Adastria : FY2024/02 Full Term Presentation Material

FY2024/02

Financial Results

April 04, 2024

Table of Contents

１．FY 2024/02 Overview

• Summary of FY 2024/02	4
• FY2025/02 is preparation of the next challenge	5
２．FY2024/02 Financial Results and
	FY2025/02 Forecast
• Summary of FY 2024/02	7
• Consolidated Income Statement Summary	9
• Adastria and Major Domestic Subsidiaries Income	11
	Statement
•	Online Business	（	）	12
	Domestic
•	Overseas Business	13
•	Consolidated Balance Sheet	14
•	Number of Stores		15
•	FY 2025/02 Consolidated Forecast	16
•	Investment Plan		18
•	Return to Shareholders	19
• Market Interests and Our Approach	20
• Making zetton, inc. a Wholly Owned Subsidiary	21
FY2024/02

３．Medium-Term Management Plan Progress

• Revision of Medium-term Management Plan	23
•	Medium-term Management Plan (Re-posting)	24
•	Growth Strategy Ⅰ :	25
	Multi-Brand,Multi-Category
•	Growth Strategy Ⅱ:	28
	Digital Customer Interactions and Services
•	Growth Strategy Ⅲ:	30
	Glocal
•	Growth Strategy Ⅳ:	32
	New Profit-center Business Models
•	Policy for M&A	33
• Management conscious of cost of capital and	34
	stock price
•	Sustainability Initiatives	36
• Progress with Numerical Goals	38

2

１．FY2024/02 Overview

Representative Director and Chairman Michio Fukuda

3

Summary of FY2024/02

Results

Background

FY2024/02

Generated record-high consolidated sales and operating profit in Adastria's 70th anniversary year, and were able to increase salaries and make digital technology investments.

Operations structured to supply merchandise at the right times, prices and volumes gave Adastria the strengths to overcome challenges created by a warm winter, the yen's weakness and other events.

The stock price rose 57.4% during the fiscal year as sales and earnings increased.

Growth was supported by the benefits of the establishment of a SPA (specialty store retailer of private label apparel) business model, which

started in 2010 as the "Fourth Change" as well as by faster growth of the

EC business during the pandemic.

Merchandise with more added value and more powerful brands made it possible to sell items at higher prices.

4

FY2025/02 is preparation of the next challenge

• Achieved the current medium-term management plan (ending in FY2026/02) ROE goal in FY2024/02, two years early, and expect to surpass the sales goal in FY2025/02, one year early.
• Continuing measures to reach the operating profit goal while making investments for more progress in the following years.
• Planning on more progress with B-to-Boperations and M&A by building even stronger ties with other companies and customers with the goal of creating a
  "good community."
• To accomplish these goals, investments in people will continue. The plan is to raise salaries again in FY2025/02, aiming for an average of at least 6% higher, which will result in a salary increase of more than 12% with the increase of about 6% in FY2024/02.
• The goal is the long-term growth of sales and earnings and of shareholder value.

FY2024/02

5

２．FY2024/02 Financial Results and

FY2025/02 Forecast

Managing Director Masayuki Kindo

6

Summary of FY 2024/02

⚫ Adastria(Non-consolidated) Monthly Sales All Stores YoY

116.0%	117.4%
117.1%	115.2%

Net sales	Physical Stores	E-commerce webC
		127.5%

121.5%

120.6%

116.3%

116.9%	113.6%
112.6%	113.2%

112.6%	117.6%
	109.4%
108.3%

112.8%

111.6%

102.4%

112.6%

106.0%

107.5%

106.1%107.0%

114.2%	111.4%
	110.9%
110.3%	110.7%

101.8%

102.0%

99.6%

102.2%

100.7%

98.7%

March	April	May	June	July	August	September October November	December January February
	1Q			2Q		3Q		4Q
Net sales:		114.4%	Net sales:		114.5%	Net sales:	105.1%	Net sales:	107.5%
Physical stores:	115.4%	Physical stores:	115.5%	Physical stores:	104.1%	Physical stores:	109.2%
EC:		111.2%	EC:		111.3%	EC:	108.2%	EC:	113.5%

• Demand involving outings continued to increase after the pandemic ended
• TV commercials for GLOBAL WORK
• Strong sales of summer merchandise due to many outings during the Golden Week period in May and favorable weather
• Sales per customer increased by price revisions and executing merchandise strategies that target customers' needs

• Sales of summer merchandise remained strong due to a summer sale, warm weather and many very hot days
• Due to favorable weather, more customers at stores because many people went on outings during the summer vacation period
• Sales per customer increased more as measures to hold down excessive discounting of merchandise continued
• Use of coupons in the EC sector was below the prior-year level.

