Izumi : Annual Report 2021

			ANNUAL REPORT 2021
			From March 1st, 2020 to February 28th, 2021
IZUMI CO., LTD.	IZUMI CO., LTD.
3-3-1 Futabanosato, Higashi-ku, Hiroshima, 732-8555, Japan
https://www.izumi.co.jp/corp/e_ir/

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NEW MANAGEMENT PHILOSOPHY

New Management Philosophy

Filling our employees with pride and joy as we continue contributing to communities and our customers'lives

Forming more intimate relationships with each local customer

As the declining birthrate and aging population trends continue, the number of elderly and single-person households has been growing, particularly in rural areas. Additionally, the utilization of AI and the IoT has accelerated amid the COVID-19 pandemic. Given the dramatic changes occurring in consumer behavior and consciousness, as well as social and economic structures, we at the Izumi Group are facing a transformation of our own.

In our new management philosophy announced in March 2021, we clearly stated our goal of becoming a 100-year-old company while maintaining our passion for supporting local communities and satisfying our customers that we have cherished since our founding 60 years ago. Going forward, we will promote responses tailored to the actual conditions in cities and towns in addition to the larger framework of the Chugoku, Shikoku, and Kyushu regions. We will also strengthen measures to form more intimate relationships with individual customers while utilizing digital technology. Further, we will make efforts to create an environment in which all employees can take pride in their work, and we will improve our corporate value in every aspect.

C O N T E N T S

Izumi Group Philosophy System

Izumi's DNA Innovation Challenge

Speed

Code of Conduct

■ 1 To be committed to customer service

Code of Conduct ■ 2 To create a company that is worth the challenge for all employees

			■
3	Always aim for better results and strive
Code of Behavior				towards such goals
		Code of Behavior

New Management Philosophy	2
History "Challenges of Izumi"	4
Strengths of Izumi	6
Izumi's business model	8
Message from the president	10
Second Medium-Term Management Plan	14
Answering market questions	18

Vision

"Contribute to a more prosperous life through commerce with a motto of gratitude and trust"

Four Dreams

1	Making customers' lives	3	Working together with
■	more comfortable	■	tenants for further

Management

Philosophy

Vision

Four Dreams

Purpose of Code of Behavior

Izumi will promote and practice management that responds to change, challenges and is speedy, while aiming for future growth and advances. To do so, it is Izumi's mission to fulfill its social responsibilities by conducting corporate activities with the themes of dream creation and being community-focused to become the center of local lifestyle and culture, and opening new stores.

In order to complete Izumi's mission, we must conduct business activities after establishing corporate ethics based on the Izumi Group Charter of Conduct. In addition, each of us aims to be sincere people who can determine "what must not be done as human beings."

Management Philosophy (formulated in 2021)

Store networks/Main business platforms	20
Operating results by segment	22
ESG management/ESG Action	24
Corporate governance	28
List of executives	32
Eleven-Year Summary	34
Management analysis of the fiscal year	36
under review
Main consolidated financial indicators	38

2	Providing a positive economic		development
■	impact on local communities	4	Providing employees with a sense of
	and make them more lively	■	worth that leads to their personal growth

Filling our employees with pride and joy as we continue contributing to communities and our customers' lives

Company summary and stock	43
information

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HISTORY "CHALLENGES OF IZUMI"

Fiscal year ending February 2022: ¥721.400 billion (forecast)

60 years of generating new value:							Fiscal year ended
						February 2021:
						¥679.778
Achieving further growth with
							billion
local communities											Fiscal year ended
														February 2020:
	It has been 60 years since Izumi opened its rst supermarket in the Chugoku and Shikoku regions in 1961.						¥744.349
						billion
	Filled with the passionate desire to make our customers happy and grow alongside communities,
	we have undertaken the challenge of creating stores and pursuing local development rooted in communities.
	We will continue striving to generate new value in response to the changing times while lending our full support to
	the dreams of our stakeholders, and we will channel these eorts into further growth.
	＝Izumi Group operating revenue *Revenues until FY1996 are non-consolidated
1961 1950 1946	1967	1970	1973	1974	1975	1977	1978	1980	1985	1986	1987	1990	1993	1995	1997	1998	2000	2003	2006	2008	2010	2011	2012	2013	2015	2016	2017	2018	2019	2020	2021
Prior to	Early times after founding			Growing years						Developing						Innovative years
founding								years

1946		The founder, Yoshimasa Yamanishi, opens a stall
		outside Hiroshima Station.
1950		Apparel wholesaler Yamanishi K.K. is established.
1961		Izumi Co., Ltd. is established. The rst Izumi
		supermarket is opened in Hatchobori.

