Takashimaya Co., Ltd. (8233) - SR Research Report

Takashimaya Co., Ltd. (8233) - SR Research Report

Takashimaya Co., Ltd. (8233) - SR Research Report

SR Research Report 2014/5/1 Takashimaya Co., Ltd. (8233) Shared Research Inc. has produced this report by request from the company discussed in the report. The aim is to provide an “owner’s manual” to investors. We at Shared Research Inc. make every effort to provide an accurate, objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data and findings. We will always present opinions from company management as such. Our views are ours where stated. We do not try to convince or influence, only inform. We appreciate your suggestions and feedback. Write to us at sr_inquiries@sharedresearch.jp or find us on Bloomberg.

Takashimaya Co., Ltd. (8233) - SR Research Report

Takashimaya Co., Ltd. (8233) 2014/5/1 http://www.sharedresearch.jp/ Copyright (C) 2013 Shared Research Inc. All Rights Reserved 2/65 SR Research Report Contents Recent updates . . 4 Highlights . . 4 Trends and outlook . . 5 Business . . 15 Business description . . 15 Market and value chain . . 31 Strategy . . 36 Historical Financial Statements . . 41 Summary . . 41 Income statement . . 52 Balance sheet . . 54 Statement of cash flows . . 56 Other information . . 57 History . . 57 News & Topics . . 58 Major shareholders . . 61 Top management . . 61 Employees . . 61 Dividends and shareholder benefits .

. 61 Investor relations . . 62 By the way . . 63 Company profile . . 64

Takashimaya Co., Ltd. (8233) - SR Research Report

Takashimaya Co., Ltd. (8233) 2014/5/1 http://www.sharedresearch.jp/ Copyright (C) 2013 Shared Research Inc. All Rights Reserved 3/65 SR Research Report Income Statement FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 (JPYmn) Cons. Cons. Cons. Cons. Cons. Est. Total Sales (Sales and Other Operating Revenue) 877,762 869,476 858,123 870,333 904,180 900,000 YoY -10.1% -0.9% -1.3% 1.4% 3.9% -0.5% Gross Profit 267,946 262,664 260,612 264,646 214,673 213,000 YoY -9.9% -2.0% -0.8% 1.5% -18.9% -0.8% GPM 30.5% 30.2% 30.4% 30.4% 23.7% 23.7% Operating Profit 13,428 18,173 21,099 25,476 29,099 31,000 YoY -45.9% 35.3% 16.1% 20.7% 14.2% 6.5% OPM 1.5% 2.1% 2.5% 2.9% 3.2% 3.4% Recurring Profit 16,764 22,484 24,355 29,866 33,350 34,000 YoY -40.1% 34.1% 8.3% 22.6% 11.7% 1.9% RPM 1.9% 2.6% 2.8% 3.4% 3.7% 3.8% Net Income 7,709 13,849 10,895 16,540 18,716 20,500 YoY -34.4% 79.6% -21.3% 51.8% 13.2% 9.5% Net Margin 0.9% 1.6% 1.3% 1.9% 2.1% 2.3% Per Share Data Number of Shares 330,827 330,827 330,827 330,827 330,828 EPS 23.4 42.0 33.0 50.1 56.7 62.1 EPS (Fully Diluted) 22.1 39.1 30.7 46.6 51.2 Dividend Per Share 10.0 10.0 10.0 10.0 10.0 10.0 Book Value Per Share 871.1 897.9 915.9 998.6 1,085.8 Balance Sheet (JPYmn) Cash and Equivalents 59,011 70,503 76,124 69,495 106,451 Total Current Assets 239,816 265,878 262,394 236,263 332,121 Tangible Fixed Assets, net 381,943 381,920 375,748 378,755 394,436 Other Fixed Assets 143,921 142,838 135,975 146,688 146,864 Intangible Assets 19,416 26,451 29,799 28,979 28,716 Total Assets 785,098 817,088 803,917 790,687 902,139 Accounts Payable 85,684 87,248 87,297 87,883 95,901 Short-Term Debt 24,593 14,083 39,811 19,172 47,301 Total Current Liabilities 302,444 304,198 322,910 294,645 335,599 Long-Term Debt 95,962 117,679 87,667 79,674 120,227 Total Fixed Liabilities 191,411 211,789 173,525 160,597 201,627 Total Liabilities 493,855 515,988 496,436 455,243 537,227 Net Assets 291,239 301,099 307,481 335,443 364,912 Interest-Bearing Debt 120,555 131,762 127,478 98,846 167,528 Cash Flow Statement (JPYmn) Operating Cash Flow 23,428 20,645 31,921 44,141 40,582 Investment Cash Flow -10,508 -13,240 -16,356 -28,470 -30,389 Financing Cash Flow 14,817 7,673 -8,210 -32,931 64,391 Financial Ratios ROA 2.2% 2.8% 3.0% 3.7% 3.8% ROE 2.7% 4.7% 3.6% 5.2% 5.0% Equity Ratio 36.6% 36.3% 37.6% 41.7% 39.7% Figures may differ from company materials due to differences in rounding methods; ROA is based on recurring profit.

Throughout this report, line item "sales" means "sales and other operating revenue" defined by the company. Source: Company data

Takashimaya Co., Ltd. (8233) - SR Research Report

Takashimaya Co., Ltd. (8233) 2014/5/1 http://www.sharedresearch.jp/ Copyright (C) 2013 Shared Research Inc. All Rights Reserved 4/65 SR Research Report Recent updates Highlights On May 1, 2014, Takashimaya released monthly store sales data for April 2014; please see the monthly trends section for further details. On April 22, 2014, SR updated comments on the company’s FY02/14 full-year earnings based on interviews with management; please see the results section for further details. On April 10, 2014, SR updated comments on the company’s FY02/14 full-year earnings based on the company’s results briefing.

On April 8, 2014, the company announced FY02/14 full-year earnings results. On April 1, 2014, the company released monthly store sales data for March 2014; please see the monthly trends section for further details. On March 3, 2014, the company released monthly store sales data for February 2014. For corporate releases and developments more than three months old, please refer to the News & Topics section.

Takashimaya Co., Ltd. (8233) - SR Research Report

Takashimaya Co., Ltd. (8233) 2014/5/1 http://www.sharedresearch.jp/ Copyright (C) 2013 Shared Research Inc. All Rights Reserved 5/65 SR Research Report Trends and outlook Monthly trends Store sales in April 2014 were down significantly, at -13.6% YoY across Takashimaya (parent) stores and 18 domestic subsidiary department stores, owing to subdued spending following the rush of demand to beat the sales tax hike on April 1.

