financial results presentation materials - bookoff.co.jp · progress report on key ......

Ⓒ2017 BOOKOFF CORPORATION LIMITED All rights reserved.

Financial Results Presentation Materials

for the First Half of the Fiscal Year Ending March 2018

(1H FY3/2018)

November 8, 2017BOOKOFF CORPORATION LIMITED

TSE First Section: 3313


Contents

1

Financial Results Overview P3

Business Results by Segment P8

Progress Report on Key Initiatives of FY3/2018

Make the Reuse Store Business More Profitable P16

Make Major Changes in the HUGALL Business P25

Outlook for FY3/2018 P31

Strategic Policies and Goals P34

Appendix P65

(Contact) Corporate Planning Department, BOOKOFF CORPORATION LIMITEDTEL: +81‐42‐750‐8588

Note Concerning Forward‐Looking Statements

The plans, strategies, and financial forecasts presented in these materials contain forward‐looking statements not based on historical fact. Forward‐looking statements are based on management judgments using information available at the time. Actual results may vary significantly from forecasts due to changes in the business environment and other factors.


Financial Results Overview and Outlook

2

• Sales were about the same as one year earlier but a big reduction in SG&A expenses produced an ordinary profit compared with a loss one year earlier.

• Due to impairment losses in the HUGALL Business and other extraordinary losses, there was a small decrease in the loss attributable to owners of parent.

• Reaffirmed the earnings forecast for FY3/2018 based on first half and subsequent performance


Financial Results Overview


Consolidated Business Results

4

• Almost no change in sales but an operating loss significantly decreased from one year earlier resulting from a reexamination of expenses that started in the third quarter of FY3/2017. There was an ordinary profit compared with a loss in FY3/2017.

• Loss attributable to owners of parent was caused by impairment losses of non‐current assets resulting from the poor performance of the HUGALL Business and other extraordinary losses.

(Million yen) 1H FY3/2017 1H FY3/2018% to sales % to sales YoY change

(Amount)YoY change (Ratio)

Net sales 39,270 100.0% 39,211 100.0% (58) 99.9%

Gross profit 23,158 59.0% 23,041 58.8% (117) 99.5%

SG&A expenses 24,252 61.8% 23,109 58.9% (1,143) 95.3%

Operating profit (loss) (1,093) ‐ (67) ‐ +1,025 ‐

Ordinary profit (loss) (880) ‐ 169 0.4% +1,049 ‐

Profit (loss) attributable to owners of parent (896) ‐ (715) ‐ +181 ‐


Selling, General and Administrative Expenses

5

• Started reexamining expenses in the third quarter of FY3/2017, mainly in the Reuse Store Business

• SG&A expenses decreased 4.7% because of the more efficient use of personnel, lower investments, a review of the use of supplies, and other cost‐saving measures.

• Rents increased because of the relocation of HUGALL Business operations to a large logistics warehouse and a newly consolidated subsidiary.



Net sales 39,270 100.0% 39,211 100.0% (58) 99.9%

Gross profit 23,158 59.0% 23,041 58.8% (117) 99.5%

Personnel* 11,015 28.1% 10,417 26.6% (598) 94.6%

Rents 5,787 14.7% 5,985 15.3% 198 103.4%

Depreciation 1,001 2.6% 916 2.3% (84) 91.6%

Advertising and sales promotion 866 2.2% 761 1.9% (105) 87.9%

Supplies 866 2.2% 668 1.7% (197) 77.2%

Others 4,715 12.0% 4,359 11.1% (356) 92.4%

Total SG&A expenses 24,252 61.8% 23,109 58.9% (1,143) 95.3%

* Includes recruiting expenses

Ⓒ2017 BOOKOFF CORPORATION LIMITED All rights reserved.6

Sales and Earnings by Segment


(Amount)YoY change(Ratio)

Net sales 39,270 100.0% 39,211 100.0% (58) 99.9%

Reuse Store Business 34,381 87.6% 34,345 87.6% (36) 99.9%

BOOKOFF Online Business 3,228 8.2% 3,031 7.7% (196) 93.9%

HUGALL Business 955 2.4% 1,186 3.0% +231 124.2%

Others 704 1.8% 648 1.7% (56) 92.0%

Operating profit (loss) (1,093) ‐ (67) ‐ +1,025 ‐

Reuse Store Business (46) ‐ 1,488 ‐ +1,535 ‐

BOOKOFF Online Business 132 ‐ 120 ‐ (11) 91.1%

HUGALL Business (116) ‐ (617) ‐ (500) ‐

Others (39) ‐ (74) ‐ (35) ‐

Corporate expenses and adjustments (1,023) ‐ (984) ‐ +38 ‐


YoY Change in Operating Profit

7

1H FY3/2017Operating profit

Lower existing‐store gross profit

Lower costs at existing stores

First profits from new FY3/2017

stores

Subsidiary consolidation

BOOKOFFOnlineBusiness

HUGALLBusiness

Corporate expenses and

others

1H FY3/2018Operating profit

Reuse Store Business +1,535

FY3/2018 store opening expenses

• In the Reuse Store Business, existing store gross profit decreased but cost cutting made a big contribution to earnings growth.

