

A reuse purchasing specialist at a store counter can appraise and buy many types of items

Open small stores that specialize in purchasing reuse merchandise in good locations for purchasing these items

One-stop purchasing consultation desk

Nakameguro Store

■Specialized purchasing stores Add purchasing desks at existing BOOKOFF stores

■Desks at existing stores

Yukigaya-Otsuka Store

Purchasing desks are a low-cost channel for buying quality reuse merchandise in urban areas

After confirming the profitability of these desks, including sales efficiency, the plan is to add 5 to 10 desks every year


Upgrade Individual Stores –More Comprehensive Large-format Stores for Earnings Growth

40

More specialization, including better customer interactions and knowledge about higher-priced items

Improve productivity for lower-priced items by using employee training, changes to sales counter positioning and other measures

The objective is becoming more profitable by using the strengths of each store package for more progress involving both broad coverage and specialization

BOOKOFF SUPER BAZAAR is a comprehensive large-format store chain that handles a broad range of reuse items. It has now developed into a chain with 41 directly operated stores nationwide.

BOOKOFF PLUS is a store complex chain that offers an extra ‘plus factor’ and deals in apparel, brand goods, and similar items. It has now developed into a chain with 55 stores, including 13 franchised stores, across Japan.

Raise earnings per square meter by using sales area layouts that reflect the characteristics of each store’s location • Use extra sales area space to add sporting

goods, household products and other merchandise categories

• Concentrate existing inventories on carefully selected items and categories

Create a more appealing lineup of merchandise by assigning experienced personnel to stores


*Number of stores as of March 31, 2018. (including franchised stores)

Now

41 stores

Now

55 stores

The main package for store openings in order to continue growing as in the past

Plan to continue opening 3 or 4 directly operated stores every year in very carefully selected locations



Multi-format stores are to become the primary source of earnings in the Reuse Store Business

The steady addition of new stores will drive profit growth

23,466

25,907 27,669

30,033

32,800 33,411

0

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

2,500,000,000

3,000,000,000

3,500,000,000

4,000,000,000

4,500,000,000

5,000,000,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

FY3/2013 FY3/2014 FY3/2015 FY3/2016 FY3/2017 FY3/2018

Operating profit

51 56 63 68 80 83 Multi-format stores at end of FY (only directly operated)

Net sales* (Million yen)

*Repackaged store sales include sales at these stores prior to the switch to a different format.



Upgrade Individual Stores –Growth of Non-store-based Services

43

Strengthen lineups of core products and products popular for many years in order to become the preeminent retailer as a “category killer” in targeted sectors

Maintain the current number of items but more tightly focus inventories, mainly by eliminating slow-selling products, to operate efficiently with a high inventory turnover ratio

Use BOOKOFF Online operational know-how to make services profitable quickly, chiefly at department store one-stop purchasing consultation desks

Purchase quality reuse products other than books and software to increase opportunities for earnings growth

Integration of people

and merchandise

Use fewer locations for distribution center operations to improve efficiency Closer ties and more cooperation between stores and distribution centers

Combining BOOKOFF Online and HUGALL creates a means of serving new customer segments that stores cannot serve


0

1,000,000,000

2,000,000,000

3,000,000,000

4,000,000,000

5,000,000,000

6,000,000,000

7,000,000,000

8,000,000,000

9,000,000,000

10,000,000,000

FY3/2014 FY3/2015 FY3/2016 FY3/2017 FY3/2018

44

Goal is to use BOOKOFF Online-HUGALL synergies to increase purchases and raise sales to ¥10 billion

Purchases

Sales

¥10 billion BOOKOFF Online Business/ HUGALL Business Sales and purchases

Upgrade Individual Stores –Growth of Non-store-based Services


Medium-term Management Policies Business Policies (2)

45



and win


会員数

約360万人

カード会員数

約1,700万人

Can different strengths dispersed across the store chain be combined?