1946 Constitution of Japan takes eect.

1955 High economic growth starts.

1956 Japan's U.N. membership is approved by the U.N. General Assembly.

1958 Construction of the Tokyo Tower is completed.

1960 Color TV broadcasting begins.

1964 Tokyo Olympic Games are held.

1966 New Three Sacred Treasures

1975		The Izumi Association is established
		to deepen exchanges with business
		partners.
1977		Izumi joins the Japan Chain Stores
		Association.
1978		The Company's stock is listed on the
		Second Section of the Osaka Securities
		Exchange and on the Hiroshima
		Securities Exchange.

1975	Hiroshima Toyo Carp wins their rst league
	championship.
1976	Hokaben lunch box shop opens.
1978	New Tokyo International Airport opens.
1979	The second oil crisis.

1990		Youme Town Takahashi and Higashihiroshima	1990	East and West Germany unies.
		open. The Youme Town format shop is
		established with the collaboration of local
		government and citizens as a shopping center	1991	Bubble economy collapses,
		energizing the community.
				Heisei era recession.
1993		Yasuaki Yamanishi is appointed president and	1993	Heisei Rice Riots.
		representative director. Yoshimasa Yamanishi is
		appointed chairperson and representative
		director.

2008		Izumi returns to its roots in Hiroshima to open
		Youme Town Hiroshima.
2011		The company's 50th anniversary. Youme Town
		Tokushima opens. Izumi's rst next generation
		store for the next 100 years.
2012		Youme Mart Kokura Higashi opens as the rst
		Youme Mart format.
2013		Izumi's new head oce building is completed.
		Youme Mall Shimonoseki opens as the rst
		Youme Mall format.

2008 iPhone is released in Japan.

Lehman shock occurs.

2010 Asteroid probe Hayabusa returns.

2011 Great East Japan Earthquake, television switches o fully to digital broadcasting.

2012 Prime Minister Shinzo Abe and his second government promises Abenomics (economic policies).

2013 Mt. Fuji is registered as a world heritage site.

1967		Izumi opens another supermarket Ekimae store
		adjacent to Hiroshima Station.

1973 The Izumi Gion store opens as the rst suburban store. It had a large parking lot prior to Japan's motorization.

1974 Nihon Ryutsu Sangyo Co., Ltd. (Nichiryu), a cooperative purchasing organization, is established by Izumi and seven other companies.

(washing machine, refrigerator, and black and white TV) become popular.

1968 The rst retort pouches of curry are available. 1969 Apollo 11 lunar landing.

1970 Osaka Expo is held.

1971 Nixon shock.

1972 Sapporo Olympic Games,

Return of Okinawa to Japanese sovereignty.

1973 Oil crisis.

1974 Skyrocketing prices.

1980		Izumi changes the Japanese spelling of
		its company name ("Izumi" changes
		from hiragana to katakana). It also
		creates its rst corporate logo.
1985		The point-of-sale (POS) systems are
		introduced.
1986		The Company's stock is listed on the
		First Section of the Osaka Securities
		Exchange and on the Second Section
		of the Tokyo Stock Exchange.
1987		The Company's stock is listed on the
		First Section of the Tokyo Stock
		Exchange.

1980	Iran - Iraq War breaks out.
1982	CDs and prepaid calling cards are released.
1983	Tokyo Disneyland opens.
1985	Plaza Accord, the bubble economy.

1987 Japan National Railways is split and privatized.

1989 The Japanese calendar enters the Heisei era. A consumption tax is introduced.

1995		Youme Town Onga opens in Fukuoka Prefecture,
		making the rst store opening in Kyushu.
1997		The Izumi Museum of Art opens.
1998		Youme Town Takamatsu opens. It is our ag ship
		Youme Town store and one of the largest retail
2000		facilities in western Japan.
	Yumesaito (Youme Town Yumesaito) and Youme
		Town Hakata open. The start of Izumi's
		full-edged expansion in Kyushu.
2003		Youme Town Kurume opens. A showcase for
		community building closely in tune with the
2006		local community.
	Youme Town Saga opens. Japan's rst mall with a
		cross-mall format.