Quarterly trends and results All Store Sales Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb FY02/12 Takashimaya (Parent) -15.6% -1.9% -3.5% 0.8% 0.1% -1.1% -1.6% -0.1% -1.7% 0.9% -1.8% 0.7% Domestic Department Stores (18 Stores) -16.8% -0.9% -2.8% 0.6% 0.8% -1.2% -1.9% 0.3% -1.4% 0.3% -1.8% -1.0% Corporate Business 14.7% -22.0% -22.3% 3.5% -19.2% 3.1% -4.9% -11.8% -11.5% 14.4% -0.9% 16.8% Cross-Media Business 2.7% -0.3% 5.3% 6.7% 1.0% -13.6% 1.8% 1.5% -6.6% 6.7% -5.3% -0.3% FY02/13 Takashimaya (Parent) 16.5% 2.8% -0.2% -0.9% -1.9% 0.6% 1.9% -1.0% 2.4% -2.7% -2.2% -0.3% Domestic Department Stores (18 Stores) 16.9% 1.9% -0.7% -0.5% -3.0% -0.6% 1.1% -1.6% 1.6% -2.6% -2.9% 0.3% Corporate Business 0.1% 23.6% 9.0% -2.5% 31.5% 20.0% 26.1% 10.3% 21.8% -7.8% 5.2% -5.6% Cross-Media Business 13.4% -10.3% -3.8% -11.7% -1.4% 22.3% 0.9% 3.6% 7.1% -0.8% 13.8% -6.1% FY02/14 Takashimaya (Parent) 2.9% -1.3% 2.5% 8.9% -3.6% 0.4% 1.9% -2.6% 2.2% 1.8% 4.1% 3.7% Domestic Department Stores (18 Stores) 4.9% -0.5% 1.0% 7.8% -4.0% 0.3% 2.6% -2.3% 3.0% 1.8% 4.1% 3.9% Corporate Business 29.1% -11.5% 20.7% 38.8% 6.0% -3.0% 3.7% -4.2% -5.9% 11.7% 7.5% 3.0% Cross-Media Business -1.8% 4.5% 11.3% 0.6% 3.9% 13.2% -18.3% -5.3% -11.2% -7.0% -0.7% -5.8% FY02/15 Takashimaya (Parent) 32.3% -13.2% Domestic Department Stores (18 Stores) 31.7% -13.6% Corporate Business 55.4% Cross-Media Business 5.4% Source: Company data processed by SR Inc.

Figures may differ from company materials due to differences in rounding methods. Quarterly Performance (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 % of FY FY Est. Sales 207,348 212,482 209,350 241,153 214,007 221,284 212,900 255,989 100.0% 904,000 YoY 6.5% -1.3% 2.3% -0.9% 3.2% 4.1% 1.7% 6.2% 3.9% GP 64,459 64,786 63,734 71,667 66,093 67,004 65,031 74,940 . YoY 6.7% -1.0% 1.5% -0.4% 2.5% 3.4% 2.0% 4.6% GPM 31.1% 30.5% 30.4% 29.7% 30.9% 30.3% 30.5% 29.3% SG&A 58,574 60,547 59,482 60,566 59,999 61,941 59,725 62,304 YoY 2.9% 1.1% 0.0% -4.2% 2.4% 2.3% 0.4% 2.9% SG&A / Sales 28.2% 28.5% 28.4% 25.1% 28.0% 28.0% 28.1% 24.3% OP 5,884 4,240 4,251 11,092 6,094 5,062 5,317 12,626 100.3% 29,000 YoY 68.7% -24.0% 28.1% 27.3% 3.6% 19.4% 25.1% 13.8% 13.9% OPM 2.8% 2.0% 2.0% 4.6% 2.8% 2.3% 2.5% 4.9% 3.2% RP 6,374 5,366 5,445 12,681 7,715 5,777 6,151 13,707 102.6% 32,500 YoY 47.0% -16.8% 36.5% 32.4% 21.0% 7.7% 13.0% 8.1% 8.8% RPM 3.1% 2.5% 2.6% 5.3% 3.6% 2.6% 2.9% 5.4% 3.6% NI 3,860 2,744 2,501 7,435 4,016 3,598 2,995 8,107 106.9% 17,500 YoY 125.6% -25.1% 71.3% 83.2% 4.0% 31.1% 19.8% 9.0% 5.8% NPM 1.9% 1.3% 1.2% 3.1% 1.9% 1.6% 1.4% 3.2% 1.9% Figures may differ from company materials due to differences in rounding methods.

Source: Company data FY02/14 FY02/13 FY02/14

Takashimaya Co., Ltd. (8233) - SR Research Report

Takashimaya Co., Ltd. (8233) 2014/5/1 http://www.sharedresearch.jp/ Copyright (C) 2013 Shared Research Inc. All Rights Reserved 6/65 SR Research Report FY02/14 results (out April 8, 2014; see table above) Sales and operating profit met targets. Recurring profit and net income outperformed targets by 2.6% and 6.9% respectively. Consolidated sales for FY02/14 totaled JPY904.2bn (+3.9% YoY). In the department store segment, sales were up 3.6% YoY to JPY798.1bn. Operating profit was up 17.5%, to JPY14.0bn. Sales of lifestyle goods such as furniture and high-end items such as select apparel/accessories and jewelry were robust, thanks partly to a rise in personal assets caused by a buoyant stock market (wealth effect).

The company worked to attracted customers through fall and spring promotions across its store network and television advertising in December 2013. The company focused on quality products, such as increasing the number and volume of products in its in-house cashmere knit collection, and introducing the STYLE & EDIT range in the Tamagawa branch. Sales of differentiated merchandise grew 5.9% YoY, to JPY32.8bn.

Year-on-year changes in store sales for each main merchandise category were as follows: menswear and goods -0.6%, women’s wear and goods +0.2%, children’s wear and goods -0.9%, other apparel +2.6%, cosmetics +2.5%, art works and jewelry +14.8%, other accessories -3.4%, furniture +7.0%, home appliances +48.8%, other household goods +0.8%, and foods +0.0%. Robust sales of jewelry and other high-priced items was particularly notable. Driven by the weakening of the yen, there was an increase in the number of foreign tourists, and sales of duty-free goods rose 73% YoY, to JPY7.2bn.

Gross profit margin at the parent level (cumulative) fell to 25.10%, from 25.41% in FY02/13.

This was the result of strong sales of low-margin high-end items such as select apparel/accessories and jewelry. The SG&A-to-sales ratio at the parent level was down to 25.0% from 25.8% the previous year. Thus, full-year consolidated operating profit was up 14.2%, to JPY29.1bn. In overseas operations, Takashimaya Singapore held sales promotions to mark the store’s expansion and remodeling as well as its 20th anniversary. The store strengthened measures targeting cardholders and tourists, while the weaker yen also had a positive impact. Sales were JPY50.0bn (+25.9% YoY) and operating profit was JPY3.9bn (+8.8% YoY).