Point Card Members

About 17 million people

Website members About 3.6 million

people

BOOKOFF’s Strengths –Be “One BOOKOFF”

More than

800 reuse stores

throughout Japan

Annual customer transactions at BOOKOFF

stores About 90 million

Department store purchasing desks

Home pick-up purchasing service for

affluent individuals

1 million members

8 million reviews

Japan’s largest inventory of used books


Member services are at the heart of the “One BOOKOFF” concept

Store

Online

Purchases Sales

Membership services

BOOKOFF’s Strengths –Be “One BOOKOFF”


Store

Sales

Online

Membership services

Integration/links for BOOKOFF Group member ID (starting with BOOKOFF and BOOKOFF Online)

Use points for more effective marketing activities

Deepen relationships with top-tier customers

Enlarge the lineup of additional services

Other initiatives

June 2018 Plan to launch a

new app ↓

Increase number of app members

Purchases

BOOKOFF’s Strengths –A Single Membership Base and Enhanced Membership Services


Store

Sales

Online

Membership services

E-purchasing/Larger database

Purchase more types of reuse items

More one-stop purchasing consultation desks

Increase Internet applications to sell items

Alliances with other companies (Kaumaenique purchasing service

and others)

Purchases

BOOKOFF’s Strengths –Upgrade Purchasing Services


Store

Sales

Online

Membership services

Portal/Information accessible to anyone

Expand the addition of merchandise categories

More large and multi-format stores

Increase sales of products available both in stores and online

Increase no. of items sold using e-commerce Use more channels to sell reuse items

Purchases

BOOKOFF’s Strengths –Upgrade Selling Services


For customers buying merchandise Internet search of store

inventories and purchases

Purchase of item brought to a store from another store or the e-commerce inventory

Notification that an item is in stock

Share inventories and information

For customers selling merchandise Store purchase reservation

Application for at-home purchasing service

Application for home pick-up purchasing service

Search of purchase price database

Share BOOKOFF Group inventories and information to build platforms centered on BOOKOFF Online for purchases and sales of reuse merchandise

Create an infrastructure that allows customers to buy nationwide BOOKOFF merchandise at any time and any place and to understand and select how to sell their unneeded items

Membership services

Customers can understand and select how to sell their

unneeded items

BOOKOFF’s Strengths –Build Platforms for Purchases and Sales

Customers can buy nationwide BOOKOFF merchandise at any

time and any place


Store

Sales

Online

Membership services

Number of annual store network customers

At least 100 million

(including repeat customer visits)

Number of Card Members

20 million people

Number of App Members

8 million people

Share of Internet sales

At least 20%

Share of Internet purchase applications

At least 10%

Purchases

BOOKOFF’s Strengths –The BOOKOFF Vision


Start of the Kaumaenique service

Operations started in November 2017

FY3/2018 4Q reuse item purchases at existing stores were

up 11.4%

from one year earlier

0

1

1

2

2

3

0

50

100

150

200

250

300

350

400

450

500

Apr. 2015 Oct. 2015 Apr. 2016 Oct. 2016 Apr. 2017 Oct. 2017

BOOKOFF Group YAHUOKU! Store

Sales

Number of Items

Number of items: More than 2 million Annual sales: Over ¥4 billion

Purchases Sales

An alliance-based service for both purchases and sales that is expected to contribute to growth

BOOKOFF’s Strengths –Business Alliance with Yahoo!

Welcome to Kaumaenique

YAHUOKU!


Medium-term Management Policies Financial Targets

Consolidated ordinary profit ¥0.0 billion

¥0.58 billion

¥1.09 billion

¥2.0 billion

ROA (Ratio of ordinary profit

to total assets)

FY3/2016 FY3/2017 FY3/2018

0.0% 1.2% 2.2% At least 5.0%

42.4 13.7 9.1 Maximum of 5.0 Interest-bearing debt-to-operating cash flow multiple

FY3/2021

Current financial targets looking ahead to FY3/2021, BOOKOFF’s 30th year


Establishment of a Pure Holding Company Structure

55

BOOKOFF CORPORATION LIMITED

Subsidiary Subsidiary Subsidiary

BOOKOFF CORPORATION LIMITED

Subsidiary Subsidiary Subsidiary

BOOKOFF GROUP HOLDINGS LIMITED

BOOKOFF plans to establish an organizational structure with a pure holding company on October 1, 2018 for the purpose of facilitating fast and flexible reorganizations of group business activities in response to changes in market conditions.

