Marui Group Co Ltd IR Day Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Toshio Takahashi - Mizuho Securities - Analyst : Thank you for the presentation. This is Takahashi of Mizuho Securities. It is a pleasure to meet you face-to-face after a long time. I have one question, but it will be divided into two in terms of timeframe. Page 15 shows trend in operating income, which has made a turnaround. As you have just explained, Marui stores have evolved significantly over the past years, but operating income for this fiscal year is projected as JPY7 billion and will not achieve the pre-COVID level of JPY10 billion. What is the reason for this gap or why are you losing profit? In other words, I assume recovering such losses will enable you to accomplish JPY7 billion target for this fiscal year and ultimately JPY12 billion, I'd like to know what are the loss opportunities? What are the measures accumulated to generate such a forecast and which of them would have the greatest impact on profits? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 09, 2023 / NTS, 8252.T - Marui Group Co Ltd IR Day And I assume you are even looking to go beyond the JPY12 billion, You have just explained various profit drivers, but which of them will be the drivers for future profit growth? You mean all of them, but I would appreciate if you elaborate on it.

Question: Toshio Takahashi - Mizuho Securities - Analyst : Let me clarify if my understanding is correct. You will recover to the JPY50,000 pre-COVID level by the fiscal year ending March 2026. And then as you have just explained, you can aim for another higher level since the unit price is high for the so-called experience-based consumption. That is your expectation. In addition, cost reduction is also progressing well. Can I assume these three factors will be your drivers?

Question: Toshio Takahashi - Mizuho Securities - Analyst : Thank you.

Question: Junichi Kanamori - Okasan Securities - Analyst : This is Kanamori, Okasan Securities. Thank you. I have only one question. In your materials on page 43, you have a graph of maximizing the share of household finances. And in your plan for the fiscal year ending March 2026, you plan to grow up to JPY800,000. Appreciate if you could expand on this. What is your outlook for your unique strategy, you believe to further expand. What kind of image you have there? In regard to your efforts to maximizing household finances, I do not necessarily have a good recollection what you explained during the IR day. You are talking about Epos card for regular payments. Utilities, for example, and could be a possible target. But back then, not many people were actually using a Epos card to pay water and utilities as you had expected. So now I'd like to know including this regular payments in terms of maximizing household finances for Epos card, compared with the situation several years ago, am I right assuming that you have made a steady progress in terms of the usage of Epos card?

Question: Junichi Kanamori - Okasan Securities - Analyst : Thank you.

Question: Toshio Takahashi - Mizuho Securities - Analyst : This is Takahashi of Mizuho Securities again. Thank you for your presentation. Listening to the explanation by President Aoi, I really feel that what we have been discussing for the last 7 or 10 years has been taking a pretty good shape. Now I'd like to ask three questions about your presentation. The first question is about employee engagement. And I found the scores are very high. But compared to 80% of expectation at the top of the list, taking on challenges based on their strength is only 52%. I assume President Aoi is not satisfied with this result. And can I assume that this 52% will increase as you make progress and the new organizational structure and other measures that you have explained today? Or if there are any other factors, please explain about them. This is my first question.

Question: Toshio Takahashi - Mizuho Securities - Analyst : Thank you. My second question is about making the new organization you explained. I mean, the project-based organization as a standard. For example, that is to take on a challenge of organizations without section managers. I don't think you will take a long time to implement this, but how long are you going to take to implement such an organizational reform? For example, as you said, we do gradually increase such organizations through experiments in some teams little-by-little, or will you change the entire organization at once at a certain point in time? I appreciate if you elaborate on this point.

Question: Toshio Takahashi - Mizuho Securities - Analyst : I am clear. Thank you. Next is my third and last question. You mentioned earlier that highly digital professionals are hired through a joint venture. I suppose your company has a very large number of regular employees and has a very high retention rate. So it must be a good place to work. I'm not saying this to flatter you, but it is my impression. On the other hand, in order to realize the future vision that President Aoi has just presented, I think the most important thing is, of course, to keep hiring new employees. My question may get slightly sidetracked, but do you intend to continue the existing human resource management system of hiring and training new graduates or hiring mid-career workers is also your option? I'd like to know your thoughts on this. Also for new graduate will be a very important asset to your company in the future. What kind of people do you want to encourage to join Marui? This is my last question. Thank you.

