ASKUL : Consolidated Financial Results for the Nine Months Ended February 20, 2022

Consolidated Financial Results for the Nine Months Ended February 20, 2022

[Japanese GAAP]*

March 15, 2022

Company name:ASKUL Corporation Stock exchange listing: Tokyo Code number: 2678

URL:https://www.askul.co.jp/kaisya/ir/ Representative: Akira Yoshioka Contact: Tsuguhiro Tamai Phone: [phone]

President and chief executive officer Executive officer and chief financial officerScheduled date of filing quarterly securities report: March 25, 2022 Scheduled date of commencing dividend payments: -

Availability of supplementary briefing material on quarterly financial results: Yes

Schedule of quarterly financial results briefing session: Yes (for institutional investors and analysts)

(Amounts of less than one million yen are rounded down)

1. Consolidated Financial Results for the Nine Months Ended February 20, 2022 (May 21, 2021 to February 20, 2022)

(1) Consolidated Operating Results

(% indicates changes from the previous corresponding period.)

Net sales	Operating profit	Ordinary profit	Profit attributable to owners of parent
Nine months ended February 20, 2022 February 20, 2021	Million yen 317,994 313,003	% 1.6 4.5	Million yen 10,637 10,286	% 3.4 62.3	Million yen 10,646 10,236	% 4.0 63.8	Million yen 7,131 6,150	% 15.9 49.4

(Note) Comprehensive income:	Nine months ended February 20, 2022:	¥7,198 million	[17.3%]
Nine months ended February 20, 2021:	¥6,135 million	[48.9%]

Basic earnings per share	Diluted earnings per share
Nine months ended February 20, 2022 February 20, 2021	Yen 69.72 60.16	Yen 69.65 60.03

(Notes)

• 1 The Group has applied "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29, March 31, 2020), etc., effective the beginning of the current period. Accordingly, the above figures for the nine months ended February 20, 2022 indicates the amounts after the application of the said accounting standard, etc. When calculating the figures for the nine months ended February 20, 2021 in accordance with the same Accounting Standard, change ratio of net sales would be 2.9%.

• 2 ASKUL Corporation conducted a 2-for-1 stock split of common stock on May 21, 2021. "Basic earnings per share" and "Diluted earnings per share" are calculated on the assumption that the said stock split was implemented at the beginning of the preceding fiscal year.

(2) Consolidated Financial Position

Total assets	Net assets	Capital adequacy ratio
As of February 20, 2022 May 20, 2021	Million yen 195,547 190,107	Million yen 58,808 59,203	% 29.8 30.9

(Reference) Equity: As of February 20, 2022: ¥58,317 million

As of May 20, 2021: ¥58,777 Million

(Note) The Group has applied "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29, March 31, 2020),

etc., effective the beginning of the current period. Accordingly, the above figures as of February 20, 2022 indicates the amounts after the application of the said accounting standard, etc.

2. Dividends

Annual dividends
1st quarter-end	2nd quarter-end	3rd quarter-end	Year-end	Total
Fiscal year ended May 20, 2021 Fiscal year ending May 20, 2022	Yen - -	Yen 19.00 15.00	Yen - -	Yen 30.00	Yen 49.00
Fiscal year ending May 20, 2022(Forecast)	15.00	30.00

(Notes) 1 Revision to the forecast for dividends announced most recently: No

2 ASKUL Corporation conducted a 2-for-1 stock split of common stock on May 21, 2021. The actual amounts of dividends before the said stock split are described for the fiscal year ended May 2021.

3. Consolidated Financial Results Forecast for the Fiscal Year Ending May 20, 2022(May 21, 2021 to May 20, 2022)

(% indicates changes from the previous corresponding period.)

Net sales	Operating profit	Ordinary profit	Profit attributable to owners of parent	Basic earnings per share
Full year	Million yen 430,000	% 1.9	Million yen 14,000	% 0.5	Million yen 13,900	% 0.4	Million yen 9,000	% 16.0	Yen 87.82

Basic earnings

(Note)Revision to the financial results forecast announced most recently: No

* Notes:

• (1) Changes in significant subsidiaries during the nine months ended February 20, 2022 (changes in specified subsidiaries resulting in changes in scope of consolidation):No

• (2) Accounting policies adopted specially for the preparation of quarterly consolidated financial statements:No

• (3) Changes in accounting policies, changes in accounting estimates and retrospective restatement

  • 1) Changes in accounting policies due to the revision of accounting standards: Yes

  • 2) Changes in accounting policies other than 1) above: No

  • 3) Changes in accounting estimates: No

  • 4) Retrospective restatement: No

• (4) Total number of issued shares (common shares)

  1) Total number of issued shares at the end of the period (including treasury shares):

February 20, 2022:

May 20, 2021:

102,518,800 shares 102,518,800 shares

2) Total number of treasury shares at the end of the period:February 20, 2022:

May 20, 2021:

2,874,339 shares 41,874 shares

3) Average number of shares during the period:

Nine months ended February 20, 2022: Nine months ended February 20, 2021:

102,288,436 shares 102,246,974 shares

(Note)ASKUL Corporation conducted a 2-for-1 stock split of common stock on May 21, 2021. "Total number of issued shares," "Total number of treasury shares," and "Average number of shares during the period" are calculated on the assumption that the said stock split was implemented at the beginning of the preceding fiscal year.