BOOKOFF plans to use the new organization for realigning business operations in the future whenever necessary

Now

From October 1, 2018


Reasons for the Shift to a Pure Holding Company

Creates more flexibility in order to realign the BOOKOFF Group’s business activities quickly as needed

Allows operating group businesses with emphasis on using capital efficiently and achieving business and corporate value growth by benefiting from the larger scale of the group’s operations


Outlook for FY3/2019


FY3/2019 Policies

58

■Basic Policies

• Achieve stable earnings in the Reuse Store Business

• Position for growth of the department store purchasing consultation desk business, which has been combined with the BOOKOFF Online Business

• Build a unified foundation for the entire chain of stores and provide outstanding services to accomplish the medium-term goals

Based on these policies, BOOKOFF expects growth in consolidated operating profit and profit attributable to owners of parent in FY3/2019


Outlook for FY3/2019 –Earnings and Dividends

59

(Million yen) FY3/2018

Results FY3/2019

Plan % to sales % to sales

YoY change (Amount)

YoY change (Ratio)

Net sales 80,049 100.0% 80,500 100.0% +450 100.5%


Ordinary profit 1,092 1.4% 1,200 1.5% +107 109.8%

Profit (loss) attributable to owners of parent

(889) - 200 0.2% +1,089 Profitable

Consolidated earnings forecast for FY3/2019

Dividend forecast for FY3/2019

¥10 per share as in FY3/2018


Assumptions for FY3/2019 Outlook

FY3/2018 Results FY3/2019 Plan

Existing-store sales vs. FY3/2018 96.5% 100.5%

New comprehensive large-format stores in Japan 3 stores 2 to 3 stores

Opening one-stop purchasing consultation desks 5 locations 5 to 10 locations

■Reuse Store Business

• Expect more improvements at existing stores mainly as the new regional sales department framework allows stores to sell merchandise that closely reflects regional markets and implements many measures for low-cost operations

• Capital expenditures of about ¥200 million for renovations and other upgrades at existing stores

• Expect an increase in existing store sales because of the previous two measures as well as an increase in stores that offer the new Kaumaenique purchasing service

• Capital expenditures for establishing a unified foundation for the entire store network, which is one of the medium-term policies

■ BOOKOFF Online Business

• Forecast a decline in profitability of books and software because of increases in delivery fees and other expenses in this business

• Earnings will be affected by expenses for the relocation and integration of distribution centers and by the time that will be needed to make department store one-stop purchasing consultation desks profitable

Note: HUGALL is no longer a reportable segment in FY3/2019 because it has been combined with the BOOKOFF Online Business.


Appendix


Consolidated Statement of Income

62

FY3/2017 FY3/2018

Net sales 81,344 80,049

Reuse Store Business 71,150 70,565

BOOKOFF Online Business 6,522 6,140

HUGALL Business 2,244 2,071

Others 1,426 1,272

Gross profit 47,179 46,994

SG&A expenses 47,063 46,381

Operating profit 116 613

Reuse Store Business 2,611 3,419

BOOKOFF Online Business 413 232

HUGALL Business (680) (897)

Others (124) (114)

Adjustment (corporate) (2,103) (2,026)

Ordinary profit 588 1,092

Profit (loss) attributable to owners of parent (1,159) (889)

(Million yen)


Consolidated Balance Sheet

63

As of Mar. 31, 2017

As of Mar. 31, 2018

Current assets 32,567 31,430

Cash and deposits

15,268 13,860

Merchandise 12,614 12,949

Others 4,684 4,620

Non-current assets 18,479 16,458

Property, plant and equipment

7,845 6,511

Intangible assets 1,421 1,303

Investments and other assets

9,213 8,643

Total assets 51,047 47,888

As of Mar. 31, 2017

As of Mar. 31, 2018

Current liabilities 16,636 24,750

Short-term loans payable

10,203 10,353

Bonds with share acquisition rights

0 7,700

Others 6,432 6,697

Non-current liabilities 20,168 9,830

Long-term loans payable 8,925 6,268

Long-term accounts payable-other

107 158

Bonds with share acquisition rights

7,700 0

Others 3,434 3,403

Total liabilities 36,804 34,580

Net assets 14,242 13,307

Total liabilities and net assets

51,047 47,888

(Million yen)