Takashimaya Shanghai, which opened in December 2012, continued to refrain from advertising, and the store’s profile among consumers appears to be lacking. As a result, sales were JPY5.2bn and operating loss was JPY1.5bn (company forecasts were for sales of JPY6.0bn and operating loss of JPY1.2bn).

In the contract and design segment, sales were JPY20.6bn (+8.5% YoY) and operating profit was JPY11.1bn (+27.9%). The renovation business grew, and there was a healthy supply of orders for hotels and commercial facilities. In the real estate segment, sales were JPY36.8 (+8.7% YoY) and operating profit was JPY8.4bn (+8.0%). The company streamlined its sales operations, while the Tamagawa Shopping Center, Kashiwa Station Mall, and Nagareyama Otakanomori Shopping Center all reported healthy revenues. In the finance segment, revenue was JPY11.9bn (+2.2% YoY) and operating profit was JPY4.1bn (+14.3%).

Takashimaya Credit Co., Ltd. reported 4% growth in revenues from card transactions, while annual membership revenue also increased.

Takashimaya Co., Ltd. (8233) 2014/5/1 http://www.sharedresearch.jp/ Copyright (C) 2013 Shared Research Inc. All Rights Reserved 7/65 SR Research Report In the other businesses segment—such as the cross media business—sales were JPY36.8bn (+2.9% YoY) and operating profit was JPY1.7bn (+30.8%). In the cross media business, online sales rose, particularly for key promotions. However, catalog sales fell as the company cut circulation to improve efficiency. Takashimaya Service Co. turned profitable, thanks to efforts to streamline operations and cut CoGS. The company plans to implement various marketing strategies with the aim of creating linkages between its brick-and-mortar stores and its online retailing activities.

As of end-FY02/14, the ratio of brands sold both in actual stores and online (including those approved by suppliers) was 60%. The number of registered online members stood at 1.44 million (compared with 1.18 million at end-FY02/13). The company released a medium-term management plan that covers a period through FY02/19. Sales: JPY920.0bn (FY02/14: JPY904.2bn) Operating profit: JPY48.0bn (FY02/14: JPY29.1bn) ROE: 6.3% (FY02/14: 5.4%) Capital-to-asset ratio: 49.4% (FY02/14: 39.7%) Interest-bearing liabilities: JPY140bn (FY02/14: JPY167.5bn) Investment amount: JPY300.0bn (FY02/14: JPY35.4bn) For details on previous quarterly and annual results, please refer to the historical financial section.

The following is a summary of the company’s earnings briefing held on the same day: Shigeru Kimoto, who has recently become president, expresses his goals for the company Takashimaya should improve the profitability of its domestic department stores. There is still room for profit growth for department stores in Japan. Kimoto believes that the company’s town development projects will contribute to earnings. Takashimaya will engage in town development projects using the expertise of Toshin Development Co., Ltd., a consolidated subsidiary.

Earnings for FY02/14 Sales were JPY904.2bn (+JPY33.8bn YoY), reaching the JPY900bn level for the first time since FY02/09.

Earnings increased at domestic department stores as the economy recovered. Sales also rose at Takashimaya Singapore and other major subsidiaries. Operating profit was JPY29.1bn (+JPY3.6bn YoY), recurring profit was JPY33.4bn (+JPY3.5bn YoY), and net income was JPY18.7bn (+2.2bn YoY). The profits rose due to an increase in sales even as gross profit margin fell and expenses of new foreign operations increased. Gross profit margin declined because of an increase in the sales composition of low-profitable products, such as accessories and jewelry. Medium-Term Management Plan Sales: JPY920bn  Domestic department stores: JPY730bn  Domestic group companies: JPY160bn  Overseas operations: JPY95bn

Takashimaya Co., Ltd. (8233) 2014/5/1 http://www.sharedresearch.jp/ Copyright (C) 2013 Shared Research Inc. All Rights Reserved 8/65 SR Research Report Operating profit: JPY48bn  Domestic department stores: JPY21bn  Domestic group companies: JPY19bn  Overseas operations: JPY8bn ROE: 6.3% Capital-to-asset ratio: 49.4% Interest-bearing liabilities: JPY140bn Investment amount: JPY300bn Takashimaya emphasized the following points: Domestic department stores  The company will improve its competitiveness by establishing community-based stores; each store will have its own unique operations (Shinjuku and Tachikawa stores for this fiscal year).

(The goal is to increase sales by JPY45bn and operating profit by JPY8bn) Takashimaya’s town development concept takes the company beyond the confines of its own stores. The company seeks to make shopping more convenient and fun by taking into consideration the viewpoint of the entire town. This new perspective will be reflected in the company’s merchandising, customer service, and sales.

Efforts for FY02/15 Shinjuku, Tachikawa stores: Town development projects will begin at its Shinjuku and Tachikawa stores, which will serve as models for other stores. Tamagawa, Kashiwa stores: These stores are located inside shopping centers. They will be renovated so that their department-store services will be enhanced. Nihonbashi store: The store will be renovated along with the redevelopment of the Nihonbashi district. The planned renovation is in line with the company’s town development concept. Omiya, Sakai stores: These stores will offer a variety of services that a town would need.

 Takashimaya will pursue omni-channel retailing efforts and take other steps to improve efficiency. The company will implement changes to cope with an increase in the consumption tax. (Sales increase of JPY25bn and operating profit increase of JPY3bn)  Takashimaya will seek to increase operating profit by JPY17bn through cost-cutting efforts. Such efforts are necessary to cope with an increase in the consumption tax. Domestic group operations  Takashimaya will pursue group-wide town development projects led by Toshin Development and create a synergy with department store operations. (Sales increase of JPY160bn and operating profit increase of JPY19bn) Overseas operations  Stores will be established in ASEAN and China.

(Sales increase of JPY95bn and operating profit increase of JPY8bn)

Takashimaya Co., Ltd. (8233) 2014/5/1 http://www.sharedresearch.jp/ Copyright (C) 2013 Shared Research Inc. All Rights Reserved 9/65 SR Research Report Plan for FY02/15 Sales: JPY900bn (-0.5% YoY) Operating profit: JPY31bn (+6.5% YoY) Recurring profit: JPY34bn (+1.9% YoY) Net income: JPY20.5bn (+9.5% YoY) Toshin Development is seeking to increase sales and profits through the development of areas around existing shopping centers. Takashimaya Singapore is also expected to increase sales thanks to promotion efforts and a floor expansion. However, domestic department stores will see their sales and profits decline due to an increase in the consumption tax; sales are expected to decline on a consolidated basis, as well.