• Earnings from stores opened in FY3/2017 were higher than expenses for stores opened during the first half of FY3/2018 because store openings were held down.

• A big drop in HUGALL Business earnings caused a first half operating loss, but the loss was much smaller than one year earlier.

(Million yen)

(1,093)

(43) (11) (500)

(67)

+2,118

+330

+46

+3

(916)


Business Results by Segment


Reuse Store Business –Business Results Overview

9

• Existing store sales were lower than one year earlier but total first half sales were about the same as one year earlier because of newly opened stores and a newly consolidated subsidiary.

• Earnings improved significantly because of a reexamination of expenses that started in the third quarter of FY3/2017.

Sales and earnings

(Million yen) 1H FY3/2017 1H FY3/2018 YoY change(Amount)

YoY change(Ratio)

Net sales 34,381 34,345 (36) 99.9%

Operating profit (loss) (46) 1,488 +1,535 ‐


Reuse Store Business –New Stores

10

Store name Opening date Location Floor space

Directly operated

New stores

SEIYU Omori Store May 18 Shinagawa‐ku, Tokyo 1,758m2

Northport Mall Store June 22 Yokohama City, Kanagawa 2,961m2

AEON Sendai Store June 29 Sendai City, Miyagi 1,689m2

Jalan Jalan Japan 1 Shamelin Mall Store September 30 Malaysia 1,421m2

Repackaged stores

Maebashi Hirose Store April 8 Maebashi City, Gunma 813m2

Nara Kashihara Store September 15 Kashihara City, Nara 869m2

FranchisedNew stores

Hamamatsu Kitaterashima Store April 21 Hamamatsu City, Shizuoka 307m2

ACROSSPLAZA Yojiro Store April 21 Kagoshima City, Kagoshima 737m2

Repackaged stores Fujinakajima Store July 22 Fuji City, Shizuoka 915m2

• Three directly operated BOOKOFF SUPER BAZAAR stores were opened as planned.

• Opened three BOOKOFF PLUS stores (two directly operated and one franchised), a format that adds apparel and other merchandise to the BOOKOFF store format

• Opened the second “Jalan Jalan Japan” reuse store in Malaysia


Reuse Store Business –Existing Store Sales

11

96.8%95.9% 96.3%

94.6%

99.5% 99.1%102.9%

102.3% 102.0%

105.2%

94.1%

100.0%100.0%

98.9%

101.7% 102.2%

95.2%

97.3%

Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.

1H FY3/2017

1H FY3/2018

YoY change in monthly sales of directly operated existing stores in Japan

• Existing store sales in the Reuse Store Business were down 3.0% from the first half of FY3/2017 when there were extensive promotions for the start of sales of reuse home appliances.


Reuse Store Business –Results by Product Categories

12

SalesYoY change(Ratio)

PurchasesYoY change(Ratio)

Books 96.1% 91.9%

Software media 96.5% 90.6%

Apparel 98.1% 94.3%

Trading cards/hobby goods 102.2% 98.1%

Home appliances/mobile phones 81.1% 58.4%

Precious metals/watches/luxury‐brand bags 114.2% 99.2%

Others 102.5% 97.4%

Total 97.0% 89.7%

Books35.6%

Software30.0%

Apparel12.9%

Trading cards/ hobby goods5.1%

Home appliances/mobile phones5.4%

Precious metals5.9%

Others5.1%

■ YoY changes in sales and purchases by product category (directly operated existing stores in Japan)

■Pct. of total sales (directly operated existing stores in Japan)

• Sales of books, software media and apparel, all of which are a large share of total sales, were lower than one year earlier.

• A decline in sales of home appliances and mobile phones mainly because of a downturn in mobile phone purchases as carriers take used phones as trade‐ins for the purchase of new models

• Consistently strong sales of trading cards, hobby goods, precious metals, watches and luxury‐brand bags• Purchases were down from one year earlier in all categories


BOOKOFF Online Business –Business Results Overview

13

• Sales in the BOOKOFF Online Business, which operates a home e‐commerce business, decreased because of a decline in inventories caused by the suspension of shipments of items in store inventories and by weakness in the home pick‐up purchasing service.

• Operating profit was lower than one year earlier due to a decline in sales.

■Sales and earnings

(Million yen) 1H FY3/2017 1H FY3/2018 YoY change(Amount)

YoY change(Ratio)

Net sales 3,228 3,031 (196) 93.9%

Operating profit 132 120 (11) 91.1%


BOOKOFF Online Business – Inventory Items and Sales

14

• Used book shipments from store inventories and other measures starting in 2015 to intentionally increase inventories. But stores stopped these shipments early in FY3/2018 to increase inventories. In addition, home pick‐up purchases were less than expected mainly due to competition. The result was a decline in inventory items in the first half of FY3/2018.