1995 Launch of Windows95.

1996 Cellular phones spread.

1997 The consumption tax is raised to 5%.

1998 Nagano Olympic Games are held.

1999 The Euro debuts.

2000 BS digital broadcasting begins.

2001 September 11 attacks.

2002 FIFA World Cup Korea/Japan.

2003 Korean culture boom.

2005 Aichi Expo is held.

2006 The rst WBC.

2007 Postal services are privatized.

2015		Youme Town Hatsukaichi opens. A shopping
		center that aims to blend the town, environment,
		and people together in harmony.
2016		A large earthquake strikes Kumamoto and Izumi immediately
		provides assistance and helps with the reconstruction eort.
2017		The new business platform LECT opens. A facility for
		spending time leisurely centered around the main
		themes of culture, food, and living. The Medium-Term
		Management Plan (FY2018-FY2020) is created.
2018		Conclusion of business alliance with Seven & i Holdings Co., Ltd.
		Mutual use service between Yumeca (e-money) and nanaco
		commences.
2019		Youme Town Fukuyama opens.
		A capital and business alliance with Maruyoshi Center Inc. forms.
2020		30th anniversary of the formation of Youme Town.
2021		60th anniversary of Izumi's founding.
		2nd Medium-Term Management Plan (FY2021-FY2025) is created.

2016 Hiroshima Toyo Carp wins the Central League championship in 25 years.

2017 President Trump visits Japan. Heavy rain hits northern Kyushu.

2018 Heavy rain hits Western Japan.

2019 Laws related to Work Style Reform is enforced. Reiwa Era begins.

The consumption tax is increased to 10%.

2020 COVID-19 begins to spread. New lifestyles start taking root.

1961: Founding → 2021: 60th Anniversary

Izumi was founded in 1961 based on the concept of "a gushing wellspring of growth." Our rst store, Izumi Hatchobori, was our rst supermarket in the Chugoku and Shikoku regions, and our rst large-scale suburban store in the Chugoku region, Izumi Gion, opened for business in 1973. In the 60 years since our founding, Izumi has developed forward-thinking stores based on its mission of making customers happy, and we will continue these eorts going forward.

			1990: Birth of Youme Town →		2020 onward: Response to
			2020: 30th Anniversary				COVID-19 infections
			It has been 30 years since Youme Town was established		We have implemented thorough countermeasures,
			in 1990 based on the concept of "creating a community		with top priority given to ensuring the safety of
			where locals can come together." It has enjoyed a		customers and employees and maintaining lifelines
			popular reception for its wide variety of products and		for the region. In light of the pandemic situation, we
			services for children, adults, and the elderly, as well as its		took measures such as closing specialty stores and
First Izumi supermarket	Izumi Gion store		spacious interior. Going forward, it will continue	Youme Town Hiroshima	encouraging employees to work remotely (see page
	promoting contributions to community building.	26 for details).
Hatchobori store

Acrylic panels installed to prevent infection from droplets

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STRENGTHS OF IZUMI

Aiming for management that continuously generates value while responding to societal change and leveraging our strengths

The Izumi Group's three unique strengths- "dominance in West Japan,""high efficiency and high wages by assigning the right people to the right positions," and "high level of store competitiveness"-are the result of the desire we have had since our founding: to grow alongside local communities and make our customers happy.

With these three strengths forming the foundation of our company, we will continue to quickly adapt to changes in society and generate our own value going forward.

The Strengths that

Form Izumi's Foundation

On-site	Ability to
Capabilities	Respond to Change
■ Updating sales areas through	■ Breadth of product lines
front-line initiatives	■ A mix of directly
■ Managing profits	managed stores and	The strengths Izumi
performance	■ Stable financial base
■ Partner/part-time employee job	specialty stores
		cultivated over the
Regional	course of its business
development
Infrastructure

■ Top store in region/Brand power

■ Card membership base

■ Chugoku, Shikoku, and Kyushu regional dominance

Establish dominance in West Japan

Increase share within area of dominance through store openings,M&A, and alliances

■ Making GMS (shopping centers) the foundation of community life ■ Driving growth for the Group through SM (food supermarkets)

■ Win-wintie-ups with leading retailers, supporting and restructuring of businesses confronted with issues

We will develop new commercial facilities for the "new normal" era that are closely intertwined with the community, and we will maximize our dominance by developing next-generation supermarkets and expanding our store network.