However, Takashimaya plans to raise profits by overcoming the effects of a consumption tax increase. The company will strengthen its sales efforts while reducing SG&A expense. At the parent level, Takashimaya will seek to increase the sales composition of profitable items, such as women’s clothes and accessories. The company targets product profit margin of 25.09% (almost unchanged from 25.10% a year earlier).

Sales at department stores rose 32% in March (forecast: +22%) as consumers increased purchases before the consumption tax was raised. April sales fell 25% (forecast: -14%) as of April 7. The company expects sales to decline 5.6% in May and 3.8% in June. The company stated that it would cautiously observe the effects of the consumption tax increase that took place in April. The company will seek to increase sales to tourists and wealthy domestic clients by making its sales floor and merchandising more attractive.

Takashimaya will seek to reduce operating expenses by JPY7.3bn to cope with the effects of an increase in the consumption tax (through a reform of its expense structure).

 Labor costs: JPY1.1bn (job cuts: JPY500bn; a reduction in overtime: JPY200mn)  Advertising costs: JPY700mn (promotion events, flyers: JPY600mn)  General costs: JPY2bn (operation costs: JPY600mn; repair costs: JPY200mn; utilities: JPY100mn)  Accounting costs: JPY3.5bn (acquisition of fixed assets: JPY3.4bn) Takashimaya also seeks to increase profits at group companies by 2bn as follows:  Toshin Development: JPY900mn (through increased rent income and reduced rent payments)  Takashimaya Service: JPY400mn (through more efficient use of workers and the standardization of outsourced duties)  Others: JPY700mn (the restructuring of operations, internalization of certain duties)

Takashimaya Co., Ltd. (8233) 2014/5/1 http://www.sharedresearch.jp/ Copyright (C) 2013 Shared Research Inc. All Rights Reserved 10/65 SR Research Report FY02/15 outlook Sales and gross profit At domestic department stores, factoring in the effects of extra demand in the lead-up to the increase in consumption tax rate (March) and the fallback in demand following the increase (April onward), sales are forecast to decline 1.0% YoY (down JPY7.4bn). The impact on sales of the consumption tax increase is FY02/15 Forecast (JPYmn) 1H 2H Full-Year 1H 2H Full-Year Sales 435,291 468,889 904,180 433,000 467,000 900,000 YoY 3.7% 4.1% 3.9% -0.5% -0.4% -0.5% CoGS 302,193 328,917 631,111 687,000 Gross Profit 133,097 139,972 214,673 213,000 YoY 3.0% 3.4% -18.9% -0.8% GPM 30.6% 29.9% 23.7% 23.7% SG&A 121,940 122,029 243,969 241,400 SG&A / Sales 28.0% 26.0% 27.0% -1.1% Operating Profit 11,156 17,943 29,099 11,700 19,300 31,000 YoY 10.2% 16.9% 14.2% 4.9% 7.6% 6.5% OPM 2.6% 3.8% 3.2% 2.7% 4.1% 3.4% Recurring Profit 13,492 19,858 33,350 13,000 21,000 34,000 YoY 14.9% 9.6% 11.7% -3.6% 5.8% 1.9% RPM 3.1% 4.2% 3.7% 3.0% 4.5% 3.8% Net Income 7,614 11,102 18,716 8,500 12,000 20,500 YoY 15.3% 11.7% 13.2% 11.6% 8.1% 9.5% Figures may differ from company materials due to differences in rounding methods.

Source: Company data Company Estimates FY02/14 Results FY02/14 Sales Forecast by Store (in million of yen) Sales Chg YoY Nihombashi 129,901 3.0% Yokohama 135,370 2.7% Konandai 10,634 0.2% Shinjuku 66,081 3.7% Tamagawa 42,468 3.7% Tachikawa 17,778 -1.9% Omiya 11,722 -7.4% Kashiwa 36,394 -0.7% Osaka 120,685 0.6% Sakai 15,171 -1.4% Kyoto 85,191 1.6% Senboku 20,178 -1.2% Parent Total 691,580 1.7% Okayama Takashimaya 18,760 4.1% Gifu Takashimaya 16,002 1.8% Yonago Takashimaya 6,363 0.3% Takasaki Takashimaya 15,105 0.7% Total (including domestic subsidiaries) 748,440 2.1% Figures of Osaka and Kyoto stores include those of Wakayama and Rakusai stores, respectively.

Sales of the Corporate and Cross-Media segments are attributable to each location. Figures may differ from company materials due to differences in rounding methods. Source: Company data, SR Inc. Research

Takashimaya Co., Ltd. (8233) 2014/5/1 http://www.sharedresearch.jp/ Copyright (C) 2013 Shared Research Inc. All Rights Reserved 11/65 SR Research Report expected to be -0.9% in 1H and -3.7% in 2H, or -2.3% over the full year (down JPY16.4bn). Other factors expected to affect sales include a general trend of rising sales of +JPY5.7bn, a fallback in sales of high-priced items (after a strong increase in FY02/14) of –JPY2.7bn, a boost from refurbishments of +JPY5.4bn, decrease in sales due to temporary store closures for renovations of –JPY2.7bn, and a rebound from the adverse effects of poor weather in FY02/14 (typhoons, heavy snowfalls) of +JPY4.4bn.

In addition, the company plans to further intensify its efforts to boost merchandise appeal, and forecasts sales of differentiated merchandise of JPY34.6bn (FY02/14: JPY32.8bn). The company also forecasts sales of duty-free goods of JPY10.0bn (FY02/14: JPY7.2bn).

Takashimaya Singapore is expected to be bolstered by a store-wide refurbishment and floor-area expansion, a drive for new card members, sales promotions and campaigns targeting tourists. As a result, sales are forecast at JPY52.8bn (+5.6% YoY). At Takashimaya Shanghai, which opened in December 2012, the company plans to expand its price range and merchandise lineup, and broaden its target market to cover such segments as families, office workers and Japanese customers. Sales are forecast at JPY5.9bn (FY02/14: JPY5.2bn) and operating loss is forecast at JPY1.7bn (FY02/14: loss of JPY1.5bn).

The company also expects other main subsidiaries to record strong growth, and forecasts consolidated sales in FY02/15 of JPY900.0bn (-0.5% YoY).

With regard to parent-only gross profit margin (GPM), while the company anticipates increases in the product mix of high-margin goods, such as women’s wear and other accessories, it also expects a slow-down in high-priced merchandise categories that grew substantially in FY02/14. Consequently, GPM is forecast to be largely in line with FY02/14 (25.10%), at 25.09%. According to the company’s forecasts, the impact of changes in the product mix is expected to be just +0.01% (FY02/14: -0.13%). The company’s assumptions for parent-only GPM appear somewhat conservative in light of the fallback in high-priced merchandise factored into the sales forecasts.