• E‐commerce site inventories decreased and first half sales were lower than one year earlier.

0

2,000

4,000

6,000

50%

75%

100%

125%

150%

Apr.2015

Jun.2015

Aug.2015

Oct.2015

Dec.2015

Feb.2016

Apr.2016

Jun.2016

Aug.2016

Oct.2016

Dec.2016

Feb.2017

Apr.2017

Jun.2017

Aug.2017

Performance

YoY change in sales

Number of inventory items (Thousand

items)

Started shipping items in store inventories

Stopped shipping items in store inventories


HUGALL Business –Business Results Overview

15

• The volume of products handled increased following the relocation of operations to a large logistics warehouse in the third quarter of FY3/2017. However, the operating loss was higher than one year earlier because of the increase in expenses associated with this relocation. A write‐down of inventories in the second quarter of FY3/2018 resulting from the decision to stop holding Tokyo Reuse Apparel sales events was another reason for the higher operating loss, an increase of ¥500 million year on year.

• An impairment loss of ¥392 million was recorded as an extraordinary loss because the HUGALL Business is not expected to post an operating profit in this fiscal year.

Sales and earnings

(Million yen) 1H FY3/2017 1H FY3/2018 YoY change (Amount)

YoY change (Ratio)

Net sales 955 1,186 +231 124.2%

Operating profit (loss) (116) (617) (500) ‐

Recorded an impairment loss of ¥392 million for the 1H of FY3/2018


Progress Report on Key Initiatives of FY3/2018

Make the Reuse Store Business More Profitable


Make the Reuse Store Business More Profitable Policy

17

Current Evaluation

Page from the FY3/2017 presentation

Become more profitable by reexamining and improving our profit structure while focusing on three key actions:

(1) Limit new store openings and investments

(2) Make existing stores more appealing

(3) Close unprofitable stores

FY3/2018 Policy –Make the Reuse Store Business More Profitable


• Making existing assets more profitable is a priority. New investments in FY3/2018 will be held down and total investments in the Reuse Store Business are to be 20% less than in FY3/2017.

Make the Reuse Store Business More Profitable (1) Limit new store openings and investments

FY3/2017Results

FY3/2018Plan

New comprehensive large‐format stores in Japan(directly operated)

6 stores 3 stores

Repackaged stores from BOOKOFF to BOOKOFF PLUS (directly operated)

6 stores 2 stores

One‐stop purchasing consultation desks 1 location 5‐7locations

IT/systems Continue investments to improve operational efficiency

Total About 20% less than in FY3/2017

Reuse Store Business Overview of capital expenditure plan


SEIYU Omori StoreOpened in May 2017

Northport Mall StoreOpened in Jun. 2017

AEON Sendai StoreOpened in Jun. 2017

• Three directly operated comprehensive large‐format stores opened as planned

• The SEIYU Omori Store is the first BOOKOFF SUPER BAZAAR in Tokyo’s 23 wards.

Make the Reuse Store Business More Profitable (1) Limit new store openings and investmentsStores opened in 1H FY3/2018(Directly operated stores in Japan)


0

2

4

6

8

10

Apr. 2017 May 2017 Jun. 2017 Jul. 2017 Aug. 2017 Sep. 2017

20

Purchases atJiyugaoka Stn. Store

(Million yen)

Small investments and higher efficiency produce purchases on the same level as

BOOKOFF SUPER BAZAAR stores

Nov. 2016 Jiyugaoka Stn. Store

Apr. 2017 Sangenjaya Store

Sep. 2017 Waseda Stn. Store

■ Stores with one‐stop purchasing consultation desks

• Added one‐stop purchasing consultation desks at existing small BOOKOFF stores in the Tokyo area, enabling customers to sell almost anything after receiving a thorough and accurate appraisal

• Sincere face‐to‐face communications with customers are creating a large number of regular customers. The volume of items purchased has been much more than anticipated despite the use of low‐cost operations at small stores.

One‐stop purchasing consultation desks

Make the Reuse Store Business More Profitable (1) Limit new store openings and investments


• The previous structure was based on store packages. The new structure has five regional sales departments in order to give stores the speed and flexibility to match the characteristics of local markets.

• Using regional departments for the supervision and operation of stores allows upgrading existing stores individually. Activities include employee development regarding merchandise and management skills, inventory links that reflect inventory levels and best‐selling items, cost structure optimization based on the condition of each store, and other initiatives.

