In fiscal 2021, the Group started the new Medium-term Business Plan that aims for full recovery from the COVID-19 crisis and regrowth. In fiscal 2021, which is its first year, we pursued initiatives with a greater focus on “defense” than “offense,” including the reduction of investment and acceleration of management restructuring, because the impact of COVID-19 was more prolonged than expected.

In the current fiscal year, infections are finally starting to show signs of settling down but remain high. I think we should assume that there is a high possibility of a resurgence of infections. What is expected of us is readiness for change with a view to the with-COVID-19 era, instead of simply waiting for the post-COVID-19 era. On the other hand, new uncertainties about the future such as increasing geopolitical risks and concern about rapid global inflation were added and we cannot be optimistic about our business environment.

However, I think it is extremely important to decide to shift to offense and make sure its timing is right in order to achieve full recovery, and furthermore, turn it into regrowth. Where are the seeds for growth? Where will we seek medium- to long-term return? Proper preparation based on clear strategies is essential to build a solid foundation for discontinuous and dramatic growth. We have to make such decisions timely and properly.

In light of the above, we positioned the current fiscal year, which is the second year of the Medium-term Business Plan, as a year for “shifting gears.” We will change our mindset to “offense” from a focus on “defense” to respond to the COVID-19 crisis and turn it into concrete actions and achievements to build a solid business foundation that enables sustainable growth.

First, for full recovery, we will strive to accelerate business model transformation in the core Department Store and SC businesses, which have been particularly hit by the COVID-19 pandemic. We will strive to overwhelmingly increase added value that is unique to physical stores and cannot be realized online while merging the real and digital worlds to depart from the vulnerability exposed by COVID-19, that is, the business structure overly dependent on physical stores. To this end, we will aggressively invest in increasing the attractiveness of stores and strengthening digitalization.

At the same time, we will steadily promote management restructuring to strengthen our ability to respond to rapid environmental changes. First, we will tackle personnel restructuring and cost restructuring based on business model transformation and reduce fixed costs by \10.0 billion or more under the current Medium-term Business Plan to lower the break-even point. In addition, we will continue to improve our balance sheet by assessing the Group businesses and selling assets.

Furthermore, for regrowth, we have newly established three divisions including Business Portfolio Transformation Promotion Division, CRE Planning Division, and Digital Promotion Division in the holding company to strengthen our promotion system. We will actively appoint people from Parco and outside the Group to key positions to bring out unprecedented ideas using diversity and achieve discontinuous growth. In order to realize that, we will address the innovation of existing businesses and the development of new businesses using the funds of ¥10.0 billion for strategic investment and through alliances, M&As, CVCs, content management funds, and others.

Meanwhile, it is also true that the COVID-19 pandemic has reinforced our determination to implement sustainability management. In the first year of the COVID-19 pandemic, the Group’s sales of ¥370.0 billion disappeared. What is our existence value? What does it mean to be required by society? I feel such essential questions were presented. We were given an opportunity to rethink about the importance of connecting with customers, employees, business partners, and society.

In order to be sustainable, we should remain an entity required by customers and markets over the long term. I think it is the very practice of our Corporate Credos including Service before Profit and Abjure All Evil and Practice All Good.

Corporate value is the aggregate of value created using not only financial capital but various capitals including human capital, social relationship capital, and natural capital. Particularly, I am acutely aware that human capital will be central to determining corporate value in the future. We will aggressively invest in the capitals that we decide that will lead to medium- to long-term value creation, including those mentioned above.

While reaffirming our raison d’etre and being committed to mitigating environmental and social risks by involving our supply chain, we will renew our strong focus on “value creation” and gear up for change toward the true “realization of CSV” that achieves both social value and economic value.

June 2022

Management Policy

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• Medium-term Business Plan

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• IR Policy