SG&A In domestic department stores, although salary expenses are expected to be down driven by a lower staff count and a reduction in overtime, personnel expenses are forecast to increase byJPY400mn due to retirement benefits and statutory employee benefits. Advertising expenses have been thoroughly reviewed centering on promotion events and advertisements, and are forecast to decrease by JPY1.4bn. In general expenses, although operational expenses and commissions are expected to be reduced, depreciation expenses and maintenance expenses associated with the acquisition of the Shinjuku and Tachikawa stores are forecast to drive a JPY1.8bn increase in general expenses.

Accounting expenses are forecast to fall by JPY4.3bn centering on lower rent expense due to the acquisition of the Shinjuku and Tachikawa stores. Consolidated SG&A is forecast at JPY241.4n (-1.1% YoY), and the SG&A-to-sales ratio is expected to be 28.7% (-0.1 percentage point YoY).

Operating profit (operating profit margin) The anticipated increase in profit at domestic department stores and profit growth at subsidiaries, such as Toshin Development and Takashimaya Singapore, are forecast to drive consolidated operating profit higher by JPY1.9bn, to JPY31.0bn. The operating profit margin is expected to be 3.7% (FY02/14: 3.4%).

Takashimaya Co., Ltd. (8233) 2014/5/1 http://www.sharedresearch.jp/ Copyright (C) 2013 Shared Research Inc. All Rights Reserved 12/65 SR Research Report Recurring profit Driven by the increase in operating profit, consolidated recurring profit is forecast to rise JPY600mn, to JPY34.0bn (+1.9% YoY).

Net income In addition to recurring profit, the company forecasts gains on sale of fixed assets, leading to a YoY increase of JPY1.8bn in consolidated net income, to JPY20.5bn (+9.5% YoY). Capital expenditure and depreciation expense Consolidated capex in FY02/15 is forecast at JPY127.0bn (FY02/14: JPY35.4bn). Major capex items are the acquisition of land lease rights and buildings for the Shinjuku store amounting to JPY105.6bn (corresponding figure of JPY700mn in FY02/14), JPY2.8bn for restaurant refurbishment and equipment renewal at the Nihombashi store (JPY3.9bn), and JPY1.7bn for refurbishment of the select apparel and accessories sales space and equipment renewal at the Yokohama store (JPY1.6bn).

Depreciation expense is forecast at JPY18.2bn (FY02/14: 18.4bn).

Future Outlook As numerical targets for FY02/19, the company is aiming to generate sales of JPY920.0bn (comparison with FY02/14: +JPY15.8bn), and operating profit of JPY48.0bn (JPY18.9bn). The company assumes that the Japanese economy will grow gradually over the period, with personal consumption expanding by JPY29tn over five years through FY02/19 (annual growth rate of 2%). Takashimaya expects structural trends to cause sales to contract JPY39.0bn over the five years and consumption tax increases to cause a similar sales contraction of JPY44.0bn, for a total contraction of JPY83.0bn. While the company expects the aforementioned factors to cause a JPY83.0bn domestic sales contraction over five years (domestic department stores: -JPY75.0bn, domestic group businesses: -JPY8.0bn), it is also aiming to generated JPY45.0bn in additional sales driven by strategic marketing initiatives at domestic department stores, giving sa net decline of JPY30.0bn in the domestic department store business.

In other domestic businesses, strategic marketing initiatives are expected to boost sales by JPY28.0bn, leading to a net sales increase of JPY20.0bn over five years. In overseas operations, the ASEAN business is forecast to grow sales by JPY23.0bn, and the China business is expected to grow sales by JPY9.0bn, for overall overseas sales growth of JPY32.0bn.

Takashimaya Co., Ltd. (8233) 2014/5/1 http://www.sharedresearch.jp/ Copyright (C) 2013 Shared Research Inc. All Rights Reserved 13/65 SR Research Report The company’s estimate of the impact of the consumption tax increase is based on trends recorded after the previous increase (1997), which saw a 4.6% decrease in department store sales. However, in 1997 the Japanese economy was stagnant and suffered the effects of several major bankruptcies (Yamaichi Securities, Hokkaido Takushoku Bank, etc.) around that time. SR believes that the fall in department store sales after the 1997 consumption tax increase was unlikely to be fully attributable to the tax increase alone, and hence the company’s forecast appears somewhat conservative.

The company has expressed its intention to manage operations tightly based on its recognition that market conditions are likely to remain harsh. This indicates that the company sees its forward estimates as conservative. Although domestic department store sales are expected to decline, at the profit level, over the five years through FY02/19, the company forecasts operating profit to increase by JPY10.0bn. Factors expected to drive this increase include improved competitiveness based on developing strong relationships in local markets and building a store-based business model, and pursuing an omni-channel retailing strategy.

Takashimaya also anticipates a JPY5.0bn increase in operating profit from other domestic group businesses, and in overseas operations forecasts a JPY4.0bn operating profit increase. Overall, operating profit is projected to rise JPY18.9bn, or a 65% increase compared with FY02/14. Based on the aforementioned profit increase, ROE is forecast to rise from 5.4% in FY02/14, to 6.3% in FY02/19. During the same period, there is unlikely to be any major change to Takashimaya’s policy on shareholder return. The company anticipates that during the three years starting from FY02/15, there will be natural attrition to its headcount of approximately 200 employees per year.

Medium-Term Targets (in billion of yen) FY02/14 FY02/19 Sales 904 920 Operating Profit 29 48 Operating Profit Margin 3.4% 5.2% Return on Equity (ROE) 5.4% 6.3% Equity Ratio 39.7% 49.4% Interest-bearing Debt 168 140 Figures may differ from company materials due to differences in rounding methods Source: Company data, SR Inc. Research

Takashimaya Co., Ltd. (8233) 2014/5/1 http://www.sharedresearch.jp/ Copyright (C) 2013 Shared Research Inc. All Rights Reserved 14/65 SR Research Report Over the five years through FY02/19, the company plans to carry out capital expenditure totaling JPY300.0bn.

In the domestic department store business, Takashimaya plans to spend JPY50.0bn on strategic marketing initiatives, JPY120.0bn on structural reform measures to deal with the consumption tax increases (including JPY105.6bn for land lease rights and buildings at the Shinjuku store), and JPY20.0bn for facilities-related investment (safety and environmental investments), to give a total of JPY190.0bn. The remaining JPY110.0bn will be used as follows: domestic group companies JPY60.0bn, China JPY3.0bn, and ASEAN JPY47.0bn.

