Results for the First Half of Fiscal 2021: Supplementary Materials

First Half of Fiscal 2021 Supplementary Material

POLA ORBIS HOLDINGS INC.

Representative Director and President

Satoshi Suzuki

This report contains projections of performance and other projections based on information currently available and certain assumptions judged to be reasonable. Actual performance may differ materially from these projections resulting from changes in the economic environment and other risks and uncertainties.

1. Highlights of Consolidated Performance
2. Segment Analysis
3. Forecasts for Fiscal 2021
4. Initiatives Going Forward & Appendices

1

Q2 Key Topics

Cosmetics Market

• The overall size of the Japanese cosmetics market (including exports) continued to shrink, despite a rebound from the levels of the previous year
• Store shutdowns, shortened opening hours and requests to refrain from going out associated with the declaration of a state of emergency, etc., particularly in the Tokyo metropolitan area, affected the net domestic market, which excludes inbound demand
• In the Chinese market, personal consumption remained higher than in the previous year

Our Group

Source: Ministry of Economy, Trade and Industry, Ministry of Internal Affairs and Communications, Japan Tourism Agency, Japan Department Stores Association, Intage SLI, and National Bureau of Statistics of China

• POLA overseas continued to perform strongly (+55% YoY), as e-commerce sales grew in each brand, consolidated revenue and income increased
• In POLA consignment sales, new customer acquisition was sluggish due to the impact of COVID-19, but loyal existing customers maintained a high level of activity
• ORBIS revenue and income decreased, with less activity from existing customers
• Achieved a profit in overseas business across the Group, with the progressive amelioration of losses in overseas brands
• FUJIMI was included in the scope of consolidation as a brand under development from April

Medium-term Management

Plan Indicators (FY2021 H1)

Overseas sales ratio	17.7%
（＋2.7ppt*）
Domestic e-commerce	27.3%
sales ratio	（＋3.4ppt*）
	*vs Dec. 2020

YoY Change in Consolidated Monthly Net Sales

		(%)	Jan. Feb. Mar. Apr. May. Jun.
	30

20

10

0
-10	Monthly net sales YoY (month by month)
Monthly net sales YoY (cumulative total)

• Recorded high year-on-year growth in April-May, rebounding after nation-wide store shutdowns and shortened opening hours during the second quarter of the previous year
• Issues in 2021, including the state of emergency, have persisted longer than was anticipated at the start of the fiscal year, significantly impacting domestic storefront operations
• Sales activities were affected under the state of emergency declared in the second quarter, including shutdowns at some stores, and counseling & aesthetic treatment in areas subject to the declaration

2

Consolidated P&L Changes Analysis

Net Sales to Operating Income

			FY2020	FY2021	YoY Change
(mil. yen)	H1 Results	H1 Results	Amount	%
Consolidated net sales	83,802	89,055	5,253	6.3%
	Cost of sales	13,567	13,471	(96)	(0.7%)
Gross profit	70,234	75,584	5,349	7.6%
	SG&A expenses	64,353	66,488	2,135	3.3%
Operating income	5,881	9,095	3,214	54.7%
	Key Factors

• Consol. net sales Increased on a consolidated basis, with a recovery due to continuing strong performance by POLA overseas and a rebound in storefront operations compared to the previous year

 Cost of sales	Cost of sales ratio improved due to an increase in the contribution
	from POLA's high price range products
	Cost of sales ratio FY2020 H1 : 16.2% ⇒ FY2021 H1 : 15.1%
 SG&A expenses	Labor expenses: up ¥897 mil. YoY
	Sales commissions: down ¥ 1,452 mil. YoY
	⇒ Decreased due to lower commissions as a proportion of net sales
	Sales related expenses: up ¥992 mil. YoY
	Administrative expenses, etc.: up ¥1,698 mil. YoY
 Operating income	Operating margin FY2020 H1: 7.0% ⇒ FY2021 H1: 10.2%

3

Consolidated P&L Changes Analysis

Operating Income to Profit Attributable to Owners of Parent

				FY2020	FY2021	YoY Change
	(mil. yen)	H1 Results	H1 Results	Amount	%
	Operating income	5,881	9,095	3,214	54.7%
		Non-operating income	206	1,487	1,280	619.1%
		Non-operating expenses	1,544	106	(1,438)	(93.1%)
	Ordinary income	4,543	10,477	5,933	130.6%
		Extraordinary income	43	297	254	589.7%
		Extraordinary losses	2,077	409	(1,668)	(80.3%)
	Profit before income	2,509	10,365	7,855	313.1%
	taxes
		Income taxes etc.	1,581	3,255	1,674	105.9%
		Profit attributable to	11	22	10	91.2%
		non-controlling interests
	Profit attributable to	916	7,086	6,170	673.3%
	owners of parent
		Key Factors
	 Non-operating income:	Foreign exchange gain ¥1,288 mil.
	 Extraordinary losses:	Loss related to COVID-19 ¥145 mil.
				（Breakdown: POLA ¥30 mil.	ORBIS ¥75 mil. ACRO ¥39 mil）
				[Reference] FY2020 H1 breakdown: POLA ¥374 mil. ORBIS ¥491 mil. ACRO ¥290 mil.		4