We will expand the Group's economic sphere by improving services in the region, thereby expanding our share of the food market and accelerating growth. In terms of economic rationality, we will utilize M&As and alliances to delve into existing markets and expand our business areas.

High efficiency and high wages by assigning the right people to the right positions

Providing high efficiency and high wages, and assigning the right peopleto the right positions

■ Promoting business reform and development of personnel ■ Achieving the benefits of business reforms by promoting DX

We will promote both business reforms and personnel development and achieve the benefits of these business reforms in multiple areas by promoting DX, as well as applying the surplus time generated from improved hourly productivity to the development of our personnel.

Work environment that is employee-friendlyand where

women can fully demonstrate their abilities

■ Established Izumi University for management development

■ Aiming for female managers to account for 20% or more of total

has■ Pushing forward with child rearing support certified as a "Child-Rearing Support

Enterprise"

We organize a career plan and education system that respects employee initiative as well as a results-based incentive system. According to each employee's goals and abilities, a career plan is developed and training is provided based on level, such as focused training for store managers, to allow employees to take the next step in their careers. We provide training opportunities to accommodate a variety of goals, such as women's leadership development training. We also recently established Izumi University as part of our training system to further enhance the development of the next generation of managers. The Izumi Group has also set a goal of "raising the percentage of female managers to 20% or higher," by organizing a system where female employees can develop their careers while considering work-life balance.

High level of store competitiveness

Competitive store format

■ Large-scalestores-responding to the needs of three generations

■ Medium-scalestores-store development that responds to the changes in market areas

■ Small-scalestores-building more profitable SM models

	Revitalization of existing stores
	■ Continuous upgrades to keep stores up-to-date
	■ Improve store value by attracting prominent tenants
Izumi's product strategy "good products at low prices"	■ Utilize apps, social media, and customer-specific purchase data

Improving management efficiencyImproving employee motivation

Aiming to be No. 1 store in the region

Environment		Customers
change
		Senior
Declining birthrate,		customers
aging population		Prioritizing
		quality
		Robust appetite
		for consumption
Entry into
dierent industries		Bipolarization
Store saturation
		Younger
Consumption tax hikes		customers
	Prioritizing price
Yen depreciation
	Tend to
Rising commodity prices
	economize
Declines in real income

economies Pursuing Emphasizing scale of value product

prices low at products Good

Izumi	Competition
	in the market
Pine	Department
(high-end)	stores
products
Bamboo
GMS
(mid-range)	SM
products
Plum	Discount stores
(economy)	Drugstores
products

We will enhance customer relationship management (CRM) through the use of apps and social media. By utilizing our customer data platform (CDP), we will create optimal promotions that are tailored to each individual customer. In addition, our new Youme app, for which we are aiming for a user base of approximately 3 million people (approximately 1.12 million as of the end of February 2021), will enhance convenience through payment and digital coupon functions. It will also improve our points of contact with our customers, thereby increasing customer lifetime value and expanding our base of new customers.

Community-based and store-initiated responses to customerneeds

■ Realize "good products at low prices"

"Offering products new to the region" and "offering the best products in the region" are our priorities every time we open a new store. In order to sensitively meet the needs of the region, we have transitioned from

1. headquarters-centralizedmanagement method to a more store-oriented approach which allows stores to implement a variety of original measures. Within the hearts of our employees is their determination to become the store most loved and trusted by local customers. Improving products assortment and services, we are aiming to become the "No. 1 store in the region."

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6	0	IZUMI'S BUSINESS MODEL

Establishing an Original Brand by

Maximizing Customer Satisfaction

We believe that customer satisfaction is the source of corporate value creation, and that striving to maximize it is the key to differentiating ourselves in the retail industry and demonstrating a competitive advantage in the marketplace.

Through selective investments of diverse array of management capital, we will achieve sustainable expansion of economic value in our financial statements while also expanding social value by embedding the "Youme brand" in local communities.