Department Store Operations (billion yen) Domestic Department Store Business (Cumulative 5 Years) Investment Sales Change OP Change Strategic marketing inititatives 58 28 8 Toshin Development: enhance existing shopping centers, develop surrounding areas and promote the use of group assets through strengthened relationships with department stores 50 8 4 Group companies: strategies centered on contributing to the department store business 6 10 3 M&A and alliances: tie-ups with companies from other sectors to meet customer needs 2 10 1 Cost reductions - - 1 Facilities investment (safety, environmental) 2 - - Impact of the consumption tax increase - -8 -4 Total 60 20 5 Overseas Business (Cumulative 5 Years) Investment Sales Change OP Change ASEAN business 47 23 2.5 Takashimaya Singapore: establish a strong competitive position in ASEAN 3 5 - Saigon Center: planned opening in 2016 5 6 - Third and fourth store openings: likely from 2017 onward 19 6 1 M&A and capital tie-ups: likely from 2016 onward 20 6 1.5 China business 3 9 1.5 Takashimaya Shanghai: implement various measures to expand sales 3 9 1.5 Total 50.0 40.0 5.0 Figures may differ from company materials due to differences in rounding methods Source: Company data, SR Inc.

Research OP Change is compared to FY02/14

Takashimaya Co., Ltd. (8233) 2014/5/1 http://www.sharedresearch.jp/ Copyright (C) 2013 Shared Research Inc. All Rights Reserved 15/65 SR Research Report Business Business description Department store model Of the company's 18 stores, only the Wakayama store is not a large-sized department store. The government’s Census of Commerce defines a department store as a store with product lineups for apparel, food, and household items that each constitute 10% or more and less than 70% of the total lineup, and where more than 50% of sales space is for face-to-face sales. This distinguishes it from a general merchandise store (GMS), which is defined as having 50% or less of its sales floor area assigned for face-to-face sales.

Large-sized department stores are those with sales floor areas of 3,000sm or more (6,000sm or more in designated wards in Tokyo and government-designated major cities), while other department stores are those of less than 3,000sm.

Hiraba and shouka: different accounting treatments. In department stores merchandise is sold at hiraba (the space designed by the company) or at boutique-type shops (unlike tenants at shopping centers [SCs], Takashimaya staff manage these shops). Hiraba sales at Takashimaya provide about 60% of total (domestic department store) sales. There are three typical transaction types—purchase-as-sold consignment sales, consignment sales, and outright purchase sales. The Japanese term for the main transaction method is shouka (purchase-as-sold), generally translated as consignment sales. Confusion can arise from the second method employed in the relationship, itaku hanbai, also translated as consignment sales.

Despite common translation, the two methods have different accounting treatments. The former (purchase-as-sold) presumes that title is not transferred to a department store until actual sale, ie, it is never booked as department store inventory; the latter “consignment sales” implies the goods become department store inventory (returnable to the manufacturer if unsold). The outright purchase method common in the US (department stores purchase inventory and assume inventory risk) is minor for the Japanese department stores (it is called kaitori, outright purchase). For the department stores cost-of-goods-sold is always the wholesale price with the COGS ratio about 10% lower for the outright purchase transaction (= about 10% higher gross profit margin, GPM).

The outright purchase sales at Takashimaya account for about 5-10% of sales, purchase-as-sold 20-25% and itaku consignment around 70%. This split tallies with the industry average. On a typical sales floor, about 20% of the sales staff are company employees (including non-full time employees) and the remaining 80% are suppliers’ personnel, who sell all of the consignment merchandise on the sales floor they are responsible for, regardless of the supply method. By product group GPMs are the highest for men’s accessories at around 40%, followed by menswear, sporting goods, kimono, womenswear, and women’s accessories.

The GPM for luxury brands is slightly above 20% and for foodstuffs just under 20%.

While other department store operators (where the bulk of sales come from the main store) tend to rely on the main store buyers for purchasing across the store network, Takashimaya with its multiple flagships has buyers at each individual store. At a typical store, food is selling at the basement floor, cosmetics, shoes, handkerchiefs, and similar goods – at the first, apparel – at the second and higher floors, followed by household and other non-fashion items. In many cases, the top floor has restaurants and event spaces to generate a “shower effect”, ie, to drive customers to the top floor and then shower them down to the shops selling apparel and accessories on the upper floors.

Takashimaya Co., Ltd. (8233) 2014/5/1 http://www.sharedresearch.jp/ Copyright (C) 2013 Shared Research Inc. All Rights Reserved 16/65 SR Research Report Department store sales tend to mirror GDP growth. The short-term sales trends in Takashimaya’s department store segment, shown in the chart below, tend to be highly correlated with business sentiment and GDP growth. Long-term growth has been below the GDP growth rate as specialty stores and other emerging competitors took market share. In 2001 Shinjuku store sales (+2.7% YoY) and Kashiwa store sales (+9.4% YoY), both enjoying visible effects from renovations, contributed to performance.

In 2003 and 2004, apparel sales were stagnant as the department store sector slumped as a whole due to economic slowdown.

For details of the real estate business model, please see the discussion on Toshin Development in this report. Business segments Parent sales are reported in three business segments: department store (93.2% of total sales in FY02/14); corporate (4.2%); and cross-media (2.6%). Corporate includes sales of products for corporate sales promotions and company uniforms. Cross-media carries out the company’s mail order and online business (e-commerce). Consolidated segments: Department stores: Includes 14 parent stores, four subsidiary stores and Takashimaya Singapore. FY02/14 sales were JPY798.1bn (up 3.6% YoY) and operating profit was JPY14.0bn (up 17.5% YoY).

Real estate: Mostly comprises Toshin Development, managing shopping centers. Revenues accrue from fixed rental charges and sales-linked revenues. A characteristic of the company’s shopping centers is a high percentage (more than 90%) of fixed rental income in segment sales. Only 10% comes from sales-linked fees. Sales in FY02/14 were JPY36.8bn (up 8.7% YoY) and operating profit was JPY8.4bn (up 8.0% YoY).

Contract and design: Mainly subsidiary Takashimaya Space Create. It undertakes each stage of the production process for commercial facilities and multipurpose facilities, from basic concept development through to design, planning and post-opening operations. The company started a renovation business from FY02/13. In September 2001, the head office of the Takashimaya contract and design segment was

Takashimaya Co., Ltd. (8233) 2014/5/1 http://www.sharedresearch.jp/ Copyright (C) 2013 Shared Research Inc. All Rights Reserved 17/65 SR Research Report integrated with Takashimaya Kosakusho, another subsidiary.