• Record heat in September pushed back the start of demand for autumn merchandise
• Promotions linking EC and physical stores; held a Dot-ST Festival
• Knitted apparel sales drove sales as temperatures were low later in the quarter

• Slow sales of winter merchandise because of warm weather until the middle of December
• Brisk sales because of a winter sale and a recovery in demand for apparel for outings during the Christmas and year-end period
• Strong sales of spring merchandise as sales began earlier than usual
• Strong sales of spring merchandise continued in February due to demand associated with new life styles and to warm weather

FY2024/02

7

Consolidated Income Statement

Millions of yen

FY2023/02 Results

Ratio

FY2024/02 Results

Ratio

YoY

Net sales	242,552	100.0%	275,596	100.0%	113.6%
	Adastria(Non-consolidated	196,727	81.1%	220,078	79.9%	111.9%
	Domestic subsidiaries *1*2	22,332	9.2%	24,007	8.7%	107.5%
	Overseas subsidiaries *3	18,017	7.4%	23,396	8.5%	129.8%
	Zetton (Food & Beverage Subsidiary) *4	9,040	3.7%	12,570	4.6%	139.0%
Gross profit	132,664	54.7%	152,354	55.3%	114.8%
SG&A expenses	121,149	49.9%	134,339	48.7%	110.9%
	Advertising & promotion	8,037	3.3%	8,712	3.2%	108.4%
	Personnel	43,076	17.8%	48,333	17.5%	112.2%
	Rent & depreciation *5	43,810	18.1%	47,785	17.3%	109.1%
	Amortization of goodwill	263	0.1%	223	0.1%	84.8%
	Others	25,961	10.7%	29,284	10.6%	112.8%
Operating profit	11,515	4.7%	18,015	6.5%	156.4%
	Adastria(Non-consolidated	10,384	4.3%	16,346	5.9%	157.4%
	Domestic subsidiaries *1*2	178	0.1%	236	0.1%	132.8%
	Overseas subsidiaries *3	524	0.2%	1,123	0.4%	214.2%
	Adastria Logistics	94	0.0%	88	0.0%	93.4%
	Zetton (Food & Beverage Subsidiary) *4	285	0.1%	179	0.1%	62.7%
Ordinary profit	12,026	5.0%	18,389	6.7%	152.9%
Net income attributable to owners of the parent	7,540	3.1%	13,513	4.9%	179.2%
EBITDA	19,964	8.2%	27,763	10.1%	139.1%
	Depreciation and amortization	8,185	3.4%	9,525	3.5%	116.4%
	Amortization of goodwill	263	0.1%	223	0.1%	84.8%
Capital expenditure	12,600		11,807

*1：Domestic subsidiaries are the sum of f our domestic subsidiaries: BUZZWIT Co., Ltd., ELEMENT RULE Co., Ltd., Adastria eat Creations Co., Ltd., ADOORLINK Co., Ltd., Gate Win Co., Ltd.

*2：Due to change in financial year, Feb-Feb (FY2023/02) and Mar-Feb (FY2024/02)

*3：Overseas subsidiaries are the sum of overseas subsidiaries: Hong Kong, Mainland China, Taiwan, Thailand, USA.(Period Jan. to Dec.2023)

*4：Operating profit of zetton, inc. is shown after consolidation adjustments. Due to change in financial year, Mar-Jan (FY2023/02) and Feb-Jan(FY2024/02)

*5：Rent & depreciation costs are the sum of Rent expenses, Lease expenses and Depreciation.