Izumi's capital

Financial capital

Available capital ■ ROE 10.3% ■ Equity ratio 47.5% ■ Rating A+ (2020 JCR)

Intellectual capital

Knowledge-based intangible assets

■ Product lineup, product development ■ Sales floor management ■ Production power of store facilities

Human capital

People's capacity, experience and willingness to innovate

■ Matching the right people to the right positions

■ Autonomous store management through support systems from the head office and by delegating authority

Manufactured capital

Products available to organization in provision of services

■ High-efficiency stores that are dominant in a limited area

■ No. 1 store in the region

■ Presence of popular store purchase card members

Social and Relationship capital

System for building trusting relationships with stakeholders

■ Opportunities to hear customer feedback

■ Local government disaster-response measures, etc.

■ Enhancing relationships through dialogue

Natural capital

All prerequisite environmental resources ■ Conserving energy

■ Effort to recycle food waste

■ Effort to reduce plastic bag and wrapping material usage

Inputs

Financial affairs

Customers

Outputs

Business structure

Human Resources and Identity

Maximizing shareholder value

P2－3

New Management Philosophy Filling our employees with pride and joy as we continue contributing to communities and our customers' lives

■ Commercial facilities that serve as a lifeline for the community, supporting food, clothing and daily necessities

■ Realization of a broad and diverse product line that responds to polarizing consumer trends

■ Providing a comfortable place for three generations of family members to spend time together

				P6－7
		Regional	On-site	Ability to
	infrastructure	capabilities	respond to change
Establish dominance	High efficiency and high wages	High level of
		in West Japan	by assigning the right people	store competitiveness
			to the right positions
Izumi's four dreams	P2－3
■	Making customers' lives more comfortable
1
2		Providing a positive economic impact on local
■ communities and make them more lively
3		Working together with tenants for further
■ development
4		Providing employees with a sense of worth
■ that leads to their personal growth

■ Make effective use of cash flow generated by the company by allocating it toward growth investments and shareholder returns

■ Maintain and further improve the high standard for capital efficiency while increasing shareholder value

	P24－27
Resolving problems for	Contribution to achieving SDGs
local customers

■ What is essential in the community ■ What is not in the community ■ Providing these in a one-stop

shopping environment

P7

P15－16

Good products at low prices

Digital transformation (DX)

Environment

Izumi

Customers

Competition

change

in the market

Declining birthrate,

customers

(high-end)

Department

Creating

Creating a

Senior

economiesPursuingEmphasizing scaleof valueproduct

Pine

Declines in real income

priceslowatproductsGood products

aging population

Prioritizing

products

stores

stores

system

quality

Entry into

Robust appetite

Bamboo

GMS

full of smiles

for the future

for consumption

Creating

Store saturation

products

dierent industries

Bipolarization

(mid-range)

SM

comfortable

customers

Younger

Plum

work environments

Yen depreciation

Tend to

Discount stores

Consumption tax hikes

Prioritizing price

Rising commodity prices

economize

(economy)

Drugstores

P28－33

Strengthen corporate governance

Board of Directors

(8 members: 5 inside, 3 outside)

Appointment/Remuneration

Audit & Supervisory Board

Committee

Management Meeting

(3 members: 1 full-time, 2 outside)

(6 members: 3 inside, 3 outside)

P16・27

Development of

Development of

Further enhancing of

management personnel

middle management

on-site capabilities

expansion Capital

Izumi's capital

Financial capital

■ Aim for an ROE of about 10%

■ Pursue optimal capital structure

■ Raise funds through interest-bearing debt and self-financing

■ Keep long-term issuer rating at single

A+ level

Intellectual capital

■ Achieve product lineup through "good products at low prices"

■ Pursue hospitality in store spaces

Human capital

■ Train next-generation of executive candidates

■ Train field leaders who can act autonomously

■ Improve productivity and motivation

Manufactured capital

■ Pursue a dominant advantage

■ Improve attractiveness by revitalizing investment in existing stores

Social and Relationship capital

■ Improve product lineup and service

level through customer feedback

■ Expand areas of partnerships contributing to the local community

■ Improve cardholder loyalty ■ Further develop stakeholders ■ Trust of customers

Natural capital

■ Environmental preservation, reduction of environmental load

■ Build recycling-based society

■ Harmony with nature and environment in local community

Capital accumulation

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