Sales in this segment in FY02/14 were JPY20.6bn (up 8.5% YoY) and operating profit was JPY1.1bn (up 27.9% YoY). Finance: This segment is the operations of Takashimaya Credit, which carries out operations required for its credit card business. It collaborates with Credit Saison, to which it outsources processing and other operations. Card commissions from Takashimaya stores provide a little less than 30% of segment sales, card commissions from other stores 30%, annual fees 20%, and cashing (interest) fees 20%. More than 60% of the company’s department store sales are made using the in-house credit card.

Finance segment sales in FY02/14 were JPY11.9bn (up 2.2% YoY) and operating profit was JPY4.1bn (up 14.3% YoY). Others: This segment includes the cross-media business (mail order and online operations). In FY02/13, the company made SELECT SQUARE, an operator of a fashion mall-type online mail order website, a subsidiary. Others segment sales in FY02/14 were JPY36.8bn (+2.9% YoY) and operating profit was JPY1.7bn (+30.8% YoY).

Department stores The table below shows FY02/14 department store sales by product category, including the four domestic department store subsidiaries. Apparel provided 32.6% of total sales, within which womenswear

Takashimaya Co., Ltd. (8233) 2014/5/1 http://www.sharedresearch.jp/ Copyright (C) 2013 Shared Research Inc. All Rights Reserved 18/65 SR Research Report contributed 20.8%. Food also constituted a large percentage of the total at 28.9%. The data is practically unchanged from the previous year, apart from sales of luxury items such as art, jewelry, and precious metals, mainly spurred by higher stock prices since end 2012.

Store network Domestically the company has 18 stores within its department store segment—14 parent stores (eight stores in Kanto region; six stores in the Kansai region) and four stores owned by subsidiaries. It holds a 100% equity position in each of its subsidiaries of Gifu Takashimaya, Yonago Takashimaya, and Takasaki Takashimaya, and a 66.6% equity position in Okayama Takashimaya. Equity method affiliates are JR Nagoya Takashimaya (equity position 33.4%) and Iyotetsu Takashimaya (33.6%). In FY02/14, in terms of sales by store, the Yokohama store contributed JPY135.4bn, followed by the Nihombashi store (JPY129.9bn), the Osaka store (JPY120.7bn), and the Kyoto store (JPY85.2bn).

Renovations at its Osaka store contributed favorably to a 1.8% YoY rise in sales. Overall sales growth rates at its stores in Kanto were higher than those of its Kansai stores, mainly as a result of recovery from depressed levels following the Tohoku earthquake.

Sales by Product and Service (including four domestic department store subsidiaries) (Million Yen) Sales % of Total Sales % of Total Sales % of Total Menswear, goods 50,202 6.9% 50,495 6.9% 50,309 6.7% Womenswear, goods 154,336 21.1% 155,118 21.1% 155,268 20.8% Children's wear, goods 20,368 2.8% 19,671 2.7% 19,460 2.6% Other apparel 17,915 2.5% 18,133 2.4% 18,490 2.5% Apparel total 242,822 33.3% 243,418 33.1% 243,529 32.6% Personal items 103,352 14.2% 106,357 14.5% 110,255 14.7% Cosmetics 41,251 5.7% 41,978 5.7% 42,991 5.8% Art works, jewelry 27,282 3.7% 29,755 4.0% 34,205 4.6% Other accessories 19,994 2.7% 18,853 2.6% 18,237 2.4% Accessories total 88,528 12.1% 90,587 12.3% 95,434 12.8% Furniture 13,336 1.8% 12,581 1.7% 13,439 1.8% Home appliances 1,923 0.3% 1,956 0.3% 2,851 0.4% Other household goods 42,701 5.8% 42,276 5.7% 42,653 5.7% Household goods total 57,961 7.9% 56,814 7.7% 58,944 7.9% Fresh produce 42,247 5.8% 42,508 5.8% 42,568 5.7% Confectionery 55,146 7.5% 54,787 7.4% 55,260 7.4% Deli foods 57,739 7.9% 56,467 7.7% 56,461 7.5% Other foods 60,509 8.3% 62,185 8.5% 62,158 8.3% Foods total 215,643 29.5% 215,949 29.4% 216,449 28.9% Restaurants, cafes 12,885 1.8% 13,316 1.8% 13,875 1.9% Services, others 8,553 1.2% 8,887 1.2% 9,323 1.2% Total 729,746 100.0% 735,332 100.0% 747,812 100.0% Figures may differ from company materials due to differences in rounding methods.

Source: Company data, SR Inc. Research FY02/14 FY02/13 FY02/12

Takashimaya Co., Ltd. (8233) 2014/5/1 http://www.sharedresearch.jp/ Copyright (C) 2013 Shared Research Inc. All Rights Reserved 19/65 SR Research Report Prior to the Second World War, the company had only three stores (in Kyoto, Osaka, and Nihombashi) but it became Japan’s largest department store chain in the post-war period. In 1989, it became the world’s first department store operator to achieve sales in excess of JPY1tn. Takashimaya now has 18 domestic stores, each with its own characteristics, customer needs, and product lineups. While the domestic operating environment is tough, management wants to maintain the existing stores, considering their contributions to local economies.

The company is advancing into overseas markets with Takashimaya Singapore (100% equity), Shanghai Takashimaya (100%), and Dayeh Takashimaya (50.0%). Takashimaya Singapore is located on Orchard Road, Singapore’s largest commercial area, and in addition to being a shopping center with 130 specialty stores it is one of the area’s landmarks. Dayeh Takashimaya of Taipei is a big suburban department store capitalized by local developer Dayeh Development Co Ltd. Floor area (m²) Sales (million yen) Chg YoY Ownership Nihombashi 50,508 129,901 3.0% 100.0 Yokohama 55,699 135,370 2.7% 100.0 Konandai 14,311 10,634 0.2% 100.0 Shinjuku 53,727 66,081 3.7% 100.0 Tamagawa 24,056 42,468 3.7% 100.0 Tachikawa 16,732 17,778 -1.9% 100.0 Omiya 12,503 11,722 -7.4% 100.0 Kashiwa 29,207 36,394 -0.7% 100.0 Osaka 68,401 120,685 0.6% 100.0 Sakai 19,507 15,171 -1.4% 100.0 Kyoto 60,184 85,191 1.6% 100.0 Senboku 20,781 20,178 -1.2% 100.0 Okayama Takashimaya 19,771 18,760 4.1% 66.6 Gifu Takashimaya 24,640 16,002 1.8% 100.0 Yonago Takashimaya 16,904 6,363 0.3% 100.0 Takasaki Takashimaya 19,456 15,105 0.7% 100.0 JR Tokai Takashimaya Co., Ltd.