Consolidated Statement of Cash Flows

64

FY3/2017 FY3/2018

Cash flows from operating activities 1,965 2,668

Profit before income taxes (137) (98)

Depreciation (including amortization of goodwill) 2,139 1,895

Changes in assets and liabilities (468) 95

Others 431 774

Cash flows from investing activities (2,054) (940)

Cash flows from financing activities 224 (3,394)

Effect of exchange rate change on cash and cash equivalents

(3) 12

Net increase (decrease) in cash and cash equivalents 131 (1,653)

Cash and cash equivalents at beginning of period 15,127 15,268

Increase in cash and cash equivalents from newly consolidated subsidiary

9 245

Cash and cash equivalents at end of period 15,268 13,860

(Million yen)


BOOKOFF handles books, CDs, DVDs, game software, home appliances, mobile phones, and other items. BOOKOFF has more than 700 stores in Japan and overseas

BOOKOFF PLUS is a store complex chain that offers an extra ‘plus factor’ and deals in apparel, brand goods, and similar items. It has now developed into a chain with 55 stores across Japan.

BOOKOFF SUPER BAZAAR is a comprehensive large-format store chain that deals in broad range of reuse items. It has now developed into a chain with 41 stores nationwide.

Major Store Packages

* Number of stores as of March 31, 2018


Store Packaging Evolution

66

・Founding ・Sell us your books ・Franchised store growth

・Faster BOOKOFF store openings ・New reuse business B KIDS, B SPORTS ・BOOKOFF Chuko-Gekijo (a comprehensive large-format store) ・Overseas expansion ・Online business starts

・More BSB and BOP store openings and store remodeling ・Large-scale urban BOOKOFF store openings

Overseas Store

The 1st BOOKOFF store

Large-scale urban BOOKOFF store

BOOKOFF Chuko-Gekijo

Focus on suburban locations

1991 2000 2009

・Opening one-stop purchasing consultation desks at the urban stores

2016

One-stop purchasing consultation desk


High Level of Recognition

67

Yes 96%

Have you heard of

Yes 78%

store

*As of August 2016, survey by MACROMILL

is well known in Japan as a reuse shop that is nearby and easy to use.

?

Is there a

near your home?


Providing a place to experience “the fun of reusing”

From BOOKOFF for Books to BOOKOFF for All Reuse Items

68


Understand “the fun of reusing” and you can enjoy life even more!

From BOOKOFF for Books to BOOKOFF for All Reuse Items

69

Home appliances, mobile phones

Books

Apparel

Luxury-brand bags

Sporting goods, musical instrument

Children’s apparel, baby goods

Furniture

A chance to find a new interest or hobby!

Try choosing a writer you've never read before!

Read the whole of a comic book series in one go!

Be bold and take the challenge of wearing a new color or style you never worn before!

The fun of coordinating!

The fun of being able to buy without worrying about the price!

You can see all the things you can't see anywhere else all gathered together here in one place!

Choose brand goods for everyday use!

The fun of collecting brands!

Buy furniture at reasonable prices!

Reuse furniture has an appeal new products cannot offer

You can buy furniture at affordable prices and select items with a texture and seasoned appearance that brand new furniture cannot match.

Go on, this is your chance to pursue nostalgic sports or to grab a musical instrument you've always wanted!

The surfing and golf goods, the guitar you’ve wanted for so long… perhaps you can't afford it new but you can get it for reuse at a very reasonable price, and you can make a start right now without worrying if you just remember that “if I don't keep it up I can always sell it.”

The blossoming of your children's talents

You've seen snowboarding, tennis, and golf genius boys and girls on TV, haven't you? It might be tough to buy a full set all in one go, but if it's reuse you can give your child the support to pursue the challenge of a new talent without having to worry about the cost.

Baby goods - they soon grow out of them which is all the more reason to get them for reuse!

Children grow so quickly, and the baby carriage you bought for them so lovingly soon falls out of use. At times like these, please buy your items reuse and carefree, and then just sell them again when you’ve finished with them.

Nowadays, for home appliance items, the functionality of reuse is completely satisfactory!