Make the Reuse Store Business More Profitable (2) Make existing stores more appealing

Employee training and development

Optimization of cost structure

Links among regional

inventories

Regional Sales Departments


(Million yen) 1H FY3/2017 1H FY3/2018 YoY change (Amount)

YoY change (Ratio)

Personnel 9,896 9,262 (633) 93.6%

Rents 5,455 5,557 +102 101.9%

Depreciation 887 786 (100) 88.7%

Advertising and promotion 695 571 (123) 82.2%

Supplies 750 576 (174) 76.8%

Others 3,190 2,738 (451) 85.8%

Total 20,874 19,492 (1,381) 93.4%

Reuse Store Business SG&A expenses

• Adding used home appliances and other new actions in FY3/2017 greatly increased expenses; started reexamining expenses in the third quarter of FY3/2017

• Rigorous use of low‐cost operations made stores more efficient. Personnel and all other cost items were cut, resulting in a 6.6% decrease in Reuse Store Business SG&A expenses that made a big contribution to earnings growth.

Better placements and use of part‐time

workers

Limit investments

• Down due to higher expenses in FY3/2017 for many new actions (used home appliances, etc.)

• Limit new store openings etc.

Cost cuts resulting from an improvement in business operations

Make the Reuse Store Business More Profitable (2) Make existing stores more appealing


• The new regional sales departments established in FY3/2018 produce store operating policy manuals that contain information about the unique characteristics of each store.

• In prior years, the same actions were used for all stores. In FY3/2018, merchandise that reflects store characteristics, personnel use, store interaction and other measures are being created separately for each store. These store‐specific actions are being used with the goal of improving earnings starting in FY3/2019.

BOOKOFF xxx StoreOperating Policy Manual

PerformanceMarket characteristicsCustomer characteristicsBest‐selling merchandiseRecruiting of part‐time workersTerms of store leasing agreement

…and other itemsAn operating policy manual for each

directly operated store

Links with inventories of

other stores in the same area

Selection of key merchandise

Training of merchandising

leaders

Better placements and use of part‐time workers

Actions for the unique requirements of each store

Make the Reuse Store Business More Profitable (2) Make existing stores more appealingMeasures for strengthening existing stores


• We will use clearly defined standards for store closing decisions and select stores that are candidates for closing over the next two or three years.

• We will continue to move quickly once a decision has been made in order to become more profitable.

Some store closings have been determined (as of September 30, 2017)(posted a store closing expense allowance of ¥17 million)More stores will be closed based on the store closing standards

Make the Reuse Store Business More Profitable (3) Close unprofitable stores

Standards for selecting stores to closeEarnings and prospects for a recovery

Geographical considerations with respect to the new store strategy

Lease agreement terms (cancelation penalty, etc.) that would make a store closing too costly

and other standards


Progress Report on Key Initiatives of FY3/2018Make Major Changes in the HUGALL Business


Make Major Changes in the HUGALL Business Business Model and Performance

• HUGALL was launched in April 2013 as a reuse business that purchases a variety of merchandise through all types of channels (not just in‐store); each item is sold using the best channel.

• Earnings have not improved in accordance with the initial timetable; aiming for profitability in FY3/2018 while assessing the viability of the HUGALL Business

Purchases SalesIn‐home purchasing

Purchasing agent stores

Home pick‐up

B‐to‐B

A variety of channels for purchasing Sell at the highest prices

Web

B‐to‐B

Special events/stores

Overseas

Optimize channelsAdd value to merchandise


Make Major Changes in the HUGALL Business Policy

Page from the FY3/2017 presentation

Current Evaluation

Significantly alter and strengthen business operations by using initiatives centered on the following three measures with the goal of becoming more profitable in FY3/2018.

(1) Concentrate resources on only carefully chosen purchasing channels while abandoning other channels

(2) Downsize distribution centers to match the overall scale of operations

(3) Eliminate inventories of lower‐priced merchandise with actions that include using the BOOKOFF store network to sell these goods

FY3/2018 Policy –Make Major Changes in the HUGALL Business


150.4%

117.3%

148.7% 136.2%

96.7%72.7%


28

Make Major Changes in the HUGALL Business (1) Concentrate resources on only carefully chosen purchasing channels while abandoning other channels

Dept. store desks In‐home purchasing

Maintain/Grow• Continue aiming for progress by

targeting mainly affluent and wealthy people

• Opened the first consultation desk in the Nagoya area in October 2017 (at NagoyaMitsukoshi Sakae Store)

Home pick‐up purchases

Purchases using automated lockers

Condominium events

Inefficient activities ended or downsized

B‐to‐B

Nihombashi Mitsukoshi Department Store Ginza Mitsukoshi ISETAN Shinjuku

Store

ISETAN Tachikawa Store TAKASHIMAYAOmiya Store

Nagoya Mitsukoshi Sakae Store

Dept. stores with Consultation Desks

• Instead of aiming for growth, HUGALL is concentrating on channels where profit margins and efficiency are high and competition is relatively low.

• Benefits of the declining purchasing expense ratio are emerging in FY3/2018.

Decline in the purchasing expense ratio

Purchasing expense ratio = Purchasing expenses / Purchases


• The amount of space used by HUGALL in the large logistics warehouse that began operating in October 2016 is being reduced. Discussions are under way with several prospective companies interested in leasing space at this warehouse.