* This Summary of Consolidated Financial Results is not subject to quarterly review.

* Notes for using forecasted information and others

Earnings forecasts and other forward-looking statements contained in this document are based on the information ASKUL has obtained to date and on certain assumptions it considers reasonable. As such, these forecasts and statements are not intended as a commitment by the Company to achieve them. Note also that actual results and other future events may differ materially from these forecasts and statements due to a variety of factors. For the assumptions on which earnings forecasts are based and notes and information on the use of earnings forecasts, see "1. Qualitative Information on Financial Results (3) Explanation of Consolidated Forecasts and Other Forward-Looking Information" on Page 4 of Attached Materials.

 Table of Contents for Attached Materials

1. Qualitative Information on Financial Results ..................................................................................................................... 2

(1) Explanation of Operating Results ................................................................................................................................. 2

(2) Explanation of Financial Position .................................................................................................................................. 4

(3) Explanation of Consolidated Forecasts and Other Forward-Looking Information ......................................................... 4

2. Quarterly Consolidated Financial Statements ................................................................................................................... 5

(1) Quarterly Consolidated Balance Sheets ....................................................................................................................... 5

(2) Quarterly Consolidated Statements of Income and Comprehensive Income ............................................................... 7

(3) Notes to Quarterly Consolidated Financial Statements ................................................................................................ 9

(Notes to Going Concern Assumption) ........................................................................................................................... 9

(Notes to Significant Changes in Shareholders' Equity) ................................................................................................. 9

(Change in Accounting Policies) ..................................................................................................................................... 9

(Segment Information, etc.) .......................................................................................................................................... 10

3. Others .............................................................................................................................................................................. 11

Details of Selling, General and Administrative Expenses (Consolidated) ...................................................................... 11

1. Qualitative Information on Financial Results

(1) Explanation of Operating Results

During the first nine months of the fiscal year under review (from May 21, 2021 to February 20, 2022), Japan saw signs of economic recovery in some fields as states of emergency and other measures, taken intermittently in the face of COVID-19, were completely lifted at the end of September 2021. However, the outlook for the Japanese economy remains uncertain partly due to the rapid spread of a new variant from the beginning of the new year.

The e-commerce market, in which the Group operates, keeps growing as it is strongly hoped that the market will play the role of allowing shopping activities where there is reduced contact among people with new lifestyles, which has been necessitated by the spread of COVID-19. On the other hand, competition in the industry for better service quality has continued. As a result, it has become a business management issue to realize sustainable growth in sales and profits while accommodating diverse customer demands.

Under such circumstances, the Group positions the fiscal year ending May 20, 2022 as the time to cement the foothold to fulfil the Medium-term Management Plan (from the fiscal year ending May 20, 2022 to the fiscal year ending May 20, 2025). To this end, the Group has actively made capital investments while securing operating profit. The B-to-B business in the mainstay e-commerce business has pushed forward with measures such as the expansion of the number of products handled and the establishment of a new website. Regarding the new website that will be a driver of high growth in the Medium-term Management Plan, the Group has decided to make an additional investment of 4,500 million yen (Note 1) due to an increase in man-hours resulting from an addition of developmental volume and other factors which was not anticipated initially, and the considerable reinforcement of a development structure that ensures the reliable release. The B-to-C business has been engaged in improving its earnings to ensure that LOHACO starts generating operating profit in the fiscal year ending May 20, 2023 and subsequently, continues growth.

In the first nine months of the fiscal year under review, the B-to-B business saw a net sales increase due to growth in sales of living supplies and MRO (Note 2), which are growth fields, despite a decline in special demand for infection-prevention products. On the other hand, the B-to-B business suffered a profit decrease due to a drop in the gross profit margin resulting from the fall in special demand and the incurring of rents prior to the operational start of ASKUL Tokyo DC, although the result was in line with the initial plan set at the start of the fiscal year. In the B-to-C business, net sales increased due to strengthened promotional collaboration mainly with the Z Holdings Group, and the effort to improve earnings has made steady progress thanks to a reduction in fixed costs accompanying the renewal of LOHACO Main Store in addition to an improvement in the variable cost ratio (real value excluding the effects of adopting "Accounting Standard for Revenue Recognition" etc.).

In the Logistics business, earnings improved significantly in part due to the expansion of the contract business of logistics, and achieved a shift from an operating loss to an operating profit in the third quarter of the fiscal year under review (for three months).

As a result, the financial performance of the Group for the first nine months of the fiscal year under review was net sales of 317,994 million yen, a 1.6% increase year on year and a 2.9% increase year on year in real terms (Note 3), operating profit of 10,637 million yen, a 3.4% increase year on year, ordinary profit of 10,646 million yen, up 4.0% year on year, and profit attributable to owners of parent of 7,131 million yen, a 15.9% increase year on year. They each reached record highs for the first nine months of a fiscal year.