FY2024/02

8

Consolidated Income Statement Summery(1)

Summary

Net sales

Parent company

Record-high sales and earnings because of a favorable business climate and measures including products with more added value and price revisions

275.5 billion yen (+13.6% YoY)

• Up 11.9% because of actions to reflect climate change, more added value and price revisions.
• Major sources of growth were GLOBAL WORK and niko and…, which are the core brands, and LAKOLE, which is a growth brand.

Domestic subsidiaries	• Up 7.5%, but sales increased 14.4% after excluding the effect of the fiscal year change in the previous fiscal year.
			• Sales at EC company BUZZWIT increased because of higher sales of a children's apparel brand acquired in FY2023/02
			and sales generated by new brands.
Overseas subsidiaries	• Up 29.8% due to a recovery following the end of lockdowns in China in the previous fiscal year and sales at new
			stores.
Food and beverage business	• Up 39.0% but sales increased 32% after excluding the effect of the fiscal year change in the previous fiscal year.
	55.3% (+0.6p YoY)
Gross profit margin

• A revision to the loyalty point program temporarily raised the gross profit margin by 0.1 percentage points (700 million yen) and the end of expenses incurred in FY2023/02 for the unauthorized access incident raised the margin by 0.5 percentage points.
• The negative effect of the yen's depreciation was offset by price increases and a decline in discounting merchandise. There was no change in the actual gross profit margin due to an improvement in ASEAN region production and overseas business.

*BUZZWIT Co., Ltd., ELEMENT RULE Co., Ltd., Adastria eat Creations Co., Ltd., ADOORLINK Co., Ltd., Gate Win Co., Ltd. and zetton, inc. changed their fiscal year end in FY2023/02.

*comparisons are Feb-Feb (FY2023/02) and Mar-Feb (FY2024/02) for all of these companies except zetton and Mar-Jun (FY2023/02) and Feb-Jun (FY2024/02) for zetton.

*OPEN AND NATURAL Inc. was absorbed by BUZZWIT Co., Ltd. on July 1, 2023

FY2024/02

9

Consolidated Income Statement Summery(2)

	48.7% (-1.2p YoY) Decreased because sales growth reduced all expense categories as a pct. of sales
SG&A expense ratio
Advertising & promotions ・ 3.2% (-0.1pYoY) (+670 million yen)
	More product promotions and actions for higher consumer awareness of the Dot-ST EC website
Personnel	・ 17.5% (-0.3p YoY) (+5,260 million yen)

Higher salaries, more recruiting activities due to the labor shortage, more working hours and an increase in bonus payments due to sales growth

Rent & depreciation ・ 17.3% (-0.8p YoY) (+3,970 million yen)

The variable portion of rent increased because of sales growth

Others

・ 10.6% (-0.1p YoY) (+3,320 million yen)

Increases in credit card fees, outsourcing expenses and delivery expenses, all due to sales growth

Operating profit 18.0 billion yen (+56.4% YoY)

Operating income ratio 6.5%, EBITDA margin 10.1% Change in fiscal year of subsidiaries in Japan +120 million yen, Temporary security deposit amortization -500 million yen

Ordinary profit 18.3 billion yen (+6,360 million yen YoY)

Non-operating income: Foreign exchange gains of 200 million yen, insurance fee income of 100 million yen

Net income

attributable to

owners of the parent

13.5 billion yen (+5,970 million yen YoY)

Extraordinary losses: Impairment loss on stores -1,000 million yen, loss (gain) on valuation of investment securities -200 million yen

Income taxes: Increase in deferred tax asset at U.S. subsidiary +1,300 million yen

*BUZZWIT Co., Ltd., ELEMENT RULE Co., Ltd., Adastria eat Creations Co., Ltd., ADOORLINK Co., Ltd., Gate Win Co., Ltd. and zetton, inc. changed their fiscal year end in FY2023/02. *comparisons are Feb-Feb (FY2023/02) and Mar-Feb (FY2024/02) for all of these companies except zetton and Mar-Jun (FY2023/02) and Feb-Jun (FY2024/02) for zetton.

*OPEN AND NATURAL Inc. was absorbed by BUZZWIT Co., Ltd. on July 1, 2023

FY2024/02

10