• Terminating Tokyo Reuse Apparel will further reduce space used at the new logistics warehouse, reducing expenses even more.

Moved to a large logistics warehouse in Oct. 2016

Difficult to maintain expected inventory volume

＋Shut down Tokyo Reuse

Apparel

Use of distribution warehouse space

No longer used

(Sub‐leased)）

Used by HUGALL

To be sub‐leased

Reduced floor area used to further increase space available for sub‐leasing

Make Major Changes in the HUGALL Business (2) Downsize distribution centers to match the overall scale of operations


4447

54 53 54 54

4238

4341

36 37

20

30

40

50

60


30

• The plan was to dispose of the inventory of Tokyo Reuse Apparel, which sells low‐priced apparel at special events at shopping malls and other locations. However, it was not possible to increase the number of locations.

• Tokyo Reuse Apparel will cease operations at the end of FY3/2018. The business model for purchasing low‐priced merchandise will be reexamined.

Monthly number of locations

Plan Results

Unable to maintain the anticipated number of locationsTokyo Reuse Apparel will be terminated at the end of FY3/2018

Tokyo Reuse Apparel Countdown Price

Make Major Changes in the HUGALL Business (3) Eliminate inventories of lower‐priced merchandise


Outlook for FY3/2018


Outlook for 2H FY3/2018 by Segment

32

Reuse Store Business The right‐sizing of expenses has been completed. Due to the difficulty of purchasing reuse items, this business plans to use additional expenditures to implement CP nationwide at the end of 2017. SG&A expenses are expected to increase as a result.In FY3/2017, the priority was discount sales to generate sales. Now the priority is creating policies for individual stores to rebuild operations that look ahead to FY3/2019.

BOOKOFF Online Business Seeking ways to use home pick‐up purchases and tie‐ups with store merchandise in order to secure sufficient merchandise, but a big increase in sales is unlikely due to the current inventory volume.Outlook is for higher SG&A expenses in part due to delivery companies asking for rate hikes.

HUGALL Business Terminating the Tokyo Reuse Apparel special event sales business will affect performance.Sub‐leasing of logistics warehouse space anticipated to start in 1H FY3/2018 is now expected to start in FY3/2019.


Outlook for FY3/2018 –Earnings and Dividends

33

(Million yen) FY3/2017Results

FY3/2018Forecast% to sales % to sales YoY change


Net sales 81,344 100.0% 82,000 100.0% +655 100.8%

Operating profit 116 0.1% 500 0.6% +383 429.0%

Ordinary profit 588 0.7% 950 1.2% +361 161.3%

Profit (loss) attributable to owners of parent (1,159) ‐ 100 0.1% +1,259 Profitable

■Consolidated earnings forecast for FY3/2018

• Although there was a big decline in the operating loss in 1H FY3/2018, the 2H outlook for all business units is not encouraging. As a result, there is no change in the forecast announced in May 2017.

• The FY3/2018 dividend is expected to be unchanged at ¥10 per share.


Strategic Policies and Goals


Contributions to society through our business

activities

Pursuit of employees’ material and spiritual

wellbeing35


The growth of a company and

its employees are mutually beneficial.

36


A company employees can trust and where everyone can grow while doing their jobs with self‐confidence

and passion

37


Contributing to society by using “reuse” to be a

source of enjoyable and enriching lives for as many

people as possible

38


Japan’s leading “reuse” company with books as the

key category

39


Books are the symbol of the BOOKOFF chain of stores and the source of our strength.

Earnings and customers linked to books will be vital to achieving earnings growth in the future.

Books will remain BOOKOFF’s core product as activities continue to build more and stronger customer relationships.

The positioning of books at BOOKOFF

40


Population of book readers in Japan (Estimate)*1

*1: Estimate is from an article written by Shuppan Ryutsu Consulting on the Nihon Chosha Hansoku Center website *2: Estimate is based on the FY2015 Reuse Promotion Business Research Council Report (March 2016) of the Ministry of the Environment

All customer segments, regardless of gender or age, buy and keep books.Handling books creates opportunities for people to visit BOOKOFF stores.

The significance of buying and selling books

Approx. 50million people

Population who have books they no longer need (Estimate)*2

Approx. 26million people

41


• A merchandise selection where they can easily find what they want

• Ease of finding, seeing and understanding things

• Systems and services that are useful day after day

• Suitable prices and a sense of receiving a bargain

What customers want most of all

42


FY3/2018‐FY3/2019

Rebuild the profit structure based on the FY3/2018 policies

Timetable and Goals

FY3/2020‐

More BOOKOFF Group earnings

growth

Build a base for growth

43


Be “One BOOKOFF” by combining real store and Internet strengths

Increase “regional chain business volume” by using unified activities and resources and making inventory information open to everyone

Basic Policies

44


Upgrade individual stores

＋Use comprehensive strengths to win

45


Our Approach for Upgrading Individual Stores

Store services

Continue to focus on upgrading what is needed to continue generating earnings by maximizing the satisfaction of everyone who visits a store.