56,246 110,000 33.4 Iyotetsu Takashimaya Co., Ltd. 43,000 33.6 Figures may differ from company materials due to differences in rounding methods. Sales of Wakayama and Rakusai stores included in those of Osaka and Kyoto stores. Source: Company data, SR Inc. Research Overseas Floor area (m²) Opening Ownership Singapore 57,400 1993 100.0 Taipei 38,000 1994 50.0 Plan Shanghai 40,000 Dec. 2012 100.0 Vietnam 10,000 2015 100.0 Shanghai Takashimaya is owned by Takashimaya (25%), Singapore Takashimaya (50%), and Toshin Development Co., Ltd. (25%). Singapore Takashimaya and Toshin Development are both fully owned subsidiaries of Takashimaya.

Singapore Takashimaya plans to fully own Vietnam Takashimaya. Source: Company data, SR Inc. Research

Takashimaya Co., Ltd. (8233) 2014/5/1 http://www.sharedresearch.jp/ Copyright (C) 2013 Shared Research Inc. All Rights Reserved 20/65 SR Research Report Main domestic stores The Nihombashi store first opened in Kyobashi. The store moved to Nihombashi upon the 1933 completion of the current main building by Nippon Life Insurance that also occupied the building. From 1952 to 1965, a series of building extensions and renovations were done, and in 1963 Nippon Life Insurance vacated the building. In 2009, the building became the first department store to be designated as one of Japan’s Important Cultural Properties.

It is the most important of Takashimaya’s stores, and most representative of its retail strategy, with a large percentage of affluent customers. As an example of its special status, the Nihombashi store uses its special wrapping paper with a picture of the store itself, in addition to the rose motif paper used by the other stores. It has a sales floor space of 50,508sm and recorded sales of JPY129.9bn in FY02/14.

The Yokohama store was initially a joint venture with Sagami Railway and opened in the Sotetsu Joinus Building, a train station building owned by Sagami Railway. It is currently the Takashimaya Group’s number one store in terms of sales and profits. At one point it was Japan’s largest department store in terms of sales floor area. The renovation of the store will be completed in the fall of 2013. It had a sales floor area of 55,699sm and recorded sales of JPY135.4bn in FY02/14. In FY02/13, the company spent JPY4.4bn renovating its Yokohama store. Despite its strength to attract customers, the old store had a large number of small stairs and uneven floor levels, making it hard for people in wheelchairs, customers using baby buggies and seniors.

The renovation is aimed at making the store barrier-free and improving overall layout.

Dayeh Takashimaya (Taipei) Source: Company data, SR Inc. Research Nihombashi Store FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 Sales (Million Yen) 153,946 154,604 159,028 162,584 159,081 146,473 130,795 127,092 124,242 126,124 129,901 YoY -6.7% 0.4% 2.9% 2.2% -2.2% -7.9% -10.7% -2.8% -2.2% 1.5% 3.0% Sales Floor Area (m2 ) 49,457 50,499 50,499 50,481 50,481 50,390 50,555 50,508 50,508 50,508 50,508 Figures may differ from company materials due to differences in rounding methods.

Takashimaya Co., Ltd. (8233) 2014/5/1 http://www.sharedresearch.jp/ Copyright (C) 2013 Shared Research Inc.

All Rights Reserved 21/65 SR Research Report The Osaka store, registered as the company’s head office, is linked to the Namba Station of the Nankai Electric Railway (OSE1: 9044) and was originally known as Nankai Takashimaya. The Nankai Building that the Takashimaya store occupies is owned by Nankai Electric Railway. Following the expansion and renovation completed in March 2011, the 68,401m2 store posted JPY120.7bn in sales in FY02/14 (including sales from Wakayama store). The goal of the renovation was to create a pleasant shopping space where items are easy to see and buy. An entrance that leads directly to the Namba Station platform has been newly built on the third floor, while part of the sales floor on the first-level basement previously used by Mitsubishi Tokyo UFJ Bank has been moved to the second floor.

The main building and the TE annex have become more integrated and it is easier for customers to move between the Nankai Namba Station and the adjacent commercial facilities of Namba City and Namba Parks. In FY02/13, the company strengthened its womenswear and women’s accessories lineups to combat the reopening of the renovated Hankyu Umeda, the main competitor.

The Kyoto store is the birthplace of Takashimaya and its first regional store. In October 1950, the store moved from the location of the first ever Takashimaya store, in Karasuma Takatsuji, to its current site in Kawaramachi Shijo. Part of the current building is owned by the Hankyu Hanshin Toho Group. The store has a sales floor area of 60,184sm and in FY02/14 it recorded sales of JPY85.2bn (including sales from the Rakusai store). The Shinjuku store is at Shinjuku Station (a major Tokyo railway station) South Exit. It was completed in 1996 as part of the redevelopment of the freight marshaling yard of the former Japan National Railway.

Yokohama Store FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 Sales (Million Yen) 174,469 166,217 170,872 159,892 159,471 148,988 135,489 134,029 131,794 131,776 135,370 YoY -0.5% -4.7% 2.8% 1.1% -0.3% -6.6% -9.1% -1.1% -1.7% -0.0% 2.7% Sales Floor Area (m2 ) 69,745 69,617 69,508 54,223 54,223 53,467 56,073 56,073 55,699 55,699 55,699 Figures may differ from company materials due to differences in rounding methods. FY02/03-FY02/06 includes Konandai Store sales.

Source: Company data, SR Inc. Research Osaka Store FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 Sales (Million Yen) 172,251 163,558 162,967 142,543 139,535 124,371 107,898 114,907 117,890 119,997 120,685 YoY -3.1% -5.0% -0.4% -1.0% -2.1% -10.9% -13.2% 6.5% 2.6% 1.8% 0.6% Sales Floor Area (m2 ) 93,791 90,854 90,869 68,931 66,834 65,804 64,070 72,869 72,978 72,712 68,401 Figures may differ from company materials due to differences in rounding methods. Includes Wakayama Store sales. FY02/04-FY02/06 includes Sakai Store sales. Source: Company data, SR Inc.

Research Kyoto Store FY02/04 FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 Sales (Million Yen) 108,540 103,522 101,555 103,415 104,193 98,236 90,364 85,370 83,878 83,866 85,191 YoY -2.1% -4.6% -1.9% 1.8% 0.8% -5.7% -8.0% -5.5% -1.7% -0.0% 1.6% Sales Floor Area (m2 ) 68,231 68,231 67,904 68,316 68,316 68,316 68,314 67,985 60,527 60,184 60,184 Figures may differ from company materials due to differences in rounding methods. Includes Rakusai Store figures.

Source: Company data, SR Inc. Research

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