Question: Toshio Takahashi - Mizuho Securities - Analyst : Well, understood. Thank you indeed.

Question: Tsuda Kazunori - Daiwa Securities - Analyst : Thank you for your kind patience. This is Tsuda from Daiwa Securities. I have two questions. The first question is a kind of follow-up on the question from Mr. Takahashi. When I was a student, Marui was known as [Fashion] Marui and labor intensive so-to-speak. But now that you are working on the three-pronged approach transcending organizational boundaries. So ROI 20 and being the hybrid. I think the future Marui will be more knowledge-intensive. Well, you are already knowledge intensive, even though the business segments will probably remain the same. But the structure, human resources and efficiency of the company will change considerably, including capital efficiency. Big changes are coming up and now you're talking about ROI 25 as well. So I wonder how you deal with those people who simply cannot cope with all of these changes. My second question is, from the customer's point of view, when they visit the Marui store, say in seven to eight years, will the format of stores have changed dramatically or you may say the store has not changed much? Not selling product, events will further evolve one after another as forecast lifetime value and cars tailored to each individual's interests. Don't they have not changed much from consumer sources, but the retail and the fintech initiatives making you very user-friendly. How do you feel about it?

Question: Tsuda Kazunori - Daiwa Securities - Analyst : [All the employee] can follow you. Well, these ideas and are coming from the long years of eight initiatives. I think you have a good gut feeling and you came up with the bigger message you are showing today. If it was 10 years ago, and I would have reacted -- wait a minute -- when I was listening to you and I was actually wondering if you -- I can truly -- you can truly make it.

Question: Tsuda Kazunori - Daiwa Securities - Analyst : In that sense, it's not the case that your people are going to say, well, this is coming from President, from the top. We simply cannot do anything. It won't be in such a cold shoulder. But employees are working to address these issues as their own issue. Am I right? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 09, 2023 / NTS, 8252.T - Marui Group Co Ltd IR Day

Question: Tsuda Kazunori - Daiwa Securities - Analyst : Well understood. Thank you indeed.

Question: Junichi Kanamori - Okasan Securities - Analyst : Please break the box. I'm looking forward to it.

Question: Hugo Peate - Mitsubishi UFJ Trust International - Analyst : This is Hugo from Mitsubishi UFJ Trust and Banking Corporation. Thank you for this opportunity and thank you for your explanation. My question is related to exactly what was just mentioned. It is about IRR of 12.7% for human resources investments. Under this logic, an increase in profitability and ROE can be expected, but 12.7% is a return on services and new businesses. So will you not invest in anything that is less than 12.7%? Can you give me a little more clarity? Thank you very much.

Question: Hugo Peate - Mitsubishi UFJ Trust International - Analyst : Thank you very much for your clear explanation. And now I have a better understanding of what Marui wants to do. Meanwhile in the capital market, I doubt that such Idea has penetrated enough. Mr. Aoi, from your point of view, do you think that the market has yet to have a good understanding of impact from human capital and not assessing it properly? Can you share your views in this regard? Because it is indeed related to valuation. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 09, 2023 / NTS, 8252.T - Marui Group Co Ltd IR Day

Question: Hugo Peate - Mitsubishi UFJ Trust International - Analyst : Thank you very much. This idea on page 112, I completely agree with you. Insufficient stock of intangible fixed assets is a major reason Japan is falling behind in its competitiveness. It may depend on verticals, but for Marui, investment in talents is definitely important. Please do continue to promote such investment. Finally, the $65 billion investment is expected to turn into services and new businesses that will generate marginal profit. Is it correct to understand that the seeds or the buds are growing in Marui? Unless you have the seeds, no matter how much investment is made, it will not lead to services or new businesses and therefore cannot be monetized. Thank you.

Question: Hugo Peate - Mitsubishi UFJ Trust International - Analyst : Thank you very much.