Non‐store services

Continue to focus on upgrading what is needed to attract individuals who have no opportunity to use a store or are unable to visit a store.

46


Our Approach for Using Comprehensive Strengths to Win

ＢＲＡＮＤ

Non‐store services

Store services (Directly operated, Franchised)

47


Customer Strategy

Sales Strategy

Purchasing Strategy

Use member services to offer greater convenienceCombine and share store and online membersReexamine the bonus point incentive programEnhance and expand services mainly by using smartphones

The Three Core Strategies

Target customers’ “wants” by strengthening stores and using the Internet

Upgrade stores by accumulating product information and expertise acquired at each storeIncrease Internet sales efficiency by building a single e‐commerce infrastructure for the entire BOOKOFF chainMeet “wants” by giving customers access to all BOOKOFF chain inventory data

More services to meet regional needs to sell reuse itemsBroader range of merchandise purchased to reflect store formats (packages) and regional needs Electronic purchasing system and more items in the purchase price databaseUpgrade the Internet purchase application service

48


The BOOKOFF Flowchart

49

Customers who want to sell

Customers whowant to buy

A single infrastructure

(membership services) (inventory management)

Make stores more appealing

Other E‐commerce websites

A single BOOKOFF

e‐commerce platform

Purchasing service for

specific regions and customer segments

YAHUOKU!


0

5,000

10,000

15,000

20,000

'1504 '1510 '1604 '1610 '1704

50

0

1,000

2,000

3,000

4,000

5,000

'1504 '1510 '1604 '1610 '1704

(Thousands) (Thousands)

Point Card Members

16 million people*

E‐commerce website members

3.6million people

Customer Strategy (Integrated membership platform)

Apr. 2015

Oct. 2015

Apr. 2016

Oct. 2016

Apr. 2017

* Based on the number of point cards issued

Apr. 2015

Oct. 2015

Apr. 2016

Oct. 2016

Apr. 2017


3.6 million users

Number of Card Members: 16 million people

Internet registered members included

Approx. 4 million people

A single BOOKOFF membership platform

Number of Card Members: 16 million people

51



10X increase in customer data that extends to purchasing histories

Internet registered members

Now

52

10 times larger

Members

Integration/Sharing


Internet registered members


Use smartphone app as the base for creating opportunities for people to use BOOKOFF real and Internet services for a broad range of needs

Customer identification

Build customer relationships

Maxim

ize opportunities to use BO

OKO

FF

1ID＝1 customer

Approx. 4 million people(includes duplication of

customers)

Single membership platform

Member app

53



Purchasing Strategy (Diversify services)

54

Diversify services to match needs of different regions and customer segments

Expand services for affluent and wealthy

customers

Addition of One‐Stop Purchasing Consultation Desks

＋

Increase merchandise handled by BOOKOFF PLUS


Purchasing Strategy (Increase customer satisfaction)

55

Increase purchasing service convenience and satisfaction

Electronic merchandise receipt and approval at stores

More efficient purchasing procedure

Improve price accuracy by expanding the merchandise

database

Merchandise database

￥事前申込み

StoreHome pick‐upDispatch purchase

Expand the Internet application service

Preliminary application


Sales Strategy (Make stores more appealing)Use merchandise data and share successful examples to make stores more appealing

+


Sales Strategy(Link real and Internet operations)Use a single e‐commerce platform for faster linkage of real and Internet operations

Uses the Internet to buy items when at home or away from home

Uses the Internet to locate an item and buys it at a store

Visits a store regularly, able to buy even items not at the store


Further increase the number of customers

58

The Goal of a Single Infrastructure

Customer Platform

Sales strategyMake stores more appealingLink real and Internet operations

Purchasing strategyDiversify servicesIncrease customer satisfaction


Business Alliance with Yahoo!

Take the item to a store

Used a tie‐up with Yahoo! to start a new purchasing serviceCustomers sent from Yahoo! are expected to increase BOOKOFF’s purchases of quality reuse items.

YAHUOKU!Introducing a purchasing service that is easier to use than C‐to‐C marketplace apps and offers a

generous amount of bonus points (T points)

Starts November 20, 2017


0

1

1

2

2

3

0

50

100

150

200

250

300

350

400

450

500

Apr. 2015 Oct. 2015 Apr. 2016 Oct. 2016 Apr. 2017

Business Alliance with Yahoo!

60

BOOKOFF GroupYAHUOKU!

Sales

Number of items

This new purchasing service is expected to contribute to sales growth by increasing purchases of reuse items and increasing reuse items for sale through links with a single e‐commerce platform.