The Group has applied the "Accounting Standard for Revenue Recognition" (Accounting Standards Board of Japan (ASBJ) Statement No. 29, March 31, 2020; hereinafter referred to as the "Accounting Standard for Revenue Recognition,") etc. since the beginning of the first quarter of the current fiscal year. Accordingly, net sales for the first nine months of the fiscal year under review decreased 4,144 million yen.

Operating results by segment are outlined below.

In the B-to-B business, the mainstay business of the Group, net sales remained solid. Net sales in the first nine months of the fiscal year under review increased as sales grew in living supplies, such as beverages consumed in diverse workplaces; MRO products, such as packing materials, whose demand rose due to increasing demand for e-commerce; and long tail products whose lineups are reinforced as a key effort although special demand for products to combat COVID-19, such as hand sanitizers and face masks, declined.

With the customer base too on an expanding trend, the Group strives to add specialized products required by each area of medical care and nursing care, and manufacturing, in particular, that the Group focuses on strategically, thereby ensuring that customers continue to use the Group's services.

As a result, net sales in the B-to-B business grew by 1,968 million yen from a year earlier to 258,287 million yen, a

0.8% increase year on year and up 2.0% year on year in real terms.

The B-to-C business relocated LOHACO Main Store to the system infrastructure that Yahoo Japan Corporation provided and renewed and opened a New Main Store in June 2021. By utilizing the Z Holdings Group's infrastructure, including the capacity to attract customers, site platforms, and payment systems, the Group will expand its customers and reduce costs. At the same time, it will further concentrate management resources on its strengths, which are original products, logistics and communication with customers, thereby boosting further growth. During the first nine months of the fiscal year under review, the functions of the renewed LOHACO Main Store were improved continuously, and simultaneously, large-scale sales promotions were carried out in coordination with SoftBank Corporation and Yahoo Japan Corporation.

As a result, LOHACO sales increased 1,415 million yen from a year earlier to 40,250 million yen, up 3.6% year on year and a 5.3% increase year on year in real terms. Consequently, net sales of the B-to-C business in total rose 1,762 million yen from a year earlier to 52,652 million yen, a 3.5% increase year on year and up 5.0% year on year in real terms.

As a result, net sales of the e-commerce business, combining the two businesses above, stood at 310,939 million yen, a 1.2% increase year on year and up 2.5% year on year in real terms. Gross profit-net stood at 76,913 million yen, down 0.8% year on year and a 0.2% increase year on year in real terms, as the gross profit margin fell 0.5 points year on year (a decrease of 0.6 points year on year in real terms), caused by lower sales of products with high profit ratios, including infection-prevention products.

Operating profit was 10,664 million yen, a 5.0% decrease year on year, as the ratio of selling, general and administrative expenses to net sales declined by 0.3 points year on year, a decrease of 0.3 points year on year in real terms, resulting in selling, general and administrative expenses standing at 66,248 million yen. The decrease in the expenses was mainly due to reduced fixed costs accompanying the renewal of LOHACO Main Store, and improvements in the logistics costs of LOHACO and Charm, a consolidated subsidiary, and a decrease in provision for term-end performance-linked bonuses and others. As a result of the application of the Accounting Standard of Revenue Recognition, etc., net sales decreased 4,144 million yen.

Net sales increased due to an expansion of the contracted business of logistics that ASKUL LOGIST Co., Ltd. received from outside the Group. In the first nine months of the fiscal year under review, the operating profit and loss situation improved significantly year on year because of the reduced burden of expenses, such as rent for a distribution center in connection with the preparation period for the contracted business of logistics. Consequently, the Logistic business achieved a shift from an operating loss to an operating profit in the third quarter of the fiscal year under review (for three months).

As a result, net sales in the first nine months of the fiscal year under review were 6,473 million yen, a 23.0% increase year on year, and operating loss was 43 million yen as opposed to an operating loss of 974 million yen a year earlier. There are no effects from the application of the Accounting Standard for Revenue Recognition, etc.

Tsumagoimeisui Corporation increased net sales due to strong sales of its bottled water, including LOHACO.

The new production line, which had been under construction, was completed in November 2021 and commenced operation. With this, the Corporation intends to accelerate future sales growth. On the other hand, while net sales grew, profit declined for the first nine months of the fiscal year under review mainly due to a decline in gross profit margin as the production volume of the plant as a whole failed to reached the planned number in the third quarter of the fiscal year under review (for three months), partly because the new production line had just started operation.

As a result, net sales for the first nine months of the fiscal year under review were 1,075 million yen, a 7.3% increase year on year, and operating profit was 33 million yen, down 54.4% year on year. There are no effects from the application of the Accounting Standard for Revenue Recognition, etc.

(Notes) 1. The estimated total amount of investment including additional investment is 10,500 million yen. The additional investments will be absorbed as much as possible in the overall budget of the Medium-term Management Plan.

• 2. MRO is an acronym for Maintenance, Repair and Operations, and the term "MRO supplies" denotes indirect materials including consumables and repair supplies for use at factories, construction sites, and warehouses and others.

• 3. A year-on-year comparison assuming that the Accounting Standard for Revenue Recognition, etc. have been applied since the fiscal year ended May 20, 2021.