If you set out to buy all of your important home appliances in one go, it's going to amount to a very expensive bill for you to pay. These days however, you can easily buy great quality reuse products with high-level functions and excellent reliability so cheaply!


Employee Training and Development

70

People are a vital element of the BOOKOFF Group’s growth. We believe that developing “human assets” with intelligence and solid character will contribute directly to the Group’s growth.

The BOOKOFF Career Path Plan program has been established in order to refine the skills of people, the most valuable asset of the BOOKOFF Group. By clearly defining the roles and challenges for progressing from one grade to another, this program shows employees what they need to learn in order to advance their careers.

Trainee

Challenger C

Challenger B

Challenger A

Trainer

Manager

Required skills

Independent work following instructions

Independent work without instructions

A model for other employees

Qualified as a trainer

Store and other management knowledge

Store and other management capability

Assistant manager

Hourly wage rises with each step

Career advancement


Activities for Diversity -Creating a Pleasant Workplace Environment-

71

Employees are the BOOKOFF Group’s most valuable asset. Developing “human assets” with intelligence and solid character will contribute directly to the Group’s growth. We are dedicated to maintaining workplace environments where all employees, regardless of gender, can fully utilize their skills. This includes a commitment to providing opportunities for people to upgrade their skills and accomplish their goals. A dialogue between senior executives and female employees resulted in improvements to a variety of programs centered on the “Project for Creating a Pleasant Working Place,” which was created in 2012.

Job site selection

Coordinated husband-wife transfers

Re-hiring system

Refreshment time off

Pregnancy and child care leave

Child care leave

Reduced working hours Nursing care time off

Job site selection for elderly parent care

Elderly parent care short or extended time off

Since October 2014, employees have had the option of requesting a job in a particular region of Japan. At first, employees could select the Tokyo area (Tokyo, Kanagawa, Chiba and Saitama), Chukyo area or Keihanshin area (Kyoto, Osaka and Hyogo). Now, this program has been expanded to include other major cities and regions.

In the past, married couples working at the BOOKOFF Group were unable to live together at times due to a transfer of one person. To end this problem, the Group has established a program that allows the other spouse to be relocated to a store near the husband or wife who was initially transferred.


Activities for Diversity -Employing Persons with Disabilities-

72

B-Assist, Inc. 主な業務

• Processing BOOKOFF Group merchandise, store maintenance, merchandise stocking and sales, production of point-of-purchase marketing materials

• Picking, shipments, and data erasure for mobile phones, tablets and other devices at distribution centers

The BOOKOFF Group is dedicated to providing jobs for people with disabilities. For these people with a desire and ability to work, we provide real employment opportunities, and the necessary workplace environment, rather than simply so-called welfare positions. We want these people to be active and self-reliant members of society. To provide these jobs, we established B-Assist in October 2010. The company was designed a special subsidiary the following December based on the Act on Employment Promotion etc. of Persons with Disabilities. At the end of March 2018, BOOKOFF Group employed 149 people (3.42% of the entire workforce) who have disabilities. This includes four individuals with physical disabilities, 136 with intellectual disabilities and 9 with mental health disabilities.

Omiya Office (established in Sep. 2015)

Higashi Chiba Office (established in Apr. 2014)

Kawasaki Office (established in Apr. 2013)

Offices Main Activities

Machida Office (established in Feb. 2013)

Seya Office (established in Oct. 2011)


About BOOKOFF

73

Name BOOKOFF CORPORATION LIMITED

Representative Yasutaka Horiuchi, President and CEO

Established August 1991

Head office 2-14-20 Kobuchi, Minami-ku, Sagamihara, Kanagawa, Japan

Capital ¥3,652 million

Business activities

Operation of comprehensive reuse business that handles books, packaged media, apparel and other items

Group companies

12 subsidiaries, 1 affiliated company

Stores 825 (including 439 FC stores)

Employees 1,279

Stock listing First Section, Tokyo Stock Exchange (Securities code: 3313)

Trading unit 100 shares

Be a source of enjoyable and enriching lives for as many people

as possible

Contributions to society through our business activities

Pursuit of employees’ material and spiritual wellbeing

Corporate Profile Corporate Philosophy

Mission

As of March 31, 2018

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