Unsold reuse merchandise in Japan is sent to Malaysia

Store name: Jalan Jalan JapanIn the Malaysian language, Jalan Jalan means taking a walk. The name was selected because the stores allow customers to enjoy the atmosphere of Japan. Merchandise that was “preloved in Japan” is sold using the brand concepts of “hargagiler” (meaning very cheap in Malaysian) and “large quantities.” Stores are designed to give families a pleasant place to do their shopping.

BOOKOFF Goes OverseasMalaysia is a new exit strategy for reuse

merchandise


BOOKOFF Goes OverseasStores in Malaysia are performing well and

more are planned

The first store

40 mins by car

The second store


The first step is achieving consistent profitability

BOOKOFF uses the entire chain’s resources to build a base for the

future.63


Appendix


Consolidated Statement of Income

66

1H FY3/2017 1H FY3/2018

Net sales 39,270 39,211

Reuse Store Business 34,381 34,345

BOOKOFF Online Business 3,228 3,031

HUGALL Business 955 1,186

Others 704 648

Gross profit 23,158 23,041

SG&A expenses 24,252 23,109

Operating profit (loss) (1,093) (67)

Reuse Store Business (46) 1,488

BOOKOFF Online Business 132 120

HUGALL Business (116) (617)

Others (39) (74)

Adjustment (corporate) (1,023) (984)

Ordinary profit (loss) (880) 169

Profit (loss) attributable to owners of parent (896) (715)

(Million yen)


Consolidated Balance Sheet

67

As of Sep. 30, 2016

As of Sep. 30, 2017

Current assets 33,010 31,267

Cash and deposits 14,430 14,198

Merchandise 13,858 12,548

Others 4,721 4,520

Non‐current assets 19,777 17,542

Property, plant and equipment 8,722 7,327

Intangible assets 1,272 1,423

Investments andother assets 9,781 8,790

Total assets 52,787 48,810

As of Sep. 30, 2016

As of Sep. 30, 2017

Current liabilities 16,753 16,928

Short‐term loans payable 10,252 10,960

Others 6,501 5,967

Non‐current liabilities 21,521 18,415

Long‐term loans payable 10,320 7,115

Long‐term accounts payable‐other 148 170

Bonds with subscription rights to shares

7,700 7,700

Others 3,353 3,429

Total liabilities 38,275 35,344

Non‐controlling interests ‐ 141

Net assets 14,512 13,465

(Million yen)


Consolidated Statement of Cash Flows

68

1H FY3/2017 1H FY3/2018

Cash flows from operating activities (2,057) 953

Profit (loss) before income taxes (1,031) (344)

Depreciation 993 908

Amortization of goodwill 48 45

Changes in assets and liabilities (2,024) 407

Others (43) (63)

Cash flows from investing activities (1,608) (551)

Cash flows from financing activities 2,983 (1,725)

Effect of exchange rate change on cash and cash equivalents (14) 7

Net increase (decrease) in cash and cash equivalents (697) (1,315)

Cash and cash equivalents at beginning of period 15,127 15,268

Increase in cash and cash equivalents from newly consolidated subsidiary ‐ 245

Cash and cash equivalents at end of period 14,430 14,198

(Million yen)


BOOKOFF handles books, CDs, DVDs, game software, home appliances, mobile phones, and other items.BOOKOFF has more than 700 stores in Japan and overseas.

BOOKOFF PLUS is a store complex chain that offers an extra ‘plus factor’ and deals in apparel, brand goods, and similar items.It has now developed into a chain with 54 stores across Japan.

BOOKOFF SUPER BAZAAR is a comprehensive large‐format store chain that deals in broad range of reuse items. It has now developed into a chain with 41 stores nationwide.

Major Store Packages

* Number of stores as of September 30, 2017


Store Packaging Evolution

70

・Founding・Sell us your books・Franchised store growth

・Faster BOOKOFF store openings・New reuse business B KIDS, B SPORTS・BOOKOFF Chuko‐Gekijo (a comprehensive large‐format store)・Overseas expansion・Online business starts

・More BSB and BOP store openings and store remodeling ・Large‐scale urban BOOKOFF store openings

Overseas Store

The 1st BOOKOFF store

Large‐scale urban BOOKOFFstore

BOOKOFF Chuko‐Gekijo

Focus on suburban locations

1991 2000 2009

・Opening one‐stop purchasing consultation desks at the urban stores

2016

One‐stop purchasing consultation desk


Providing a place to experience “the fun of reusing”

From BOOKOFF for Books to BOOKOFF for All Reuse Items

71


Understand “the fun of reusing” and you can enjoy life even more!

From BOOKOFF for Books to BOOKOFF for All Reuse Items

72

Home appliances, mobile phones

Books

Apparel

Luxury‐brand bags

Sporting goods, musical instrument

Children’s apparel, baby goods

Furniture

A chance to find a new interest or hobby!

Try choosing a writer you've never read before!

Read the whole of a comic book series in one go!

Be bold and take the challenge of wearing a new color or style you never worn before!The fun of coordinating!

The fun of being able to buy without worrying about the price!You can see all the things you can't see anywhere else all gathered together here in one place!

Choose brand goods for everyday use!

The fun of collecting brands!

Buy furniture at reasonable prices!Reuse furniture has an appeal new products cannot offer

You can buy furniture at affordable prices and select items with a texture and seasoned appearance that brand new furniture cannot match.

Go on, this is your chance to pursue nostalgic sports or to grab a musical instrument you've always wanted!

The surfing and golf goods, the guitar you’ve wanted for so long… perhaps you can't afford it new but you can get it for reuse at a very reasonable price, and you can make a start right now without worrying if you just remember that “if I don't keep it up I can always sell it.”The blossoming of your children's talents

You've seen snowboarding, tennis, and golf genius boys and girls on TV, haven't you? It might be tough to buy a full set all in one go, but if it's reuse you can give your child the support to pursue the challenge of a new talent without having to worry about the cost.

Baby goods ‐ they soon grow out of them which is all the more reason to get them for reuse!

Children grow so quickly, and the baby carriage you bought for them so lovingly soon falls out of use. At times like these, please buy your items reuse and carefree, and then just sell them again when you’ve finished with them.

Nowadays, for home appliance items, the functionality of reuse is completely satisfactory!

If you set out to buy all of your important home appliances in one go, it's going to amount to a very expensive bill for you to pay. These days however, you can easily buy great quality reuse products with high‐level functions and excellent reliability so cheaply!


Activities for Diversity ‐Creating a Pleasant Workplace Environment‐

73

Employees are the BOOKOFF Group’s most valuable asset. Developing “human assets” with intelligence and solid character will contribute directly to the Group’s growth. We are dedicated to maintaining workplace environments where all employees, regardless of gender, can fully utilize their skills. This includes a commitment to providing opportunities for people to upgrade their skills and accomplish their goals. A dialogue between senior executives and female employees resulted in improvements to a variety of programs centered on the “Project for Creating a Pleasant Working Place,” which was created in 2012.

Job site selection

Coordinated husband‐wife transfers

Re‐hiring system

Refreshment time off

Pregnancy and child care leave

Child care leave

Reduced working hours Nursing care time off

Job site selectionfor elderly parent care

Elderly parent care short or extended time off

Since October 2014, employees have had the option of requesting a job in a particular region of Japan. At first, employees could select the Tokyo area (Tokyo, Kanagawa, Chiba and Saitama), Chukyo area or Keihanshin area (Kyoto, Osaka and Hyogo). Now, this program has been expanded to include other major cities and regions.

In the past, married couples working at the BOOKOFF Group were unable to live together at times due to a transfer of one person. To end this problem, the Group has established a program that allows the other spouse to be relocated to a store near the husband or wife who was initially transferred.


Activities for Diversity ‐Employing Persons with Disabilities‐

74

B‐Assist, Inc.主な業務

• Processing BOOKOFF Group merchandise, store maintenance, merchandise stocking and sales, production of point‐of‐purchase marketing materials

• Picking, shipments, and data erasure for mobile phones, tablets and other devices at distribution centers

The BOOKOFF Group is dedicated to providing jobs for people with disabilities. For these people with a desire and ability to work, we provide real employment opportunities, and the necessary workplace environment, rather than simply so‐called welfare positions. We want these people to be active and self‐reliant members of society. To provide these jobs, we established B‐Assist in October 2010. The company was designed a special subsidiary the following December based on the Act on Employment Promotion etc. of Persons with Disabilities. At the end of March 2017, BOOKOFF Group employed 150 people (3.31% of the entire workforce) who have disabilities. This includes four individuals with physical disabilities, 136 with intellectual disabilities and 10 with mental health disabilities.

Omiya Office (established in Sep. 2015)

Higashi Chiba Office(established in Apr. 2014)

Kawasaki Office (established in Apr. 2013)

OfficesMain Activities

Machida Office (established in Feb. 2013)

Seya Office (established in Oct. 2011)


About BOOKOFF

75

Name BOOKOFF CORPORATION LIMITED

Representative Yasutaka Horiuchi, President and CEO

Established August 1991

Head office 2‐14‐20 Kobuchi, Minami‐ku, Sagamihara, Kanagawa, Japan

Capital ¥3,652 million

Business activities

Operation of comprehensive reuse business that handles books, packaged media, apparel and other items

Group companies 13 subsidiaries, 1 affiliated company

Stores 839 (including 444 FC stores as of the end of September 2017)

Employees 1,244 (as of the end of March 2017)

Stock listing First Section, Tokyo Stock Exchange(Securities code: 3313)

Trading unit 100 shares

“BOOKOFF is for people who don’t let things go to waste”

A company with an infrastructure for people who refuse to discard items that

can be reused

Contributions to society through our business activities

Pursuit of employees’ material and spiritual wellbeing

Corporate Profile Corporate Philosophy

Mission

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